Baidu : Announces Third Quarter 2021 Results - Form 6-K

Baidu Announces Third Quarter 2021 Results

BEIJING, China, November 17, 2021-Baidu, Inc. (NASDAQ: BIDU and HKEX: 9888) ("Baidu" or the "Company"), a leading AI company with strong Internet foundation, today announced its unaudited financial results for the third quarter ended September 30, 2021.

"Baidu is bringing innovation across the consumer, enterprise and public sector with our commitment to AI," said Robin Li, co-founder and CEO of Baidu. "Our AI Cloud is helping businesses better serve customers and move faster with greater efficiency. We are building Baidu Apollo smart transportation and intelligent driving to smoothen traffic congestion, accelerate the move to EV and reduce traffic accidents."

"Baidu Core delivered another solid quarter, powered by our AI cloud revenue growing 73% year over year," said Rong Luo, CFO of Baidu. "With a diversified AI portfolio, including cloud services, smart transportation, smart devices, self-driving, smart EV and robotaxi, we are well positioned for long-term growth."

Third Quarter 2021 Financial Highlights¹

		Baidu, Inc.
(In millions except per		Q3			Q2			Q3
ADS, unaudited)		2020			2021			2021			YOY			QOQ
		RMB			RMB			RMB			US$
Total revenues			28,232				31,350				31,921				4,954				13	%			2	%
Operating income			6,156				3,463				2,308				358				(63	%)			(33	%)
Operating income (non-GAAP) 2			7,636				5,653				4,708				731				(38	%)			(17	%)
Net income (loss) to Baidu			13,678				(583	)			(16,559	)			(2,570	)			-				2740	%
Net income to Baidu (non-GAAP) 2			6,988				5,359				5,090				790				(27	%)			(5	%)
Diluted earnings (loss) per ADS			39.79				(1.70	)			(48.18	)			(7.48	)			-				2734	%
Diluted earnings per ADS (non-GAAP) 2			20.35				15.41				14.66				2.28				(28	%)			(5	%)
Adjusted EBITDA 2			9,073				7,295				5,962				925				(34	%)			(18	%)
Adjusted EBITDA margin			32	%			23	%			19	%			19	%

1	Unless otherwise noted, RMB to USD was converted at an exchange rate of RMB6.4434 as of September 30, 2021, as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. Translations are provided solely for the convenience of the reader.

2	Non-GAAP measures are defined in the Non-GAAP Financial Measures section (see also "Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures" for more details).

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		Baidu Core
		Q3			Q2			Q3
(In millions, unaudited)		2020			2021			2021			YOY			QOQ
		RMB			RMB			RMB			US$
Total revenues			21,379				24,041				24,661				3,827				15	%			3	%
Operating income			7,404				4,619				3,718				577				(50	%)			(20	%)
Operating income (non-GAAP) 2			8,505				6,467				5,823				904				(32	%)			(10	%)
Net income (loss) to Baidu Core			14,368				172				(15,625	)			(2,425	)			-				-
Net income to Baidu Core (non-GAAP) 2			7,486				5,942				5,855				909				(22	%)			(1	%)
Adjusted EBITDA2			9,822				7,991				6,994				1,085				(29	%)			(12	%)
Adjusted EBITDA margin			46	%			33	%			28	%			28	%

Other Highlights

Corporate

•

Q3 21 net loss includes a RMB 18.9 billion non-cash,mark-to-market loss in long-term investments arising from quarterly fair-value adjustment.

•

ESG:

•

Baidu donated RMB 90 million to help Henan province cope with its recent natural disaster.

•

Xiaodu launched "visual assistance" to enable visually impaired voice control and on-demand screen-text reading for a smoother audio experience.

•

In October, Baidu established a Data Management Committee, to consolidate its existing committees on data management, data privacy & protection and data security, to further improve its policies and oversight around data management.

AI Cloud

•

Baidu releases end-to-end AI cloud solution, powered by Kunlun AI chip and PaddlePaddle deep learning framework, to help financial services firms digitize and automate their operational processes, enlisting leading customers like China Life and Bank of Jiangsu.

•

Lijiang, a UNESCO Heritage Site with 800-year old bridges and waterways, is using Baidu smart-city cloud to keep the city safe and clean for visitors. Leveraging the digitalization of tourist areas, Baidu AI solution helps local authorities timely detect and address infractions, e.g., illegal parking and littering.

•

Tongxiang, Zhejiang (province) signed with Baidu to enable its manufacturing-based enterprises with Baidu AI solutions, allowing Baidu to further penetrate into industrial Internet.

•

Baidu ACE smart transportation has been adopted by 24 cities, tripling year over year, based on contract amount over RMB10 million.

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Intelligent Driving

•

Apollo L4 has accumulated over 10 million test miles, up 189% year over year, and has received 411 autonomous driving permits, reflecting Apollo's broad geographic coverage and wide-ranging test scenarios.

•

Rides provided by Apollo Go doubled sequentially, which are available in Shanghai, Beijing, Guangzhou, Changsha and Cangzhou.

•

WM Motor, a Chinese EV OEM, signed with Baidu to install Apollo Navigation Pilot (ANP) in its new W6 SUV, taking the total makes that have partnered with Apollo for self-driving and infotainment solutions to 31.

Other Growth Initiatives

•

Xiaodu ranks No.1 in smart display shipments globally and smart speaker shipments in China for Q2 2021, according to Strategy Analytics, IDC and Canalys.

•

In August 2021, Xiaodu completed Series B financing at a valuation of US$5.1 billion with Baidu retaining super-majority shareholding.

Mobile Ecosystem

•

In September, Baidu App's MAUs reached 607 million, up 12% year over year, and daily logged in users reached an all-time high of 79%, reflecting positive user experience.

•

Managed Page reached 43% of Baidu Core Q3 online marketing revenue, through continuous marketing-cloud enhancements, such as expanded e-commerce features and tools.

•

The open nature of Baidu's Internet infrastructure is leading to top smartphone makers to select Baidu's smart mini program as the landing page for their browser search.

iQIYI

•

iQIYI subscribers reached 104 million in September 2021, creating a strong foundation to provide innovative, self-developed blockbusters.

Third Quarter 2021 Financial Results

Total revenues were RMB 31.9 billion ($4.95 billion), increasing 13% year over year.

•

Revenue from Baidu Core was RMB 24.7 billion ($3.83 billion), increasing 15% year over year; online marketing revenue was RMB 19.5 billion ($3.02 billion), up 6% year over year, and non-online marketing revenue was RMB 5.2 billion ($806 million), up 76% year over year, driven by cloud and other AI-powered businesses.

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•

Revenue from iQIYI was RMB 7.6 billion ($1.18 billion), increasing 6% year over year.

Cost of revenues was RMB 16.1 billion ($2.50 billion), increasing 26% year over year, primarily due to an increase in traffic acquisition costs, content costs and cost of goods sold related to new AI business.

Selling, general and administrative expenses were RMB 7.3 billion ($1.14 billion), increasing 56% year over year, primarily due to an increase in channel spending, promotional marketing, personnel-related expenses and contingent loss pertaining to legal proceeding involving former advertising agency.

Research and development expense was RMB 6.2 billion ($957 million), increasing 35% year over year, primarily related to personnel-related expenses.

Operating income was RMB 2.3 billion ($358 million). Baidu Core operating income was RMB 3.7 billion ($577 million), and Baidu Core operating margin was 15%. Non-GAAP operating income was RMB 4.7 billion ($731 million). Baidu Core non-GAAP operating income was RMB 5.8 billion ($904 million), and Baidu Core non-GAAP operating margin was 24%.

Total other loss, net was RMB 21.5 billion ($3.34 billion), which included a RMB 18.9 billion non-cash,mark-to-market loss in long-term investments. Such quarterly fair-value adjustment may result in further net income volatility in the future.

Income tax benefit was RMB 1.8 billion ($286 million), compared to an income tax expense of RMB 1.6 billion for Q3 '20, primarily due to an increase in deferred tax benefit recognized on fair value loss of long-term investments and deduction on certain expenses that were previously considered non-deductible.

Net loss attributable to Baidu was RMB 16.6 billion ($2.57 billion), and diluted loss per ADS was RMB 48.18 ($7.48). Net loss attributable to Baidu Core was RMB 15.6 billion ($2.43 billion). Non-GAAP net income attributable to Baidu was RMB 5.1 billion ($790 million), and non-GAAP diluted earnings per ADS was RMB 14.66 ($2.28). Non-GAAP net income attributable to Baidu Core was RMB 5.9 billion ($909 million).

Adjusted EBITDA was RMB 6.0 billion ($925 million). Adjusted EBITDA for Baidu Core was RMB 7.0 billion ($1.09 billion) and adjusted EBITDA margin for Baidu Core was 28%.

As of September 30, 2021, cash, cash equivalents, restricted cash and short-term investments were RMB 194.6 billion ($30.20 billion), and cash, cash equivalents, restricted cash and short-term investments excluding iQIYI were RMB 183.6 billion ($28.49 billion). Free cash flow was RMB 691 million ($108 million), and free cash flow excluding iQIYI was RMB 2.9 billion ($449 million).

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Financial Guidance

For the fourth quarter of 2021, Baidu expects revenues to be between RMB 31.0 billion ($4.81 billion) and RMB 34.0 billion ($5.27 billion), representing a growth rate of 2% to 12% year over year, which assumes that Baidu Core revenue will grow between 5% and 16% year over year.

The COVID-19 situation in China is evolving and business visibility is limited. The above forecast reflects Baidu's current and preliminary view, which is subject to substantial uncertainties.

Conference Call Information

Baidu's management will hold an earnings conference call at 7:30 AM on November 17, 2021, U.S. Eastern Time (8:30 PM on November 17, 2021, Beijing Time).

Please register in advance of the conference call using the link provided below. Upon registering, you will be provided with participant dial-in numbers, Direct Event passcode and unique registrant ID by email.

For pre-registration, please click

http://apac.directeventreg.com/registration/event/8590343. It will automatically direct you to the registration page of "Baidu Q3 2021 Earnings Conference Call", where you may fill in your details for RSVP. If it requires you to enter a participant conference ID, please enter " 8590343".

In the 10 minutes prior to the call start time, you may use the conference access information (including dial-in number(s), Direct Event passcode and unique registrant ID) provided in the confirmation email that you have received following your pre-registration.

Additionally, a live and archived webcast of this conference call will be available at http://ir.baidu.com.

A replay of the conference call may be accessed by phone at the following number until November 24 2021:

International:		[phone]
Conference ID:		8590343

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About Baidu

Founded in 2000, Baidu's mission is to make the complicated world simpler through technology. Baidu is a leading AI company with strong Internet foundation, trading on the NASDAQ under "BIDU" and HKEX under "9888". One Baidu ADS represents eight Class A ordinary shares.

Contacts

Investors Relations, Baidu, Inc.

Tel: [phone]

Email: [e-mail]

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the outlook for the fourth quarter of 2021, quotations from management in this announcement, as well as Baidu's and other parties' strategic and operational plans, contain forward-looking statements. Baidu may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in announcements made on the website of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about Baidu's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Baidu's growth strategies; its future business development, including development of new products and services; its ability to attract and retain users and customers; competition in the Chinese Internet search and newsfeed market; competition for online marketing customers; changes in the Company's revenues and certain cost or expense items as a percentage of its revenues; the outcome of ongoing, or any future, litigation or arbitration, including those relating to intellectual property rights; the expected growth of the Chinese-language Internet search and newsfeed market and the number of Internet and broadband users in China; Chinese governmental policies relating to the Internet and Internet search providers, and general economic conditions in China and elsewhere. Further information regarding these and other risks is included in the Company's annual report on Form 20-F and other documents filed with the Securities and Exchange Commission, and announcements on the website of the Hong Kong Stock Exchange. Baidu does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of the date of the press release, and Baidu undertakes no duty to update such information, except as required under applicable law.

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Non-GAAP Financial Measures

To supplement Baidu's consolidated financial results presented in accordance with GAAP, Baidu uses the following non-GAAP financial measures: non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss) attributable to Baidu, non-GAAP net margin, non-GAAP diluted earnings per ADS, adjusted EBITDA, adjusted EBITDA margin and free cash flow. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Baidu believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding certain items that may not be indicative of its recurring core business operating results, such as operating performance excluding non-cash charges or non-operating in nature. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to Baidu's historical performance and liquidity. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using these non-GAAP financial measures is that these non-GAAP measures exclude certain items that have been and will continue to be for the foreseeable future a significant component in the Company's results of operations. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to the Company's data.

Non-GAAP operating income represents operating income excluding share-based compensation expenses, amortization and impairment of intangible assets resulting from business combinations and contingent loss pertaining to legal proceeding in relation to former advertising agency.

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Non-GAAP net income attributable to Baidu represents net income attributable to Baidu excluding share-based compensation expenses, amortization and impairment of intangible assets resulting from business combinations, contingent loss pertaining to legal proceeding in relation to former advertising agency, disposal gain or loss, impairment of long-term investments, fair value change of long-term investments, charitable donation from Baidu, adjusted for related income tax effects. Baidu's share of equity method investments for these non-GAAP reconciling items, amortization and impairment of intangible assets not on the investees' books, accretion of their redeemable non-controlling interests, and the gain or loss associated with the issuance of shares by the investees at a price higher or lower than the carrying value per shares, adjusted for related income tax effects, are also excluded.

Non-GAAP diluted earnings per ADS represents diluted earnings per ADS calculated by dividing non-GAAP net income attributable to Baidu, which is adjusted for accretion for the redeemable non-controlling interests, by the weighted average number of ordinary shares expressed in ADS. Adjusted EBITDA represents operating income excluding depreciation, amortization and impairment of intangible assets resulting from business combinations, contingent loss pertaining to legal proceeding in relation to former advertising agency, and share-based compensation expenses.

For more information on non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP financial measures to the nearest comparable GAAP measures."

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Baidu, Inc.

Condensed Consolidated Statements of Income (Loss)

(In millions except for per share (or ADS) information, unaudited)

		Three Months Ended
		September 30,			June 30,			September 30,			September 30,
		2020			2021			2021			2021
		RMB			RMB			RMB			US$(2)
Revenues:
Online marketing services			20,201				20,828				21,050				3,267
Others			8,031				10,522				10,871				1,687
Total revenues			28,232				31,350				31,921				4,954
Costs and expenses:
Cost of revenues(1)			12,815				15,897				16,126				2,503
Selling, general and administrative(1)			4,700				5,707				7,320				1,136
Research and development(1)			4,561				6,283				6,167				957
Total costs and expenses			22,076				27,887				29,613				4,596
Operating income			6,156				3,463				2,308				358
Other income (loss):
Interest income			1,297				1,342				1,462				227
Interest expense			(755	)			(845	)			(880	)			(137	)
Foreign exchange (loss) income, net			(271	)			(36	)			7				1
Share of loss from equity method investments			(546	)			(4	)			(4	)			(1	)
Others, net			9,169				(2,887	)			(22,079	)			(3,426	)
Total other income (loss), net			8,894				(2,430	)			(21,494	)			(3,336	)
Income (loss) before income taxes			15,050				1,033				(19,186	)			(2,978	)
Income tax expense (benefit)			1,618				2,197				(1,839	)			(286	)
Net income (loss)			13,432				(1,164	)			(17,347	)			(2,692	)
Net loss attributable to noncontrolling interests			(246	)			(581	)			(788	)			(122	)
Net income (loss) attributable to Baidu			13,678				(583	)			(16,559	)			(2,570	)
Earnings (loss) per ADS (1 ADS representing 8 Class A ordinary shares):
-Basic			40.21				(1.70	)			(48.18	)			(7.48	)
-Diluted			39.79				(1.70	)			(48.18	)			(7.48	)
Earnings (loss) per share for Class A and Class B ordinary shares:
-Basic			5.03				(0.21	)			(6.02	)			(0.93	)
-Diluted			4.97				(0.21	)			(6.02	)			(0.93	)
Weighted average number of Class A and Class B ordinary shares outstanding (in millions):
-Basic			2,719				2,782				2,778				2,778
-Diluted			2,747				2,782				2,778				2,778
(1) Includes share-based compensation expenses as follows:
Cost of revenues			81				112				74				11
Selling, general and administrative			403				483				353				55
Research and development			930				1,521				921				144
Total share-based compensation expenses			1,414				2,116				1,348				210

(2)	All translations from RMB to U.S. dollars are made at a rate of RMB 6.4434 to US$1.00, the exchange rate in effect as of September 30, 2021 as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System.

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Baidu, Inc.

Condensed Consolidated Balance Sheets

(In millions, unaudited)

		December 31,			September 30,			September 30,
		2020			2021			2021
		RMB			RMB			US$
ASSETS
Current assets:
Cash and cash equivalents			35,782				40,701				6,317
Restricted cash			758				10,773				1,672
Short-term investments, net			126,402				143,127				22,213
Accounts receivable, net			8,668				8,704				1,351
Amounts due from related parties			726				947				147
Other current assets, net			11,006				11,142				1,728
Total current assets			183,342				215,394				33,428
Non-current assets:
Fixed assets, net			17,508				20,722				3,216
Licensed copyrights, net			6,435				7,293				1,132
Produced content, net			6,556				9,598				1,490
Intangible assets, net			2,022				1,769				275
Goodwill			22,248				22,605				3,508
Long-term investments, net			76,233				74,012				11,486
Amounts due from related parties			3,438				3,485				541
Deferred tax assets, net			1,674				2,567				398
Operating lease right-of-use assets			9,804				10,491				1,628
Other non-current assets			3,448				16,420				2,547
Total non-current assets			149,366				168,962				26,221
Total assets			332,708				384,356				59,649
LIABILITIES AND EQUITY
Current liabilities:
Short-term loans			3,016				3,990				619
Accounts payable and accrued liabilities			36,716				40,461				6,279
Customer deposits and deferred revenue			12,626				13,525				2,099
Deferred income			158				99				15
Long-term loans, current portion			7,427				659				102
Convertible senior notes, current portion			4,752				4,808				746
Notes payable, current portion			-				5,793				899
Amounts due to related parties			1,324				1,824				283
Operating lease liabilities			2,366				2,756				428
Total current liabilities			68,385				73,915				11,470
Non-current liabilities:
Deferred income			97				119				18
Deferred revenue			686				197				31
Amounts due to related parties			3,543				3,318				515
Long-term loans			-				12,768				1,982
Notes payable			48,408				48,438				7,517
Convertible senior notes			11,927				12,671				1,967
Deferred tax liabilities			3,067				3,377				524
Operating lease liabilities			4,693				4,900				760
Other non-current liabilities			59				92				14
Total non-current liabilities			72,480				85,880				13,328
Total liabilities			140,865				159,795				24,798
Redeemable noncontrolling interests			3,102				7,916				1,229
Equity
Total Baidu shareholders' equity			182,696				211,378				32,805
Noncontrolling interests			6,045				5,267				817
Total equity			188,741				216,645				33,622
Total liabilities, redeemable noncontrolling interests, and equity			332,708				384,356				59,649

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Baidu, Inc.

Selected Information

(In millions, unaudited)

		Three months ended September 30, 2020 (RMB)			Three months ended June 30, 2021 (RMB)			Three months ended September 30, 2021 (RMB)			Three months ended September 30, 2021 (US$)
		Baidu Core			iQIYI			Elim & adj(2)			Baidu, Inc.			Baidu Core			iQIYI			Elim & adj(2)			Baidu, Inc.			Baidu Core			iQIYI			Elim & adj(2)			Baidu, Inc.			Baidu Core			iQIYI			Elim & adj(2)			Baidu, Inc.
Total revenues			21,379				7,188				(335	)			28,232				24,041				7,608				(299	)			31,350				24,661				7,589				(329	)			31,921				3,827				1,178				(51	)			4,954
YOY											15	%			6	%				13	%
QOQ											3	%			(0	%)				2	%
Costs and expenses:
Cost of revenues (1)			6,728				6,363				(276	)			12,815				9,289				6,869				(261	)			15,897				9,370				7,028				(272	)			16,126				1,454				1,091				(42	)			2,503
Selling, general and administrative (1)			3,354				1,364				(18	)			4,700				4,526				1,185				(4	)			5,707				6,089				1,246				(15	)			7,320				945				193				(2	)			1,136
Research and development (1)			3,893				671				(3	)			4,561				5,607				676				-				6,283				5,484				683				-				6,167				851				106				-				957
Total costs and expenses			13,975				8,398				(297	)			22,076				19,422				8,730				(265	)			27,887				20,943				8,957				(287	)			29,613				3,250				1,390				(44	)			4,596
YOY
Cost of revenues											39	%			10	%				26	%
Selling, general and administrative											82	%			(9	%)				56	%
Research and development											41	%			2	%				35	%
Cost and expenses											50	%			7	%				34	%
Operating income (loss)			7,404				(1,210	)			(38	)			6,156				4,619				(1,122	)			(34	)			3,463				3,718				(1,368	)			(42	)			2,308				577				(212	)			(7	)			358
YOY											(50	%)			13	%				(63	%)
QOQ											(20	%)			22	%				(33	%)
Operating margin			35	%			(17	%)				22	%			19	%			(15	%)				11	%			15	%			(18	%)				7	%
Add: total other income (loss), net			8,827				67					8,894				(2,204	)			(226	)			-				(2,430	)			(21,163	)			(331	)			-				(21,494	)			(3,285	)			(51	)			-				(3,336	)
Less: income tax expense (benefit)			1,599				19					1,618				2,167				30				-				2,197				(1,848	)			9				-				(1,839	)			(287	)			1				-				(286	)
Less: net income (loss) attributable to NCI			264				13				(523	)(3)			(246	)			76				19				(676	)(3)			(581	)			28				22				(838	)(3)			(788	)			4				4				(130	)(3)			(122	)
Net income (loss) attributable to Baidu			14,368				(1,175	)			485				13,678				172				(1,397	)			642				(583	)			(15,625	)			(1,730	)			796				(16,559	)			(2,425	)			(268	)			123				(2,570	)
YOY											-				47	%				-
QOQ											-				24	%				2740	%
Net margin			67	%			(16	%)				48	%			1	%			(18	%)				(2	%)			(63	%)			(23	%)				(52	%)
Non-GAAP financial measures:
Operating income (loss) (non-GAAP)			8,505				(831	)				7,636				6,467				(780	)				5,653				5,823				(1,073	)				4,708				904				(166	)				731
YOY											(32	%)			29	%				(38	%)
QOQ											(10	%)			38	%				(17	%)
Operating margin (non-GAAP)			40	%			(12	%)				27	%			27	%			(10	%)				18	%			24	%			(14	%)				15	%
Net income (loss) attributable to Baidu (non-GAAP)			7,486				(830	)				6,988				5,942				(1,065	)				5,359				5,855				(1,400	)				5,090				909				(217	)				790
YOY											(22	%)			69	%				(27	%)
QOQ											(1	%)			31	%				(5	%)
Net margin (non-GAAP)			35	%			(12	%)				25	%			25	%			(14	%)				17	%			24	%			(18	%)				16	%
Adjusted EBITDA			9,822				(711	)				9,073				7,991				(662	)				7,295				6,994				(990	)				5,962				1,085				(153	)				925
YOY											(29	%)			39	%				(34	%)
QOQ											(12	%)			50	%				(18	%)
Adjusted EBITDA margin			46	%			(10	%)				32	%			33	%			(9	%)				23	%			28	%			(13	%)				19	%
(1) Includes share-based compensation as follows:
Cost of revenues			29				52					81				69				43					112				34				40					74				5				6					11
Selling, general and administrative			187				216					403				274				209					483				196				157					353				30				25					55
Research and development			846				84					930				1,443				78					1,521				837				84					921				131				13					144
Total share-based compensation			1,062				352					1,414				1,786				330					2,116				1,067				281					1,348				166				44					210

(2)	Relates to intersegment eliminations and adjustments

(3)	Relates to the net loss attributable to iQIYI noncontrolling interests

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Baidu, Inc.

Condensed Consolidated Statements of Cash Flows

(In millions, unaudited)

		Three months ended			Three months ended			Three months ended			Three months ended
		September 30, 2020 (RMB)			June 30, 2021 (RMB)			September 30, 2021 (RMB)			September 30, 2021 (US$)
		Baidu excl. iQIYI			iQIYI			Baidu, Inc.			Baidu excl. iQIYI			iQIYI			Baidu, Inc.			Baidu excl. iQIYI			iQIYI			Baidu, Inc.			Baidu excl. iQIYI			iQIYI			Baidu, Inc.
Net cash provided by (used in) operating activities			9,716				(1,929	)			7,787				9,362				(1,426	)			7,936				5,436				(2,081	)			3,355				844				(323	)			521
Net cash (used in) provided by investing activities			(6,576	)			343				(6,233	)			(12,220	)			58				(12,162	)			(15,857	)			1,885				(13,972	)			(2,461	)			293				(2,168	)
Net cash (used in) provided by financing activities			(4,387	)			238				(4,149	)			5,256				801				6,057				7,744				867				8,611				1,201				135				1,336
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(77	)			(113	)			(190	)			(342	)			(92	)			(434	)			(47	)			(21	)			(68	)			(8	)			(3	)			(11	)
Net (decrease) increase in cash, cash equivalents and restricted cash			(1,324	)			(1,461	)			(2,785	)			2,056				(659	)			1,397				(2,724	)			650				(2,074	)			(424	)			102				(322	)
Cash, cash equivalents and restricted cash
At beginning of period			16,597				5,280				21,877				44,756				7,395				52,151				46,812				6,736				53,548				7,266				1,045				8,311
At end of period			15,273				3,819				19,092				46,812				6,736				53,548				44,088				7,386				51,474				6,842				1,147				7,989
Net cash provided by (used in) operating activities			9,716				(1,929	)			7,787				9,362				(1,426	)			7,936				5,436				(2,081	)			3,355				844				(323	)			521
Less: Capital expenditures			(1,417	)			(90	)			(1,507	)			(2,435	)			(61	)			(2,496	)			(2,548	)			(116	)			(2,664	)			(395	)			(18	)			(413	)
Free cash flow			8,299				(2,019	)			6,280				6,927				(1,487	)			5,440				2,888				(2,197	)			691				449				(341	)			108

Note: Baidu excl. iQIYI represents Baidu, Inc. minus iQIYI's consolidated cash flows.

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Baidu, Inc.

Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures

(In millions except for per ADS information, unaudited)

		Three months ended			Three months ended			Three months ended			Three months ended
		September 30, 2020 (RMB)			June 30, 2021 (RMB)			September 30, 2021 (RMB)			September 30, 2021 (US$)
		Baidu Core			iQIYI			Baidu, Inc.			Baidu Core			iQIYI			Baidu, Inc.			Baidu Core			iQIYI			Baidu, Inc.			Baidu Core			iQIYI			Baidu, Inc.
Operating income (loss)			7,404				(1,210	)			6,156				4,619				(1,122	)			3,463				3,718				(1,368	)			2,308				577				(212	)			358
Add: Share-based compensation expenses			1,062				352				1,414				1,786				330				2,116				1,067				281				1,348				166				44				210
Add: Amortization and impairment of intangible assets(1)			39				27				66				62				12				74				62				14				76				10				2				12
Add: Contingent loss(5)			-				-				-				-				-				-				976				-				976				151				-				151
Operating income (loss) (non-GAAP)			8,505				(831	)			7,636				6,467				(780	)			5,653				5,823				(1,073	)			4,708				904				(166	)			731
Add: Depreciation of fixed assets			1,317				120				1,437				1,524				118				1,642				1,171				83				1,254				181				13				194
Adjusted EBITDA			9,822				(711	)			9,073				7,991				(662	)			7,295				6,994				(990	)			5,962				1,085				(153	)			925
Net income (loss) attributable to Baidu			14,368				(1,175	)			13,678				172				(1,397	)			(583	)			(15,625	)			(1,730	)			(16,559	)			(2,425	)			(268	)			(2,570	)
Add: Share-based compensation expenses			1,056				352				1,252				1,777				330				1,947				1,086				281				1,231				169				44				191
Add: Amortization and impairment of intangible assets(1)			38				27				55				55				12				62				55				14				63				9				2				10
Add: Disposal loss (gain)			(5	)			-				(5	)			-				(45	)			(28	)			-				-				-				-				-				-
Add: Impairment of long-term investments			-				-				-				205				2				206				3,187				29				3,202				494				5				497
Add: Fair value (gain) loss of long-term investments			(8,855	)			(39	)			(8,880	)			3,180				(9	)			3,175				18,970				8				18,974				2,944				1				2,945
Add: Reconciling items on equity method investments(2)			556				3				558				190				32				207				36				3				38				6				-				6
Add: Charitable donation from Baidu(4)			-				-				-				-				-				-				90				-				90				14				-				14
Add: Contingent loss(5)			-				-				-				-				-				-				976				-				976				151				-				151
Add: Tax effects on non-GAAP adjustments(3)			328				2				330				363				10				373				(2,920	)			(5	)			(2,925	)			(453	)			(1	)			(454	)
Net income (loss) attributable to Baidu (non-GAAP)			7,486				(830	)			6,988				5,942				(1,065	)			5,359				5,855				(1,400	)			5,090				909				(217	)			790
Diluted earnings (loss) per ADS					39.79						(1.70	)					(48.18	)					(7.48	)
Add: Accretion of the redeemable noncontrolling interests					0.04						0.02						0.49						0.08
Add: Non-GAAP adjustments to earnings per ADS					(19.48	)					17.09						62.35						9.68
Diluted earnings per ADS (non-GAAP)					20.35						15.41						14.66						2.28

(1)	This represents amortization and impairment of intangible assets resulting from business combinations.

(2)

This represents Baidu's share of equity method investments for other non-GAAP reconciling items, amortization and impairment of intangible assets not on the investee's books, accretion of their redeemable noncontrolling interests, and the gain or loss associated with the issuance of shares by the investees at a price higher or lower than the carrying value per shares.

(3)	Tax impact of non-GAAP adjustments is separately presented from 2020Q4, with comparative periods retrospectively adjusted.

(4)	This represents non-recurring charitable donation to discrete events.

(5)	This represents contingent loss pertaining to legal proceeding involving former advertising agency.

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