This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Baidu.com Inc. (BIDU: chart) on February 13, 2008.

Chief Executive Officer: Robin Li
Vice President of Business Operations: Haoyu Shen
Investor Relations: Linda Sun

Key Investors Issues

- The diluted earnings per share were 92 cents in the quarter.
- The quarterly revenue grew 110.5% over last year to RMB571.1 million.
- For fiscal 2008, the total revenues were RMB1.7 billion, a 108% increase from the previous year.

Fourth Quarter Fiscal 2007 Financial Highlights

Net income for the quarter was RMB225 million, up 79% year over year.

Net income, excluding share-based compensation expenses, a non-GAAP measure, was RMB233 million, a 79% increase from the fourth quarter of 2006. Basic and diluted EPS, excluding share-based compensation expenses, were RMB6.84 and RMB6.70, translating roughly to 94 cents and 92 cents respectively.

The fourth quarter total revenues were approximately RMB571.1 million.

This was within the firm’s guidance range and up 110.5% over the year-ago period. The revenue growth was driven by healthy increases in both of the key growth drivers, the number of active online marketing customers, and revenue per customer. The firm’s active online marketing customers grew to 155,000, approximately a 44% increase year over year. Revenue per online marketing customer rose to RMB3,700, up 48% year over year.

Online marketing revenues were RMB570 million, representing 111% growth year over year.

The growth was driven by a number of factors, including traffic growth, an increase in the number of active online marketing customers of over 8% over the third quarter of 2007, as well as a nearly 6% sequential increase in per-customer spending.

Traffic acquisition costs as a component of the cost of revenues was RMB72 million or almost 13% of the total revenues compared to nearly 9% in the year-ago period.

The increase in TAC as a percentage of total revenues primarily reflects the continued growth of revenue contribution from Baidu Union members.

Share-based compensation expenses increased to RMB13 million in the fourth quarter of 2007 from RMB7 million in the year-ago period.

- SG&A expenses were RMB132 million, an 86% increase from the fourth quarter in 2006. Excluding share-based compensation expenses, SG&A rose 95% year over year.
- Research and development expenses were RMB47 million, a 123% increase from the corresponding period in 2006. Excluding share-based compensation expenses, R&D expenses rose 99% year over year, mainly due to the expansion of headcount.
- Costs and expenses related to the Japan operations in the fourth quarter of 2007 were RMB25 million in aggregate.

Net margin excluding share-based compensation expenses for the fourth quarter of 2007 was 41%, down from 48% in the year-ago period.

The firm ended the fourth quarter of 2007 with cash, cash equivalents and short-term investments of RMB 1.6 billion, or $218 million.

- Operating cash inflow for the quarter was RMB335 million or $46 million, a year-over-year increase of 96%.
- Capital expenditure for the fourth quarter of 2007 was RMB166 million, up from RMB23 million in the year-ago period.
- Adjusted EBITDA was RMB247 million for the fourth quarter, an increase of 87% from the corresponding period in 2006.

The firm’s leading market share in Chinese search grew, as users continued to choose Baidu’s suite of search and community-based offerings, such as Baidu Knows and Baidu Post Bar.

According to iResearch, Baidu’s web search share rose to nearly 72% in the fourth quarter, up from nearly 69% in the third quarter of 2007. A study recently released by comScore found that Baidu is the third most popular search engine.