Zhihu Inc. Reports Unaudited First Quarter 2024 Financial Results

BEIJING, June 12, 2024 /PRNewswire/ — Zhihu Inc. (“Zhihu” or the “Company”) (NYSE: ZH; HKEX: 2390), a leading online content community in China, today announced its unaudited financial results for the quarter ended March 31, 2024.

First Quarter 2024 Highlights

Total revenues were RMB960.9 million (US$133.1 million) in the first quarter of 2024, compared with RMB994.2 million in the same period of 2023. Gross margin expanded to 56.6% in the first quarter of 2024 from 51.5% in the same period of 2023. Net loss was RMB165.8 million (US$23.0 million) in the first quarter of 2024, narrowed by 7.4% from the same period of 2023. Adjusted net loss (non-GAAP)[1] was RMB135.7 million (US$18.8 million) in the first quarter of 2024, compared with RMB120.2 million in the same period of 2023. Average monthly active users (MAUs)[2] were 89.0 million in the first quarter of 2024.  Average monthly subscribing members[3] were 14.8 million in the first quarter of 2024.

“We are delighted to start 2024 with a solid financial and operating performance,” said Mr. Yuan Zhou, chairman and chief executive officer of Zhihu. “We made substantial strides toward our break-even target by enhancing operating efficiency and accelerating loss reduction. Furthermore, our efforts to enhance ‘trustworthiness’ within the Zhihu community continued to drive community prosperity, resulting in significant increases in core users’ engagement and retention rates, as well as our DAU time spent. We believe that our AI search feature’s emerging potential and the value we continue to unlock across the trustworthy Zhihu community will provide fresh momentum for our sustainable growth and a clear path to profitability for the remaining quarters of the year.”

Mr. Han Wang, chief financial officer of Zhihu, added, “We optimized our cost structure and enhanced monetization efficiency during the quarter. Our gross profit margin has improved year-over-year for six consecutive quarters. In terms of operating expenses, we significantly reduced community-related new user acquisition costs and maintained a high ROI across our multiple business lines, while investing prudently in AI. We are confident that with continued strong strategic execution, we will remain on track to achieve our profitability goals.”

First Quarter 2024 Financial Results

Total revenues were RMB960.9 million (US$133.1 million) in the first quarter of 2024, compared with RMB994.2 million in the same period of 2023.

Marketing services revenue was RMB330.5 million (US$45.8 million), compared with RMB392.1 million in the same period of 2023. The decrease was primarily due to our ongoing refinement of service offerings to strategically focus on margin improvement.

Paid membership revenue was RMB449.7 million (US$62.3 million), compared with RMB454.8 million in the same period of 2023. The slight decrease was primarily attributable to a slight decline in our average monthly subscribing members.

Vocational training revenue was RMB145.4 million (US$20.1 million), representing a 35.9% increase from RMB107.0 million in the first quarter of 2023. The increase was primarily due to our further enriched online course offerings.

Other revenues were RMB35.2 million (US$4.9 million), compared with RMB40.3 million in the same period of 2023.

Cost of revenues decreased by 13.4% to RMB417.4 million (US$57.8 million) from RMB482.0 million in the same period of 2023. The decrease was primarily due to a decrease in content and operating costs in connection with the decline in our revenues.

Gross profit was RMB543.5 million (US$75.3 million), representing a 6.1% increase from RMB512.2 million in the same period of 2023. Gross margin expanded to 56.6% from 51.5% in the same period of 2023, primarily attributable to our monetization enhancements.

Total operating expenses were RMB768.2 million (US$106.4 million) in the first quarter of 2024, compared with RMB729.0 million in the same period of 2023.

Selling and marketing expenses increased to RMB478.0 million (US$66.2 million) from RMB445.6 million in the same period of 2023. The increase reflects our continued efforts in promoting our product and service offerings.

Research and development expenses increased to RMB197.4 million (US$27.3 million) from RMB183.0 million in the same period of 2023. The increase was primarily due to our increased spending on technology innovation.

General and administrative expenses decreased to RMB92.9 million (US$12.9 million) from RMB100.4 million in the same period of 2023. The decrease was primarily due to lower share-based compensation expenses.

Loss from operations was RMB224.7 million (US$31.1 million) in the first quarter of 2024, compared with RMB216.7 million in the same period of 2023.

Adjusted loss from operations (non-GAAP)[1] was RMB193.6 million (US$26.8 million) in the first quarter of 2024, compared with RMB157.3 million in the same period of 2023.

Net loss was RMB165.8 million (US$23.0 million) in the first quarter of 2024, compared with RMB179.0 million in the same period of 2023.

Adjusted net loss (non-GAAP)[1] was RMB135.7 million (US$18.8 million) in the first quarter of 2024, compared with RMB120.2 million in the same period of 2023.

Diluted net loss per American depositary share (“ADS”)[4] was RMB1.76 (US$0.24), compared with RMB1.78 in the same period of 2023.

Cash and cash equivalents, term deposits and short-term investments

As of March 31, 2024, the Company had cash and cash equivalents, term deposits and short-term investments of RMB5,216.9 million (US$722.5 million), compared with RMB5,462.9 million as of December 31, 2023.

Share Repurchase Programs

As of March 31, 2024, the Company had repurchased 31.1 million Class A ordinary shares (including Class A ordinary shares underlying the ADSs) for a total price of US$66.5 million on both the New York Stock Exchange and The Stock Exchange of Hong Kong Limited under the Company’s existing US$100 million share repurchase program (the “2022 Repurchase Program”) established in May 2022, extended in May 2023, and effective until June 10, 2024. The repurchases made under the 2022 Repurchase Program were covered by the general unconditional mandate to purchase the Company’s own shares approved by shareholders at the Company’s annual general meetings held on June 10, 2022 and June 30, 2023, respectively.

The board of directors of the Company has approved an extension of the 2022 Repurchase Program until June 26, 2025, which is subject to shareholder approval for granting a general mandate to the board of directors to repurchase shares and/or ADSs of the Company not exceeding 10% of the total number of issued shares of the Company (excluding any treasury shares) as of the date of such approval (the “2024 Repurchase Mandate”) at the forthcoming annual general meeting of the Company to be held on June 26, 2024 (the “2024 Shareholder Approval”).

The board of directors of the Company further announces that, in addition to the extended 2022 Repurchase Program, it proposes to conduct a concurrent share repurchase program effective until June 26, 2025 (the “2024 Repurchase Program”). The maximum number of shares (including shares underlying the ADSs) that can be repurchased under the 2024 Repurchase Program, together with the remaining number of shares (including shares underlying the ADSs) that can be repurchased under the 2022 Repurchase Program, will not exceed the 2024 Repurchase Mandate, subject to the 2024 Shareholder Approval. The Company’s proposed repurchases, if approved, may be made from time to time in the open market at prevailing market prices or through other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations. The Company plans to fund any such repurchases from its existing cash balance.

[1] Adjusted loss from operations and adjusted net loss are non-GAAP financial measures. For more information on the non-GAAP financial measures, please see the section “Use of Non-GAAP Financial Measures” and the table captioned “Unaudited Reconciliations of GAAP and Non-GAAP Results” set forth at the end of this press release.

[2] MAUs refers to the sum of the number of mobile devices that launch our mobile apps at least once in a given month, or mobile MAUs, and the number of logged-in users who visit our PC or mobile website at least once in a given month, after eliminating duplicates.

[3] Monthly subscribing members refers to the number of our Yan Selection members in a specified month. Average monthly subscribing members for a period is calculated by dividing the sum of monthly subscribing members for each month during the specified period by the number of months in such period.

[4] On May 10, 2024, we effected a change in the ratio of our ADSs to Class A ordinary shares from two ADSs representing one Class A ordinary share to a new ratio of one ADS representing three Class A ordinary shares. Basic and diluted net loss per ADS have been retrospectively adjusted to reflect this ADS ratio change for all periods presented.

Conference Call

The Company’s management will host an earnings conference call at 7:00 a.m. U.S. Eastern Time on June 12, 2024 (7:00 p.m. Beijing/Hong Kong time on June 12, 2024).

All participants wishing to join the conference call must pre-register online using the link provided below. Once the pre-registration has been completed, each participant will receive a set of dial-in numbers, a passcode, and a unique registrant ID which can be used to join the conference call. Participants may pre-register at any time, including up to and after the call start time.

Participant Online Registration: https://dpregister.com/sreg/10189533/fc960a34f7

Additionally, a live and archived webcast of the conference call will be available on the Company’s investor relations website at https://ir.zhihu.com.

A replay of the conference call will be accessible approximately one hour after the conclusion of the live call, until June 19, 2024, by dialing the following telephone numbers:

United States (toll free):

+1-877-344-7529

International:

+1-412-317-0088

Replay Access Code:

6946527

About Zhihu Inc.

Zhihu Inc. (NYSE: ZH; HKEX: 2390) is a leading online content community in China where people come to find solutions, make decisions, seek inspiration, and have fun. Since the initial launch in 2010, we have grown from a Q&A community into one of the top comprehensive online content communities and the largest Q&A-inspired online content community in China. For more information, please visit https://ir.zhihu.com

Use of Non-GAAP Financial Measures

In evaluating the business, the Company considers and uses non-GAAP financial measures, such as adjusted loss from operations and adjusted net loss, to supplement the review and assessment of its operating performance. The Company defines non-GAAP financial measures by excluding the impact of share-based compensation expenses, amortization of intangible assets resulting from business acquisitions and the tax effects of the non-GAAP adjustments, which are non-cash expenses. The Company believes that the non-GAAP financial measures facilitate comparisons of operating performance from period to period and company to company by adjusting for potential impacts of items, which the Company’s management considers to be indicative of its operating performance. The Company believes that the non-GAAP financial measures provide useful information to investors and others in understanding and evaluating the Company’s consolidated results of operations in the same manner as it helps the Company’s management.

The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The presentation of the non-GAAP financial measures may not be comparable to similarly titled measures presented by other companies. The use of the non-GAAP financial measures has limitations as an analytical tool, and investors should not consider it in isolation from, or as a substitute for analysis of, our results of operations or financial condition as reported under U.S. GAAP. For more information on the non-GAAP financial measures, please see the tables captioned “Unaudited Reconciliations of GAAP and Non-GAAP Results” set forth at the end of this press release.

Exchange Rate Information

This announcement contains translations of certain Renminbi amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from Renminbi to U.S. dollars were made at a rate of RMB7.2203 to US$1.00, the exchange rate in effect as of March 29, 2024 as set forth in the H.10 statistical release of the Federal Reserve Board.

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. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “target,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to,” or other similar expressions. Further information regarding these and other risks, uncertainties or factors is included in the Company’s filings with the SEC and the Hong Kong Stock Exchange. All information provided in this press release is as of the date of this press release, and the Company does not undertake any duty to update such information, except as required under applicable law.

For investor and media inquiries, please contact:

In China:

Zhihu Inc.
Email: [email protected]

Piacente Financial Communications
Helen Wu
Tel: +86-10-6508-0677
Email: [email protected] 

In the United States:

Piacente Financial Communications
Brandi Piacente
Phone: +1-212-481-2050
Email: [email protected]

 

 

ZHIHU INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(All amounts in thousands, except share, ADS, per share data and per ADS data)

For the Three Months Ended

March 31,

2023

December 31,

2023

March 31,

2024

RMB

RMB

RMB

US$

Revenues: 

Marketing services

392,137

465,153

330,542

45,780

Paid membership

454,769

455,906

449,724

62,286

Vocational training

106,998

169,272

145,436

20,143

Others

40,316

47,966

35,161

4,870

Total revenues

994,220

1,138,297

960,863

133,079

Cost of revenues

(482,001)

(465,197)

(417,384)

(57,807)

Gross profit

512,219

673,100

543,479

75,272

Selling and marketing expenses

(445,565)

(527,604)

(477,954)

(66,196)

Research and development expenses

(182,960)

(232,585)

(197,356)

(27,333)

General and administrative expenses

(100,438)

(91,069)

(92,917)

(12,869)

Total operating expenses

(728,963)

(851,258)

(768,227)

(106,398)

Loss from operations

(216,744)

(178,158)

(224,748)

(31,126)

Other income/(expenses):

Investment income

6,006

12,279

16,902

2,341

Interest income

39,493

38,828

30,763

4,261

Fair value change of financial instruments

(3,582)

14,780

9,408

1,303

Exchange (losses)/gains

(5,649)

(937)

120

17

Others, net

6,333

15,032

3,043

421

Loss before income tax

(174,143)

(98,176)

(164,512)

(22,783)

Income tax expense

(4,829)

(4,929)

(1,284)

(178)

Net loss

(178,972)

(103,105)

(165,796)

(22,961)

Net (income)/loss attributable to
   noncontrolling interests

(2,383)

(666)

950

132

Net loss attributable to Zhihu Inc.’s
   shareholders

(181,355)

(103,771)

(164,846)

(22,829)

Net loss per share

Basic

(0.59)

(0.36)

(0.59)

(0.08)

Diluted

(0.59)

(0.36)

(0.59)

(0.08)

Net loss per ADS (One ADS represents
    three Class A ordinary shares)

Basic

(1.78)

(1.07)

(1.76)

(0.24)

Diluted

(1.78)

(1.07)

(1.76)

(0.24)

Weighted average number of ordinary
   shares outstanding

Basic

305,245,036

291,056,615

281,549,707

281,549,707

Diluted

305,245,036

291,056,615

281,549,707

281,549,707

 

 

ZHIHU INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(All amounts in thousands, except share, ADS, per share data and per ADS data)

For the Three Months Ended

March 31,

2023

December 31,

2023

March 31,

2024

RMB

RMB

RMB

US$

Share-based compensation expenses included in:

Cost of revenues

4,400

1,575

2,497

346

Selling and marketing expenses

8,758

(7,001)

3,272

453

Research and development expenses

21,205

(57)

3,680

510

General and administrative expenses

21,555

12,983

16,363

2,266

 

 

ZHIHU INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands)

As of December 31,

2023

As of March 31,

2024

RMB

RMB

US$

ASSETS

Current assets:

Cash and cash equivalents

2,106,639

2,194,419

303,923

Term deposits

1,586,469

1,553,663

215,180

Short-term investments

1,769,822

1,468,801

203,427

Trade receivables

664,615

638,226

88,393

Amounts due from related parties

18,319

31,277

4,332

Prepayments and other current assets

232,016

239,814

33,214

Total current assets

6,377,880

6,126,200

848,469

Non-current assets:

Property and equipment, net

10,849

10,794

1,495

Intangible assets, net

122,645

117,113

16,220

Goodwill

191,077

191,077

26,464

Long-term investments

44,621

51,176

7,088

Right-of-use assets         

40,211

31,141

4,313

Other non-current assets

7,989

7,875

1,090

Total non-current assets

417,392

409,176

56,670

Total assets

6,795,272

6,535,376

905,139

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Accounts payable and accrued liabilities

1,038,531

1,023,973

141,819

Salary and welfare payables

342,125

332,077

45,992

Taxes payables               

21,394

16,328

2,261

Contract liabilities

303,574

310,307

42,977

Amounts due to related parties

26,032

9,491

1,314

Short term lease liabilities             

42,089

33,729

4,672

Other current liabilities

171,743

165,873

22,973

Total current liabilities

1,945,488

1,891,778

262,008

Non-current liabilities

Long term lease liabilities

3,642

2,861

396

Deferred tax liabilities

22,574

21,505

2,979

 Other non-current liabilities

121,958

111,664

15,465

Total non-current liabilities

148,174

136,030

18,840

Total liabilities

2,093,662

2,027,808

280,848

Total Zhihu Inc.’s shareholders’ equity

4,599,810

4,393,324

608,468

Noncontrolling interests

101,800

114,244

15,823

Total shareholders’ equity

4,701,610

4,507,568

624,291

Total liabilities and shareholders’ equity

6,795,272

6,535,376

905,139

 

 

ZHIHU INC.

UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS

(All amounts in thousands)

For the Three Months Ended

March 31,

2023

December 31,

2023

March 31,

2024

RMB

RMB

RMB

US$

Loss from operations

(216,744)

(178,158)

(224,748)

(31,126)

Add:

Share-based compensation expenses

55,918

7,500

25,812

3,575

Amortization of intangible assets resulting
    from business acquisitions

 

3,490

5,365

5,365

743

Adjusted loss from operations

(157,336)

(165,293)

(193,571)

(26,808)

Net loss

(178,972)

(103,105)

(165,796)

(22,961)

Add:

Share-based compensation expenses

55,918

7,500

25,812

3,575

Amortization of intangible assets resulting
    from business acquisitions

3,490

5,365

5,365

743

Tax effects on non-GAAP adjustments

(600)

(1,069)

(1,069)

(148)

Adjusted net loss

(120,164)

(91,309)

(135,688)

(18,791)