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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."

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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: ir@zhihu.com

Piacente Financial Communications
Helen Wu
Tel: +86-10-6508-0677
Email: zhihu@tpg-ir.com

In the United States:

Piacente Financial Communications
Brandi Piacente
Phone: +1-212-481-2050
Email: zhihu@tpg-ir.com

 

 

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)

 

Cision
Cision

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SOURCE Zhihu Inc.