Zhihu Inc. Reports Unaudited Third Quarter 2023 Financial Results

BEIJING, Nov. 29, 2023 /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 September 30, 2023.

Third Quarter 2023 Highlights

  • Total revenues were RMB1,022.2 million (US$140.1 million) in the third quarter of 2023, representing a 12.1% increase from the same period of 2022.
  • Net loss was RMB278.4 million (US$38.2 million) in the third quarter of 2023, narrowed by 6.5% from the same period of 2022.
  • Adjusted net loss (non-GAAP)[1] was RMB225.3 million (US$30.9 million) in the third quarter of 2023, narrowed by 10.1% from the same period of 2022.
  • Average monthly active users (MAUs)[2] reached 110.5 million in the third quarter of 2023. 
  • Average monthly subscribing members[3] reached 14.8 million in the third quarter of 2023, representing a 35.9% increase from the same period of 2022.

“Our significant strides in commercialization and the vibrant dynamism across the Zhihu community once again drove sustainable business growth during the third quarter of 2023. Our total revenues for the quarter continued their year-over-year growth momentum, fueled by accelerated development in paid memberships and our vocational training business,” said Mr. Yuan Zhou, chairman and CEO of Zhihu. “We will devote more resources to our multi-engine monetization strategy on a mid- to long-term basis. This strategy enabled us to deliver resilient revenue growth this year despite the macro uncertainties. I am committed to narrowing losses by improving strategy execution. Zhihu will continue to integrate cutting-edge AI technology into its products and business operations to enhance content quality and user experience.”

Mr. Henry Sha, CFO of Zhihu, added, “We achieved another strong quarter with total revenues increasing by 12.1% year over year. Among our various revenue streams, our paid membership revenue grew by 39.2% while our vocational training business soared 85.6%, both year over year. We further enhanced our gross margin through ongoing cost efficiency refinements. Despite the challenging economic climate, we are well-positioned to execute our growth strategy and achieve our financial targets.”

Third Quarter 2023 Financial Results

Total revenues were RMB1,022.2 million (US$140.1 million) in the third quarter of 2023, representing a 12.1% increase from RMB911.7 million in the same period of 2022.

Marketing services revenue[4] was RMB383.0 million (US$52.5 million), compared with RMB461.9 million in the same period of 2022.

Paid membership revenue was RMB466.8 million (US$64.0 million), representing a 39.2% increase from RMB335.4 million in the same period of 2022. The increase was primarily driven by the continued growth of our subscribing members.

Vocational training revenue was RMB144.8 million (US$19.8 million), representing an 85.6% increase from RMB78.0 million in the same period of 2022. The significant increase was primarily attributable to our further enriched online course offerings and the revenue contributions from our recently acquired businesses in the period.

Other revenues were RMB27.6 million (US$3.8 million), compared with RMB36.3 million in the same period of 2022.

Cost of revenues increased by 1.4% to RMB473.7 million (US$64.9 million) from RMB467.3 million in the same period of 2022. The increase was primarily due to the growth of content and operating costs as we continued to enhance our content attractiveness, and an increase in staff costs, partially offset by the decrease in cloud services and bandwidth costs.

Gross profit increased by 23.4% to RMB548.5 million (US$75.2 million) from RMB444.4 million in the same period of 2022. Gross margin expanded to 53.7% from 48.7% in the same period of 2022, primarily attributable to our enhanced monetization efforts and the improvement of cloud services and bandwidth utilization efficiency. 

Total operating expenses were RMB898.6 million (US$123.2 million), compared with RMB723.0 million in the same period of 2022.

Selling and marketing expenses increased to RMB534.3 million (US$73.2 million) from RMB478.3 million in the same period of 2022. The increase reflects our continued efforts in promoting our product and service offerings.

Research and development expenses increased to RMB249.7 million (US$34.2 million) from RMB160.8 million in the same period of 2022. The increase was primarily attributable to our increased spending on technology innovation.

General and administrative expenses increased to RMB114.6 million (US$15.7 million) from RMB83.9 million in the same period of 2022. The increase was primarily due to higher rental expenses and the increased share-based compensation expenses from our business acquisition.

Loss from operations increased to RMB350.1 million (US$48.0 million) from RMB278.6 million in the same period of 2022. 

Adjusted loss from operations (non-GAAP)[1] increased to RMB295.9 million (US$40.6 million) from RMB231.0 million in the same period of 2022. 

Net loss was narrowed by 6.5% to RMB278.4 million (US$38.2 million) from RMB297.6 million in the same period of 2022.

Adjusted net loss (non-GAAP)[1] was narrowed by 10.1% to RMB225.3 million (US$30.9 million) from RMB250.6 million in the same period of 2022.

Diluted net loss per American Depositary Share (“ADS”) was RMB0.47 (US$0.06), compared with RMB0.49 in the same period of 2022.

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

As of September 30, 2023, the Company had cash and cash equivalents, term deposits and short-term investments of RMB5,654.2 million (US$775.0 million), compared with RMB6,261.5 million as of December 31, 2022.

Share Repurchase Program

As of September 30, 2023, 18.3 million Class A ordinary shares (including Class A ordinary shares underlying the ADSs) had been repurchased for a total price of US$42.6 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 established in May 2022 and extended in May 2023 (the “Repurchase Program”), which is effective until June 10, 2024. The repurchases made under the 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.

[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 of “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] Starting with the first quarter of 2023, we report revenues generated from advertising and content-commerce solutions collectively as “marketing services revenue” to better present our business and results of operation in line with our overall strategies. Revenues for the applicable comparison periods of 2022 have been retrospectively re-classified.

Conference Call

The Company’s management will host an earnings conference call at 6:00 a.m. U.S. Eastern Time on November 29, 2023 (7:00 p.m. Beijing/Hong Kong time on November 29, 2023).

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/10184549/fb0dd38135

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 December 6, 2023, by dialing the following telephone numbers:

United States (toll free):

+1-877-344-7529

International:

+1-412-317-0088

Replay Access Code:

4452699

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 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 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 RMB7.2960 to US$1.00, the exchange rate in effect as of September 29, 2023 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

For the Nine Months Ended

September 30,
2022

June 30,

2023

September 30,

2023

September 30,
2022

September 30,

2023

RMB

RMB

RMB

US$

RMB

RMB

US$

Revenues: 

Marketing services

461,938

412,740

382,962

52,489

1,384,093

1,187,839

162,807

Paid membership

335,435

449,098

466,784

63,978

828,273

1,370,651

187,863

Vocational training

78,004

144,520

144,795

19,846

163,675

396,313

54,319

Others

36,334

37,851

27,622

3,786

114,913

105,789

14,500

Total revenues

911,711

1,044,209

1,022,163

140,099

2,490,954

3,060,592

419,489

Cost of revenues

(467,327)

(482,131)

(473,712)

(64,928)

(1,311,425)

(1,437,844)

(197,073)

Gross profit

444,384

562,078

548,451

75,171

1,179,529

1,622,748

222,416

Selling and marketing expenses

(478,279)

(540,593)

(534,328)

(73,236)

(1,517,239)

(1,520,486)

(208,400)

Research and development
     expenses

(160,760)

(236,245)

(249,662)

(34,219)

(550,867)

(668,867)

(91,676)

General and administrative
     expenses

(83,944)

(112,460)

(114,564)

(15,702)

(498,866)

(327,462)

(44,882)

Total operating expenses

(722,983)

(889,298)

(898,554)

(123,157)

(2,566,972)

(2,516,815)

(344,958)

Loss from operations

(278,599)

(327,220)

(350,103)

(47,986)

(1,387,443)

(894,067)

(122,542)

Other income/(expenses):

Investment income

23,138

11,793

11,617

1,592

64,458

29,416

4,032

Interest income

14,598

39,987

40,363

5,532

34,433

119,843

16,426

Fair value change of financial
     instruments

(79,322)

(9,016)

(7,352)

(1,008)

(172,066)

(19,950)

(2,734)

Exchange gains/(losses)

28,302

7,076

(393)

(54)

73,273

1,034

142

Others, net

(3,047)

644

27,227

3,732

(116)

34,204

4,688

Loss before income tax

(294,930)

(276,736)

(278,641)

(38,192)

(1,387,461)

(729,520)

(99,988)

Income tax (expense)/benefit

(2,655)

(2,330)

256

35

(11,428)

(6,903)

(946)

Net loss

(297,585)

(279,066)

(278,385)

(38,157)

(1,398,889)

(736,423)

(100,934)

Net income attributable to
     noncontrolling interests

(2,590)

(775)

(289)

(40)

(2,590)

(3,447)

(472)

Net loss attributable to Zhihu
     Inc.’s shareholders

(300,175)

(279,841)

(278,674)

(38,197)

(1,401,479)

(739,870)

(101,406)

Net loss per share

Basic

(0.98)

(0.92)

(0.94)

(0.13)

(4.60)

(2.45)

(0.34)

Diluted

(0.98)

(0.92)

(0.94)

(0.13)

(4.60)

(2.45)

(0.34)

Net loss per ADS (Two ADSs
     represent one Class A
     ordinary share)

Basic

(0.49)

(0.46)

(0.47)

(0.06)

(2.30)

(1.22)

(0.17)

Diluted

(0.49)

(0.46)

(0.47)

(0.06)

(2.30)

(1.22)

(0.17)

Weighted average number of
     ordinary shares outstanding

Basic

306,621,507

304,068,362

297,742,064

297,742,064

304,837,976

302,063,397

302,063,397

Diluted

306,621,507

304,068,362

297,742,064

297,742,064

304,837,976

302,063,397

302,063,397

 

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

For the Nine Months Ended

September 30,
2022

June 30,

2023

September 30,

2023

September 30,
2022

September 30,

2023

RMB

RMB

RMB

US$

RMB

RMB

US$

Share-based compensation
     expenses included in:

Cost of revenues

(411)

2,146

1,630

223

8,198

8,176

1,121

Selling and marketing
     expenses

6,647

6,384

5,741

787

19,315

20,883

2,862

Research and development
     expenses

16,608

14,941

13,758

1,886

46,672

49,904

6,840

General and administrative
     expenses

22,002

28,976

27,662

3,791

257,165

78,193

10,717

 

ZHIHU INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands)

As of December 31,

2022

As of September 30,

2023

RMB

RMB

US$

ASSETS

Current assets:

Cash and cash equivalents

4,525,852

3,133,073

429,423

Term deposits

948,390

1,147,648

157,298

Short-term investments

787,259

1,373,502

188,254

Trade receivables

834,251

624,251

85,561

Amounts due from related parties

24,798

12,834

1,759

Prepayments and other current assets

199,249

330,762

45,335

Total current assets

7,319,799

6,622,070

907,630

Non-current assets:

Property and equipment, net

7,290

10,865

1,489

Intangible assets, net

80,237

126,399

17,324

Goodwill

126,344

191,077

26,189

Long-term investments

30,000

4,112

Right-of-use assets         

100,119

44,772

6,137

Other non-current assets

22,450

23,072

3,162

Total non-current assets

336,440

426,185

58,413

Total assets

7,656,239

7,048,255

966,043

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Accounts payable and accrued liabilities

916,112

954,069

130,766

Salary and welfare payables

283,546

287,626

39,422

Taxes payables               

25,975

14,621

2,004

Contract liabilities

355,626

359,325

49,250

Amounts due to related parties

24,861

9,187

1,259

Short term lease liabilities             

53,190

47,784

6,549

Other current liabilities

165,531

238,980

32,755

Total current liabilities

1,824,841

1,911,592

262,005

Non-current liabilities

Long term lease liabilities

43,367

3,657

501

Deferred tax liabilities

11,630

23,642

3,240

 Other non-current liabilities

82,133

127,487

17,474

Total non-current liabilities

137,130

154,786

21,215

Total liabilities

1,961,971

2,066,378

283,220

Total Zhihu Inc.’s shareholders’ equity

5,653,696

4,894,135

670,797

Noncontrolling interests

40,572

87,742

12,026

Total shareholders’ equity

5,694,268

4,981,877

682,823

Total liabilities and shareholders’ equity

7,656,239

7,048,255

966,043

 

ZHIHU INC.

UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS

(All amounts in thousands)

For the Three Months Ended

For the Nine Months Ended

September 30,
2022

June 30,

2023

September 30,

2023

September 30,
2022

September 30,

2023

RMB

RMB

RMB

US$

RMB

RMB

US$

Loss from operations

(278,599)

(327,220)

(350,103)

(47,986)

(1,387,443)

(894,067)

(122,542)

Add:

Share-based compensation
     expenses

44,846

52,447

48,791

6,687

331,350

157,156

21,540

Amortization of intangible assets
     resulting from business
     acquisition

2,763

5,365

5,365

735

7,563

14,220

1,949

Adjusted loss from operations

(230,990)

(269,408)

(295,947)

(40,564)

(1,048,530)

(722,691)

(99,053)

Net loss

(297,585)

(279,066)

(278,385)

(38,157)

(1,398,889)

(736,423)

(100,934)

Add:

Share-based compensation
     expenses

44,846

52,447

48,791

6,687

331,350

157,156

21,540

Amortization of intangible
     assets resulting from
     business acquisition

2,763

5,365

5,365

735

7,563

14,220

1,949

Tax effects on non-GAAP
     adjustments

(600)

(1,069)

(1,069)

(146)

(1,800)

(2,738)

(375)

Adjusted net loss

(250,576)

(222,323)

(225,298)

(30,881)

(1,061,776)

(567,785)

(77,820)

 

Cision View original content:https://www.prnewswire.com/news-releases/zhihu-inc-reports-unaudited-third-quarter-2023-financial-results-302000358.html

SOURCE Zhihu Inc.