Zhihu Inc. Reports Unaudited Fourth Quarter and Fiscal Year 2023 Financial Results

BEIJING, March 26, 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 and fiscal year ended December 31, 2023.

Fourth Quarter 2023 Highlights

  • Total revenues were RMB1,138.3 million (US$160.3 million) in the fourth quarter of 2023, representing a 2.2% increase from the same period of 2022.
  • Gross margin expanded to 59.1% in the fourth quarter of 2023 from 56.4% in the same period of 2022.
  • Net loss was RMB103.1 million (US$14.5 million) in the fourth quarter of 2023, narrowed by 42.6% from the same period of 2022.
  • Adjusted net loss (non-GAAP)[1] was RMB91.3 million (US$12.9 million) in the fourth quarter of 2023, narrowed by 31.9% from the same period of 2022.
  • Average monthly active users (MAUs)[2] reached 99.0 million in the fourth quarter of 2023.
  • Average monthly subscribing members[3] reached 14.2 million in the fourth quarter of 2023, representing a 9.2% increase from the same period of 2022.

Fiscal Year 2023 Highlights

  • Total revenues were RMB4,198.9 million (US$591.4 million) in 2023, representing a 16.5% increase from 2022.
  • Gross margin expanded to 54.7% in 2023 from 50.2% in 2022.
  • Net loss was RMB839.5 million (US$118.2 million) in 2023, narrowed by 46.8% from 2022.
  • Adjusted net loss (non-GAAP)[1] was RMB659.1 million (US$92.8 million) in 2023, narrowed by 44.9% from 2022.

"In the fourth quarter of 2023, we successfully navigated a challenging macroeconomic and competitive environment and achieved meaningful revenue growth and efficiency improvement through our multi-engine monetization approach, bolstered by our valuable community ecosystem," said Mr. Yuan Zhou, chairman and chief executive officer of Zhihu. "We also honed our content strategy to fortify our position as a trustworthy online content community. By prioritizing user experience and improving our strategic execution, cost control and overall efficiency, we have set the stage for sustainable growth and continued value creation for our users and stakeholders."

Mr. Han Wang, chief financial officer of Zhihu, added, "While we faced a myriad of challenges in 2023, we remained resilient and dedicated to our multi-engine monetization strategy. As a result, our total revenues for the fourth quarter and full year increased by 2.2% and 16.5% year over year, respectively. Through prudent cost control and operating leverage, we were pleased to conclude the year with a further enhanced gross margin and significantly narrowed bottom-line loss. Going forward, we will remain committed to boosting our operating efficiency to reinforce our trajectory towards profitability."

Fourth Quarter 2023 Financial Results

Total revenues were RMB1,138.3 million (US$160.3 million), representing a 2.2% increase from RMB1,114.0 million in the same period of 2022.

Marketing services revenue[4] was RMB465.2 million (US$65.5 million), compared with RMB572.4 million in the same period of 2022.

Paid membership revenue was RMB455.9 million (US$64.2 million), representing a 13.3% increase from RMB402.5 million in the same period of 2022. The increase was primarily driven by the continued growth of our subscribing members.

Vocational training revenue was RMB169.3 million (US$23.8 million), representing a 100.1% increase from RMB84.6 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 vocational training businesses.

Other revenues were RMB48.0 million (US$6.8 million), compared with RMB54.5 million in the same period of 2022.

Cost of revenues decreased by 4.2% to RMB465.2 million (US$65.5 million) from RMB485.4 million in the same period of 2022, primarily attributable to a decrease in cloud services and bandwidth costs resulting from our improved efficiency.

Gross profit increased by 7.1% to RMB673.1 million (US$94.8 million) from RMB628.5 million in the same period of 2022. Gross margin expanded to 59.1% from 56.4% 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 RMB851.3 million (US$119.9 million), compared with RMB844.8 million in the same period of 2022.

Selling and marketing expenses increased to RMB527.6 million (US$74.3 million) from RMB509.2 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 RMB232.6 million (US$32.8 million) from RMB212.5 million in the same period of 2022. The increase was primarily attributable to our increased spending on technology innovation.

General and administrative expenses decreased by 26.0% to RMB91.1 million (US$12.8 million) from RMB123.1 million in the same period of 2022. The decrease was primarily attributable to a decline in personnel-related expenses.

Loss from operations was narrowed by 17.6% to RMB178.2 million (US$25.1 million) from RMB216.3 million in the same period of 2022. 

Adjusted loss from operations (non-GAAP)[1] decreased to RMB165.3 million (US$23.3 million) from RMB170.3 million in the same period of 2022. 

Net loss was narrowed by 42.6% to RMB103.1 million (US$14.5 million) from RMB179.5 million in the same period of 2022.

Adjusted net loss (non-GAAP)[1] was narrowed by 31.9% to RMB91.3 million (US$12.9 million) from RMB134.1 million in the same period of 2022.

Diluted net loss per American depositary share ("ADS") was RMB0.18 (US$0.03), compared with RMB0.29 in the same period of 2022.

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

As of December 31, 2023, the Company had cash and cash equivalents, term deposits and short-term investments of RMB5,462.9 million (US$769.4 million), compared with RMB6,261.5 million as of December 31, 2022.

Fiscal Year 2023 Financial Results

Total revenues were RMB4,198.9 million (US$591.4 million), representing a 16.5% increase from RMB3,604.9 million in 2022.

Marketing services revenue[4] was RMB1,653.0 million (US$232.8 million), compared with RMB1,956.5 million in 2022.

Paid membership revenue was RMB1,826.6 million (US$257.3 million), representing a 48.4% increase from RMB1,230.8 million in 2022. The increase was primarily driven by the continued growth of our subscribing members.

Vocational training revenue was RMB565.6 million (US$79.7 million), representing a 127.8% increase from RMB248.3 million in 2022. The significant increase was primarily attributable to our further enriched online course offerings and the revenue contributions from our recently acquired vocational training businesses.

Other revenues were RMB153.8 million (US$21.7 million), compared with RMB169.4 million in 2022.

Cost of revenues increased to RMB1,903.0 million (US$268.0 million) from RMB1,796.9 million in 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 payment processing costs driven by our revenue growth, partially offset by the decrease in cloud services and bandwidth costs.

Gross profit increased by 27.0% to RMB2,295.8 million (US$323.4 million) from RMB1,808.1 million in 2022. Gross margin expanded to 54.7% from 50.2% in 2022, primarily attributable to our enhanced monetization efforts and the improvement of cloud services and bandwidth utilization efficiency.

Total operating expenses decreased to RMB3,368.1 million (US$474.4 million) from RMB3,411.8 million in 2022.

Selling and marketing expenses were RMB2,048.1 million (US$288.5 million), compared with RMB2,026.5 million in 2022.

Research and development expenses increased to RMB901.5 million (US$127.0 million) from RMB763.4 million in 2022. The increase was primarily attributable to our increased spending on technology innovation.

General and administrative expenses decreased to RMB418.5 million (US$58.9 million) from RMB622.0 million in 2022. The decrease was primarily attributable to lower share-based compensation expenses.

Loss from operations was narrowed by 33.1% to RMB1,072.2 million (US$151.0 million) from RMB1,603.8 million in 2022. 

Adjusted loss from operations (non-GAAP)[1] was narrowed by 27.1% to RMB888.0 million (US$125.1 million) from RMB1,218.8 million in 2022.

Net loss was narrowed by 46.8% to RMB839.5 million (US$118.2 million) from RMB1,578.4 million in 2022.

Adjusted net loss (non-GAAP)[1] was narrowed by 44.9% to RMB659.1 million (US$92.8 million) from RMB1,195.9 million in 2022.

Diluted net loss per ADS was RMB1.41 (US$0.20), compared with RMB2.59 in 2022.

Share Repurchase Program

As of December 31, 2023, 26.3 million Class A ordinary shares (including Class A ordinary shares underlying the ADSs) had been repurchased for a total price of US$58.5 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 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 7:00 a.m. U.S. Eastern Time on March 26, 2024 (7:00 p.m. Beijing/Hong Kong time on March 26, 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/10187223/fbcf65bd2c

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 April 2, 2024, by dialing the following telephone numbers:

United States (toll free):

+1-877-344-7529

International:

+1-412-317-0088

Replay Access Code:

4320125

 

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 RMB7.0999 to US$1.00, the exchange rate in effect as of December 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: ir@zhihu.com 

Piacente Financial Communications
Hele
n 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


For the Year Ended


December 31,

2022


September 30,

2023


December 31,

2023


December 31,

2022


December 31,

2023


RMB


RMB


RMB


US$


RMB


RMB


US$

Revenues: 














Marketing services

572,387


382,962


465,153


65,515


1,956,480


1,652,992


232,819

Paid membership

402,531


466,784


455,906


64,213


1,230,804


1,826,557


257,265

Vocational training

84,591


144,795


169,272


23,841


248,266


565,585


79,661

Others

54,456


27,622


47,966


6,756


169,369


153,755


21,656

Total revenues

1,113,965


1,022,163


1,138,297


160,325


3,604,919


4,198,889


591,401

Cost of revenues

(485,442)


(473,712)


(465,197)


(65,522)


(1,796,867)


(1,903,041)


(268,038)

Gross profit

628,523


548,451


673,100


94,803


1,808,052


2,295,848


323,363















Selling and marketing expenses

(509,229)


(534,328)


(527,604)


(74,311)


(2,026,468)


(2,048,090)


(288,467)

Research and development
   expenses

(212,495)


(249,662)


(232,585)


(32,759)


(763,362)


(901,452)


(126,967)

General and administrative
   expenses

(123,107)


(114,564)


(91,069)


(12,827)


(621,973)


(418,531)


(58,949)

Total operating expenses

(844,831)


(898,554)


(851,258)


(119,897)


(3,411,803)


(3,368,073)


(474,383)















Loss from operations

(216,308)


(350,103)


(178,158)


(25,094)


(1,603,751)


(1,072,225)


(151,020)















Other income/(expenses):














Investment income

5,922


11,617


12,279


1,729


70,380


41,695


5,873

Interest income

33,671


40,363


38,828


5,469


68,104


158,671


22,348

Fair value change of financial
   instruments

(4,619)


(7,352)


14,780


2,082


(176,685)


(5,170)


(728)

Exchange (losses)/gains

(1,524)


(393)


(937)


(132)


71,749


97


14

Others, net

6,099


27,227


15,032


2,117


5,983


49,236


6,935















Loss before income tax

(176,759)


(278,641)


(98,176)


(13,829)


(1,564,220)


(827,696)


(116,578)

Income tax (expense)/benefit

(2,755)


256


(4,929)


(694)


(14,183)


(11,832)


(1,667)

Net loss

(179,514)


(278,385)


(103,105)


(14,523)


(1,578,403)


(839,528)


(118,245)

Net income attributable to
   noncontrolling interests

(164)


(289)


(666)


(94)


(2,754)


(4,113)


(579)

Net loss attributable to Zhihu
   Inc.'s shareholders

(179,678)


(278,674)


(103,771)


(14,617)


(1,581,157)


(843,641)


(118,824)















Net loss per share














Basic

(0.59)


(0.94)


(0.36)


(0.05)


(5.19)


(2.82)


(0.40)

Diluted

(0.59)


(0.94)


(0.36)


(0.05)


(5.19)


(2.82)


(0.40)















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














Basic

(0.29)


(0.47)


(0.18)


(0.03)


(2.59)


(1.41)


(0.20)

Diluted

(0.29)


(0.47)


(0.18)


(0.03)


(2.59)


(1.41)


(0.20)















Weighted average number of
   ordinary shares outstanding














Basic

304,665,906


297,742,064


291,056,615


291,056,615


304,836,318


299,132,894


299,132,894

Diluted

304,665,906


297,742,064


291,056,615


291,056,615


304,836,318


299,132,894


299,132,894















 

 

 

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 Year Ended


December 31,

2022


September 30,

2023


December 31,

2023


December 31,

2022


December 31,

2023


RMB


RMB


RMB


US$


RMB


RMB


US$

Share-based compensation
    expenses included in:














Cost of revenues

3,663


1,630


1,575


221


11,861


9,751


1,373

Selling and marketing
   expenses

5,019


5,741


(7,001)


(986)


24,334


13,882


1,955

Research and development
   expenses

15,831


13,758


(57)


(8)


62,503


49,847


7,021

General and administrative
   expenses

18,032


27,662


12,983


1,829


275,197


91,176


12,842

 

 

 

ZHIHU INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands)




As of December 31,

2022


As of December 31,

2023


RMB


RMB


US$

ASSETS






Current assets:






Cash and cash equivalents

4,525,852


2,106,639


296,714

Term deposits

948,390


1,586,469


223,449

Short-term investments

787,259


1,769,822


249,274

Trade receivables

834,251


664,615


93,609

Amounts due from related parties

24,798


18,319


2,580

Prepayments and other current assets

199,249


232,016


32,679

Total current assets

7,319,799


6,377,880


898,305

Non-current assets:






Property and equipment, net

7,290


10,849


1,528

Intangible assets, net

80,237


122,645


17,274

Goodwill

126,344


191,077


26,913

Long-term investments

-


44,621


6,285

Right-of-use assets         

100,119


40,211


5,664

Other non-current assets

22,450


7,989


1,125

Total non-current assets

336,440


417,392


58,789

Total assets

7,656,239


6,795,272


957,094

LIABILITIES AND SHAREHOLDERS' EQUITY






Current liabilities






Accounts payable and accrued liabilities

916,112


1,038,531


146,274

Salary and welfare payables

283,546


342,125


48,187

Taxes payables               

25,975


21,394


3,013

Contract liabilities

355,626


303,574


42,758

Amounts due to related parties

24,861


26,032


3,667

Short term lease liabilities             

53,190


42,089


5,929

Other current liabilities

165,531


171,743


24,189

Total current liabilities

1,824,841


1,945,488


274,017

Non-current liabilities






Long term lease liabilities

43,367


3,642


513

Deferred tax liabilities

11,630


22,574


3,179

Other non-current liabilities

82,133


121,958


17,177

Total non-current liabilities

137,130


148,174


20,869

Total liabilities

1,961,971


2,093,662


294,886







Total Zhihu Inc.'s shareholders' equity

5,653,696


4,599,810


647,870

Noncontrolling interests

40,572


101,800


14,338

Total shareholders' equity

5,694,268


4,701,610


662,208







Total liabilities and shareholders' equity

7,656,239


6,795,272


957,094

 

 

 

ZHIHU INC.

UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS

(All amounts in thousands)




For the Three Months Ended


For the Year Ended


December 31,

2022


September 30,

2023


December 31,

2023


December 31,

2022


December 31,

2023


RMB


RMB


RMB


US$


RMB


RMB


US$

Loss from operations

(216,308)


(350,103)


(178,158)


(25,094)


(1,603,751)


(1,072,225)


(151,020)

Add:














Share-based compensation
   expenses

42,545


48,791


7,500


1,056


373,895


164,656


23,191

Amortization of intangible
   assets resulting from
   business acquisitions

3,490


5,365


5,365


756


11,053


19,585


2,758

Adjusted loss from
   operations

(170,273)


(295,947)


(165,293)


(23,282)


(1,218,803)


(887,984)


(125,071)





























Net loss

(179,514)


(278,385)


(103,105)


(14,523)


(1,578,403)


(839,528)


(118,245)

Add:














Share-based compensation
   expenses

42,545


48,791


7,500


1,056


373,895


164,656


23,191

Amortization of intangible
   assets resulting from
   business acquisitions

3,490


5,365


5,365


756


11,053


19,585


2,758

Tax effects on non-GAAP
   adjustments

(600)


(1,069)


(1,069)


(151)


(2,400)


(3,806)


(536)

Adjusted net loss

(134,079)


(225,298)


(91,309)


(12,862)


(1,195,855)


(659,093)


(92,832)

 

SOURCE Zhihu Inc.