BEIJING, Aug. 23, 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 June 30, 2023.

Second Quarter 2023 Highlights

  • Total revenues were RMB1,044.2 million (US$144.0 million) in the second quarter of 2023, representing a 24.9% increase from the same period of 2022.
  • Net loss was RMB279.1 million (US$38.5 million) in the second quarter of 2023, narrowed by 42.7% from the same period of 2022.
  • Adjusted net loss (non-GAAP)[1] was RMB222.3 million (US$30.7 million) in the second quarter of 2023, narrowed by 49.9% from the same period of 2022.
  • Average monthly active users (MAUs)[2] reached 109.4 million in the second quarter of 2023, up from 105.9 million in the same period of 2022. 
  • Average monthly subscribing members[3] reached 14.0 million in the second quarter of 2023, representing a 65.3% increase from the same period of 2022.

“In the second quarter of 2023, we continued to achieve high-quality growth and optimize our operating efficiency,” said Mr. Yuan Zhou, chairman and chief executive officer of Zhihu. “Meanwhile, our dedication to content enrichment encouraged deeper user engagement and inspired our content creators. Bolstered by Zhihu’s prominent brand name and comprehensive product offerings, our paid membership and vocational training businesses continued to grow rapidly. We also remained committed to investing in cutting-edge technology to improve content consumption efficiency and develop new user experiences.”

Mr. Henry Sha, chief financial officer of Zhihu, added, “Our multi-engine business model delivered solid results this quarter with sustainable growth momentum. Our total revenue increased by 24.9% year over year, benefiting from our robust and growing paid membership and vocational training businesses. Our gross margin also expanded further during the quarter, by 6 percentage points year over year to 53.8%, boosted by our effective and ongoing cost control measures. In comparison with the same period last year, our adjusted net loss narrowed by 49.9%. Going forward, we will continue to concentrate on our loss reduction strategy and working to achieve healthy growth.”

Second Quarter 2023 Financial Results

Total revenues were RMB1,044.2 million (US$144.0 million) in the second quarter of 2023, representing a 24.9% increase from RMB836.0 million in the same period of 2022.

Marketing services revenue[4] was RMB412.7 million (US$56.9 million), compared with RMB478.1 million in the same period of 2022. The decrease was primarily due to ongoing refinement of service offerings to strategically focus on margin improvement.

Paid membership revenue was RMB449.1 million (US$61.9 million), representing a 65.6% increase from RMB271.2 million in the same period of 2022. The increase was primarily attributable to the continued growth of our subscribing members, driven by our content enhancements and improved user experience.

Vocational training revenue was RMB144.5 million (US$19.9 million), representing a 213.3% increase from RMB46.1 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 RMB37.9 million (US$5.2 million), compared with RMB40.7 million in the same period of 2022.

Cost of revenues increased by 10.5% to RMB482.1 million (US$66.5 million) from RMB436.4 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, as well as an increase in payment processing costs driven by our revenue growth, and was partially offset by the decrease in cloud services and bandwidth costs.

Gross profit increased by 40.7% to RMB562.1 million (US$77.5 million) from RMB399.6 million in the same period of 2022. Gross margin expanded to 53.8% from 47.8% 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 RMB889.3 million (US$122.6 million), compared with RMB860.3 million in the same period of 2022.

Selling and marketing expenses increased to RMB540.6 million (US$74.6 million) from RMB532.4 million in the same period of 2022. The slight increase reflects our continued efforts in promoting our product and service offerings.

Research and development expenses increased to RMB236.2 million (US$32.6 million) from RMB223.6 million in the same period of 2022. The increase was primarily attributable to our increased spending in technology innovation.

General and administrative expenses increased to RMB112.5 million (US$15.5 million) from RMB104.3 million in the same period of 2022. The increase was primarily due to increased share-based compensation expenses.

Loss from operations narrowed by 29.0% to RMB327.2 million (US$45.1 million) from RMB460.7 million in the same period of 2022. 

Adjusted loss from operations (non-GAAP)[1] narrowed by 35.4% to RMB269.4 million (US$37.2 million) from RMB416.8 million in the same period of 2022. 

Net loss narrowed by 42.7% to RMB279.1 million (US$38.5 million) from RMB487.0 million in the same period of 2022.

Adjusted net loss (non-GAAP)[1] narrowed by 49.9% to RMB222.3 million (US$30.7 million) from RMB443.8 million in the same period of 2022.

Diluted net loss per American Depositary Share (“ADS”) was RMB0.46 (US$0.06), compared with RMB0.79 in the same period of 2022.

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

As of June 30, 2023, the Company had cash and cash equivalents, term deposits and short-term investments of RMB6,158.6 million (US$849.3 million), compared with RMB6,261.5 million as of December 31, 2022.

Share Repurchase Program

As was previously announced, the Company established a share repurchase program in May 2022, which was extended in May 2023, under which the Company may repurchase up to US$100 million of Class A ordinary shares or ADSs until June 10, 2024 (the “Repurchase Program”). 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. As of June 30, 2023, approximately 13.0 million Class A ordinary shares (including Class A ordinary shares underlying the ADSs) had been repurchased on both the New York Stock Exchange and The Stock Exchange of Hong Kong Limited under the Repurchase Program for a total price of US$30.8 million.

[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 8:00 a.m. U.S. Eastern Time on August 23, 2023 (8:00 p.m. Beijing/Hong Kong time on August 23, 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/10181708/fa277db324

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 August 30, 2023, by dialing the following telephone numbers:

United States (toll free):

+1-877-344-7529

International:

+1-412-317-0088

Replay Access Code:

6924451

About Zhihu Inc.

Zhihu Inc. (NYSE: ZH; HKEX: 2390), 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 Measure

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 RMB7.2513 to US$1.00, the exchange rate in effect as of June 30, 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
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

For the Six Months Ended

June 30,

2022

March 31,

2023

June 30,

2023

June 30,

2022

June 30,

2023

RMB

RMB

RMB

US$

RMB

RMB

US$

Revenues: 

Marketing services

478,051

392,137

412,740

56,919

922,155

804,877

110,998

Paid membership

271,168

454,769

449,098

61,933

492,838

903,867

124,649

Vocational training

46,127

106,998

144,520

19,930

85,671

251,518

34,686

Others

40,670

40,316

37,851

5,220

78,579

78,167

10,780

Total revenues

836,016

994,220

1,044,209

144,002

1,579,243

2,038,429

281,113

Cost of revenues

(436,414)

(482,001)

(482,131)

(66,489)

(844,098)

(964,132)

(132,960)

Gross profit

399,602

512,219

562,078

77,513

735,145

1,074,297

148,153

Selling and marketing expenses

(532,375)

(445,565)

(540,593)

(74,551)

(1,038,960)

(986,158)

(135,997)

Research and development
   expenses

(223,589)

(182,960)

(236,245)

(32,580)

(390,107)

(419,205)

(57,811)

General and administrative
   expenses

(104,290)

(100,438)

(112,460)

(15,509)

(414,922)

(212,898)

(29,360)

Total operating expenses

(860,254)

(728,963)

(889,298)

(122,640)

(1,843,989)

(1,618,261)

(223,168)

Loss from operations

(460,652)

(216,744)

(327,220)

(45,127)

(1,108,844)

(543,964)

(75,015)

Other income/(expenses):

Investment income

20,596

6,006

11,793

1,626

41,320

17,799

2,455

Interest income

10,480

39,493

39,987

5,514

19,835

79,480

10,961

Fair value change of financial
   instruments

(101,197)

(3,582)

(9,016)

(1,243)

(92,744)

(12,598)

(1,737)

Exchange gains/(losses)

49,126

(5,649)

7,076

976

44,971

1,427

197

Others, net

1,001

6,333

644

89

2,931

6,977

962

Loss before income tax

(480,646)

(174,143)

(276,736)

(38,165)

(1,092,531)

(450,879)

(62,177)

Income tax expense

(6,375)

(4,829)

(2,330)

(321)

(8,773)

(7,159)

(987)

Net loss

(487,021)

(178,972)

(279,066)

(38,486)

(1,101,304)

(458,038)

(63,164)

Net income attributable to
   noncontrolling interests

(2,383)

(775)

(107)

(3,158)

(436)

Net loss attributable to Zhihu
   Inc.’s shareholders

(487,021)

(181,355)

(279,841)

(38,593)

(1,101,304)

(461,196)

(63,600)

Net loss per share

Basic

(1.59)

(0.59)

(0.92)

(0.13)

(3.62)

(1.52)

(0.21)

Diluted

(1.59)

(0.59)

(0.92)

(0.13)

(3.62)

(1.52)

(0.21)

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

Basic

(0.79)

(0.30)

(0.46)

(0.06)

(1.81)

(0.76)

(0.10)

Diluted

(0.79)

(0.30)

(0.46)

(0.06)

(1.81)

(0.76)

(0.10)

Weighted average number of
   ordinary shares outstanding

Basic

307,101,052

305,245,036

304,068,362

304,068,362

303,843,801

304,052,681

304,052,681

Diluted

307,101,052

305,245,036

304,068,362

304,068,362

303,843,801

304,052,681

304,052,681

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 Six Months Ended

June 30,

2022

March 31,

2023

June 30,

2023

June 30,

2022

June 30,

2023

RMB

RMB

RMB

US$

RMB

RMB

US$

Share-based compensation
  expenses included in:

Cost of revenues

3,839

4,400

2,146

296

8,609

6,546

903

Selling and marketing
   expenses

6,196

8,758

6,384

881

12,668

15,142

2,088

Research and development
   expenses

14,294

21,205

14,941

2,060

30,064

36,146

4,985

General and administrative
   expenses

17,108

21,555

28,976

3,996

235,163

50,531

6,968

ZHIHU INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands)

As of December 31,

2022

As of June 30,

2023

RMB

RMB

US$

ASSETS

Current assets:

Cash and cash equivalents

4,525,852

4,033,624

556,262

Term deposits

948,390

1,068,551

147,360

Short-term investments

787,259

1,056,376

145,681

Trade receivables

834,251

751,276

103,606

Amounts due from related parties

24,798

9,833

1,356

Prepayments and other current assets

199,249

239,671

33,052

Total current assets

7,319,799

7,159,331

987,317

Non-current assets:

Property and equipment, net

7,290

9,410

1,298

Intangible assets, net

80,237

131,688

18,161

Goodwill

126,344

191,077

26,351

Long-term investments

30,000

4,137

Right-of-use assets         

100,119

82,138

11,327

Other non-current assets

22,450

29,946

4,130

Total non-current assets

336,440

474,259

65,404

Total assets

7,656,239

7,633,590

1,052,721

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Accounts payables and accrued liabilities

916,112

1,136,723

156,761

Salary and welfare payables

283,546

239,535

33,033

Taxes payables               

25,975

29,028

4,003

Contract liabilities

355,626

378,279

52,167

Amounts due to related parties

24,861

16,580

2,286

Short term lease liabilities             

53,190

61,024

8,416

Other current liabilities

165,531

229,399

31,636

Total current liabilities

1,824,841

2,090,568

288,302

Non-current liabilities

Long term lease liabilities

43,367

19,759

2,725

Deferred tax liabilities

11,630

24,711

3,408

 Other non-current liabilities

82,133

153,084

21,111

Total non-current liabilities

137,130

197,554

27,244

Total liabilities

1,961,971

2,288,122

315,546

Total Zhihu Inc.’s shareholders’ equity

5,653,696

5,271,380

726,958

Noncontrolling interests

40,572

74,088

10,217

Total shareholders’ equity

5,694,268

5,345,468

737,175

Total liabilities and shareholders’ equity

7,656,239

7,633,590

1,052,721

ZHIHU INC.

UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS

(All amounts in thousands)

For the Three Months Ended

For the Six Months Ended

June 30,

2022

March 31,

2023

June 30,

2023

June 30,

2022

June 30,

2023

RMB

RMB

RMB

US$

RMB

RMB

US$

Loss from operations

(460,652)

(216,744)

(327,220)

(45,127)

(1,108,844)

(543,964)

(75,015)

Add:

Share-based compensation
   expenses

41,437

55,918

52,447

7,233

286,504

108,365

14,944

Amortization of intangible assets
   resulting from business
   acquisition

2,400

 

3,490

5,365

740

4,800

8,855

1,221

Adjusted loss from operations

(416,815)

(157,336)

(269,408)

(37,154)

(817,540)

(426,744)

(58,850)

Net loss

(487,021)

(178,972)

(279,066)

(38,486)

(1,101,304)

(458,038)

(63,164)

Add:

Share-based compensation
   expenses

41,437

55,918

52,447

7,233

286,504

108,365

14,944

Amortization of intangible
   assets resulting from
   business acquisition

2,400

3,490

5,365

740

4,800

8,855

1,221

Tax effects on non-GAAP
   adjustments

(600)

(600)

(1,069)

(147)

(1,200)

(1,669)

(230)

Adjusted net loss

(443,784)

(120,164)

(222,323)

(30,660)

(811,200)

(342,487)

(47,229)

Source: Zhihu Inc.