Zhihu Inc. Reports Unaudited Third Quarter 2023 Financial Results

Rhea-AI Summary

Zhihu Inc. (NYSE: ZH; HKEX: 2390) announced unaudited financial results for Q3 2023, with RMB1,022.2 million total revenues, a 12.1% increase from 2022, and a narrowed net loss of RMB278.4 million. MAUs reached 110.5 million, with paid members at 14.8 million, showing a 35.9% increase.

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: 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 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)

 

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SOURCE Zhihu Inc.

FAQ

What are Zhihu Inc.'s (NYSE: ZH; HKEX: 2390) Q3 2023 financial results?

Zhihu Inc. announced unaudited financial results for Q3 2023, with RMB1,022.2 million total revenues, a 12.1% increase from 2022, and a narrowed net loss of RMB278.4 million.

How many monthly active users (MAUs) did Zhihu Inc. (NYSE: ZH; HKEX: 2390) have in Q3 2023?

MAUs reached 110.5 million in Q3 2023.

What was the net loss of Zhihu Inc. (NYSE: ZH; HKEX: 2390) in Q3 2023?

The net loss was RMB278.4 million in Q3 2023, narrowed by 6.5% from the same period of 2022.

How many paid members did Zhihu Inc. (NYSE: ZH; HKEX: 2390) have in Q3 2023?

Paid members reached 14.8 million in Q3 2023, showing a 35.9% increase.

What is the multi-engine monetization strategy mentioned by Zhihu Inc.'s (NYSE: ZH; HKEX: 2390) CEO?

The CEO mentioned that Zhihu will devote more resources to its multi-engine monetization strategy on a mid- to long-term basis to deliver resilient revenue growth.