Zhihu Inc. Reports Unaudited Third Quarter 2024 Financial Results

Rhea-AI Summary

Zhihu reported Q3 2024 financial results with total revenues of RMB845.0 million (US$120.4 million), down from RMB1,022.2 million in Q3 2023. Despite revenue decline, the company showed significant improvement in profitability metrics. Gross margin expanded to 63.9% from 53.7% year-over-year, while net loss narrowed by 96.8% to RMB9.0 million. The company maintained 81.1 million monthly active users and 16.5 million average monthly subscribing members. Cost optimization efforts led to a 35.6% decrease in costs of revenues and 30.5% reduction in operating expenses.

Positive

• Gross margin expanded significantly to 63.9% from 53.7% YoY
• Net loss narrowed by 96.8% to RMB9.0 million
• Total operating expenses decreased by 30.5%
• Cost of revenues decreased by 35.6%
• Strong cash position with RMB5,048.0 million in cash and equivalents

Negative

• Total revenues declined 17.3% YoY to RMB845.0 million
• Marketing services revenue decreased by 33% YoY
• Vocational training revenue dropped 27.4% YoY
• Paid membership revenue slightly decreased YoY

Insights

Financial Analyst

Zhihu's Q3 results show significant progress in profitability despite revenue headwinds. The RMB845.0 million revenue represents a 17.3% YoY decline, but gross margin expanded impressively to 63.9% from 53.7%. The company achieved its lowest quarterly loss since IPO, with net loss narrowing by 96.8% to just RMB9.0 million.

The cost optimization strategy is yielding results, with total operating expenses down 30.5% YoY. The company maintains a strong balance sheet with RMB5.05 billion in cash and equivalents. The recent share repurchase activities, including a tender offer that bought back 11.2% of outstanding shares, demonstrate management's confidence in the company's value proposition.

Market Research Analyst

The platform's user metrics reveal both challenges and opportunities. While maintaining 81.1 million MAUs, the focus on premium content is evident with 16.5 million average monthly subscribers. The strategic pivot toward AI-powered search with "Zhihu Zhida" and "Professional Search" represents a differentiated approach in the competitive content market. The decline in marketing services revenue by 33% YoY suggests a deliberate shift toward higher-margin business models, prioritizing quality over quantity in revenue generation.

BEIJING, Nov. 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 ended September 30, 2024.

Third Quarter 2024 Highlights

• Total revenues were RMB845.0 million (US$120.4 million) in the third quarter of 2024, compared with RMB1,022.2 million in the same period of 2023.

• Gross margin expanded to 63.9% in the third quarter of 2024 from 53.7% in the same period of 2023.

• Net loss was RMB9.0 million (US$1.3 million) in the third quarter of 2024, narrowed by 96.8% from the same period of 2023.

• Adjusted net loss (non-GAAP)^[1] was RMB13.1 million (US$1.9 million) in the third quarter of 2024, narrowed by 94.2% from the same period of 2023.

• Average monthly active users (MAUs)^[2] were 81.1 million in the third quarter of 2024. 

• Average monthly subscribing members^[3] were 16.5 million in the third quarter of 2024.

"In the third quarter, we strengthened our commitment to reducing losses and executed our strategies with precision," said Mr. Yuan Zhou, chairman and chief executive officer of Zhihu. "Our community ecosystem optimization has produced multiple positive outcomes, including steady improvements across key user health metrics and quarter-over-quarter MAU growth. We also revitalized our content creators' confidence, leading to enhanced content quality, elevated engagement, and a thriving community atmosphere. Furthermore, user visits to Zhihu Zhida, our AI-powered search tool, have increased rapidly. Building on this momentum, we introduced the 'Professional Search' feature, which represents a meaningful step forward in building our differentiated approach in exploring deeper, specialized scenarios. Going forward, we will remain dedicated to enhancing the user experience and deepening community trustworthiness to unlock the full potential of Zhihu's brand and user base."

Mr. Han Wang, chief financial officer of Zhihu, added, "We continued to improve profitability and achieved another milestone, delivering our lowest quarterly loss since our U.S. IPO. In the third quarter, our gross profit margin expanded to 63.9%, with total costs and operating expenses decreasing year-over-year by 35.6% and 30.5%, respectively, driven by enhanced operational efficiency and disciplined cost management. Looking ahead, we will dedicate more resources to strategically exploring business models that reinforce Zhihu's high-value brand image and distinctive user positioning. In the long-term, we aim to achieve sustainable profitability growth, empowering substantial value returns to our shareholders."

Third Quarter 2024 Financial Results

Total revenues were RMB845.0 million (US$120.4 million) in the third quarter of 2024, compared with RMB1,022.2 million in the same period of 2023.

Marketing services revenue was RMB256.6 million (US$36.6 million), compared with RMB383.0 million in the same period of 2023. The decrease was primarily due to our proactive and ongoing refinement of service offerings to strategically focus on margin improvement.

Paid membership revenue was RMB459.4 million (US$65.5 million), compared with RMB466.8 million in the same period of 2023. The slight decrease was primarily attributable to a marginal decline in our average revenue per subscribing member.

Vocational training revenue was RMB105.1 million (US$15.0 million), compared with RMB144.8 million in the same period of 2023. The decrease was primarily driven by lower revenue contributions from our acquired businesses, partially offset by the growth of our self-operated course offerings.

Other revenues were RMB23.9 million (US$3.4 million), compared with RMB27.6 million in the same period of 2023.

Cost of revenues decreased by 35.6% to RMB304.9 million (US$43.4 million) from RMB473.7 million in the same period of 2023. The decrease was primarily due to reduced content and operating costs associated with the decline in our revenues, and a decrease in cloud services and bandwidth costs resulting from our improved technological efficiency.

Gross profit was RMB540.1 million (US$77.0 million), compared with RMB548.5 million in the same period of 2023. Gross margin expanded to 63.9% from 53.7% in the same period of 2023, primarily attributable to our monetization enhancements and improvements in our operating efficiency. 

Total operating expenses decreased by 30.5% to RMB624.5 million (US$89.0 million) from RMB898.6 million in the same period of 2023.

Selling and marketing expenses decreased by 27.4% to RMB388.0 million (US$55.3 million) from RMB534.3 million in the same period of 2023. The decrease was primarily due to more disciplined promotional spending and a decrease in personnel-related expenses.

Research and development expenses decreased by 28.2% to RMB179.3 million (US$25.5 million) from RMB249.7 million in the same period of 2023. The decrease was primarily attributable to more efficient spending on technology innovation and a decrease in personnel-related expenses.

General and administrative expenses decreased by 50.1% to RMB57.2 million (US$8.1 million) from RMB114.6 million in the same period of 2023. The decrease was primarily attributable to lower share-based compensation expenses.

Loss from operations narrowed by 75.9% to RMB84.3 million (US$12.0 million) from RMB350.1 million in the same period of 2023.

Adjusted loss from operations (non-GAAP)^[1] narrowed by 70.3% to RMB87.8 million (US$12.5 million) from RMB295.9 million in the same period of 2023.

Net loss narrowed by 96.8% to RMB9.0 million (US$1.3 million) from RMB278.4 million in the same period of 2023.

Adjusted net loss (non-GAAP)^[1] narrowed by 94.2% to RMB13.1 million (US$1.9 million) from RMB225.3 million in the same period of 2023.

Diluted net loss per American depositary share ("ADS") ^[4] was RMB0.11 (US$0.02), compared with RMB2.81 in the same period of 2023.

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

As of September 30, 2024, the Company had cash and cash equivalents, term deposits, restricted cash and short-term investments of RMB5,048.0 million (US$719.3 million), compared with RMB5,462.9 million as of December 31, 2023.

Share Repurchase Programs

As of September 30, 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 and extended until June 26, 2025. In addition, a concurrent share repurchase program (the "2024 Repurchase Program") was established in June 2024 and will remain effective until June 26, 2025. 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 10% of the total number of issued shares of the Company (excluding any treasury shares) as of June 26, 2024, the date of the resolution granting the general unconditional mandate to purchase the Company's own shares approved by shareholders.

In addition, as previously announced, the Company recently conducted an all cash tender offer and repurchased a total of 33,016,016 Class A ordinary shares tendered (including 19,877,118 Class A ordinary shares in the form of 6,625,706 ADSs), representing approximately 11.2% of the Company's total issued and outstanding ordinary shares before the repurchase. The total consideration for these Class A ordinary shares is approximately HK$300 million. These shares were repurchased and canceled on November 8, 2024.

[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 6:00 a.m. U.S. Eastern Time on November 26, 2024 (7:00 p.m. Beijing/Hong Kong time on November 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/10194497/fdf969aff8

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 3, 2024, by dialing the following telephone numbers:

United States (toll free):	+1-877-344-7529
International:	+1-412-317-0088
Replay Access Code:	3486495

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 they help 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 them 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 RMB7.0176 to US$1.00, the exchange rate in effect as of September 30, 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								For the Nine Months Ended
	September 30, 2023		June 30, 2024		September 30, 2024				September 30, 2023		September 30, 2024
	RMB		RMB		RMB		US$		RMB		RMB		US$
Revenues:
Marketing services	382,962		343,979		256,631		36,570		1,187,839		931,152		132,688
Paid membership	466,784		432,652		459,387		65,462		1,370,651		1,341,763		191,200
Vocational training	144,795		133,633		105,058		14,971		396,313		384,127		54,738
Others	27,622		23,546		23,944		3,412		105,789		82,651		11,778
Total revenues	1,022,163		933,810		845,020		120,415		3,060,592		2,739,693		390,404
Cost of revenues	(473,712)		(377,266)		(304,879)		(43,445)		(1,437,844)		(1,099,529)		(156,682)
Gross profit	548,451		556,544		540,141		76,970		1,622,748		1,640,164		233,722
Selling and marketing expenses	(534,328)		(416,985)		(388,049)		(55,297)		(1,520,486)		(1,282,988)		(182,824)
Research and development expenses	(249,662)		(209,323)		(179,261)		(25,544)		(668,867)		(585,940)		(83,496)
General and administrative expenses	(114,564)		(114,107)		(57,161)		(8,145)		(327,462)		(264,185)		(37,646)
Total operating expenses	(898,554)		(740,415)		(624,471)		(88,986)		(2,516,815)		(2,133,113)		(303,966)
Loss from operations	(350,103)		(183,871)		(84,330)		(12,016)		(894,067)		(492,949)		(70,244)
Other income/(expenses):
Investment income	11,617		21,811		13,679		1,949		29,416		52,392		7,466
Interest income	40,363		26,754		31,136		4,437		119,843		88,653		12,633
Fair value change of financial instruments	(7,352)		31,412		6,887		981		(19,950)		47,707		6,798
Exchange (losses)/gains	(393)		289		(1,097)		(156)		1,034		(688)		(98)
Others, net	27,227		15,947		23,799		3,391		34,204		42,789		6,097
Loss before income tax	(278,641)		(87,658)		(9,926)		(1,414)		(729,520)		(262,096)		(37,348)
Income tax benefits/(expenses)	256		7,063		949		135		(6,903)		6,728		959
Net loss	(278,385)		(80,595)		(8,977)		(1,279)		(736,423)		(255,368)		(36,389)
Net income attributable to    noncontrolling interests	(289)		(2,144)		(1,514)		(216)		(3,447)		(2,708)		(386)
Net loss attributable to Zhihu Inc.'s    shareholders	(278,674)		(82,739)		(10,491)		(1,495)		(739,870)		(258,076)		(36,775)
Net loss per share
Basic	(0.94)		(0.30)		(0.04)		(0.01)		(2.45)		(0.92)		(0.13)
Diluted	(0.94)		(0.30)		(0.04)		(0.01)		(2.45)		(0.92)		(0.13)
Net loss per ADS (One ADS represents    three Class A ordinary shares)
Basic	(2.81)		(0.89)		(0.11)		(0.02)		(7.35)		(2.77)		(0.39)
Diluted	(2.81)		(0.89)		(0.11)		(0.02)		(7.35)		(2.77)		(0.39)
Weighted average number of ordinary    shares outstanding
Basic	297,742,064		279,241,647		277,309,431		277,309,431		302,063,397		279,367,448		279,367,448
Diluted	297,742,064		279,241,647		277,309,431		277,309,431		302,063,397		279,367,448		279,367,448

 

 

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, 2023		June 30, 2024		September 30, 2024				September 30, 2023		September 30, 2024
	RMB		RMB		RMB		US$		RMB		RMB		US$
Share-based compensation expenses included in:
Cost of revenues	1,630		750		1,016		145		8,176		4,263		608
Selling and marketing expenses	5,741		(6,063)		547		78		20,883		(2,244)		(320)
Research and development expenses	13,758		4,439		6,233		888		49,904		14,352		2,045
General and administrative expenses	27,662		33,515		(14,767)		(2,104)		78,193		35,111		5,003

 

 

ZHIHU INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
	As of December 31, 2023		As of September 30, 2024
	RMB		RMB		US$
ASSETS
Current assets:
Cash and cash equivalents	2,106,639		3,214,074		458,002
Term deposits	1,586,469		993,111		141,517
Short-term investments	1,769,822		789,020		112,434
Restricted cash	-		51,774		7,378
Trade receivables	664,615		445,288		63,453
Amounts due from related parties	18,319		48,498		6,911
Prepayments and other current assets	232,016		207,843		29,617
Total current assets	6,377,880		5,749,608		819,312
Non-current assets:
Property and equipment, net	10,849		9,625		1,372
Intangible assets, net	122,645		58,048		8,272
Goodwill	191,077		126,344		18,004
Long-term investments, net	44,621		51,177		7,292
Right-of-use assets	40,211		13,327		1,899
Other non-current assets	7,989		456		65
Total non-current assets	417,392		258,977		36,904
Total assets	6,795,272		6,008,585		856,216
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	1,038,531		893,532		127,327
Salary and welfare payables	342,125		226,866		32,328
Taxes payables	21,394		15,093		2,151
Contract liabilities	303,574		278,735		39,719
Amounts due to related parties	26,032		7,849		1,119
Short-term lease liabilities	42,089		16,031		2,284
Short-term borrowings	-		51,774		7,378
Other current liabilities	171,743		148,584		21,173
Total current liabilities	1,945,488		1,638,464		233,479
Non-current liabilities
Long-term lease liabilities	3,642		2,630		375
Deferred tax liabilities	22,574		7,430		1,059
Other non-current liabilities	121,958		14,998		2,137
Total non-current liabilities	148,174		25,058		3,571
Total liabilities	2,093,662		1,663,522		237,050
Total Zhihu Inc.'s shareholders' equity	4,599,810		4,289,054		611,185
Noncontrolling interests	101,800		56,009		7,981
Total shareholders' equity	4,701,610		4,345,063		619,166
Total liabilities and shareholders' equity	6,795,272		6,008,585		856,216

 

 

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, 2023		June 30, 2024		September 30, 2024				September 30, 2023		September 30, 2024
	RMB		RMB		RMB		US$		RMB		RMB		US$
Loss from operations	(350,103)		(183,871)		(84,330)		(12,016)		(894,067)		(492,949)		(70,244)
Add:
Share-based compensation expenses	48,791		32,641		(6,971)		(993)		157,156		51,482		7,336
Amortization of intangible assets resulting from       business acquisitions	5,365		4,115		3,490		497		14,220		12,970		1,848
Adjusted loss from operations	(295,947)		(147,115)		(87,811)		(12,512)		(722,691)		(428,497)		(61,060)
Net loss	(278,385)		(80,595)		(8,977)		(1,279)		(736,423)		(255,368)		(36,389)
Add:
Share-based compensation expenses	48,791		32,641		(6,971)		(993)		157,156		51,482		7,336
Amortization of intangible assets resulting from       business acquisitions	5,365		4,115		3,490		497		14,220		12,970		1,848
Tax effects on non-GAAP adjustments	(1,069)		(756)		(600)		(85)		(2,738)		(2,425)		(346)
Adjusted net loss	(225,298)		(44,595)		(13,058)		(1,860)		(567,785)		(193,341)		(27,551)

 

 

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SOURCE Zhihu Inc.

FAQ

What was Zhihu's (ZH) revenue in Q3 2024?

Zhihu reported total revenues of RMB845.0 million (US$120.4 million) in Q3 2024.

How much did Zhihu (ZH) reduce its net loss in Q3 2024?

Zhihu narrowed its net loss by 96.8% to RMB9.0 million (US$1.3 million) compared to Q3 2023.

What was Zhihu's (ZH) user base in Q3 2024?

Zhihu had 81.1 million monthly active users (MAUs) and 16.5 million average monthly subscribing members in Q3 2024.

What was Zhihu's (ZH) gross margin in Q3 2024?

Zhihu's gross margin expanded to 63.9% in Q3 2024 from 53.7% in Q3 2023.