BEIJING, May 24, 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 March 31, 2023.

First Quarter 2023 Highlights

• Total revenues were RMB994.2 million (US$144.8 million) in the first quarter of 2023, representing a 33.8% increase from the same period of 2022.
• Net loss was RMB179.0 million (US$26.1 million) in the first quarter of 2023, narrowed by 70.9% from the same period in 2022.
• Adjusted net loss (non-GAAP)^[1]was RMB120.2 million (US$17.5 million) in the first quarter of 2023, narrowed by 67.3% from the same period of 2022.
• Average monthly active users (MAUs)^[2] reached 102.4 million in the first quarter of 2023, compared with 101.6 million in the same period of 2022. 
• Average monthly subscribing members^[3] reached 14.9 million in the first quarter of 2023, representing a 116.0% increase from the same period of 2022.

“We are pleased to report a strong first quarter of 2023, with impressive revenue growth and another quarter of significantly narrowed loss. Our user growth reaccelerated during this quarter, and in March our MAUs surpassed 110 million, driven by our diverse content formats and enriched consumption scenarios. Our paid membership revenue reached the historical high while vocational training revenue continued to grow rapidly, as we extended our user coverage beyond the Zhihu community and deepened our services along the industry value chain. Our outstanding performance is a testament to our continued innovation in content community development and integration of cutting-edge AI technology.” said Mr. Yuan Zhou, chairman and chief executive officer of Zhihu.

Mr. Henry Sha, chief financial officer of Zhihu, added, “We outperformed this quarter by beating market consensus in terms of both top line and bottom line. Our total revenues for the quarter increased by 33.8% year over year to RMB994.2 million, driven by robust growth in both paid membership and vocational training businesses, and our gross margin expanded to 51.5% from 45.1% in the same period last year. We also achieved RMB59.9 million operating cash flow during the first quarter. It is the first time that Zhihu generates positive operating cash flow since its initial public offering. We will continue to focus on our core business development and remain prudent in exploring potential opportunities.”

First Quarter 2023 Financial Results

Total revenues were RMB994.2 million (US$144.8 million) in the first quarter of 2023, representing growth of 33.8% from RMB743.2 million in the same period of 2022.

Marketing services revenue^[4] was RMB392.1 million (US$57.1 million), compared with RMB444.1 million in the same period of 2022. The decrease was primarily due to the challenging macroeconomic environment.

Paid membership revenue was RMB454.8 million (US$66.2 million), representing a 105.2% increase from RMB221.7 million in the same period of 2022. The increase was primarily attributable to the continued growth of our average monthly subscribing members which reached 14.9 million from 6.9 million in the same period of 2022.

Vocational training revenue was RMB107.0 million (US$15.6 million), representing a 170.6% increase from RMB39.5 million in the first quarter 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 RMB40.3 million (US$5.9 million), representing a 6.3% increase from RMB37.9 million in the same period of 2022. The year-over-year increase was primarily attributable to the increased sales of our private label products and book series.

Cost of revenues increased by 18.2% to RMB482.0 million (US$70.2 million) from RMB407.7 million in the same period of 2022. The increase was primarily due to an increase in content and operating costs to enhance our content attractiveness, as well as an increase in payment processing costs in connection with our revenue growth, partially offset by the decrease in cloud services and bandwidth costs resulting from our improved technology efficiency.

Gross profit was RMB512.2 million (US$74.6 million), representing a 52.7% increase from RMB335.5 million in the same period of 2022.  Gross margin expanded to 51.5% from 45.1% 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 decreased by 25.9% to RMB729.0 million (US$106.1 million) from RMB983.7 million in the same period of 2022.

Selling and marketing expenses decreased by 12.0% to RMB445.6 million (US$64.9 million) from RMB506.6 million in the same period of 2022, primarily due to more disciplined promotional spending and decrease in salaries and welfare expenses.

Research and development expenses increased to RMB183.0 million (US$26.6 million) from RMB166.5 million in the same period of 2022. The increase was primarily attributable to the increase in the salaries and welfare of research and development personnel, as well as the increased spending in technology innovation.

General and administrative expenses decreased by 67.7% to RMB100.4 million (US$14.6 million) from RMB310.6 million in the same period of 2022, primarily due to lower share-based compensation expenses recognized and the decrease in professional service fees.

Loss from operations decreased by 66.6% to RMB216.7 million (US$31.6 million) from RMB648.2 million in the same period of 2022. 

Adjusted loss from operations (non-GAAP)^[1] decreased by 60.7% to RMB157.3 million (US$22.9 million) from RMB400.7 million in the same period of 2022. 

Net loss decreased by 70.9% to RMB179.0 million (US$26.1 million) from RMB614.3 million in the same period of 2022.

Adjusted net loss (non-GAAP)^[1]decreased by 67.3% to RMB120.2 million (US$17.5 million) from RMB367.4 million in the same period of 2022.

Diluted net loss per American Depositary Share (“ADS”) was RMB0.30 (US$0.04), compared with RMB1.02 in the same period of 2022.

Cash and cash equivalents, term deposits and short-term investments
As of March 31, 2023, the Company had cash and cash equivalents, term deposits and short-term investments of RMB6,257.7 million (US$911.2 million), compared with RMB6,261.5 million as of December 31, 2022.

Share Repurchase Program

The Company announced a share repurchase program in May 2022 under which the Company may repurchase up to US$100 million of Class A ordinary shares or ADSs for a 12-month period, which was approved by shareholders at the Company’s annual general meeting held on June 10, 2022. As of March 31, 2023, approximately 6.9 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 program for a total price of US$17.8 million.

The board of directors of the Company has approved to extend the share repurchase program until June 10, 2024, which is subject to the shareholders’ approval for granting a general mandate to the board of directors to repurchase shares and/or ADSs of the Company not exceeding 10% of the total number of issued shares of the Company as of the date of such approval at the forthcoming annual general meeting of the Company.

Conference Call

The Company’s management will host an earnings conference call at 7:30 a.m. U.S. Eastern Time on May 24, 2023 (7:30 p.m. Beijing/Hong Kong time on May 24, 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/10179092/f976dce55c

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 May 31, 2023, by dialing the following telephone numbers:

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 RMB6.8676 to US$1.00, the exchange rate in effect as of March 31, 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