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

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.

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:

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
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 Year Ended
	December 31, 2022		September 30, 2023		December 31, 2023				December 31, 2022		December 31, 2023
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