EX-99.1 2 tm2216875d1_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

Zhihu Inc. Reports First Quarter 2022 Unaudited Financial Results

  

BEIJING, May 25, 2022 - Zhihu Inc. ("Zhihu" or the "Company") (NYSE: ZH; HKEX: 2390), the operator of Zhihu, a leading online content community in China, today announced its unaudited financial results for the quarter ended March 31, 2022.

 

First Quarter 2022 Highlights

 

●Total revenues were RMB743.2 million (US$117.2 million) in the first quarter of 2022, representing a growth of 55.4% over the first quarter of 2021.

 

●Gross Profit was RMB335.5 million (US$52.9 million) in the first quarter of 2022, representing a growth of 23.1% over the first quarter of 2021.

 

●Average monthly active users (MAUs)[1] reached 101.6 million in the first quarter of 2022, representing a growth of 19.4% over the first quarter of 2021.

 

●Average monthly paying members[2] reached 6.9 million in the first quarter of 2022, representing a growth of 72.8% over the first quarter of 2021.

  

“The successful dual primary listing on the Hong Kong Stock Exchange in April, following our listing on the NYSE in the first quarter of last year, not only marks a new milestone in our development path, but also lays a solid foundation for our sustainable and long-term growth,” said Mr. Yuan Zhou, Chairman of the Board and Chief Executive Officer of Zhihu. “In the first quarter, the fundamental value of Zhihu’s fulfilling content and its content-centric community ecosystem has been further validated through our strong growth in both financial and operating performance. With the “Community ecosystem comes first” strategy, we continued to cultivate additional content verticals. Our interactive algorithm of fulfilling content, combined with refined analysis of user needs, has continued to enhance our understanding of our users, allowing us to address their needs more precisely. At the same time, our iterated tools, creator operations and support helped to further encourage content creation. All the above contributed effectively to boost the sustained vitality and prosperity of our community ecosystem.”

 

Mr. Wei Sun, Chief Financial Officer of Zhihu, added, “Despite the recent resurgence of COVID-19 and macroeconomic uncertainties, we are delighted to report another solid quarter of performance in the first quarter of 2022, with total revenues up 55.4% year over year. Continuing to benefit from our dynamic community ecosystem and increasing content creation, our revenue structure was further diversified. Our content-commerce solutions and advertising services together contributed 59.8% of total revenues. As our No. 1 growth engine, content-commerce solutions achieved year over year growth of 87.7% in revenue. Vocational training, a new initiative further diversifying our commercialization capabilities, demonstrated promising growth momentum with quarterly revenue contribution exceeding 5% for the first time. During the quarter we maintained our gross margin at 45% in a challenging operating environment. Going forward, we will continue to employ well-managed cost control practices and further improve our operating efficiency, driving the healthy and sustainable growth of our business for the long run.”

 

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First Quarter 2022 Financial Results

  

Total revenues were RMB743.2 million (US$117.2 million) in the first quarter of 2022, representing a growth of 55.4% from RMB478.3 million in the same period of 2021. The increase was driven by the expansion of our user base and increase of our average revenue per MAU.

  

Advertising revenue was RMB217.3 million (US$34.3 million) in the first quarter of 2022, representing a growth of 1.7% from RMB213.7 million in the same period of 2021. The year-over-year increase was primarily attributable to the expansion of our user base.

 

Paid membership revenue was RMB221.7 million (US$35.0 million) in the first quarter of 2022, representing a growth of 75.1% from RMB126.6 million in the same period of 2021. The year-over-year increase was primarily attributable to increases in our overall user base and paying ratio for the period.

 

Content-commerce solutions revenue was RMB226.8 million (US$35.8 million) in the first quarter of 2022, representing a growth of 87.7% from RMB120.8 million in the same period of 2021. The strong year-over-year growth was primarily driven by rapid increases in both our user base and average content-commerce solutions revenue per MAU, reflecting our sustainable development of this business line.

 

Vocational Training revenue[3] was RMB39.5 million (US$6.2 million) in the first quarter of 2022, which grew from RMB3.1 million in the first quarter of 2021. The year-over-year growth was primarily driven by a more diversified vocational training course offering, as well as the revenue contributions from companies newly acquired in the second half of 2021.

 

 

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Other revenues[3] were RMB37.9 million (US$6.0 million) in the first quarter of 2022, compared with RMB14.1 million in the same period of 2021. The year-over-year increase was primarily attributable to the continued growth in e-commerce services.

  

Cost of revenues increased to RMB407.7 million (US$64.3 million) in the first quarter of 2022 from RMB205.6 million in the same period of 2021. The increase was primarily due to an increase in execution costs for advertising services and content-related costs, as well as an increase in staff costs due to the increased headcount to support our growth. The growth in user traffic in the quarter also resulted in increases in cloud services and bandwidth costs.

 

Gross profit was RMB335.5 million (US$52.9 million) in the first quarter of 2022, compared with gross profit of RMB272.7 million in the same period of 2021.

  

Gross margin in the first quarter of 2022 was 45.1%, compared to 57.0% in the same period of 2021.

 

Total operating expenses were RMB 983.7 million (US$155.2 million) in the first quarter of 2022, compared with RMB615.1 million in the same period of 2021.

  

Selling and marketing expenses were RMB506.6 million (US$79.9 million) in the first quarter of 2022, compared with RMB346.6 million in the first quarter of 2021. The increase was primarily due to higher promotion and advertising expenses related to attracting new users and strengthening Zhihu’s brand recognition.

 

Research and development expenses were RMB166.5 million (US$26.3 million) in the first quarter of 2022, compared with RMB106.3 million in the same period of 2021. The increase was primarily due to the higher headcount of research and development personnel, as we continued to invest in technical infrastructure, and research and development.

 

General and administrative expenses were RMB310.6 million (US$49.0 million) in the first quarter of 2022, compared with RMB162.2 million in the same period of 2021. The increase was primarily due to an increase in share-based compensation expenses, as well as the expense related to our dual primary listing on The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”).

 

Loss from operations was RMB648.2 million (US$102.3 million) in the first quarter of 2022, compared with RMB342.5 million in the same period of 2021.

 

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Net loss was RMB614.3 million (US$96.9 million) in the first quarter of 2022, compared with RMB324.7 million in the same period of 2021.

 

Adjusted net loss (non-GAAP)[4] was RMB367.4 million (US$58.0 million) in the first quarter of 2022, compared with RMB193.6 million in the same period of 2021.

  

Basic and diluted net loss per ADS was RMB1.02 (US$0.16) in the first quarter of 2022, compared with RMB3.46 in the same period of 2021.

 

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

 

As of March 31, 2022, the Company had cash and cash equivalents, term deposits, restricted cash and short-term investments of RMB7.1 billion (US$1.1 billion), compared with RMB7.4 billion as of December 31, 2021.

  

Dual-primary Listing in Hong Kong

 

On April 22, 2022, the Company successfully listed its Class A ordinary shares on the Main Board of the Hong Kong Stock Exchange under the stock code “2390,” and the stock short name is “ZHIHU-W”.

 

Share Repurchase Program

 

The board of directors is confident about the Company’s continued growth in the future and announces that it proposes to conduct a share repurchase program of up to US$100 million available for the coming 12 months, 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 passing of this resolution at the annual general meeting to be held on June 10, 2022 as set forth in the notice of annual general meeting dated May 19, 2022. The Company’s proposed repurchases, if approved, may be made from time to time in the open market at prevailing market prices and/or through other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations. The Company plans to fund any such repurchases from its existing cash balance.

 

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[1] MAUs refers to the sum of the number of mobile devices that launch our mobile app 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.

  

[2] Average monthly paying members for a period is calculated by dividing the sum of monthly paying members for each month during the specified period by the number of months in such period.

 

[3] Effective in the first quarter of 2022, the Company separately reported the revenue of its vocational training business, which was formerly included in “revenue - others”, in light of the significant growth of the revenue contribution from vocational training to the Company’s total revenues. For comparison purposes, the revenue of vocational training business and the revenue in “others” for the first quarter of 2021 have been retrospectively re-classified.

 

[4] Adjusted net loss is a non-GAAP financial measure. For more information on the non-GAAP financial measure, please see the section of “Use of Non-GAAP Financial Measure” and the table captioned “Unaudited Reconciliations of GAAP and Non-GAAP Results” set forth at the end of this press release.

 

Conference Call

 

The Company's management will host an earnings conference call at 8:00 a.m. U.S. Eastern Time on May 25, 2022 (8:00 p.m. Beijing/Hong Kong time on May 25, 2022).

 

All participants must pre-register online using the link provided below. Once the pre-registration has been completed, participants will receive 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.

 

PRE-REGISTER LINK: https://dpregister.com/sreg/10167344/f2d0c75040

  

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 June 1, 2022, by dialing the following telephone numbers:

 

United States: +1-877-344-7529
International: +1-412-317-0088
Replay Access Code: 1483549

 

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About Zhihu Inc.

  

Zhihu Inc. (NYSE: ZH; HKEX: 2390), the operator of Zhihu, a leading online content community in China where people come to find solutions, make decisions, seek inspiration, and have fun. We have been dedicated to expanding our content and service offerings to enable our users to explore and enjoy "fulfilling content" (有获得感的內容) that broadens horizons, provides solutions, and resonates with minds. Since the initial launch in 2010, we have grown from a Q&A community into one of the top five comprehensive online content communities and the largest Q&A-inspired online content community in China, both in terms of average mobile MAUs and revenue in 2019, 2020, and 2021, according to CIC. For more information, please visit https://ir.zhihu.com. 

 

Use of Non-GAAP Financial Measure

  

In evaluating the business, the Company considers and uses adjusted net loss, a non-GAAP financial measure, to supplement the review and assessment of its operating performance. The Company defines adjusted net loss as net loss adjusted for the impact of share-based compensation expenses, amortization of intangible assets resulting from business acquisition and tax effects of the non-GAAP adjustments, which are non-cash expenses. The Company believes that the non-GAAP measure facilitates 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 measure provides 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 measure is not defined under U.S. GAAP and is not presented in accordance with U.S. GAAP. The presentation of the non-GAAP financial measure may not be comparable to similarly titled measure presented by other companies. The use of the non-GAAP measure 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 measure, 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 RMB6.3393 to US$1.00, the exchange rate in effect as of March 31, 2022 as set forth in the H.10 statistical release of the Federal Reserve Board.

 

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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

 

The Piacente Group, Inc.

Helen Wu

Tel: +86-10-6508-0677

Email: zhihu@tpg-ir.com

 

In the United States:

 

The Piacente Group, Inc.

Brandi Piacente

Phone: +1-212-481-2050

Email: zhihu@tpg-ir.com

  

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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 
   March 31,
2021		   December 31,
2021		   March 31,
2022		 
   RMB   RMB   RMB   US$ 
Revenues:                
Advertising   213,730    377,812    217,317    34,281 
Paid membership   126,572    208,756    221,670    34,968 
Content-commerce solutions   120,845    367,295    226,787    35,775 
Vocational Training   3,051    22,197    39,544    6,238 
Others   14,088    43,160    37,909    5,980 
Total revenues   478,286    1,019,220    743,227    117,242 
Cost of revenues   (205,616)   (539,392)   (407,684)   (64,311)
Gross profit   272,670    479,828    335,543    52,931 
                     
Selling and marketing expenses   (346,633)   (470,175)   (506,585)   (79,912)
Research and development expenses   (106,302)   (208,006)   (166,518)   (26,268)
General and administrative expenses   (162,196)   (176,881)   (310,632)   (49,001)
Total operating expenses   (615,131)   (855,062)   (983,735)   (155,181)
                     
Loss from operations   (342,461)   (375,234)   (648,192)   (102,250)
                     
Other income/(expenses):                    
Investment income   9,662    22,107    20,724    3,269 
Interest income   3,327    9,877    9,355    1,476 
Fair value change of financial instrument   -    6,100    8,453    1,333 
Exchange losses   (693)   (30,154)   (4,155)   (655)
Others, net   6,009    (12,964)   1,930    304 
                     
Loss before income tax   (324,156)   (380,268)   (611,885)   (96,523)
Income tax expense   (537)   (3,023)   (2,398)   (378)
Net loss   (324,693)   (383,291)   (614,283)   (96,901)
Accretions of convertible redeemable preferred shares to redemption value   (170,585)   -    -    - 
Net loss attributable to Zhihu Inc.’s shareholders   (495,278)   (383,291)   (614,283)   (96,901)
                     
Net loss per share                    
Basic   (6.93)   (1.29)   (2.04)   (0.32)
Diluted   (6.93)   (1.29)   (2.04)   (0.32)
                     
Net loss per ADS (Two ADSs represent one Class A ordinary share)                    
Basic   (3.46)   (0.65)   (1.02)   (0.16)
Diluted   (3.46)   (0.65)   (1.02)   (0.16)
                     
Weighted average number of ordinary shares outstanding                    
Basic   71,493,738    296,870,566    300,483,336    300,483,336 
Diluted   71,493,738    296,870,566    300,483,336    300,483,336 
                     

 

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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 
   March 31,  
2021		   December 31,
2021		   March 31,
2022		 
   RMB   RMB   RMB   US$ 
Share-based compensation expenses included in:                    
Cost of revenues   2,232    8,865    4,770    752 
Selling and marketing expenses   4,803    10,419    6,472    1,021 
Research and development expenses   7,608    25,514    15,770    2,488 
General and administrative expenses   116,484    95,904    218,055    34,397 

 

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ZHIHU INC.

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

(All amounts in thousands)

  

   As of December 31,
2021		   As of March 31,
2022		 
   RMB   RMB   US$ 
ASSETS            
Current assets:               
Cash and cash equivalents   2,157,161    2,393,111    377,504 
Term deposits   2,815,509    1,724,171    271,981 
Short-term investments   2,239,596    2,718,980    428,909 
Restricted cash   -    222,187    35,049 
Trade receivables   831,628    811,572    128,022 
Amounts due from related parties   18,196    38,930    6,141 
Prepayments and other current assets   272,075    182,030    28,715 
Total current assets   8,334,165    8,090,981    1,276,321 
Non-current assets:               
Property and equipment, net   9,865    9,031    1,425 
Intangible assets, net   68,308    63,085    9,951 
Goodwill   73,663    73,663    11,620 
Long-term investments   19,127    19,045    3,004 
Term deposits   159,393    -    - 
Right-of-use assets    126,512    135,025    21,300 
Other non-current assets    14,132    14,132    2,229 
Total non-current assets   471,000    313,981    49,529 
Total assets   8,805,165    8,404,962    1,325,850 
LIABILITIES AND SHAREHOLDERS’ EQUITY               
Current liabilities               
Accounts payables and accrued liabilities   1,026,534    1,023,258    161,415 
Salary and welfare payables   313,676    316,760    49,968 
Taxes payables    66,184    17,916    2,826 
Contract liabilities   239,757    257,850    40,675 
Amounts due to related parties   83,591    81,427    12,845 
Short term lease liabilities    40,525    52,344    8,257 
Other current liabilities   127,447    124,158    19,585 
Total current liabilities   1,897,714    1,873,713    295,571 
Non-current liabilities               
Long term lease liabilities   82,133    80,257    12,660 
Deferred tax liabilities   14,030    13,430    2,119 
Other non-current liabilities   73,139    76,331    12,041 
Total non-current liabilities   169,302    170,018    26,820 
Total liabilities   2,067,016    2,043,731    322,391 
                
Total Zhihu Inc.’s shareholders’ equity   6,730,654    6,349,638    1,001,630 
Noncontrolling interests   7,495    11,593    1,829 
Total shareholders’ equity   6,738,149    6,361,231    1,003,459 
                
Total liabilities and shareholders’ equity   8,805,165    8,404,962    1,325,850 

 

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ZHIHU INC.

 

UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS

 

(All amounts in thousands)

  

   For the Three Months Ended 
   March 31,
2021		   December 31,
2021		   March 31,
2022		 
   RMB   RMB   RMB   US$ 
Net loss   (324,693)   (383,291)   (614,283)   (96,901)
Add:                    
Share-based compensation expenses   131,127    140,702    245,067    38,658 
Amortization of intangible assets resulting from business acquisition   -    2,400    2,400    379 
Tax effects on non-GAAP adjustments   -    (600)   (600)   (95)
Adjusted net loss   (193,566)   (240,789)   (367,416)   (57,959)

 

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