Zhihu Inc. Reports First Quarter 2021 Unaudited Financial Results – About Your Online Magazine


BEIJING, May 17, 2021 / PRNewswire / – Zhihu Inc. (“Zhihu” or the “Company”) (NYSE: ZH), the operator of Zhihu, a leading online content community in China, today announced its unaudited financial results for the first quarter ended March 31, 2021.

Highlights of the first quarter of 2021

  • Average monthly active users (MAUs)[1] reached 85.0 million in the first quarter of 2021, representing a growth of 37.7% over the first quarter of 2020.
  • Average monthly paying members[2] reached 4.0 million in the first quarter of 2021, representing a growth of 137.8% over the first quarter of 2020.
  • Total revenue we are RMB478.3 million ($ 73.0 million) in the first quarter of 2021, representing a growth of 154.2% in relation to the first quarter of 2020.
  • Gross profit was RMB 272.7 million ($ 41.6 million) in the first quarter of 2021, representing a growth of 248.5% compared to the first quarter of 2020.
  • Gross margin increased to 57.0% in the first quarter from 41.6% in the same period last year.

“We started Zhihu ten years ago with the conviction that everyone has a wealth of knowledge, experience and insights, regardless of training or education. We successfully completed our initial public offering and became a public company listed on the New York Stock Exchange during the first quarter of 2021, which we believe is a milestone and the starting point of a new journey for Zhihu. “said Mr. Yuan Zhou, Chairman and CEO of Zhihu. “We recorded strong growth and delivered a set of solid results in the first quarter of 2021, reflecting our firm commitment to execute our growth strategy centered on content and monetization approach. We also celebrate Zhihu’s 10th anniversary as we continue to solidify and strengthen the brand of Zhihu image. We also continue to execute our video-lization strategy and we hope that our community will benefit even more from an enriching content portfolio, along with improved content creation and user involvement. potential customers and our strong ability to honor our commitment to our users, content creators and business partners. ”

Sir. Wei Sun, Chief Financial Officer of Zhihu, added: “In the first quarter of 2021, we recorded total revenue of RMB478.3 million, reflecting a growth of 154.2% in relation to the same period in 2020. Our average MAUs reached 85.0 million, representing an increase of 37.7% in relation to the same period in 2020, since our user base continued to grow quickly. Our gross margin increased to 57.0% from 41.6% in the first quarter of 2020. We are very pleased with our achievements in the first quarter of 2021 and we hope to continue to successfully implement our growth centered on content and monetization strategy with our improvement financial strengths after the completion of our IPO. ”

Financial results for the first quarter of 2021

Total revenue we are RMB478.3 million ($ 73.0 million) for the first quarter of 2021, representing an increase of 154.2% in RMB188.2 million for the same period in 2020. The increase was due to increases in all of our business lines.

Advertising revenue was RMB 213.7 million ($ 32.6 million) for the first quarter of 2021, representing an increase of 70.1% in 125.6 million RMB for the same period in 2020. The year-over-year increase was mainly attributable to the continued expansion of our user base coupled with an increase in average advertising revenue generated by MAU.

Paid subscription revenue was 126.6 million RMB ($ 19.3 million) for the first quarter of 2021, representing an increase of 127.0% in RMB55.8 million for the same period in 2020. The year-over-year increase was mainly attributable to an increase in our overall user base, along with an improved payment rate.

Revenue from content commerce solutions was RMB 120.8 million ($ 18.4 million) for the first quarter of 2021, which increased from RMB 1.1 million in the first quarter of 2020, showing strong growth dynamics in the business line. We formally launched our pioneering content commerce solutions in early 2020. Year-over-year growth was mainly driven by the rapid increase in our user base and the average revenue from content commerce solutions by MAU.

Other revenue we are RMB 17.1 million ($ 2.6 million) for the first quarter of 2021, compared to RMB 5.7 million for the same period in 2020. The year-over-year increase was mainly due to the continued growth of our online education and e-commerce services.

Cost of revenue increased to RMB 205.6 million ($ 31.4 million) for the first quarter of 2021 from RMB 109.9 million for the same period in 2020. The increase was mainly due to increased costs of running our advertising services and costs related to content. The rapid growth in user traffic in the quarter also resulted in increases in our cloud services and bandwidth costs.

Gross profit was RMB 272.7 million ($ 41.6 million) for the first quarter of 2021, compared to a gross profit of RMB78.3 million for the same period in 2020.

Gross margin in the first quarter of 2021 it was 57.0%, compared to 41.6% in the same period in 2020.

Total operating expenses we are RMB 615.1 million ($ 93.9 million) for the first quarter of 2021, compared to RMB 289.2 million for the same period in 2020.

Sales and marketing expenses we are RMB 346.6 million ($ 52.9 million) for the first quarter of 2021, compared to RMB 125.4 million in the first quarter of 2020. The increase was mainly due to higher spending on promotion and advertising activities to strengthen the recognition of our brand.

Research and development expenses we are RMB 106.3 million ($ 16.2 million) for the first quarter of 2021, compared to RMB86.6 million for the same period in 2020. The increase was mainly due to the increase in the staff of our research and development team, as we continue to invest in technical infrastructure and development.

General and Administrative Expenses we are RMB162.2 million ($ 24.8 million) for the first quarter of 2021, compared to RMB77.1 million for the same period in 2020. The increase was mainly due to the increase in share-based compensation expenses.

Loss from operations was RMB 342.5 million ($ 52.3 million) for the first quarter of 2021, compared to RMB210.9 million for the same period in 2020.

Net loss was RMB 324.7 million ($ 49.6 million) for the first quarter of 2021, compared to 201.3 million RMB for the same period in 2020.

Adjusted net loss (non-GAAP)[3] was RMB 193.6 million ($ 29.5 million) for the first quarter of 2021, compared to RMB161.8 million for the same period in 2020.

Basic and diluted net loss per ADS was RMB3.46 ($ 0.53) for the first quarter of 2021, compared to RMB2.87 in the same period of 2020.

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

From March 31, 2021, the Company had cash and cash equivalents, time deposits and short-term investments of RMB 7,960.4 million ($ 1,215.0 million), compared to RMB 3,096.7 million from December 31, 2020. The increase was mainly due to the net resources of the company’s initial public offering and the simultaneous private placements concluded in March 2021.

Recent development

Inside March 2021, the Company completed its initial public offering (the “IPO”) on the New York Stock Exchange. During the IPO, the Company sold a total of 55,000,000 ADSs, with two ADSs representing a Class A common share of the Company with a par value of $ 0.000125 by sharing. In addition, the Company sold and issued 13,157,892 Class A common shares in simultaneous private placements to certain investors based on the IPO price of $ 9.50 by ADS. The company received a total of approximately $ 737.1 million net product after deducting relevant underwriter fees and offering expenses.

Inside April 2021, subscribers exercised their option to purchase an additional 259,904 ADSs and we received a total of approximately $ 2.3 million net income after deducting underwriter commissions.

Panorama

For the second quarter of 2021, the Company currently expects its total revenue to be between RMB622 million ($ 94.9 million) and RMB 627 million ($ 95.7 million) The above perspective is based on current market conditions and reflects the Company’s preliminary estimates, which are subject to change.

[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 connected users who visit our PC or mobile site at least once in a given month, after deleting duplicates.

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

[3]The adjusted net loss is a non-GAAP financial measure. For more information on non-GAAP financial measures, see the “Use of non-GAAP financial measures” section and the table entitled “Unaudited reconciliations of GAAP and non-GAAP results” defined at the end of this press release.

Conference call

The company’s management will hold a results conference call 8:00 in the morning. Eastern Time in May 17, 2021 (8:00 pm. Beijing/Hong Kong on time May 17, 2021)

The dialing details for the results conference call are as follows:

U.S:

+ 1-888-317-6003

International:

+ 1-412-317-6061

Hong Kong, China:

800-963-976

Mainland China:

400-120-6115

Participant code:

7287305

In addition, a live, archived webcast of the conference call will be available on the Company’s investor relations website at https://ir.zhihu.com.

The replay of the conference call will be accessible approximately one hour after the conclusion of the live conference call until May 24, 2021, by dialing the following telephone numbers:

U.S:

+ 1-877-344-7529

International:

+ 1-412-317-0088

Repeat access code:

10155887

About Zhihu Inc.

Zhihu Inc. (NYSE: ZH) is the operator of Zhihu, a leading online content community in China, dedicated to enabling people to share knowledge, experiences and perceptions and to find their own answers. Zhihu promotes a vibrant online community where users contribute and get involved, respecting diversity and valuing constructiveness, promoting a culture of sincerity, experience and respect developed over years of cultivation. Zhihu is From China largest online community inspired by questions and answers and one of the top five Chinese communities of comprehensive online content, both in terms of average monthly mobile users and revenue in 2020. Zhihu is also recognized as the most trusted and widely regarded online content community as the one that offers the best quality content in China, according to research carried out by CIC. For more information please visit https://ir.zhihu.com.

Use of Non-GAAP Financial Measures

When evaluating the business, the Company considers and uses the adjusted net loss, a non-GAAP financial measure, to complement the review and assessment of its operating performance. The Company defines adjusted net loss as net loss adjusted by the impact of stock-based compensation expenses, which are non-monetary expenses and are partially discretionary. The company believes that the non-GAAP measure facilitates comparisons of operating performance from period to period and from company to company, 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 investors and others with useful information to understand and evaluate the consolidated results of the Company’s operations, in the same way that it helps the Company’s management.

The non-GAAP financial measure is not defined in accordance with 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 the 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 or as a substitute for analyzing our operating results or financial condition as reported under US GAAP. For more information on non-GAAP financial measures, see the tables entitled “Unaudited reconciliations of GAAP and non-GAAP results” presented at the end of this press release.

Exchange rate information

This advertisement contains translations of certain RMB amounts into US dollars at a rate specified only for the convenience of the reader. Unless otherwise stated, all translations of RMB into US dollars have been done at a rate of RMB6.5518 for $ 1.00, the exchange rate in force from March 31, 2021 as set out in the Federal Reserve Board’s statistical statement H.10.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made in accordance with the “safe harbor” provisions of the United States Private Securities Litigation Reform Act 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 several factors may cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements may be identified by words or phrases such as “can”, “will”, “wait”, “anticipate”, “visa”, “visa”, “esteem”, “intend” “plan,” “believe,” “potential”, “continue”, “is / is likely” or other similar expressions. More information about these and other risks, uncertainties or factors is included in the company’s filings with the SEC. All information provided in this press release is as of the date of this release, and the Company assumes no obligation to update such information, except as required by applicable law.

For investor and media inquiries, please contact:

Inside China:

Zhihu Inc.
Email: [email protected]

The Piacente Group, Inc.
Helen Wu
Tel: + 86-10-6508-0677
Email: [email protected]

Inside the United States:

The Piacente Group, Inc.
Brandi Piacente
Phone: + 1-212-481-2050
Email: [email protected]

ZHIHU INC.

STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS NOT AUDITED

(All amounts in thousands, except shares, ADS, data per share and data per ADS)



For the Three Months Ended


March 31,

2020


December 31th,

2020


March 31,

2021


RMB


RMB


RMB


US $

Recipes:








Advertising

125,629


319,172


213,730


32,621

Paid subscription

55,759


104,372


126,572


19,319

Content commerce solutions

1,067


76,485


120,845


18,445

Others

5,706


19,778


17,139


2,616

Total revenue

188,161


519,807


478,286


73,001

Cost of revenue

(109,911)


(186,721)


(205,616)


(31,383)

Gross profit

78,250


333,086


272,670


41,618









Sales and marketing expenses

(125,423)


(242,937)


(346,633)


(52,907)

Research and development expenses

(86,618)


(82,359)


(106,302)


(16,225)

General and Administrative Expenses

(77,134)


(112,297)


(162,196)


(24,756)

Total operating expenses

(289,175)


(437,593)


(615,131)


(93,888)









Loss from operations

(210,925)


(104,507)


(342,461)


(52,270)









Other income / (expenses):








Return on investment

15,382


11,989


9,662


1,475

Interest income

9,870


4,135


3,327


508

Change in the fair value of the financial instrument

(381)


(49,246)



Exchange (losses) / gains

(15,281)


41,786


(693)


(106)

Others, network

701


6,271


6,009


917









Loss before income tax

(200,634)


(89,572)


(324,156)


(49,476)

Income tax expense

(703)


(485)


(537)


(82)

Net loss

(201,337)


(90,057)


(324,693)


(49,558)

Additions of redeemable convertibles
preferred shares at redemption value

(165,511)


(169,783)


(170,585)


(26,036)

Net loss attributable to Zhihu Inc.
shareholders

(366,848)


(259,840)


(495,278)


(75,594)









Net loss per share








Basic

(5.73)


(3.94)


(6.93)


(1.06)

Diluted

(5.73)


(3.94)


(6.93)


(1.06)









Net loss per ADS (two ADSs represent
a Class A common share)








Basic

(2.87)


(1.97)


(3.46)


(0.53)

Diluted

(2.87)


(1.97)


(3.46)


(0.53)









Weighted average number of ordinary shares
outstanding shares








Basic

63,984,168


65,948,861


71,493,738


71,493,738

Diluted

63,984,168


65,948,861


71,493,738


71,493,738









ZHIHU INC.

STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS NOT AUDITED (CONTINUED)

(All amounts in thousands, except shares, ADS, data per share and data per ADS)



For the Three Months Ended


March 31,

2020


December 31th,

2020


March 31,

2021


RMB


RMB


RMB


US $

Share-based compensation expenses included in:








Cost of revenue

2,181


(441)


2,232


341

Sales and marketing expenses

5,652


2,044


4,803


733

Research and development expenses

7,449


4,613


7,608


1,161

General and Administrative Expenses

24,305


57,537


116,484


17,779

ZHIHU INC.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(All amounts in thousands, except shares, ADS, data per share and data per ADS)



As of December 31,

2020


As of March 31,

2021


RMB


RMB


US $

ACTIVE






Current assets:






Cash and cash equivalents

957,820


6,005,655


916,642

Time deposits

1,092,921


716,272


109,324

Short-term investments

1,046,000


1,074,154


163,948

Commercial accounts receivable

486,046


487,942


74,475

Amounts owed by related parties

13,843


17,053


2,603

Prepayments and other current assets

123,536


99,995


15,262

Total current assets

3,720,166


8,401,071


1,282,254

Non-current assets:






Fixed assets, net

8,105


6,820


1,041

Intangible assets, net

23,478


20,655


3,153

Long-term investments


19,714


3,009

Time deposits


164,282


25,074

Right-of-use assets

3,241


79,063


12,067

Other non-current assets

6,451


4,705


718

Total non-current assets

41,275


295,239


45,062

Total assets

3,761,441


8,696,310


1,327,316

LIABILITIES, MEZANINE ASSETS AND
(DEFICIT) / SHAREHOLDERS ‘EQUITY






Current liabilities






Accounts payable and accumulated liabilities

501,848


601,376


91,788

Social security salary and accounts payable

231,847


253,457


38,685

Taxes to pay

7,066


4,087


624

Contract responsibilities

159,995


180,738


27,586

Amounts due to related parties

45,983


58,848


8,982

Short-term lease liabilities

2,893


23,904


3,648

Other current liabilities

64,936


111,704


17,049

Total current liabilities

1,014,568


1,234,114


188,362

Non-current liabilities






Long-term lease liabilities


49,112


7,496

Total non-current liabilities


49,112


7,496

Total liabilities

1,014,568


1,283,226


195,858







Total net worth of the mezzanine

7,891,348









Total shareholders (deficit) / shareholders’ equity

(5,144,475)


7,413,084


1,131,458







Total liabilities, intermediate shareholders’ equity and shareholders
(deficit) / equity

3,761,441


8,696,310


1,327,316

ZHIHU INC.

UNAUDITED RECONCILIATIONS OF GAAP AND NON GAAP RESULTS

(All amounts in thousands, except shares, ADS, data per share and data per ADS)



For the Three Months Ended


March 31,

2020


December 31th,

2020


March 31,

2021


RMB


RMB


RMB


US $









Net loss

(201,337)


(90,057)


(324,693)


(49,558)

To add:








Share-based compensation expenses

39,587


63,753


131,127


20,014

Adjusted net loss

(161,750)


(26,304)


(193,566)


(29,544)


















SOURCE Zhihu Inc.

Paula Fonseca