PR Newswire | Aug 16, 2021 04:54AM EDT

08/16 03:53 CDT

Zhihu Inc. Reports Second Quarter 2021 Unaudited Financial Results BEIJING, Aug. 16, 2021

BEIJING, Aug. 16, 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 second quarter ended June 30, 2021.

Second Quarter 2021 Highlights

* Average monthly active users (MAUs)[1] reached 94.3 million in the second quarter of 2021, representing a growth of 46.2% over the second quarter of 2020. * Average monthly paying members[2] reached 4.7 million in the second quarter of 2021, representing a growth of 121.1% over the second quarter of 2020. * Total revenues were RMB638.4 million (US$98.9 million) in the second quarter of 2021, representing a growth of 144.2% over the second quarter of 2020. * Gross profit was RMB376.6 million (US$58.3 million) in the second quarter of 2021, representing a growth of 197.9% over the second quarter of 2020. * Gross margin increased to 59.0% in the second quarter of 2021 from 48.4% in the same period of last year.

"We are delighted to report another strong quarter, with solid growth in both operating and financial performance. We believe our founding belief, establishing a content-centric ecosystem and sustainable commercialization model, is the fundamental driver behind our achievements as a company. We continued to strive towards this goal in the quarter, by optimizing our content structure and refining our evaluation standards for quality content, thereby enhancing a "sense of fulfilment" for our users. We believe such quality content will broaden horizons, provide resolutions and resonate with minds. We further believe this "sense of fulfilment" will not only strengthen trust amongst users, content creators and our platform, but will also be a key element that will enhance our unique position in the market and further solidify our leadership position in the long-term." said Mr. Yuan Zhou, Chairman of the Board and Chief Executive Officer of Zhihu.

Mr. Wei Sun, Chief Financial Officer of Zhihu, added, "We have continued to deliver outstanding operating and financial results in the second quarter of 2021. In the quarter, our user base continued its rapid growth, with average MAUs increasing by 46% year-over-year to 94.3 million. Our content-centric monetization also enjoyed robust enhancement, yielding a 144% year-over-year growth in revenue. Our revenue structure diversified further in the quarter with a higher percentage of revenue coming from content-commerce solutions and paid memberships. At the same time, our gross margin remained strong at 59% for the quarter, compared with 48% for the same period last year, which significantly reinforces our strong capability in upgrading our content infrastructure and allows us to continue creating long-term value for our users, business partners and shareholders."

Second Quarter 2021 Financial Results

Total revenues were RMB638.4 million (US$98.9 million) in the second quarter of 2021, representing an increase of 144.2% from RMB261.4 million in the same period of 2020. The increase was driven by our expanding user scale and continued growth of our average revenue per user.

Advertising revenue was RMB248.3 million (US$38.5 million) in the second quarter of 2021, representing an increase of 48.4% from RMB167.3 million in the same period of 2020. The year-over-year increase was primarily attributable to the continued expansion of our user base coupled with an increased average advertising revenue generated per MAU.

Paid membership revenue was RMB154.9 million (US$24.0 million) in the second quarter of 2021, representing an increase of 123.5% from RMB69.3 million in the same period of 2020. The year-over-year increase was primarily attributable to an increase in our overall user base coupled with an enhanced paying ratio for the period.

Content-commerce solutions revenuewas RMB207.4 million (US$32.1 million) in the second quarter of 2021, compared with RMB12.7 million in the second quarter of 2020. The strong year-over-year growth was primarily driven by the rapid increases of both our user base and average content-commerce solutions revenue per MAU, which reflected our continued commitment to our content-centric commercialization strategy.

Other revenues were RMB27.8 million (US$4.3 million) in the second quarter of 2021, compared with RMB12.0 million in the same period of 2020. The year-over-year increase was primarily attributable to the continued growth of our e-commerce services and online education services that provide vocational training and professional courses for adults.

Cost of revenuesincreased to RMB261.8 million (US$40.5 million) in the second quarter of 2021 from RMB135.0 million in the same period of 2020. The increase was primarily due to increased execution costs for our advertising services and content-related costs. The rapid growth in user traffic in the quarter also resulted in increases in our cloud services and bandwidth costs.

Gross profit was RMB376.6 million (US$58.3 million) in the second quarter of 2021, compared with a gross profit of RMB126.4 million in the same period of 2020.

Gross margin in the second quarter of 2021 was 59.0%, compared to 48.4% in the same period of 2020.

Total operating expenses were RMB727.1 million (US$112.6 million) in the second quarter of 2021, compared with RMB284.0 million in the same period of 2020.

Selling and marketing expenses were RMB443.2 million (US$68.6 million) in the second quarter of 2021, compared with RMB146.7 million in the second quarter of 2020. The increase was primarily due to the increased expenses in promotion and advertising activities to attract new users, as well as to strengthen our brand recognition.

Research and development expenses were RMB120.6 million (US$18.7 million) in the second quarter of 2021, compared with RMB83.6 million in the same period of 2020. The increase was primarily due to the increased headcount in our research and development personnel as we continued to invest in technical infrastructure, research and development.

General and administrative expenses were RMB163.2 million (US$25.3 million) in the second quarter of 2021, compared with RMB53.7 million in the same period of 2020. The increase was primarily due to the increased share-based compensation expenses.

Loss from operations was RMB350.5 million (US$54.3 million) in the second quarter of 2021, compared with RMB157.7 million in the same period of 2020.

Net loss was RMB321.1 million (US$49.7 million) in the second quarter of 2021, compared with RMB116.1 million in the same period of 2020.

Adjusted net loss (non-GAAP)[3]was RMB200.3 million (US$31.0 million) in the second quarter of 2021, compared with RMB70.2 million in the same period of 2020.

Basic and diluted net loss per ADS was RMB0.55(US$0.08) in the second quarter of 2021, compared with RMB2.22 in the same period of 2020.

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

As of June 30, 2021, the Company had cash and cash equivalents, term deposits, restricted cash and short-term investments of RMB7,703.1 million (US$1,193.1 million), compared with RMB3,096.7 million as of December 31, 2020.

Outlook

For the third quarter of 2021, the Company currently expects its total revenues to be between RMB815 million (US$126.2 million) and RMB820 million (US$127.0 million). The above outlook is based on the current market condition and reflects the Company's preliminary estimates, which are all 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 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] 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-GAAPFinancial Measure" and the table captioned "Unaudited Reconciliations of GAAPand 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 August 16, 2021 (8:00 p.m.Beijing/Hong Kong time on August 16, 2021).

Dial-in details for the earnings conference call are as follows:

United States: +1-888-317-6003

International: +1-412-317-6061

Hong Kong, China: 800-963-976

Mainland China: 400-120-6115

Participant code: 5296870

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 August 23, 2021, by dialing the following telephone numbers:

United States: +1-877-344-7529

International: +1-412-317-0088

Replay Access Code: 10159155

About Zhihu Inc.

Zhihu Inc. (NYSE: ZH) is the operator of Zhihu, a leading online content community in China, dedicated to empowering people to share knowledge, experience, and insights, and to find their own answers. Zhihu fosters a vibrant online community where users contribute and engage while respecting diversity and valuing constructiveness by promoting a culture of sincerity, expertise, and respect developed through years of cultivation. Zhihu is China's largest Q&A-inspired online community and one of the top five Chinese comprehensive online content communities, both in terms of average mobile monthly average users and revenue in 2020. Zhihu is also recognized as the most trustworthy online content community and widely regarded as offering the highest quality content in China, according to a survey conducted by 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, which are non-cash expenses and are partially discretionary in nature. 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 RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars were made at a rate of RMB6.4566 to US$1.00, the exchange rate in effect as of June 30, 2021 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. 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 WuTel: +86-10-6508-0677Email: zhihu@tpg-ir.com

In the United States:

The Piacente Group, Inc.Brandi PiacentePhone: +1-212-481-2050Email: 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 Six Months Ended

June 30, March 31, June 30, June 30, June 30,

2020 2021 2021 2020 2021

RMB RMB RMB US$ RMB RMB US$

Revenues:

Advertising 167,342 213,730 248,272 38,452 292,971 462,002 71,555

Paid membership 69,284 126,572 154,872 23,987 125,043 281,444 43,590

Content-commerce solutions 12,731 120,845 207,431 32,127 13,798 328,276 50,843

Others 12,031 17,139 27,777 4,302 17,737 44,916 6,957

Total revenues 261,388 478,286 638,352 98,868 449,549 1,116,638 172,945

Cost of revenues (134,994) (205,616) (261,798) (40,547) (244,905) (467,414) (72,393)

Gross profit 126,394 272,670 376,554 58,321 204,644 649,224 100,552

Selling and marketing expenses (146,746) (346,633) (443,229) (68,647) (272,169) (789,862) (122,334)

Research and development expenses (83,553) (106,302) (120,620) (18,682) (170,171) (226,922) (35,146)

General and administrative expenses (53,746) (162,196) (163,243) (25,283) (130,880) (325,439) (50,404)

Total operating expenses (284,045) (615,131) (727,092) (112,612) (573,220) (1,342,223) (207,884)

Loss from operations (157,651) (342,461) (350,538) (54,291) (368,576) (692,999) (107,332)

Other income/(expenses):

Investment income 13,817 9,662 11,791 1,826 29,199 21,453 3,323

Interest income 7,410 3,327 8,251 1,278 17,280 11,578 1,793

Fair value change of financial 19,619 - 10,610 1,643 19,238 10,610 1,643 instrument

Exchange (losses)/gains (689) (693) 5,458 845 (15,970) 4,765 738

Others, net 930 6,009 (5,076) (786) 1,631 933 145

Loss before income tax (116,564) (324,156) (319,504) (49,485) (317,198) (643,660) (99,690)

Income tax benefit/(expense) 449 (537) (1,580) (245) (254) (2,117) (328)

Net loss (116,115) (324,693) (321,084) (49,730) (317,452) (645,777) (100,018)

Accretions of convertible redeemable preferred shares to (172,534) (170,585) - - (338,045) (170,585) (26,420) redemption value

Net loss attributable to Zhihu (288,649) (495,278) (321,084) (49,730) (655,497) (816,362) (126,438) Inc.'s shareholders

Net loss per share

Basic (4.45) (6.93) (1.09) (0.17) (10.17) (4.45) (0.69)

Diluted (4.45) (6.93) (1.09) (0.17) (10.17) (4.45) (0.69)

Net loss per ADS (Two ADSs represent one Class A ordinary share)

Basic (2.22) (3.46) (0.55) (0.08) (5.09) (2.22) (0.34)

Diluted (2.22) (3.46) (0.55) (0.08) (5.09) (2.22) (0.34)

Weighted average number of ordinary shares outstanding

Basic 64,894,737 71,493,738 293,735,095 293,735,095 64,439,452 183,518,197 183,518,197

Diluted 64,894,737 71,493,738 293,735,095 293,735,095 64,439,452 183,518,197 183,518,197

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 Six Months Ended

June 30, March 31, June 30, June 30, June 30,

2020 2021 2021 2020 2021

RMB RMB RMB US$ RMB RMB US$

Share-based compensation expenses included in:

Cost of revenues 2,239 2,232 2,349 364 4,420 4,581 709

Selling and marketing 5,094 4,803 4,614 715 10,746 9,417 1,459 expenses

Research and development 5,814 7,608 2,709 419 13,263 10,317 1,598 expenses

General and administrative 32,720 116,484 111,073 17,203 57,025 227,557 35,244 expenses

ZHIHU INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

As of December 31, As of June 30,

2020 2021

RMB RMB US$

ASSETS

Current assets:

Cash and cash equivalents 957,820 884,544 136,998

Term deposits 1,092,921 3,546,595 549,298

Short-term investments 1,046,000 1,314,536 203,596

Restricted cash - 1,214,499 188,102

Trade receivables 486,046 567,542 87,901

Amounts due from related parties 13,843 35,393 5,482

Prepayments and other current assets 123,536 151,182 23,415

Total current assets 3,720,166 7,714,291 1,194,792

Non-current assets:

Property and equipment, net 8,105 7,329 1,135

Intangible assets, net 23,478 17,833 2,762

Long-term investments - 19,380 3,002

Term deposits - 742,911 115,062

Right-of-use assets 3,241 83,145 12,877

Other non-current assets 6,451 5,679 880

Total non-current assets 41,275 876,277 135,718

Total assets 3,761,441 8,590,568 1,330,510

LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' (DEFICIT)/EQUITY

Current liabilities

Accounts payables and accrued liabilities 501,848 754,420 116,845

Salary and welfare payables 231,847 248,614 38,505

Taxes payables 7,066 29,529 4,573

Contract liabilities 159,995 201,652 31,232

Amounts due to related parties 45,983 54,324 8,414

Short term lease liabilities 2,893 24,357 3,772

Other current liabilities 64,936 110,334 17,089

Total current liabilities 1,014,568 1,423,230 220,430

Non-current liabilities

Long term lease liabilities - 52,675 8,159

Total non-current liabilities - 52,675 8,159

Total liabilities 1,014,568 1,475,905 228,589

Total mezzanine equity 7,891,348 - -

Total shareholders' (deficit)/equity (5,144,475) 7,114,663 1,101,921

Total liabilities, mezzanine equity and shareholders' 3,761,441 8,590,568 1,330,510 (deficit)/equity

ZHIHU INC.

UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS

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

For the Three Months Ended For the Six Months Ended

June 30, March 31, June 30, June 30, June 30,

2020 2021 2021 2020 2021

RMB RMB RMB US$ RMB RMB US$

Net loss (116,115) (324,693) (321,084) (49,730) (317,452) (645,777) (100,018)

Add:

Share-based compensation 45,867 131,127 120,745 18,701 85,454 251,872 39,010 expenses

Adjusted net loss (70,248) (193,566) (200,339) (31,029) (231,998) (393,905) (61,008)

View original content: https://www.prnewswire.com/news-releases/zhihu-inc-reports-second-quarter-2021-unaudited-financial-results-301355650.html

SOURCE Zhihu Inc.