Zhihu Inc. Reports Unaudited Fourth Quarter and Fiscal Year 2024 Financial Results

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 and fiscal year ended December 31, 2024.

Fourth Quarter 2024 Highlights

— Total revenues were RMB859.2 million (US$117.7 million) in the fourth quarter of 2024, compared with RMB1,138.3 million in the same period of 2023.

— Gross margin expanded to 62.9% in the fourth quarter of 2024 from 59.1% in the same period of 2023.

— Net income was RMB86.4 million (US$11.8 million) in the fourth quarter of 2024, compared with a net loss of RMB103.1 million in the same period of 2023.

— Adjusted net income (non-GAAP)[1] was RMB97.1 million (US$13.3 million) in the fourth quarter of 2024, compared with an adjusted net loss of RMB91.3 million in the same period of 2023.

— Average monthly active users (MAUs)[2] were 81.4 million in the fourth quarter of 2024.

— Average monthly subscribing members[3] were 14.1 million in the fourth quarter of 2024.

Fiscal Year 2024 Highlights

— Total revenues were RMB3,598.9 million (US$493.0 million) in 2024, compared with RMB4,198.9 million in 2023.

— Gross margin expanded to 60.6% in 2024 from 54.7% in 2023.

— Net loss was RMB169.0 million (US$23.1 million) in 2024, narrowed by 79.9% from 2023.

— Adjusted net loss (non-GAAP)[1] was RMB96.3 million (US$13.2 million) in 2024, narrowed by 85.4% from 2023.

“The year of 2024 marked a significant turnaround for Zhihu, driven by the successful execution of the strategic roadmap we laid out at the beginning of the year and culminating in a profitable fourth quarter,” said Mr. Yuan Zhou, chairman and chief executive officer of Zhihu. “We optimized our ecosystem to foster greater vibrancy and trust across our community, consistently improving user metrics and deepening creator engagement throughout the year. We have consistently invested in AI applications, leveraging our premium content and strong network of trusted experts. By further integrating AI into our diverse community scenarios, we are unlocking new possibilities to redefine user interactions in the AI era while sharpening our own competitive edge.”

Mr. Han Wang, chief financial officer of Zhihu, added, “The fourth quarter of 2024 marked a milestone for Zhihu as we achieved a major inflection point with positive operating profit and net income on both GAAP and non-GAAP basis for the first time-a testament to our strategic focus and successful execution. Improved operating efficiency and disciplined cost management drove significant margin expansion during the quarter, with gross profit margin expanding by 3.8 percentage points year-over-year to 62.9% while operating expenses decreased by 37.9%. Going forward, we will build on this robust momentum to lay a solid foundation for sustainable long-term growth, unlocking greater value for our shareholders and users.”

Fourth Quarter 2024 Financial Results

Total revenues were RMB859.2 million (US$117.7 million), compared with RMB1,138.3 million in the same period of 2023.

Marketing services revenue was RMB315.9 million (US$43.3 million), compared with RMB465.2 million in the same period of 2023. The decrease was primarily due to our proactive and ongoing refinement of service offerings to strategically focus on margin improvement.

Paid membership revenue was RMB420.2 million (US$57.6 million), compared with RMB455.9 million in the same period of 2023. The slight decrease was primarily attributable to a marginal decline in our average revenue per subscribing member.

Vocational training revenuewas RMB84.0 million (US$11.5 million), compared with RMB169.3 million in the same period of 2023. The decrease was primarily driven by lower revenue contribution from our acquired businesses.

Other revenues were RMB39.1 million (US$5.4 million), compared with RMB48.0 million in the same period of 2023.

Cost of revenues decreased by 31.5% to RMB318.5 million (US$43.6 million) from RMB465.2 million in the same period of 2023. The decrease was primarily due to reduced content and operating costs associated with the decline in our revenues and a decrease in cloud services and bandwidth costs resulting from our improved technological efficiency.

Gross profit was RMB540.7 million (US$74.1 million), compared with RMB673.1 million in the same period of 2023. Gross margin expanded to 62.9% from 59.1% in the same period of 2023, primarily attributable to our monetization enhancements and improvements in our operating efficiency.

Total operating expenses decreased by 37.9% to RMB528.8 million (US$72.4 million) from RMB851.3 million in the same period of 2023.

Selling and marketing expenses decreased by 40.1% to RMB316.2 million (US$43.3 million) from RMB527.6 million in the same period of 2023. The decrease was primarily due to more disciplined promotional spending and a decrease in personnel-related expenses.

Research and development expensesdecreased by 37.0% to RMB146.6 million (US$20.1 million) from RMB232.6 million in the same period of 2023. The decrease was primarily attributable to more efficient spending on technological innovation and a decrease in personnel-related expenses.

General and administrative expenses decreased by 27.5% to RMB66.0 million (US$9.0 million) from RMB91.1 million in the same period of 2023. The decrease was primarily attributable to a decline in the allowance for expected credit losses on trade receivables.

Income from operations was RMB11.9 million (US$1.6 million), compared with a loss from operations of RMB178.2 million in the same period of 2023.

Adjusted income from operations (non-GAAP)[1] was RMB23.1 million (US$3.2 million), compared with an adjusted loss from operations of RMB165.3 million in the same period of 2023.

Net income was RMB86.4 million (US$11.8 million), compared with a net loss of RMB103.1 million in the same period of 2023.

Adjusted net income (non-GAAP)[1] was RMB97.1 million (US$13.3 million), compared with an adjusted net loss of RMB91.3 million in the same period of 2023.

Diluted net income per American depositary share (“ADS”)[4] was RMB1.00 (US$0.14), compared with a diluted net loss per ADS of RMB1.07 in the same period of 2023.

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

As of December 31, 2024, the Company had cash and cash equivalents, term deposits, restricted cash and short-term investments of RMB4,859.0 million (US$665.7 million), compared with RMB5,462.9 million as of December 31, 2023.

Fiscal Year 2024 Financial Results

Total revenues were RMB3,598.9 million (US$493.0 million), compared with RMB4,198.9 million in 2023.

Marketing services revenue was RMB1,247.1 million (US$170.9 million), compared with RMB1,653.0 million in 2023. The decrease was primarily due to our proactive and ongoing refinement of service offerings to strategically focus on margin improvement.

Paid membership revenue was RMB1,762.0 million (US$241.4 million), compared with RMB1,826.6 million in 2023. The slight decrease was primarily attributable to a marginal decline in our average revenue per subscribing member.

Vocational training revenuewas RMB468.1 million (US$64.1 million), compared with RMB565.6 million in 2023. The decrease was primarily driven by lower revenue contribution from our acquired businesses, partially offset by the growth of our self-operated course offerings.

Other revenues were RMB121.7 million (US$16.7 million), compared with RMB153.8 million in 2023.

Cost of revenues decreased by 25.5% to RMB1,418.1 million (US$194.3 million) from RMB1,903.0 million in 2023. The decrease was primarily due to reduced content and operating costs associated with the decline in our revenues and a decrease in cloud services and bandwidth costs resulting from our improved technological efficiency.

Gross profit was RMB2,180.8 million (US$298.8 million), compared with RMB2,295.8 million in 2023. Gross margin expanded to 60.6% from 54.7% in 2023, primarily attributable to our monetization enhancements and improvements in our operating efficiency.

Total operating expenses decreased by 21.0% to RMB2,661.9 million (US$364.7 million) from RMB3,368.1 million in 2023.

Selling and marketing expenses decreased by 21.9% to RMB1,599.2 million (US$219.1 million) from RMB2,048.1 million in 2023. The decrease was primarily due to more disciplined promotional spending and a decrease in personnel-related expenses.

Research and development expenses decreased by 18.7% to RMB732.6 million (US$100.4 million) from RMB901.5 million in 2023. The decrease was primarily attributable to more efficient spending on technological innovation and a decrease in personnel-related expenses.

General and administrative expenses decreased by 21.1% to RMB330.2 million (US$45.2 million) from RMB418.5 million in 2023. The decrease was primarily attributable to lower share-based compensation expenses.

Loss from operations narrowed by 55.1% to RMB481.1 million (US$65.9 million) from RMB1,072.2 million in 2023.

Adjusted loss from operations (non-GAAP)[1] narrowed by 54.4% to RMB405.4 million (US$55.5 million) from RMB888.0 million in 2023.

Net loss narrowed by 79.9% to RMB169.0 million (US$23.1 million) from RMB839.5 million in 2023.

Adjusted net loss (non-GAAP)[1] narrowed by 85.4% to RMB96.3 million (US$13.2 million) from RMB659.1 million in 2023.

Diluted net loss per ADS[4] was RMB1.88 (US$0.26), compared with RMB8.46 in 2023.

Share Repurchase Programs

As of December 31, 2024, the Company had repurchased 31.1 million Class A ordinary shares (including Class A ordinary shares underlying the ADSs) for a total price of US$66.5 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 (the “2022 Repurchase Program”), established in May 2022 and extended until June 26, 2025. In addition, a concurrent share repurchase program (the “2024 Repurchase Program”) was established in June 2024 and will remain effective until June 26, 2025. The maximum number of shares (including shares underlying the ADSs) that can be repurchased under the 2024 Repurchase Program, together with the remaining number of shares (including shares underlying the ADSs) that can be repurchased under the 2022 Repurchase Program, will not exceed 10% of the total number of issued shares of the Company (excluding any treasury shares) as of June 26, 2024, the date of the resolution granting the general unconditional mandate to purchase the Company's own shares approved by shareholders.

In addition, as previously announced, the Company conducted an all cash tender offer and repurchased a total of 33,016,016 Class A ordinary shares tendered (including 19,877,118 Class A ordinary shares in the form of 6,625,706 ADSs) for a total consideration of approximately HK$300 million. These shares were repurchased and canceled on November 8, 2024.

[1] Adjusted income/(loss) from operations and adjusted net income/(loss) are non-GAAP financial measures. For more information on the non-GAAP financial measures, please see the section “Use of Non-GAAP Financial Measures” and the table captioned “Unaudited Reconciliations of GAAP and Non-GAAP Results” set forth at the end of this press release.[2] MAUs refers to the sum of the number of mobile devices that launch our mobile apps 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.[3] Monthly subscribing members refers to the number of members who subscribed for our membership packages in a specified month. Average monthly subscribing members for a period is calculated by dividing the sum of monthly subscribing members for each month during the specified period by the number of months in such period.[4] On May 10, 2024, we effected a change in the ratio of our ADSs to Class A ordinary shares from two ADSs representing one Class A ordinary share to a new ratio of one ADS representing three Class A ordinary shares. Basic and diluted net loss per ADS have been retrospectively adjusted to reflect this ADS ratio change for all periods presented.

Conference Call

The Company's management will host an earnings conference call at 7:00 a.m. U.S. Eastern Time on March 26, 2025 (7:00 p.m. Beijing/Hong Kong time on March 26, 2025).

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 and a unique access PIN which can be used to join the conference call.

Registration Link: https://register-conf.media-server.com/register/BI822b4edc673942e382e2354f17702df3

Additionally, a live and archived webcast of the conference call will be available on the Company's investor relations website athttps://ir.zhihu.com.

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 visithttps://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 income/(loss) from operations and adjusted net income/(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 they help 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 them 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 RMB7.2993 to US$1.00, the exchange rate in effect as of December 31, 2024 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:

Zhihu Inc. Email: ir@zhihu.com

Christensen Advisory Roger Hu Tel: +86-10-5900-1548 Email: zhihu@christensencomms.com

ZHIHUINC.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, September 30, December 31, December 31, December 31, 2023 2024 2024 2023 2024 RMB RMB RMB US$ RMB RMB US$Revenues:Marketing services 465,153 256,631 315,940 43,284 1,652,992 1,247,092 170,851Paid membership 455,906 459,387 420,215 57,569 1,826,557 1,761,978 241,390Vocational training 169,272 105,058 83,984 11,506 565,585 468,111 64,131Others 47,966 23,944 39,073 5,353 153,755 121,724 16,676Total revenues 1,138,297 845,020 859,212 117,712 4,198,889 3,598,905 493,048Cost of revenues (465,197) (304,879) (318,547) (43,641) (1,903,041) (1,418,076) (194,276)Gross profit 673,100 540,141 540,665 74,071 2,295,848 2,180,829 298,772Selling and marketing expenses (527,604) (388,049) (316,198) (43,319) (2,048,090) (1,599,186) (219,088)Research and development (232,585) (179,261) (146,613) (20,086) (901,452) (732,553) (100,359)expensesGeneral and administrative (91,069) (57,161) (65,988) (9,040) (418,531) (330,173) (45,234)expensesTotal operating expenses (851,258) (624,471) (528,799) (72,445) (3,368,073) (2,661,912) (364,681)(Loss)/Income from operations (178,158) (84,330) 11,866 1,626 (1,072,225) (481,083) (65,909)Other income/(expenses):Investment income 12,279 13,679 13,049 1,788 41,695 65,441 8,965Interest income 38,828 31,136 26,311 3,605 158,671 114,964 15,750Fair value change of financial 14,780 6,887 30,698 4,206 (5,170) 78,405 10,741instrumentsExchange (losses)/gains (937) (1,097) 1,701 233 97 1,013 139Others, net 15,032 23,799 113 15 49,236 42,902 5,878(Loss)/Income before income (98,176) (9,926) 83,738 11,473 (827,696) (178,358) (24,436)taxIncome tax (expenses)/benefits (4,929) 949 2,663 365 (11,832) 9,391 1,287Net (loss)/income (103,105) (8,977) 86,401 11,838 (839,528) (168,967) (23,149)Net income attributable to (666) (1,514) (127) (17) (4,113) (2,835) (388)noncontrolling interestsNet (loss)/income attributable (103,771) (10,491) 86,274 11,821 (843,641) (171,802) (23,537)to Zhihu Inc.'s shareholdersNet (loss)/income per shareBasic (0.36) (0.04) 0.34 0.05 (2.82) (0.63) (0.09)Diluted (0.36) (0.04) 0.33 0.05 (2.82) (0.63) (0.09)Net (loss)/income per ADS(One ADS represents threeClass A ordinary shares)Basic (1.07) (0.11) 1.01 0.14 (8.46) (1.88) (0.26)Diluted (1.07) (0.11) 1.00 0.14 (8.46) (1.88) (0.26)Weighted average number ofordinary shares outstandingBasic 291,056,615 277,309,431 256,257,971 256,257,971 299,132,894 273,560,865 273,560,865Diluted 291,056,615 277,309,431 259,990,323 259,990,323 299,132,894 273,560,865 273,560,865ZHIHUINC.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 Year Ended December 31, September 30, December 31, December 31, December 31, 2023 2024 2024 2023 2024 RMB RMB RMB US$ RMB RMB US$Share-based compensationexpenses included in:Cost of revenues 1,575 1,016 (314) (43) 9,751 3,949 542Selling and marketing (7,001) 547 269 37 13,882 (1,975) (271)expensesResearch and development (57) 6,233 (6,436) (882) 49,847 7,916 1,084expensesGeneral and administrative 12,983 (14,767) 14,261 1,954 91,176 49,372 6,764expensesZHIHUINC.UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(All amounts in thousands) As of December 31, As of December 31, 2023 2024 RMB RMB US$ASSETSCurrent assets:Cash and cash equivalents 2,106,639 3,999,160 547,883Term deposits 1,586,469 320,088 43,852Short-term investments 1,769,822 538,816 73,817Restricted cash – 900 123Trade receivables 664,615 420,636 57,627Amounts due from related parties 18,319 41,588 5,698Prepayments and other current assets 232,016 163,446 22,392Total current assets 6,377,880 5,484,634 751,392Non-current assets:Property and equipment, net 10,849 8,490 1,163Intangible assets, net 122,645 54,534 7,471Goodwill 191,077 126,344 17,309Long-term investments, net 44,621 51,176 7,011Right-of-use assets 40,211 7,151 980Other non-current assets 7,989 623 85Total non-current assets 417,392 248,318 34,019Total assets 6,795,272 5,732,952 785,411LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilitiesAccounts payable and accrued liabilities 1,038,531 835,688 114,489Salary and welfare payables 342,125 275,260 37,710Taxes payables 21,394 22,081 3,025Contract liabilities 303,574 235,539 32,269Amounts due to related parties 26,032 6,825 935Short term lease liabilities 42,089 17,308 2,371Other current liabilities 171,743 131,955 18,078Total current liabilities 1,945,488 1,524,656 208,877Non-current liabilitiesLong term lease liabilities 3,642 1,823 250Deferred tax liabilities 22,574 6,830 936Other non-current liabilities 121,958 3,957 541Total non-current liabilities 148,174 12,610 1,727Total liabilities 2,093,662 1,537,266 210,604Total Zhihu Inc.'s shareholders' equity 4,599,810 4,136,123 566,647Noncontrolling interests 101,800 59,563 8,160Total shareholders' equity 4,701,610 4,195,686 574,807Total liabilities and shareholders' equity 6,795,272 5,732,952 785,411ZHIHUINC.UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS(All amounts in thousands) For the Three Months Ended For the Year Ended December 31, September 30, December 31, December 31, December 31, 2023 2024 2024 2023 2024 RMB RMB RMB US$ RMB RMB US$(Loss)/Income from (178,158) (84,330) 11,866 1,626 (1,072,225) (481,083) (65,909)operationsAdd:Share-based compensation 7,500 (6,971) 7,780 1,066 164,656 59,262 8,119expensesAmortization of intangible 5,365 3,490 3,490 478 19,585 16,460 2,255assets resulting frombusiness acquisitionsAdjusted (loss)/income (165,293) (87,811) 23,136 3,170 (887,984) (405,361) (55,535)from operationsNet (loss)/income (103,105) (8,977) 86,401 11,838 (839,528) (168,967) (23,149)Add:Share-based compensation 7,500 (6,971) 7,780 1,066 164,656 59,262 8,119expensesAmortization of intangible 5,365 3,490 3,490 478 19,585 16,460 2,255assets resulting frombusiness acquisitionsTax effects on non-GAAP (1,069) (600) (600) (82) (3,806) (3,025) (414)adjustmentsAdjusted net (loss)/income (91,309) (13,058) 97,071 13,300 (659,093) (96,270) (13,189)

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