Zhihu (ZH) Q1 2025 Earnings Call May 27, 2025 08:00 AM ET Company Participants Yolanda Liu - Director - IRWang Han - Chief Financial OfficerYuan Zhou - Founder, Chairman & CEOLincoln Kong - Executive DirectorThomas Chong - Managing DirectorVicky Wei - Vice President - Citi Internet Research team Conference Call Participants Xueqing Zhang - Media Analyst Operator Ladies and gentlemen, thank you for standing by, and welcome to the Johal Inc. First Quarter twenty twenty five Financial Results Conference Call. ...

Financial Data and Key Metrics Changes - The company achieved a non-GAAP net profit of RMB6.9 million in Q1 2025, compared to an adjusted net loss of RMB135.7 million in the same period last year, marking a significant improvement in profitability [7][28] - Total revenue for the quarter was RMB729.7 million, down 24% from RMB960.9 million in Q1 2024, reflecting ongoing adjustments to the business [24][25] - Gross profit for the quarter was RMB451.1 million, with a gross margin of 61.8%, an increase of 5.2 percentage points year over year [26][28] - Total operating expenses decreased by 34.4% year over year to RMB503.7 million, driven by better cost management [27][28] Business Line Data and Key Metrics Changes - Revenue from marketing services was RMB197 million, a decline of 40.4% year over year, primarily due to the adoption of a trustworthy content model [15][24] - Paid membership revenue remained stable at RMB417.9 million, with average monthly paying members increasing by 1.2% sequentially to 14.2 million [19][25] - Vocational training revenue was RMB94.5 million, down 35% year over year, reflecting a strategic transformation of the business model [20][21] Market Data and Key Metrics Changes - The number of daily active high-tier content creators increased by 20% year over year, indicating growth in the creator ecosystem [12] - AI-related professional content grew by 46% year over year, highlighting the increasing engagement with AI-driven content [11] Company Strategy and Development Direction - The company is focusing on integrating AI applications into its community, with plans to launch a public knowledge base to enhance content quality [8][37] - The strategic focus is on balancing commercial growth with community integrity, aiming to create a sustainable commercial flywheel [14][18] - The company is transitioning its vocational training business to a more socially interactive model, leveraging its content ecosystem [21][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing optimization of the business model and expects financial performance to exceed initial expectations for 2025 [49] - The company aims to capitalize on the opportunities created by AI, enhancing connections and engagement among its user base [22][29] Other Important Information - The company repurchased 31.1 million Class A ordinary shares for a total value of USD66.5 million, as part of its share repurchase program [28][29] - A new share repurchase program was approved, allowing for the repurchase of up to 10% of total issued shares [29] Q&A Session Summary Question: What other AI initiatives can be expected next within the Juhu community and beyond? - Management highlighted the focus on trustworthy content and expert networks, with plans to integrate more experts and aggregate high-quality content [33][37] Question: Can management share some color on the revenue trends for each business segment in 2025 and the profitability outlook? - Management indicated that each business stream is entering a new phase of growth, with a focus on aligning the community ecosystem with commercial operations [47][49] Question: What are the thoughts about the shareholder return program this year? - Management confirmed commitment to enhancing shareholder returns through a share repurchase plan, emphasizing confidence in the company's long-term success [52][53]

Core Insights - Zhihu reported a total revenue of 730 million yuan for Q1 2025, with an adjusted net profit of 6.94 million yuan, marking a strong start to the year [1][2] - The paid reading business remains the largest revenue source, contributing 418 million yuan, accounting for 57.3% of total revenue [1] - The company experienced a significant increase in user engagement, with daily active users spending nearly 38 minutes on the platform, a 17.6% increase year-over-year [1] Revenue Breakdown - Paid reading business: 418 million yuan (57.3% of total revenue) [1] - Marketing services: 197 million yuan (27% of total revenue) [1] - Vocational education: 94.53 million yuan (13% of total revenue) [1] User Engagement Metrics - Daily active users' usage time increased to nearly 38 minutes, up 17.6% from the previous year [1] - Monthly active user base remained stable, with a monthly average of 14.2 million paid members showing an upward trend [1] AI Integration and Content Creation - Zhihu has become a significant content source for AI applications, with a citation rate of 29.9% for its professional content [1] - The activity of high-level creators related to AI increased, with AI-related professional content production growing by 46% year-over-year [1] - The introduction of AI-focused creators and companies, such as DeepSeek and others, indicates a growing trend in the platform's content ecosystem [1] Product Development - Zhihu Zhi Da, an AI search product launched in June 2024, has over 10 million monthly active users, with a growth of over 37% from the beginning of Q1 [2] - The product has been updated to support direct sourcing of search results from original creators on Zhihu [2] Leadership Commentary - The CEO highlighted the company's first-ever non-GAAP net profit in Q1 since its IPO, reflecting sustained profitability and community engagement [2]

Core Viewpoint - Zhihu Inc. reported its first-ever non-GAAP net income for the first quarter of 2025, reflecting effective operational strategies and AI integration, despite a decline in total revenues compared to the previous year [3][4]. Financial Performance - Total revenues for Q1 2025 were RMB 729.7 million (US$ 100.6 million), down from RMB 960.9 million in Q1 2024 [4][8]. - Non-GAAP net income was RMB 6.9 million (US$ 1.0 million), a significant improvement from a net loss of RMB 135.7 million in the same period of 2024 [8][12]. - Gross margin increased to 61.8% in Q1 2025 from 56.6% in Q1 2024, attributed to monetization enhancements and operational efficiency improvements [7][8]. Revenue Breakdown - Marketing services revenue decreased to RMB 197.0 million (US$ 27.1 million) from RMB 330.5 million in Q1 2024, due to strategic refinements in service offerings [4]. - Paid membership revenue was RMB 417.9 million (US$ 57.6 million), slightly down from RMB 449.7 million in Q1 2024, primarily due to a marginal decline in average monthly subscribing members [5]. - Vocational training revenue fell to RMB 94.5 million (US$ 13.0 million) from RMB 145.4 million in Q1 2024, mainly due to lower contributions from acquired businesses [5]. Cost Management - Cost of revenues decreased by 33.3% to RMB 278.6 million (US$ 38.4 million) from RMB 417.4 million in Q1 2024, driven by reduced content and operating costs [6]. - Total operating expenses decreased by 34.4% to RMB 503.7 million (US$ 69.4 million) from RMB 768.2 million in Q1 2024, with selling and marketing expenses down by 32.9% [9]. Shareholder Value Initiatives - As of March 31, 2025, the company had cash and cash equivalents totaling RMB 4,766.5 million (US$ 656.8 million) [13]. - The company repurchased 31.1 million Class A ordinary shares for a total of US$ 66.5 million under its existing share repurchase program [13][14].

Core Insights - Zhihu-W (02390.HK) reported its first quarter unaudited financial performance for 2025, showing total revenue of RMB 729.7 million, a decrease from RMB 960.9 million in the same period of 2024 [1] - The gross margin improved from 56.6% in 2024 to 61.8% in 2025 [1] - The net loss for the first quarter of 2025 was RMB 10.1 million, a significant reduction of 93.9% compared to the net loss in the same quarter of 2024 [1] - Adjusted net profit (non-GAAP) for the first quarter of 2025 was RMB 6.9 million, compared to an adjusted net loss of RMB 135.7 million in the same quarter of 2024 [1] - The average monthly subscription members reached 14.2 million in the first quarter of 2025 [1] Management Commentary - The Chairman and CEO of Zhihu, Zhou Yuan, highlighted that the first quarter of 2025 marked the first time the company recorded non-GAAP net profit in the first quarter since its listing, continuing the profitability momentum from the fourth quarter [2] - Zhou emphasized the effectiveness of the refined operational strategy and the deep integration of artificial intelligence within the Zhihu ecosystem, noting improvements in core user retention, daily active user engagement, and creator activity [2] - CFO Wang Han noted that the company achieved non-GAAP net profit of RMB 6.9 million in the first quarter while maintaining a gross margin increase of 5.2 percentage points year-on-year, reflecting improved execution and operational efficiency [2] - Looking ahead, the company aims to enhance its commercialization capabilities and unlock the community's significant value, focusing on sustainable growth and profitability to create long-term value for shareholders [2]

Core Insights - The total revenue for Zhihu (02390.HK) in Q1 2025 was RMB 730 million (USD 100.6 million), a decrease from RMB 960.9 million in the same period of 2024 [1] - The gross margin improved from 56.6% in Q1 2024 to 61.8% in Q1 2025 [1] Financial Performance - Q1 2025 total revenue: RMB 730 million (USD 100.6 million) [1] - Q1 2024 total revenue: RMB 960.9 million [1] - Q1 2025 gross margin: 61.8% [1] - Q1 2024 gross margin: 56.6% [1]

Group 1 - The core point of the article is that Zhihu (02390.HK) reported a net loss of RMB 10.1 million (USD 1.4 million) for the first quarter of 2025, which represents a significant reduction of 93.9% compared to the same period in 2024 [1]

Financial Performance - For Q1 2025, the total revenue was RMB 729.7 million (USD 100.6 million), a decrease from RMB 960.9 million in Q1 2024[10] - The gross margin increased to 61.8% in Q1 2025, up from 56.6% in the same period last year, reflecting improved operational efficiency[12] - The net loss for Q1 2025 narrowed to RMB 10.1 million (USD 1.4 million), a 93.9% reduction compared to RMB 165.8 million in Q1 2024[14] - Adjusted net profit (non-GAAP) for Q1 2025 was RMB 6.9 million (USD 1.0 million), compared to an adjusted net loss of RMB 135.7 million in Q1 2024[14] - Marketing services revenue decreased to RMB 197.0 million (USD 27.1 million) from RMB 330.5 million in Q1 2024, primarily due to a strategic focus on improving profit margins[11] - Paid membership revenue slightly decreased to RMB 417.9 million (USD 57.6 million) from RMB 449.7 million in Q1 2024, attributed to a minor decline in average monthly subscribers[11] - Operating expenses decreased by 34.4% to RMB 503.7 million (USD 69.4 million) from RMB 768.2 million in Q1 2024[12] - The company recorded an operating loss of RMB 52.6 million (USD 7.2 million), a 76.6% improvement from RMB 224.7 million in Q1 2024[12] Membership and Subscribers - Average monthly subscription members reached 14.2 million in Q1 2025[10] - The average monthly subscription members are calculated by dividing the total number of monthly subscription members by the number of months in the specified period[20] Cash and Investments - As of March 31, 2025, the company's cash and cash equivalents, along with short-term investments, totaled RMB 4,766.5 million (USD 656.8 million), a slight decrease from RMB 4,859.0 million as of December 31, 2024[15] - Cash and cash equivalents decreased to RMB 3,239,963 thousand as of March 31, 2024, down from RMB 3,999,160 thousand at the end of 2023[31] Share Repurchase - The company has repurchased 31.1 million Class A ordinary shares under the existing USD 100 million share repurchase program, totaling USD 66.5 million[16] - A new share repurchase program is proposed for approval at the annual general meeting on June 25, 2025, allowing for the repurchase of up to 10% of the total issued shares[16] Future Outlook and Strategy - The company aims to enhance commercialization capabilities and unlock significant community value for sustainable growth and profitability[10] - Forward-looking statements are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, involving inherent risks and uncertainties[24] Company Information - The company is listed on the New York Stock Exchange under the ticker symbol ZH and has developed into China's largest online content Q&A community since its launch in 2010[19] - For investor inquiries, the company can be contacted via email at ir@zhihu.com[25] Previous Quarter Comparison - Total revenue for Q1 2024 reached RMB 960,863 thousand, a 11.8% increase from RMB 859,212 thousand in Q4 2023[27] - Paid membership revenue was RMB 449,724 thousand, up 7% from RMB 420,215 thousand in the previous quarter[27] - Operating loss for Q1 2024 was RMB 224,748 thousand, compared to a profit of RMB 11,866 thousand in Q4 2023[27] - Net loss attributable to Zhihu shareholders was RMB 164,846 thousand, a significant decline from a profit of RMB 86,274 thousand in the previous quarter[27] - Total assets amounted to RMB 5,683,060 thousand as of March 31, 2024, slightly down from RMB 5,732,952 thousand at the end of 2023[33] - Total liabilities were RMB 1,523,697 thousand, a slight decrease from RMB 1,537,266 thousand at the end of 2023[33] - Basic net loss per share for Q1 2024 was RMB (0.59), compared to a profit of RMB 0.34 in Q4 2023[29] - Adjusted operating loss for Q1 2024 was RMB (193,571) thousand, compared to an adjusted profit of RMB 23,136 thousand in Q4 2023[35] - The company reported a significant increase in research and development expenses, totaling RMB 197,356 thousand for Q1 2024, up from RMB 146,613 thousand in Q4 2023[27]

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Core Insights - The 11th New Knowledge Youth Conference, organized by Zhihu, has commenced, highlighting the significant increase in AI professionals among the annual new knowledge contributors [2] - The annual new knowledge contributors are recognized for their expertise, community influence, and user popularity, with 100 contributors selected across 25 fields [2] Group 1 - The representation of AI industry professionals has notably increased, providing valuable insights into AI entrepreneurship and innovation [2] - Contributors from major national institutions, such as China Aerospace Science and Technology Corporation and China National Nuclear Corporation, continue to share significant research achievements [2] - Long-term contributors like Qian Cheng and Cecilia have established themselves as authoritative sources for life knowledge [2] Group 2 - AI chip entrepreneur Ji Yu Mackler has analyzed the competitive logic of the AI hardware ecosystem, gaining support from technical professionals [3] - Researcher Su Jianlin utilizes a dual perspective of mathematics and physics to explore technical topics, seeking ultimate beauty in symmetry and conservation [3] - The Zhihu platform has become a favored space for AI professionals to share their experiences in large model development, fostering a vibrant exchange of ideas [3] Group 3 - Zhihu's founder and CEO, Zhou Yuan, emphasized that the new knowledge contributors represent a valuable asset and a rare force in today's culture, promoting sincere expression and rational thinking [3] - The concept of "annual new knowledge contributor" embodies a culture that encourages sharing and believes in the impact of ordinary individuals through their expertise [3]