- Gross Margin: Increased by 5.8 percentage points year over year to 59.6%.
- Total Operating Expenses: Decreased by more than RMB140 million year over year.
- Marketing Expenses: Reduced by over RMB120 million year over year.
- Adjusted Net Loss: Declined by 79.9% year over year to RMB44.6 million.
- Marketing Services Revenue: RMB344 million, a decrease of 16.7% year over year.
- Brand Advertising Revenue: Increased by 17% year over year.
- Performance-Based Advertising Revenue: Increased by 28.4% year over year.
- Paid Membership Revenue: RMB432.7 million, a decrease of 3.7% year over year.
- Number of Subscribing Members: Grew by 4.7% year over year to 14.7 million.
- Vocational Training Revenue: RMB133.6 million, a decrease from RMB144.5 million year over year.
- Gross Profit: RMB556.5 million compared to RMB562.1 million year over year.
- Total Operating Expenses: RMB740.4 million, a 16.7% decrease from RMB889.3 million year over year.
- Selling and Marketing Expenses: Decreased by 22.9% to RMB417 million year over year.
- Research and Development Expenses: Decreased by 11.4% to RMB209.3 million year over year.
- General and Administrative Expenses: RMB114.1 million compared to RMB112.5 million year over year.
- GAAP Net Loss: Decreased by 71.1% year over year.
- Non-GAAP Net Loss: Decreased by 79.9% year over year.
- Cash and Cash Equivalents: RMB5.1 billion as of June 30, 2024, compared to RMB5.5 billion as of December 31, 2023.
Release Date: August 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zhihu Inc (ZH, Financial) achieved a significant improvement in operating efficiency, with gross margin increasing by 5.8 percentage points year over year to 59.6%.
- The company reported a 79.9% year-over-year decline in adjusted net loss, marking the lowest quarterly loss since its US IPO.
- Zhihu Inc (ZH) launched Zhihu Zhida, an AI-powered search initiative, which has shown promising increases in user engagement and market reputation.
- The number of content creators on the platform grew by 12.5% year over year, reaching 74.9 million, with a 16.8% increase in cumulative content pieces.
- User engagement metrics improved significantly, with average daily engagements per DAU growing by nearly 40% year over year and monthly average uploads increasing by over 47% year over year.
Negative Points
- Marketing services revenue decreased by 16.7% year over year to RMB344 million, reflecting ongoing refinement of service offerings.
- Paid membership revenue saw a slight decline of 3.7% year over year to RMB432.7 million, primarily due to a marginal decline in average revenue per subscribing member.
- Vocational training revenue decreased to RMB133.6 million from RMB144.5 million in the same period of 2023, due to strategic refinement of acquired businesses.
- Total operating expenses for the quarter were RMB740.4 million, a 16.7% decrease from the same period last year, indicating cost-cutting measures but also potential constraints on growth initiatives.
- Despite improvements, the company still faces challenges in achieving profitability, with ongoing efforts required to reduce losses and enhance operational efficiency.
Q & A Highlights
Q: Would management share some color about the progress of achieving breakeven target?
A: Wang Han, CFO: Our profitability growth remains unchanged and resolute. We still plan to achieve a quarterly non-GAAP net profit in the fourth quarter. Our second-quarter financial results validate our strong strategic planning and execution capabilities. After a single quarter of adjustments, we reduced our losses by streamlining costs and expenses, recording our lowest absolute quarterly loss since our IPO.
Q: How has Zhihu managed to maintain a stable user base despite scaling down community promotion expenses?
A: Yuan Zhou, CEO: The proactive user strategy adjustments we have made over the past two quarters were quality-oriented, prioritizing our core user experience. The core is user retention improvement, which comes from the improvement of high-quality content. Our in-depth content cultivation approach has been effective, and our user base remains stable.
Q: Can management share the progress of AI search and the metrics after the launch of Zhihu Zhida?
A: Yuan Zhou, CEO: We successfully launched Zhihu Zhida on the PC platform at the end of June. Our work has focused on optimizing the model and upgrading the end. This has led to significant improvements in user retention and the number of high-frequency users. We are also preparing to launch Zhihu Zhida on our mobile end. Currently, our primary focus is on improving the experience for heavy users, with commercialization not being the priority at this moment.
Q: What are the drivers behind the growth of Zhihu's paying user base, and what is the outlook for this segment?
A: Wang Han, CFO: The two main drivers are the growth of subscribing members and the increase in ARPU. We will continue to explore multiple channels to expand our user base. The MAU of Yanyan Stories app in July saw a year-over-year increase of more than 36%. We are also enriching membership benefits, such as audiobooks and radio dramas, which have been steadily increasing in orders.
Q: How do you view the future of your self-operated vocational training business, especially given the current economic and consumption environment?
A: Wang Han, CFO: The external environment is positive for our self-operated vocational training business. The increased demand for professional skills due to employment pressures and favorable regulatory policies in the education industry are beneficial. Our primary goal is to improve efficiency and accelerate loss reduction. We have adjusted underperforming courses and reallocated resources to strengthen core programs. In the long term, the synergy between our vocational training business and community will empower this segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
