Zhihu Shares Fell Nearly 10% after Announcing Its Financial Results

Zhihu shares fell nearly 10% after announcing its financial results.

Fourth Quarter and Full Year 2021 Highlights

• Average monthly active users (MAUs)[1]reached 103.3 million in the fourth quarter of 2021, representing a growth of 36.4% over the fourth quarter of 2020.Average MAUsfor the year was 95.9 million, representing a growth of 40.0% from 2020.
• Average monthly paying members[2] reached 6.1 million in the fourth quarter of 2021, representing a growth of 102.0% over the fourth quarter of 2020.Average monthly paying membersfor the year was5.1 million, representing a growth of 114.8% from 2020.
• Total revenueswereRMB1,019.2 million(US$159.9 million) in the fourth quarter of 2021, representing a growth of 96.1% over the fourth quarter of 2020.Total revenuesfor the year wereRMB2,959.3 million(US$464.4 million), representing a growth of 118.9% from 2020.
• Gross profitwasRMB479.8 million(US$75.3 million) in the fourth quarter of 2021, representing an increase of 44.1% over the fourth quarter of 2020.Gross profit for the yearwasRMB1,553.9 million(US$243.8 million), representing an increase of 105.1% from 2020.

Fourth Quarter 2021 Financial Results

Total revenueswereRMB1,019.2 million(US$159.9 million) in the fourth quarter of 2021, representing an increase of 96.1% from RMB519.8 million in the same period of 2020. The increase was driven by the continued expansion of both our user base and average revenue per active user.

Advertising revenue was RMB377.8 million(US$59.3 million) in the fourth quarter of 2021, representing an increase of 18.4% fromRMB319.2 million in the same period of 2020. The year-over-year increase was primarily attributable to the continued expansion of our user base.

Paid membership revenue was RMB208.8 million(US$32.8 million) in the fourth quarter of 2021, representing an increase of 100.0% fromRMB104.4 million in the same period of 2020. The year-over-year increase was primarily attributable to increases in our overall user base and paying ratio for the period.

Content-commerce solutions revenue was RMB367.3 million (US$57.6 million) in the fourth quarter of 2021, compared with RMB76.5 million in the same period of 2020. The strong year-over-year growth was primarily driven by rapid increases in both our user base and average content-commerce solutions revenue per MAU, reflecting our continued development of this business line.

Other revenueswereRMB65.4 million(US$10.3 million) in the fourth quarter of 2021, compared withRMB19.8 million in the same period of 2020. The year-over-year increase was primarily due to the growth of our vocational training business and continued growth in our e-commerce services.

Cost of revenues increased toRMB539.4 million(US$84.6 million) in the fourth quarter of 2021 fromRMB186.7 million in the same period of 2020. The increase was primarily due to an increase in execution costs for our advertising services and content-related costs, as well as an increase in staff costs due to our increased headcount to support our growth. The rapid growth in user traffic in the quarter also resulted in increases in cloud services and bandwidth costs.

Gross profit was RMB479.8 million(US$75.3 million) in the fourth quarter of 2021, compared with gross profit ofRMB333.1 million in the same period of 2020.

Gross margin in the fourth quarter of 2021 was 47.1%, compared to 64.1% in the same period of 2020.

Total operating expenses were RMB855.1 million(US$134.2 million) in the fourth quarter of 2021, compared with RMB437.6 million in the same period of 2020.

Loss from operationswasRMB375.2 million(US$58.9 million) in the fourth quarter of 2021, compared withRMB104.5 millionin the same period of 2020.

Net losswasRMB383.3 million(US$60.1 million) in the fourth quarter of 2021, compared withRMB90.1 millionin the same period of 2020.

Adjusted net loss (non-GAAP)[3]wasRMB240.8 million(US$37.8 million) in the fourth quarter of 2021, compared withRMB26.3 millionin the same period of 2020.

Basic and diluted net loss per ADSwasRMB0.65(US$0.10)in the fourth quarter of 2021, compared withRMB1.97in the same period of 2020.

Outlook

For the first quarter of 2022, the Company expects its total revenues to be betweenRMB720 million and RMB740 million. The above outlook is based on current market conditions and reflects the Company's preliminary estimates, which are subject to change.