Zhihu Inc (ZH) 2025 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Zhihu Inc first-quarter 2025 financial results conference call. (Operator Instructions) Today's conference is being recorded and webcasted.

At this time, I would like to turn the conference over to you, Yolanda Liu, Director of Investor Relations. Please go ahead, ma'am.

Thank you, Heidi. Hello, everyone. Welcome to Zhihu's first-quarter financial results conference call. Joining me today on the call from the senior management team are Mr. Zhou Yuan, Founder, Chairman, and Chief Executive Officer; and Mr. Wang Han, our Chief Financial Officer.

Before we begin, I would like to remind you that today's discussion will include forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. As such, actual results may be materially different from the views expressed today.

Further information regarding these and other risks and uncertainties is included in our public filings with the US Securities and Exchange Commission and the Hong Kong Stock Exchange. The company does not assume any obligation to update any forward-looking statements except as required under applicable law.

Additionally, the discussion today will include both GAAP and non-GAAP financial measures for comparison purpose only. For reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to our earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our IR website at ir.zhihu.com.

I will now turn the call over to Mr. Wang Han, CFO of Zhihu. Han, please go ahead.

Thank you, Yolanda. Hello, everyone, and thank you for joining our Zhihu's first-quarter 2025 earnings call. I'm pleased to deliver today's opening remarks on behalf of Mr. Zhou Yuan, Founder, Chairman, and CEO of Zhihu.

In the first quarter, we carried our momentum of improving profitability forward, delivering another quarter of positive bottom-line results in terms of non-GAAP net income that significantly exceeded market expectations. This marks the first time we have achieved a non-GAAP net profit in the first quarter of the year since our IPO.

Adjusted net income for the quarter was RMB6.9 million compared with an adjusted net loss of RMB135.7 million during the same period last year. This milestone reflects the continued execution and the enhancement of our operating strategy as well as the increased operating leverage enabled by AI integration.

Deep and engaging discussions across various professional fields continued to take place on our Zhihu platform, expanding the influence of our trustworthy content and contributors within and beyond our community. For time spent per DAU, core user retention rate, and contributor activeness all showed improvements in the first quarter. We're active in a healthy community, along with its robust network of experts passionate about sharing knowledge, experience, and insights forms the foundation and core advantage for our transition into the AI era. Investment in an exploration of AI applications remains a top priority for us. In the first quarter, we launched the contributor attribution feature, a key step for the broader integration of AI with our community.

By attributing high-quality content to a contributor, this feature further amplifies the influence of our expert network built over years of professional accumulation. This innovative feature helps reduce AI hallucination in specialized domains and has been well received by users.

We believe AI will catalyze our rapid growth and, through its deep integration with our community, enable us to expand the reach of our differentiated value proposition, high-quality content, trusted creator network, and AI capabilities to broader use cases and audiences.

In the first quarter, we saw growth in both content consumption and creation, along with a stronger sense of community belonging. Increased engagement was evident in several of our key user metrics. While our monthly active user base remained stable, average daily user time spent reached nearly 38 minutes, up 17.6% year-over-year. Core user retention rate improved both sequentially and year-over-year.

Zhihu has long been the go-to platform for in-depth and vibrant discussion across a wide range of professional fields. We're seeing a robust flow of high-quality content that both deepens our user trust and drives more expert interactions. During the quarter, AI-related professional content grew by 46% year-over-year. Our high-quality content continues to rank highly on major search engines and is increasingly cited by large language models and AI-powered search applications.

According to Qbit Research Institute, in professional domains, AI assistants cite community platform content 62.4% of the time with Zhihu ranking highest, cited almost 4x as much as the number 2 platform, highlighting the importance of content quality and professional credibility in the AI era.

Zhihu is emerging as a leading source of trustworthy professional content. The number of daily active high-tier content creators continued to grow sequentially in Q1 with verified honored creators increasing 20% year-over-year. Our higher-tier creators include frontline experts in niche topics. In AI, our community not only discusses macro level topics like LLMs, intelligent agents, but also dives into foundational technologies such as embodied AI, autonomous driving and model compression. For example, Ji Yu, founder of Xingyun IC, and Yang Shuo, a top robotics contributor and former Tesla engineer, both chose Zhihu as the first platform to discuss their start-up journeys.

Xu Huazhe, founder of StarMap, and Professor Zhou Boyu of SUSTech regularly post their technical insights on Zhihu, generating widespread discussions across the broader Internet. Qwen's "Parallel Scaling" lead author and core ByteDance, Trae and MarsCode developers also use Zhihu to share their ideas and development progress. The integration of AI within our community remains our priority this year. The user base for Zhihu Zhida has grown steadily as a result. By the end of March, monthly active users grew over 37% compared to the start of the quarter, with improved usage frequency and user stickiness in high-value fields like technology, finance, workplace and health.

One of our next major updates will include a Public Knowledge Base built on top of existing personal knowledge libraries, enabling professional content creators and expert networks to deliver even greater value at scale. Turning to commercialization. We remain committed to balancing commercial growth with protecting the integrity of our community and user experience. Our trustworthy content and active professional creator ecosystem enhance the commercial appeal of our brand and monetization potential. We believe a healthy and sustainable commercial flywheel will, over time, further drive our user engagement and improve community vitality.

In the first quarter, our total revenue was RMB729.7 million, down 15.1% sequentially. Now turning to our performance by segment. In the first quarter, revenue from our marketing services business reached RMB197 million, representing a year-over-year decline of 40.4%. This decrease was primarily due to the adoption of Trustworthy Content Model, which identifies and distributes both commercial and organic content. As of the end of the quarter, the consumption of low-quality marketing content declined by more than 90% year-over-year.

At the same time, we are optimizing our client mix. Since the beginning of 2025, we have expanded our enterprise-facing client base, working with partners such as HarmonyOS NEXT developers and China Mobile cloud services, unlocking the commercial value of our high-quality user base and strong brand influence. Leveraging our trusted AI content framework and vibrant professional creator ecosystem, we're also helping brand partners explore new AI application scenarios. At the 2025 AWE, under the theme “AI technology, AI Life”, we partnered with brands such as Haier, Gree, Loock, and Baidu's Xiaodu to create an immersive offline experience within the Zhihu “Future Questions Store.” Based on user interaction data and content insights, we identified 5 key “AI home Appliances and AI Lifestyle” themes, helping brand partners establish credibility and improve the visibility of their next-gen tech products.

We're using this experience to accumulate valuable content and data assets for future AI use cases. Top-tier AI-related advertisers also remained active on our platform this quarter. Additionally, leveraging our in-house AI capabilities, we continue to upgrade our marketing product suite. In Q1, we maintained Ad load at one of the lowest historical levels, while improving CPM performance across most product categories, driving higher commercial efficiency for brand partners. With overall ad exposure volume remaining stable, ARPU increased steadily. As AI rapidly reshapes content distribution and brand marketing, Zhihu is emerging as a key upstream node in the AI search value chain, driven by our trustworthy content and network of professional creators in specialized fields. We believe our marketing services business has reached a strategic inflection point. What was once “disadvantage” under traditional commercial paradigm is now increasingly transforming into a structural advantage in AI era. For our paid membership business, we continued to prioritize ROI in user acquisition, resulting in an improved return profile of new members.

In this context, we are pleased that our average monthly paid members remained resilient in the first quarter, up by 1.2% on a sequential basis to 14.2 million. Our paid membership revenue was RMB417.9 million, remaining stable quarter-over-quarter. We continue to drive paid user conversion and engagement rates through our premium short-form paid content and are actively exploring new paid content formats and monetization opportunities. A recent highlight is the original audio drama Love with Ghost King over Three Lifetimes, adapted from a popular story by Yanyan writer. Upon release, the series quickly rose to the top of our trending charts and led in the weekly streaming rankings.

Building on the strong momentum of our short-form content, we've also expanded into longer-form content. On May 8, we launched Season 4 of Yanyan Story Long-form Writing Marathon, a 6-month competition that invites submissions of high-quality long-form stories from across the Internet. This season features 4 creative categories, including historical fiction, mystery, women’s fiction and speculative fiction, with a prize of RMB100,000 for the top winner. Going forward, we will continue to leverage a combination of premium short-form and mid- to long-form content to fulfill the needs of a more diverse audience, reinforcing Yanyan Story's leadership in the paid reading space. Lastly, our vocational training business recorded revenue of RMB94.5 million in Q1, down 35% year-over-year.

This performance reflects our ongoing strategic transformation of the vocational training business, leveraging our high-quality content ecosystem and trusted professional creator network. We're shifting away from a traditional subject-based expansion model, which focused on a few core categories, towards a more socially interactive and knowledge sharing-driven one. This transition is expected to further enhance operational efficiency and profitability over time. At core of this transformation is our goal to empower professional creators. Product development will increasingly focus on integrating paid knowledge content with social interactions.

For example, our Column product can not only better address the learning and knowledge needs of users, but also enable creators to publish in-depth expertise-driven content, while building their own communities and amplifying their personal influence. Going forward, we will continue to build on this new business model, expanding our product and service offerings, while further unlocking the value of Zhihu's high-quality content and trusted creator network. As we move further into 2025, we remain determined to capitalize on historic opportunity created by AI. Building on a strong foundation of community trust, we will further enhance connections and engagement among our high-value user base. By accelerating the synergistic evolution of high-quality content, a trusted creator network and AI reasoning capabilities, we aim to continuously strengthen Zhihu's competitive advantages and deepen our competitive advantage in the AI era.

We believe this strategy will position Zhihu for sustained leadership in the next generation of intelligent content platforms. This concludes Mr. Zhou Yuan'a remarks. Now, I will review the details of our first quarter financials. For a complete overview of our first quarter 2025 results, please refer to our press release issued earlier today.

In the first quarter, we achieved non-GAAP profitability and expanded our gross margin as we continue to execute strongly and enhance operational efficiency. We're encouraged by the progress we made to start off the year and remain firmly focused on building upon this momentum to lay a stronger foundation for sustainable growth. Our total revenue for the quarter were RMB729.7 million compared with RMB960.9 million in the same period of 2024. The decrease reflects the ongoing adjustment to our business and our strategic focus on improving revenue quality and mix. Our marketing services revenue for the quarter was RMB197 million compared with RMB330.5 million in the same period of 2024.

The decrease was mainly driven by our proactive ongoing optimization of service offerings to strategically expand margins. Paid membership revenue was RMB417.9 million compared with RMB449.7 million in the same period of 2024. While average monthly subscribing members declined slightly year-over-year, they increased by 1.2% sequentially. Notably, user engagement with premium content remained strong throughout the quarter, reinforcing the value of our content ecosystem. Vocational training revenue was RMB94.5 million compared with RMB145.4 million in the same period of 2024.

The decrease was primarily due to our strategic refinement of acquired business as we continue to prioritize faster-growing self-operated programs. Other revenues were RMB20.3 million compared with RMB35.2 million in the same period of 2024. Our gross profit for the quarter was RMB451.1 million compared with RMB543.5 million in the same period of 2024. Supported by improved operational efficiency, our gross margin expanded by 5.2 percentage points year-over-year, reaching 61.8%. Our total operating expenses for the quarter declined by 34.4% year-over-year to RMB503.7 million.

This decrease reflects better cost management and ongoing efficiency improvements, driven by technological innovation. Selling and marketing expenses decreased by 32.9% to RMB320.6 million from RMB478 million in the same period of 2024. The decrease was primarily due to the more disciplined promotional spending and a decrease in personnel-related expenses. R&D expenses decreased by 28.1% to RMB141.9 million from RMB197.4 million in the same period of 2024. The decrease was primarily driven by more efficient spending on technological innovation.

G&A expenses decreased by 55.6% to RMB41.2 million from RMB92.9 million in the same period of 2024. As a result, our GAAP net loss for the quarter narrowed by 93.9% year-over-year. On a non-GAAP basis, we remained profitable for the second consecutive quarter, recording adjusted net income of RMB6.9 million compared with an adjusted net loss of RMB135.7 million in the same period of 2024. As of March 31, 2025, we had cash and cash equivalents, term deposits, restricted cash and short-term investment of RMB4.8 billion compared with RMB4.9 billion as of December 31, 2024. As of May 26, 2025, we repurchased 31.1 million Class A ordinary shares for an aggregate value of USD 66.5 million on open market.

We also repurchased a total of 17.8 million Class A ordinary shares for aggregate value of USD 26.9 million through the trustee of the company. In addition, the Board has approved the new 2025 share repurchase program, which will be effective until June 25, 2026 with a maximum repurchase size of 10% of total issued shares, subject to shareholder approval at our upcoming Annual General Meeting. Looking ahead, we will continue strengthening our commercialization capabilities and capitalizing on the long-term growth potential within our community. Our goal remains clear to drive sustainable growth and profitability and to deliver lasting value to our shareholders. This concludes my prepared remarks on our financial performance for the quarter.

Let's turn the call over to the operator for the Q&A session.

(Operator Instructions) Xueqing Zhang, CICC.

(spoken in foreign language) The management mentioned about Zhihu's strategic AI plans in the prepared remarks and also shared some metrics and user feedback Zhida. It sounds like Zhida is not only AI product of Zhihu. So what other AI initiatives can we expect next, both within the Zhihu community and beyond?

(spoken in foreign language) Thanks you for your question, Xueqing. This is from Zhihu CEO, Zhou Yuan. So, on macro level, we expect over next two years, the intelligent ceiling of AI models will continue rising. So our strategic focus in AI centers around trustworthy content and our expert network. In fact, we believe this can be summarized as a simple formula, trustworthy content, times community expert network, times AI capabilities, equals to a scalable growth path.

As you just mentioned, Zhida -- truly Zhida serves as an AI interface of the entire community of us, or you could say a new entry point to our community. What you are seeing today is only a partial realization of our vision. In fact, how our users are engaging and be active with it is providing us with invaluable feedback. We didn't choose to roll out a series of cookie-cutter or repetitive features. On one hand, we believe many of these common functions will soon be overtaken by the rising intelligence ceiling of foundation models.

On the other, we don't see value in customizing features just to showcase model capabilities if they don't provide lasting value to our users. So fundamentally, I believe there are 2 more fundamental tasks in the context of what I mentioned of this rapid model evolution. First of all, we are integrating more experts. It's what we refer to as the "expert network." Our initial milestone here was to enable "Contributor Attribution" or traceability, which is now fully rolled out and has been positively received by our users. We will definitely continue integrating on this front.

Second, we aim to aggregate more high-quality content. So our next step is to launch Public Knowledge Bases, which will help us scale our library of trustworthy content. We plan to introduce expert knowledge bases in different diversified sectors during the upcoming Gaokao, the college entrance examination season in China, providing reliable support for students in making informed decisions. Looking ahead, both of these 2 pillars will continue to evolve themselves. Today, the expert network primarily manifests through content.

But with the development of agent-based technology, the value of the expert network may increasingly extend beyond content itself and enter a new stage of the evolution. Thank you for your question again.

We will take our next question. Your next question comes from the line of Lincoln Kong from Goldman Sachs.

(spoken in foreign language)

(spoken in foreign language) Thank you for your question, Lincoln. As you may know, our current priority is the quality of our entire ecosystem. Since last year, we've executed this strategy with strong conviction. While overall community user scale has remained quite stable, what's more important here is that all key user health metrics have continued to improve, and we are seeing a stronger and more engaged community atmosphere. This is very much in line with our expectations.

Just last week, we wrapped up the 11th Zhihu Youth Knowledge Conference. (spoken in foreign language) And on site, we heard a lot of positive feedback from long-time and new creators like including many who've been contributing to Zhihu for over a decade. This kind of early positive momentum is encouraging. I believe that incremental changes will compound into meaningful breakthroughs, and over time, we'll see greater returns. In the first quarter, the number of our professional creators honoured under key programs, such as Outstanding Contributors, Rising Contributors, Blue Label Professionals, and Navigators, grew significantly year over year. These creators are expanding their influence both within the community and beyond, evidenced by the interactions per creator and per post surging more than 45% and 90% year-over-year, respectively.

We also upgraded our Column and Idea features to better support both long and short-form content -- professional content creation and offered improved channels for interaction and monetization. Since the rollout of the new Column feature in March, we’ve achieved two consecutive months of rapid growth in both content creation and user consumption. Likewise, the volume of ideas generated by professional creators surged in the first quarter, showing exceptional user engagement. Thank you.

Thomas Chong.

(spoken in foreign language) So my question is could management, share some color on the revenue trends for each business segment in 2025 and the profitability outlook?

(spoken in foreign language) Thank you for your question. This is from Zhihu'S CFO, Wang Han. So 2025 is another very important year of business model optimization for us. Our key focus is to further align our community ecosystem with our commercial operations, while enhancing the Zhihu brand's commercial value and the pricing power to build a more sustainable long-term business flywheel. Although our Q1 revenue declined year-over-year, but each of our business streams is entering a new phase of growth with evolving monetization models.

For our marketing services, it has been evidenced that low -- relatively low quality marketing content consumption has dropped to a very low level, and we are now seeing an accelerated momentum in both client mix optimization and commercial product updates. On top of that, AI is unlocking new marketing product opportunities. In terms of our paid membership, we are broadening our content offering to include a mix of premium short-form and mid- to long-form content, this strategy strengthens our competitive edge in this sector. For our vocational training business, we are transitioning from a traditional model to a more socially engaging knowledge-sharing model that better leverages our community strength. On the innovation front, we remain disciplined with our investments, particularly in AI-driven initiatives that align Zhihu's core strength in content and community.

Our ongoing ecosystem upgrades and AI initiatives come with both opportunities and challenges. With continued operational refinements and a more granular management execution, we are confident our financial performance will exceed our initial expectations for the year. Thank you for your question.

(Operator Instructions) Vicky Wei, Citi.

(spoken in foreign language) Congrats on a stronger-than-expected quarter. And would management share some color in your thoughts about the shareholder return program this year?

Thank you for your question, Vicky. This year, we remain committed to enhancing shareholder returns through share repurchase plan. Earlier today, our Board approved the 2025 buyback plan, authorizing a repurchase of up to 10% of our issued and outstanding shares. So we will execute the buyback in the open market on a best effort basis. We believe the current share price does not fully reflect the value of our company, and this will underscores management's confidence in our long-term success.

Thank you. Thank you again.

That concludes today's Q&A session. At this time, I will turn the conference back to Yolanda for any additional or closing remarks.

Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or Christensen Advisory. Thank you. Thank you so much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.