Q3 2022 Zhihu Inc Earnings Call
Speaker 1: Today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. After-result and outcomes may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update this forward-looking information except as required by law.
During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see our earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our website at ir.joo.com.
I will now turn the call over to Mr. Sun Wei, our CFO .
Thank you.
I'm pleased to deliver today's opening remarks on behalf of Mr. Zhou Yan, founder and CEO of Jihoo.
Thank you for joining JQUE's third quarter 2022 earnings call.
We delivered another quarter of solid execution on our community's system-first strategy and are delighted with the strides we have made promoting our community's prosperity.
Starting from the beginning of this year, we shifted our strategic focus towards growing quality users and further bolstering the strength and resilience of our content-centric business model.
In Q3, the excellence rate of our ad users at the AU over MAU reached its highest level in the past three quarters of this year.
And the time spent for daily active users climbed both year over year and quarter over quarter.
Faced by this still challenging macro environment, our community ecosystem demonstrated strength and resilience during the third quarter.
OpenRAP is by double digits on a year-over-year basis as we continue to expand and optimize our content offerings and enhance our content creators' user experience.
Furthermore, our initiative to heighten operating efficiency drove significant improvements in our bottom line performance total clutter.
In Q3, total revenue reached RMB 911.7 million, increasing by 11%, compared with the same period last year, and net loss measured by 39%, quarter over quarter.
Our paid membership is paying robust growth momentum, increasing by 88% over the year, and it contributed to 37% of the total revenue during the quarter.
Meanwhile, vocational training services continue to accelerate their contribution to total revenue with a 458% growth rate year over year.
Continuing efforts to refine our business line and improve operational efficiency during the quarter helps make our ecosystem stronger and more resilient.
The Jifu community is thriving and becoming more healthier and healthier.
The results of our efforts give us further confidence to invest in long-term growth while striving for profitability in the near term.
Now, I'd like to share some more details on third-quarter achievements.
The first part is by users. At Juhu, our differentiated, fulfilling content and a unique content-centric ecosystem not only resonates with users, but also well-position us to address their evolving demands.
In turn, increasing user interaction attracts more content creators and inspires their creation, driving the healthy and sustainable growth of community growth.
With this in mind, since the beginning of this year, we have shifted our focus from user expansion to quality user growth, which has produced remarkable achievements in the third quarter.
On top of our record high effectiveness rate for app monthly active users, we have a video over ME in Q3.
The time spent per user grew by 26% year over year and 14% quarter over quarter, reaching 29 minutes.
Average MAUs were down in Q3 by approximately 4% year-over-year, as expected.
We continuously expand the breadth and depth of our high quality content to support user interaction and introduce timely and fulfilling new content.
For example, our protocol-related content significantly drove up the time that young users spend on our platform during the summer vacation period.
Moreover, our timely content offerings during the quarter not only attracted male users, but also encouraged them to engage more deeply in rational discussions within the community.
In Q3, we also continue to innovate in content format development.
aiming to encourage user interaction in more diversified content formats.
In particular, our new thoughts format has caught on quickly among creators and users alike.
Thanks to its flexible nature and broad appeal, it is now becoming a more frequent format for both constant creation and constant consumption.
Accordingly, in 2.3, the new active follow-up, one of the ways that our users interact with each other, move by 16% year over year and 19%, quarter over quarter.
The second part is about content.
We believe that we may better meet users' demands for more high-quality content.
Higher quality user growth is a natural result.
In Q3, we continue to improve user experience and enhance our competitiveness by expanding our content offering.
diversifying our multimedia content formats, and further enhancing our recommendation algorithms.
At the end of Q3, the cumulative pieces of content in our community reached 579 million, representing a 26% year-over-year increase.
Office 485 kneeling were questions and answers.
representing a year-over-year increase of 22%.
Our scenario-oriented content cultivation approach has proven to be effective, not only in exploring and satisfying the demands of our various user groups.
but also in motivating content creation and boosting content consumption.
For example, during the last flammable vacation period,
We presented Wilderne's talk 20 of the time.
an eight-part series of high-quality, self-produced programs.
where our content creators, the YouTube team and the Lee Seung-woo exchange their thoughts with other young people. Call Jenners and you will see the words.
Through this innovation format, we were able to share a brand new word from Gen Z's perspective and help our viewers better understand their view on life.
The theorists resonating concepts attracted many young viewers, generating a annual penetration rate of 28.4% for the quarter.
Content offerings associated with self-improvement also proved popular with users between 18 to 25.
Privately effectively by the denial of the activity, the percentage of new users between 18 and 25 among our total new MAUs was 4 percentage points higher compared to the same period last year.
In September , we further expanded our content offerings in our career development segment.
through diverse content formats including VD, LiveGenie, Salk, and Text and Picture C&A.
The expanded content format generated huge interest.
For example, the thought provoking video speech.
Always should get along with our work.
presented by history major. volume.
produced over 20 million views within just two weeks.
During September , more than 13% of our DAUs consumed career development related content.
and their retention rate was higher than that of our overall DAU by
taking percentage point.
Moving to concentrator.
Our content creators are the most important asset in driving sustainable growth within our community's ecosystem.
At end of Q3, our community member of creators has reached a new high.
reaching $61.2 million, a year-on-year increase of 50%.
We are committed to providing our content creators with an enhanced creation experience as well as fruitful rewards.
We work towards this goal by leveraging the solid foundation of our content-centric ecosystem and by providing a broad array of creator-centric programs.
Feel free.
We are delighted to see thousands of common creators from a cross-section of ranking levels and verticals including esports, career development and education.
received financial incentives from the 100 million RMB fund and the future plan.
In Q3, average income per content creator increased by 47%, compared with the same tier locked here.
Furthermore,
On September 13th, we officially launched the second prize.
a new form of program under DQP plan.
The beacon prize will award specific subsidize to the top 10 content creators who make significant contributions in the field of science or humanities.
The third part is about community culture.
in line with our community ecosystem first strategy.
We are committed to better serving our users and the concentrators with clearer community and the guidance.
better product and features and enhanced protection.
In future, our regular surveys show significantly increased user satisfaction with our community government and its services.
In addition, this survey also indicated a significant improvement in content creators' net promoter scores, of course, and the rate of sub-category scores.
including creating tools, growth guides, creator benefits, and copyright protection.
As a leading online content community, during the quarter we continue to fulfill our social responsibilities by leveraging our technological capabilities to promote rational, multidimensional, and constructive discussion on our timely content offering.
For example, we enhance the emotional monitoring function on our Drupal hot-lit to ensure a professional and rational community environment.
Next part is about monetization.
Our electric world in content library, trading creator ecosystem and flourishing community are the assets that differentiate us in this class-evolving and highly competitive market.
During the third quarter, our high quality, constant sensitive communities drove sustainable improvement in our modplex digital ecosystems.
enhancing the resilience of our business model and creating new growth drivers for our longer-term development.
Our paid membership has maintained a year-over-year growth every quarter for the past three years.
In the third quarter of 2022, revenue from paid membership increased by 88% year-over-year.
37% to our total revenues.
At the same time, our average monthly payment users exceeded 10 million for the quarter.
These achievements were given by the expansion of our premium content library, especially in vertical targeting mail users.
Meanwhile, the enhanced influence of our premium content endorsed with the exclusive EEBO flight also contributed to this goal.
To better satisfy users' demands for a sustainable supply of premium content, we further grant support for premium content creators to encourage their creation efforts and enhance their creation theories.
In Q3, we were pleased to see an increasing number of our premium content become mature commercial IP. In Q4, we were pleased to see an increasing number of our premium content become mature
This in turn rewarded their creators with a better income.
Furthermore, I will upgrade the copyright protection feature.
help the people creators trust and rely on the Drupal community.
In the third quarter, the average income earned by premium content creators increased by almost 30% compared to things here last year.
Earlier this year, we set a target to help 100 creators learn more than 1 million RMDs while on a paid membership plan.
We are now setting a new target and planning to launch a new ambitious program to H-HIT.
A new super novel program established under the future plan will have greater funding resources and will aim to help 500 content creators learn more than 1 million RMB over the coming three years.
We first established our vocational training and business team in 2019 to better meet our users evolving needs for knowledge related content.
Now, after nearly three years of its development.
We are well positioned in the rising demand market with our trusted brand, improved technical capabilities and a mature team structure.
In the third quarter, revenue from our vocational training business
quadrupled year over year and contributed 9% to our total revenue.
clearly cementing the specific segment as our emerging climate.
During the quarter, we continue to expand our course offerings facing our users' on-the-go needs scenarios and in two major categories, academic improvement and career promotion.
We further enhance our technical capabilities, including our CRM system.
and improve our operational efficiency to better support the robust growth of this system.
Our effective customer acquisition strategy paired with diverse high quality programs drove a 300% year over year increase in vocational training paying users in the quarter.
We acquired a new vocational training brand.
that specialize in professional teacher qualification certification.
In doing so, we further broaden our vocational training program coverage to better meet our unities SERcommunication s Pictures
Going forward, we will continue to explore greater growth opportunities to drive the sustainable development of our community co-system.
Now moving to our advertising and content commerce solution.
Based by challenging micro dynamics in C3, Xiu-Kou continued to gain traction in marketing budget share and increased greater recognition from brands and merchants.
Our CCS and advertising business maintain its growth in our leading industries including IP and 3C automotive and gaming.
The quarter top five contributors for CCS and advertising were ICN3C, cosmetics, e-commerce, automotive, and education.
We continue to upgrade our chip platform in the third quarter with additional improvements in the platform infrastructure.
We also released a new version of the Commercial Value Index to further improve matching efficiency between brands and content creators.
Due to continuing weak market conditions for online advertising, CCS revenue decreased slightly in Q3 year over year.
but show a sub-addicted quarter over quarter growth.
Total income earned by coming creators through the CHIS platform continues sustainable growth in Q3.
We have long been dedicated to delivering better marketing performance through technology and innovation.
As such, a reinventing, IT-based,
our inventive IP-based marketing campaign has become an effective extension of our traditional advertising program.
The IP-based campaigns we released including Curiosity Lab, Auto Lab, Ingredient Lab, and the G-trial Lab have gained great market recognition by advertisers in various industries such as consumer goods, automobiles, and e-commerce.
In Q3, we launched a new Wizarding Factory IP campaign.
Comment leaders as experts in different views were encouraged to visit the factory and R&D facilities of different brands. She can answer something about our users.
This campaign has received positive feedback from both our users and the brand.
The resulting high quality content helps our users better understand these brands' products and enhance their trust in these brands through transparent communication.
To sum up, our long-term strengths are impact and our fulfilling content and user quality are well recognized by brands and merchants.
We expect that we will continue to win market share in the growing content marketing industry.
And moving forward, we will continue to expand our portfolio of marketing solutions to empower our clients in reaching their goals.
Meanwhile, we will continue to enhance Jihoo's competitiveness to broaden our fulfilling content, drive user engagement, improve operating efficiency, and further enhance our trustworthy community culture.
The road ahead is long and will involve many challenges, but with determination...
perseverance, and our goal in sight. JUQ is well positioned to forge a path.
to growth and profitability.
This concludes each student's remarks. I will now turn to our financials.
In the third quarter, our community ecosystem's first strategy continues to effectively strengthen the resilience of our counter-essential physics model.
as evidenced by our solid operating and financial performance.
Total revenue grew by 11% year over year, reaching RMB 911.7 million in 2013.
And our net loss margin narrowed significantly by 26 percentage points over Q2.
thanks to our discipline, cost control measures.
The strength of our multiple growth engines in the concentric business model once again improved itself in the third quarter with a further balanced running structure.
CCS and our advertising business combined contributed 51% of our total revenue.
At the same time, the state membership and vocational education accounted for 37.9% of total revenue expected in the quarter.
Up 4 and 3 percentage points, quarter over quarter respectively.
Our peer membership maintains rapid growth momentum in Q3 with revenue increasing by 88% over the years to R&B 3.4 billion.
The average number of shipped users reach a record high of 10.9 million, representing a percentage rate of 11.2% among the total average MAUs in the Jekyll community.
And notably, the revenue from our emerging growth engines, vocational training was an over fourfold year-over-year liquid to RMB 778 milling.
In the quarter.
Revenue from CCS and our advertising business came under pressure in 2.3, impacted by the overall weak market conditions for online advertising.
Also combined revenue for CCR and advertising for the quarter was down 23% in over a year and the 3% quarter over quarter.
12 profit for Q3 with R&B for comfort billing.
Worth margin was 48.7%.
of one percentage point compared to the last quarter.
remaining at the high end of the industry.
The quarter over quarter improvement in growth margins is mainly attributable to our continuous videos call control and ongoing efficiency improvement.
During the quarter, I was relatively fixed cost.
Mainly including cloud services, bandwidth, and personnel costs, along with content costs, continue to decline as a percentage of total remnants.
Continuing our efforts, starting from the beginning of this year, we further work to optimize operating expenses and streamline operating efficiency in the third quarter.
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Total operating expenses for the third quarter were RMB 7.2 billion, leading to our improved operating margins, both year over year and quarter over quarter.
As we continue shifting our focus from user expansion to user engagement,
Social marketing expenses decreased by more than 10% quarter over quarter.
For R&D and G&A expenses, we continue to optimize the expense structure to increase our operational efficiency and R&D and G&A expenses as a percentage of revenue decreased by 9 percentage points and 3 percentage points, quarter over quarter, respectively.
We are steadily reducing our net loss. Our SCEP net loss for the quarter was RMB 297.6 compared with the net loss of RMB 487 million in previous quarter.
Our adjusting analog, which primarily excludes shared-based competition spaces, was RMB 260.6 milling for Q3 compared with RMB 443.8 milling last quarter.
As of September 30, 2022, the company had cash and cash equivalents, term deposits, restricted cash, and short-term investments of RMB 6.6 billion.
And as of September 30, 2022, we have repurchased approximately 4.9 million Class A ordinary chairs at a total cost off-lot. U.S. dollars.
13.2 million.
This concludes my prepared remarks on our financial performance for this quarter. Let's turn the call over to the operator for the Q&A session. Thank you. Thank you. We will now begin the question and answer session.
To ask a question you may press star then one on your touch tone phone. If you are using a speakerphone we ask that you please pick up your handset before pressing the keys.
To answer your question, please press star then 2.
In the interest of time, please ask one question each time. If you have any follow-up questions, please go back into the queue.
Thank you.
Today's first question comes from Steve Q. with Goldman Sachs. Please go ahead.
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Thank you for watching my questions and congrats on the progress of cost counting initiatives.
I have a question on MAU. So noticing that your MAU has declined over the quarter, yet the time spent and monetization efficiency of her MAU was much better.
Could you shift your strategy from pursuing absolute MU growth to extract the lifetime value for the high quality user? And could you share some insights on our long term musical potential?
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Thank you for this question. The answer from Mr. Zhou Yuan, the CEO of the company. At the beginning of the year, we set our annual strategy as a year of transitioning, that is to keep our community ecosystem first. And that means a good experience for content creators, fulfilling content, as well as a good atmosphere for the community.
And more importantly, that is to have a commercialization that goes in line with our current community, or simply to achieve profitability as soon as possible.
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In the year while we are pushing forward our strategy of year of transitioning and community ecosystem first we had make some adjustments. We believe that our volume numbers remained quite stable and we had hit our strategy target such as revenue and volume output targets.
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In the past year, we have made quite a lot of effort in fulfilling content optimization, quality control, as well as the algorithm improvement on the user side, the rewarding to the content creators, as well as upgrades of our product. And I would like to talk a little bit more details about this.
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the content creators. They are more active on our community. High-level content creators on this quarter had an increase of 27% increase of daily activity rate. And they keep injecting high-quality professional content to our community.
in May this year we have launched our High-End Plan 4.0. And in this system, the content creators with specialties in key areas are enjoying better tools and growth support as well as rewards to their content creation. And the average income per income-making creator had a revenue increase of 47% in Q3.
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Second is ever-growing fulfillment content that we have due to the optimization on the product and algorithm that we provide to the users and they have better experience in consuming our content and they go deeper in consumption and as well as the intensity of content consumption gets better.
In the third quarter, you can see that our daily time spent per user had been as long as 29 minutes, with an increase of 26% year-over-year and 14% quarter-over-quarter.
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The third point is that we keep optimizing our community atmosphere and our community services both for the users and content creators. On the user side, their satisfaction rate for our governance of community and services both increase significantly. And on the content creator side, their net promoter scores as well as other subcategories for our site.
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Okay. And the last point is that our users are getting more active. For instance, our app DAU and NAU are getting increased for three quarters consecutively. And also we believe that we focus more on the commercialization that goes more in line with our community so that our high quality users will keep giving us drivers for commercial growth.
so that we can develop a virtual cycle of healthy community and sustainable business growth. In the third quarter, our R-Pool had a year-over-year growth of over 15%.
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So overall speaking, we believe that improvement for the ecosystem takes time, and there are a lot of details to attend to, and it takes time for us to generate greater value for the community through a better ecosystem. And if you improve the user experience, this will organically drive up the user base in a more sustainable way. And for the long term, we believe that it is.
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Overall speaking, our target remains unchanged. That is to drive profitability. And for the short term, we do see some slightly changes in our users. And for the third quarter to be more specifically, our monthly viewers grow by 23% year over year. And we see that our users are getting more consumption on our content. And we'll...
The question today comes from Shuh-Hwing Zong with CICC. Please go ahead.
Q. I'm not sure if you have any questions regarding membership business. My question is related to paid membership business. The membership business once again demonstrated strong growth this quarter.
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Thank you for this question. It was three years ago since we began to launch our membership program. Up until now, you see our membership growth is faster than our expectation at the very beginning. We believe that the demand for the paying for the premium content is still there and will remain resilient for a long time.
started off with losing money and now it's getting more and more sustainable in driving profit and also to the net profit we have as a whole community.
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our membership growth is a healthy and a fast one and as you can see our high quality content and high quality content creators are the main drivers for our membership business and the third quarter our membership content creator member content creator had an increase of 40% year over year and the income per member creator increased by 29% year over year.
Chamber. Effective paying your a numberber is over 11 million and we see that this number kidps increasing and we think that these had provide very good driver force for paying members both in and outside of the website and so far we haven't seen any sign of slowing down of member growth.
And we think that this is thanks to the momentum that we cultivated through our community content based business model.
I think that the Chinese government is very important to us. We are very proud to be able to work with you. We are very proud to be able to work with you and to be able to work with you. We are very proud to be able to work with you. Thank you.
We do value the value created by our content creator, Yen Plus, to our community. In the past three years, they kept creating high quality content for us. We just launched our Supernova program for the next three years.
As mentioned by my colleague Mr. Sun Wei, we had hit this year's target ahead of schedule. So with our next three years program, we hope to create more content creators with revenue over one million, and we hope that more people can join us and benefit from our platform for more growth and reward.
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So, I think that's it for today. If you have any questions or comments, please feel free to contact me. I'll be happy to answer any questions you have. I'll see you in the next video.
I think that's it for today. Thank you for your attention. We will now take questions from the audience. If you have any questions, please feel free to contact us. We will be happy to answer any questions you have. We will be happy to answer any questions you have. We will be happy to answer any questions you have.
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Our membership business actually is emerged from our ecosystem and its ever-growing size proved again that our member payment system from premium content based on community screening is really powerful and highly potential. For the mid to long term, I think that our membership business will not be limited to the community growth. I think that our membership business will not be limited to the community growth.
Thank you. And our next question today comes from Ashley Shue with Credit Suisse. Please go ahead.
I will translate by myself. My question is related to the ads and the CCS revenue.
What's the driver of third quarter decline and how is the fourth quarter outlook? And could management for one more color by different verticals? Thank you
Okay, actually, we're still not able to add anything.
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Thank you very much for this question. The answer comes from our CAO, Mr. Sun Wei. Well, thank you. Overall speaking, in the third quarter, demand decreased, slightly decreased from the ads, and CCS business is mainly due to a weaker market environment as a whole and also a struggling environment due to COVID.
I think overall speaking, if you compare advertisement and CCS as a whole, our CCS business remained more resilient against a struggling environment compared with traditional advertisement business. So they are rather resilient and they only had a single digit decrease.
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And IT, CC, automobile, and games are exactly the same areas that we have in our community, and also in our content offerings. So that in a way proves that our content and our community are really popular amongst the users as well as the merchandisers on CCS area.
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we've tried various ways of marketing to showcase the brand so as to bring longer lasting and sustainable marketing values for our client. And I think this has been proven by our results and also in our premium content analysis product.
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Our advantage that based on the commercial product, based on the premium content and community has always been our competitive advantage. And for the long term, this will remain so for the future. So when the market comes back, when the consumption recovers, we will be able to go back to a fast.
growth track due to our advantages position in CCS and gain more market share in the marketing world.
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As for the lookout for the fourth quarter, we believe that we will register a double-digit growth, but compared with the high base in the fourth quarter of last year, the to-be business for advertisement CCS in fourth quarter will probably be still subject to the COVID situation and the weaker economic environment. For more information, visit www.ccs.gov.au
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As for the trajectory in 2023, I think it pretty much depends on the macro economy as well as the COVID policy evolution. So we keep a close eye on those market situations, but so far we are not able to make an accurate prediction as to what will happen next year.
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Thank you. And our next question today comes from Yuen Zhong with China Renaissance. Please go ahead.
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Thank you very much. The answer from CEO Mr. Zhou Yuan. So, for our vocational training business, for this year, we had already registered multiple times of growth for three consecutive quarters. And for this quarter, particularly the contribution from vocational training to total revenue is expanding to over 8% and will continue to increase.
Please note that the departments of the public sector are moonlight partners. The success of the singular role of the public sector is not different from everything that the interest in communities have held, or thanks to higherseller with high poverty. We will continue this work to produce efficient protest
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We provide a diversity of curriculums to cater for the needs for the users to study and improve their skills. To be more specific, the Graduate School Examination-related program saw a record high enrollment numbers, and our users are really happy and give us some positive feedback for our high quality students.
paying user number increased by nearly 300% year over year and with a quarter over quarter 40%. But still right now the paying users are relatively small and still has a great, great room for further growth. And we will keep diversifying and enriching our training programs to cater for their needs and to give them better content.
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Another point I want to make is to expand our vocational training business through M&A activities. In October this year we had acquired a teacher qualification training company so as to make our offerings more comprehensive. And also thanks to the great branding value and word of mouth.
company had registered a 60% increase with ever-growing paying users.
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As about our future plan, while actually our vocational training business emerged from our community years demand and in 2019 we just started to launch our education training part of our business make off us trials in vocational training and over the past of three years we had roughly developed.
business presence either by self-operating or acquisition or merges or a cooperation in operating of the businesses and as we keep expanding it we believe that the successful business model will gradually being expand and be able to provide premium content and drive commercialization for users across the world.
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We had made quite a lot of effort in launching products in this area. For instance, in June this year, the learning zone went live. And on this learning zone, we launched multiple popular programs, for instance, the AI. And we will also launch a special platform for training.
and transforming the content and also to increase the commercialization efficiency of vocational training for our business.
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Overall speaking, vocational training will serve as an important second curve for our business revenue. We believe that this will continue to benefit the overall sector and also benefit our company Jupu. Thank you.
Thank you, and ladies and gentlemen, this concludes our question and answer session at this time. I will turn the conference back to Jingjing for any additional or closing remarks. Thank you all once again for joining us today. If you have any further questions, please contact our IR team directly or TPG Resto.