Zhihu Inc. — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing; quarterly figures below are company-reported and unaudited. Financial statements are prepared under U.S. GAAP and reported in RMB unless stated otherwise.
Business context
Zhihu operates a Chinese online content community, monetized through advertising, paid memberships, content-commerce solutions, vocational training and e-commerce. It is a Cayman Islands holding company; some China operations are conducted through variable interest entities (VIEs) controlled by contractual arrangements. VIEs contributed 25.9% of 2021 revenue.
Financial and operating results
| Metric | FY2020 | FY2021 | Change |
|---|---|---|---|
| Revenue | RMB1,352.2m | RMB2,959.3m | +118.9% |
| Gross profit / margin | RMB757.8m / 56.0% | RMB1,553.9m / 52.5% | Profit +105.1%; margin down 3.5 percentage points |
| Operating loss | RMB602.9m | RMB1,390.7m | Loss widened |
| Net loss | RMB517.6m | RMB1,298.9m | Loss widened 151.0% |
| Operating cash flow | Use of RMB244.4m | Use of RMB440.2m | Outflow increased |
FY2021 net loss attributable to Zhihu shareholders was RMB1,469.5m, including RMB170.6m of accretion on redeemable preferred shares before their conversion at the IPO. Basic and diluted loss per share was RMB6.12 (US$0.96 convenience translation).
Revenue mix shifted toward newer monetization channels: advertising was RMB1,160.9m (39.2% of revenue, +37.7%); paid membership RMB668.5m (22.6%, +108.6%); content-commerce RMB974.0m (32.9%, +617.2%); and other revenue RMB155.9m (5.3%, +196.3%). Vocational training revenue was RMB45.8m.
Fourth-quarter revenue was RMB1,019.2m, versus RMB519.8m in Q4 2020. Q4 average MAUs were 103.3m, up 36.4% year over year; average mobile MAUs were 99.6m. The company reported 6.1m average monthly subscribing members in Q4 and 390m average monthly engagements.
Liquidity, cash flow and debt
At year-end, cash and cash equivalents were RMB2,157.2m, term deposits RMB2,974.9m and short-term investments RMB2,239.6m, totaling approximately RMB7,371.7m. Net current assets were RMB6,436.5m. Management stated that available resources were sufficient for at least 12 months from the report date.
Investing activities used RMB3,136.5m, mainly reflecting purchases of term deposits and short-term investments; financing generated RMB4,876.2m, primarily from the U.S. IPO. No material borrowings or debt securities are identified in the filing. Lease liabilities totaled RMB122.7m, including RMB40.5m current and RMB82.1m non-current.
Cash generation remains constrained by losses and working-capital needs. Trade receivables rose to RMB831.6m from RMB486.0m, with the increase principally related to advertising revenue. The filing reports no dividends paid or planned in the foreseeable future.
Material changes and management outlook
- Revenue grew rapidly, but operating expenses rose 116.4% to RMB2,944.6m. Selling and marketing increased 122.5%, R&D 87.9%, and general and administrative expenses 133.1%.
- Cost of revenue increased 136.4%; content and operating costs rose 267.2%. Gross margin declined as the company expanded content offerings and incurred higher content-related costs.
- Share-based compensation was RMB541.0m. Management attributed much of the G&A increase to a one-time option grant to founder and CEO Yuan Zhou.
- Management expects net losses and operating cash outflows to continue in the near term while investing in content, user engagement, technology and growth. It expects operating expenses to increase in absolute terms; no specific financial guidance was provided.
- Management noted that Q1 2022 MAUs could be flat or decline sequentially due to seasonality and external conditions, while still growing year over year.
Risks, contingencies and unusual items
- China structure and regulation: The holding company has no equity ownership in its VIEs; investors own the Cayman Islands company, not the VIEs. Enforceability of the contractual arrangements and future PRC regulatory treatment are uncertain.
- Data and listing oversight: The filing identifies evolving cybersecurity, data privacy, algorithm and overseas-listing requirements as material uncertainties.
- Audit inspection and controls: The filing says the PCAOB could not inspect the company’s auditor and describes potential HFCAA trading restrictions. Management found disclosure controls ineffective at year-end because a previously identified material weakness in U.S. GAAP financial reporting controls remained unremediated. The financial-statement auditor issued an unqualified opinion; it did not attest to internal control effectiveness.
- Cash access: RMB3,573.1m of PRC net assets were subject to restrictions on transfers, compared with RMB754.4m a year earlier. Currency conversion and dividend remittances are also subject to PRC rules.
- Receivables and investments: Expected credit loss allowances increased; short-term investments are wealth-management products whose fair values and returns involve risk.
- Acquisitions: The company acquired vocational-training businesses in 2021, recording RMB73.7m of goodwill; no goodwill impairment was recorded for the year.
- Other items: No material legal proceedings or material litigation liabilities were reported. The company disclosed lease-registration issues for leased properties and historical regulatory penalties relating to online content.
Investor verification priorities
- Reconcile the annual net loss of RMB1,298.9m with the RMB1,469.5m loss attributable to shareholders, including preferred-share accretion.
- Assess whether strong revenue growth—especially content-commerce—can outpace content costs, marketing and share-based compensation, and restore gross margin.
- Review cash-flow quality, receivable collection and the liquidity and valuation risks of term deposits and short-term investments.
- Check the continuing effectiveness of financial-reporting controls and the auditor-inspection and listing disclosures.
- Evaluate the enforceability of VIE arrangements, PRC regulatory exposure, and the practical availability of cash held within China.