Zhihu Inc.

Ladies and gentlemen, thank you for standing by and welcome to Chihu Inc. fourth quarter and full year 2024 financial results conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. Today's conference is being recorded and webcasted. At this time, I'd like to turn the conference over to Yolanda Liu, Director of Investor Relations. Please go ahead, ma'am.

Thank you, Amberlyn. Hello, everyone. Welcome to JUHU's fourth quarter and full year 2024 financial results conference call. Joining me on the call today from the senior management team are Mr. Zhou Yuan, our founder, chairman, and the chief executive officer, and Mr. Wang Han, our chief financial officer. Before we get started, I'd like to remind you that today's discussion will include forward-looking statements made under the Safe Harbor provisions of the U.S. Private Security Selegation Reform Act of 1995. These statements involve inherent risks and uncertainties. As such, actual results may be materially different from the views expressed today. Full information regarding these and other risks and uncertainties is included in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. The company does not assume any obligation to update any forward-looking statements as required under the 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 issue earlier today. In addition, a webcast replay of this conference call will be available on our IR website at ir.zhuhu.com. Now I will turn the call over to Mr. Wang Han, CFO of Zhuhu. Han, please go ahead.

Thank you, Yolanda. Hello, everyone, and thank you for joining Zhihu's fourth quarter and full year 2024 earnings call. I'm pleased to deliver today's opening remarks on behalf of Mr. Zhou Yuan, founder, chairman, and CEO of Zhihu. 2024 marked a transformative turnaround for Zhihu, where we successfully executed the strategic roadmap laid out at the first of the year and delivered results that far surpassed our expectations. The fourth quarter was a strong finish in 2024, with robust profitability. For the first time ever, we reported adjusted net income of RMB 97.1 million compared to an adjusted net loss of RMB 91.3 million in the same period of last year. Moreover, we swung from an adjusted net operating loss of RMB 165.3 million in the first quarter last year to an adjusted operating profits of RMB 23.1 million this quarter. The strategic decisions made at the beginning of 2024, combined with consistent quarter-after-quarter execution yielded significantly better than expected financial results this quarter, showcasing the strengths of our strategic judgment and execution capabilities. By prioritizing community trust and enhancing the core user experience, we made a deliberate choice to forego some periphery users. This approach not only saved the community user acquisition related expenses by 88% year-over-year, which is one of the key drivers to profitability, it also resulted in notable growth in key engagement metrics, time span, retention, and content creation while maintaining a stable overall user base. AI represents a historic opportunity for Zhihu. As the AI landscape evolves, it is more and more clear that Authentic, professional, and in-depth content created by real individuals and most valuable assets to help AI overcoming hallucinations. And this is the most unique assets that Jihoo has been accumulated for 14 years. In essence, the Jihoo community is a dynamic network of real experts who continuously share knowledge, experiences, and insights. Through rigorous community peer review, content is validated through discussions across diverse fields, driving the creation of high quality and multidimensional content. Just two days ago, Zhida entered another major upgrade. Users can now clearly see the contribution of our professional creators to each piece of Zhida's output. They can also proactively engage with specific Zhihu content creators who are real experts with certificated professional background within the community. Currently, Jira has achieved over 10 million MAU on our app and PC platforms and continues to receive positive user feedback in key areas such as response completeness, accuracy, and reduction of hallucinations. Going forward, we will continue enhancing our product in this direction. further strengthening the synergies between Jira and Zhihu community while reinforcing trust between users and creators through professional, authentic, and in-depth content. Moving to our user and content. During the first quarter, we maintained our focus on improving user engagement, retention, and acquisition efficiency. Average MAUs were 81.4 million, up 0.3% sequentially. A strong result given our strategic decision to decrease community-related promotional expenses by over 45% from Q3 and nearly 90% year-over-year. This focused approach delivered clear results during the quarter with improved user engagement. Time spent per DAU grew 23% year-over-year, while core user retention rates improved both sequentially and year-over-year. Throughout 2024, we comprehensively optimized our community ecosystem through product enhancements, refined content strategies, and algorithm upgrades. This initiative has made high-quality content more discoverable and consumable, inspiring and motivating creators to produce their best work. As a result, we all witnessed the most insightful and dynamic discussions in various professional domains take place in our community. making us the go-to platform for professional and in-depth discussions. Notably, our community has already become a center for AI-related topics long before engaging discussions sparked by DeepSeq's open-source release of the R1 model, and has continued to gain momentum since then. In the first quarter, both AI-related content volume and AI-focused creators grew more than 50% every year. Our community of creators includes many leading entrepreneurs and industry pioneers who engage in multi-dimensional, professional, and in-depth discussions, such as Wang Xinxin, CEO of Unitree Robotics, who has been an active contributor in Zhihu's community since 2016. In early March, we were honored to be selected by DeepSeq as exclusive Chinese content platforms to release the latest details and cost-benefit analysis of their open-source model. This demonstrates that we are the community with the highest concentration of AI professionals and entrepreneurs and the most important discussion hub for AI trends across the Internet. Users join our community for insightful discussions spanning diverse topics. For example, during the U.S. presidential election cycle, our community generated more than 23,000 answers across nearly 200 questions, driving over 140 million page views of related content. We remain dedicated to discovering new high-quality content creators and supporting their growth through advanced creation tools and operational initiatives unique to our platform. This commitment ensures a dynamic creator base and a continuous flow of diverse, authentic, and professional content. As of the end of Q4, cumulative content volume on our platform reached 874.6 million pieces. an increase of 12.9% year-over-year. This included 654.8 million Q&A entries of 10.5% year-over-year. The JUGU community is now home to 77.7 million content creators of 8.9% year-over-year. The growing vibrancy of our content creators community is reflected in a growing daily activities of high-tier creators. Income-generating creators increased substantially by over 22% year-over-year during the quarter, with high-tier creators accounting for the most significant gains. The revenue share of Zhizhi plan grew by nearly 20% between September and December 2024. During the quarter, we prioritized the onboarding of new high-tier creators. Notably, many podcasters have demonstrated their ability to develop exceptional visual and reading content that drives strong user engagement with our community. Within 30 days of joining, these creators achieved a daily active rate of over 90% on average. In late January 2025, Li Ziqi, the renowned short video creator celebrated for showcasing the beauty of Chinese culture, officially became Zhihu's Intangible Culture Heritage Officer. During the Chinese New Year holiday, her insights into the first World Intangible Culture Heritage Edition Spring Festival and detailed explanations of Sichuan's holiday costumes sparked widespread community discussions about regional traditions. As we continue optimizing the creators and user experiences and enhanced community atmosphere, negative user feedback has declined consistently, while positive engagement has increased. Average daily engagements per DAE rose consistently on a sequential basis throughout the year, with the fourth quarter's monthly average upward surging over 30% year-over-year. A healthy and consistent active community ecosystem remains our core assets, providing us with strong competitive advantages in AI era. Moving to commercialization. Since April 2004, we have prioritized the core user experience and community trustworthiness by actively managing the proportion of commercial content distributed and ensuring differentiated experiences for distinct user groups. This strategy has driven the ongoing optimization of our community ecosystem and enhanced the trustworthiness of our brand. While this approach has short-term trade-offs, including sunsetting lower-quality revenue streams, We're confident that the long-term value from strengths and trust in our brand and improved health of our community will prove more impactful. Total revenues during the fourth quarter were RMB $859.2 million, which revenues for full year 2024 came in at RMB $3,598.9 million, a decrease of 14.3% from last year as a result of strategic adjustments away from lower quality revenues. diving into our performance by segments. For paid membership business, we focused on maximizing ROI in an environment of rising user acquisition costs and channel expenses. We drove an increase in ARPU of 7% sequentially during the quarter while maintaining a relatively stable membership base. Average monthly paid members were 14.1 million during the quarter, a slightly decrease of 0.8% every year. while paid membership revenue were RMB 420.2 million. Our leadership in premium short-form paid content, strengthened as our Zhihu Yanyan Story brand, continues to gain user mindshare. In December 2024, Zhihu Yanyan Story hosted the 2024 Short Story Impact Night in Boao, Hainan Province, honoring 76 outstanding creators and stories. This event introduced new categories like best audio drama and rookie creators of the year. For expanding the influence of JuHuYan's creators across platforms and reinforcing our multi-media short-form content ecosystem. With an improved content supply and creator ecosystem, income generating creators for paid members shares by 78.3% year-over-year during the fourth quarter. We also further unlocked the monetization potential of YANN Storage IP, driving a nearly 50% sequential increase in IP revenue during the first quarter. Going forward, we'll continue leveraging the strengths of our premium short-form paid content to drive paid membership engagement while exploring new diverse paid content formats and monetization opportunities. Turning to marketing services, in line with our company-wide focus on trust and quality, we're establishing a new baseline for marketing services revenue, which raised RMB 315.9 million during the quarter. Encouragingly, the rate of decline narrowed compared to the third quarter of 2024, with revenue growing 23.1% sequentially. Brand advertising was resilient, maintaining a stable performance despite the high base last year. Key clients increasingly recognize the premium value of our high-quality user base and brand equity. This is clearly seen by year-over-year increase in brand advertiser output during 2024, with standout growth in sectors like e-commerce, IT, and 3C, beauty, and personal care, FMCG, and healthcare. We strengthened our presence in automotive sectors by hosting the first E-Club Xinzhi Technology Conference in Chengdu, where we brought together key industry players like BYD, Chang'an Qiyuan, and Xphone, alongside with our automotive expert network. The event facilitated in-depth professional impartial discussions on EV trends and technologies, generating 630 million online impressions and 30 million video views. For CCS business, content optimization remains our central focus. It reduced low-quality commercial content by over 50% year-over-year and sequentially during the quarter, further enhancing advertisers' trustworthiness for users. This drove a 15% sequential decline in negative user feedback on commercial content. Looking to 2025, we will empower more emerging product categories especially those with technological barriers, to increase their market exposure and credibility, leveraging our professional ecosystem and the trust of our high-value users. At the same time, we will create partnerships, enable them to monetize their expertise and maximize earnings through our platform. Lastly, our vocational training business, where revenue decreased 50.4% every year to RMB 84 million during the quarter, as we streamline the acquired business. Our self-operated business maintained robust momentum, delivering double-digit growth year-over-year and achieving a turnaround in operating profitability. The strong increase in revenue from our self-operated business was driven by our strategic focus on high-performing courses categories like AGI and film post-production, which remained highly popular during the quarter. Deep community integrations continues to foster a low user base with an extended lifecycle. Operating efficiency initiatives show further ROI improvements during the quarter, with over 80% of our courses now delivering returns exceeding 2x, learning a clear path towards profitability for our vocational training business. The integration of advanced AI is accelerating these gains in operating efficiency. During the quarter, AI drove conversion efficiency gains by 10% and reduced costs by 20% for our proprietary live streaming platform. We also piloted a new AI-driven sales model during the quarter, which is already making solid progress. For example, the customer service to user ratio for our proprietary writing course tripled when we compared to the manual processes we previously deployed. Going forward, our priorities include deeper integration of our vocational training business across our community, developing additional proprietary high margin courses that address evolving user demand and fostering greater engagement. Simultaneously, we will expand the deployment of AI to enhance operational efficiency and accelerate our path to sustainable long-term profitability. In the first quarter of 2024, we not only drove a turnaround in both net income and operating profits, but also achieved a double-digit net margin, demonstrating our profitability potential. AI presents a historic opportunity for growth, and our substantial cash reserves gives us the flexibility to invest in strategic initiatives that will evolve short-term losses. We view this investment as crucial steps towards achieving long-term profitabilities and maximizing our competitive advantages in AI era. From an operational standpoint, we will focus on reinforcing the trust and credibility that enterpene the Juhu community and unlock the commercial opportunities by caring to evolving needs of high-value users and consumers. We believe this will solidify our unique position and competitive advantage in AI area as we continue to explore innovative AI applications that effectively leverage Shuhu's distinct strengths. This concludes Mr. Julian's remarks. Now I will review the details of our fourth quarter financials. For a complete overview of our fourth quarter 2024 results, please refer to our press release issued earlier today. The fourth quarter of 2004 was a true milestone for us, an inflection point that underscores our strategic focus and strong execution. For the first time, we achieved positive operating profits and net income on a both gap and non-gap basis, a clear testament to the strength of our approach and the momentum we have built. Total revenues for the quarter were RMB $859.2 million compared with RMB 1,138.3 million in the same period of 2023, reflecting our strategy to prioritize trust, quality, and return on investment. Our revenue mix has become more diversified, with pay membership and vocational training contributing over 62% of total revenues. Our marketing services revenue for the quarter was RMB 315.9 million, compared with RMB 465.2 million in the same period of 2003. The decline was mainly driven by our proactive and continuous optimization of service offerings, strategically aimed at enhancing margins. Pay membership revenue was RMB 420.2 million, compared with RMB 455.9 million in the same period of 2003. While our average monthly subscribing members saw a slight year-over-year decline, our premium paid content continued to maintain high engagement rates among paying users. Well, our pool decline year-over-year has grew 7.3% sequentially. Vocational training revenue was RMB 84 million compared with RMB 169.3 million in the same period of 2023. The decrease was primarily due to our strategic refinement of acquired business with a continued focus on prioritizing the fast-growing self-operated programs. Our revenues were RMB 39.1 million. compared with RMB 48 million in the same period of 2003. Our gross profit for the first quarter was RMB 540.7 million, compared with RMB 673.1 million in the same period of 2003. Driven by improved operational efficiency, our gross margin expanded further year-over-year, reaching 62.9%. Driven by disciplined cost management and enhanced efficiency from technological innovation, Our total operating expenses per quarter declined by 37.9% year-over-year to RMB 528.8 million. Selling and marketing expenses decreased by 40.1% to RMB 316.2 million from RMB 527.6 million in the same period of 2023. The decrease was primarily driven by more disciplined promotional spending and a decrease in personnel-related expenses. Research and development expenses decreased by 37 percent to RMB 146.6 million from RMB 232.6 million in the same period of 2003. The decrease was primarily attributable to more efficient spending on technological innovation. General administrative expenses decreased by 27.5 percent to RMB 66 million or RMB 91.1 million in the same period of 2003. As of December 31st, 2004, the company has cash and cash equivalents, term deposit, restricted cash, and short-term investment of RMB 1.9 billion, compared with RMB 5.5 billion as of December 31st, 2003. Since our Hong Kong IPO up until December 31st, 2004, we repurchased 31.1 million plus ordinary shares for an aggregate value of US dollar 66.5 million, on the open market and subsequently canceled them. We also repurchased a total of 11.1 million Class A ordinary shares for an aggregate value of US dollar 17.8 million to be utilized upon investing of restricted shares in future. In addition, we repurchased another 33 million Class A ordinary shares for an aggregate value of US dollar 38.5 million via general offers, which we completed on November 8, 2014. In total, the company purchased 75.3 million Class A ordinary shares for an aggregate value of US dollar 1.2 billion. Looking ahead to 2025, we will focus on continuously enhancing the trustworthiness of our community while strengthening our profitability, fostering a mutually reinforcing journey of shareholder returns and enterprise value growth. This concludes my prepared remarks on our financial performance for this quarter. Let us turn the call over to the operator for the Q&A session.

Thank you. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, please ask one question each time. If you have any follow-up questions, please go back to the queue. Once again, that's star 11 for questions. We will now take our first question from the line of Xueqin Zhang from CICC. Please ask your question, Xueqin.

Thank you, Manager Chen, for accepting my question. First of all, congratulations to the company for getting the first profit on the GAAP and non-GAAP levels. My question is about the call-to-answer. Can you share with us the data of the user test and the search questions that you have seen so far? What kind of help does Zhihu Zhida have for the entire Zhihu community? In addition, from the perspective of the industry, are we worried that AI will be replaced on the basis of the new LMM promotion? Thank you. Thanks management for taking my question and congratulations on the first profit quarter on both gap and non-gap basis. My question about Zhihu Zhida, could management share your insights regarding the user size data of Zhihu Zhida? How does it benefit the overall Zhihu community ecosystem? Additionally, from an industrial perspective, is there any concern that with the advancements in LLM inference capabilities, Zhihu could be replaced by AI? Thank you.

Thank you, Xueqing. I'm Zhou Yuan. Thank you very much for your long-term attention to Zhihu. Actually, you just asked three questions. The first question is about the data of Zhihu Zhida. In the past six months, Zhihu Zhida has been growing very healthily. Zhida's user size has gone from millions to tens of millions of users. This process is a result of natural growth. It mainly comes from the user's review and reputation.

Thank you, Sheqing. This is from Zhifu CEO Zhou Yuan. Thanks for your long time support for the company. So I will just start by addressing your first question. Over the past six months, Zhida's user-based data grow healthily, and the MAU have grown from the scale of about 1 million to 10 million. And we believe this strong organic growth has been driven by the high repeat visits and the positive word of mouth.

第二个问题呢,你是问的直达对整个社区的帮助或者说是影响。 在今天啊,我们都可以看到知乎社区它有着一个不可替代的在全网独一无二的专家网络。 在今天呢, And to your second question, how do that benefits our overall community?

So Juhu community has an irreplaceable and unique position over the whole internet with this network of experts. This network is increasingly crucial because the expansion of the AI-generated content and AI hallucination has made trustworthy content and environment a rigid demand.

Although many AI products have already existed today,

They lack the ability to generally connect with real people, especially experts.

现在这个问题或者这个需求 其实已经得到了一个全新的解决方案了。 我们这两天已经发布了最新版本的知乎直达。 这个PC版已经全亮了。 移动版就是APP版现在正在灰度中。 应该大家很快就可以被灰度到。 Today, you will find that we have two new ways to establish connections between AI and the community. In AI, the inference result of the call to answer can be directly attributed to a real caller in the community. Secondly, you can also directly add a caller so that each caller becomes

And we believe this question may be answered in an alternative way. We have a very latest update, have perfectly addressed this need. And we can see now the PC platform fully rolled out and another Zhihu app is already in the grayscale testing now. In this update, we've introduced two new ways to build these connections within the community through AI. Firstly, the inquiry of results of Zhihu Zhida can now directly be traced back to the actual community contributor. And secondly, you can directly ask mentioned special contributor. These effectively turning average you who experts into users interaction, personal knowledge base.

We are very happy that after the launch of the new branch, we have seen a lot of positive user reviews in the community. This afternoon, I just received a comment from an excellent author in the field of single-player games and painting, Scott. He said that if the call-and-answer tool before the upgrade is defined as an efficient AI search tool, then the call-and-answer tool after the upgrade becomes a way of connecting people. This is very useful. Another author said, I used to think that the leaders of the industry were unbeatable. Now, with the help of the app, I can stand on the shoulders of giants. Zhihu Zhida's update has really made Zhihu's knowledge pool extremely useful. That's all I have to say. I welcome everyone to use Zhihu Zhida.

And we are very glad to see, lastly, Judah received many positive feedbacks from our own content creator. I just come across an excellent content this afternoon. This is from one of our content creator, Scotty, who specialized in single player games, painting, and art topics. Scottie just mentioned if the pre-update Zhihu Zhida was defined as an efficient AI search tool, then the post-upgrade Zhida has now become a form of human-to-human connection. This is very in Zhihu style. And I will just quote from another Zhihu content creator. This creator said, I used to think industry leaders were out of reach, but now with this app feature, I can stand on the shoulders of giants. This data update has truly taken knowledge, accessibility to the extreme. So I will just pause here a little bit, and you are all welcome to try this out more.

Now, just to address your third question is about whether AI could replace Zhihu.

We believe, actually, it's uncontroversial. AI will significantly enhance Zhihu's development.

In an AI-driven era, we believe trustworthiness is paramount, making an expert network very essential.

Zhihu has the strongest expert network available.

Zhihu has the strongest expert network available. Zhihu has the strongest expert network available. Zhihu has the strongest expert network available. Zhihu has the strongest expert network available. Zhihu has the strongest expert network available. Zhihu has the strongest expert network available. Zhihu has the strongest expert network available. And second, Zhihu's expert network has attracted pioneers from diverse industries who

who lead cutting-edge transformations and industry evolutions. As they embrace and use new technologies, including AI technologies, they embody a seamless integration of human and AI capabilities. So far from being replaced by AI, the value of the top-tier experts for example, the top 10% with their respective industries, will actually be amplified. As more and more experts join and engage with our community, our content ecosystem will become even more credible and trustworthy.

So on this basis, the efficiency of the production and transmission of high-end content in the community will be further expanded, attracting and serving wider users. Thank you.

With the credibility and trust as our foundation, we can leverage AI to further improve the efficiency of high-quality content production and dimensionation, attracting and serving an even wider range of users. Thank you. Thank you for your question. Thank you.

Our next question comes from the line of Thomas Chong. from Jefferies. Please ask your question, Thomas.

Thank you for taking my question. My question is also related to AI. I would like to ask you if there will be any changes and innovations in the product this year. On the other hand, will there be any new directions in the combination of AI? Thanks, management, for taking my question. My question is also about AI. What other changes and innovation can we expect on the product side this year? Are there any new directions about AI integration? Thank you.

Okay, Thomas, thank you for your question. The focus of the community this year, the focus of the product, is the improvement of sociality and credible content brands. Since this year, I guess you've already seen a lot of positive changes are actually happening Thank you for your question, Thomas. This is from Zhihu CEO Zhou Yuan.

So this year, our focus is on strengthening social interactions and enhancing our brand as a trusted content platform. We have already seen very encouraging developments since the start of this year. So in the product environment, direction, we have been developing social circles and new ideas suitable for the shorter form and high-frequency content, and columns and podcasts for longer form content and subscription plans, establishing this as important values for community engagement and content consumption.

In terms of content brands, such as Dazhu Review Group, Yan Club, and Zhihuo Science. These content IPs will be the focus of this year. We will further diversify these content brand IPs and continuously expand new native influence IPs. This will also gain new business cooperation opportunities on the basis of Hangshi Kexi content brand.

So in terms of the content branding, IEP initiatives such as our Jew Who Renewal Jewelry and Yen Club and Science Season will be key area of focus this year. We also plan to expand into more specialized verticals and introduce new original IPs. Further strengthening our position as a trusted content brand, while creating new commercial opportunities.

So I want to say that this professional influencer and credible content brand is by no means the most important asset in today's era. It has the advantage of being sufficiently differentiated. Our work will also continue to make this asset grow.

So, in this era, we believe the influential experts, contributors, and the trusted content brands are most valuable than ever. This is where we stand out. We have a very clear-cut advantage here, and our priority is to maximize the value of these assets.

You just mentioned the combination of AI work and AI. AI plus community is undoubtedly the direction of our important product. AI will also boost the whole ceiling of our product strategy. One specific direction is that as we reach the top of the new version, we have started to use completely different methods to make deep connections between AI and community. This integration work will continue to be deepened in order to better expand the influence of expert networks. The second direction is that there will be a lot of workflow in the community that will be powered by AI, which will further bring about higher-quality content production, including the improvement in the efficiency of transmission.

So, I believe as you mentioned, you want to know more about our plan to better integrate AI with our entire community. So, our AI-related initiatives will take these questions to the next level, and we will advance on two fronts. First of all, The latest version of we have implemented completely new ways for AI to integrate with our community. We will continue this integration to amplify the impact of our expert network. And second, AI will empower many of our community workflows boosting the efficiency of high-quality content creation and distribution.

We believe this is a brand-new beginning. Facing the big era of AI, we are conducting many new explorations and experiments. We also believe that in order to maintain the high-quality content of the community, we are in the right place to embrace this brand-new era. Thank you.

We believe this is a new beginning for us. In the era of AI, we are exploring and experimenting with many new possibilities. We believe that thanks to Zhu Hu's continuous accumulation of high quality content, we're well positioned to better embrace this new era. Thank you.

Thank you. Our next question comes from the line of Daisy Chin from Haitong International. Please ask your question, Daisy.

Thank you, Guanlin, for accepting my question. You just mentioned the impact of the large model on the customer's community. I want to ask a more detailed question. I want to ask if you have any help with the product of large model online sales. good evening management for taking my question you just have mentioned that you have you just have talked about the ai and the large network model uh the uh how how did uh yeah um and the influence about the influence on the uh community um My question is about how can the AI and the network model benefit to online marketing products? Do you have any example or data case for us? Thank you.

Thank you for your question. I'm the CFO of the company, Wang Han. We all know that most of the players in the AI marketing model are still in the search phase. But I can share some of our current thoughts.

Thank you for the question, Dizzy. This is from Zhifu CFO, Wang Han. AI is changing the monetization model of advertising, and the most industry players are now staying in the exploration stage. But I can share some of our current thinking.

Did you notice a very interesting phenomenon? In the past, what did people say about the challenges of the payment management model on the Internet?

I don't know whether you may notice or not, what were one thing as the challenges for Juku in traditional internet era has now become our biggest competitive advantage and are in the most AI native way.

In the past,

Zhihu has been recognized for its highly knowledgeable users and in-depth content features, which were maybe regarded as difficult to monetize in the traditional internet paradigm that prioritized high traffic and lengthy user engagement. And these may often favor entertainment-focused platforms.

However, in this era, in the AI era, this has completely reversed.

And AI LLMs now prioritize the most high quality answer generated by top tier experts.

Consequently, traffic is increasing down towards the highest quality content.

I can give you an example here. For example, This example comes from the chat box. Many popular AI chat bots rely heavily on Zhihu's real expert-generated content for their indexed responses, attributing its considerable importance.

So if that's the case, then the advertising client will pay more attention to the content and reputation in the call station. In the past, everyone did SEO, search engine optimization. So now there is a more and more consistent consensus that we need to set up an AI-era SEO in advance, which is called GEO, Generative Engine Optimization. Do you want to get more commercial opportunities in the AI answer? Then do you have to do more content in the highest call in the whole world? Is it a transformation?

So for advertisers, they are becoming increasingly focused on the content marketing and the brand reputation management on our platform. Previously, the industry also mentioned, well, often mentioned on the SEO, search engine optimization, and today, This is shifting towards geo or generative engine optimization to gain visible in AI-generated answers. So if you aim to maximize business opportunities and monetization efficiency within AI-generated results, actively managing their content, you should actively managing your content on our platform. Thank you. Thank you for your question.

Thank you. Our next question comes from the line of Vicky Wei from Citi.

Please ask your question, Vicky. 我的问题是关于我们财务方面的。 想请问管理层如何看待我们长期稳态的利润率, 还有我们应该如何看待今年整体利润率的情况, 还有我们现金使用的方向。 Thanks management for taking my question and congrats on a very solid quarter. My question is regarding to the long-term margin profile. So how should we think of the long-term profitability of Zhihu and how should we think of the 2025 margin outlook for this year? And how should we think of the cash utilization? Thank you.

Thank you for your question, Vicky. This is from Zhihu's CFO, Wang Han. 对,今年的Q4呢,从我们历史上第一个利润转正的季度,我们就有双位数的这个利润率,11%的non-GAAP性利润率。 This Q4, we achieved a profitability for the first time in our history with a double-digit non-GAAP net profit margin of 11%.

我们想看全球中美其他各种UGC类型的social media这个platform。 If we look broadly across the global landscape of the UGC platform, the user-generated content platform,

We believe that net margins typically range from 25% to 40% or even higher to 50%. This reflects the fundamental advantage of UGC platforms over maybe media platforms, which incur copyright-related costs.

So, when it comes to the outlook of the profit and loss situation in 2025, we believe that AI is a very historic opportunity for the public.

Looking ahead to our profitability outlook for 2025, we believe AI represents a historical opportunity for Zhihu. And also given our strong cash position, we may choose to maintain a slightly overall loss temporally to continue pursuing and capturing the potential opportunities arising from deeper integration between Zhihu and AI.

Regarding the use of cash, although our market value has risen a little in recent months, it is still much lower than that of cash.

So regarding cash utilization, although our market value has increased in recent months, it still remains significantly below our net cash position. At this clear undervalued stage, we will continue to conduct open mark buybacks at appropriate times. In fact, looking back over the past period, we have been one of the U.S.-listed Chinese companies with the highest share repurchase ratio.

Yeah, that's it.

Thank you. This concludes our answers. Thank you.

Thank you. That concludes today's question and answer session. At this time, I'll turn the conference back to Yolanda for any additional or closing remarks.

Thank you, operator, and thank you all again for joining us today. If you have any further questions, please contact our IR team directly or Chris at Adversary. Thank you.

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