Ladies and gentlemen, thank you for standing by, and welcome to the Jehu Incorporated First Quarter 2021 Financial Results Conference Call.
At this time, all participants
are in listen only mode. After the speakers' presentation, there will be a Q and A session. Today's conference is being recorded at this time. I would like to turn the conference over to Ms. Jingjing Du, Head of Investor Relations.
Please go ahead, ma'am.
Thank you, operator. Hello, everyone. Welcome to our Q1 2021 financial results conference call. Joining us today are Mr. Zhou Yuan, Chairman and CEO of Juhuhe and Mr.
Sun Wei, our CFO. Before we start, we would like to remind you that today's discussion may contain forward looking statements, which involve a number of risks and uncertainties. Actual results and outcome 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 except as required by law. During today's call, management will also discuss certain non GAAP financial measures for comparison purpose only.
For definition of non GAAP financial measures and a reconciliation of non GAAP to non GAAP financial results, please see the earnings release issued earlier today. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on our website at ir.jihu.com. I will now turn the call over to Mr. Sun Wei, our CFO.
Please.
Okay. Thank you, Jingping. I'm pleased to deliver today's opening remarks on behalf of Mr. Zhu Yan, Founder and CEO of Jigu Liying. Thank you everyone for joining our first earnings call.
I'm pleased to report that Zhihu delivered a strong set of results in the Q1 of 2021. Our user base and revenue both experienced significant growth during the period. In Q1, our user base continued to grow rapidly. Our average MAUs reached 85,000,000 representing a year over year growth of 38%. This is an impressive growth momentum we successfully managed to maintain even after the significant growth we realized in Q1 2020, during which most users spend more time online due to the COVID-nineteen pandemic.
Our revenue increased significantly, growing 154% year over year to RMB478.3 million. This growth was largely attributable to our commitment to the execution of our content centric monetization capabilities. Now I will elaborate a little bit of our revenue growth by business line. Most impressively, our content commerce solution also known as ChipPlus continues to deliver expectation beating results, contributing RMB121 1,000,000 in revenue during the Q1. This compares with an annual revenue of RMB136 1,000,000 from this business line in 2020.
The strong growth momentum of 2 plus was reflective of the market recognition of its high marketing efficiency among merchants and brands. The number of customers for the business line experienced a tenfold increase compared with Q1 last year. In addition, our growing merchant and brand portfolio for the business lines also represents a much broader industry coverage, such as fast moving consumer goods, education, beauty and personal care, as well as daily life services. We see great growth momentum in the business line delivering optimal marketing efficiency to our customers and contributing great commercial content to our users. Zhenzhu's advertising business continued its rapid growth in Q1 2021, effectively overcoming the negative impact of COVID-nineteen from the Internet advertising sector.
In the quarter, our advertising revenue reached RMB214 1,000,000 representing a year over year increase of 70%. The increase was mainly due to the growth of brand advertising, which was driven by our growing user base and brand recognition, as well as our strong capabilities in offering tailored marketing solutions to our brand customers. We also saw a steady increase in performance based advertising revenue. We expect the advertising sector will experience a strong recovery as the implications of COVID-nineteen pandemic continue to weaken and we will continue to benefit from both a favorable industry trend as well as our strong recognition among advertisers' target audiences, uniquely strong product offerings and execution capabilities. The rapid growth of Zhuhu's paying member is another important engine driving the development of Zuho's content centric business model.
In the Q1 of 2021, revenue from Fit membership was RMB127 1,000,000, representing a year over year increase of 127%. The average quarterly paying members reached 3,980,000, representing a 138% increase on a year over year basis. The paying ratio reached 4.7% in the quarter. Our paid membership program is a vital component of our community with great growth potential. We will continue to invest in this growth through offering more premium content and improving our paying members' user experience.
In the Q1, we continue to expand the coverage and depth of Zhihu's paid content library. By the end of Q1 2021, items of paid content had increased by 190% on a year over year business with a broader range of categories offered. In the Q1, we continued to fine tune and execute our other content centric monetization channels and initiatives such as recommended goodies. In the Q1, the GMV generated by recommended goodies reached RMB1.5 billion, representing a year over year increase of 2 14%. With our business benefiting from deep ongoing cooperation with our strategic shareholders such as Taobao and JD, we expect to make further breakthroughs in the e commerce space.
We continue to deepen our monetization in the education sector as we start to enhance the quality and depth of our education content offering, including our self operated course portfolio, which has expanded from examination to now also cover courses in finance and business. We have also expanded offering to cover more target audience through a variety of partnerships with offline third party vendors. We will continue to seek strategic partners in the education sector to offer great growth potential and product synergies with Juhu's current offering. Now let's dig a little bit into deeper into to review our operations across a couple of our key operating perspectives: content, content creation, user growth and monetization capabilities. As a comprehensive online content community, we are dedicated to addressing the needs of people as they seek information, find solutions, make decisions or help fund.
In Q1, we have maintained lifestyle and consumer content category as our most active and popular category on our platform. This was closely followed by the entertainment category and the Zhuhu's cornerstone categories, including natural science, engineering, psychology, and politics, etcetera, which forms a bedrock of our content library. Active content creation, especially those focusing on high quality content is a vital factor in driving strong growth of our user base and monetization capabilities. To this end, we continuously strive to enhance the breadth and depth of our content offering with strong product development and refined operational initiatives. During Q1, we also concentrated on the strengthening the timeliness of content created in response to trending events and enriching the format of our content offerings to include more videos carrying strong Zhihu content features and styles.
Trending topics in Zhihu communities are also attracting an increasing number of themes. In-depth discussions on trending topics have generated significant organic traffic and word-of-mouth recommendations. Zhuhu trending topic in Chinese Zhuhu Jioba has become a favorite place for in-depth discussion following the current major events. In the Q1, more than 23,020 topic events This further strengthens Jiho's brand recognition by encouraging users' participation in both spontaneous content creation and in-depth discussion. Through our 10 years of operation, we have successfully developed a comprehensive system for attracting users and increasing their interactions on our platform.
In order to cater to the various demands of users, we encourage our content creators to generate a diverse spectrum of content, making full use of the rich media format our platform has to offer. We also launched creative online campaigns for targeted demographics. Highlights of these included content creation workshop specifically organized for younger and amateur users and open forum focusing on certain specialized areas for certain group of users. All these events were well received by users and generated a great volume of content creation and engagement activities. We are focusing on offering a broader range of such events to a great catalog of the category and have received satisfying results.
By the end of the Q1, our content library measured by accumulated content pieces on Zuhu platform grew about 60% year over year. Now I will spend a little bit of time on our visualization initiatives, which is rapidly becoming a core part of our business. Daily time spent on video by video viewers has increased by 1.6 times in the quarter compared to the same period of last year. We saw very impressive growth in the volume of uploaded Mayform videos in the quarter, increasing 17 times on a year over year basis. We believe that leveraging our rich content pool, Zuhu is well placed to capitalize video's increasing dominance in online content consumption.
By adopting a visualization strategy for our platform, our accumulated library of premium content will be consumed by ever larger groups of users, further accelerating our user growth. As part of our visualization strategy, we launched various video creation utilities and toolkits for our video content creators and have also introduced a dedicated video tab on the app homepage. Going forward, we believe our premium video content will differentiate Zuhu in the market and will be a key driver of growth for the segment. To facilitate our strategy, we will continue to invest in product innovation and introduce more monetization channels for video content services. As we move to the next page, we are committed to providing more made from video content with a differentiating sense of fulfillment for our users.
Our content creators continue to be highly active on our platform. In the Q1, there were 3,400,000 active content creators per month on average, representing an increase of 100,000 from the Q4 of 2020. Our creator community contributed more than 12,800,000 pieces of content in March 2021 alone. These achievements reflect our continuous effort in improving the ecosystem for our content creators. We provide our creators with a sophisticated and dedicated platform encompassing various effective creativity toolkits and utilities, such as AI powered video creation functionality that greatly simplifies the process of making video content.
We also offer full service assistance to the video content creators through a project we call Project Haiyan, which includes training courses on video creation, traffic support, cash incentive plans and the connectivity with the merchant partners for content monetization. We are excited to see that these efforts have led to a rapid increase in video creation volume over the past 12 months. As I just mentioned, made from videos increased 17 times in the quarter on a year over year basis. Notably, we are seeing more and more video content created not only by our top content creators, but also from medium level and new content creators, encompassing and increasing coverage ratio among our content creators. Our continuously solidifying partnership with a growing group of new talented creators will help us further accelerate the visualization of our business.
In addition to supporting operations and content creation, we have also provided our content creator community with multiple channels of recognition and ways to monetize their contribution. An example of this is our recent new generation of the lowing ceremony in Chinese Xinjiang Dawei. Here we are recognized, awarded and honored 187 outstanding young people who provided premium answers to high quality topics on our platform. By continuously building partnerships with younger generation and new content creators, we are fortifying our ecosystem by building a pipeline of future premium content to the benefit of our entire community. Zhuhu has maintained its industry leading position in terms of user acquisition efficiency by adopting a content and technology driven growth strategy.
The acquisition cost per new MAU for Q1 was RMB37, which represents an optimal level of cost efficiency among other players in the online content community industry. Going forward, we will continue to grow our user base while maintaining user acquisition efficiency. On our 10th anniversary in January this year, we launched a series of branding campaigns to further improve Zuhu's brand awareness in the marketplace centered around our new tagline. If there is a question, there will be an answer. In Chinese, we believe this branding concept clearly reflects Jifu's value and mission and will enable us to attract a wider range of users to our content community.
In the quarter, we launched events such as An Adventure Evening with Answers, an online new generation of moeing ceremony, aimed at encouraging excellent answers and recognizing them for their contribution to our community. These branding campaigns have enhanced Jehu's brand identity and the recognition among content community users. In future, we will continue to invest in our brand, which is a key asset to driving long term user growth. The foundation of our closed loop ecosystem is trust. Trust in our community enhances the partnerships from our content creators, brands and merchants, encouraging an integrated approach to answering user acquisition and fulfilling their needs.
In the Q1, the number of content creators that received income on the Juhu platform increased by 2 96% compared to the same period of last year. This is a solid evidence of how the growing maturity and the success of our content centric monetization approach has incentivized our content creator. In conclusion, we are very pleased with Zhuhu's solid growth in the Q1. In the past 10 years, we have become China's largest Q and A inspired online content community. Going forward, our growing user base in reaching premium content, expanding content creator base and diversifying monetization channels will continue to make Zhihu well positioned to capitalize opportunities in China's rapidly expanding online content sector.
Okay. This concludes the remarks of Mr. Zhou Yan, our Founder and CEO. I will now start with our financial performance review for the Q1 2021. As a quick review, in the Q1 of 2021, our total revenues experienced solid growth.
Our total revenues amounted to RMB478.3 million, representing a 154% year over year increase compared with the same period 2020. This was driven by our strong user growth and the fast evolving content centric monetization model. In the Q1, our new monetization channels continued to grow and contributed a more balanced portion to our total revenue. For example, common commerce solutions represented 25.3% of our total revenue in the quarter compared with 0.6% in Q1 2020 and 10% in 2020 full fiscal year. While the contribution of advertising revenues decreased to 44.7% from 66.8% in the same period of last year.
Paid memberships accounted for 26.5% of our total revenues compared to 29.6% in Q1 2020 and other revenues accounted for the remaining 3.6% for the Q1 2021. Gross profit for the quarter was RMB272.7 million, up 2 48 percent year over year. Our gross margin was also significantly enhanced to 57% in the quarter compared to 42% in Q1 of last year, benefiting mainly from our change in revenue mix with higher contribution from business contributing significantly higher margins such as content commerce solutions. Moving on to the costs and expenses. Our costs increased in line with our growth of our business scale, though at a relatively lower pace delivering a higher gross margin.
In particular, increased advertising execution and the content related costs were up much of our 87% year over year increase in cost of revenue, which were RMB205.6 million for the quarter. We also saw increases in cloud services and bandwidth costs incurred in support of the significant increase in user traffic and activities on our platform. As an illustration, our average MAU increased by 38% in the quarter on a year over year basis and we experienced a 138% year over year increase in average monthly paying members. Our total operating expenses also increased in support of our growth with the total expenses amounting to RMB615.1 million. As a percentage of total revenue, it decreased to 129% in the quarter compared with 154% during the same period of last year.
This shows a continuously enhancing operational efficiency, which we focus a lot in association with driving our growth. The main driver of operating expense growth in the quarter was selling and marketing expenses, reflecting various marketing and branding events and campaigns we launched during the same period. We also experienced higher personnel and share based compensation costs as we continue to invest in talent to support our growth. Loss from operations was RMB342 point 5 million compared to RMB 210.9 million for Q1 2020. And net loss for the quarter was RMB324.7 million compared to RMB201.3 million for the same period of last year.
Our adjusted net loss, which is a non GAAP measure that includes share based compensation expenses, was RMB193.6 million for the Q1 of 2021. Proceeds from our IPO continues to enhance our balance sheet. As of the end of March 2021, the company had cash and cash equivalents, term deposits and short term investments of RMB7960.4 million. Dollars I will make a brief remark on our financial outlook. Looking into the Q2 of 2021, the company expects that our total revenues will be in the range of RMB622 1,000,000 and RMB627 1,000,000.
This only reflects our current and preliminary estimates and is subject to any change due to factors including those that are beyond our control. This concludes our earnings remarks. We will take questions from the audience. Could the operator please open the line and let us commence our Q and A session.
We will now begin the question and answer session. Our first question comes from Piyush Malvi from Goldman Sachs. Please go ahead.
Good evening. Congratulations on your numbers as well as the listing a couple of weeks ago. My first question centers around your MAU progression, which we note has done very well. May I ask you to talk through the MAU as of the end of the quarter and where are you seeing that growth come through? And if possible, could you reflect on the trajectory you're observing at the end of the quarter and whether that quarter that trajectory can be maintained at that pace through the rest of the year potentially?
That's my first question. My second question, at the time of the IPO, you talked about you disclosed what the total visitor number was. And I wonder if we could go back and get a feel for how that visitor number has changed potentially since the last time we saw that number reported in the filings? Thank you.
The MAU growth in Juhu has always been driven by our content. We have a very high percentage of new users coming from the content created by the organic traffic. And in terms of profiling our new users, we noticed that they are presenting the same features and behaviors generally. However, relatively speaking, I should say, the female new users are giving us a higher percentage on a year on year basis. Has been growing very sustainably and we are well penetrating into a wider range of topic areas.
In different scenarios, we are able to meet the demands from various users. We have the best in class content as well as content creators in 10 knowledge areas and we have been maintaining our advantage in our industry all the time. I can give you some examples. For instance, our unique visitor number increased by 2 20% in material science and by 5 60% in Microeconomics year on year. Whereas at the same time, we are also well positioned in other topic areas such as hobbies.
For instance, in ACG, in 3Cs and in gaming, the content and content creators are also very active. These help us to attract more younger users. Our percentage the percentage of users under 25 years old are also on the right.
In
terms of on top of knowledge sharing and interest discussion, we are also helping our users to solve their actual problem. These kind of content are also on the rise. For instance, we have a very popular topic that is about preparation for the exam for graduation school in China. Right now, every day, there are more than 1,000,000 users looking at those information. And we're also helping our users to gain life skills such as cooking and we are also providing solutions for the newbies in the workplace.
So these will help our users not only to share their views about their interest, but also solving their actual problems in their work and life. We see that in both retention rate and in tech, these new content are giving us very nice numbers in terms of users that we have and we will continue to invest and gaining more and more users this way. Thank you. As to your second question, the monthly viewers they are having right now is 4 60,000,000 maintained a stable level. And also the percentage of MAU to monthly viewers are also on a stable uprising trajectory.
Thank you.
Thank you.
The next question comes from Alex Xie from Credit Suisse. Please go ahead.
Hi. Thank you very much for taking my questions and congratulations on good results. I'll ask my questions first in Chinese and translate in the page by myself. My first question will be about progress and in the video utilization strategy. Would you please share some more figures about the scale of video consumption and the production?
Also, what will be the key initiatives to further drive penetration of video in MAU and content creators? And then my second question is about the GP margins breakdown and outlook. Would you please share us about the segment business segment's shipping margins such as for example, margins for content commerce solution and the membership business? Also how should we think about the GP margin trends in the rest of this year? Thank you.
Thank you. Mr. Zhou Yuan will address your first question about video strategy. So video content is a very important part in our ecosystem. And in the past couple of months, you see that our value of the video both in terms of creation and consumption increased significantly.
For those videos that are over 1,000,000 long, the daily uploading volume increased by 17 times on the past quarter and the average consumption on video also increased by over 60%. Our Zuho community is very open and highly accommodating to different kinds of content creators, different kinds of media formats and different kinds of user groups. So right now, you see video penetrated DAU is now over 30 percent. People do enjoy watching video on JUHU platform. And also as we are progressing in our product as well as technology innovation, video is going to be a very important element to content creators as one of their creation tools.
And we believe that every answer on Zhihu should have a video version. Text and image as well as video are just part and parcel of our entire content library. As you can see in our community, video is presenting very nice growth rate and also the content as well as the categories are looking very healthy. On the other hand, in the entire industry of video, mid form video is still at a very early stage. If you look at many other similar content communities, if we put all the uploading volumes of mid form videos altogether, the daily uploading volume is only by 100 of 1000.
And we believe that going forward, this volume will explode to about to buy 1,000,000 on a daily basis. So we believe that this sector still has enormous potential and we believe that we will be able to see more and more quality video content and video content creators in the community of Qifeng. Thank you. And I also want to mention the ecosystem that we're building for video development. Unlike many other platforms, our community video strategy is driven by our ecosystem, which is very healthy that promotes the good quality to come out from the rest.
And this will again reinforce a healthy atmosphere that we are enjoying in our community. In Q1, we actively taking some measures to control the low quality content, meaning that it would give more exposure opportunities for better quality videos. And also at the same time, our content creators for better quality videos are enjoying a wider space for their creation. And in the second quarter, we expect we hope to make some structural changes to the content videos as well as to further build on our ecosystem, so that as an entirety, our video business will continue to grow very fast.
Thank you. Yes. This is CFO of the company, Sun Lei. I'll try to answer the second question from Alex regarding the gross profit margin. I'll speak in Chinese and Grace will have Hong translation.
Thank you. This is from CFO, Sun Wei of Jihoo. And the answer to the gross margin is by 2021, our Q1 gross margin stood at 57%, which represented a very significant increase over the same period last year. The first reason for that is the economy of sales that we are enjoying as a result of increased revenue that we are seeing from our business. Both of our G plus and paid membership business represented over 100% increase, whereas our advertisement grew by over 70%.
Okay.
The second reason is the significant mix change that you're seeing in our revenue. For instance, for our G plus business in 20 2Q1 accounted for only 1% of our total revenue, whereas by the Q1 2021 is accounting for 25%. And our revenue contribution from paid membership and advertisement stood at 67% 30%, respectively, in the Q1 of 2020, whereas the percentage has now dropped to 45% 26%, respectively. So therefore, you see that our higher margin business that is G plus is contributing more to our gross margin as a whole. And the third reason is that we keep a very good control on our fixed cost items.
For instance, the cost for our bandwidth as well as for our servers are not increasing at the same pace as we are increasing our user base in our business. Therefore, due to the economy of scale that we're getting from the fixed items of cost, we are also registering a higher gross margin. So the above mentioned three reasons are contributing to a higher gross margin this quarter. Thank you. Going forward, I think in the next couple of quarters, we might see some slight changes in our gross margin level as we are seeing very nice perspectives in terms of the video conference that we have.
Therefore, we will invest a little bit more in encouraging the video creations and content creators by compensating them more on their content creation and video format? Thank you.
The next question is from Binbin Dieng from JPMorgan. Please go ahead.
So my question I have 2 questions. My first question is about the content commerce solution. So can management share some colors in terms of the drivers behind the strong growth in the Q1? For example, what are the key industries or notable business customers who have contributed to the growth? And how does operating metrics such as click through rate, ECPM look like in the Q1?
And how should we look at the trend in the rest of 2021? And my second question is about your sales and marketing expenses, which nearly tripled in the Q1 of 2021 compared to the same period last year. Can management elaborate on the key investment areas of the investment of the sales and marketing investment and how should we look at the trend in the following quarters? Thank you very much.
Thank you. Let me address the first question on content commerce solution first. Well, actually in Q1, Content Commerce Solutions beat our expectations for that, which registered a revenue of RMB 121,000,000 accounting for about 89% of the numbers that we got from the last year entirely, increasing by over 100% and even on a quarter on quarter basis. As for the drivers behind content commerce solution, I would say that we are very happy to see that both the number of the brands and margins on our platform are on the rise as well increased by about 10 times if you compare the number in Q1 2020. And because there are larger volumes of merchants working on our community platform, we are seeing very nice price out of the bidding from the merchants.
Therefore, we have very nice CPC numbers as well. So in conclusion, I think I would say that both the volume as well as the price are the drivers behind our CCS growth content commerce solution. Thank you. In terms of industry concentration, we see very nice popularity from the sectors such as FMCG, education, beauty, products, 3Cs and automobiles, whereas we're seeing very nice conversion rate from the CCS that we're having. And I will say for FMCG, Education and Beauty, they have been the biggest contributors to our merchant base and brand base.
Sales and marketing expenses in our Q1, well, I should say that in January, we were celebrating the 10th anniversary of Zhihu as a community. Therefore, we launched a number of brand campaigns heavily in the country such as Night Party Adventure as well as the award ceremony for new generation of knowing, which is very welcomed by the community as a whole. And this helped us a lot in building our brand recognition. And that is why we see a jump in terms of sales and marketing expenses, especially in this Q1.
Okay.
That said, I should say that we're still very stringent in terms of our sales and marketing expenses and looking at the efficiency of our money our marketing dollars spend, the CAC of our MAU still stood at RMB37 per MAU and still keeping at a very low level.
The next question is from Fikke from CICC. Please go ahead.
I'll briefly transmit myself. Thanks, management, for taking my question and congrats on your strong financial performance. My question is regarding the drivers of the advertising business. Since it is said that brand ads have strong performance, how do you view and project the growth of performance at low ratio and in CPM? And maybe in terms of advertisers, is it because that you have gained more share in their accounts or there are more KA or SME clients?
Thank you. Thank you for the question. Well, our advertisement business revenue increased by 70% compared with the previous year and that was mainly contributed by our brand advertisement. It used to accounted for the majority part of our advertisement income. That is because we have launched a new product as well as helping our brand advertisers building more values on our community by giving them better high quality content that would accumulate in our community.
And our advertisement income mainly comes from the KA. Our performance is accounting for less of a percentage versus the brands ad, which is pretty much in line with our development strategy. And we hope to work even harder for the brand advertisement and trying to gain more of their budget on advertisements. As for the ad load, going forward, we will keep our ad load unchanged. Instead, we will rely on the increase on our user base, the better and higher recognition of our Jupu as a community and also diversifying our format so that there will be more forms for consumption on our of the advertisement on our community.
Thank you.
Due to time constraints, that concludes today's question and answer session. At this time, I will turn the conference back to Jingjing 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
Thank you once again for joining us today. If you have any further questions,