Wen | Yang Yafei Editor| Qiao Qian
The online gym that young people most often go to is going to go on sale.
On the evening of February 25, according to documents from the Hong Kong Stock Exchange, online fitness platform Keep has submitted an application for listing. An important background is that benefiting from working from home and living longer after the epidemic, Keep has ushered in a "performance highlight" moment in the past two years. In the first three quarters of 2021, Keep achieved revenue of 1.2 billion yuan, an increase of 41.3% year-on-year; previously, the revenue in 2020 was 1.1 billion yuan, an increase of 66.9% from 660 million yuan in 2019.
Young people, especially fitness experts from first- and second-tier cities, are the main users of Keep. According to the prospectus, about 74.1% of Keep's 34.4 million monthly active users in 2021 are under the age of 30. In addition, users in first-tier, new first-tier and second-tier cities accounted for as much as 52.2% of the total users of the platform.
Keep's IPO has been rumored for a long time, and the Hong Kong Stock Exchange is not the first choice. In May last year, the media reported that Keep had planned to go to the United States to IPO and raise $500 million, but shortly thereafter, it was announced that the IPO plan to go to the United States was canceled. Based on past experience, the company is likely to officially land on the Hong Kong Stock Exchange in the next 3-6 months.
However, Keep's IPO trip is probably uncertain. According to the prospectus, Keep's adjusted net loss for the first three quarters of 2021 was 696 million yuan, compared with only 15.55 million yuan in the same period last year, a significant increase of about 4380% year-on-year.
The official explanation for this is that "strategically increased spending on traffic acquisition and brand promotion to further acquire, activate and retain users." ”
In other words, it is to burn money to stimulate user activity. This tried-and-true approach in the Internet industry has also given Keep a taste of sweetness: the average number of monthly subscription members has increased from 1.9 million in 2020 to 3.3 million in 2021, an increase of 73.7% year-on-year. However, at the cost of a huge increase in losses, and a 41.3% year-on-year increase in revenue growth in the first three quarters of 2021, it is not very prominent.
Calories burned, money burned
Compared with offline gyms, the online fitness platform represented by Keep is a more convenient way to "burn calories", which seems to be the most suitable for urban white-collar workers with fast-paced lives. But what really got fitness enthusiasts to notice them was after the pandemic.
According to the prospectus, Keep's average monthly active users in the second quarter of 2020 were 33.25 million, an increase of about 48% over the same period last year of 22.44 million, and more than 10 million new monthly active users were added year-on-year.
Since the official launch of the product in 2015, Keep has unlocked the first "10 million monthly active" in only about a year; but until 2019, the average monthly active monthly activity by quarter is still fluctuating around 20 million. Until 2020, Keep's average monthly active users once again stabilized at around 30 million.
Keep 2019-2021 quarterly average monthly active users, according to the prospectus
This is a rare "bonus period".
Among them, Keep's revenue increased from 663 million yuan in 2019 to 1.1 billion yuan in the 2020 annual report, during which gross profit increased by 83.2%, adjusted losses shrank rapidly from 360 million yuan in 2019 to 106 million yuan in 2020, and sales and marketing expenses fell from 44.6% of revenue in 2019 to 27.3% in 2020.
In 2021, Keep significantly increased its marketing efforts, with sales and marketing expenses surging to $818 million from $185 million in the first three quarters of 2020, and making the adjusted net loss expand rapidly from $155 million in the first three quarters of 2020 to $696 million in the first three quarters of 2021.
Kee business performance, figure according to the prospectus
While getting more people to burn calories on Keep, Keep's funding is also burning.
Officially, this is paving the way for "long-term sustainable profitability.". But in reality, it's more like rushing to prove your ability to monetize.
Keep's revenue is based on three main aspects, in order of contribution to revenue, including private label goods, membership subscriptions and online paid content, advertising and other services. Judging from the disclosure of the prospectus, in 2020, the revenue contribution of the above three types of business was 57.5%, 30.5% and 12% respectively.
Private label products, membership subscriptions and online paid content revenue are two categories, which are the main sources of income for Keep. In contrast, the contribution of advertising and other services to revenue has been stable at a low percentage. For Keep, the above two major businesses are also the key to self-certification of monetization ability.
Keep revenue contribution by business type, according to the prospectus
Including smart fitness equipment, fitness equipment, clothing and food and other private brand products, the highest proportion of revenue, but the corresponding product raw material procurement, production and manufacturing and other operating costs are also high, in 2019, 2020 private brand products accounted for 38.7% of the total cost of the period, 36.7%, respectively.
Keep operating costs by business type, based on prospectus
It may be more intuitive to compare the gross profit margin of a single business. According to the above two tables, in 2020, the gross profit margins of Keep's own brand products, membership subscriptions and online paid content were 36.3% and 64.8%, respectively, and the latter was almost twice the gross profit margin of the former - this is not difficult to understand, because the former sells physical goods and the latter sells content.
Subscription memberships and paid content businesses with higher gross margins are the key to Keep's future success in the capital markets.
Keep's commercial performance in the past year has been outstanding, with revenue growth of 33.6% and 52.5% in the first three quarters of 2021 for private label products, membership subscriptions and online paid content businesses.
However, this improvement in liquidity is at the expense of gross profit margin.
According to the prospectus, in the first three quarters of 2021, due to the substantial increase in promotion expenses, the gross profit margin of private label goods decreased from 38.6% in the first three quarters of 2020 to 29.3%, and during the same period, the gross profit margin of member subscriptions and online paid content fell from 66.3% at the beginning of the period to 58.8%.
Whether this gross margin will be maintained in the future is unknown, but Keep's 9.5% member penetration rate in the third quarter of 2021 may have reached a certain bottleneck. In contrast, according to the statistics of The Insight Consulting, the online fitness subscription rate in the United States in 2021 is 10.7%, and the two are almost equal.
After the epidemic, due to the fitness scene from outdoor to indoor, a large number of users poured into Keep, by sacrificing gross profit margin, Keep to further expand the penetration rate of members, but as the epidemic situation slowed down, when indoor exercise is no longer a mandatory option, the high growth rate of users may be difficult to maintain.
In other words, rather than continuing to pull new ones, Keep needs to convince existing keepers to increase their budget for online fitness paid content.
Branding, paying for knowledge, or community?
As of now, Keep covers more than 10,000 recordings of different fitness theme types. According to the production mode, keep content is divided into three categories, one is the platform's original PGC content; the second is the PUGC provided by the platform's masters; and the third is the AIGC training plan generated by artificial intelligence.
But compared to the content of the multi-volume, free and systematic courses, is the key to Keep attracting fitness enthusiasts. For comparison, according to the China Insight Consulting Report, the average price of offline gym members and offline training courses in 2021 is 409 yuan per month.
Compared with offline, the online fitness crowd has a higher penetration rate, according to The Insight Consulting, the penetration rate of China's fitness population in 2021 is 21.5%, while the penetration rate of the online fitness population is as high as 42.7%. But most people, just fitness interest users, high stickiness users account for a relatively low proportion.
According to the prospectus, Keeper has about 1.7 billion exercises in 2021, and based on the current period of 34.4 million monthly active users, the average user uses Keep 49.4 times a year, which is more or less the frequency of weekly exercises.
Moreover, people's fitness habits have obvious seasonal characteristics, according to the average monthly life of keep in the quarters, spring and summer, are the peak period of the use of Keep, compared with autumn and winter, there is a certain decline. For Keep, the first quarter also accounted for the lowest proportion of annual revenue.
Keep average monthly active and average monthly DTC paying users, according to the prospectus
Usage habits are not yet stable, and online fitness consumption habits may be more difficult to develop. According to China Insight Consulting, the average annual expenditure of China's fitness population in 2021 is 2596 yuan, which is a big gap from the 14268 yuan in the United States in the same period.
The growth in related revenues over the past year may be less indicative. Compared with the early days of the epidemic, the growth of Keep in 2021 has a high dependence on marketing. A core indicator is that the share of revenue from sales and marketing expenses surged from 27.3% in 2020 to 70.6% in the first three quarters of 2021. In 2019, before the outbreak, this figure was 44.6%.
According to the data disclosed in the prospectus, the expenditure from "brand and marketing promotion expenses and other related expenses" in 2020 decreased compared with 2019. In 2021, Keep significantly increased the relevant budget, and the related expenditure rose rapidly from less than 100 million yuan in the first three quarters of 2020 to 660 million yuan.
Keep disaggregated expenses by nature, based on the prospectus
According to the official information, this item is mainly used in two places, namely "traffic acquisition" and "general promotion of applications and private label products".
Including yoga mats, sportswear, accessories, functional foods and other fitness-related retail products, is still the main product of Keeper consumption, this series of products market competition is also the most fierce, both Nike, Adidas, ANTA, Xtep and other traditional sports brands, but also includes like lululemon, mint health, wonderlab and other new and old brands in the health vertical market.
Keepland's expansion is another main line, but it is still limited to the Beijing area, operating on a small scale in the form of self-operated and cooperative third-party gyms. Subject to the service limitations of the course itself, the contribution of revenue is directly related to the pricing and expansion of the course.
Keep is also trying to build a new interactive entrance with users, launching a series of intelligent hardware such as smart bicycles, bracelets, scales and treadmills. According to the prospectus, by the end of 2021, the above-mentioned product Keep has shipped about 67,000 units, 1.2 million units, 825,000 units and 180,000 units respectively.
However, smart hardware still faces similar brand competition problems with retail products, as well as a large number of research and development investment bases, for Keep, which is still losing money, it requires a lot of determination.
In contrast, the customized rights and interests of exclusive fitness classes, live classes, personalized fitness training plans and other customized rights and interests involved in subscription members are the long-term brand barriers that the Keep platform has really established. But how willing will new customers who spend a lot of money pay for their online fitness training programs?
Compared with the stimulation of marketing promotion, the "healthy" paid user profile is a more accurate reference for this company.