Text/Gide
Edit/Midnight
As the "first sports technology stock" in Hong Kong, Keep has been listed for nearly a year, and its situation is getting better, but it is still in the stage of proving itself to the capital market.
According to the latest financial report, its total revenue in 2023 will be 2.138 billion yuan, a year-on-year decrease of 3.3%, an adjusted net loss of 295.4 million yuan, a year-on-year decrease of 55.7%, and a gross profit margin will increase from 40.7% in 2022 to 45%, an increase of 4.3 percentage points.
Loss reduction is the biggest signal conveyed by this financial report, and another signal is that Keep's revenue structure has changed, and the online membership and paid content business with higher gross profit margin has surpassed its own brand sports products to become the largest source of revenue, which is inseparable from Keep's performance in virtual sports events and the exploration of membership models last year.
At the same time, in the business with low gross profit margin, Keep has reduced investment, such as reducing investment in its own brand, and plans to eliminate the loss-making offline gym business.
Overall, Keep is learning to be a money-making company, but it obviously takes time and patience to convince the capital market of its long-term competitiveness.
In July 2023, Keep's issue price was HK$28.92 when it landed on the Hong Kong stock market, and its share price soared to HK$40 after that. But for nearly a year, its share price has been on a decline.
On the first trading day after the release of the latest earnings report, Keep's share price was at an all-time low of HK$4.52, with a total market capitalization of HK$23.76, down more than 90% from its peak.
The stock price is a mirror, reflecting the outside world's confidence in Keep's track and performance. So far, Keep has not achieved profitability, and it has undergone several business restructuring to accelerate its commercialization and prove its commercial value and self-hematopoietic ability, the results of which have been written in the financial report, but not enough to reverse the perception of the capital market.
For Wang Ning, the process of pushing Keep to profitability is a long and protracted battle.
Founded in 2014, Keep put commercialization on the agenda very early, and in its first press conference in 2018, Wang Ning publicly announced that Keep will change from a fitness tool to a sports technology platform that accommodates a complex ecology, and began to increase investment in the "real commercialization focus", that is, online paid services, offline hardware and offline sports space brand Keepland.
In the past few years of promotion and exploration, Keep's strategic direction has been adjusted several times, and Wang Ning is still looking for the best solution.
If you want to truly solve the problem of low valuation, it is an important task for Keep to take a "step away" from profitability.
Fitness and pan-sports, which are rare hot tracks in the past few years, are also considered to have better performance prospects driven by consumer trends and policies.
Keep, as a leading player in the track, should come up with more certain performance and more stable cash flow to convince the capital market that it can go further in the fitness and pan-sports market.
1. Moving towards profitability is the core proposition of Keep this year
For Keep, the key to getting rid of losses is to expand more diversified revenue sources and provide more revenue contributions to important businesses.
After several strategic transformations, Keep has diversified its revenue sources. Before 2018, Keep monetized ads on the left hand and sold goods on e-commerce on the right hand.
Wang Ning mentioned in an interview with 36Kr that the company did not invest much energy in these two monetization methods, "Advertising monetization is the easiest, there is traffic and users, advertisers will pay, it is understandable that it is done by piggybacking." ”
Since 2018, Wang Ning has accelerated Keep's commercialization and improved Keep's profit model in three directions: developing its own brand, launching business lines such as KeepKit and KeepUp to build a brand matrix, going offline and launching Keepland, an offline sports space brand, and introducing KOLs and content IPs for paid content and services online.
Now, with Keep's horizontal expansion of the business, this business model exploration has achieved phased results. At present, Keep's main revenue sources are private label sports products, membership subscriptions and online paid content, advertising and others.
For the creation of its own brand matrix, Keep's investment is more cautious. For example, the KeepKit business line, since Keep's first intelligent hardware product K1 smart treadmill was released 6 years ago, it has successively released hardware products such as body fat scales, sports bracelets, and spinning bikes in recent years, and the expansion of product categories has been relatively slow.
Source: Keep's official website
For Keep, the expansion of this business also needs to be postponed. Since the first half of last year, Keep's own brand revenue has declined. It also mentioned multiple reasons in the financial report: lower than expected online consumer sentiment, an increase in offline leisure and tourism activities in 2023, resulting in a decrease in the consumption of indoor sports products, and a cost control related to product development, deployment and marketing under the strategy of reducing costs and increasing efficiency.
On the other hand, on the way to the offline scene, Wang Ning no longer expects the commercial value that the offline sports space brand Keepland can create.
The background of Keepland's birth is that in 2017, Keep's online users began to migrate to offline, and the number of old users who used offline courses increased. However, due to the external environment and internal strategic shifts, Keepland's business began to shrink in 2019.
From the perspective of user habits, online and offline are the two indispensable scenarios for fitness activities. Unwilling to lack the traffic and revenue that can be brought by this link, Keep will enhance Keep's offline influence in 2022 through the combination of sports medal gameplay and virtual events.
Keep's medal gameplay is to launch co-branded medals through cooperation with popular games, animation, and film and television IPs such as "Honkai: Star Railway" and "Love and Producer" to attract young people to participate in virtual activities online and complete sports competitions offline to get rewards. This year, Keep also plans to co-brand with Sanrio, Disney and other IPs.
The joint medal of the movie "Fengshen", source Keep's official website
The exploration and experimentation of offline scenarios have helped Keep strengthen the attractiveness of online membership and paid content. According to the financial report, Keep's online membership and paid content revenue in 2023 will be 996 million yuan, a year-on-year increase of 11.4%, mainly due to the virtual sports events held by Keep.
In addition, the revenue proportion of online membership and paid content business increased to 46.58%, becoming the largest source of revenue. The increase in gross profit from this business drove Keep's overall gross profit from $900 million in 2022 to $962 million in 2023.
In the process of increasing the scale of revenue and expanding revenue sources, Keep has also begun to reduce costs and increase efficiency for several years. As early as 2019, when Keep carried out layoffs, CTO Peng Yuehui mentioned in an internal letter that "the commercial business has more than doubled compared to 2018, but it is far from meeting expectations...... The company's energy is limited, and it is necessary to put the limited energy into more core and valuable things, and consider ROI. ”
In 2022, Keep's marketing actions will be significantly reduced, including variety show sponsorship, short video promotion, etc. In 2023, there is news of Keepland contracting again. According to the financial report, Keep will reduce its operating costs by 10.3% to 1.176 billion yuan in 2023.
In the past few years, Keep has explored the monetization model, and carried out all-round attacks and operations in online and offline, paid content and self-operated products, but at the same time, with the changes in the market environment, Keep's multi-line development has also undergone corresponding strategic changes.
After that, Keep also needs to dig deeper into the potential business, optimize the business structure, and expand the proportion of revenue for the stable growth and high gross profit business to serve the company's profit target.
2. To be recognized by the capital market, Wang Ning needs to work harder
For the capital markets, the story that Keep tells is not difficult to understand. The fitness track where it is located has room for rapid growth with the changes in the lifestyle of the current mainstream young consumer groups and the impact of the epidemic.
From a more macro perspective, the concept of "Internet + fitness" can be said to have the dividends of the times. Chen Xian, managing partner of Keep's lead investor, SoftBank Vision Fund, once mentioned that "fitness has become an indispensable part of Chinese people's daily life...... We are very pleased to be able to support the ambitious vision of promoting national fitness advocated by Keep." ”
Keep wants to gain the recognition of the capital market, provided that it can prove the deterministic value of this track as a leading player in the industry, but now Keep's financial report data is not very bright, and it will take longer to build its core advantages, and the market has many doubts about whether the "anti-human" fitness track can continue to grow, how high the ceiling is, and other issues.
Looking back on the past few years, Wang Ning led Keep's product expansion, including going offline, pushing hardware, and branding, which are very in line with the mainstream trend. At the same time, this series of actions is also to broaden its own boundaries, release to the outside world the ambition of transforming from a tool to a platform and brand, and support the commercial value of Keep that is different from other fitness products and services.
However, the capital market has not changed its evaluation of Keep, largely because in the process of business expansion, there have also been many problems, and Keep has to start round after round of adjustments.
One of the most notable is that the business model has become heavier due to years of commercialization exploration, and Keep has started a series of cost reductions and efficiency improvements, business contraction, and key investments in online payment businesses with higher gross profit margins.
A problem that has become more and more prominent in recent years is that the expansion of Keep's business territory has not promoted more users to be active, interactive and share on the platform.
Wang Ning once mentioned that when Keep was first founded, fitness awareness had just risen, so Keep's positioning was not for professional fitness enthusiasts, but for more popular beginners.
However, as more social media platforms focus on the sports track, Keep needs to form its own competitive barriers if it wants to open up the gap, provide users with more dimensional and high-quality fitness content, and compete with platforms such as Bilibili, Xiaohongshu, and Douyin from the content level, so that users can have the brand impression that Keep can provide better and more professional fitness content and courses.
Source: Keep's official website
In particular, Keep's dependence on paid content and service revenue has increased, and the barriers to the content ecosystem have become more critical. To this end, in the recent 8.0 product update, Keep has increased its investment in fitness IP and content, such as signing TOP talents on the whole network and launching exclusive customized courses, and continuing to invest in official high-quality courses and subdividing the difficulty.
At present, Keep is still difficult to retain paying users, and it has also become a key issue affecting the perception of the capital market. According to the financial report, the average number of monthly subscribers of Keep in 2023 will be 3.193 million, a year-on-year decrease of 428,000, a decrease of 11.82%.
This is why in the past year, Keep has placed more emphasis on value mining for existing paying users. From the disguised downgrading of the original membership rights in March 2023 to stimulate users to buy membership cards with a more expensive unit price, to the increase in the number of recorded courses and exclusive courses on the platform in the past year, the effect is also directly reflected in the financial report - the average monthly income per monthly active user in 2023 will increase by 17.65% year-on-year to 6.0 yuan.
Whether it is the mining of user value or the improvement of self-hematopoietic ability, Keep needs to give the capital market a more stable and certain answer.
3. Will going outdoors raise Keep's imagination?
Since 2023, the consumption trend of the fitness track has changed significantly, different from the home fitness boom after the epidemic, this time people have begun to go outdoors, driving the outdoor-related sports equipment, supporting scene services and other related markets.
"Go outdoors" has gradually become the key word of Keep. From the expansion of outdoor sports equipment by its own brand to the comprehensive upgrade of the App in the near future, it is to focus on "going outdoors" as the company's future growth driver.
The recently released version 8.0 at the same time as the earnings report set Slogan as "home everywhere", pointing to Keep's ambition to broaden the boundaries of sports. The focus of this version of the update is also closely related to the development direction of Keep's in-depth pan-sports scene this year.
Behind the action of "going outdoor", it is actually the consideration and layout made by Keep in order to restore the recognition and confidence of the capital market in its long-term development direction.
In order to drive the growth of user scale, Keep targets sports people in different sports categories in the new version to attract more users to use Keep's App and brand products.
Specifically, version 8.0 covers more sports categories from the perspective of sports tool attributes, including running, cycling, ball games, skiing, etc., on the basis of home fitness scenarios.
Among them, for the more popular projects, Keep has carried out more detailed product updates, such as outdoor running projects that provide more than 300 cities and more than 100,000 running routes, and upgraded the recording function for professional marathon runners.
Source: Keep's official Weibo
By entering the pan-sports field, Keep's business boundaries can also be broadened, no longer limited to the track of home fitness, which also means greater commercialization space.
However, the difficulty is also obvious, most sports categories have been developed as independent subdivisions for many years, and there are many highly influential head brands.
As a latecomer, Keep needs to start from scratch, and there are many categories of synchronous layout, so it is not easy to break through among the strong ones.
In addition to making efforts to attract new users in more sports categories, Keep has also made more moves to improve user stickiness and community atmosphere.
It is mainly through the way of gathering fan groups and building "semi-acquaintance" communities, such as the establishment of more than 140 sports clubs, from which online activities are provided for users to form teams or PK. In this way, users are encouraged to share their daily sports routines and participate in community interactions to enhance the activity of platform users.
Keep also seems to realize that after the pandemic gradually moved away from people's lives, the dividends it has enjoyed online in the past few years are gone, and it has become more difficult to maintain its user growth. Expanding the user base, retaining old users, and supporting its own business path have also become Keep's top priorities.
Before that, Keep also needs to solve the problem of book loss under the lack of hematopoietic capacity. As of December 31, 2023, Keep had cash and cash equivalents of 1.6 billion on its books, a decrease of 1 billion from 2022.
Whether it is the layout of pan-sports, a potential but highly competitive market, or the continuous enhancement of paid content and service experience around user value, it takes a lot of time and resources to invest. For Keep, how to race against time and patience with the capital market is also the most important issue at present.
(The header image of this article comes from Keep's official website.) ）