Release Date: August 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenues reached RMB1,037 million, up 5.4% year over year.
- Gross profit margin expanded to 46%, indicating improved operational efficiency.
- Adjusted net loss narrowed by 28% year over year to RMB161 million.
- Average MAUs climbed to 29.7 million, showing user base growth.
- Introduction of the Keep Watch Pilot 1 smartwatch, enhancing product portfolio.
Negative Points
- Revenue from online membership and paid content slightly decreased.
- Cost of revenues remained high at RMB560 million.
- Selling and marketing expenses increased by 25.8% year over year.
- Cash and cash equivalents decreased to RMB1.4 billion from RMB1.6 billion.
- User activities were impacted by a spike in tourism and offline entertainment activities.
Q & A Highlights
Q: We have seen how you are expanding user base and improving user activities after stepping out of the hardware effect in the first half of 2024. How should we look at our user growth trend going forward and what's our strategy to further revitalize user growth?
A: (Ning Wang, CEO) We prioritize balanced development of both scale and efficiency to deliver high-quality growth. Post-COVID, user demand is shifting towards outdoor and offline activities. Our app upgrade in March focuses on enhancing user sports experience and outdoor exposure. We aim to expand user base by exploring outdoor scenarios, more sports categories, and diversifying user groups beyond our app.
Q: With extended categories of product offerings, we have seen a recovery in fitness products businesses. Could management share some color on the outlook for these businesses in the second half and what are Keep's core competitiveness amid the fierce competition in consumption goods?
A: (Ning Wang, CEO) The Olympic Games and various sports events have boosted sports consumption in China. We achieved solid revenue growth in self-branded fitness products. We will adapt flexibly to market changes, focusing on expanding from indoor to outdoor categories, improving go-to-market strategy, and optimizing sales mix. Our core capability is to expand market share in indoor fitness equipment while progressing in outdoor equipment and apparel categories.
Q: The company's gross margin and adjusted net profit both improved during the first half of the year. What is the company's consideration for the long-term cost strategy?
A: (Weibo Huang, CFO) We have optimized OpEx ratios by 6 percentage points year over year. We focus on improving operational capabilities and business foundations, strengthening budget measurements, and enhancing efficiency in sales and R&D. We increased marketing investment strategically to boost brand awareness and go-to-market strategy. We will continue to drive revenue growth and improve overall operating efficiencies.
Q: How is Keep leveraging the growing trend of outdoor activities to enhance its product offerings and user engagement?
A: (Ning Wang, CEO) We are investing in expanding categories such as running, walking, and cycling. Our events have expanded to include more types of activities and new gameplay options to increase participation. We have partnered with renowned organizers of offline events to target diverse user groups. These efforts have broadened our advertising opportunities and boosted advertising sales.
Q: Can you provide more details on the performance and future plans for Keep's self-branded fitness products?
A: (Ning Wang, CEO) Our self-branded fitness products rebounded in the first half of 2024, with gross profit margin increasing to 31.5%. We have strengthened operational performance and improved supply chain management. We released our first smartwatch, the Keep Watch Pilot 1, which features expanded sporting activities and scenarios. We aim to continue expanding our product offerings and improving profitability.
Q: What are the key areas of investment for Keep moving forward?
A: (Ning Wang, CEO) We will enhance our online offerings, explore outdoor categories, enrich membership privileges, and expand our AI-driven overseas portfolio. We will also promote the growth of our self-branded business products and seek collaboration opportunities to increase business synergies and commercial value across our ecosystem.
Q: How is Keep planning to leverage AI and data-centric tools to enhance user experience?
A: (Ning Wang, CEO) We are gradually seeing a positive impact from wider usage of data-centric tools within our app. These enhancements have led to an increase in membership penetration rate. We are focusing on developing our in-house R&D capabilities for wearable products and integrating AI-driven functionalities to boost athletic performance and user engagement.
Q: What measures is Keep taking to improve operational efficiency and reduce costs?
A: (Weibo Huang, CFO) We have optimized warehousing, packing, and delivery expenses, and reduced promotional and advertising expenses. We have also decreased expected credit losses in accounts receivables and streamlined technical service charges. We will continue to refine our business goals, expand online offerings, and optimize new initiatives to drive sustainable growth.
Q: How is Keep planning to enhance its brand value and user engagement?
A: (Ning Wang, CEO) We have launched various marketing campaigns, including collaborations with food service providers and naming new generation athletes as brand ambassadors. We aim to attract more users and increase brand awareness through creative marketing campaigns and public fitness activities. We will continue to enhance user engagement and build deeper trust and recognition.
Q: What is Keep's strategy for expanding its offline presence and capturing new market opportunities?
A: (Ning Wang, CEO) We are leveraging our online offerings and e-commerce fitness product sales to gain insights into online users and the fitness community. We are actively adapting to the growing demand for online and outdoor activities by optimizing the structure of our sport events business. We are prioritizing user engagement and expanding our reach through partnerships with professional organizers of offline events.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
