Mar 1
Company Analysis — Keep
Keep is a Chinese mobile fitness app that allows users to follow instructions in video-format courses. It also sells fitness equipment. Recently Keep filed for IPO in HongKong, and let’s take a deep dive.
Core Metrics
- MAU
MAU has being steadily growing since the past 3 years, but the growth is also slowing down. For 2021, average MAU is around 35 million users. Also, seasonality matters for Keep because it’s a fitness app. Peak season is summer, and during winter MAU usually is 70% of that of summer.
- MSU (Monthly Subscription Users)
MSU growth rate is much higher than MAU, which is a sign of healthy monetization. In 2019, Monthly Subscription Users were 3.7% of MAU. It increased to 9.4% in 2021. More % of MAU becoming sticky subscribed users indicates a good portion of users finding value in the app.
- Monthly DTC Users
This group of users are users who purchased Keep’s fitness equipment through Keep’s Direct To Consumer channel (Keep app, JD, Tmall). The growth rate is modest, because in 2019 DTC represents 0.88% of MAU, while in 2021 DTC represents 1.04% of MAU. Cross-selling didn’t play too well here.
Revenue Breakdown
Fitness Equipment sales continuously contributed to more than 50% of Keep’s revenue. Subscription fee and in-app purchases was 22.8% in 2019, but it went up to 32.8% in 2021 (though we should discount it a bit for 4th quarter). Advertisement revenue has been relatively steady. It looks like subscription and in-app purchases has been and will continue to be the most promising source of growth for Keep.
Gross Profit Breakdown
Gross profit across 3 segments increased in 2020, but for the first 9 months of 2021 the % looks very disappointing. (Might be due to seasonality? Should revisit after full fiscal year report is out.) If gross profitability stays around 2021 level, we should figure out why it’s the case. It is most likely that Keep in 2021 has been trying to improve its top line at the expense of its bottom line. However, the revenue growth in 2021 was still slowing down. In my view, Keep faces trouble scaling its 2 core businesses. Keep’s fitness equipment gross profit is now below 30%. Keep’s subscription and in-app business might be acquiring more users at the expense of lower subscription fees or other forms of discounts. This raises a question: if users left to be converted are more price-sensitive, will Keep continuously have trouble scaling its business? A possible way to solve it is to generate more revenue from core users, and we can keep an eye on Keep’s executions.
