After the market on March 26, Crazy Sports (0082.HK), a leading digital sports entertainment operator in China and a leading company in the internet sports industry, announced its 2023 annual results and held a roadshow on the Gelonghui online platform on March 27. CEO Mr. Peng Xitao and Mr. Chen Lijun, Financial Director and Company Secretary, attended the roadshow to fully exchange and share the Group's development situation and future development strategies. The following is a summary of this roadshow exchange compiled by the author for your reference.
I. Overview of Group Development
Crazy Sports Group is a leading digital sports entertainment operator in China. The company uses the new retail business of Crazy Red Single+Sports Lottery as its main business, and uses event+quiz and IP+ games as the two wings to build a multi-dimensional, real-time participation and vibrant digital sports entertainment community around sports enthusiasts.
2024 is another big year of sports, and Crazy Sports will set sail again. The company will be highly integrated with current development opportunities based on its own sufficient product advantages.
2024 is a critical year for the Chinese industry to reach the $5 trillion target. In the 2024 Central Economic Work Conference, sporting events were also included as a new consumption growth point. The emergence of a series of favorable policies will also provide strong support for the vigorous development of the sports industry. On the market side, driven by the European Cup, the Paris Olympics and the America's Cup, it will attract the attention of sports users and have great market opportunities. In the field of science and technology, the rapid development of artificial intelligence is profoundly changing the world. The integration of digital and sports has formed an important factor in the new quality of productivity. This fusion not only unleashes powerful energy, but also reveals a broad space for imagination. This development trend is highly compatible with the strategy of Crazy Sports Digital+ Sports.
2024 is a year full of hope, and Crazy Sports will continue to uphold its leading role in the industry, further consolidate its leading position in the digital sports field, and contribute to the construction of China's sports power.
II. Business progress
In 2023, in the face of a complex external environment, the company continuously optimized its business model and actively adjusted its development strategy.
First, Crazy Red List is a professional sports event analysis tool. It mainly provides professional game analysis, expert interpretation, real-time data and score prediction for Chinese lottery users. The content covers almost all soccer and basketball matches. In addition to this, Crazy Red List also provides users with services such as tournament information, scores, live streaming, live video, and interactive communities. The platform currently hosts more than 300 sports experts and 30,000 influencer experts and grassroots experts. Furthermore, at present, the platform also covers more than 40 sports platforms, including CCTV, Migu, Hupu, Master Qiudi, Tencent Sports, etc., covering nearly 70% of domestic sports users.
In terms of new retail of sports lottery tickets, the company has now signed contracts with sports lottery centers in more than 20 provinces and cities, covering 42 convenience store channels including Lawson, China Resources Wanjia, and Jingdong convenience stores, as well as many small and micro stores. At the same time, Crazy Sports is also actively exploring the sports lottery multi-channel and multi-format sales model. Last year, 12 sports brand image stores were opened in large commercial complexes. Since online platform services (lottery, check the schedule) are more convenient, cooperation in offline lottery ticket sales will also provide continuous growth impetus for online platforms.
In terms of sports games, in 2023, the company obtained official licenses from FIFPro and La Liga, and began global distribution of sports games in the second half of 2023, officially entering the overseas game market. Crazy Sports will use this as an opportunity to enhance the company's brand and value awareness, increase the user base, and promote the integrated development of online and offline businesses.
In terms of fantasy events, in 2023, the company cooperated to host a series of events including the IPBU International Professional Boxing Series and the National Youth Karate Championship. Among them, Crazy Sports, as one of the organizers of the National Youth Karate Championships, provides professional services throughout the event to ensure the safe and smooth running of the competition. Furthermore, in order to respond to the relevant policies of the State Administration of Sports, promote the high-quality development of rural sports, and give better play to the important role of sports in promoting rural revitalization. As a partner unit of Hainan Village VA, the Crazy Sports and Dream Tournament platform broadcast the full video broadcast of the event, which was watched by more than 400,000 people.
III. 2024 European Cup layout plan
Currently, Crazy Sports revolves around the core concept of “digital+sports”, and uses the European Cup as an opportunity to enhance the company's profits through multiple strategies.
Source: Roadshow Documents
First, seize the opportunity of the Super Tournament Year and make every effort to win the European Cup, achieve a double harvest of sales and profits, and inject strong impetus into the company's continuous development. Second, in the field of live streaming and short video, the company has built its MCN through intensive cultivation. By making rational use of its MCN, the company can continuously increase its private domain traffic and obtain a larger user base. Third, make full use of AI artificial intelligence technology to optimize the company's products and services to provide 400 million lottery players with better auxiliary tools. Fourth, in terms of new lottery retail, the company not only does a good job in offline sales, but also actively explores innovation in drainage models, builds new physical stores for continuous diversified business development, and maintains close cooperation with sports lottery centers. Fifth, rely on the company's IP advantage to distribute quality games through competitions such as the European Cup. Sixth, embrace globalization and achieve the company's global layout and development by opening up overseas game markets.
IV. Overview of Group Performance
In 2023, the company's total revenue reached HK$490 million, with gross profit of approximately HK$179 million. According to the latest annual report, as of December 31, 2023, the company's platform had a total of 87 million registered users, an increase of 22.8% over the end of 2022.
In 2023, the company maintained its growth momentum in the core business of digital sports entertainment. Among them, the revenue of sports knowledge payment platforms reached HK$227.6 million, an increase of 12.2% over the previous year, while limiting losses caused by uncertain economic and consumer environments. After three years of changes in the epidemic, the content payment industry experienced disruptive changes, and the popularity of the lottery market reached a new high in 2023, driving the company's sports knowledge payment business to a steady growth.
The company's overall financial position remains stable. As of the end of 2023, the company's total assets were HK$1,077 million, with an extremely low capital-to-debt ratio of 2.6%; while the total assets of the Group's core digital sports and entertainment business were HK$792 million. In addition to the natural growth of its core business, the Group also has a strategic investment portfolio of HK$285 million, which brings realized income and dividend income to the Group.
Q&A
Q1：The board is optimistic about the company's long-term growth potential, but given the current loss situation, does the company have a clear long-term growth strategy plan? Furthermore, how does the company view the future development trend of China's sports industry, and the company's position and competitive advantage in this trend?
A1：While focusing on lottery-related businesses centered on lottery players, Crazy Sports will actively develop value-added businesses such as games, short videos, and e-commerce. The company uses the new retail of Crazy Red Single+Sports Lottery as the main line, and uses events+contests and IP+ games as the two wings to expand its business. The company has now formulated a series of long-term growth strategies, including focusing on core business, improving technology and service quality, expanding the user base, expanding new business areas and markets, and continuing to invest in technological innovation and content production. These strategies can drive the company's long-term growth. From this point of view, Crazy Sports's goal is not just to turn losses into profit, but to become a leading digital entertainment group in China.
Regarding the development trend of China's sports industry, Crazy Sports believes that with the current improvement of residents' living standards and the country's emphasis on the sports industry, China's sports industry will maintain a rapid growth trend. The application of digital and intelligent technology will also further promote innovation and transformation in the sports industry. Currently, as consumption grows and more enterprises enter the sports industry, these are all playing a strong role in promoting the digital transformation of the sports industry. At the same time, the diversification of the sports consumer market will also provide a wider space for the development of the sports industry. Furthermore, this year's major conferences all proposed cultivating and expanding new types of consumption. One of the important ones is to actively cultivate sporting events as a new consumption growth point.
As far as Crazy Sports is concerned, the company has now established a clear competitive advantage in the field of digital sports and sports knowledge payment services, especially in terms of technological innovation, content production, and user experience optimization. Through continuous investment, the company maintains a leading position in the fierce market competition. While focusing on its core business, Crazy Sports will continue to consolidate and expand the company's market share by expanding overseas markets and hosting or participating in influential events to better adapt and lead the future development trend of the Chinese sports industry, and thus achieve sustainable growth.
Q2：What are the company's specific initiatives in the development and application exploration of AIGC technology? How can these technologies help the company grow its business? What is Crazy Red Single's current user growth strategy? How can companies increase user engagement and retention through AIGC technology?
A2：In terms of AIGC's technology, Crazy Sports mainly focuses on the following aspects. The first is content generation. Through AIGC technology, content such as event analysis, game predictions, and sports news is automatically generated, improving the update speed and coverage of the company's content, while effectively reducing labor costs. The second is personalized recommendations, which use AI technology to analyze user behavior data and recommend personalized content to users to enhance user experience and satisfaction. The third is to provide an interactive user experience based on natural language. Based on the big language model, the company developed an interactive tool called Hongdan Assistant to process users' consulting services in natural language, so that users can have a better sense of interaction. Finally, in terms of games, the company uses AIGC technology to develop and simulate sports games.
The company has been continuously pursuing the growth of users of Crazy Red List. The company has always sought user growth by using the company's online big data and offline big networks, Crazy Red List's big data, and artificial intelligence algorithms to provide high-quality content. Specifically, the first is the company's brand advantage. The company's China Football Lottery Network has accumulated more than 200 million users to provide a stable traffic pool for the company's development. Second, the company continues to expand new customer acquisition channels and increase user coverage through cooperation with app stores and Internet companies to attract a large number of new users. Third, it combines live streaming elements with offline community operations to provide users with a unique lottery shopping experience, thereby continuously exploring the youth group market. Fourth, continue to grow MCN and expand the company's brand influence by deepening the short video field.
Q3：What are the specific aspects of the company's strategic plan for the 2024 European Cup? How is this expected to impact the company's financial performance and market position? Can we talk about it in connection with the business? In terms of games, how exactly will the 2024 European Cup be used to promote new games and expand influence in the international market?
A3：In terms of service quality, first, the company will continue to improve the content quality of Crazy Red List, use the company's technical advantages to improve content, and attract and retain sports lottery users by providing more accurate game predictions. Second, based on the big model, the company launched an intelligent assistant focusing on the European Cup to create private services for users to explore and automate users' accurate information and display as much as possible. In terms of channels, the company has established private domain transformation by deepening the field of live streaming and short video, and acquiring more users through in-depth exploration of channel resources. In addition, the company launched a multi-modal product distribution strategy to distribute the company's multi-modal products through various forms, thereby gaining new users on different online traffic platforms. Finally, improve community operation capabilities to enhance the value of new and existing users.
In terms of games, the company has three game reserves. The first is a soccer game licensed by FIFPro. The preparation time was three years long, and it was also the company's main product in 2024. The second is a soccer game distributed internationally by the company. It will be officially distributed in countries and regions such as Europe, America, Japan, South Korea, and Southeast Asia before the European Cup. The third is the La Liga soccer game, which will be released during the European Cup.
The company hopes to bring user growth to the company mainly through crazy red orders and the marketing of new games. These strategies can not only boost Mad Sports's business revenue and profits during the European Cup. At the same time, we can use this opportunity to further expand the company's brand influence and lay the foundation for the company's continued growth in the future.
Generally speaking, companies tend to experience significant growth during the competition year. For example, during the 2022 World Cup, the company's revenue increased by 37.6%, and the total number of users increased by 47.9% year-on-year. Over 5 million monthly active users were active during World Cup Month and World Cup. Therefore, during the competition, the company's operating revenue will increase significantly. More importantly, after every competition, the company's business reached the next level.
Q4：We have seen that now the company is using integrated commercial stores to conduct online distribution. How can the company measure the effect of offline diversion to online sales? Is there specific data or case studies showing the success of offline diversion strategies?
A4： In 2023, after the epidemic was over, consumers returned to the commercial complex, the number of people in shopping malls increased markedly, and the overall sales data of the store was also in a good trend. Crazy Sports has focused one of the development of the new lottery retail business on sports lottery brand image stores within the commercial complex. Currently, the company's image stores are mainly open to the food and entertainment floor of shopping malls. Relying on the huge traffic flow of commercial complexes, we are exploring more young lottery buyers.
In the end, the effect of channeling offline traffic to online sales will have to be converted into a standard by paying users. The company gradually allocates more resources for private domain user maintenance, so that offline users first become the company's private domain users, then develop a service response mechanism to conduct hierarchical marketing for private users, establish user trust, and create the conversion of paying users.
Currently, the best way to divert streaming is mainly a giveaway campaign where you scan a code to join a group. Through these activities, companies can directly acquire users. In addition, the company also acquires customers through joint marketing activities. Currently, converted sales still account for a small share of red order revenue, but the company will apply this strategy to more stores this year to achieve better results.
Q5：The company mentioned actively adjusting the distribution strategy for the game business and announced the launch of an international distribution strategy. Can you specify what these adjustments include? When are these measures expected to have a positive impact on earnings?
A5：In the game sector, the company insists on the distribution of this sports game as the core, and achieves development and breakthroughs in the company's game business by providing users with excellent quality game works. In 2023, the company will reduce investment in joint distribution and other types of games, and focus on creating Crazy Sports's own boutique games. The company will use the European Cup to further open up overseas markets this year.
In the future, the company will continue to take advantage of integrating global distribution resources to gain experience in opening up overseas markets for subsequent soccer game products, so that the company can go global with more excellent games.
The growth brought about by the gaming business is expected to pay off after the European Cup. In the short term, it can bring revenue growth to the company, increase the company's user base, and expand the company's popularity. Later, through data analysis and user feedback, the company will continue to iteratively update the game to further enhance the user experience, thereby having a positive impact on the company's earnings in the medium to long term.
Q6：What is the company's share in the sports lottery market? What are your main competitors? So what is their share?
A6：There is currently no clear third-party data to reflect the company's market share.
In the field of new lottery retail business, the Chinese sports industry has also continued to expand the offline lottery sales business. The current expansion focus is similar to that of the company. However, among the companies currently cooperating with the Sports Lottery Center on a general basis, the one with the largest size and the largest sales network is Crazy Sports. Crazy Sports has cooperated with sports lottery centers in more than 20 provinces and cities, and has an absolute advantage in the number of new retail stores and commercial complexes.
In terms of the knowledge payment business, Crazy Sports is a pioneer in this field. In this field, there are companies that have both their own content and cooperative content, such as Qiudi and Live Streaming Bar. There are also companies that specialize in the knowledge payment revenue business, such as K Ball, Lottery Cat, Lightning Sports, etc.