Investment Rating - The report maintains an "Accumulate" rating for the company [1][2]. Core Views - The company has significantly reduced losses and is expected to grow by providing a one-stop solution for users through fitness content and sports products [1]. - For H1, the company reported revenue of 1.04 billion RMB, a 5.4% increase year-on-year, with adjusted net loss of 160 million RMB, improving from a loss of 220 million RMB in the same period last year [2]. - The forecast for adjusted net profit for 2024-2026 is -267 million, -56 million, and 81 million RMB respectively, indicating a gradual recovery [2]. Summary by Sections Revenue Performance - H1 revenue breakdown: - Own brand sports products: 501 million RMB (+7.5%) due to increased wholesale channels and sales of fitness equipment and apparel - Online membership and paid content: 437 million RMB (-2.6%) due to a decline in virtual sports event revenue - Advertising and others: 989 million RMB (+42.4%) due to the integration of online and offline advertising business [2]. User Engagement - Average monthly active users reached 29.66 million (+0.4%), with subscription members at 3.282 million (+8.8%), solidifying the company's leading position in the industry - Subscription penetration rate improved to 11.1% (+0.9 percentage points) [2]. Profitability and Cost Structure - H1 gross margin was 46% (+3 percentage points), with own brand sports products at 31.5% (+3.6 percentage points) - Adjusted loss rate was -15.5% (+16.4 percentage points) - Cost structure improved with a reduction in expense ratio to 64.8% (-5.95 percentage points) [2]. Product Development and Future Outlook - The company continues to iterate its own brand matrix and plans to explore overseas AI markets - New product launches include the Keep Watch Pilot 1 smart sports watch and significant upgrades to the Keep App [2]. - The number of exclusive courses for members increased to 5,595 (+136%), with workout sessions increasing by over 70% [2].

Financial Performance - Total revenue for the six months ended June 30, 2024, was RMB 1,037.3 million, representing a year-on-year increase of 5.4%[6] - Gross profit for the same period was RMB 477.3 million, with a gross margin of 46.0%, up from 43.0% in the previous year, reflecting a 3.0 percentage point improvement[6] - Adjusted net loss for the six months was RMB 160.7 million, a significant reduction of 28.0% from RMB 223.1 million in the same period last year[6] - Total revenue for the six months ended June 30, 2024, was RMB 1,037,343 thousand, an increase from RMB 984,656 thousand in the same period of 2023, resulting in a gross profit of RMB 477,322 thousand[40] - The company reported a net loss of RMB 163,353 thousand for the six months ended June 30, 2024, compared to a net profit of RMB 1,195,124 thousand for the same period in 2023[41] - Basic loss per share for the six months ended June 30, 2024, was RMB (0.35), a significant decrease from RMB 8.64 in the prior year[58][59] User Engagement and Growth - Average monthly active users increased to 29.7 million, compared to 29.5 million in the previous year, while average monthly subscribers rose to 3.3 million from 3.0 million[8] - Monthly average revenue per active user grew by 5.0% year-on-year to RMB 5.8[8] - Membership penetration rate improved to 11.1% from 10.2% year-on-year, indicating a successful expansion of the user base[6] - The company launched the upgraded Keep App 8.0 in March 2024, enhancing user experience and engagement[8] - As of June 30, 2024, the total number of member-exclusive courses increased to 5,595 from 2,366 a year earlier, representing a growth of over 135%[11] - The number of workout sessions for member courses grew by over 70% in the first half of 2024 compared to the same period in 2023[11] Revenue Breakdown - Revenue from proprietary sports products reached RMB 501.5 million, up 7.5% from RMB 466.4 million in the prior year, primarily due to increased sales through wholesale channels and fitness equipment[21] - Advertising and other revenue surged by 42.4% to RMB 98.9 million, compared to RMB 69.4 million in the previous year, mainly due to online-to-offline integrated advertising services[21] - Online membership and paid content revenue was RMB 436,996,000, slightly decreasing from RMB 448,864,000 in the previous year[53] Cost Management - Operating costs slightly decreased by 0.2% to RMB 560.0 million from RMB 561.0 million in the previous year, attributed to reduced costs in online membership and paid content[22] - Administrative expenses decreased by 19.3% from RMB 112.0 million to RMB 90.5 million, attributed to optimized accounts receivable management[29] - Research and development expenses decreased by 19.6% from RMB 243.4 million to RMB 195.7 million, mainly due to reduced personnel costs and cloud service fees[30] - Online membership and paid content costs decreased by 21.8% from RMB 179.4 million for the six months ended June 30, 2023, to RMB 140.4 million for the six months ending June 30, 2024[24] Strategic Initiatives - The company initiated and expanded a share repurchase program to enhance shareholder value, reflecting confidence in future business prospects[7] - The strategic focus on core business and operational efficiency has led to a gradual narrowing of losses, supporting growth in both scale and monetization capabilities[7] - The company is exploring new initiatives, including the optimization of virtual sports events and plans to launch AI sports products overseas[7] - Keep is actively exploring new market opportunities by expanding its offline activities and enhancing its event structure to boost user participation[13] Product Development - Keep App 8.0 version covers over 60 sports categories and integrates with more than 50 smart devices, enhancing user experience and convenience[9] - Keep's new immersive course experiences, such as the collaboration with "Arknights," utilize 3D motion capture to engage users more effectively[11] - The company aims to release its first smartwatch in August 2024, expanding its wearable product offerings and enhancing user experience[16] Financial Position - As of June 30, 2024, the company's cash and cash equivalents amounted to RMB 1.4 billion, a decrease from RMB 1.6 billion as of December 31, 2023, primarily due to cash used in operating and financing activities[36] - The company's asset-liability ratio as of June 30, 2024, was 0.27, compared to 0.24 as of December 31, 2023, indicating a slight increase in leverage[39] - The total equity as of June 30, 2024, was RMB 1,693,287 thousand, down from RMB 1,873,149 thousand as of December 31, 2023, reflecting a decrease in shareholder value[43] Shareholder Communication - The audit committee has reviewed the unaudited condensed consolidated interim financial information for the six months ended June 30, 2024[69] - The interim report will be sent to shareholders and published on the company's website in due course[70] - The company expresses gratitude to shareholders, management team, employees, business partners, and customers for their support and contributions[70]

Investment Rating and Target Price - The report initiates coverage on Keep with a "Buy" rating and a target price of HKD 9.35, based on a 2024 target PS of 2.0x, which is discounted compared to the industry average of 3.0x [2][6] Core Investment Thesis - Keep is positioned as a leading fitness content platform in China, leveraging the synergy between online content and fitness products to drive healthy growth in membership and product revenues [2] - The company is expected to achieve revenue of RMB 2.26 billion, RMB 2.37 billion, and RMB 2.46 billion in 2024, 2025, and 2026, respectively, with a CAGR of 4.8% [2] - Non-IFRS net profit is projected to improve from a loss of RMB 240 million in 2024 to a profit of RMB 160 million in 2026, driven by improved gross margins in consumer goods and recovery in high-margin membership business [2] Industry Overview - China's fitness market is experiencing steady growth, supported by government policies, increasing fitness participation, and rising willingness to pay for fitness services [3][11] - The online fitness market penetration reached 50.4% in 2023, surpassing offline for the first time, with further growth expected due to technological advancements and digitalization trends [3][11] - Keep holds a leading position in the online fitness platform market, with a 30.8% market share in 2022, significantly ahead of competitors [11] Business Model and Growth Drivers - Keep operates a "content + hardware" business model, integrating online fitness content with smart fitness devices and complementary products to create a closed-loop ecosystem [2][5] - The company has expanded its outdoor fitness services, including running, walking, and cycling courses, and launched new products such as running gear and small ball sports equipment to meet diverse consumer needs [4] - Keep's competitive pricing strategy, with products priced at 20%-30% of comparable Lululemon and Nike items, positions it well to capture cost-conscious consumers [12] Financial Performance and Outlook - Keep's revenue grew from RMB 660 million in 2019 to RMB 2.21 billion in 2022, with a CAGR of 49.4%, although 2023 revenue slightly declined by 3.3% to RMB 2.14 billion [16][20] - Membership and online paid content revenue increased by 11.4% in 2023, becoming the largest revenue contributor at 46.6% of total revenue [20] - The company's gross margin improved to 45.0% in 2023, driven by higher-margin membership and online content business, with further upside potential from operational efficiencies [21][23] Competitive Advantages - Keep has built a deep moat through its cross-dimensional ecosystem, combining online fitness content with smart hardware and complementary products, creating a differentiated positioning compared to platforms like Bilibili and Douyin [5][12] - The company's ability to integrate offline exercise data with online platforms provides users with personalized feedback and training plans, enhancing user stickiness [5][43] - Keep's focus on professional and high-quality fitness content, along with its community-driven approach, strengthens its competitive edge in the online fitness market [37][38] Future Growth Opportunities - Keep is expected to benefit from the continued expansion of China's fitness market, driven by increasing fitness participation and willingness to pay [5][11] - The company's ongoing investment in AI and IoT technologies, such as the Keep Station smart fitness device, positions it to capitalize on the growing demand for smart fitness solutions [46][47] - Keep's ability to leverage its ecosystem to drive user growth and retention will be critical for sustainable commercialization and long-term value creation [48][49]

Financial Performance - Total revenue for 2023 was RMB 2,137,834, a decrease of 3.3% from RMB 2,211,551 in 2022[7] - Gross profit for 2023 reached RMB 961,644, with a gross margin of 45.0%, up from 40.7% in 2022[7] - The company reported a net profit of RMB 1,105,908 for 2023, a significant recovery from a loss of RMB 104,551 in 2022[7] - Total revenue for 2023 was RMB 2,137.8 million, a decrease of 3.3% year-over-year, primarily due to lower consumer confidence in e-commerce affecting proprietary brand sports product sales[12] - Revenue from proprietary sports products was RMB 946.1 million, down 16.8% from RMB 1,137.0 million in the previous year, attributed to lower consumer sentiment and increased offline leisure activities post-pandemic[26] - Revenue from online membership and paid content increased by 11.4% to RMB 995.8 million, driven by growth in virtual sports events[27] - Gross profit increased by 6.8% from RMB 900.4 million for the year ended December 31, 2022, to RMB 961.6 million for the year ended December 31, 2023[32] - Gross margin improved by 4.3 percentage points from 40.7% for the year ended December 31, 2022, to 45.0% for the year ended December 31, 2023, primarily due to increased revenue and gross profit contributions from online memberships and paid content[32] User Engagement and Membership - Average monthly active users decreased to 29,756 thousand in 2023 from 36,388 thousand in 2022[10] - Monthly average revenue per user increased to RMB 6.0 in 2023, compared to RMB 5.1 in 2022[10] - The average number of monthly subscription members was 3,193 thousand, down from 3,621 thousand in 2022[10] - The membership penetration rate improved to 10.7% in 2023 from 10.0% in 2022[10] - Monthly average revenue per active user increased by 17.6% year-over-year, driven by the continued growth of the virtual sports events business[14] - The number of recorded courses offered to paid members increased to 4,225 by December 31, 2023, up from 1,873 courses in 2022[15] - Average revenue per paid user in virtual sports events increased by over 30% compared to 2022, reflecting successful collaborations with well-known brands[19] Operational Efficiency and Cost Management - The company is focused on optimizing products and services while enhancing operational efficiency for sustainable growth[11] - The company aims to maintain a prudent cost control strategy to ensure user satisfaction across products and services[11] - Operating costs decreased by 10.3% to RMB 1,176.2 million from RMB 1,311.2 million in the previous year, significantly outpacing the slight decline in revenue[29] - The company successfully reduced inventory turnover days and lowered sales and marketing expense ratios, improving operational efficiency[24] - Operating expenses decreased by 22.8% from RMB 201.6 million for the year ended December 31, 2022, to RMB 155.7 million for the year ended December 31, 2023, mainly due to reduced revenue from proprietary fitness products and further optimization of logistics and warehousing costs[35] - Sales and marketing expenses decreased by 11.9% from RMB 646.2 million for the year ended December 31, 2022, to RMB 569.3 million for the year ended December 31, 2023, primarily due to reduced promotional and advertising expenses[36] Strategic Initiatives and Future Plans - The company aims to invest in immersive and exclusive online fitness content to enhance user acquisition and retention, strengthening its market position[25] - The company plans to continue enhancing and executing its core business strategy in 2024, focusing on empowering users pursuing a healthy lifestyle[12] - The company plans to further expand outdoor functionalities and products, enhancing service for outdoor users[25] - The app introduced new features including personalized route recommendations and enhanced social interaction capabilities, aimed at increasing user engagement[20] Shareholder and Governance Information - The company reported that its top five customers accounted for less than 30% of total sales, indicating a diversified customer base[90] - The issued share capital of the company as of December 31, 2023, was 525,671,987 shares[92] - The company maintained a minimum public float of 25% as required by listing rules as of December 31, 2023[98] - The company has a diverse shareholder base, including various investment funds and trusts, which may influence strategic decisions and market positioning[114] - The voting rights associated with 21,652,719 shares are controlled by Mr. Wang through a voting proxy agreement[112] - The company continues to monitor shareholder interests and compliance with securities regulations to ensure transparency and governance[113] Employee and Management Information - As of December 31, 2023, the total number of full-time employees was 955, down from 1,243 as of December 31, 2022[50] - Employee benefits for the year ended December 31, 2023, amounted to RMB 639.8 million, compared to RMB 766.8 million for the year ended December 31, 2022, reflecting a decrease of approximately 16.5%[50] - The company has implemented diverse learning and development programs for employees, including management training initiatives[87] - The board of directors includes key executives such as the CEO and co-founders, ensuring strong leadership continuity[100] - The compensation committee has been established to review the compensation policies and structures for all directors and senior management, ensuring a formal and transparent process[169] Compliance and Legal Matters - The company has complied with all relevant laws and regulations during the year ending December 31, 2023, with no significant legal proceedings affecting its operations[85] - The independent non-executive directors confirmed that the related party transactions were conducted according to the agreement terms and were fair and reasonable[155] - The company has complied with the applicable provisions of the listing rules regarding related party transactions for the year ended December 31, 2023[156] Risk Management and Financial Health - The company is continuously monitoring current and expected liquidity needs to ensure sufficient cash reserves for both short-term and long-term requirements[51] - Cash and cash equivalents decreased from RMB 1.7 billion as of December 31, 2022, to RMB 1.6 billion as of December 31, 2023, mainly due to cash used in operating activities[45] - As of December 31, 2023, the outstanding borrowings were RMB 10.0 million, with a debt-to-asset ratio of 0.24, significantly improved from 3.85 as of December 31, 2022[51] - The company does not face significant interest rate risk due to the absence of major floating-rate assets or liabilities, with financial assets and liabilities primarily consisting of fixed-rate instruments[54]

Investment Rating - The report maintains a "Buy" rating for KEEP (3650) [3][10]. Core Views - The company has significantly reduced losses through optimizing its business structure and cost control measures, and the future outlook remains positive due to its comprehensive fitness content and sports products [2]. - In 2023, the company achieved revenue of 2.138 billion RMB, a decrease of 3.3%, with an adjusted loss of 295 million RMB, which is an improvement from the previous year's loss of 667 million RMB [2]. - The report anticipates a slight increase in expenses for 2024-2025, adjusting the forecasted net profit to -267 million RMB and -56 million RMB respectively, with a projected adjusted net profit of 81 million RMB for 2026 [2]. Revenue Breakdown - Revenue by segment in 2023: - Proprietary sports products: 946 million RMB, down 16.8% - Online membership and paid content: 996 million RMB, up 11.4% - Advertising and others: 196 million RMB, up 8.6% [2]. - Average monthly active users decreased by 18.2% to 29.756 million, while subscription members decreased by 11.8% to 3.193 million, attributed to external environmental impacts and cost control strategies [2]. Profitability and Cost Control - The gross margin improved to 45%, an increase of 4.27 percentage points, with specific segments showing varied performance: - Proprietary sports products: 27.7%, down 0.43 percentage points - Online membership and paid content: 62.8%, up 8.58 percentage points - Advertising and others: 37.6%, down 15.1 percentage points [2]. - The adjusted loss margin was -13.8%, an improvement of 16.4 percentage points, achieved through reduced marketing activities and optimized logistics and personnel structures [2]. Product and Content Development - By the end of 2023, the platform offered 4,225 recorded courses to paid members, an increase of 2,352 courses, with a significant rise in workout frequency among members [2]. - New virtual events and challenges were launched to enhance brand recognition among niche audiences, resulting in a record high average revenue per paid user, increasing by over 30% [2]. - The company focused on optimizing the design and cost structure of smart devices, launching several new products that received positive feedback [2].

Investment Rating - The investment rating for the company is "Buy" (maintained) [4] Core Views - The company experienced a revenue decline of 3.3% in 2023, with significant improvements in adjusted net profit loss. The average monthly active users (MAU) decreased by 18.2% to 29.76 million, but the paid penetration rate increased from 10.0% to 10.7%, and the average revenue per user grew by 17.6% [1][12] - The company is expanding into outdoor equipment and course content, which is expected to drive revenue and gross margin growth in the consumer goods segment [12] - Due to a continued weak recovery in the industry and planned increases in expenditure, the profit forecast has been adjusted downwards for 2024-2026 [12] Summary by Relevant Sections Financial Performance - In 2023, the company's revenue was 2.138 billion yuan, down from 2.212 billion yuan in 2022, reflecting a 3.3% decrease. The adjusted net profit loss was 295 million yuan, an improvement from a loss of 667 million yuan in 2022 [2][13] - The gross margin for 2023 was 45.0%, an increase of 4.3 percentage points year-on-year. The company managed to reduce its expense ratio by 9 percentage points [1][12] Revenue and Profit Forecast - The revenue forecasts for 2024, 2025, and 2026 are set at 22.7 billion yuan, 24.0 billion yuan, and 25.2 billion yuan, respectively, with expected growth rates of 6.0%, 5.9%, and 5.1% [7][12] - The adjusted net profit forecasts for the same years are -2.4 billion yuan, -0.5 billion yuan, and +0.3 billion yuan, indicating a gradual improvement towards profitability [7][12] Valuation Adjustments - The target price has been adjusted to 4.6-4.9 HKD, corresponding to a price-to-sales (PS) ratio of 0.95-1.0x for 2024, reflecting a downward revision due to lower expected revenue growth and net profit margins [9][12]

Core Insights - KEEP reported a revenue of RMB 2.138 billion for the year ending December 31, 2023, a decrease of 3.3% year-on-year, while gross profit increased by 6.8% to RMB 0.962 billion [1] - The adjusted net loss for the year was RMB 0.295 billion, a significant reduction of 55.7% compared to the previous year, and the profit attributable to owners was RMB 1.106 billion, compared to a loss of RMB 0.1055 billion in the same period last year [1] - The company aims to promote a healthy and active lifestyle through its AI-driven personalized training plans and professional online fitness content, including recorded and interactive live classes [1] Financial Performance - Total revenue for 2023 was RMB 2.138 billion, down 3.3% year-on-year, primarily due to lower consumer confidence affecting self-branded sports product sales and a cautious approach to new product expansion and market strategies [1] - The gross margin improved significantly from 40.7% in the previous year to 45.0% in 2023 [1] - The adjusted net loss narrowed from RMB 0.667 billion in 2022 to RMB 0.295 billion in 2023, with an adjusted net loss rate of 6.3% in the second half of 2023, down from 29.1% in the same period last year [1] User Engagement - The average monthly active users and average monthly subscription members for 2023 were 29.8 million and 3.2 million, respectively, down from 36.4 million and 3.6 million in 2022 [2] - The decline in user numbers was attributed to a surge in COVID-19 cases at the beginning of 2023 and increased offline leisure and travel activities post-pandemic [2] - In the second half of 2023, the decline in average monthly active users and subscription members slowed, indicating a recovery as the company introduced new outdoor programs [2] Revenue Growth - The average revenue per monthly active user increased by 17.6% year-on-year, driven by the continued growth of the virtual sports events business [2] - Membership penetration improved from 10.0% in the previous year to 10.7% in 2023, reflecting the company's efforts to enhance content and services [2]

Financial Performance - Total revenue for 2023 was RMB 2,137.8 million, a decrease of 3.3% compared to RMB 2,211.6 million in 2022[2] - Gross profit increased to RMB 961.6 million, up 6.8% from RMB 900.4 million in the previous year, resulting in a gross margin of 45.0%, an increase of 4.3 percentage points[2] - Adjusted net loss for 2023 was RMB 295.4 million, significantly reduced from RMB 666.9 million in 2022, with an adjusted net loss margin improving to (13.8%) from (30.2%) year-on-year[2] - The company reported a profit of RMB 1.1 billion for the year ended December 31, 2023, compared to a loss of RMB 104.6 million for the year ended December 31, 2022, mainly due to the fair value change of convertible redeemable preferred shares[28] - The net profit attributable to the company's owners for the year was RMB 1,105,908 thousand, a significant recovery from a loss of RMB 104,551 thousand in the previous year[35] - The company's profit for the year ended December 31, 2023, was RMB 1,105,908 thousand, compared to a loss of RMB (104,551) thousand for the year ended December 31, 2022, resulting in a basic earnings per share of RMB 3.78, up from a loss of RMB (0.76) per share[58] User Engagement and Membership - Average monthly active users (MAUs) decreased to 29.8 million in 2023 from 36.4 million in 2022, while average monthly subscribers fell to 3.2 million from 3.6 million[5] - Monthly average revenue per MAU increased by 17.6% year-on-year to RMB 6.0 in 2023, up from RMB 5.1 in 2022[7] - Membership penetration rate improved to 10.7% in 2023, compared to 10.0% in the previous year[5] - Member workout sessions grew by over 200% in 2023 compared to 2022, reflecting increased user engagement and satisfaction[8] - The introduction of outdoor courses is expected to enhance member retention and attract new users, contributing to improved member penetration rates and average monthly retention rates in 2023[9] Revenue Streams - Revenue from proprietary sports products was RMB 946.1 million, down 16.8% from RMB 1,137.0 million in the previous year, attributed to lower consumer sentiment and increased offline leisure activities post-pandemic[15] - Revenue from online membership and paid content increased by 11.4% to RMB 995.8 million, driven by growth in virtual sports events[16] - Advertising and other revenue increased by 8.6% to RMB 196.0 million, supported by enhanced online-to-offline integrated advertising services[16] - Revenue recognized at a point in time was RMB 976,837 thousand, while revenue recognized over time was RMB 1,160,997 thousand for the year ended December 31, 2023[50] Cost Management - Operating costs decreased by 10.3% to RMB 1,176.2 million, significantly outpacing the slight decline in revenue, indicating effective cost control measures[17] - Sales and marketing expenses decreased by 11.9% to RMB 569.3 million for the year ended December 31, 2023, down from RMB 646.2 million for the year ended December 31, 2022, primarily due to reduced promotional and advertising expenses[23] - Administrative expenses decreased by 14.8% to RMB 209.3 million for the year ended December 31, 2023, down from RMB 245.6 million for the year ended December 31, 2022, mainly due to a reduction in administrative personnel costs[24] - Research and development expenses decreased by 16.2% to RMB 449.7 million for the year ended December 31, 2023, down from RMB 536.9 million for the year ended December 31, 2022, primarily due to reductions in R&D personnel costs and cloud computing service fees[25] Product Development and Strategy - The company focused on optimizing products and services, enhancing operational efficiency, and implementing prudent cost control measures throughout 2023[6] - The strong performance of the virtual sports events business contributed to growth in online membership and paid content revenue, offsetting declines in fitness product revenue[6] - The company plans to continue refining and executing its core business strategy in 2024, aiming to empower users pursuing a healthy lifestyle[6] - The company launched several new products in 2023, including the C1 Mini+ smart bike and the A1 rowing machine, which received positive market feedback and improved gross margins through cost optimization[12] - Future focus includes investing in immersive online fitness content and expanding outdoor functionalities to enhance user engagement and retention[13] Financial Position and Assets - Cash and cash equivalents amounted to RMB 1.6 billion as of December 31, 2023, down from RMB 1.7 billion as of December 31, 2022, primarily due to cash used in operating activities[32] - The company had a total debt of RMB 575,592 thousand as of December 31, 2023, down from RMB 10,143,704 thousand in 2022, indicating a substantial reduction in liabilities[40] - The company maintained a debt-to-asset ratio of 0.24 as of December 31, 2023, a significant improvement from 3.85 in the previous year[34] - The company had 955 full-time employees as of December 31, 2023, a decrease from 1,243 employees in 2022, reflecting a reduction of approximately 23.2%[34] Governance and Compliance - The company has adopted the corporate governance code and has complied with all applicable provisions during the reporting period[66] - The independent auditor confirmed that the financial statements accurately reflect the company's financial position as of December 31, 2023[65] - The audit committee has reviewed the results of the investigations and considers the measures taken to be appropriate and sufficient[84] Future Plans and Investments - The company plans to allocate approximately HKD 67.2 million (35% of net proceeds) for R&D to enhance technical capabilities and drive product innovation by 2025[73] - The company will invest HKD 57.6 million (30% of net proceeds) in fitness content development and diversification by 2025[74] - The company plans to enhance its technical capabilities by investing HKD 19.2 million (10% of net proceeds) in AI, data analytics, and technical infrastructure[73] Marketing and Promotions - The company has engaged a law firm in Hong Kong to assist the audit committee in investigating marketing promotion transactions as of November 2023[78] - The company has terminated the marketing promotion agreement and refunded all payments made under it as of November 2023[80] - An independent investigation has been initiated to assess the commercial substance and impact of the marketing promotion agreements with Company A[81]

Financial Performance - Keep Inc. reported a revenue of $XX million for the first half of 2023, representing a YY% increase compared to the same period last year[6]. - Total revenue for the first half of 2023 was RMB 984.7 million, a decrease of 2.7% compared to RMB 1,011.7 million in the same period of 2022[14]. - Revenue for the six months ended June 30, 2023, was RMB 984,656 thousand, a decrease of 2.5% from RMB 1,011,707 thousand in the same period of 2022[95]. - Membership subscription and online paid content revenue increased by 10.0% to RMB 448.9 million in H1 2023, driven by growth in virtual sports events[23]. - The company reported a net profit margin of FF% for the first half of 2023, an improvement from GG% in the previous year[6]. - The company reported a profit of RMB 1.2 billion for the six months ended June 30, 2023, compared to RMB 261.6 million for the same period in 2022[35]. - The company reported a total comprehensive income of RMB 760,249 thousand for the period, compared to a loss of RMB 129,866 thousand in the same period last year[96]. - The company’s accumulated losses decreased to RMB 6,225,267 thousand from RMB 7,420,391 thousand as of December 31, 2022[99]. - The company reported a net loss of RMB 585 thousand from the sale of property and equipment for the six months ended June 30, 2023, compared to no loss in the same period of 2022[121]. User Engagement and Growth - The user base grew to ZZ million active users, marking a growth of AA% year-over-year[6]. - Average monthly active users (MAUs) decreased to 29.5 million from 37.7 million year-on-year, while average monthly subscribers fell to 3.0 million from 3.7 million[15]. - Membership penetration rate improved to 10.2% in the first half of 2023, compared to 9.7% in the same period of 2022[13]. - Membership penetration increased from 9.7% in H1 2022 to 10.2% in H1 2023, indicating improved user engagement[17]. - The number of on-demand courses offered to paid members increased from 1,391 to 2,464, reflecting a significant expansion in content offerings[16]. - The company launched new series of courses in collaboration with renowned fitness influencers, enhancing user engagement and satisfaction[16]. Cost Management and Profitability - The company is focused on optimizing operations and improving cost management to enhance profitability amid a recovering post-pandemic environment[14]. - Operating costs decreased to RMB 1,256,934 thousand as of June 30, 2023, from RMB 1,349,688 thousand in the same period of 2022, indicating a reduction of 6.9%[120]. - Employee benefits expenses decreased to RMB 335,236 thousand in the first half of 2023 from RMB 366,692 thousand in the same period of 2022, a decline of 8.6%[120]. - Sales and marketing expenses decreased by 15.4% from RMB 304.0 million to RMB 257.1 million, attributed to reduced promotional and advertising expenses[30]. - The company is implementing new marketing strategies aimed at increasing brand awareness and user acquisition[6]. Investment and Future Plans - Keep Inc. is investing in new product development, focusing on fitness technology and personalized training solutions[6]. - The company plans to expand its market presence in Southeast Asia, targeting a growth rate of DD% in that region[6]. - The company plans to invest RMB 19.2 million (10% of net proceeds) in research and development for smart fitness equipment, enhancing existing products and creating innovative offerings for diverse fitness needs[49]. - An investment of RMB 23.0 million (12% of net proceeds) is planned to expand the fitness content library and enhance user engagement through innovative methods such as virtual coaching[50]. - The company aims to cultivate more fitness experts and collaborate with professionals to introduce specialized content, with an investment of RMB 11.5 million (6% of net proceeds)[52]. - The acquisition of valuable exclusive fitness intellectual property and third-party content is planned, with an investment of RMB 5.8 million (3% of net proceeds)[53]. Financial Position and Assets - Cash and cash equivalents amounted to RMB 1.5 billion as of June 30, 2023, down from RMB 1.7 billion as of December 31, 2022[39]. - Total assets decreased to RMB 2,393,527 thousand from RMB 2,633,541 thousand as of December 31, 2022[98]. - The company’s total liabilities decreased to RMB 1,256,934 thousand as of June 30, 2023, from RMB 1,349,688 thousand as of June 30, 2022, indicating a decrease of 6.9%[120]. - The company’s bank borrowings increased to RMB 50,708 thousand in the current period, compared to RMB 17,008 thousand in the previous period, indicating a significant rise in financing activities[102]. - The company has not adopted any new accounting standards that would have a significant impact on its financial performance for the current or future reporting periods[105]. Shareholder Information - As of June 30, 2023, Mr. Wang holds a total of 109,031,837 shares, representing approximately 20.74% of the company's equity[61]. - GGV shareholders collectively own 75,814,900 shares, accounting for approximately 14.42% of the company's equity[61]. - The company has not been listed on the stock exchange as of June 30, 2023, affecting the applicability of certain securities regulations[60]. - The company has disclosed all major shareholders and their respective equity interests as required by the Securities and Futures Ordinance[68]. Stock Options and Incentive Plans - The total number of unissued rewards and unexercised options under the pre-IPO share incentive plan is 22,753,075 shares[70]. - The company does not plan to grant any new rewards under the pre-IPO share incentive plan after listing[70]. - The purpose of the pre-IPO share incentive plan is to attract and retain top talent by providing additional rewards and opportunities for participants[81]. - The plan aims to align the interests of participants with those of the company and its shareholders[81]. - The maximum number of shares that participants can enjoy under the pre-IPO share incentive plan is unlimited[74]. Risks and Contingencies - The company does not face significant foreign exchange risks as most transactions are settled in RMB, and there are no major financial assets or liabilities denominated in currencies other than the functional currency[45]. - There were no significant contingent liabilities or guarantees as of June 30, 2023[44]. - The company has no significant commitments as of June 30, 2023[172].

Financial Performance - Total revenue for the six months ended June 30, 2023, was RMB 984.7 million, a decrease of 2.7% compared to RMB 1,011.7 million in the same period of 2022[2] - Gross profit increased to RMB 423.7 million, with a gross margin of 43.0%, up from 40.9% in the previous year, representing an increase of 2.1 percentage points[2] - Net profit for the period was RMB 1,195.1 million, a significant increase of 356.8% compared to RMB 261.6 million in the same period of 2022[2] - Adjusted net loss decreased by 29.7% to RMB 223.1 million from RMB 317.4 million year-on-year, with an adjusted net loss margin of (22.7%), improving from (31.4%)[2] - Revenue from proprietary sports products was RMB 466.4 million, down 9.5% from RMB 515.4 million in the same period last year[13] - Revenue from membership subscriptions and online paid content increased by 10% to RMB 448.9 million compared to RMB 408.0 million in the previous year[14] - Advertising and other revenue for the six months ended June 30, 2023, was RMB 69.4 million, a decrease of 21.4% from RMB 88.3 million for the same period in 2022, mainly due to the negative impact of COVID-19 on advertising clients[15] - Basic earnings per share for the six months ended June 30, 2023, were RMB 8.64, compared to RMB 1.89 for the same period in 2022, representing a substantial increase[55] - The net profit attributable to the company's owners for the six months ended June 30, 2023, was RMB 1,195,124 thousand, compared to RMB 261,619 thousand in the previous year[55] User Engagement and Membership - Average monthly active users (MAUs) decreased to 29.5 million from 37.7 million in the same period of 2022[5] - Average monthly revenue per MAU increased by 24.1% to RMB 5.6 from RMB 4.5 year-on-year[5] - Average monthly subscription members decreased to 3.0 million from 3.7 million in the same period of 2022[5] - Membership penetration rate improved to 10.2% from 9.7% year-on-year[5] - The total number of recorded courses offered to paid members increased from 1,391 as of June 30, 2022, to 2,464 as of June 30, 2023, representing a growth of approximately 77%[7] - The number of workout sessions by members increased by over 200% in the first half of 2023 compared to the same period in 2022[7] Operational Efficiency - The company focused on optimizing operations and managing costs to enhance operational efficiency during the recovery period post-COVID-19[6] - Operating costs decreased by 6.2% to RMB 561.0 million for the six months ended June 30, 2023, from RMB 598.3 million for the same period in 2022, consistent with the decline in total revenue[16] - Research and development expenses decreased by 2.1% to RMB 243.4 million for the six months ended June 30, 2023, from RMB 248.6 million for the same period in 2022[22] - Sales and marketing expenses decreased by 15.4% to RMB 257.1 million for the six months ended June 30, 2023, from RMB 304.0 million for the same period in 2022, mainly due to reduced promotional and advertising expenses[20] - Administrative expenses decreased by 6.8% to RMB 112.0 million for the six months ended June 30, 2023, from RMB 120.2 million for the same period in 2022, primarily due to a reduction in administrative personnel costs[21] Assets and Liabilities - Cash and cash equivalents as of June 30, 2023, amounted to RMB 1,500 million, down from RMB 1,700 million as of December 31, 2022, primarily due to cash used in operating activities[30] - The company's total assets as of June 30, 2023, were RMB 2,393,527 thousand, down from RMB 2,633,541 thousand as of December 31, 2022[38] - The company's debt-to-asset ratio as of June 30, 2023, was 3.81, slightly improved from 3.85 as of December 31, 2022[32] - Total liabilities amounted to RMB 9,129,447 thousand as of June 30, 2023, down from RMB 10,143,704 thousand at the end of 2022, indicating a decrease of about 10%[39] - Non-current liabilities decreased to RMB 8,471,295 thousand as of June 30, 2023, from RMB 9,476,589 thousand as of December 31, 2022, a reduction of approximately 10.6%[39] Corporate Governance and Compliance - The company has adhered to the corporate governance code since its listing date, ensuring the protection of shareholder rights[70] - The audit committee, consisting of three members, has reviewed the unaudited condensed consolidated financial statements for the six months ending June 30, 2023[73] - The company plans to continue reviewing and monitoring its corporate governance practices to maintain high standards[70] - The roles of the chairman and CEO are currently held by the same individual, which the board believes enhances strategic planning efficiency[70] - The company has confirmed compliance with the standard code for securities transactions by directors since the listing date[72] Initial Public Offering - The company completed its initial public offering on July 12, 2023, issuing 10,838,600 shares at a price of HKD 28.92 per share[69] - The net proceeds from the global offering, after deducting underwriting commissions and expenses, amount to approximately HKD 192.0 million, which will be used as outlined in the prospectus[75] Miscellaneous - The company did not declare or pay any dividends for the six months ended June 30, 2023[65] - No significant events affecting the group have been reported since June 30, 2023, up to the date of this announcement[74]