Keep Inc. Announces 2023 Annual Results

BEIJING, March 28, 2024 /PRNewswire/ -- Keep Inc. ("Keep" or the "Company"), the largest online fitness platform in China, today announced its audited annual results for the year ended December 31, 2023.

Full Year 2023 Financial Highlights

• Total revenues were RMB2,137.8 million in 2023, a decrease of 3.3% from RMB2,211.6 million in 2022.
• Revenues from online membership and paid content were RMB995.8 million in 2023, an increase of 11.4% from RMB894.2 million in 2022.
• Gross profit was RMB961.6 million in 2023, an increase of 6.8% from RMB900.4 million in 2022.
• Gross profit margin was 45.0% in 2023, a significant improvement from 40.7% in 2022.
• Adjusted net loss was RMB295.4 million in 2023, compared with adjusted net loss of RMB666.9 million in 2022.
• Adjusted net loss margin narrowed significantly to 13.8% in 2023, compared with 30.2% in 2022.

Full Year Operational Highlights

Mr. Wang Ning, the CEO of Keep Inc., said, "Throughout 2023, our focus remained firmly on refining our products and services and improving operational efficiency to navigate a challenging market environment. While weak consumer sentiment impacted revenues from self-branded fitness products, this was largely offset by an 11.4% increase in revenues from online membership and paid content driven by the growth of virtual sports events. This resulted in a significant expansion of our gross margin to 45.0% from 40.7% last year. Adjusted net loss for 2023 narrowed significantly to RMB295.4 million from RMB666.9 million in 2022 while adjusted net loss margin during the second half of the year further narrowed to 6.3%, compared to 29.1% for the same period of 2022."

"We continued to invest in the production of premium online fitness content and app features to improve user engagement and implemented prudent cost controls to support our sustainable and resilient business model without impacting user satisfaction for all our products, services, and sales networks. Both average MAUs and average monthly subscribing members saw moderating declines during the second half of 2023 and have begun to recover when compared to the first half of 2023 which underscores how we are regaining momentum. Supported by the continuous growth of our virtual sports events, average monthly revenues per MAU also increased by 17.6% year-over-year in 2023. These initiatives have positioned us to drive long-term sustained growth by generating high-quality revenue, expanding gross profit margins, and improving operating leverage. With a solid foundation now in place, our focus going forward in 2024 will be on refining and executing our core business initiatives and further empowering users pursuing healthy and active lifestyles."

Full Year 2023 Financial Results

Revenues

Total revenues were RMB2,137.8 million in 2023, a decrease of 3.3% from RMB2,211.6 million in 2022, primarily due to a decrease in revenues from self-branded fitness products. 

Revenues from self-branded fitness products were RMB946.1 million in 2023, a decrease of 16.8% from RMB1,137.0 million in 2022. The decrease was mainly attributable to (i) the overall online consumer sentiment being lower than expected in a challenging environment; (ii) an increase in offline leisure and travel activities post-pandemic in 2023, leading to a decrease in consumption of indoor fitness products; and (iii) cost controls for product development, deployment, and marketing.

Revenues from online membership and paid content were RMB995.8 million in 2023, an increase of 11.4% from RMB894.2 million in 2022, mainly attributable to an increase in revenues generated from virtual sports events.

Revenues from advertising and others were RMB196.0 million in 2023, an increase of 8.6% from RMB180.4 million in 2022, mainly attributable to a recovery in integrated online-to-offline advertising campaigns during the second half of 2023. 

Cost of Revenues

Cost of revenues was RMB1,176.2 million in 2023, a decrease of 10.3% from RMB1,311.2 million in 2022. Cost of revenues decreased significantly more than total revenues in 2023, primarily due to the effectiveness of cost controls.

Cost of self-branded fitness products was RMB683.9 million in 2023, a decrease of 16.3% from RMB816.9 million in 2022, in-line with the decrease in revenues from self-branded fitness products. 

Cost of online membership and paid content was RMB370.1 million in 2023, a decrease of 9.5% from RMB409.1 million in 2022, mainly attributable to decreases of (i) RMB22.2 million in employee benefits; (ii) RMB18.4 million in content related costs; and (iii) RMB9.4 million in channel fees paid to third-party application stores and other payment channels, which were partially offset by a RMB26.8 million increase in costs associated with virtual sports events.

Cost of advertising and others was RMB122.2 million in 2023, an increase of 43.5% from RMB85.2 million in 2022, mainly attributable to an increase of RMB31.9 million in advertising costs associated with integrated online-to-offline advertising campaigns.

Gross Profit and Gross Profit Margin

Gross profit was RMB961.6 million in 2023, an increase of 6.8% from RMB900.4 million in 2022. Gross profit margin was 45.0% in 2023, a 4.3 percentage points increase from 40.7% in 2022, mainly attributable to an increase in revenues and gross profit contribution from online membership and paid content.

Gross profit from self-branded fitness products was RMB262.2 million in 2023, a decrease of 18.1% from RMB320.1 million in 2022, mainly attributable to the decrease in revenues from self-branded fitness products.

Gross profit from online membership and paid content was RMB625.7 million in 2023, an increase of 29.0% from RMB485.1 million in 2022, mainly attributable to an increase in revenues from online membership and paid content and the further optimization of content related costs and employee benefits.

Gross profit from advertising and others was RMB73.8 million in 2023, a decrease of 22.5% from RMB95.2 million in 2022, primarily due to an increase in costs associated with integrated online-to-offline advertising campaigns.

Fulfilment Expenses

Fulfilment expenses were RMB155.7 million in 2023, a decrease of 22.8% from RMB201.6 million in 2022, primarily due to a decrease in revenues from self-branded fitness products and the further optimization of logistics and storage costs.

Selling and Marketing Expenses

Selling and marketing expenses were RMB569.3 million in 2023, a decrease of 11.9% from RMB646.2 million in 2022, primarily due to a decrease of RMB79.2 million in promotional and advertising expenses following a reduction in certain marketing spending activities and improved user acquisition efficiency.

Administrative Expenses

Administrative expenses were RMB209.3 million in 2023, a decrease of 14.8% from RMB245.6 million in 2022, primarily attributable to a decrease of RMB47.6 million in administrative personnel costs (including related share-based compensation expenses).

Research and Development Expenses

Research and development expenses were RMB449.7 million in 2023, a decrease of 16.2% from RMB536.9 million in 2022, primarily attributable to a decrease of (i) RMB59.3 million in research and development personnel costs (including related share-based compensation expenses); (ii) RMB17.0 million in cloud computing service fees; and (iii) RMB7.8 million in outsourcing and other labor costs.

Fair Value Changes of Convertible Redeemable Preferred Shares

Fair value changes of convertible redeemable preferred shares were RMB1.4 billion for the year ended December 31, 2023, compared with RMB665.0 million for the year ended December 31, 2022. The fair value changes of convertible redeemable preferred shares before the Company's listing was primarily attributable to changes in the valuation of the Company. Keep did not record any further fair value changes of the convertible redeemable preferred shares following the Listing as preferred shares liabilities were redesignated and reclassified from liabilities to equity after automatically converting into ordinary shares upon Listing.

Profit/(loss)

Profit was RMB1.1 billion in 2023, compared with a loss of RMB104.6 million in 2022, primarily attributable to fair value changes of convertible redeemable preferred shares of RMB1.4 billion for the year ended December 31, 2023. 

Adjusted Net Loss

Adjusted net loss (non-IFRS measure) was RMB295.4 million in 2023, compared with adjusted net loss of RMB666.9 million in 2022. Adjusted net loss margin was 13.8% in 2023, compared with 30.2% in 2022.

Liquidity and Capital Resource

As of December 31, 2023, cash and cash equivalents were RMB1.6 billion, compared with RMB1.7 billion as of December 31, 2022. The decrease was primarily due to the use of cash for operating activities, which was partly offset by proceeds from the issuance of ordinary shares relating to the Listing. Most of Keep's cash and cash equivalents were denominated in Renminbi while most of the time deposits were denominated in U.S. dollars.

Outlook

Keep remains optimistic about its long-term growth prospects and will work towards improving efficiency in the commercialization of services and products and improving profitability.

The Company's focus going forward will be squarely on investing in immersive, exclusive, and professional online fitness content that will form the foundation of its business and allow it to acquire and retain high-quality users and enhance its leadership position in the online fitness market. Additionally, Keep is further expanding and refining its outdoor fitness functions and products to better serve users going outdoors. The Company recently launched a fully upgraded version 8.0 of its app that allows users to easily sort through classes, offers deeper community engagement functionality, and facilitates user feedback to recommend and inspire others to explore and join. Moreover, the Company is developing and applying new technologies and intelligent features by exploring AI-driven technology application prospects in overseas markets. Keep plans to leverage AI advancements to drive innovative and elevated fitness experiences in a more efficient and distinguished manner, in order to attract new user groups and discover new commercialization opportunities.

Conference Call

The Company's management will host an earnings conference call at 8:00 p.m. Beijing Time on March 28, 2024. 

Participants who wish to join the call should follow the following method: 

1) Please click on the call link and complete the online registration form. Kindly register at least one working day before the event. https://register.vevent.com/register/BI7ad91c739a6b4eccafb12cad2b58cc51

2) Upon registering you will receive the dial-in info and a unique PIN to join the call as well as an email confirmation with the details.

3) Select a method for joining the call:

1. 1. Dial-In: A dial in number and unique PIN are displayed to connect directly from your phone.
   2. Call Me: Enter your phone number and click "Call Me" for an immediate callback from the system. The call will come from a US number, and this function is only applicable for participants outside China.

4) Please dial in 15 minutes before the call is scheduled to begin and provide the personal PIN to join the call.

Additionally, a live and archived webcast of the conference call will be available at https://ir.keep.com/en/news_events.php.

About Keep Inc.

Keep Inc. (HKEX Stock Code: 3650) is the largest online fitness platform in China in terms of MAUs and number of workout sessions completed by users in 2022, according to CIC. Keep offers a comprehensive fitness solution to help users achieve their fitness goals. On the Keep platform, extensive, professional, and premium fitness content with diverse activities and services are offered to encourage users to engage in daily exercise. Keep platform leverages AI technology to provide personalized workout programs incorporating recorded courses and interactive live streaming classes, dynamically customized to each user's athletic levels, fitness goals, daily workout patterns and diet. Keep's services seamlessly connect the physical and digital realms, spanning smart devices, workout equipment, athletic apparel and food to provide an immersive fitness experience. The Keep brand has become synonymous with passion for fitness, and 77.5% of fitness enthusiasts in China are aware of the Keep mobile app. We've inspired millions to join our community, resulting in 29.8 million MAUs.

For more information on Keep Inc., visit https://keep.com/.

Forward-looking statements 

This press release contains forward-looking statements relating to the business outlook, estimates of financial performance, forecast business plans and growth strategies of the Company. These forward-looking statements are based on information currently available to the Company and are stated herein on the basis of the outlook at the time of this press release. They are based on certain expectations, assumptions and premises, some of which are subjective or beyond our control. These forward-looking statements may prove to be incorrect and may not be realised in the future. Underlying these forward-looking statements are a lot of risks and uncertainties. In light of the risks and uncertainties, the inclusion of forward-looking statements in this press release should not be regarded as representations by the board of directors of the Company or the Company that the plans and objectives will be achieved, and investors should not place undue reliance on such statements.

Non-IFRS Measures

To supplement our consolidated financial statements, which are presented in accordance with IFRS Accounting Standards as issued by the IASB, we also use adjusted net loss as an additional financial measure, which is not required by, or presented in accordance with, IFRS Accounting Standards.

The Company's management believe adjusted net loss provides useful information to investors and others in understanding and evaluating our consolidated results of operations in the same manner as they help our management. However, our presentation of adjusted net loss may not be comparable to similarly titled measures presented by other companies. The use of adjusted net loss has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for an analysis of, our results of operations or financial condition as reported under IFRS Accounting Standards.

The following table reconciles our adjusted net loss for the years presented to the most directly comparable financial measure calculated and presented in accordance with IFRS Accounting Standards, which is profit/(loss) for the years ended December 31, 2023 and 2022: