On August 18, LEMO SERVICES released its interim results for the first half of 2026. During the period, the company generated revenue of RMB 443 million, a year-on-year increase of 2.31%, while gross profit reached RMB 142 million, down 1.24% from the prior year. Profit attributable to equity shareholders stood at RMB 36.75 million, a decrease of 3.21%, and adjusted net profit fell by 17.55% to RMB 38.89 million.

Revenue continued to grow, yet profits declined, with the initial impact evident in the gross margin. Based on rounded figures disclosed in the announcement, the gross margin for the first half was approximately 32.1%, compared with roughly 33.2% in the same period last year. The cost of sales, totaling about RMB 301 million, rose approximately 4% year-on-year, outpacing the revenue growth rate. The company attributed this to higher venue network costs and increased research and development expenses.

LEMO SERVICES operates massage machine services at commercial complexes, cinemas, and transportation hubs under its 'LEMO Bar' brand, employing both direct-operated and partner models. Under the direct-operated model, the company manages network operations, bearing costs such as site fees, equipment depreciation, and maintenance. In the partner model, local partners oversee daily operations while the company supplies equipment and support. The ability of new outlets to generate corresponding orders directly impacts profitability.

Examining the existing cost structure, network expenses constitute the largest outlay. In 2025, network and related costs accounted for 65.23% of sales costs, with depreciation and amortization representing 23.94%. During that period, the service network expanded to 49,877 outlets with 539,443 massage devices, driving revenue growth of 13.63%, yet the gross margin contracted from 36.07% to 33.67%. In the first half of this year, the gross margin continued to decline, indicating that expansion costs have yet to be fully absorbed.

Research and development investment is another contributing factor. These expenditures extend beyond massage equipment to include IoT systems and operational platforms. In 2025, R&D expenses totaled RMB 23.38 million, up 8.76% year-on-year, primarily due to an increase in project count as well as a rise in R&D personnel numbers and compensation. Whether this investment translates into improved equipment utilization and operational efficiency remains to be validated by subsequent data.

The sharper decline in adjusted net profit compared with profit attributable to shareholders also requires context based on calculation methods. By the company's definition, adjusted net profit adds back items such as share-based payments and listing expenses. The prior-year comparable period fell within the listing preparation phase; the difference between the two profit figures suggests a higher adjustment amount in the same period last year, which serves as an important backdrop for the divergent decline rates. Based on rounded data estimates, the net margin for the first half was approximately 8.3%, with an adjusted net margin of about 8.8%, both lower than the prior-year period.

According to data from Frost & Sullivan cited in the prospectus, LEMO SERVICES held a 42.9% share of China's machine massage services market by transaction value in 2024. However, as scale expands, growth quality increasingly depends on location selection and per-outlet efficiency. The company has outlined plans to optimize high-value scenarios and has initiated pilot operations in Thailand, Indonesia, and Hong Kong SAR; as of the end of 2025, overseas business remains in its early stages.

Based on revenue data, the first half has yet to show contraction, but the modest growth rate is insufficient to cover incremental costs. In the second half, the key watchpoints are whether the company can improve its network structure and equipment efficiency while stabilizing gross margins amid continued R&D investment.