Operator: Hello, ladies and gentlemen. Thank you for standing by for KE Holdings Inc.’s First Quarter 2025 Earnings Conference Call. Please note that today’s call, including the management’s prepared remarks and question-and-answer session will all be in English. Simultaneous interpretation in Chinese is available on a separate line for the duration of the call. To access the call in Chinese, you will need to dial-in to the Chinese language line. At this time, all participants are in listen-only mode. Today’s conference call is being recorded. I will now turn the call over to your host, Ms. Siting Li, IR Director of the company. Please go ahead, Siting.

Siting Li: Thank you, operator. Good evening and good morning, everyone. Welcome to KE Holdings Inc., or Beike’s first quarter 2025 earnings conference call. The company’s financial and operating results were published in the press release earlier today and are posted on the company’s IR website, investors.ke.com. On today’s call, we have Mr. Tao Xu, our Executive Director and Chief Financial Officer. Mr. Xu will provide an overview of our strategies and business developments on behalf of our — of Mr. Stanley Peng, our Co-Founder, Chairman and Chief Executive Officer. And then, Mr. Xu will discuss the financials in more detail. Before we continue, I refer you to our safe harbor statements in our earnings press release, which applies to this call, as we will make forward-looking statements.

Please also note that Beike’s earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to the company’s press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Lastly, unless otherwise stated, all figures mentioned during this conference call are in RMB. Certain statistical and other information relating to the industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial sources. Neither the company nor any of its representatives have independently verified such data, which may involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information and estimates.

For today’s call, management will use English as the main language. Please note that the Chinese translation is for convenience purpose only. In the case of any discrepancy, management’s statements in their original language will prevail. With that, I will now turn the call over to our CFO, Mr. Tao Xu. Please go ahead, Tao.

Tao Xu: Thank you, Siting. Hello, everyone. Thank you for joining Beike’s first quarter 2025 earnings conference call. In the first quarter, our business continued to deliver rapid growth. This expansion was partially based on the market momentum that was built by the supportive policies since last September. It was also consistently driven our active growth strategy that we started in the second half of 2023. In the fourth quarter, GTV our platform increased by 34% and revenue rose by 42% both on a year-over-year basis. Our business continued to outperform the market in the fourth quarter across multiple metrics. Notably, GTV for our in home transition business increased by 28% year-over-year in the fourth quarter. According to Beike Research Institute data, the year-over-year growth of the national GTV in this segment was about 60%.

GTV for our new home transaction business increased by 53% year-over-year versus 0.4% nationwide, declined year-on-year reported by the NBS data. While the top 100 developers of GTV for new home sales also fell by approximately 7% in the first quarter. We continue to see strong momentum in the growth of connected stores and agent platform. In the fourth quarter, the number of active stores surpassed 55,200, a record high increasing over 12,600 from the same period one year ago. Of those, the number of connect stores increased by more than 12,300. On the agent side, the number of active agents grew by 23% year-over-year, representing a net addition of over 90,000 agents compared with the same period last year, with Active Agents [Technical Difficulty] collect store growing by more than 73,000 year-over-year to reach a record high.

We’ve also seen a steady improvement in efficiency at the store and data level. In the fourth quarter, GTV per store per agent rose by 8% and 14%, respectively, making the fourth consecutive quarter of year-over-year increase. For connected stores, GTV per agent was up by 18% year-over-year, translating into stronger revenue for both stores and agents. Our platform’s operation support ratio remained high with impressive year-over-year improvement. This year, we are focused on driving both scale and efficiency as due priorities of our growth strategy. In the first quarter, traffic needs for our new home transaction services hit a new record. The ensure active market helped with driving more traffic leads with additional benefit from the higher customer satisfaction from the search results and the more personalized recommendations.

By tailoring the broad experience to each user scenario and profile will make it easier for people to install home listing in our apps that fit their needs. This improving performance also reflect users’ current preference to build more home listing before making purchase decisions. For our new home transaction business, this year, we are focusing on optimizing our collaboration with developers to better support their sales and needs while improving agent efficiency in matching customers to a suitable new home projects. In the fourth quarter, we concentrate our effort on high-end projects in the market. At the same time, we continue to drive greater participation from our stores in the new home business through the incentive mechanism. Our One Body, Three Wings strategy maintained stronger performance traction.

For the home renovation and the furniture business, we have adjusted our pace this year to strategically focus on reshaping our product and delivery capabilities. Our primary goal is to make them more customer oriented, while [indiscernible] our organizational structure for greater efficiency. On product front, we significantly advanced the design of our new Home Group renovation products in the first quarter. On delivery side, we rolled out the project manager professions and programs into these cities. This drove 156% year-over-year increase in average monthly order intake for project manager, reaching 2.97 compared with previously 1.16 in 2024. We also carried out a worker sharing model as a result top-performing project managers have improved personnel income, enabling them to focus on more for service delivery and quality.

In the first quarter, over 4% of our total home renovation projects came from referral by previous customers. In addition, our front-end organizational management efficiency improved markedly. The average month order volume per home renovation increased by almost 33%, moving from 0.79 in 2024 to 1.05 in the first quarter of this year, and outpacing total order growth year-over-year in the home renovation business. Our home rental services continue to achieve the skilled breakthroughs in the first quarter with more than 500,000 rental units under our management. We also made solid progress in improving both default management and increasing our renewal rate. Last quarter, Stanley shared some thoughts on our AI deployment plan. Next, I’d like to provide an update on our use of AI in the first quarter.

In our housing transaction business, on service to end customers, we conduct testing of our AI-powered home seeking assistant, [indiscernible], which is already accessible to 40% of our traffic on our home page. [indiscernible] developed based on DeepSeek R1 on our massive platform data sets and proprietary knowledge gross, while actively building an industry vertical database based on the large module to improve [indiscernible] smart response accuracy, and improved multi-module display capability to optimize the interactions between the service provider and customers. We believe that smart AI system will empower both homeowners and the buyers with more patent solutions for the home making and decision making. We are also helping service providers identify more accurate leads.

In terms of AI tools for service providers, our agent service homebuyers were introduced [indiscernible], an AI-based agent assistant [indiscernible] offers a full suite of features including customer acquisition and home selection, [indiscernible] and smart follow-up. These tools empower agents to activate customers enhance their professional service capabilities and improve efficiency in connecting with customers. By end of March 2025, over 200,000 agents nationwide have used [indiscernible], collectively manage over 2.5 million customers with impressive efficiency improvements. The conversion rate from leads to formal client mandates increased by over 30% and the mandate to transaction commercial rate rose over 10%. Agents effectively using [indiscernible] achieved the land to transaction conversion rate that was 3 times higher than those announced using this product.

For agent serving homeowners, we identify a common issue, many home listings were not being properly maintained on platform due to agents limited time and attention, which reduced sales through efficiency. To solve this, we leverage the AI property maintenance assistant, which helps agents match listing more efficiently and improve experience for homeowners. Within the homeowner dedicated AI service group, the assistant offers smart replans, market trend insights, report analysis and impacted voice-based promotion. As of the end of March 2025, the product has been tailored by 110,000 agents and have served 400,000 homeowners cumulatively. Home testing maintained with our pay assets achieved a transaction conversion rate of 4 times that of those without it.

Additionally, our digital partner, Xiaobei utilize their ability to enhance critical operation book flow from contract quality inspection to automate post signing follow-ups. The solution driven improvements in online service quality and efficiency, delivering over 30,000 cumulative powers in productivity savings. In our home renovation business, we launched the AI customers’ maintenance to strengthen product and the lead conversion during the most critical two week window in home renovation marketing. The AI based lightweight BIM and intelligent marketing solution has improved efficiency in both design and marketing. For our home rental services, our AI system for post rental support [indiscernible] has been tested online in 30 cities. It is already successful handling 25% per tenant request through intelligent automation, providing tenant with a more responsive service experience.

At the same time, it enhanced efficiency through better collaboration among the various roles involved in the recent progress. I shared lots of numbers on the total volume and the average efficiency rate of our business, but these are not the key items we focus on. We care deeply about every individual customer’s experience and will remain committed to enhance our service quality. Since 2024, we introduced the fund custody system in our home renovation business, giving customers greater control and peace of mind. Under this model, renovation funds are frozen in customer personal bank account and only released [indiscernible] after project milestone has been completed, and approved by customers including plumbing and electrical tracks. Based on renovation and final acceptance.

This model shifts away the traditional pay first renovation approach in the industry. Through the system integration, customers can track their phones online in real time with full visibility and traceability. Any interest earned during the cap fee period is returned to the customer. In 2025, we rolled out our renovation fund Captee Services in several cities including Beijing and Wuhan. On top of that, we have developed a farm custody solution plan framework that can be utilized by other industry peers, underscoring our commitment to driving the industry progress. Finally, we are encouraged by China Technical advance, and are closely watching the evolving of external microenvironment. While we remain confident in our platform ability to deliver sustained growth over the long chain under our one body driven strategy.

We’re approaching the short comes with cautious optimism. That is why we still continue to invest firmly in AI while taking a more measured approach to other investments this year. Following last year’s rapid investment in the US wide subsidies, we are now setting clear short-and-medium-ROI benchmark to ensure the disciplined capital allocation. This balance strategy will help us better position ourselves to capitalize on both market recovery opportunities and AI driven generation, productivity leaps, and the safeguard of operational stability, all while protecting the interests of the shareholders who share our long-term vision. In line with that commitment this year we will continue with active shareholder returns. Thank you. Next, I will review our first quarter 2025 financials.

Once again, thank you everyone for joining us. Before I dive into our Q1 performance, I’d like to briefly touch upon some updates in the housing market. In Q1, the market performance was very stable, perpetuating the continued policy influence result from policy implemented in September last year. The threshold cost for the home purchase were further lowered, exerting a stronger incentive effort on home buyers. According to National Bureau of Statistics, new home sales remained relatively flat year-over-year in Q1, better than the substantial year-over-year decline in the same period last year. Meanwhile, the in-home market remained at a high level in activity excluding the impact of the holidays. Benefiting from the readily available nature of unforeseen homes.

According to the Beike Research Institute, in Q1 existing home GTV grows by around 16% and the number of home transaction climbed by around 28% both year-over-year. With the growth in the transaction volume, the overall supply demand relationship improved and the housing price showed a signal of bottoming out instilling more confidence in potential home buyers to enter the market. Demand for the upgrades was even more robust amongst the single home sales in key cities. The share of three bedroom, and the larger homes continue to rise year-over-year in Q1. Turning to our Q1 financial performance. Our total TTB was RMB844.2 billion, representing a year-over-year increase of 34%. Net revenue reach RMB23.3 billion, up 42.4% year-over-year. Gross margin declined by 4.5 percentage points year-over-year to 28.7%.

GAAP net income was RMB855 million, increasing 97.9% year-over-year. Non-GAAP net income reached RMB1.39 billion remaining stable year-over-year. Looking at our housing transaction services, revenue from in home transaction reached RMB6.9 billion in Q1, up 20% year-over-year and down 23% quarter-over-quarter. GTV was RMB580.3 billion, rising by 28.1% year-over-year and declining by 22.1% quarter-over-quarter. GTV growth outpaced the revenue year-over-year, mainly due to a decline in the revenue share of the rental brokerage services, and a high contribution from the in-home transaction service GTV facilitated by connect agents. Revenue are recorded as net revenues derived from platform services. The contribution margin from its in home transaction services was 38.1% in Q1 representing a decline of 6.4 percentage point year-over-year primarily due to the increased support and the improved welfare for the service providers.

This is our long-term strategy to build a harmonious ecosystem. Sequentially, the contribution margin dropped by 2.3 percentage points, attributable to negative leverage influence due to the decline in revenue exceeding that in fixed labor cost. In terms of the new home transaction services, we still outperformed market. CRRC reports that the sales from the top 100 developers grew by around 7% year-over-year and 41% sequentially in Q1. In comparison, our new home GTV reached RMB232.2 billion in Q1, up 53% year-over-year and down 34.6% quarter-over-quarter, once again outperforming the industry. This was mainly due to the deepening of our collaboration with developers and our finely tuned operational capability and more sales confirmation from the partial subscription in last quarter.

Revenue from new home transactions was RMB8.1 billion in Q1, rising by 64.2% year-over-year and dropping by 38.2% from previous quarter. Revenue outperformed GTV year-over-year demonstrating our stronger amortization capabilities, while GTV growth outpaced revenue growth sequentially due to seasonality. The contribution margin from the new home transaction and services rose by 1.1 percentage point year-over-year to 23.4% as we gained leverage from the revenue growth exceeding that of the fixed costs. Sequentially, the new home contribution margin declined by 2.2 percentage points, largely attributable to the seasonality effect. In Q1, SOE developers contributed around 54% of our new home sales revenue, increasing by around 4 percentage points year-over-year.

Revenue from home renovation and furniture home rental service, and emerging other services grew by 46.2% year-over-year in Q1. It accounted for 35.9% of our total revenue compared to 35% in the same period last year. The contribution profit from this business accounted for 32.7% of our total gross profit. Revenue reached RMB2 — for our home renovation and furniture business, revenue reached RMB2.9 billion, increasing by 22.3% year-over-year mainly due to the increased orders from the home renovation. Contribution margin for the home renovation and furniture business reached a record high of 32.6%, up 2 percentage points year-over-year and 2.8 percentage points quarter-over-quarter, mainly driven by the increased gross margin of our home renovation business.

Our home rental services business continued to grow at an accelerated pace. In Q1, its revenue reached a record high of RMB5.1 billion, up 93.8% year-over-year, mainly benefiting from the rapid growth in the number of the rental unit under management. End of Q1 the number of rental units under management, exceeded 500,000 compared with over 250,000 in the same period of 2024. The contribution margin for the home rental services was 6.7%, up 1.2 percentage point year-over-year and 2.1 percentage points quarter-over-quarter, largely due to the improved gross profit of our Carefree Rent business. As we continue to refine the Carefree Rent business model based on the sense of the business contract, the revenue from some newly managed rental units were recorded as net revenues derived from the service fee in this quarter.

In Q1 our revenue from emerging and other services decreased by 50% year-over-year and the 20.3% quarter-over-quarter to RMB350 million. Next let’s move on to our other cost expenses in Q1. Our store cost reached only RMB717 million, remaining relatively stable year-over-year and dropping by 8.8% quarter-over-quarter. The sequential decrease was mainly from the lower store rental cost. Other costs were RMB547 million, up 44.4% year-over-year primarily due to the increased tax and the surcharge and the financial service reserve and its credit losses. Sequentially, other costs declined by 26.7% largely driven by the decreases in the tax and supplies. Financial services and reserves and credit losses and the share based compensation. Gross profit rose by 17% year-over-year to RMB4.82 billion.

Gross margin was 20.7%, down 4.5 percentage point year-over-year. The primary reason for the decline was decrease in contribution margin from the in-home transaction services. Gross margin grew by 2.4 percentage points sequentially in Q1. Mainly due to the structural region as the revenue contribution of new home construction service declined. In Q1, our GAAP operating expenses totaled RMB4.2 billion up 2.9% year-over-year and down 31.3% sequentially. Notably, G&A expenses were RMB1.9 billion decreasing by 7.2% year-over-year mainly due to the reduced share based compensation expenses. G&A expenses dropped by 36.7% quarter-on-quarter, primarily attributable to the lower personnel expenses and the decreased bad debt provision. Sales and market expenses increased by 9.2% year-over-year to RMB1.8 billion resulting from the increased expenses for the home renovation and furniture business.

Total , sales and marketing expenses fell by 24.4%, mainly due to a decline in market expenses for home construction services and reduced personnel expenses. Our R&D expenses were RMB584 million, up 24.9% year-over-year, driven by higher personnel expenses and technical service fee. Sequentially, R&D expenses dropped by 21% largely as a result of reduced personnel expenses. In terms of the profitability, GAAP income from operations totaled RMB591 million in Q1, a remarkable increase compared with the same period of last year and decreasing by 41.6% sequentially. GAAP operating margin was 2.5%, increasing by 2.5 percentage point from Q1 2024, and falling by 0.7 percentage point quarter-over-quarter. Non-GAAP income from operations totaled RMB1.15 billion, growing by 19.6% from the same period of last year and dropping by 34.6% sequentially.

Non-GAAP operating margin reached 4.9%, down 0.9 percentage points from Q1 2024 and 0.7 percentage points from the previous quarter. Mainly attributable to the gross margin decreased both year-over-year and quarter-over-quarter. GAAP net income totaled RMB855 million in Q1, rising by 97.9% year-over-year and 48.2% quarter-over-quarter. Non-GAAP net income was RMB1.39 billion, remaining stable year-over-year and increasing 3.7% quarter-over-quarter. Moving to our cash flow and balance sheet. We realized the net operating cash outflow of RMB4 billion in Q1. New home DSO reached 63 days in Q1, remaining at a healthy level on top of approximately $139 million allocated to share repurchase during Q1. Our total cash liquidity remained at the high level of RMB74.3 billion, which excludes customer deposit payable.

With our robust cash reserves, we continue to reward our shareholders who have grown with us through the active share buyback, enhancing capital operation efficiency, and sharing the benefit of our development with investors. In Q1, we repurchased around $139 million worth of shares, which accounted for around 0.6% of the company’s total share outstanding at the end of 2024. We have consistently delivered our promise to reward shareholders. Since the launch of our share repurchase program in September 2022, we have repurchased roughly $1.76 billion in shares at the end of Q1 2025, accounting for around 9.2% of our total share outstanding before the program began. This year, our business will focus on efficiency improvements in financial strategy.

We will ensure that our investments are made more efficiently to improve personnel and store productivity. We will respect advocating and make sure the money spent yields visible results, while maintaining the disciplined cost expense control. We will continue to support long-term business development by fully backing our onboarding surveillance strategy initiatives and actively exploring AI technology. At the same time, we possess naturally driven resources with the intention to consistently offer the stable and sustainable returns to our shareholders. This concludes my prepared remarks for today. Operator, we are ready to take questions.

Operator: Thank you. [Operator Instructions] Your first question comes from Timothy Zhao from Goldman Sachs. Please go ahead.

Timothy Zhao: [Foreign Language] [Interpreted] Thank you, management for taking my questions. I think my question is regarding the outlook for the property market going forward. I think we note strong rebound of the property market transactions after Chinese New Year. Just wondering from second quarter and onwards, what is your outlook for the property market, really considering the latest macro dynamics as well as the impact from the U.S. tariff? Thank you.

Tao Xu: Thank you, Timothy. For Q1 market performance, with the central government’s continuous efforts to stabilize the real estate market, the existing home market saw a relatively strong recovery after Chinese New Year and the new home market also performed stable. Let me give some details. The existing home market rebounded after Chinese New Year as expected. According to Beike Research Institute, nationwide existing home GTV grew by 16% year-over-year in Q1, sustaining the momentum fueled by the September ’26 policy stimulus. This growth was mainly due to the cumulative impact of the early stimulus policies. These policies substantially lowered the threshold and the cost of the home purchase, motivating more people to buy.

Rising transaction volume also helped to balance supply and demand in the short term, narrowing the decline in the home prices year-over-year and bringing the cautious buyers back to the market. Leasing home prices have stayed mostly stable, dipping by 0.5% month-over-month in March in first-tier cities like Beijing and Shanghai as well as second-tier cities with a strong net population inflows and a steady increase in the housing demand in recent years, such as Hangzhou and Chengdu, leasing home prices have picked up slightly month-over-month. For new home market in Q1, it is also very stable. According to MBS data, Q1 new home sales were overall flat year-over-year, down 0.4%. GTV of 1,200 real estate developers dropped by 7% year-over-year in Q1.

Notably, the sales by floor area decreased by over 15% year-over-year. Since Q2, after Chinese New Year, the market followed its typical seasonal pattern. The existing home transaction volume peaked in the early March, then gradually declined through April. The month-over-month decrease of existing home prices expanded somewhat with a 1.3% drop in April as transaction volume reduced. From a supply-demand standpoint, the total number of existing home listings on Beike rose in Q1, up fall in Q4 of last year. This aligns with the seasonal trend of lower inventory at the year-end and higher inventory at the start of the year. It is also a natural result of the existing home market dysfunction and the lifting of the sales restrictions, which have released more housing supply.

The faster the supply of the nearly new existing home into the market has also improved overall listing supply quality and created better conditions for buyers looking to the home upgrades. Meanwhile, we observed that increase in the market demand outpaced the increase in inventory. In April ratio of the home viewing to inventory was at 1.8, which is at the higher end of the historical range of the 1.6 to 1.9. This addresses stronger buyer interest and plenty of demand with the market able to absorb new inventory. However, the conversion from the home viewing to transaction has slowed, mainly due — this is mainly due to the short-term uncertainties affecting buyer expectations, including external factors such as the geopolitical tension. This has led to some softening the housing price expectations, which made buyers more hesitate to enter the market.

For future market outlook, we believe the market outlook will depend on two main factors: the impact of international trade frictions on housing transactions and the strength and the timing of domestic countermeasures. On a neutral scenario, we expect a typical seasonal slowdown in Q2 on a sequential quarter basis. Year-over-year, however, the existing home market is expected to see a slight increase in existing home transaction volume, also at a slower pace than Q1. This is supported by the higher transaction volume in Q1, the growing supply of the high-quality nearly new existing home and the year-over-year increase in customer home building. As the market experienced a quarter-on-quarter decline in Q2, and if external trade pressure intensified in Q3, indicators such as the housing price, transaction volume and development investment may weaken.

This could create room for further supportive policy measures in the second half of the year, which would help improve both supply and demand in property market and support stable market development. We are also closely monitoring the impact of the change in global trade on real estate market. In terms of home listings, the overall number of new listings on Beike platform remained stable in April with no signs of the homeowners rushing to sell. The number of the home viewing for both existing and new homes still showed a notable year-over-year increase in April. When categorizing the cities that we covered by high and low trade dependency, we observed that since the tariff start off in early April, cities with high trade dependency have slowed — have shown weaker year-over-year and month-over-month home viewing performance compared to cities with low trade dependency.

This indicates that while the trade frictions have caused some short-term disruption in buyer expectation in certain cities, there has not been a significant trend of the divergence overall and the homeowner sentiment remains stable. Moving forward, we will continue to monitor potential impact of the trade frictions on housing market through the lead indicators such as home viewing, customer traffics and listing volume. We observed a notable de-escalation in recent U.S.-China trade tensions, which should help stabilize the business and the consumer expectation in near term. In our view, we believe that the international trade frictions represent a long-term dynamic process with uncertainties and the potential for improvement. During the upcoming 90-day negotiation window, we will closely monitor the development, track the resulting impact and assess the potential implications for both real estate market and our company on an ongoing basis.

In the medium to long term, we maintain a cautiously optimistic outlook, trusting both China and the U.S. will continue to move together with each other based on the positive progress made so far. Meanwhile, the continued implementation of domestic supportive policies is expected to further boost customer confidence. Together, this is expected to mitigate the impact of the trade risk on the property market, helping to consolidate the initial stabilization of the existing home market and ease pressure on the new home market. Thank you.

Operator: Thank you. Your next question comes from Xiaodan Zhang from CICC. Please go ahead.

Sophie Zhang: [Foreign Language] [Interpreted] So thanks management for taking my questions. And my question is regarding the housing transaction services business. So could management elaborate on the expansion plan for this year in terms of housing agents and the agency stores? And on top of that, how will you continuously improve the efficiency of those existing and newly connected agents and stores on the platform? Thank you.

Tao Xu: Thank you, Sophie. This year, we will continue to promote healthy growth of our agency store network to support the sustained expansion of our housing transaction services. At the same time, we will place greater emphasize on the cost effectiveness of the store expansion. Our aim is to enhance the efficiency and the income of platform stores and the agents, thereby increasing the stability of agent careers, providing better services to customers and achieving more sustainable long-term growth for our platform. In terms of the agent and store network expansion, by end of this Q1, the number of active stores on our platform increased by nearly 30% year-over-year and the number of active agents grew by 23% year-over-year.

The growth was mainly driven by the non-Lianjia segment with a 33% year-over-year increase in active non-Lianjia store and a 24% year-over-year increase in active non-Lianjia agents in our platform. In Q1, several major brands joined our platform. This includes our collaboration with [indiscernible] brokerage company in Kunshan, Suzhou. This shows the core value of our platform in buy-side market, which is our stronger existing home business operation, agent connection network and digital empowerment capabilities. In Q1, our efficiency efforts paid off in the stable market environment. The average number of the transaction per agent rose notably in Q1. This helped offset the decline in average housing unit prices. As a result, its in-home GTV per agent grew by over 9% year-over-year in Q1.

The average number of agents also rose by 18% year-over-year. Together, this factor led to a 28% year-over-year increase in existing home GTV on our platform, clearly outperforming the 16% increase in nationwide GTV as estimated by Beike Research Institute. Our platform’s efficiency focused mechanism also start to show results. The share of the high-performing stores increased from 16.7% at the end of 2024 to 18.4% in Q1. However, the stores were about 2.5 times more productive than that of those stores on the platform in their respective cities. To improve the efficiency, we refined our internal management. We used the digital tools such as online store owner workshop and AI property listing assistant, along with offline property listing sessions to facilitate the separation of home listing, which accelerate sales.

We also improved platform operation through the building mechanisms, like a point-based incentive program and regional co-governance council. This encourages store owners to keep growing business and work more closely with each other. Our store retention rate remained healthy for both old and new stores. Our in-home attrition rate dropped to 2.9% in Q1, down 6% sequentially and 38% year-over-year. And the 6-month retention rate for newly connected stores in first half of 2024 was 94%, showing the long-term value of our platform support. For full year, we reasonably foresee that the number of Lianjia agents and store will remain largely stable. Meanwhile, we expect a modest increase in scale of non-Lianjia agent stores with target expansion in certain key regions.

On top of the stable agent store networking, improving efficiency will be our core goal this year and beyond. This year, we will provide more targeted support to store owners to help them improve regional competitiveness. At the same time, under our points-based incentive system, we aim to develop more high-performing stores, aiming to upgrade the overall structure of our store network. In the long run, the large store model will be a key strategy for enhancing productivity. In the future, our platform will host more high-performing large stores, each with over 10 agents. These stores will attract more top talent. This large store boost high efficiency and strong staff retention, allowing store owners to achieve better income and stay in business longer.

Those store owners can better support agents, ensure their income stability and enabling the owners to provide superior service to customers. The platform’s various residential service will also offer agents diversified opportunities for additional income. Additionally, we firmly believe that breakthroughs in AI will present opportunities for transformative improvements in industry productivity. We have already developed a variety of AI applications to support our service and providers, and we will continue to accelerate development to redefine the capabilities of the quality service providers and drive their efficiency gain. This year, in a volatile market, we aim to increase the average number of transaction per connected agent to maintain stable per capita commissions.

Over the next two to three years, we plan to increase the proportion of large and high-quality stores. This store will have a more stable, high-performing agents with high efficiency with store productivity being 2 times to 3 times of the current average. We anticipate with this — within three years, this will have led to approximately 20% improvement in efficiency of those connected agents on our platform. Thank you.

Operator: Thank you. Your next question comes from Jizhou Dong from Nomura. Please go ahead.

Jizhou Dong: [Foreign Language] [Interpreted] Bakers’ home renovation and furnishing business achieved 20% plus year-on-year growth in the first quarter with a 2 percentage point improvement in contribution margin. Could management share more specifics of the segment’s operation, as well as the outlook on the margin in the future? And in addition, management has shared a lot of the ideas of Beike using AI to drive its business and improve its service quality. Looking into the next few quarters, could management update us more on Beike’s strategy and investment plan for AI from both the 2B and 2C perspective? Thank you.

Tao Xu: Thank you, Jizhou. Our home renovation and furnishes business demonstrated excellent performance in Q1. In terms of scale, the revenue amounted to RMB2.9 billion, up 22.3% year-over-year. Cities such as Beijing, Guangzhou and Zhengzhou performed especially well and each achieved over 50% year-over-year growth in revenue. Regarding profitability, the contribution margin for the home renovation and furnishing business reached 32.6% in Q1, an increase of 2 percentage points compared to the same period last year, reaching a record high and reflecting our capability of the refined operation and management. We believe that the AI has extensive application scenarios in the home renovation and furnishing. We are also continuously deepening the application of AI, such as contract conversion, construction process and internal management.

Let me elaborate for details. First, in the early stage of the contract conversion, previously, designers conduct the initial communication with customers through the two-dimensional black and white flow plans. The only professional drawing reduced the customer’s perception and affect the efficiency of the contract conversion. Currently, empowered by AI, when a customer visits our offline store for the first time, designers can rapidly formulate an IR proposal based on the customer’s preference for decoration style and home layouts. This AI proposal encompass the various type of the 3-dimensional color-rendered design drawing, dynamic and static space analysis, storage and smart device layout plan. This significantly enhanced the experience of first-time store visitors and thereby boost the contract conversion rate.

Taking Wuhan as an example, the time period from first-time visiting store to signing a preliminary contract was shortened from previously 10 days to within six days in March. Secondly, in the construction process, we have developed an intelligent construction system. Real-time online inspections are realized by installing cameras on spot. AI can also realize automatic measurement in core construction operation such as the real name on the drop certification, the inspection of the site cleanliness and the noise recognition. In addition, by equipping staff with smart inspection devices, we assist in standardizing the home renovation acceptance process through AI recording technology. We can recontrast the acceptance process, enabling principle and quantifiable evaluation of the construction quality.

Taking Beijing as an example, the acceptance of actual risk rate has increased by more than 2 percentage points compared with before. Meanwhile, in terms of the internal management, we have multiple AI employees. Sun Xiaosheng, as operating management AI employee enhanced the effectiveness of the team management by automatically summarizing and commenting on daily reports and demanding about the pending matter through AI. This option has collected and commented on more than 20,000 daily reports, saving team more than 18,000 hours within half a year. So fashioned as order following AI employee realized functions such as information distribution and automatic order assignment through the information collection and AI analysis capabilities, Sun Xiaosheng had distributed information over 5,000 times and some timely reminder over 10,000 times within half a year.

In the future, our AI exploring for home renovation business will be concentrated on the following aspects: more accurate insights and analysis of the customer demands and the more efficient design powered by AI. We aim to achieve the better personnel solution from demand to design and comprehensively enhance the professionalism and the efficiency of our services. Thank you.

Operator: Thank you. Your next question comes from John Lam from UBS. Please go ahead.

John Lam: [Foreign Language] [Interpreted] So let me translate my questions. So my question is regarding on Beihaojia. So we see that Beihaojia has already participated numerous new home projects. So just wanted to see how Beihaojia contributes to the new home development? And also regarding on the C2M business, how the business is being reflected? Thank you.

Tao Xu: Thank you, John. Beihaojia’s business model provides a C2M new home product solution for partners like developers. We use intelligent algorithm and massive database to deeply understand our target customers’ needs and preference. Our tools help predict the type of home customers wanted and the price they expect. Developers use this insight to guide project positioning and product design, making their new home offering more catered to customer demands. So far, Beihaojia has participated in line purchase across different models. So our self-operated project aimed at more comprehensive, validating our C2M capabilities. Back projects involve equity partners with Beihaojia primarily focused on the product positioning using HY as a right to projects are purely light asset model, where we do not engage in investment, but instead provide product positioning solution to partners and charge a service fee.

Regarding the funding use across the seven investment-involved projects, the total investments have reached about RMB2.3 billion. By end of this Q1, we have recovered nearly RMB500 million from [indiscernible]. Net investment from our own funds stands over RMB1.8 billion. Among this, our first IP partnership, new home projects, which we collaborated with PowerChina Real Estate on Beijing [indiscernible] of Beijing City achieved a complete sellout of all initial units on the first day of launch. The project delivered an IRR nearly 30% at the shareholder level, demonstrating how our C2M service capability provides partners with enhanced sales and operation certainty. In building C2M capabilities, we have two key advantages. First, we have a deep understanding of the needs of potential consumers.

This came from our unique database built on massive online and offline traffic of our platform. It also draws from the rich customer interactions in our brokerage, home renovation and rental services. Together, this forms the foundation of our core data infrastructure. With this data, we can analyze key indicators, such as the source, quantity, purchasing power and the specific product needs of potential customers in a more timely, intuitive and competitive manner. This level of detailed customer insight helps developers make a more accurate decision and allocate resources more effectively in areas such as land auction assessment, unit mix planning and product set, ultimately leading to the greater operational certainty. Our second advantage is a strong market knowledge and price ability.

We use actual transaction price of this new home along with the real-time and upstream data like homeowner’s listing price and the price adjustments. We then apply the algorithm model to build a valuation model for different geographic districts. These models can more accurately estimate the project and sector value and update quickly based on the change in the market. This approach aligns more closely with the price formation logic in a buyer’s market. The new home price are largely unaffected by policies of both developers strategy and instead result from a decentralized and free negotiation between buyers and sellers. In a market dominated by new home transaction, this new home prices often give a more accurate multilayered view of the market than new home market data.

This help us better market trends. Based on this true advantage, we have refined our core C2M tools. We will continue to improve their accuracy and proficiency over time. We also support our C2M model with more innovative ways to reach customers. While our agent network connect with customers, we are also building an online community called building a better home together with our application. This enables users to directly participate in evaluation and co-creation of new home product design. For example, in our Hongqing project in Shanghai, users can visit building a better home together page. They can view and compare two home design plans engaging in the design process of their future dream homes. This model let us connect with customers much earlier than traditional methods.

It also makes their preference reflect in the new home products. We have already provided our first C2M product solution service in Xi’an project through which we earn a service fee, showing stronger market recognition from our business approach. In Xi’an project, Beihaojia provide a full set of product solutions. This included customer service, product exact positioning, cost optimization, price forecasting and market services. We also give target project planning advice such as optimizing the elevator to household visual, enhancing the landscape and adjusting in size, trying to address the key developer pain points such as fast capital recovery, product premium and product competitiveness. Last but not least, as a newcomer to the industry, Beihaojia remains humble and respectful to the market.

Although the business line has been established for less than two years, we have already seen the promising results in several projects. These early signs have gradually validated our capability path and strengthened our confidence in continuous optimization and moving forward. Thank you.

Operator: Thank you. We are now approaching the end of the conference call. I will now turn the call over to your host today, Ms. Siting Li for closing remarks.

Siting Li: Thank you once again for joining us today. If you have any further questions, please feel free to contact Beike’s Investor Relations team through the contact information provided on our website. This concludes today’s call, and we look forward to speaking with you next quarter. Thank you, and good-bye.

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KE HOLDINGS INC

Q1 2025

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