This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Hello, ladies and gentlemen. Thank you for standing by for KE Holdings Inc's fourth quarter and fiscal year 2020 earnings conference call. At this time, all participants are in the listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Matthew Zhao, IR Director of the company. Please go ahead, Matthew.
spk06: Thank you, operator. Good evening and good morning, everyone. Welcome to Kerr Holdings, Inc., or Baker's First Quarter and Physical Year 2020 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, www.investors.ke.com. On today's call, we have Mr. Stanley Yongdongpeng, our co-founder and chief executive officer, and Mr. Tao Xu, our Chief Financial Officer. Minister Peng will provide an overview of our strategies and business developments. And Minister Xu will provide additional details on the company's financial results and discuss the financial outlook. Before we continue, I refer you to our Steve Hubbard statement in our earnings press release, which apply to this call as we will make forward-looking statements. Please also know that Baker's earnings press release and this conference call include discussions of an audit gap financial information as well as an audit non-gap financial measures. Please refer to the company's press release, which contains a reconciliation of the audit non-gap measures to comparable gap measures. Lastly, unless otherwise stated, all figures mentioned during this conference call are in remit B. With that, I will now turn the call over to our CEO, Mr. Stanley Peng. Please go ahead, sir.
spk04: Thank you, Matthew. Hello, everyone, and thank you for joining us today on our fourth quarter and fiscal year 2020 audience conference call. We achieved exceptional growth in 2020, closing the year with strong fourth quarter operational and financial results. Our massive scale of operating efficiency and quality services combined with the strong network effects, have created the self-reinforcing virtual cycle. It drove out four full years GTV to increase by 64.5% to reach a historical high of 3.5 trillion RMB, and helped us solidify our leadership position as the largest housing transaction and services platform in China, and the second largest commerce platform across all industries in China. 2020 marked the 19th anniversary of Li and Jia's operations and the third year since the big curfew platforms inception. The ground we have covered over the past years, as well as our outstanding results in 2020, have provided further affirmation of our belief that a path we are taking in doing the right thing, even if it is difficult, is the right path. It also brings us closer to our vision of providing comprehensive and trusted housing services to 300 million families in China. I would now like to provide you with a closer look at exactly what we accomplished over the past year. Looking back, 2020 was a challenging year for our business and for the world. facing the COVID-19 pandemic, we worked hand-in-hand with the Canadian brands, stores, agents, developers, and other platform participants to overcome these tremendous obstacles and emerge stronger. We carried out a series of measures to help our own and Canadian agents persist during this difficult period. This included fee waivers. timely payments, supporting brand owners and store owners to ensure their agents continue to be paid, and etc. With offline activities severely hampered by the pandemic, we promoted online agent training, online VR property sharing, and online property sales when the pandemic just broke out. These initiatives supported agent capabilities to continue to push forward online. lock in sales opportunities, and build out the inventory of potential buyers during the period at the impact from COVID-19 started to ease in China. The sales performance of Canadian stores and agents on our platform recovered rapidly, demonstrating the significant value of our platform. This period of shared adversity enhanced trust to brand owners, store owners, and agents in a bigger platform. while in turn contributed to accelerated momentum and improved operational efficiencies. In 2020, we focused on expanding the scale of our AC network with quality growth The total number of Canadian stores grew by 25.1% year-over-year, reaching 46.9 thousand by the end of 2020, among which over 30% of stores have annual GTV of 15 million RMB or more, which we believe is an adequate level to support sustainable growth of the stores, compared to only 19% in 2019. The total number of agents on the big platform grew by 37.9% to 493.1, by the end of 2020. And more than 30% of the agents in our ACN have college backgrounds. 75% of the total existing home transactions were completed through cross-store collaborations, while Canadian stores contributed over 81% of existing home listings, indicating continuously enhanced cooperation on the platform. Our offline expansion was underpinned by increased industry digitalization, along with our growing online presence. we recorded data for almost 240 million homes in our housing dictionary and VR data for more than 9 million homes. More than 73% of our existing home listings were covered by VR property insurance by the end of 2020. The number of VR property insurance exceeded 66 million in 2020, compared with 3.9 million in 2019. Total MAUs of our platform's apps and the WeChat mini programs increased by 88.3% to 48.2 million in the fourth quarter of 2020, while Baker scores were viewed online more than 1.1 billion times, growing almost 150 times year on year, which implies the increasing significance of the Baker score in assessing service quality for both consumers and agents. Next, let me give you more colors in terms of our existing home transaction services business. In the past year, we further solidified our competitive advantages in the existing home transactions market, continued enhancing consumer experience and empowering brands, stores, and agents to improve productivity and service quality, and achieved substantial growth on multiple fronts. According to FICO's research institute, GTV of existing home transactions in China grew 6.7% to 9 trillion RMB in 2020, while including 7.5 trillion RMB of existing home sales, increasing 11.8% year-over-year. On our platform, GTV of existing home transactions grew 49.5% to 1.94 trillion RMB in 2020. GTV of connected stores grew 109.9% year-over-year, accounting for 48% of total GTV from existing home transactions, compared with 34% in 2019, as third-party stores are increasingly playing a vital role on our platform. We always focus on creating value for our customers and providing them with a wide range of commitments. As well as value-added services, we endeavor to promote the eight core commitments, including authentic listing guarantees, no markup in pricing, transaction from escrow, and Accenture. 84% of stores in top 30 major cities pledged to honor these eight core commitments in the fourth quarter of 2020. And 100% of these stores have endorsed the most foundational commitments, such as authentic listing guarantees. Given that consumer funds safety has been one of the biggest concerns in home transactions, we strengthened the escrow services for transaction funds, which covered more than 80% of transactions non-mortgage payments volume at the end of December. In terms of value added services, one particular noteworthy was the premium package for home sellers services. through which 45,000 housing transactions were completed. Our focus on quality services brought us not only recognition from customers and agents, but also financial rewards. As a result, in 2020, the commission rate of our existing home transaction services increased slightly for both Lianjia and Canadian stores. Meanwhile, brands, stores, and agents on our platform increasingly benefit from efficiency improvement as our AC network affairs play out. In terms of operational enhancement, we vigorously promoted the store scoring and ranking system to find and reward the finest service providers and supporting them to flourish. We also deployed a series of digital operational tools to help both brand owners and store owners carry out systematic business analysis and measures As a result, unit store GTV of existing home sales for both Lianjia and Canadian stores achieved the mid- to high-tense percentage growth rate in 2020. Turning to the new home transaction services business, according to the National Bureau of Statistics, GTV or China overall, new home transaction grew by 10.8% to 15.5 trillion RMB in 2020. Our new home transaction services business delivered robust all-around results, reaching annual GTV of 1.38 trillion RMB with 85% year-over-year growth, the solid performance was primarily driven by the strong GTV growth of Canadian stores and other channels. In order to take better care of our customers in 2020, we focused on advocating the three-day free return commitment for new home sales, which we collaborated with developers to pioneer. In the fourth quarter, this commitment was offered in 100 cities. We put considerable effort to support brands, stores, owners, and agents, and we put their experience in the new home transaction services thanks to our advanced risk control mechanism. Our AR turnover in new home transactions was 103 days in 2020, only slightly increased from 2019, Achievement given that the GTV or our new home transaction grew 85% from 2019 and the industry restored impact from COVID-19 pandemic. As such, agents on our platform have been able to receive their commissions on a timely basis. Meanwhile, to further support the agents, the commission advances. We extended cover more than 40% of new home sales commission split. We successfully brought the whole commission advance progress online and enabled the 24 hours commission advances payments. For operational enhancement in new home sales, we invested in online infrastructure and equipped agents with advanced tools and methodologies. Leveraging our stronger capability to mobilize agents, we made concentrated sales forces possible for certain projects in order to increase productivity and project sales through certainty. These initiatives led to continuously improved capabilities of both our own and kinetic agents and resulted in more than 20% growth in terms of unit store GTV on new home sales. we have built relationships with an increasing number of real estate developers and have provided more tailored and efficient services. As of the end of 2020, the number of new home projects on sale listed on our platform reached 8,600 compared with 2020. At the end of 2019, in the second half of 2020, we directed our emphasis to accelerate new home sales through promoting and implementing cross-city and cross-region sales. We are pleased that our efforts are bearing fruit and our market share and leadership position in the new home transaction services market have gone from strength to strength. A few comments on our emerging services. Regarding our new home renovation services in 2020, we focused on Beijing market to expand our capabilities and product meaningful results. We developed the beta version of the in-house SaaS platform for service providers and an app for consumers, as well as detailed SOPs management. We completed more than 1,200 projects and connected more than 404 men, 5,000 workers, and 200 designers at the end of 2020. For real estate financial services, we have been continuously upgrading products and offerings to optimize customer experience and encouraging financial advisors to interact with customers at an easier stage of the transaction process to improve penetration and customer experience. In 2020, the penetration of our financial services averaged 8.4%. and reached 10.5% in the fourth quarter. Looking to 2021, we have found key focus areas stepped in taking care of the customers, supporting the service providers, nurturing our emerging services, creating social value and fostering the critical role technology plays in the broad market opportunity. First, we continue to see clear signs of the rising power of customers. To embrace this, we have an unwavering commitment to consistently refine the consumer experience through increased digitalization and enhanced service quality. In 2021, we will leverage our capabilities in systematic data collection and artificial intelligence, as well as our extensive offline network to enrich the content offering in new home sales to meet consumers' demand for abundant and accurate online information for new homes. We will start by building out the housing dictionary for new homes, new houses. Each house will have more than 200 descriptions fields that incorporate basic housing information as well as details that our user insight tools have identified as particularly important to Chinese customers. Leveraging our AI technology, we can provide more extensive information, even pinpointing the lighting and noising conditions on different floors. In terms of service quality, we intend to provide our customers and platform participants with even more security and quality through the continuous construction of our platform's infrastructure. Specifically, we plan to make all customer complaints public for increased transparency and further improve customer satisfaction. Second, we are increasingly convinced of the tremendous value of service providers through tools that we plan to launch in 2021, such as 30-day tune rate, easy warning and intervention model, and the professional scoring, ranking, and the training framework for more platform participants. We aspire to identify and retain the finest service providers, including brand owners, store owners, and agents, and empowering them to flourish. we will nurture the healthy development of emerging and other services. Our focus will be on building out our core competencies in home renovation services to achieve multi-faceted customer satisfaction improvement by providing a seamlessly integrated transaction experience. Meanwhile, we will continuously upgrade the product and service offerings and increase the service efficiency of our real estate financial services. For example, we will launch the system to bring all of the financial advisors daily operations online in 2021. Fourth, we are committed to creating more social value. We believe it is our corporate responsibilities to assist in building a stable real estate market characterized by a neutral market view. Our social responsibilities extends to facilitating transit transition in the residential real estate market from an opportunistic one to a more orderly and sustainable one. Meanwhile, we aim to fulfill our broader social responsibilities through a series of initiatives in 2021. For example, our platform will offer agent recruiting and retaining programs to provide more job opportunities to the community. Especially for new graduates, we will continue to upgrade our rental services, offering young tenants more convenient and affordable experience. Furthermore, since our deeply rooted community-centric stores and agents have gradually become gathering points for local residents, We will continue to contribute in community services across the country. For example, we will continue the smartphone training sessions, volunteer our agents, which we offer to more than 147 elderly citizens in the past year. Lastly, on the technology front, in 2021, we will continue leveraging our massive and authentic housing and transaction data and our deep understanding of business scenarios to innovate AI-driven technologies that drive optimal alignment between agents, consumers, and home through smart matching and personal recommendations in housing transactions. This will be implemented with the products, including our AI assistant, Xiaobai, Baker's Pit, VR, and Accenture. We will also push forward data and AI-driven intelligence operations, such as the intelligent operations of BakerCon, in order to improve the overall platform operations efficiency. In summary, the market is rich with opportunity by ensuring consumers' needs and met while simultaneously supporting service providers online and offline. We are driving transformational industry change. The progress we made in 2020 show us we are on the right path. We are confident in our growth trajectory forward as we continue to expand our self-reinforcing network that is greater than the sum of its parts. With this in mind, we will work to create further value for the consumers, agents, sellers, brands, real estate developers, and all other platform participants. With that, I would like to turn the call over to our CFO, Xu Tao, for a close view of our first quarter and full-year financials. Thank you.
spk07: Thank you, Stanley. Thank you, Alvin, for joining us. I would like to provide a brief overview for our fourth quarter of the fiscal year 2020 financial results. We are pleased to deliver another strong quarter of financial results, marked by high revenue growth and a strong profitability. Our net revenue has reached a historical high for the first quarter of 2020, driven by strong GDP growth. Our net revenue increased by 57.6% year-over-year to RMB 22.7 billion in Q4. exceeding both the high end of our guidance and the strict consensus. The rapid growth of net revenue was driven by solid GTV growth of 65.4% year-over-year to RMB 1.12 trillion, along with increased productivity and the continuously improved service quality on our platform. In particular, our net revenue from visiting home transaction services increased by 56.1% year-over-year to RMB 9.2 billion in Q4, mainly due to 69.8% year-over-year increase in GTV of new home transaction to RMB 584.7 billion in Q4. Our net revenue from new home transaction services increased by 58.8% year-over-year to RMB 12.9 billion in Q4, primarily due to a 55.5% year-over-year increase in GTV of new home transaction to RMB 469.2 billion in Q4. Our net revenue from emergent and other services increased by 58.1% year-over-year to RMB 0.6 billion in Q4. The increase was primarily due to the increase of penetration level in companies' financial services around our housing transaction services, as well as increased number of home decoration units completed through companies' platform. Cost of revenues increased by 48.2% year-over-year to RMB 17.2 billion in Q4. Gross profit increased by 97.4% year-over-year to RMB 5.4 billion in 2004. Gross margin increased to 23.9% from 19.1% in the same period of 2019. The increase of gross margin was mainly due to the decrease of internal commission and the compensation as a percentage of net revenue from the sitting home transaction service completed through Lianjia Brand. as well as the sequence of commission to be at percentage of net revenue from new home transaction services to connect agent and other sales channel. Operating expenses for RMB 4.2 billion in Q4, compared to RMB 5.9 billion in the same period of 2019. General administrative expenses for RMB 1.88 billion, compared to RMB 4.56 billion in the same period of 2019. mainly due to the decrease of share-based compensation expenses. Sales and marketing expenses for RMB 1.32 billion, compared to RMB 831 million in the same period of 2019, mainly due to the increase of brand advertising and promotion marketing activities. Research and development expenses for RMB 714 million in Q4. compared to RMB 478 million in the same period of 2019, mainly due to the increase of share-based compensation expenses. Income tuition was RMB 1.27 billion in Q4, compared to loss from operation of RMB 3.12 billion in the same period of 2019. Operating margin was 5.6% in Q4, compared to 1921.7% in the same period of 2019. compensation expenses. Excluding non-GAAP items, our adjusted income from operations were RMB 2.23 billion in Q4, compared to negative RMB 18 million in the same period of 2019. Adjusted operating margin was 9.8% in Q4, compared to negative 0.6% in the same period of 2019, mainly attributable to increased gross margin and improvement of operating leverage. Adjusted EBITDA increased by 2,183.9% year-over-year to RMB 2.9 billion in Q4. Net income was RMB 1.1 billion in Q4 compared to net loss of RMB 31 billion in the same period of 2019. Excluding non-GAAP items, our adjusted net income increased by 4,424.8% year-over-year to RMB 2 billion in Q4. Net income attributable to Kerr Holding Inc.' 's ordinary shareholders was RMB 1.1 billion in Q4, compared to negative RMB 3.7 billion in the same period of 2019. Adjusted net income attributable to Kerr Holding Inc. increased by 4,508.2% yearly to RMB 2 billion in Q4. For the fourth quarter of 2020, diluted net income for ADS attributable to current Holdings Inc's ordinary shareholders was RMB 0.93, compared to negative RMB 7.99 in the same period of 2019. Adjusted diluted net income for ADS attributable to current Holdings Inc's ordinary shareholders was RMB 1.71, compared to negative RMB 1.15 in the same period of 2019. As of December 31, 2020, the combined balance of our cash, cash equivalents, restricted cash, and shorting investment amounted to RMB 65.2 billion, or US dollar 10 billion. And for the full year of 2020, Our business achieved robust operation and financial growth and our GTV increased by 64.5% year-over-year to historical high of RMB 3.5 trillion from RMB 2.13 trillion. Enabling Earth remains the second largest commerce platform across all industries in China and the third largest spending platform globally. Our net revenue increased by 53.2% year-over-year to historical high of RMB 17.5 billion from RMB 46 billion. Our net income reached historical high of RMB 2.78 billion compared to net loss of RMB 2.18 billion in 2019. Our adjusted net income increased by 245.4% year-over-year to historical high of RMB 5.72 billion from RMB 1.66 billion. Looking forward to our first quarter of 2021, we expect our net revenue to be between RMB 18.5 billion and RMB 19.5 billion, representing an increase approximately of 159.8% to 173.9% from the same quarter of 2020. The relative high year-over-year growth of our revenue guidance is mainly due to the significant negative impact of COVID-19 for our business in the same period last year, which results in a meaningful portion of transactions shifted from Q1 to Q2 last year. The business outlook reflects the company's current and preliminary view on the business situation and market conditions, which is subject to change. Last but not least, we've lived the long run under the principle of housing for living, not for speculation. The real estate market in China will continue to shift toward a more stable and steady growth. This in turn will create a more favorable environment for us to carry out our commitment to reinvent the industry and deliver the highest quality service to 300 million families in China. Going forward, we will remain the focus on taking better care of consumer and support platform participants such as brokerage brands, store owners, agents, and real estate developers. to take better care of the consumers while continuously strengthening our competitive modes and our growing business at a faster pace. As we continue to reinvent our agent-corruption network infrastructure, user-based functions, and innovative AI technologies, we are confident we will further enhance our monetization capability and deliver sustainable growth. That concludes our prepared remarks. We would like to now open the call to questions. Operator, please go ahead.
spk00: Thank you so much. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, you will need to press star and 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Again, it's star and one if you wish to ask a question. And for the benefit of all participants on today's call, please limit yourself to one question. And if you have additional questions, you may re-enter the queue. If you're going to ask a question in Chinese, please follow the English translation. Thank you so much. And your first question comes from the line of Elsie Cheng from Goldman Sachs. Elsie, your line is now open.
spk08: Thank you. and the impact and expectation of the year-round performance. The second question is about the competition pattern of the real estate economy industry. 584 has been around for a while, and we also saw that during the Spring Festival, a large number of companies are actively establishing their own digitalized teams. So I would like to ask the management floor about the changes in the competitive mindset of this industry and the strategic layout of the shell. The last small question is about the progress and prospect of new business. Can you share in detail the situation of the operation of the decoration and hardware side? Thank you, management, for taking my questions, and congratulations on the strong results again. I have three questions here. One is really about the changing macro environment and titling regulation in the housing industry in China. How does it impact Beike and its operations in major cities, and how should we think about its impact to our full-year results? And the second is on the competitive landscape. It's been a while since Uber got privatized, and we also observed some developers who are proactively building their own digitalized team. So can management share a little bit more color on your observation in the key trends in the industry and bigger strategy in sustaining the competitive mode? And the last one, it's about emerging businesses. We continue to see the GTV and revenue scale robustly in the segment. Can management share a little bit more color into the progress of operations in our home decoration and financial services? Thank you.
spk07: Thank you, Ailsi. This is Xu Tao. Let me address your first questions. Let me talk about some policy changes recently. So overall, China's housing policy is aiming at promoting housing for living, not for speculation, and preventing the financial systematic risk arising from the real estate market. with layer, mirror, and city-specific policies. So in Chinese, we call this as . A stable growth market is beneficial for the sustainable development for Beike and the industry as a whole. The SOFA policy we saw to slow the market from overheating by using a relatively mild regulation can be implemented in a timely manner to prevent the most severe regulation measures and a greater market fluctuation down the road. As part of the long-term mechanism to maintain an effective housing market, it consumes the It also consumes the volatility of the real estate market that was often seen in the past and makes the competitive landscape more about the scalability, quality, and efficiency and creates a favorable environment for Baker and the whole industry. From our observation, the recent housing policy has no significant or direct impact on the national real estate transaction momentum, nor brought significant changes in the overall market price of the transaction volume since the policy has been limited to some overheated cities like Shenzhen and Shanghai. But the housing is still necessary and the demand in China. So let me talk about Shenzhen. In Beike, actually we have a basic presence of 402 cities and all of our incremental revenue was mainly come from is the star city of Baker. Its market share improved from 70% in 2018 when we launched Baker to 29% in 2020. It still counts low single-digit percentage of Baker total GDP in 2020. So we would like to say at present that we don't have a centralization problem for specific cities. And Baker is a platform company, and our nationwide platform is able to mitigate the downside risk of the deviation from any particular cities. And also for Shanghai, and Shanghai is a large visiting home sales market in China, with largest housing stock over 2 million. Measures in Shanghai are relatively mild, with a limited impact on the transaction volume, and we believe the city will return to a healthy market with active trading in due time. The recent merits in Shanghai are not as strong as Shenzhen, and the impact on the transaction volume and the price will be relatively mild. This is your first question. Regarding some competition, yes, we do notice some peers step into this area. So normally, we don't comment on other peers' performance directly, but the two things are very certain. Baker's IPO has inspired so many people and that there will be more players and capital step into the residential real estate market. The second, Baker is very confident and is very happy to see new industry entrants to step into this area and allowing us to further enhance our capability to be the leader of the industrial internet. And I think deeply about our strategy, that is how to take care of our clients and how platform participants to take a better care of our clients. Regarding the marketing conditions, I would like to say that the right is there is still some competition among investors, among developers. The developers may hesitate to use somebody's one developer as their brokerage channel due to the competition or might worry about the customer ,, which makes the cooperation mechanism even unlikely. Baker will hold the different value proposition against to set target or make a promise on the future valuation at the beginning of the entrepreneurship. Baker's strategy has never been changed. Again, our strategy is to take care of customers and have a service provider to take care of customers. So from the financial number and the business performance perspective, no impact to Beko. If you look at the GTV, our takeaway and contribution margin in the past three years, the GTV will increase from $280 billion to $747 billion. And last year, we further increased to $1.38 trillion. And the take rate for the new home sales, we have a modest increase. So our take rate increased from 2.68 to 2.71, and last year increased to 2.74. And the contribution margin for the new home continues to improve. And the input from $3 billion to $4.9 billion, and the last year is $8.2 billion. And the DSO, we also, all of our scalability doubled year over year, but our DSO is improved. In 2018, 117 days, and 2019, 96 days. Last year, we have slightly increased, 103 days, just as a combined impact of COVID-19. If you look at the Q3 and Q4 number, we are reduced to 87 days. there is no significant impact. So the last question regarding our business strategy for the new business, I would like to invite our CEO, Stanley, to give the answer.
spk04: Hello, this is a new business. Let's look at it this way. For example, next month, we will have our shell established for three years. But in fact, before the shell was established, we had been in the business for 17 years. So we have a deep understanding of this industry, that is, we need to establish standards first, that is, we have to do it vertically first, and then take the standards out, and then do it horizontally. So in the area of housing, it's all very big, including what we saw today, real estate transactions, decoration, and housing. Many of these areas are very large, these racetracks. So we have a lot of expectations for the second new business, because its market space is still relatively large.
spk06: This is Danny. Let me address your question in terms of the emerging services development. So the next month, we will enter the three years of anniversary for the Bitcoin platform, as well as almost like 20 years of anniversary. So in the past 20 years, we actually accumulated a lot of experience, especially during our procedures to restructuring of the halting transaction. industries. So we really focus on how we can build up the overall standard to the industry. What we get to take from the past 20 years experience is we need to doing the business horizontally firstly, right? So then after that, when we get to know the know-how of the industry, we can start to doing the platform business vertically. So that's also what we get to take. And we noticed for a lot of different kind of the business, such as housing transaction or the decoration, as well as the furnitures, Each of them has a significant big of the potential market size. So we'll continue to develop the opportunities there.
spk04: So this is the second question for you. Because we feel that the core of this kind of heavy Internet or industrial Internet is to bring these standards out. This requires some time and know-how to accumulate. So when we look at new racetracks, we have this logic to choose from. First, the industry needs to be big enough. Second, we need to have the ability to create value. Third, it has to do with our mission. Our mission is to serve with dignity and live in a better way. That is, we will use our mission to build our new racetrack. So based on these few points, I can share two. For example, one is home decoration, the other is finance. We are still focusing on packaging in Beijing. We want to bring out the SOP and system standards of the entire industry. This is something that we have to do if we want to transform the industry. So we will polish our packaging in Beijing in 2021. Oh.
spk06: We're looking for the opportunities in the industrial internet going forward. When we look at the potential sectors to develop, we always look at the following characteristics. Firstly, the industry should be very big enough. Secondly, we also look at how we can copycat and iterate of our capabilities from the past years of the operational experience. And thirdly, we also look at the potential opportunities within that track. So from that perspective, I can give you two examples going forward in terms of our continued development. So first is about the decoration business, and secondly is about the financial business. For the decoration business, in the year of 2021, as I described in the prepack remarks, we'll continue to focus on the Beijing market We will focus on to build up the SOP for this industry and build up the SaaS system, as well as continue to iterate of the system's capabilities. So we will focus on the workers' management as well as the overall industry chain management in order to further build up our capability within of the decoration business in Beijing.
spk04: In terms of finance, we will upgrade the entire system process, including the system construction of the entire financial consultant today. We will do a corresponding upgrade. Second, we will face C-end users, including some products of Anxinbao, which is for business owners and banks. How to improve this kind of onlineization and flow of resupply? We will carry out corresponding explorations in this place in 2021. At the same time, we will put a lot of good practice in 2020 and will promote it to more cities. Yes, this is our direction in finance.
spk06: In terms of financial business, for this year, we'll continue to improve our capability to promote the online process. We will try to build up a system for the financial advisors to ensure the working procedures can be completed online. And meanwhile, in terms of the customer side, we're also trying to promote the products such as the Safeguard and Symbol products for home sellers' mortgage redemption needs. So in order to connect the buyer's mortgage with the seller together to further improve the user experience. So in the future, as I mentioned, so looking into 2021, we'll continue to explore the good practice as well as other explorations within of the financial services. Thank you.
spk08: Okay, I understand. Thank you very much.
spk00: Thank you so much. And your next question comes from the line of Bin Bin Di from JP Morgan. Bin Bin, your line is now open.
spk05: Hello, Mr. Guan. Thank you for accepting my question. And congratulations on another strong record. My question is mainly about our pricing strategy. I have noticed that now we are gradually promoting this 3% discount rate in some cities. I have a few small questions about this. First, how many cities have we started to use this 3% rate? Second, in each city, do we have a unified price for this chain of energy and third-party energy? The third question is, do we plan to expand this 3% rate to more cities? Then how do we look at So my question is about the pricing strategies. We noticed that recently, Baker has gradually raised the secondary home transaction commission rate to 3% in some cities. So I was wondering, number one is, in how many cities have they started to adopt the 3% commission rate? And second is, in each city, how do we differentiate the pricing of our in-house Lianjia stores versus third-party connected stores? The third one is, are we going to further expand the 3% pricing to more cities in China, and how should we look at the secondary home commission takeover in the rest of the year? And a related question is, do we have any plans to increase the commission rate in new home transactions in the near future? Thank you very much.
spk07: Okay, thank you. Let me address your question. So for our commission rate for the existing home, actually we want to clarify the level commission rate actually reflects the service quality and transaction efficiency. The market of existing home sells is a market with a full competition and a balanced supply and demand market. Rising commission without being justified by service quality or transaction efficiency It's just like water without a source and a tree without a root. In other words, it's just not sustainable. So with the neutral market view, our platform will actively explore a bilateral commission model to balance the financial burden between the buyers and sellers while striving to improve the overall service quality, commitment, coverage, and the ability to identify the customer with strong purchase power in order to support the local brand to improve their marketing power. So the basic infrastructure of Baker is community centric store network. So to balance our recent home and the new home sales is very crucial. And we encourage our agents to take part in the community service. and self clamp better and the build-up to long-term commitments and professional dignity to continuously improve the service quality efficiency and offers the most of guarantees so if you look at our tick rate for our using home cells in past three years so this is still in a modest increase for our proprietary brand of Lianjia in past three years the commission rate from 2.32 And the last year is 2.4. And for our franchise brand of the year, the commission rate up and down in a very limit range. So it's varied from, it's changed from 2.15% and 1.99% and last year is 2.00%. And for our connected brand in Baker platform for 278 brands, so the weighting average, the tick rate, they have a modest increase from 1.89 to 1.92, and the last year, 2.07%. So inclusion. So for our existing home commission rate, we expect a steady growth in both Lianjia, Biyou, and our connected stores. The existing home sales commission rate are more commitment covered, and the quality service are improved, and this will be the benefit from our platform. And for the new home commission rate, actually for new home sales market is also a 2B market, in which we play an important and equal role with the developers. This is a perfect market, and the high commission rate reflects our high efficiency, fast cash collection, So it's a long road for the new home commission rate. In order to maintain a mutual and beneficial and sustainable relationship with the real estate developer, we expect the commission rate to remain stable and at around 2.77%. Thank you.
spk05: Thank you very much.
spk00: Thank you so much. And your next question comes from the line of Stephen Chai from Morgan Stanley. Stephen, your line is now open.
spk01: 管理層,你們好。謝謝接受我的提問。 那我的問題是關於三方門店的提效。 那先前管理層曾經提過說平台上的cohold門店在第一年、第二年分別能提升100%、26%的店效。 那能不能跟我們分享一下比較後期加入的品牌跟門店, 像是在19下半年或是去年上半年。 Thank you, Benjamin, for taking my question. My question is related to the sales efficiency improvement for the connected stores. You previously mentioned that on a cohort basis, the third-party stores improved GTV per store by 100% and 26% in their first and second year, respectively, on the platform. So just wondering if there is any difference for the stores that joined later in second half of 19 or first half of 20 in terms of a sales improvement trend that you have observed so far. Thanks.
spk07: Okay, thank you. Actually, we would like to say in 2020, Baker connected more than 47,000 stores and 493,000 agents. And our GTV year-over-year, as I mentioned just now, increased 64.5%. Among these incremental facts, we the agent cooperation network to promote healthy platform development and prevent the racial competition through the ecosystem governance. So in 2020, raising bigger price for more than 81.5% listing actually come from third-party stores and more than 75%. There's a cross-store transaction and more than 36% is cross-brand collaboration. So as a consequence of this, so if you look at our number, the store efficiency, namely the annual GTV per store in 2020, this is the total number. For the third brand of Lianjia, year-over-year increased 21.2%. And for our franchise brand of Douyou, year-over-year, they increased 18.7%. For our connected brand in Baker platform, year-over-year efficiency increased by 17.2%. This is a big picture. If you look at the cohort base, at the cohort base, their efficiency year-over-year increased just over 26%. Thank you.
spk01: Thank you. It's very clear.
spk00: Thank you so much. And your next question comes from the line of Jam Lam from UBS. Jam, the line is now open.
spk03: Thank you, management. Thank you, management. This is the first question. The second question is about the margin. Last year, the adjusted net margin was about 8.8%. Which city has the highest net margin? How high is the highest margin in that city? These are the two questions. Let me ask you a question. So there are two questions for me. Number one is about what do we see in terms of the GDV trend for the primary and also secondary transaction? And also, do we have the guidance for 2021 GDV? And my second question is regarding the margins. We see that during the fourth quarter, adjusted net margin is about 8.8%. And which city has the highest adjusted net margin? And what is the level of that margin? Thank you.
spk07: Thank you, John. Just to talk and let me address your question. So we see steady growth, especially for the home sales sector. This will be the front in our outlook for the first quarter. As I mentioned just now, we expect the revenue for the first quarter of 2021 will be reached 18.5 to 19.5 billion RMB. So we cannot give the very detailed number for the Q1 because Q1 is due on progress. So regarding the second question, where cities margin is high, so let me clarify. Internally, we do not measure our financial performance by cities. We are just a consultation of the legal entity. So and also we just can come and say internally we have a measurement. This is a managerial measurement. It's like the store efficiency. As I just talked with the last analyst, say we measure the store efficiency by different city, different brand. So this is our internal measurement. And so far, we can see the Shanghai city, the store efficiency is very good because when we have our business, we step into Shanghai for three years, and we continue to recruit new graduates from the college. And also in Shanghai, our local management teams issue so many service guarantee and so much contact for the agent. So overall, the client satisfaction has improved. API has continuously improved, so the efficiency of our store as a consequence continues to improve as well. Thank you.
spk00: Okay, thank you. Thank you. Thank you so much. And our last question comes from the line of Thomas Chong from Jefferies. Thomas, your line is now open.
spk02: Good morning. Thank you, Manager Cheng, for accepting my question. Congratulations on your long-term performance. I mainly want to ask about our long-term outlook. In the next few years, will our GTV goals and our profitability goals be more optimistic? And in the future, My question is more about the long-term outlook. Can management talk about how we should think about the long-term trend in terms of the GTV and profitability, are we getting a bit even more optimistic about the outlook in the next few years? And on the other hand, can you comment about any technological upgrade that we should be aware with regard to our back-end ecosystem? Thank you.
spk07: Thank you for the question. This is Xu Tao. Let me address your first question. Regarding our launching GTV, Ramya, and the profitability projection, actually, last year, when we prepared the IPO, we have an IPO model and the releases to the market. We still keep our IPO model as I changed. So in that model, in 2024, we see the GTV will be $7.6 trillion. That revenue will be over $161 billion. And that profit will be adjusted net profit will be $18 billion. So far, we will not change this projection. Because we need to balance our investment in the future and also our profitability. But with the management of Baker, we have a strong confidence to beat and raise on this. So regarding your second question, I will invite our CEO to give some further explanation.
spk04: Yes, because with our network, there will be a lot of data. So we are focusing on the core of ASN. Through technology, data, and AI, we can bring many products to the market to provide better services to our customers and our managers. as well as the so-called AI smart robots. These will greatly optimize and improve the efficiency of the entire process. So in this, we have a definition of ourselves. In fact, we believe that this kind of industrial Internet can be upgraded to a greater degree by engineers plus agents, or by technology plus servers. This may be the first optimization of ASN this year.
spk06: This is Stanley. Let me address your second question. So since we actually have been accumulating huge amounts of data in our operational history, so in terms of the ASIN evolution this year, we'll continue using the technology as well as the AI capability to continue to iterate our products and to further help the agents to get better services as well as serve better to our customers. So we'll using a lot of different types of the you know, the truth as I mentioned before such as you know Baker's peak as well as our AI assistance of a Which is help the agents agent people to continue out in mice Optimize as well as to improve their efficiency as well as productivity. So in the following in the previous of the experience of In terms of the industrial internet, we truly believe the engineers' capability definitely can help of the service as well as the service providers within the industry can bring better. So definitely in the future, we will combine the two parts of the culture and the capability together to continue to improve the efficiency and the productivity for the AC network. Thank you. Thank you.
spk00: Thank you so much. And due to the time limits, I will now turn the call over to your speaker host today, Mr. Matthew Zhao, for closing remarks.
spk06: Yes, thank you, Operator. Thank you once again for joining us today. If you have further questions, please feel free to contact Bakersey Investor Relations teams through the contact information provided on our website. This concludes today's call, and we look forward to speaking with you again next quarter. Thank you and goodbye.
spk00: And that does conclude our conference for today. Thank you for participating. You may all now leave.
Disclaimer