KE Holdings Inc

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.

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.

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.