KE Holdings Inc

Hello, ladies and gentlemen. Thank you for standing by for KE Holdings Incorporated's third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. Also, today's conference call is being recorded. I will now turn the call over to your host, Mr. Matthew Chow, IR Director of the company. Please go ahead, Matthew.

Thank you, operator. Good evening and good morning, everyone. Welcome to KE Holdings Inc. of Baker's third quarter 2021 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.co.com. On today's call, we have Mr. Stanley Yongdongpeng, our co-founder, chairman, and chief executive officer, and Mr. Tao Xu, our Executive Director, and the Chief Financial Officer. Mr. Peng will provide an overview of our strategy and business development, and Mr. Xu will provide additional details on the company's financial results. Before we continue, I refer you to our Steve Harper statement in our earnings press release, which applies to this call, as we'll make forward-looking statements. Please also note that Baker's earnings press release and this conference call includes discussions of an audit gap financial information, as well as an audit non-gap financial matters. Please refer to the company's press release, which contains a reconsideration of the audit non-gap matters to comparable gap matters. Lastly, unless otherwise stated, all figures mentioned during this conference call are infinity. With that, I will now turn the call over to our Chairman and the CEO, Mr. Stanley Peng. Please go ahead, sir.

Thank you, Matthew. Hello, everyone, and thank you for joining us today on our third quarter 2021 earnings conference call. Before I go into more details, let me first provide a big picture view of our industry. During the past quarter, the entire big housing transactions and services industry, including ourselves, faced a series of challenges. At the new and existing home and land market experienced substantial corrections, transaction rules, marketing making a historical corner. The industry collectively made difficult but correct adjustments. Not only is economic growth driven by high leverage not sustainable, but it will also negatively affect people's lives and create systematic risks. result correction creating the developer's business model that were based on high turnover, high leverage, and a high housing price. Our national policy, goal of housing is for living, not for speculation. That encourages both housing purchase and renting will become a castle in the sky. If the housing transactions and service industry blindly expand, in scale without offering some professional services, it will be unable to ensure service quality nor adequately protect our consumer rights and an efficient housing market will be impossible. When we talk about do the right things even if it is difficult, we are referring to instance where there is an opportunity to undertake daunting tasks with a weak payoff in a short time, but will prove to generate great value in the long term. As a participant of an industry in need of reform and under guidance of the Chinese government's policy to correct market instability and create more equitable housing circumstances, it's a big hostility to shoulder the responsibilities for the great good rather than solely serving our business needs. We firmly believe China's housing industry is facing crucial development opportunities. A promising era for existing homes and better living is coming up upon us at an accelerated pace. With that backdrop in mind, let's talk about the industry and overall performance of our company in more detail. A series of policies such as purchase restrictions, loan quarter limits, sales restrictions, reference prices, financing limitation, payment restrictions, and recent ad alerts from several developers have also dragged down market sentiment. The result has been a significant downtrend in the existing home transaction market in first tier cities and more second tier cities. GTV of existing home sales market declined 41.6% year-over-year, while GTV of new home sales market declined 14.1% year-over-year in Q3. During the shock market downturn, the ecosystem of the brokerage industry worsened quickly. The total number of brokerage agents on our platform shrunk, and the brokerage stores faced severe challenges. In Q3, the number of stores on our platform with a trailing 12-month CTV exceeding the line of RMB 15 million become 3.3% quarter over quarter, accounting for 33.7% of total stores. Our mission is to promote admirable services and joyful living in China. We have come to a point where our corporate culture, organization capabilities, and our two decades of successful operations play a pivotal role as we move ahead. We have a strong team of senior managers taking charge at the divisions, provincial, and city levels. These dedicated leaders average more than 10 years' usual services at a big club. They see better industry developments as their personal responsibility. With their seasoned team and great determination, we are confident we can navigate the tough market cycle and come out even stronger. During the third quarter, we implemented a range of measures to ensure stable operations and a sufficient income for high quality store owners and agents. We strive to inspire owners and agents to make the right choices, provide quality services in the face of challenges, and deliver on their commitment to take care of customers against interferences. We believe the key is focus and collaboration. First, we have resolutely promoted our agent specialization strategy. increasing productivity through remaining focus. Second, we are diverting more resources to new home sales and rental services. Third, we further encourage cross-brand, cross-stock collaboration and cooperate among existing and new home sales and rentals. We also promote joint efforts between new and seasoned agents, as well as between functional functional teams, and the business team. Together, we keep our feet on the ground and carry on. During the third quarter, the number of Canadian stores on our platform increased 2% quarter over quarter to 53,946, and only 1.7% of stores on our platform closed due to a market correction. We also facilitate some store merges to improve productivity. Advised low efficiency stores based on a target diagnostics and dropped some non-cooperative stores from our platform. This also demonstrates that there is increasing stickiness among Canadian stores on our platform. And a growing number of stores outside of our ACM have joined us for support. during the down cycle. 29% of new stores that joined our AC network in Q3 were from external Fengjianghu stores, compared with 22% in Q2. The number of agents on our platform was 515,000 at the end of Q3, 6% lower than the previous quarter end. The decline was a result of increasing aging attrition resulting from the market correction. For the most part, this has been the industry normal, but also due to our initiatives in some cities to improve overall aging quality. As we implemented various mitigating measures in Q3, the aging attrition rate in Beijing and Shanghai remained lower at 3.9%, better than the four 4.7% we saw during the same period last year. Despite this broad challenges, our collaborative spirits continue to be the foundation of our business. In Q3, transactions on our platform completed. Through cross-door collaborations and the proportion of existing home listings Contributed by Nunley and Jack Nelly stores, both remain stable at 76% and 85.5% respectively. Moving to our quarterly performance and the measures we have taken with each of our business lines. With respect to existing home transaction services, according to Baker Research Institute, nationwide GTV for existing home sales decline 41.6% year-over-year in Q3. GTV for our existing home transaction was 378 billion RMB, with a year-over-year decrease of 34.3%. Specifically, GTV for our existing home sales decreased by 36.8% year-over-year, demonstrating a relatively resilience of our business in the down cycle. Function allocation is the foundation of our ACM. Division of labor brings focus, focus brings professionalism and competitiveness, and cooperate, bond these all together. To this end, we ask you, our aging specialization strategy, the overall 31,000 stores in Q3, covering over 300 Transaction completed collaboratively by specialized agents on our platform accounted for 29.6% of total transactions in Q3, up from 14.4% in Q2. We are also making strides in digital empowerment. We launched the Xiaobei existing home sales training camp which is an online standardized and intelligent system for vocational training. The Xiaobai training camp simulates the interactions between agents and customers in VR and offline property assurance and provides performance evaluations, leveraging our AI capabilities. We can identify best practice in the process, as well as each agent's weakness for target training. In Q3, More than 125,000 agents took Xiaobei existing home trans-sales training in more than 1.2 million essential sessions. In the future, as we accumulate more data in existing home sales services, Xiaobei Training Camp can be used for broader vocational training fields such as new home sales and home renovation services. Turning to new home transactions, as we mentioned, The degree of correction in the new home market in Q3 exceeded our expectations. According to the National Bureau of Status, GTV or property sales decreased by 14.1% year-over-year in Q3. Our new home sale GTV was 410 billion RMB, down 2.5 year-over-year, performing much better than the broader market. the overall industry continued to trend downwards from July to September, leading to further buildup of pressure on sales through. On the other hand, brokerage penetration bottomed out in Q3 as developers became more reliant on brokerage channels to accelerate sales to preserve liquidity. This, in turn, benefited those new home sales channels that provide quality services, protect the interests of consumers, and hold strong agent mobilization capabilities. We can see this by looking at the increase in the number of new home projects for sale on our platform, which rose 36% from June to September, while our platform has been well recognized by developers, we continue adhering to high standards for project cooperation and performing end-to-end risk control to ensure timely and healthy payment collections. In our new home business, we have prioritized timely payment collections over scale expansion or any other metrics. In our view, timely collection always trumps commission rates. We strictly implemented an end-to-end risk management and control system, which enables response measures within 24 hours after a risk warning is treated. We do not expect to have significant risk in our new home business. We operate in a high independent fashion and have never relied on resources in domains or relationships for our growth. Our confidence comes from the southern of excellent stores and agents on our platform, and a strong customer recognition they have gained by performing high-quality services. We are also far ahead in digitalization and enrich online content for our new home business to provide consumer objective, neutral, personalized online content that narrows information gain. We are encouraging occupational generated content. or OGC, we are building an open platform to enable those professionals to supply comprehensive commentaries, positive or negative, and empower customers with more information and informed decision-making capabilities. This will further enhance the platform generated content, such as our housing dictionary. At the end of Q3, our housing dictionary had achieved 100% coverage of the target new home listings on the market. Notably, in Q3, we create China's biggest database describing unfavorable factors of new home projects. This lays the groundwork for Baker to bridge the information gap and provide truly reliable and useful new home content. We will never stop our pursuit of top quality services. During market corrections, we believe it is more important than ever to emphasize the governance of new home business conducts. At the end of Q3, our Five Don'ts commitment to developers have covered all developers in 66 cities, 11,191 new home projects in total. By mid-October, we identified a total of 47 misconducts and provided nearly 2 million RMB in compensation to developers, fulfilling our commitment to them. Moving to emerging services, in Q3, we steadily progressed home renovation business, including self-operated Beiwu and Shendu, which we are in the process of acquisition. Beiwu completed the renovation of 1,127 home renovation units in Q3 up 35% quarter-over-quarter, while the contracted sales of Shendu also increased more than 35% year-over-year by the end of Q3. Regarding its operations, they will achieve breakthroughs in empowering both services providers and customers in Q3. For service providers, Craftsman Academy, the industry's first full services vocational training base, opened in September. It aims to cultivate renovation professionals across the industry chain, nutrient designers, foremen, workers, and more. The focus is on general and professional competencies and leadership. In September, 394 foremen took part in the training. Long-planned by the shortage of high-quality services providers. Industry infrastructure, such as Craftsman Academy, is designed to upgrade renovation services standards and help industry practitioners achieve personal growth. Meanwhile, we upgrade our home thought system to manage and empower both foremen and workers. This upgrade allows even the construction process to be standardized, modulized, assessed, distributed, and managed to the finest granularity. Labor and materials are centrally deployed by the platform with an accurate and controllable budgeting process. For customers, they will launch 10 hard-to-hard service commitments in September. to address the renovation industry key pain points for customers. Our pledges include double compensation for malicious increase beyond the scope of the contract, double refund for under the table charges, triple compensation for using fake materials, compensation for delays, and six others covering alerts, covering areas of budgeting materials, construction, timelines, and services. In summary, in this round of corrections, we are accelerating our thinking on the additional value we can create for society and our social responsibility we should take. The answer has become increasingly clear. In China, people's yearning for a better life is reflecting in their desire to live and work with joy. To facilitate joyful living, we hope to provide a rich variety of high-quality and affordable housing services and products for those, including the fresh college graduates, low-income new urban citizens. Therefore, we are devoting more talent and resources to innovations and our rental services and a regeneration of older residential communities to facilitate work that is rewarding and fulfilling. With the government's support of vocational education, we have established a multiple layer training and education system for housing services providers. This includes the Original Force Academy for brokerage brand owners, Huachao Academy for store owners and a brokerage academy for agents, as well as Craftsman Academy for renovation services providers, as we mentioned earlier. Our goal is to have more home-related services providers with a path for long-term career development and cultivate more high-quality professionals and technical experts for the industry. All in all, despite the short-term impact on our business, and the industry at large during the market downturn. The overall trend in the housing market remains healthy. Lately, regulatory authorities have responded multiple times to market concerns. Consumers with reasonable funding needs are gradually being met. Meanwhile, by the accelerated introduction of a property tax pilot program, we believe that a long-term regulatory mechanism can be quickly formed. In turn, we see promoting the emergency of a new patch of existing homes and quality services sooner than we expected. The real estate sector in major developed countries accounts for approximately 10% to 12% of a country's GDP. Housing investment makes up only about 5% and the rest comprise a broader array of housing services. In contrast, the real estate sector contributes to merely 7% of China's GDP. This housing investment makes up a majority of China's real estate sector. This indicates massive potential for our domestic housing services industry. If the past five years have been the golden age of real estate development, then the next five years will be the age of joyful living, characterized by quality housing services. Short-term fluctuation imposed on long-term secular trends are simple noises. We follow our inner compass, and we will persist to become the leading comprehensive home services providers for the 300 million families in China. With that, I would like to turn the call over to our CFO, Tao Ge, for a closer review of our third quarter financials. Thank you.