KE Holdings Inc

Hello, ladies and gentlemen. Thank you for standing by for KE Holdings Incorporation's fourth quarter and fiscal year 2021 earnings conference call. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I'll 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 KE Holdings & Albeco's fourth quarter and fiscal year 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.ke.com. On today's call, we have Mr. Stanley Yongdong Peng, 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 strategies and business developments, and Mr. Xu will provide additional details on the company's financial results. Before we continue, I refer you to our CPAPR statement in our earnings press release, which applies to this call, as we will make forward-looking statements. Please also note that FACO'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 reconsideration of the audit non-gap matters to comparable gap matters. Lastly, unless otherwise stated, all figures mentioned during this conference call are in the media. 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. Thank you for joining Bitcoin's first quarter 2021 audience conference call. 2021 was a year of unprecedented hardship with lots of passing, the significant correction in the real Eastern market, and the new paradigm for the internet-based platform economy. Massive changes took place, both internally and externally, posing many new challenges to our company. However, this is not uncharted territory for us. Over the past 21 years, difficulties and change have accomplished us and gotten us where we are today. For an organization, it's not hardship when everyone within it is working together toward a common future goal. It's not hardship when an organization proactively resolves a problem it encountered and get better and stronger from the experience each time. This is when hardships become a blessing, rising to challenges, transforming through changes, and deriving more vitality in the process. It's embedded within our DNA. This is also our stance and solution to address the current hardships. Market fluctuations have their own logic and inviolability. The many changes happening right now, or that will happen in the future, have there ceased so a long time ago. From a long-term perspective, the market will revert to its mean, and in the short term, the market will gradually recover. Our underlying belief about the housing-related industry has never changed. It is certain that digitalization catalyzes industry transformation. Service providers are indispensable, and service quality builds customer trust and transcendent market cycles. It's also certain that a business model or industry is characterized by slow early stage development, which means it will take time to establish a virtuous cycle, yet Once we move past the inflection point, business will take off very quickly. All the right things we are doing now will surely sow the seeds for a better future. Therefore, we have a deep peace of mind. We are undisturbed by external fluctuations, and we propel ourselves to looking forward for answers. Be the enterprise of the era. That's our answer. At the end of 2021, we officially launched Baker's One Body, Two Wings. Strategic upgrade. One Body refers to our call, which is our existing and new home transaction services business, while Two Wings refers to our home renovation and furnishing offerings and our inclusive housing services. Through our upgraded strategic focus, we aim to fully energize our wins as we accelerate our core business progress towards its goals. Building an increasing presence in the wide housing related service industry, reaching consumer more broadly and enduring through our diverse array of sources and product innovations. and becoming a new living services provider that make home a better place. By that, we are responding to the higher requirements put forward to us by our country and society in this era, capturing to consumers' fast-evolving demands from finding a place to live to a place to enjoy living as housing price stabilizes and at the same time meeting an organization's need for continuous iteration and progress. It provides long-term vision for our talent and drives the organization to thrive. Can we do this? If something is relevant to our mission and vision, and it is something we have a strong desire and adequate ability to accomplish, we can. Why can we do this? Over the past 21 years, Lianjia expanded its single-city presence in Beijing to nationwide, and Beike grew from a pilot in Zhengzhou and several cities to a platform operating in over 100 cities across China. During this time, we iterated a completed set of methodologies to grow from zero to one for the industrial Internet. We accumulated rich experience and learnings, such as cultivating key capabilities in each stage and finding the right place for the team. Sometimes you can't go too fast. If you want a tree to grow taller, you can't rush it to blossom or bear fruits. The aim needs to be higher and faster. Other times, you must beat up and keep running forward with all your strength to achieve fast iterations. Our team is extremely adept at reflection and abstract thinking, which enables us to constantly learn from experiences, accumulate and improve. Our profound set of zero-to-one methodologies also give us full confidence in our expansion into new business areas. Next, moving to our fourth quarter of 2021, of progress implementing the One Body, Two Wings strategy and our future plans. Thanks to policy support, the market has shown signs of bottoming out since the fourth quarter of last year. However, it will take time for transaction volume to fully recover and the industry supply side to further contract in Q1. According to data from Kong Bai Research Institute, Kong Bai Yan Jiu Yuan, as of the end of last year, the industrial number of agents has contracted by at least 30% to 40% with wide variation across cities. In comparison, on the Baker's platform, we have 51,000 Canadian stores by the end of the fourth quarter up, 8.7% year-over-year and down 5.4% quarter-over-quarter. The number of actual stores exceeded 45,000, up 4.4% year-over-year and down 8.3% quarter-over-quarter. The quarter-over-quarter store reduction was mainly due to a few newly added stores during the market down cycle, as well as store merge to stay competitive. At the end of the fourth quarter, we had around 455,000 agents on our platform, a decline of 7.8% year-over-year and 11.8% quarter-to-over-quarter. Our two agents were around 407,000 down 8.7% year-over-year, 13.1% quarter-over-quarter, and 18.1% 18.6% lower from its peak in the second quarter in 2021, which was in line with our expectation. Our resilience compared with the broader market was largely owned to our aging mechanism and aging specialization, which brought our aging more opportunities to take part in transactions and more stable income. This, together with the base compensation guaranteed to high-quality agents provided by solid store owners, empowered our platform with stronger agent retention capability and resilience. Meanwhile, given the lower housing transaction volume in the fourth quarter, we temporarily cut back our online advertising budget and experienced a decrease in platform traffic In the fourth quarter, we have 37.4 million MAUs on the Baker app and the MIDI program, down 22% year-over-year. Nevertheless, as the market recovers, we expect our online traffic to resume growth in 2022. Moving on to existing and new homes. Regarding existing home transaction services, according to data from Baker Research Institute, GTV of existing home sales market dropped 43% year-over-year in the fourth quarter, and the GTV of existing home transactions on Bitcoin's platform was on the 354.6 billion, down 39% year-over-year, of which existing home sales declined 41%, slightly better than the overall market. Existing home transaction volume is some key cities have started to bottom out. We believe the key to successful brokerage business operation is collaboration and focus. In 2021, we established rules such as agent specialization and agent and store ranking system. We find our existing home sales leads allocation mechanism and direct it agents and stores to focus on homeowners' retention through platform resources deployment, all of which enable us to lead agents to focus and collaborate, strengthening the superior and exclude the inferior. We are also firmly committed to investing in industrial infrastructure. As of the end of last year, we started to operate 200 and 98 contract service centers in 30 key cities. And over 90% of the existing home transaction signing process was completed in these centers. As part of our infrastructure, these centers not only improve customer signing experiences, ensure firms' safety, but will also become one of the best scenarios to direct traffic to our emerging business segments. turning to new home transaction services. The new home market declined 20% year-over-year in the fourth quarter, and the GTV, or new home transaction, on Baker's platform dropped 24%, slightly underperforming the market, meaning as we cut back our new home transaction business due to the liquidity risks of developers to ensure the long-term health of our business. From short-term perspective, it will take more time for the overall new home market to recover. We have prioritized new home risk management to ensure safe home handovers to buyers and payment collection by service providers. With the premise, we also hope to help developers through higher sales efficiency. The key to improving sales through is to provide a work environment that give agents a sense of security with the knowledge that they will receive their commission on time, and their transaction will not be broken by any misconduct such as client information leakage that has prevailed in the industry. In 2021, we continue to promote new home business conduct improvement plan, establishing infrastructure and comprehensive procedures to prevent, intervene, trust, and penalize misbehaviors. We investigated and deal with over 3,000 incompliance cases throughout the year. Agents were feeling safer doing new home sales business. We further developed our systems and tools to enhance agent capabilities. Our Xiaobei training camp also enhanced agents' familiarity with new home projects and their ability to introduce them to customers. 98% of agents in the pilot program use our Xiaobei assistant at night to answer questions on their behalf and pick up the conversation the next day, significantly reducing the loss of customers at night. Looking forward, Regarding our brand body, the housing transaction services business, we have a committed goal in mind and a clear path to get there. Our goal is to offer better customer experience and gather more capable and ethical agents, store managers, and brands. And the path leading to this long-term target is simple. Take care of our customer and helping service providers take care of the customers. empower agents and raising their professional ethics, improve store quality, and become friends with the communities. In 2022, the first target for our core business segment is to neutral capital, ethical, and dignified service providers and advance their professionalism. Second, we will pay more attention to improve the platform operation efficiency of our home transaction business. We will continue to improve organizational flexibility to quickly respond to any changes and take measures according to either increase or rain in expenses. Third, the strength in our body will facilitate the development of our tool wings as we build a higher efficiency customer referral model to our new business. Next, Moving to our progress and plans for our two wins, new business development. We define 2021 and 2022 as the year during which our home renovation and furnishing services business group takes root. We believe that a customer demand for home renovation and furnishing will continue to grow as housing prices stabilize In this market, helping service providers is a key to enhance consumers' experience, standardization, and digitalization, along with renovation product upgrades at the core of improved service providers' capability and delivery quality. In developing our renovation and furnishing offering, we started with the hardest part in the home renovation innovation process. delivering a high-quality interior construction finish. Over the past few years, we have laid the groundwork for this business. This part of our business seems slow, but once we nail it, it will take off quickly. We have already advanced from zero to one in the home renovation business. We are determined. Our team is confident and motivated by the positive feedback from customers. And we have built a replicable regional model. Chengdu is the most significant piece of the piezo we have found, which allow us to replicate our model more rapidly at a scale to go from 1 to 100. In 2021, we built up our capabilities to support expansion in a standardized manner at a large scale. In building our underlying capabilities, we instituted a scientific management approach with respect to scheduling transaction orders and a cooperation mechanism. We officially rolled out the HomeSaaS version 1 system covering the entire home renovation business with multi-modules that could enable process standardization and enhance process productivity. For example, its BIM version 1 system has become the industry's first product covering design, design rendering, detailing, and modularization into a bill of materials. Boostered by our strong capabilities, Baker's self-operated home renovation business Beiwu has become an industry leader in terms of construction standards and the construction cycle, as well as process management and control. In 2021, we delivered our tender offer to Shengdu Home Renovation, China's leading home renovation and furnishing service brand, and the transaction has been approved by the SAMR. As of the end of 2021, Chengdu has more than 110 stores in 31 cities nationwide. We kicked off the preliminary integration between Chengdu and Beike. Chengdu has an absolute leadership position in the industry when it comes to size, organizational management, internal cost control, and supply chain management. Beike has a unique capability in digitalization standardization of complex industry process and customer acquisition in home renovation and furnishing. Not to mention a sizable talent pool of industrial internet professionals, our combined companies are leveraging our respective advantages to generate substantial signatures and build China's number one home renovation and furnishing brand to empower the entire industry. Looking forward to 2022, we hope to accelerate the expansion of our home renovation and furnishing business as well as the development of our underlying capabilities. With respect to building our capabilities, first, we will improve our ability to provide high-quality services through the establishment of middle office capabilities, guarantees, and training. Second, we will focus on improved capabilities of construction, delivery, from both online and offline. Third, we will establish standardized operations to construction delivery process, service provider certification, and so on. We will also continue to iterate our home SaaS version 2 system and invest in our talent pool. Supported by our upgraded underlying capabilities, we will actively expand our home renovation and furnishing business in nine cities. We are big because housing transaction services have core advantages. Our housing transaction services will refer customers to our two wings business. In the pilot cities, our home transaction services already contribute 30% of the new business customer list in the fourth quarter. We are optimistic we can achieve further breakthroughs in 2022 after integration, fostering remarkable growth for our overall home renovation and furnishing business. through the large-scale connection with high-quality services providers, plus customized home furnishing production and sales on the back end. The second win is our one-body, two-win strategy is inclusive housing services. It carries out affection and devotion to our country and responsibility to society. It mainly covers home rentals, plus a wide range of value-added home services. The housing supply gap is a prominent program for new urban residents, young adults, and low-income groups who are in the most urgent need of improving their living conditions. The national policy specifically encourages both home purchase and renting. We will deeply participate in this industry in the future, increase high-quality rental housing supply, and elevate the quality of the industry through diverse solutions and broader external collaborations, providing real solutions to livelihood problems and improving living environments inclusively. Our inclusive housing business is divided into three categories. general home rental brokerage services, light rental property management services, and centralized service apartments, plus value-added home services. In 2021, over 2.5 million general home rental transactions were completed on our platform, up 41% year-over-year. In the second half of 2021, we launched a rental commission fee reduction campaign for fresh university graduates in cities such as Beijing and offer our support to more than 1,600 university students in finding their first home after graduation. The Light's rental property management services manager more than 11,000 units in 2021 on average, up over 51% year over year. As to infrastructure, we promoted post-rental housekeeping services by providing a comprehensive variety of convenient home services for talent and realized penetration of over 80% in the pilot program. In 2022, we will deepen our exploration of diversified solutions for inclusive living from both the supply side and the user end. We will make efforts in a diversified model to address over 100,000 rental units for new urban residents, young people, and low-income groups. On the consumer side, we plan to provide a comprehensive guarantee system for all types of tenants. This, coupled with a diversified home services offer, will provide tenants with safe and high-quality rental experiences. Lastly, It's a great honor for us to do business in China's housing-related services sector, a fertile ground full of promise. No matter what weather comes our way, we will give back to this land, to our society and the people, through our inclusive housing initiatives and more diverse solutions in the future. We, as an organization, will forever strive to go ahead and stay open. With that, I would like to turn the call over to our CFO, Xu Tao, for a close review of our first quarter and full year financials.