KE Holdings Inc

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

Thank you operator. Good evening and good morning everyone. Welcome to KE Holdings Inc's first quarter 2025 earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website, .ke.com. On today's call, we have Mr. Tao Xu, our executive director and chief financial officer. Mr. Xu will provide an overview of our strategies and business developments on behalf of Mr. Stanley Peng, our co-founder, chairman and chief executive officer. And then Mr. Xu will discuss the financials in more detail. Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to these calls as we will make forward looking statements. Please also know that they could earnings press release and these conference call include discussions of unnoticed gap financial information as well as unnoticed non-gap financial measures. Please refer to the company's press release, which contains a reconciliation of the unnoticed non-gap measures to comparable gap measures. Leftly, unless otherwise stated, all figures mentioned during this conference call are in R&B. Certain statistical and other information relating to the industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial sources. Neither the company nor any of its representatives have independently verified such data, which may involve a number of assumptions and limitations. And you are cautioned not to give undue weight to such information and estimates. For today's call, measurements will use English as the main language. Please note that the Chinese translation is for convenience purpose only. In the case of any discrepancy, measurement statements in their original language will prevail. With that, I will now turn the call over to our CFO, Mr. Tao Xu. Please go ahead, Tao.

Thank you, Siting. Hello, everyone. Thank you for joining Baker First Quarter 2025 Early Conference Call. In the first quarter, our business continued to deliver rapid growth. This expansion was partially based on the market momentum that was fueled by the supportive policies since last September. It was also consistently driven our active growth strategy that we started in the second half of 2023. In the first quarter, PTB on our platform increased by 34% and the revenue rose by 42%, also on a -over-year basis. Our business continued to outperform the market in the first quarter across multiple metrics. Notably, PTB for our skin home transaction business increased by 28% -over-year in the first quarter. According to Baker Research Institute data, the -over-year growth of the national GTB in this segment was about 60%. PTB for our new home transaction business increased by 53% -over-year, versus .4% nationwide, decline -over-year reported by the NBS data. We are the top 100 developers of GTB for new home sales, also filled by approximately 7% in the first quarter. We continue to see strong momentum in the growth of connected stores and agents on our platform. In the first quarter, the number of active stores surpassed 55,200, a record high, increasing over 12,600 from the same period one year ago. Of those, the number of connected stores increased by more than 12,300. On the agent side, the number of active agents grew by 23% -over-year, representing a net addition of over 90,000 agents compared with

the same period last year. With active agents, Leyland's agent sales Sweets Inc. positive reporting experience. From recent2020, we've seen over 43 commitment to the African agent that this sector operates in. has put connected stores growing

by more than 73,000 -over-year to reach a record high. We also see steady improvement in efficiency at the store and agent level. In the fourth quarter, GTV per store and agent rose by 8% and 14% respectively, making the fourth consecutive quarter of -over-year increase. For connect stores, GTV per agent was up by 18% -over-year, translating into stronger revenue for both store and agent. Our platform's operations support ratio remains high, with impressive -over-year improvement. This year, we are focused on driving both skill and efficiency as two priorities of our growth strategy. In the fourth quarter, traffic leads for our new home transaction services hit a new record. The Enduroactive market helped with driving more traffic leads, with additional benefits from the higher customer satisfaction from the search results and more personalized recommendations. By carrying the growth experience to each user's scenario and profile, we made it easier for people to explore home listing on our apps that fit their needs. This improving performance also reflects users' current preference to view more home listing before making purchase decisions. For our new home transaction business, this year we are focusing on optimizing our collaboration with developers to better support their sales through needs, while improving agent efficiency in matching customers with suitable new home projects. In the fourth quarter, we concentrated our efforts on high-end projects in the market. At the same time, we continued to drive greater participation from our stores in the new home business through the incentive mechanism. Our -by-one strategy maintains stronger performance traction. For the home renovation and the furniture business, we have adjusted our pace this year to strategically focus on reshaping our products and delivery capabilities. Our primary goal is to make them more customer-oriented while streamlining our organizational structure for greater efficiency. On product front, we significantly advanced the design of our new home group renovation products in the first quarter. On delivery side, we rolled out a project management professionalism program in 20 cities. This drove a 156% annual increase in average monthly order intake per project manager, reaching 2.97 compared with previously 1.16 in 2024. We also carried out a worker-sharing model. As a result, top-performing project managers have seen improved personnel income, enabling them to focus on more for service delivery and quality. In the first quarter, over 4% of our total home renovation projects came from the referral by previous customers. In addition, our front-end organizational management efficiency improved markedly. The average month order volume per home renovation designer increased by almost 33%, moving from 0.79 in 2024 to 1.05 in the first quarter of this year, and outpacing total order growth -over-year in the home renovation business. Our home rental services continue to achieve the skill breakthroughs in the first quarter, with more than 500,000 rental units under our management. We also made solid progress in improving both default measurements and increasing our renewal rate. Last quarter, Stanley shared some thoughts on our AI deployment plan. Next, I'd like to provide an update on our use of AI in the first quarter. In our housing transaction business, on -to-end customers, we conducted testing of our AI-powered home seeking assistant, Putin, in ten cities, which is already accessible to 40% of our traffic on our homepage. Putin was developed based on DeepSec R1 and our massive platform datasets and proprietary knowledge graphs. We are actually building an introductory vertical database based on the larger module to improve Putin's smart response accuracy and improve multi-module display capability to optimize the interactions between the service provider and the customers. We believe a smart AI assistant will empower both homeowners and buyers with more intelligent solutions for the homemaking and decision-making. We are also helping service providers identify more accurate leads. In terms of AI tools for service providers, our agent service home buyers were introduced by Lai Ke, an AI-based agent assistant. Lai Ke offers a full suite of features, including customer acquisition, AI home selection, AI trap assistance, and smart follow-ups. These tools empower agents to activate customers, enhance their professional service capability, and improve their efficiency in connecting with customers. By the end of March 2025, over 200,000 agents nationwide had used Lai Ke. Collectively managed over 2.5 million customers with impressive efficiency improvements. The conversion rate from leads to formal client mandates increased by over 30%, and the mandate to transaction conversion rate rose over 10%. Agents effectively using Lai Ke achieved a -to-transaction conversion rate that was three times higher than those not using this product. For agents serving homeowners, we identified a common issue. Many home listings were not being properly maintained on the platform due to agents' limited time and attention, which reduced sales through efficiency. To solve this, we leveraged the AI property maintenance assistant, which helps agents match listings more efficiently and improves experience for homeowners. Within the homeowner-dedicated AI service group, the assistant offers smart replies, multi-trend insights, report analysis, and intelligent voice-based promotion. At the end of March 2025, the product has been partnered by 110,000 agents and has served 400,000 homeowners cumulatively. Home visiting maintained with our AI assistant achieved transaction conversion rate four times that of those without it. Additionally, our digital partner, Xiao Yi, utilized AI capability to enhance critical operational work flow from contract quality inspection to automated post-signing forms. The solution has given marital improvements in front line service quality and efficiency, delivering over 30,000 cumulative hours in productivity saving. In our home renovation business, we launched AI customer maintenance tool to strengthen follow-up and lead conversion through the most critical two-way window in home renovation marketing. The AI-based lightweight beam and intelligent marketing solution has improved efficiency in both design and marketing. For our home rental service, our AI assistant for post-rental support, Xiao Hui, has been tested online in 30 cities. It is already successful handling 25% of talent requests through intelligent automation, providing talent with a smart, more responsive service experience. At the same time, it enhanced efficiency through better collaboration among the various roles involved in the recent progress. I share lots of numbers on the total volume and the average efficiency rate of our business, but this is another key item we focus on. We care deeply about every individual customer's experience, and we remain committed to enhance our service quality. Since 2024, we introduced the Fund custody system in our home renovation business, giving customers greater control and a piece of net. On this model, renovation funds are frozen in customer personal bank accounts and only released to us after project milestone has been completed and approved by customers, including plumbing and electrical checks based on renovation and final acceptance. This model shifts away the traditional pay-first, renovate later approach in the industry. Through the system integration, customers can track their funds online in real time, with full visibility and traceability. Any interest earned during the custody period is returned to the customer. In 2025, we rolled out our renovation fund custody service in several cities, including Beijing and Wuhan. On top of that, we have developed a fund custody solution plan framework that can be utilized by other industry peers. On the scoring, our commitment to driving the industrial progress. Finally, we are encouraged by China's technical advance and are closely watching the evolving of the traditional market environment. While we remain confident in our platform ability to deliver system growth over the long term on our -suit-one strategy, we are approaching the short term with cautious optimism. That is why we still continue to invest formally in AI, while taking a more measured approach to other investments this year. Following last year's rapid investments in the investment-wide subsidies, we are now setting clear short-term middle-term ROI benchmark to ensure the disciplined capital allocation. This balanced strategy will help us better position ourselves to capitalize on both multi-precarious opportunities and AI-driven generational productivity data and the safeguard of operational stability, all while protecting the interests of the shareholders who share our long-term vision. In our Wednesday afterminment this year, we will continue with active shareholder returns. Thank you. Next, I will review our first quarter 2025

financials. Once again, thank you everyone for joining us. Before we dive

into our Q1 performance, I'd like to briefly touch upon some updates in the housing market. In Q1, the market performance was very stable, perpetuating the continued policy inference result from the policy implemented in September last year. The thresholds of cost for the home purchase were further lowered, exerting a stronger incentive effort on home buyers. According to the National Bureau of Statistics, new home sales remained relatively flat -over-year in Q1, other than the substantial -over-year decline in the same period last year. Meanwhile, the existing home market remained at a high level in activity, excluding the impact of the holidays. Benefiting from the relatively valuable nature of existing homes, according to the Baker Research Institute, in Q1, the existing home GDP rose by around 16 percent, and the number of existing home transaction claims by around 28 percent both -over-year. With the growth in the transaction volume, the overall supply-demand relationship improved, and the housing price showed a signal of bottom-out. In feeling more confidence in potential home buyers to enter the market, demand for the upgrades was even more robust. Among the existing home sales in key cities, the share of -by-room and larger homes continued to rise -over-year in Q1. Turning to our Q1 financial performance, our total GDP was RMB 844.2 billion, representing a -over-year increase of 34 percent. Net revenue reached RMB 23.3 billion, up 42.4 percent -over-year. Coast margin declined by 4.5 percentage points -over-year to 20.7 percent. Gap net income was RMB 855 million, increasing 97.9 percent -over-year. Non-gap net income reached RMB 1.39 billion, remaining stable -over-year. Looking at our housing transaction services, revenue from the in-home transaction reached RMB 6.9 billion in Q1, up 20 percent -over-year and down 23 percent quarter. GDP was RMB 580.3 billion, rising by 28.1 percent -over-year and declining by 22.1 percent quarter. GDP growth outpaced the revenue -over-year, mainly due to a decline in the revenue share of the rental brokerage services and a high contribution from the in-home transaction services GTV facilitated by connect agents. The revenues are recorded as net revenues derived from platform services. The contribution margin from the in-home transaction services was 38.1 percent in Q1, representing a decline of 6.4 percentage points -over-year, primarily due to the increase in support and the improved welfare for the service providers. This is our long-term strategy to build a harmonious ecosystem. Sequentially, the contribution margin dropped by 2.3 percentage points, which built both to negative leverage influence due to the decline in revenue exceeding that in fixed labor costs. In terms of the new home transaction services, we still outperform the market. The RRC reports that the sales from the top 100 developers fell by around 7 percent -over-year and 41 percent sequentially in Q1. In comparison, our new home GTV, rich RMB, 232.2 billion in Q1, up 53 percent -over-year and down 34.6 percent -over-quarter. Once again, outperforming the industry. This was mainly due to the deepening of our collaboration with developers and our finely tuned operational capability and the most sales confirmation from the partial subscription in last quarter. Revenue from new home transactions was RMB 8.1 billion in Q1, rising by 64.2 percent -over-year and dropping by 38.2 percent from previous quarter. Revenue outperformed the GTV -over-year, demonstrating our stronger monetization capabilities, while GTV growth outpaced revenue growth sequentially due to the systematization. The contribution margin from the new home transaction services rose by 1.1 percentage point -over-year to 23.4 percent, as we gained leverage from the revenue growth exceeding that of the fixed cost. Sequentially, the new home contribution margin declined by 2.2 percentage points, largely attributable to the seasonality effect. In Q1, SOE developers contributed around 54 percent of our new home sales revenue, increasing by around 4 percentage points -over-year. Revenue from home renovation and furnishing, home rental service and emerging art services grew by 46.2 percent -over-year in Q1. It accounted for 35.9 percent of our total revenue compared to 35 percent in the same period last year. The contribution profit from this business accounted for 32.7 percent of our total gross profit. Revenue reached 4-hour home renovation and furnishing business. Revenue reached R&B 2.9 billion, increasing by 22.3 percent -over-year, mainly due to the increased orders from the home renovation. Contribution margin for the home renovation and furnishing business reached a record high of 32.6 percent, up 2 percentage points -over-year, and 2.8 percentage points -to-quarter, mainly driven by the increased gross margin of our home renovation business. Our home rental services business continued to grow at an accelerated pace in Q1. The revenue reached a record high of R&B 5.1 billion, up 93.8 percent -over-year, mainly benefiting from the rapid growth in the number of rental units on the measurement. At the end of Q1, the number of rental units on the measurement exceeded 500,000 compared with over 250,000 in the same period of 2024. The contribution margin for the home rental services was 6.7 percent, up 1.2 percentage points -over-year, and 2.1 percentage points -to-quarter, largely due to the increased gross profit of our carefully run business. As we continue to refine the carefully run business model, based on the essence of the business contract, the revenue from some newly managed rental units were recorded as net revenues derived from the service fee in this quarter. In Q1, our revenue from emerging and other services decreased by 50 percent -over-year, and the 20.3 percent -to-quarter showed R&B 350 million. Next, let's move on to our after-cost expenses in Q1. Our store costs reached R&B 717 million, remaining relatively stable -over-year, undergrewing by 8.8 percent -to-quarter. The sequential decrease was mainly from the lower store rental costs. Other costs were R&B 547 million, up 44.4 percent -over-year, primarily due to the increased tax and surcharge and the financial service reserves and the credit losses. Sequentially, other costs declined by 26.7 percent, largely driven by the decreases in the tax and surcharge, financial service and reserves, and the credit losses, and the share-based compensation. Growth profit goes by 17 percent -over-year, to R&B 4.82 billion. Growth margin was 28.7 percent, down 4.5 percentage points -over-year. The primary reason for the decline was decrease in contribution margin from the in-home transaction services. Growth margin grew by 2.4 percentage points sequentially in Q1, mainly due to the structural region, as the revenue contribution of new home transaction services declined. In Q1, our GAAP operating expenses totaled R&B 4.2 billion, up 2.9 percent -over-year, and down 31.3 percent sequentially. Notably, G&E expenses for R&B 1.9 billion, decreasing by 7.2 percent -over-year, mainly due to the reduced share-based compensation expenses. G&E expenses dropped by 36.7 percent -to-quarter, primarily attributable to the lower personnel expenses and the decreased budget provision. Sales and marketing expenses increased by 9.2 percent -over-year to R&B 1.8 billion, resulting from the increased expenses for the home renovation and furniture business. -to-quarter sales and marketing expenses fell by 24.4 percent, mainly due to a decline in marketing expenses for home transaction services and reduced personnel expenses. Our R&B expenses for R&B 584 million, up 24.9 percent -over-year, drained by higher personnel expenses and technical service fees. Secretually, R&B expenses dropped by 21 percent, largely as a result of reduced personnel expenses. In terms of the profitability, gap income from operations totalled R&B 591 million in Q1, a remarkable increase compared with the same period of last year, and decreasing by 41.6 percent sequentially. Gap operating margin was 2.5 percent, increasing by 2.5 percentage points from Q1 2024, and falling by 0.7 percentage point quota of culture. Nougat income from operations totalled R&B 1.15 billion, growing by 19.6 percent from the same period of last year, and dropping by 34.6 percent sequentially. Nougat operating margin reached 4.9 percent, down 0.9 percentage points from Q1 2024, and 0.7 percentage points from the previous quota, mainly attributable to the gross margin decrease. In terms of revenue, both -over-year and quota of quota, Nougat income totalled R&B 855 million in Q1, rising by 97.9 percent -over-year, and 48.2 percent quota of quota. Nougat net income was R&B 1.39 billion, remaining stable -over-year, and increasing 3.7 percent quota of quota. Moving to our cash flow and balance sheet, we realize the net operating cash outflow of R&B 4 billion in Q1. New home ISO reached 63 days in Q1, remaining at a healthy level. On top of approximately US$139 million allocated to share repurchase during Q1, our total cash liquidity remained at a high level of R&B 74.3 billion, which excludes custom deposit payable. With our robot cash reserves, we continue to reward our shareholders who have ground reserves through the active share playback, enhancing capital operation efficiency and sharing the benefit of our developments with investors. In Q1, we repurchased around US$139 million worth of shares, which accounted for around 0.6 percent of the company's total share outstanding at the end of 2024. We have consistently delivered on our promise to reward shareholders. Since the launch of our share repurchase program in September 2022, we have repurchased roughly $1.76 billion in shares at the end of Q1 2025, accounting for around 9.2 percent of our total share outstanding before the program began. This year, our business will focus on efficiency improvements. In financial strategy, we will ensure that our investments are made more efficiently to improve personnel and store productivity. We will respect every penny and make sure the money spent yields visible results. While maintaining the discipline that causes expense control, we will continue to support the long-term business development by fully backing our one-body three-way strategy initiatives and actively exploring AI technology. At the same time, we possess maximum resources and the intention to consistently offer stable and sustainable returns to our shareholders. This concludes my prepared remarks for today. Operator, we are ready to take questions.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. As a reminder, we only accept questions on the English language line. For the benefit of all participants on today's call, please limit yourself to one question. And if you have additional questions, you can re-enter the queue. If you're going to ask a question in Chinese, please follow with an English translation. Your first question comes from Timothy Zhao from Goldman Sachs. Please go ahead.

My question is about the market outlook for real estate. We can see that the market is showing a good performance in the spring. I would like to ask if we look back from the second quarter, what are the special outlooks for the market under the latest changes in the macroeconomic situation, including the exchange rate fluctuations? I will translate quickly. I think we note a strong rebound of the property market transactions after the Chinese New Year. Just wondering from the second quarter and onwards, what is your outlook for the property market? It's really considering the latest macro dynamics as well as the impact from the US tariff. Thank you. Thank

you, Timothy. For Q1 market performance, with the central government continuing its efforts to stabilize the real estate market, the in-home market saw a relatively strong recovery after the Chinese New Year, and the new home market also performed stable. Let me give some details. The in-home market rebounded after the Chinese New Year as expected. According to Baker Research Institute, nationwide, in-home GDP grew by 16% over the year in Q1, sustaining the momentum fueled by the September 26 policy stimulus. This growth was mainly due to the cumulative impact of the early stimulus policies. These policies substantially lowered the threshold and the cost of the home purchase, motivating more people to buy. Rising transaction volume also helped balance supply demand in the short term, narrowing the decline in the home prices year over year, and bringing cautious buyers back to the market. The in-home prices have stayed most stable, even by .5% -over-month in March. In first tier cities like Beijing and Shanghai, as well as second tier cities with strong net population inflows and a steady increase in the housing demand in recent years, such as Hangzhou and Chengdu, the in-home prices have picked up slightly -over-month. For new home market in Q1, it is also very stable. According to NBS data, Q1 new home sales were overall flat year over year, down 0.4%. TTV of 200 real estate developers dropped by 7% year over year in Q1. Notably, the sales by floor area increased by over 15% year over year. In Q2, after the Trump's new year, the market followed the typical seasonal pattern. The in-home transaction volume peaked in early March, then gradually declined through April. The -over-month decrease of in-home prices responded somewhat with a .3% drop in April, as transaction volume reduced. From a supply demand standpoint, the total number of in-home listings on Baker, Rosin, Q1 are the following in Q4 of last year. This aligns with the seasonal trend of lower inventory at the year end and higher inventory at the start of the year. It is also a natural result of the in-home market dysfunction and the lifting of the sales restrictions, which have released more housing supply. The faster supply of the nearly new existing home into the market has also improved overall listing supply quality and created better conditions for buyers looking to the home upgrades. Meanwhile, we observed that the increase in the market demand outpaced the increase in inventory. In April, the ratio of the home viewing to inventory was at 1.8, which is at the higher end of the historical range of 1.6 to 1.9. This suggests a stronger buyer interest and a plentiful demand, with the market able to absorb new inventory. However, the conversion from the home viewing to transaction has slowed. Many due to the shortened uncertainties affecting buyer expectations, including external factors such as the geopolitical tension, this has led to some softening of the housing price expectations, which made buyers more hesitant to enter the market. For future market outlook, we believe market outlook will depend on two main factors. The impact of international trade restrictions on housing transactions and the strength and timing of domestic countermeasures. On a neutral scenario, we expect a typical seasonal slowdown in Q2 on a secret cultural basis. -over-year, however, the home market expects to see a slight increase in its home transaction volume, also at a slower pace than Q1. This is supported by the higher transaction volume in Q1, the growing supply of the high-quality, nearly new existing home, and the -over-year increase in customer home viewing. As the market experiences a on-courter decline in Q2, and if external trade pressures intensify in Q3, indicators such as the housing price, transaction volume, and development investment may weaken. This could create room for further supportive policy measures in the second half of the year, which would help improve both supply and demand in property market and support stable market development. We are also closely monitoring the impact of the change in global trade on real estate market. In terms of home listings, the overall number of new listings on the bigger platform remains stable in April, with no signs of homeowners rushing to sell. The number of home viewing for both existing and new homes still shows a noticeable -over-year increase in April. When categorizing the cities that were covered by high and low trade dependency, we observed that since the tariffs fell off in early April, cities with high trade dependency have shown weaker -over-year and -over-month home viewing performance compared to cities with low trade dependency. This indicates that while the trade frictions have caused some short-term disruption in bear expectations in certain cities, there has not been a significant trend of divergence overall, and the homeowner sentiment remains stable. Moving forward, we will continue to monitor potential impact of the trade frictions on housing market through the leading indicators, such as home viewing, customer traffic, and listing volume. We observed a notable de-escalation in recent U.S.-China trade tensions, which should help stabilize business and consumer expectation in the near term. In our view, we believe that intentional trade frictions represent a long-term, dynamic process with uncertainties and potential for improvement. During the upcoming 90-day negotiation window, we will closely monitor the development, track the resulting impact, and assess the potential implications for both real estate market and our economy on an ongoing basis. In the medium to launch, we maintain a cautiously optimistic outlook. Trusting both China and the U.S., we will continue to move together, each other based on the positive progress made so far. Meanwhile, the continued implementation of domestic supportive policies is expected to further boost customer confidence. Together, this is expected to mitigate the impact of trade risks on the property market, helping to consolidate the initial stabilization of the in-home market and ease pressure on the

new home

market. Thank

you.

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

Hello, Mr. Wang. Thank you for answering my question. My question is about the economy. I would like to ask you to introduce a strategy and goal for expanding the scale of our stores this year. Based on this, how does the company plan to increase platform storage and the efficiency of new chain-based economy and economy stores? I will quickly answer my question. Thanks, management, for taking my questions. My question is regarding the housing transaction services business. Could management elaborate on the expansion plan for this year in terms of housing agents and the agency stores? On top of that, how will you continuously improve the efficiency of those existing and newly connected agents and stores on the platform? Thank you.

Thank you, Sophie. This year, we will continue to

promote healthy growth of our agent-store network to support the sustained expansion of our housing transaction services. At the same time, we will place greater emphasis on the cost-effectiveness of the storage expansion. Our aim is to enhance the efficiency and income of platform stores and agents, thereby increasing the stability of agent careers, providing better services to customers, and achieving more sustainable long-term growth for our platform. In terms of the agent-store network expansion, at the end of Q1, the number of active stores on our platform increased by nearly 30% -over-year, and the number of active agents grew by 23% -over-year. The growth was mainly driven by the non-lensia segment, with a 33% -over-year increase in active non-lensia stores, and a 24% -over-year increase in active non-lensia agents in our platform. In Q1, several major brands joined our platform. This includes our collaboration with the Zhongyuan sub-brand Bao Yuan and Kunzhu Brokage Company in Kunshan, Suzhou. This shows the core value of our platform in the buy-side market, which is our stronger existing home business operation, agent connection network, and digital empowerment capabilities. In Q1, our efficient efforts paid off in the stable market environment. The average number of transactions per agent rose notably in Q1. This helped offset the decline in average housing unit prices. As a result, the in-home GTV per agent grew by over 9% -over-year in Q1. The average number of agents also rose by 18% -over-year. Together, this factor led to a 28% -over-year increase in in-home GTV on our platform, clearly outperforming the 16% increase in national GTV as estimated by Baker Research Institute. Our platform's efficiency-focused mechanism also started to show results. The share of the high-performing stores increased from .7% at the end of 2024 to .4% in Q1. However, the stores were about 2.5 times more productive than those stores on the platform in their respective cities. To improve the efficiency, we refined our internal measurements. We used the digital tools such as online store owner workshop and AR property listing assistant, along with offline property listing sessions to facilitate the separation of home listings and accelerate sales. We also improved platform operations through the building mechanisms like point-based incentive programs and regional co-governance councils. This encourages store owners to keep growing business and work more closely with each other. Our store retention rate remained healthy for both old and new stores. Our in-home nutrition rate dropped to .9% in Q1, down 6% sequentially and 38% -over-year. And the six-month retention rate for newly connected stores in the first half of 2024 was 94%, showing the long-term value of our platform support. For two years, we recently foresee that the number of Lianjia agents in the store will remain largely stable. Meanwhile, we expect a modest increase in the scale of non-Lianjia agent stores, where the target is functioned in certain key regions. On top of the stable agent and store networking, improving efficiency will be our core goal this year and beyond. This year, we will provide more targeted support to store owners to help them improve regional competitiveness. At the same time, under our point-based incentive system, we aim to develop more high-performance stores, aiming to upgrade the overall structure of our store network. In the long run, the large store model will be a key strategy for enhancing productivity. In the future, our platform will host more high-performing large stores, each with over 10 agents. These stores will attract more top talents. These large stores boost high efficiency and strong staff retention, allowing store owners to achieve better income and stay in business longer. Those store owners can better support agents, ensuring their income stability and enabling the owners to provide superior service to customers. The platform's various residential services will also offer agents diversified opportunities for additional income. Additionally, we firmly believe that breakthroughs in AI will present opportunities for transformative improvements in industrial productivity. We have already developed a variety of AI applications to support our service and providers, and we will continue to accelerate developments to redefine the capabilities of the quality service providers and drive their efficiency gain. This year, in a volatile market, we aim to increase the average number of transaction per connect agents to maintain stable per capita permissions. Over the next two to three years, we plan to increase the proportion of large and high-quality stores. These stores will have more stable, high-performing agents with high efficiency, with store productivity being two to three times the current average. We anticipate within three years, this will allow to approximately 20% improvement in efficiency of those connected agents on our platform. Thank you.

Thank you. Your next question comes from Zhizhu Dong from Numera. Please go ahead.

Thank you. Thank you. Thank you. Thank you.

We believe that the AI has extensive application scenarios in the home renovation and furnishing. We are also continuously deepening the application of AI, such as the contract conversion, construction process, and internal management. Let me elaborate for details. First, in the early stage of the contract conversion, previously, designers conduct the initial communication with customers through the two-dimensional black and white flow plans. The only professional drawing reduced the customer's perception and affect the efficiency of the contract conversion. Currently, empowered by AI, when customers visit our offline store for the first time, designers can rapidly formulate an AI proposal based on the customer's preference for decoration style and the home layout. This AI proposal encompasses various types of three-dimensional color-rendered design drawings, dynamic and static space analysis, storage and smart device layout plans. This significantly enhances the experience of first-time store visitors, and thereby boosts the contract conversion rate. Taking Wuhan as an example, the time period from first-time visit in the store to sending a preliminary contract was shortened from previously 10 days to within six days in March. Secondly, in the construction process, we have developed an intelligent construction system. Real-time online inspections are realized by installing cameras on the spot. AI can also realize automatic measurements in core construction operations, such as the real name on the drop certification, the inspection of the site cleanliness, and the noise recognition. In addition, by equipping staff with smart inspection devices, we assist in standardizing the home renovation acceptance process through AI recording technology. We can re-contrast the acceptance process, enabling traceable and quantifiable evaluation of the construction quality. Taking Beijing as an example, the acceptance of actual risk rate has increased by more than two percentage points compared with before. Meanwhile, in terms of the internal measurements, we have multiple AI employees. Xin Xiaosheng as an operating management AI employee, enhanced the effectiveness of the team measurements by automatically summarizing and commenting on daily reports and demanding about the planning matter through AI. Xin Xiaosheng has collected and commented on more than 20,000 daily reports, saving the team

more

than

18,000 hours

within half a year. Xin Xiaosheng as the order following AI employee, realized functions such as information distribution and automatic order assignments through the information collection and AI analysis capabilities. Xin Xiaosheng has distributed information over 5,000 times and sent timely reminder over 10,000 times within half a year. In the future, our AI exploring for home renovation business will be concentrated on the following aspects. More accurate insights and analysis of the customer demands and more efficient design powered by AI. We aim to achieve the best personal solution from demand to design and comprehensively enhance professionalism and the efficiency of our services. Thank you.

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

Hello, Tao Ke, thank you for answering my question. My question is about Beihang Home. I see that the company has also participated in many new projects. Can you tell us what role is Beihang Home playing, including C2M, and how it is reflected? So let me translate my questions. So my question is regarding on Beihang Home. So we see that Beihang Home has already participated in numerous new home projects. So just want to see how Beihang Home contributes to the new home development and also regarding on the C2M business, how the business is being reflected. Thank you.

Thank you, John. Beihang Home's business model provides a C2M new home product solution for partners like developers. We use the intelligent algorithm and massive database to deeply understand our target customer's needs and preferences. Our tools help predict the type of home customers want it and the price they expect. Developers use this insight to guide project positioning and product design, making their new home offering more catered to customer demands. So far, Beihang Home has participated in nine projects across different models. Two are self-operated projects aimed at more comprehensive validating of C2M capabilities. Five projects involve equity partners, which Beihang Home primarily focus on the product's positioning using H2I. The rest two projects are purely like an ICES model, where we do not engage in investments, but instead provide product positioning solutions to partners and charger service fees. Regarding the funding use across the seven investment-involved projects, the total investment has reached about RMB 2.3 billion. At the end of Q1, we have recovered nearly RMB 500 million from Chiuofen. The next investment from our own fund stands over RMB 1.8 billion. Among these, our first equity partnership, New Home Projects, which we collaborated with PowerChina Real Estate on Beijing Chang'an Huaxi Mansion in the central district of Beijing City, achieved a complete sellout of all initial units on the first day of launch. The project delivered an IRR nearly 30% at the shareholder level, demonstrating how our C2M service capabilities provide partners with enhanced sales and operation certainty. In building C2M capabilities, we have two key advantages. First, we have a deep understanding of the needs of potential consumers. This came from our unique database built on the massive online and offline traffic of our platform. It also draws from the rich customer interactions in our brokerage, home rental machines, and rental services. Together, this forms the foundation of our core data infrastructure. With this data, we can analyze the key indicators, such as the source, quantity, purchasing power, and the specific product needs of potential customers in a more timely, intuitive, and quantitative manner. This level of detailed customer insight helps developers make a more accurate decision and allocate resources more effectively in areas such as land auction assessment, unit mix planning, and product design, ultimately leading to greater operational certainty. Our second advantage is strong marketing, knowledge, and price ability. We use actual transaction price of each new home, along with the real-time and upstream data like a homeowner's listing price and the price adjustments. We then apply the algorithm model to build a valuation model for different geographic histories. These models can more accurately estimate the project and sector value and update quickly based on the change in the market. This approach aligns more closely with the price formation logic in a buyer's market. New home prices are largely unaffected by policies or developers' strategies and instead result from decentralized and free negotiations between buyers and sellers. Your market dominates by its in-home transactions. Its in-home prices often give a more accurate, much -to-view of the market than new home market data. Just have a better market track. Based on these two advantages, we have refined our core C2IM tools. We will continue to improve their accuracy and professionalism over time. We also support our C2IM model with more innovative ways to reach customers. While our agent network connects with customers, we are also building an online community called Building a Better Home Together with our application. This enables users to directly participate in evaluation and core creation of new home product designs. For example, in our Fengxing project in Shanghai, users can visit Building a Better Home Together page that can view and compare two home design plans, engaging in the design process of their future dream homes. These models connect with customers much earlier than traditional methods. It also makes their preference reflect in the new home product. We have already provided our first C2IM product solution service in the Xi'an project, through which we earn a service fee, showing stronger marketing recognition from our business approach. In Xi'an project, we provide a full set of product solutions. This includes customer surveys, product design positioning, cost optimization, price forecasting, and market services. We also give perfect project planning advice, such as optimizing the elevation to household ratio, enhancing the landscape and adjusting size, trying to address the key developer pinpoints, such as fast capital recovery, product premium, and product competitiveness. Last but not least, as a newcomer to the industry, we remain humble and respectful to the market. Although the business plan has been established for less than two years, we have already seen the promising results in several projects. This early science has gradually validated our capability path and strengthened our confidence in continuous optimization and moving forward. Thank you.

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

Thank you once again for joining us today. If you have any further questions, please feel free to contact the AECA's Investor Relations Team through the contact information provided on our website. This concludes the call, and we look forward to speaking with you next quarter. Thank you and goodbye.