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. Si-Ting Lee, IR Director of the company. Please go ahead, Si-Ting.

Thank you, operator. Good evening and good morning, everyone. Welcome to K.E. Holdings Incorps' first quarter 2025 earnings conference call. The company's financial and operating results were published in a press release earlier today and are posted on the company's IR website, investors.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 this call as we will make forward-looking statements. Please also note that Baker's earnings press release and this 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. Lastly, unless otherwise stated, all figures mentioned during this conference call are in RNB. 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, management will use English as the main language. Please note that the Chinese translation is for convenience purpose only. In the case of any discrepancy, management's 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's 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 since we started in the second half of 2023. In the first quarter, PTV on our platform increased by 34% and revenue rose by 42%, both on a year-over-year basis. Our business continued to outperform the market in the first quarter across multiple metrics, GTV for our in-home transition business increased by 28% year-over-year in the first quarter. According to Baker Research Institute data, the year-over-year growth of the national GTV in this segment was about 16%. GTV for our new home transition business increased by 53% year-over-year, versus 0.4% nationwide decline year-over-year reported by the NBS data. while the top 100 developers of GTV for new home sales also failed 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 connect stores increased by more than 12,300. On the agent side, the number of active agents grow by 23% year-over-year, representing a net addition of over 90,000 agents compared with the same period last year. for the Connect store growing by more than 73,000 year-over-year to reach a record high. We're also seeing a steady improvement in efficiency at the store and agent level. In the fourth quarter, GTV per store and per agent rose by 8% and 14% respectively, making the fourth consecutive quarter of year-over-year increase. For Connect stores, GTV per agent rose up by 18% year-over-year, translating into stronger revenue for both stores and agents. Our platform's operations support ratio remains high, with impressive year-over-year improvement. This year, we are focused on driving both skill and efficiency as due priorities for our growth strategy. In the first quarter, traffic leads for our in-home transaction services hit a new record. The Enduroactive market helped with drive more traffic leads with additional benefits from the higher customer satisfaction from the search results and the more personalized recommendations. By tailoring the browsing 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 one-body ceremony strategy maintains stronger performance traction. For the home renovation and furniture business, we have adjusted our pace this year to strategically focus on reshaping our products and delivery capabilities. Our primary goals are 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% year-over-year 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's 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 year-over-year in the home renovation business. Our home rental services continue to achieve the skilled breakthroughs in the first quarter, with more than 500,000 rental units under our management. We also made solid progress in improving both default management 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 server-to-end customers, we conduct testing of our AI-powered home-seeking assistant, Pudding, in 10 cities, which is already accessible to 40% of our traffic on our homepage. Pudding was developed based on DeepSeq R1 and our massive platform datasets and proprietary knowledge graphs. We're actually building an introductory vertical database based on the larger module to improve putting smart response accuracy and then improve multi-module display capability to optimize the interactions between the service provider and the customers. We believe a smart AI system will empower both homeowners and the buyers with more intelligent solutions for the homemaking and decision making. We're also helping service providers identify more accurate leads In terms of AI tools for service providers, our agent service home buyers, we introduced Lyco, an AI-based agent assistant. Lyco offers a full suite of features, including customer acquisition, AI home selection, AI chart assistance, and smart follow-ups. These tools empower agents to activate the customer, enhance their professional service capability, and improves their efficiency in connecting with customers. By the end of March 2025, over 200,000 agents nationwide have used Lai Ke, collectively managed over 2.5 million customers with impressive efficiency improvements. The conversion rate from these to formal client mandates increased by over 30%, and the mandate to transition conversion rate rose over 10%. Agents effectively using LICO achieved a land-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 the sales efficiency. To solve this, we leveraged the AI property maintenance assistant, which helps agents manage listing 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 an intelligent voice-based promotion. As of end of March 2025, the product has been piloted by 110,000 agents and have served 400,000 homeowners cumulatively. Home visiting maintained with our AI system achieved the transaction conversion rate four times that of those without it. Additionally, our digital partner, Xiaoyi, utilized AI capability to enhance critical operational workflow, from contract quality inspection to automate the post-signing for us. given memorable improvements in frontline service quality and efficiency, delivering over 30,000 cumulative hours in productivity savings. In our home renovation business, we launched AI Customer Maintenance 2 to strengthen follow-up and lead conversion during the most critical two-way window in home renovation marketing. The AI-based, lightweight theme and intelligent marketing solution has improved efficiency in both design and marketing. For our home rental service, our AI system for post-rental support Xiaohui has been tested online in 30 cities. It is already successful handling 25% of the tenant requests through intelligent automation, providing tenant with a smart, more responsive service experience. At the same time, It enhances efficiency through better collaboration among the various roles involved in the recent progress. I share lots of numbers on the total volume and average efficiency rate of our business, but these are not the key items 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 found custody system in our home renovation business, giving customers greater control on the piece of land. Under this model, renovation funds are frozen in customer's personal bank account and only released to us after the project milestone has been completed and approved by customers, including plumbing and electrical tracks 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 trace 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 firm custody solution plan framework that can be utilized by other industry peers, underscoring our commitment to driving the industry progress. Finally, we are encouraged by China's technical advance and are closely watching the evolving of the external market environment. While we remain confident in our platform ability to deliver sustained growth over the long-term on our one-body-three-win 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 US wide subsidies, we are now setting clear short- and middle-term ROI benchmark to ensure the disciplined capital allocation. This balanced strategy will help us better position ourselves to capitalize on both market recovery opportunities and AI-driven generation productivity base and the safeguard of operational stability, all while protecting the interests of the shareholders who share our long-term vision. In line with that commitment, this year we will continue with active shareholder returns. Thank you. I will review our first quarter 2025 financials.