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.

Once again, thank you everyone for your generous.

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 policy implemented in September last year. The thresholded cost for the home purchase was further lowered, exerting a stronger incentive effort on home buyers. According to the National Bureau of Statistics, new home sales remained relatively flat year-over-year in Q1, rather than the substantial year-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 readily available nature of existing homes, according to the Baker Research Institute, in Q1, the existing home GTV rose by around 16%, and the number of existing home transactions climbed by around 28%, both year over year. With the growth in the transaction volume, the overall supply-demand relationship improved, and the housing price showed a signal of bolting out, instilling more confidence in potential home buyers to enter the market. Demand for the upgrades was even more robust. Among the thin-home sales in key cities, the share of three-by-room and larger homes continued to rise year-over-year in Q1. Turning to our Q1 financial performance, Our total TQB was RMB 844.2 billion, representing a year-over-year increase of 34%. Net revenue reached RMB 23.3 billion, up 42.4% year-over-year. Cost margin declined by 4.5 percentage points year-over-year to 28.7%. Gas net income was RMB 855 million, increasing 97.9% year-over-year. Non-gas net income which RMB 1.39 billion, remaining stable year-over-year. Looking at our housing transaction services, revenue from the in-home transaction reached RMB 6.9 billion in Q1, up 20% year-over-year and down 23% quarter-over-quarter. GTB was RMB 580.3 billion, rising by 28.1% year-over-year and declining by 22.1% quarter-over-quarter. GTV growth outpaced the revenue year-over-year, mainly due to a decline in the revenue share of the rental brokerage services and the high contribution from the in-home transaction services GTV facilitated by Connect agents. The revenue are recorded as net revenues derived from platform services. The contribution margin from the in-home transaction services was 38.1% in Q1. representing a decline of 6.4 percentage points year-over-year, primarily due to the increased 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, attributable to negative leverage influence due to the decline in revenue exceeding that in fixed labor costs. In terms of the new home transition services, we still outperform the market. SARRC reports that the sales from the top 100 developers fell by around 7% year-over-year and 41% sequentially in Q1. In comparison, our new home DTV, rich RMB, $232.2 billion in Q1, up 53% year-over-year and down 34.6% quarter-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 self-confirmation from the partial subscription in last quarter. Revenue from new home transactions was RMB 8.1 billion to 1, rising by 64.2% year-over-year and dropping by 38.2% from previous quarter. Revenue outperformed the GTV year-over-year demonstrating our stronger monetization capabilities, while GTV growth outpaced revenue growth sequentially due to the seasonality. The contribution margin from the new home consent services rose by 1.1 percentage point year-over-year to 23.4%, as we gained leverage from the revenue growth exceeding that of the fixed costs. Sequentially, the new home contribution margin declined by 2.2 percentage points, largely attributable to the seasonality effect. In Q1, SOE developers contribute around 54% of our new home sales revenue, increasing by around 4 percentage points year-over-year. Revenue from home renovation and furniture, home rental service, and emergency and other services grow by 46.2% year-over-year in Q1. it accounted for 35.9% of our total revenue compared to 35% in the same period last year. The contribution profit from this business accounted for 32.7% of our total gross profit. Revenue reached for our home renovation and furniture business, revenue reached RMB 2.9 billion, increasing by 22.3% year-over-year. mainly due to the increased orders from the home renovation. Contribution margin for the home renovation and furniture business reached a record high of 32.6%, up 2 percentage points year-over-year and 2.8 percentage points quarter-over-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, its revenue reached a record high of RMB 5.1 billion, of 93.8% year-over-year, mainly benefiting from the rapid growth in the number of the rental units under management. Band of Q1, the number of rental units under management 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%, up 1.2 percentage point year-over-year and a 2.1 percentage point quarter-over-quarter, largely due to the improved gross profit of our carefully run business. As we continue to refine the carefully run business model, based on the sense 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% year-over-year, under 28.3% quarter-over-quarter, to R&B 350 million. Next, let's move on to our other cost expenses in Q1. Our stock cost reached R&B 770 million, remaining relatively stable year-over-year, under dropping by 8.8% quarter-over-quarter. The sequential decrease was mainly from the lower store rental cost. Other costs were only 547 million, up 44.4% a year, primarily due to the increased tax and the surcharge and the financial service reserve and the credit losses. Sequentially, other costs declined by 26.7%, largely driven by the decreases in the tax and the surcharge, financial service and reserve, and the credit losses. and the share-based compensation. Gross profit rose by 17% year-over-year to RMB 4.82 billion. Gross margin was 28.7% down 4.5 percentage point year-over-year. The primary reason for the decline was decrease in contribution margin from the seen home transaction services. Gross margin filled by 2.4 percentage points sequentially in Q1. Many due to the structural region as the revenue contribution of new home construction service declined. In Q1, our GAAP operating expenses totaled RMB 4.2 billion, up 2.9% year-over-year and down 31.3% sequentially. Notably, G&E expenses were RMB 1.9 billion, decreasing by 7.2% year-over-year, mainly due to the reduced share-based compensation expenses G&D expenses dropped by 36.7% quarter-of-quarter, primarily attributable to the lower personnel expenses and the decreased better provision. Sales and marketing expenses increased by 9.2% year-on-year to R&B 1.8 billion, resulting from the increased expenses for the home renovation and furniture business. Quarter-of-quarter sales and marketing expenses fell by 24.4%, mainly due to a decline in market expenses for home construction services and reduced personnel expenses. Our R&D expenses were R&D 584 million, up 24.9% year-over-year, driven by higher personnel expenses and technical service fee. Secretarily, R&D expenses dropped by 25%, largely as a result of reduced personnel expenses. In terms of the profitability, GAAP income from operations totaled RMB 591 million in Q1, a remarkable increase compared with the same period of last year, and decreasing by 41.6% sequentially. GAAP operating margin was 2.5%, increasing by 2.5 percentage points from Q1 2024, and falling by 0.7 percentage point quarter of quarter. Non-GAAP income from operations totaled RMB 1.15 billion, growing by 19.6% from the same period of last year and dropping by 34.6% sequentially. Long-term operating margin reached 4.9%, down 0.9 percentage points from Q1 2024 and 0.7 percentage points from the previous quarter, mainly attributable to the gross margin decrease both year-over-year and quarter-over-quarter. GAAP net income totaled RMB 855 million in Q1, rising by 97.9% year-over-year and 48.2% quarter-of-quarter. Non-GAAP net income was RMB 1.39 billion, remaining stable year-over-year and increasing 3.7% quarter-of-quarter. Moving to our cash flow and balance sheet, we realized the net operating cash outflow of RMB 4 billion in Q1. New Home DXO 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 RMB $74.3 billion, which I suppose is custom deposit payable. With our robust cash reserves, we continue to reward our shareholders. who have grown with us through the ActiveShare iPad, enhancing capital operation efficiency and sharing the benefit of our developments with investors. In Q1, we repurchased around US$1,139 million worth of shares, which accounted for around 0.6% 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 US$1.76 billion in shares at the end of Q1 2025, accounting for around 9.2% 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 investment and stock productivity. We will respect every penny and make sure the money spent yields with visible results. While maintaining the discipline and consistency in expense control, we will continue to support long-term business developments by fully backing our OneBody3Win strategy initiatives and actively exploring AI technology. At the same time, we possess natural resources and the intention to consistently offer the 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.

Good evening, Mr. Tao. Thank you for accepting my question. My question is about the prospect of the real estate market. We see that after the Spring Festival, the market has a good performance of Xiao Yangchun. I would like to ask if we look back from the second quarter, under the latest red-collar change, including some fluctuations in tariffs, what are our special prospects for the market now? I will translate it quickly. Thank you, Michael, for taking my questions. I think my question is regarding the outlook for the property market going forward. I think we note a strong rebound of the property market transactions after Chinese New Year. Just wondering from second quarter and onwards, what is your outlook for the property market? Is it really considering the latest microdynamics as well as the impact from the U.S. tariff? Thank you.

Thank you, Timothy. For Q1 market performance, With the central government's continuous effort 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, its in-home GDP grew by 16% year-over-year in Q1, sustaining the momentum field 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 to balance supply and demand in the short term, narrowing the decline in the home prices year-over-year and bringing the cautious buyers back to the market. Using home prices have stayed most stable, dipping by 0.5% month-over-month in March. In first-tier cities like Beijing and Shanghai, as well as second-tier cities with a strong net population inflows and a steady increase in the housing demand in recent years, such as Hangzhou and Chengdu, using home prices have picked up slightly month-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%. PTV of 200 real estate developers dropped by 7% year-over-year in Q1. Notably, the sales by flow area increased by over 15% year-over-year. Next is Q2. After Trump's New Year, The market followed its typical seasonal pattern. The e-thin home transaction volume peaked in early March, then gradually declined through April. The month-over-month decrease of e-thin home prices responded somewhat, with a 1.3% drop in April as transaction volume reduced. From a supply-demand standpoint, the total number of e-thin home listings on Baker rose in Q1, at the following 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 existing 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 Meanwhile, we observed that increase in the market demand outpaced the increase in unitary. In April, April ratio of the home building to unitary was at 1.8, which is at the higher end of the historical range of the 1.6 to 1.9. This suggests a stronger buyer interest and plenty of demand, with the market able to absorb new unitary. the conversion from the home viewing to transaction has slowed, mainly due to the shortening of certainties affecting buyer expectations, including external factors such as geopolitical tension. This has led to softening the housing price expectations, which made buyers more hesitant to enter the market. For future market outlook, We believe the market outlook will depend on two main factors, the impact of the international trade frictions 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 sequential culture basis. Year-over-year, however, the existing home market is expected to see lower 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 yield will increase in customer home viewing. As the market experienced a quarter-on-quarter decline in Q2, and if external trade pressure intensified in Q3, indicators such as the housing price, transaction volume, and development investments 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 the property market and support stable market developments. We are also closely monitoring the impact of the change in global trade on real estate market. In terms of home listings, with no signs of the homeowners rushing to sell. The number of home viewing for both existing and new homes still shows a notable yield increase in April. When categorizing the cities that were covered by high and low trade dependency, we observed that since the tariffs stopped in early April, cities with high trade dependency have slowed have shown the weaker year-over-year and the month-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 buyer 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 bullying. We observed a notable de-escalation in recent U.S.-China trade tensions, which should help stabilize the business and the consumer's expectation in the near term. In our view, we believe that intentional trade frictions represents a long-term dynamic process with uncertainties and the 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 company on an ongoing basis. In the medium to long term, we maintain a cautiously optimistic outlook Trusting both China and the U.S. will continue to move together each other based on the policy 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 risk on the property market, helping to consolidate the initial stabilization of the think-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.

So thanks, management, for taking my questions. And my question is regarding the housing transaction services business. So could management elaborate on the expansion plan for this year in terms of housing agents and the agency stores? And 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. Our agency store network to support the sustained expansion of our housing construction services At the same time, we will place greater emphasis on the cost effectiveness of the store's dysfunction. Our aim is to enhance efficiency and the 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 and store network dysfunction, by the end of this Q1, The number of active stores on our platform increased by nearly 30% year-over-year, and the number of active agents grew by 23% year-over-year. The growth was mainly driven by the nanlianjia segment, with a 33% year-over-year increase in active nanlianjia stores and a 24% year-over-year increase in active nanlianjia agents on our platform. Several major brands join our platform. This includes our collaboration with Zhongyuan's sub-brand, Baoyuan, and Kunzhu, a brokerage company in Kunshan, Suzhou. This shows the core value of our platform in buy-side market, which is our stronger existing home business operation, agent connection network, and digital empowerment capabilities. In Q1, our efficiency 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, its in-home GTV per agent grew by over 9% year-over-year in Q1. The average number of agents also rose by 18% year-over-year. Together, this factor led to a 28% year-over-year increase on our platform, currently outperforming the 16% increase in National YGTB as estimated by Baker Research Institute. Our platform's efficiency-focused mechanism also starts to show results. The share of the high-performing stores increased from 16.7% at the end of 2024 to 18.4% in Q1. The store 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 digital tools such as online store owner workshop and AR property listing assistant, along with offline property listing sessions to facilitate separation of homelessness, their accelerated sales. We also improve platform operation through the building mechanisms like a point-based incentive program and regional co-governance council. This encourages store owners to keep growing business and work more closely with each other. Our store retention rate remains healthy for both our risk-in-home nutrition rate dropped to 2.9% in Q1, down 6% sequentially and 38% year-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 a full year, we reasonably foresee that the number of Lianjia agents in the store will remain largely stable. Meanwhile, we expect a modest increase in scale of non-designated 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, on our points-based incentive system, we aim to develop more high-performing 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. This large store boost allowing store owners to achieve better income and stay in business longer. Those store owners can better support agents, ensure 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 gains. This year, in a volatile market, we aim to increase the average number of transactions per connected agent to maintain stable per capita emissions. Over the next two to three years, we plan to increase the proportion of large and high-quality stores. This store will have a more stable, high-performing agent with high efficiency, with store productivity being two to three times of the current average. We anticipate within three years, This will lead to approximately a 20% improvement in efficiency of those connected agents on our platform. Thank you.

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

This is my question. We see that the company's furniture and home appliances have a growth of more than 20% in the first quarter, and the profit rate has also increased by two points. I would like to ask the management to share with us the progress of home appliances and the future, for example, the profit rate of the whole year in 2025. In addition, Mr. Stanley and Mr. Tao shared a lot of ideas about how to use AI technology to drive business and improve service quality. Could you please look forward to the layout and investment plan of 2B2C AI in the next few weeks? Thank you. And then I will quickly translate it myself. ACOS home renovation and furnishing business achieved 20 plus percent young year growth in the first quarter with 82 percentage point improvement in contribution margin. Good management share more specifics of this segment's operation as well as the outlook on the margin in the future. And in addition, management has shared a lot of the ideas of Beike using AI to drive its business and improve its service quality. Looking into the next few quarters, management update us more on Beike's strategy and investment plan for AI from both the 2B and 2C perspectives. Thank you.

Thank you, Zhizhou. Our home renovation and furniture business demonstrate excellent performance in this Q1. In terms of scale, the revenue amounted to RMB 2.9 billion, up 22.3% year-over-year. Cities such as Beijing, Guangzhou, and Zhengzhou performed especially well, and each achieved over 50% year-over-year growth in revenue. Regarding profitability, the contribution margin for the home renovation and furniture business reached 32.6% in Q1. an increase of 2 percentage points compared to the same period last year, reaching a record high and reflecting our capability of the refined operation and management. We believe that the AI has extensive application scenarios in the home renovation and furniture. 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. Normally, professional drawing reduces the customer's perception and affects 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 AR proposal based on the customer's preference for decoration style and the home layouts. This AR proposal encompasses various types of three-dimensional color-oriented design drawing, dynamic and aesthetic space analysis, storage, and the smart device layout plan. This significantly enhances the experience of first-time store visitors and thereby both the contract conversion rate. Taking Wuhan as an example, the time period from the first time visiting the store to signing 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 installing cameras on the spot. AI can also realize automatic measurements in core construction operation, such as the real name on the drop specification, 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 recontrast the acceptance process, enabling traceable and quantifiable evaluation of the construction quality. Taking Beijing as an example, the acceptance of at-risk rate has increased by more than 2 percentage points compared with before. Meanwhile, in terms of the internal management, we have multiple AI employees Xin Xiaosheng, as the operating management AI employee, enhanced the effectiveness of the team management by automatically summarizing and commenting on daily reports, and reminding about the pending matters through AI. Xin Xiaosheng has collected and commented on more than 20,000 daily reports, saving the team more on within half a year. Xiao Caixiong, as an order following AI employee, realized functions such as information distribution and automatic order assignments, so the information collection and AI analysis capabilities. Xiao Caixiong had distributed information over 5,000 times and sent timely reminders 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 the more efficient design powered by AI. We aim to achieve the better personnel solution from demand to design and comprehensively enhance the professionalism and the efficiency of our services. Thank you.

Thank you.

Your next question comes from John Lam from UBS. Please go ahead. So let me translate my questions. So my question is regarding on 備好家. So we see that Beihaujia has already participated numerous new home projects. So just to see how Beihaujia contribute to the new home development and also regarding on the C2M business, how the business is being reflected. Thank you.

Thank you, John. Beihaujia's business model provides a C2M new home product solution For partners like developers, we use intelligent algorithms and a massive database to deeply understand our target customers' needs and preferences. Our tools help predict the type of home customers wanted and the price they expect. Developers use this insight to guide project positioning and product design, making their new home offerings more catered to customer demands. So far, Beihaujia 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 Beihaujia primarily focuses on the product position using H1. And the rest two projects are purely light access models, where we do not engage in investment, but instead provide a product positioning solution to partners and charge a service fee. Regarding the funding use, across the seven investment invoved projects, the total investment have been reached about RMB 2.3 billion. At the end of this Q1, we have recovered nearly RMB 500 million from Chosin. 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 Power China Real Estate on Beijing Chang'an Huaxi Mansion, in Mentokou District of Beijing City, achieved a complete sell-out of all initial units on the first day of launch. The project delivered the IRR nearly 30% at the shareholder level, demonstrating how our C2M service capacity provides partners with enhanced sales and operations 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 massive online and offline traffic of our platform. It also draws from the rich customer interactions in our brokerage, home renovation, 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 the greater operational certainty. Our second advantage is strong market knowledge and price ability. We use actual transaction price of leasing home, along with the real-time and upstream data, like a homeowner's leasing price and the price adjustment. We then applied the algorithm model to build a valuation model for different geographic histories. These models can more accurately estimate the project and the 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. The existing home prices are largely unaffected by policies or developers' strategies. and instead results from a decentralized and free negotiation between buyers and sellers. The new market dominates by its in-home transactions. In-home prices often give a more accurate, multi-layered view of the market than new home market data. This helps us better understand the market trend. Based on these two advantages, we have refined our core C2M tools We will continue to improve their accuracy and professionalism over time. We also support our C2I 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 co-creation of new home project designs. For example, in our function project in Shanghai, users can visit Building a Better Home Together page. They can view and compare two home design plans, engaging in the design process of their future dream homes. This model allows us to 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 C2M product solution service in the CN project, through which we earn a service fee, showing stronger marketing recognition from our business approach. In the CN project, Pei Haojia provides a full set of product solutions, just including the customer service, product design positioning, cost optimization, cost optimization, price forecasting, and market services. We also give targeted project planning advice, such as optimizing the elevation to household ratio, enhancing the landscape, and adjusting unit size, trying to address the key developer pinpoints, such as fast capital recovery, product premium, and product competitiveness. but not less. As a newcomer to the industry, Baicaojia remains humble and respectful to the market. Although the business has been established for less than two years, we have already seen the promising results in several projects. These early signs have 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. Siting Lee, for closing remarks.

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