KE Holdings Inc

Hello, ladies and gentlemen. Thank you for standing by for K.E. Holdings' second quarter 2026 earnings conference call. I am Siting Li, higher director of K.E. Holdings. Please know that today's call, including the management's prepared remarks and Q&A session, will all be in Chinese. Simultaneous interpretation in English will be available on a separate line for the duration of the call. To access the call in Chinese, you will need to dial into the Chinese language line. At this time, all participants are in listen-only mode. to this conference call is being recorded. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website. On today's call, we have Mr. Stanley Peng, our co-founder chairman and chief executive officer, and Mr. Tao Xu, our executive director and CFO. Mr. Xu will provide an overview of our business update and financial performance. Then Mr. Peng will share more on the progress of our strategic transformation. Before we continue, I refer you to our safe harbor statement in our earnings price release which applies to this call as we will make forward-looking statements. Please note that Baker's earnings price release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures Please refer to the company's press release which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Lastly, unless otherwise stated, all figures mentioned during this call are all in RMB. 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 has 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 Chinese as the main language. Please note that English translation is for convenience purposes only. In case of any discrepancy, management's statements in their original language will prevail. We now turn the call over to our CFO, Mr. Tao Xu. Thank you, Siting. Hello, everyone. Welcome to our Q2 2026 earnings call. Let me begin with the key financial takeaways. Our total GDP return to growth, despite a modest year-over-year revenue decline, profits increased significantly, materially outperforming both GTV and revenue. In Q2, GTV increased 6.3% a year-to-year, while revenue decreased 5.7% a year-to-year. This revenue decline stems primarily from adjustments in our home renovation and furnishing business. Revenue recognition impacts from iterative product modeling in the home renovation services. Non-GAAP net income grew 74.9% a year-to-year to $3.185 billion. Non-GAAP net margin reached a 13% up 6 percentage points a year-to-year, a three-year high. Profit improvements were driven by a healthier cost structure, strict financial discipline, and a higher operating efficiency. Contribution margins across all core business lines improved year-over-year and quarter-over-quarter, driving the group's gross margin up 6.7 percentage points year-over-year to 28.6%. Simultaneously, gap operating expenses fell 14.1% year-over-year This combination of gross margin expansion and a lower operating expenses fuels our profit growth. Next, I'll review our segment financial performance. First, existing home transaction services. Q2 scale return to growth and profitability improved significantly. GTV reached $629.89 billion, up 8% year-over-year, and 17.9% quarter-over-quarter. Revenue was $7.02 billion up, 4.5% year-over-year, and 14.5% quarter-over-quarter. GTV outpaced revenue growth year-over-year, primarily because non-lianjiao GTV, where platform service fees are recognized on a net base, accounted for a larger share. This quarter, non-lianjiao platform service revenue increased to 27.8% year-over-year and 29.8% quarter-over-quarter. With a stable network scale, we advanced refined our operations to boost per store output, helping connected stores outperform the market in enhancing overall platform efficiency. Q2 contribution margin reached a 46.1% up, 6.1 percentage points a year driven by a lower fixed labor costs and a structural shift toward a higher margin platform service revenue. It also raised 4.8 percentage points quarter-over-quarter, benefiting from operating leverage amid revenue recovery and further business mix improvements. Second, the new home business. Q2 scale remained stable year-over-year, while profitability continued to improve. GTV reached $258.39 billion, up 1.2% year-over-year, and 77% Hsueh-Hsueh-Hsueh-Hsueh. Contribution margin reached 28.8% up, 4.4 percentage points a year driven by cost structure optimization from refined operations. It also raised 3.1 percentage points a quarter of a quarter benefiting from the same factors plus operating leverage from revenue growth. Third, home renovation and furnishing. Q2 revenue was 3.19 billion, down 30.1% year-over-year and up 36.4% quarter-over-quarter. The year-over-year decline reflects our proactive adjustments of inefficient customer acquisition channels and exits from cities with a weak unit economics. New home market pressures also dampened renovation demand. The quarter-over-quarter revenue increase reflects seasonal business recovery. Q2 contribution margin was 39.6%, up 7.5 percentage points year-over-year, and 3.4 percentage points quarter-over-quarter, driven by lower material costs through centralized procurement and refined cost management.

Fourth, home rental services.

Q2 revenue was 4.83 billion, down 14.8% year-over-year, and 3.6% quarter-over-quarter. This stemmed from transitioning and Sharefree ran to a lighter, low-risk product model utilizing net basis revenue recognition. While this reduces reported accounting revenue, managed rental units continued rapid growth. By end of Q2, managed units exceeded 790,000, up approximately 34% every year, with a net base product comprising over 50%. Q2 contribution margin reached 15.3%, up 6.9 percentage points year-over-year. This reflects a favorable product mix shift in operating improvement from lower labor, installation, and post-lease costs. Quarter-over-quarter contribution margin rose 0.5 percentage points, driven by continued increase in net base products. This emerging in other businesses. Q2 revenue reached 550 million RMB up 26.4% a year-over-year, and 70% quarter-over-quarter. Next, turning to Costs, Expenses, and Profits. Q2 store-related costs were 560 million RMB down, 25.9% a year-over-year, and broadly stable quarter-over-quarter. The year-over-year decline reflects a lean just rent cost optimization and network adjustments. Total Q2 gap Operating expenses were 3.989 billion RMB, down 14.1% year-over-year, driven by improved organizational efficiency, optimized marketing spend, and continued financial display. Operating expenses rose 21.3% in Q2 due to higher selling expenses from the home renovation seasonal recovery and the bad debt provisions in new home business. Specifically, G&A expenses were $2.04 billion, down 2.1% year-over-year. The 18.9% quarter-to-quarter increase resulted from a full debt provision of around $280 million following a prudent assessment of SINAC-related receivables and collateral value. So, the marketing expenses were 1.4 billion, down 26.1% a year due to optimized sales, personnel costs, and refunded marketing spend, but rose 29.6% a quarter from seasonal and higher home renovation and selling expenses. R&D expenses were 550 million RMB, down 13.4% a year due to lower labor and technical service costs. 11.4% quarter-over-quarter due to increased technical service fees. On the bottom line, Q3 gap operating profit reached 3.026 billion RMB up, 185.6% year-on-year. Non-gap operating profit was 3.592 billion, up 123.6% year-on-year. Gap operating profit rose 137.8% quarter-over-quarter with a 12.3% margin, up 8.3 percentage points year-over-year and 5.6 percentage points quarter-over-quarter. Non-GAAP operating profit grew 115.7% quarter-over-quarter with a 14.6% margin, up 8.5 percentage points year-over-year and 5.8 percentage points quarter-over-quarter. This year-on-year and quarter-by-quarter margin expense was driven mainly by higher gross margins and lower operating expenses ratios. Q2 GAAP net income was 2.624 billion, up 100.8% year-over-year, and 109.1% quarter-by-quarter. Non-GAAP net income was 3.185 billion RMB, up 74.9% year-over-year, 97.6% a quarter per quarter. Final turning to cash flow, balance sheet, and shareholder returns. Our Q2 net operating cash inflow was a 6.61 billion RMB net. A new home account receivable turnover was around 39 days down, around a 12-day review reflecting effective risk management. Excluding customer deposits, our end of Q2 broad cash balance remained at around and 67.3 billion RMB. This ample liquidity strengthened our risk of resilience while supporting business development and shareholder returns. In Q2, we spent around $250 million on share repurchases, including our first buyback in Hong Kong market. In the first half, we spent around $450 million on repurchases up around 14% a year representing around 2.4% of our year-end 2025 outstanding shares. Since launch of this share repurchase program in September 2022 through Q2 2020, we have repurchased around 2.99 billion US dollars in shares representing around 14.8% of outstanding shares prior to the program start. In summary, Q2 profitability improvements reflect combined cost optimizations, operating enhancements, and a favorable business mix. Looking ahead, maintaining a solid balance sheet and ample liquidity will anchor our long-term growth. Across all core new and technical investments, we will enforce strict ROI discipline and take customer value, operating efficiency, and sustainable returns as our Wang, and Zeng Li. Next, I'll turn the call over to our chairman and CEO, Mr. Stanley Peng. Please go ahead.