Hello, ladies and gentlemen, thank you for standing by for KE Holdings Incorporated’s First Quarter 2021 Earnings Conference Call. 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, Mr. Matthew Zhao, IR Director of the company. Please go ahead, Matthew.

Thank you, operator. Good evening and good morning everyone. Welcome to KE Holdings Inc. or Beike's first quarter 2021 earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted on our company's IR website, www.investors.ke.com. On today's call, we have Mr. Stanley Yongdong Peng, our Co-Founder and Chief Executive Officer, and Mr. Tao Xu, our Chief Financial Officer. Mr. Peng will provide an overview of our strategies and business developments and Mr. Xu will provide additional details on the company's financial results. Before we continue, I refer you to our Safe Harbor statement in our earnings press release, which applies to this call, as we will make forward-looking statements. Please also know that Beike's earnings press 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 conference call are in renminbi. With that, I will now turn the call over to our CEO, Mr. Stanley Peng. Please go ahead, Stanley.

Thank you, Matthew. Hello, everyone, and thank you for joining us today on our first quarter 2021 earnings conference call. We are very grateful to have achieved operational and financial results in the first quarter that considerably exceeded expectations, thanks to the tailwinds from China's robust economic growth following the COVID-19 pandemic and the adherence of the national policy, houses are for living not for speculation, as well as our unwavering focus on the long-term goal of delivering an excellent consumer experience through quality service. Our total GTV grew rapidly to RMB1.07 trillion, up 224.2% year-over-year. Meanwhile the self-reinforcing virtuous cycle of efficiency and scalability driven by quality service was further enhanced on our platform. We continued promoting industry digitalization by further building online infrastructure. In the first quarter, our housing dictionary contained data for over 244 million homes in China. Average MAUs including our platform's apps and WeChat mini-programs reached 48.5 million in the first quarter, up 78% year-over-year. The expansion of our network's scale also continued at a robust pace, while we remained focused on the quality of our network. By the end of the first quarter the total number of connected stores reached 48,700, up 25.4% year-over-year. Seamless and win-win collaboration among stores and brands continued to prevail on our platform. In the first quarter, 76% of transactions on our platform were completed through cross-store collaborations and the transactions completed through cross-brand collaborations remained steady at 36% on our platform, while connected stores accounted for 83% of existing home listings. In addition, we continuously supported our connected stores and brands in recruiting, cultivating and retaining agents in the first quarter, which led to 41.8% year-over-year growth of the number of agents on our platform reaching a total of 528,000. With that overview, I would now like to…

Thank you, Stanley. Thank you everyone for joining us. I would like to provide a brief overview for our first quarter of 2021 financial results. We are pleased to deliver another strong quarter of financial results, marked by high revenue growth and strong profitability. Our net revenues, increased by 190.7% year-over-year to RMB20.7 billion in Q1, exceeding both, the high-end of our guidance and street consensus. The rapid growth of net revenues was driven by solid GTV growth of 224.2% year-over-year to RMB1.07 trillion. The high growth rate in the first quarter of 2021 was primarily attributable to a lower base in the same period of last year under the impact of COVID-19. However, although we experienced the impact of the Chinese New Year in Q1, our net revenues in Q1 still surpassed the revenues in both, Q2 and Q3 of last year and only declined single-digit on a sequential basis, demonstrating the strong momentum of top line growth. In particular, our net revenues from existing home transaction services, increased by 202.1% year-over-year to RMB10.2 billion in Q1, mainly due to a 244.2% year-over-year increase in GTV of existing home transactions to RMB673.4 billion in Q1. Our net revenues from new home transaction services, increased by 187.6% year-over-year to RMB9.9 billion in Q1 primarily due to a 194.9% year-over-year increase in GTV of new home transactions to RMB343.4 billion in Q1. Our net revenues from emerging and other services increased by, 96.2% year-over-year to RMB0.6 billion in Q1. The increase was primarily due to an increase in the GTV of financial services around the housing transaction services as well as an increased number of home decorations units, completed through the Company's platform. Cost of revenues, increased by 140.0% year-over-year to RMB15.9 billion in Q1. Gross profit increased by 860.4% year-over-year…

[Operator Instructions] Your first question comes from the line of Elsie Cheng from Goldman Sachs. Please ask your question.

[Foreign Language] Thank you, management for taking my questions and congrats on the strong quarter again. I have three questions. First is about the efficiency at Lianjia and Beike stores. Can you share a bit more color into the GTV personal growth, as well as the main drivers of the growth for the quarter? And then second is on antitrust regulations in China. How does management think about the regulatory environment and the impacts to our Company if any? Third is for the macro and housing industry, where we've seen some tightening policies in a couple of tier one cities and what would be the impact from those cities and how should we think about future trends? Thank you.

Thank you, Elsie. Regarding our store efficiency for the Lianjia and Beike store for the first quarter for 2021, the average GTV per store increased 186.3% year-over-year and quarter-over-quarter sequentially, we decreased 2%. Our [Indiscernible] year-over-year has increased 182% and the quarter-over-quarter increased 2%. Our connected stores increased year-over-year, 193%, whereas quarter over quarter decreased 5%, so year-over-year increase is mainly due to negative impact of COVID-19, because last year all [indiscernible] COVID-19 outbreak, we shut down our business for 1.5 months to the secure safety of our agents of our regions and the funds. During the period back for a while, so that's -- and then meaningful housing transaction, [indiscernible] this is the main reason. But the quarter-over-quarter decrease just owing to 2019 is normally, so after Q4's strong quarter and Q1's relatively weak quarter owing to the Chinese New Year holiday. But if you look at this Q1 versus Q4, the number post-COVID is very meaningful because even though we had the impact of the Chinese New Year, but quality, efficiency and stability and Beike store is what played out. That's the traditional low season of first quarter and with a big single first quarter did not show much impact and just Q1, we're still robust with the number exceeds last Q2 and Q3. [indiscernible] RMB164 million to remaining other finance store that's RMB36 million opportunity there were more than 31% store passed the 50 million benchmark. Looking forward, this number increased to 36.7% in this quarter. That means more than 17,000 stores in this platform already passed the 50 million benchmark. We anticipate by 2025 more than 90% of our store enrolled and pass the 50 million benchmark. According to our proprietary model and the 2019 as stated and we are very confident that our third brand…

Thank you.

Your next question comes from the line of Thomas Chong from Jefferies. Please ask your question.

[Foreign Language] Thanks management for taking my questions and congratulations on the very solid set of results. My question is more about the second half outlook as well as the trend for different segments. Can management comment about how the trend will look like for the GTV revenue and the profitability together with on the by-segment basis how should we think about the trend for the existing home, new home as well as the emerging services outlook as we come to the second half? Thank you.

Okay. Thank you, Thomas. And regarding the first question for the second half outlook, because Beike has delivered the record highest financial performance in past three quarters continues after IPO. So looking forward, we have a target and continue to deliver strong growth for the rest of the year. Just now we give our guidance of Q2 revenue, which is RMB 23.5 billion, an increase from RMB 5 billion year-over-year was due 11% to 23% increase. So in 2021 the fundamental purpose of regulatory policy in certain cities providing housing price going up too fast and very rational. So, just as I answered the question to Elsie, we still saw the second half of our market will be stable in the housing owing to the resi demand and the people’s willingness to change the particular input living additions. So, we do not believe it's a nationwide transition while we see the facts. So, we are very confident to give the robust result for the rest of the year. This is our answer to first question. The second is regarding a question for our – I think rate and our commission rate. So I think this question we iterate from time-to-time during past few years, the Lianjia initial rate actually the exact quality and transaction efficiency, a number of the services that we offer. Today China residential market, house for these new homes as the new home is a market that was public issue and apparent facts and the one. The platform announced and the platform has the capability to actively control it, may make working of commission work without being justified by the service quality, transaction efficiency and number of service guarantees offered is not sustainable, especially for the new home sales market with the digital 2D [ph] market. Developers…

Thank you.

[Foreign Language] Hi, Thomas. This is Stanley. Let me add on in terms of our philosophies to develop the new business in the future. So firstly, when we look at the new business we always look at the big potentials or big market size in those kinds of areas. We know there's a rounding of the residential topics there will always be some of the big market potentials such as renovation and decoration. When we notice those kinds of industries, they always have some of the common pain-points such as overall user experience extremely low and there's the overall players in that market are quite fragmented as well as the overall service procedures are quite complicated. So based on our past 19 years of experience from the Lianjia practice to Beike, we believe the transforming of the industrial internet will definitely go to the routine. Firstly doing deeply, then doing horizontally. So we believe it's the only way to do that, right? Especially when we're doing deeply it means we will dig deep into that industry and understand the standard and build up the new standard for the services. So in the past 19 years, we actually get a couple of the takes. Firstly is the -- is what we used to call the three standards. So firstly, it's about the service provider standard. What kind of services could be called the good services? Now how we define that. So that will be the first thing is we can further empower to the service providers in the industry such as decoration and renovation. Secondly, it is standard for the overall service procedures, right? Especially for example, the renovation business during -- of the whole construction part and how we can provide the SOP as well as define the new standard…

Okay. Thank you.

Your next question comes from the line of Liping Zhao from CICC. Please ask your question.

[Foreign Language] Good evening, Stanley, Tao Xu and Matthew. Thanks for taking my questions. I have two questions here. First one is related to the new home transaction. Some believe the entry barrier of new home transaction business is relatively lower compared to existing home transaction. There are more players in the market recently. What is Beike's core competitive advantage in new home transaction and what's your strategy to protect and gain more market share? And second question related to existing home transactions. Compared with property service companies Beike has strong efficiencies in matching buyers and the listed home. However, those property service companies have the advantage of being localized players and tight relationships with property owners. In the long run whether our AC plan to - plans to involve more players around the industry value chain, for example those property service companies? Thank you.

Okay. Thank you. Regarding your first question for the new home sales and our core competency]. Some acres [indiscernible] let's say, as we mentioned year-over-year costs right after [indiscernible] player guarantee to this industry. That is not huge. And we truly welcome all players into this area [indiscernible] continuously reevaluate and polish our strategy and iterate ourselves. From Beike, we do hope to work with everyone to make this industry a better environment for agents and an increase agent efficiency and improve the customer experience for the housing transactions. So far we do realize there is some strange things it's like the unfair competition and the capital base that is always functions such as the setting low commission rates, higher rebate or so-called unrealistic a binding valuation promise. Just as the fact [indiscernible] competition and for which is laid out the deep understanding of how to do investment for the new home transactions. And in the past and last year last year was mega internet, how to enter into this industry with the high-profile job which ended up with acquisition, as this approach situation now. So as core competitors of the new home business, we need to two things. The first is total number of agents. Agent basic interests and the timely payments by far in Q1 will pay the full 4.3 billion and which can move the box to secure the agent interest and make sure the people were getting money in time. The second is [Indiscernible] about customers improving the customer experience in the new home buying process and the promoting the three days cooling down period et cetera. Since it's what we have continues to do. Also we are not prepared at this moment, but we are already on the way of doing so. Where there is…

Your next question comes from the line of Binbin Ding from JPMorgan. Please ask your question.

[Foreign Language] I'll translate it myself quickly. I have two questions. So the notice that originally the management of anti-gov [ph] made some comments on label regarding the industry as well as Beike. So my first question is for anti-trust, I know from a market share perspective you are not apparently not in an, obviously, dominant position in the market. But in what aspects or processes are exposed to the highest potential anti-trust risk in your view? Second question is related to competition. So from a competitive angle will the changes in recent competitive dynamic including the listing of anti-trust bring any changes or make you become more aggressive in terms of certain operational strategies? Thank you.

Okay. Thank you Binbin. Regarding your second question for the anti-trust, I believe I have already gave a very clear answer on the capitalization, where I answered questions from IOC about government. So regarding your first question, we would like to see anti-trust used to be a leading online information content type. We will stay very close. It has been stalling and accumulate online use of clickbait, and used to establish some competitive advantage in society [ph]. Just like in-house, [indiscernible] it is one of the fellow industry participants and we have always respect. Normally we don't comment other peers or comment directly, but I would like to take this chance to share our view on how to build capable company when doing housing construction in China. Maintaining and providing service is not an option. It is a foundation for all real estate transactions. Even inauthentic and fake listings, mark the beginning of the successful and ambitious model. This is I want to mention the point one. The point two is when it’s like new home purchase should work with, people should adhere to a comprehensive and straight management system with three key requirements; scale of the project, reasonable commission rate to incentivize agents, and solid payment capability as well as the positive cash flow of the business operation otherwise the business model is not sustainable. The third, the comprehensive risk assessment system, fantastic and experienced operation forms housing accounts receivable over date days and big pockets provide commission in advance and secures agents' interest, significant monitor and prevail repay and the customer interception behaviors. This has a long way to go. The competition through the short-term behavior such as an excessive commission sharing and lower price is what brings the high uncertainty to their business model in the long run versus the false proposition and the legal uncertainty of the market. So we'll just [indiscernible] position might be a bottleneck for Lianjia [ph] to grow its new home business, but doing new home business requires strong cash position of the audit. According to Lianjia growth prospectus as of February 28, 2021, the balance of Lianjia gross cash, cash equivalent and short-term investment, the total amounting to RMB1.63 billion, while in the same period Beike just paid commission in advance of RMB4.3 billion to agents to secure their interest, which covers 163 [ph] and 130,000 payments and recover 5,080 projects. From agricultural [ph] business, our cash, cash equivalents and short-term investments amounted to RMB49.1 billion at the end of Q1, which comes to 30 times. Regarding recent noises from Yojimbo [ph] on social media, we are reluctant community where we go slow, or we go high, don't waste time on this guy. Operator let’s move to next question.

We are now approaching the end of the conference call. I will now turn the call over to your speaker host today, Mr. Matthew Zhao for closing remarks.

Thank you operator. Thank you once again for joining us today. If you have any further questions, please feel free to contact Beike's investor relation team through the information provided on our website. This concludes today's call and we are looking forward to speaking with you again next quarter. Thank you and goodbye.

That concludes today's conference call. Thank you for participating. You may now disconnect.