Hello, ladies and gentlemen. Thank you for standing by for KE Holdings, Inc.’s Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today’s conference call is being recorded. I would now like to turn the call over to your host today, 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 second quarter 2022 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, investors.ke.com. On today’s call, we have Mr. Stanley Yongdong Peng, our Co-Founder, Chairman and Chief Executive Officer; and Mr. Tao Xu, our Executive Director and Chief Financial Officer. Mr. Peng will provide an overview of our strategy 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 note 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 all these 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 Chairman and CEO, Mr. Stanley Peng. Please go ahead, Stanley.

Thank you, Matthew. Hello, everyone. Thank you for joining Beike second quarter 2022 earnings conference call. In the second quarter on a proactively easing purchase for industry and the effective pandemic controls. China’s real estate transaction market saw a series of positive changes, especially in the existing home market. Meanwhile, we improved our performance operating efficiency and stability in a scale of our stores and agents as well as year productivity by the internal and external environment we live in remains follow challenges. Micro uncertainty continued to increase and our businesses are becoming more diverse and complex as we advance our One Body, Two Wings strategy. Faced with such a complex internal and external environments to command and control our diversifying businesses, our organization need to have deeply what players at the center that we need to believe service providers, the real estate agents, when a veteran workers and foreman, designers, customer service representatives, rental housekeepers. They are our customers and our valuable assets in terms of market corrections, our tried and true progress of the years, it will seek any answers from industries frontline finance trends from the day to day work our ordinary service providers. This is even more necessary today, because we faced a market adjustment with a greater than euro magnitude in a scale and the complexity of our organization have also reached a new level. First, going to a frontline will have us to award the potentially the company disease, as we grow in scale, by our management in a platform teams connecting with those we so as equals, instead of from the call, while the frontline remains at a distance. We can bring everyone’s heart together and establish a true understanding amongst one another. Second, we need to be all have to all the…

Thank you, Stanley. Thank you everyone for joining us today. Before discussing more detail about our second quarter of 2022 financial results. I’d like to provide a brief update on the recent housing market. In the past quarter, so most supportive policies rolled out to shore up demand in the real estate market in China. That includes the central government that holds it lower mortgage rates guided by the Central Bank and the stand up easing measures from lower to higher tier cities across the country. The property market has to show some signs of improvement with the existing housing market, especially responding quickly to the policy relaxation. With the new home market was still clouded by that crisis among developers and weak homebuyer sentiment. Recently, the reemergence of COVID-19 operates and mortgage boycotts sites on unfinished new home projects have a disrupted recovery of China housing market. However, we would like to address those resulting hurdles will now the impact Beike’s business directly. As we believe this government will properly resolve the issue and ensure the delivery of the property project. In addition, the uncertainty of the new home market in some cities could apply a part of demand to the whole housing market. While we have a stronger presence and the incomparable competitiveness, while position the shift in demand, while those market was still on a rocky way of recovery. We were able to take a concrete measures to continuing building up our market presence and to maximize our restaurants including the collaboration network and the digitalization capability to enhance operating efficiency. Here, we would like to extend a sincere gratitude to the employees who have been impacted by the company’s business restructuring in Q2 for their dedication and professionalism in the transition period. So contributions are extremely…

Thank you. [Operator Instructions] Our first question comes from Jiong Shao with Barclays. Your line is open.

Thank you very much for taking my Questions. I have a couple of questions if I may. The first question is you briefly mentioned about the policy relaxation in your prepared remarks. And I was just wondering, could you talk about the actual fact you’re seeing from those policy relaxation, and any comments about the potential further relaxation for the second half of the year? My second question is that you also highlighted in your prepared remarks of a very nice rebound of the existing home sales, particularly in Shanghai and Beijing. Could you just talking about your expectation for further recovery for the second half or what have you seen so far in the third quarter? Thank you very much.

Thank you, Mr. Sharo. Let me address your first question. Guided by the supportive time set by the central governments and is a central bank liquidity support from low to higher tier cities. We actually saw the local government continue to step up the policy relaxation. Since the beginning of this year, about 220 Province at the city level authorities have loosened the restrictions nearly 600 times exceeding the total 400 tightening policies issued last year. In particular, after politburo meeting, as end of this April, so frequency which the local relaxation policy were introduced in the same call, second-tier cities can play accelerate, reaching more than 110 times for each month from April to June. These policies are meant to ensuring the normal creation of the growth entities under the stability of the market transactions. There are many full types of easing measures. The first is relaxation on the loan restriction, and also includes into the record. The mainstream first and second home purchase mortgage interest rate, we monitor the 103 cities recently dropped to 4.35% and 5.07% in July, respectively. Beijing is a new loan since the year of 2017. Relaxation on loan restrictions also include the reduction of down payment ratio, lower recognition standard for the second hand home, and also lowered the restriction on the use of housing provident fund et cetera. Cities that issued actual relaxation in the city of Suzhou, Taiyuan, Jinan, and Guangzhou. And the second part is the relaxation on the home purchase restrictions, including encouraged for the city resident, and the relaxed purchase distribution for non-local householders is a function of non-restricted every [ph], and also the added purchase quota for the family members with more than one child and this was implemented in the city such as Nanjing, [Baotou and…

Very helpful. Thank you so much, Tao Xu.

Thank you.

Thank you. Our next question comes from Harry Cheng with Citi. Your line is open.

[Interpreted] Thank you management for the opportunity. My first question is about mortgage boycott and the provision of receivables. Starting from July, there has been mortgage boycott for new home with construction suspended in various cities in China. Could the management share your views of the impact on company business? Besides the company management give us an update on collection and the provision of accounts receivables. My second question is to ask management’s views of current new home market and its outlook after the contaminants fine tune the second quarter of this year? Thank you.

Hello, Harry. I’d like to hear from you. Let me address your first question. Firstly, we want to continuously reiterate that it is a bank and the referral rate is kind of Beike for the payment by card, so to know the right impact on Beike. Most of the developers suffering from the mortgage rewards will identify by earlier so called a high rate developers. So we have made a sufficient bad debt provisions for those receivable concerned. Secondarily, to start new home construction and the mortgage payment, the suspension or the events to happen under extraordinary circumstance at the extraordinary time. And we believe the Chinese government has sufficient capability and a determination to resolve the issue. Recently, from our observation, local governments, in several cities already implemented various initiatives to ensure the project delivery, and as a result multiple project was a potential mortgage payment to rebound risk resumed construction. Under most circumstances, homebuyers called mortgage payments, owner was new home construction is stalled as a protest to get its construction to resume instead of refusing to pay all right. We also believe in some mortgage payments suspension, while promoting local government to help industry and our crisis difficult as the faster pace and stabilize the consumer expectation, which will be instrumental for the industry to return to normal operation. Thirdly, if mortgage payments suspension will choose supply, it may indeed negatively affect new home market sentiment in some cities, and that disrupts the new home market or recovery in the second half of this year. It is very bad. However, due to new home that [indiscernible] have to start construction that may fulfill the spell over demand from the new home market, which could benefit the Beike giving up giving our wilder presence in the new home…

Thank you, management.

We have a question from Steven Tsai with Morgan Stanley. Your line is open.

[Interpreted] Thank you management for taking my questions. My question is about the whole innovation business, could management share with see if there’s any update on the business strategy or geographic pleasure plan or postal consolidation percent to, and if there’s any guidance on this business for the coming quarters. Also, is there any update on the timing of your launch in the platform model for renovation which you mentioned the 2025 or 2026 before? Any milestone related to that that you are looking at internally where are we now and what’s the biggest bottleneck are you think? Thank you.

[Interpreted] This is Stanley Peng. Let me quickly address your question. So firstly, as I mentioned during the prepared remarks, so during the second quarter, if you look at the leading industry combination in the whole renovation and furnishing business has been declined over 20% year-over-year. But whereas our home renovation furnishing business, actually has been increased significantly on a year-over-year basis. So the revenue is one that I was already mentioned another dimension we can describe for that business is we look at a referral rate from our core business issues are housing transaction business. So when we look at the second quarter results, we’re actually seeing more than 25% of the referring and a conversion coming from the housing transaction business already in some of the special cities such as Beijing, the conversion rate actually it also has been reduced to 80% or even higher, some of these didn’t do very well, right? But we do believe there has a huge space to continue you full. So overall, we do believe the customers referral and a conversion from the mandate needs also another dimension to do has a program for that purpose. So when look at a future evolution for the home decoration and furnishing business. We actually look at it in the four business elements or the three major reasons. The firstly coming from the policy side, so we recently noted the fall of the central government department. The action has been drawn to promote so called high quality of the leaving fans into the national wide, so that definitely will provide the additional policy drivers for the overall industry environment. Secondly, we look at the overall so called industrial pattern or shape as well as industrial correlations, which is link into the home decoration and furnishing…

Our next question comes from Timothy Zhao with Goldman Sachs. Your line is open.

Hi, Stanley. Hi, Tao Xu. Thank you for taking my question. I also have real quick question on the cost saving, I think, you mentioned in the second half, you expect around RMB300 million to RMB400 million costing per quarter. Could you further elaborate on the competence measures, how to cut costs and improve the efficiency as well as what would be the future impact of these measures on your financial performance? That would be helpful. Thank you.

Okay. Thank you, Timothy. As I mentioned in my first day remarks, we took a series of cost saving measures and the focus on enhancing the efficiency and profitability in our day to day operation in Q2. Meaningful progress was delivered was again repricing our organizational strong execution and operational quality. We adjust our organizational structure and adjust is the proportion of the junior and senior agents according to the different conditions in different cities and the most regional teams. In addition, we prioritize the new home business and higher profit making new home business on our city level. In terms of the cost control, where we form and the shutdown, the loss making stores on the drop run through reduction for stores and office space, where this measures our fixed costs and expenses, as well as our particular level breakeven points continue to fall. In Q2 the fixed costs for the Lianjia decreased by more than 25% year-over-year. And the way it’s all breaking expenses of the saving for the housing transaction and services in the second half of this year, to reach up to approximately RMB300 million to RMB400 million in agriculture. And obviously, the dollar amount of the operating expenses will be decreased to the same level of the second half of 2019. As a way to carve out further organizational restructuring initiatives in Q2, we have again to the larger operating leverage and the profitability for our housing transaction services against the challenge market environment. Our Shengdu business, for example, central pockets in June, for the first time in past 15 months in face of the very weak market. Another example is the [part of affordable] [ph] also reflect in the improvement of our contribution margin of new home business, which was at two years high opportunity 4% contribution margin in Q2, despite the still sluggish new home market, followed by this due to Q2 market recovery in the coming quarters. We believe our possibility for the housing transaction and services while gradually recover in the second half of this year. Thank you.

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

Yeah. Thank you, operator. Thank you once again for joining us today. If you have further questions, please feel free to contact Beike’s Investor Relations team through the contact information. Thank you and goodbye. This concludes today’s call and we look forward to speaking with you again next quarter. Thank you and goodbye.

This concludes today’s conference call. Thank you for participating. You may now disconnect.