Hello, ladies and gentlemen. Thank you for standing by for KE Holdings, Inc.'s Third 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, Ms. Siting Li, IR Director of the Company. Please go ahead, Siting.

Thank you, operator. Good evening, and good morning, everyone. Welcome to KE Holdings for Beike's third 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 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 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 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 the unaudited non-GAAP measures to comparable GAAP measures. Lastly, unless otherwise stated, all figures mentioned during this conference call are in RMB. With that, I will now turn the call over to our Chairman and CEO, Mr. Stanley Peng. Please go ahead, Stanley.

Thank you, Siting. Hello, everyone. Thank you for joining Beike's third quarter 2022 Earnings Conference Call. Against the many uncertainties in the real estate market, we achieved a series of breakthroughs in the third quarter. We have supported our stores and agents’ network to consistently outperform the market and achieved steady efficiency and profitability improvements in each business line on our platform. This was thanks to the initiatives we implemented beginning last year to enhance efficiencies. I believe ultimately, these achievements stemmed from the enterprising spirit of the organization, from the perseverance of each one of us on the platform in the face of external challenges. November 12 marked the 21st anniversary of our organization's founding. To celebrate this momentous occasion, we organized a “homelinker” event, witnessed online by over 7,000 “homelinkers” who have stayed with us for more than 10 years, spreading in more than 80 cities across China.Homelinkers are employees who have been with our organization, share the same experience and collective memories and have learned the same methodologies. Moreover, they believe in the same values and make similar choices.They shape the resilience of the organization. We are not only practitioners, but also disseminators of our spirits. We carry the same mission and responsibilities to influence more people, cementing their convictions during down times and keeping them grounded in the upcycle, while always striving for growth, virtue and positivity. Moving on to our progress in the third quarter of 2022, in our “one body” -our existing and new home transaction services. We have prominent advantages in our “one body”business thanks to our years of efforts and investments in the initiatives to enhance efficiency. Now, our “one body” has entered the development stage, where deepened operations are vital for incremental improvements. These strategic measures may look small to outsiders,…

Thank you, Stanley and thank you, everyone, for joining us today. Before discussing more details about our third quarter of 2022 financial results, I'd like to provide a brief update on the recent housing market. In the third quarter of this year, policymakers maintained relatively easy credit conditions, and local governments continued to introduce city-specific measures to better satisfy demand for housing and home upgrades. Overall, however, the frequency and intensity of supportive policies throughout Q3 weakened compared to Q2. And we also saw some strong relaxations reversed in some several key cities. Meanwhile, a number of factors disrupted China’s housing market recovery in Q3. These included heatwaves that ravaged a vast swathe of the country, COVID-19 flare-ups, the slowdown in developers’ sales promotions, and the fact that some buyers ceased mortgage payments on unfinished new home projects. The existing home market maintained a moderate recovery, with GTV ticking up slightly on a year-over-year basis. The new home market also saw a decrease in GTV contraction, but still remained soft. Despite the macro headwinds, our operating efficiency and profitability improved significantly in Q3. The profitability of our new home transaction services, and the Company's gross margin both reached new highs since our IPO in 2020, whereas our DSO and Non-GAAP operating expenses fell to record lows since IPO. These results did not come about overnight. They are the result of our rapid and resolute implementation of a series of cost management and efficiency enhancing measures launched a year ago in the face of market adjustment. They also embody our courage against setbacks. Our management team’s humility and involvement in the frontline operations and our decisive will to never give up. These achievements further motivate us to respect the laws of the market, return to the essence of the operation, seek…

Thank you. The first question comes from Steven Tsai with Morgan Stanley. Your line is open.

Thank you management for taking my question, my question is on market outlook. Could you share with us your view of fourth quarter outlook for each of new home and existing home market? And what are the underline consumption behind your Q4 revenue guidance? Also, I know it's a bit too early, but could you also share with us on the market recovery path next year, if you look through the short-term pandemic impact in the quarter? I'm asking this because on the one hand, we have seen a lot of supporting policies in the past few weeks. But on the other hand, some of the existing home sales have seen some slowdown in sales recovery, while existing home supply seems increasing fast, but price is also trending down. So just wondering how we should think about the path next year?

Thank you, Steven, it's Tao. Let me talk about the third quarter review first. For the macro perspective, the real estate market in the third quarter was affected by multiple factors, including an unusually hot summer across country. The pandemic flare-ups in some high-tier cities and new home mortgage payment suspensions, slowdown in developers’ sales promotions as well as households’ concerns about geological tensions, economic downturn, and uncertainty for the income expectations. At the same time, the frequency and magnitude of supportive policies slowed down in Q3 from both the central and local government levels. In the second quarter, the central and local governments introduced close to 100 measures and policies to support market recovery. But in this Q3, there's only 70. And we also saw some strong relaxation reversing in some several key cities. The reduction of the positive factors and the increase of inhibitive factors both contributed to the recovery slowdown in the housing market in Q3. In terms of the existing home market. Despite the macro headwinds, in third quarter the recovery of the existing home market quickened. The GTV for China’s existing home market increased by 6.6% year-over-year and 8.1% quarter-over-quarter.The GTV in July recorded year-over-year growth for the first time in the past 12 months. Specifically, the existing home market hit a high July and moderated month-over-month afterwards. This trend is consistent with the monthly trend in the third quarters of 2018 to 2021. City-wise, the first-tier cities benefited from the pent-up demand after pandemic restrictions were lifted, resulting in a significant GTV growth quarter-over-quarter, while the performance in the second and third-tier cities was basically flat versus the second quarter. Among them, cities such as Jinan and Suzhou, which have more supportive policies, and Zhengzhou, which benefited from the demand shift from the new…

The next question comes from Timothy Zhao with Goldman Sachs. Please go ahead.

I have two questions here. First, could management share some outlook on how our Lianjia store and network store expansion plan in next year? And what is the operating efficiency and net income level of the stores and agents at this moment? And in the third quarter, we achieved very strong profitability and that means the income level of the stores and agents is coming up. And secondly, it's related to the SOE versus private developers breakdown with new home sales, as I noticed private developers still accounted for over 50% of new home sales on Beike platform. May I check what are the top customers in the private developers? We are seeing ßprivate developers also default on bonds and delayed the interest payment? Are we expecting more risk related to the current account receivables?

Thank you, Timothy. Regarding your first question, store and agent numbers are stabilizing and even starting to grow in some cities. We see stabilizing store and agent network scale. Since the second quarter, the number of active stores and agents have started to stabilize, and in the third quarter, the quarter-over-quarter decrease in active stores and agents narrowed to 3% and 2%, respectively. Among then, in nearly 30 cities, including Nanjing, Changsha and Hefei, the number of active stores grew quarter-over-quarter and the number of active agents increased quarter-over-quarter in 40 cities, including Shenzhen. There's no significant network expansion needed going forward in short run: a large number of practitioners left the industry, following the recent round of market corrections, and we believe many of them might not return even when the market recovers. Therefore, looking ahead, we do not expect the rapid growth in the number of stores the agent industry-wide in short to medium-term, and the number of stores and agents on our platform will also remain relatively stable over coming quarters. The steady improvement in store and agent productivity facilitates organic business growth. We believe increasing per store and per agent income is the key to organic growth. The industry has shifted away from the frenzy of the pure scale expansion towards the pursuit of the refined, high-quality services. Only in such an environment, can service providers who take care of customers to stand out from the pack and to see the improvement in their living conditions. In 2021, the average income of Lianjia agents nationwide was still far below the average local salary, 77% and 63% of average and median local salary, respectively. Therefore, while maintaining a relatively stable scale of stores and agents on our platform, we hope to support each high-quality store and agent…

The next question comes from Liping Zhao with CICC. Please go ahead.

So since the consolidation of Shengdu in second quarter, the Company has achieved many progresses in terms of home renovation and furnishing capabilities and also the enhanced cooperation with transaction business line. Looking ahead, what's your development strategy of this business? And how will you balance the growth and investment of this sector?

Okay. I'm Stanley. Thanks for your question. The home renovation and furnishing industry is relatively capital intensive and faces many iteration opportunities, we have our understandings to such industry that requires high standardization and transformation through technology, our understandings are: First, we must not rush. It took Beike and Lianjia 20 years of development to get to where we are now. It's the same for home renovation and furnishing. We need to look at growth with a time horizon of three years for the business, and its gradual start does not mean it will not reach greater heights in the future. Second, to achieve long-term growth, we should cultivate needed capabilities and resolve the major outstanding issues in the industry. We have observed the following areas in the industry where changes are need. One, there is no online service with great home renovation and furnishing experience provided in China. Two, in terms of productization, of localized home renovation and furnishing products tailored for the Chinese market, the industry is still relatively weak. Three, the home renovation and furnishing services are not standardized. Four, professional skills of service providers need to be improved. Five, we need to identify possible areas of innovation through structural changes in technology, materials, processes, and methods. Facing these industry problems and opportunities, we need to leverage our store agent network traffic, and provide more and better products. At the same time, we need to upgrade our capability to capture these opportunities and realize long-term growth. Therefore, we need to make steadfast and targeted investments in areas that will enable us to provide more products and iterate our capabilities for long-term benefits, instead of making investment to stimulate short-term growth and expand scale without growing our capabilities: This is why we are not going to advertise heavily,…

We are now approaching the end of the conference call. I would now like to turn the call over to your speaker host today, Ms. Siting Li for closing remarks.

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

Thank you. The conference has ended. You may now disconnect your lines.