Hello ladies and gentlemen. Thank you for standing by for KE Holdings Inc’s First Quarter 2023 Earnings Conference Call. At this time, all participants are in 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 or Beike’s first quarter 2023 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 statements 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 first quarter 2023 earnings conference call. During the past quarter, we have witnessed the real estate market in China, along with various other industries, rebounding from the pandemic. GTV of existing home sales in China increased by 51%, while GTV on new residential home sales increased by 7%, with sales of the top 100 developers growing by 2%, all on a year-over-year basis. Existing home transactions GTV on our platform increased by 78% year-over-year in the first quarter, and our new home sales GTV increased by 44% year-over-year in the first quarter, outperforming the industry by a great extent. In the past few years, aimed the tremendous volatility in the market, our continued investment in our ACN network and infrastructure, our persistent support for quality service providers and our efforts to shift towards higher quality, more efficient development, have enabled our outstanding performance during the market recovery process. As the external market gradually stabilizes and our organization gets stronger, we face people’s questions such as: where we can find our more growth opportunities going forward? What are the drivers? And how much upside is there in the next 10 years? Will we play defense or continue to pursue high-speed growth? And how will we allocate our significant cash position? These questions are important to both our investors and our company. Having pondered these questions, today, I would like to take this opportunity to face the future together and share my thoughts on our costs over the next decade. Most importantly, we are an organization that always seeks development because we are committed to making the industry better. Our mission gives us a great cause. Beike was established to serve our mission of “admirable service, joyful living”. It has made us…

Thank you, Stanley. Thank you everyone for joining us. Before going into the detail of our first quarter financial results, I would like to provide a brief update on housing market in the first quarter. Since the beginning of this year, the real estate market has staged a significant recovery, bolstered by a favorable policy of “preventing risks and supporting demand”, coupled with the concentrated release of pent-up housing demand from the pandemic. Notably, the existing home market saw a strong pick-up with housing prices beginning to narrow their year-over-year decline and showed a return to quarter-over-quarter increase from the sequential decline in previous periods. The new home market also experienced a moderate recovery with the consumer confidence improving. As effects of the one-off release of pent-up demand and the seasonality wore off, starting in March, market transaction volume began to normalize from an excessively high level. Benefiting from relatively stable scale of our ACN network during the market’s protracted slump and the effective promotion of refined operations for stores and agents, we proactively capitalized the market recovery tailwinds and the seasonal dividend as the market rebounded at the beginning of the year. As a result, our GTV growth significantly outperformed the market. According to Beike Research Institute, in first quarter, GTV of existing new home sales in China increased by 51.2% year-over-year, while the existing home transaction GTV on Beike platform grew by 77.6% year-over-year. Data from National Bureau of Statistics also showed that the GTV of the new home sales in China increased by 7.1% year-over-year, while the new home transaction GTV on Beike platform rose by 44.2% year-over-year. Our net revenue in the first quarter reached RMB 20.3 billion, representing a 61.6% increase year-over-year, beating both the high-end of our guidance and the street consensus. The increase…

[Operator Instructions] If you’re going to ask the question in Chinese please follow with the English translation. Today’s first question comes from Harry Chen with Citigroup. Please go ahead.

This is Harry Chen from Citigroup. So thank you management for the opportunity and first of all, I want to congratulate on extremely solid results in the first quarter. So my question is regarding the general housing market. We see that as a housing market was in great shape in the first quarter of this year. Have there been any structural changing in the market? And a series of leading indicators since March seem to show both the existing and the new home markets are relatively soft. What are the company’s observations of the latest market conditions and how to interpret this leading indicator? What’s the company’s view about the future trends of the existing and the new home market and how will the market performance differ among different CPPs? Thank you.

Regarding your first question, in the first quarter, the release of pent-up home transaction demand, along with the support of easing policies, contributed to a significant rebound in China’s existing and the new home market, followed by a normalization of the market. Overall, the China housing market experienced moderate recovery, with new characteristics including: the demand for home upgrades becoming a solid driving force in the market, and existing home as the major market contributor, and the second-tier cities as the strongest players. In particular, in the first quarter, the GTV of existing home sales in China increased by 51% year-over-year, but was 25% lower than that in the first quarter of 2021. The GFA [gross floor area] of the new home sales grew by 1.4% year-over-year, the first year-over-year increase in past 6 quarters, while its GTV rose by 7% year-over-year, the second highest year-over-year growth in history. Price-wise, existing home price ended their 17 consecutive quarters of decline and they grew by only 0.4% quarter-over-quarter, with the year-over-year decline narrowing to 5.5%. New home prices increased by 0.7% sequentially in the first quarter, with year-over-year decrease narrowing to 1.4%. Home upgrade demand was the main contributor to the market for the recent round of recovery and future market growth. These demands comes from the people that already own at least one home and are looking for the upgrade. The proportion of the home upgrade demand exceeded 70% in the first quarter of this year, up 7 percentage points from 2019. Notably, over 45% of this demand was for the first-time upgrades. The implication of this increased demand of the market as follows: first, clients with the home upgrade demand are bound to enter the existing home market first. As most of the new home channel sales customers come…

Thank you, management.

Thank you. And our next question today comes from Eddy Wong with Morgan Stanley. Please go ahead.

Thank you, management for taking my question and congratulations on the very great results. So, my question is that Beike has significantly outperformed the market across different business lines in the first quarter. Could you please share how the company achieved this very strong results and performance, and how should we think about your performance relative to the overall market going forward? Thank you.

Thank you, Eddy. In first quarter, our company significantly outperformed the market across all of our business lines. Our GTV of existing home sales increased by 78% year-over-year in the first quarter compared with the market’s growth of 51%. And our market penetration rate increased by 6.6% quarter-over-quarter. And our GTV for new home sales increased by 44% year-over-year, compared with the market’s 7% increase, and our penetration rate increased by 1% quarter-over-quarter. Firstly, we need to oversize this our significant show-run outperformance, which is similar to what happened in 2 years ago. That is the second quarter of 2020 following the pandemic outbreak, and the way we expect a return to normal in this year as well. In Q2 2020, our market penetration of existing and the new home increased by 6% and 2%, respectively, both quarter-over-quarter. In the third quarter, as the market has normalized, our market gain has also returned to 1% increase quarter-over-quarter. Meanwhile, the difference in the sales recognition may also be one of the reasons why our data significantly exceeds market. The existing home market data is based on the online registrations when transactions are closed, while our data is based on the contract signing, which leads to the online closing date by around hald-a-month to one month. Excluding the above factors, our first quarter performance also demonstrate our strong ability to capture the market opportunities during the recovery cycle. Firstly, we supported and retained the high-quality service providers during the market downturn, which has enabled us to reap the benefit of the market economy. Our view on the future market is that those who can attract the existing and the high-quality service providers will be the ultimate winner. In the first quarter, we took advantage of the recruiting season and the exit of…

Thank you, Tao Xu, and congratulations on the results again.

Thank you.

Thank you. And our next question comes from Timothy Zhao with Goldman Sachs. Please go ahead.

Hi, Stanley, Tao Xu and team. Thank you for taking my question and congrats on the very strong results. My question is about the efficiency improvement, as you mentioned in your remarks. And just wondering if management see any opportunities for further efficiency improvement after very strong Q1 results, and how do you plan to achieve them? And additionally, are there any specific measures that management have in their mind for this year to further improve the quality of the services to customers? Thank you.

Okay. Regarding efficiency improvements, we have already mentioned some idesa in our prepared remarks. The key to focus on customer experience and enhanced capabilities of stores and agents, while improving our platform ecosystem and mechanisms. We have implemented many initiatives to greatly enhance the customer experience over the past 20 years. This has helped us to win customer’s trust and become a top choice for both customers and service providers through initiatives such as transparent pricing, authentic listing, and housing dictionary. And our commitment to the protection of secure transactions through these efforts, we have addressed many key pain-points that customers face on the transaction side, and significantly improve the industry ecosystem as well as efficiency. As the market supply and demand gradually balance, pain points of owners become increasingly prominent. Their needs have undergone changes and ability to better meet these needs will be an important direction for enhancing customer experience in the next stage. Furthermore, this year, we will iterate our commitment system for housing transaction services, by enhancing the overall customer experience by addressing core pain points. At the end of 2022, our platform offered 56 service commitments to customers in our housing transaction services. The fulfillment of this commitment is far more important than their quantity. Therefore, we will prioritize our commitments to address our customers’ most relevant pain points and promote a high-quality management of our service commitments. Firstly, we will focus on more targeted brand level service commitments. Secondly, we will steadfastly improve the quality and the fulfillment of commitments that will cover key customers’ painpoints,such as compensation for damage caused by water leakage. Thirdly, we will provide commitment -- guarantees to both end customers and our business partners. For our home renovation and furnishing business, the key to success lies not in customers’…

Thank you.

Thank you. And our next question today comes from Xiaodan Zong with CICC. Please go ahead.

This is Xiaodan from CICC. Thanks, management for taking my questions, and congrats on another strong quarter. So my question is on the new home transaction services. As mentioned in the last quarter’s call, Beike plan to dynamically adjust the credit ranking of developers based on market conditions, which may in turn expand the addressable market. So could you please update us on the progress of that? Additionally, have you noticed any changes in the channel penetration rate, commission and split rate in the market? And what are the measures the company has taken in response to those market changes? Thank you.

Beike is a company with a strategic focus. Regardless of market conditions, we know what to do and what not to do. And this is especially true for our new home business. Last year, we established a solid foundation for the safe operation and optimized business conduct of the new home transaction service industry. We have improved the service capability for the high-quality SOE developers. And in Q1, the proportion of the new home sales had increased to nearly 46%. Our cooperation with a larger number of SOE developers is also a validation of our ability to provide the high-quality service and our high sales efficiency. We have transformed the industry payment mechanism to protect the receivable security of the service providers. Projects with a commission in advance have higher sales efficiency than those without, which is a win-win situation for all parties involved. We have also established a safer working environment for both consumers and service providers. This is the right choice regardless of market environment. In this year, the overall market is experiencing moderate recovery. Strategic-wise, we will maintain consistent and stability without focusing on the short-term or being overly aggressive and blindly pursuing skill. We will focus on the better collaboration with upstream developers and further safeguard the interests of all of the service providers in Beike platform. And first, we have set minimum commission split with our channel partners to prevent the planned pursuit of profit, which would lead to a deterioration of downstream ecosystem. Second, we are strengthening the requirements of the reciprocal protection period, which extends our receivable requirements to ensure the equal protection of the agents and the developers. Third, the refined management, we are strengthening the management of the new home sales external Fangjianghu channel to achieve the tiered-management, further empowerment and to allocate the resources more efficiently to them. We also conduct the rating for the new home project in order to better organize and allocate our agents to accelerate the sales through of the high-quality listing, therefore improving the efficiency. And fourthly, we are enhancing our efforts in ecosystem governance with more than 5,000 cooperating new home projects implementing “private phone number protection services”, and more than 4,000 new home projects covered by a commitment from both the developers and the platform to transparent operations. Overall, with our four strategic initiatives and a stable market environment, we expect our new home business will achieve more win-win situation, greater safety, and a more dynamic growth in this year.

Thank you. We’re approaching the end of the conference call. I will now turn the call over to your speaker host today, Miss 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.