Hello, ladies and gentlemen. Thank you for standing by for KE Holdings, Inc. Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. Please note that today's call, including management's prepared remarks and a question-and-answer session will all be available in English. Simultaneous interpretation in Chinese is available on a separate line for the duration of the call. [Operator Instructions] Today's conference call is being recorded. I will now 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 Inc, Beike's Fourth Quarter and Fiscal Year 2025 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. Xu will provide an overview of our business update and financial performance, then Mr. Peng will share more on our strategic update and thinking. 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. 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 way to such information and estimates. For today's call, management will use English as the main language. Please note that the Chinese translation is for convenience purpose only. In the case of any discrepancy, management statements in their original language will prevail. With that, I will now turn the call over to our CFO, Mr. Tao Xu. Please go ahead.

Thank you, Siting. Hello, everyone. Thank you for joining our 2025 Q4 and full year earnings call. To begin, I would like to provide a summary of our financial highlights for the fiscal year of 2025. In 2025, in response to evolving customer needs, we initiated a strategic pivot from sales-driven to efficiency-driven growth to optimize our business model, better leverage technology and improve our cost structure and unit economics, we implemented a series of initiatives, these efforts are laying the foundation for more sustainable growth while strengthening the stability and the flexibility of our earnings model. First, our fee revenue remained relatively stable amid market fluctuations, outperforming the broader industry trend. This performance was underpinned by a more diversified and the countercyclical business structure. Revenue from our non-housing transaction business accounted for a record high of 41% of total revenue. The internal structure of the housing transaction services also improved. With the existing home GTV accounting for 67.6% of our total GTV, reflecting our focus on market segments with greater structural growth potential. Notably, the GTV contribution from connected brands further increased to approximately 63% of our existing home GTV, indicating higher contribution of revenue with lighter business model. The existing home platform service revenue was basically stable year-on-year, also demonstrating the resilience of our platform business model. Second, our operational efficiency improved and the cost structure was optimized, laying foundation for future profit expansion. In our existing home business, fixed labor costs recorded a sequential decline for the 4 consecutive quarters throughout the year, significantly enhanced the profit elasticity. By the end of the year, we had a same release of operating leverage with the contribution margin of existing home business rebounding sequentially in Q4. In our new home business, both variable cost ratio and fixed personnel expenses…

Thank you, Tao. Good evening, everyone. Thank you for joining us today for Beike's Fourth Quarter and Full Year 2025 Earnings Conference Call. Over the past year, we have seen many changes in the market. For example, the transaction structure is evolving. The share of our existing home transaction in China's housing market continues to increase. In 2025, the number of existing home transactions nationwide hit a historical high. The new home market is also seeing greater differentiation with higher quality and new standard projects attracting stronger market demand. More and more young people are choosing to rent while rental yields are gradually improving. Customer transaction behavior is also changing. Housing information is becoming increasingly abundant, yet the decision-making process is becoming more complex. Both buyers and sellers are thinking are taking longer to complete transactions, the cost of making a mistake is much higher now and consumers are more and more cautious. Buying a home used to be a relatively easy decision. Today, it's a balancing act that can require a careful reallocation of family assets. At the same time, something have not changed. The overall demand for better living remains stable and consumers' demand for safe, professional, transparent and reliable services is still strong. By looking at what has changed and what has stayed consistent, we can tell two very important things: first, China's residential market remains the largest and most valuable housing market in the world; second, the housing service industry has made a fundamental shift in its approach. Today, the consumer needs more professional services that offer certainty in decision-making. The industry is entering a new stage where core competency will no longer be defined by resource scale, but by service capability and operational efficiency. Ultimately, creating value for customers will be the only stable source…

[Operator Instructions] Your first question comes from Timothy Zhao with Goldman Sachs.

[Foreign Language] My question is regarding our operating efficiency enhancement on the store level and agent level. I was just wondering after the restructuring and investments, have we observed any change in terms of agent efficiency? And if this year, the overall market recovers, do we have enough power to gain share? And going forward, what are our execution plan in terms of future efficiency-driven growth strategy?

Thank you, Timothy. First, the strategic upgrade from scale-driven assumption to efficiency-driven growth is the natural and inevitable outcome of the evolution of our platform business. What this transition really means is upgrade in the way value is created, that created its great value for our customers. We aim to improve the penetration of community-based into residential services, increase the conversion efficiency of resources and ultimately drive the business growth. This is in fact the opposite of logic of simply cutting capacity or contracting the business. To understand this evolution, we need to ask a more fundamental question. What truly determines the capacity in our industry? What are the core production factors and the production function. What customers truly need is not simply more agents or more stores, but higher quality and more reliable decision support. This includes more precise matching, more effective marketing solutions and more comprehensive home buying planning solutions. What we are doing is reallocating resources from nominal capacity to effective capacity, concentrating our organizational efforts on areas that generally solve customer problems. Against this backdrop, in 2025, we have taken several stance around our agent and store network. First, we do believe in the business, we have a concentrated resources on high-performing stores and agents to improve operational efficiency. Going forward, we will further strengthen our management structure so that managers with the strongest customer service capability can stay closer to the front line to create value. At the same time, while confining and embedding the high-quality service capabilities into platform and is a division of labor system rather than leaving them dispersed among individuals. Second, on the broader platform side, we continue to expand the scale of agent stores, but with a greater emphasis on the quality and efficiency. By the end of 2025, the…

Your next question comes from Zhen Guo with Guangfa Securities.

[Foreign Language] Let me translate my question. My question is about the new home business. The new home market is facing multiple pressures, including developers struggle with sell-through, declining profitability and increasing market concentration among state-owned companies. Management mentioned innovations in marketing model in the new home business. How will the innovation change the company dynamics and the relationship with the company -- with the developers? How will the performance of the new home business be sustained?

Thank you, Zhen. Our view on the new home business starts from the structural change in industry. The level of the digital penetration in the new home sector remains relatively low. In the past, our operating model for the new home business was largely based on the traditional channel sales logic. This involved allocating resources around commissions and traffic and leveraging our massive channel traffic to solve developer sell issue for the core projects. This model was effectively -- this model was effective during the market expansion phase, but under current conditions, its boundary are more limited. It can only serve certain projects at certain buyers and the value creation for developers and especially for homebuyers is relatively constrained. We believe the new home market is entering a new stage. For homebuyers, the concern is not whether there is enough information, but whether they can be more certain about the purchase decision. For developers, the key concern is no longer simply gaining another sales channel, but whether they can achieve more predictable sales results within a constrained market. Accordingly, we are upgrading the role of our new home business from a channel player to an integrated capability platform. Number one, the level of online integration and digitalization in the new home segment remains relatively low. This represents a common pain point across the industry, but also a significant opportunity for upgrading. We are working to enhance the online decision-making support in new home journey through the stronger data and product capabilities, truly helping customers solve their most difficult decision-making pain points. Number two, we will further optimize allocation of the traffic resources by leveraging our data and system capabilities to improve the structural matching efficiency between purchase and potential buyers. We aim to expand service coverage among homebuyers, broaden the top of our funnel and ultimately improve the competitiveness and ultimately improve conversion. Number three, we view developers as our long-term clients rather than merely the channel sales partners. We aim to provide developers with an integrated solutions covering the product acquisition, customer acquisition, matching and the sales pace management, helping improve overall project efficiency and drive key pain points. In the long term, our goal is for the new home business to evolve beyond the transaction distribution layer and become an efficiency-enhancing platform between developers and homebuyers. As this capability evolves, our service offering and the revenue stream in the new home segment will become more diversified and our business model will become more resilient. We believe this evolution will be critical to sustaining our long-term competitiveness in the new home market. Thank you.

Your next question comes from Miranda Zhuang with BofA Securities.

[Foreign Language] my question is about AI. So with the recent rapid advancement of AI, how does the company view the potential impact of AI on the real estate sector? For Beike Company, how is AI being used to empower the different business lines? And what are the progress so far?

Thank you, Miranda, for your question. Recently, there have been many discussions about whether AI will bring a revolutionary impact to real estate brokerage industry. My view is that the key question is not whether AI will replace real estate agents, but rather how it will reshape the division of labor, value creation and organizational structure of the industry. A housing transaction is fundamentally not a short standard consumption decision. Instead, it's a long cycle, multistate and high complex decision-making process from searching for a property to make a decision to completing the transaction and then to move in operating the property and improve the living experience. There are many stages along the way where AI can significantly improve efficiency and in some cases, even automate the process. For example, information gathering, demand matching, process reminders, document generating, preliminary risk check and workflow coordination are all standardized and repetitive tasks governed by clear rules. In this area, AI can deliver significant productivity gains. We have already begun to see some very tangible changes internally. For example, in housing transaction services, agents previously spent a large amount of time organizing property information, creating marketing materials and responding to repetitive inquiries. With AI, we can now automatically generate AI video explanations, property interpretations and communication materials for clients, allowing agents to focus more of their time on understanding customer needs and supporting transaction decisions. In our rental business, AI is also beginning to participate in property acquisition decisions, rental pricing recommendations and leasing matching by analyzing historical transaction data, regional supply and demand and property characteristics, AI help our operators more quickly determine whether a property is suitable for acquisition, recommend a reasonable rental range and improve leasing efficiency while strengthening risk identification. Taken together, these capabilities essentially allow standardized tasks to…

Your next question comes from John Lam with UBS.

Stanley [Foreign Language]. So my question is regarding the new media. So how does the company look at the new media? And also, how does the company look at some of the KOL utilizing new media to facilitate the property transaction?

Thank you, John, for the question. Regarding the influence of influencers and public accounts on the company, my view is that whenever a phenomena continue to attract the attention of customers, it usually reflects some real demand. So rather than judging whether it is positive or negative, the more useful question is that needs, it is actually serving which customers it resonates with in which situations and what needs may not have been well addressed before. In my view, this also reflects a broader shift in the industry. In the past, the real estate industry was largely centered around the property itself. At that stage, the key question for many customers was simply whether there was a suitable home available and whether they could buy it. The property was the primary scarce resource and customer decision often revolved around the house itself. The personal needs and circumstances behind the decision were not always fully reflected in the process. Today, the situation has changed. The industry is moving from being centered on properties to being centered more on people. Customers are not just home buyers in an abstract sense. Each decision reflects a set of real-life considerations, including family structure, budget constraints, lifestyle preference, education needs, computing patterns, risk tolerance and plans for improving or relocation, buying, renting or upgrading a home may appear to be a real estate decision. But in many cases, it is essentially a decision about how people want to organize their lives. From this perspective, housing transactions have always involved complex decisions for a long time. However, the industry handled them more as a relatively light match-making process as customer needs become more complex and personalized. The decision is returning to its original nature. It requires understanding, explanation, judgment and trade-offs. Against this backdrop, the rise…

Your next question comes from Eddy Wang with Morgan Stanley.

[Foreign Language] My question is regarding the renovation and furnishing business. We see the business has experienced slower revenue growth in 2025, but gross margin improved. What's the current status of the development in supply chain centralized procurement and the standardization execution? When should we expect to see the inflection point for the profitability in the home renovation business?

Thank you, Eddy. The slower revenue growth in 2025 was the result of our deliberate decision to control the pace of expansion. Home renovation is a delivery center business. If the underlying unit economy are not stable, progressive expansion itself becomes a risk. The liquidity challenges of certain industry players in 2025 further reinforce this pain point for us. As a result, our priority last year was repairing and validating the underlying profitability structure of the business. From the results we have seen so far, the contribution margin has improved and overall losses have narrowed significantly, which indicates that unit economics at the individual project level are becoming healthier. At the current scale of roughly RMB 15 billion in revenue, we break down improvements in unit economics into 3 main variables: product structure optimization, controlling explicit costs such as materials, labor efficiency and delivery efficiency, and the reduction of implicit costs, including rework, up sales issues and the reputation-related losses. In 2025, our primary focus was the cost side, on explicit costs. Centralized procurement across the supply chain has helped to optimize our material cost structure. We have completed the centralized national or regional procurement tenders for approximately 80% of our key materials and about 60% of our auxiliary materials. This has strengthened our buying power, improved long-term product quality stability and reduced exposure to the price volatility. At the same time, through the improvement in work order mismatch mechanism and also adoption of the digital design and modular tools, along with regular admission certification and rating system, we are building a dedicated pool for high-quality delivery teams. This has meaningfully improved the productivity of both project managers and designers. On interest and costs, we are even more focused on long-term fulfillment quality through measures such as fund escrow, service…

Your next question comes from Brenda Zhao with CICC.

My question is related to the home rental business because in the past 2 years, the business has developed rapid profit growth, which has been a pleasant surprise. However, revenue has been contracted Q-on-Q due to the impact of the accounting treatment. I believe it may be fair to assess this business from the perspective of long-term unit economics. How does the company view the long-term UE trajectory and the potential for improvement in this business?

Thank you, Brenda. Regarding our rental business, I'd like to clarify 2 key aspects: the trend in business scale, and the profitability structure. First, from an accounting perspective, the short-term revenue contraction mainly results from the change in accounting treatment for the new product offering of our Carefree Rent business, which moved from gross revenue recognition to net revenue. Under in that method, we only recognize the service fee income, which more accurately reflect our growth as an asset management service provider. This accounting treatment, along with the lighter operating model and the substantially reduced risk profile under the new product offering. Importantly, this adjustment does not have a negative impact on our cash flow or the unit level profitability per managed of the property. If we look at the underlying business fundamentals, the scale of our managed rental unit continues to grow rapidly, both historically and looking ahead, the core operating metrics for this business, the number of units under management has maintained a strong expansion. By the end of 2025, our managed home units exceeded 700,000, representing a year-over-year increase of 62%. This growth reflects improvement in product competitiveness and the expansion of the market demand rather than any accounting change. Second, in terms of the profitability model, we focus more on the continuous improvement of the unit economics at the single unit level. In 2025, the rental business turned profitable for the full year after previous operating at a loss. The improvement in the profitability was not driven purely by the scale expansion. Looking ahead, we continue to see the room for the profit growth driven by the structural improvement in unit economics. This improvement mainly come from several factors. First, workforce productivity improvement, particularly improvement for the productivity of our key role, the property manager. In…

We are now approaching the end of the conference call. I will now turn the call back 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.