Q2 2022 Ke Holdings Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Yeah.
Hello, Ladies and gentlemen, thank you for standing by for K E Holdings, Inc. 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.
I, our director of the company. Please go ahead Matthew.
Thank you operator, good evening and good morning, everyone. Welcome to <unk> Holdings, Inc. All based on 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.
<unk> Dot <unk> dot com.
On today's call we have Mr. Stanley Wang our co founder Chairman and Chief Executive Officer and to meet their Toshi.
Protective director and Chief Financial Officer.
Mr. Paul will provide an overview of our strategies and business development.
<unk> 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 are tied to these call as we will make forward looking statements.
Please also note that the earnings press release and in this conference call include discussions of all of the GAAP financial information as well as the non-GAAP financial measures. Please refer to the company's press release, which contains a reconciliation of the non.
non-GAAP measures to comparable GAAP measures.
Lastly, unless otherwise stated all figures mentioned during this conference call.
B.
With that I'll now turn the call over to our chairman and CEO , Mr. Steiner and Paul. Please go ahead Sir.
Thank you Michelle.
Hello, everyone.
Sorry for joining <unk> second quarter 2022 earnings conference call.
The second quarter on a per accurately easing policies for the industry and in fact, you pandemic controls China real estate transaction market saw a serious a postural changes.
Especially in the existing home market.
Meanwhile, we can provide.
Proved outperformance operational efficiency and stability in our scale all of our stores and agents as well.
ZR productivity.
By the internal and external environment, we are living remains full of challenges.
Micro uncertainty continue to increase.
Our businesses are becoming more diverse and complex as we advance our one body <unk> strategy.
Faced with such a complex internal and external environment.
To a command and control our diversified businesses.
Addition to have a deeply rooted beliefs.
At the center.
We need to believe service providers that real estate agents renovation workers and our Forman designers customer service representatives rental housekeepers.
Our customers and are valuable assets.
In times of market corrections.
Our tried and true prejudice of the years, it was safe and answers from industry as frontline.
Finance strengths from the day to day work of ordinary service providers. This is even more necessary today.
Because we face a market adjustments with a greater than your magnitude in a.
Scale and complexity.
Nation have also rich a new level.
First go into a frontline will help us to award the potential be comp company disease as we grow in scale.
Management and our platform teams <unk> resource, we so as equals.
Oh from the call while the frontline remains at a distance.
We can bring <unk> together and it had been a true understanding amongst a win other.
Second we need to be old hat to our phone line.
B our industry in Internet platform, we have deep industry insights.
It's only through our complex companies industry in Mercury.
We can leverage the advantage of the platform.
Formulate useful rules and the mechanisms.
And develop helpful functions on a per dose.
To Zeta and close to half of the 147 middle and senior management members on the Peco transform myself included spin two one to two months working on the frontline over the past few months as a junior.
Agents.
Intra designers are real key housekeeper.
And back to frontline has fueled our organization with energy to fulfill our mission at <unk> service.
Chromatin us to again to again.
Think about how to a truly.
Our service providers.
<unk> productivity Java security and enhanced here since our happiness at work.
It has also urged us to streamline our process in it.
Thats all I have in addition, Lee at.
At the same time by going to the frontline we are more convinced.
Yes.
The ever opposed.
<unk> could become industries spokes person.
Our openings and not the other high quality providers in the industry, but all the low quality service providers.
The industry's reputation and customer experiences.
We will make the industry better by accelerating the elimination of this.
Suffered by players.
According to the frontline we have gained more confidence in our wind body tubing strategy.
Our infrastructure foundation, the agents and our store network in our communities.
Already complete completed.
Lack of high quality loans.
<unk> is now open for more vehicles based positioning us as a full living service platforms providing.
Providing a complex range of services, including home purchase and our sales home rental home renovations and other home related services.
Moving on to our progress second quarter with our when bought a parts exist.
Existing and the new home transaction services.
The end of the second quarter, the number of stores <unk> stores on <unk> platform was over 42008.
And a 41.
100006% or 4% quarter over quarter, respectively.
The same time.
<unk> agents and <unk> agents on our platform was over 415.
<unk>.
And 380, <unk> with <unk> with.
With a moderate quarter over quarter decline of 3% and.
4% respectively.
Number of stores and agents.
And more and more cities.
Stabilize in the second quarter with a churn rate for John agents dropping to a chance to win two 3% in Beijing and Shanghai.
<unk> agile.
Churn rate fell to only five 6% in June significantly better than the industry average of over 12%.
Cities, where existing home show sure showed a stronger recovery trend on our platform such as social and a photo the number of agents even start to grow.
Total miu's bakers platform reached $43 million up 8% quarter over quarter.
Existing home transaction services continue to outpace the market.
According to data from the Baker of research institutes.
Institutes nationwide CTV existing home sales dropped 45% year over year in the second quarter.
As CTV or exiting home transaction on Baker's platform was RMB suite $393 5 billion.
Down 40% year over year of which use lithium home sales declined 41% outperforming the market.
So the second quarter the year over year decline I'll, let yossi team home CTV continue to narrow from 41% in April to 7% to 17%.
In June .
In 21 out of 30.
Two Baker.
Key cities existing home CTV UCT, the average 2021 level in June .
The frequent.
The release of easing policies in a second.
And the lower cities cities.
Pin up.
<unk>.
Upgrade demand back to the market.
Superb the recovery or using home market in the cities we have.
Our Q2 existing home transactions.
TV of Nandi, and Johnson <unk> stores increased.
As much as 33% quarter over quarter.
In Beijing, and Shanghai, you factual pandemic controls firmly took routes in June and we saw transactions recover rapidly.
I returned to normal levels in the five five.
Anil weeks of the months.
On a firm investment in infrastructure and the products have a support more stable network of stores and agents and a higher operating efficiency, allowing us to substantially outpace the market in the recovery cycle on.
On the infrastructure side, we constantly iterate, our fear and a competitive platform operation mechanism to motivate and retain high quality of service providers in the <unk>.
Quarter, we optimized our basically to deep allocation to Canada to prevent cheating.
Hence the sense of fairness, we also <unk> our businesses leads.
<unk> model to match, the more accurate and the operation more focused.
In terms of operations, we continue to refine our operations.
Existing home sales that center on our home listings.
Proving home lifting mccann maintenance lifting promotion under conversing efficiencies effectiveness.
Following this.
This year I have focused on improving operations to solidify the foundation for quality services and the Organon National development in the second quarter. We won several major initiatives first we reduced number of loss making stores through more.
Granulite management and advised diabetes <unk> single store P&L models as a result the probe.
A portion of loss, making stores Elian, Josh <unk> pilot cities dropped by significant 80%.
From January secondly, we further improved agent productivity Vice tabulation of file a protest activity management model to enhance overall management Ah study any capabilities apart from Beijing and Shanghai in the other 2000.
700 cities in Johnson agents versus Canada stores agents per agent productivity ratio is pending by more than 21% from the 2020 when them certainty Dan just agents activity participated in community pandemic prevention services.
In the womb recognition from community we see.
Yes.
Which refer to those.
The rapid recovery of our business of the pandemic.
Researches past sins.
Since July theyre, helping some corrections in the existing home market affected by the unusually hot temperatures.
In the southern cities.
Micro market fluctuations, but we are more convinced than.
However.
However that existing home services, we will be the call of our future our future and we will strategically redouble our focus on existing home services.
Turning to our new home transaction services. According to data from the National Bureau of statistics.
<unk> in the second quarter, the GTD or new residential home sales.
We're down <unk>, 6% initial one year over year.
It's pending from the first quarter.
And it was our second largest single quarter decline since 1999 that CTV, obviously, Ics top 100 real estate companies fail by 43, 4% year over year.
Your home market remain in the top.
Tom with weakness on both the supply and demand side.
Amidst the market.
How do we use <unk>.
<unk> TV for new home sales on our platform was RMB $222 7 billion down 55% year over year and up.
C 17, 6% quarter over quarter.
Positively changes emerged at the end of May and a number of new home purchases.
Offers on Baker's platform.
Materially increased.
So credential.
Okay.
So potential basics in May and June for the industry continues to face significant churn.
Challengers in the short term.
King improvements in financing and <unk>.
<unk> demand.
Mountain pressure on sales through as the industry undergoes rapid and powerful tenders high quality developers have begun to establish new understandings.
<unk> long term divestitures will be built through better on a comprehensive utilization of quantifying sales channels.
Against this backdrop.
In term of new home give teams we have been vigorously carrier house corporate to corporate collaboration with high quality developers, increasing our share of sale by state and our central developers too.
<unk>, 7% in the second quarter.
Seven percentage points higher quarter over quarter. This has improved the quality of our new home listings and emitter, our sales easier and more risk.
System resistant second with respect to channels.
The recent enrollment or market corrections agents placed more emphasis on operational safety.
<unk> to collaborate with a painful with high quality listings strict risk control and a safe foster receivable collections.
Channels with weak risk control adequate receivable collection medicaments and a single mine single minded approach.
On a scale.
We did.
The market. This will be a result high concentration for new home sales channels, and our higher coverage or new home.
Agents in our stores.
Operationally, we continue to promote and to reinforce execution of the commission and events model.
Other full.
Focused sales strategies, the commission and events model offer developers the opportunity to pay and events.
With the commissioning and events consistently deliver higher sales through efficiency, making to widely accepted by the developers.
Agents and our receivable collection will further secure sitting in motion.
A positive cycle in the first half of the year commissioning and events accounted for <unk>, 22% of revenue from new home sales on our platform.
Despite a short term challengers.
These patents are.
Our stable new home market.
As higher certainty in our long term after after this round of correction, we will continue to strengthen our strategic focus and the increased cooperation with high quality stay in a centrally owned developers iterate on risk control protocols data products.
Other value added products and our services, while further reducing costs and enhancing efficiency.
Moving on.
To the home renovation in our finishing business of our two wings July six.
This year marks the first anniversary of our own.
Official announcements of the Chengdu acquisition.
Our financial officially consolidated with <unk>.
During the second quarter this year over the past year Baker and assumed.
For Carryout efficient all London.
Integrations of term of <unk> organization structure operations and our systems. The process has progressed very smoothly.
Driving diverse Synagis for example, the supply chain.
At the vantage.
Our <unk> tool has helped raise.
<unk>.
Up plus 30.
33% year over year.
And the referral customers from our core business contribute to over 25% of home renovation and affiliations.
Contracted celsis in a SEC.
During the quarter, our home renovation in our finishing business achieved robust growth against challenges of the pandemic. According to data from the China building Declaration Association, the bras outputs value of leading home renovation and are furnishing companies decline 10%.
1% year over year in the second quarter, while our home renovation in our finishing business generated pro forma revenue of RMB, one <unk> 7 billion.
<unk> more than 10% year over year.
58% quarter over quarter.
Our contractor sales reached close to RMB, one 7 billion. Meanwhile, radius <unk> organizational structure as well as ground rules and our systems to support a better connection between call emerging businesses.
<unk> brokerage stores owners can receive commissions within five days of the year refer traffic to home renovation and <unk> signed contracts.
<unk>.
Incentive <unk> TV.
Traffic.
Rose in June comparative sales from our business transaction traffic a referee.
Rose.
Our content for over 25% of home renovation in our furnishes contract sales.
Home renovation and are finishing is a lower transaction fee to frequency industry to improve the quality and the consumer experience with the earlier with the industry ROE that interacts with the pencil with high frequency.
Service providers only happy service providers can bring quality services.
The customers service providers in the industry, how many pain points, including on a stable order dispatching.
On timely settlement and that of course does not does.
<unk> does not necessarily yet called income, we build trend transparent frameworks and system errors that cover the service providers product qualification at the mission.
When king promotion and rewards.
Paul on the passes on service quality to address pinpoints in terms of our project delivery, we carry out refining process management to ensure on time construction competition is tabulation systematic online offline close loop management on a promote.
Standardization of construction technology projects.
Substance and other actions from consumers, we further advanced our service commitments of Tim permits for Tim <unk>.
Our construction process can be monitored online by customers in real time in office sales men tenants can be completed within six states as a result.
Absolute construction delivery periods was short term in.
And the customer since infection NPS of construction completion increased from 40.
40% in January towards 35% in June .
We are exploring how to raise our topline potential on our profitability beyond the range Youre already seeing in the traditional home furnishing business.
In the natural home renovation is our service business is about quality service with a high entry barrier on a carry.
Relatively low profitability furniture and home furnishing on the other hand.
As a manufacturing business with a good traffic acquisition.
Significant economics of scale can be sure we are trying to find out.
If it is possible to drive the sales of <unk>.
In our home furnishing, including customized 22.
Soft furnishings electrical appliances, you central so home renovation.
Assessing this.
Our tracking 20, <unk> and our home furnishing sales as a percentage of full service <unk>.
Contract sales as we believe on a single city buses and for our overall business unit, 30% represents the initial validation milestones of this model visibility and a 50% will represent the mid term milestone of its maturity today.
We are rapidly.
Growing our furniture and home furnishing sales as a percentage of full service controls celsis raising residents from 11% in the first quarter to 16% in the second quarter, yet there is still tremendous upside potential.
Moving to our home rental services.
Creating social value.
As a society.
Our social responsibility enterprise.
Steve.
High quality development in our core.
Rental services in the second quarter.
Ah patients greater importance to cost control and our sales through efficiency.
Our aim is to achieve long term operational sustainability of this business.
As of the end of <unk>.
As of the end of second quarter, the number of contracted rental units manager all co manager on our rental services exceeded 42 solid.
The increase of nearly 22 solid units from the end of the first quarter and London. There one study when solving the units under carefree events. We also took various mayors towards improved staff.
Connectivity and the occupancy rate.
Aiming to balance scale and profitability.
Through business model iterations scientific amendments systematic incentive mechanisms, we strive to stay on the high value units added right price realized fast sales through all with enhanced services quality and our productivity with.
This initiatives that occupancy rates, our care free rents continue to improve at the pandemic with resurgence past.
In addition, we jointly launched the new use initiatives in June to provide fresh college graduates with favorable rental rates and the commission reductions.
<unk> exemptions to have them address the difficulty of renting house houses.
That's it.
Affordable prices.
July 31.
<unk> 2022, or solid transactions were completed under the new youth initiative.
Serving the graduates approximately RMB <unk> <unk> million.
Lastly.
Like to go back and talk about our returns our return to the phone from that.
Our business followed down to be about people.
Especially the case for the housing related services industry.
Which part to both consumers and our service providers for our managers on the platform and myself is easier to connect and relate to consumers.
Cause everyone or loss is a consumer at some point, but it's more difficult to identify with service providers by going back to.
Through the phone line.
Lower horse power tool.
Emphasize.
With service providers relating to consumer convinced us.
That is here they are.
Crest for Joy for leaving new never changed on the same token.
Identifying with service providers enables us to understand and he is strengthening.
Diction that <unk> to.
So service providers the need for long term Proteus and Pride, India occupation remains constant.
As it Poland goals.
When the water ends.
We will revise the business were of the future and never stop change.
Presenting us with <unk>.
Another.
But as long as we can match with the constant elements, while continuing to iterate ourselves.
Only get better and help the industry get it better.
Thank you next.
Next I would like to turn the call over to our CFO Paul to review, our second quarter financials.
Thank you Sterling.
Thank you everyone for joining us today.
What is causing more detail about our second quarter opportune data neutral financial results I would like to provide a brief update on the originally the housing market.
The past quarter. So most of the positive policies they rolled out to shop demand the growth market in China.
That includes the central government that home siding lower mortgage rates are guided by the central Bank.
The step up is measured from lower to higher tier cities across country.
The property market has to show some final component.
With the existing housing market specialty responding quickly to the policy relaxation.
With the new home market was still cloudy to bite that prices are multibank, although weak homebuyer sentiment.
Recently.
The reemergence of COVID-19 operate.
Mortgage boycott sorry, it's all about finishing the new home project.
It's dropped the recovery of the housing market.
However, we would like to drive that adults charlatan incredible well note the impact Baker's business directly.
The weight per day with garment while properly resolve the issue a new short term delivery with a property or project.
In addition.
So I'll split the deal for the new home market in some cities will drive part of that demand.
The whole housing market.
We have a stronger presence under your comparable competitors.
Our competitiveness well positioned to absorb the shift in demand.
Autos market was still on a roku we offer recovery.
We were able to take a concrete measures to continuing building up our market presence.
Maximize our strengths, including the collaboration network under digitalization capability to enhance operating efficiency.
Here, we would like to send the sincere gratitude to the employee.
How big impact, but the comp is the restructuring in Q4.
For their dedication and professionalism in the cure rate.
So our contributions.
Kimberly available just comp there will be always be a solid opening the fruition of all of our future developments.
Yes.
We updated our segment reporting from Q2.
As a result of acquisition options.
Which was closed in late April .
We are consequently update our business structure result in fallout business, which what.
<unk> home transaction services.
Home transaction services home renovation and the furniture and then your merchandise offer services.
And update the financial measures accordingly.
Turning to our financial details in Q2.
Net revenues decreased by 43% to RMB 13, 8 billion in Q2.
RMB $24 2 billion in the same Purion <unk> 2021.
<unk>.
Based on the hand of our guidance by over 30%.
<unk> the street consensus.
The better than expected revenue were fueled by the following factors.
Firstly.
And the Shanghai to.
To make a market in the world.
Offline operation Guangzhou holds due to their colby.
Lockdown in April and May.
So its transaction rebound rapidly in June after the pandemic.
Which was much quicker than what we expected previously.
Secondly.
I think home market in the higher tier cities with Apple to stage, a solid recovery support by the policy.
This was approved by about 33% quarter over quarter jump of CTV publishers home confection served by agent or the <unk> in Q2.
Suddenly also in the overall market remains weak.
Our strengthened cooperation with the high quality of our efforts on the fourth highest of sell through ability.
Which enable us to seize the opportunities.
<unk> brought it to a trough the video unit sales performance.
However, the year over year revenue decrease was primarily attributable to the decline in total TV 47, 6% to RMB $639 5 billion in Q2.
<unk> thousand $228 8 billion in the same period of 2021.
In particular.
Our net revenue from the home transaction.
Decreased by 42, 5% to RMB five 5 billion in Q2.
Compared to RMB nine 6 billion in the same pure opportunity to tier one.
Primarily due to a 39, 6% decreasing two television operating home transaction to RMB.
Thank you $3 5 billion in Q2 from RMB 652 billion in the same period of 2021.
Our net revenue from the new home transaction services.
<unk> by 52% to RMB six 7 billion in Q2.
RMB 13, 9 billion in the same Purion <unk> 2021.
Primarily due to a 55, 3% decrease in CTV of new home transaction to RMB $222 7 billion in Q2 from RMB 498 points to repeating the same material.
Good luck.
Our net revenue from home resolution on furniture, or RMB 1.0 beta in Q2 compared to RMB 43, many interesting material opportunity to tier one.
Primarily because of the company competes acquisition are assumed to home renovation quality admitted.
The direct basis opportunity to it.
<unk> begun to consolidated financial results during the second quarter of 2022.
While net revenues from your merchant and other services decreased by nine 6% to RMB 557 million in Q2.
$660 million Imperial particularly took away <unk>.
Primarily attributable to the decrease in net revenue from financial services, which was partially offset by the increase of net revenue from the large rental property management services.
Cost of revenues.
<unk> by 41, 3% to RMB 11, 1 billion in Q2.
From RMB $18 8 billion in the same pure opportunity to a tier one.
Gross profit was RMB, two 7 billion in Q2 compared to RMB five 3 billion at the same period of 2021.
Gross margin was 19, 7% in Q2 compared to 22, 1% the same journal 2021.
The decrease in gross margin was mainly due to a relatively higher percentage of cost related.
Two 1% the same journal 2021.
The decrease in gross margin was mainly due to a relatively higher percentage of costs related to store of net revenue as a result of the decrease of net revenue in Q2 compared to the same period 2021.
Operating expenses remained flat at RMB, four 2 billion in Q2 compared to the same period 2021, <unk> flat at RMB four 2 billion in Q2.
Back to the same period 2021.
And other administrative expenses were RMB 2000, 250 million Q2.
Compared to RMB $2200 2 million in the same share of 2021.
Mainly due to the increase of the share based compensation expenses and additional severance payments in credit in Q2, which was partially offset by the decrease of the recruiting personal cost and overhead along with the decrease thaicom.
The conference and the <unk> expenses.
It's out of the COVID-19 outbreak in certain region in Q2 compared to the same period of 2021.
Sales and marketing expenses.
South into $122 million in Q2 compared to RMB sells into 241 million in the same carryover 2021.
Mainly due to the decrease of the brand advertising and promotional marketing expenses for the housing transaction services.
Which was partially offset by the sales and marketing expenses of <unk> two.
Research and development expenses.
RMB 779 million in Q2 unchanged from RMB $775 million, the same pure opportunity to do what they.
Mainly due to additional severance payments incurred in Q2, which was mainly offset by the decrease of recruiting personnel cost and the sharp it's competition as a result of the decrease.
Hi, Carl in research and development personnel in Q3 compared to the same purion opportunities with your wife.
Loss from operations was RMB south of 580 million in Q3.
Compared to income from operations of RMB <unk> hundred $16 million in the same <unk>.
Hi.
Operating market with Nike, 11% in Q2 compared to four six.
And the same care opportunity to new one.
<unk> due to one a relatively lower gross profit margin under to the increase of the percentage of total recurring operating expenses of net revenue in Q2, primarily due to the decrease in net revenue and the three additional severance cost of RMB 400 stated many incurred in Q2.
Compared to the same period opportunity to 'twenty one.
According non-GAAP items.
The loss from operations was RMB 619 in Q2.
Compared to adjusted income from operations of RMB itself into $669 million in the same period opportunities in tier one.
Adjusted operating margin was 19, five zero percent in Q2 compared to six 9% in the same period of 2021.
Adjusted EBITDA was not to RMB 204 meeting in Q2.
Compared to RMB 2550, 5 million in the same <unk> 2021.
Backlog was RMB.
866 million in Q2 compared to a net income of RMB sells into Hungary, and a $16 million in the same period of two to one.
Excluding non-GAAP items.
Adjusted net loss was RMB $619 million in Q2 compared to adjusted net income of RMB South into 638 million in the same period of 2021.
Net loss attributable to <unk> Holdings, Inc. Ordinary shareholders.
RMB.
868 million in Q3.
Compared to <unk>.
Income attributable to <unk>, holding Inc. Auto shareholders of RMB sells into a $112 million in the same period of 2021.
Okay.
Net loss attributable to <unk> Holdings, Inc. Ordinary shareholders was RMB $622 million in Q2.
Third to attach 19, com, which beautiful <unk> holding inc. Alternate shareholders of RMB.
$635 million in the same Purion <unk> 2021.
Diluted net loss per ads attributable to <unk> Holdings, Inc. Auto shareholders was RMB, one 570 in Q2 compared to diluted net income point, yet attributable to <unk> holding Inc. Hope the new shareholders of RMB <unk> 93 in the same period of 2020.
<unk>.
Diluted net loss per ads attributable.
Thats beautiful to <unk> holding Inc. Ordinary shareholders was RMB zero.
Five two in Q2 compared to adjusted diluted not incomplete, yes attributes.
Attributable to <unk> Holdings, Inc. Ordinary shareholders of RMB 137 in the same period of 2021.
We maintained a strong cash position and sufficient liquidity in Q2.
That's helpful ended June so combined balance of cash cash equivalents restricted cash and short term investments amounted to RMB, <unk> 50 billion or USD seven 5 billion.
The balance of our long term cash items vending.
Venues, including long term investments amounted to RMB $24 billion.
<unk> three 6 billion.
In addition, we have pockets of positive operating cash flow. Despite the challenged environment under cash to income ratio of our new home services was one seven in Q2.
Strengthening our strong cash generation ability.
I will talk about the recent developments regarding all of our operational and capital market initiatives.
Our near term focus also corporate financials.
First of all waiting not to seek isolate by interface of the market headwinds.
Nearly half of our senior level directors linked with the bulk of that in the past month to walk or spirits at the agent's home decoration commanders Oahu rose.
Holding default beneath that.
<unk> become one often cut you're almost done so often.
By working side by side with our service providers at the engaging day to day interaction with customers.
Have a deeper understanding of how to truly help service providers inputs out productivity.
Over the security.
The better satisfy customer demand.
It also caregivers to fully embarrass the challenges and create the indispensable value for the industry.
Secondly, we took a series of cost saving measures and focused on the efficiency in our daily operation to enhance the profitability.
Our total efforts were reflected in the improvement of the contribution margin of the new home, Kentucky facilities.
Which was a two year high of 24% in Q2, despite the still sluggish new home market.
Moreover, that's the way Carryout the photo op in that is our main station initiative in Q2, well again, the larger operating leverage for our housing type business services. Okay.
Market environment.
Great.
The operating expenses saving for the housing type business services in the second half of this year to reach approximately 300 to 490 <unk> quarter.
In absolute dollar involved operating expenses should be decreased to the same level of the second half of 2019.
Followed by the expected the market recovery in the coming quarters, we believe our possibility for the housing transaction services will gradually recover in the second half of this year.
Certainly well continue to make investments in our <unk> business home renovation and furnishing services under Baker rental services.
Despite the tough market environment.
Especially makes the necessary and sufficient investment to heat the home renovation and essential services.
Switching in July for March locker, total addressable market compared to the halting transaction services.
We formulated this investment will yield long term benefits under the trust, we can from our customer under the capability, we have accumulated in our corporate needs.
All well positioned to capture the rising demand in that particular sector.
Firstly.
<unk> up 10%.
Darryl.
Additional mandate from to repurchase the shares following shareholder.
The annual General meeting held on August 12.
Offset well execute the share repurchase program of up to USD 1 billion of Barbara I guess covered 12 months period.
Just highlight the confidence we have in our long term growth and has the capability of our capital allocation, which are prioritized for the balance of the financial flexibility with an efficient capital structure.
Turning to the guidance for the third quarter opportunity.
Well, the new home market is steel <unk> Doc.
Housing market is already seeing the light at the end of the tunnel.
On these pads into two stages largest scale recovery in the second half of this year.
Based on the ball considerations, combining the factor itself into a potential negative impact of COVID-19 containment measures in certain region under the base effect of the same period of 2021, we expect total revenue to be between RMB 16, 5 billion under RMB 17.
In Q3.
Representing a decrease of approximately six 1% to eight 8% from the same period of 2021.
This forecast does constitute accomplished current and the preliminary view of the business situation on the market conditions, which are subject to change.
Lastly.
I would like to highlight such a recovery of the property market is on horizon.
Foreign policy harping on the supporting slides, which are focused on meeting demand for the Baidu housing.
Where are you relative to opportunities to further increase the efficiency. So a range of cost management to put the synergy I look where the resources more efficient.
Indeed on the rig conversion.
And the strike a balance between the profitability and the investment into new business.
So we continue to reiterate cannot how to market street into year from the new home sector to the new home market.
Accelerated pace.
But the home prices stabilizing and the need for the <unk> of the trends people.
Great.
Home upgrade demand will survive the prominent driver turbocharging continue this function of the market and the result of higher drive demand.
For Greenfield facilities.
Putting home renovation furnishing and rental services for <unk> of our unique competency and a solid lay out until sector, whereas the poll to take the path and achieve that rapid growth in the long run.
This is the what we have been doing not perfect.
We are on our way.
That concludes our prepared remarks, we will like now to open the call to Apache's operator. Please go ahead.
Yes.
Thank you as a reminder to ask a question. Please press star one one for the benefit of all participants on today's call. Please limit yourself to one question. If you have additional questions. You can re enter the queue. If youre going to ask a question in Chinese please follow up with the English translation.
One moment, while we compile the Q&A roster.
Our first question comes from <unk> Shao with Barclays. Your line is open.
Thank you very much.
For taking my questions.
I have couple of questions. If I may. The first question is that you briefly mentioned about the policy relaxation in your prepared remarks.
And I was just wondering could you talk about the the acura effect that you're seeing from those policy relaxation and any comments about the potential further relaxation.
For the second half of the year.
Second question is that you also highlighted in your prepared remarks have a very nice rebound off the existing home sales, particularly in Shanghai and Beijing.
Could you just talk 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.
Sentiment, Sean let me address your first question.
Guided by the positive top set by the central requirements and that the central bank liquidity support from low to higher tier cities.
We actually sold the local government and continue to step up the policy relaxation since the beginning of this year.
<unk> 220 province at the city level or <unk> of <unk>.
Loosened the roads.
Restriction nearly 600 times exceeding the total 400 tightening policies issued last year.
In particular.
The Politburo, making us the end of April so a frequency which to local relaxation policy award excuses in the same call second tier of cities to deeply accelerate reaching more than $100 change hunt for each month from April to June .
Since policies aimed at ensuring the normal accretion of the grilling entities under the stability of the marquee transactions.
There are many full type of the easing measures.
Just a relaxation of the loan restriction.
And also to include the recurrent.
The midstream first and second home purchase mortgage interest rate, where mortgage the in 103 cities dropped to $4 three 5% and five 7% in July respectively.
Creating the new loan since the euro for 2017.
Relaxation on loan restrictions.
So included reduction of downpayment ratio.
Lower recognition standard for the secondhand homes.
Also lowered the restriction on the use of housing.
Provident fund et cetera.
Is that issue was such a relaxation in the CTO.
Joe Taiyuan Jinan virtual machine on.
And the second part is the relaxation.
Home purchase restrictions.
<unk> encouraged for the Cte restaurant and the relax the purchases solution for non local householders.
Dysfunction of non restricted <unk> and also the added purchase quota for the family members with more than one child.
And first of all implemented in the city, such as the 19, Hangzhou and the tongue shop.
So third parties subsidy incentive, including the Thailand settlement subsidies housing purchase of subsidies.
Meaningful value added impact the deep taxi et cetera.
Kind of in Khartoum and policy implemented in the city such as the suit on the jumpshot.
Both copies promoting home upgrades in the first half of two new to new to 19 cities.
Comment to measure such as Shanghai tunnel revamps by using so called the housing coupon at a monetary compensation.
Eating policies with a stronger entity implementing the <unk> such as the genco into 19.
We also set up the reintroduction of our policies.
Multiple cities. So the subsequent show recovery in strong leading indicators, including the number of new property listings.
New home customer and also the proxy twos as well as the agent confidence index.
Don't forget also saw the substantial recovery in the transaction volume region.
In the second half of 'twenty, two new two weeks by the various cities to continue reducing the easing policies to support the steady market recovery.
So there are still substantial room.
For more policy easing in.
In last year.
<unk>, new one marked the year of the currently the policy control impostor 12 years sooner.
Silver relaxation and support this year.
Restriction gradually being loosened.
Nevertheless at the end of the June most of our key second tier cities will finalize to relax the compared to the most relaxed the purion in parts of 12 years.
The basic principle, helping US 40 mean multiple accretion does do a lot of potential for further policy relaxation in different regions.
In terms of the diversity and the intensity of the you can policies.
The central government has started to Poland to encourage the local garment to activate introduce a policy to ensure the market stability.
With the recent new hallmarks of the rig recruit emerging part of your meeting.
As of July upper side to a full on the factory utilization of our policy to box.
But the policy to support the ratings holding demand on home operating model.
Local government.
To fulfill our responsibility to ensure the delivery of the home protest and to protect People's livelihood. So from our perspective wait to do that.
For the tier two cities have a strong housing demand and solid fundamentals.
Under their local finance on that dependent on the real estate.
The local property market could recover to a healthy level, even we felt a policy support.
<unk> for the photo supportive policies.
We introduced the second tier cities and the lower tier city during the second half of the year to actively reduce risk and to restart the market confidence.
I suppose the continued recovery of the market transaction.
And then regarding your second question.
In the second quarter.
Let me take it opens a policy toolbox and actively to use the easing policies.
With these new haul market beans.
<unk>.
Market sentiment boat's not.
Generally speaking wholesale Beijing, Shanghai was severely affected by the pandemic large number of consumer who had they're taking a wait and see.
<unk> begun to enter to the market as evidenced by clear recovery signs in the transaction volume of the existing home market.
Overall, according to Baker Research Institute in the second quarter, the Ptv for China existing home sales market increased by nine 8% quarter over quarter on the decline.
45% year over year.
A series of leading indicators the monitored by Pedro such as the whole between tax number of new customers and the new lifting under the price index.
That the Marquis petition rebounded in May and June problems of Bolton.
<unk> seen home prices in June several was slight year over year increase in the fourth tier cities the exception.
Well with the prices in the 2000 <unk> second tier cities have recovered to the level of the same time last year.
But it's a process in the third year in a voluntary on the fourth tier cities continue to trend up.
Different type of cities.
Key second tier cities.
So it relates to a recovery due to the less impact from the pandemic and the strong policy support.
This in home self GT bone Baker platform accordion between the Shanghai increased sequentially by 23%, 20% month over month in May and June respectively.
In June .
And home sales volume.
<unk> Beijing, and Shanghai, we are balancing the 205% of the average concession volume opportunity to do one on a year over year decline narrow down to only 2%.
Transaction volume up to 10 tier one major cities, such as Chengdu, Suzhou, Hangzhou and the Tiger So past so 2021 average level in June.
Cities, such as achieved all hot coffee have also rebounded level similar to 22, new or average.
<unk> is bad debt in the second half of the year to key second tier cities will quickly return to year over year growth given the continue introduced to.
The continued construction of the easing policy and a stabilizing market sentiment.
And the public tender Shanghai, there were significantly impacted by Covid Apple in the main but to deliver the strong marquee resiliency too with the transaction voting rapidly picking up.
<unk> come under control.
Transaction volume off the page and the Shanghai in the last week of two routes into 'twenty to do what average levels, which is a very good signals.
That said in July Beijing, and Shanghai will benefit from the release of the pent up demand caused by the pandemic disruption.
The monthly transaction volume.
It's likely to return to year over year growth.
Starting from the fourth quarter, Beijing, Shanghai will enter to a policy on the normalized range in terms of transaction volume together with restoring confidence in Greece and home marketing nationwide.
For the whole country recovery pace.
We have repeatedly emphasized that the China market trend.
Yes.
Transitioning from the new home driven to the existing home driven the recent the emergence of a serious problem in the new home market the wells that Bert a substantial amount of the demand to the existing home market from the new home market.
Due to the increasingly evident in a number of key second tier cities.
For example.
Net income transaction accounted for 40% of the total transaction.
Half of this year compared to roughly 30% in 2020.
Same thing income drove the proposal and comp transactions increased to nearly 38% in the first half of 'twenty two new tube from 28% in 2020.
But there is certain that at least in the home market and well continue to recover.
Greater scale in the second half of the year.
We normally put thousands of entire cycle of real estate transaction into both stage certamen cycle, including the stage of the price stable and the volume under the price volume Basta soft cycle include the stage of price stable and devoting increased under the price and the volume.
Oxnard.
During the past half year, so its new home market start to shape hovering extra bolton towards a recovery.
Some strong second tier cities have gradually enter into the recovery stage.
Take most of six months for the market to fully recover into some wrong.
Baker researches due to data.
So overall in home sales market and deliver a year old vehicles.
July to August market was a temporary impact on euro <unk>.
<unk> beyond the normal seasonality.
I'll now turn the recovery trajectory.
We expect home prices in some weaker second tier cities to stabilize into Q3.
Well, it's a home prices in the third on the lower tier cities will be stabilized by the end of.
This year, okay. Thank you.
Very helpful thing gets so much telephone.
Thank you.
Yes.
Thank you one moment.
Our next question comes from Harry Chen with Citi. Your line is open.
Okay.
Gail.
Sure Henry.
Yeah.
Sure.
Fantastic.
Hi, Ken.
Yes.
Good evening Steve.
Yes.
Okay.
Yes.
Sure sure.
Okay.
And Dr Calvin issue.
Sure.
Hi, Ken.
Thank you Sir.
Okay.
Okay.
Gotcha.
You bet.
Yes.
Thank you management for the opportunity. My first question is about small things like call. It like a probation, how we keep ourselves starting from July .
In mortgages for.
New home construction.
India and China.
China could the management share your view.
On company business.
Hi.
Company mentioned that came back.
Next year.
How can we keep it looks.
My second question is to act in management's view of current new home market and <unk> outlook after nickel comments.
Second quarter of this year. Thank you.
Hello hiring prior to hear from you, but let me address your first question firstly.
We want to continuously reiterate that as a bank and will give efforts right.
Batesville for the payment by card sorry to note the writing pad on Baker.
Most of the vipers suffering from the mortgage erodes or identified by our earlier.
The so called a high rate go backwards. So we have made are sufficient in the bad debt provisions for doubtful receivable concerned.
Secondly to start new home construction and the mortgage payment suspension.
So it's a hyphen under extraordinary circumstances.
Connery talks underway.
We believe the Chinese government has sufficient new capability under the determination to resolve the issue.
Recently from our observation local garments in several cities already implemented various niche of Q2.
To ensure the appropriate delivery.
<unk> multiple project, what's the potential mortgage payment to reboot risks could resume construction.
Under most circumstances homebuyers home mortgage payments.
Wins in new home construction is stalled as a protest to get its construction to resume.
Refusing to pay for all right. We also believe it is a mortgage payment suspension will promote a local government to help the industry and they are quite as difficult as the fast pace and stabilize the consumer expectation ritual instrumental for the industry to return towards.
In normal operation.
Certainly.
For mortgage payment suspension, which was surprising.
Indeed negatively affects the overall market sentiment in some cities under disrupts the new home market recovery in the second half of this year is it's a very bad however.
<unk> home, that's not covered in the rate of the installed cost structure.
Fulfilled spill over a few months from the new home market.
<unk> could benefit debate.
<unk>.
Given our Wilder.
<unk> presence in the home market.
Existing home higher profitability comparably to the new home at all.
Also off site to sung you tend to the mortgage payment suspension, Nike fact onto new home market.
For <unk>.
<unk> new hold by the provision we have made adequate bad debt provision for the new home receivables.
Until Q2.
Our cumulative balance of the bad debt provision was RMB two <unk>, two 1 billion covering 31% of the original value of the corresponding.
Total receivables, especially.
Great.
One hybrid <unk>, including <unk>, we made a bad debt provision the operating mid of 83 per sell their historical unsecured receivables balance.
<unk> amounted to RMB 132 billion.
We have made a bad debt provision of <unk> 49 per itself the receivable, but that in Dubai percent protest with the curriculum amount of $160 million.
Absolutely remaining developers who are at the low risk. We also made a bad debt provision that threshold for 10% to 20%.
I believe the current identified at least of the property developers with a high provision already covered nearly all the higher with the wrapper the industry with a lethal chunks of.
Incurring subsequent enlarged by debt provisions.
While maintaining a sufficient reserve against the backdrop. We're also consistently reinforce our collection measurement of the receivables in.
In the second quarter, we collected a total of RMB eight.
Four 5 billion of new home sales receivables 127 times.
The RMB six 7 billion of our new home sales revenue in this quarter.
So new home gasoline vehicle also fell from last Q1 from Q1 hundred 52 days.
In the fourth quarter 208 days in this quarter.
At the same time, we have maintained to our selection criteria under roof control mechanism for collaboration with drivers.
<unk> give a pro rate evolution model.
Mindsets settlement in terms of the conditions in the increase the percentage of the project with your Viper.
For the commission.
Creating a favorable condition for the subsequent receivable collections.
Addition, we incorporated with new home receivable quality in Chihuahua mentors of performance evaluation system at the operating level.
We believe this initiative combined.
<unk> consistently lowered the flagship risk of our new home and receivables.
Regarding your second question.
I'd say in.
In the first half of this year.
National New home market.
Week, both on the supply and the demand side.
But <unk> Q2 <unk>.
New home sales bump the National Bureau of Statistics hip.
We're talking to a year over year decline of 36%.
While the TV offer crc's called hundreds erodes the developer fueled by 53, 4%.
Goodbye efforts investment confidence once a week in most cities.
The industry was in the deepwater.
With the sluggish consumer demand.
<unk>.
Okay.
<unk> resurgence on some mortgage payments quite cost.
Well, so some positive changes in the new home market since may.
Number one the market recovery Poe powered by multiple parties stocking.
Starting in May step up local supplier policies.
<unk> for the half year performance and calculate the delta to hardly have a brown a series of positive change with the market and is a positive change verified by its upfront and numbers.
The numbers of the offers to buy new hormone bigger platform achieved consecutive growth in May and June .
Off of 50%.
27% month over month, respectively.
Hey, Chris New home loan side, South data from 52 cities.
Also right in quarter two.
Kentucky, two months onto highest come out water freezing cold range.
Also.
Active promotion by <unk>, the <unk> panel attrition rate in the second quarter increased significantly quarter over quarter, So new home market recovery in June with the year over year decrease narrow down to a 23%.
According to the National Bureau of statistics.
Does skew uncertainties in the new home market in the second half of the year.
So macro economy onto income suffocation.
<unk>.
And so.
Homes higher.
Under the Orexin Goodbye up a higher requirement for the living.
And also the geopolitical situation just facing uncertainties.
Under there.
Painted the pandemic.
Surgeons mortgage payment to buying cost <unk>.
By default and uncertainties into new home project deliveries are affecting the restoration of the market confidence.
In short tune overdraft tilt to the new home demand in certain regions is also a constraint for the recovery of the nuclear market.
The industry is still facing the huge downward pressure under to recover as the new home market that will take time.
We can monitor the subsequent to promotional to give a percentage of effort on the policy acquisition to establish the slope of the recovery trajectory.
That system going forward.
John were shortened collection in the new home sales in July and August that keep efforts mutual year promotion in fact.
A moderate from June .
Meanwhile, the combined efforts of Euro high temperature in China Southeast southwest.
It's also a problem.
Summer.
And also the mortgage payments suspension have also led to a notable decline into new home market in dry August compared to June .
Starting from September from overall observation and transportation, we expect <unk> to again entering into an attitude promoting those cycle.
Under the pressure of the fleet or soft target. Therefore, the market is more likely to enter to a weak recovery period devices.
Thank you Harry.
Yes.
Management.
Okay.
We have a question from Steven <unk> with Morgan Stanley . Your line is open.
Thanks, so much.
While Johnson one side Josh Your line is open to the so-called Hollywood, social and try and do acquisitions and so forth on the Tmall put Australia middle East.
Okay Goldman Sachs Hi, Keith.
Key towards that.
Questions.
C G Delta sequentially.
How do you.
<unk> May proceed Fabio <unk> milestone.
Okay that was laid out at <unk>.
Susan.
Yes.
Thank you management for taking my questions. My question is about the whole innovation business.
Thank you Michelle with you, but there is there any update on the basic strategy or geographic expansion plan post the consolidation of a center.
Just any guidance on this business for the coming quarters also have you seen any update on the timing of Youre launching the platform model for renovation, which you mentioned.
Can you touch a file with 50064 any milestone related to that that you are looking at internally.
Now and what's the biggest bottleneck you think thank you.
Hello.
Hello Hunter for Trc.
Cold weather through global banks that aren't yet.
I don't know that Josh.
Elements Egfr not just a niche about that issue.
Issue Patricia shortage ago.
Okay.
Finally, let me address your question. So firstly as I mentioned during the prepared remarks. So during the second quarter. If you would look at.
The leading industry culminate in the home renovation furnishing business has been declining <unk>.
Or 20% year over year, but whereas our renovation furnishing business actually has been increased significantly on a year over year basis.
Sure.
Or do you are they don't know mechanical just had homegrown does India you said.
Selling general and Tolerability of attendee at 10 Union traveller, just with them Yahoo.
You mentioned in terms of announcing Guardian listen who can give you something incremental that Bosch relationship with India Hanmi.
<unk> probably holiday <unk>.
<unk>, that's the only time element.
Thiago <unk>.
<unk> is a homegrown doesn't dip down to the dollar.
Clearly the PD.
So the revenue when the nationality fashion. Another dimension, we can expect for that business as we look at the referral rate from our core business issues of Hudson transaction business. So when we look at our second quarter results were actually seeing more than 25% offset referring and commercial all coming from the.
Hudson transaction business already in some of the expensive cities such as Beijing. The commercial rate actually also has been reached to 80% or even higher some of it is given to where well ramp up we do believe there is a huge space to continually improve so overall, we do btu.
As our customers referral and the conversion from the <unk>.
The amendment also another dimension to the progress of that package.
So if without doing a bunch of <unk> as I said earlier you've got.
<unk>.
<unk> dinar persistent won't be the template format.
<unk> got probably the tritium Johnson culturally.
Got you down in front of us and move on to remain agile and critical strategic fit.
This is a tissue reviews on.
Yeah, I'll comment on your buying huge in Italy.
And on a pulpwood Chinese Shenandoah triangle, Orlando <unk> known that the Republican Yeah.
Controllable and lithography and talk to you about <unk> data on <unk> rewards customers.
<unk> auto home <unk> in frontline.
In long haul off on their cash on coupon pretty interesting I'm not sure.
Sort of changed.
Horizontal Illinois with <unk>.
John future year.
<unk> <unk> with <unk>.
Those are programs.
Shiho cohort.
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Patricia hold undergone handle designs.
Some furniture to bring a couple of details can.
Can you guys healthy donor couldn't see along with the selling of awards Tony agenda. So Indra countries to hadar drawn onto a cola going in Guangzhou Hyatt <unk> partners.
Dr Sangre <unk>.
Longer path on your sort of a cellphone and you don't need to worry that it's not going to either 2017 will generally have a driver.
So when we look at future evolution for the home decoration Flemington business, we actually don't kind of in the fall business element all the three major reasons, firstly coming from the policy. So we recently no.
And in the fall of the central.
Central government requirements as the actually has been drawn promote.
So called the high quality of the meeting.
Pat.
Through the national wide, so that definitely will provide.
And our policy of drivers for the overall industry environment. The secondly, we look at the overall also called the industrial partnership as well as industrial correlation.
Making into the whole declaration of furnishing business, we look at into from both of the upstream and downstream practice from the downstream.
Rather than.
The existing hall reaches has.
He knew furnishing.
Movement of the services, often humana rather than that we also saw the new home. We also have.
The declaration.
Finishing demand. So we do believe that will create additional market opportunities and from the offered stream. We also look at.
The correlation of our partnership.
<unk>.
<unk> back from recent business itself into the furniture and home furnishing South business together and we do believe by leveraging off the good quality of the home declarations and definitely that will bring the additional potential to further boom of our furniture and home <unk>.
Furnishing business, our board and 30 from the consumers back to you all prefer more like half.
Full coverage on a one stop cyber attacks.
<unk> from the previously sure.
Construction services into the full coverage.
Scientists, we've just means.
Color from both of the construction part as well as the home furnishing and a declaration of independence as a whole right. So we don't view by promoting of those kind of.
Services, you also will create additional opportunity for us.
Thanks Randall.
I won't say 100 by year one.
Our fleets in Santa Clara.
Joseph <unk>.
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So it won't be as strong.
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Moving onto insurance or data.
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You said on.
<unk> and <unk> this year.
<unk> is one.
Number $1 <unk>.
And just finally been online, but also David I don't know if any of the macroeconomic.
So John I'll tell Ya <unk> hydromorphone.
So looking into the future development for the home operation of finishing business, but we do believe there are three of.
Quantified all of the elements as well as additional mark satisfying quantified answer elements Casino bar business right. So in terms of the quantified.
Elements. So firstly when you look at our scale right.
Until now we don't see any of the companies in the industry and surpassed <unk> of RMB scale.
The home home decoration of furnishing industry in China, right. So whether there could be one store company, which has annual revenue included surpassing 10 billion RMB. We do believe that was one of the accounting file ahead of it and secondly, as we look at as I mentioned before is our conversion rate from the call.
Weakness into the home decoration and furnishing business we.
We do we do in the future these kind of customer before and our commercial rate who has surpassed 40% from our housing transaction business into the home decoration of furnishing business and we will continue to grow so thats what will be the second quantify of the elements the second sorry.
The third factor quantify factor.
The correlation between of.
<unk>.
The home decoration business with the furniture and.
Home furnishing cells.
Starting from the beginning this year, we look at the correlation is about a 1.08.
Is gradually actually has been increased to roughly one one and we do believe long mid to long term goal will be one quantify right. We choose means every.
One.
<unk>.
Also construction.
And we will come with rapidly back half half dollars I'll hop off.
The home loan bank funding.
Furniture and home furnishing of the cells.
Of the revenues right so that.
And so we do believe in the history of the accounting five factors, we can continue monitor and.
Beyond that we do video and other content side of the factor is as you mentioned is a platform business model right.
If you look at our execution in the past decade Sue of based on the successful execution.
The improvement of the.
Our platform business model in our housing transaction business. So we do believe for the housing.
For the home decoration of furnishing business definitely also.
Gradually grow too.
<unk> business model.
Now ill turn the call right, but in the next couple of years, especially in the next two to three years. We do believe we will focus on our <unk> business.
The balance.
We do believe there has a lot of teams we can continue to grow including the teams maturity, including the numerous policy in terms of supply chain in terms of the design in terms of the online and offline correlation asphalt.
The offline of cells.
For us.
South market or other kind of offline events, Stephanie for all of those kind of things we can continue to grow.
He knew to show off the solid progress in the next two to three years. So we don't believe we had not burn cash to run through the <unk> business model so to round that part up high while we trying to do is build a.
More solid progress for our <unk> business, then chooses to nature, we congratulate <unk> back into the platform business model.
The answer to your question. Thank you.
Yeah.
Yes.
Operator.
Our next question comes from Timothy Zhao with Goldman Sachs. Your line is open.
Hi, Thank you for taking my question.
Question on the cost savings.
You mentioned in the second half do you expect around 300 to 400 million.
RMB, causing poor quarter could you further elaborate on the Comcast Margaret how to cut costs.
You can see as.
So I'll ask what would be the future impact of obvious measures on your financial performance that'd be helpful. Thank you.
Okay. Thank you can see as I mentioned in my prepared.
Remarks, we took a series of cost saving measures on the focus on enhancing the efficiency and profitability our dairy operation in Q2.
Meaningful progress was delivered was again refracting all of our organizational structure.
On the operational quality.
We adjust our organizational structure and attractive proposal, the junior and senior agents according to the different conditions and different cities.
The <unk> the original teams yes.
Addition, we prioritize.
Home business, and higher pulp and making new home business on a city level.
In terms of the cost control.
A full month to shutdown the loss, making stores under drove the rent reduction for stores in the office space.
With this measured our fixed cost and the expenses as well as opportunity level break even points continue to fall in.
In Q2.
<unk> cost for the danger decreased by more than 25% year over year.
And we expect the operating expenses of the saving for the housing consumer services in the second half of this year to reach up to approximately 300 to 400 million in agriculture.
And obviously the dollar amount of the operating expenses to be decreased to the same level.
The second half of 2019.
As a way of kind of support their optimization restructuring initiative in Q2.
Again, the larger operating leverage the profitability for all of our housing transaction services Okay.
Market environment.
Our <unk> business for example, central pockets in June .
First time in 15 months.
The increase of a very weak market.
Another example is the parcel effort. It will also reflect in the improvement of our contribution margin of new home business.
Which was.
Sure Hi off the 24% contribution margin in Q2, despite the still sluggish new home market.
Followed by a market recovery in the coming quarters, we believe our profitability, what's the Hudson container services well gradually recover in the second half of this year.
We are now.
Yes, we are now approaching the end of the conference call I will now turn the call over to your host today, Mr. Matthew Zhao.
Closing remarks.
Yeah. Thank you operator, thank you once again for joining US today. If you have further questions feel free to contact vacancy in western nations team through the contact against called here. 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.
The conference will begin shortly.
So raise your hand during Q&A you can dial one one.
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Okay.
Okay.
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