Q4 2022 Ke Holdings Inc Earnings Call

March 16, 2023

Speaker 1: Hello ladies and gentlemen. Thank you for standing by for K.E. Holdings Inc.'s fourth quarter and full year 2022 earnings conference call.

Speaker 1: At this time, all participants are in a listen-only mode.

Speaker 1: Today's conference call is being recorded.

Speaker 1: I would now like to turn the call over to your host, Ms. Sittin Lee, IR Director of the company. Please go ahead, Sittin.

Speaker 2: Thank you operator. Good evening and good morning everyone. Welcome to KE Holdings or BECA's fourth quarter and fiscal year 2022 earnings conference call. The company's financial and operating results were published in press release earlier today and are posted on the company's IR website investors.ke.com

Speaker 2: and business development. And Mr. Hsu will provide additional details on the company's financial results. Before we continue, I refer you to our Safe Harbor statement in our earnings press release, which applies to these calls as we will make forward-looking statements. Please also note that paper's earnings press release and this conference call include discussions of...

Speaker 2: mentioned during this conference call are in R&D.

Speaker 2: With that, I will now turn the call over to our Chairman and CEO , Mr. Stanley Pung. Please go ahead, Stanley.

Speaker 3: Thank you, Soutine. Hello, everyone. Thank you for joining Bakersport's quarter and the full year 2022 audience conference call. For the past two years, the industry has faced unprecedented challenges, but every winter will pass and the spring will come as promised.

Speaker 3: In January and February , people around the country quickly emerged from the pandemic. At the same time, the real estate market began to recover. By the end of February , existing home sales on our platform had rebounded sharply, reaching a level close to the same period in 2021.

Speaker 3: the most active year for existing home transactions, sales of new homes have also increased significantly year over year, returning yearly to the post lockdown level in 2020. As we transcendent its realm of market correction, our firmly held views have been proven correct.

Speaker 3: and our underlying capabilities have been validated. First, our market neutral view and the persistencies in that view has been proven. As part of our digital service platform for the housing industry, professional agents must advertise the housing industry.

Speaker 3: counterbalance of herd mentality in up and down microcycles. This means they must not blindly follow the crowd or engage in HAP, LIGER. They must evaluate the multiple objectivity, multidimensionally and rationally.

Speaker 3: There must be a stabilizer for the market and never magnifying anxiety.

Speaker 3: The market has been in a downward trend since the middle of 2021.

Speaker 3: But through it, we have always believed that consumer desire for better living will not change, and the market will return to a normalized level. We also see opportunities in the market recovery. Therefore, with a stable state of mind, we quickly made a serious internal adjustment.

Speaker 3: to cope with short-term fluctuations and prepare for market recovery. We launched a one-body, two-wind strategy, transformed from scale-impension to quality growth, and implemented a series of measures to reduce costs and enhance efficiency. We protected the Commission's collection and operational security.

Speaker 3: or social providers on our platform, providing them with tools and capabilities in order to support them through the truth of the cycle. In addition, hundreds of our measurement members went to the frontline to hack the battles.

Speaker 3: Our market neutral view has allowed us to strengthen our muscles and watch for our recovery when the market was in a downturn. Facing the current market in recovery, we will continue practicing our market neutral view, acting as a counterbalance against market-changing behaviors.

Speaker 3: Since significant market volatility has the industry in the long run, we hope to facilitate a healthy and all-dream market recovery.

Speaker 3: Second, the colorability of the big as a powerful, how beautiful is a better day for the large mark of saturation. V is to finish.

Speaker 3: the big platform in 2018. In order to open up the capabilities we have accumulated nearly 20 years to the industry, we have constantly refined our protocols.

Speaker 3: ecosystems and digital infrastructure to further unlock the ACN network effects and scale efforts.

Speaker 3: of our platform, providing support for customers, solid providers, and industry partners such as developers, helping them to better interact, cooperate, learn from one another, and achieve win-win results.

Speaker 3: This one, or Machiavitetit, is the first major task.

Speaker 3: We have experienced as a platform, we have delivered more stable profitability than before and proving our ability to expand our business, which demonstrates our strengths as a digital service platform for the housing industry. We have also prepared...

Speaker 3: the momentum needed for the industry long-term development. High-quality industry suppliers have been protected and stabilized.

Speaker 3: and the low quality and efficient supplies not only on our platform but also outside our platform are celebrated via a switch.

Speaker 3: which is a currency for the entire industry.

Speaker 3: We proved our most stable profitability. In 2022, the national existing home market GTV fell by 31% year-over-year and sales of about 100 new home developers fell by 42% year-over-year. However, our annual non-GA, net profit, backed.

Speaker 3: the trend and achieved a year-over-year increase of 24%. Our operating cash inflow grew by 135% in 2022. Against the significant fluctuations in the external market, we have demonstrated the stability of profitability in power on platform model.

Speaker 3: We also tested our tested out our platforms. It has 10 sensitivity in 2022. The first year for us to advance our web body to win strategy. Our home renovation and the furnishings contract yourselves rich on the 6.9 billion. We create 31% year-over-year on our approach.

Speaker 3: for full integration with Shem Dung in Beijing. Two ways are counted for more than 10% of our volume in 2022.

Speaker 3: Increasing from less than 3% in 2021, while our one body provided more than 90% of their customer leads, the ability of our platform to extend to a wide range of sources around the sector of living has been initially validated, showcasing the high replicability of our industry.

Speaker 3: that this has been validated.

Speaker 3: with accelerated usage of low quality and efficient supply in the industry. We expect an increase in unit store productivity in the future. The trend of larger stores will become more pronounced.

Speaker 3: given the wide coverage of both home listings and a community store customer leads. And more, I will justify business operations leading to stronger risk resistance. As such, stall efficiency has become a key management viable.

Speaker 3: And high quality agents are crucial to our operations. Star owners' abilities install operations, team measurements as well as recording and energizing agents have become different agent factors in successful operations.

Speaker 3: with respect to the industry will not and should not be flat with the as is capability in the future the industry will enter the era of the efficiency improvement of the existing capability and agent implements the productivity of high level agents in two times

Speaker 3: the industry media, which shows that the mid-level group of agents will become the most vital force in the industry in the future. We have always been and will continue to be committed to helping agents improving efficiency, obtaining a decent and stable income.

Speaker 3: realize long-term employment and pride themselves of their professionalism on our platform. Therefore, we have been firmly moving forward with our large, strong strategy. In 2022, we support it.

Speaker 3: and empower the re-organization of over 3,000 stores out there for them. We also constantly strengthen the professional competencies of start owners at the end of 2022. More than six.

Speaker 3: 700 and 900 store owners completed the study in our Beikou Huachou Academy. Moreover, we built out the store and agent-reccing infrastructure with competencies ranking standards, which improve the management and operating capabilities of the platform and store owners.

and assist in building an aging talent pipeline.

We also, at the best, the governments of the Indian Institute and the new home business contacts.

This relatively cracking down on incidences of wrong behavior, we set up a comprehensive monetary mechanism to encourage customers, guest partners, and platform employees to support the supervised and the report, violations such as off-clairform transactions.

We also fully implemented and jointly promised with new home developers that there will be no customer information leakage, customer poaching and so on, and promoting the customer contact information to be provided throughout the showing process. All this.

work to enhance security in agents' operations.

While the store and agent count on our platform declined in 2022, with the number of actual stores and actual agents at around 37,400 and 350,000 respectively, the structure and efficiency of store and agents on our platform continue to improve.

and only 3% for lead jar stores.

Together as a group, we have gone through a difficult winter and this experience has given us a lot of strength. Our team will be more determined than ever and become the backbone of the industry. This engineering is also the most valuable asset of BICU.

One who possesses a piece of land, she'll have his piece of mind. Turning to our one body, our existing and new home transaction services. In 2022, we transitioned.

to a stage of quality growth from when of scale expansion. We quickly adjust our operation to improve efficiency and cost defenses, scaling down the P&L units for operation and management. With digital tools, we can check goods management classic custom workload model, partnering with only our users We are continuing to recover data sources

order and personnel basis as well as profit for each store, which encourages business team to focus on profitability indicators as well as cultivate cost effective mindset among managers at all levels.

driven by these initiatives. With the need to continue enhance our platforms of rational efficiency and our optimized cost and independence. Moving to existing home transactions sources, according to data from the data research institute, four year in TV of the same home sales in China will earn B4.9.8 trillion in 2022, dropping by about

31% year-over-year and declined by about 3% year-over-year in the first quarter. Whereas existing home transaction GTC on big-source platform failed by only 3% year-over-year.

23% year-over-year in 2022 and raw. We lost by 1.5% year-over-year in the first quarter. We outperformed the industry.

I missed challenges.

thanks to our empowerment and retention of high quality store owners and agents. In the hands of the HD network events, continuously getting platform operations and increased user value delivered to end customer and business partners. For example, we rebuild our platform's list of location mechanics.

for existing homes in 2022. The new mechanism also advocates leads, based on stockpile performance scores, raising the percentage of agent mentioned with familiar home lifting by 10%. It's reduced number on productive, on productive actions agents to acquire leads.

Allow them to be more focused and as such agent provided customer with more professional services Next moving to new home transaction sensors on a market firms according to data from National Bureau of Studies GTV on new is residential home sales in China I'm wanted

to RMB 11.7 trading in 2022.

down 20-80% and 27% year over year for the full year and the first quarter respectively. GTV of CRIC's top 100 real estate companies fell by 42% and 30% year over year in 2022 and the first quarter respectively.

in comparison, GTB or new home sales on our platform declined by 42% year over year in 2022 and by 26% in the first quarter. While our full year's GTB performance was in line with the market, we realized our got back of our new home and depth.

provision for the year and our DSO hit the lowest while our profitability reached a record high since our listing.

This represents the excellent results of our core strategy, which is not a compromise on consumer's interest in exchange for expansion. At the same time, we proactively strengthen our risk controls, security, and profitability, specifically our core strategy.

We consistently integrated our developer risk evaluation system to manage business risk in a preemptive way. In the fourth quarter, commission and advance model accounted for 44% of our total commission doubling from the beginning of the year. It ensures the security of our agents' receivable collection.

Moreover, the average number of homes sold by projects under the Commission and advanced model was 35% higher than general new home projects reflecting the developers sales rule were also accelerated. The proportion of state-owned developers continued to rise.

with their projects accounted for 45% of our new home revenues in the first quarter.

Next, moving to our tool win businesses. Over the past years, we validated the authenticity of our strengths and capabilities in the tool wins industry and further demonstrated that our tool wins businesses are not only natural fits.

for our whole business and also feedback to it. 2022 was also a challenging year for the home renovation and the furniture industry. According to data from China Building Declaration Association, the total revenue of leading home renovation and furniture companies is $2.5 billion.

In 2022, decreased by about 9% year-over-year. Our home renovation and the flourishing business generated the contract sales or RMB 6.9 billion in 2022, raising by 31% year-over-year on our pro-former basis.

among our contracted sales.

33% were attributable to call business customer referrals.

On top of this, in April 2022, we launched our new retail sales of home furniture and furniture strategy, which leverages our full-service innovation offerings. Our first new retail home furniture contribution to our total contract sales grew from 12% in the first quarter.

to 26% in the fourth quarter of 2022, further retaining the platform's business beyond low-frequency transactions. With respect to our rental services in 2022, the number of rental units rendered by our home rental services exceeded.

120,000 with over 17,000 units under decentralized leading management or carefree events. More than 90% of this would contribute by core business customer referrals. Clearly, the mobilization and the empowerment of our core business.

has enabled our two wins business to substantially outperform the market. Meanwhile, the broad market space of the two wins business, as well as a recognition from customers and society, greatly boosted agent professionals value. And more importantly, are being Monte

of mortality into our organization, setting the stage of boundless possibilities for us to unleash our potential.

leveraging our digitalized transformation with your decision having industries with no transaction frequencies, complex processes and a focus on offline operations. We have been working to reshape the video.

the home renovation and the furniture industry. Through digitalization and online operations, we explore to standardize the construction practice while restructuring the home renovation, construction, and a customized furniture delivery process. We establish a quality-based service, so it's provider management.

and incentive mechanism, as well as our order this pay-chain system as part of our scientific management capabilities. Additionally, our home, SAS2, will also take part in this initiative to lead and implement industry digital transformation. In December 2022, 80% of our order

In case it is automatically detached, our renovation delivery cycles are shortened by five days from previous year and our A-value service providers retention rate reached 97%. These capabilities will help us to grow with quality.

In 2022, we worked even harder to fulfill our society responsibilities and be an enterprise of the era as the only private enterprise select among the first group of affordable rental housing operations and as enterprises in Chengdu.

We have provided more than 1,700 rental homeowners and talent with superior leasing operation services, including leasing brokerage services, as of the end of 2022.

leaving behind a year of challenges and also rewards. We are ready to embark on a new journey in 2023 facing the recent notable market calling.

We will maintain a consistent strategy for our core business based on our market neutral view. That is, on top of cost reductions, efficient enhancements, and risk controls, we will continue to deepen our operations and improve our ecosystem.

to capture high quality growth opportunities. In 2023, we will work to enhance our long-term capabilities which require positions and continuous investment in areas such as business contact governance services and product delivery or home renovation, and incremental efficiency enhancement on our existing core of agents.

Through these efforts, we will seek and fill the gap between our capability and the needs of consumers and service providers, fulfilling our society's responsibilities to be a great company in the hearts of society and the people. Thank you. Next, I would like to turn the call over to the CFO Paul.

to review our first quarter and full year financials.

Thank you, Stanley, and thank you everyone for joining us. Before discussing more detail about our first quarter and the full year 2022 financial results, I'd like to provide a brief update on the housing market in 2022. In 2022, China housing market encountered on presentative challenges.

affected by the frequent disruption from pandemic. Microeconomics opened.

and the customers' uncertainty around the future expectations heightened. This factor then inspires home purchase willingness and their ability to pay, while also impeding transaction process.

on certainty around the future expectations heightened. This factor strengthens buyers' home purchase willingness and their ability to pay, while also impeding transaction process. Additionally, it's a new home market.

Consumers' confidence in the housing project delivery hit a trough, giving the spillover risk among the real estate developers. All of Bob greatly diluted the policy effects of the favorable policies, resulting in a profound and sustained market correction.

facing the predicament.

We took decisive actions and seek answers from the frontline operations.

sharpening our focus on the essence of business.

risk control and efficiency enhancement.

We managed to achieve a strategic transformation in 2022 through high quality growth from scale spotion.

Particularly, we reported a smaller contraction in net revenue compared with market adjustment.

Realized, significant year-over-year growth margin increase and trend-bucket non-gap net income growth.

effectively mitigating the impact of the micro-conditions, especially in profitability and cash flow.

further strengthening our leading position in the industry.

Now, let's tune to the financial details for Q4.

Our next brand news will RMB 16.7 billion in Q4, exceeding both the hands of our guidance and the screwed consensus.

Mainly because, first, people's day-to-day lives, as well as existing home transactions normalised after the pandemic peaked in some cold-trending cities at the end of December .

First, people's day-to-day lives as well as existing home transactions normalize after the pandemic peaked in some cold-tending cities at the end of December .

The existing home market in Chengdu and some cities in Yangtze River, D.C. performed well in Q4, leading to a year-on-year increase for Nang Lianjiang existing home revenues from the lower base in 2021.

Third, new home sales settlements performed while in Beijing and Shanghai in Q4, under our sales conversion initiatives. In particular, all-night brand news from these in-home transaction services.

decreased by 11.8% year over year to RMB 5.3 billion in Q4.

Our GTV of the single transaction actually increased by 1.5% yield beer in Q4.

With GTV, back-night agent increased by 24.3% year-over-year in Q4. Nevertheless, they were recorded on night basis in revenue.

While GTV from Myanmar decreased as top-tier cities took a heavier blow of COVID in Q4 and doubled the quality on a growth basis in revenue. Our net revenues from the new home contracting services decreased by 26.8% year-over-year to RMD 8.3 billion Q4, primarily due to the decrease of new home GTV of 26.1%.

to RMB 263.5 billion in the period. Next brand news from the home renovation and furniture or RMB 2.1 billion in Q4, compared to RMB 58 million in the same period of 2.1 billion.

primarily because we completed the acquisition of Chengdu, as well as organic growth of this line of business. Our net value from emerging and other services increased by 152% year-over-year to RMB 1.1 billion Q4. primarily attributable to the increase of net value.

from our rental property management services and financial services. Gross profit increased by 40.4% to RMB 4.1 billion Q4.

Gross margin increased to 24.4% in Q4 from 16.4% in Q4 2021. The increase primarily due to a shift of revenue mix towards its in-home transaction services and home renovation and furniture, with a relatively higher contribution margin than new home transaction services.

b. A higher contribution margin for both existing and new home transaction services as a result of effective cost control.

and c, a relatively lower percentage of costs related to store and other costs of net revenue in Q4.

All breaking expenses decreased by 9.6% year-over-year to RMB 3.7 billion Q4.

General and administrative expenses decreased by 18.6% to RMB 1,792 million, mainly due to the decrease of the provision for credit loss and the personnel cost and overhead. Sales and marketing expenses increased by 1.5% and 1.5% by 1.5%. This concludes the report.

or RMB 1,333 million in Q4, compared to RMB 809 million in the same period of 2021. This increase was mainly due to the consolidation with Chengdu. Research and development expenses increased by 31.1% to RMB 500 at the night meeting.

387 million in Q4 compared to loss from operations of RMB 1,084 million in Q4 2021.

The increase in gross margin and the decrease in operating expenses have brought about the increase in operating margin to 2.3% in Q4 from 9Q6.7% in Q4 2021.

Our non-GAI income from operations was RMB 339 million, with non-GAI operating margin reached 8.0% in Q4, compared to negative 2.2% in the same period of 2021.

Adjust EBITDA was RMB 2064 million in Q4 compared to RMB 484 million in Q4 2021. That income was RMB 372 million in Q4 compared to that loss of RMB 933 million in Q4 2021.

Non-gap net income was RMB 1547 million Q4 compared to RMB 42 million in the same period of 2021.

Turning to our financial details in fiscal year 2022.

Our net revenue decreased by 24.9% year-over-year to RMB 60.7 billion while the GTV declined by 32.3% to RMB 2609.6 billion due to the soft market sentiment and the COVID-19 disruptions.

Our goals for each departed a narrow-diffed crease of 12.9% year-old year, 2 Army 13.8 billion.

Growth margin increased by 3.1% to 22.7% in 2022.

Our loss from operations was RMB 833 million in 2022 compared to loss from operations of RMB 1.4 billion in 2021.

Our waiting margin was 91.4% in 2022 compared to 91.7% in 2021, primarily due to a relatively higher gross profit margin, which was partially offsite by the increased spending in home renovation and furniture, and emerging and other services.

in 2022 compared to 2021. non-GAAP income from operations was RMB 2.3 billion in 2022 compared to RMB 1.4 billion in 2021.

Non-gap operating margin was 3.8% compared to 1.7% in 2021. Oignac loss was RMB 1,397 million in 2022 compared to RMB 525 million in 2021.

non-GAAP net income was RMB 2843 million in 2022, compared to RMB 2294 million in 2021. Now, I'd like to highlight the following financial highlights for the full year. Firstly, the RMB 2104 million was RMB 1.5 million in 2022, and the RMB 2104 million was RMB 1.5 million in 2022.

China's real estate market experienced a severe adjustment in 2022. According to Baker Research Institute, the existing housing market fell 31% in a year.

while data from CRRC showed new home sales from the country's top 100 developers tumbled 42%.

However, due to our diversified business structure and the better retention of high-quality service capacity, our annual PTV shows an amount of 32%.

Thanks to the stronger market vision of our new home and this income business.

as well as the increase in the proportion of the home renovation and furnishing services with a higher manifestation rate. Our revenue declined by only 25% year-on-year, a much smaller contraction compared with market adjustments.

Our non-gap net profit saw a trans-barking growth of 24% for the full year of 2022 on the series of the cost optimization measures.

The value of the platform has supported us in achieving impressive results in perfect quality management.

the value of the platform has supported us in achieving impressive results in profit quality management.

Our one-party business, which is the home construction services, delivered strong performance in profitability and financial health.

See you over here.

In the face of the market downturn,

We also made a force for managers to scale down the P&L unit for operation management, encouraging the facility team to focus on the probability indicators through the performance evaluations. 40 and Jia were made a considerable effort in 2022 to deepen this operation and achieve the notable results.

Proportional loss-making stores declined by 7% in 2022 from 2021. Under Lianjia, two connected stores, agent productivity ratio, in cities excluding Beijing and Shanghai, increased to 1.3 in 2022 versus 1.2 in 2021. Lianjia's improvement in agent compensation and efficiency has been increased by 7% in 2021.

also helped reduce our cost. In addition, in 2022, we continue to respond to repeated collaborations with the state-owned developers.

With purchase from those partnerships accounting for 45% of our sales in Q4, rising from 28% in Q1.

The proportion was 31% for the full year of 2022. On top of this trend, we still managed to have a new home acquisition rate increase moderately in 2022.

Although the possibility of our in-home transaction services far too late is a quarter over quarter due to the pandemic impact, on a full year basis.

The contribution margin of its in-home business reached 39.8%, up 2.8% from 2021, driven by stronger operating leverage due to the fixed cost optimization and higher revenue contribution from platform services.

As our run-news from this in-home service continues to respond, we expect this business will have input further in profitability.

In the full year of 2022, the contribution margin of new home transaction services reached 23.6 percent.

up 4.4% from 2021, mainly driven by the increased percentage of high-prohibility projects and significant fixed cost reductions, validating our strategy of strictly balancing risk and the profits in a high volatile market. In particular, mixed risk and any risk analysitions

New home contribution margins climbed to 26.2% in Q4, hitting another record high since our listing, supported by incremental improvements in the new home market in some high-tier cities. With the increase in its in-home and new home contribution margins, our goals marten for the full year of 2022.

responded notably to 22.7%, up 3.1% point year-over-year. Thirdly, in terms of operating expenses, while maintaining our investment in new businesses including home renovation and furniture, our total non-cap expenses in 2022.

Decry by 20% year-over-year to RMB 11.8 billion.

The productivity of the platform operation teams in terms of their support to frontline agents increased by 20% year-over-year by end of 2022. For new home business, we continue to promote the Commission DevOps model to ensure more secure mission collected by platform agents.

And to speed up, the project sales through. Commissioning events accounted for 44% of the total commissioning in Q4, up from 20% in Q1.

In Q4, Commissioning the V

Under such efforts, in 2022, we had a better provision written back of RMB 206 million for the new home business.

and RMB21 million for the whole group, compared with the beta provision of RMB1.3 billion in 2021. This reflects our principle of adopting most prudent accounting treatments, while emphasizing the treatments under risk control management with a sharp focus.

on receiver collection and improving the sense of security of agents. Fourthly, our home renovation and furnishing business has gained considerable traction. Benefiting from powerful synergies between BECO and Chengdu, our performance revenue for 2022 amounted to RMB $6.2 billion. RMB $2.2 billion

2.1 billion into 4, up 13% quarter over quarter. Specifically, full-year contract sales in Hangzhou and Beijing exceeded RMB1 billion each, with Hangzhou achieving city-level profitability and Beijing breaking even in the second half of 2022. The leading growth in these top cities.

demonstrate our ability to achieve the fast breakthroughs in scale during the dry cell stage, while making notable improvements in probability.

Aided by our first supply chain build-out, quality delivery and digitalization capabilities we are confident that we will accomplish the high quality function in more cities.

Fifthly, our cash position and cash flow remain robust and sufficient, and we have found capital management. At the end of 2022, they combined the balance of cash like items.

Total RMB 78.3 billion, all US dollar 11.4 billion, up by RMB 1.1 billion from end of September and RMB 7.3 billion from end of 2021. Among which, the combined balance over cash.

cash equivalents, restricted cash and short-term investments with RMB $61.1 billion. The balance of our long-term cash-life items mainly included in the long-term investments amounted to RMB $70.2 billion.

Our net operating cash flow was RMB 2.6 billion in Q4, remaining positive for the fifth quarter in a row. Moreover, we have a zero deposit in Silicon Valley Bank and Credit Suisse. We have mentioned a steadfast commitment to risk control and residual management. Cash collection from New Home Business has exceeded the New Home running...

of 2021.

Turning to the guidance of the first quarter of 2023, we expect total net revenue to be between 18.0 billion to 18.5 billion Q1.

representing an increase of approximately 43.4% to 47.4% from the same period of 2022. This forecast consists of the potential impact of the recent real estate related policies. The macro economies covered status.

as well as release of the pent-up demand in 2022. It constitutes current and plain review on our business situation and market conditions, which are subject to change. Entering Q4 of last year, policy relief initiatives were rolled out on a large scale.

is undid, sequential decline, transactions start to rebound. We think this should be viewed rationally and objectively.

The recent uptick can be attributed to two factors. One is the higher sales volume partly generated by the released pent up demand once the pandemic situation is used, which further illustrates that the housing demand can only be default, not eliminated. The other reason is that the market expectation has gradually improved against the backdrop of macroeconomic recovery and the success in the market.

confidence.

Supporting the how to upgrade is on the top of initiative.

the housing upgrade is on the top of initiatives for responding to domestic demand.

As an enterprise, we will remain equally practical and rational, and always uphold market neutral view. That is, steady long-term market development is aligned with the fundamental interests of the consumers, the government and the industry.

It has been and will continue be our belief that the industry's enduring value is built upon stable transaction volume and prices rather than fluctuation.

as market stability leads to sustainable transactions which accentuate the value of agents. And the agents should be the counter force to the market's ups and downs.

This is our social responsibility as well as professional dignity.

In 2023, our one-body, two-wing strategy will draw more diversified developments and a continuous scale dysfunction, which pose a higher requirement for our operational stability, resources allocation and profitability. As such, we will continue to work on the development of the new technology. Thank you very much.

Our finance strategy will remain focused on the essence of business operations, on the basis of optimized cost-expensive structure in 2022.

This year, we will raise profits from efficiency, the profits' growth, and continue to improve the service quality. At the same time, we will continue to strictly control the risks.

balance the relationship between the efficiency, receivable collection and the scale growth, and promote cooperation with upstream and downstream under the condition of safe accounts receivable. On to the new tomorrow's review.

We are fully confident in how to market stable developments in the long run. This does not provide a stable environment for our long-term development, but also offers a great opportunity for us to further elevate the quality of our operations. Going forward.

We will continue to forge ahead with enduring strength in our hearts, and face hard-won with the tenacity and optimism, powered by our relentless pursuit of creating indispensable value for the vast living service sector and our society. That concludes my prepared remarks.

We would like now to open the call to your questions. Operator, please go ahead.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2.

If you are on a speakerphone, please pick up the handset to ask your questions. For the benefit of all participants on today's call, please limit yourself to one question. And if you have additional questions, you can re-enter the queue.

If you are going to ask the question in Chinese, please follow with the English translation. Today's first question comes from Timothy Zhao with Goldman Sachs. Please go ahead. Yes, thank you, Madrian, for taking my question and congratulations on the strong results.

My question is on the industry outlook. Could Medrin share your updated outlook for the existing home and new home market for 2023? And especially related to the strong growth of the existing home volume in China over the past two months. Could you share some color on how much about the rebound is from the pandemic demand?

and how sustainable do you think is the current running rate in the existing home market? Thank you. Okay, thank you, Kim-Sie. Regarding the recent market performance and the uncertainty caused by COVID-19, the Chinese restaurant mortality has shifted back to the...

pursuit of the world's security and growth from precautionary saving and risk aversion. In terms of the real estate policies, there were over 1000 stimulus policies released across countries in 2022.

compared to roughly 450 tightening policies in the year of 2021.

As a result, support for market recovery is accumulating. We saw increased power support in December and January , when almost strong second-tier cities loosened their home purchase and mortgage restrictions. But multi-cities, for example, don't go under full trend.

implemented the full relaxation. To some extent, this policy change have a support of boating you out in the market.

According to recent real estate market data, consumer sentiment towards the housing market also has significantly improved on the demand side. For existing home sales, weekly transactions on our platform before the Chinese New Year market in January were close to those in July 2021.

And the monthly in-home GTV on our platform in February was close to the historical high in March 2021. Among that, the GTV of Care One cities in February was just 8.6% lower than the peak of March 2021.

while the GTV for the stronger tier 2 cities and weaker tier 2 cities plus tier 3 and 4 cities grow 11.3% and 5.5% from the 2021 peak respectively. Particularly, stronger tier 2 cities show the strong momentum with Chengdu, Suzhou, Nanjing, Chengzhou and Tianjin.

all exceeded the high point of March 2021 by 20%. This trend was partly due to the one-time release of the pandemic demand accumulated during the pandemic. For new home sales, it has also demonstrated a notable recovery trend. Our new home subscription grows.

in January , growing 20% year-over-year. In February , our new home subscription increased by 148% year-over-year from the lower base in 2022, reaching the level of June 2021, having a year-on-year new home sales growth since February of this year.

Regarding the housing prices, despite the very strong momentum in transaction volume, unfortunately we haven't seen significant fluctuations in housing prices.

In January , prices for both existing and new homes ended a long stick of the monthly decline across the country. And in February , existing home prices grew 1.6% quarter over quarter, but they still posted a year-over-year decline of 5%.

As the increasing number of customers list their homes for upgrading demand amid relaxed government policies this year.

The number of listed existing homes nationwide grows 10% in our view. The ample existing home listing keeps the market supply and demand relatively balanced. We still hold the neutral market view. The recent rebound in transaction volume demonstrates the housing market's high resilience and electricity on the demand side.

This short-chain rebound was driven by several factors, including normalized transaction demand.

One-time carving of the accumulated pent-up demand during the pandemic flares up, and even earlier release of future purchase needs from the customers who are concerned with potential housing price rise. This factor leads to the sales volume being built up within a very short time. Speaking to a market neutral we believe the market will gradually normalize.

and will enter into a more stable growth stage over the long run. Since March, we have also noticed that the weekly transaction volume of existing and new home subscriptions on platform began to steadily normalize.

Regarding the future market, in terms of the market sustainability, based on our analysis of top 30 cities, we expect the market to be relatively stable in the future for fourth tier cities. The average flow space of the house transact and the home buyers demographic since this year were very similar to the prior three years.

This transaction has been driven mainly by the home upgrade and the rigid demand for the property within the floor area of 90 square meters. In addition, the distribution of purchase by local and non-local residents has also been stable. For more information, please visit www.fema.gov.

Home upgrade demand was significantly stimulated. This drove a 3% increase in share of transact house over 90 square meters.

and a 5% increase in percentage of customer age over 35, and a 4% increase in percentage of non-local home buyers.

Going forward, such market might experience volatilities in the short term due to the structural change. Nevertheless, with the non-local taking root in the city's most supportive policies and stabilizing housing prices, home upgrade demand from the local residents. Microsoft Building

and MITRE brings solid demand support and helps the market stabilize in the long run. For existing home market in 2023, based on our new home market review, we believe that the in-home market will grow by around 50% year-over-year in 2023.

solid demand support and help the market stabilize in the long run. For existing home market in 2023, based on our neutral market view, we prudently believe that the existing home market will grow by around 15% year-over-year in 2023, where the crisis remains relatively stable.

We believe there is plenty of upsize for the market given the transaction unit of eSting and new home in China accounted only for 3.5% of total number of eSting homes in 2022.

And the data channel rate for its new homes was only 0.7%, versus the normal rate, at least 1%, totally.

We need to consider the potentially unfavorable factors, such as the impact from the global economy slowdown, growing geopolitical tensions, and muted export growth on the macroeconomic and housing demand. For Nihon Mati in 2023.

We expect the total GTV of the market in 2023 to remain at the same level as in 2022. Housing project delivery has become less of a concern for consumers with the deployment of the financing policies for developers and the improvement of their funding status as well as gradually resumption of the project construction.

In the meantime, with price stabilizing, home upgrade demand will return back to the new home market. The new home market recovery will further ease real estate developers' cash flow constraints.

Recently, land auction went well in a city like Hangzhou and Suzhou, where several private developers appeared on the land auction list. Private developers renewed enthusiasm for the land auction in more areas is also a critical indicator. Over past few years, the company has been working on a new technology for the land auction

China's housing market has seen great highs and lows. Looking back, shortened uncertainties are inevitable, and one mustn't be overly optimistic or pessimistic about the sub-trains.

Yet, as we navigate through the highs of market volatility and cycles, our unwavering belief in the long-term outlook for the China housing market remains steadfast.

We firmly believe that against the backdrop of the housing is fully meaning not for speculation, the existing home market will increasingly take a standard stage, while new home operations demand a more refined approach, and the quality service will come to the forefront. The time forces change is approaching. Thank you.

Thank you. And our next question today comes from Harry Chen with Citigroup. Please go ahead. And this is Harry Chen from Citigroup. Thanks management for the question opportunity and also congratulations.

Can management share with us whether the company will dynamically adjust its strategies in response to changing market conditions, such as channel expansion, to gain more market share? Where are your target markets this year, and will you expand through Nian Jia or non-Nian Jia stores? What is expansion strategy in markets where you have relatively low market share?

The management team has always been adhering to the core principle of taking care of customers and helping service providers to be good to customers.

Nevertheless, we must reach a certain scale threshold safety-wise to realize the network's effect and the scale effects of our core business, and to fully benefit from the intensification of our agents and store networks as the infrastructure around the living services. Therefore, we need to pay attention to scale.

and the need to achieve the sufficient skills through connecting and empowering our connected store agents.

In past two years, the market correction was long and deep, resulting in significant industry supplies by the reductions in various regions.

Still, we have better capacity retention, the number of active agents in 25 key cities even increase year-over-year at the end of 2022. Moreover, we have a focus on retaining high quality agents, which are also to benefit more from the market rebound during the recovery cycle.

specific initiatives in different cities. For our top-performing cities, we will continue to explore the opportunity in specific market segments, such as the middle-to-high-end market.

initiative in different cities. For our top-performing cities, we will continue to explore the opportunity in specific market segments such as middle to high-end market, suburban market, etc.

In the cities with a competitive environment, we saw businesses respond at a relatively fast pace starting in the second half of last year. As our battery capacity, retention, our business contact governance, our focused operations and our community asked for the training generated remarkable results.

We have even bigger opportunities in the cities where there is still a lot of room for improvement in our school and the market is relatively fragmented.

For example, in Shanghai, trading on the market, our market penetration is still significantly lower in Beijing. To expand our business in the cities, we will actively implement a series of initiatives such as establishing more connections to the high quality service providers.

investing in our brand and service quality and strengthening operational efficiency. Regarding the new home-transcendent services, this year we will consistently emphasize the risk version as top priority as we did in the year of 2022 and 2021. We will not proactively loosen our risk controls over the next few months.

improves, their receivable payment to us will improve as well, which will lead to the upgrade they are reaching in Baker Credit Ranking System. To improve the credit ranking will allow us to expand our cooperation and the addressable market for our new home transaction service may also expand.

Meanwhile, new home sales market has seen significant increase in concentration in the recent market correction. Our better and safer receivable collection and healthy new home business conduct gets trust from a larger number of service providers and agents on the sector.

They connect us with the ACN as the Fang Jiangfu channel, becoming the cornerstone of the continued dysfunction of our new home transaction services as the market recovers. Thank you, Henry. Thank you. And our next question today comes from Zhang Shao with Barclays. Please go ahead.

Thank you very much for taking my question and let me add to my congratulations on the very strong results and Guidance and you talked about improving efficiencies of your agents and of your stores I was just wondering could you talk about your target if you have any for the stores and agents for for this year?

and you have already improved their productivity quite a bit last year, how can you improve their productivity further from here while sort of not losing the very strong cultural and performance element of the equation? Thank you.

The second is to show, although we have no plans for significant dysfunction for our stores and agents, as we mentioned last quarter, our focus is on improving per-store and per-agent efficiency while enhancing the agent income, rather than pursuing a large-scale dysfunction. This approach will now change.

Only when the income of stores and agents increase steadily, can the industry retain high quality people and achieve healthy development. Furthermore, given the current trend of balanced supply and demand market, and the broader emphasis on housing is for the meaning of speculation, we do not anticipate.

a significant increase in industry capability following this market recovery. Our plans for the agents and stores this year include following. Regarding the scale, store-wise, we plan to focus on the large and high-quality stores, and the drive onboarding of Fangjianghu stores for new home sales to our platform at Connect stores.

Agent wise, we plan to recruit agents during the spring recruiting season in 2023.

After which, we expect to maintain a stable agent count. This includes increasing of the proportion of middle-level agents and increasing the number of agents in few cities which need a skills function. Regarding the quality and efficiency, let me talk about the store productivity first. In 2020-03, we expect to see a significant improvement in store productivity as a result of over-on-site testing.

huge room to improve in the long run.

Beijing could be a benchmark, where our agency productivity is 3 to 4 times higher than the industry average.

For Lianjia, in 2022, excluding Beijing and Shanghai, Lianjia's Agent productivity was 1.3 times that of Connect agents and our target this year is to further increase its ratio to 1.4 times. Cato union to pick upEF tool..

Although we will not set a specific target for agent productivity this year, we will not improve our range of flow.

operating metrics to improve the agent productivity. Such metrics include cross-stock, cross-brand cooperation ratio, accompanied home tools by home listing agents, price difference management between the listing and transaction prices, and the ACM low space ratio for one transaction. In terms of the character, we believe in the value of taking good care of customers.

We believe in the value of sharing successful experiences and infrastructure to the industry to empower and enhance industry efficiency. We believe in the value of protecting the interests of the service providers, paying permission timely. We believe in the value of improving the industry code of conduct.

and help developers and all participants to work with the center of security and fairness. We believe in the value of our hundreds of thousands of accident service providers who have been serving the community for many years and established this unique mount in home services.

help developers and all participants to work with the sense of security and fairness. We believe in the value of our hundreds of thousands of accident service providers who have been serving the Committee for many years and established this unique mount in home services. And we believe in the value of time.

This is what we have been doing, not perfectly, but we are on our way. Thank you, Mr. Strahl.

This is what we have been doing, not perfectly, but we are on our way. Thank you, Mr. Thank you, Taw Dung, for the insight.

Thank you. Our next question today comes from John Lamb at UBS. Please go ahead. Thank you. Also, congratulations for the good results. My question is regarding on the cost optimization. The demand foragan is building. The demand foragan is moving and a very hard-hit machine is built in place. That would be shut off if not for the Hay."

So we have seen that in the third quarter last year the cost optimization was very effective. Is there any room for further improvement in the cost optimization? And also, can the expense ratio from the third quarter last year, 2022, could be used to infer the subsequent profitability? Thank you.

Thank you, John . For cost and expense for our one-party business, we quickly implement a series of cost reduction and efficiency enhancement initiatives in 2022. Consequently, the cost and expenses for our one-party business were optimized to reach the level in the year opened in 2019.

which we believe is relatively sustainable. In terms of the cost control, in the fourth quarter of 2022, the fixed cost of our one-body business fell by 36% year-over-year, and its variable cost as a percentage of revenue dropped by 5.6 percentage point year-over-year. In terms of expenses, the fixed cost of our one-body business fell by 36.6 percent year-over-year.

In 2023, our platform's agent productivity will see even greater improvement and we will implement incentives to develop and retain our employees. We also hope to offset the cost of such initiative through the continuous cost control of the non-personnel experiences. In addition, we hope to improve the agent productivity by technology investment.

to further industry optimization as well as potential platform profitability improvements. All in all, our financial strategy for our one-body business will remain focused on efficiency. With optimized costs and expense level in 2022, we will support the quality growth cognitively. Meanwhile, we will continue to strictly control the risk.

and strike a balance between the efficiency, receivable collection speed, and the skills function. With the ensured security of the accounts receivable, we will enhance our cooperation with partners in upstream and downstream. For tooling business, regarding our home renovation and furniture business.

In addition to making sure its total loss ratio will not further expand, we will capture opportunities to reinforce our fundamental capabilities.

including the products, supply chain, and service delivery ability, and invest in high quality service providers. On the whole, we will reflect some of our redundant investments we made during the last round of market growth. And while continuing to promote our business growth.

Strictly, it controls cost and expense to balance the scores and the profitability. Thank you, John . Thank you. Sorry, can I ask one more question? So, you also mentioned about the tool wings. So, what is your plan regarding on scale expansion and also efficiency improvement for tool wings?

from one to 10. Please share with us with key focuses and goals in 2020. Thank you. Okay, I will answer your question. 2022 was the year of our two wins for the ball and the two good.

We have taken solid steps for both our home renovation and furniture business and our rental business. It will still be a bad day in more cities. On the home renovation and furniture side, our total contract sales sparked the trend and increased by more than 30% year over year. With total revenue, it is sitting at 6 billion.

In both Beijing and Hangzhou, we reached the first milestone of over 1 billion in annual contract sales. And for rental services, we entered 30 cities in 2022 and the total number of rental units on demand is 120,000.

In 2023, we will establish benchmark cities, achieve breakthroughs, and make commitment investment to build long-term capabilities. In 2023, our tool-wisdom will build on the current momentum in the cities we enter. We will not be pursuing comprehensive and rapid scale of your pension.

First, instead of focusing on short-term and rapid scale expansion, we will continue to decisively invest in our long-term capabilities, including the ability to send our services and provide better online appearances, as well as our online operations of the supply chain.

For our rental units improve consumer satisfaction and enhance the efficiency of our service providers and our business Our 2023 goal is to penetrate several key cities deeply and establish them as a benchmark.

In empowering our two wins to truly complete the Blackstone. In 2024, we will replicate and promote this benchmark to more cities.

enabling our two wins to truly complete the next room. In 2024, we will replicate and promote this benchmark to more cities. Yeah, that's my answer, thank you.

Thank you. Thank you. We are now approaching the end of the conference call. I will now turn the call over to your speaker and host today, Ms. Cydney Lee for closing remarks. Ms. Cydney Lee?

Thank you once again for joining us today. If you have any further questions, please feel free to contact the investor relations team through the contact information provided on our website. Please complete the call. We look forward to speaking with you again next quarter. Thank you, Annie. Goodbye.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

I have.

The.

Hello ladies and gentlemen. Thank you for standing by for KE Holdings Inc.'s fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen only mode. Today's conference call is being recorded. I would now like to turn the call over to your host.

Ms. Cetin Li, IR Director of the company. Please go ahead, Cetin. Thank you, operator. Good evening and good morning, everyone. Welcome to KE Holdings or BECA's fourth quarter and fiscal year 2022 earnings conference call. The company's financial and operating results were published in press release earlier today.

and are posted on the company's IR website, investors.ke.com. On today's call, we have Mr. Stanley Pong, our Co-Founder, Chairman, and Chief Executive Officer, and Mr. Tao Hsu, our Executive Director and Chief Financial Officer. Mr. Pong will provide an overview of our strategies and business developments, and Mr. Hsu will provide additional details on the company's financial results.

referred to the company's press release which contains a reconciliation of the unedited non-GAAP measures to comparable GAAP measures. Lastly, unlike otherwise stated, all figures mentioned during this conference call are in R&D.

With that, I will now turn the call over to our Chairman and CEO , Mr. Stanley Peng. Please go ahead, Stanley.

For every winter will pass and the spring will come as promised. In January and February , people around the country quickly emerged from the pandemic. At the same time, the real estate market began to recover. By the end of February , existing home sales on our platform had rebounded sharply, reaching a level close to the same period in 2021.

the most active year for existing home transactions. Sales of new homes have also increased significantly year over year, returning yearly to the post lockdown level in 2020. As we transcendent it, it's around our market correction, our firmly held views have been proven correct, and our underlying capabilities have been validated. First, our market neutral view and the persistencies in that view have been proven.

As part of our digital service platform for the housing industry, professional agents must advertise the counterbalance of the current mentality in up and down market cycles. This means they must not blindly follow the crowd or engage in help. LIGER, the market evaluates the market objectively.

multidimensionally and rationally. They must be stabilizers for the market and never magnifying anxiety. The market has been in a downward trend since the middle of 2021. As through it all, we always believe.

that consumers desire for better living will not change and the market will return to a normalized level. We also see opportunities in the market recovery. Therefore, with a stable state of mind, we quickly made a serious internal adjustment to cope with short-term fluctuations and prepare for market recovery. We launched a one-body, two-wind strategy.

transformed from scale intention to quality growth and implemented a series of measures to reduce costs and enhance efficiency. We protected the Commission collection and operation security of source providers on our platform, providing them with tools and capabilities in order to support them through the cycle.

In addition, hundreds of our measurement members went to the front line to hack the battles. Our market neutral view has allowed us to strengthen our muscles and watch for our recovery when the market was in a downturn. Facing the current market in recovery, we will continue practicing our market neutral view.

acting as a counterbalance against market-changing behaviors. Since significant market volatility harms the industry in the long run, we hope to facilitate a healthy and orderly market recovery. Second, the capability of BIC as a platform has been further validated during the large market fluctuations. We established the BIC as a platform in 2018.

in order to open up the capabilities we have accumulated nearly 20 years to the industry. We have constantly refined our protocols, ecosystems, and digital infrastructure to further unlock the ACN network effects and the scale effort of our platform, providing support for customers, solid providers, and industry partners such as developers, helping them to better interact, cooperate, learn from one another, and achieve win-win results. This run of market volatility is the first major task.

We have experienced as a platform, we have delivered more stable profitability than before and proving our ability to expand our business, which demonstrates our strength as a digital service platform for the housing industry. We have also prepared the momentum needed for the industry long-term development, for high-quality industry success.

have been protected and stabilized. And the low quality and efficient supplies, not only on our platform, but also outside our platform, have accelerated their efforts, which is a good thing for the entire industry. We proved our more stable profitability.

In 2022, the national existing home market GTV fell by 31% year-over-year, and sales of the top 100 new home developers fell by 42% year-over-year. However, our annual non-gap net profit backed the trend and achieved a year-over-year increase of 24%. Our operating cash inflow grew by 135%.

of one body to win strategy. Our home renovation and furnishings contrast your sales which RMB 6.9 billion increase 31% year over year on a pro forma basis. Also backing the market trend is result benefited from our network infrastructure of stores and agents.

our digital transformation capabilities for low-frequency, complex, and heavy decision-making industries, and our full integration with Shengdu in Beijing to raise accounts accounted for more than 10% of our revenue in 2022.

Increasing from less than 3% in 2021, while our one body provided more than 90% of their customer needs, the ability of our platform to attend to a wide range of sources around the sector of living has been initially validated, showcasing the high replicability of our industrial capabilities and our ability to meet more and more complex needs of our customers.

in unit store productivity in the future. The trend of larger stores will become more pronounced given the wide coverage of both home listings and community customer leads and more diversified business operations leading to stronger risk resistance.

As such, store efficiency has become a key management variable. And high quality agents are crucial to our operations. Store owners' abilities in store operations, key management, as well as recruiting and energizing agents have become the appreciating factors in successful operations.

level agents is two times the industry media, which shows that the mid-level group of agents will become the most vital force in the industry in the future. We have always and will continue to be committed to helping agents improve efficiency, obtain a decent and a stable income.

realize long-term employment and pride themselves of their professionalism on our path. Therefore, we have been firmly moving forward with our large, strong strategy. In 2022, we supported and empowered the reorganization of over exacerbating thanksgiving during con Pitrealfff

3000 stores on our platform. We also constantly strengthen the professional competencies of store owners at the end of 2022. More than 6...

700 and 900 store owners completed the study in our Baker Huachao Academy. Moreover, we built out the store and agent-reccing infrastructure with competencies ranking standards, which improve the management and operating capabilities of the platform and store owners.

and assisted in building an aging talent pipeline. We also advanced the governance of existing and new home business contacts, with new to the cracking down on incidences of wrong behavior. We set up a comprehensive monitoring mechanism in cards plus numbers.

business partners and platform employees to supervise and report violations such as off-platform transactions. We also fully implemented and jointly promised with new home developers that there will be no customer information leakage, customer poaching and so on, and promoting the customer contact information to be provided or provided.

throughout the showing process. All this works to enhance security in agents' operations. While the store and agent count on our platform declined in 2022, with the number of actual stores and actual agents at around 37,400 and 350,000 respectively, the structure and efficiency of store and agents on our platform continue to improve.

through a difficult winter. And this experience has given us a lot of strengths. Our team will be more determined than ever and become the backbone of the industry. It's also the most available asset of Baker. One who possesses a piece of land shall have his piece of mind. Turning to our one body, our existing and new home transaction services.

In 2022, we transitioned to a stage of quality growth from when of scale expansion. We quickly adjust our operation to improve efficiency and cut expenses, scaling down the PML units for operation and amendment. With digital tools, we can check goods management per order under our personnel basis.

as well as profit for each store, which encourages business teams to focus on profitability indicators as well as cultivate cost-effective mindsets among managers at all levels. Driven by these initiatives, we significantly enhance our platform's operational efficiency and optimize our business.

costs and expenses. Moving to existing home transaction sources. According to data from the Baker Research Institute, four years in TV of existing home sales in China were on the 4.83% treaty in 2022, dropping by about 31% year over year and declined by about 3% year.

of a year in the fourth quarter, whereas existing home transaction GTV on big news platform failed by only 23% a year of a year in 2022, and it was lost by 1.5% a year of a year in the fourth quarter. We outperformed the industry amidst challenges. Thanks to our empowerment and the retention of high quality store owners and agents.

HD network effects, continuously getting platform operations increased user value, delivered to end customer and business partners. For example, we reviewed our platform's list allocation mechanism for existing homes in 2022. The new mechanism allocates leads based on store platform performance scores, raising the percentage of agent matching with familiar home listing by 10%. It's reduced the number of unproductive actions agents to acquire leads, allowing them to be more focused. And as such...

Agent provided customer with more professional services. Next, moving to new home transaction services. On a market firms, according to data from national bureau of statistics, GTV or new residential home sales in China amounted to RMB 11.7 trading in 2022.

down to 80% and 27% year over year for the full year and the first quarter respectively. GTV or CRIC's top 100 real estate companies fell by 42% and 30% year over year in 2022 in the first quarter respectively. In comparison, GTV or New Home Sales on our platform declined by...

42% year-over-year in 2022, and by 26% in the fourth quarter. While our four-year ETV performance was in line with the market, we realized our right back of our new home and debt provision for the year. And our DSO hit the lowest, while our profitability reached a record high since our listing. This represents the excellent results of our core strategy.

which is not a compromise in items and the consumer's interest in change for expansion. At the same time, we proactively strengthen our risk controls, security and profitability. Specifically, we consistently integrated our developer risk evaluation system to manage business risk in a preemptive way. In the fourth quarter, commission and advance model accounted for...

44% of our total commission are doubling from the beginning of the year. It ensures the security of agents' receivable collection. Moreover, the average number of homes sold by projects under the Commission and Advanced Model was 35% higher than general new home projects reflecting the developers sales rule will also accelerate it.

The proportion of state-owned developers continue to rise, with their projects accounting for 45% of our new home revenues in the fourth quarter. Next, moving to our tool-win businesses. Over the past years, we validated the authenticity of our strengths and capabilities in the tool-win industry and further demonstrated that our tool-win business is a tool-win business.

are not only natural fits for our whole business, but also feedback to it. 2022 was also a challenging year for the home renovation and the photo chain industry. According to data from China Building Declaration Association, the total revenue of leading home renovation and photo chain companies in 2022 decreased by about 9% year-over-year of home renovation and photo chain business generated contracted sales of RMB $6.9 billion in 2022.

Raising by 31% year-over-year on a pro forma basis among our contracted sales 30 33% for the attributable to call business customer reference on top of this in April 2022 we launched our new retail sales our home furniture and the furniture in

strategy, which leverages our full service innovation offerings, new retail home furniture's contribution to our total contract yourselves grew from 12% in the first quarter to 26% in the fourth quarter of 2022, further retaining the platform's business beyond low frequency transactions.

With respect to our rental services in 2022, the number of rental units rendered by our home rental services exceeded 120,000, with over 17,000 units under decentralized leasing management or carefree rent. More than 90% of this would contribute by co-business customer referrals. Clearly, the mobilization and the empowerment of our co-business has enabled our two ways business.

to substantially outperform the market. Meanwhile, the broad market space of the two wings business, as well as a recognition from customers and society, gradually boosted as in the professional's value. And more importantly, rest fresh, enduring mortality into our organization, setting the stage of boundless possibilities for us to unleash our potential.

Leveraging our digitalized transformation with your decision having industries with no transaction frequencies, complex processes, and a focus on offline operations. We have been working to reshape the home renovation and the publishing industry through digitalization and online operations. We struggle to paying low-oran mass construction costs so that the private sector can identify all assets to buy them. Remember, single-family services is possible without an indigenous agent! Use other and special capital to make use of these services

in construction practice while restructuring the home renovation, construction, and customized furniture delivery process. We establish a quality buyer service, service provider management, and incentive mechanism, as well as our other dispatching system as part of our scientific management capabilities. Additionally, our home, SAS2, will also take part in these initiatives to lead and implement...

we worked even harder to fulfill our society responsibilities and be an enterprise of the era. As the only private enterprise selected among the first group of affordable rental housing operations services enterprises in Chengdu, we have provided more than 100,000 people with disabilities in the world.

1,700 rental homeowners and talent with superior leasing operation services, including leasing workers and services as of the end of 2022.

leaving behind a year of challenges and also rewards. We are ready to embark on a new journey in 2023 facing the recent notable market calling.

We will maintain a consistent strategy for our core business based on our market neutral view. That is, on top of cost reductions, efficient enhancement and risk controls, we will continue to deepen our operations and improve our ecosystem to capture high quality growth opportunities. In 2023, we will work to enhance our long-term capabilities.

which require positions and continuous investment in areas such as business contact governance services and product delivery or home renovation, and incremental efficiency enhancement of our existing core of agents.

Thank you, Stanley, and thank you everyone for joining us. Before discussion more detail about our first quarter and the full year 2022 financial results, I'd like to provide a brief update on the housing market in 2022. In 2022, China housing market encountered unprecedented challenges affected by frequent disruption from pandemic.

Microeconomy softened, and the customers' uncertainty around future expectations heightened. This factor strengthens buyers' home purchase willingness and their ability to pay, while also impeding transaction process. Additionally, it's in your home market.

Consumers' confidence in the housing product delivery hit a trough, giving the spillover risk among the real estate developers. All of Bob's greatly diluted the positive effects of the fillable policies.

resulting in a profound and sustained market correction. Facing the predicament, we took decisive actions and seek answers from the frontline operations.

sharpening our focus on the essence of business, risk control, and efficiency enhancement. We managed to achieve a strategic transformation in 2022 through high quality growth from scale expansion. Particularly, we reported a smaller contraction in net revenue compared with market adjustment.

Realized significant year-over-year growth margin increase under trend-bucking, non-gap, net income growth, effectively mitigating the impact of the micro-conditions, especially in profitability and cash flow.

further strengthening our leading position in the industry. Now let's change to the financial details for Q4. Our next brand news will earn $16.7 billion in Q4, exceeding both the hands of our guidance and the strict consensus, mainly because, first, people's day-to-day lives, as well as existing home transactions, normalized after the pandemic peaked in some cold-training cities at the end of December .

Second, the existing home market in Chengdu and some cities in Yangtze River Delta performed well in Q4, leading to a year-on-year increase for Nang Lianjia existing home revenues from their lower base in 2021. Third, the existing home market in Chengdu and some cities in Nang Lianjia existing home revenues from their lower base in 2021.

New home sales settlements performed well in Beijing and Shanghai in Q4, out of sales conversion initiatives. In particular, all net revenues from these in-home transaction services decreased by 11.8% year-over-year to RMB 5.3 billion in Q4.

Our GTV of the in-home transactions actually increased by 1.5% yield in Q4, with GTV by connect agent increased by 24.3% yield in Q4. Nevertheless, they were recorded on the 9th basis in revenue.

While GTV from Lianjia decreased as top tier cities took a heavier blow of COVID in Q4 and doubled the quality on a growth basis in revenue. Our net revenues from the new home contracting services decreased by 26.8% year-over-year to RMB 8.3 billion Q4, primarily due to the decrease of new home GTV of 26.1% to RMB 263.5 billion in the peer rate.

Net revenue from home renovation and furniture or RMB 2.1 billion in Q4, compared to RMB 58 million in the same period of 2021, primarily because we completed the acquisition of Chengdu as well as organic growth of this line of business. Our net revenue from emerging and other services increased by 152% year-over-year to RMB 1.1 billion in Q4, primarily attributable to the increase of net revenues from our rental property management services and financial services.

Gross profit increased by 40.4% to RMB 4.1 billion in Q4. Gross margin increased to 24.4% in Q4 from 16.4% in Q4 2021. The increase primarily due to a shift of revenue mix towards its in-home transaction services and home renovation and furniture, with a relatively higher contribution margin than new home transaction services.

b. A higher contribution margin for both existing and new home transportation services as a result of effective cost control. c. A relatively lower percentage of costs related to store and other costs of net revenue in Q4. Our breaking expenses decreased by 9.6% year-over-year to RMB 3.7 billion in Q4. General and administrative expenses decreased by 18.6%.

to RMB 1,792 million, mainly due to the decrease of the provision for credit loss and the personnel cost and overhead. Sales and marketing expenses for RMB 1,333 million in Q4 compared to RMB 1,809 million in the same period of 2021. This increase was mainly due to the consolidation of Chengdu.

Research and development expenses decreased by 31.1% to RMB 509 million, mainly due to the decrease of personnel cost and share-based compensation as a result of decreased high costs. Income from operations was RMB 387 million in Q4 compared to loss from operations of RMB 1,184 million in Q4 2021. The increasing gross margin and the decreasing operating expenses

have brought about the increase in operating margin to 2.3% in Q4 from negative 6.7% in Q4 2021. Our non-gap income from operations was RMB $339 million with non-gap operating margins reached 8.0% in Q4 compared to negative 2.2% in the same period of 2021. Adjust the EBITDA for the RMB $2,264 million in Q4.

compared to RMB 484 million in Q4 2021. Net income was RMB 372 million in Q4 compared to net loss of RMB 933 million in Q4 2021. Non-gap net income was RMB 1,547 million in Q4 compared to RMB 42 million in the same period of 2021.

Turning to our financial details in fiscal year 2022, our net revenue decreased by 24.9% year-over-year to RMB 60.7 billion while the GTV declined by 32.3% to RMB 2609.6 billion due to the soft market sentiment and COVID-19 disruptions.

Our gross profit reported a narrower decrease of 12.9% year-over-year to RMB 13.8 billion. Gross margin increased by 3.1% to 22.7% in 2022.

Our loss from operations was RMB 833 million in 2022, compared to loss from operations of RMB 1.4 billion in 2021. Operating margin was 91.4% in 2022, compared to 91.7% in 2021, primarily due to a relatively higher gross profit margin which was partially offside by the increased spending in home renovation and furnishing, and emerging and other services in 2022, compared to 2021.

non-GAAP income from operations was RMB 2.3 billion in 2022 compared to RMB 1.4 billion in 2021. non-GAAP operating margin was 3.8% compared to 1.7% in 2021.

Of net loss was RMB 1,397 million in 2022 compared to RMB 525 million in 2021. Non-gap net income was RMB 2,843 million in 2022.

compared to RMB 2294 million in 2021. Now, I'd like to highlight the following financial highlights for the full year. Firstly, China's real estate market experienced a severe adjustment in 2022. According to Baker Research Institute, the market's real estate market experienced a severe adjustment in 2022.

The existing housing market fell 31% in the year, while data from CRRC showed new home sales from the country's top 100 developers tumbled 42%.

However, due to our diversified business structure and the better retention of high-quality service capacity, our annual PTV sold an annual downfall of 32%. Thanks to the stronger market vision of our new home and this in-home business.

Our non-gap net profit saw a trans-bucking growth of 24% for the full year of 2022 under a series of cost optimization measures. The value of the platform has supported us in achieving impressive results in profit quality management. Secondly, our one-body business, which is the home construction services, delivered strong performance in profitability and financial health.

and achieved remarkable results in cost and expense optimization. In terms of the cost control, the fixed cost of our one-body business fell by over one-third year-on-year in 2014, and the variable cost as a percentage of revenue dropped around 6 percentage points year-over-year. In the face of the market downturn, we also made a forceful measure to scale down the P&L unit for operation management.

encouraging the business team to focus on the profitability indicators through the performance evaluations. Paulie and Jia, who made a considerable effort in 2022 to deepen this operation and achieve the notable results. Propulsion of loss-making stores declined by 7% in 2022 from 2021.

Finally, in Jia, to connect the stores, agent productivity ratio in cities excluding Beijing and Shanghai increased to 1.3 in 2022 versus 1.2 in 2021. Then Jia's improvement in agent composition and efficiency also helped reduce our cost. In addition, in 2022, we continue to expand strategic collaborations with still-owned developers. create change as involved talent for the Bretton MemorialAAAAAA

With purchase from those partnerships accounting for 45% of our sales in Q4, rising from 28% in Q1. The proportion was 41% for the year 2022. On top of this trend, we still managed to have a new home acquisition rate increase moderately in 2022. Although the profitability of our in-home transaction services far too aided the quarter of the quarter due to the pandemic impact, on a full-year basis, the contribution margin of its in-home business reached 39.8%.

up 2.8 percentage points from 2021, driven by stronger operating leverage due to the fixed cost optimization and higher revenue contribution from platform services. As our revenues from this in-home service continue to expand, we expect this business will have input further in profitability.

In the full year of 2022, the contribution margin of new home transaction services reached 23.6%, up 4.4% from 2021, mainly driven by the increased percentage of high-probability projects and significant fixed cost reductions, validating our strategy of strictly balancing risk and profits in a high volatile market.

In particular, new home contribution margins climbed to 26.2% in Q4, hitting another record high since our listing, supported by incremental improvements in the new home market in some high-care cities. With the increase in its in-home and new home contribution margins, our growth margin for the full year of 2022 responded notably to 22.7%, up 3.1% year-over-year. Thirdly, in terms of operating expenses, while maintaining our investment in new businesses including home renovation.

Commission in Q4, up from 20% in Q1. In Q4, Commission in Advanced accounted over 36% of commissions from state-owned developers and 49% of that from private developers. Under such efforts, in 2022, we had a better provision written back of RMB 206 million for the new home business. I am the RMB 201 million for the whole group.

compared with the better provision of RMB 1.3 billion in 2021. This reflects our principle of adopting most prudent accounting treatments, while emphasizing the treatments on the risk control management, with a sharp focus on receiver collection and improving the sense of the security of agents. Firstly, our home renovation and furnishing business has gained considerable traction, benefiting from powerful synergies between BECC and Chengdu. Our performer revenue for 2022 amounted to RMB 6.2 billion.

Rambamu totaled 2.1 billion into 4, up 13% quarter over quarter. Specifically, full-year contract sales in Hangzhou and Beijing exceeded RMB1 billion each, with Hangzhou achieving city-level profitability and Beijing breaking even in the second half of 2022. Our leading growth in these top cities demonstrated our ability to achieve fast breakthroughs in scale during the dry sale stage while making notable improvements in profitability. 80's by our first supply chain build-out.

quality delivery, and digitalization capabilities, we are confident that we will accomplish the high quality function in more cities. Fifthly, our cash position and cash flow remain robust and sufficient, and we have found capital management. At the end of 2022, the combined balance of cash-like items, total RMB is $78.3 billion, all US dollars given $11.4 billion.

up by RMB 1.1 billion from end of September and RMB 7.3 billion from end of 2021. Among which, the combined balance over cash, cash equivalents, restricted cash and short-term investments was RMB 61.1 billion. The balance of our long-term cash-like items, mainly included in the long-term investments, amounted to RMB 70.2 billion. Our net operating flow was RMB 2.6 billion in Q4.

remaining positive for the fifth quarter in a row. Moreover, we have a zero deposit in Silicon Valley Bank and Credit Suisse. We have mentioned a steadfast commitment to risk control and receivable management. Cash collection from New Home Business has exceeded the New Home revenue for six quarters in a row.

totaling RMB $35.9 billion for the full year, with cash-to-run ratio at 1.25. New home gear ISO was at 64 days in Q4, shortening by 14 days from Q3, and 28 days from the same period of 2021.

Turning to the guidance of the first quarter of 2023, we expect total net revenue to be between RMB 18.0 billion to 18.5 billion Q1, representing an increase of approximately 43.4% to 47.4% from the same period of 2022.

This forecast consists of potential impact of the recent real estate related policies. You will need toYYE to access this uhm or thevery flows window if you despaire7oo.

as well as release of the pent-up demand in 2022. It constitutes current and the plain review on our business situation and market conditions, which are subject to change. I'm turning Q4 of last year.

Policy relief initiatives were rolled out on a large scale, on both supply and demand side. In early December , COVID-19 curbs were optimized, and since then, infection has quickly picked out, driving an option in the property market.

Notably, since the beginning of this year, home prices ended, sequential decline, transactions started to rebound. We think this should be viewed rationally and objectively. The recent uptick can be attributed to two factors.

Once the higher cells' volume is partly generated by the released pent-up demand once the pandemic situation is used, which further illustrates that the housing demand can only be default, not eliminated.

The other reason is that the market expectation has gradually improved against the backdrop of macroeconomic recovery and the successive introduction of support policies. At the event for 2022 past in the wake of numerous unexpected shocks, the main policy will be received while interest year will be pressed forward with a problem.

with a pragmatic approach to promote economy recovery and to revise the market confidence. Supporting the housing upgrade is on the top of initiatives for responding to domestic demand. As an enterprise, we will remain equally practical and rational.

and always upholds market neutral view. That is, studied long-term market development is aligned with the fundamental interest of the consumers, the government, and the industry. It has been and will continue be our belief that the industry enduring value is built upon stable transaction volume and the prices rather than fluctuations. As market stability leads to sustainable transactions which accentuate the value of agents, and the agents should be the counterforce to the market's ups and downs.

This is our social responsibility as well as professional dignity. In 2023, our one-body, two-wing strategy will draw more diversified developments and a continuous scale dysfunction, which pose a higher requirement for our operational stability, resources allocation and profitability.

As such, our finance strategy will remain focused on the essence of business operations on the basis of optimizing the cost and expenses structure in 2022. This year, we will reap profits from efficiency to profit growth and continue to improve the benefits of its quality.

At the same time, we will continue to strictly control the risks, balance the relationship between the efficiency, receivable collection, and the scale growth, and promote cooperation with upstream and downstream under the condition of safe accounts receivable. Under the neutral market review, we are fully confident in how to mark stable developments in the long run. This does not provide a stable environment for our economy.

long-term development but also offers a great opportunity for us to further elevate the quality of our operations. Going forward, we will continue to forge ahead with enduring strength in our hearts and face high-winds with tenacity and optimism, powered by our relentless pursuit of creating indispensable value for the vast living service sector and our society. That concludes my prepared remarks.

We would like now to open the call to your questions. Operator, please go ahead. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, please limit yourself to one question and if you have additional questions, you can reenter the queue. If you are going to ask a question in Chinese.

Please follow with the English translation. Today's first question comes from Timothy Zhao with Goldman Sachs. Please go ahead. Yes, thank you, Madeline, for taking my question and congratulations on the strong results to end the year. My question is on the industry outlook. Could Madeline share your updated outlook for the existing home and new home market for 2003? And it's actually related to the strong growth of the existing home volume over the past two months. Could you share some color on how much about the rebound is from the pent-up demand?

and how sustainable do you think is the current running rate in the existing home market? Thank you. Okay, thank you, Kim-Sie. Regarding the recent market performance, the uncertainty caused by COVID-19 recedes. The Chinese resident mortality has shifted back to the pursuit of the world's security and growth from precautionary saving and risk aversion.

In terms of the real estate policies, there were over 1000 stimulus policies released across the country in 2022, compared to roughly 450 tightening policies in the year of 2021. As a result, support for market recovery is accumulating. We saw increased policy support in December and January , when almost the strong second-tier cities loosened their home purchase and mortgage restrictions. Among these cities, for example, Dongguo and Foshan implemented the full relaxation. To some extent, there's policy change.

have a support of bulging out in the market. According to recent real estate market data, consumer sentiment towards the housing market also has significantly improved on the demand side. For existing home sales, weekly transactions on our platform before the Chinese New Year holiday in January were close to those in July 2021.

And the monthly in-home GTV on our platform in February was close to the historical high in March 2021. Among that, the GTV of Tier 1 cities in February was just 8.6% lower than the peak of March 2021, while the GTV for the stronger Tier 2 cities and the weaker Tier 2 cities plus Tier 3 and Tier 4 cities grew 11.3% and 5.5% from the 2021 peak, respectively. Particularly, stronger Tier 2 cities showed a strong momentum.

with Chengdu, Suzhou, Nanjing, Zhengzhou and Tianjin all exceeded the high point of March 2021 by 20%. This trend was partly due to the one-time release of the pandemic month accumulated during the pandemic.

For new home sales, it also demonstrates a notable recovery trend. Our new home subscription growth changed positive in January , growing 20% year-over-year. In February , our new home subscription increased by 148% year-over-year from the lower base in 2022, reaching the level of June 2021, driving a year-on-year new home sales growth since February of this year.

year. Regarding housing prices, despite the very strong momentum in transaction volume, fortunately we haven't seen significant fluctuations in housing prices. In January , prices for both existing and new homes ended a long stick of the monthly decline across the country, and in February , existing home prices grew 1.6% quarter over quarter, but they still posted a year-over-year decline of 5%. As the increasing number of customers leave their homes were upgrading demand amid relaxed government policies this year.

The number of listed existing homes nationwide grows 10% in OV. The ample existing home listing keeps the market supply and demand relatively balanced. We still hold the neutral market view. The recent rebound in transaction volume demonstrates the housing market's high resilience and electricity on the demand side. This short-term rebound was driven by several factors.

including normalized transaction demand, one-time carving of the accumulated pent-up demand during the pandemic flares up, and even earlier release of future purchase needs from the customers who are concerned with the potential housing price rise. These factors led to the sales volume being built up within a very short time.

Speaking to a market neutral view, we believe the market will gradually normalize and will enter into a more stable growth stage over the long run. Since March, we have also noticed that the weekly transaction volume of existing and new home subscriptions on platform began to steadily normalize.

Regarding the future market, in terms of the market sustainability, based on our analysis of top 30 cities, ways that the market should be relatively stable in the future for fourth tier cities. The average flow space of the house transact and the home buyers demographic since this year were very similar to the prior three years. This transaction has been driven mainly by the home upgrade and the rigid demand for the property within the floor area of 90 square meters.

The distribution of purchase by local and non-local residents has also been stable. For secondary cities, home upgrade demand was significantly stimulated. This drove a 3% increase in share of transacted house over 90 square meters, and a 5% increase in percentage of customer age over 35, and a 4% increase in percentage of non-local home buyers. Going forward, such market match might experience the volatilities in the short term due to the structural change. Nevertheless, with the non-local taking root in these cities, more supportive policies are being made.

and stabilizing housing prices, home upgrade demand from the local residents might follow up and might bring solid demand support and help the market stabilize in the long run. For existing home market in 2023, based on our neutral market view, we prudently believe that the existing home market will grow by around 50% year-over-year in 2023, where the prices remains relatively stable. We believe there is plenty of upside for the market given

the transaction unit of this steam and new home in China accounted only for 3.5% of the total number of existing homes in 2022. And that channel rate for its new homes was only 0.7% versus the normal rate at least 1% historically. We need to consider the potentially unfavorable factors.

section unit of the new home in China accounted only for 3.5% of the total number of new homes in 2022. And the total rate for its new homes was only 0.7% versus the normal rate at least 1% historically. We need to consider the potentially unfavorable factors such as the impact from the global economy slowdown.

growing geopolitical tensions and the muted export growth on the macroeconomic and housing demand. For the new home market in 2023, we expect the total GTV of the market in 2023 to remain at the same level as in 2022. Housing project delivery has become less of a concern for consumers with the deployment of the financing policies for developers and the improvement of their funding status as well as gradually resumption of the project construction.

In the meantime, with price stabilizing, home upgrade demand will return back to the new home market. The new home market recovery will further ease real estate developers' cash flow constraints. Recently, land auctions went well in the cities like Hamdo and Sudo, where several private developers appeared on the land auctions list.

Private developers renew the enthusiasm for the land auction in more areas is also a critical indicator. Over past few years, China's housing market has seen great highs and lows. Looking back, shortened uncertainties are inevitable, and one mustn't be overly optimistic or pessimistic about the sub-trains. Yet, as we navigate through the highs of the market volatility and cycles, our unwavering belief in the long-term outlook for the China housing market remains steadfast. We firmly believe that against the backdrop of the housing is for the meaning not for

the in-home market will increasingly take a standard stage, while new home operations demand a more refined approach, and the quality service will come to the forefront. The time forces change as approaches. Thank you, Kim-Sie. Thank you. Thank you. And our next question today comes from Harry Chen with Citigroup. Please go ahead. This is Harry Chen from Citigroup. Thanks management for the question, opportunity, and also...

Will you expand through Nian Jia or non-Nian Jia stores? What is expansion strategy in markets where you have relatively low market share such as Shanghai, Guangdong and Fujian? And how will you deal with the competition with the no-code leaders? Thank you. Thank you, Harry. Our view on the market share.

as we don't operate with a market share as our KPI. The management team has always been adhering to the core principle of taking care of customers and helping service providers to be good to customers.

Nevertheless, we must reach a certain skill threshold city-wide to realize the network's effects and skill effects of our core business, and to fully benefit from the intensification of our agents and store network as an infrastructure around the living services. Therefore, we need to pay attention to skill, and we need to achieve sufficient skill through connecting and empowering our connected store and agents.

For its in-home transaction services, this round of massive market correction has presented us with opportunities to scale faster, and we anticipate a greater number of customers while enjoyed quality service offered by Bakers this year. In past two years, the market correction was long and deep, resulting in significant industry price-fibered reductions in various regions. Still, we have a better

capacity, retention, the number of active agents in 25 key cities, even increase year-over-year at the end of 2022. Moreover, we have a focus on retaining high-quality agents, which are also to benefit more from the market rebound during the recovery cycle. But this news to be different cities.

For our top forming cities, we will continue to explore the opportunity in specific market segments such as middle to high-end market, suburban market, etc. In the cities with a competitive environment, we saw a business respond at a relatively fast pace starting in the second half of last year.

As our better capacity, retention, our business contact governance, our focused operations, and our community expert training generate remarkable results. We have even bigger opportunities in the cities where there is still a lot of room for improvement in our skills and the market is relatively fragmented. For example, in Shanghai, our trading RME market, our market penetration is still significantly lower in Beijing.

To expand our business in the cities, we will actively implement a series of initiatives, such as establishing more connections to the high-quality service providers, investing in our brand and service quality, and strengthening operational efficiency.

to expand our business into cities, we will actively implement a series of initiatives such as establishing more connections to the high quality service providers, investing in our brand and service quality, and strengthening operational efficiency. Regarding the new home transfer services,

This year, we will consistently emphasize the risk aversion as top priority as we did in the year 2022 and 2021. We will not proactively loosen our risk controls or compromise business security, especially the security of the agents' receivable collection, in exchange for so-called platform security functions. But we will also make dynamic adjustments depending on the market and the recovery of the developers.

Last year, we will consistently emphasize the risk aversion as top priority as we did in the year of 2022 and 2021. We will not proactively loosen our risk controls or compromise business security, especially the security of agents' receivable collection in exchanges, so-called platform security dysfunction. But we will also make a dynamic adjustment depending on the market and the recovery of the developers. As developers, cash flow situation improves.

Their receivable payment to us will improve as well, which will lead to the upgrade their written in-baker credit ranking system. Their input in the credit ranking will allow us to expand our cooperation and the addressable market for our new home transaction service may also expand. Meanwhile, new home sales market has seen significant increase in concentration in the recent bond of market correction. Our better and safer receivable collection and the health of new home business conduct gains trust from a large number of service providers and agents on the sector. They connect us with ACM and the Fang Jiangfu channel becoming the cornerstone of the continued dysfunction of our new home transaction services as the market recovers. Thank you very much.

of the equation. Thank you.

The second is to show, although we have no plans for significant dysfunction for our stores and agents, as we mentioned last quarter, our focus is on improving per store and per agent efficiency while enhancing the agent income, rather than pursuing a larger scale dysfunction. This approach will now change. Only when the income of stores and agents increase steadily can the industry retain the high quality people.

Regarding the scale, store-wise, we plan to focus on the large and high quality stores and drive the onboarding of Fangjiang Hu stores for new home sales to our platform as connect stores. Agent-wise, we plan to recruit agents during the spring recruiting season in 2023, after which we expect to maintain a stable agent count.

This includes increasing of the proportion of middle level agents and increasing the number of agents in few cities which need a skills function. Regarding the quality and the efficiency, let me talk about the store productivity first. In 2003, we expect to see a significant improvement in store productivity as a result of our ongoing efforts in large store and agent ranking systems, misconduct evidence, and the Huaxiao Academy. We are committed to improving the management on loss making and inefficient stores.

and we believe that the inefficiency could be temporary. Regarding the agent productivity, the general agent productivity has a huge room to improve in the long run. Beijing could be a benchmark, where our agent productivity is 3 to 4 times higher than the industry average. In 2022, the school in Beijing and Shanghai will be in the middle of a pandemic.

Lianjia's agent productivity was 1.3 times that of Connect agents, and our target this year is to further increase its ratio to 1.4 times. For Deo-Yuan, the Big Connect stores, although we will not set a specific target for agent productivity this year, we will improve a range of operating metrics to improve the agent productivity. Such metrics include cross-stock, cross-brand cooperation ratio, accompanied home tools by home listing agent, price difference management between the listing and transaction prices, and the ACN-JAWS space ratio for one transaction.

In terms of the culture, we believe in the value of taking good care of customers. We believe in the value of sharing successful experiences and infrastructure to the industry to empower and enhance industry efficiency. We believe in the value of protecting the interests of the service providers, paying for important information and insight.

We believe in the value of improving the industry code of conduct and help developers and all participants to work with the sense of security and fairness. We believe in the value of our hundreds of thousands of accident service providers who have been serving the community for many years and established this unique mount in home services. And we believe in the value of time. This is what we have been doing, not perfectly, but we are on our way. Thank you, Mr. Truong. Thank you, Taodong, for your time. Thank you. And our next question today comes from John Lamb at UBS. Please go ahead. Thank you. And also congratulations for the good results. So my question is regarding on the cost optimization. So we have seen that in the third quarter last year, the cost optimization was very effective. Is there any room for further improvement in the cost optimization?

and also can the expense ratio from the third quarter last year 2022 could be used to infer the subsequent profitability. Thank you. Thank you, John . For cost and expense for our one-body business, we quickly implement a series of cost reduction and efficiency enhancement initiatives in 2022. Consequently, the cost and expenses for our one-body business were optimized to reach the level in the year of 2019, which we believe is relatively sustainable. In terms of the cost control in the fourth quarter of 2022,

The fixed cost of our one-party business fell by 36% year-over-year, and its variable cost as a percentage revenue dropped by 5.6% year-over-year. In terms of expenses, the total amount of non-GAAP operating expenses declined by 70% year-over-year to the same level in the year of 2019. The expense reduction will be most significant if we exclude the impact from the consolidation of the Shengdu. Commissioning development accounted for 44% of total new home commission in first quarter, up from 20% in the first quarter. Just ensure the collection of the new home receivables.

mitigating the negative impact of the new home better provisions on our expenses. In 2023, our platform's agent productivity will see even greater improvements and we will implement incentives to develop and retain our employees. We also hope to offset the cost of such initiatives through the continuous cost control of the non-personal experiences.

In addition, we hope to improve the agents productivity while technology investment to reduce their time spent on the low productivity matters. Hence, allowing them to get off work earlier, spend more time with their families, and contributing to further industry optimization as well as potential platform for profitability improvements. All in all, our finance strategy for our one-body business will remain focused on efficiency.

With optimized cost and expense level in 2022, we will support quality growth cost-definitely. Meanwhile, we will continue to strictly control the risk and strike a balance between efficiency, receivable collection speed, and the skill exposure.

With the insured security of the council is reasonable, we will enhance our cooperation with partners in upstream and downstream. For two wings business, regarding our home renovation and furniture business, in addition to making sure its total loss ratio will not further expand, we will capture opportunities to reinforce our fundamental capabilities including the products, supply chain and the service delivery ability.

and invest in high quality service providers. On the whole, we will reflect some of our redundant investments we made during the last round of market growth. And while continuing to promote our business growth, strictly control the cost and expense to balance the growth and profitability. Thank you, John .

Thank you. Sorry, can I ask one more question? So you also mentioned about the tool wings. So what is your plan regarding on scale expansion and also efficiency improvement for tool wings? In terms of the change for expansion and also the scale of investment, could I say that for the full surface home renovation and finishing model, do I shift that to 0 to 1 in 2022? Is 2023 a critical year to go from 1 to 10?

Please share with us with key focuses and goals in 2020. Thank you. Okay, I will answer your question. 2022 was the year of our two wins for the ball and two to the root. We have taken solid steps for both our home renovation and finishing business and our rental business. It will still be a busy day in more cities.

On the home renovation and inflation side, our total contract sales sparked the trend and increased by more than 30% year over year. With total revenue, you see the sixth bidding in both Beijing and Hangzhou, we reached the first to March of over one bidding in annual contract sales. And for our rental centers, we enter 30 cities in 2022 and the total number of rental units on demand in the city is 120,000. In 2023, we will finish benchmark cities, achieve the breakthrough.

and make commitment investment to build long-term capabilities. In 2023, our two wins business will build on the current momentum in the cities we enter. We will not be pursuing comprehensive and rapid scale expansion. First, instead of focusing on short-term and rapid scale expansion, we will continue to decisively invest in our long-term capabilities, including the ability to standardize services and provide better online businesses, as well as our online operations of the supply chain.

digitalization capabilities, product specification for Chinese consumers, and professionalism of service providers. Second, based on these capabilities, we hope to achieve comprehensive scientific management, business need conversion, and operating efficiency improvement for both renovation and finishing. We also expect to reduce the vacancy period for our rental units, improve consumer satisfaction, and enhance the efficiency of our service providers and our business. Our two 2023 goals is to penetrate several...

key cities deeply and establish them as a benchmark. In neighboring our two wins to truly complete the next room. In 2024, we will replicate and promote this benchmark to more cities. Yeah, that's my answer, thank you. Thank you. Thank you. We're in the...

We are now approaching the end of the conference call. I will now turn the call over to your speaker and host today, Ms. Siddy Lee, for closing remarks. Thank you, Wes, again for joining us today. If you have any further questions, please feel free to contact the investor relations team through the contact information provided on our website.

with you again next quarter. Thank you, Annie. Goodbye. Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Q4 2022 Ke Holdings Inc Earnings Call

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