Q3 2024 KE Holdings Inc Earnings Call
Speaker Change: Hello ladies and gentlemen. Thank you for standing by for K.E. Holdings Inc's third quarter 2024 conference call.
Speaker Change: Please note that today's call including the management's prepared remarks and question-and-answer session will all be in English. Simultaneous interpretation in Chinese is available on a separate line for the duration of the call.
Speaker Change: To access the call in Chinese, you will need to dial into the Chinese language line.
Speaker Change: At this time, all participants are in listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Siting Li, IR Director of the company. Please go ahead, Siting.
Siting Li: Thank you, operator. Good evening and good morning, everyone. Welcome to KE Holdings World Bank's third quarter 2024 earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website, investors.ke.com. Under this call, we have Mr. Stanley Peng, our co-founder, chairman, and chief executive officer, and Mr. Tao Xu, our executive director and chief financial officer.
Siting Li: Mr. Peng will provide an overview of our strategies and business development and Mr. Xu will provide additional details on the company's financial results. Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call as well as...
We will make for the consumers
Siting Li: These also note that they could only press release and this conference call include discussions of unnoticed gap financial information as well as unnoticed non-gap financial measures.
Siting Li: This refers to the company's press release, which contains a reconciliation of the unnoticed non-GAP measures.
to comparable gap measures.
Siting Li: Lastly, unless otherwise stated, all figures mentioned during this conference call are in R&D.
Siting Li: certain statistical and other information relating to the industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial resources. Neither the company nor any of its representatives
Siting Li: have independently verified such data, which may involve a number of assumptions and limitations.
Siting Li: and you are cautioned not to give undue weight to such information and estimation.
Speaker Change: For today's call management will use English as the main language. Please note that the Chinese translation is for convenience purpose only In case of any discrepancy management statements in their original language will prevail
Siting Li: With that, I will now turn the call over to our Chairman and CEO, Mr. Stanley Peng. Please go ahead, Stanley. Thank you, Siting. Hello, everyone. Thank you for joining BAKER's 3rd Quarter 2024 audience conference call.
Siting Li: In the third quarter, we continue demonstrating our dynamic, sustainable growth momentum. Despite challenges in the market, each of our business segments deliver solid results.
Siting Li: GTV for our existing home transaction business, which will be 477.8 billion in the third quarter.
Siting Li: The total number of online registered transactions for existing homes grew by about 21% year-over-year in the third quarter, while the number on the BAKER platform soared by 44% year-over-year.
Siting Li: For new home transactions, GTV on Faker platform increased by an impressive 18% to RMB 227.6 billion in the third quarter, while new home transaction GTV or CLAC token 100 developer declined 29% year-over-year.
Siting Li: In the third quarter, our home renovation and furnishing and home rental services revenue grew year-over-year by around 33 percent and 118 percent respectively.
Siting Li: At the end of Q3, a noticeable shift in policy also boasting a solid market rebound.
Siting Li: In this market cycle, one thing we have become increasingly certain about is the importance of thinking long-term. We are going to deeply understand the power of our long-term perspective for our organization. Survival and development are our core imperatives.
Siting Li: Among this, our foremost priority is to survive. Enduring and surviving.
Siting Li: Therefore, our focus is not just on how to navigate next year, but on how to become a company that can survive for 30, 40, or even 100 years.
The greatest of the great to our companies
Siting Li: longevity, rigidity, bureaucracy, and loss of ability to grow and innovate.
Speaker Change: doing the right things, even if it's difficult, and fostering creativity.
Speaker Change: This is how we will become a company. They stand the test of time. Let me share how we are putting this vision into action.
Speaker Change: For any large organization, the biggest transfer rate is late or gross.
Speaker Change: In terms of scale, at the end of the third quarter, we have increased the number of active stores on our platform.
Speaker Change: by 14.6% year-over-year, with a net addition of almost 6,000 stores compared with the same period last year.
Speaker Change: We now have more than 46,800 active stores. The number of active agents also grew to over 420,000, which means we added
Speaker Change: 24,000 agents since the third quarter of last year. Our strategic collaborations
in the new home market.
Speaker Change: and all top tier developers. In August, the number of transactions from our strategic project developers accounted for 26% of our total new home transactions.
Speaker Change: We also made strides in improving store and platform operating efficiencies.
Speaker Change: In the third quarter, the average revenue per store on our platform, excluding Beijing and Shanghai, surpassed levels from the same period in previous years.
Speaker Change: The right mechanisms are also crucial for fostering organizational creativity. In the third quarter, we officially established a Small Leadership Committee as an innovative step toward rethinking large organizations' governance.
Speaker Change: It's a governance system that ensures forward thinking and our long-term outlook.
Speaker Change: After a year of trial implementation, the committee is now officially in place. It consists of the leaders of our main business lines as well as the heads of our finance and HR departments.
Xu Yulan Gao
Speaker Change: The goal is to ensure collaborative leadership, clear accountability, and continuous self-reflection by design. This model brings together diverse perspectives to help us make better decisions and strengthen our unity as a team.
Speaker Change: In the future, we will continue to refine and promote the innovation of our company's governance mechanism to further strengthen our leadership framework. In addition, we have officially appointed the CEOs of our new initiative businesses.
Speaker Change: Wang Yongqun will head for our new for our home rental services business and also continue in his role as a CEO of Lianjia.
with development over the past few years.
Speaker Change: of Home Renovation and Furnishing and Home Rental Services Business have achieved several key milestones.
Speaker Change: In the first three quarters of this year alone, revenues from our home renovation and furnishing business surpassed RMB 10 billion across more than 45,000 projects. Revenue from our home rental services business approached RMB 10 billion during the first three quarters.
Speaker Change: with a number of rental units managed under carefree way exceeding 360,000.
Speaker Change: I am truly grateful to our excellent team for fostering this achievement.
That is to say, we have more work to do.
Speaker Change: There are still many fundamental unresolved problems in the industry. We will iterate our scientific management and other capabilities to address the industry underlying issues related to quality and commitment.
Speaker Change: among others. We hope that when people talk about this industry and our brand in a few years, they will say your quality is exceptional.
Speaker Change: Today, we are at a pivotal moment in this undertaking. Over the next two years, we will strengthen our core capability to reach our vision.
Speaker Change: For our platform ecosystem, we are more committed than ever to working with store owners and store managers. They are the high-frequency players in this low-frequency industry.
Speaker Change: Our top priority is helping them achieve better returns. If they adopt a long-term mindset, a platform can achieve lasting growth. In the third quarter, we introduced new operational mechanisms to support this goal.
Speaker Change: We launched our StorePoints incentive program that rewards store owners for long-term platform loyalty, strong performance, integrity, and innovative business practices.
This initiative is to significantly enhance store owners satisfaction and
Speaker Change: allegiance to our platform. In Q3, we distributed around RMB 18 million in cash equivalent incentives to homeowners in pilot cities.
Speaker Change: Take Shenzhen, one of our pilot cities, as an example, over the past two to three years, more than 100
face three major challenges, insufficient emphasis on existing home transactions,
Speaker Change: Slow progress in new initiatives like home renovation and rentals, and weak collaboration across the platform with relatively high post-transaction customer complaint rates.
We tell her
stores can now increase 20% extra bonus points.
Speaker Change: for completing existing home listing transactions. They also received two to three times bonus points for conducting non-housing transaction businesses.
Speaker Change: Stores are also avoiding separate bonus points if they have been in our network for a long time and have a history of compliance and collaboration.
Speaker Change: Store owners can convert their points into additional benefits. In October, store owners in Shenzhen received a total RMB 2.2 billion.
Speaker Change: 49 million equivalent incentives and 930,000 BTC with top single store receiving RMB210,000 equivalent incentives
Speaker Change: Notably, the platform's profit-sharing payouts to store owners boosts their income, offsetting the cost of renting a storefront.
Speaker Change: At the same time, we effectively addressed the three core problems. Mostly existing home transactions began to recover and increase by 12% sequentially in September.
Speaker Change: Number of units leased out under carefree range grew by 21% in Q3 compared with Q2.
Speaker Change: 74.5% of total transactions are recorded high. Of course, these metrics only indicate short-term achievements. More importantly, our goal is to use the store membership point system to encourage store owners to think long-term, share value with them, and provide a clear development path on the platform.
Moving on to Grand Ole Olympia
Speaker Change: We have continued to advance its technology this year. Our decision to invest in Lianjia during tough market adjustments is also firmly rooted in our long-term vision. First, Lianjia is the cornerstone of our One Body Three Wings strategy.
Speaker Change: Maintaining limb-joint solid fundamentals is crucial while we promote expansion based on sustainable operations and ongoing efficiency.
Speaker Change: Lianjia also needs to lead the way in innovation and be the frontrunner in tackling industry changes.
13% year-over-year.
Speaker Change: exceeding 110,000. The Lianjia agent attrition rate in cities excluding Beijing and Shanghai dropped to 4.4% at the end of September.
2023
Speaker Change: In addition, we also continue to make headway in the large-store model, with the average number of agents per store across Lianjia Nationwide climbing to 19.2. As of September, nearly 3,800 Lianjia manager-level employees and above
have trained in, again, their large-scale leadership development program.
Speaker Change: To sustain creativity, we will constantly map out new opportunities and possibilities for the future. We cannot afford to wait until growth slows down to start innovation.
Speaker Change: Nor should we fall into complacency or simply defend what we have. Instead, we must plan ahead.
Speaker Change: We remain open to embracing new ideas and embracing long-term strategies. That's saying, we won't make blind faith.
Each segment in our industry is substantial.
Speaker Change: And entering any new venture requires an intensive decision-making process. Our approach includes extensive forethoughts, pilot trials by dedicated teams, and deep engagement.
Speaker Change: Our sole understanding is essential before taking any action. We don't rush. That's our underlying rationale for exploring Beihao Jia's business opportunities.
Speaker Change: Since the end of September, the market reaction has been strong and far-reaching. We are now seeing signs of market recovery with regards to both volume and prices.
Speaker Change: As we navigate through highs and lows, we must remain calm at the peaks. Stay fast.
and their truths.
Speaker Change: are grounded in a reality in between. This is how we find true stability.
Speaker Change: with the broader environment improving. The truths we have learned during this period of market adjustment are clear.
Steering Committee to Long-Term Maintaining Optimism, Fostering Resilience
I'm a eunuch.
Speaker Change: This truth, and the bold efforts we made in challenging times, will enable us to go even further in a more soluble environment. Thank you. Next, I would like to turn the call over to our CFO, Jun Tao, to reveal our third quarter 2024 financials.
Speaker Change: He's a thief.
Jun Tao: Thank you, Stanley, and thank you, everyone, for joining us before we dive into our Q3 performance.
Jun Tao: I'd like to briefly touch on some updates in the housing market.
Jun Tao: The market's performance in Q3 was in line with our previous projections.
to market experience.
Jun Tao: gradually retreated for the following post-life rebound fueled by intensive supportive policy release in May.
Jun Tao: particularly in September, the year-over-year decline in market performance widened due to higher rates.
Jun Tao: In Q3, the existing home market was relatively stable with year-over-year increase in transaction volume.
Jun Tao: This was primarily attributed to home buyers' preference for the readily available existing homes.
in comparison.
Jun Tao: The new home market will still be in a bottoming out stage with weak supply and demand.
Jun Tao: as it would take time to resolve the real estate developers' debt risks.
Jun Tao: By end of September, there was an intensive array of real estate policies.
from the central and the local authorities.
This included a lowering interest rate.
Jun Tao: Reducing mortgage rate for existing homes and aligning the minimum down payment ratio for the first-time and second-time home buyers.
the policies for the stimulated housing demand.
Jun Tao: Meanwhile, other macroeconomic policies, such as monetary policies, indirectly fuel the market confidence.
which stimulated the market activities.
Jun Tao: We are highly anticipating the market performance of the third quarter.
Jun Tao: Turning to our financial performance in Q3, our total GQV reached RMB736.8 billion, up 12.5% year-over-year.
Jun Tao: Net Revenue was RMB22.6 billion, representing a year-over-year increase of 26.8%.
Jun Tao: Gross margin declined by 4.7 percentage points year-over-year to 22.7 percent
Jun Tao: Gap net income reached RMB1.2 billion, showing a year-over-year decrease of 0.2%.
Jun Tao: Non-Gap Net Income reached RMB 1.8 billion, reflecting a year-over-year decrease of 17.5%.
Non-Gap Net Income Exceeds Market Consensus
Jun Tao: Moving to our home transaction services, revenue from existing home transactions reached RMB 6.2 billion, down 1.4% year-over-year and 15.2% quarter-over-quarter.
Jun Tao: GTV was RMB 477.8 billion, up 8.8% year-over-year, and down 16.3% quarter-over-quarter.
Our GTV and REMNI show the similar sequential declines.
Jun Tao: Year-over-year, GTV growth surpassed the revenue, which was mainly due to the higher contribution from the GTV of existing home transactions facilitated by the Connect agent.
The revenue was recorded on a night basis.
Jun Tao: This decree was primarily due to the increased fixed labor costs related to the increased number of agents and improved welfare of agents under the retreated market circumstances.
and Siting Li. Thank you.
Speaker Change: In terms of the new home transaction services, although the market remains sluggish, we significantly outperformed the market across all metrics.
Speaker Change: CRIC shows that the sales from the top 100 developers decreased by around 29% year-over-year and around 27% sequentially in Q3.
Speaker Change: In contrast, our new home DTV reached RMB227.6 billion in Q3, up 18.4% year-over-year, while down 3.3% quarter-over-quarter.
Speaker Change: This remarkable performance, notably above industry, was mainly propelled by deeper cooperation with developers and our refined operations that strengthened our capabilities.
Speaker Change: Revenue from new home transactions rose by 30.9% year-over-year to RMB7.7 billion, but dropped around 2.6% from the previous quarter.
revenue outperformed GTV both year-over-year and sequentially.
Speaker Change: Once again, demonstrating our strong and steady monetization capability in new home transactions.
Speaker Change: The contribution margin from new home transaction services fell by 0.4 percentage point year-over-year to 24.8 percent.
Speaker Change: In Q3, the commission income percentage from SOE developers rose to 58%, and the proportion of the commission-in-advance projects maintained a relatively high level at 44%.
and Siting Li.
Run Liu from the Home Renovation and Furniture business.
Home Rental Services, Emerging and Other Services
Speaker Change: grew by 54.3% year-over-year in Q3, accounting for a portion of our total revenue at 38.3% with a record high, and a surge by 6.8 percentage points from the same period of 2023.
Our home renovation and furniture business maintain a steady growth.
In Q3, contractive cells reached Rb4.1 billion, up 24.6% year-over-year.
Speaker Change: Revenue amounted to RMB4.2 billion, rising by 32.6% year-over-year. The revenue growth rate outpaced that of the contracted sales, mainly due to the higher delivery efficiency.
Speaker Change: This was primarily driven by growth margin improvement in our home renovation business.
Speaker Change: The contract sales of furniture and home furnishing retail, which are outside of our home renovation package, reached approximately RMB 1.1 billion in Q3.
Speaker Change: accounting for approximately 28.1% of the total contract sales, improving by 2.1% from the same period of 2023.
or Home Rental Services business.
Speaker Change: continue to grow at an accelerated pace. In Q3, its revenue reached RMB3.9 billion, up 118.4% year-over-year.
Speaker Change: In particular, the number of rental units managed under our Carefree Rent exceeded 360,000, compared with around 160,000 in the same period of last year.
Speaker Change: His contribution margin was 4.4%, declined by 1.4 percentage points sequentially. This was mainly due to the higher commission expenses due to the seasonality.
Speaker Change: In Q3, our net revenue from emerging and other services decreased by 21.5% year-over-year to RMB487 million.
Speaker Change: Next, let's move on our other costs and expenses in Q3.
Gross profit rose by 5.2% year-over-year to RMB 5.130
Gross margin was 22.7%.
down 4.7 percentage points year-over-year and 5.2 percentage points sequentially.
Speaker Change: The primary reason for the decline was the falling contribution margin of the East Link Home Transaction Service, led by the increased fixed labor costs.
Thank you, Siri.
Speaker Change: J&A expenses were relatively stable year-over-year at RMB 1.930 while falling sequentially by 8.6 percent.
Speaker Change: This was mainly attributable to the reduction in the share-based conversation.
Speaker Change: Sales and marketing expenses grow by 18.6% year-over-year to RMB 1.9 billion as we invest in the rapid dysfunction of our home renovation and furniture business. Increasing associated sales and marketing expenses
Speaker Change: Quote of Quote, sales and marketing expenses rose by 2.8%, remaining largely stable.
Speaker Change: Our RMB expenses were RMB573 million rising by 21.5% year-over-year and 13.6% sequentially.
Speaker Change: due to the increased R&D expense in our home transaction services and the higher expenses of exploration for some advanced R&D projects.
Speaker Change: I'm sorry, I'm sorry, I'm sorry
Speaker Change: In terms of the profitability, GAAP income from operations totals RMB727 million in Q3, down 20.2% year-over-year and 63.9% especially.
Speaker Change: Gap operating margin was 3.2%, a decrease of 1.9% and 5.4% from Q3 2023 and Q2 2024 respectively.
Speaker Change: Non-cap operating margin reached 6% down 4.6% and 6% point from Q3 2023 and Q2 2024 respectively.
Speaker Change: The decline in operation margin was mainly due to the lower gross margin.
Speaker Change: Gap net income totaled RMB1.2 billion in Q3, showing a year-over-year decrease of 0.2% while dropping by 38.5% Q2.
Speaker Change: Non-GAAP net income reached RMB1.8 billion, down 17.5% year-over-year and 33.8% quarter-over-quarter.
Speaker Change: Moving to our cash flow and balance sheet, we realize the net operating cash inflow of RMB449 million in history.
The new home BSO was 40.
Speaker Change: was 47 days in Q3, which is a testament to our effective risk measurement.
Speaker Change: On top of approximately US$204 million allocated to the share repurchase during Q3, our total cash liquidity remained at a high level of RMB76.3 billion, which excludes customer deposits payable.
Thank you.
Speaker Change: With our robust cash results, we continue to reward our shareholders who have grown with us through the active share buybacks.
Speaker Change: Enhancing capital operation efficiency and sharing the benefits of our development with investors.
Speaker Change: At the end of Q3, we had repurchased around US$584 million worth of shares this year, which accounted for around 3.3% of the company's total shares outstanding at the end of 2023.
We have consistently delivered on our promise to reward shareholders.
Speaker Change: since the launch of our Shared Reports program in September 2022.
Speaker Change: We have repurchased around US$1.49 billion worth of shares at the end of Q3, which accounted for around 8.1% of the company's total share outstanding before the program began.
Speaker Change: As our business becomes more diverse and expands in scale, we have set higher requirements for the reasonable allocation of resources and financial prudence.
Speaker Change: Our financial strategy is to focus on the essence of the operation and support the growth of our one-body, three-wins business.
Speaker Change: but strictly controlling our rain thresholds and maintaining a healthy catch flow.
for our housing transaction services.
on the situation of our stone's puncture strategy.
Speaker Change: We have implemented a comprehensive upgrade of the financial accounting model.
regarding our home renovation and furniture business.
Speaker Change: We continue to comb through and update our business and the financial process to facilitate business development.
Thank you.
regardless how external environment changes.
will remain true to our original intentions.
Facilitating customers' better living.
Enabling Service Provider Spread Protect
promoting industries advancement and the building harmonious ecosystem.
Speaker Change: That concludes my prepared remarks for today. Operator, let's open for questions.
Speaker Change: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced.
Speaker Change: If you wish to cancel your request, please press star 2.
Speaker Change: If you're on a speakerphone, please pick up the handset and ask your question. As a reminder, we only accept questions on the English language line. For the benefit of all participants on the call, please limit yourself to one question. And if you have additional questions, you can re-enter the queue.
If you're going to ask the question in Chinese
Speaker Change: Please follow with an English translation. Your first question comes from John Lam with UBS. Please go ahead.
Speaker Change: Hello, Tao and Siting. I have a question about the new real estate policy. I would like to ask you how you view this round of real estate policy and how it is different from the previous one.
Speaker Change: Now, let's see what the real effect is, including what the sports information is like. If we want to see the market at its core, what kind of power do we need?
Speaker Change: So maybe I translate my question in English, so my question is more regarding on the recent poverty policy. So how does the management view about this policy versus in the past?
Speaker Change: and so far how is the effect from the policy thing, how is the sustainability and also what kind of market forces is required in order to have a market stabilization. Thank you.
Speaker Change: Thank you, John. In Q3, the overall market performance was muted.
Speaker Change: As a factor of the May 17th policy we stated, coupled with the low summer season, the extended home transition market shows a month-by-month decline in July, August, and September.
Speaker Change: For the new home market, the year-over-year decline in GDP of CRRC's top 100 real estate developers also worsened month-by-month in Q3, even after seasonal improvement mid-year.
Speaker Change: However, since the launch of the policy package at the end of September, consumption volumes in existing and new home markets surge nationwide.
Speaker Change: Tier 1 cities lately struck. Meanwhile, with the huge infection volumes, home practice also shows signs of temporary stabilization.
Speaker Change: Overall, this round of policies has driven stronger market recovery than the last two previous rounds on August 31st last year and May 17th this year.
Speaker Change: For details, this round of the pot exceeded the last two rounds in both scope and intensity.
Speaker Change: Unlike previous relaxation in either purchase restriction or mortgage condition, this round of policy introduces a whole package of the counter-cyclical policies.
Speaker Change: Directly initiated by the Politburo in response to new issues in the current market economy.
Speaker Change: combined with greater credit support from the central bank and the swift implementation of purchase restriction relaxation in tier one cities.
Let the lab show the market-alt performance.
for Ethical Markets.
following this round of policies.
Speaker Change: Transaction volumes have increased significantly across first, second, and third-tier cities.
This contrasts with post-May 17th policy response.
where the rebound was only in the posterior cities.
Speaker Change: In October, the number of existing home transactions on our platform marked the highest monthly level.
rising by over 70% year-over-year and a 60% from September
Speaker Change: Notably, the transaction volume in Kowloon City so year over year.
Speaker Change: increased this over a hundred percent, with Shenzhen up by over 250 percent.
Speaker Change: Year-over-year growth in Beijing and Shanghai was also more than 120 percent.
Speaker Change: For Tier 2 and Tier 3 cities, transaction volume saw a yearly growth of more than 60%.
regarding its visit home practice.
Speaker Change: A positive signal is that October saw a month-by-month price stabilization, with a slight 0.3% increase.
Speaker Change: Thanks to the surge in traffic volume and the improving market sentiment.
Speaker Change: This marks a notable improvement from the 2.1% decline in September, and is the first increase since the beginning of 2023.
Speaker Change: Prices in Beijing, Shanghai and Shenzhen were up 2.2%, 2% and 0.7% respectively.
Speaker Change: compared with September. This was mainly due to the fewer homeowners are rushing to sell at a steep discount.
This shape is reflected in the paper for practical impacts.
Speaker Change: After hovering below 10 since its rise early this year, the index recently recovered to 14.
Speaker Change: In K1 cities, this rose to 19, with Shenzhen jumping to 32, to a relatively active range.
Speaker Change: This shape indicates an incremental increase in the number of homeowners raising their home leasing prices.
Regarding the Twentieth Stratum,
Speaker Change: The market was primarily led by home operators, who had previously been viewing properties but were in a wait-and-see mood.
In Taiwan cities, it's grown from 17% to 31%.
The proportion of the weight and the seed consumer decreased.
Regarding the new home market,
Speaker Change: In October, the GDV of CRRC 1200 development increased by 73% from September and 7% from the same time last year.
Speaker Change: New home subscriptions on our Payco platform during National Day holiday nearly match the subscription level for the entire month of September.
Speaker Change: New homes experience a greater month-by-month rebound of the existing homes.
Speaker Change: One reason is the lower base in September. The other reason is that new policies mitigate the consumers' concerns about home delivery issues, and developers' active promotions during the National Day holiday also help boost the new policies' effectiveness and accelerate sales through.
Regarding the Marky Oluvint filter,
Speaker Change: The latest round of POTS has no enduring effect on the housing market, given its wider scope and intensity compared to previous ones.
Speaker Change: It is worth noting that since October and through the first two weeks of November, the weekly sitting-home contact volume on the platform has remained stable at a high level.
demonstrating a strong shortening momentum.
Speaker Change: We expect the market to be relatively stable in the fourth quarter.
Speaker Change: For existing home prices, they are remaining stable in the short-term, but their sustainability requires further observation.
Speaker Change: However, beyond the boost to the sentiment, the further recovery of the economy is fundamental. It is key to ensure the profit market is holding out.
Speaker Change: This relies on enhanced policy focused on the overall market economy improvement.
Speaker Change: On top of policy-stimulating housing demand, the further rollout of the measures on supply side, such as support for developers and inventory reduction, will help rebalance supply demand in new home market and re-visualize the industry.
Speaker Change: Continued favorable policy for the real economy will also provide a greater support for residents income expectations and purchasing power fundamentally stabilizing the real estate market. Thank you
Speaker Change: Thank you. Your next question comes from Timothy Zhao with Goldman Sachs. Please go ahead.
Timothy Zhao: Great, thank you management for taking my question. My question is regarding your home renovation and furnishing business. As we have seen signs of recovery in the home transactions in both existing home and new home markets in September, how should we think about the growth outlook for home renovation business? Could you share some recent progress on this business line such as how you managed to improve the operating efficiency? Thank you.
Speaker Change: Thank you, Timothy. In Q3, our home renovation and furniture business achieved a steady growth.
Speaker Change: As for scale, our contracted sales reach RMB4.1 billion, making a year-over-year increase around 25%, with revenue rising to RMB4.2 billion, up 33% year-over-year.
Speaker Change: But for the profitability, home renovation contribution margin reached 31.2% in Q3, showing an improvement compared to the same period last year. That's mainly due to the following factors. First, we focus on reformed operation management.
Since the home renovation construction involves lots of complex steps,
Speaker Change: We conduct a thorough review of each phase to identify key areas for improvement.
Speaker Change: For example, when we notice excess materials, we quickly adjust our construction process and strengthen the internal control to minimize the material waste.
Speaker Change: We also continue to update our product package during the initial design phase. We carefully analyze the cost and construction standards for each type of product.
Speaker Change: running portability model to ensure that each package maintains a reasonable gross margin during the initial development phase.
Additionally, we increased the proportion of centralized purchasing.
Speaker Change: for products with a high degree of authentication, where you scale up the centralized purchasing at the group level.
Speaker Change: The Centralized Procurement Ratio for both maintained supplementary material reached over 30% in Q3, while it was over 20% in Q2.
Speaker Change: As our home renovation business has expanded rapidly, we not only increase the purchase volume from existing products, but also renegotiate unique prices to reflect our large scale.
while strengthening the possibility management.
Speaker Change: We also continuously focus on improving our operational process and models to enhance quality and boost customer satisfaction.
Speaker Change: For timeline management, we further shortened construction timelines by optimizing workflow and dispatch efficiency.
Speaker Change: This brought the combined timeline for basic construction and preliminary material to an average around 99.5 days in Q3, compared to 109.3 days in the same period last year.
regarding often cells.
Speaker Change: While implementing proactive maintenance services, we expanded our in-house after-sales team nationwide.
Speaker Change: Our upsells team grew from over 200 people at the end of last year to over 500 at the end of September this year.
Speaker Change: This team, remotely and carefully, will address customer repair requirements and further enhance our customer satisfaction.
in our Home Renovation-Based Model of Quality, Scale, and Efficiency.
College remains at the core.
Speaker Change: We will continue to iterate and invest in building our infrastructure and capabilities to strengthen quality foundation, which is essential to remain competitive in the future. Thank you.
Speaker Change: Thank you. Your next question comes from Griffin Chan with City. Please go ahead.
Speaker Change: Hello, Mr. Guan. I'm from the Chinese Stock Research Department of Huaqi, my name is Griffin Chen Junwei. My question is, how can we maintain the positive trend in the second-hand and new-hand business of shell companies? What should be the next step? What will be the positive trend? In addition, this year, our door-to-door sales are relatively positive. How should we plan for the next step of shell companies? So this is Griffin from Siting. I will translate my own questions. Data has outperformed the market for both existing and new home business. Will the management have confidence in sustaining this outperformance?
Speaker Change: Besides, WeNote Data has been actively expanding store this year. Would management please share your plan going forward? Thank you.
Speaker Change: Take a briefing. This year, we focused on engine and storage function and ecosystem development.
Speaker Change: and the proactively strengthening high-level collaborations with developers in new home business.
Speaker Change: These efforts have all paid off, enabling us to continuously outperform the market.
Speaker Change: Regarding scaling our platform, our agent and store network continue to respond.
Speaker Change: By end of Q3, the total number of IP non-lienjia stores on our platform was more than 41,000.
Speaker Change: And the number of acting non-lianjia agents was 315,000, up 16% and 4% EOB, respectively.
were provided brands with the fittest costs.
and other support to attract them to join our network.
Speaker Change: For the volatile market, our platform's rich customer resources, extensive cooperation network, professional empowerment, and diversified services such as New Home and Home Renovation had a stronger appeal to store outside of the network.
Returns from our investment in storage functions have remained good.
Speaker Change: From the platform perspective, by end of September, newly-sensed In-Q-One this year had a positive ROI, with all regions covering their cost.
Speaker Change: As we made steady progress in connecting stores, we have further shifted our strategy in the second half of this year from connecting small and scattered community stores to large stores.
Speaker Change: or calculate we raise the threshold of the average number of agents per store, performance requirements and incentives.
Speaker Change: Our goal was to attract more college students in the industry to join Baker to boost overall skill and efficiency.
Speaker Change: Regarding the slow network operation, we adopt a more refined strategy at each individual business district level.
all the areas fully covered by our network.
We place the most emphasis on ecosystem optimization.
Speaker Change: We hope the store owner and agent retain more income through a series of platform benefits and supportive measures.
Speaker Change: Stock productivity in these commercial areas was 1.2 times as high as other commercial areas.
Speaker Change: We focused on target management and empowerment through the platform data analysis.
Speaker Change: problem diagnosis and strategy support aligned with the involvement of the store owner co-governance council. We promoted the focus on the colleague home listings, enhanced sell-through and boosted cooperation among stores.
Speaker Change: In areas with insufficient network coverage, we actively connect to the new stores through various types of storage function packages.
Speaker Change: For existing stores, we piloted a points-based incentive system in Q3 to motivate stores to enhance efficiency and optimize our ecosystem.
Speaker Change: This system is essentially a membership program for the store owners through which the platform giving back returns as incentive to outstanding stores.
Speaker Change: This was aimed to achieving share value and win-win between the platform stores.
Speaker Change: Among the nine pilot cities in Q3, the platform issued over 18 million yuan in equivalent cash benefit to store owners, with 30% of stores receiving this reward.
Speaker Change: The incentive system will bring more flexibility to our housing transaction business operation, while motivating store owners to engage more in our new business, including renovation and rentals.
Speaker Change: In our new home business, we continue to outperform the industry. In Q3, our new home GTV reached RMB 227.6 billion, up 18.4% year-over-year, compared with 29.5% year-over-year.
percent decline in the GTV or what?
and Tao Ke Xia. Thank you.
Thank you for watching
Thank you.
Yixing Chenbo
Speaker Change: The number of our co-op new projects accounted for 64% of all new home projects across cities where we operate, excluding Beijing and Shanghai, compared with 53% in the same period of last year. This was a result of growing recognition among developers for our sales capability, as well as a proactive effort to respond to collaborations.
We continue to make the breakthrough in strategy collaboration.
Speaker Change: We have already covered 7 out of the 10 top developers.
Speaker Change: Strategic collaborations differ from the top single project cooperation, which typically features a competitive relationship between the two sides.
Speaker Change: In strategic collaboration, the two sides work as a partner to enhance mutual understanding.
Speaker Change: We inform our cooperative partners of the operations and needs of our agents, market dynamics, and additional services, and value our platform efforts beyond the broken channel.
through the top-down promotions of central warning in low-institute companies.
Speaker Change: will help to overcome difficulties in negotiation of city-level projects leading to more co-operative projects.
Speaker Change: Through the strategic collaboration, we can also better protect agents' rights.
Speaker Change: For instance, we incorporate customer private home, private phone number protection and equal protection period into the strategic collaboration framework to promote the fair cooperation.
Speaker Change: Moreover, we enhance the business conduct governance to improve operational transparency, putting developers' minds at ease in their cooperation with us.
Speaker Change: Our stable monetization and receivables collection also motivate agents to work more actively on their new home sales, boosting our new home sales through.
Meanwhile
Speaker Change: The agent's operational ecosystem has continued to improve. The penetration of the customer's profit from numbers promotes protection, rose to 67% in Q3, up by 80% from Q2, bringing more sense of security of the agent, which also improves their willingness to sell their new home. Thank you.
Speaker Change: Thank you. Your next question is from Thomas Chong with Jeffreys. Please go ahead.
Speaker Change: Thanks management for taking my question. My question is about our home rental business. As we see our KFB rent is undergoing fast growth pace, while this business requires quite a lot of involvement in operation. Can management share about how we are different from others in terms of operations? Thank you.
Speaker Change: Thank you, Thomas. In Q3, revenue from our home rental services reached RMB3.94 billion, up 118.4% year-over-year. It's mainly due to the continuous increase in the number of the home units under our management.
Speaker Change: By end of Q3, we were managing over 360,000 units under our Carefree Ranch module, compared to over 160,000 in Q3 last year.
Speaker Change: The contribution margin of our home rental services fell slightly quarter of a quarter in Q3 due to the seasonality.
Speaker Change: In the summer peak season of July and August, our cafe runs saw rapid growth in unit size and occupancy.
Speaker Change: which increases commission costs for the channel referrals and related personnel which impacts contribution margin.
Speaker Change: Excluding the seasonal impact, the core metrics of the carefree run improved significantly year-over-year from January to September.
Speaker Change: Our operations focus on quality and efficiency, have yielded good results.
On improving services to customers, we provide pre-moving inspections.
Speaker Change: standardized handover services and a tenant-side property transfer services with a cumulative service count exceeded 970,000.
Speaker Change: provide a series of the core interest and rights guarantees to our tenants.
Speaker Change: Also, we centralize the management of the two types of property managers, tenant service manager and property service manager.
to realize the centralized empowerment and standardized services.
in terms of the operation efficiency.
Speaker Change: We continue to increase the percentage of the lease renewals, which helps reduce the channel costs associated with re-renting and finding new tenants.
were chosen to import post-date services.
Speaker Change: At the same time, we actively engage with tenants prior to Li's expiration to discuss renewables, thereby boosting the renewal rate.
Speaker Change: And of Q3, the least renewal rate was around 52 percent.
compared to 48% in the same period last year.
Speaker Change: Regarding the management and rental cost due to the vacancies, we shortened the days needed to rent out the properties through the refined operations.
Speaker Change: The time required to rent out the property for the second time decreased to 7.5 days at the end of Q3, from 14.7 days at the beginning of the year.
We also continue to optimize and upgrade our project module.
Speaker Change: This was mainly due to the improvement in the successful rate of the first-time rentals, which rose to 82% by end of Q3, from 76% in the same time of last year.
driven by higher personal protective qualities.
up 5% point from the same churro last year.
In addition, regarding Q3 operations,
Speaker Change: We took target measures to ensure the health and efficiency of our business in peak and light seasons, respectively.
Speaker Change: The specialization strategy for the service providers based on their roles significantly boosts our efficiency.
leading to large-scale growth and incremental profit margin.
Speaker Change: In the peak season of July-August, in particular, the personnel productivity of the unit stands out and the occupancy improved notably year over year.
Speaker Change: Since entering the off-season in September, we have implemented multiple strategies, including strengthening the rental occupancy made through our self-build team and agent, and improving their productivity.
using various marketing methods for the targeted customers.
continuously major lease renewals and a second time leasing pre-sales.
Speaker Change: and focusing on carriers of the housing unit subs and effectively manage inventory. Thank you.
Speaker Change: Thank you. Your next question comes from Miranda Zhang with Bank of America Securities. Please go ahead.
Speaker Change: 感谢管理层接受我的提问,晚上好! Thank you for accepting my questions, good evening! 我的问题是跟备好家有关的,看到最近备好家在成都有拿到了这个地块, My question is related to Beihaujia. I saw that Beihaujia has recently acquired this land in Chengdu. 想请管理层分享一下关于这个项目的情况,我们做这个项目的逻辑原因是什么? Could you please share with us the logic behind this project and the reason why we are doing this project?
Speaker Change: 然后我们对于这个备好家这块业务整体上所考虑的商业模式是什么样子的? 谢谢。 Thank you for taking my question. My question is about 备好家. We see the news that 备好家 has successfully be the land in Chengdu city. So can management share with us about the project and the rationale about it? And then what's company's business model for the 备好家? Thank you.
[inaudible]
Speaker Change: Second Miranda, our new business Bei Hao Jia won a piece of land through the auction in Chengdu core area of Jinjiang district, financial city phase 3 in September.
Speaker Change: We undertook this project after carefully review and selection, and it will be operated by Bei Haojia team independently.
Speaker Change: We aim to use the pilot project like this to better validate our ability to implement our C2IM solutions.
at every stage, including the land auction.
for their position, design, and marketing.
Speaker Change: By creating multiple projects, we can build trust with future partners, such as developers.
Speaker Change: towards our business model and the product solution, ultimately helping us achieving a long-term life asset service platform model.
Speaker Change: But it is very clear that we do not intend to become a real estate developer.
Speaker Change: In terms of our long-term business model, we will not use our own capital for large-scale heavy assets investment.
Speaker Change: We position the Fei Hao Jia as a data-driven residential development service platform achieved through a one-plus-two business model.
Speaker Change: This includes C2IM product solution, supported by our accumulated user insight and big data, and complemented by efficient customer acquisition and marketing capability.
Speaker Change: This empowers all partners in the industry to create homes that are well suited to customers.
Speaker Change: C2I will be our core capability. It leverages vast amounts of data and AI technology to ensure the customer preference and demand are reflected in the new home price such as possible.
Speaker Change: Regarding to commercialization, we will charge service fees for offering an integrated set of solutions, including product positioning, initial and in-depth design, rather than through the large-scale capital contribution or early investment returns.
Speaker Change: Lastly, we were fortunate to acquire the land on September 20, right before the government rolled out the subsequent bundle of favorable policies.
This has made the land acquisition price highly competitive.
Speaker Change: We believe this project will serve as a testbed for our capabilities, allowing us to accumulate know-hows to support the realization of our long-term platform model. Thank you.
I don't know what to do. I don't know. I don't know. I don't know. I don't know.
Thank you.
We are now approaching the end of the conference call.
Speaker Change: I will now turn the call over to your speaker host today, Ms. Siting Li, for closing remarks. Thank you once again for joining us today. If you have any further questions, please feel free to contact the Investor Relations team through the contact information provided on our website. This concludes today's call and we look forward to speaking with you again next quarter. Thank you and goodbye.
Speaker Change: Laozi Tao, Siting Li Zhao Sheng, Siting Li Jiang Chufei, Zhao Shen Natta Yang, Chufei Li Zixuan, Li Zixuan Li Zixuan, Li Zixuan
Speaker Change: Inverted Converse An example of inverted converse Reversible Head An example of inverted head An example of inverted head Irradiated Dipole An example of irreversible dipole Likewise, an example of irreversible dipole
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Speaker Change: Shanghai may have an investor on its side Nevertheless, contrary to our own expectation, the investment market this time is not as good as it was A detailed analysis of the global investment market first See you then
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