Q2 2025 KE Holdings Inc Earnings Call

Siting Li: Hello, ladies and gentlemen. Thank you for standing by for KE Holdings Inc.'s second quarter 2025 earnings conference call. 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. To access the call in Chinese, you will need to dial into the Chinese language line. 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.

Hello, ladies and gentlemen, thank you for standing by for KE Holdings Inc.'s second quarter 2025 earnings conference call.

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.

To access the call in Chinese, you will need to dial into the Chinese language line.

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, Mr. Tingly, IR Director of the company.

Please go ahead. See

Siting Li: Thank you, our presenter. Good evening and good morning, everyone. Welcome to KE Holdings Inc.'s second quarter 2025 earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website, investors.ke.com. On today's call, we have Mr. Stanley Peng, our co-founder, chairman, and chief executive officer, and Mr. Tao Xu, our executive director and chief financial officer. Mr. Xu will provide an overview of our business updates and financial performance. Then, Mr. Peng will share more strategic thinking on our current and future developments. Before I continue, I will refer you to our safe harbor statement in our earnings press release, which applies to these calls as we will make forward-looking statements.

Thank you, operator. Good evening and good morning, everyone. Welcome to K Holdings Incorporated's second quarter 2025 earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website for investors. On today's call, we have Mr. Stanley Pong, our co-founder, chairman, and chief executive officer, and Mr. Tao Xu, our executive director and chief financial officer. Mr. Xu will provide an overview of our business updates and financial performance. Then, Mr. Pong will share more strategic thinking on our current and future developments.

Siting Li: Please also note that Baker's earnings press release and these conference calls include discussions of unnoticed gap financial information as well as unnoticed non-gap financial measures. Please refer to the company's press release, which contains a reconciliation of the unnoticed non-gap measures to comparable gap measures. Lastly, unless otherwise stated, all figures mentioned during this conference call are in R&D. Certain statistical and other information relating to industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial sources. Neither the company nor any of its representatives has independently verified such data, which may involve a number of assumptions and limitations. And you are cautioned not to give undue weight to such information and estimates. For today's call, management will use English as the main language. Please note that the Chinese translation is for convenience purposes only.

Before I continue, I refer you to our Safe Harbor statements in our earnings press release, which applies to this call, as we will make forward-looking statements.

Include discussions of unnoticed GAAP financial information as well as unnoticed non-GAAP financial measures. Please refer to the company's press release, which contains a reconciliation of the unnoticed non-GAAP measures to comparable GAAP measures. Lastly, unless otherwise stated, all figures mentioned during this conference call are in R&D, with certain statistical and other information relating to the industry in which the company is engaged being mentioned. This information has been obtained from various publicly available official or unofficial sources.

Neither the company nor any of its representatives has independently verified such data. We may involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information. Please ask me.

Siting Li: In the case of any discrepancy, management's statements in their original language will prevail. With that, I will now turn the call over to our CFO, Mr. Tao Xu. Please go ahead, Tao.

Tao Xu: Thank you, Siting, and thank you, everyone, for joining our 2025 half-year results conference call. In Q1, the real estate market continued its recovery momentum, which was at the end of last year. However, as we entered Q2, the momentum softened and the slowdown was largely due to international trade friction and the fading impact of the early policy measures. Because of the high base created by intensive earning policy in the middle of last year, the real estate market recorded a year-over-year decline in Q2. Turning to our business performance, our platform, agent, and store network continued to scale, along with refined operations and ecosystem improvements. Our existing home and the new home business significantly outperformed the market in the first half of 2025. The proportion of the number of housing transactions from existing home sales reached a record high.

For today's call, management will use English as the main language. Please note that the Chinese translation is for convenience purposes. Only in the case of any discrepancy will management statements in their original language prevail. I will now turn the call over to our CFO, Mr. Tayu. Please go ahead.

2025 Half-Year Results Conference Call

In Q1, the real market continues recovery mode.

We saw at the end of last year.

however, as we entered Q2 at the moment in software, and the Slowdown was largely due to International Trade friction, and the feeding impact of the early policy measures,

Because of the high base created by intensive learning policies in the middle of last year, the real market recorded a year-over-year decline in Q2.

Turning to our business performance, our platform agent and store, Network, continued to scale, along with refined operations and ecosystem improvements.

It's been home and the new home business significantly outperforms the market in the first half of 2025.

Tao Xu: At the same time, our home renovation and furniture business and the home rental service business both achieved high-quality growth. Revenue from non-housing transaction services accounted for 41% of total revenue in Q2, highlighting our diversified growth drivers. Regarding our overall financial performance in Q2, our total GDP was R&B 878.7 billion, representing a year-over-year increase of 4.7%. The revenue reached R&B 26 billion, up 11.3% year over year. Gross margin declined by 6 percentage points year over year to 21.9%. GAAP net income was R&B 1.31 billion, falling 31.2% year over year. Non-GAAP net revenue reached R&B 1.82 billion, down 32.4% year over year. Next, I'd like to elaborate on the operational updates and the financial performance of our business segments. Looking at our housing transaction services, the momentum from our proactive growth efforts has been clearly evident.

The proportion of the number of housing transactions from a single home sale reached a record high.

At the same time, our home renovation and furniture business and the home rental service business both achieved high-quality growth.

Revenue from non-hinged accounted for 41% of total revenue in Q2.

Highlighting our Diversified growth drivers.

Regarding our overall financial performance in Q2.

Our total GTB was R&B 878.7 billion.

Presenting a year-over-year increase of 4.7%.

The revenue reached RMB 26 billion, an increase of 11.3% year-over-year.

Growth margin declined by 6 percentage points year-over-year to 21.9%.

At income for R&B $1.31 billion, 14, $31.2 year over year.

Long gap, net revenue reached RMB 1.82 billion.

32.4% Europe.

Next, I'd like to elaborate on the operational updates and financial performance of our business segments.

Tao Xu: In the first half of the year, the number of existing home sales on our platform rose by 26%, outpacing the market growth rate of 19% estimated by Baker Research Institute both year over year. New home orders on our platform increased by 19%, outperforming the market, which, according to Baker Research Institute, declined by 6% both year over year. The share of our existing home sales continued to rise, with a proportion of total home transaction orders on the platform increasing from 51% in the first half of 2021 to 76% in the same period of this year. Our competitive edge in the existing home market led to more stable and solid overall business performance. Our agent and store network further expanded.

Looking at our housing transaction services, the momentum from our productive growth efforts has been clearly evident in the first half of the year. The number of in-home sales...

On our platform, rose by 26%; our pacing, the market growth rate of 19%. Estimated by Baker Research Institute.

Over here.

New home orders on the platform increased by 19%, outperforming the market.

According to Baker Research Institute, it declined by 6% year over year.

The share of our home sales continues to rise, with our proportion of total home transaction orders on the platform increasing from 51% in the first half of 2021 to 76% in the same period of this year.

Tao Xu: In the first half of the year, various high-quality industrial brands joined our platform, including Guangzhou Hope Real Properties, Tianjin Baoyuan Properties, Wuxi Zhongshan Real Estate Services, and the Shenyang Yuimei Properties. The number of active stores on our platform increased by 30% in the first half of the year, of which active non-lien-ja stores soared by 36.8% both year over year. The number of active agents on our platform lifted by 19.5% in the first half of the year, including a nearly 24% increase in the number of non-lien-ja agents both year over year. For our existing home transaction services, we continue to deepen and refine our operations, leveraging our centrifugal management system, perform-based operations, and AI-driven technology applications to boost the store and agent productivity throughout the home listing, customer acquisition, and the conversion process.

Our competitive tax in the single market is the most stable and solid overall business performance. Our agent and store network is expanded.

In the first half of the year, various high-quality industry brands joined our platform, including Guango Hope Real Properties.

Changing properties.

The number of active.

Our platform.

Increased by 30% in the first.

Half of which active, non-and just store.

Sourced by 36.8% both year over year.

Listed by 19.5% in the first half of the year.

Including a nearly 24% increase in the number of agents year over year.

While existing home transaction services continue to deepen and refine our operations, by region, we center our scientific management system.

Tao Xu: On the home listing side, we have tools like a home maintenance score and exceptional home products to help agents better market home listings while focusing on top listings to increase transaction conversion. On the conversion side, we also implemented measures to strengthen store-level operation and network operation to enhance matching and transaction efficiency. These measures included mechanisms like incorporating competition into our store centrifugal management system, deepening the operation of core governance consoles, store point-based incentive programs, and designating cardigan efficiency business districts. In terms of financial performance, revenue from existing home transactions reached R&B 6.7 billion in Q2, down 8.4% year over year, and the remaining relatively flat total of closing. GTV was R&B 583.5 billion, remaining relatively stable year over year.

Performing data-based operations and AI-driven technology applications to boost store and agent productivity throughout the home listing, customer acquisition, and conversion process.

On the home listing side, we have tools like a home maintenance school and the exceptional home product to help agents better market home listings while focusing on top listings to increase transaction conversion.

On the conversion site, we also implemented measures to strengthen store-level operations and network operations to enhance matching and transaction efficiency.

These measures included mechanisms such as incorporating competition into our store scientific management system.

Deep into the operation of core governance. Councils.

Stall Point Face, the incentive program under the Designating Card, is Efficiency Business Districts.

in terms of financial performance,

revenue from the Singh home transactions, Rich, R&B 6.7 billion in Q2 bank 8.4% and the remaining relatively flat quarter of culture.

Tao Xu: And the total of closing, the GTV growth outpaced revenue on a year-over-year basis, mainly due to a higher GTV contribution from existing home transaction services facilitated by a connected agent, for which revenue recorded on a net basis. The contribution margin for the existing home transaction services was 39.9% in Q2, a decline of 7.5% points year over year, primarily due to a higher fixed labor cost resulting from the increase in the number of lien-ja agents and the lasting impact of the agent welfare improvement strategy we implemented since last year. Sequentially, the contribution margin grew by 1.8% points due to stronger leverage as our series of cost reduction and efficiency enhancement initiatives conducted this year led to a quarter-over-quarter decrease in fixed labor cost while revenue remained generally flat. For our new home transaction services, the scale of our collaborative project remained steady.

PKV was R&B. $500.83 billion, remaining right here. This stable year. We.

Undercut, of course, the GDP growth appears to be on pace to run you on a year basis.

Many due to a higher GPV contribution from missing home transactions. Services facilitated by Connect Agent, for which revenue is recorded on a net basis.

The contribution margin for the Sing Home Transaction Services was 39.9% in Q2, a decline of 7.5 percentage points year over year.

Primarily due to a higher fixed labor cost, resulting from the increase in the number of danger agents and the lasting impact of the agent welfare improvement strategy we implemented since last year.

Sequentially, the contribution margin increased by 1.8 percentage points due to stronger leverage from our series of cost reduction and efficiency initiatives.

Use case conducted this year linked to a cultural shift, decreasing fixed labor costs, while Rimu remains generally flat.

for our new home, construction services,

Tao Xu: Through our AI-driven agent, Tianjin, we refined the management of new home projects, revitalizing more existing projects. On the customer front, we reinforced business synergies between existing new home and rental services and fine-tuned operations, while launching our AI assistant, Tianjin, to help service providers emulate customer demands and improve matching efficiency. In terms of the financial performance, our new home GTV reached R&B 255.4 billion in Q2, up 8.5% year over year and 10% quarter-over-quarter. Revenue from new home transactions was R&B 8.6 billion in Q2, rising by 8.6% year over year and 6.7% quarter-over-quarter. Revenue growth was in line with GTV growth year over year, demonstrating our steady monetization capabilities in new home transactions, while GTV growth outpaced the revenue growth sequentially due to the system evaluation of the take rate.

The skill of our collaborative project remains steady.

So, our event. Our AI student agent, Cheni, will refund the management of new home projects, revitalizing more existing projects.

On the customer front, with reinforced businesses, we are focusing on existing new home and rental services, fine-tuning operations, and launching our AI assistant, Chew, to assist service providers.

Stimulated customer demand and input matching efficiency.

In terms of the financial performance, our new home TV return will be $2,555.4 billion in Q2, at 8.5% year-over-year and a 10% cost of culture.

From new home transactions, R&B was $8.6 billion in Q2, rising by 8.6% year-over-year and 6.7% quarter-over-quarter.

From New Growth was in line. With GTV girls, Elva, dumped, streaking our setting. My decision capabilities in new home transactions.

Tao Xu: The contribution margin from the new home transaction services fell by 0.6% point year over year to 24.4% due to an increased variable cost resulting from our agent welfare improvements last year. Sequentially, the new home contribution margin rose by 1% points, largely attributed to the quarter-over-quarter decline in variable cost, thanks to our refined operations and the focusing sales strategy to maximize unit sales for property projects this year. For our home renovation and furniture business, we focused on enhancing the operations to build up our underlying capability to support our sustainable growth. On product capabilities, we analyzed the customer data and insight to understand our core needs, leveraging master designs and R&D. We introduced home renovation modules that can be flexibly configured and quickly iterated. By combining these modules with design adjustments, we provide customers with a one-stop home renovation solution.

While TV growth outpaced, the Romney growth sequentially due to the system, valuation of the tech rate.

The contribution margin from the new home transaction services fell by 0.6 percentage points year over year, to 24.4%, due to an increase in variable costs resulting from our agent welfare improvement last year.

Sequentially, the new form contribution margin closed by 1 percentage point.

Largely attributed to the decline in variable costs, thanks to our refund operations and the focused self-strategy to maximize unique cells for property projects this year.

Our home renovation and Furniture business.

We focus on enhancing the operations to build up our underlying capability to support our sustainable growth.

On product capabilities, we are analyzing the custom data and insights to understand our call needs.

We introduced the home renovation modules that can be flexibly configured and quickly iterated.

Tao Xu: On the supply chain side, our digital infrastructure enables us to significantly streamline partner, brand selection, and SQL comms based on custom needs. The proportion of centralized procurement rose markedly, while the overall unit purchase price declined significantly. To further improve our delivery quality, we identified over 2,600 high-quality project managers on our platform, improving their efficiency and income, while elevating the end-user experience. Operationally, we implemented cardigan efficiency business district strategy, which scored business districts based on the multiple indicators such as building age and the housing transaction volume. This allowed designers, project managers, and other service providers to focus on high-score districts, enabling them to gain better, to gain deeper insight to the customer and the property conditions. By introducing the upfront site measurements and other processes, we reshaped the workflow to improve operational efficiency.

By combining these models with the design adjustments, we provide customers with a one-stop home renovation solution.

On the supply chain side, our digital infrastructure enables us to significantly streamline partner brand selection and ask you cons based on customer.

the proportion of centralized procurement in those markets.

While the overall purchase price declined significantly.

To further improve our delivery quality.

We identified over 2,600 high-quality product managers on our platform, improving the efficiency and income.

Well, elevating the end user experience.

Operationally, we implement a quality and efficiency business district strategy.

We scored the business district based on multiple indicators, such as building age and the housing transition volume.

It's a lot for designer project managers and other service providers to focus on High School District.

To the customer and the property conditions.

By introducing the upfront site measurements and...

Tao Xu: We also accumulated and refined design solutions on the construction guidelines, ultimately enhancing the customer experience. In terms of the financial performance, revenue from our home renovation and furniture business reached R&B 4.6 billion, increasing by 13% year over year. This was mainly driven by the increase in home renovation orders, alongside with the high average revenue per order, stemming from an increase in the average price of furniture and home furniture retail. Contribution margin for the home renovation and furniture business reached 32.1%, up 0.8% points year over year, primarily driven by a larger proportion of centralized procurements and its enhanced order dispatching efficiency. Sequentially, the contribution margin fell by 0.4% points, mainly attributable to a structural shift with an increased revenue contribution of furniture and home furniture retail, which had a relatively low contribution margin.

We reshaped the workflow to improve operational efficiency.

We also accumulated and refunded design solutions on the construction guidelines, ultimately enhancing.

The customer experience.

in terms of the financial performance,

Revenue from our home renovation and furniture business reached R&B 4.6 billion.

Increasing by 13% year over year.

This $1 million is driven by the increase in home renovation orders.

Alongside the high average revenue per order.

Stemming from an increase in the average price of furniture and home furniture retail.

Contribution margin for the home renovation and the furniture business.

Reached 32.1% of 0.8 percentage points year over year.

Primarily driven by a larger proportion of centralized procurements, this enhanced all the dispatching efficiency.

Secretly, the contribution margin filled by 0.4 percentage points.

Many executables to start to shift with the increased revenue, contribution of furniture, and home, furniture retail, which has relatively low contribution market.

Tao Xu: In our home rental service business, we continue to iterate our products and apply AI to reconstruct our business process and operational finals. On the product front, we expanded our differentiated product portfolio, launching product 09 in the first half of the year to meet homeowners' various needs around the vacancy period and retail income, while balancing risk and returns for our business. For unit sales and occupancy, we implemented quality-driven leads allocation rules so that a better listing and a better service provider gets more leads. Customers will also benefit. We also leveraged AI capabilities for the intelligent collection and identification of the rental housing conditions, as well as intelligent pricing, to explore a unit sale module led by the platform AI.

In our home rental service business, we continue to iterate our products and applied AI to reconstruct our business process and operational funnels.

On product fronts.

Spies are differentiated product portfolio. Launching products, 09 is the first half of the year to meet the homeowners. Various means around the vacancy period and retail income, while balancing risk and returns for our business.

For Unique sales and occupancy.

We implemented.

Did even these allocation rules ensure that the battery listing and the better service provider get more leads?

Customers will also benefit.

We also leverage AI.

capabilities for the impacted collection and identification of the rental housing conditions as well as entitled the pricing

Tao Xu: In terms of the operational management, we leveraged AI's massive computing power to optimize resource dispatching, inventory, unit sales, and occupancy, which enhanced both personal productivity and rental occupancy rates in our pilot regions. In overall personal productivity, it improved remarkably in the first half of the year. The average number of the rental unit managers per property manager rose significantly, with the number of unit sales growing by over 50% in June compared with the same period of last year. Regarding the financial performance, revenue from our home rental services business reached a record high of R&B 5.7 billion in Q2, up 78% year over year, mainly benefiting from the rapid growth in the number of the rental units under management. By the end of Q2, we have over 590,000 rental units under our management, compared with over 310,000 in the same period of 2024.

To explore a unisar model led by the platform AI.

In terms of the operational management.

We leveraged AI and massive computing power to optimize resource dispatching, inventory management, and occupancy, which enhanced both personal productivity and rental occupancy rates in pilot regions.

In oral personal productivity.

Improves the remarkably in the first half of the year.

The average number of rental unit management property managers has increased significantly.

Which the number of unisoft growing by over 50% in June compared with the same period last year.

Regarding the financial performance.

Revenue from our home run to services business reached a high of $5.7 billion in Q2.

Of 78% year-over-year.

From the rapid growth in the number of rental units under management.

Right. At the end of Q2, we have over 590,000 new rental units on the market.

Tao Xu: The contribution margin for home rental service was 8.4%, up 2.5% points year over year and 1.6% points quarter-over-quarter, largely due to the improved gross profit of our carefully run business. As we continue to refine the carefully run business model, based on the essence of the service contract, the revenues from the some newly managed rental units were recorded as net revenues derived from the service fee. For BAO Jia business, our strategic direction is very clear and firm. We will never be a developer. Our commitment to assets like this model is absolute. Other than Chengdu Beichen and the Shanghai Fengxing Shinteng project, we will not independently operate any other projects. Our role is to deliver Sichuan product solutions and the marketing service for developers and other partners in industry, and we categorically do not provide any form of fund solutions.

Compared with over 300 and 10,000 in the same period of 2024.

Rental service was 8.4% up 2.5% in point year over year and 1.6 percentage points, code of culture largely due to the improved growth period of our carefully, right business.

as we continue to refine the career run business model,

Based on the essential service contract, the revenues from the Sun newly managed rental units were recorded at night revenues, derived from the service speed.

Our strategic direction is very clear, and for...

We will never be a developer.

Our commitment to Isis, like this model, is absolute.

Other things.

We will not independently operate, any other project.

Our role is to deliver Sichuan product solutions and the marketing service for developers and other partners in the industry.

And we categorically do not provide any form of Fund Solutions.

Tao Xu: In Q2, our revenue from emerging and other services decreased by 50.6% year over year and grew by 23.5% quarter-over-quarter to R&B 432 million. Now, moving to other costs and expenses, profitability, cash flow, and other financial metrics in Q2. Our store cost reached R&B 762 million, increasing by 11.9% year over year and remaining relatively stable quarter-over-quarter. The year-over-year growth was mainly from a higher store repair and maintenance cost. Other costs were R&B 588 million, up 15.2% year over year and 7.5% sequentially, primarily due to a higher basic maintenance cost of our home rental service business. Gross profit dropped by 12.5% year over year to R&B 5.7 billion. Gross margin was 21.9%, down 6% points year over year, primarily due to the decrease in contribution margin from the existing home transaction services.

In Q2, our revenue from emerging and other service decreased by 50.6% year-over-year, and the grow by 23.5%, cut of culture, 2 armed before 10032 million.

Now, moving to other costs and expenses, profitability, cash flow, and other financial metrics in Q2.

Our stock cost per R&B is $762 million.

Increasing by 11.9% year-over-year and the remaining relatively stable cultural culture.

The year-over-year growth was mainly from a higher store repair at the maintenance cost.

At a cost warranty, $50,088 million, up 15.2% year-over-year and 7.5% sequentially, primarily due to a higher basic maintenance cost of...

Of our home rental service business.

Gross profit dropped by 12.5% year-over-year to $5.7 billion.

Gross margin was 221.9%.

From 6 percentage points year over year.

Tao Xu: Gross margin increased by 1.2% points sequentially in Q2, mainly due to the greater revenue contribution from the home renovation and furniture business, which has a relatively high contribution margin. In Q2, our GAAP operating expenses totaled R&B 4.6 billion, up 3.1% year over year and 9.7% sequentially. Notably, G&D expenses were R&B 2.1 billion, remaining flat year over year and increasing by 11% quarter-over-quarter, primarily attributed to an increase in bidet provision. Sales and marketing expenses amounted to R&B 1.9 billion, remaining relatively stable year over year and growing by 7.1% quarter-over-quarter, primarily resulting from the increased sales and marketing expenses for home renovation and furniture business. Our R&D expenses were R&B 633 million, up 25.6% year over year and 8.5% sequentially, largely driven by a higher personnel cost and the detective service fee.

Primarily due to the decrease in contribution margin from the single home transaction services.

Gross margin increased by 1.2 percentage points sequentially in Q2.

Mainly due to the greater revenue contribution from the home renovation and friendship business, which has a relatively high contribution margin.

In Q2, operating expenses totaled $4.6 billion, up 3.1%.

3.1% eobs and 9.7% sequentially.

Notably, G&D expenses or R&B remained flat year over year at $2.1 billion, increasing by 11% in culture.

Primarily attributed to an increase in that provision.

Marking expenses amongst R&B: $1.9 billion remaining, driven to a stable year-over-year growth of 7.1%. Cuts, of course, are primarily resulting from the increase in sales and marketing expenses for the home renovation and furniture business.

Our R&D expenses for R&B were $633 million, up 25.6% year-over-year and 8.5% sequentially. This increase was largely driven by higher personnel costs and the detective service fees.

Tao Xu: In terms of the profitability, GAAP income from the operations totaled R&B 1.06 billion in Q2, down 47.4% from the same period of last year and up 79.4% sequentially. GAAP operating margin was 4.1%, dropping by 4.5% points from Q2 2024 and rising by 1.5% points quarter-over-quarter. Non-GAAP income from operations totaled R&B 1.61 billion, falling by 42.9% from the same period of last year and increasing by 40% sequentially. Non-GAAP operating margin reached 6.2%, down 5.9% points from Q2 2024, mainly due to a year-over-year gross margin decline. Non-GAAP operating margin rose by 1.3% points from the previous quarter, mainly attributed to a sequential gross margin improvement. GAAP net income totaled R&B 1.31 billion in Q2, down 31.2% year over year and up 52.8% quarter-over-quarter. Non-GAAP net income was R&B 1.82 billion, falling 32.4% year over year and increasing 30.7% quarter-over-quarter.

in terms of the profitability,

That income from the operations totaled. R&B 1.06, billion in Q2 down 47.4% from the same period of last year and up 79.4% sequentially.

Capital breaking, Martin was 4.1%, dropping by 4.5 percentage points from Q2 2024, while rising by 1.5 percentage points in the quote of culture.

Non Gap income from operations, totaled, R&B 1.61 billion following by 42.9% from the same period of last year and increasing by 40% sequentially.

Long Gap. Operating margin reached 6.2%.

Bound 5.9 percentage points from Q2 2024 mainly due to a year-over-year growth margin decline.

Long cast of Breaking margin growth by 1.3 percentage points from the previous quarter million attributes to a sequential growth Market improvements.

That's net income total. R&B 1.31 billion in Q2 down 31.2% year-over-year and up. 52.8% could, of course

Tao Xu: Moving to our cash flow and the balance sheet, we generated a net operating cash inflow of R&B 826 million in Q2. New home DSO reached 51 days in Q2, remaining at a healthy level. On top of spending approximately US$2,254 million per share repurchase and distributing US$400 million for 2024 final cash dividend during Q2, our total cash liquidity, excluding custom deposits payable, remained at a high level of around R&B 17 billion. With our robust cash reserves, we will continue to augment shareholder returns throughout active share buyback to further enhance capital allocation and capital operation efficiency. At the end of Q2, we repurchased around US$394 million worth of shares this year, which accounted for around 1.7% of the company's total share outstanding at the end of 2024. We have consistently delivered on our promise to reward shareholders since launch of the share repurchase program in September 2022.

Going to our cash flow and the balance sheet.

We generated a net operating cash inflow of R&B 826 million.

In Q2.

New home, Paso reached. The 51 days in Q2 remaining at a housing level.

On top of spending approximately US dollar 20254 million for share repurchase and the Distributing your solar 400 million for 2024 final cash dividend during Q2 our total cash liquidity.

including custom deposits payable remaining at a high level of.

70 billion.

with our low pass cash reserves, we will continue to augment shareholder return throughout

Active share by bank to further enhance capital allocation by capital operation efficiency.

End of Q2, we will see departures around the US dollar, with $394 million worth of shares this year.

Which accounted for around 1.7% of the company's total share of outstanding. At the end of 2024, we have consistently delivered on our promise to reward shareholders.

Tao Xu: We have repurchased around US$2 billion in shares as of the end of June 2025, accounting for about 10.3% of our total share outstanding before the program began. Today, we are pleased to announce that our board has approved the expansion of the existing share repurchase program. The authorization has been increased to US$5 billion, and the program has been extended to August 31, 2028. Going forward, we will continue to reward our shareholders who have grown with us and share the value we create. Despite fluctuations in the macro environment, we have delivered a chopping performance that significantly outperforms the market, underpinned by our solid business fundamentals and a diversified portfolio. We are actively driving operational improvements to maximize the company's long-term value. AI-driven refined operations and ecosystem optimization are continuously unleashing the platform's long-term potential.

Since the launch of the shared purchase program in September 2022,

We have repurchased the wrong, your Solar $2 billion in shares.

As of the end of June 2025,

accounting for about 10.3% of

Our total shares outstanding before the program began,

Today, we are pleased to announce that our board has approved a function of the Extinction repurchase program.

The authorization has been increased to your store to $5 billion, but the program has been extended to August 31, 2028.

Going forward, we will continue to reward our shareholders, who have grown with us and shared value. We create.

Despite fluctuations in microenvironments, we have delivered a job plan performance that has significantly outperformed the market, underpinned by our solid business fundamentals and our diversified portfolio.

While actively driving operational improvement to maximize the company's long-term value.

Tao Xu: Our healthy cash flow and the proactive shareholder return policy demonstrate our firm commitment to long-term value creation. Looking ahead, we will join force with our partners and shareholders to seize opportunities and create great value together. Thank you. Next, I would like to turn the call over to our chairman and CEO, Mr. Stanley Peng. Go ahead, sir.

Are driven refunds operations and ecosystems of optimization continuously unleashing the platform's long-term potential.

Our healthy cash flow and the proactive shareholders and policy demonstrate our form. Commitment to long-term value creation.

Looking ahead, we will join forces with all partners and shareholders to seize opportunities and create great value together.

Thank you. Next, I would like to hand the call over to our Chairman and CEO, Mr. Stunning Pong.

Stanley Peng: Thank you, Paul. For the overview of our updates for the first half of the year, now I'd like to share the reasoning behind our initiatives and address some key interests and concerns. First, I'd like to talk about scale and efficiency. For our housing transaction services business, we have expanded our agent and store network very rapidly over the past few years. In the first half of the year, a large number of new brands, stores, and agents joined our network. However, we saw some softness in our efficiency indicators in housing transaction services in the second quarter. Our ACN and authentic listing were originally built to solve the key consumer pain points of that time. But as China's real estate market evolved, consumer needs changed dramatically, and our response didn't fully meet those emerging needs.

Oh, I have, sir. Thank you for the overview of our updates for the first half of the year. Now, I'd like to share the reasoning behind our initiatives and address some key interests and concerns.

First, I'd like to talk about scale and efficiency.

For our housing transaction services business, we have expanded our aging and store network very rapidly over the past few years.

In the first half of the year, a large number of new brand stores and agents joined our network.

However, we saw some softness in our efficiency indicators in housing transactions in the second quarter.

Our ACN and authentic listing were originally built to solve the key consumer pain points of that time.

As China's real estate market has evolved, consumer needs have changed dramatically.

Stanley Peng: This created an urgent need for us to shift our growth engine from scale to efficiency. The main challenge we cleared was clear how would we raise productivity per store and per agent and increase platform efficiency while maintaining the scale of our agent and store network. Resolving this will define the next stage of our development. To begin with, I want to stress that scale and efficiency are not a zero-sum trade-off. Gaining efficiency doesn't mean sacrificing scale. Reaching the current scale of our agent store network was no small feat. You would be hard-pressed to find a comparable example anywhere in the world of a company that has reached such a large presence in a single city through its own operations. So how did we accomplish it? In the past, the scarcest resources in the market were high-quality assets and transaction security guarantees.

Our response didn't fully meet those emerging needs.

This created an urgent need for us to shift our growth engine from scale to infinity.

The main challenge we cleared was clear. How would we raise productivity for the store and per agent?

An increase platform efficiency.

While maintaining the scale of our agent and store network.

Resolving. This will, uh, define the next stage of our development.

To begin with, I want to stress that scale and efficiency are not a zero-sum trade-off.

Gain efficiency doesn't mean sacrificing scale.

Reaching the current scale of our agent Stone network was no small feat.

In the world of a company that has reached such a large patient base in a single city through its own operations, how did we accomplish it?

Stanley Peng: That is why we built our ACN and introduced authentic listings and service commitments, integrating online platform innovation, offline business execution, and disciplined scientific management to support them. By providing what was scarce, we achieved a breakthrough in scale and built a deep competitive moat. So how do we move from scale to efficiency? First, by looking at our history, we need to find out the existing strengths that we can leverage while anchoring new capabilities for today's context. Second, by responding to consumers' evolving needs in China's changing real estate market. The new scarce resources are accurate market insights to help buyers make the right decisions, operational capabilities to help sellers market properties effectively, and the emotional value that comes from emphasizing with customers. Buyers want professional advice. Homeowners need skilled marketing support. And in the age of AI, consumers crave emotional connection.

In the past, the scariest resources in the market were high-quality assets and the transaction security guarantees. That is why we built our ACN and introduced authentic listings and service commitments.

Integrating online platform innovation, offline business execution, and the discipline of Scientific Management to support them by providing. What was discussed? We achieved a breakthrough in scale and built a deep competitive moat.

So how do we move from scale to efficiency? First, by looking at our history, we need to find out the existing strengths that we can leverage while acquiring new capabilities for today's context.

Second, by responding to consumers involving needs in China's changing real estate market.

The newscast resources are accurate market insights to help buyers make the right decisions and operational capabilities to help sellers market properties effectively.

And, uh, emotional value that comes from empathizing with customers.

Stanley Peng: Our task is to create clear pathways to deliver these values. As we seek a new growth paradigm, we start by challenging a paradox. Large organizations often sacrifice efficiency to pursue scale. We already have the drives for efficiency improvements. First, the transformation of customer demands acts as a natural form of selection. Second, AI-led innovation is delivering real productivity gains. As a new means of production, AI is becoming increasingly powerful, capable of replacing traditional means of production. These two factors, two forces, enable us to raise efficiency while maintaining the scale of our agent and store network. Our end game is clear, but how we get there is still being defined. Going forward, we will commit our energy and resources to those areas to reshape our growth paths. Now I'd like to delve into the logic behind some of the business initiatives we are working on.

Buyers want professional advice, homeowners need skilled marketing support, and on the edge of AI, consumers face crime and seek an emotional connection. Our task is to create clear pathways to deliver these values.

As we seek a new growth paradigm.

We start by changing a paradox, large organizations, often sacrifice efficiency to pursue scale. We already have the drives for efficiency improvements first the transaction, the transformation of customer demands acts as a natural force of selection. Second AI leads. Innovation, is delivering real productivity. Gains as a new means of production, AI is becoming increasingly powerful capable of replacing. Traditional means of production, these 2 factors 2 forces, enable us to raise efficiency while maintaining the scale of our agent and store Network our, our in end game is clear.

How we can get there is still being defined going forward. We will commit our energy and resources to those areas to reshape our growth path.

Now, I'd like to dive into the logic behind some of the business initiatives.

Stanley Peng: I will start with the home renovation business. As Tom mentioned, our strategy centers on community-centric operations and our full-services premium store model. Our rationale reflects a major emerging trend. It's a shift from a traffic-driven mansard to a local community-centric approach. We have begun piloting this model throughout our first full-services home renovation premium store in Beijing. In the premium store, we put in showrooms with our more modular renovation products so potential customers can see real replicable home renovations based on typical local floor plans in the community. Our organizational structure has adapted accordingly. Designers, project managers, and workers are now dedicated to specific communities, gaining knowledge and experience of both properties and customers there. The key here is to deepen our engagement, locking in high-value areas and strengthening our presence to become customers' first choice in the region, ultimately occupying their mind share.

Uh, we are working on. I'll start with the home renovation business.

As Tom mentioned, our strategy Center on Community Center uh Centric operations and our full Services premium store model, our rational, reflects a major emerging Trend, it's a shift from a traffic driven, a men's size to a local community Century approach.

We have begun.

Piloting this model throughout our our first full Services home renovation, premium store in Beijing in the premium store we put in in showrooms with our more modular renovation products. So potential customers can see real replicable home, renovations, based on typical local floor plans in the community.

Organizational structure has adapted accordingly. Designers, project managers, and workers are now dedicated to specific communities, gaining knowledge and experience of both properties and customers there.

Key here is to deepen our engagement.

Stanley Peng: Our goal is to bridge the distance between our services and the users. We want to bring them closer physically, psychologically, and in decision-making. So we can evolve from a city-level renovation service provider to a community-level partner whose interests are deeply aligned with customers specifically. By opening our home renovation premium store adjacent to our existing home transaction contract signing centers, we have reduced the physical distance to our customers. This tells our customers we are the neighbor right down the street, not a large distant company they have to drive an hour to reach. This builds trust and convenience at the same time. Our community-based premium store and community-specific service providers are well-versed in the floor plans and customer needs, so they can offer tailored home renovation design plans even before customers purchase homes. This shortens the decision-making distance for customers. Why is it?

Blocking in high-value areas and strengthening our presence to become the first choice in the region. Ultimately occupying their mind share. Our goal is to bridge the distance between our services and you.

We want to bring them.

Closer, physically and psychologically, and in decision-making. So we can evolve from a city-level renovation service provider to a community-level partner, whose interests are deeply aligned with the customers.

Premium store adjacent to our existing home transaction.

Contract signing centers, we have reduced the, the physical distance distance to our customers. This tell our customers, we are the Neo right down the street. Not a large distance company, they have to drive an an hour, an hour to reach this builds trust and convenience at the same time. Our community based premium store and Community specific with providers are well and well versed in the floor, plans and customer needs so they can offer tailored home renovation. Design plans, even before customers perch purchase homes, this shortened, the decision, making distance for customers.

Stanley Peng: Because the biggest pain point in traditional home renovation is uncertainty. Customers often don't know the final cost, what their homes will look like, or whether a service will be reliable. We solve this with two innovative services: community showroom designs and pre-signing measurements and drawing. Community showroom designs say to potential customers your neighbor's home with the same floor plan as yours has already been renovated, with visible results, clear prices, and proven satisfaction. No guesswork is needed. Our pre-signing measurement and drawing flips the traditional payments-first service letter model. We demonstrate value upfront by providing professional measuring and design renderings before customers commit. This gives people great security and confidence right from the start. Our strategy also reduces the psychological distance for users. With a physical store, proven cases, and a professional consulting team in the community, our brand is no longer a cold impersonal advertisement.

Why is it?

Because the biggest pain points in traditional home renovation are uncertainty.

Customers often don't know the final costs, what their homes will look like, or whether the service will be reliable. We solve this with two innovative services: community showrooms, designer designs, and pre-signing measurements and drawings.

Community showrooms design—say to potential customers, your neighbor's home with the same floor plan.

You, as yours has already been renovated with visible results, clear, process and proven satisfaction. No, no guess work is needed our pre-signing measurement and drawing flips, the traditional payments. First service letter model, we demonstrate value upfront by providing professional measure a measuring and design re renderings before customers commit.

Stanley Peng: It becomes a real, tangible presence customers can interact with anytime. The assets we gain from this kind of deepened operation are more powerful than marketing, turning one-time transactional customers into long-term interactive community users. These are just some of the ways we think about our initiatives in the home renovation business. Next, I'd like to talk about how we view the home rental business. Tom has already covered much of our progress in this segment, including product interaction and a broader use of AI to boost property management efficiency and streamline other operations. Why do we pursue maximum efficiency in this business? Because under the traditional management model, our carefree rental business inevitably faces the economics of scale. Once the numbers of units reach a certain level, complexity may rise sharply due to the nonstandard nature of our products, the service provider abilities, and the sales negotiations.

This gives people great security and confidence right from the start. Our strategy also reduced the psychological distance for users with a physical store, proving cases, and a professional consulting team in the community. Our brand is no longer a code in personal and white advertisement; it becomes a real tangible presence. Customers can interact with us at any time.

The assets we gain from this kind of deepening operational are more powerful than marketing.

Turning transactional customers into long-term interactive community users.

These are just some of the ways we think about our initiatives in the home renovation business.

Next, I would like to talk about how we view the home rental business.

It's already covered much of our progress in this segment.

Including product in interaction and, uh, uh, broader user or AI to boost property management efficiency and streamline other operations.

Why do we pursue maximum efficiency in this business?

Because under the traditional management model, our Carefree rental business inevitably faces issues in economies of scale. Once the number of units reaches a certain level...

Stanley Peng: At the same time, the rental business operates on the service fee profit margin, which cannot absorb losses from nonstandard operations and low efficiency. These three major challenges form an iron triangle that compels us to break through the traditional model and pursue maximum operational efficiency. So how do we achieve maximum efficiency? In phase one, we restructured our organization, moving away from the all-in-one manager model to six specialized roles fully aligned with the logic of our ACN. This division improved professional skills, reduced service variance, and embedded these capabilities into our platform. In phase two, we optimized our product model, shifting from the high-risk nonstandard vacancy-prone lease-out model to a steady rent pass-through model with unified service fees. This stabilized revenue per property, aligned team goals, and removed the obstacles for scaling growth. We also digitalized processes through our SaaS system, accumulating structured data to fuel AI applications.

Complexity may rise sharply due to the non-standard nature of our products, the service provider's abilities, and the scale, as well as the sales negotiation negotiations.

At the same time, the rental business operates on the service fee, profit, uh, fee profit margin, uh, which cannot absorb losses from non-standard operations and low efficiency.

These three major challenges from the Iron Triangle compel us to break through the traditional model and pursue maximum operational efficiency.

So how do we achieve maximum efficiency in Phase? 1 we we restructured our organization moving along, moving away from the all-in-1 manager. Model to 6, specialized roles fully aligned with the logical of our ACN. This is this division, improved professional skills reduced service VAR uh variance and embedded its capabilities into our platform.

Stanley Peng: In phase three, we began to build intelligence into operations, deploying our AI human model, where AI handles standardization, pricing, auditing, and 24/7 virtual services. We hoped that AI could cover 80% of standardized work, while people can focus on trust in regular cases and high-quality services. The logic tying all of this together is about transforming a nonstandardized offline industry full of uncertainty into a data and intelligence-driven business with more certainties. At its core, our system reduced reliance on individual experience, smoothing our fluctuations in service quality and customer experience. Efficient operations and consistent service quality create a growth flywheel, reinforcing the synergies across the home rental business, home renovation, and housing transactions. Our vision is to build an AI-driven rental platform that combines AI, IoT hardware, and operating processes. We hope this platform will give the rental industry a proven and scalable profit model.

Scaling groups, we also digitalized processes through our SAS system, accumulating structured data to fuel AI applications. In Phase 3, we begin to build intelligence into operations, deploying our AI human model where AI handles standardization, pricing, auditing, and 24/7 virtual services. We hope that AI could cover 80% of standardized work while people can focus on trust in regular cases and high-quality services. The logic behind all of this is about transforming a non-standardized, offline industry full of uncertainty into a data and intelligence-driven business with more certainties.

At at its core, our system reduced. Reliance on individual experience, smoothing our fluctuations in service quality and the customer experience. Efficient operations, and the consistent service, quality creates a growth flywheel reinforcing does incentives across the home. Rental business, home renovation and house housing transactions. Our vision is to build an AI driven rental platform by combining AI iot hardware and operating processes. We hope this platform will give the rental industry.

Stanley Peng: Meanwhile, the pursuit of operational excellence will inevitably compel our whole organization to develop more efficient operational mechanisms. We also hope it can be an example for the traditional service industry, showing how structure, model design, and technology can solve issues like nonstandardized nature and the economics of scale. Now, moving to our BAO Jia business, why are we pursuing this business? We will not be developers. To be clear, we will not be adopting an asset-heavy model. The traditional real estate developer business used to depend on land and money. In today's market, there is a new variable, a customer-oriented mindset. Because we are so close to our customers, we can collect more customer insights and data to add value to this third variable.

Approving a scalable profit model. Meanwhile, the pursuit of operational excellence will inevitably compel our whole organization to develop more efficient operational mechanisms.

We also hope it can be an example for the traditional service industry, showing how structured model design and technology can solve issues like non-standardization and the economics of scale.

Now, moving to our business. Why are we pursuing this business? We will not be developers, to be clear. We will not be adopting an asset-heavy model.

Stanley Peng: In the early stage of this business, we ran two self-operated projects to test our understanding and to see what value we could create for this third factor. Genuine customer needs are at the very core of our product design and construction. We leverage our robust data and AI-powered capabilities, including pricing prediction, unit mix optimization, and potential customer insights to deeply understand our target customer needs. Our project positioning, product design, and construction adhere to these authentic customer needs, including many small details traditional developers might overlook, but that we consider critical to the long-term living experience. In our Chengdu Beichen project, we have dedicated meticulous design and construction efforts to over 108 quality-driven details that are many things minor yet meaningful.

The traditional real estate developer business used to depend on land and money. In today's market, there is a new variable: a customer-oriented mindset. Because we are so close to our customers, we can collect more customer insights and data to add value to this third variable.

In the early stage of this business, we ran 2 self-operated projects to test our understanding and to see what value we could create for this third factory.

Junior customer needs.

At the very core of our product design and construction, we leverage our rubber data and AI-powered capabilities, including pricing.

Prediction, you need to mix.

Optimization and potential customer insights to deeply understand. Our target customer needs our project positioning, product design, and construction to adhere to these authentic customer needs, including many small details traditional developers might overlook, but that we consider crucial to the long-term living experience in our trend.

Project we have dedicated.

Stanley Peng: This spans from urban integration of architecture design, landscape planning, homecoming journey experiences, interior spatial planning to AI, IoT-enabled sensory systems covering sight, sound, smell, taste, touch, consciousness, as well as lifestyle scenarios and property services. This productization capability is something that is becoming crucial as the market shifts to buyers. This means the supply side must offer differentiated, not homogeneous products. And this is how we add value to the industry through the third variable of production beyond land and money. Finally, we now stand at a crucial turning point, balancing scale and efficiency. Adapting to evolving customer demands and keeping pace with rapid technology development are all issues we must address.We

Meticulous design and construction efforts to over 108. Quality-driven details that many consider minor yet meaningful.

This suspense from Urban integrates the design of architecture and landscape planning.

Homecoming. Journey experiences, interior special planning to an AI.

Our IoT-enabled sensory system covers a site with capabilities for detecting smell, touch, and consciousness, as well as for lifestyle scenarios and property services. This productization capability is becoming crucial as the market shifts toward buyers. This means the supply side must offer differentiation.

Not homogeneous products. This is how we add value to the industry: through the third variable of production, beyond land and money.

Finally, we now stand at a crucial trading point, balancing scale and efficiency.

Speaker 1: have already started exploring and testing new approaches across our business. While maintaining the scale advantage of our platform, we aim to revamp our service interface through community-centric operations, unlock organizational efficiencies with AI, rebuild our product logic with a customer-centric mindset, and continuously shape new paradigms in the residential service industry. This concludes my prepared remarks for today. Alberta, we are now ready to take questions.

These are all issues we must address. We have already started exploring and testing new approaches across our business.

While maintaining the scale advantage of our platform.

We aim to revamp our service interface through community-centric operations, unlock organizational efficiencies with AI rebuilds, reshape our product logic with a customer-centric mindset, and continuously shape new paradigms. In the residential service industry,

This concludes my prepared remarks for today. We are now ready to take questions.

Siting Li: 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're on a speaker phone, please pick up the handset to ask your question. As a reminder, we only accept questions on the English language line. 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're going to ask a question in Chinese, please follow with an English translation. Your first question comes from Timothy Zhao from Goldman Sachs. 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're on a speakerphone, please pick up the handset to ask your question.

As a reminder, we only accept questions on the English language line.

For the benefit of all participants on today's call, please limit yourself to one question. If you have additional questions, you can re-enter the queue.

If you're going to ask the question in Chinese, please follow with an English translation.

Your first question comes from Timothy Jaw from Goldman Sachs. Please go ahead.

Siting Li: Great. Thank you, Majun, for taking my question and congrats on the solid results. And I'm very excited to hear about your new approach in growing the business in the future. I think my question is on the secondary home. I'm just wondering if management can provide us any overview on the second quarter secondary home market and how should we expect the trajectory into the second half of this year? What kind of policy tools that we can expect for the rest of this year? 感谢关羽城接受我的提问, 那也非常的惊喜能够听到关羽城关于如何增长我们的业务在未来的几年如何平衡这个规模和效率。那我的问题其实是关于二手房的这个市场, 那请问你能帮我们回顾一下二季度二手房的一个大盘的情况, 那我们如何预期今年下半年的一个二手房的走势, 还有哪些政策工具是我们可以预期的? 谢谢。

Great. Uh, thank you. Imagine for taking my question and congrats on the solid result and very excited to hear about your new approach, uh, in growing the business in future. I think my question is, uh, on the secondary home. Uh, I just wondering if management can provide us any overview on the second quarter, secondary home, uh, market and how should we expect the uh, the uh, the trajectory into the second half of this year? What kind of policy tools that we can expect for the rest of this year? Um,

Tao Xu: Thank you, Timothy. Let me first take a brief look on the market in the first half. The total value of the housing transaction nationwide was stable overall. The market was off to a good start in Q1, sustaining the recurring momentum from the Q4 of last year. But both the number and the price of transactions weakened significantly in this Q2. Divergence also intensified. Based on NBS data, new home sales nationwide dropped by 5.2% year over year in the first half. CRIC research indicates that 1,200 developers saw steeper declines, posting a 10.9% in the first half of sales flat, then intensified to 14.5% year over year in this Q2. The listing home market holds up relatively well, according to Baker Research Institute in the first half. The total value of online registered transactions for listing homes rose 8.3% year over year.

Thank you for the TMC. Uh, let me first take a brief look at the market in the first half. The total value of the housing transactions nationwide was stable overall. The market was off to a good start in Q1.

Sustaining the recovering momentum from the Q4 of last year.

But both the number and the price of transactions weakened significantly in Q2. Divergence also intensified.

Based on NBS data, new home sales nationwide dropped by 5.2% year-over-year in the first half.

There are still research indications regarding the 1,200 developers. So, steeper declines are posting a 10.9% decrease in first-half sales, which intensified to 14.5% year-over-year in this Q2.

Tao Xu: This was driven by a 19% increase in the number of transactions, even though average price fell by 9% both year over year. That's the momentum lowest in this Q2. The transaction volume growth rate dipped to just 2%, and the number of transactions also slipped to a 12% gain. In June, the number of transactions decreased by 8% year over year, and the home prices dropped further month over month by 1.7%. Rent has been more stable than home prices. Nationwide, rental yield has been steadily rebounding since the year of 2021. In June this year, it reached a higher of 2.5%, about 30% higher than its lowest point, creating value support for the home prices. Structurally, existing homes continue to perform better than new homes. Existing home transactions tended to have a large average GFA, lower total price and a higher share of the nearly new existing homes.

The E3 Home Market holds up relatively well. According to Baker, recent estimates in the first half indicate that the total value of online registered transactions for new homes is up 8.3% year over year.

This was driven by a 19% increase in the number of transactions.

Even though the average price fell by 9% year over year, set aside the momentum; transactions volume slowed in this Q2.

Girls' rate dips to just 2%, and the number of transactions also slips to 12% again.

In June, the number of transactions decreased by 8% year-over-year.

And the home prices dropped further by 1.7% over the months.

Rent has been more stable than home prices nationwide. Run to yield has been steadily rebounding since the year 2021.

In June this year, it reached a high of 2.5%.

about 40% higher than the lowest point, creating valuable support for home prices.

Gradually visiting home. We continue to perform better than new homes.

Tao Xu: Population movement from lower to higher-tier cities remains steady, and we continue to see wild differences across cities in terms of the housing price, unit resale through, and the land auction premiums. Our key indicators, like homeowner price adjustment, prospective index, and agent competence index, show the weak market sentiment. The fitting efforts of the new policies, China-US trade tensions, shortened the policy vacuums, and the system market correction steps to market momentum. Reinforced expectations for price declines constrained the market recovery. All of this adds to a strong downward pressure for the market. Since the beginning of July, the market downturn has picked up speed. The number of existing home transactions fell by over 5% month over month, while the prices dropped by 1.5%. New home subscriptions fell by 25% month over month, signaling a period of sharp correction.

Let's see, home transaction, pending to have a large average, GFA lower total price and the higher share of the Nearly New existing homes.

Population movements from lower to higher cities remain steady, and we continue to see the differences.

And the land auction premise.

Our key indicators, like homeowner sentiment, price adjustment perspective, index, and agent competence index, show the weight of market sentiment.

The feeding efforts of the new policies.

China-U.S. trade tensions shortened the policy.

Mums and the system market, the correction serves to market momentum.

Reinforced is a reinforced.

Expectations for Price declines.

Constraint the market recovery.

All of this adds strong, strong pressure to the market.

Since the beginning of July, the market Junction has picked up speed.

The number of transactions filled by over 5% month over month while the prices dropped by 1.5%.

New home subscriptions view by 25% month over month.

Tao Xu: Looking ahead, the market path will still depend on the pace of the future policies and the supply-demand balance improvements. Both are key to restore the confidence, which in turn influences buying behavior and the price trends. On June 30, the State Council Executive Meeting once again emphasized the need to double down on stabilizing the market, signaling the potential for stronger policy support. On top of current policies that remain in place, there is still room for new, stronger policies aimed at boosting demand and improving supply. On the demand side, leading cities have further relaxed the purchase restrictions. Urban renewal, relocation vouchers, and the purchase subsidy can also unlock potential home buying demand. On the supply side, high-quality housing from the fourth-generation houses and the nearly new existing home supply enable the easing of sales restrictions, could elevate supply side quality and potentially market sentiment and transaction volume.

Signaling: a period of sharp reaction.

Looking ahead, the market pass will still depend on the pace of the future policies and the improvements in the supply-demand balance.

Both are key to restoring the conference.

The, uh, to restore the confidence, which in turn influences buying behavior and the price trend.

On June 30th, the State Council is actually making policy adjustments. Once again, it underscores the need to double down on stabilizing the market, signaling the potential for stronger policy support.

On top of current policies that remain in place, there is still room for new, stronger policies, boosting demand and improving supply.

On the demand side, leading cities have further relaxed the portal restrictions.

Urban renewal, relocation voters, and the purchase subsidy can also unlock potential home buying demand.

on supply side.

Tao Xu: Proactive policy can help counteract the market downward trend and support a shift towards recovery. Thank you.

High-quality housing from the fourth generation of houses and nearly new existing home supply enables the eating of self-restrictions for Elevate, supply side quality, and the potential market sentiments and transaction volume.

Productive policy can help counteract the market downward trend and support the shift towards recovery. Thank you.

Siting Li: Thank you. Your next question comes from John Lam from UBS. Please go ahead.

Thank you. Your next question comes from John Lamb from UBS. Please go ahead.

Stanley Peng: 呃, thank you。嗯, 是, 你, 涛哥, 你们好。那个, 我这边有个问题想问一下关于, 呃, 行业的beta以及那个公司的alpha. 呃, 我们也知道行业的话都在, 呃, 比较困难。那在行业beta往下的背景下的话, 呃, 能不能请教一下管理层做了什么东西来去体现公司的alpha, 呃, 比如说市占率、呃, 人效、门店的效率、呃, 后续的门店的增长的策略是怎么样? so let me translate my question in English. So, could management share about, under the backdrop of the, the sector downturn, regarding the property sector, is there anything that the management team has done to deliver the alpha, to the investors? for example, would be like the market share, agents' productivity or store productivities. And also, how does the management think about the growth strategy for both the agents and also the number of stores? Thank you.

Tao Xu: John, thank you for the question. We hope to outperform the market for a long time to come and have taken steps to achieve that. I will answer a question from two angles: scale and efficiency. First, the continuous expansion of our platform agent and store network over the past few years has fueled fast business growth. Going forward, we will slow the pace of our store and agent growth and focus more on efficiency for sustainable development. This strategy will vary by the city. In places where store network coverage is already high, we will impose higher quality and ROI requirements to onboard new stores. In few cities where store network coverage is still relatively low, we'll continue to make a strategic investment. At the end of the year, we expect to keep our store and agent number stable outside of Beijing and Shanghai.

Uh, thank you. Um, so let me translate my question into English. So, could management share about, uh, under the backdrop of the, uh, the sector downturn regarding the property sector. Uh, is there anything that the management team has done to deliver overall, uh, to the investors? Uh, for example, would it be like the market share, uh, agents' productivity, or store productivity? And also, how does the management think about the growth strategy for both the agents and the social number of stores? Thank you.

We hope to offer from the market for a long time to come and have taken steps to achieve that. I will answer a question from triangle's skill and efficiency.

First, the Continuous is a function of our platform agents. Don’t network our past few years; it has a few of the fast business goals.

Going forward, we will slow the pace of our store and Asian growth, and focus more on efficiency and sustainable development.

This strategy will vary by city in places where store network coverage is already high. We will impose higher quality and ROI requirements.

To onboard new stores in a few cities, our network coverage is still relatively low. We'll continue to make a strategic investment.

Tao Xu: In those two cities where agent growth has been strong over the past few years, we are consolidating lower-performing stores and phasing out lower-performing agents. I believe it's time to shift our growth focus from scale to efficiency, starting with deeper operational efforts in the short term. In the long term, we set the technology to drive the industry-wide gains in total factor productivity. In details, we will implement in-depth systematic centrifugal management operations, particularly by enhancing operations that add competitive dimensions. This involves management processes that influence competitive outcomes, such as focusing on properties, customers, and improving collaboration and matching to enhance the competitiveness of individual stores on our platform.

By the end of the year, we expect to keep our store and agent number stable outside of Beijing and Shanghai.

In those two cities, world agent growth has been strong over the past few years. We are consolidating lower-performing stores and phasing out lower-performing agents.

I believe.

It's time to ship our goals. Focus from skill to efficiency.

New long term, we start the technology to drive the industry Wild Games in total factor productivity.

In detail, we will implement in tips systematic scientific management operations.

Particularly by enhancing operations that add competitive dimensions.

This involves manager processes that influence competitive outcomes, such as focusing on properties.

Tao Xu: And we will also continue to strengthen our key operational initiatives, such as our points-based store incentive system, regional co-governance councils, management of high-quality business districts, and the separation of agent roles for homeowners and buyers, which we piloted in Shanghai. These projects are helping us improve our ecosystem and guide service provider behavior. For example, stores in high-quality business districts had 1.44 times the average productivity of other stores compared with less than 1.4 times in the second half of 2024. Over the long term, technology will be key to enhancing our efficiency and consistently delivering alpha. We see that the advance in large AI module technology, combined with our unique scenarios and the data in the residential service sector, have strong potential in reshaping user experience, boosting efficiency, and spurring transformation both in the real estate industry.

Customer and improving collaboration and matching are to enhance the competitiveness of individual stores on our platform.

And we will also continue to strengthen our key operational initiatives, such as our points-based store incentive system and regional governance councils.

Management of high-quality business districts and separation of agent role or homeowners, and the buyers who will be partners in Shanghai.

This project is helping us improve our ecosystem and guide service provider behavior. For example, a store in a high-quality business district had a 1.44 times the average productivity of other stores.

Compared with less than 1.4 times in the second half of 2024.

After the long term, technology will be key to enhancing our efficiency and consistently delivering our.

Tao Xu: We have established the AI project metrics that develop different AI applications simultaneously for different roles on our CM and BM. On both strategic and operational levels, some of these applications have demonstrated good results. One example is our AIGC marketing and AI-driven CRM products that address customer acquisition and the conversion of agents. We have built an intelligent AIGC marketing agent for real estate agents to support customer acquisition through self-media, private domain traffic operations, and lead conversion. It offers a full set of tools to help agents create a multi-modal content for multitrillionaire customer acquisition, perform better data analysis, and lead identification, analyze leads, and create icebreaker scripts, and generate price trends automatically. Our intelligent AI-powered CRM agent strengthens customer acquisition and conversion for all customer-facing roles. Here, I refer to the brokerage agent as brokers to avoid any confusion.

Which ones, in large AI module technology, combined with our unique scenarios and the data in the residential service sector, have strong potential in reshaping user experience, boosting efficiency, and springing transformation for the real estate industry?

We have established project metrics that are developed differently for the AI applications used simultaneously for different roles within sand and beer.

On both strategic and operational levels.

Some of these applications have demonstrated good results.

1 example is.

Our AIGC marketing and AI-driven CRM products.

That drives customer acquisition and the conversion of agents.

We have built an intelligent AI DC marketing agent for real estate agents to support customer acquisition through self-media private domain traffic operations and lead conversion.

It offers a full size of tools, helps agents, and creates a matching model content for multi-Chrome customer acquisition, performs better data analysis, and leads identification.

Analyze leads and create Icebreaker scripts and generate price trend, automatically.

Our intention, AI-powered CRM agents strengthen customer acquisition and conversion for all customer-facing roles.

Tao Xu: For existing home brokers, our AR CRM improves customer management through a constantly evolving multi-agent system. Powered by our user data, it gives the brokers personalized guidance ranging from market insights and customer strategy to recommended actions. This input helps brokers understand users' needs, gauge their intentions, and spot new opportunities. It also automates personalized follow-up tasks to drive transactions. By the end of June 2025, Lyco, one of our AI-driven CRM product applications, was in use across 59 cities with over 335,000 brokers. The product penetration rate exceeded 75% across Beijing and Shanghai. In Xi'an, for example, brokers who use Lyco extensively achieve a 30% higher conversion rate for final customer mandates and about a 20% higher conversion rate for showing compared with brokers that use the product less frequently.

Here, I refer to The Brokerage agent as Brokers to avoid any confusion.

For our home brokers, ARCM improves customer management through a constantly evolving marketing system.

Powered by our user data, it provides the brokers with personalized guidance, ranging from marketing insights and customer strategies to recommended actions.

This input helps Brokers understand, users needs.

Gauge their intentions and the sports new opportunities.

It also outlines how to make personalized follow-up tasks to drive transactions.

By the end of June 2025, our AI-driven CRM product application was in use across 69 cities, with over 335,000 brokers.

The product penetration rate exceeded 75% across Shanghai.

in here, for example, brokers, who is like extensively achieve, 30% higher conversion rate,

Tao Xu: For new homes, we have AI-driven CRM agents, Qianji and Qianzhu, that help new home sales managers improve listing management efficiency and strengthen both matching and marketing for new home products. On our customer consumer side, for example, our Putting AI online service assistant now provides real estate market analysis, city-wide home search, regional analysis, home listing comparisons, preliminary matching for home listing and agents. We began grey-box testing in May, making pushing available to select users in 11 cities. In July, this MAU reached 780,000, up 10% from June. Commercial volume grew by 59%, and average time spent per user was up 14%. Putting now supports marketing language, marketing model services, while also transforming pushing to allow it to proactively explore customer needs and handle tasks while providing more precise, high-quality, instructive answers. These enhancements will help users make decisions and move transactions forward.

For final customer mandate and about the change of higher conversion rate for showing compared with Brokers that use the product less frequently.

For new homes, we have AI-driven CRM, Agent Chi, and Chenu. They have new home sales managers in pro listing management, efficiency, and strengthened both matching and marketing for new home products.

On our customers, on our consumer side, for example, we are putting AI online service assistance, which does not provide real estate marketing analysis.

Citywide the home search Regional analysis published in comparisons, preliminary matching for home listing and agents.

In July, the same menu reached 780,000.

Up, 10% from June.

Commercial volume grew by 59% and average times, when the producer was up 14%.

Putting not support the market Long Reach Market model services.

While also transforming, pushing to a large scale to proactively explore customer needs and handle tasks.

While providing more precise, high quality, destructive answers.

Tao Xu: Putting is our first two C trial in offering AI-powered services, and we are making extensive efforts to offer more intelligent services to the industry. We believe AI is the most crucial driver for our next generation productivity improvements. We will keep you posted on our internal progress. Thank you.

Just enhancements will have user Make decision and the more transaction forward.

Putting is our first 2C trial in offering AI-powered services.

And we are meeting extensive efforts to offer more important services to the industry.

We believe AI is the most crucial driver for our next-generation productivity improvements. We will keep you posted on our internal progress. Thank you.

Siting Li: Thank you. Your next question comes from Griffin Chen from Citi Please.

Thank you. Your next question comes from Griffin Chan from City, please.

Stanley Peng: 管理层好。我是话题的股票分析员, Griffin 陈主任。我这边一个提问是关于新房的新模式的一个影响。就房地产市场的新模式呢, 比方说现房销售, 比方说好房子呢, 未来是否会被可能带来一些业务的增长潜力呢? 比方说在未来需求或是产品设计方面。 So my question is about how will the property new development model, such as companies' property sales, or promote of the quality house, create new opportunity for Baker, for example, in demand forecast or even for the quality side? Thank you.

Watch it.

I need to be.

Um, so my question is about how will the property new development model, such as companies, property sales, or promotion of the Quality House, create new opportunities for Baker, for example, in demand forecasts or even for the product design? Thank you.

Tao Xu: Thank you, Griffin. To see it, supply side policy in real estate has accelerated input, better living quality, especially through high-quality homes and the moving ready new homes. These measures are being implemented at a fast pace. Residential products that meet new national standards have performed well, and the pilot sales of the moving ready new homes in Xinjiang have set a good example. Surveys show that among the factors holding back buyers, price precipitation accounted for nearly 50%, while home suitability accounts for around 20%. As new home products better meet home upgrades, suitability demands, and the system for selling moving ready new homes gradually responds, we expect to see reduced quantity and input quality supply. This new model sets much higher requirements on developers from securing funding and ensuring project returns to understanding upgrade needs, project positioning, and pricing, and sales through marketing.

Uh, thank you, Grayson. Just here to supply a start policy in real estate. Have a pushback, living quality, especially through high-quality homes and the moving revenue homes.

These measures are being implemented at a fast pace.

Residential products that meet new national standards have performed well.

And the pilot cells of the moving are ready. New homes in Shanghai.

Have such a good example.

Service. So, show that among the factors holding back buyers.

Price accounts for nearly 50%. Home suitability accounts for around 20%.

At New Home Products, better meet home.

Upgrade suitability demands and the system for selling moving right in your home gradually responds to see a reduction in quantity and an improvement in input quality supply.

Tao Xu: This will further highlight the value of Baker bringing to developers. In terms of the impact of the current brokerage model, in the short term, in four-tier cities, new home products that meet the new standards will have a lower brokerage sales proportion and the commission rate than the products under the old standard. Nevertheless, in most cities, new standard products currently only accounted for around 10% of units, and their presence will push old standard products to raise their brokerage service penetration ratio. As a consequence of this, the overall impact on the brokerage channel sales market is relatively small. When new standard products make up over 30% of the project launch in the city, for example, as they do in Xi'an, the brokerage penetration and the commission rate will match those of old standard products.

This new model sets much higher requirements on developers, from securing funding and ensuring project returns to understanding upgrade needs, project positioning, and the pricing and sales within the market.

This will further highlight the value of Baker. Bring to developers.

In terms of the impact of the current brokerage module,

In the short term in four steel cities.

New home products that meet the new standards will have a lower purpose, sales proportion, and commission rate compared to the products under the old standard. Nevertheless, in most cities, new center products currently only account for around 10% of units.

And their presence will push all their products to reach their brokerage service penetration ratio.

As a consequence of this, the overall impact on the Brokerage China sales market is gradually very small.

Tao Xu: The fast sales through of new regulation products can boost agents' confidence in new home products, forming a water cycle. Opportunities for cooperation model upgrades. The industry new model will also drive upgrades in how we work with developers beyond the brokerage channel sales model. Our goal is to offer the tailored service for managers of full project lifecycle based on each developer's needs and project type. This will further highlight the value of Beihao Jia business, from its C2M product solution to its integrated online/offline marketing services. Pricing forecast capability. We leverage a systematic modeling approach, including a subjective factor-eliminated pricing model with a rolling review and a calibration mechanism and a comparable price trend analysis based on authentic existing home market data. Our algorithm seeks out structural factors so that the prices are comparable both across market and over time.

When you send a product, make up over 30% of the pretty launch in the city. For example, I said to Shia that the brokerage penetration and commission rates will match those of old standard products.

The fast sales of the new regulation products can boost agents' confidence in New Home Products, forming a virtuous cycle.

Opportunities for cooperation motor upgrades.

The industry new model will also drop upgrades in how we work with developers, beyond the broken China sales model.

Our goal is to offer the tailor service for managers of food project lifecycle.

Pricing model with a rolling review and the calibration mechanism.

And the comparable price trend analysis, based on authenticating Home Market data.

Our algorithm set out structural factors.

Tao Xu: This pricing capability helps developers objectively assess price trends and set accurate prices, avoiding property loss from the mispricing. When competition in selling moving ready new homes intensifies, it can also improve the project value for money positioning. For example, in Nanjing and Wuhan, new standard products are noticeably more competitive, exhibiting independent price trends. Baker's price forecasting capability enables granular segmentation analysis to better characterize some market dynamics. Today, our pricing model already has a fairly high level of accuracy. Regarding the unit mixed forecasting capability, we apply matching learning algorithms to model and forecast customers' housing unit needs, drawing on both potential customer behavior and historical transaction data. In June 2025, the compliance rate of our sample simulations continues to rise.

So that the prices are comparable both across marketing and over time.

This pricing capability helps developers. Objectively, Excel.

Price trends and set accurate prices.

Avoiding profit loss from the mispricing.

One competition in selling moving. Ready? New home? Intensifies.

It can also improve the product's value-for-money position.

For example, in Q2 2025, new standard products are noticeably more competitive, excepting independent, the price trend.

Baker's price forecasting capability enables granular segmentation analysis to better characterize some market dynamics.

Today, our pricing model already has a fairly high level of accuracy.

Regarding the unique mix to forecasting capability.

We apply a maintenance learning algorithm to model and forecast customer housing unit needs.

Drawing on both potential, customer behavior, and historical transaction data.

In June 2025, the compliance rate of our sample.

Tao Xu: Our goal for the year of 2026 is to have a full plot and market coverage to help developers plan unit mixes more accurately or widen inventory builds up and speed up sales of moving ready new homes. Regarding the customer insights, we can clearly define and pinpoint potential customers for building projects in specific districts along with their needs and profiles. This includes identifying their purchasing power, preferred housing unit type, location, age, purchase purpose, failing size, and so on. Using our potential customer model, we can forecast the high-priced intent buyers in the next 90 days for any given district and their specific needs. This gives developers the information they need to enhance competitive needs by targeting the right demographic and the design, optimizing products that meet the new standard requirements.

Simulations continue to rise. Our goal for the year 2026 is to have a full product and market coverage to help deliver this plan. You mix more accurately, or why human reviews are and the speed up sales of moving ready new homes.

Regarding the customer insight.

We can clearly define and pinpoint potential customers for building projects in specific districts.

Along with their needs and profiles.

This includes identifying their purchasing power.

Prefer the housing unit type.

Location age, purchase purpose, finding size, and so on.

Using our potential customer model, we can focus on the high price in chain buyers in the next 90 days for any given district, and there are specific needs.

Tao Xu: At the current stage, we hope to help developers position their products accurately at the early stage, reducing the cost of the latest stage adjustments and improving product alignment with the market demand. Looking ahead, we will focus on building customization and community operation capabilities to help developers stand out in the moving ready new home market. By complementing developers with our strengths in moving ready new home sales through regulatory reduction and the bottom line protection, our value to developers will extend from brokerage to product floor. Thank you.

This gives developers the information they need to enhance competitiveness by targeting the right demographic and designing products that optimize the new standard requirements.

At the current stage, we hope to have developers position their products accurately as early stage.

Reducing the cost of the latest stage adjustments and improving product alignment with market demand.

Looking ahead, we will focus on building customization and community operation capabilities to help developers spend time in the morning. Ready for the new home market.

By complimenting developers with our strengths in moving ready new home sales through regulatory reduction and bottom-line protection, our value to developers will extend from brokerage to product source. Thank you.

Siting Li: Thank you. Your next question comes from Daniel Chen from JP Morgan. Please go ahead.

Thank you. Your next question comes from Danielle Chen from JP Morgan. Please go ahead.

Stanley Peng: 谢谢管理层接受我的问题。啊, 我的问题是关于咱们的家装业务。呃, 看到这块业务的利润率今年是有提高的。呃, 同时整体的经营情况呢, 也有比较好的改善。想问一下背后的驱动因素是什么? 呃, 后续是否还有这个持续降本增效的空间? 呃, 另外就是家装业务现在的城市的布局, 啊, 是否已经比较完善了? 我们是否需要进一步的去拓店或者去, 呃, 做一些关店的行为? 啊, 谢谢。 so my question is on the home renovation and furnishing business. we have seen that the margin improvement, has been strong on a yearly basis, and revenue growth is healthy. So what's the key growth driver behind? Is there further room for cost optimization? Meanwhile, are we going to expand the city coverage, or are we going to, further optimize, our store network? Thank you.

uh, s with the

Uh, so my question is on the home renovation and furnishing business. We have seen that margin improvement has been shown on the earlier basis and revenue growth is healthy. So what's the key growth driver behind this? Is there further room for cost optimization? Meanwhile, are we going to expand the CT coverage, or are we going to further optimize our store network? Thank you.

Tao Xu: Well, thank you, Daniel. So home renovation and furnishing business maintained a relatively high growth rate in the first half of this year. Scale-wise, its revenue reached RMB 7.51 billion, up 16.5% year over year. On the profitability front, the second profit margin was 32.3% in the first half of the year, rising by 1.3 percentage points from the same period of last year. Operational efficiency also improved significantly at the city level in Q2. Operational efficiency enhancement is the focus of our home renovation business this year. We have implemented a series of initiatives aimed at enhancing fundamentals like our product and delivery capability, streamlining our organizational structure, and amplifying management and operational efficiency. These efforts have led to continuous improvements in our performance. Here, I'd like to elaborate. In terms of the cost, the home renovation business expense mainly includes material and labor costs.

Thank you, Danielle. So home renovation, the French business maintains the right to the high growth rate in the first half of this year.

Skill wise with revenue, reach R&B $7.51 Belly Up, 16.5% year over year.

Writing by 1.3 percentage points from the same period of last year.

Operational efficiency also improved significantly at the city level in Q2.

Operation efficiency enhancements are a focus of our home renovation business this year.

We have implemented a series of initiatives aimed at enhancing fundamentals like our product and delivery capability.

Streamlining our organizational structure and the unconfined management and operational efficiency.

This effort has led to continuous improvements in our

performance.

Here, I'd like to.

Elaborate.

In terms of cost.

Tao Xu: For materials, we cut procurement costs by consolidating brands and SKUs and moving to centralized procurement. By leveraging customer insight to streamline brand selection and SKU counts, we have consolidated procurement to three or fewer brands for most categories and achieved significant SKU reduction. Centralized procurement rate for primary and auxiliary materials reached more than 60% in Q2 2025, compared with over 20% in the same period of last year. This increased procurement volume for SKU in each category has led to a significant decrease in the unit price of some products that were awarded contracts. On the labor side, we have improved service providers' work efficiency by optimizing our order dispatching rules, enhancing the system order distribution capability, and focusing project manager service area on specific business districts. Also, we are allocating more resources to high-quality service providers.

The homeowner innovation business expense mainly includes the mature and the labor costs.

For your materials.

We cut procurement costs by consolidating brands and ice cubes, and moving to centralized procurement.

By leveraging custom insights to streamline brand selection and Ice skill. Comes.

We have consolidated procurement to three fuel brands for most of the category and achieved significant IQ reduction.

Centralized procurement rate for primary and auxiliary materials reached more than 60% in Q2 2025.

Compared with over 20% in the same period of last year.

This increased equipment value, volume price competition, and the contracts awarded in each category have led to a significant decrease in the unit price of some products.

On the labor side, we have improved service. Providers work efficiently by optimizing our order dispatching rooms, enhancing the system of distribution capability, and focusing project manager service areas on specific business districts.

Tao Xu: In Q2 2025, average monthly order intake per professional project manager was more than double last year's average, driving significant improvement in both their efficiency and income. In terms of the sales and marketing expenses, this mainly covers the sales personnel costs for designers and customer managers and the store and brokerage channel costs. As a percentage of revenue, sales personnel costs for designers and other roles significantly decreased year over year, primarily due to our agile transformation of the home renovation business organization structure. We streamlined the design team, optimized the overall home renovation business workflow, eliminated certain roles in the sales process, and shifted the functions towards leaders. Our digital tools, such as AI proposal and lightweight BIM, have significantly increased operational efficiency in the sales process.

Also, while allocating more resources to high-quality service providers,

In Q2 to Q5, the average monthly order intake for professional project managers was more than double last year's average, driving significant improvement in both their efficiency and income.

In terms of the sales and marketing expenses, we will mainly cover the sales personnel costs for designers and customer managers, as well as the store and the brokerage channel costs.

As a percentage of revenue, sales personnel costs for the vendors and other roles significantly decreased year-over-year.

Due to our ideal transformation of the home renovation, business organization, structure.

With streamlined processes, the design team optimized the overall home renovation business workflow, eliminated certain roles in the sales process, and shifted the functions towards data.

Our digital tools, such as AI proposals and lightweight beings.

Tao Xu: The average monthly order volume for designers has increased from around 0.8 orders last year to over 1.2 orders in the second quarter of this year. To optimize store costs, we closed some underperforming large stores and piloted a small-sized premium home renovation store near our home transaction counter standing center, where we integrated master design prototype showrooms. We hope to strengthen the synergy between our housing transaction business and the new initiatives, reducing store costs and improving sales per unit area, while exploring a new one-stop full-service home renovation model. For G&A expenses, we also made some structural enhancements, responding service scope to middle and back office personnel. The average number of orders supported by each middle and back office personnel increased by 70% year over year in this Q2. This initiative enabled us to achieve a better operational result while continuously improving the service quality.

Have we significantly improved operational efficiency in the sales process?

The average amount order volume.

For designers, the number of orders has increased from around 0.8 orders last year to over 1.2 orders in the second quarter of this year.

For optimized store cost, we closed some underperforming large stores and the pallets. A small-sized premium home renovation store near our Home Transaction Contracting Center, where we integrated the master.

Design prototype showrooms.

We have to strengthen the synergy between our housing transition business. At the new issue, initiatives are focused on reducing store costs and improving sales per unit area, while exploring a new one-stop food and service home renovation model.

14 in the expenses.

We also made some structural enhancements, responding to the service scope of the middle and back office personnel.

The average number of authors supported by each needle and the back office personnel increased by 70% year-over-year in this country.

Tao Xu: In Q2 this year, the customer compliance rate of our home renovation and furniture business dropped to below 10% from over 25% in the same period last year. We have seen a significant improvement in the unit economies at the city level. In the Beijing area, revenue increased from over 700 million yuan in the first half of 2023 to 1.15 billion yuan in the first half of 2024 and exceeded 1.5 billion yuan in the first half of this year, representing a year-over-year growth rate of over 30%. The gross profit margin in the first half of 2023, 2024, and 2025 were 35%, 36.1%, and 36.3% respectively. So operational margin at the city level rose from around 5% in the first half of 2023 to over 11% in the same period of 2025.

This initiative enables us to achieve better operational results while continuously improving service quality.

In Q2 this year, the customer compliance rate of our home renovation business dropped to below 10% from over 25% in the same period last year.

The gross profit margin for the first half of 2023, 2024, and 2025 was 35%, 36.1%, and 36.3% respectively.

Tao Xu: The remarkable improvement in the model cities, UE, has boosted our confidence in the business continuous operation and the future success. There are still plenty of rooms for the operational efficiency improvements. Moving forward, our focus will shift from organizational structure optimization this year to implementing ongoing innovation in these models, products, and technology. Thank you.

So, the operational margin by the city-level loads increased from around 5% in the first half of 2023 to over 11% in the same period of 2025.

The remarkable improvement in the model cities has hosted our confidence in the business continuity of creation and the future success.

There are still plenty of opportunities for operational efficiency improvements.

Moving forward, our focus will shift from organizational structure and optimization this year to implementing ongoing innovation in this model's products and technology. Thank you.

Siting Li: Thank you. Your next question comes from Xiaodan Zhang from CICC. Please go.

Thank you. Your next question comes from Zardin Jiang from CIC. Please go ahead.

Speaker 6: 嘿, 啊, 管理层晚上好, 感谢接受我的提问。啊, 我的问题是关于贝好佳这块业务。啊, 那从2023年底贝好佳成立以来, 那目前已经有不少的这个项目启动和入市。那基于过去一年多以来啊, 积累的这个业务经验, 想请管理层分享一下啊, 未来对于贝好佳业务的一个规划, 那包括具体的一个业务模式啊, 以及单项目是否会设置一个这个投资额的上限。啊, 那我快速翻译一下我的问题。 so thanks management for taking my questions, and we know that since its launch in the end of 2023, Beihao Jia has brought a number of projects to the market. drawing on the operational experience accumulated over the past year or so, could management share the future plans for Beihao Jia, and specifically, what business model will it adopt, and will there be an upper limit on the investment budget for individual projects? Thank you.

Hey, are you going to my number?

And see. Um so thanks management for taking my questions and we know that since it's launched in the end of 2023 has brought a number of projects to the market. Um drawing on operational experience uh accumulated over the past year or so could management share the future plans for they have that and specifically uh what business model? Will it adopt and will there be an upper limit on the investment budget for individual projects? Thank you.

Tao Xu: Thank you, Sophie. We have been very clear about our Beihao Jia strategic direction. We are adamant about not being developers. In terms of business models, we are dedicated to an asset-led business model. Except for our Chengdu Financial City project and the Shanghai Fengxian Xincheng project, where we are not independently operating other projects. The C2M model does not provide funding solutions. We will continue to explore a platform model that offers full front-to-back-end service for developers, construction contractors, property owners, and asset planners, including product solutions and marketing services. Our product solutions cover C2M product positioning and design plans baked by AI and big data. Our marketing services are integrated online/offline promotional service for more efficient customer acquisition. Regarding the setup capital, which I know is a concern from all of you, we will set a strict bid means and the peak total investment from our own funds.

Thank you, Sophie.

We're very clear about our strategic direction. We're also adamant about not being developed.

In terms of business models, who are dedicated to assessing such business models?

Except for our two Financial City projects and the shop, we will not independently operate other projects.

The situation model does not provide funding solutions. We will continue to explore the platform. The module offers full front-to-back-end service for developers.

Construction contractors.

Property owners and other partners, including product solutions and the marketing services,

Our product solutions cover situ and product positioning on the design plans.

Baked by AI and big data, our marketing services integrate online and offline promotional services for more efficient customer acquisition.

Regarding the setup capital, which I know is a concern for all of you.

Tao Xu: Based on the amount already deployed by the group as of June 30, we will invest no more than RMB 1 billion in additional self-owned funds. After the exit of two proprietary development projects in Chengdu and Shanghai, the limit of our capital allocation for this business will be reduced by the investment amount of these two projects further lowering our aggregate self-owned funding cap. Thank you.

We will set a strictly needs of the peak, total investment from our own funds.

Based on the amount ready to depart by group as of June 30th, R&B has $1 billion in additional self-owned funds.

After the exit of two property development projects in Shanghai, the limit of our Type 2 occupation for this business will be reduced by.

investment amount of these 2 projects for the lowering of active GATE, self-owned funding time.

Thank you.

Siting Li: Thank you. We are now approaching the end of the conference call. I will now turn the call over to your speaker host today, Ms. Xi Jingli, for closing remarks.

Thank you. We are now approaching the end of the conference call.

I will now turn the call over to your speaker host today, Miss Dingley, for closing remarks.

Siting Li: Thank you once again for joining us today. If you have any further questions, please feel free to contact Baker's investor relations team through the contact information provided on our website. This concludes today's call, and we look forward to speaking with you again next quarter. Thank you and goodbye.

Thank you once again for joining us today. If you have any further questions, please feel free to contact Paper's investor relations team through the contact information provided on our website. This concludes today's call, and we look forward to speaking with you again next quarter. Thank you, and goodbye.