Q3 2025 KE Holdings Inc Earnings Call

November 10, 2025

Operator: 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 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. Siqing Li, IR Director of the company. Please go ahead, Siqing.

In 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 and Chinese you will need to dial into the Chinese 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. Li IR director of the company. Please go ahead sitting.

Thank you operator, good evening and good morning, everyone welcome to <unk> holdings, or because third 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 thought paid up home.

Siting Li: Thank you, operator. Good evening and good morning, everyone. Welcome to KE Holdings or Beike's Q3 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. Mr. Peng will share more on our strategic developments and innovative initiatives. Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Please also note that Beike's earnings press release and this conference call include discussions on un-audited GAAP financial information, as well as un-audited non-GAAP financial measures.

On today's call we have Mr. Sally Pope our co founder Chairman and Chief Executive Officer, and Mr. Tao Qi, our executive director and Chief Financial Officer, Mr. Hu will provide an overview of our business updates and financial performance.

Mr. Polin will share more on our strategic developments and innovative initiatives before we continue I refer you to our safe Harbor statement in our earnings press release, which applies to this call as we will make forward looking statements.

Please also note that because earnings press release and this conference call include discussions on I'm not at the GAAP financial information as well as I'm glad that the non-GAAP financial measures. Please refer to the company's press release, which contains a reconciliation of the unmet need of non-GAAP measures to comparable GAAP.

Siting Li: Please refer to the company's press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Lastly, unless otherwise stated, all figures mentioned during this conference call are in RMB. Certain statistical and other information relating to the industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial sources. Neither the company nor any of its representatives has independently verified such data, which may involve a number of assumptions and limitations, and we are cautioned not to give undue weight to such information and estimates. For today's call, the management will use English as the main language. Please note that the Chinese translation is for convenience purpose only. In the case of any discrepancies, management's statements in their original language will prevail.

Measures.

Lastly on <unk>.

Otherwise stated.

All figures mentioned during these conference call are in RMB, certain statistical and other information relating to the industry in which the companies engaged to be mentioned in this call. That's been obtained from various publicly available official or unofficial sources. Neither the company nor any of this.

Representative 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. The management will use English as the main language. Please note that.

The Chinese translation needs for convenience purpose only in the case of any discrepancy mentioned misstatements in the original language will prevail with that I will now turn the call over to our CFO. Mr. Kalle sheet. Please go ahead.

Siting Li: With that, I will now turn the call over to our CFO, Mr. Tao Xu. Please go ahead.

Thank you.

I have one for Joe Smith, Cogent 22, New Foreign earnings Conference call.

Tao Xu: Thank you, Siqing, and thank you, everyone, for joining our Q3 2025 earnings conference call. In Q3, under the strategy of balancing scale and efficiency, we further optimized our business structure, enhanced operational and the middle and the back-office efficiency through AI technology, and achieved the city-level profitability in both our home renovation and rental business before deducting HQ expenses. Their combined contribution profit to company's total gross profit reached a record high. The cost and expenses of our core business segments were further optimized. We also significantly enhanced the execution of shareholder returns with a single quarter share repurchase spending, reaching its highest level in past 2 years. Regarding our overall financial performance in Q3, our total GTV was RMB 736.7 billion, remaining flat year-over-year. Total revenues reached RMB 23.1 billion, up 2.1% year-over-year.

Q3 under the draft deal balancing scale and efficiency.

To optimize.

Gotcha.

We should know on the middle and the back office efficiencies through technology.

And then the city level liquidity you both of them are home demolition rental business.

Deducting our corporate expenses.

The combined contribution puppets to company's total gross profit reached a record high.

Cost and expenses with Evercore business segments.

Martin.

We also significantly enhance execution of shareholder returns.

Single quarter share repurchase spend be reaching its highest level in past two years.

Yeah.

Regarding our overall financial performance in Q3.

Total T T D was RMB $736 7 billion remaining flat year over year.

Total revenues reached RMB $23 1 billion.

Two one.

Yeah.

Gross margin declined by one three percentage points year over year to 21, 4%.

Tao Xu: Gross margin declined by 1.3 percentage points year-over-year to 21.4%. GAAP net income was RMB 747 million, down 36.1% year-over-year. Non-GAAP net income was RMB 1.29 billion, down 27.8% year-over-year. With that overview, I'd like to provide some details on operational and financial performance for each segment. Looking at our housing transaction services, we have been continuously enhancing the productivity and operational performance through the application of AI and other technologies as well as in-depth operational optimization. For our existing home transaction services, we upgraded our AI tool, Haoke. As of end of Q3 this year, high-quality business opportunities identified through Haoke account for only a single-digit percentage of total potential leads, yet contributes over 50% of transaction volume on our platform.

GAAP net income was RMB 737 million tons.

56, 9% year over year.

non-GAAP net income.

RMB, one 9 billion down 27, 8% year over year.

With that overview I'd like to point to some details on our operational and financial performance for each segment.

Looking at all the housing transaction services.

We have been continuously enhancing the productivity and operational performance applications yeah.

Other technologies as well as in tapes operational optimization.

All of these new home transaction services.

We upgraded our P&I to haul crude.

And build to suit quota this year.

Hi, coffee business opportunities identifying sue how cool we're comfortable in the mid single digit percentage of the total potential release.

You have to contribute over 50% of transaction volume on our platform.

Oh, the housing supply site.

Tao Xu: On the housing supply side, we launched innovations such as agent specialization module, which agents are assigned to specially manage home listing or to serve, or serve the buyer based on their expertise, as well as innovative services, including home staging and open house events. These efforts have enhanced the buyer conversion and the marketing, and the sales through efficiency of the home listings. For our new home transaction services, we have also continuously iterate our AI agent Tianji system for intelligent operations and marketing, as well as AI system, Tianji. In terms of the financial performance, revenue from existing home transactions reached RMB 6 billion in Q3, down 3.6% year-over-year and down 10.8% quarter-over-quarter. GTV was RMB 505.6 billion, up 5.8% year-over-year, and down 13.3% quarter-over-quarter.

We launched innovations such as agent specialization module.

Each and all of a sudden two specialty managers homeless team both the silver.

The buyer based on their expertise as well as innovative services, including home CPG and the open house events.

This effort.

In terms of the payer conversion and the marketing and the sales team efficiency of the homeless camps.

For our new home of transaction services.

We have also continues to deteriorate.

Agent Chinchy system put.

Putting touch on operations and marketing as well as AI assistant the Ginger.

In terms of the financial performance.

Revenue from existing home transactions reached <unk> 6 billion in Q3 down three 6%.

On the down 10, 8% quarter over quarter.

CTV was RMB 500, and a $5 6 billion up five 8%, albeit down 13, 3% quarter over quarter.

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Paste revenue on a yearly basis.

Tao Xu: The GTV growth outpaced revenue on a yearly basis, mainly due to a higher GTV contribution from existing home transaction facilitated by connect agent, for which revenue are recorded on net basis. While revenue performance outpaced the GTV quarter-over-quarter, mainly due to the structural shift as revenue contribution from the rental brokering services increased amid seasonal fluctuations, which have a relatively high take rate. The contribution margin of the existing home business was 39% in Q3, a decline of 2 percentage points year-over-year, primarily due to the relatively stable fixed labor cost amid the revenue decline. Sequentially, the contribution margins declined by 1 percentage point due to the decline in revenue exceeding the fixed labor costs. Our new home GTV reached RMB 196.3 billion in Q3, down 13.7% year-over-year, and 23.1% quarter-over-quarter.

Mainly due to a higher contribution from this new home transaction facilitated by connect agent for which revenue recorded on that basis.

While revenue performance outpaced the TTP quarter over quarter, mainly due to the structural shifts at the revenue contribution from the rental brokerage services increased to meet seasonal fluctuations, which have a relatively high take rate.

The contribution of these two home business.

Two 9% in Q3, but declined two percentage points year over year.

Primarily due to the right people.

Cost to meet the revenue decline.

Crucially the contribution margin declined by one percentage point due to the decline in revenue exceeded the use of fixed labor costs.

Our new home Dtb reached RMB $196 3 billion in Q3.

13, 7% year over year under 23, 1% quarter over quarter.

Revenue from the new home transactions with RMB, six 6 billion in Q3, decreasing by 14, 1% year over year on the 23% quarter over quarter.

Tao Xu: Revenue from the new home transactions was RMB 6.6 billion in Q3, decreasing by 14.1% year-over-year and 23% quarter-over-quarter. Revenue performance was in line with GTV performance both year-over-year and quarter-over-quarter, reflecting our steady monetization capability in new home business. The contribution margin from new home transaction services was 24.1%, down by 0.7 percentage points year-over-year due to an increase in variable cost resulting from our agent benefit improvement last year. On quarterly basis, the new home contribution margin fell by 0.3 percentage points, largely due to a higher variable cost and a smaller decline in fixed labor cost compared with the revenue. For our home renovation and furniture services, we continued to strengthen our core capability to support long-term sustainable growth.

Revenue performance was particularly performance both year over year under Cordoba culture, reflecting steady.

That is modular infusion capability in new home business.

The contribution margin from new home transaction services with 24, 1%.

Done by 0.7 percentage points year over year due to an increase in vehicle cost, resulting from our agent benefit improvement last year.

On a quarterly basis, the new home contribution margin fueled by three three percentage points.

Largely due to a higher variable costs and the smaller D. Crap, you fixed labor cost comparable revenue.

All of them are homegrown, Alicia and finishing services.

We continued to strengthen our core capabilities to support long term sustainable growth.

On the potash side, we successfully replicate our prototypes showed a molecule in multiple cities.

Tao Xu: On the product side, we successfully replicate our prototyped showroom model in multiple cities. On supply chain side, we expanded our centralized procurement categories and adopt localized sourcing standards and the selection process, further reducing the overall unit purchase price. To enhance delivery quality, we focus on improving construction quality, standardizing on-site management, laying the foundation for a unified system to exercise construction site quality. In terms of the financial performance, revenue from our home renovation and the furniture business was RMB 4.3 billion, remaining relatively flat year-over-year. Contribution margin for the segment reached 32%, up 0.8 percentage points year-over-year, primarily driven by the reduced procurement cost, resulting from a larger proportion of centralized purchasing and decreased labor cost, resulting from enhanced order dispatching efficiency. Sequentially, the contribution margin remained relatively stable.

On supply chain side, we expanded our centralized procurement categories.

Local lines associates vendors and the selection process further reducing the overall unit purchase price.

Julian has delivery quality with focus on improving construction quality.

Sounds like things.

Inside amendments.

Laying the foundation for a unified system to exercise construction psychotic.

In terms of this initial performance.

Revenue from other home renovation and the furniture business was RMB four 3 billion.

<unk> relatively flat year over year.

Contribution margin for the segment.

Reached 32% off of <unk> eight percentage points year over year, primarily driven by reduced tooling cost, resulting from a larger proportion of our centralized purchasing and a decrease in labor cost, resulting from enhanced the older dispatching efficiencies.

Sequentially contribution margin remained the Brexit very stable.

For our home rental services business.

Tao Xu: For our home rental service business, on product front, our new zero land products have been launched in 10 cities, offering property owners diversified service options. For unit sales and occupation, our improved operational efficiency through AI-powered housing condition assessment and intelligent pricing, while further promoting our quality-based traffic allocation rules to achieve faster housing turnover. In Q3, the conversion ratio of Carefree Rent business opportunities to rental deals increased by more than 2 percentage points year-over-year. In terms of the operational management, we enhanced the productivity for the property managers and other personnel through the further refinement of the role specialization of labor, the integration of operational process, and the empowerment of AI technology.

Put upfront our new zero mountain products have been launched in 10 cities offering property owners diversified service option.

So units are under occupation.

Our improved operational efficiency. So AI powered housing condition assessments, and then touch on the pricing.

Total promoting our car T based traffic alopecia use to achieve faster housing turnover.

In Q3, the conversion ratio of copies and business opportunities to rental deals in.

Kris by more than two percentage points year over year.

In terms of the operational management.

In the hands of productivity for the property managers and other personal suits a further refinement of the specialization of labor to a depletion of operational process.

The impairment or pay out technology.

Regarding our financial performance.

Tao Xu: Regarding financial performance, revenue from our home rental services reached a record high of RMB 5.7 billion in Q3, up 45.3% year-over-year, driven by rapid growth in the number of rental units under management. By end of Q3, we had over 660,000 rental units under management, compared with over 370,000 in the same period of 2024. The contribution margin for home rental services was 8.7%, up 4.3 percentage points year-over-year and at 0.3 percentage points quarter-over-quarter, largely driven by improved gross margin from our Carefree Rent business.

Revenue from our home rental services reached a record high of RMB five 7 billion in Q3.

Off of 45, 3% year over year.

Driven by record growth in the number of events of units under management.

End of Q3, we had over 660000 rental units under management.

Payment rates over $300.

70000.

In the same period opportunity to neutral.

The contribution margin for home rental services was eight 7% up four three percentage points year over year, and the 0.3 percentage points quarter over quarter, largely driven by improved gross margin from our cafe rent business.

As we continue to refine the business model we have adapt.

Tao Xu: As we continue to refine the business model, we have adopt a net revenue recognition approach based on service fees for the certain newly signed properties in line with the nature of the underlying service contract. In Q3, our revenue from emerging and other services decreased by 18.7% year-over-year and 8.4% quarter-over-quarter to RMB 396 million. Now moving to the four other financial metrics in Q3, including other costs and expenses, profitability, and the cash flow. Our store costs reached RMB 663 million in Q3, decreasing by 5.8% year-over-year and 13% quarter-over-quarter, mainly due to the lower store rental costs. Gross profit dropped by 3.9% year-over-year to RMB 4.9 billion. Gross margin was 21.4%, down 1.3 percentage points year-over-year.

That's revenue recognition approach based on service fees for the certain newly funded properties.

New language the nature of the underlying service contracts.

In Q3, our revenue from emerging on other services decreased by 18, 7% year over year, and eight 4% quarter over quarter to RMB $396 million.

Now moving to the other financial metrics in Q3, including other costs and expenses profitability and cash flow.

Our stock costs reached RMB 663 million in Q3.

Decreasing by five 8% year over year, and 13% quarter over quarter.

Only due to the lower store rental costs.

Gross profit dropped by three 9% year over year to RMB four 9 billion.

Gross margin was 21, 4% down.

Down one three percentage points year over year.

The decline was mainly due to the structural impact from a lower revenue proportion of its new home under new home business.

Tao Xu: The decline was mainly due to the structural impact from a lower revenue proportion of existing home and the new home business, which have relatively high contribution margins, as well as the decrease in contribution margin from the existing home business. This will partially offset as increase in contribution margin from the home rental services. Gross margin declined by 0.5 percentage points quarter-over-quarter in Q3, mainly due to the structural impact as the revenue contribution of new home concession service declined. In Q3, our GAAP operating expenses totaled RMB 4.3 billion, down 1.8% year-over-year and 6.7% quarter-over-quarter. Notably, G&A expenses were RMB 1.9 billion, relatively flat year-over-year and down by 10.3% quarter-over-quarter. Primarily attributable to the decrease by their provisions and the reduced share-based compensation expenses.

Which have relatively high contribution margins as well as the decrease in contribute Martin promptly to new home business.

This was partially offset by the <unk>.

Chris in contribution margin from the home rental services.

Gross margin declined by two five percentage points quarter over quarter in Q3, mainly due to the structural impact that's a revenue contribution of new home construction services declined.

In Q3.

Operating expenses totaled RMB, four 3 billion down one 8% year over year on a six 7% quarter over quarter.

G&A expenses were RMB, one 9 billion relatively flat year over year and are down by 10, 3% quarter over quarter.

Primarily attributable to the decrease by the producers and the reduced share based compensation expenses.

Selling and marketing expenses were RMB, one 7 billion down 10, 7% year over year, mainly due to the lower personnel expense and reduced the pricing and promotion expenses under the efficiency enhancement strategy.

Tao Xu: Sales and marketing expenses were RMB 1.7 billion, down 10.7% year-over-year, mainly due to the lower personnel expense and the reduced advertising and promotion expenses under the efficiency enhancement strategy. On quarterly basis, the sales and market expenses were down 9%, mainly driven by a reduction in labor-related costs. Our R&D expenses were RMB 648 million, up 13.2% year-over-year and a 2.3% sequentially, largely driven by a higher personnel expenses. In terms of the profitability, GAAP income from operations totaled RMB 608 million in Q3, down 16.4% year-over-year and 42.6% quarter-over-quarter. GAAP operating margin was 2.6%, dropping by 0.6 percentage point from Q3 in 2024 and 1.4 percentage points quarter-over-quarter.

On a quarterly basis to sales and market expenses.

9%.

Mainly driven by a reduction in labor related costs.

Our R&D expenses were RMB $648 million up 32% year over year, and two 3% sequentially largely driven by a higher personnel expenses.

In terms of the profitability.

Income from operations totaled RMB $608 million in Q3 down 16, 4% year over year under 42, 6% quarter over quarter.

GAAP operating margin was two 6% dropping by <unk> six percentage points from Q3 'twenty to neutral on the one four percentage points quarter over quarter.

The non-GAAP income from operations totaled RMB, one 7 billion decreasing 14% year over year under 27% quarter over quarter.

Tao Xu: The non-GAAP income from operations totaled RMB 1.17 billion, decreasing 14% year-over-year and 27% quarter-over-quarter. Non-GAAP operating margin was 5.1%, down 1 percentage point from Q3 2024, mainly due to the decline in gross margin. Non-GAAP operating margin was down 1.1 percentage points from the previous quarter, mainly due to the increase in operating expenses ratio sequentially. GAAP net income totaled RMB 747 million in Q3, down 36.1% year-over-year and 42.8% quarter-over-quarter. Non-GAAP net income was RMB 1.29 billion, falling 27.8% year-over-year and 29.4% quarter-over-quarter. Moving to our cash flow and the balance sheet. We generated net operating cash inflow of RMB 851 million in Q3.

non-GAAP operating margin was five 1%.

One percentage points from Q3, 'twenty 'twenty four mainly due to the decline in gross margin.

non-GAAP operating margin was down one one percentage points from the previous quarter.

Due to the increase in operating expenses ratio sequentially.

GAAP net income totaled RMB 747 million in Q3.

Down 36, 1% year over year, and 42, 8% quarter over quarter.

non-GAAP net income was RMB 129 billion falling 27, 8% year over year on the 29, 4% total culture.

Moving to our cash flow and our balance sheet.

We generated net operating cash inflow of RMB 851 million in Q3.

New home gases remain.

It remains at a healthy level with 14th.

Tao Xu: New home DSO remained at a healthy level with 54 days in Q3. In addition to spending approximately $281 million in share repurchase during Q3, our total cash liquidity, excluding customer deposits payable, remained at around RMB 78 billion. Facing the short-term business challenges brought by external fluctuation and internal strategic transformation, we support and reward our shareholders through consistently active share repurchase to improve the efficiency of the capital operations. From Q1 to Q3 of this year, we spent $139 million, $254 million, and $281 million on share repurchase respectively, with a cumulative amount of approximately $675 million in this year, up 15.7% year-over-year.

With 54 days in Q3.

In addition to spending approximately 281 million in share repurchases during Q3, our total cash and liquidity excluding customer deposits payable remained at around RMB 17 8 billion.

Switching to short term business tenders brought back small fluctuation on the internal strategic.

Transformation.

We support and the reward our shareholders suit consistently active share repurchase to improve the efficiency of the capital appreciation.

From the fourth to third quarter of this year.

We spent just dollar hundreds of $39 million.

Dollar 254 million and USD 281 million on share repurchase respectively.

The cumulative amount of approximately.

$675 million in this year.

Up 15, 7% year over year.

So the end of Q3 to nonprofit repurchase share accounts for about 3% of the company's total issued share.

Tao Xu: As of the end of Q3, the number of repurchased share accounts for about 3% of the company's total issued share as at end of 2024. Since launch of our share repurchase program in September 2022, we had repurchased around $2.3 billion worth of shares as of the end of September this year, accounting for about 11.5% of our total issued shares before the program began. We have made progress in Q3 this year in proactively optimizing our business structure, strengthening technology empowerment, and enhancing shareholder return. Our forward-looking layouts of the home renovation and furniture services and home rental services have both achieved profitability at the city level before deducting HQ expenses in Q3.

End of 'twenty two before.

Since the launch of all of our share repurchase program in September 2022.

We had repurchased around U S dollar $2 3 billion worth of shares as of the end of September this year.

Accounting for about 11, 5% of our total issued shares before the program began.

We have made progress in Q3 this year.

Actively optimizing our business structure.

Strengthening technology impairment and enhancing shareholder return.

Forward looking lay out of the home renovation, a bunch of services and home rental services.

Both achieved profitability by the city level before deducting headquarter expenses in South Dakota.

The AI capabilities have shown initial result in driving the business development and improving to walk the efficiency of the service provider and the middle and the back office personnel.

Tao Xu: The AI capabilities have shown initial results in driving the business development and improving the work efficiency of the service provider and the middle and the back-office personnel. We are also fulfilling our shareholder return commitment with a greater intensity, repurchasing your stock at $281 million in a single quarter, increasing 38.3% year-over-year. As the industry enters a new stage of high-quality development, we are taking initiative in building a residential services ecosystem. With our combination of technological innovation, anti-cyclical business portfolio, and highly efficient and well-structured operation system, we are well-positioned to deliver greater value to both customers and investors. Thank you. Next, I would like to turn the call to our Chairman and CEO, Stanley.

We're also fielding our shareholder return commitment with a greater intensity.

Repurchasing your thorough 281 million in a single quarter.

Creasing 38, 3% year over year.

As the industry enters a new stage of a high quantity of vitamins.

<unk> chicken initiative in building or residential services ecosystem.

With our combination of technology innovation and.

Cyclical business portfolio.

Highly efficient and well structured operating system, we are well positioned to deliver greater value to both customers and investors. Thank.

Operator: 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 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.

Thank you.

Next I would like to tend to call to our chairman and CEO Lenny.

In Q3, this year and proactively optimizing our business structure.

Thank you all for sharing our business and our financial developments on a solid quarter that stretches you got a share count growth engine from scale and efficiency.

Lengthening technical team performance and enhancing shareholder return.

Stanley Peng: Thank you, Tao, for sharing our business and financial developments for Q3. We are strategically shifting our growth engine from scale to efficiency. Today, I'd like to highlight some innovative initiatives we have rolled out across businesses to advance this shift. First, in terms of our core business, transaction services. Externally, we see new demand from both buyers and sellers under the new norm for China housing market. Home sellers expect stronger marketing capabilities from us. Buyers are counting on us for customer-oriented insights to support their decision-making in areas such as timing, asset planning, and listing comparisons. These trends place due requirements on our traditional agent skill model. Agents who are great at supporting both buyers and sellers are extremely rare. Since mid-year, we have been working to restructure our capabilities across both buyer and seller agents.

Stanley Yongdong Peng: Thank you, Tao, for sharing our business and financial developments for Q3. We are strategically shifting our growth engine from scale to efficiency. Today, I'd like to highlight some innovative initiatives we have rolled out across businesses to advance this shift. First, in terms of our core business, transaction services. Externally, we see new demand from both buyers and sellers under the new norm for China housing market. Home sellers expect stronger marketing capabilities from us. Buyers are counting on us for customer-oriented insights to support their decision-making in areas such as timing, asset planning, and listing comparisons. These trends place due requirements on our traditional agent skill model. Agents who are great at supporting both buyers and sellers are extremely rare. Since mid-year, we have been working to restructure our capabilities across both buyer and seller agents.

Our forward looking way out of the home renovation that Flintshire services and home rental services have both achieved profitability by the city level before deducting headquarter expenses in South Dakota.

Today.

Now to highlight some initiatives innovative initiatives rehab rollouts across businesses to a diverse.

The AI capabilities have shown initial result in driving the business development and improving efficiency of the service provider in the middle and the back office personnel.

As shifts.

First in terms of our office and transaction services.

Siting Li: Thank you, Operator. Good evening and good morning, everyone. Welcome to KE Holdings' or Beike's third 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. Mr. Peng will share more on our strategic developments and innovative initiatives. Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call, as we will make forward-looking statements. Please also note that Beike's earnings press release and this conference call include discussions on unaudited GAAP financial information as well as unaudited non-GAAP financial measures.

Externally, we see new demand from both buyers and sellers under the new norm for China market.

We're also fueling our shareholder return commitment with a greater intensity.

Home centers.

Stronger marketing capabilities from us.

Repurchasing your thorough 281 million in a single quarter.

<unk> are counting on us for customer oriented and insights.

Increasing 38, 3% year over year.

So Pos.

Making areas such as timing asset planning and enhanced income comparisons. This trend plays dual requirements on our traditional agency model and agents core upgrades and some audience of buyers and sellers are extremely rare.

As the industry enters a new stage of a high quality development.

<unk> Chicken initiative.

In our residential services ecosystem.

With our combination of our technological innovation anti cyclical pieces of portfolio and the highly efficient and well structured opportunistically, we're all well positioned to deliver greater value to both customers and investors.

Since mid year, we have been working to restructure to discharge her own capabilities across both buyer and seller agents.

Thank you next I would like to turn to call to our chairman and CEO of <unk>.

Hi.

Stanley Peng: In Shanghai, we piloted a seller and buyer agent specialization mechanism to enhance our marketing and operating excellence on the home seller's agent side first. The mechanism redefines organizational roles, commission structures, and performance initiatives, and offer supporting tech products. This, in turn, allowed buyer's side agents to prioritize quality listings and improve transaction conversion. The underlying logic is that high-quality home listings are engineered, not ready-made. They require skilled agents to master market analytics, pricing, property staging, owner engagement, and decision-making, pre-precision marketing. Second, inventory quality drives customer acquisition. Superior listings inherently attract more serious buyers, driving transaction speed and our brand reputation, which in turn attracts better talent to join us. Therefore, we did several things to implement this. First, we adjusted our organizational structure and incentive mechanisms.

Stanley Yongdong Peng: In Shanghai, we piloted a seller and buyer agent specialization mechanism to enhance our marketing and operating excellence on the home seller's agent side first. The mechanism redefines organizational roles, commission structures, and performance initiatives, and offer supporting tech products. This, in turn, allowed buyer's side agents to prioritize quality listings and improve transaction conversion. The underlying logic is that high-quality home listings are engineered, not ready-made. They require skilled agents to master market analytics, pricing, property staging, owner engagement, and decision-making, pre-precision marketing. Second, inventory quality drives customer acquisition. Superior listings inherently attract more serious buyers, driving transaction speed and our brand reputation, which in turn attracts better talent to join us. Therefore, we did several things to implement this. First, we adjusted our organizational structure and incentive mechanisms.

Our seller and buyer agent specialization mechanism to enhance our marketing and operating our strengths on the homes that are signed.

Thank you Paul.

Sharing our business and financial developments.

That's great to see about a shift in our growth engine from scale and efficiency.

Siting Li: Please refer to the company's press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Lastly, unless otherwise stated, all figures mentioned during this conference call are in RMB. Certain statistical and other information relating to the industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial sources. Neither the company nor any of its representatives has independently verified such data, which may involve a number of assumptions and limitations, and we are cautioned not to give undue weight to such information and estimates. For today's call, the 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, management statements in their original language will prevail.

And Mccann Ism Redefines National Rose Commission structures and performance initiatives and offer supporting Tech products. This in turn allows.

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Siting Li: With that, I will now turn the call over to our CFO, Mr. Tao Xu. Please go ahead.

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Tao Xu: Thank you, Siting. Thank everyone for joining our third quarter 2025 earnings conference call. In Q3, under the strategy of balancing scale and efficiency, we further optimized our business structure, enhanced operational, middle, and back office efficiency through AI technology, and achieved city-level profitability in both our home renovation and rental business before deducting high-quarter expenses. Their combined contribution profit to the company's total gross profit reached a record high. The cost and the expenses of our core business segments were further optimized. We also significantly enhanced the execution of shareholder returns, with single-quarter share repurchase spending reaching its highest level in the past two years. Regarding our overall financial performance in Q3, our total GTV was RMB 736.7 billion, remaining flat year over year. Total revenues reached RMB 23.1 billion, up 2.1% year over year. Gross margin declined by 1.3 percentage points year over year to 21.4%.

Stanley Peng: We shifted some senior agents into hybrid roles that combine management and home seller-focused responsibilities, giving them the authorities to form and lead their own teams dedicated to listing management. Under the ACN commission allocation mechanism, we raised the selling agent share from 40% to over 50%. We are maximizing incentives for top-performing agents to focus on marketing high-quality home listings. This group of home seller-focused agents can earn around 25% more than before, assuming our market share remains stable. To mitigate potential pressure on buyers' agents, we reduced the mandatory 10-role commission split, raised the minimum commission for selling agents, and offered extra incentives for selling high-score listings. Second, we provided agents with systematic support and digitalized products to help them manage listings. In the past, home owners' relationship management, listing presentation, and marketing relied on agents' personal experience.

Stanley Yongdong Peng: We shifted some senior agents into hybrid roles that combine management and home seller-focused responsibilities, giving them the authorities to form and lead their own teams dedicated to listing management. Under the ACN commission allocation mechanism, we raised the selling agent share from 40% to over 50%. We are maximizing incentives for top-performing agents to focus on marketing high-quality home listings. This group of home seller-focused agents can earn around 25% more than before, assuming our market share remains stable. To mitigate potential pressure on buyers' agents, we reduced the mandatory 10-role commission split, raised the minimum commission for selling agents, and offered extra incentives for selling high-score listings. Second, we provided agents with systematic support and digitalized products to help them manage listings. In the past, home owners' relationship management, listing presentation, and marketing relied on agents' personal experience.

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Tao Xu: GAAP net income was RMB 747 million, down 36.1% year over year. Non-GAAP net income was RMB 1.29 billion, down 27.8% year over year. With that overview, I'd like to provide some details on operational and financial performance for each segment. Looking at our housing transaction services, we have been continuously enhancing the productivity and operational performance through the application of AI and other technologies, as well as in-depth operational optimization. For our existing home transaction services, we upgraded our AI to Hao Ke. As of the end of the third quarter this year, high-quality business opportunities identified through Hao Ke account for only a single-digit percentage of total potential leads, yet contribute over 50% of transaction volume on our platform.

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Stanley Peng: That made it hard to replicate and scale. We have built an AI-powered listing score system that captures and qualifies the know-how required in six key areas: home listing maintenance completeness, home owner engagement depth, property condition, for example, renovation recency, listing cross-channel marketing performance, AI-powered pricing competitiveness, buyer's interest, for example, the listings' online/offline viewings. These metrics help agents clearly understand what defines a high-quality listing and how to better present and market homes. Home buyer agents can also focus on sale and selling high score listings to drive better sales conversions. In terms of results, in September, high-scoring listings accounted for more than 75% of transactions. Our every average market coverage in Shanghai hit records high in Q3, increased 1.2 percentage points year-over-year and 2.6 percentage points quarter-over-quarter. The experience of homeowners looking to sell quickly also improved.

Stanley Yongdong Peng: That made it hard to replicate and scale. We have built an AI-powered listing score system that captures and qualifies the know-how required in six key areas: home listing maintenance completeness, home owner engagement depth, property condition, for example, renovation recency, listing cross-channel marketing performance, AI-powered pricing competitiveness, buyer's interest, for example, the listings' online/offline viewings. These metrics help agents clearly understand what defines a high-quality listing and how to better present and market homes. Home buyer agents can also focus on sale and selling high score listings to drive better sales conversions. In terms of results, in September, high-scoring listings accounted for more than 75% of transactions. Our every average market coverage in Shanghai hit records high in Q3, increased 1.2 percentage points year-over-year and 2.6 percentage points quarter-over-quarter. The experience of homeowners looking to sell quickly also improved.

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Tao Xu: On the housing supply side, we launched innovations such as agent specialization module, which agents are assigned to specialty managers, home listing, or server, also the buyer based on their expertise, as well as innovative services, including home staging and open house events. These efforts have enhanced the buyer conversion, the marketing, and the sales through efficiency of the home listings. For our new home transaction services, we have also continuously iterated our AI agent TNG system for intelligent operations and marketing, as well as AI assistant Tianzhu. In terms of the financial performance, revenue from existing home transactions reached RMB 6 billion in Q3, down 3.6% year over year, and down 10.8% quarter over quarter. GTV was RMB 505.6 billion, up 5.8% year over year, and down 13.3% quarter over quarter.

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Stanley Peng: Many homeowners reached out to us proactively to learn how to raise their listing scores. Buyers also naturally prefer high-scoring listings, creating a positive cycle that benefits everyone involved. The home seller buyer side agent specialization in Shanghai is an important initiative designed to meet the changing needs of our customers and marks a milestone in our shift from scale to efficiency. We will continue to track its progress and explore new initiatives on the home buyer's agent side. In addition, we tried innovative approaches to make our new business more efficient. For example, in our home rental business, Q2 marked the first time we excluded headquarter costs from breakeven at a city level, and Q3 is expected to contribute over RMB 100 million in profits.

Stanley Yongdong Peng: Many homeowners reached out to us proactively to learn how to raise their listing scores. Buyers also naturally prefer high-scoring listings, creating a positive cycle that benefits everyone involved. The home seller buyer side agent specialization in Shanghai is an important initiative designed to meet the changing needs of our customers and marks a milestone in our shift from scale to efficiency. We will continue to track its progress and explore new initiatives on the home buyer's agent side. In addition, we tried innovative approaches to make our new business more efficient. For example, in our home rental business, Q2 marked the first time we excluded headquarter costs from breakeven at a city level, and Q3 is expected to contribute over RMB 100 million in profits.

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Tao Xu: The GTV growth outpaced revenue on a yearly basis, mainly due to a higher GTV contribution from existing home transactions facilitated by connect agents, for which revenue is recorded on a net basis. While revenue performance outpaced the GTV quarter over quarter, mainly due to the structural shift as revenue contribution from the rental brokerage services increased amid seasonal fluctuations, which have a relatively high take rate. The contribution margin of existing home business was 39% in Q3, a decline of 2 percentage points year over year, primarily due to the relatively stable fixed labor costs amid the revenue decline. Essentially, the contribution margin declined by 1 percentage point due to the decline in revenue exceeding the fixed labor costs. Our new home GTV reached RMB 196.3 billion in Q3, down 13.7% year over year and 23.1% quarter over quarter.

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Jeffrey Rand reps, our decentralized long term rental business housing businesses inherently fastest challenge changes, including relatively low average selling process now standardized products and sensors tansu.

Stanley Peng: Carefree Rent, our decentralized long-term rental business, housing businesses, inherently faces challenges including relatively low average selling prices, non-standardized products and services, extensive service coverage, and high maintenance costs, traditionally requiring heavy manpower and variable costs investment for scaling and operations. This sector has struggled with economics of scale industry-wide. With no established best practices yet, as newcomers, we embraced this as an opportunity to build an AI-native operation from inception, enabling parallel development of business capabilities, frontline operations, and AI intelligence. Through our organizational restructuring, process optimization, and AI strategy and products, we are pioneering an AI-driven efficiency, economically sustainable model. Early results demonstrate significant improvements, offering valuable insights for our other platform businesses. I'll walk you through three major AI-driven breakthroughs across different dimensions. First, AI has been fully integrated into our rental services business, enabling end-to-end intelligent decision-making and business operations.

Stanley Yongdong Peng: Carefree Rent, our decentralized long-term rental business, housing businesses, inherently faces challenges including relatively low average selling prices, non-standardized products and services, extensive service coverage, and high maintenance costs, traditionally requiring heavy manpower and variable costs investment for scaling and operations. This sector has struggled with economics of scale industry-wide. With no established best practices yet, as newcomers, we embraced this as an opportunity to build an AI-native operation from inception, enabling parallel development of business capabilities, frontline operations, and AI intelligence. Through our organizational restructuring, process optimization, and AI strategy and products, we are pioneering an AI-driven efficiency, economically sustainable model. Early results demonstrate significant improvements, offering valuable insights for our other platform businesses. I'll walk you through three major AI-driven breakthroughs across different dimensions. First, AI has been fully integrated into our rental services business, enabling end-to-end intelligent decision-making and business operations.

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Tao Xu: Revenue from the new home transactions was RMB 6.6 billion in Q3, decreasing by 14.1% year over year and 23% quarter over quarter. Revenue performance was in line with GTV performance both year over year and quarter over quarter, reflecting our steady monetization capability in new home business. The contribution margin from the new home transaction services was 24.1%, down by 0.7 percentage points year over year due to an increase in variable costs resulting from our agent benefit improvement last year. On a quarterly basis, the new home contribution margin fell by 0.3 percentage points, largely due to a higher variable cost and a smaller decline in fixed labor cost compared with revenue. For our home renovation and furnishing services, we continued to strengthen our core capability to support long-term sustainable growth. On the product side, we successfully replicated our productized showroom model in multiple cities.

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Stanley Peng: For rental unit sign-ups, AI now powers critical processes, including property lead identification, personnel management and deployment, property evaluation, pricing strategies, and homeowner communication. For example, previously, personnel management and operational relies heavily on experience level with supervisors deciding which agents were responsible for which area. Now, through AI-driven grid management support, supported by our unique dynamic domain data and modeling capabilities, AI can make data-driven determinations. It evaluates factors such as the number and the quality of property leads, local supply and demand relationships, and personnel capabilities and models. Based on these data sets, it determines the optimal personnel assignments, regional coverage, and organizational structure. AI can simulate up to 90,000 design scenarios per minute, automatically generating the most efficient staffing and operational strategies. This has greatly improved how we allocate our service personnel's deployment configuration and operational scope.

Stanley Yongdong Peng: For rental unit sign-ups, AI now powers critical processes, including property lead identification, personnel management and deployment, property evaluation, pricing strategies, and homeowner communication. For example, previously, personnel management and operational relies heavily on experience level with supervisors deciding which agents were responsible for which area. Now, through AI-driven grid management support, supported by our unique dynamic domain data and modeling capabilities, AI can make data-driven determinations. It evaluates factors such as the number and the quality of property leads, local supply and demand relationships, and personnel capabilities and models. Based on these data sets, it determines the optimal personnel assignments, regional coverage, and organizational structure. AI can simulate up to 90,000 design scenarios per minute, automatically generating the most efficient staffing and operational strategies. This has greatly improved how we allocate our service personnel's deployment configuration and operational scope.

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Tao Xu: On the supply chain side, we expanded our centralized procurement categories and adopted localized sourcing standards and the selection process, further reducing the overall unit purchase price. To enhance delivery quality, we focused on improving construction quality, standardizing on-site management, laying the foundation for a unified system to excise construction site quality. In terms of the financial performance, revenue from our home renovation and furnishing business was RMB 4.3 billion, remaining relatively flat year over year. Contribution margin for the segment reached 32%, up 0.8 percentage points year over year, primarily driven by the reduced procurement cost resulting from a larger proportion of centralized purchasing and a decreased labor cost resulting from enhanced order dispatching efficiency. Sequentially, the contribution margin remained relatively stable. For our home rental service business, on the product front, our new zero-to-nine products have been launched in 10 cities, offering property owners diversified service options.

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Stanley Peng: We also use AI to guide and execute our core business strategies and daily helping us move forward fully in intelligent operations. For rental unit sign-up, we roll out AI-powered rental unit sign-up assistant that use real-time data and algorithms to predict market demand, property inventory, and price trends. It generates automated sign-up strategies and dynamic pricing recommendations, delivering tailored plans for each property through adaptive decision models. As market conditions change, such as customer demands, property inventory, and pricing, AI can guide our operations team to make timely adjustments. For example, when there is an oversupply of three-bedroom units in a certain area, the system automatically triggers price controls and sign-up restrictions. When unit types are in short supply, AI reactivates dormant property leads.

Stanley Yongdong Peng: We also use AI to guide and execute our core business strategies and daily helping us move forward fully in intelligent operations. For rental unit sign-up, we roll out AI-powered rental unit sign-up assistant that use real-time data and algorithms to predict market demand, property inventory, and price trends. It generates automated sign-up strategies and dynamic pricing recommendations, delivering tailored plans for each property through adaptive decision models. As market conditions change, such as customer demands, property inventory, and pricing, AI can guide our operations team to make timely adjustments. For example, when there is an oversupply of three-bedroom units in a certain area, the system automatically triggers price controls and sign-up restrictions. When unit types are in short supply, AI reactivates dormant property leads.

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Tao Xu: For unit sales and occupation, our improved operational efficiency through AI-powered housing condition assessment and intelligent pricing, while further promoting our quality-based traffic allocation rules to achieve faster housing turnover. In Q3, the conversion ratio of carefully run business opportunities to rental deals increased by more than 2 percentage points year over year. In terms of the operational management, we enhanced the productivity for the property managers and other personnel through the further refinement of the role specialization of labor, the integration of operational process, and the empowerment of AI technology. Regarding financial performance, revenue from our home rental services reached a record high of RMB 5.7 billion in Q3, up 45.3% year over year, driven by rapid growth in the number of rental units under management. By end of Q3, we had over 660,000 rental units under management, compared with over 370,000 in the same period of 2024.

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Stanley Peng: Our upcoming AI cloud partner will also automatically contact homeowners of these reactivated properties. In Ningbo, where we begin pilot operations in August, our workforce decreased by 10%, while new rental sign-up units grew up 10% even in the off-peak season. For rental unit leasing, our AI inventory management system frequently monitors inventory and checks forward, managing high risk or low maintenance properties. It dynamically adjusts pricing and targeted discounts while optimizing traffic to speed up leasing. In Q3, these capabilities accelerated the lease out of 350,000 units across 11 cities with 90% price adjustment adoption. These efforts generated over RMB 100 million in nationwide cost savings. Second, we use AI and technology to solve the industry's long-standing problems with non-standardization, enable high quality, scalable growth. The home rental industry has several characteristics.

Stanley Yongdong Peng: Our upcoming AI cloud partner will also automatically contact homeowners of these reactivated properties. In Ningbo, where we begin pilot operations in August, our workforce decreased by 10%, while new rental sign-up units grew up 10% even in the off-peak season. For rental unit leasing, our AI inventory management system frequently monitors inventory and checks forward, managing high risk or low maintenance properties. It dynamically adjusts pricing and targeted discounts while optimizing traffic to speed up leasing. In Q3, these capabilities accelerated the lease out of 350,000 units across 11 cities with 90% price adjustment adoption. These efforts generated over RMB 100 million in nationwide cost savings. Second, we use AI and technology to solve the industry's long-standing problems with non-standardization, enable high quality, scalable growth. The home rental industry has several characteristics.

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Tao Xu: The contribution margin for home rental services was 8.7%, up 4.3 percentage points year over year, and 0.3 percentage points quarter over quarter, largely driven by improved gross margin from our carefully run business. As we continue to refine the business model, we have adopted a net revenue recognition approach based on service fees for certain newly signed properties, in line with the nature of the underlying service contracts. In Q3, our revenue from emerging and other services decreased by 18.7% year over year and 8.4% quarter over quarter to RMB 396 million. Now, moving to the four other financial metrics in Q3, including other costs and expenses, profitability, and cash flow. Our store costs reached RMB 663 million in Q3, decreasing by 5.8% year over year and 13% quarter over quarter, mainly due to the lower store rental costs.

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Stanley Peng: Home listings are scattered. Each home has different and complex internal conditions, making the products non-standard. Service providers are many. Their levels vary, the workforce is also non-standard. Market price fluctuates. Traditional pricing relies on frontline staff's on-site judgment, leading to non-standard pricing. Operational processes are mostly offline and complex, making sales strategies and service execution non-standard as well. These are the traditional constraints of the industry. With the progress of AI, we see changes to achieve both standardization and personalization at the same time. At the property quality and risk assessment stage, we have achieved human AI integration, with AI now leading the entire unit sign-up workflows. Our AI property evaluation assistant uses visual recognition and multimodal analysis to intelligently capture indoor features, assess property conditions, and evaluate potential risks. It also incorporates market data to generate intelligent AI-driven pricing recommendations.

Stanley Yongdong Peng: Home listings are scattered. Each home has different and complex internal conditions, making the products non-standard. Service providers are many. Their levels vary, the workforce is also non-standard. Market price fluctuates. Traditional pricing relies on frontline staff's on-site judgment, leading to non-standard pricing. Operational processes are mostly offline and complex, making sales strategies and service execution non-standard as well. These are the traditional constraints of the industry. With the progress of AI, we see changes to achieve both standardization and personalization at the same time. At the property quality and risk assessment stage, we have achieved human AI integration, with AI now leading the entire unit sign-up workflows. Our AI property evaluation assistant uses visual recognition and multimodal analysis to intelligently capture indoor features, assess property conditions, and evaluate potential risks. It also incorporates market data to generate intelligent AI-driven pricing recommendations.

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Tao Xu: Gross profit dropped by 3.9% year over year to RMB 4.9 billion. Gross margin was 21.4%, down 1.3 percentage points year over year. The decline was mainly due to the structural impact from a lower revenue proportion of existing home and the new home business, which have relatively high contribution margins, as well as the decrease in contribution margin from the existing home business. This will partially oversight as increase in contribution margin from the home rental services. Gross margin declined by 0.5 percentage points quarter over quarter in Q3, mainly due to the structural impact as the revenue contribution of new home transaction service declined. In Q3, our GAAP operating expenses totaled RMB 4.3 billion, down 1.8% year over year and 6.7% quarter over quarter.

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Stanley Peng: Beyond analyzing photos, the system can integrate property attributes holistically, helping address challenges such as consistent product standards, varying personnel capabilities, and pricing accuracy. In the homeowner communication phase, we launched an AI negotiation assistant. This tool package AI-driven property assessment, dynamic pricing, and competitive market data into tailored home sign-up strategies and negotiation scripts, helping our service providers communicate and negotiate with homeowners more effectively. This provides a more professional and friendly experience for our clients, equipping new service providers with the tools they need to grow quickly and learn how to address non-standard sales issues. We piloted this feature in Ningbo, and unit sign-up productivity rose by over 10 percentage points in Q3 compared with Q2, ranking number one nationwide. Third, we achieved a leap in efficiency by adopting different AI applications.

Stanley Yongdong Peng: Beyond analyzing photos, the system can integrate property attributes holistically, helping address challenges such as consistent product standards, varying personnel capabilities, and pricing accuracy. In the homeowner communication phase, we launched an AI negotiation assistant. This tool package AI-driven property assessment, dynamic pricing, and competitive market data into tailored home sign-up strategies and negotiation scripts, helping our service providers communicate and negotiate with homeowners more effectively. This provides a more professional and friendly experience for our clients, equipping new service providers with the tools they need to grow quickly and learn how to address non-standard sales issues. We piloted this feature in Ningbo, and unit sign-up productivity rose by over 10 percentage points in Q3 compared with Q2, ranking number one nationwide. Third, we achieved a leap in efficiency by adopting different AI applications.

Tao Xu: Notably, G&A expenses were RMB 1.9 billion, relatively flat year over year and down by 10.3% quarter over quarter, primarily attributable to the decreased bad applications and reduced share-based compensation expenses. Sales and marketing expenses were RMB 1.7 billion, down 10.7% year over year, mainly due to the lower personnel expense, and reduced advertising and promotion expenses under the efficiency enhancement strategy. On a quarterly basis, the sales and marketing expenses were down 9%, mainly driven by a reduction in labor-related costs. Our R&D expenses were RMB 648 million, up 13.2% year over year and 2.3% sequentially, largely driven by higher personnel expenses. In terms of the profitability, GAAP income from operations totaled RMB 608 million in Q3, down 16.4% year over year and 42.6% quarter over quarter. GAAP operating margin was 2.6%, dropping by 0.6 percentage points from Q3 2024, and 1.4 percentage points quarter over quarter.

Harnessed ticketing, helping address changes such as consistent product standards, a very narrow capabilities and pricing accuracy.

Service providers are meeting and they are the levels borrowing. So the workforce is also announced in the market price fluctuations in the traditional pricing realized on frontline stops on the sites judgment, leading pronounced and bond pricing operational process.

Home owner communication face, we launched negotiation our system. They are to package, a accurate and property assessments and entering a pricing and a companion market data into tenor homicide strategies and negotiation of stream crepes.

<unk> offline in a complex, making sales strategies and our service as pure execution nonstandard and where they are the traditional constraints of the industry.

Our service providers communicate and negotiated with homeowners Marlin factually.

This provides a more professional in a friendly environments for our clients.

The progress with the changes to achieve post intubation and our personalization at a same time.

In newer service providers with the tools they need to grow quickly and how to address now stand ourselves seizures.

That's a property quality on our risk assessment stage, we have achieved human AI integration with and leading the entire union sign off and workflows.

<unk> is the future and nimble and unify our productivity rose by over 10%.

Our AI property evaluation and assistant users.

Tentage cards in Q3, compared with Q2 ranking number one nationwide.

Users visual recognition and a multi modal analysis to intelligently capture indoor features.

We achieved.

The efficiency by adopting.

Property conditions.

Different AI applications during our SIOP stretch our Aon reviews system has replaced menu refuse inequity in 40 automated risk control as of September <unk> review function.

Potential risks. It also incorporates market data to generate intelligence AI driven pricing accommodations beyond.

Stanley Peng: During the sign-up stage, our AI reviews system has replaced manual reviews, enabling fully automated risk control. As of September, the AI review function cover 11 cities, processing each case in just 20 seconds on average, making a 64 efficiency gain, saving more than 33,000 work hours and intercepting more than 16,000 risky properties. In the leasing stage, we use AI to power content lead marketing, expanding lead generation while reducing labor needs. AI intelligently analyzes and identifies high-quality leads, enhancing leasing efficiency. The AI-driven operational system in our home rental services has enabled us to see the possibility of scalable yet personalized services for previous fragmented, non-standardized demands, demonstrating the potential for traditional industries to overcome these economics of scale through technological innovation.

Stanley Yongdong Peng: During the sign-up stage, our AI reviews system has replaced manual reviews, enabling fully automated risk control. As of September, the AI review function cover 11 cities, processing each case in just 20 seconds on average, making a 64 efficiency gain, saving more than 33,000 work hours and intercepting more than 16,000 risky properties. In the leasing stage, we use AI to power content lead marketing, expanding lead generation while reducing labor needs. AI intelligently analyzes and identifies high-quality leads, enhancing leasing efficiency. The AI-driven operational system in our home rental services has enabled us to see the possibility of scalable yet personalized services for previous fragmented, non-standardized demands, demonstrating the potential for traditional industries to overcome these economics of scale through technological innovation.

Ziv photos in our system can interpret property attributes harnessed.

Cover you Havent cities processing each case in just 20 seconds on average, making 60 from efficiency gains and send them on hand.

Harnessed, particularly happy and address changes such as <unk>.

Tao Xu: The non-GAAP income from operations totaled RMB 1.17 billion, decreasing 14% year over year and 27% quarter over quarter. Non-GAAP operating margin was 5.1%, down 1 percentage point from Q3 2024, mainly due to the decline in gross margin. Non-GAAP operating margin was down 1.1 percentage points from the previous quarter, mainly due to the increase in operating expenses ratio sequentially. GAAP net income totaled RMB 747 million in Q3, down 36.1% year over year and 42.8% quarter over quarter. Non-GAAP net income was RMB 1.29 billion, falling 27.8% year over year and 29.4% quarter over quarter. Moving to our cash flow and the balance sheet, we generated net operating cash inflow of RMB 851 million in Q3. New home DSO remained at a healthy level with 54 days in Q3.

System product standards, a very narrow capabilities on our pricing accuracy.

But it is somehow one of ours.

Home owner communication face, we launched without V. I, a negotiation our system there to package AI, driven property assessments and entering a pricing and a companion market data into tenor homesite opportunities and negotiation of stream creeps.

In the interim.

Intercepting more then.

16, southern risky properties.

The laser stage, we use AI to power content leader marketing spending on lead generation, while reducing member needs.

Our service providers communicates and negotiated with homeowners Molly factually.

Intelligently alignments.

<unk> high quality leads enhancing leasing efficiency.

This provides a more professional unfriendly Europeans for our clients.

The AI training operational system.

<unk> newest service providers with the tools they need to grow quickly on her how to address <unk> issues.

Our home rental services has enabled us to see the possibility of scale yet.

Part of it is the future and nimble and units per rep productivity rose by over 10%.

This fall premieres.

A fragmented now standardized demands demonstrating the potential for traditional industries to overcome these economics of scale.

Vintage pods in Q3, compared with Q2 ranking number one nationwide.

Third we achieved on the leap <unk>.

Technological innovation.

Cincy adopting.

Now integrated AI across our entire home rental services process and replicating and system across.

A different AI applications during the sign upstairs or Aon reviews system has replaced menu refuse in Aberdeen and fully automated risk control as of September, but a review function.

Stanley Peng: We now integrate AI across our entire home rental services process and are replicating this system across 13 key cities. Only through continuous innovation can we navigate the industry cycle. By implementing home buyer, seller agent specialization, and AI-driven home rental operations, we have forged a new path that reengineers workflows through technology and fuels scale through efficiency. Moving forward, we will deepen AI integration across business scenarios to advance both service providers' capabilities and consumer experiences. As China's housing service industry undergoes this next evolution, we are afforded a historical opportunity to further its transformation, guided by our commitment to technology power, high-quality growth, and its potential to unlock infinity possibilities for modern living services.

Stanley Yongdong Peng: We now integrate AI across our entire home rental services process and are replicating this system across 13 key cities. Only through continuous innovation can we navigate the industry cycle. By implementing home buyer, seller agent specialization, and AI-driven home rental operations, we have forged a new path that reengineers workflows through technology and fuels scale through efficiency. Moving forward, we will deepen AI integration across business scenarios to advance both service providers' capabilities and consumer experiences. As China's housing service industry undergoes this next evolution, we are afforded a historical opportunity to further its transformation, guided by our commitment to technology power, high-quality growth, and its potential to unlock infinity possibilities for modern living services.

Certain key cities.

One is through continuous innovation can be navigating industry cycle.

Tao Xu: In addition to spending approximately $281 million in share repurchase during Q3, our total cash liquidity, excluding customer deposit payable, remained at around RMB 70 billion. Facing the short-term business challenges brought by external fluctuation and internal strategic transformation, we support and reward our shareholders through consistently active share repurchase to improve the efficiency of the capital operations. From the fourth to third quarter of this year, we spent $139 million, $254 million, and $281 million on share repurchase, respectively, with an accumulative amount of approximately $675 million in this year, up 15.7% year over year. As of the end of Q3, the number of repurchased shares accounts for about 3% of the company's total issued shares at the end of 2024.

By implementing a homebuyer center in June.

11 cities processing each case in just 20 seconds on average, making 64 efficiency gain selling them on hand.

Foundation, and an air driven home rental operations, we have launched a new pass.

Engineers working for us so our technology and our fears scale.

But it's something one of ours.

Scale through efficiency moving forward.

And the interest in into something more than.

AI integration across business areas to enhance our service providers kind of amenities and a consumer experience.

16000 risky properties.

At this stage, we use AI to power content leader marketing spending lead generation, while reducing labor needs. They are intent intelligently alignments and identifying high quality leads.

China is housing services industry undergoes. This next evolution, we are afforded a historic opportunity a majority to further his transformation guided by our commitment to technology power high quality cars.

In leasing efficiency.

And clearly the operational system.

To unlock infinity possibilities for modern leaving surface.

Our home rental services has enabled us to see the possibility loss gamble, yet plus nine sources.

This concludes my prepared remarks for today, operator, we are now ready to take questions.

<unk>.

Tao Xu: This conclude my prepared remarks for today. Operator, we are now ready to take questions.

Fragmented now standardized demands demonstrating the potential for traditional industries to overcome these economics, so scale through technological innovation, we now integrate AI across our entire home rental services process and replicating and system across.

Thank you as a reminder.

Operator: Thank you. 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 reenter the queue. If you are going to ask the question in Chinese, please follow with an English translation. Your first question comes from John Lam with UBS.

On the English language.

Okay.

And on today's call. Please limit yourself to one question and if you have it.

So questions.

Can we enter the queue.

Tao Xu: Since the launch of our share repurchase program in September 2022, we had repurchased around $2.3 billion worth of shares as of the end of September this year, accounting for about 11.5% of our total issued shares before the program began. We have made progress in Q3 this year in proactively optimizing our business structure, strengthening technology empowerment, and enhancing shareholder return. Our forward-looking layout of the home renovation and furnishing services, and home rental services, have both achieved profitability at the city level before deducting high-quarter expenses in the third quarter. The AI capabilities have shown initial results in driving the business development and improving the work efficiency of the service provider, and the middle and back office personnel. We are also fulfilling our shareholder return commitment with greater intensity, repurchasing $281 million in a single quarter, increasing 38.3% year over year.

If youre going to ask the question in Chinese please with an English translation.

13 cities.

Only through continuous innovation can be navigated industry cycle by implementing a homebuyer center spend.

First question comes from Jon Lange with UBS.

Okay.

The presentation and an air driven home rental operations, we have launched a new pass then it would be.

Oh wait I translate.

Bob.

John Lam: Let me translate my questions. For the new home business, in the past, the company has been achieving or outperforming the market in terms of the alpha. It seems that the magnitude of the alpha has been diminishing. May I know what's the reason why, and also how should the investor look at the company new home business growth potential? Thank you.

Great.

Engineers working for those some of our technology and our fears scale.

Hey, how does she said I talk with me a holiday.

Scale through efficiency moving forward, we will deepen the integration across business scenarios to Ed events, all the service providers kind of any views on a consumer experience.

Based on internal I'm, telling them, what they need when tissue outweighs that one unique CFO.

<unk>.

Sure.

Or how should we be key take alpha, but what kind of what's your that lets you go with a hard hat.

China is housing so as the industry undergoes. This next evolution, we are afforded our historical approach.

Towards that yet or not.

Actually Gary shots.

Shovel alcohol with Idaho cross sell them into my kind of die horseshoes snowfall data dump that Dino.

Maturity to further his transformation guided by our commitment to technology power high quality borrowers and its potential to unlock infinity.

So let me translate my questions.

No.

The new home business in the past the company has seen that shifting are outperforming the market.

Entities for modern leaving cirrhosis.

To conclude my prepared remarks for today, operator, we are now ready to take questions.

Terms of the alpha, but it seems that the magnitude of the alpha has been diminishing.

Banner, what's the reason why and also how it should be or how should investors look at the company and they won't be the scope of potential. Thank you.

Thank you that's a reminder.

Questions on the English language side.

Okay.

Tao Xu: As the industry enters a new stage of high-quality development, we are taking initiative in building a residential services ecosystem with our combination of technological innovation, anti-cyclical business portfolio, and a highly efficient, well-structured operating system. We are well-positioned to deliver greater value to both customers and investors. Thank you. Next, I would like to turn the call to our Chairman and CEO, Stanley. Thank you, Tao, for sharing our business and the financial developments for the third quarter. We are strategically shifting our growth engine from scale to efficiency. Today, I'd like to highlight some innovative initiatives we have rolled out across businesses to advance this shift. First, in terms of our core business transaction services, externally, we see new demand from both buyers and sellers under the new norm for China housing market. Home sellers expect stronger marketing capabilities from us.

On today's call. Please limit yourself to one question I think you have additional questions.

Hey, Joe.

Tao Xu: Thank you, John. Although the recent performance of our new home transaction business has been affected by the market volatility, we remain confident in its ability to outperform the market in the long run. China's new home market has gradually matured in past 2 years, with supply-side risks gradually easing. Against this backdrop, we have shifted from a cautious approach to a more growth-driven strategy. Our new home transaction business has significantly outperformed the broader market in past few quarters until this Q2, with a higher brokerage penetration in the industry, our broader housing transaction service network, and more collaborative projects. In this Q3, our year-over-year growth narrowed relatively to the market, mainly due to the several factors. First, customers on our platform often look at both new and existing home before making a purchase decision.

So Nielsen performance, so far new home transaction business has been affected by the market volatility we remain confident in its ability to outperform the market in the long run.

We entered the queue.

Thank you I'm going to ask the question in Chinese please write in English.

Thanks.

Your first question comes from John Lee with UBS.

China's new home market has gradually mature in past two years with supply side risks that are they easing.

Okay.

Oh wait I can relate to.

Melba.

Okay.

Against this backdrop, we have shipped from a cautious approach to a more growth driven strategy.

Hey, how does she said I talk with me a holiday.

You'll be attending John what do you mean, you're going to wake up one unit CFO.

Our new home transaction business significantly outperformed the broader market in possibly coaches on kyocera second quarter.

Joe.

T J in the hot tea language.

The key take.

With a higher brokerage penetration in the industry.

<unk> alpha, but what kind of what's your that lets you go with a hot alpha towards that you're a little no actually galleys shots.

Our broker holding consistent service network and more collaborative projects.

In Q3.

Well I don't have also meant that I can buy whole should see final data set that tone at all.

Their growth narrowed relative to the market mainly due to the several factors first customers on our platform.

So let me just say my my questions. So for the new home business in the past the company has seen that shipping well outperforming the market in terms of the alpha but it seems that the mandatory alpha has been diminishing.

Look at both new and existing homes before making a purchase decision.

Recently, the prices of homes have been considerably more tricky to do.

Tao Xu: Recently, the prices of existing home have been considerably more attractive than the prices of the comparable of new homes, leading both first-time buyers and the home upgrader to choose existing homes. Second, this is a base effect. The platform's new home transaction has a relatively higher base in last Q3, as many policy-driven new home subscriptions in Q2 were transacted in Q3, causing a timing mismatching with the market data. Third, of course, it is important to note that in recent years, our new home business has grown rapidly from a lower base as we made significant gains in brokerage penetration, the scale of our collaborative projects, and our sales network and capabilities. We estimate the Beike China penetration ratio in the new home market has grown to over 50% this year from approximately 30% a few years ago.

Prices for comparable new homes.

Tao Xu: Buyers are counting on us for customer-oriented insights to support their decision-making in areas such as timing, asset planning, and listing comparisons. These trends place due requirements on our traditional agent skill model, and agents who are great at supporting both buyers and sellers are extremely rare. Since mid-year, we have been working to restructure our capabilities across both buyer and seller agents. In Shanghai, we piloted a seller and buyer agent specialization mechanism to enhance our marketing and operating excellence on the home seller's agent side first. The mechanism redefines organizational roles, commission structures, and performance initiatives, and offers supporting tech products. This, in turn, allowed buyer-side agents to prioritize quality listings and improve transaction conversion. The underlying logic is that high-quality home listings by engineers not really made. They require skilled agents to master market analytics, pricing, property staging, owner engagement, and decision-making precision marketing.

What's the reason why and also how to be well how should investors look at the company and they won't be the scope of potential. Thank you.

Leading both both first time buyers under home Upgrader, two truth is new homes.

<unk>.

This is basically effect.

Platforms, New home transaction at the relatively higher base in Q3.

So good job.

So Nielsen performance so far.

The business has been affected by the market volatility we remain confident in its ability to outperform the market in the long run trend.

As many of policy driven new home subscription in Q2 were trimmed back in Q3, causing a timing mismatch with the monkey data.

China's new home market.

So it's of course, it's important to note that in recent years, our new home business has grown rapidly from a lower base. So we've made a significant gains in brokerage been accretion to.

Gradually mature in past two years, what's if I say risks that are they easing.

Against this backdrop, we have shipped from our cautious approach to a more growth driven strategy.

The scale of our collaborative programs and all of our sales through network and our capabilities.

Our new home transaction business significantly outperformed both the monkey in possibly coaches on killed this second quarter.

We estimate the broker channel penetration ratio into new home market has grown to over 50% this year from <unk>.

With a higher voltage penetration but industry.

Our broader holding consistent service network and more collaborative projects.

<unk>, 30% a few years ago.

New cities, we operate in.

In Q3.

Tao Xu: New cities we operate in, the coverage of our collaborative project has expanded to over 70% from roughly 39% in 2023. To achieve further growth in a higher base, we have several key opportunities. First, we plan to expand into more cities and broaden our target market. Second, Beike China penetration in China still lags behind developed markets, leaving ample room for growth. Third, we leverage refined operation management to enhance the service capability for the new home customers and the sales efficiency, as well as improve our coverage and the sales capability for high-end products. Now, let's take a closer look at the details. First, we are piloting lighter product offerings to tap in some lower-tier cities. What we call B+. Our platform business still has over 150 prefecture and country-level market now yet to be covered.

So coverage of our collaborative project has expanded to over 70% from roughly 69% in 2023.

Growth narrowed that's related to the market mainly due to the several factors first customers on our platform.

Look at both new and existing home people, making a purchase decision.

To achieve further growth higher base, we have several key opportunities first we plan to expand into more cities and broaden our target market.

Recently the prices so put it in the home hub have been considerably more type you depresses local comparable homes, leaving.

Second broker channel penetration in China still lags behind about markets.

In both both first time buyers and a whole lot greater to truth is new homes.

And per room for growth.

Second.

This is basically effect.

So we leverage refund operation management to enhance our service capability, both new home customers and our sales through efficiency.

Tao Xu: Second, inventory quality drives customer acquisition. Superior listings inherently attract more serious buyers, driving transaction speed and our brand reputation, which, in turn, attracts better talent to join us. Therefore, we did several things to implement this. First, we adjusted our organizational structure and incentive mechanisms. We shifted some senior agents into heartbreed roles that combine management and home seller-focused responsibilities, giving them the authorities to form and lead their own teams dedicated to listing management. Under the ACN commission allocation mechanism, we raised the selling agent share from 40% to over 50%. We are maximizing incentives for top-performing agents to focus on marketing high-quality home listings. This group of home seller-focused agents can earn around 25% more than before, assuming our market share remains stable.

The platform's new home construction at the relatively higher base he wants to Q3.

When they pulse driven new home subscription in Q2, which was done in Q3, causing the timing might be.

As well as improve our coverage of the <unk> capability for hand to put us.

Market data.

No.

Oh of course.

Take a closer look at the details.

And to know that in recent years.

First we are piloting lighter product offerings to tapping some lower tier cities. So what we called B plant put us.

New home business has grown rapidly from a lower base. So we've made a significant gains in brokerage and appreciate that.

Scalable Volvo collaborative programs and all of our social network and the capabilities.

Our platform business still has over 150 with feature and country level market to be covered.

We estimate.

Okay triangle, Patricia ratio into new home Monkey has grown to over 50%. This year from approximately 30% a few years ago.

Using our outlook amendment authentic with teens.

Tao Xu: Building on our commitment to authentic listings, the B+ pilots equips local brokerage stores and agents in more cities with the system capability, traffic support, and commercialization tools. This lighter operational approach enables more flexible collaboration on home listings and sales, and the new home sales with our channel partners. As of September 2025, our B+ business has been piloted in 4 cities. We plan to expand to over 30 cities by end of the year, unlocking additional market opportunities. Second, we see the room to grow our sales opportunity with the collaborative projects. On the to customer end, we will optimize content development and operational strategy for our new home business to reach more buyers and increase the conversion rates.

These pillars equipped local brokerage stores, an agent in more cities with the system capability to support the commercialization tooth.

Cities, we operate.

So coverage of our collaborator <unk> project has responded to over 70% from roughly 69%.

Just like our operational approach enables more flexible collaboration on homeless things themselves.

Tuned into this week.

To achieve further goes higher basis, we have with several key opportunities first we plan to expand into more cities and Bolton our totally mortgage.

New home sales with all of our channel partners.

So September tended to define our beef business has been tailored in four cities.

Second broker channel penetration in China still lags behind.

We plan to response over 30 cities.

Tao Xu: To mitigate potential pressure on buyer's agents, we reduced the mandatory 10-year commission split, raised the minimum commission for selling agents, and offered extra incentives for selling high-score listings. Second, we provided agents with systematic support and digitalized products to help them manage listings. In the past, homeowners' relationship management, listing presentation, and marketing relied on agents' personal experience, which made it hard to replicate and scale. We have built an AI-powered listing score system that captures and qualifies the know-how required in six key areas: home listing maintenance completeness, homeowner engagement depth, property condition, for example, renovation recency, listing cross-channel marketing performance, AI-powered pricing competitiveness, and buyer's interest, for example, the listing's online/offline viewings. These metrics help agents clearly understand what defines a high-quality listing and how to better present and market homes. Home buyer agents can also focus on selling nice-score listings to drive better sales conversions.

Markets.

Yeah.

Uncle room for growth.

Looking at the snow monkey opportunities.

So we leverage refund or push amendments to the service capability, both new home customers and our sales through efficiency.

We see the room to grow all of our sales opportunity with our collaborator protests.

Answer to a customer and we.

As well as improve our coverage and our sales capabilities for high end to put out.

We will optimize the content development and operational strategy for our new home business to reach more buyers and that includes the conversion rates.

Let's take a closer look at the detailed.

I wanted to cut demand Lugo Pedro rates, our partnership models.

First well pay a team like to put our openings to tapping some lower tier city. So what we called B plant put us.

Tao Xu: On the to customer end, we will iterate our partnership models and products offerings to developers. Third, both supply and demand in new home markets are increasingly shifting towards the home upgrade projects. On supply side, we will more precisely identify these projects and boost their exposure to both agents, and the customers. We then match suitable agents to this upgrade projects and then direct more customer traffic to them, creating a closed loop among homes, agents, and the customers. This approach will also help agents strengthen their sales capability for upgrade products and narrows the price gap between the platform average new home unit and the broader market. Thank you.

Product offerings to give us.

So both supply and demand in new home markets are increasingly shifting towards the whole upgrade projects.

Our platform business.

<unk> has over 150 with feature and country level market Nokia to be covered.

On supply side.

We will more precisely under goodbye this progress on the boost our exposure to both agents and customers.

Using all the commitment to authentic 15th.

B pillar equipped local brokerage stores, an agent you more thinking with the system capability.

With the match suitable agent to just upgrade project and the direct more customer perfect with J crew.

As the poll.

Taking a close loop among homes agents and customers.

Utilization tools.

Just like the whole person approach enables more flexible collaboration a homeless things themselves.

This approach will also help agents dunson sort of sales capability for how can we put us at the narrows the gap between the pro forma average new home unit and the broader market. Thank you.

The new home sales with all with triangle partners.

So September tended to define our BPM business.

Been piloted in four cities and we plan to use bumps over 30 cities.

Your next question comes from Catherine Chen with Citi.

Operator: Your next question comes from Griffin Chan with Citi.

For the year.

Okay.

Monkey opportunities.

Alright.

What's the what's your time, Okay, Rachel Glaser.

Tao Xu: Hi, speaks in foreign language. I'm going to translate my question. This is Griffin Chan from Citi. How did the leasing service business manage to turn last year losses into the operating profit by Q3 this year? What opportunity remains for further improvement going forward? Thank you. Thank you, Griffin Chan. The profitability of our home rental services improved significantly this year. Excluding HQ allocations, city-level operating profits resumed in Q2 and became profitable into Q3. First, we benefited from economies of scale from rapid growth in both scale and revenue. The total number of managed unit exceeding 660,000 by end of Q3, up 75% year-over-year. Revenue from our home rental service business reached RMB 5.7 billion in Q3, up 45.3% year-over-year.

Griffin Chan: Hi, speaks in foreign language. I'm going to translate my question. This is Griffin Chan from Citi. How did the leasing service business manage to turn last year losses into the operating profit by Q3 this year? What opportunity remains for further improvement going forward? Thank you. Thank you, Griffin Chan.

We see room to grow all of our sales opportunity with our collaborator put us.

Yes, so glad you're doing that now for when that yes, it would hold true NAV accretion.

Answer to customer land.

Tao Xu: In terms of results, in September, high-scoring listings accounted for more than 75% of transactions. Our average market coverage in Shanghai hit a record high in Q3, increased 1.2 percentage points year over year, and 2.6 percentage points quarter over quarter. The experience of homeowners looking to sell quickly also improved. Many homeowners reached out to us proactively to learn how to raise their listing scores. Buyers also naturally prefer high-scoring listings, creating a positive cycle that benefits everyone involved. The home seller buyer-side agent specialization in Shanghai is an important initiative designed to meet the changing needs of our customers, and marks a milestone in our shift from scale to efficiency. We will continue to track its progress and explore new initiatives on the home buyer's agent side. In addition, we tried innovative approaches to make our new business more efficient.

Some people, which is the one that you can say that services.

We will optimize the content development and operational strategy for the new home business to reach more buyers and that equals the conversion rates.

No. It's a good time got seasonable medicine.

Now as you well know.

Alright.

Pardon me about season commentary, Ohio Law you cannot.

I wanted to cut demand Lugo Pedro age or partnership models.

Yes, I'm going to try to say my question. So this is <unk> from Citi properly Kim So how did the leaving surface business managed to turn nausea losses into the operating profit by third quarter this year and what opportunity remains.

Put out its offerings to give out.

Both supply and demand in new home monkeys are increasingly shifting towards the whole pump quite potent.

<unk>.

Improvement going forward. Thank you.

We will more precise date under goodbyes, just progress on the boost our exposure to both agents and customers.

Yes. Thank you operator, the profitability of our home rental services improved significantly this year.

The match suitable agent to tick up with purpose and the direct more customer perfect towards.

Tao Xu: The profitability of our home rental services improved significantly this year. Excluding HQ allocations, city-level operating profits resumed in Q2 and became profitable into Q3. First, we benefited from economies of scale from rapid growth in both scale and revenue. The total number of managed unit exceeding 660,000 by end of Q3, up 75% year-over-year. Revenue from our home rental service business reached RMB 5.7 billion in Q3, up 45.3% year-over-year.

Excluding codell accretions.

Creating a closed loop among homes and agents on the customers.

City level operating profit breakeven in Q2 as it become profitable in just Q3.

This approach will also help agents dunson sort of sales capability.

First we benefited from economies of scale from rapid growth in both scoop and the revenue.

How can we put us at the narrows the gap between the pro forma average new home needs and.

So total number of multi unit exceeding 660000.

Both of the market. Thank you.

Sweet.

Okay.

75% year over year.

Revenue from our home rental services business reached RMB five 7 billion in Q3 up 40.

Your next question comes from Catherine Chen with Citi.

45, 3% year over year.

Hi.

So contribution perfect from overall rental services also rose significantly to nearly RMB 500 million in Q3.

What's the what's your time, okay, Rachel but of course that whats.

Tao Xu: For example, in our home rental business, Q2 marked the first time we excluded headquarter costs from break-even at the city level, and Q3 is expected to contribute over CNY 100 million in profits. Carefree Rent, our decentralized long-term rental business, housing businesses inherently faces challenges, including relatively low average selling prices, non-standardized products and services, extensive service coverage, and high maintenance costs, traditionally requiring heavy manpower and variable cost investment for scaling and operating. This sector has struggled with economics of scale industry-wide, with no established base practices yet. As newcomers, we embraced this as an opportunity to build an AI-native operation from inception, enabling parallel developmental business capabilities, frontline operations, and AI intelligence. Through our organizational restructuring, process optimization, and AI driving and products, we are pioneering an air traffic efficiency, economically sustainable model. Early results demonstrate significant improvements, offering valuable insights for our other platform businesses.

Tao Xu: The contribution profit from our home rental services also grew significantly to nearly RMB 500 million in Q3, up 186% year-over-year, with contribution margin of 8.7%, up 4.3 percentage points year-over-year. On one hand, the net asset model of our Carefree Rent business has given us a higher margin, lower risk revenue structure. Starting in this Q3, the revenue from newly added rental units and renewed existing unit on the Carefree Rent has been accounted on a net basis. In Q3, rental units under the net revenue accounting method made up 25% of the total unit under management, up 10 percentage points quarter-over-quarter, contributing approximately RMB 470 million in revenue.

Yes, I'm glad you're doing that now.

For when that yes, it would hold true and accretion of about <unk> <unk>.

<unk> hundred 86% year over year with contribution margin of eight 7% up four three percentage points year over year.

Well, maybe you can tell me about the U S.

No. It's a good time to call it seasonal but that's a little closer together now holzschuh woman.

I mean, that's even Colgate hail no you can't.

Hunt.

That's a multiple of our company run business has given us a higher margin lower risk run this structure.

Yes, I'm going to try to say my question. So it is with US from city property team. So how did the leaving surface witnessed manage the turn nausea losses into the operating pool, but by third quarter Bcf.

Starting in Q3.

The revenue from newly added rental units and the renewed the unit on the capital front has been counted.

The main threat.

Improvement going forward. Thank you.

That's the basis.

In Q3 rental units other than that's revenue accounting method made the opportunity of 5% of the total units under management.

Yes, thank you operator.

Oh Boy home rental services improved significantly this year.

Percentage points quarter over quarter, contributing approximately RMB 470 million in revenue.

<unk> Codell accretions.

City level operating profit breakeven in Q2.

Profitable in Q3.

Structural shift drove RMB 113, many increase in cafe runs Q3 contribution profit lifted.

Tao Xu: This structural shift drove a RMB 130 million increase in Carefree Rent's Q3 contribution profit and lifted its contribution margin by 3 percentage points. At the same time, 2025 has been a year of improving operation efficiency. Streamlined and highly efficient operation have driven the reduction in several cost ratio, adding above RMB 170 million to contribution profit and increasing contribution margin by roughly 1.5 percentage points. Excluding rental costs recognized on a gross basis, the main cost of Carefree Rent are labor cost, channel cost, post-rental installation, and default costs. The improvement was mainly driven by the optimized operation labor cost. In Q3, the average monthly number of unit managed per property, per property manager exceeded 130, compared with over 90 in the same period last year.

First we benefited from economies of scale from rapid growth in both scoop and the revenue.

Contribution margin by three percentage points.

So the total number of multi unit exceeding 660000.

But at the same time 22, five has been a year of improving operational efficiency.

Q3.

Up 75% year over year.

Revenue from our home rental services business, which RMB five 7 billion in Q3.

Two months into a highly efficient operation have driven the reduction in several close ratio.

45, 3% year over year.

I think above RMB hungry, some committed to contribution appropriate and increasing contribution margin by roughly one five percentage points.

So contribution profit from all of our home rental services also significantly to nearly RMB 500 million in Q3.

Excluding rental costs recognized.

186% year over year with contribution margin of eight 7% up four three percentage point year over year.

Tao Xu: I'll walk you through three major AI-driven black stores across different dimensions. First, AI has been fully integrated into our rental services business, enabling end-to-end intelligent decision-making and business operations. For rental unit sign-ups, AI now powers critical processes, including property lead identification, personnel management and deployment, property evaluation, pricing strategies, and homeowner communication. For example, previously, personnel management and operational relied heavily on experience level, with supervisors deciding which agent was responsible for which area. Now, through AI-driven grid management supported by our unique dynamic domain data and modeling capabilities, AI can make data-driven determinations. It evaluates factors such as the number and quality of property leads, local supply-demand relationships, and personnel capabilities models. Based on these data sets, it determines the optimal personnel assignments, regional coverage, and organizational structure. AI can simulate up to 90,000 design scenarios per minute, automatically generating the most efficient staffing and operational strategies.

Cost basis, the main cost of coffee runs our labor cost channel cost posted one tool installation and the diesel costs.

And so that's it's multiple ball, we're carefully run business, that's giving us a higher margin lower risk run this structure.

Yeah.

The improvement was mainly driven by the optimized the operation labor costs.

In Q3, so average monthly number op unit managed property.

Starting in Q3.

The revenue from newly added rental unit and the renewed the unit on the pet food rent has been counted.

Property manager exceeded 130 compel rates over 90 in the same period last year.

That's the basis.

In the fourth quarter of this year.

In Q3.

Tao Xu: In the first three quarters of this year, average monthly efficiency in unit hours and the occupancy rose by approximately 10% and 28% year-over-year respectively. The default cost ratio declined by 0.1 percentage points, benefiting from our strong leasing capability. In Q3, initial leasing success rate improved by 0.9 percentage points year-over-year. So far this year, contribution profits from our home rental business segment has grown much faster than operating expenses. These expenses mainly comprise high culture and the city level staff compensation and R&D, with a quite low expense ratio. A series of operating management tools have consistently improved the productivity of our middle and back office personnel.

The unions other than that's revenue accounting method made the opportunity of 5% of the two.

Average monthly efficiency in uniforms and occupancy rose by approximately 10% to 20.

Total units under management.

10 percentage points quarter over quarter contributing approximately RMB 470 million in revenue.

8% year over year, respectively.

So the full cost ratio.

Climbed by 0.1 percentage points.

Let's start with shift drove a RMB 130 minute increased Interstate runs Q3 contribution profit.

<unk> form over a strong leasing capability.

Three initial leasing success rate improved by 0.9 percentage points year over year.

Lifted there is a contribution margin by three percentage points.

So far this year contribution profit from our home rental business segment has grown much faster to operating expenses.

At the same time 22, five has been a year of improving.

Improving operating efficiency.

So two months into a highly efficient operation have driven the reduction in several close ratio.

<unk> expenses, mainly comprised of high quarter by the city level staff compensation, and R&D, which are quite low expense ratio.

I think above RMB hungry, some committed to contributing appropriate and increasing contribution margin by roughly one five percentage points.

A series of operating mentioned in true hovered consistently improves the productivity of our middle and back office personnel.

Excluding rental costs with open minds.

Cost basis, the main cost of coffee runs our labor cost general cost posted one tool installation and the diesel costs.

The average number of units under maintenance that needle in the back office personnel goes by seven 5% year over year, while the overall operating expense ratio declined year over year.

Tao Xu: The average number of units under management by each middle and back office personnel rose by 7.5% year-over-year, while the overall operating expense ratio declined year-over-year. In the coming years, there is a significant room to continuously improve contribution margin in our Carefree Rent business. The key drivers will be the continuous growth potential of the rental unit scale of the Carefree Rent and the ongoing improvement of our operational efficiency. From a per unit optimization perspective, we're diversifying our channels for renting out our property to reach broader tenant demographics. Increasing the share of our in-house rental occupancy team and reducing reliance on the concentrated broker channels. This is expected to lower the per-unit channel cost ratio. In addition, labor costs remain a large part of per-unit UE, and there's still room for further reduction of the cost ratio.

Tao Xu: This has greatly improved how we allocate our service personnel's deployment, configuration, and operational scope. We also use AI to guide and execute our core business strategies, daily helping us move forward fully in intelligent operations. For rental unit sign-up, we roll out AI-powered rental unit sign-up assistant that uses real-time data and algorithms to predict market demand, property inventory, and price trends. It generates automated sign-up strategies and dynamic pricing recommendations, delivering tailored plans for each property through adaptive decision models. As market conditions change, such as customer demands, property inventory, and pricing, AI can guide our operations team to make timely adjustments. For example, when there is an oversupply of three-bedroom units in a certain area, the system automatically triggers price controls and sign-up restrictions. When unit types are in short supply, AI reactivates dormant property leads.

Yeah.

The improvement was mainly driven by the optimize the operation of labor costs.

In the coming years.

In Q3, so average monthly number of Union managed property.

So if there's room to continuously improve the contribution margin.

Property manager exceeded 130 <unk>.

Our company run business.

The key drivers Walgreens, a continuous growth potential of the rental unit SKU of the country right.

<unk> was over 90 interest in pure last year.

The first three quarter of this year.

Average monthly efficiency in Uni songs.

Going to improvement of our operational efficiency.

Occupancy rose by approximately 10%.

One more for you.

8% year over year, respectively.

Optimization puts banking well diversifying our channels for renting out our property to reach broader tenant demographics.

So the full cost ratio.

Climbed by 0.1 percentage points.

Benefiting from over a strong leasing capability.

Increasing the share of our in house rental occupancy team and reducing reliance on concentrate the broker channels.

In Q3.

This will be through successive rate improve by 0.9 percentage points year over year.

So far this year contribution profit from our home rental business segment has grown much faster than operating expenses.

This is expected to lower the per unit cost ratio.

In addition, labor costs remain a large puddle per unit.

This expense is mainly comprised of high culture at the city level staff compensation and R&D.

Per unit <unk>.

And that there is still room for further reduction of the cost ratio.

So quite low expense ratio.

We see the potential to nearly double the number of units manage it.

A series of operating mentioned two public consistently improves the productivity of our middle and back office personnel.

Tao Xu: We see the potential to nearly double the number of units managed per property manager, moving towards your average over 200 units per person. Furthermore, we will keep exploring and expanding diverse value-added services with the home rental ecosystem. We will continue to invest in AI and online digital capacity within our home rental service, while other operating expenses should stay relatively stable. As the business continues to scale and we further optimize per unit UE, we expect our home rental service to maintain a strong operating leverage in the year ahead. Thank you.

Manager.

Moving to work to average over 200 units per person.

The average number of units under maintenance that needle in the back office personnel by seven 5% year over year, while the overall operating expense ratio.

Furthermore, we will keep exploring and expanding that book value added services with our home rental ecosystem.

Tao Xu: Our upcoming AI cloud builder will also automatically contact homeowners of these reactivated properties. In Linyi, where we began pilot operations in August, our workforce decreased by 10%, while new rental sign-up units grew up 10% even in the off-peak season. For rental unit leasing, our AI inventory management system frequently monitors inventory and takes over managing high-risk or low-maintenance properties. It dynamically adjusts pricing and targeted discounts, while optimizing traffic to speed up leasing. In Q3, these capabilities accelerated the lease out of 350,000 units across 11 cities, with 90% price adjustment adoption. This effort generated over RMB 100 million in nationwide cost savings. Second, we use AI and technology to solve the industry's long-standing problems with non-standardization, enabling high-quality, scalable growth. The home rental industry has several characteristics. Home listings are scattered, and each home has different and complex internal conditions, making the products non-standard.

We will continue to invest.

Year over year.

An online digital kubicki, reaching all of our home rental services.

In the coming years.

If there's room to continuously improve the contribution margin.

While other operating expenses should stay relatively stable.

Our company run business.

The business continues.

The key drivers would be to continue its growth potential of the rental unit SKU of the country.

To scale, although we put to optimize per unit you mean.

Pat.

And the ongoing improvement of our operational efficiency.

Our home rental service to maintain a strong operating leverage in the year ahead. Thank you.

One more for you.

Optimization with Viking.

Well diversifying our channels for renting out our property to reach broader tenant demographics.

Your next question comes from John <unk> with Barclays.

Operator: Your next question comes from Jiong Shao with Barclays.

Thank you very much for taking my questions and good evening.

Jiong Shao: Thank you very much for taking my questions. Good evening. My question is around your renovation business. You have done very well in cities like Beijing and Shanghai, and I was just wondering, for you to do well in those cities, is that because you have high market share with your Lianjia brand in those cities? Do you think that's a key reason? Do you think for cities outside Shanghai and Beijing, how would you kind of motivate your agents to cross-sell or to sell the renovation business when you don't have such a high market share? Thank you so much.

Increasing the share of our in house rental occupancy team and reducing their lungs home to concentrate the broker channels.

<unk>.

My question is around your renovation business, you'll have done very well in cities like Beijing and.

This is.

To lower the per unit cost ratio.

In Shanghai and I was just wondering for you to do well in those cities is that because you have high market share.

In addition, labor costs remain the largest hurdle for you.

Per unit <unk>.

And there is still room for further reduction of the cost ratio.

Would you lean jaw.

Our brand in those cities and what sort of do you think that's a key reason and do you think for cities outside Shanghai and Beijing, How would you kind of a.

We see the potential to nearly double the number of units manage it where appropriate lender.

Going to work to average over 200 units per person.

Motivate your agents to cross sell or to sell their renovation business. When you don't have such a high market share. Thank you so much.

For the.

We will keep evolving and expanding that book value added services.

Home run through ecosystem.

Tao Xu: Service providers are many, and their levels vary, so the workforce is also non-standard. Market price fluctuates, and traditional pricing relies on frontline staff's on-site judgment, leading to non-standard pricing. Operational processes are mostly offline and complex, making sales strategies and service execution non-standard as well. There are the traditional constraints of the industry, but with the progress of AI, we see challenges to achieve both standardization and personalization at the same time. At the property quality and risk assessment stage, we have achieved human-AI integration, with AI now leading the entire unit sign-up workflows. Our AI property evaluation assistant uses visual recognition and multimodal analysis to intelligently capture indoor features, assess property conditions, and evaluate potential risks. It also incorporates market data to generate intelligent AI-driven pricing recommendations.

We will continue to invest.

Thank you so.

On the online digital.

First of all that is important to note is that home renovation market.

Tao Xu: Thank you, Shao. First of all, it is important to note that the home renovation market in second and third-tier cities represent a critical long-term growth driver for our future home renovation business, carrying irreplaceable strategic value. From a market fundamental perspective, compared to the first-tier cities, the cost of purchasing a similar size of property is much lower in small cities. Based on the latest data from our platform, the average price of existing home in Beijing and Shanghai is around RMB 4 million, versus just over RMB 1 million in other cities. This price gap presents a meaningful opportunity as the customers in second and third-tier cities can allocate a relatively larger budget for the home renovation. In 2024, we recorded approximately 1 million existing home transaction outside Beijing and Shanghai.

Reaching all of our home rental services.

While other operating expenses should stay relatively stable.

I'm curious on the socio cities represented a critical long term growth for our future home renovation business.

The business continues.

To scale, although we put to optimize per unit you mean.

Currently irreplaceable stretch value.

Pat.

Our home rental service to maintain a strong operating leverage in the year ahead. Thank you.

From a market fundamental perspective.

Compared to the fourth tier cities, so call so for purchasing a similar size of property is much lower in small cities.

Okay.

Yes.

Your next question comes from Jim <unk> with Barclays.

Based on the latest data from over painful so average price of homes in Beijing, and Shanghai is around RMB 4 million versus just over RMB 1 million the other cities.

Thank you very much for taking my questions and good evening.

My question is around your renovation business, you'll have done very well in cities like Beijing and.

This Prescott presents a meaningful opportunity.

Customers in second and associated cities kind of allocate a relatively larger budget for the home renovation.

Shanghai and I was just wondering for you to do well in those cities is that because you have high market share.

Infinite and therefore, we've recorded approximately.

Would you lean jaw.

One meeting existing home transaction outside of Beijing and Shanghai.

Our brand in those cities and whats sort of do you think that's a key reason and do you think for cities outside Shanghai and Beijing, How would you kind of.

These are cities Homeland division contract older generated through our agent network only accounted for around 30% of overall homegrown nutrition comfort holders.

Tao Xu: In these cities, home renovation contract order generated through our agent network only accounted for around 30% of overall home renovation contract orders. Our conversion rate from existing home transaction to home renovation contract in these cities was just less than 5% compared to over 20% and 10% in Beijing and Shanghai respectively. Our strategic rationale is clear. Larger scale expansion into additional cities will only begin once the home renovation business underlying operational capability are mature, and the module has been fully proven in the core cities. Therefore, our resources are highly concentrated in core cities at this moment, and we have not yet made a big effort to drive traffic for our home renovation business through non-Lianjia agent channel in the second and third tier cities so far. This approach is to ensure that every step of our growth is solid and sustainable.

Tao Xu: Beyond analyzing photos, the system can interpret property attributes holistically, helping address challenges such as consistent product standards, varying personnel capabilities, and pricing accuracy. In the homeowner communication phase, we launched the AI negotiation assistant. These two package AI-driven property assessment, dynamic pricing, and competitive market data into tailored home sign-up strategies and negotiation scripts, helping our service providers communicate and negotiate with homeowners more effectively. This provides a more professional and friendly experience for our clients, equipping new service providers with the tools they need to grow quickly and learn how to address non-standard sales issues. We piloted its future in Linyi, and unit sign-up productivity rose by over 10 percentage points in Q3 compared with Q2, ranking number one nationwide. Third, we achieved a leap in efficiency by adopting different AI applications.

Motivate your agents to cross sell or to sell their renovation business. When you don't have such a high market share. Thank you so much.

Our conversion rate from existing home transaction to a homerun that we can contract in the city with just less than 5% compared to over 20% and 10% in Beijing and Shanghai, respectively.

So.

First of all it is important to know decides to home renovation market.

Our strategic progression no it's clear.

I'm curious on the 30th cities represented a critical long term growth Provost, Paul we're future home renovation business.

Larger scale expansion into additional cities will only became once the home renovation business underlying operational capability almost sure.

Currently irreplaceable stretch value.

And the module has been fully proven into core cities.

From a market fundamental perspective.

Compared to the fourth tier cities, so call so for purchasing a similar size of property is much lower in small cities.

Therefore, all of our resources are highly concentrated you host cities at this moment and then we have a note you have made a big effort to drive traffic Barbara home demolition business soon only agent China in the second tier cities so far.

Based on the latest data from over painful. So average price is in the home depot tuna Shanghai is around RMB 4 million most of it jumped over RMB 1 million the other cities.

This approach is to ensure that every step of our growth is solid and sustainable.

This Prescott presents a meaningful opportunity.

Customers in second and associated cities located relatively larger budget for the home renovation.

Meanwhile, we put in place a multi dimensional it's matthew are pushing for more of them to engage with and modulate among the agent with.

Tao Xu: Meanwhile, we put in place a multidimensional systematic operational framework to engage with and motivate non-Lianjia agents. It includes three components. First, we aim to deepen our operation team's understanding and expertise in home renovations. Our operation teams have also shared the knowledge and the proven operational capability to connect the store owners and the agents, fostering an ecosystem marked by professional collaboration and a shared competency. Second, we rolled out innovative incentive program to build an online brand promotion metrics. By offering incentives such as the Beike coins, we encourage more connected store agents to visit our offline home renovation stores and showcase our service through the short video, which they will also upload to the leading social media platforms such as Douyin.

Infinite and therefore, we've recorded approximately.

Tao Xu: During the sign-up stage, our AI review system has replaced manual reviews, enabling fully automated risk control. As of September, the AI review function covered 11 cities, processing each case in just 20 seconds on average, making a 64% efficiency gain, saving more than 33,000 work hours, and intercepting more than 16,000 risky properties. In the leasing stage, we use AI to power content lead marketing, expanding lead generation while reducing labor needs. AI intelligently analyzes and identifies high-quality leads, enhancing leasing efficiency. The AI-driven operational system in our home rental services has enabled us to see the possibility of scalable, yet personalized services for previous fragmented, non-standardized demands, demonstrating the potential for traditional industries to overcome these economics of scale through technological innovation. We now integrate AI across our entire home rental services process, and I'm replicating this system across 13 key cities.

It includes three components.

Meaning existing home transaction outside of Beijing and Shanghai.

First we aim to deepen our operation teams understanding and expertise in home renovations.

These are cities Homeland division contract older generated through our <unk> network only accounted for around 30% of overall home renovation comfort holders.

Our operating teams have also shares the knowledge and the proven operational capability to Tonight store Inland Center agents.

Our conversion rate from existing home transaction to a homerun that we can contract in the city.

Bolstering.

Ecosystem month by professional collaboration and the shared competency.

Less than 5% compared to over 20% and 10% in Beijing and Shanghai, respectively.

Second we wrote zones innovative incentive program to build an online brand promotion metrics.

Our strategic progression now it's clear.

Lots of skilled dysfunction into additional cities well only became once the home renovation business underlying operational capability almost sure.

Okay incentives such as the bigger coins.

We encourage more connected store agent to visit our offline.

Homegoods stores and a showcase over service so the short video.

And the module that's been fully proven into core cities.

Which then will also uploads to the leading social media platforms such as <unk>.

Therefore, our resources are highly concentrated you host cities at this moment, although we have a note you have made a big effort to drive Turkey, Barbara home the nutrition business soon only agent China in the second tier cities so far.

Since the launch of this program.

Tao Xu: Since launch of this program in the late April of this year, more than 30,000 agents in over 30 cities have uploaded over 50,000 short videos. This has cultivated a positive environment of full participation and a widespread promotion. Last, on top of improving agent capability, we are leveraging AI to boost the contract conversion efficiency. Using AI, we access key attributes of the property within the store owner's coverage area, such as the property age, layout, condition, and assess quantitative scores. This allows us to accurately identify high-scoring homes with a higher likelihood of generating home renovation business. Feedback from the pilot cities has been extremely positive. While high-scoring homes constitute only low single-digit of the total home renovation leads, they contribute to over 20% of preliminary home renovation contracts, underscoring AI's value in boosting our operation efficiency.

April of this year.

30000 agents in over 30 cities.

Loaded over 50, so digital videos.

This has killed.

This approach is to ensure that every step of our growth is solid and sustainable.

Calculated positive environment of full participation and widespread promotion.

Meanwhile, we put in place a multi dimensional it's Matthew operating framework, Julian gateways and the module H among the agents.

On top of improving agent ability.

Leveraging AI to boost the contract conversion efficiency.

Yeah.

The key attributes of the property within the store owners coverage area, such as the appropriate age layout condition.

Includes three components.

First we aim to deepen our operation teams understanding and expertise in home renovations.

Tao Xu: Only through continuous innovation can we navigate the industry cycle. By implementing home buyer-seller agent specialization and AI-driven home rental operations, we have forged a new path that re-engineers workflows through technology and fuels scale through efficiency. Moving forward, we will deepen AI integration across business scenarios to advance both service providers' capabilities and consumer experiences. As China's housing service industry undergoes this next evolution, we are afforded a historical opportunity to further its transformation, guided by our commitment to technology power, high-quality growth, and its potential to unlock infinite possibilities for modern living services. This concludes my prepared remarks for today. Operator, we are now ready to take questions.

The.

Our operating teams have also shares the knowledge and proven operational capability to Tonight.

Quantitative scores.

Just a lawsuit.

Accurately identifying high scoring homes with a higher likelihood of generating homegrown lubricant business.

And the agents.

<unk> three <unk>.

Ecosystem month by professional collaboration and shared competency.

Feedback from the pattern cities has been extremely positive.

Second we go Jones innovative incentive program to build an online brand promotion metrics.

Well highest scoring homes constitute only low single digit of the total homerun obviously these.

Okay incentives such as the bigger coins will encourage more connected store agent to visit our offline homegrown, which is stored in the showcase over service. So the short video, which they will also uploads to the leading social media platforms such as <unk>.

To contribute to over 20% of our preliminary home furnishing contracts.

It's growing.

In boosting our operation efficiency.

<unk>.

In Q3 this year, our home relocation leads from 1980 triangles achieved year over year growth under the lead to contract conversion rates increased compared with last year's average.

Tao Xu: In Q3 this year, our home renovation leads from non-Lianjia agent channels achieved year-over-year growth, and the lead to contract conversion rates increased compared with last year's average. In the short term, our approach for the home renovation business remains relatively conservative. In the long run, once our home renovation service meet our established high standards across customer experience, product competitiveness, and the delivery quality, we will initiate a more proactive traffic diversion strategy through non-Lianjia agent channels in the cities outside Beijing and Shanghai. Thank you.

Since the launch of this program in the late April this year.

What was it 30000 agents in over 30 cities uploaded over 50, so digital videos.

In the short term.

Our approach for the homeowners business remains relatively conservative.

Siting Li: Thank you. 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 are going to ask a question in Chinese, please follow with an English translation. Your first question comes from John Lin with UBS.

Just had two.

They take a pause.

It's a long run once in our home demolition services made already established highest thunder a cost.

<unk> of our full participation and widespread promotion.

Customer experience product competitiveness, and the delivery quality, well initiate a more proactive traffic diversion strategy.

On top of improving agent capability.

Leveraging AI to boost the contract conversion efficiency.

Yeah.

Now he can triangles in the cities of Beijing, and Shanghai century.

The key attributes of the property, reaching their store owners coverage area, such as the appropriate age layout condition.

Your next question comes from Timothy <unk> with Goldman Sachs.

Tao Xu: 喂，请问可以听到吗？

Operator: Our next question comes from Timothy Zhao with Goldman Sachs.

Quantitative scores.

Stanley Peng: 可以。

Just a lot of those two.

Tao Xu: 好的，谢谢。涛哥，您好。UBS林振宏，我这边有个问题想问一下关于新房的。就看到新房业绩这边的话，一直以来过去公司都超出预期这个 Alpha。不过看到过去两个季度的话，这个 Alpha 的程度在减弱。能不能请教一下这个具体原因是什么？包括未来的话，公司我们怎么看待后续的新房的一个增长动能？ Let me translate my questions. For the new home business, in the past, the company has been achieving or outperforming the market in terms of the Alpha, but it seems that the magnitude of the Alpha has been diminishing. May I know what's the reason why, and also how should the investor look at the company new home business growth potential? Thank you.

Great.

I didn't hear.

<unk> New management team. Thank you for taking my question. My question is about your costs and expenses.

High scoring homes with a higher likelihood of generating homegrown lubricant business.

Timothy Zhao: Great. Good evening, management team. Thank you for taking my question. My question is about your cost and expenses. Could you further elaborate what are the measures for the company to control costs and any effects or outcome that you have seen so far? What we should expect from this cost and expenses line going forward? Thank you.

Feedback from the pilot cities has been extremely positive.

Could you further elaborate what matters for the company to control costs and in fact, the outcome that you have seen so far and what we should expect ground beef cost and an extensive line going forward. Thank you.

Well, the highest scoring homes constitute only low single digit of the total homerun, obviously at least.

They contribute to over 20% of our preliminary Homegoods Division Conklin.

Yes, some contingency.

Under the strategic guidance up operational efficiency enhancement.

Tao Xu: Yeah, thank you, Timothy. Under the strategic guidance of operational efficiency enhancement, all businesses have ultimately implement a series of optimization measures and achieved a phased result. Now I'd like to elaborate on the cost reduction achievements of each business line and overall operating expenses in Q3 2025. For our existing home transaction services, we continue to boost the productivity of our Lianjia team, and organizational optimization has driven a notable decline in labor cost. Organizational optimization has directly led to a cost reduction, with the fixed labor cost in Q3 decreasing by more than 20% compared with the peak in Q4 last year. The labor efficiency has been continuously improved. For new home transaction services, we have both streamlined the fixed labor costs and the variable cost structure through streamlining the organizational structure of new home operation team.

It's going to be a study in.

In boosting our operation efficiency.

Businesses have ultimately implement a series softball optimization measures and the attributes of phase II results now I'd like to elaborate on the closer reduction achievements of each business line and overall operating expenses.

In Q3 this increase.

In Q2 this year, our home relocation leads from 1980 channels achieved year over year growth.

Need to contract conversion rate increased compared with last year's average.

In the short term.

Third quarter opportunity to new slot.

Our approach for the homeowners business remains relatively conservative.

For our existing home transaction services, we continue to boost the productivity of our being junkie and open additional optimization I think driven a notable decline in labor cost.

It's a long run once in our home demolition services made already established Thunder.

Stanley Peng: Thank you, John. Although the new home performance of our new home construction business has been affected by the market volatility, we remain confident in its ability to outperform the market in the long run. China's new home market has gradually matured in the past two years, with supply-side risks steadily easing. Against this backdrop, we have shifted from a cautious approach to a more growth-driven strategy. Our new home construction business has significantly outperformed the broader market in past few quarters until this second quarter, with a higher brokerage penetration in the industry, our broader housing construction service network, and more collaborative projects. In this Q3, our year-over-year growth narrowed relatively to the market, mainly due to several factors. First, customers on our platform often look at both new and existing homes before making a purchase decision.

From experience.

Product competitiveness and the delivery quality.

Organizational optimization as the Luckily virtue of close reduction.

Well initiate a more proactive traffic diversion strategy.

With the fixed labor cost in Q3, decreasing by more than 2% concur with peak in Q4 last year.

Now he can triangles in the cities of Beijing and Shanghai.

And the labor efficiency has been continuously improved.

Your next question comes from Timothy <unk> with Goldman Sachs.

Our new home transaction.

Services, we have a both streamlined fixed labor costs and the variable cost structure through streamlining the organizational structure of new home operation team.

Alright good.

A new management team. Thank you for taking my question. My question is about your costs and expenses.

Could you further elaborate.

We have achieved a reduction of more than 40% you're aggressively.

<unk> for the company to control costs and in effect. The outcome that you have seen so far and what we should expect ground beef cost and an extensive line going forward. Thank you.

Tao Xu: We have achieved a reduction of more than 40% year actively in relevant fixed labor cost compared to peak in Q4 last year. On the variable cost side, the gross profit margin per project has been steadily increased by focusing sales strategy to maximize unit sales per single housing project. The commission speed of non-Lianjia channels has decreased by more than 1 percentage point from the peak in Q1 this year. For our home renovation and furniture business, we have effectively lowered the material cost through supply chain integration. By streamlining partner brand selection and SKU counts, we have achieved a significant cost saving in procurement. Our centralized purchasing category has expanded from 4 as of Q2 to 13 as of Q3, covering core categories such as wooden doors, flooring, and tiles.

Relevant to fixed paper cost compared to peak in Q4 last year.

On the variable cost side to.

Gross Martin.

Yes, some contingency.

The gross profit margin.

The strategic guidance operationally efficiency enhancement.

Project has been steadily increased by focusing sales strategy to maximize unit sales per single housing project.

Businesses have ultimately implement a series softball optimization measures and the attributes of the phase II results.

Stanley Peng: Recently, the prices of existing homes have been considerably more attractive than the prices of comparable new homes, leading both first-time buyers and home upgraders to choose existing homes. Second, just as a basic fact, the platform's new home transaction has a relatively higher base in last Q3, as many policy-driven new home subscriptions in Q2 were transacted in Q3, causing a timing mismatching with the market data. Third, of course, it is important to note that in recent years, our new home business has grown rapidly from a lower base as we made significant gains in brokerage penetration. The scale of our collaborative projects and our sales through network and capabilities, we estimate the brokerage channel penetration ratio in the new home market has grown to over 50% this year, from approximately 30% a few years ago.

The commission speeds of ammonia and Def channels has decreased by more than one percentage point from the peak in Q1 this year.

I'd like to elaborate on the closer reduction achievements of each business line and overall operating expenses in the third quarter opportunity to new slot.

While our home reservation in the furniture business.

We have effectively lower the material cost.

For our existing home transaction services, we continue to boost the productivity of our being junkie and open additional optimization I think driven a notable decline in labor cost.

The <unk> integration.

By streamlining partner brand selection and SKU counts.

We have achieved significant cost savings in procurement.

Organizational optimization.

The centralized purchasing category has a spunky from four as.

That to a close reduction.

So Q2 to 13, so for Q3.

With the fixed labor cost in Q3 decreasing by more than 20%.

In core categories, such as indoor growing and hotels.

<unk> with the peak in Q4 last year.

On the labor efficiency has been continuously improved.

So procurement unit price of some production has decreased by over 20%.

While new home transaction services, we have a both streamline to fixed labor costs and the variable cost structure through streamlining the organizational structure of new home operation team.

Tao Xu: The procurement unit price of some products has decreased by over 20%. The effectiveness of the cost optimization has been reflected in the financial re-report, with the proportion of material-related costs as a percentage of revenue in Q3 decreasing by about 1 percentage point compared to last year average. For our home rental services, cost reduction has been driven by both technological improvements and business model refinement. We have improved the efficiency of the rental housing turnover management through AI deployment and the task specialization of the service providers. The proportion of operating labor cost to revenue in Q3 decreased by around 1 percentage point year-over-year. For store costs, we have reduced the fixed expenses through the refined management and closed underperforming stores.

The effectiveness of the cost optimization.

In fact in the financials.

Reports with the propulsion automobile related costs as a percentage of revenue in Q3 decreasing by about one percentage point compared to a loss of your average.

Have achieved a reduction of more than 40% you're aggressively.

Stanley Peng: In cities we operate in, the coverage of our collaborative project has expanded to over 70%, from roughly 39% in 2023. To achieve further growth in a higher base, we have several key opportunities. First, we plan to expand into more cities and broaden our target market. Second, brokerage channel penetration in China still lags behind developed markets, leaving ample room for growth. Third, we leverage refined operation management to enhance the service capability for the new home customers and sales through efficiency, as well as improve our coverage and sales through capability for high-end products. Now, let's take a closer look at the details. First, we are piloting lighter product offerings to tap in some lower-tier cities through what we call B+ products. Our platform business still has over 150 prefecture and county-level markets now yet to be covered.

Relevant to fixed deferred cost compared to peak in Q4 last year.

For our horizontal services cost reduction has been driven by both technological impairments and business model refinements.

On the variable cost side the gross Martin.

The gross profit margin.

We have improved the efficiency of the rental housing toll momentum into <unk>.

Project has been steadily increased by focusing sales strategy to maximize unit sales per single housing project.

Impairments under task specialization of the service providers.

The proportion of operating labor cost to revenue in Q3 decreased by around one percentage point year over year.

The commission speeds opened only into our channels has decreased by more than one percentage point from the peak in Q1 this year.

While our home reservation in the furniture business.

So store costs, we have reduced our fixed expenses.

We have effectively lower the material cost.

The measurements and closed underperforming.

<unk> integration.

Underperforming stores.

By streamlining partner brand selection and SKU comes we have achieved significant cost savings in procurement.

The loan growth activity industrial has been decreased the pharma wrong to 5600 as of Q4 last year to less than 500 200.

Tao Xu: The number of the active Lianjia store has been decreased from around 5,600 as of Q4 last year to less than 500 200 at the end of this Q3, a decrease of around 8%. We have actively promoted the rent negotiation with existing Lianjia store owners and achieved average rent reduction of over 10%. Regarding the control of the operating expenses and R&D investments, for G&A expenses, we have achieved efficient cost control through the organizational optimization. On non-GAAP basis, the G&A expenses of the home renovation business have decreased by more than 100 million RMB compared to the peak in Q3 last year. This was mainly due to the adjustments of the organizational structure. The headquarters G&A has also been optimized based on the market conditions.

Our centralized purchasing category.

At the end of Q3.

Spunky from Q2 to 13, so for Q3.

Decrease of around 8%. Meanwhile, we have actively promote the runt negotiation with exiting the industrial owners.

Having core categories such as the.

Indoors blowing and hotels.

Achieved average rent reduction of over 10%.

So procurement unit price of some production has decreased by over 20%.

Regarding to control operating expenses in the R&D investments.

The effectiveness of the cost optimization, that's been refracts in the financials.

<unk> expenses.

Stanley Peng: Building on our commitment to authentic listings, the B+ pilot equips local brokerage stores and agents in more cities with the system capability, traffic support, and commercialization tools. This lighter operational approach enables more flexible collaboration on home listings and sales, and new home sales with our channel partners. As of September 2025, our B+ business has been piloted in four cities, and we plan to expand to over 30 cities by the end of the year, unlocking additional market opportunities. Second, we see the room to grow our sales opportunity with collaborative projects. Under to customer end, we will optimize content development and operational strategy for our new home business to reach more buyers and increase the conversion rates. Under to customer end, we will iterate our partnership models and product offerings to developers.

We have achieved efficient cost controls through the organizational optimization.

Reports with the propulsion automobile related cost as a percentage of revenue in Q3 decreasing by about one percentage point compared to about the either reach.

non-GAAP basis, G&A expenses of the home renovation business have decreased by more than 100, many young compared to the peak in Q3 last year.

For our horizontal services cost reduction has been driven by both technological impairments and business model refinements.

This was mainly due to the adjustments of the organizational structure.

So a headquarters G&A has also been optimized based on the market conditions.

We have improved the efficiency of the rental housing toll momentum into <unk>.

Impairments under task specialization of the service providers.

For sales and marketing expenses.

Tao Xu: For sales and marketing expenses, both marketing spending optimization and improvements of the labor efficiency have been implemented. On non-GAAP basis, the sales and marketing expenses of the housing transaction business have decreased by around RMB 90 million compared to the peak in Q3 last year. Mainly through the optimization of the advertising and marketing placement. The related advertising and promotion expenses have declined by more than 20% compared to the peak in Q3 last year. The sales and marketing expenses for home renovation business have decreased more significantly by more than RMB 100 million compared to the peak in Q3 last year. The core driving factors including AI technology enhancing the operation efficiency of the designers and other front-end staff, as well as organizational optimization that improve the workforce structure.

Both marketing spending optimization under the improvements of the labor efficiency have been implemented.

The proportion of operating labor cost to revenue in Q3 decreased by around one percentage point year over year.

On non-GAAP basis.

Selling and market expenses of the housing construction business.

Well stock costs, we have reduced our fixed expenses.

Decrease by around RMB 90 million compared to its peak in Q2 last year.

Find the measurement and the closed underperforming.

Minnesota optimization of the advertising and marketing placements.

Underperforming stores.

The loan growth activity industrial has been decreased the pharma wronged.

Related to the pricing on the promotion expenses have declined by more than 20% compared to the peak in Q2 last year.

600 as of Q4 last year to less than 500 or 200.

At the end of Q3.

The sales and marketing expenses for home renovation business, how about decreased most significantly.

Decrease of around 8%. Meanwhile, we have actively promote the runt negotiation with exiting the industrial owners.

Stanley Peng: Third, both supply and demand in new home markets are increasingly shifting towards the home upgrade projects. On the supply side, we will more precisely identify these projects and boost their exposure to both agents and customers. We then match suitable agents to these upgrade projects and direct more customer traffic to them, creating a closed loop among homes, agents, and customers. This approach will also help agents strengthen their sales capability for upgrade products, and narrows the price gap between the platform average new home unit and the broader market. Thank you.

Most of the RMB $100 million compared to the peak in Q3 last year.

Achieved average rent reduction of over 10%.

The cold traveling vectors, including anthem.

Regarding to control operating expenses in the R&D investments.

Enhancing to the operation efficiency.

And the other from and the staff as well as organizational optimization improved workflow structure.

<unk> expenses.

We have achieved efficient cost controls through the organizational optimization.

For R&D expenses.

non-GAAP basis, G&A expenses of the home renovation business have decreased by more than 100 million Yuan compared to the peak in Q3 last year.

Tao Xu: For R&D expenses, the non-GAAP basis, the expenses in Q3 increased by around RMB 79 million year-over-year as the scale of R&D team has expanded steadily. As of Q3, there were more than 2,300 R&D-related personnel, an increase of more than 100 compared with the Q3 last year. Among which the number of AI related R&D personnel exceed 600, doubling compared to the same period last year. R&D resources continue to be tilted towards the core areas with R&D investment related to AI in Q3 exceeding RMB 150 million, nearly doubling compared to the same period last year. Our operational efficiency enhancement strategy has a clear execution path. We firmly believe that once the market environment stabilize, our continuous operation optimization will fully release the operating leverage effort. Thank you.

The non-GAAP basis, the expenses in Q3 increased by around RMB 79 million.

Yeah.

The scale of R&D team has expanded steadily.

This was mainly due to the adjustment of the organizational structure.

Q3, there were more than 2300 R&D related personnel.

So headquarters G&A has also been optimized based on the market conditions.

An increase of more than $100 compared with Q2 last year.

For sales and the marketing expenses.

Siting Li: Your next question comes from Griffin Chen with Citigroup.

Among which the number of AI related R&D personnel.

Both marketing spending optimization under the improvements of the labor efficiency have been implemented.

<unk>.

Tao Xu: Hi. 我是花旗地产股票研究部的 Griffin。我这边问题是关于租赁的。租赁服务业务从去年的亏损到今年上季度，其实我们已经实现了城市层面的利润。这个成果其实我们是如何实现的？后续我们在这个方面租赁方面的提升空间还有哪一些呢？ Yeah, I'm going to translate my question. This is Griffin from City Property Team. How did the leasing service business manage to turn last year's losses into the operating profit by third quarter this year? What opportunity remains for the improvement going forward? Thank you.

600, doubling compared to the same period last year.

On a GAAP basis to sales and market expenses of the holding consulting business have decreased by around RMB 90 million compared to its peak in Q2 last year.

R&D resources, continuing to be tilted towards the acquirers.

With the R&D investment related to AI in Q3.

Sitting RMB 150 million yearly.

Minnesota optimization of the pricing and marketing placements.

Doubling compared to the same period last year.

Alright.

The related advertising and promotion expenses have declined by more than 20% compared to the peak in Q3 last year.

Traditionally efficiency enhancing the strategy, that's a cute clear execution path, we're firmly believes that with the monkey diamond stabilize our continuous operation optimization, well, Chile relief to operating leverage effort. Thank you.

The sales and marketing expenses for home renovation business, how about decreased most significantly.

By most of the RMB 100 million compared to the peak in Q3 last year.

So a whole troubling vectors, including an accordion.

We are now approaching the end of the conference call I will now turn the call over to your speaker today, Mr. Li for closing remarks.

Operator: We are now approaching the end of the conference call. I will now turn the call over to your speaker today, Mr. Siting Li, for closing remarks.

I think the operational efficiency of the containers and other Franck and staff as well as organizational optimization.

Stanley Peng: Yeah, thank you, Griffin. The possibility of our home rental services improved significantly this year, excluding high-cost allocations. City-level operating profits became in Q2 and became profitable in Q3. First, we benefited from economies of scale from rapid growth in both scale and revenue. The total number of managed units exceeding 660,000 by end of Q3, up 75% year-over-year. Revenue from our home rental service business reached RMB 5.7 billion in Q3, up 45.3% year-over-year. The contribution profit from our home rental services also rose significantly to nearly RMB 500 million in Q3, up 186% year-over-year, with a contribution margin of 8.7%, up 4.3 percentage points year-over-year. On one hand, the light asset model of our Carefree Rent business has given us a higher margin, lower-risk rental structure.

Thank you once again for joining us today.

Improved workflow structure.

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

Other questions, please feel free to contact us.

For R&D expenses the.

Investor Relations team.

The non-GAAP basis. These expenses in Q3 increased by RMB 79 million.

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.

Year over year.

The scale of R&D team has expanded steadily.

As of Q3, there were more than 2300 R&D related to personnel.

Increase of more than 100 comparable to Q2 last year among.

Among which the number of AI related R&D personnel.

<unk>.

600.

When compared to the same period last year.

R&D with Joseph continuing to be tilted towards the acquirers.

Whereas the R&D investment related to AI in Q3.

Exceeding RMB $150 million.

Doubling compared to the same period last year.

All right.

Operational efficiency enhancement strategy, that's clear execution path with.

We firmly believe that with the monkey environment stabilize.

Stanley Peng: Starting in Q3, the revenue from newly added rental units and renewed existing units under Carefree Rent has been accounted on a net basis. In Q3, rental units under the net revenue accounting method made up 25% of the total units under management, up 10 percentage points quarter over quarter, contributing approximately RMB 470 million in revenue. This structural shift drove an RMB 130 million increase in Carefree Rent Q3 contribution profit and lifted its contribution margin by 3 percentage points. At the same time, 2025 has been a year of improving operation efficiency. The streamlined and highly efficient operation have driven the reduction in several cost ratios, adding above RMB 170 million to contribution profit and increasing contribution margin by roughly 1.5 percentage points. Excluding rental costs recognized on a gross basis, the main costs of Carefree Rent are labor costs, channel costs, post-rental installation, and default costs.

Our continuous operation optimization, well, Chile relief to operating leverage I've heard some cute.

We are now approaching the end of the call.

Carl I will now turn the call over to your speaker today, Mr. Li for closing remarks.

Thank you once again for joining us today, if you have any further questions. Please feel free.

Investor Relations team.

The 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.

[music].

Stanley Peng: The improvement was mainly driven by the optimized operation labor costs. In Q3, the average monthly number of units managed per property manager exceeded 130, compared with over 90 in the same period last year. In the first three quarters of this year, average monthly efficiency in unit size and occupancy rose by approximately 10% and 28% year-over-year, respectively. The default cost ratio declined by 0.1 percentage points, benefiting from our strong leasing capability. In Q3, initial leasing success rate improved by 0.9 percentage points year-over-year. This year, contribution profits from our home rental business segment have grown much faster than operating expenses. These expenses mainly comprise high-culture and city-level staff compensation and RMB, with a quite low expense ratio. A series of operating management tools have consistently improved the productivity of our middle and back office personnel.

Sure.

[music].

Stanley Peng: The average number of units under management by each middle and back office personnel rose by 7.5% year-over-year, while the overall operating expense ratio declined year-over-year. In the coming years, there is significant room to continuously improve the contribution margin in our Carefree Rent business. The key drivers will be the continuous growth potential of the rental unit scale of the Carefree Rent and the ongoing improvement of our operational efficiency. From a per-unit optimization perspective, we are diversifying our channels for renting out our property to reach broader tenant demographics, increasing the share of our in-house rental occupancy team, and reducing reliance on the concentrated brokerage channels. This is expected to lower the per-unit channel cost ratio. In addition, labor costs remain a large part of per-unit UE, and there is still room for further reduction of the cost ratio.

Stanley Peng: We see the potential to nearly double the number of units managed per property manager, moving towards an average of over 200 units per person. Furthermore, we will keep exploring and expanding diverse value-added services with the home rental ecosystem. We will continue to invest in AI and online digital capability within our home rental service, while other operating expenses should stay relatively stable. As the business continues to scale and we further optimize per-unit UE, we expect our home rental service to maintain a strong operating leverage in the year ahead. Thank you.

Siting Li: Your next question comes from Jiang Xiao with Barclays.

Jiang Xiao: Thank you very much for taking my questions. Good evening. My question is around your renovation business. You have done very well in cities like Beijing and Shanghai. I was just wondering, for you to do well in those cities, is that because you have a high market share with your Lianjia brand in those cities? Do you think that's a key reason? Do you think for cities outside Shanghai and Beijing, how would you kind of motivate your agents to cross-sell or to sell the renovation business when you don't have such a high market share? Thank you so much.

Stanley Peng: Thank you, Xiaozong. First of all, it is important to note that the home renovation market in second, third, and fourth-tier cities represents a critical long-term growth driver for our future home renovation business, carrying irreplaceable strategic value. From a market fundamental perspective, compared to the first-tier cities, the cost of purchasing a similar size of property is much lower in small cities. Based on the latest data from our platform, the average price of a single home in Beijing and Shanghai is around RMB 4 million, versus just over RMB 1 million in other cities. This price gap presents a meaningful opportunity, as customers in second and third-tier cities can allocate a relatively larger budget for the home renovation. In 2024, we recorded approximately 1 million existing home transactions outside Beijing and Shanghai.

Stanley Peng: In these cities, home renovation contract orders generated through our agent network only accounted for around 30% of overall home renovation contract orders. Our conversion rate from existing home transaction to home renovation contract in these cities was just less than 5%, compared to over 20% and 10% in Beijing and Shanghai, respectively. Our strategic rationale is clear. Larger-scale expansion into additional cities will only begin once the home renovation business underlying operational capability are mature, and the module has been fully proven in core cities. Therefore, our resources are highly concentrated in core cities at this moment, and we have not yet made a big effort to drive traffic for our home renovation business through Lianjia agent channel in the second and third cities so far. This approach is to ensure that every step of our goals is solid and sustainable.

Stanley Peng: Meanwhile, we put in place a multidimensional systematic operational framework to engage with and motivate Lianjia agents. It includes three components. First, we aim to deepen our operation teams' understanding and expertise in home renovations. Our operation teams have also shared the knowledge and proven operational capability to connect store owners and agents, fostering an ecosystem marked by professional collaboration and shared competency. Second, we rolled out innovative incentive programs to build online brand promotion metrics. By offering incentives such as the Beike Coins, we encourage more connected store agents to visit our offline home renovation stores and showcase our service through the short video, which they will also upload to the leading social media platforms such as Douyin. Since the launch of this program in late April 2024, more than 30,000 agents in over 30 cities have uploaded over 50,000 short videos.

Stanley Peng: This has cultivated a positive environment of full participation and widespread promotion. On top of improving agent capability, we are leveraging AI to boost the contract conversion efficiency. Using AI, we access key attributes of the property within the store owner's coverage area, such as property age, layout, condition, and assess quantitative scores. This allows us to accurately identify high-scoring homes with a higher likelihood of generating home renovation business. Feedback from the parallel cities has been extremely positive. While high-scoring homes constitute only low single digits of the total home renovation lease, they contribute to over 20% of preliminary home renovation contracts, underscoring AI's value in boosting our operation efficiency. In Q3 this year, our home renovation leads from Lianjia agent channels achieved year-over-year growth, and the lead-to-contract conversion rate increased compared with last year's average.

Stanley Peng: In the short term, our approach for the home renovation business remains relatively conservative. In the long run, once our home renovation service meets our established high standards across customer experience, product competitiveness, and delivery quality, we will initiate a more proactive traffic diversion strategy through Lianjia agent channels in the cities outside Beijing and Shanghai. Thank you.

Siting Li: Your next question comes from Timothy Zhao with Goldman Sachs.

Timothy Zhao: Great. Good evening, management team. Thank you for taking my question. My question is about your cost and expenses. Could you further elaborate what are the measures for the company to control costs and any effects or outcomes that you have seen so far, and what we should expect from this cost and expenses line going forward? Thank you.

Stanley Peng: Yes, thank you, Timothy. Under the strategic guidance of operational efficiency enhancement, all businesses have already implemented a series of optimization measures and achieved phased results. Now, I'd like to elaborate on the cost reduction, achievement of each business line, and overall operating expenses in the third quarter of 2025. For our existing home transaction services, we continue to boost the productivity of our Lianjia team, and organizational optimization has driven a notable decline in labor cost. Organizational optimization has directly led to a cost reduction, with the fixed labor cost in Q3 decreasing by more than 20% compared with the peak in Q4 last year. The labor efficiency has been continuously improved. For new home transaction services, we have both streamlined fixed labor costs and the variable cost structure through streamlining the organizational structure of new home operation team.

Stanley Peng: We have achieved a reduction of more than 40% relatively in relevant fixed labor cost compared to the peak in Q4 last year. On the variable cost side, the gross profit margin per project has been steadily increased by focusing sales strategy to maximize unit sales per single housing project. The commission speed of Lianjia channels has decreased by more than 1 percentage point from the peak in Q1 this year. For our home renovation and furnishing business, we have effectively lowered the material cost through supply chain integration. By streamlining partner brand selection and SKU counts, we have achieved significant cost savings in procurement. Our centralized purchasing category has expanded from 4 as of Q2 to 13 as of Q3, covering core categories such as wooden doors, drawing, and tiles. The procurement unit price of Sun Plus has decreased by over 20%.

Stanley Peng: The effectiveness of the cost optimization has been reflected in the financial reports, with the proportion of material-related costs as a percentage of revenue in Q3 decreasing by about 1% compared to last year's average. For our home rental services, cost reduction has been driven by both technological improvement and business model refinement. We have improved the efficiency of the rental housing channel management through AI employment and task specialization of the service providers. The proportion of operating labor cost to revenue in Q3 decreased by around 1% year-over-year. For store cost, we have reduced fixed expenses through the refined management and closed underperforming stores. The number of the active Lianjia stores has been decreased from around 5,600 as of Q4 last year to less than 5,200 at the end of Q3, a decrease of around 8%.

Stanley Peng: Meanwhile, we have actively promoted the rent negotiation with existing Lianjia store owners and achieved average rent reduction of over 10%. Regarding the control of the operating expenses and R&D investments, for G&A expenses, we have achieved efficient cost control through the organizational optimization. On a non-GAAP basis, the G&A expenses of the home renovation business have decreased by more than CNY 100 million compared to the peak in Q3 last year. This was mainly due to the adjustment of the organizational structure. The headquarters' G&A has also been optimized based on the market conditions. For sales and marketing expenses, both marketing spending optimization, and the improvement of the labor efficiency have been implemented.

Stanley Peng: On a non-GAAP basis, the sales and marketing expenses of the housing transaction business have decreased by around RMB 90 million compared to the peak in Q3 last year, mainly through the optimization of the advertising and the marketing placement. The related advertising and promotion expenses have declined by more than 20% compared to the peak in Q3 last year. The sales and marketing expenses for home renovation business have decreased most significantly by more than RMB 100 million compared to the peak in Q3 last year. The core driving factors include AI technology enhancing the operation efficiency of the designers and other front-end staff, as well as organizational optimization that improved the workforce structure. For R&D expenses, the non-GAAP basis, the expenses in Q3 increased by around RMB 79 million year-over-year, as the scale of R&D team has expanded steadily.

Stanley Peng: As of Q3, there were more than 2,300 R&D-related personnel, an increase of more than 100 compared with Q3 last year, among which the number of AI-related R&D personnel exceeded 600, doubling compared to the same period last year. R&D resources continue to be tilted towards the core areas, with R&D investment related to AI in Q3 exceeding RMB 150 million, nearly doubling compared to the same period last year. Our operational efficiency enhancement strategy has a clear execution path. We firmly believe that with the market environment stabilized, our continuous operation optimization will fully release the operating leverage effort. Thank you.

Siting Li: We are now approaching the end of the conference call. I will now turn the call over to your speaker today, Mr. Ting Li, for closing remarks.

Q3 2025 KE Holdings Inc Earnings Call

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