Q2 2026 KE Holdings Inc Earnings Call

August 21, 2026

Siting Li: Hello, ladies and gentlemen. Thank you for standing by for KE Holdings' Q2 2026 earnings conference call. I am Siting Li, IR director of KE Holdings. Please note that today's call, including the management's prepared remarks and Q&A session, will all be in Chinese. Simultaneous interpretation in English will be available on a separate line for the duration of the call. To access the call in Chinese, you will need to dial into the Chinese language line. At this time, all participants are in listen-only mode. Today's conference call is being recorded. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website. 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 CFO.

Speaker #1: Please note that today's call, including management's prepared remarks and the Q&A session, will all be in Chinese. Simultaneous interpretation in English will be available on a separate line for the duration of the call.

Speaker #1: To access the call in Chinese, you will need to dial into the Chinese-language line. At this time, all participants are in listen-only mode. This is a conference call.

Speaker #1: It's being recorded. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website.

Speaker #1: On today's call, we have Mr. Stanley Pone, our Co-Founder, Chairman, and Chief Executive Officer, and Mr. Tao Shi, our Executive Director and CFO. Mr. Shi will provide an overview of our business update and financial performance.

Siting Li: Mr. Xu will provide an overview of our business update and financial performance. Then Mr. Peng will share more on the progress of our strategic transformation. 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 note that because earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures, 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 call are all 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.

Speaker #1: Then Mr. Pone will share more on the progress of our strategic transformation. 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.

Speaker #1: Please note that because this earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures, please refer to the company's press release, which contains the reconciliation of the unaudited non-GAAP measures to comparable GAAP measures.

Speaker #1: Lastly, unless otherwise stated, all figures mentioned during this 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.

Speaker #1: Neither the company nor any of its representatives has independently verified such data, which may involve a number of assumptions and limitations. You are cautioned not to give undue weight to such information and estimates.

Tao Xu: Neither the company nor any of its representatives has independently verified such data, which may involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information and estimates. For today's call, management will use Chinese as the main language. Please note that English translation is for convenience purposes only. In case of any discrepancy, management statements in their original language will prevail. With now, I will turn the call over to our CFO, Mr. Tao Xu. Thank you, Siting. Hello, everyone. Welcome to our Q2 2026 earnings call. Let me begin with the key financial takeaways. Our total GTV returned to growth. Despite a modest year-over-year revenue decline, profits increased significantly, materially outperforming both GTV and revenue. In Q2, GTV increased 6.3% year-over-year, while revenue decreased to 5.7% year-over-year.

Siting Li: Neither the company nor any of its representatives has independently verified such data, which may involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information and estimates. For today's call, management will use Chinese as the main language. Please note that English translation is for convenience purposes only. In case of any discrepancy, management statements in their original language will prevail. With now, I will turn the call over to our CFO, Mr. Tao Xu.

Speaker #1: For today's call, management will use Chinese as the main language. Please note that the English translation is for convenience purposes only. In case of any discrepancy, management statements in their original language will prevail.

Speaker #1: We'll now turn the call over to our CFO, Mr. Tao Shi. Thank you, Siting. Hello, everyone. Welcome to our Q2 2026 earnings call. Let me begin with the key financial takeaways.

Tao Xu: Thank you, Siting. Hello, everyone. Welcome to our Q2 2026 earnings call. Let me begin with the key financial takeaways. Our total GTV returned to growth. Despite a modest year-over-year revenue decline, profits increased significantly, materially outperforming both GTV and revenue. In Q2, GTV increased 6.3% year-over-year, while revenue decreased to 5.7% year-over-year.

Speaker #1: Our total GDP returned to growth. Despite a modest year-over-year revenue decline, profits increased significantly, materially outperforming both GTV and revenue. In Q2, GTV increased 6.3% year-over-year, while revenue decreased 5.7% year-over-year.

Speaker #1: This revenue decline stemmed primarily from adjustments in our home renovation and furnishing business, and revenue recognition impacts from iterative product modeling in our home rental services.

Tao Xu: This revenue decline stemmed primarily from adjustments in our Home renovation and furnishing business, and revenue recognition impacts from iterative product modeling in home reno services. Non-GAAP net income grew 74.9% year-over-year to RMB 3.185 billion. Non-GAAP net margin reached 13%, up 6 percentage points year-over-year, a three-year high. Profit improvements were driven by a healthier cost structure, strict financial discipline, and a higher operating efficiency. Contribution margins across all core business lines improved year-over-year and quarter-over-quarter, driving the group's gross margin up 6.7 percentage points year-over-year to 28.6%. Simultaneously, GAAP operating expenses fell 14.1% year-over-year. This combination of gross margin expansion and a lower operating expenses fueled our profit growth. Next, I will review our segment financial performance. First, Existing home transaction services. Q2 scale returned to growth and profitability improved significantly. GTV reached RMB 629.89 billion, up 8% year-over-year and 17.9% quarter-over-quarter.

Speaker #1: Non-GAAP net income grew 74.9% year-over-year to $3.185 billion. Non-GAAP net margin reached 13%, up 6 percentage points year-over-year, a three-year high. Profit improvements were driven by a healthier cost structure, strict financial discipline, and higher operating efficiency.

Speaker #1: Contribution margins across all core business lines improved year over year and quarter over quarter, driving the Group's gross margin up 6.7 percentage points year over year to 28.6%.

Speaker #1: Simultaneously, GAAP operating expenses fell 14.1% year-over-year. This combination of gross margin expansion and lower operating expenses fueled our profit growth. Next, I'll review our segment financial performance.

Speaker #1: First, existing home transaction services. In Q2, the scale returned to growth and profitability improved significantly. GTV reached 629.89 billion, up 8% year-over-year and 17.9% quarter over quarter.

Speaker #1: Revenue was $7.02 billion, up 4.5% year-over-year and 14.5% quarter-over-quarter. GTV outpaced revenue growth year-over-year, primarily because non-line gap GTV, where platform service fees are recognized on a net basis, accounted for a larger share.

Tao Xu: Revenue was RMB 7.02 billion, up 4.5% year-over-year and 14.5% quarter-over-quarter. GTV outpaced revenue growth year-over-year, primarily because non-Lianjia GTV, where platform service fees are recognized on a net base, accounted for a larger share. This quarter, non-Lianjia platform service revenue increased to 27.8% year-over-year and 29.8% quarter-over-quarter. With a stable network scale, we advanced and refined our operations to boost per store output, helping connected stores outperform the market in enhancing overall platform efficiency. Q2 contribution margin reached 46.1%, up 6.1 percentage points year-over-year, driven by a lower fixed labor cost and a structural shift toward a higher margin platform service revenue. It also rose 4.8 percentage points quarter-over-quarter, benefiting from operating leverage amid revenue recovery and further business mix improvements. Second, the new home business. Q2 scale remained stable year-over-year, while profitability continued to improve.

Speaker #1: This quarter, non-line GAP platform service revenue increased 27.8% year-over-year and 29.8% quarter-over-quarter. With a stable network scale, we advanced and refined our operations to boost per-store output.

Speaker #1: Helping connected stores outperformed the market in enhancing overall platform efficiency. Q2 contribution margin reached 46.1%, up 6.1 percentage points year-over-year, driven by lower fixed labor cost and a structural shift toward higher-margin platform service revenue.

Speaker #1: It also rose 4.8 percentage points quarter over quarter, benefiting from operating leverage, net revenue recovery, and further business mix improvements. Second, the new home business.

Speaker #1: Q2 scale remained stable year-over-year, while profitability continued to improve. GTV reached 258.39 billion up, 1.2% year-over-year, and 77.1% quarter over quarter. Revenue reached a 8.95 billion up, 3.8% year-over-year, and 75.9% quarter over quarter.

Tao Xu: GTV reached RMB 258.39 billion, up 1.2% year-over-year, and 77.1% quarter-over-quarter. Revenue reached RMB 8.95 billion, up 3.8% year-over-year and 75.9% quarter-over-quarter. Despite a pressured market, we maintained a stable scale by collaborating on high-quality projects, improving customer conversion, and optimizing costs. Q2 contribution margin reached 28.8%, up 4.4 percentage points year-over-year, driven by cost structure optimization from refined operations. It also rose 3.1 percentage points quarter-over-quarter, benefiting from the same factors plus operating leverage from revenue growth. Third, Home renovation and furnishing. Q2 revenue was RMB 3.19 billion, down 30.1% year-over-year and up 36.4% quarter-over-quarter. The year-over-year decline reflects our proactive adjustments of inefficient customer acquisition channels and exits from cities with weak unit economics. New home market pressures also dampened renovation demand. The quarter-over-quarter revenue increase reflects seasonal business recovery.

Speaker #1: Despite pressure to market, we maintained a stable scale by collaborating on high-quality projects, improving customer conversion, and optimizing costs. Q2 contribution margin reached 28.8%, up 4.4 percentage points year-over-year, driven by cost structure optimization from refined operations.

Speaker #1: It also rose 3.1 percentage points quarter over quarter, benefiting from the same factors, plus operating leverage from revenue growth. Third, home renovation and furnishing.

Speaker #1: Q2 revenue was $3.19 billion, down 30.1% year over year and up 36.4% quarter over quarter. The year-over-year decline reflects our proactive adjustments of inefficient customer acquisition channels and exits from cities with weak unit economics.

Speaker #1: New home market pressures also dampened renovation demand. The quarter-over-quarter revenue increase reflects seasonal business recovery. Q2 contribution margin was 39.6%, up 7.5 percentage points year-over-year, and 3.4 percentage points quarter-over-quarter, driven by lower material costs through centralized procurement and refined cost management.

Tao Xu: Q2 contribution margin was 39.6%, up 7.5 percentage points year-over-year and 3.4 percentage points quarter-over-quarter, driven by lower material costs through centralized procurement and refined cost management. Fourth, Home rental services. Q2 revenue was RMB 4.83 billion, down 14.8% year-over-year and 3.6% quarter-over-quarter. This stemmed from transitioning Carefree Rent to a lighter, lower-risk product model utilizing net-basis revenue recognition. While this reduces reported accounting revenue, managed rental units continued rapid growth. By end of Q2, managed units exceeded 790,000, up approximately 34% year-over-year, with a net base product comprising over 50%. Q2 contribution margin reached 15.3%, up 6.9 percentage points year-over-year. This reflects a favorable product mix shift and operating improvements from lower labor, installation, and post-lease costs. Quarter-over-quarter contribution margin rose 0.5 percentage points, driven by continued increase in net-based products. Fifth, emerging and other businesses.

Speaker #1: Fourth, home rental services. Q2 revenue was $4.83 billion, down 14.8% year-over-year and 3.6% quarter-over-quarter. This stemmed from transitioning Carefree Rent to a lighter, lower-risk product model utilizing net basis revenue recognition.

Speaker #1: While this reduces reported accounting revenue, managed rental units continue rapid growth. By the end of Q2, managed units exceeded 790,000, up approximately 34% year-over-year, with net base product comprising over 50%.

Speaker #1: Q2 contribution margin reached 15.3%, up 6.9 percentage points year-over-year. This reflects a favorable product mix shift and operating improvements from lower labor installation and post-lease cost.

Speaker #1: Quarter-over-quarter contribution margin rose 0.5 percentage points, driven by continued increase in net base products. Fifth, emerging and other businesses. Q2 revenue reached RMB 550 million, up 26.4% year-over-year and 70% quarter-over-quarter.

Tao Xu: Q2 revenue reached RMB 550 million, up 26.4% year-over-year and 70% quarter-over-quarter. Next, turning to costs, expenses and profits. Q2 store-related costs were RMB 560 million, down 25.9% year-over-year and broadly stable quarter-over-quarter. The year-over-year decline reflects Lianjia's rent cost optimization and network adjustments. Total Q2 GAAP operating expenses were RMB 3.99 billion, down 14.1% year-over-year, driven by improved organizational efficiency, optimized marketing spend, and continued financial discipline. Operating expenses rose 21.3% quarter-over-quarter due to higher selling expenses from the home renovation seasonal recovery and the bad debt provisions in new home business. Specifically, G&A expenses were RMB 2.04 billion, down 2.1% year-over-year. The 18.9% quarter-over-quarter increase resulted from a full bad debt provision of around RMB 280 million, following a prudent assessment of SNEC-related receivables and collateral value.

Speaker #1: Next, turning to costs, expenses, and profits. Q2 store-related costs were RMB 560 million, down 25.9% year-over-year, and broadly stable quarter-over-quarter. The year-over-year decline reflects a lineage rent cost optimization and network adjustments.

Speaker #1: Total Q2 GAAP operating expenses were RMB 3.99 billion, down 14.1% year-over-year, driven by improved organizational efficiency, optimized marketing spend, and continued financial discipline. Operating expenses rose 21.3% quarter-over-quarter due to higher selling expenses from the home renovation seasonal recovery and the bad debt provisions in the new home business.

Speaker #1: Specifically, G&A expenses were $2.04 billion, down 2.1% year-over-year. The 18.9% quarter-over-quarter increase resulted from a full bad debt provision of around $280 million, following an approved assessment of Senec-related receivables and collateral value.

Speaker #1: Marketing expenses were $1.4 billion, down 26.1% year-over-year due to optimized sales personnel costs and refined marketing spend, but rose 29.6% quarter-over-quarter from seasonally higher rental home renovation selling expenses.

Tao Xu: Sales and marketing expenses were RMB 1.4 billion, down 26.1% year-over-year due to optimized sales personnel costs and refined marketing spend. But rose 29.6% quarter-over-quarter from seasonal and higher home renovation selling expenses. R&D expenses were RMB 550 million, down 13.4% year-over-year due to lower labor and technical service costs. But up 11.4% quarter-over-quarter due to increased technical service fees. On the bottom line, Q2 GAAP operating profit reached RMB 3.026 billion, up 185.6% year-on-year. Non-GAAP operating profit was RMB 3.592 billion, up 123.6% year-over-year. GAAP operating profit rose 137.8% quarter-over-quarter with a 12.3% margin, up 8.3 percentage points year-over-year and 5.6 percentage points quarter-over-quarter. Non-GAAP operating profit grew 115.7% quarter-over-quarter with a 14.6% margin, up 8.5 percentage points year-over-year, and 5.8 percentage points quarter-over-quarter.

Speaker #1: R&D expenses were RMB 550 million, down 13.4% year-over-year due to lower labor and technical service costs, but up 11.4% quarter-over-quarter due to increased technical service fees.

Speaker #1: On the bottom line, Q2 operating GAAP profit reached RMB 3.026 billion, up 185.6% year-over-year. Non-GAAP operating profit was RMB 3.592 billion, up 123.6% year-over-year.

Speaker #1: GAAP operating profit rose 137.8% quarter over quarter, with a 12.3% margin—up 8.3 percentage points year over year and 5.6 percentage points quarter over quarter. Non-GAAP operating profit grew 115.7% quarter over quarter, with a 14.6% margin—up 8.5 percentage points year over year and 5.8 percentage points quarter over quarter.

Speaker #1: This year-on-year and quarter-over-quarter margin expense was driven mainly by higher gross margins and lower operating expense ratios. Q2 GAAP net income was $2.624 billion, up 100.8% year-over-year.

Tao Xu: This year-on-year and quarter-over-quarter margin expansion was driven mainly by higher gross margins and lower operating expenses ratios. Q2 GAAP net income was RMB 2.624 billion, up 100.8% year-over-year, and 109.1% quarter-over-quarter. Non-GAAP net income was RMB 3.185 billion, up 74.9% year-over-year, 97.6% quarter-over-quarter. Finally, turning to cash flow, balance sheet, and shareholder returns. Our Q2 net operating cash inflow was RMB 6.61 billion. Our new home accounts receivable turnover was around 39 days, down around 12 days year-by-year, reflecting effective risk management. Excluding customer deposits, our end of Q2 broad cash balance remained at around RMB 67.3 billion. This ample liquidity strengthened our risk resilience while supporting business development and shareholder returns. In Q2, we spent around $250 million on share repurchases, including our first buyback in the Hong Kong market.

Speaker #1: And 109.1% quarter-over-quarter. Non-GAAP net income was RMB 3.185 billion, up 74.9% year-over-year and 97.6% quarter-over-quarter. Finally, turning to cash flow, balance sheet, and shareholder returns.

Speaker #1: Our Q2 net operating cash inflow was RMB 6.61 billion. Net on new home accounts receivable turnover was around 39 days, down around 12 days year-over-year, reflecting effective risk management.

Speaker #1: Excluding customer deposits, our end-of-Q2 broad cash balance remained at around RMB 67.3 billion. This ample liquidity strengthened our risk resilience while supporting business development and shareholder returns.

Speaker #1: In Q2, we spent around $250 million on share repurchases, including our first buyback in the Hong Kong market. In the first half, we spent around $460 million on repurchases, up around 14% year-over-year, representing approximately 2.4% of our year-end 2025 outstanding shares.

Tao Xu: In H1, we spent around $460 million on repurchases, up around 14% year-over-year, representing around 2.4% of our year-end 2025 outstanding shares. Since launch of this share repurchase program in September 2022 through Q2 2026, we have repurchased around $2.99 billion in shares, representing around 14.8% of outstanding shares prior to the program start. In summary, Q2 profitability improvements reflect combined cost optimizations, operating enhancements, and a favorable business mix. Looking ahead, maintaining a solid balance sheet and ample liquidity will anchor our long-term growth. Across all core, new, and technical investments, we will enforce strict ROI discipline and take customer value, operating efficiency, and sustainable returns as our priority or key metrics. Ultimately, we will balance business development with the shareholder returns to consistently create long-term value. Next, I'll turn the call over to our Chairman and CEO, Mr. Stanley Peng. Please go ahead.

Speaker #1: Since the launch of this share repurchase program in September 2022 through Q2 2026, we have repurchased around $2.99 billion in shares, representing approximately 14.8% of outstanding shares prior to the program's start.

Speaker #1: In summary, Q2 profitability improvements reflect combined cost optimizations, operating enhancements, and a favorable business mix. Looking ahead, maintaining a solid balance sheet and ample liquidity will anchor our long-term growth.

Speaker #1: Across all core new and technical investments, we will enforce strict ROI discipline and take customer value, operating efficiency, and sustainable returns as our priority or key metrics. Ultimately, we will balance business development with shareholder returns to consistently create long-term value.

Speaker #1: Next, I'll turn the call over to our Chairman and CEO, Mr. Stanley Punk. Please go ahead.

Speaker #2: Thank you, investors and analysts. Good evening. Last quarter, we discussed our shift toward a consumer-centric transformation. This quarter, I will talk about how these changes translate into our operations.

Stanley Yongdong Peng: Thank you. Investors and analysts, good evening. In last quarter, we discussed our shift toward a consumer-centric transformation. This quarter, I will talk about how the changes translate into our operations. in Q2, I observed 2 trends. Our operation foundation stabilized and our organization truly mobilized. This foundation enables the long-term change. I will address 5 key questions. The first one, what changes as transformation enters daily operations? Second, does being consumer-centric mean bypassing agents? Thirdly, as AI advances, will agents become obsolete? Fourthly, how is AI applied in our business, and what is the result? Fifthly, how will we know we are on the right track moving forward? For the first question, what change as transformation enters daily operation? In this quarter, I spent a lot of time on the frontline visiting stores, properties, construction sites, and discussing issues with clients, agents, and the store owners.

Stanley Peng: Thank you. Investors and analysts, good evening. In last quarter, we discussed our shift toward a consumer-centric transformation. This quarter, I will talk about how the changes translate into our operations. in Q2, I observed 2 trends. Our operation foundation stabilized and our organization truly mobilized. This foundation enables the long-term change. I will address 5 key questions. The first one, what changes as transformation enters daily operations? Second, does being consumer-centric mean bypassing agents? Thirdly, as AI advances, will agents become obsolete? Fourthly, how is AI applied in our business, and what is the result? Fifthly, how will we know we are on the right track moving forward? For the first question, what change as transformation enters daily operation? In this quarter, I spent a lot of time on the frontline visiting stores, properties, construction sites, and discussing issues with clients, agents, and the store owners.

Speaker #2: In Q2, I observed two trends: our operational foundation stabilized and our organization truly mobilized. This foundation enables long-term change. I will address five key questions.

Speaker #2: The first one: What changes as transformation enters daily operations? Second, does being consumer-centric mean bypassing agents? Thirdly, as AI advances, will agents become obsolete?

Speaker #2: Fourthly, how is AI applied in our business and what is the result? Fifthly, how will we know we are on the right track moving forward?

Speaker #2: So, for the first question: what changes as transformation enters daily operations? In this quarter, I spent a lot of time on the frontline—visiting stores, properties, construction sites, and discussing issues with clients' agents and their store owners. The changes boil down to three areas.

Stanley Yongdong Peng: The changes boil down to 3 areas. First, refined operation. We are shifting from the one-size-fits-all approach to the district-specific and the project-specific strategies. Rather than tracking a single citywide metric, we analyze specific districts or projects to tailor solutions and what is the solution for each community. For example, in a high-end community where clients view properties across districts, our legacy geographic-bound model failed, and we regrouped operational units based on actual clients' viewing path, assigning project experts for professional presentations and the clients' experts to address specific family needs. With 600 projects driving half the city's volume, standardizing these professional judgments into a clear division of labor allow us to replicate this model, and other cities have begun similar operations, explorations. Second, a shift in metrics. Scale and markets share still matter.

Stanley Peng: The changes boil down to 3 areas. First, refined operation. We are shifting from the one-size-fits-all approach to the district-specific and the project-specific strategies. Rather than tracking a single citywide metric, we analyze specific districts or projects to tailor solutions and what is the solution for each community. For example, in a high-end community where clients view properties across districts, our legacy geographic-bound model failed, and we regrouped operational units based on actual clients' viewing path, assigning project experts for professional presentations and the clients' experts to address specific family needs. With 600 projects driving half the city's volume, standardizing these professional judgments into a clear division of labor allow us to replicate this model, and other cities have begun similar operations, explorations. Second, a shift in metrics. Scale and markets share still matter.

Speaker #2: First, refined operation. We are shifting from a one-size-fits-all approach to district-specific and project-specific strategies. So, rather than tracking a single city-wide metric, we analyze specific districts or projects to tailor solutions.

Speaker #2: And what is the solution for each community? For example, in high-end communities, where clients view properties across districts, our legacy geographic-bound model failed. We regrouped operational units based on actual clients' viewing paths, assigning project experts for professional presentations, and client experts to address specific family needs.

Speaker #2: So, with 600 projects driving half the city's volume, standardizing these professional judgments into a clear division of labor allows us to replicate this model.

Speaker #2: And other cities have become similar operations—explorations. Second, shifted metrics. Scale and market share still matter, but now we focus more on consistent agent transactions, rising agent efficiency and income, healthy store profitability, and stable service quality.

Stanley Yongdong Peng: But now we focus more on consistent agent transactions, rising agent efficiency, and income healthy store profitability, and a stable service quality. Leasing illustrates this perfectly. In 2025, we have at most 700 agents for leasing at the peak, and the average agent efficiency fell below 2 transactions. Instead of adding headcounts, we divided the city into smaller blocks, rematching properties, clients, and agents based on familiarity and capabilities. From April to July, average agent efficiency jumped from 3 to 5.6 transactions, and the zero transaction ratio dropped from nearly 25% to under 10%. I think what matters is that the effective organization matters more than mere head count. Thirdly, mobilize the people. Managers have left meeting rooms already front line. These culture managers personally sold stale listings, revisited dead leads, and accompanied agents to signing centers. My only requirement for a manager is to presence.

Stanley Peng: But now we focus more on consistent agent transactions, rising agent efficiency, and income healthy store profitability, and a stable service quality. Leasing illustrates this perfectly. In 2025, we have at most 700 agents for leasing at the peak, and the average agent efficiency fell below 2 transactions. Instead of adding headcounts, we divided the city into smaller blocks, rematching properties, clients, and agents based on familiarity and capabilities. From April to July, average agent efficiency jumped from 3 to 5.6 transactions, and the zero transaction ratio dropped from nearly 25% to under 10%. I think what matters is that the effective organization matters more than mere head count. Thirdly, mobilize the people. Managers have left meeting rooms already front line. These culture managers personally sold stale listings, revisited dead leads, and accompanied agents to signing centers. My only requirement for a manager is to presence.

Speaker #2: So leasing illustrates this perfectly. In 2025, we had at most 700 agents for leasing at the peak, and the average agent efficiency fell below two transactions, instead of adding headcount.

Speaker #2: We divided the city into smaller blocks, rematching properties, clients, and agents based on familiarity and capabilities. So, from April to July, average agent efficiency jumped from 3 to 5.6 transactions, and the zero-transaction ratio dropped from nearly 25% to under 10%.

Speaker #2: So I think what matters is that effective organization matters more than mere headcount. Thirdly, mobilize the people. Managers have left the meeting rooms for the frontline.

Speaker #2: This quarter, managers personally sold still listings, revisited dead leads, and accompanied agents to signing centers. And my only requirement for managers is to be present.

Speaker #2: You cannot learn to swim without getting in the water. So, in short, operationalizing transformation means refined operations, shifted metrics, and mobilized people. This stems from a single approach: solving real consumer and frontline problems first, then reorganizing our people, resources, and platform.

Stanley Yongdong Peng: You cannot learn to swim without getting in the water. In short, operationalizing transformation means refined operations, shifted metrics, and mobilized the people. This stems from a single approach, solving real consumer and frontline problem first, then reorganizing our people, resources, and platform. We are moving towards the changes and that they are now being seen in operational units. The second question is, does being consumer-centric mean bypassing agents? This assumes that if the platform moves closer to the consumer, it must take from the agents. Historically, we only split a single transaction commission, which is a zero-sum game. This is what we did in the past, but to break this equation, we must create more high-value tasks, not just redivide the same money. Consumers are changing. Good used to be aesthetic property attributes. Today, I think good means a proper match.

Stanley Peng: You cannot learn to swim without getting in the water. In short, operationalizing transformation means refined operations, shifted metrics, and mobilized the people. This stems from a single approach, solving real consumer and frontline problem first, then reorganizing our people, resources, and platform. We are moving towards the changes and that they are now being seen in operational units. The second question is, does being consumer-centric mean bypassing agents? This assumes that if the platform moves closer to the consumer, it must take from the agents. Historically, we only split a single transaction commission, which is a zero-sum game. This is what we did in the past, but to break this equation, we must create more high-value tasks, not just redivide the same money. Consumers are changing. Good used to be aesthetic property attributes. Today, I think good means a proper match.

Speaker #2: So, we are moving toward changes, and they are now being seen in operational units. The second question is: does being consumer-centric mean bypassing agents?

Speaker #2: So this assumes that if the platform moves closer to the consumer, it must take from the agents. Historically, we only split a single transaction commission, which is a zero-sum game.

Speaker #2: So this is what we did in the past. But to break this equation, we must create more light—create more high-value tasks, not just re-divide the same money.

Speaker #2: Consumers are changing. 'Good' used to be a static property—attributes. Today, I think 'good' means a proper match. The fireballs determine goods, expected from one, two, three.

Stanley Yongdong Peng: The variables determine goods expanded from 1, 2, 3. The property, the family situation, and also the service provider, where the service provider is now a vital variable, not just a conduit. As decisions become harder, tasks must be segmented. There are three reasons. First, the required knowledge. It exceeds one's personal capacity. For example, we needed to know the properties, client circumstances, mortgage, and the renovations and furnishing business. This exceeds one's capacity. Second, the building expertise require mutually exclusive path. You must either deeply root yourself in one project or follow a group of clients, so you cannot do both simultaneously. That is the second reason. The third one is the most valuable action has shifted from providing options to confidently eliminating them. I think we are not only offering more choices to the consumers, and instead, we needed to help them to filter.

Stanley Peng: The variables determine goods expanded from 1, 2, 3. The property, the family situation, and also the service provider, where the service provider is now a vital variable, not just a conduit. As decisions become harder, tasks must be segmented. There are three reasons. First, the required knowledge. It exceeds one's personal capacity. For example, we needed to know the properties, client circumstances, mortgage, and the renovations and furnishing business. This exceeds one's capacity. Second, the building expertise require mutually exclusive path. You must either deeply root yourself in one project or follow a group of clients, so you cannot do both simultaneously. That is the second reason. The third one is the most valuable action has shifted from providing options to confidently eliminating them. I think we are not only offering more choices to the consumers, and instead, we needed to help them to filter.

Speaker #2: The property, the families' situation, and also the service provider. So the service provider is now a vital variable, not just a conduit. As decisions become harder, tasks must be segmented.

Speaker #2: There are three reasons. First, the required knowledge. It feeds one's personal capacity. For example, we needed to know the properties, client circumstances, mortgage, and renovations and furnishing business.

Speaker #2: So this exceeds one's capacity. Second, building expertise requires mutually exclusive paths. You must either deeply root yourself in one project or follow a group of clients.

Speaker #2: So you cannot do both simultaneously. That is the second reason. The third one is that the most valuable action has shifted from providing options to confidently eliminating them.

Speaker #2: I think we are not only offering more choices to the consumers, and instead, we need to help them to filter. However, filtering does not mean transaction.

Stanley Yongdong Peng: However, filtering does not mean transaction. As long as income relies solely on closings, true professionalism won't develop. I think professionalism must be financially viable. Therefore, we are untethering our roles income from closed deals, aligning them entirely with the buyers or seller. This AI-assisted role is the client manager. Previously, platform insight stopped once a lead reached an agent. The client manager ensures continuity. AI organizes data, and while human assesses the client stage and needs, the agent receives fully profiled clients and because the client managers are not paid per transaction, they remain purely objective. As I have mentioned, the managers are not paid per transaction. From May to July, this role handled over 50,000 leads, achieving a 7.4% lead-to-showing conversion rate, outperforming the broader market 5%.

Stanley Peng: However, filtering does not mean transaction. As long as income relies solely on closings, true professionalism won't develop. I think professionalism must be financially viable. Therefore, we are untethering our roles income from closed deals, aligning them entirely with the buyers or seller. This AI-assisted role is the client manager. Previously, platform insight stopped once a lead reached an agent. The client manager ensures continuity. AI organizes data, and while human assesses the client stage and needs, the agent receives fully profiled clients and because the client managers are not paid per transaction, they remain purely objective. As I have mentioned, the managers are not paid per transaction. From May to July, this role handled over 50,000 leads, achieving a 7.4% lead-to-showing conversion rate, outperforming the broader market 5%.

Speaker #2: So as long as income relies solely on closings, true professionalism won't develop. I think professionalism must be financially viable. So, therefore, we are untethering gross income from closed deals, aligning them entirely with the buyer or seller.

Speaker #2: And this assisted role is the client manager. Previously, platform insights stopped once a lead reached an agent. The client manager ensures continuity. AI organizes data, and while a human assesses the client's stage and needs, the agent receives fully profiled clients. Because the client managers are not paid per transaction, they remain purely objective.

Speaker #2: So, as I have mentioned, the managers are not paid per transaction. From May to July, this role handled over 50,000 leads, achieving a 7.4% lead-to-showing conversion rate, outperforming the broader market's 5%.

Speaker #2: So, the platform's mission is evolving from splitting commission to building a structure where every specialized skill is independently verified and compensated. ECN is shifting from a single listing workflow to a modular ecosystem.

Stanley Yongdong Peng: The platform's mission is evolving from splitting commission to building a structure where every specialized skill is independently verified and compensated. ACN is shifting from a single listing workflow to a modular ecosystem, which includes consulting, showing, contracting, reporting, marketing materials, renovation, and leasing, and so on. Anyone creating incremental value is a service provider, and this is our definition, which is expanded. The main goal is enabling professional service providers to win in the long term. Being consumer-centric means transforming a single agent into a group of independently valuable specialized roles, and now we have the help of AI, which give us more impetus. The question, as AI advances, will agents become obsolete? This assumes agents only sells static information easily fetched by AI. However, technology reshuffles value and some things depreciate while others become scarce.

Stanley Peng: The platform's mission is evolving from splitting commission to building a structure where every specialized skill is independently verified and compensated. ACN is shifting from a single listing workflow to a modular ecosystem, which includes consulting, showing, contracting, reporting, marketing materials, renovation, and leasing, and so on. Anyone creating incremental value is a service provider, and this is our definition, which is expanded. The main goal is enabling professional service providers to win in the long term. Being consumer-centric means transforming a single agent into a group of independently valuable specialized roles, and now we have the help of AI, which give us more impetus. The question, as AI advances, will agents become obsolete? This assumes agents only sells static information easily fetched by AI. However, technology reshuffles value and some things depreciate while others become scarce.

Speaker #2: This includes consulting, showing, contracting, reporting, marketing, materials, renovation, and leasing, and so on. So anyone creating incremental value is a service provider. This is our definition, which has been expanded.

Speaker #2: So the main goal is enabling professional service providers to win in the long term. So, being consumer-centric means transforming the single agent into a group of independently valuable, specialized roles. And now we have the help of AI, which gives us more impetus. So the question is, as AI advances, will agents become obsolete?

Speaker #2: So, this assumes agents only sell static information easily fetched by AI. However, technology reshuffles value, and while some things depreciate, others become scarce.

Speaker #2: So we should ask, what is depreciating and what is becoming more scarce? So for the scarce part, what kind of progress can the platform and the service provider make?

Stanley Yongdong Peng: We should ask, what is depreciating and what is becoming more scarce? For the scarcer part, what kind of progress the platform and the service provider can make? What is depreciating? Static information, bedrooms, price, and year built, and also the layout of the house. I think this kind of information cannot support the decision-making, and it is very easy to get. If we only transport information, we may have no more opportunities going forward. What is scarce? Dynamic, deep, inspiring insights, and they cannot be fabricated. For example, the reason of selling, renovation potential, or local market assessment from seasoned managers, and how is the situation in the communities by the managers, and what is the closings and how is the deal last the time. This information lives in people's minds, and the industry lacks the pipeline to capture and reuse it.

Stanley Peng: We should ask, what is depreciating and what is becoming more scarce? For the scarcer part, what kind of progress the platform and the service provider can make? What is depreciating? Static information, bedrooms, price, and year built, and also the layout of the house. I think this kind of information cannot support the decision-making, and it is very easy to get. If we only transport information, we may have no more opportunities going forward. What is scarce? Dynamic, deep, inspiring insights, and they cannot be fabricated. For example, the reason of selling, renovation potential, or local market assessment from seasoned managers, and how is the situation in the communities by the managers, and what is the closings and how is the deal last the time. This information lives in people's minds, and the industry lacks the pipeline to capture and reuse it.

Speaker #2: So what is depreciating? Static information, bedrooms, price, and year build. And also the layout of the house. So I think this kind of information can not support the decision-making and it is very easy to get so if we only transmit or we only transport the information, we may have no more opportunities going forward.

Speaker #2: So, what is scarce are dynamic, deep, inspiring insights, and they cannot be fabricated. For example, the reason for selling, renovation potential, or local market assessment from seasoned managers, and how the situation is in the communities by the managers. And what are the closings, and how is the deal, not the time.

Speaker #2: And this information lives in people's minds, and the industry lacks the pipeline to capture and reuse it. And fundamentally, AI does not build as a consequence of poor decisions.

Stanley Yongdong Peng: Fundamentally, AI does not bear the consequence of poor decisions, and AI may not take any accountabilities. As the cost of counseling mistake rises, consumer needed to reduce uncertainty grows. Therefore, three things will happen. Firstly, the industry becomes more valuable by mitigating uncertainty. Secondly, creating value is hard, requiring deep data and deeper surveys. The third thing is those who transform in the direction become more valuable, including platforms and their managers. We do not need information. We are players. We need professionals who dare to make judgments and take responsibility. The previous questions is about the industry and the service provider. If we look around, and if we look inward, then which comes to the question for how is AI applied in our business and with what results? Actually, the business itself is a production function.

Stanley Peng: Fundamentally, AI does not bear the consequence of poor decisions, and AI may not take any accountabilities. As the cost of counseling mistake rises, consumer needed to reduce uncertainty grows. Therefore, three things will happen. Firstly, the industry becomes more valuable by mitigating uncertainty. Secondly, creating value is hard, requiring deep data and deeper surveys. The third thing is those who transform in the direction become more valuable, including platforms and their managers. We do not need information. We are players. We need professionals who dare to make judgments and take responsibility. The previous questions is about the industry and the service provider. If we look around, and if we look inward, then which comes to the question for how is AI applied in our business and with what results? Actually, the business itself is a production function.

Speaker #2: And AI may not take any accountability. So as the cost of housing mistakes rises, consumers need to reduce uncertainty in growth. Therefore, three things will happen.

Speaker #2: Firstly, the industry becomes more valuable by mitigating uncertainty. Secondly, creating value is hard, requiring deep data and deeper surveys. The third thing is that those who transform in this direction become more valuable, including platforms and the managers.

Speaker #2: So, we do not need information replayers. We need professionals who dare to make judgments and take responsibility. So, the previous question was about the industry and the service provider.

Speaker #2: And if we look around and if we look inward, then we come to the question of how AI is being applied in our business and with what results.

Speaker #2: Actually, the business itself is a production function. What is our input and what is the output? There is human capital and labor, capital, and technology in the function.

Stanley Yongdong Peng: What is our input and what is output, and there is human capital and labor, capital and technology in the function. In today's AI, we should know the situation of AI in the industry. Is AI a sub-item or a direct variables? If it's a sub-item, it is an efficiency tool, or if it is a direct variable, it requires a totally rewrite. We needed to change attitudes in the first. We now also open some of the foundational datas, and we are lowering the threshold. We are worried about whether there will be disruption, and we are thinking about how AI can be a new production factor rather than an opponent enables innovation. I think the consumers finally pay the value. I think the consumers need a better experience, and we need to solve the problems of consumers.

Stanley Peng: What is our input and what is output, and there is human capital and labor, capital and technology in the function. In today's AI, we should know the situation of AI in the industry. Is AI a sub-item or a direct variables? If it's a sub-item, it is an efficiency tool, or if it is a direct variable, it requires a totally rewrite. We needed to change attitudes in the first. We now also open some of the foundational datas, and we are lowering the threshold. We are worried about whether there will be disruption, and we are thinking about how AI can be a new production factor rather than an opponent enables innovation. I think the consumers finally pay the value. I think the consumers need a better experience, and we need to solve the problems of consumers.

Speaker #2: So in today's AI, we should know the situation of AI in the industry. So is AI a sub-item or a direct variable?

Speaker #2: So, if it's a sub-item, it is an efficiency tool; but if it is a direct variable, it requires a total rewrite. So, we needed to change attitudes in the first place.

Speaker #2: We now also open some of the foundational data, and we are lowering the threshold. So, we are worried about whether there will be disruption.

Speaker #2: And we are thinking about how AI can be a new production factor rather than an opponent that enables innovation. So I think the consumers will ultimately pay for the value.

Speaker #2: I think consumers need a better experience, and we need to solve the problems of consumers. The second is, it changes management. In the recent 200 years, we have seen improvement in science and management, and we need quantifiable data in management.

Stanley Yongdong Peng: The second is it changes management. In the recent 200 years, we have improvement in the science and management, and we need quantifiable data in the management. I think we all benefit from this methodology in KE Holdings and also Lianjia. We need standard, and we also need tools for the improvement. However, for the unquantifiable, they cannot be measured. This is also a big problem. Sometimes we may only focus on the numbers, and sometimes we find that the numbers are too abstract, and the consumers now become the numbers and also become the number 1 in the standard. However, with the help of AI brings the unstructured data, and I think the language and the numbers are totally different informations and signals. The granularity shifts from managing average to managing individual properties, clients and agents.

Stanley Peng: The second is it changes management. In the recent 200 years, we have improvement in the science and management, and we need quantifiable data in the management. I think we all benefit from this methodology in KE Holdings and also Lianjia. We need standard, and we also need tools for the improvement. However, for the unquantifiable, they cannot be measured. This is also a big problem. Sometimes we may only focus on the numbers, and sometimes we find that the numbers are too abstract, and the consumers now become the numbers and also become the number 1 in the standard. However, with the help of AI brings the unstructured data, and I think the language and the numbers are totally different informations and signals. The granularity shifts from managing average to managing individual properties, clients and agents.

Speaker #2: And I think we all benefit from this methodology in KE Holdings, and also Lianjia. We need standards, and we also need tools for improvement.

Speaker #2: However, for the arm quantifiable, they cannot be measured. This is also a big problem. But on the numbers. And we find that but sometimes we find that the numbers are too abstract.

Speaker #2: And the consumers now become the numbers and also become the number one in the standard. However, with the help of AI—AI brings in unstructured data—and I think language and the numbers are totally different information and signals.

Speaker #2: And the granularity shifts from managing averages to managing individual properties, clients, and agents. Previously, we managed the averages, but now we have the computing power and the knowledge.

Stanley Yongdong Peng: Previously, we manage the average, but now we have the computation powers and the knowledge, and we can have the tailored solution for each individual. The third part is about AI changes the division of labor. We talk about the segmentation of the task in the company by AI. Now we have these scenarios, which includes financial, human resource products, technology, and also front stage, back stage, and the computation power. Now we have AI breaking down the threshold, and all of them are in the computation power of AI. The old division vanish and the new ones emerge.

Stanley Peng: Previously, we manage the average, but now we have the computation powers and the knowledge, and we can have the tailored solution for each individual. The third part is about AI changes the division of labor. We talk about the segmentation of the task in the company by AI. Now we have these scenarios, which includes financial, human resource products, technology, and also front stage, back stage, and the computation power. Now we have AI breaking down the threshold, and all of them are in the computation power of AI. The old division vanish and the new ones emerge.

Speaker #2: And we can have tailored solutions for each individual. The third part is about how AI changes the division of labor. We talk about the segmentation of tasks, or in the company, by AI.

Speaker #2: Now we have the scenarios, which include financial, human resource products, technology, and also from the stage, backstage, and the computation power. But now, we have AI breaking down the threshold, and all of them are in the computation power of AI.

Speaker #2: And previously, the old divisions vanish and the new ones emerge.

Speaker #1: So, you know we’re changing new home business. We shifted labor between humans and AI. AI helps agents compare proposals using a dynamic knowledge base.

Stanley Yongdong Peng: In our changing new home business, we shifted the labor between humans and AI. AI helps agents compare proposals using a dynamic knowledge base, allowing agents to focus on understanding clients. The agents could fine-tune their understanding of the clients. This produces both close deals and also reusable organizational capabilities. These only come from the frontline. This disruption reshapes the organization. It concerns on four things. First is cost. AI lowers fixed costs and increases variable costs, enabling rapid iteration. Whoever iterates fast, who creates more value. Next is the trial and error. In the past, it takes a lot of efforts. Right now, it takes a long path to evaluate, test, validate a proposal. The bigger the organization, I mean, the longer the chain is. Many people just hesitate.

Stanley Peng: In our changing new home business, we shifted the labor between humans and AI. AI helps agents compare proposals using a dynamic knowledge base, allowing agents to focus on understanding clients. The agents could fine-tune their understanding of the clients. This produces both close deals and also reusable organizational capabilities. These only come from the frontline. This disruption reshapes the organization. It concerns on four things. First is cost. AI lowers fixed costs and increases variable costs, enabling rapid iteration. Whoever iterates fast, who creates more value. Next is the trial and error. In the past, it takes a lot of efforts. Right now, it takes a long path to evaluate, test, validate a proposal. The bigger the organization, I mean, the longer the chain is. Many people just hesitate.

Speaker #1: Allowing agents to focus on understanding clients means the agents can fine-tune their understanding of the clients. So this produces both closed deals and also reusable organizational capabilities.

Speaker #1: So these only come from the frontline. So this disruption reshapes the organization. So it concerns four things. First is cost. AI lowers fixed costs and increases variable costs.

Speaker #1: Enabling rapid iteration. So whoever iterates fast creates more value. And next is trial and error. In the past, it took a lot of effort. Right now, it still takes a long path to evaluate, test, and validate a proposal.

Speaker #1: So the bigger the organization, I mean the longer the chain is, many people just hesitate to right now AI shifts innovation from heavy slow investments into a high frequency and low cost probability gains.

Stanley Yongdong Peng: Right now, AI shifts innovation from heavy, slow investments into a high frequency and low cost of probability gains. This allows us to trial and test multiple models at the same time, and we have a higher probability of winning out the game. Next is the frontline and the middle office. The frontline workers, armed with AI, can rapidly build and test solutions. The mid-office can then scale with them. Last but not least, managers. In the past, the bigger the organization, the lower the efficiency is. Right now, I actually talked to a lot of managers. They don't feel like a lot of a sense of value. Right now, AI flattens the organization. It's changing the roles, handling the reporting. We're forcing managers to stop being megaphones and start creating real business value.

Stanley Peng: Right now, AI shifts innovation from heavy, slow investments into a high frequency and low cost of probability gains. This allows us to trial and test multiple models at the same time, and we have a higher probability of winning out the game. Next is the frontline and the middle office. The frontline workers, armed with AI, can rapidly build and test solutions. The mid-office can then scale with them. Last but not least, managers. In the past, the bigger the organization, the lower the efficiency is. Right now, I actually talked to a lot of managers. They don't feel like a lot of a sense of value. Right now, AI flattens the organization. It's changing the roles, handling the reporting. We're forcing managers to stop being megaphones and start creating real business value.

Speaker #1: So, this allows us to trial and test multiple models at the same time, and we have a higher probability of winning out the game.

Speaker #1: And next is the frontline and the middle office. So the frontline workers, armed with AI, can rapidly build and test solutions. The middle office can then co-host them.

Speaker #1: Last but not least, managers. So in the past, the bigger the organization, the lower the efficiency is. Right now, I actually talked to a lot of managers.

Speaker #1: They don't feel a strong sense of value right now. AI flattens the organization—it's changing the roles, handling the reporting, and forcing managers to stop being megaphones and start creating real business value.

Speaker #1: So they're not just simply presenting the numbers; they are actually creating real, genuine value from the frontline, because they're in the process of creating the value.

Stanley Yongdong Peng: They're not just simply just presenting the numbers, they are actually creating real, genuine value from the frontline. Because they're in the process of creating the value. Finally, the bottleneck shifts to humans. Look at KE. We have a long industrial process. AI can perfect a lot of the workflows. And those that with the human intervention becomes the bottleneck. There is this human and human interaction that AI cannot replace. Whether we can unite people together and provide them with the training, allow them to work efficiently with the AI. One is culture, the other is evolution. This is essentially a change we're talking about towards the whole industry. Now back to the very first question, whether AI is a direct variable. Because it changes who we serve, our judgments, our process, and our organization. This is a direct variable.

Stanley Peng: They're not just simply just presenting the numbers, they are actually creating real, genuine value from the frontline. Because they're in the process of creating the value. Finally, the bottleneck shifts to humans. Look at KE. We have a long industrial process. AI can perfect a lot of the workflows. And those that with the human intervention becomes the bottleneck. There is this human and human interaction that AI cannot replace. Whether we can unite people together and provide them with the training, allow them to work efficiently with the AI. One is culture, the other is evolution. This is essentially a change we're talking about towards the whole industry. Now back to the very first question, whether AI is a direct variable. Because it changes who we serve, our judgments, our process, and our organization. This is a direct variable.

Speaker #1: Lastly, the bottleneck shifts to humans. Look at KE—we have a long industrial process. AI can perfect a lot of the workflows, and then, with human intervention, it becomes the bottleneck.

Speaker #1: So, there's this human and human interaction that AI can have to replace. So, whether we can unite people together and provide them the training, allow them to work proficiently with AI—so one is culture, the other is evolution.

Speaker #1: So, this is essentially a change we're talking about for the whole industry. Now, back to the very first question—whether AI is a direct variable.

Speaker #1: Because it changes who we serve, our judgments, our process, and our organization. So, this is a direct variable. That means we're not simply installing AI into the company.

Stanley Yongdong Peng: That means we're not simply installing AI into the company. We are regrowing the company with AI. Looking into the next phase, how will we know we're on the right track moving forward? Now, we must separate two things. Where we need to place heavy bets from where we seek answers. I think there are three areas we are placing heavy bets, deep service, deep data, and a platform ecosystem. As information democratize, deep data becomes scarce and the harder the decision-making becomes, and the deeper service becomes more valuable. As labor specializes, a platform is needed to orchestrate it. The one where we're still seeking answers, AI's final form and the ultimate structures of management and expertise remain uncertain. Directional matters require unwavering bets. How do we capture users' evolving needs? Management, of course, carries its value.

Stanley Peng: That means we're not simply installing AI into the company. We are regrowing the company with AI. Looking into the next phase, how will we know we're on the right track moving forward? Now, we must separate two things. Where we need to place heavy bets from where we seek answers. I think there are three areas we are placing heavy bets, deep service, deep data, and a platform ecosystem. As information democratize, deep data becomes scarce and the harder the decision-making becomes, and the deeper service becomes more valuable. As labor specializes, a platform is needed to orchestrate it. The one where we're still seeking answers, AI's final form and the ultimate structures of management and expertise remain uncertain. Directional matters require unwavering bets. How do we capture users' evolving needs? Management, of course, carries its value.

Speaker #1: We are regrowing the company with AI. So, looking into the next phase, how will we know we're on the right track moving forward? Now, we must separate two things.

Speaker #1: Where we need to place heavy bets is where we seek answers. I think there are three areas for placing heavy bets: deep service, deep data, and the platform ecosystem. As information becomes democratized, deep data becomes the scarce resource.

Speaker #1: And the harder the decision making becomes, and the deeper service becomes more valuable as labor specializes a platform is needed to orchestrate it. So while we're seeking answers, the one where we're still seeking answers, AI's final form and the ultimate structures of management and expertise remain uncertain.

Speaker #1: Directional matters require unwavering bets. So how do we capture users' evolving needs? Management, of course, carries this value. For more logical matters, small investments, rapid testing, and cutting losses early are required.

Stanley Yongdong Peng: So morphological matters require small investments, rapid testing, and cutting losses early. Why do we need to separate these things by certainties? Because again, we have already proven that directive matters requires unwavering bets, whereas the morphological matters requires more investment and rapid testing. Looking back at the past two quarters, we have approved in some areas that keeping investment in areas with low marginal returns is meaningless. The purely skill-driven model is dead. So we should stop those meaningless investments. Most of all, we must validate four things. First, professionals facing AI, whether they can use it directly or indirectly to create a value. Do they have new definitions for what is professionalism and whether they are committed to this concept? Second, for managers, whether they can return to the frontline and produce high-quality judgments to recreate this sense of value.

Stanley Peng: So morphological matters require small investments, rapid testing, and cutting losses early. Why do we need to separate these things by certainties? Because again, we have already proven that directive matters requires unwavering bets, whereas the morphological matters requires more investment and rapid testing. Looking back at the past two quarters, we have approved in some areas that keeping investment in areas with low marginal returns is meaningless. The purely skill-driven model is dead. So we should stop those meaningless investments. Most of all, we must validate four things. First, professionals facing AI, whether they can use it directly or indirectly to create a value. Do they have new definitions for what is professionalism and whether they are committed to this concept? Second, for managers, whether they can return to the frontline and produce high-quality judgments to recreate this sense of value.

Speaker #1: So why do we need to separate these things by certainty? Because, again, we have already proven that direct matters require unwavering bets, whereas the morphological matters require small investments and rapid testing.

Speaker #1: So, looking back at the first two quarters, we have proven in some areas that keeping investment in areas with low marginal returns is meaningless.

Speaker #1: The purely skill-driven model is dead. We should stop those meaningless investments. Moving forward, we must validate four things. First, professionals: facing AI, whether they can use it directly or indirectly to create value, do they have new definitions for what professionalism is, and whether they're committed to this concept?

Speaker #1: And second, for managers, whether they can return to the frontline and produce high-quality judgments to recreate this sense of value. The third is about processes and judgments.

Stanley Yongdong Peng: The third is the processes and judgments. With the deeper services, can they earn the trust from their customers? Whether they can earn a better recognition or trust. Number four, organizational capabilities. Can we turn a single success into a replicable capability? In such a discontinuous transformation, for many industries, they are pretty much faced with the same challenge. The way I see it, human conviction is the leading indicator. Numbers are the lagging indicator. Many of the management tend to hide their expertise within themselves. Without the open sharing, we cannot make that into replicable, successful models. Our core test is whether we can consistently execute a consumer centricity and enable professionalisms to win. This must be embedded in our culture and our workflows. We will measure this success across four pillars: customer, service provider, operations, and replicability, all four master co-choice.

Stanley Peng: The third is the processes and judgments. With the deeper services, can they earn the trust from their customers? Whether they can earn a better recognition or trust. Number four, organizational capabilities. Can we turn a single success into a replicable capability? In such a discontinuous transformation, for many industries, they are pretty much faced with the same challenge. The way I see it, human conviction is the leading indicator. Numbers are the lagging indicator. Many of the management tend to hide their expertise within themselves. Without the open sharing, we cannot make that into replicable, successful models. Our core test is whether we can consistently execute a consumer centricity and enable professionalisms to win. This must be embedded in our culture and our workflows. We will measure this success across four pillars: customer, service provider, operations, and replicability, all four master co-choice.

Speaker #1: With deeper services, can they earn the trust of their customers? Whether they can earn broader recognition, better recognition, or trust. Number four, organizational capabilities.

Speaker #1: Can we turn a single success into a replicable capability? In such a discontinuous transformation— for many industries, they are pretty much faced with the same challenge.

Speaker #1: The way I see it, human conviction is the leading indicator. Numbers are the lagging indicator. So many in management tend to hide their expertise within themselves.

Speaker #1: So, without open sharing, we cannot turn that into a replicable, successful model. So our core test is whether we can consistently execute consumer centricity and enable professionalism to win. This must be embedded in our culture and in our workflows.

Speaker #1: So we will measure these successes across four pillars: customer, service provider, operations, and replicability. All four must coach us. So if you look at these five things, we have to redefine our playbook.

Stanley Yongdong Peng: If you look at these five things, we have to redefine our playbook. Consumers are facing harder decisions to make, that is driving deeper specialization. The AI is depreciating role info while elevating true expertise and reorganizational internal work. Our direction is certain deep service, deep data, and a platform ecosystem. Q2 is not the conclusion, it is just the beginning. Thank you. I will now turn the call to the Analyst for a Q&A. Thank you, Stanley. As a reminder, we only accept questions on the Chinese language line. If you would like to ask a question, please press star 1. If you would like to cancel your request, please press the pound key. For the benefit of all participants on today's call, please limit yourself to one question. If you have additional questions, you can re-enter the queue.

Stanley Peng: If you look at these five things, we have to redefine our playbook. Consumers are facing harder decisions to make, that is driving deeper specialization. The AI is depreciating role info while elevating true expertise and reorganizational internal work. Our direction is certain deep service, deep data, and a platform ecosystem. Q2 is not the conclusion, it is just the beginning. Thank you. I will now turn the call to the Analyst for a Q&A.

Speaker #1: So consumers are facing harder decisions to make, which is driving deeper specialization. AI is depreciating the role involved, while elevating true expertise and reorganizing internal work.

Speaker #1: So our direction is certain: deep service, deep data, and a platform ecosystem. So Q2 is not the conclusion; it is just the beginning. Thank you.

Speaker #1: I will now turn the call over to the analysts for Q&A. Thank you, Stanley. As a reminder, we are only accepting questions on the Chinese language line.

Operator: Thank you, Stanley. As a reminder, we only accept questions on the Chinese language line. If you would like to ask a question, please press star 1. If you would like to cancel your request, please press the pound key. For the benefit of all participants on today's call, please limit yourself to one question. If you have additional questions, you can re-enter the queue.

Speaker #1: If you would like to ask a question, please press star one. If you would like to cancel your request, please press the pound key.

Speaker #1: For the benefit of all participants on today's call, please limit yourself to one question. If you have additional questions, you may re-enter the queue.

Speaker #1: The first question comes from Team Fidel from Goldman Sachs. Please go ahead. Thank you, management, for taking my question. Congratulations on the strong Q2 results.

Timothy Zhao: The first question comes from Timothy Zhao from Goldman Sachs. Please go ahead. Thank you, management, for taking my question. Congratulations on the strong Q2 results. My question is on the overall property market. It saw a diverging trend in volume and price in Q2, with some fluctuations in momentum in Q3. Given the uncertainty ahead, what controllable levers does the company have for Q3 and the full year? Thank you, Timothy. In H1, the existing home market showed a structural recovery in transactions, with the prices bottoming. In Q2, this recovery became more evident, though the pace varied across cities and price segments. By Q2, transaction volumes recovered faster in Tier 1 cities, where the H1 prices also showed greater sequential resilience. In Q2, year-over-year growth in registered existing home transactions in Tier 1 cities outpaced other cities.

Operator: The first question comes from Timothy Zhao from Goldman Sachs. Please go ahead.

Timothy Zhao: Thank you, management, for taking my question. Congratulations on the strong Q2 results. My question is on the overall property market. It saw a diverging trend in volume and price in Q2, with some fluctuations in momentum in Q3. Given the uncertainty ahead, what controllable levers does the company have for Q3 and the full year?

Speaker #1: My question is on the overall property market. Eighth, so a diverging trend in volume and price in Q2, with some fluctuations in momentum in Q3.

Speaker #1: Given the uncertainty ahead, what controllable levers does the company have for Q3 and the full year? Thank you, Timothy. In the first half, the existing home market showed a structural recovery in transactions with the prices.

Tao Xu: Thank you, Timothy. In H1, the existing home market showed a structural recovery in transactions, with the prices bottoming. In Q2, this recovery became more evident, though the pace varied across cities and price segments. By Q2, transaction volumes recovered faster in Tier 1 cities, where the H1 prices also showed greater sequential resilience. In Q2, year-over-year growth in registered existing home transactions in Tier 1 cities outpaced other cities.

Speaker #1: Bottoming. In Q2, this recovery became more evident. Now, the pace varied across cities and price segments. By Q2, transaction volumes recovered faster in tier one cities, where the first half prices also showed a greater sequential resilience.

Speaker #1: In Q2, year over year growth in registered existing home transactions in tier one cities outpaced other cities. According to Baker Research Institute, in the first half, tier one existing home prices rose cumulatively by 3.6% quarter over quarter, while national prices remained broadly stable year over year.

Tao Xu: According to Beike Research Institute, in the H1, Tier 1 existing home prices rose cumulatively by 3.6% quarter over quarter, while national prices remained broadly stable year over year. Prices across all tiers remained in an adjustment phase. For our platform, volume for lower-priced homes grew faster than mid to high-priced homes. However, the transaction mix across unit sizes remained stable, indicating housing demand hasn't broadly downgraded to smaller homes. Instead, this reflects a downward shift in transaction price bands as prices adjusted. Meanwhile, higher priced homes saw smaller year-over-year price declines, showing resilience in core, upgrade-oriented, and high-quality residences. In the new home market, overall Q2 volume remained under pressure, though projects in core cities with a strong product offering showed better support. Structurally, existing homes accounted for over 80% of the total national residential transaction area in the H1, becoming the market mainstay for housing demand.

Speaker #1: Prices across all tiers remain adjustment-based. On our platform, volume for lower-priced homes grew faster than mid- to high-priced homes. However, the transaction mix across unit sizes remained stable.

Speaker #1: This indicates that housing demand hasn't broadly shifted to smaller homes. Instead, it reflects a downward shift in transaction price bands as prices adjusted. Meanwhile, higher-priced homes are experiencing smaller year-over-year price declines.

Speaker #1: Showing resilience in core, upgrade-oriented, and high-quality residences in the new home market. Overall, Q2 volume remained under pressure. The projects in core cities with strong product offerings showed better support.

Speaker #1: Structurally, existing homes accounted for over 50% of the total national residential transaction area in the first half, becoming the market mainstay for housing demand.

Speaker #1: Overall, we see a structural transaction recovery. While prices continue to bottom, core cities and high-quality supply are more resilient, but the market remains polarized.

Tao Xu: Overall, we see a structural transaction recovery while prices continue to bottom. Core cities and high-quality supply are more resilient, but the market remains polarized. With more property choices, customers are deciding cautiously, valuing professional judgment and transaction certainty. They need professional decision support, not just transaction matching or facilitation. This highlights our platform's accumulated service capabilities. Based on this, we will focus on three areas. First, capturing structural market opportunities to strengthen revenue resuming. We will allocate resources based on market performance across cities, customer groups, and property types, reinforcing coverage in higher tier cities. Meanwhile, centered around content-driven engagement, precise matching, and professional execution will help customers make better decisions and convert genuine demand into transactions. Second, we'll continue to reinforce financial discipline and flexible resource allocation. Our leaner cost structure improves our ability to hedge against or fend off market volatility.

Speaker #1: With more property choices, customers are deciding cautiously, valuing professional judgment and transaction certainty. They need professional decision support, not just transaction matching or facilitation.

Speaker #1: This highlights our platform's accumulated service capabilities. Based on this, we will focus on three areas. First, capturing the structure of market opportunities to strengthen revenue resilience.

Speaker #1: We will allocate resources based on market performance across cities, customer groups, and property types, reinforcing coverage in higher-tier cities. Meanwhile, centered around content-driven engagement, precise matching, and professional execution will help customers make better decisions and convert genuine demand into transactions.

Speaker #1: Second, we'll continue to reinforce financial discipline and flexible resource allocation. Our leaner cost structure improves our ability to hedge against or fend off market volatility.

Speaker #1: If pressure persists, we will dynamically allocate resources, prioritizing our core professional service provider network over short-term profits. Even if the market improves, we will not return to extensive expansion.

Tao Xu: If pressure persists, we will dynamically allocate resources, prioritizing our core professional service provider network over short-term profits. Even if the market improves, we will not return to extensive expansion. New investments must pass stage-gated ROI and service validations before scaling, ensuring transactions translates efficiently into profit and cash flow. Third, we'll also prioritize cash flow and a solid balance sheet. We'll strictly manage receivables and collections, control risk exposure, and limit non-essential investments to preserve flexibility. Therefore, our H2 operations will not rely on market bets. On the revenue side, better decision support will help us win more customers. On the financial side, our healthier cost structure will protect cash flow and core capabilities in weak markets, and release greater operating leverage while markets improve. Thank you.

Speaker #1: New investments must pass stage-gated ROI and service validations before scaling, ensuring transactions translate efficiently into profit and cash flow. Third, we'll also prioritize cash flow and a solid balance sheet.

Speaker #1: We'll strictly manage receivables and collections, control risk exposure, and limit non-essential investments to preserve flexibility. Therefore, our second half operations will not rely on market bets.

Speaker #1: On the revenue side, better decision support will help us gain more customers. On the financial side, our healthier cost structure will protect cash flow and a core capability in weak markets.

Speaker #1: And release greater operating leverage when markets improve. Thank you.

Speaker #2: Thank you. So our next question comes from Jonah from UBS. Please go ahead. Thank you, Mr. Tao, for your answer. So my question is that in Q2, the profits outpaced revenue growth significantly.

Siting Li: Thank you. Our next question comes from Zheng Lan from UBS. Please go ahead. Thank you, Mr. Tao, for your answering. My question is that in Q2, the profit outpaced revenue growth significantly. Could the management break down the impact of business performance, operating efficiency, expense baselines, and if there is any one-off factors? For those improvements, how sustainable are they in the long run? Thank you for your question. In Q2, the profit improvements were mainly driven by higher contribution margins across the core business and the lower operating expenses. For the core business contribution margins, they improved year on year and quarter on quarter, driving the group's gross margin up 6.7 percentage points year on year to 28.6%. At the same time, GAAP operating expenses fell 14.1% year on year. There are three drivers.

Operator: Thank you. Our next question comes from Zheng Lan from UBS. Please go ahead.

John Lam: Thank you, Mr. Tao, for your answering. My question is that in Q2, the profit outpaced revenue growth significantly. Could the management break down the impact of business performance, operating efficiency, expense baselines, and if there is any one-off factors? For those improvements, how sustainable are they in the long run?

Speaker #2: So could the management breakdown the impact of business performance, operating efficiency, expense baselines? And if there is any one-off factors, and for those improvements, how sustainable are they in the long run?

Speaker #2: Thank you for your question. In Q2, the profit improvements were mainly driven by higher contribution margins across the core business and lower operating expenses.

Tao Xu: Thank you for your question. In Q2, the profit improvements were mainly driven by higher contribution margins across the core business and the lower operating expenses. For the core business contribution margins, they improved year on year and quarter on quarter, driving the group's gross margin up 6.7 percentage points year on year to 28.6%. At the same time, GAAP operating expenses fell 14.1% year on year. There are three drivers.

Speaker #2: For the core business contribution margins, they improve year on year and quarter on quarter, driving the group's growth margin up 6.7 percentage points year on year to 28.6%.

Speaker #2: At the same time, GAAP operating expenses fell 14.1% year on year. There are three drivers. First, a lower cost and expenses baseline. Over the past years, we optimized Lianjia store and agent structure by expanding management spans, consolidating resources, and reducing low-productivity investment.

Tao Xu: First, a lower cost and expenses baseline. Over the past few years, we optimized Lianjia's store and agent structure by expanding management expense, consolidating resources, and reducing low productivity investment. This lowered the fixed labor cost and our break-even point. We also have a persistent baseline. Second, improved operating efficiency in housing transaction in new homes, strengthening coverage of high-quality projects and improving customer conversion, enhanced transaction resilience. We also have stable monetization and better channel efficiency drove profit growth. For the existing homes, focusing on the priority listings and refined operational support for connected stores significantly boosted connected store revenue and profit contribution. Thirdly, improved the unit economics and the business mix in new business. We have centralized the procurement and refined the cost management, lowered the material cost ratios in home renovation.

Speaker #2: And this lowered fixed labor cost and our break-even point, so we also have a persistent baseline. Second, we improved operating efficiency in housing transactions and new homes, generating coverage of high-quality projects and improving customer conversion, which enhanced transaction resilience.

Speaker #2: We also have stable monetization, and better channel efficiency drove profit growth. For existing homes, focusing on the priority listings and refund operational support for connected stores significantly boosted connected store revenue and profit contribution.

Speaker #2: Thirdly, improve the unit economics and business mix in new business. We have centralized procurement and refined cost management, lowering material cost ratios in home renovation. The contribution margin in rental services improved due to a mix shift toward a net-basis revenue product, alongside genuine operating improvements.

Tao Xu: In rental services, the contribution margin improved due to a mix shift toward a net basis revenue product, alongside the genuine operating improvements in labor installation and post-lease cost. Looking ahead to the next two quarters, under a neutral market assumption, the lower cost baseline will contribute to support profit. However, marketing channel incentives and the search front line sales cost may fluctuate quarter on quarter due to revenue scale, mix, and seasonality. We will not simply extrapolate a single quarter's profit, but focus on achieving balanced revenue and profit growth. If the market improves, incremental revenue will release stronger operating leverage from the lower baseline, creating greater profit upside. If pressure continues, our healthier cost structure reduces profit sensitivity to market volatility. Simply put, our current structure increases both upside potential and downside protection. In the long run, this optimization builds a healthy operating foundation.

Speaker #2: In labor installation and post-lease cost. Looking ahead to the next two quarters, under a neutral market assumption, the lower cost baseline will contribute to supporting profits.

Speaker #2: However, marketing channel incentives and certain floor flag sales costs may fluctuate quarter on quarter due to revenue scale, mix, and also seasonality. We will not simply extrapolate a single quarter's profit, but focus on achieving balanced revenue and profit growth.

Speaker #2: So, if the market improves, incremental revenue will release stronger operating leverage from the lower baseline, creating greater profit upside. If pressure continues, our healthier cost structure reduces profit sensitivity to market volatility.

Speaker #2: And, simply put, our current structure increases both upside potential and downside protection. In the long run, these optimizations build a healthy operating foundation.

Siting Li: This is step 1 of our strategic transformation, optimizing resources allocation for current markets. This is how we can cope with the uncertainty. Step 2 is directing limited resources toward initiatives that create customer value rather than just cutting cost. Ultimately, through workflows, evaluation incentives and the platform tools, we will embed efficient resource allocation into our daily organizational capacities to support a sustainable growth. Thank you, Mr. Tao. The next question comes from Sheldon Chan from CICC. Please go ahead. Good evening, Mr. Tao. Thank you for taking my question. Congratulations on your strong performance on Q2. The question is about existing homes. In Q2, the existing home GTV increased 8% year on year with contribution margin up 6.1 percentage points. How much of this stems from market recovery versus company operations, and what metrics demonstrate this operating alpha? Thank you. Thank you, Sheldon.

Tao Xu: This is step 1 of our strategic transformation, optimizing resources allocation for current markets. This is how we can cope with the uncertainty. Step 2 is directing limited resources toward initiatives that create customer value rather than just cutting cost. Ultimately, through workflows, evaluation incentives and the platform tools, we will embed efficient resource allocation into our daily organizational capacities to support a sustainable growth.

Speaker #2: This step—this is step one of our strategic transformation: optimizing resource allocation for the current market. And this is how we can take away the uncertainty.

Speaker #2: Step two is directing limited resources toward initiatives that create customer value, rather than just cutting costs. And ultimately, through work, through workflows, evaluations, incentives, and the platform tools, we will embed efficient resource allocation into our daily organizational capacities to support sustainable growth.

Speaker #2: Thank you, Mr. Tao. The next question comes from Xiaodan Zhang from CICC. Please go ahead. Good evening, Mr. Tao. Thank you for taking my question.

Operator: Thank you, Mr. Tao. The next question comes from Sheldon Chan from CICC. Please go ahead.

Xiaodan Zhang: Good evening, Mr. Tao. Thank you for taking my question. Congratulations on your strong performance on Q2. The question is about existing homes. In Q2, the existing home GTV increased 8% year on year with contribution margin up 6.1 percentage points. How much of this stems from market recovery versus company operations, and what metrics demonstrate this operating alpha? Thank you. T

Speaker #2: Congratulations on your strong performance in Q2. So the question is about existing homes. In Q2, existing home GTV increased 8% year over year, with contribution margin up 6.1 percentage points.

Speaker #2: So, how much of this stems from market recovery versus company operations? And what metrics demonstrate this operating alpha? Thank you. Thank you, Xiaodan. I am happy to hear your voice.

Tao Xu: hank you, Sheldon.

Tao Xu: I am happy to hear your voice. In short, while the market recovery provided a foundation for transaction volume, our existing home operating alpha didn't come from expanding our network or rising prices. It came primarily from higher unit productivity within our stable network and a better conversion of platform service value into revenue. The simultaneous margin improvement confirms we didn't sacrifice profitability for growth. Specifically in Q2, the existing home transaction volume in our key cities recovered moderately with sequential price stabilization providing some external support. We have that external support. However, the year on year average transaction price remained in adjustment, offering low price tailwind. In this backdrop, our Q2 existing home GTV grew 8% year on year, and the transaction volume grew nearly 25% year on year, significantly outperforming the market. The more direct alpha source was higher unit productivity in our connected store network.

Speaker #2: In short, while the market recovery provided a foundation for transaction volume, our existing home operating alpha didn't come from expanding our network or rising prices.

Speaker #2: It came primarily from higher unit productivity within a stable network and better conversion of platform service value into revenue. The simultaneous margin improvements confirm we didn't sacrifice profitability for growth.

Speaker #2: Specifically, in Q2, the existing home transaction volume in our key cities recovered moderately, with sequential price stabilization providing some external support. And we have that external support.

Speaker #2: However, the year on year average transaction price remained injustment, offering low price till wind. In this backdrop, our Q2 existing home GDP grew 8% year on year and the transaction volume grew nearly 25% year on year, significantly outperforming the market.

Speaker #2: The more direct alpha source was higher unit productivity in our connected store network. In Q2, the connected store transaction volume grew nearly 30% year-on-year, while network scale didn't expand.

Tao Xu: In Q2, the connected store transaction volume grew nearly 30% year on year. Network scale didn't expand. The active stores and agents remained broadly stable year on year, but average transaction per active connected store rose 26%. This shows that our network is shifting from expansion to high-quality operation. As earlier connected stores mature and the platform collaboration deepens, that network volume translates directly into higher per store output and high efficiency. The second alpha was improved conversion of platform service value into revenue. Q2 non-Lianjia platform service revenue grew 27.8% year on year, outpacing non-Lianjia GTV. In a buyer's market, professional marketing, property presentation, and transaction facilitation create a clear value and are increasingly chosen by the homeowners. At the same time, the existing home contribution margin grew 6.1 percentage points year on year to 46.1%, confirming growth wasn't fought at the expense of profitability.

Speaker #2: The active stores and agents remain broadly stable year on year, but average transactions per active connected store rose 26%. This shows that our network is shifting from expansion to high-quality operation.

Speaker #2: As earlier connected stores mature and the platform collaboration deepens, that network volume translates directly into higher per-store output and higher efficiency. The second alpha was improved conversion of platform service value into revenue.

Speaker #2: Q2 non-Lianjia platform service revenue grew 27.8% year on year, outpacing non-Lianjia GTV. In a buyer's market, professional marketing, property presentation, and transaction facilitation created clear value and are increasingly chosen by homeowners.

Speaker #2: At the same time, the existing home contribution margin rose 6.1 percentage points year on year to 46.1%, confirming growth wasn't bought at the expense of profitability.

Speaker #2: Going ahead, we will monitor if connected store output and the platform service revenue conversion remain stable across different markets, and going forward, we will focus more on the output of the connected store and also whether the conversion remains stable across different markets to validate the sustainability of this alpha.

Tao Xu: Going ahead, we will monitor if connected store output and the platform service revenue conversion remain stable across different markets. Going forward, we will focus more on the output of the connected store and also whether the conversion remains stable across different markets to validate the sustainability of this alpha. Thank you, Mr. Tao. Our next question comes from Alvin from CLSA. Please go ahead. Thank you for taking my question. For the new home business, it is also amazing. What drove the Q2 new home alpha as the operation upgrade from traditional channel collaboration to integrated marketing and the project service? What capabilities sustainably create value? Also in the process, how do you balance growth margins, contribution margin, collection cycles, and developers' credit risk? Thank you, Alvin. Good evening.

Speaker #2: Thank you, Mr. Tao. Our next question comes from Alvin from COSA. Please go ahead. Thank you for taking my question. For the new home business, it is also amazing.

Tao Xu: Thank you, Mr. Tao. Our next question comes from Alvin from CLSA. Please go ahead.

Alvin Huang: Thank you for taking my question. For the new home business, it is also amazing. What drove the Q2 new home alpha as the operation upgrade from traditional channel collaboration to integrated marketing and the project service? What capabilities sustainably create value? Also in the process, how do you balance growth margins, contribution margin, collection cycles, and developers' credit risk?

Speaker #2: So what does the Q2 new home alpha as the operation upgrade from traditional channel collaboration to integrated marketing and the project service? So what capabilities sustainably create value?

Speaker #2: And also, in the process, how do you balance growth margins, collection contribution margin, collection cycles, and developers’ credit risk? Thank you, Alvin. Good evening.

Tao Xu: Thank you, Alvin. Good evening.

Speaker #2: So, in the first half of this year, the new home market remained under pressure, but in Q2 there was an improvement, with the year-on-year sales decline among the top 100 developers narrowing to 9.3%. Demand and new supply are increasingly concentrated in core cities, high-quality projects, and upgrade-oriented products.

Tao Xu: In the first half of this year, the new home market remained under pressure, but in Q2, there was the improvement with the year on year sales declining among top 100 developers narrowing to 9.3%. Demand and the new supply increasingly concentrated in qualitative, high-quality projects and upgrade-oriented products. In this backdrop, our Q2 new home GTV grew by 1.2% year on year, driven mainly by improved coverage of high-quality projects and higher conversion efficiency. Firstly, we identified and collaborated with high-quality and newly launched projects earlier, improving our coverage and performance in market-leading projects. Secondly, we have refined needs identification and project matching. We effectively allocated resources to high-potential projects, boosting conversion rate. For the second half of this year, we assume the market will remain in adjustment with cautious customers focusing on optimizing project mix and conversion to improve controllable operating efficiency.

Speaker #2: So in this backdrop, our Q2 new home GTV grew by 1.2% year over year, driven mainly by improved coverage of high-quality projects and higher conversion efficiency.

Speaker #2: Firstly, we identified and collaborated with high-quality and newly launched projects earlier, improving our coverage and performance in market-leading projects. And secondly, we have refined needs identification and project matching.

Speaker #2: We effectively allocated resources to high-potential projects, boosting the conversion rate. For the second half of this year, we assume the market will remain in adjustment, with cautious customers focusing on optimizing project mix and conversion to improve controllable operating efficiency.

Speaker #2: In the long run, our new home business aims to solve customer housing decisions, not just extend the service chain. So, in the buyer's market, consumers face complex choices and multiple options, and they need more than just access to the projects.

Tao Xu: In the long run, our new home business aims to solve customer housing decisions, not just extend the service chain. In a buyer's market, consumers face complex choice and multiple choice, and they need more than just access to the projects. I think they need to understand the project suitability, product value, and the comparisons with the nearby options and alternatives in terms of price, layout, and also the amenities, and whether their needs can be met. We are also evolving from the transaction channel to the customer-centric full-cycle project services. What we hope is that we want to be consumer-centric. We want to provide full-cycle services and integrating consumer insights into project research, repositioning, and sales, and also the decision-making to support the consumers. Consumer value drives this upgrade, developer value follows from us serving consumers better.

Speaker #2: So I think they need to understand the project's scalability, product value, and the comparisons with the nearby options and alternatives—in terms of price layout as well as the amenities, and whether their needs can be met.

Speaker #2: And if and we are also evolving from the transaction channel to the customer centric four cycle project services. So what we hope is that we want to be consumer centric.

Speaker #2: We want to provide four-cycle services and integrate consumer insights into project research, positioning, and sales, as well as decision-making, to support our consumers.

Speaker #2: Consumer value drives this upgrade; developer value follows from us serving consumers better. In this direction, we are also building three capacities. Firstly, we have earlier consumer insights and matching.

Tao Xu: In this direction, we are also building three capacities. Firstly, we have earlier consumer insights and matching. We are using data from existing home transactions, searches, and viewings. We understand the demand to aid a project's positioning and marketing, reducing the mismatch between developer products and actual demands. Second, we translate product value into comparable decision metrics. We turn complex factors like location, layout, natural light, and amenities into intuitive content. We also have the explanation and other services to help the decision-making. For example, at Guangzhou Star River Make Levels, we have 3D community presentations and layout analysis, which help consumers intuitively understand the products, improving on-site conversion. Thirdly, we have end-to-end project operating capacities based on customer feedback. Now, we link customer analysis, content, and channel sales for a project, and we also have the timely adjustment and resources allocation.

Speaker #2: We are using data from existing home transaction searches and viewings. We understand the demand in order to aid project positioning and marketing, reducing the mismatch.

Speaker #2: Between developer products and actual demands. Second, we translate product value into comparable decision metrics. We turn complex factors like location, layout, natural light, and amenities into intuitive content.

Speaker #2: And we also have the explanation and other services to help with decision making. For example, at Guangzhou Star River Mid Levels, we have 3D community presentations and layout analysis, which help consumers intuitively understand the products, improving onsite conversion.

Speaker #2: Thirdly, we have end-to-end project operating capacities based on customer feedback. Now we link customer analysis, content, and channel sales for a project, and we also have time adjustment and resource allocation.

Speaker #2: For example, for a project in Shangri-La, the developer helped to gain local market knowledge. We reanalyzed target consumers, we adjusted the feedback from the market, and we adjusted the sales strategy and the link between channel acquisition and onsite conversion, boosting the sales efficiency.

Tao Xu: For example, for a project in Shangrao, the developer helped to gain local market knowledge. We reanalyzed target consumers. We adjusted the feedback from the market, and we adjusted the sales strategy and linked channel acquisition with on-site conversion, boosting the sales efficiency. But I think these capacities remain in early validation. We will tailor them per project, validating consumer value, operating results, and economics before scaling in all of those projects. I think we need a sustainable validation, and we can have better replication. As we expand our services and as our service scope deepens, we will manage payment terms and the developer credit risk even more prudently, avoiding the unreasonable risks just to expand the GTV.

Speaker #2: But I think these capacities remain in early validation. We will tailor them per project, validating consumer value, operating results, and economics before scaling. In all of those projects, I think we need sustainable validation, and we can have better replication as we expand our services. As our service scope depends, we will manage payment terms and developer credit risk even more prudently, avoiding unreasonable risks.

Speaker #2: Just to expand the GTV. So in the long term, the growth will be felt through deeper consumer understanding and more accurate matching. Ultimately, this will translate into high-quality revenue, healthy profitability, and strong cash collection, enabling us to achieve high-quality growth.

Stanley Yongdong Peng: In the long term, the growth will be built on deeper consumer understanding and accurate matching, ultimately translating into high-quality revenue, healthy profitability, and strong cash collection, and we can have high-quality growth. Thank you.

Tao Xu: In the long term, the growth will be built on deeper consumer understanding and accurate matching, ultimately translating into high-quality revenue, healthy profitability, and strong cash collection, and we can have high-quality growth. Thank you.

Speaker #2: Thank you.

Speaker #1: Thank you, Mr. Shi. The last question comes from Siddiq Gritten from CLIC. My question is on home renovation and Care Free. So, our Q2 home renovation revenue declined faster year over year, but contribution margins improved significantly.

Siting Li: Thank you, Mr. Xu. Your next question comes from Griffin from CLSA. From CITIC. My question is on Home renovation and Carefree Rent. Our Q2 Home renovation revenue declined faster year-to-year, but contribution margins improved significantly. What drove this decline? Are earlier adjustments largely complete? When will revenue recover? How do you balance scale, contribution margin, and delivery quality? Carefree Rent profitability or margins significantly improves, and how do we ensure the sustainability? Thank you, Grayson, for your question. The industry is undergoing a profound supply-demand restructuring as property adjustments feed into renovation. New home deliveries have dropped. Companies that previously focused on new homes are flooding into the existing home market, intensifying the competition. In such an environment, navigating the cycle depends on the operating quality, product competitiveness, and delivery quality, not just scale. The Q2 revenue decline stems from two factors.

Operator: Thank you, Mr. Xu. Your next question comes from Griffin from CLSA. From CITIC.

Siting Li: My question is on Home renovation and Carefree Rent. Our Q2 Home renovation revenue declined faster year-to-year, but contribution margins improved significantly. What drove this decline? Are earlier adjustments largely complete? When will revenue recover? How do you balance scale, contribution margin, and delivery quality? Carefree Rent profitability or margins significantly improves, and how do we ensure the sustainability?

Speaker #1: What drove this decline, and are earlier adjustments largely complete? When will revenue recover? And how do you balance scale, contribution margins, and delivery quality?

Speaker #1: Carefree rent profitability or margin significantly improves, and how do we ensure the sustainability? Thank you, Gritten, for your question. The industry is undergoing a profound supply-demand restructuring, as property adjustments feed into renovation.

Tao Xu: Thank you, Grayson, for your question. The industry is undergoing a profound supply-demand restructuring as property adjustments feed into renovation. New home deliveries have dropped. Companies that previously focused on new homes are flooding into the existing home market, intensifying the competition. In such an environment, navigating the cycle depends on the operating quality, product competitiveness, and delivery quality, not just scale. The Q2 revenue decline stems from two factors.

Speaker #1: New home deliveries have dropped, so companies that previously focused on new homes are flooding into the existing home market, intensifying the competition. In such an environment, navigating the cycle depends on the operating quality, product competitiveness, and delivery quality.

Speaker #1: Not just scale. So, the Q2 revenue decline stems from two factors. First, we proactively exited inefficient cities, stores, and acquisition channels over the past year.

Tao Xu: First, we proactively exited inefficient cities, stores, and acquisition channels over the past year. Second, overall demand remains pressured due to fewer new home deliveries, which directly weighs on the home renovation business. Competitors use price cuts and high channel incentives to fight for existing home customers. This proactive adjustment is now largely complete. We expect no further broad-based contractions this year. Despite pressured revenue, contribution margins improved as significantly centralized procurement and supply chain optimization meaningfully lowered the material costs. Service provider productivity per store also improved year over year, and store costs were optimized, indicating a healthier retained capacity and cost structure. Regarding revenue recovery, the contract value is a leading indicator.

Speaker #1: Second, overall demand remains pressured due to fewer new home deliveries, which directly impacts the home renovation business. Meanwhile, competitors use price cuts and high channel incentives to fight for existing home customers.

Speaker #1: So, this proactive adjustment is now largely complete. We expect no further broad-based contractions this year. Despite pressured revenue, contribution margins improved significantly. Centralized procurement and supply chain optimization meaningfully lowered material costs.

Speaker #1: So, provider productivity per store also improved year over year, and store costs were optimized, indicating a healthier retained capacity and cost structure.

Speaker #1: Regarding revenue recovery, the contract value is a leading indicator, while reported revenue lags due to construction cycles. Positively, front-end metrics like July showroom visits improved quarter over quarter due to restored internal collaboration incentives.

Tao Xu: While reported revenue lags due to construction cycles, positively front-end metrics like July showroom visits improved quarter over quarter due to restored internal collaboration and incentives, though it will take time to translate to revenue. Going forward, we will not trade profitably for scale. Long-term growth relies on delivery quality via frequent inspections, and enhanced user experience, product competitiveness, which will be achieved through tailored renovation packages as well as integrated showrooms at transaction centers. We are pursuing quality products and healthy profitability as three pillars, a growth strategy that will drive our deep growth in revenue and profit. On Carefree Rent, the units under management gradually grow steadily to less than 790,000, up 34% year over year. Revenue was around 4.83 billion RMB, with a 15.3% contribution margin, up 6.9 percentage points year over year.

Speaker #1: Though it will take time to translate to revenue, going forward, we will not trade profitability for scale. Long-term growth relies on delivery quality via frequent inspections and also enhanced user experience and product competitiveness, which will be achieved through tailored renovation packages as well as integrated showrooms at transaction centers.

Speaker #1: We are pursuing quality, product, and healthy profitability as three pillars of a growth strategy that will drive our deep growth in revenue and profit. On care-free rent, the units under management gradually grew steadily to just under 790,000, up 34.34% year over year. Revenue was around RMB 4.83 billion, with a 15.3% contribution margin.

Speaker #1: Up 6.9 percentage points over the year. The year-over-year revenue decline reflects Carefree’s strength, iteration toward a lighter database revenue product. Profitability improved due to the structural shift and general operating optimizations in labor, insulation, and posterior lease costs.

Tao Xu: The year over year revenue decline reflects Carefree Rent's iteration toward a lighter database revenue product. Profitability improved due to the structural shift and genuine operating optimizations in labor, installation, and post-lease costs. On top of this, whether we can sustain this profitability, I think that requires more than just acquiring more units. It requires managing an asset pool with a lower churn, fewer re-leases, and higher renewals. This way, the costs related to labor and channel will grow slower than actual revenue. Going forward, I think we will focus on three areas. First, stabilizing the units under management portfolio to reduce the re-leasing channel costs. As we see more units under management, more units are entering renewal or existing homes are going for re-leases. We are going to take a proactive lease management and deliver quality service. This will boost renewal and also boost retention.

Speaker #1: On top of this, whether we can sustain this profitability—I think that requires more than just acquiring more units. It requires managing an asset pool with lower churn, fewer leases, and higher renewals.

Speaker #1: So this way, the costs related to labor and channel will grow slower than actual revenue. Going forward, I think we'll focus on three areas.

Speaker #1: First, stabilizing the units under management portfolio to reduce the relieving channel costs. As we see more units under management, more units are entering renewal, or existing homes are going for releases.

Speaker #1: We're going to take a proactive lease management approach and deliver quality service. This will boost renewal and also boost retention. In Q2, the owner renewal rate hit 74%, up 4 percentage points, and the tenant renewal rate hit 56%, up 1 percentage point year over year.

Tao Xu: In Q2, the owner renewal rate hit 74%, up 4 percentage points, and the tenant renewal rate hit 56%, up 1 percentage point year over year. Second, improving efficiency to lower per-unit labor cost. Q2 managed units per asset manager rose 40% year over year to around 170. Going forward, we will pilot separating transaction tasks such as sourcing and leasing from management tasks such as renewal and post-lease to boost specialization and per-personnel efficiency. AI also can come into play. We can use AI planning to manage scale complexity by optimizing service areas and matching task scheduling, as well as many other refined operational measures. Third, improving incremental scale quality. We will increase asset light products to withstand rental fluctuation.

Speaker #1: Second, improving efficiency to lower per unit labor cost. Q2 management units per asset manager rose 40% year over year to around 170. Going forward, we will pilot separating transaction tasks such as sourcing and leasing from management tasks such as renewal and post-lease to boost specialization.

Speaker #1: Personnel efficiency. AI can also come into play. We can use AI planning to manage scale complexity by optimizing service areas and matching task scheduling, as well as many other refined operational measures.

Speaker #1: Third, improving incremental scale quality, we'll increase asset-light products to withstand rental fluctuation. Additionally, we'll tailor to different cities. We're going to adopt differentiated product solutions that will achieve healthier unit economics.

Tao Xu: Additionally, to tailor to different cities, we are going to adopt differentiated product solutions that will achieve healthier unit economics. Most importantly, service quality underpins all of these improvements. Whether tenants or owner decides to renew, hinges on the reputation we purchase and also the channel costs. We are going to pay special attention to reputation and lower channel costs. We believe profitability is only sustainable when service experience renewal and efficiency forms a positive cycle. We are solidifying this foundation to translate our scale growth directly into profit growth. Thank you. Thank you, Mr. Xu. That concludes our Q&A session. Thank you once again for joining us today. If you have further questions, please feel free to contact Beike's IR team through the contact information provided on our website. That concludes today's call, and we look forward to speaking with you next time. Thank you and goodbye.

Speaker #1: Most importantly, service quality underpins all of these improvements. So whether tenants or owners decide to renew, I mean, it hinges on the reputation, repurchase, and also the channel costs.

Speaker #1: So we're going to pay special attention to reputation and lowering channel costs. We believe profitability is only sustainable when service experience, renewal, and efficiency form a positive cycle.

Speaker #1: So we're solidifying this foundation to translate our scale growth directly into profit growth. Thank you. Thank you, Mr. Hsu. That concludes our Q&A session.

Operator: Thank you, Mr. Xu. That concludes our Q&A session. Thank you once again for joining us today. If you have further questions, please feel free to contact Beike's IR team through the contact information provided on our website. That concludes today's call, and we look forward to speaking with you next time. Thank you and goodbye.

Speaker #1: Thank you once again for joining us today. If you have further questions, please feel free to contact Baker's IR team through the contact information provided on our website.

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Q2 2026 KE Holdings Inc Earnings Call

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