KE Q1 2025 Earnings Report

KE EPS Results

• Actual EPS: N/A
• Consensus EPS: $0.16
• Beat/Miss: N/A
• One Year Ago EPS: $1.18

KE Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $20.76 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

KE Announcement Details

• Quarter: Q1 2025
• Date: 5/15/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 15, 2025
• Conference Call Time: 8:00AM ET

KE (NYSE:BEKE) Holdings Inc., through its subsidiaries, engages in operating an integrated online and offline platform for housing transactions and services in the People's Republic of China. It operates through four segments: Existing Home Transaction Services, New Home Transaction Services, Home Renovation and Furnishing, and Emerging and Other Services. The company operates Beike, an integrated online and offline platform for housing transactions and services; Lianjia, a real estate brokerage branded store; Agent Cooperation Network, an operating system that fosters reciprocity and bonding among various service providers; and software-as-a-service systems. It also owns the Deyou brand for connected brokerage stores; and other brands. In addition, the company offers contract, secure payment, escrow, and other services. KE Holdings Inc. was founded in 2001 and is headquartered in Beijing, the People's Republic of China.

KE Q1 2025 Earnings Call Transcript

Key Takeaways

• The company reported Q1 revenue up 42% YoY and PTV +34%, with in-home GTV +28% and new home GTV +53%, significantly outperforming national market trends.
• Active stores reached 55,200 (+12,600 YoY) and active agents grew 23% YoY (+90,000), while GTV per store and per agent rose 8% YoY for the fourth consecutive quarter, boosting overall efficiency.
• AI tools like the home-seeking assistant Putty and agent assistant LaiQ are live in 10 cities and used by 200,000 agents, improving lead-to-client mandates by 30% and tripling transaction conversion rates for adopters.
• The home renovation and furniture segment achieved Q1 revenue of RMB 2.9 billion (+22.3% YoY) with a record 32.6% contribution margin, driven by AI-powered design proposals, project management programs, and a worker-sharing model.
• Overall gross margin declined 4.5 pp YoY to 28.7% in Q1 due to increased welfare support for service providers and a mix shift toward lower-margin offerings.

Presentation

[Operator]

Ladies and gentlemen. Thank you for standing by for KE Holdings, Inc. First Quarter twenty twenty five Earnings Conference prepared remarks and question and answer session, will all be in English. Simultaneous interpretation in Chinese is available on a separate line for the duration of the call. To access the call in Chinese, you will need to dial in to the Chinese language line.

[Operator]

Today's conference call is being recorded. I will now turn the call over to your host, Ms. Seating Li, Director of the company. Please go ahead, Seating.

[Siting Li, Investor Relations at KE]

Thank you, operator. Good evening, and good morning, everyone. Welcome to Keating Holdings, Inc. Baker's third quarter twenty twenty five earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website, investors.ke.com.

[Siting Li, Investor Relations at KE]

On today's call, we have Mr. Tao Xu, our Executive Director and Chief Financial Officer. Mr. Xu will provide an overview of our strategies and business developments on behalf of our of Mr. Stanley Peng, our Co Founder, Chairman and Chief Executive Officer.

[Siting Li, Investor Relations at KE]

And then Mr. Xu will discuss the financials in more detail. Before we continue, I refer you to our Safe Harbor statement in our earnings press release, which applies to this call as we will make forward looking statements. Please also note that Baker's 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.

[Siting Li, Investor Relations at KE]

Lastly, unless otherwise stated, all figures mentioned during this conference call are in RMB. Certain statistical and other information relating to the industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial sources. Neither the company nor any of its representatives have independently verified such data, which may involve a number of assumptions and limitations. And you are cautioned not to give undue weight to such information and estimates. For today's call, management will use English as the main language.

[Siting Li, Investor Relations at KE]

Please note that the Chinese translation is for convenience purpose only. In the case of any discrepancy, management statements in their original language will prevail. With that, I will now turn the call over to our CFO, Mr. Tao Xu. Please go ahead, Tao.

[Tao Xu, CFO & Executive Director at KE]

Thank you, Christine. Hello, everyone. Thank you for joining Baker first quarter twenty twenty five earnings conference call. In the first quarter, our business continued to deliver rapid growth. This expansion was partially based on the market momentum that was fueled by the supportive policies since last September.

[Tao Xu, CFO & Executive Director at KE]

It was also consistently driven our active growth strategy that was started in the second half of twenty twenty three. In the first quarter, PTV on our platform increased by 34% and revenue rose by 42%, both on a year over year basis. Our business continue to outperform the market in the first quarter across multiple metrics. Notably, GTV for our in home transaction business increased by 28% year over year in the first quarter. According to Baker Research Institute data, the year over year growth of the national GTV in this segment was about 60%.

[Tao Xu, CFO & Executive Director at KE]

GTV for our new home transaction business increased by 53% year over year, versus a 0.4% nationwide decline year over year reported by the MBS data. We also talked 100 developers GTV for new home sales also failed by approximately 7% in the first quarter. We continue to see strong momentum in the growth of connected stores and agent on our platform. In the first quarter, the number of active store surpassed 55,200, a record high, increasing over 12,600 from the same period one year ago. Of those, the number of connect stores increased by more than 12,300.

[Tao Xu, CFO & Executive Director at KE]

On the agent side, the number of active agents grow by 23% year over year, representing a net addition of over 90,000 agents compared with the same period last year, with active agents year over year to reach a record high. We also seen the steady improvement in efficiency at the store and agent level. In the fourth quarter, GTV per store and per agent rose by 814% respectively, making the fourth consecutive quarter of year over year increase. For connected stores, GTV per agent was up by 18% year over year, translating into stronger revenue for both store and agents. Our platform's operation support ratio remain high with impressive year over year improvement.

[Tao Xu, CFO & Executive Director at KE]

This year, we are focused on driving both scale and efficiency as few priorities of our growth strategy. In the first quarter, traffic leads for our new home concession services hit new record. The interior active market helped with driving more traffic leads with additional benefit from the higher customer satisfaction from the search results and the more personalized recommendations. By carrying the broad both experience to each user's narrow and profile, will make it easier for people to explore home listing on our apps that fit their needs. This improving performance also reflect user's current preference to view more home listing before making purchase decisions.

[Tao Xu, CFO & Executive Director at KE]

For our new home transaction business, this year, we are focusing on optimizing our collaboration with developers to better support their sales through needs, while improving agent efficiency, imagine customers with suitable new home purchase. In the fourth quarter, we concentrate our efforts on high end projects in the market. At the same time, we continue to drive greater participation from our stores in the new home business through the incentive mechanism. Our one body three month strategy, maintain stronger performance traction. For the home renovation and the furniture business, we have adjusted our pace this year to strategically focus on reshaping our products and delivery capabilities.

[Tao Xu, CFO & Executive Director at KE]

Our primary goal are to make them more customer oriented, while streamlining our organizational structure for greater efficiency. On product front, we significantly advanced the design of our new home group renovation products in the first quarter. On delivery side, we rolled out a project management, perfectionism program into the city. This drove a 56% year over year increase in average monthly order intake for project manager, reaching 2.97 compared with previously 1.16 in 2024. We also carried out a worker sharing model.

[Tao Xu, CFO & Executive Director at KE]

As a result, top performing project managers have seen improved personnel income, enabling them to focus on more for service delivery and quality. In the first quarter, over 4% of our total home renovation projects came from the referral by previous customers. In addition, our front end organizational management efficiency improved the market delay. The average amounts order volume per home renovation designer increased by almost 33%, moving from 0.79 in 2024 to 1.05 in the first quarter of this year. And outpacing total order growth year over year in the home renovation business.

[Tao Xu, CFO & Executive Director at KE]

Our home rental services continue to achieve the skill breakthroughs in the first quarter, with more than 500,000 rental units under our management. We also made solid progress in improving both default management and increasing our renewal rate. Last quarter, Stanley shared some thoughts on our AI deployment plan. Next, I'd like to provide an update on our use of AI in the first quarter. In our housing transaction business, on service to end customers, we conduct testing of our AI powered home seeking assistant, PuTTY, in 10 cities, which is already accessible to 40% of our traffic on our homepage.

[Tao Xu, CFO & Executive Director at KE]

Putting was developed based on deep sig ROI on our massive platform datasets and proprietary knowledge graphs. We're actually building the industry vertical database based on the larger module to improve putting smart response accuracy and improve multimodal display capability to optimize the interactions between the service provider and customers. We believe the smart AI assistant will empower both homeowners and the buyers with more intelligent solutions for the homemaking and decision making. We're also helping service providers identify more accurate leads. In terms of AI tools for service providers, our agent service home buyers will introduce the LaiQ, the AI based agent assistant.

[Tao Xu, CFO & Executive Director at KE]

LaiQ offers a full suite of features, including customer acquisition, AI home selection, AI chat assistance, and a smart follow-up. These tools empower agents to activate the customer, enhance their professional service capability, and the input efficiency in connecting with customer. By March 2025, over 200,000 agents nationwide have used LaiQoo, collectively managed over 2,500,000 customers with impressive efficiency improvements. The commercial rate from leads to formal client mandates increased by over 30% and the mandate to transaction conversion rate rose over 10%. Agents effectively using LaiQoo achieved the land to transaction conversion rate that was three times higher than those not using this product.

[Tao Xu, CFO & Executive Director at KE]

For agents serving homeowners, we identify a common issue. Many home listing were not being properly maintained on platform due to agents limited time and tension, which reduced the sell through efficiency. To solve this, we leverage we leverage the AI property maintenance assistance, which helps agents match listing more efficiently and improve the experience for homeowners. Within the homeowner dedicated AI service group, their system offers the most replies, market trend insights, report analysis, and the intelligent voice based promotion. As of March 2025, the product has been piloted by 110,000 agents and have served 400,000 homeowners cumulatively.

[Tao Xu, CFO & Executive Director at KE]

Home fifteen maintained with our AI system achieved the transaction conversion rate four times that of those without it. Additionally, our digital partner Xiaoyi utilized AI capability to enhance critical operational workflow from contract quality inspection to automate the post signing for us. The solution even marvel improvements in frontline service quality and efficiency, delivering over 30,000 cumulative hours in productivity saving. In our home renovation business, we launched AI customer maintenance tool to strengthen follow-up on the lead conversion during the most critical two week window in home renovation marketing. The AI based, lightweight beam, and the intelligent marketing solution has improved efficiency in both design and the marketing.

[Tao Xu, CFO & Executive Director at KE]

For our home rental service, our AI system for post rental support, Xiaohui, has been tested online in 13 cities. It is already successful handling 25% per tenant request, so intelligent automation, providing talent with a smart, more responsive service experience. At the same time, it enhanced the efficiency through the better collaboration among the various roles involved in the recent progress. I share lots of numbers on the total volume and the average efficiency rate of our business, but these are not the key items we focus on. We care deeply about every individual customers experience, and we will remain committed to enhance our service quality.

[Tao Xu, CFO & Executive Director at KE]

Since 2024, we introduced the found custody system in our home renovation business, giving customers greater control and the peace of mind. On this model, renovation funds are frozen in customer personal bank account and only released tours after project milestone has been completed and approved by customer, including plumbing and electrical tracks based on renovation and the final acceptance. This model shifts away the traditional pay first, renovate later approach in the industry. Through the system integration, customers contract their funds online in real time with full visibility and the traceability. Any interest earned during the custody period is retained to the customer.

[Tao Xu, CFO & Executive Director at KE]

In 2025, we rolled out our renovation fund custody service in several cities, including Beijing and Wuhan. On top of that, we have developed a fund custody solution plan framework that can be utilized by other industry peers, underscoring our commitment to driving the industry progress. Finally, we are encouraged by China technical advance and are closely watching the evolving of external market environment. While we remain confident in our platform ability to deliver sustained growth over the long chain on our one body driven strategy, while approaching the short term with cautious optimism. That is why we're still continue to invest formally in AI, while taking a more mirrored approach to other investments this year.

[Tao Xu, CFO & Executive Director at KE]

Following last year's rapid investments and invest wider subsidies, we are now setting clear short and medium to ROI benchmark to ensure the disciplined capital allocation. This balanced strategy will help us better position ourselves to capitalize on both market recovery opportunities and AI driven generation productivity dates and the safeguard of our operational stability, all while protecting the interest of the shareholders, who share our long term vision. In our reserve commitment, this year, we will continue with active share shareholder returns. Thank you. Next, I will review our first quarter twenty twenty five financials.

[Tao Xu, CFO & Executive Director at KE]

Once again, thank you everyone for joining us. Before we dive into our Q1 performance, I'd like to briefly touch upon some updates in the housing market. In Q1, the market performance was very stable, perpetuating to continue the positive influence result from positive implemented in September. The cycle with the cost for the home purchase will further lowered, exerting a stronger incentive effort on home buyers. According to National Bureau of Statistics, new home sales remained relatively flat year over year in Q1, but it's in the substantial year over year decline in the same period last year.

[Tao Xu, CFO & Executive Director at KE]

Meanwhile, the existing home market remained at a high level in activity excluding the impact of the holidays. Benefiting from the readily available nature of existing homes, according to the Baker Research Institute, in Q1, Western home GTV rose by around 16% and the number of home existing home transaction client by around 28% both year over year. With the growth in the transaction volume, the overall supply demand relationship improved and housing price showed a signal of putting out. This feeling more confidence in potential home buyers to enter the market. Demand for the upgrade was even more robust.

[Tao Xu, CFO & Executive Director at KE]

Amongst its new home sales in key cities, the share of three bedroom and the larger homes continue to rise year over year in Q1. Turning to our Q1 financial performance. Our total TTV was RMB 844,200,000,000.0, representing a year over year increase of 34%. Net revenue reached RMB 23,300,000,000.0, up 42.4 year over year. Gross margin declined by 4.5 percentage points year over year to 28.7%.

[Tao Xu, CFO & Executive Director at KE]

GAAP net income was RMB $855,000,000, increasing 97.9% year over year. Non GAAP net income reached RMB1.39 billion remaining stable year over year. Looking at our housing transaction services, revenue from existing home transaction reached RMB 6,900,000,000.0 in Q1, up 20% year over year and down 23% quarter over quarter. GTV was RMB 580,300,000,000.0, rising by 28.1% year over year and declining by 22.1% quarter over quarter. GTV growth outpaced the revenue year over year, mainly due to a decline in the revenue share of the rental brokerage services and the high contribution from this in home transaction service GTV facilitated by connect agents.

[Tao Xu, CFO & Executive Director at KE]

The revenue recorded net revenues derived from platform services. The contribution margin from this in home transaction services was 38.1% in Q1, representing a decline of 6.4 percentage point year over year, primarily due to the increased support under the improved welfare for the service providers. This is our long term strategy to build a harmonious ecosystem. Sequentially, the contribution margin dropped by 2.3 percentage points, which is beautiful to negative leverage influence due to the decline in revenue exceeding that in fixed labor cost. In terms of the new home concession services, we still outperformed market.

[Tao Xu, CFO & Executive Director at KE]

Star RRC reports that the sales from the top 100 developers grew by around 7% year over year and 41% sequentially in Q1. In comparison, our new home PTV reached RMB 232,200,000,000.0 in Q1, up 53% year over year and down 34.6% quarter over quarter, once again outperforming the industry. This was mainly due to the deepening of our collaboration with developers and our finely tuned operational capability, and the most sales confirmation from the partial subscription in last quarter. Revenue from new home transactions was RMB 8,100,000,000.0 in Q1, rising by 64.2% year over year and dropping by 38.2% from previous quarter. Revenue outperformed the GTV year over year, demonstrating our stronger monetization capabilities, while GTV growth outpaced revenue growth sequentially due to seasonality.

[Tao Xu, CFO & Executive Director at KE]

The contribution margin from the new home content services rose by 1.1 percentage point year over year to 23.4%. As we gained leverage from the revenue growth, it is setting that of the fixed cost. Sequentially, the new home contribution margin declined by 2.2 percentage points, largely attributable to the seasonality effect. In Q1, I saw developers contribute around 54% of our new home sales revenue, increasing by around four percentage points year over year. Revenue from home renovation and furniture, home rental service and emerging other services grew by 46.2% year over year in Q1.

[Tao Xu, CFO & Executive Director at KE]

It accounted for 35.9% of our total revenue compared to 35% in the same period last year. The contribution profit from this business accounted for 32.7% of our total gross profit. Revenue reached RMB 2 for our home renovation and furniture business, revenue rate RMB 2,900,000,000.0, increasing by 22.3% year over year, mainly due to the increased orders from the home renovation. Contribution margin for the home renovation and the furniture business reached a record high of 32.6%, up two percentage points year over year and 2.8 percentage points quarter over quarter, mainly driven by the increased gross margin of our home renovation business. Our home rental services business continue to grow at an accelerated pace in Q1.

[Tao Xu, CFO & Executive Director at KE]

Its revenue reached a record high of RMB5.1 billion, up 93.8% year over year, mainly benefiting from the rapid growth is number of the rental unit under management. End of Q1, the number of rental units under management exceeded 500,000 compared with over 250,000 in the same period of 2024. The contribution margin for the home rental services was 6.7%, up 1.2 percentage point year over year and the 2.1 percentage points quarter over quarter, largely due to the improved gross profit of our carefully run business. As we continue to refine the carefully run business model based on the sense of the business contract, The revenue from some newly managed rental units were recorded as net revenues derived from the service fee in this quarter. In Q1, our revenue from the merchant and other services decreased by 50% year over year and the 28.3% quarter over quarter to RMB $350,000,000.

[Tao Xu, CFO & Executive Director at KE]

Next, let's move on to our other cost expenses in Q1. Our store cost reached RMB $717,000,000, remaining relatively stable year over year and the dropping by 8.8% quarter over quarter. The sequential decrease was mainly from the lower store rental cost. Other costs were RMB $547,000,000 up to 44.4 percent year over year, primarily due to the increased tax and the surcharge and the financial service reserve and the credit losses. Sequentially, other cost declined by 26.7%, largely driven by the decreases in the tax and surcharge, financial service and reserves and the credit losses and the share based compensation.

[Tao Xu, CFO & Executive Director at KE]

Gross profit goes by 17% year over year to RMB4.82 billion. Gross margin was 28.7%, down 4.5 percentage point year over year. The primary reason for the decline was decrease in contribution margin from the same home transaction services. Gross margin fueled by 2.4 percentage points sequentially in Q1, mainly due to the structural region as the revenue contribution of new home concession service declined. In Q1, our GAAP operating expenses totaled RMB4.2 billion, up 2.9% year over year and down 31.3% sequentially.

[Tao Xu, CFO & Executive Director at KE]

Notably, G and A expenses were RMB 1,900,000,000.0, decreasing by 7.2% year over year, mainly due to the reduced share based compensation expenses. G and A expenses dropped by 36.7% quarter over quarter, and primarily attributable to the lower personnel expenses and the decreased the bad debt provision. Sales and marketing expenses increased by 9.2% year over year to RMB 1,800,000,000.0, resulting from the increased expenses for the home renovation and furniture business. Total of quarter sales and marketing expenses fell by 24.4%, mainly due to a decline in marketing expenses for home construction services and the reduced personnel expenses. Our R and D expenses were RMB $584,000,000, up 24.9% year over year, driven by higher personnel expenses and technical service fee.

[Tao Xu, CFO & Executive Director at KE]

Sequentially, R and D expenses dropped by 21%, largely as a result of reduced personnel expenses. In terms of the profitability, GAAP income from operation totaled RMB $591,000,000 in Q1, a remarkable increase compared with the same period of last year and decreasing by 41.6% sequentially. GAAP operating margin was 2.5%, increasing by 2.5 percentage points from Q1 twenty twenty four and the falling by 0.7 percentage point quarter over quarter. Non GAAP income from operations totaled RMB1.15 billion, growing by 19.6% from the same period of last year and dropping by 34.6% sequentially. Non GAAP operating margin reached 4.9%, down 0.9 percentage points from Q1 twenty twenty four and zero point seven percentage points from the previous quarter, mainly attributable to the gross margin decrease both year over year and quarter over quarter.

[Tao Xu, CFO & Executive Director at KE]

GAAP net income totaled RMB $855,000,000 in Q1, rising by 97.9% year over year and 48.2% quarter over quarter. Non GAAP net income was RMB1.39 billion, remaining stable year over year and increasing 3.7% quarter over quarter. Moving to our cash flow and balance sheet, we realized the net operating cash outflow of RMB4 billion in Q1. New Home DSO reached sixty three days in Q1, remaining at a healthy level. On top of approximately US159 dollars allocated to share repurchase during Q1.

[Tao Xu, CFO & Executive Director at KE]

Our total cash liquidity remains at the high level of RMB74.3 billion, which excludes the customer deposit payable. With our robust cash reserves, we continue to reward our shareholder, who have a ground with us through the active share buyback, enhancing capital operation efficiency and sharing the benefit of our developments with investors. In Q1, we repurchased around US139 dollars worth of shares, which accounted for around 0.6% of the company's total shares outstanding at the end of twenty twenty four. We have consistently delivered our promise to reward shareholders since the launch of our share repurchase program in September 2022, we have repurchased roughly US1.76 billion in share at the end of Q1 twenty twenty five, accounting for around 9.2% of our total share outstanding before the program began. This year, our business will focus on efficiency improvements.

[Tao Xu, CFO & Executive Director at KE]

In financial strategy, we will ensure that our investments are made more efficiently to improve personnel and store productivity. We will respect every penny and make sure the money spent yield with visible results. While maintaining the discipline, the cost is expense control, we will continue to support a long term business development by fully backing our one body through with strategy initiatives and actively exploring AI technology. At the same time, we possess natural resources and the intention to consistently offer the civil and sustainable returns to our shareholders. This concludes my prepared remarks for today. Operator, we are ready to take questions.

[Operator]

Thank you. If you wish to ask a question, please press 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press 2. If you're on a speakerphone, please pick up the handset to ask your question. As a reminder, we only accept questions on the English language line.

[Operator]

For the benefit of all participants on today's call, please limit yourself to one question. Your first question comes from Timothy Zhao from Goldman Sachs. Please go ahead.

[Timothy Zhao, Equity Research Analyst at Goldman Sachs]

Thank you, management, for taking my questions. I think my question is regarding the outlook for the property market going forward. I think we note strong rebound of the property market transactions after Chinese New Year. Just wondering from second quarter and onwards, what is your outlook for the property market? Is it considering the latest macro dynamics as well as the impact from The U. S. Tariff? Thank you.

[Tao Xu, CFO & Executive Director at KE]

Thank you, Tim C. For Q1 market performance, with the central government continues effort to stabilize the real estate market, the new home market is still a relatively strong recovery of the Chinese New Year. And the new home market also performed stable. Let me give some details. The in home market rebound after Chinese New Year as expected.

[Tao Xu, CFO & Executive Director at KE]

According to Baker Research Institute, nationwide is in home GTV for about 16% year over year in Q1, sustaining the momentum fueled by the September 26 policy stimulus. This growth was mainly due to the cumulative impact of the early stimulus policies. This policies substantially lower the size code and the cost of the home purchase, motivating more people to buy rising transaction volume also helped to balance supply demand in the short term, narrowing the decline in the home prices year over year and bringing to cautious buyers back to the market. Using home prices have stayed most stable, keeping by 0.5% month over month in March. In first tier cities, like Beijing and Shanghai, as well well as second tier cities with a strong net publishing close and the steady increase in the housing demand in recent years, such as Hangzhou and Chengdu.

[Tao Xu, CFO & Executive Director at KE]

Let's see home prices have picked up slightly month over month. For new home market in Q1, this is also very stable. According to NBS data, Q1 new home sales were all overall flat year over year, down 0.4%. PTV of 1,200 developers dropped by 7% year over year in Q1. Notably, the sales by flow area increased by over 15 year over year.

[Tao Xu, CFO & Executive Director at KE]

Since Q2 of the Trans New Year, the market follow these typical seasonal pattern. The existing home transaction volume peaked into early March, then gradually declined through April. The month over month decrease of existing home prices is bounded somewhat with 1.3% drop in April as transaction volume reduced. From a supply demand standpoint, the total number of the single home listing on Baker rose in q one, up falling q four of last year. This aligns with seasonal trend of lowering inventory at the year end and higher inventory at the start of the year.

[Tao Xu, CFO & Executive Director at KE]

It is also a natural result of the single market dysfunction and the lifting of the sales restrictions, which have released the more housing supply. The faster supply of the nearly new existing home into the market has also improved our listing supply quality and create a better conditions for buyers looking to the home upgrades. Meanwhile, we also have increase in the market demand outpaced the increase in inventory. In April, April ratio of the home viewing to inventory was at 1.8, which is at the higher end of the historical range of the 1.6 to 1.9. This address a stronger buyer interest and the plenty of demand with the market able to absorb new inventory.

[Tao Xu, CFO & Executive Director at KE]

However, the conversion from the home viewing to transaction has slowed, Mainly due this is mainly due to the short term uncertainties affecting buyer expectation, including external factors, such as the geopolitical tension. This highlights some sort of softening the housing price expectations, which made the buyers more hesitate to enter the market. For future market outlook, we believe the market outlook will depend on two main factors. The impact of the international trade frictions on housing transactions and the strength of the timing of domestic comfort measures. On a neutral scenario, we expect a typical seasonal slowdown in Q2 on a sequential quarter basis.

[Tao Xu, CFO & Executive Director at KE]

Year over year, however, the single market is bad to see a slight increase in the single transaction volume, also at a slower pace in Q1. This supported by the higher transaction volume in Q1. The growing supply of the high quality, nearly new in fitting home and as a yield will increase in customer home viewing. As the market experienced a quarter on quarter decline in Q2, and if at no trade pressure, it intensifies in Q3 indicators such as the housing price, concession volume and development investments may weaken. This could create rooms for further supportive policy measures in the second half of the year, which would help improve both supply and demand in property market and support stable market developments.

[Tao Xu, CFO & Executive Director at KE]

We're also closely monitoring the impact of the change in global trade on real estate market. In terms of home listings, the overall number of the new listing on bigger platform remains stable in April, with no signs of the homeowners rushing to sell. The number of the home viewing for both existing and new home, still showed a notable year over year increase in April. When categorizing the cities that will be covered by high and low trade dependency, we observed that since the tariff start off in early April, cities with a high trade dependency have a slowed, have shown the weaker year over year and the month over month home viewing performance compared to cities with low trade dependency. This indicates that while the trade friction trade restrictions have caused some short term disruption in better expectation in certain cities.

[Tao Xu, CFO & Executive Director at KE]

There has not been a significant trend of the divergence overall, and the homeowner sentiment remains stable. Moving forward, we will continue to monitor potential impact of the trade frictions on housing market. So the leading indicators, such as home viewing, customer traffic and the listing volume. We observed notable the escalation in recent US China trade tensions, where this should help stabilize the business and the consumer expectation in near term. In our view, we believe that the intentional trade frictions represent a long term dynamic process with uncertainties and the potential for improvements.

[Tao Xu, CFO & Executive Director at KE]

During the upcoming ninety days negotiation window, we will closely monitor the developments, track the resulting impact and assess the potential implication for both real estate market and our company on ongoing basis. In the medium to long term, we maintain a cautiously optimistic outlook, trusting both China and The US will continue to move together each other based on the positive progress made so far. Meanwhile, to continue the implementation of domestic supportive policies is expected to further boost customer confidence. Together, this is expected to mitigate the impact of trade risk of the property market, helping to consolidate the initial stabilization of the single market and ease pressure on the new home market. Thank you.

[Operator]

Thank you. Your next question comes from Xiaodong Zhang from CICC. Please go ahead.

[Xiaodan Zhang, Equity Research Analyst at China International Capital Corporation (CICC)]

So thanks management for taking my questions. And my question is regarding the housing transaction services business.

[Xiaodan Zhang, Equity Research Analyst at China International Capital Corporation (CICC)]

So could management elaborate on the expansion plan for this year in terms of housing agents and the agency stores? And on top of that, how will you continuously improve the efficiency of those existing and new newly connected agents and stores on the platform? Thank you.

[Tao Xu, CFO & Executive Director at KE]

Thank you, Sophie. This year, we will continue to promote healthy growth our agents to network to support the sustained expansion of our housing construction services. At the same time, we will place greater emphasis on the cost effectiveness of the stores in this partnership. Our aim is to enhance efficiency and the income of platform stores and agents, thereby increasing the stability of agent careers, providing better services to customers, and achieving most sustainable long term growth for our platform. In terms of the agent and store network expansion, by end of this Q1, the number of active stores on our platform increased by nearly 30% year over year, as the number of active agent grew by 23% year over year.

[Tao Xu, CFO & Executive Director at KE]

The growth was mainly driven by the non data segments, with a 33% year over year increase in active non store and of 24% year over year increase in active nonmeta agents in our platform. In Q1, several major brands join our platform. This includes our collaboration with Chongyuan sub brand Bao Yuan and the Kunzhu, a brokerage company in Kunshan and Sudou. This shows the core value of our platform in Bai Sai market, which is our stronger existing home business operation, agent connection network, and the digital empowerment capabilities. In Q1, our efficiency efforts paid off in the stable market environment.

[Tao Xu, CFO & Executive Director at KE]

The average number of the transaction per agent rose notably in q one. This helped offset the decline in average housing unit prices. As a result, the in home GTV per agent grew by over 9% year over year in q one. The average number of agent also rose by 18% year over year. Together, this factor led to a 28% year over year increase in existing home GTV on our platform, clearly outperforming the 16% increase in national watch TV as estimated by a big research institute.

[Tao Xu, CFO & Executive Director at KE]

Our platforms efficient for efficiency focused mechanism also start to show results. The share of the high performing stores increased from 16.7% at the end of twenty twenty four to eighteen point four percent in Q1. However, the store were about 2.5 times more productive than that of those stores on the platform in their respective cities. To improve the efficiency, we refined our internal measurements. We use the digital tools such as online store owner workshop and AR property listing assistant, along with offline property listing sessions to facilitate the separation of home listing to accelerate sales.

[Tao Xu, CFO & Executive Director at KE]

We also improved platform operation, so the building mechanisms like a point based incentive program and regional co governance council. This encourages the owners to keep to keep growing business and work more closely with each other. Our store retention rate remained healthy for both old and new stores. Our in home attrition rate dropped to 2.9% in Q1, down 6% sequentially and 38% year over year. And the six months retention rate for newly connect stores in first half of twenty twenty four was 94%, showing the long term value of our platform support.

[Tao Xu, CFO & Executive Director at KE]

For full year, we recently foresee just the number of Linzhou Agents and store will remain largely stable. Meanwhile, we expect a modest increase in scale of non Linzhou Agent stores where the traffic is function in certain key regions. On top of the stable agent and store networking, improving efficiency will be our core goal this year and beyond. This year, we will provide more targeted support to store owners to help them in regional competitiveness. At the same time, on our points based incentive system, we aim to develop more high performance stores aiming to upgrade the overall structure of our store network.

[Tao Xu, CFO & Executive Director at KE]

In the long run, the large store model will be a key strategy for enhancing productivity. In the future, our platform will host more high performing large stores, each with over 10 agents. These stores will attract more top tenants. This large store boost high efficiency and a strong staff retention, allowing store owners to achieve better income and stay in business longer. Those store owners can better support agents, ensure their income stability and enabling the owners to provide superior service to customer.

[Tao Xu, CFO & Executive Director at KE]

The platforms various residential service will also offer agent diversify opportunities for additional income. Additionally, we firmly believe that breakthroughs in AI will present opportunities for transformative improvements in industrial productivity. We have already developed a variety of AI applications to support our service and providers, and we will continue to accelerate development to redefine the capabilities of the quality service providers and to drive their efficiency gain. This year, in a volatile market, we aim to increase the average number of transaction per connect agent to maintain stable per capita emissions. Over the next two to three years, we plan to increase the proportion of large and high quality stores.

[Tao Xu, CFO & Executive Director at KE]

This store will have a more stable, high performing agents with high efficiency with store productivity being two to three times of the current average. We anticipate with this within three years, this will lead to approximately a 20% improvement in efficiency of those connected agent of our platform. Thank you.

[Operator]

Thank you. Your next question comes from Jisi Dong from Nomura. Please go ahead.

[Jizhou Dong, Head of China Consumer & Property at Nomura]

Baker's home renovation and furnishing business achieved 20 plus percent year on year growth in the first quarter with 82 percentage points improvement in contribution margin. Could management share more specifics of the segment's operation as well as the outlook on the margin in the future? And in addition, management has shared a lot of the ideas of Faker using AI to drive its business and improve its service quality. Looking into the next few quarters, could management update us more on bigger strategy and investment plan for AI from both the 2B and 2C perspectives? Thank you.

[Tao Xu, CFO & Executive Director at KE]

Thank you, Chizhou. Our home renovation and furniture business demonstrated excellent performance in Q1. In terms of scale, the revenue amounted to RMB 2,900,000,000.0, up 22.3% year over year. Cities such as Beijing, Guangzhou and and Zhengzhou performed especially well and each achieved over 50% year over year growth in revenue. Regarding profitability, the contribution margin for the home renovation and furniture business reached 32.6% in Q1, an increase of two percentage point compared to the same period last year, reaching a record high and reflecting our credibility of the refined operation and management.

[Tao Xu, CFO & Executive Director at KE]

We believe that the AI has extensive application scenarios in the home renovation and furniture. We're also continuously deepening the application of AI, such as the contract conversion, construction process, and internal management. Let me elaborate for details. First, the in the early stage of the contract conversion, previously, designers conduct the initial communication with customers through the two dimensional black and white flow plans. The only professional drawing reduced the customers perception and the fact efficiency of the country conversion.

[Tao Xu, CFO & Executive Director at KE]

Currently, empowered by AI, when customer visit our offline store for the first time, designers can rapidly formulate an AI proposal based on the customer's preference for decoration style and the home layouts. This AI proposal in contrast to various type of the three-dimensional color rounded design drawing, dynamic and aesthetic space analysis, storage and the smart device layout plan. This significantly enhanced the experience of first time store visitors and thereby boost the contract conversion rate. Taking Wuhan as an example, the time period from first time visiting the store to sending a preliminary contract was shortened from previously ten days to within six days in March. Definitely, in the construction process, we have developed an intelligent construction system.

[Tao Xu, CFO & Executive Director at KE]

Real time online inspections are realized by installing by installing cameras on the spot. AI can also realize automatic measurements in core construction operation, such as the real name on the drop specification, the inspection of the site cleaning needs, and the noise recognition. In addition, by equipping staff with the smart inspection devices, we assist in standardizing the home renovation acceptance process through AI recording technology, we can recontrast the acceptance process, enabling principle and the quantifiable evaluation of the construction quality. Taking picture as an example, the acceptance of accurate accurate risk rate has increased by more than two percentage point compared with before. Meanwhile, in terms of the internal management, we have a multiple AI employees, Xin Xiaosheng, as the operating management AI employee, enhance the effectiveness of the team management by automatically summarizing and commenting on daily reports and commenting about the pending matters through This option has cracked and commented on most in 20,000 daily reports, saving the team more on.

[Tao Xu, CFO & Executive Director at KE]

But the c 70 more than eighteen thousand hours within half a year. Citation at the order following AI AI employee realized functions such as information distribution and automatic order assignments through the information collection and AI analysis capabilities. Xiaotation had to distribute information over 5,000 times and some time and reminder over 10,000 times within half a year. In the future, our AI is borrowing for home renovation business, while we concentrate on the following aspects, more accurate insights and an analyst of the customer demands, and the more efficient the design powered by AI. We aim to achieve the better personnel of the solution from demand to design, and comprehensively enhance the professionalism and the efficiency of our services. Thank you.

[Operator]

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

[John Lam, Managing Director at UBS Group]

So let me translate my questions. So my question is regarding on. So we see that Beihaojia has already participated a numerous new home projects. So just wanted to see how Beihaojia contribute to the new home development. And also regarding on the c two m business, how the business is being reflected? Thank you.

[Tao Xu, CFO & Executive Director at KE]

Yeah. Thank you, John. Peiho just business model provides the c two m new home product solution for partners like developers. We use the tightened algorithm and massive database to deeply understand our target customers needs and the preference. Our tools help predict the type of home customers wanted and the price they expect.

[Tao Xu, CFO & Executive Director at KE]

Developers use this insight to guide the project positioning and the product design, making their new home offering more catered to custom demands. So far, Behaojia has participate in nine projects across different models. To our self operate project, they might more comprehensive validating our c two m capabilities. Five projects involve equity partners, which Beihaojia primarily focus on the products position using H1. And the rest two projects are purely light ISS model, where we do not engage in investment, but instead provide a product positioning solution to partners and the charger service fee.

[Tao Xu, CFO & Executive Director at KE]

Regarding the funding use across the seven investment involved projects, So total investments have been reached about RMB 2,300,000,000.0. By end of this Q1, we have recovered nearly RMB 500,000,000 from chosen. Net investment from our own funds stands over RMB 1,800,000,000.0. Amongst this, our first active partnership, New Home Projects, which we collaborated with the Power China Real Estate on Beijing Chang Huaxi Mansion, inventory of Beijing City, achieved a complete sellout of all initial units on the first day of launch. The project delivered the IRR nearly 50% at the shareholder level, demonstrating how our C2M service capacity provide partners with the enhanced sales and operation certainty.

[Tao Xu, CFO & Executive Director at KE]

In building C2M capabilities, we have a two key advantage. First, we have a deep understanding of the needs of potential consumers. This came from our unique database built on massive online and offline traffic of our platform. It also draws from the rich customer interactions in our brokerage, home renovation and rental services. Together, this forms the foundation of our core data infrastructure.

[Tao Xu, CFO & Executive Director at KE]

With this data, we can analyze the key indicators such as the source, quantity, purchasing power, and the specific product needs of the of potential customers in a more timely, intuitive, and competitive manner. This level of detailed customer insight helps developers make a more accurate decision and allocate resources more effectively in areas such as land option assessment, unit mix planning and productivity leading to the greater operational certainty. Our second advantage is a strong market knowledge and price ability. We use actual transaction price of leasing home along with the real time and the upstream data like a homeowners leasing price and the price adjustments. We still apply the algorithm model to build a valuation model for differences, geographic histories.

[Tao Xu, CFO & Executive Director at KE]

These models can more accurately estimate the project and the sector value and update quickly based on the change in the market. This approach aligns more closely with the price formation logic, your buyers market. It's in home price are largely all effect by policies or developers strategy, and instead results from the decentralized and the free negotiation between buyer and sellers. Your market dominates by using home transaction. Using home prices often give a more accurate, multi layered view of the market to new home market data.

[Tao Xu, CFO & Executive Director at KE]

Just have a better market trend. Based on these two advantage, we have refined our core C2M tools. We will continue to improve their accuracy and professionalism over time. We also support our CTIM model with more innovative ways to reach customers. While our agent network connectors with customers, we're also building an online community called a building a better home together with our application.

[Tao Xu, CFO & Executive Director at KE]

This enables users to directly participate in evaluation and co creation of new home product design. For example, in our function product in Shanghai, users can visit building a better home together page. They can view and compare to home design plan, engaging in the design process of their future dream homes. This model has us connect with customers much earlier than traditional methods. It also makes their preference reflect in the new home products.

[Tao Xu, CFO & Executive Director at KE]

We have already provide our first Sichuan product solution service in Xian project, through which we've run a service fee, showing stronger marketing recognition from our business approach. In Xian project, they have provided a full set of product solutions, just including the customer service, product interpretation, cost optimization, price forecasting and the market services. We also give profit project planning advice, such as optimizing the elevation to household ratio, enhancing the landscape and adjust unit size, trying to address the key developer pin points, such as fast capital recovery, product premium and the product competitiveness. Last but not the last, as a newcomer to the industry, Jiepao Zhao remains humble and respectful to the market. Although the business line has been established for less than two years, we have already seen the promising results in several projects.

[Tao Xu, CFO & Executive Director at KE]

This already science have gradually validates our capability path and strengthens our confidence in continuous optimization and moving forward. Thank you.

[Operator]

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

[Siting Li, Investor Relations at KE]

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

Participants

Executives

• Siting Li, Investor Relations
• Tao Xu, CFO & Executive Director

Analysts

• Timothy Zhao, Equity Research Analyst at Goldman Sachs
• Xiaodan Zhang, Equity Research Analyst at China International Capital Corporation (CICC)
• Jizhou Dong, Head of China Consumer & Property at Nomura
• John Lam, Managing Director at UBS Group