KE Holdings Inc - ADR Stock

Hello, ladies and gentlemen. Thank you for standing by for KE Holdings Second Quarter 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 in to the Chinese language line.

[Operator Instructions]

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. 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 Beike'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.

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. 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's statements in the original language will prevail.

With that, I will turn the call over to our CFO, Mr. Tao Xu.

[Interpreted]

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 by 5.7% year-over-year. This revenue decline stemmed primarily from adjustments in our home renovation and furnishing business and revenue recognition impacts from iterative product modeling in home rental 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 3-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 the lower operating expenses fueled our profit growth.

Next, I'll 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. 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 of non-Lianjia GTV, where platform service fees are recognized on a net basis, accounted for a larger share. This quarter, non-Lianjia platform service revenue increased by 27.8% year-over-year and 29.8% quarter-over-quarter. With a stable network scale, we advanced refined operations to boost per store output, helping connected stores outperform the market and enhancing overall platform efficiency.

Q2 contribution margin reached 46.1%, up 6.1 percentage points year-over-year, driven by a lower fixed labor costs 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 and net revenue recovery and further business mix improvements. Second, the new home business. Q2 scale remained stable year-over-year, while profitability continued to improve.

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 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 these same factors plus operating leverage from revenue growth. Third, home renovation and furnishing. 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 exit from cities with weak unit economics.

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.

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 low-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 products 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 improvement 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. Q2 revenue reached RMB 550 million, up 26.4% year-over-year and 70% quarter-over-quarter. Next, turning to cost of 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 to 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 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 SNC-related receivables and collateral value. Sales and marketing expenses were RMB 1.4 billion, down 26.1% year-over-year due to optimized sales personnel costs and refining marketing spend, but rose 29.6% quarter-over-quarter from seasonally higher rental -- 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, Q3 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-on-quarter. 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. And 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 net new home accounts receivable turnover was around 39 days, down around 12 days year-over-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 USD 250 million on share repurchases, including our first buyback in the Hong Kong market. In first half, we spent around USD 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 USD 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 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.

[Interpreted]

Thank you. Investors and analysts, good evening. So last quarter, we discussed our shift towards consumer-centric transformation. This quarter, I will talk about how the changes translate into our operations. In Q2, I observed 2 trends of operation foundation stabilized and our organization truly mobilized. So this foundation enables the long-term change.

I will address 5 key questions. The first one, what changes as transformation enter 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 result; fifthly, how will we know we are on the right track moving forward. So for the first question, what changed as transformation enter enters daily operation. In this quarter, I spent a lot of time on the front line visiting stores, properties, construction sites and discussing issues with clients, agents and store owners. The changes boil down to 3 areas: first, refined operation. We are shifting from a one-size-fits-all approach to the district specific and the project-specific strategies. So rather than tracking a single city-wide metric, we analyze specific districts or projects to tailor solutions and what is the solution for each community.

For example, in the high-end community where clients view property 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 client experts to address specific family needs.

So 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, shift in 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.

So leasing illustrates this perfectly. In 2025, we have at most 700 agents for leasing at the peak. And that 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. So from April to July, average agent efficiency jumped from 3 to 5.6 transactions and a 0-transaction ratio dropped from nearly 25% to under 10%. So I think what matters is -- the effective organization matters more than mere headcount.

Thirdly, mobilized people. Managers have exited meeting rooms for front line. This quarter, managers personally sold stale listings, revisited dead leads and accompanied agents to signing centers. And -- my only requirement for manager is to presence. You cannot learn to swim without getting in the water. So in short, operationalizing transformation means refined operations, shifted metrics and mobilized people. So this stems from a single approach, solving real consumer and frontline problem first, then reorganizing our people resources in the platform. So we are moving towards changes and they are now being seen in operational units.

The second question is does being consumer-centric mean bypassing agents? 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. So -- and 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 redivided the same money. Consumers are changing. Good used to be a static property attributes. Today, I think good means a proper match, the variables determine goods expanded from [indiscernible], the property, the family situation and also the service provider.

So the service provider is now a vital variable, not just a conduit. So as decision become harder, tasks must be segmented. There are 3 reasons. First, the required knowledge exceeds one's personal capacity. For example, we needed to know the properties, client circumstances, mortgage and renovations and the furnishing business. So this exceeds one's capacity. Second, building expertise require a mutually exclusive path. You must either deeply root yourself in one project or follow a group of clients. So you cannot do both simultaneously. So 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. 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. So therefore, we are untethering a role's income from closed deals, lining them entirely with the buyers or seller. This assisted role is the client manager. So previously, platform insight stopped once a lead reached agent. The client manager ensures continuity.

AI organizes data and while human assesses the client stage and needs. The agent received fully profiled clients and because the client managers are not paid per transaction and that they remain purely objective. So as I have mentioned, managers are not paid per transaction. So from May to July, this handled over 50,000 leads, achieving a 7.4% lead to showing conversion rates outperforming the broader market 5%. So 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. So anyone creating incremental value is a service provider. And this is our definition, which is expanded. 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, as AI advances, will agents become obsolete? So this assumes agents only sells static information easily fetched by AI. However, technology reshuffles value. And we are -- some things depreciate while others become scarce. So we should ask what is depreciating and what is becoming more scarce?

So for the scarce part, what kind of progress the platform managed service provider can make? So what is depreciating? Static information, bedrooms, price and year built and also the layout of the house. So I think this kind of information cannot support the decision-making, and it is very easy to get.

So if we only transmit -- we only transport information, we may have no more opportunities going forward. So what is scarce dynamic, the 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 time. And we -- this information lives in people's minds and the industry lacks the pipeline to capture and reuse it.

And fundamentally, AI does not bear the consequence of poor decisions and AI may not take any accountabilities. So as the cost of housing mistake rises, consumer needed to reduce uncertainty in growth. Therefore, 3 things will happen. Firstly, the industry becomes more valuable by mitigating uncertainty. Secondly, creating value is hard, requiring deep data and deep service. The third thing is those who transform in the direction become more valuable, including platforms and managers. So we do not need information players, we need professional who dare to make judgments and take responsibility. So the previous question is about the industry and the service provider. And if we look around and if we look inward and with those comes to the question for how is AI applied in our business and with what results. Actually, the business itself is a production function, what is our input and what is the output and there is human labor, capital and technology in the function. So in today's AI, we should know the situation of AI in the industry.

So is AI subitem or a direct variables. So if it's a subitem, it is an efficiency tool or if it is a direct variable, it requires a total rewrite. So we needed to change attitudes in the first. 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. And we are thinking about how AI can be a new production factor rather than an opponent enables innovation.

So 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. 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. And I think we all benefit from this methodology in KE Holdings and also 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. But sometimes, we may only focus on the numbers, and we find that -- sometimes we find that the numbers are too abstract and the consumers now become the numbers and also become the #1 in the standard. However, with the help of AI, AI brings the unstructured data and language and the numbers are totally different information and signals. And the granularity shift from the managing average to managing individual properties, clients and agents.

Previously, we manage the average, but now we have the computation power and the knowledge, and we can have the tailored solution for each individual. And 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 the scenarios, which includes financial, human resource products, technology and also from the stage back stage and the computation power. But now we have AI breaking down the threshold and all of them are in the computation power of AI. And previously -- so the old division finished and the new ones emerge.

So in our [indiscernible] 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. So the agents could fine-tune their understanding of the clients. So this produces both closed deals and also reusable organizational capabilities. So these only come from the front line.

So this disruption reshapes the organization. So it concerns on 4 things. First is cost. AI lowers fixed costs and increases variable costs, enabling rapid iteration. So whoever iterates fast, who creates more value. And the next is a trial and error. So in the past, it takes a lot of efforts. Right now, throughout the -- it takes a long path to evaluate, test, validate a proposal. So the bigger the organization, I mean, the longer the chain is -- so many people just hesitate.

So right now, AI shifts innovation from heavy slow investments into high frequency and low-cost probability gains. 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. Next is the front line and the middle office. So the frontline workers armed with AI can rapidly build and test solutions. The mid-office can then scale them. Last but not least, managers. So in the past, the bigger the organization, so the lower the efficiency is. Right now, I actually talked to a lot of managers. They don't feel like a lot of sense of value. Right now, AI flattens the organization. is changing the role, handling the reporting, forcing managers to stop being megaphones and start creating real business value.

So they are not just simply just presenting the numbers, they are actually creating real genuine value from the front line because they are in the process of creating the value. Last -- 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 -- so there's this human and human interaction that AI can have to replace.

So whether we can unite people together and provide them with the training, allow them to work efficiently with AI. So one is culture, the other is evolution. So this is essentially a change we are 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. So this is a direct variable.

That means we're not simply installing AI into the company. We are regrowing the company with AI. So looking into the next phase, how we will know we are on the right track moving forward. Now we must separate 2 things, where we need to place heavy bets from where we seek answers. I think there are 3 areas we are placing heavy bets, deep service, deep data and the platform ecosystem. So 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.

So while we are seeking -- so the one where we are still seeking answers is AI's final form and the ultimate structures of management and expertise remain uncertain. Directional matters require unwavering bets. So how do we capture users' evolving needs? So management, of course, carries this value. So morphological matters require small investments, rapid testing and cutting losses early. So why do we need to separate these things by certainty? Because, again, we have already proven that directive matters require unwavering bets, whereas the morphological matters requires small investment and rapid testing.

So looking back at the past 2 quarters, we have proved in some areas that keeping investment in areas with low marginal returns is meaningless. The purely scale-driven model is dead. We should stop those meaningless investments. Moving forward, we must validate 4 things. First, professionals. Facing AI, whether they can use it directly or indirectly to create value.

Do they have new definitions for what is professionalism and whether they're committed to this concept. And second, for managers, whether they can return to the front line and produce high-quality judgments to recreate this sense of value. The third is the processes and judgments. With deeper services, can they earn the trust from their customers, whether they can earn a broader recognition -- a better recognition or trust. Number four, organizational capabilities. Can we turn a single success into a replicable capability? So in such a discontinuous transformation, so 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. So many of the management tend to hide their expertise within themselves. So without the open sharing, we cannot make that into replicable successful model. So our core test is whether we can consistently execute consumer centricity and enable professionalisms to win. This must be embedded in our culture and our workflows. So we will measure the success across 4 pillars: customer service provider operations and replicability, all form of the culture. So if you look at these 5 things, so we have to redefine our playbook. So consumers are facing harder decisions to make. So that is driving deeper specialization.

So the AI is depreciating [ role and full into ] -- while elevating true expertise and reorganizational internal work. 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. I will now turn the call to the analysts for Q&A.

Thank you, Stanley. [Operator Instructions]

The first question comes from Timothy Zhao from Goldman Sachs.

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 and momentum in Q3. 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 prices bottoming. In Q2, this recovery became more evident though the pace fared across cities and price segments. By city tier, transaction volumes recovered faster in Tier 1 cities, where the first half prices also showed a greater sequential resilience. In Q2, year-over-year growth in registered existing home transactions in Tier 1 cities outpaced other cities. According to Beike Research Institute, in the first half, 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 remain 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 size 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 offerings showed better support. Structurally, existing homes accounted for over 80% of the total national residential transaction area in the first half becoming the market mainstay housing for demand.

Overall, we see a structural transaction recovery while prices continue to bottom, core cities and high-quality supply are more resilience, 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 3 areas. First, capturing structural market opportunities to strengthen revenue resiling. We will allocate resources based on market performance across cities, customer groups and property types, reinforcing coverage in higher-tier cities. Meanwhile, centered around the 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. 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 profits and cash flows. Third, we also prioritize cash flow and a solid balance sheet. We'll strictly manage receivables and collections, control risk exposure and limit nonessential investments to preserve flexibility. Therefore, our second half 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 when markets improve.

Thank you.

Our next question comes from John Lam from UBS.

So my question is that in Q2, the profit outpaced revenue growth significantly. So could the management break down the impact of business performance, operating efficiency, expense baseline? And if there is any one-off factors? And for those improvements, how sustainable are they in the long run?

Thank you for your question. In Q2, the profit improvement was 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 3 drivers: first, lower cost and expenses baseline. Over the past year, we optimized Lianjia store and agent structure by expanding management spend, consolidating resources and reducing low productivity investment. And fix -- lowered fixed labor cost and our breakeven point. So 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 a better channel efficiency drove profit growth. And for the existing homes, focusing on the priority, listings and refine operational support for connected stores, significantly boosted connected store revenue and profit contribution. Thirdly, improved unit economics and the business mix in new business.

So we have centralized procurement and refined cost management, lowered the material cost ratios in home renovation. In rental services, the contribution margin improved due to a mix shift toward a net basis revenue products, alongside the genuine operating improvements in labor, installation and post lease costs. Looking ahead to the next 2 quarters, under a neutral market assumption, the lower cost baseline will contribute to support profit. However, marketing channel incentives and certain product line sales cost 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. 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. Simply put our current structure increases both upside potential and downside protection. But in the long run, this optimization builds a healthy operating foundation. This step -- this is step 1 out of 1 of our strategic transformation, optimizing resources allocation for current market. And this is how we can cope with the uncertainty. Step 2 is directing limited resources towards initiatives that create customer funding rather than just cutting cost.

And ultimately, through workflows, evaluations, 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. Next question comes from Xiaodan Zhang from CICC.

Congratulations on your strong performance on Q2. So 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. So how much of this stems from market recovery versus company operations? And what metrics demonstrate this operating [ alpha ]?

Thank you, Xiaodan. 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 a 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. And we have the external support. However, the year-on-year average transaction price remained in adjustment offering no-price tailwind. In this backdrop, our Q2 existing home GTV grew 8% year-on-year transaction volume grew nearly 25% year-on-year, significantly outperforming the market.

The more direct [ alpha ] source with higher unit productivity in our connected store network. 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, 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 Lianjia GTV. In a buyer's market, professional marketing property presentation and transaction facilitation created clear value and are increasingly chosen by the homeowners.

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

Thank you, Mr. Tao. Our next question comes from Alvin from CLSA.

So for the new home business, it is also amazing. So what drove the Q2 new home [ alpha ] as the operation upgrade from traditional channel collaboration to integrated marketing and project services. So what capabilities sustainably create value? And also in the process, how do you balance gross margins, collection -- contribution margin collection cycles and developer's credit risk?

Thank you, [indiscernible]. Good evening. So 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 new supply increasingly concentrated in core cities, high-quality projects and upgrade oriented products. So 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 need, identification and project matching. We effectively allocated resources to high potential projects boosting conversion rate. So 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. 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, consumer face complex choice and multiple choice and they need more than just access to the project. So I think they need to understand the project scalability, 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. And if -- and we are also evolving from the transaction channel to the customer-centric full-cycle project services. So 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 positioning and sales and also the decision-making to support the consumers.

Consumer value drives this upgrade, developer value follows from us serving consumers better. So in this direction, we are also building 3 capacities. Firstly, we have earlier consumer insights and matching. Using data from existing home transaction searches and views, we understand the demand -- demand to aid project positioning and marketing reducing the mismatch between developer products and actual demand. Second, we translate product value into comparable decision metrics. We turn complex factors like location, layout and natural light and amenities into intuitive content.

And we also have the explanation and also 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 their product, 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 time adjustment and resources allocation. 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 link 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. And 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 developer credit risk even more prudently avoiding the unreasonable risks. just to expand the GTV.

So 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.

Thank you. Mr. Xu. The last question comes from Griffin from CLSA -- from Citic.

My question is on home renovation and Carefree. So our Q2 home renovation revenue declined faster year-over-year, but contribution margins improved significantly. What drove this decline and our earlier adjustments largely complete? When will revenue recover? And how do you balance scale contribution margin and delivery quality? Carefree Rent profitability or margin significantly improves? And how do we ensure the sustainability?

Thank you, Griffin, for your question. The industry is undergoing a profound supply-demand restructuring as property adjustments feed into renovation, 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, not just scale.

So the Q2 revenue decline stems from 2 factors. 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, while competitors use price cuts and high channel incentives to fight for existing home customers. 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 the material costs. Service provider productivity per store also improved year-over-year and also store costs were optimized -- indicating healthier retained capacity and cost structure.

Regarding revenue recovery, so 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, 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 also enhanced user experience, product competitiveness, which will be achieved through tailored renovation packages -- as well as an integrated showrooms at transaction centers.

We are pursuing quality product and healthy profitability has 3 pillars: a growth strategy that will drive our growth in revenue and profit. On Carefree Rent, so the units under management gradually grow steadily to less than 790,000 up 34% year-over-year. Revenue was around RMB 4.83 billion with a 15.3% contribution margin, up 6.9 percentage point year-over-year. The year-over-year revenue decline reflects Carefree Rent iteration toward a lighter net-based revenue products. Profitability improved due to the structural shift and genuine operating optimization 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 that requires managing an asset pool with a lower churn, fewer re-leases and higher renewals. So this way, the costs related to labor and channel will grow slower than actual revenue.

So going forward, I think we will focus on 3 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 releases. We're going to take a proactive lease management 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 tenants renewal rate hit 56%, up 1 percentage point year-over-year. Second, improving efficiency to lower per unit delivery cost. Q2 managed units per asset manager rose 40% year-over-year to around 170. Going forward, we will pilot separate transaction tasks such as sourcing and leasing from management tasks such as renewal and post lease to boost specialization and personnel efficiency.

AI also can come into play. We can use AI planning to manage scale complexity by optimizing service areas, matching, task scheduling as well as many other refined operational measures. Third, improving incremental scale quality. We'll increase asset-light products to withstand rental fluctuation.

Additionally, tailored to different cities, we're going to adopt a differentiated product solutions that will achieve healthier unit economics. Most importantly, service quality underpins all of these improvements.

So whether tenants or owner decides to renew, I mean, hinges on the reputation, repurchase and also the channel cost. So we're going to pay special attention to reputation and lower channel costs. So we believe profitability is only sustainable when service experience renewal and efficiency forms a positive cycle. So 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.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, ladies and gentlemen. Thank you for standing by for KE Holdings First Quarter 2026 Earnings Conference Call. I am Siting Li, IR Director of KE Holdings. Please note that today's call, including management's prepared remarks and Q&A session will all be in Chinese. Simultaneous Interpretation in English will be available on a separate line. [Operator Instructions] Please note that 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. With us today, we have Mr. Stanley Peng, our Co-Founder, Chairman and Chief Executive Officer; and Mr. Xu Tao, our Executive Director and CFO. Mr. Xu will provide an overview of our business updates and our financial performance. Then Mr. Peng will share more on our strategic transformation and insight.

Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Please also note that Beike's earnings press release and this conference call include discussions 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 the comparable GAAP measures.

Unless otherwise stated, all figures mentioned in today's call are in RMB. Certain statistical and other information relating to the industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial sources, Neither the company nor any of its representatives has independently verified such data, which may involve a number of assumptions and limitations, and 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 the case of any discrepancy, management statements in the original language will prevail.

With that, I will now turn the call over to our CFO, Mr. Xu Tao, please go ahead.

Thank you. Hello, everyone. Thank you for joining our Q1 2026 earnings call. First, let me summarize the financial highlights of the quarter. In Q1, our non-GAAP operating profit reached RMB 1.67 billion, up 45.1% year-over-year and 416.2% quarter-over-quarter. Non-GAAP operating margin stood at 8.8% reaching the highest level in the past 7 quarters. The optimization of our cost and expense structure in 2025 has been reflected in our operating profit in Q1 this year and we expect it to provide a long-term positive support to our operating performance going forward. Guided by the strategic focus on balancing scale and efficiency, we have rolled out new initiatives, including refining depth operation and technology-driven empowerment.

In Q1, the contribution margin of all of our core business lines improved year-on-year, reflecting the translation of our cost structure optimization efforts in 2025 into our income statement. We believe this is a structural improvement rather than a cyclical one. Even with a year-on-year decline in the revenue in Q1, our contribution margin continued to expand, validating the release of profit elasticity. Meanwhile, our operational efficiency continued to improve the absolute amount of R&D, selling and administrative expenses all decreased both year-on-year and quarter-over-quarter marking the effectiveness of our refined management and the cost to control measures. Driven by the simultaneous improvements in both gross margin and operating expense ratios on a year-over-year and quarter-over-quarter basis, we saw a further release of operating leverage with a non-GAAP net profit margin hitting a record high for the past 7 quarters.

In addition, we continue to deliver on our commitments to shareholders. During the quarter, we spent around USD 195 million on share repurchases and increasing of about 40% year-on-year. This move not only represents ongoing returns to shareholders but also underscores our firm confidence in the company's sustainable and steady development over the medium to long term.

Turning to our key financial metrics for Q1. Due to the high base from the real estate market in the same period last year, the group's GTV and revenue declined year-over-year. GTV was RMB 711.2 billion, down 15.6% year-over-year, the revenue was RMB 18.9 billion, down 19% year-over-year. That said, we achieved a meaningful improvement in operating efficiency. The group's gross margin reached 24.1%, up 3 percentage points year-over-year, driven by gross margin expansion and improved operating efficiency. Our net margin also increased year-over-year. In the first quarter, GAAP net income was RMB 1.26 billion, up 46.7% year-over-year, while the non-GAAP net income was RMB 1.61 billion, up 15.7% year-over-year. Now let me provide you some more details.

For our existing home transaction services, business scale declined year-over-year due to the high base in the same period last year, while profitability continued to improve. In Q1, GTV reached RMB 534.4 billion, down 7.9% year-over-year and up 10.9% quarter-over-quarter. Revenue from existing home transaction services reached RMB 6.1 billion, down 10.7% year-over-year and up 12.7% quarter-over-quarter. The GTV declined less than revenue year-over-year, mainly because of the higher proportion of existing home transaction GTV facilitated by connected agents, where revenue is recognized on a net basis of platform services fee. On a quarter-over-quarter basis, revenue growth outperformed GTV, mainly due to improvement in Lianjia's commission rate, in particular, platform service revenue increased by 3.8% year-over-year and 12.5% quarter-over-quarter, outperforming the overall GTV and demonstrating resilience of our platform model. Despite the year-over-year decline in revenue scale, contribution margin for the existing home transaction services reached 41.3% at the highest level in the past 7 quarters. It was up 3.2 percentage points year-over-year, mainly attributable to the decline in the fixed labor costs driven by the optimization of the Lianjia's agent and store scale as well as improved organizational efficiency. The contribution margin also increased by 0.9 percentage points quarter-over-quarter, mainly driven by the operating leverage from the revenue recovery in Q1 with fixed labor costs remain relatively stable. For new home businesses, business scale declined year-over-year due to a high market base in the same period last year, while profitability improved year-over-year. Q1 GTV reached RMB 145.9 billion, down 37.2% year-over-year, and 29.5% quarter-over-quarter. New business revenue was RMB 5.1 billion, down 37% year-over-year and 30% quarter-over-quarter. The year-on-year and quarter-over-quarter GTV performance was largely consistent with revenue, reflecting our stable monetization capability for the business segment. Even amid significant fluctuations in scale, Q1 contribution margin of the new home business was 25.7%, up 2.3 percentage points year-over-year, benefited from cost structure optimization brought by refined operations. It fell 2.6 percentage points quarter-over-quarter, mainly due to the high base cost divided one-off factors in the previous quarter. For home renovation and furnishing Services, Q1 revenue reached RMB 2.3 billion, down 20.6% year-over-year and 35.3% over quarter. The year-on-year and quarter-over-quarter revenue decline was due to our proactive exit from low-quality and efficient customer acquisition channels as well as cities with poor EV models. The contribution margin of the home renovation and furnishing business was 36.2% in Q1, up 3.6 percentage points year-on-year mainly driven by material cost of savings from our continued efforts in centralized purchasing and tender-based local procurement as well as labor cost of savings from improved order assignment efficiency. On a quarter-over-quarter basis, contribution margin increased by 7.4 percentage points mainly due to material cost savings and low base effect from certain one-off factors in previous quarter. For our home rental services, revenue in Q1 reached RMB 500 million, representing a slight year-over-year decline of 1.5% and a quarter-over-quarter decline of 7.4%. The decline was mainly due to the continued iteration of Carefree Rent toward our lighter and lower-risk product model with a higher proportion of the home units recognized on a net revenue basis, which had a temporary impact on reported revenue scale. However, this doesn't change the growth strategy, a trajectory of our managed rental unit and service capability. As of the end of the Q1, the number of rental units under our management exceeded 740,000 units representing an increase of around 47% year-over-year. Meanwhile, contribution margin for our home rental services business reached 14.8% in Q1, up 8.1 percentage points year-over-year and 4 percentage points quarter-over-quarter marking the sixth consecutive quarter of sequential improvement, this was mainly attributable to two factors. First, proportion of products recognized on a net revenue basis, which have higher contribution margins continue to increase. Second, labor cost per unit declined driven by productivity improvements enabled by AI and a more specialized division of labor. For emerging and other businesses, net revenue in Q1 was RMB 321 million, down 8.1% year-over-year and 30% quarter-over-quarter.

Now let me walk you through the specific key financial metrics for the quarter. Q1 store costs were RMB 571 million, down 20.3% year-over-year and 19.6% quarter-quarter, mainly benefiting from the rental cost optimization and store network adjustments. For Lianjia, Q1 gross profit decreased by 5.4% year-over-year to RMB 4.6 billion and decreased by 4.1% quarter-over-quarter. Gross margin was 24.1% up 3.5 percentage points year-over-year and 2.7 percentage points quarter-over-quarter. Gross margin expanded year-over-year driven by 3 factors: first, improvement in brand of services contribution margin; second, favorable mix toward the existing home transactions, which carry a higher contribution margin; third, improvement in existing home contribution margin. Sequentially, the expansion was mainly due to higher mix of existing on revenue and improvement in existing home contribution margin.

Q1 total GAAP operating expenses were RMB 3.3 billion, reaching the lowest level in nearly 3 years down 22.3% year-over-year. This was mainly attributable to the operating leverage relief from improved organizational efficiency, strengthened the financial discipline and optimize the marketing spending efficiency. Operating expenses decreased by 33% quarter-over-quarter, partly due to the high base from onetime expenses related to the organizational efficiency improvement and resource allocation in the prior quarter. Specifically, general and administrative expenses were RMB 1.7 billion, down 8.6% year-over-year, mainly due to a decrease in share-based compensation expenses. On a quarter-over-quarter basis, G&A expenses decreased by 24%, mainly due to the high basis of onetime expenses in the prior quarter and low expenses driven by the improved organizational efficiency. Sales and marketing expenses were RMB 1.1 billion, down 39% year-over-year, mainly driven by the improved and organized efficiency and more refined management of marketing and promotion expenses. On a quarter-over-quarter basis, sales and marketing expenses decreased by 43.9%, mainly due to the seasonal factors and a high base of onetime expenses in the prior quarter. R&D expenses were RMB 493 million, down 15.6%, mainly due to improved organizational efficiency and lower technical services fees. On a quarter-on-quarter basis, R&D expenses decreased by 31.1%, primarily due to the high base onetime expenses in the prior quarter.

Moving to our bottom line performance. Our GAAP operating profit was RMB 1.27 billion in Q1 compared with a profit of RMB 591 million in Q1 2025 and a loss of RMB 147 million in Q4 2025. The operating margin was 6.7%, a year-over-year increase of 4.2 percentage points and a sequential uptick of 7.4 percentage points.

Q1 non-GAAP income from operations totaled RMB 1.67 billion, increasing 45.1% year-over-year and 416% quarter-over-quarter. The non-GAAP operating margin was 8.8% a year-over-year increase of 3.9 percentage points, mainly due to the increase in the gross margin and a sequential increase of 7.4 percentage point mainly due to the decrease in the operating expense ratio and an increase in the gross margin. Finally, GAAP net income totaled RMB 1.26 billion in Q1 up 46.7% year-over-year and 1,425% quarter-on-quarter. Non-GAAP net income was RMB 1.61 billion, up 15.7% year-over-year and 211.5% quarter-to-quarter. In terms of the cash flow and balance sheet, we recorded a net operating cash outflow of RMB 1.5 billion in Q1. Our operating cash flow was lower than our profit and performance, mainly due to the timing factors related to the payment of accrued employee compensation from the previous year, excluding the impact of this timing factor and our operating cash flow performance was broadly in line with our profitability. In Q1, the turnover days of accounts receivables for our new home business was 64 days, largely stable year-over-year and remaining at a healthy level. In addition, even after spending approximately USD 195 million on share repurchases during this quarter, our broader cash balances excluding customer deposits remain at approximately RMB 65.6 billion. Supported by our solid cash reserves we placed great importance on shareholder returns. In the first quarter, we spent over -- around USD 200 million on share repurchases with a number of shares repurchased, representing around 1% of our total shares outstanding as of the end of 2025 since the launch of our share repurchase program in September 2022 through the end of the first quarter of 2026, we have cumulatively spent around USD 2.7 billion on share repurchases with a number of shares repurchased representing around 13.5% of the company's total shares outstanding before the program began.

In summary, in the first quarter, we delivered on our operating commitments and achieved a meaningful enhancement in our operating capabilities through proactive cost structure optimization, technology-driven empowerment and more refined management. Looking ahead, we'll continue to uphold the principle of maximizing the company's overall value as our core priority. We will allocate resources around our long-term strategic decision -- direction of what pursuing local optimums and shorter-term gains. At the same time, we'll use data and business fundamentals as basis for decision-making, maintain our clear ROI discipline for key investments, direct resources to areas where we can better enhance the customer experience and service better efficiency.

Now I'll hand over the call to our CEO.

Well, thank you, Mr. Tao. Now I would like to welcome all of you for joining us at KE Holdings 2026 first quarter earnings call. In the first quarter, we saw an encouraging early signs across the property market. The existing home market, in particular, experienced a noticeable spring rebound after Chinese New Year with transaction momentum into deal conversion, buyer decisiveness and seller sentiment all improving in some key cities, the price expectations are moderating toward a rational level, and previously pent-up, move-up, and trade-up demand is now beginning to clear the market in an orderly manner. That said, a divergence in core cities in the market segment remains pronounced, and we are still in the phase of structural adjustment and confidence rebuilding. We're not reading too much into one quarter's data nor are we disheartened by the continued volatility inherent in any cycle. More importantly, consumers are placing greater emphasis on authentic living needs, asset quality, and long-term lifestyle fit. The overall industry is now evolving towards a more stable, healthy and sustainable path. Our company's operational quality is also on the rise despite a high base in the prior year period. Q1 GTV and revenue declined year-over-year, yet adjusted net income climbed 15.7% year-on-year. Now we have seen 3 notable improvements.

First, Efficiency gains in Q1, Lianjia's nationwide per capita transaction volume rose 26% year-on-year with per capita commission up 8.5%. From January to April, cumulative per capital commission increased 20% year-on-year, comfortably outperforming local real estate transaction market; second, no comprise on scale. Our platform's existing home transactions grew 12% year-on-year, Non-Lianjia's existing home transactions rose 16% year-on-year markedly outpacing the market. In Beijing and Shanghai, where Lianjia posted the strongest per capita efficiency gains and market penetration also rebounded from the second half of the last year. Third, improved profitability. The group's adjusted operating margin recovered to over 8.8%, up 3.9 percentage points year-on-year. while adjusted operating profit rose by approximately RMB 500 million year-on-year. These measurable Q1 improvement stem from our relentless pursuit of efficiency-driven growth. This is not merely about cutting investment controlling costs or downsizing to boost profits. It means fundamentally reevaluating which services truly solve consumer pain points in today's market, which providers can deliver sustainable value and how our platform amplifies that value through technology, mechanisms and resource allocation. At the end of March this year, we announced a new round of strategic and organizational restructuring. This transformation rests on one fundamental premise. The housing service industry is undergoing fundamental changes. .

An industry creates value by solving for what is scarce. For years, China's housing market was defined by rapid growth, tight supply and strong expectations of rising prices. Listings or the scarce resource, value came from controlling listing information and the path clients took to reach them. Consumers wanted to know where are the listings? what do they cost? Can I get one? And can we close fast? So the earlier brokerage industry organized naturally around listings. And for KE Holdings, we are trying to make sure that the industry's core is now within our adjustment and [indiscernible] to be wanted matter most. And now it is the ability to guide decision. Value creation is upgrading from organizing supply to delivering decision support and housing advisory provide services. So what consumers really need today is to make sure that they make the right decision with high ticket risks and sorted information so that they can make well-informed decisions. And for buyers, decision support means helping them understand whether where and what truly fits. And for owners, consumer questions have also changed. Their core anxiety has shifted from can I get one? am I getting it wrong? what they care about now is should I even buy right now? How do I weigh school districts against the community and living comfort? And these two units each have their strength and which one should I get? And for buyers, decision support means helping them understand whether to buy or not, where to buy and what can truly fit. So for owners, it means helping them understand how to present value, price right, find the right buyer and increase closing certainties. AI will accelerate this shift. It will rapidly commodify and pure information sorting and shallow matchmaking while further amplifying the value of service providers who can guide decisions, it can also turn top agent expertise into platform capabilities. For us, our real-world scenarios and service network and transaction groups and continuous data feedback gives us the opportunity to combine with AI and build a deep moat. So the strategic restructuring we announced this year is neither short-term cost-cutting nor a defensive move. It is about reorganizing production around the new scarce resource. KE Holdings is evolving from a platform that organizes transactions into one that supports higher quality housing decisions, redefining the very paradigm of value creation for this area. Here, the key is to be more professional and professionalism for us is simple. It is decision support. What exactly does it take to be more professional? 3 things. First, the key organizational change towards better professionalism is to get managers back into the front line. And we have 500 core managers and in 2,534 directors who are, in theory, our most capable, highest leverage people yet today, many spend over half of their time in meeting, pricing metrics and cranking out reports.

The management system, metrics and processes we built once drove our growth and made the industry more efficient. But any system that doesn't center around the consumers' real needs, risk becoming an end in itself. And that is why a critical part of this transformation is sending managers back to the front line to reunderstand consumers, reunderstand what service provider means and redefine their own professional values. .

In Beijing, our Regional Director [Zhang] has done a lot what I consider truly returning to the front lines. He manages 16 commercial districts and 12 stores. Every week, he reviews listings in person. Every week, he joins online interviews, every Saturday, he holds office advertising. So every time he was involved, efficiency improves. There was an owner and an agent in deadlock over a small price gap and the deal stuck for ages. So when [Zhang] stepped in, he stopped talking about on price and started asking why are you selling, where are you heading next? And what is this money used for? He discovered that owner didn't need a better price. They need a trade-up plan, so we help them rethink their housing options ultimately driving both the new home purchase and the existing home sales. So he feeds store and competitive data into AI to generate diagnostic reports shifting from rating metrics to prescribing solutions. The oversight has given way to sparking specific problems and helping fix them.

Next, he's building a knowledge base across district store and individual tiers, qualifying property details, customer profiles and listing presentation playbooks. Second, service providers must become more professional. In the past, agents were essentially generalists. They took every client, handled every need and touched every stage of the deal and the model works when listings were scarce and deals move fast. But today, AI is rapidly flattening the traditional agents edge in process, scripted talk and policy know-how. At the same time, customer needs are clearly segmented, school districts, luxury upgrades, new homes, asset dispositioning, leasing renovation, et cetera, each demands a different knowledge base and service approach and a trust building process. The true professionalism in the future will be defined by 3 things AI cannot do, understanding our clients' real pain points and needs, efficient support, helping them think through the trade-off, this is analytical and a proposal capability and delivering reliable, accountable and recommendations. This is accountability for high-stakes decisions. So these 3 capabilities can only grow in real-world scenarios.

So to make our service providers more professional, first we need to do is to train them from testing knowledge to hands-on drills and case-based reviews, the system will also capture frontline vast practices and with AI, structure them for people to study and benchmark against. Second, judging whether service providers professional may shift from a static exam or certificate to how they serve clients over time and what clients say about them. AI can track a service provider, analyzing their service process and client feedback, making their professional capabilities visible, evaluable and able to continuously accumulate and grow. Third, the platform must turn nonstandard services into products.

Much of our best service used to depend on individual know-how, but these skills are scattered, inconsistent and hard to replicate. The platform's job is to qualify this expertise into products, tools and processes. So every consumer gets consistently great service and every agent is properly equipped. For sellers, we're pushing decision support further upstream to cover the entire sales cycle before listing, we help owners understand the market, comparable properties, likely buyers, and fair price ranges. So agents can craft a shopper sales plan. After listing, we feed back information that actual matters to that specific property, helping owners make informed calls on pricing pacing and strategy. And for owners with different needs, we are testing differentiated products through owner segmentation and listing tiering. For example, community open day concentrate exposure and buyer feedback. For owners ready to sell and entering price negotiations, commit to sell uses and deposits, online bidding and system comparisons to cut down back and forth and help both sides reach agreement faster. A recent commit to sell deal illustrates this very well, an owner in Beijing in the Desheng district had a property worth over RMB 10 million. She was torn in price, but more anxious about locking in a sale before the month's end. In the past , this meant endless showings and price ping pong and stalled deals. But commit to sell compresses everything into clear window, under the owner put down deposit, the listing got concentrated promotions and buyers bid online and everyone knew the clock was ticking. The winning buyer wasn't even first in line, but with transparent rules and a firm deadline, she bid online in Friday evening and close at the owner's price. The buyer saw an opportunity, the seller got certainty, no price slashing just a product mechanism that's matched a real seller, a real buyer and an agent who know the property and the market. For buyers, we're also pushing services earlier. Today, clients enter a content and driven pre-decision phase long before they need an agent. They search everywhere, but credible mutual structured guidance is very scarce. So they need professional support as a reference in their decision-making. So we're putting our frontline leaders managers, directors and district head who know the market and consumer base on the front lines of content creation and building a tiered content matrix with the platform. We're not trying to turn them into influencers, chasing traffic, rather, this pushes them to truly present their expertise about communities listing transactions and clients already in their head.

Simultaneously, before the client reaches the agent, we are adding a more neutral decision service layer through middle office service [ roles ] combined with AI experts in legal, finance, school districts and high-end properties. We help the client conduct clarification of needs purchasing power calculation, risk disclosure, preliminary asset planning, then we match these clear, better understood needs to the most suitable service provider. Therefore, we'll pivot to a more precise matching stage. I want to say that AI is not a single tool, but a new organizational capability. For instance, with our application building platform for frontline employees, staff simply describe their needs using natural language and AI helps generate and deploy the application. As of the end of April, the platform has covered over 7,100 employees with more than 4,400 applications seeing actual traffic and total business surpassing RMB 4.12 million.

So this is proof that tools originating from the front lines are being utilized by the business and organizational resources will traditionally flow toward real problems. Furthermore, one city is piloting a new collaboration model, business experts defined as scenarios, function staff designed the skills and the scenario engineers provide tool and API support. A 3-person squad can simultaneously advance over 20 specific scenarios. So in the past, the business proposed me then waited for the development. Now whoever best understand the scenario participated in its definition and rapid iteration. In this way, the frontline expertise is no longer just a personal experience. It can be amplified and institutionalized by AI.

Beyond property transactions, I would also like to briefly talk about home renovation and leasing. Q1 contract value and revenue declined year-over-year, primarily due to our proactive focus on specific cities in China since last year coupled with the new home market volatility that also impacts the demand. However, we are more focused on the underlying capabilities in the path to monetization or profitability. In Q1, the contribution margin of home renovation reached 36.2%, up 3.6 percentage points year-over-year, with the losses narrowing significantly. For the past year, we have done substantial fundamental work in product, modernization, digitalization of tools, supply chain centralized to procurement and other types of works. So driving the business from being highly nonstandardized toward becoming more stable, replicable and manageable. For our leading business, units under management reached RMB 740,000 in Q1, maintaining rapid growth. The share of net method products rose quickly. The profit and margin contribution from care free rent increased from 6.7% in the same period last year to 14.8%. So how are all these are product structure, optimizations, EU management, AI empowering and organizational process restructuring. So the leasing business proves that a seemingly fragmented operational heavy business can also enhance efficiency and gradually form economies of scale through AI and process restructuring. Looking further ahead, we aim to center our efforts on communities to reconstruct long-term operational capability, Stores in the future were gradually upgrading to community housing service node. And agents will also evolve from a single transaction roles into client managers capable of deploying platform capabilities across existing homes, new homes, leaving, renovation, design, delivery, et cetera, and et cetera.

Regarding how investors can track this progress. I believe there are several metrics. First, core business efficiency and operational quality. Second, the pilot programs in community operational units and also our actions of putting managers into the front line. Number three, this is productization of buyer and seller services. Now before, the adoption of AI across the organization and also its improvement on customer experience and also our operational efficiency. Number five, the expansion from single transactions to long-term community operations and long-term value; Number six, long-term incentive direction and organizational stability. These are not short-term commitments, but rather a framework to guide our transformation progress. These decisions cannot be accomplished or goals cannot be accomplished in a single quarter. We are planning this round of transformation across a multiyear cycle. Our principal are clear. Pilots comes first without blind expansion, we're going to have prudent operations, ensuring core business operational quality and cash flow remains stable and continuous duration constantly optimizing service provider, division of labor, resource allocation, AI tools, seller service products, buyer decision service layers and et cetera.

In conclusion, I would like to summarize Beike's long-term value in one sentence, the industry is transitioning from finding listings to making decisions and what Beike must do is to upgrade our platform capability from organizing transaction to supporting higher quality residential decision. The significance of Q1 results lies not only just margin improvement, but also in validating that a virtuous cycle can be formed among organizational efficiency, per capita efficiency gains, service provider structure optimization and platform growth. Going forward, we'll continue to invest resources, mechanisms, AI and product capabilities where genuine customer value is created driving Beike to forge more stable, higher quality and more sustainable long-term value.

Thank you, everyone. We will now open the floor for the QA session.

[Operator Instructions] First question comes from Thomas Chong from Jefferies.

We noticed that the existing home market saw a spring rally in Q1. What are the main -- what were the main drivers? And how does it compare to previous year? And also, is this trend sustainable?

Thank you, Thomas, for your question. Compared with the previous rebounds, this round of recovery stands out in 3 ways. First, it's not just a short-term volume bond driven by policy stimulus. It reflects genuine demand being released as the price correction have lowered the price barrier to homeownership. Second, it's not just a simple case of trading price for volume; we are seeing prices stabilize at this stage. And third, it's not only buyers coming back to the market, seller expectations and supply mix are also showing incremental improvement.

So this recovery is now more resilient than we have seen in the past. Looking at the volume and price performance. First, existing home transactions on our platform grew 12% year-over-year in Q1 and in March set a new all-time monthly record up 21% year-over-year. At the same time, core cities showed clear signs of the phased price stabilization according to Beike Research Institute, existing home prices in Tier 1 cities rose by 1.5% month-over-month in March, marking two consecutive months of sequential growth. In Beijing and Shanghai, prices increased by 3.8% and 3.3%, respectively, during the Q1.

We see 3 factors driving the shift. First, it's the policy. The government's signal to stabilize the housing market, has been clear, measures such as tax optimization and housing provident fund adjustments have reduced transaction costs. Second, on the price side, after deep correction, the entry barrier for homebuyers has come down substantially. In March, the rental yield across the top 50 cities rose 40% -- 40 basis points year-over-year to 2.8% and spread versus mortgage rates continue to narrow. Housing is gradually regaining its appeal. Third, on the demand side of combination of policy support in the lower-price brought up by previously hesitant buyers back to the market, driving the recovery in transaction. More importantly, we're seeing market expectation and supply-demand structure, improving on the margin. On the one hand, buyers are making decisions faster. The conversion rate from viewing to a transaction has improved. On the other hand, seller expectations are stabilizing, and pressure to cut prices has eased. Q1, the share of sellers are willing to offer sharp discount for a quick sale followed by 3 percentage points quarter-on-quarter and new listings in March were down 14% year-over-year. Looking at the transaction mix, upgraded demand remains a long-term driver in Q1, seasonal factors like residential registration and school enrollment, combined with the targeted policies favoring lower-priced homes lead to seasonal increase in the share of first-time homebuyers in Tier 1 cities. That aside, from a long-term perspective, upgrade demand has continued to rise and now is approaching 60% making it a core driver of the market. Heading into Q2, the market transaction volume came down seasonally from its March peak but the pace of adjustment has been more moderate than the same period of last year. In April, year-over-year growth in existing home transactions on our platform expanded further to over 30% and the absolute volume hit a second highest record showing resilience. In terms of price, Beike Research Institute data shows that existing home prices in the top 50 cities, held steady month-over-month for a second consecutive month in April in top -- in Tier 1 cities, prices are up 2.8% cumulatively from January through April, with Shanghai up 5.9% and Beijing up over 4%. The trade-up chain is also recovering since April, larger size in mid- to high-priced homes have accounted for a slightly higher share of transactions in core cities, indicating a recovery in upgrade demand and providing some support to market resilience. Overall, we believe existing home transaction volumes should continue to grow year-over-year in Q2.

On pricing. Core areas in Tier 1 cities have relatively solid support, but a broader nationwide stabilization will need a more month of data to confirm.

Next question comes from [indiscernible] at CITIC Securities.

Congratulations on the noncyclical revenue uptick for the past quarter. Here's my question for the management. The company is advancing its strategic transformation. We noticed that you have been highlighting a program called Commit to Sell in Beijing. Could you share an update on that progress? Are there any cases that validated the impact? And can it effectively improve the transaction efficiency?

Thank you for the question. Well, some investors may not be familiar with this product yet. [Foreign Language] or Commit to Sell is one of the products under our homeowner side of service transformation in Beijing. It is still in its early pilot stage. So it's not a simple auction-style listing. It's a matching tool designed to help both buyers and sellers come down on the back and forth and negotiating. The sellers set a reserve price online and buyers place bids back to buy a deposit and the system whereas matches the bids against the reserve price to close the deal. It focuses on the bidding and closing stages even when the transaction didn't go through, the bidding results provide some incredible valuable insights that feeds the sellers into making better decisions going forward. We have noticed that early signs are encouraging. Transaction cost cycles have been shortened. Homeowner satisfaction have been high. That said , the sample size is still quite small. So we are being prudent in how we read these early results.

Before I dive any further, I'd like to bring it back and put it in the context of our broader strategic transformation, which I think will make the things clear. In today's market listings are rising, buyers are more cautious homeowners essentially sell by playing the odds, they don't get a clear read on the market feedback, and they don't have many effective tools beyond cutting the price. So that's why the core of our homeowner side of service transformation is to help sellers make better decisions throughout the selling process and improve the certainty of closing.

So namely, whether now is the right time to sell at what price and through what approach. In practice, we are not building a single product instead of we are identifying seller objectives, expectations and property characteristics and we bring our services across the entire selling life cycle, covering listing, pricing, marketing, exposure viewing, feedback and bid negotiation.

So for Commit to Sell, is one of the pilot products are designed for a specific group of sellers. So these products are on a fixed line up. They are continuing -- they continue to evolve based on the feedback of the seller and also market changes. The core idea is to match the right transaction path and the right service to each seller and each property rather than pushing every listing to the same playbook. From the pilot programs that we have at hand so far, these products indeed improved the price discovery and transaction efficiency. We're also piloting other services such as community open day events designed to concentrate buyer interest. Going forward, for each of these new products, and services will continue tracking key operating metrics, including product adoption rates, transaction efficiency and agent productivity.

On the aging side, I want to make one point, especially clear. This new model definitely didn't diminish the value of agents, it amplifies it. It elevates the agents role from passing along information and relaying offers to helping sellers assess price, identifying genuine buyers and build trust and the momentum in the negotiation process. Every successful closing reflects the core value that a professional agent brings. Finally, I want to emphasize that this transformation is a long-term journey. Our approach is a small-scale piloting continuous integration and data-driven validation for the long run if we can keep improving the decision quality of both sellers and buyers. There's significant room to expand the service penetration and efficiency.

So the next question comes from Timothy Zhao at Goldman Sachs.

My question is about the home renovation and furnishing business. And we have seen some decline in this part of the business. Could you share with us what reasons are now driving this decline? And how do you make up the briefing tendencies in this business? And since given the current KPIs of this part of the business, what exactly are the major KPIs you're focusing on? And what progress have been made in that regard?

Well, thank you for the question. I want to explain 3 reasons. First is our business changes. We have shut down some of our traditional business parts. That is the first reason. The second one is that we have narrowed down our -- some part of our furnishing and renovation businesses in some cities. And the other one is that we have seen a declining market trend. And there are some also declines on the demand for renovation and furnishing. So about how do we read these declines? Or as you said, this year, our focus this year is not to focus on the scale and also instead, we're focusing on optimizing the business model around healthy and sustainable profitability, personalized offerings under a long defined framework and higher quality fulfillment and delivery these are the important foundations for the next stage of growth. We have already seen tangible improvements in delivering capabilities and profitabilities. And going forward, we'll continue to deepen synergies with our home transaction services, improved conversion and gradually enhance revenue performance. And this year, we are focused on 3 key areas: improving product capabilities, standardization, construction fulfillment and delivery and upgrading our designed tool to improve efficiency. And on the product side, our approach is not to view customer demand as a simple trade-off between standardization and personalization instead we're using a two dimensional product metrics to better address different customer needs.

Vertically, we designed different packages based on budget level and service debt helping customers with different needs from those seeking practical solutions to those looking to upgrade living quality and horizontally we break down customer's high-frequency lifestyle needs into modules such as style storage and soft finishing. This allows customers to combine modules within clear product framework and get solutions that better fit their family needs. At the same time, it allows us to improve efficiency, control costs and enhance unit economics through module review and SKU concentration, design tools and standardized delivery process. In terms of construction fulfillment and delivery standardization, this year, we have extended our professionalization of project managers to the work level. For certain key types of workers, we are moving away from a relatively loose labor cooperation model to a model based on platform selection platform evaluation and platform coordination dispatch where workers with a stronger delivery performance and better customer feedback can receive more job. At the same time, this helped us do a more stable delivery workforce, creating a positive cycle among service quality, worker income and delivery consistency. In march, among these professionalized workers and plumbing and electrical workers saw their average monthly order volume increased by over 50% compared with the average in the second half of 2025. At the same time, we continue to deepen the development of our self-developed BIM design tools. We're promoting the full process digitalization of floor plan imports, solution design rendering, online quotation and construction joint output. This enables us to build a low data loop on the platform, which in turn supports the continuous integration of our BIM tool and help improve design productivity. Overall, while the revenue side has been affected in the near term by adjustments and volatility in external demand transmission, we're seeing improvements in the underlying capabilities of the business. In particular, standardization and replicability are gradually being strengthened across key areas, and we believe revenue from our home renovation furnishing business can stabilize and return to quality growth. Now the next question, please.

Congratulations on the positive trend. It was clear year-over-year improvement in profit margins across the company's businesses in Q1. So how does the management assess the sustainability of current margin levels and is there further room for improvement going forward?

Thank you, John, for the question. Our profitability improved significantly year-on-year in Q1, and gross margin reached 24.1%, up 3.5 percentage points year-on-year and non-GAAP operating margin rate, 8.8% up 3.9 percentage points both at a 7-quarter high. This margin improvement wasn't driven by any single business or one-off factors. It is the result of a series of proactive optimization across operating quality, resource allocation, cost structure and unit economics. Looking at each business in Q1, contribution margins improved year-over-year across all our core businesses, starting from our housing transaction business. The contribution margin improvement in existing home transactions came mainly from lower fixed labor costs and higher in the agent productivity and fixed labor costs in existing home transactions were down 24% year-on-year in Q1, which was a key driver of the margin expansion. And this reflects the work we've been doing since last year on Lianjia including refining store and agent scale, optimizing organizational structure and improving resource allocation efficiency, et cetera. In the long run, further upside will come from continued gains in Lianjia store and agent productivity and resource conversion efficiency as our business and transformation we go forward.

The new home business, a more refined operational management was the overall variable cost ratio down 3.7 percentage points. Going forward, we'll innovate our sales model by providing developers with a full life cycle project solutions by leveraging our data, marketing and other capabilities and this will diversify our revenue mix and support stable profitability. In Home Renovation and Furnishing, contribution margin improved mainly thanks to lower material costs and higher labor productivity. Since last year, we've been actively advancing centralized procurement alongside localized embedding. This has driven down prices on some materials by more than 20% and those cost savings continue to flow through this year. We've also optimized our order dispatch system routing more orders to project managers with stronger execution capabilities focused on serving platform customers and tightening their service radius to improve productivity per person. And looking ahead, as supply chain scale benefits continue to materialize and service provider productivity further improve, there's still room to optimize the unique economics of our home renovation business. In home rental services contribution margin improved quarter-over-quarter, mainly driven by better unit economics in our care free rental, a structural shift into our rental unit accounted under a net accounting method, which carries a higher gross margin. As of the end of March, net net method home units accounted for over 40% of our managed inventory. Meanwhile, the UE improvement came from several drivers: higher productivity, which both reduced internal costs and streamlined operational labor better supply chain pricing, which lowers the maintenance and cost ratio and some seasonal factors as well.

Looking forward, with quarterly margins may fluctuate, the shift toward higher-margin revenue combined with continued improvements in our products and operations leaves room for further improvement in the unit economics and rental services. On the expense side, total operating expenses in Q1 hit a near 3-year low, the decline across all 3 expense lines was driven by improvements organizational productivity and disciplined financial management, including refined control of marketing spend. On AI, we're maintaining a disciplined investment approach. We continue to fill up investment in core business models and a foundational AI capabilities. While active reviewing and reallocating resources from lower ROI projects, through areas with higher long-term value creation. This lets us keep investing in long-term capabilities on a solid financial foundation supports sustainable [ function ] and continue opening up new and more efficient avenues for growth. For the whole year, our home transaction business has did a great earnings flexibility, the profitability model in our two wing businesses will continue to improve and our cost discipline remains firm. Our quarterly margins may show some seasonal fluctuations, but we are confident in year-on-year margin improvement for the full year. Thank you.

So thank you, Mr. Xu. With that, we conclude our Q&A session. Thank you once again for joining today's conference call. And should you have any further questions, please reach out to KE Holdings' Investor Relations team via the contact details listed on our website. This brings today's earnings call to a close. We look forward to connecting with you again next quarter. Thank you, and goodbye.

[Statements in English on this transcript were

spoken by an interpreter present on the live call.]

Hello, ladies and gentlemen. Thank you for standing by for KE Holdings, Inc. Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. Please note that today's call, including management's prepared remarks and a question-and-answer session will all be available in English. Simultaneous interpretation in Chinese is available on a separate line for the duration of the call. [Operator Instructions] Today's conference call is being recorded.

I will now turn the call over to your host, Ms. Siting Li, IR Director of the company. Please go ahead, Siting.

Thank you, operator. Good evening, and good morning, everyone. Welcome to KE Holdings Inc, Beike's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website, investors.ke.com. On today's call, we have Mr. Stanley Peng, our Co-Founder, Chairman and Chief Executive Officer; and Mr. Tao Xu, our Executive Director and Chief Financial Officer. Mr. Xu will provide an overview of our business update and financial performance, then Mr. Peng will share more on our strategic update and thinking.

Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Please also note that Beike's earnings press release and this conference call include discussions 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 conference call are in RMB. Certain statistical and other information relating to the industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial sources. Neither the company nor any of its representatives has independently verified such data, which may involve a number of assumptions and limitations, and you are cautioned not to give undue way to such information and estimates. For today's call, management will use English as the main language. Please note that the Chinese translation is for convenience 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.

Thank you, Siting. Hello, everyone. Thank you for joining our 2025 Q4 and full year earnings call. To begin, I would like to provide a summary of our financial highlights for the fiscal year of 2025. In 2025, in response to evolving customer needs, we initiated a strategic pivot from sales-driven to efficiency-driven growth to optimize our business model, better leverage technology and improve our cost structure and unit economics, we implemented a series of initiatives, these efforts are laying the foundation for more sustainable growth while strengthening the stability and the flexibility of our earnings model.

First, our fee revenue remained relatively stable amid market fluctuations, outperforming the broader industry trend. This performance was underpinned by a more diversified and the countercyclical business structure. Revenue from our non-housing transaction business accounted for a record high of 41% of total revenue. The internal structure of the housing transaction services also improved. With the existing home GTV accounting for 67.6% of our total GTV, reflecting our focus on market segments with greater structural growth potential. Notably, the GTV contribution from connected brands further increased to approximately 63% of our existing home GTV, indicating higher contribution of revenue with lighter business model. The existing home platform service revenue was basically stable year-on-year, also demonstrating the resilience of our platform business model.

Second, our operational efficiency improved and the cost structure was optimized, laying foundation for future profit expansion. In our existing home business, fixed labor costs recorded a sequential decline for the 4 consecutive quarters throughout the year, significantly enhanced the profit elasticity. By the end of the year, we had a same release of operating leverage with the contribution margin of existing home business rebounding sequentially in Q4. In our new home business, both variable cost ratio and fixed personnel expenses decreased year-on-year, driving a 0.2 percentage points year-on-year increase in the full year contribution margin. The home renovation business significantly narrowed its operating losses and home rental services turned profitable at the operating level for the full year, with their contribution margin rising by 0.7 percentage points and 3.6 percentage points year-on-year, respectively. The overall operational efficiency also continued to improve with operating expenses ratio down 1.4 percentage points year-on-year.

Third, we remain steadfast in our commitment to delivering active shareholder returns. In 2025, our total share repurchase reached approximately USD 921 million, a year-on-year increase of around 29%. Furthermore, we are pleased to announce a final cash dividend plan for 2025 of approximately USD 0.3 billion, bringing our full year total shareholder return to approximately USD 1.22 billion, a year-on-year increase of around 9%. This accounts for approximately 170% of our 2025 non-GAAP net profit, far exceeding the proportion of the 2024.

Turning to our Q4 performance. Due to the high base in the same period of 2024, our GTV and revenue saw a notable year-on-year decline. Our GTV reached RMB 724.1 billion, representing a decrease of 36.7% year-on-year. Revenue was RMB 22.2 billion, down 28.7% year-on-year. As a result of the decline in transaction scale, our gross profit margin was 21.4%, a year-on-year decrease of 1.6 percentage points.

Q4 GAAP net profit was RMB 823 million (sic) [ RMB 82 million ], down 85.7% year-on-year. Non-GAAP net profit was RMB 517 million, representing a year-on-year decline of 61.5%. It is important to note that our bottom line performance in Q4 was partially affected by one-off expenses related to our cost optimization initiatives, which this adjustment weighed on near-term profitability. They are helping us to streamline our cost structure and position the company with greater operating leverage going forward.

With that overview, I'd like to provide some details on the financial performance of each business segment. In our existing home business, due to the relatively higher base in the same period last year, the scale of our existing home transaction business declined in the fourth quarter, while the profitability improved. GTV from the existing home business reached RMB 482 billion in Q4, reflecting a 35.3% decrease year-on-year and a 4.7% decrease quarter-on-quarter. Revenue was RMB 5.4 billion, down 39% year-on-year and 9.2% quarter-on-quarter. GTV outperformed revenue year-on-year was mainly due to the higher GTV contribution from the existing home transaction facilitated by connected agents for which revenues are recorded on a net basis.

On a quarter-on-quarter basis, GTV outperformed revenue was mainly driven by the structural shift as the revenue contribution from the rental brokerage services decreased amid the seasonal fluctuations, which have a relatively higher take rate. In this segment, revenue from platform service decreased by 19.9% year-on-year, significantly outperforming the overall GTV decline and demonstrating the resilience of the platform model. Despite the year-on-year adjustment and the sequential decline in revenue, the contribution margin of the existing home business reached 40.4%, remaining stable year-on-year and rising 1.5 percentage points quarter-on-quarter. This resilience in profitability against external volatility is a direct result of our disciplined headcount control and our focus on organizational efficiency in 2025.

For new home business, affected by high base, the scale declined year-on-year, with profitability improved. GTV reached RMB 207 billion in Q4, a year-on-year decrease of 41.7% and a sequential increase of 5.5%. Revenue from the new home business was RMB 7.3 billion, a year-on-year decrease of 44.5% and a sequential increase of 9.4%. GTV outperformed the revenue year-on-year was mainly due to the higher base of monetization rate, while revenue outperformed GTV quarter-on-quarter, primarily due to the seasonal factors, even with the significant scale fluctuation, the contribution margin of the new home business rose to 28.3%, an increase of 2.6 percentage points year-on-year and 4.2 percentage points quarter-on-quarter, benefiting from the cost structure optimization driven by new home operations.

For home renovation and franchise services, revenue reached RMB 3.6 billion in Q4, a year-on-year decrease of 12% and a sequential decrease of 15.9%. This temporary softening in revenue reflects our prudent balance between scale and risk, as we proactively optimized our channel structure and moderate pace of certain non-brokerage channels. Contribution margin was 28.8% in Q4, down 0.9 percentage points year-on-year and 3.2 percentage points quarter-on-quarter, mainly because we made provision for potential warranty costs of the home renovation orders still on the warranty period at the end of 2025 based on the principle of the prudence. Excluding this impact, our core cost structure continues to improve. This increased the centralized procurement has led to a sustained savings in material costs.

Turning to our home rental services. Revenue reached RMB 5.4 billion in Q4, a year-on-year increase of 18.1% with profitability improved. The growth in revenue was mainly driven by the rapid growth in the number of the rental units under management. At the end of Q4, we had over 700,000 rental units under management, a year-on-year increase of around 62%. On a sequential basis, revenue saw a slight decrease of 5.5%, mainly due to change in accounting method brought by product model upgrade. The Carefree Rent business has continued to iterate towards lighter and lower rates of product model, leading to an increase in the proportion of rental units with revenue recognized on a net basis, which has a temporary impact on the revenue scale. However, this does not change the robust growth trajectory of our management scale or the service capability.

Meanwhile, the contribution margin from rental services was 10.4% in Q4, up 5.9 percentage points year-on-year and 1.7 percentage points sequentially, mainly driven by 2 factors: first, the structural improvement from the ongoing shift towards a lighter product model. As of the end of 2025, the proportion of rental units with revenue recognized on a net basis has exceeded 30%.

Second, operational efficiency gains that optimized our unit economy model. Through the process restructuring and professional role specialization, we have significantly improved the productivity of the property managers, leading to a notable optimization of labor costs. In addition, the gradual penetration of AI technology across the entire operation value chain has laid the foundation for the large-scale expansion and the sustained profitability of the business.

In Q4, our revenue from emerging and other services increased by 4.5% year-on-year and 16% quarter-on-quarter to RMB 459 million.

Now moving to other financial metrics in Q4, including other costs and expenses, profitability and cash flow. Our store costs were RMB 710 million in Q4, a year-on-year decrease of 9.6%. This was primarily driven by the optimization of rental cost for our Lianjia stores and the refinement of our store structure. On a sequential basis, store costs increased by 7.2%, primarily due to one-off expenses from the store closures.

Q4 gross profit decreased by 33.7% year-on-year to RMB 4.8 billion, remaining relatively flat sequentially. The gross margin was 21.4%, a year-on-year decrease of 1.6 percentage points, mainly due to the declining revenue contribution of the existing home and the new home segments, which have relatively higher contribution margins. This impact was partially offset by the year-on-year gross profit margin expansion of the home rental business. Our gross margin was relatively flat quarter-on-quarter.

In Q4, GAAP operating expenses were RMB 4.9 billion, a year-on-year decrease of 20.4% and a sequential increase of 13.3%. The quarter-on-quarter increase was mainly due to one-off expenses related to the cost optimization initiatives. Excluding this nonrecurring impact, the trend of operating expenses is fully consistent with our efficiency improvement efforts. This expense optimization initiatives position us for greater operating leverage moving forward.

To break down the components, G&A expenses were RMB 2.3 billion, down 23.9% year-on-year, mainly due to the reduced bad debt provisions and lower share-based compensation. The 20.8% sequential increase was mainly due to the aforementioned one-off optimization costs. Sales and marketing expenses were RMB 1.9 billion, down 17.7% year-on-year, mainly due to the lower personnel-related expenses driven by operational efficiency improvements. The 11.7% sequential decrease was mainly due to the seasonal marketing and promotion expenses. R&D expenses were RMB 715 million, relatively flat year-on-year and up 10.3% quarter-on-quarter, mainly due to the aforementioned one-off optimization costs.

Moving to our bottom line performance. Our GAAP operating losses was RMB 147 million in Q4 compared with a profit of RMB 1.01 billion in Q4 of 2024 and RMB 608 million in Q3. The operating margin was negative 0.7%, a year-on-year decrease of 3.9 percentage points and a sequential decrease of 3.3 percentage points. The non-GAAP income from operations totaled RMB 323 million, decreasing 81.6% year-on-year and 72.5% quarter-on-quarter. The non-GAAP operating margin was 1.5%, a year-on-year decrease of 4.2 percentage points and a sequential decrease of 3.6 percentage points, mainly due to the increase in the operating expenses ratio.

Finally, GAAP net income totaled RMB 82 million in Q4, down 85.7% year-on-year and 89% quarter-on-quarter. Non-GAAP net income was RMB 517 million, falling 61.5% year-on-year and 59.8% quarter-on-quarter.

Moving to our cash flow and the balance sheet. We generated net operating cash inflow of RMB 1.9 billion in Q4. In 2025, our full year net operating cash flow was below the profit performance, mainly affected by the timing factors in working capital, including the payment of the accrued bonus from the previous year and the change in contract liability in our home renovation business due to order intake are moderated. Excluding the impact of above timing factors, our net operating cash flow performance was broadly consistent with the profitability.

Our new home accounts receivable turnover days was 44 days in Q4, a sequential decrease of approximately 10 days, remaining at a healthy level. In addition to spending approximately USD 246 million on share repurchase during Q4, our total cash liquidity, excluding customer deposit payable remained at around RMB 68.7 billion. With a robust cash reserve, we placed a high importance on shareholder returns. We spent approximately USD 921 million on share repurchase for the full year of 2025, representing approximately 4.1% of total share outstanding at the end of 2024. Our track record reflects a consistent dedication to fulfilling our promise to shareholders. Since the launch of our share repurchase program in September 2022, we have repurchased a total of approximately USD 2.5 billion in shares at the end of 2025, a total reduction of approximately 12.6% of company's total issued share prior to the program launch.

On top of this robust shareholder return, we are pleased to announce a final cash dividend plan totaling approximately USD 0.3 billion, which will be funded by surplus cash on our balance sheet. With this, our total shareholder return for 2025 significantly exceeded our non-GAAP net income, representing around 170% of our total -- of our non-GAAP net income for the year.

Overall, in 2025, we placed a greater focus on improving operation quality and resources allocation efficiency, while continuing to optimize our business mix, cost structure and expense discipline. Our current cost structure is more streamlined. The profit model is clear and the profitability quality of each business segment has improved. We have also adopted a more comprehensive and prudent approach for the pace of our emerging business, heavy investments and risk control, which has ensured a sound balance sheet.

Looking ahead to 2026, we will maintain prudent financial discipline and strike a balance between efficiency and growth. We will continue to improve our earning qualities, optimize our capital efficient structure while safeguarding our long-term competitiveness, thereby creating sustainable value for our shareholders.

Thank you. Next, I would like to turn the call to our Chairman and CEO, Stanley.

Thank you, Tao. Good evening, everyone. Thank you for joining us today for Beike's Fourth Quarter and Full Year 2025 Earnings Conference Call. Over the past year, we have seen many changes in the market. For example, the transaction structure is evolving. The share of our existing home transaction in China's housing market continues to increase. In 2025, the number of existing home transactions nationwide hit a historical high. The new home market is also seeing greater differentiation with higher quality and new standard projects attracting stronger market demand. More and more young people are choosing to rent while rental yields are gradually improving. Customer transaction behavior is also changing.

Housing information is becoming increasingly abundant, yet the decision-making process is becoming more complex. Both buyers and sellers are thinking are taking longer to complete transactions, the cost of making a mistake is much higher now and consumers are more and more cautious. Buying a home used to be a relatively easy decision. Today, it's a balancing act that can require a careful reallocation of family assets. At the same time, something have not changed. The overall demand for better living remains stable and consumers' demand for safe, professional, transparent and reliable services is still strong.

By looking at what has changed and what has stayed consistent, we can tell two very important things: first, China's residential market remains the largest and most valuable housing market in the world; second, the housing service industry has made a fundamental shift in its approach. Today, the consumer needs more professional services that offer certainty in decision-making. The industry is entering a new stage where core competency will no longer be defined by resource scale, but by service capability and operational efficiency. Ultimately, creating value for customers will be the only stable source of our long-term growth. And this trend, we can continue to evolve in 2025.

First, we improved our operational governance, creating more rooms for long-term strategic transformation and enabling us to continue driving progress across the residential service industry. Second, we upgraded our strategy, leveraging data and AI. We are rebuilding our service logic around consumer, customer value through greater value creation, we aim to improve the platform overall customer coverage, resource conversion efficiency and unit outputs. Our growth model is, therefore, shifting from when driving primarily by the scale of agents and stores to when driving by efficiency and value creation.

In the past, we focused on expanding the number of stores, listing coverage and lead volume. Going forward, we will focus more on delivering greater certainty in transactions for customers, improving matching precision and strengthening the unit economics.

Specifically, we are working in 4 key areas: first, upgrading transaction services into full process decision support services, improving professionalism and certainty in the service process; second, optimizing resource allocation through data and AI, so consumers can receive high-quality, better matching services; third, embedding AI capabilities into our service workflows, helping service providers and the platform deliver more professional, people-centric services; fourth, building diversified service capabilities across the broader residential ecosystem to meet customers' full range of housing needs.

Next, I will walk you through the progress of our major business segments in 2025 and share some of our thinkings. For existing home business, the platform facilitated RMB 2.15 trillion in GTV from the existing home transaction in 2025. Within that total, the number of existing home sales transactions increased by more than 10% year-over-year, reaching a record high. At the same time, transaction volume from platform connected stores increased by 15% year-over-year. These 2 figures highlight the resilient demand in the existing home market and the strengthening of our platform model.

The overall scale of agents and stores on the platform remained stable with more than 58,000 connected stores and over 445,000 agents at year-end. In terms of productivity, in 2025, the average number of the in-home transaction per connected agents increased by 6% year-over-year, rising from less than 2 transaction per agent in 2022 to more than 3.

For our directly operated Lianjia business, we proactively optimized store networks and agent structure in 2025. We focus on high efficiency capability and deeper operations in core cities. O the adjustments, Lianjia's per agent productivity in core cities improved indicating we are gradually achieving a healthier balance between scale, discipline and productivity improvements. Operationally, we upgraded our lead allocation mechanisms and refine store services, ensuring that high-quality clients receive services better matched to their needs. We also continue upgrading our service model to adopt a more consultative approach, moving beyond simple property tools and matchmaking for a deeper support for decision-making.

In today's market environment, customers do not like information. In today's market environment, customers are not short of information. What do they lack? It's the assistance in making judgment. AI is becoming a new productivity engine for our industry. Property transactions are not standardized commodity transactions. They involve both rational analysis and emotional judgment. They require both data support and real-world offline experience. In the past, the industry has not done a good job of structuring the rational parts of their process nor has it placed emotional aspects where they create the most value.

In some cases, emotional judgment has even been used to replace decisions that should have been made rationally. When these 2 elements become into win, when it wins, it inevitably leads to a loss of efficiency. AI can make the rational part of the process extremely rational while amplifying the value of the human and emotional aspects that must be handled by people.

In our industry, machines can process data, but true judgment, explanation and trust still need to come from people. AI cannot be ignored nor can humans be replaced. This is why our strategy is to combine human expertise with AI capabilities. We are embedding AI directly into our core operational scenarios across the platform. For example, in our housing transaction business, AI making marketing assistant help agents automatically generate marketing materials, AI simulated tools also help service providers through customer interaction scenarios and continuously improve their professional capabilities.

Going forward, AI will attract as our copilot for service providers across the entire customer life cycle. This includes demand identification, precise matching between agents, homes and customers, pricing decision support and process automation. Over time, AI will help package the expertise of those top performing service providers so that these professional skills can be shared and used across the platform. New home business transitioning from channel dividend to structural efficiency. In our new home business, we are shifting from relying on channel distribution advantages to driving growth through structural efficiency improvement.

In 2025, Beike facilitated RMB 890.8 billion (sic) [ RMB 890.9 billion ] in new home GTV, despite a volatile market environment, we see to outperform the broader market, building on our growing listing supply and channel sales scale, we are now driving sustainable growth by improving structural efficiency. This includes optimizing the mix of customers, projects and service providers as well as improving matching precision.

For homebuyers, we are strengthening capabilities in customer demand identification, cross-project comparison, service providers matching and decision support. For developers, we are beginning to provide early-stage project positioning insights while also offering integrated marketing and sales services in the later stage of project sell-through. For service providers, we continue to refine evaluation system and operational tools and refine our resource allocation mechanisms, ensuring that agents with stronger conversion capabilities are matched with the right resources. Our goal is to upgrade the new home business from a model focused on traffic distribution to one that delivers greater certainty of results for all participants in the ecosystem. New business from scale exploration to profit quality and sustainable models.

Beyond brokerage services, our home renovation and furnishing and home rental business both enter a healthier stage of development in 2025. Across both business segments, we are placing great emphasis on profit quality and on building sustainable and replicable operating models. This is the foundation for this business to scale over time. In the home renovation and furnishing segment, full year revenue grew by 4.4% to RMB 15.4 billion, while profitability improved meaningfully. Contribution margin increased to 31.4%, up 0.7 percentage points year-over-year and operating losses narrowed significantly.

Over the past year, we have focused on advancing product standardization and design digitalization through our system called packager and modularized product offerings as well as AI enabled online design workflow, we are gradually turning design capabilities into system capabilities. This have reduced service variance and improve conversion efficiency. At the same time, we have been advancing supply chain integration and building standardized delivery systems while improving the customer experience. These efforts have also enhanced profitability, while gross margin increased losses narrowing significantly.

And the home renovation business is evolving from a project-based model reliant on individual experience to a more scalable and replicable service model. We have also established a clear path toward long-term profitability. In our home rental services segment, the number of managed units exceed 700,000 by year-end, representing a 62% year-over-year increase. The business achieved full year profitability with contribution margin improved to 8.6%, up 3.6 percentage points year-over-year, demonstrating a meaningful improvement in profitability. We continue to upgrade the product structure towards lighter, more resilient and more controllable models while strengthening unit economics at the individual property level. By redesigning our workflows and introducing specialized roles, the operational efficiency of core service providers continues to improve.

AI capabilities are gradually being embedded into key areas, including property sign-up, pricing support, leasing management and upgrading strategy. This helps reduce operational risk, including increased leasing efficiency and optimize cost structures. With this improvement, our rental business is forming a more stable profitability profile and more consistent cash flow. Overall, our new business are moving from a phase of scale exploration into a stage focused on business model validation and profitability improvement. As these models mature and technology adoption increase, that will further diversify our revenue structure, strengthen resilience across market cycle and better serve our consumer broader residential needs.

At the organizational level, we are also advancing structure optimization and rebuilding capabilities. The purpose of our organization is not simple to manage metrics, but to continuously improve the customer experience. We are streamlining organizational structures, simplifying management layers that do not directly create customer value and encourage managers to move closer to the front line to better understand and create customer value in real operating scenarios.

In terms of capital allocation, while maintaining a strong cash position and the ability to invest for the long term, we continue to deliver meaningful returns to shareholders. In 2025, we repurchased approximately USD 920 million in shares, representing about 4.5% of our total shares outstanding at the end of 2024. We also announced a final cash dividend. In total, shareholder return for the year was approximately USD 1.22 billion, significantly exceeding our non-GAAP net income for the year. I believe our long-term advantage lies in the combination of organizational efficiency and capability -- capital efficiency.

For 2026, we maintain a neutral market view, given the scale of China's real estate market and the continued differentiation in demand structures, long-term value will not be driven by just buying staffing or adding more labor. Instead, it will be determined by how deeply we understand customer needs and by the systematic service capabilities we build around the entire customer life cycle.

For Beike, 2026 will be a year of validating our decision support service model. We will focus on testing how this model improves conversion rates and unit economics. 2026 will also be a year of strengthening our service and organizational capabilities. This capability will allow us to demonstrate greater operational resilience as the industry stabilizes. In a new cycle, true leadership will not come from scale, but from capability. And the foundation of capability, we believe, ultimately lies in only one thing, that is continuously creating real and verifiable value for our customers.

With that, we can now move to the Q&A session. Thank you.

[Operator Instructions] Your first question comes from Timothy Zhao with Goldman Sachs.

[Foreign Language] My question is regarding our operating efficiency enhancement on the store level and agent level. I was just wondering after the restructuring and investments, have we observed any change in terms of agent efficiency? And if this year, the overall market recovers, do we have enough power to gain share? And going forward, what are our execution plan in terms of future efficiency-driven growth strategy?

Thank you, Timothy. First, the strategic upgrade from scale-driven assumption to efficiency-driven growth is the natural and inevitable outcome of the evolution of our platform business. What this transition really means is upgrade in the way value is created, that created its great value for our customers. We aim to improve the penetration of community-based into residential services, increase the conversion efficiency of resources and ultimately drive the business growth. This is in fact the opposite of logic of simply cutting capacity or contracting the business.

To understand this evolution, we need to ask a more fundamental question. What truly determines the capacity in our industry? What are the core production factors and the production function. What customers truly need is not simply more agents or more stores, but higher quality and more reliable decision support. This includes more precise matching, more effective marketing solutions and more comprehensive home buying planning solutions. What we are doing is reallocating resources from nominal capacity to effective capacity, concentrating our organizational efforts on areas that generally solve customer problems.

Against this backdrop, in 2025, we have taken several stance around our agent and store network. First, we do believe in the business, we have a concentrated resources on high-performing stores and agents to improve operational efficiency. Going forward, we will further strengthen our management structure so that managers with the strongest customer service capability can stay closer to the front line to create value. At the same time, while confining and embedding the high-quality service capabilities into platform and is a division of labor system rather than leaving them dispersed among individuals.

Second, on the broader platform side, we continue to expand the scale of agent stores, but with a greater emphasis on the quality and efficiency. By the end of 2025, the number of active connected stores and agents continue to grow significantly year-on-year, increasing by 29% and 27%, respectively. At the same time, we are optimizing the structure of the network by identifying and amplifying the value of high-performing high-rated store and agents. In the first quarter, agents activity improved sequentially. In cities, excluding Beijing and Shanghai, the digital conversion rate for its in-home sales increased by around 8% quarter-over-quarter, while average per agent commission income from existing and new home transactions increased by 2% sequentially. We are also improving the efficiency more platform-based capability, including AI-driven tools.

Third, data and AI are the most important drivers behind this evolution, leveraging our data and AI capabilities, while redesigning many aspects of the platform, including resources allocation mechanism, the division of growth among service providers and the service process for both homeowners and buyers. In many areas, this represents a systematic redesign of how the platform operates.

Meanwhile, as housing decisions become more complex for consumers, our opportunity to create value also grows, helping customers reduce the profitability of the [indiscernible] in one of their most important decisions of their lives, selling or buying a home or improving the overall service experience creates value for each individual customer. At the same time, it helps reduce the friction across the entire market and potentially increases market turnover, effectively expanding the size of our market.

Therefore, to answer your question, the future growth and earnings elasticity of the platform will not depend on who has the largest headcount or store count. Instead, it will depend on the expansion of platform's capability boundary, as well as those of the service providers operating on the platform. Those stronger professional services and higher overall efficiency, we aim to earn the trust and choices of the more customers.

Your next question comes from Zhen Guo with Guangfa Securities.

[Foreign Language] Let me translate my question. My question is about the new home business. The new home market is facing multiple pressures, including developers struggle with sell-through, declining profitability and increasing market concentration among state-owned companies. Management mentioned innovations in marketing model in the new home business. How will the innovation change the company dynamics and the relationship with the company -- with the developers? How will the performance of the new home business be sustained?

Thank you, Zhen. Our view on the new home business starts from the structural change in industry. The level of the digital penetration in the new home sector remains relatively low. In the past, our operating model for the new home business was largely based on the traditional channel sales logic. This involved allocating resources around commissions and traffic and leveraging our massive channel traffic to solve developer sell issue for the core projects. This model was effectively -- this model was effective during the market expansion phase, but under current conditions, its boundary are more limited. It can only serve certain projects at certain buyers and the value creation for developers and especially for homebuyers is relatively constrained.

We believe the new home market is entering a new stage. For homebuyers, the concern is not whether there is enough information, but whether they can be more certain about the purchase decision. For developers, the key concern is no longer simply gaining another sales channel, but whether they can achieve more predictable sales results within a constrained market. Accordingly, we are upgrading the role of our new home business from a channel player to an integrated capability platform.

Number one, the level of online integration and digitalization in the new home segment remains relatively low. This represents a common pain point across the industry, but also a significant opportunity for upgrading. We are working to enhance the online decision-making support in new home journey through the stronger data and product capabilities, truly helping customers solve their most difficult decision-making pain points.

Number two, we will further optimize allocation of the traffic resources by leveraging our data and system capabilities to improve the structural matching efficiency between purchase and potential buyers. We aim to expand service coverage among homebuyers, broaden the top of our funnel and ultimately improve the competitiveness and ultimately improve conversion.

Number three, we view developers as our long-term clients rather than merely the channel sales partners. We aim to provide developers with an integrated solutions covering the product acquisition, customer acquisition, matching and the sales pace management, helping improve overall project efficiency and drive key pain points. In the long term, our goal is for the new home business to evolve beyond the transaction distribution layer and become an efficiency-enhancing platform between developers and homebuyers. As this capability evolves, our service offering and the revenue stream in the new home segment will become more diversified and our business model will become more resilient. We believe this evolution will be critical to sustaining our long-term competitiveness in the new home market. Thank you.

Your next question comes from Miranda Zhuang with BofA Securities.

[Foreign Language] my question is about AI. So with the recent rapid advancement of AI, how does the company view the potential impact of AI on the real estate sector? For Beike Company, how is AI being used to empower the different business lines? And what are the progress so far?

Thank you, Miranda, for your question. Recently, there have been many discussions about whether AI will bring a revolutionary impact to real estate brokerage industry. My view is that the key question is not whether AI will replace real estate agents, but rather how it will reshape the division of labor, value creation and organizational structure of the industry. A housing transaction is fundamentally not a short standard consumption decision. Instead, it's a long cycle, multistate and high complex decision-making process from searching for a property to make a decision to completing the transaction and then to move in operating the property and improve the living experience.

There are many stages along the way where AI can significantly improve efficiency and in some cases, even automate the process. For example, information gathering, demand matching, process reminders, document generating, preliminary risk check and workflow coordination are all standardized and repetitive tasks governed by clear rules. In this area, AI can deliver significant productivity gains. We have already begun to see some very tangible changes internally.

For example, in housing transaction services, agents previously spent a large amount of time organizing property information, creating marketing materials and responding to repetitive inquiries. With AI, we can now automatically generate AI video explanations, property interpretations and communication materials for clients, allowing agents to focus more of their time on understanding customer needs and supporting transaction decisions.

In our rental business, AI is also beginning to participate in property acquisition decisions, rental pricing recommendations and leasing matching by analyzing historical transaction data, regional supply and demand and property characteristics, AI help our operators more quickly determine whether a property is suitable for acquisition, recommend a reasonable rental range and improve leasing efficiency while strengthening risk identification.

Taken together, these capabilities essentially allow standardized tasks to be handled by the system, enabling service professionalism, professionals to focus more on complex decision-making and client service. At the same time, they are part of this value chain that are not easily replaced by AI. In fact, these areas may become even more important as AI develops. For example, someone still need to determine whether what the clients say they want truly reflects their underlying needs. Some may need to make pricing judgments to dynamically coordinate between buyers, sellers, mortgage providers, title transferring process and fulfillment risks and someone need to stabilize expectations and feeling at the final stage of a transaction. And ultimately, some may need to take responsibility.

The core of this task is not simply information processing, but judgment, coordination, trust and accountability. This is where human value continue to lie. Therefore, our view is that AI will effectively split the workflow of this industry into two parts: one part will become highly automated with efficiency improving rapidly; the other part will increasingly concentrated on professional expertise, accountability and high-value services.

From this perspective, the value of the traditional information intermediary will diminish, while the value of transaction responsibility and housing service infrastructure will become even more important. For Beike, this does not mean the opportunity becomes smaller, it actually become larger, because what Beike aims to build is not simply AI-driven efficiency. Our goal is to leverage AI to further upgrade ourselves into a comprehensive housing service infrastructure.

On one hand, we want information matching processes and collaboration to become far more efficient. On the other hand, we want transaction responsibility, fulfillment assurance and service delivery to become more reliable. There is also another important characteristics of this industry. First, demand on the consumer side is difficult to fully articulate. Many clients cannot clearly express what they truly want at the beginning.

Second, supply is highly nonstandardized. Homes are not fully standardized or commoditized products. Their pricing suitability and risk level all contain significant uncertainty because demand is difficult to articulate and supply is highly nonstandardized. This industry inherently requires people to interpret this plan, match, coordinate and ultimate take responsibility. Looking further ahead, AI's impact goes beyond this. As AI significantly improve the efficiency of standardized process, people will increasingly become the key variable that determine the upper bound of efficiency.

In the past, inefficiency was often constrained by process, tools and information. But as these constraints are optimized by AI, the ultimate limit of our organization will increasingly depending on the capabilities of the service professional themselves. Moreover, the improvement in service professionals' capabilities is no linear. It has clear leverage effects as AI raise the efficiency baseline of the system, stronger service professionals can generate disproportionately greater marginal value.

In other words, AI does not weaken service professionals. It differentiates them, amplifies the base events and makes the upgrading of the service capabilities itself, one of the most important growth levers. So for an organization, the real question is no matter whether they have AI, but whether they can organize people and organize people together with AI. In such an environment, organizational capabilities, collaboration mechanisms, culture and value become increasingly important. In highly efficient, transparent and collaborative systems, it becomes even more critical to have a stable set of value judgments, unified service standards and trusted behavior norms to connect every service professionals, every operational stages and every interaction with customers.

From this perspective, the continued evolution of this industry will not be driven by a single force, but by 4 forces working together: the power of technology, which drives efficiency improvements and capability expansion; the professionalism of service provider, which determines judgment and service quality in complex scenarios; customer trust, which determine whether transaction can actually be complete and whether long-term relationship can be formed; and organizational culture and values, which determine whether the previous 3 forces can be continuously integrated into a stable, scalable and evolving system.

In this sense, AI will indeed reshape the industry. It will eliminate information asymmetry, compress low-value competitive work, compress and amplify the value of professional services, transaction responsibility, customer trust and housing service infrastructure. Ultimately, what determines how far a platform can go is not simply whether it has AI, but whether it can truly integrate AI, professional service providers, customer trust and organizational culture into a continuously evolving model. Thank you.

Your next question comes from John Lam with UBS.

Stanley [Foreign Language]. So my question is regarding the new media. So how does the company look at the new media? And also, how does the company look at some of the KOL utilizing new media to facilitate the property transaction?

Thank you, John, for the question. Regarding the influence of influencers and public accounts on the company, my view is that whenever a phenomena continue to attract the attention of customers, it usually reflects some real demand. So rather than judging whether it is positive or negative, the more useful question is that needs, it is actually serving which customers it resonates with in which situations and what needs may not have been well addressed before.

In my view, this also reflects a broader shift in the industry. In the past, the real estate industry was largely centered around the property itself. At that stage, the key question for many customers was simply whether there was a suitable home available and whether they could buy it. The property was the primary scarce resource and customer decision often revolved around the house itself. The personal needs and circumstances behind the decision were not always fully reflected in the process.

Today, the situation has changed. The industry is moving from being centered on properties to being centered more on people. Customers are not just home buyers in an abstract sense. Each decision reflects a set of real-life considerations, including family structure, budget constraints, lifestyle preference, education needs, computing patterns, risk tolerance and plans for improving or relocation, buying, renting or upgrading a home may appear to be a real estate decision. But in many cases, it is essentially a decision about how people want to organize their lives.

From this perspective, housing transactions have always involved complex decisions for a long time. However, the industry handled them more as a relatively light match-making process as customer needs become more complex and personalized. The decision is returning to its original nature. It requires understanding, explanation, judgment and trade-offs. Against this backdrop, the rise of self-media, influencers and public accounts is not simply about new media channels. What they provide is a different form of value. Their focus is not just on the properties itself, but on the person behind the decision.

Through our content perspectives and explanations, they help customers better understand the market, compare options and reflect on their own needs. In doing so, they can help reduce decision costs and anxiety in making decisions. Customers follow them not simple to obtain more information, but because they hope someone can help them make judgment, compare alternatives and weigh different trade-offs. For our company, this phenomenon is both a reminder and an opportunity. The reminder that we should no longer think ourselves simply as an information platform that matches people with listings, instead, we need to become truly customer centered and focus on understanding the person behind the transaction.

The opportunity that if we can combine content capabilities, professional service capabilities, execution capabilities and customer trust, we may be able to build a more durable and deeper competitive advantage. Influencers can provide our perspectives and influence. But in complex transactions, the responsibilities for execution, risk management and service delivery ultimately depending on a professional service system.

So fundamentally, I do not think we -- the key question is whether self-media will negatively impact or not, company like ours, rather, what this phenomenon remind us is that customers today need more than probably information. What they increasingly need is decision support, professional judgment and trustworthy services centered around the individual. Company that can better meet these needs will be better positioned in the long run. Thank you.

Your next question comes from Eddy Wang with Morgan Stanley.

[Foreign Language] My question is regarding the renovation and furnishing business. We see the business has experienced slower revenue growth in 2025, but gross margin improved. What's the current status of the development in supply chain centralized procurement and the standardization execution? When should we expect to see the inflection point for the profitability in the home renovation business?

Thank you, Eddy. The slower revenue growth in 2025 was the result of our deliberate decision to control the pace of expansion. Home renovation is a delivery center business. If the underlying unit economy are not stable, progressive expansion itself becomes a risk. The liquidity challenges of certain industry players in 2025 further reinforce this pain point for us. As a result, our priority last year was repairing and validating the underlying profitability structure of the business.

From the results we have seen so far, the contribution margin has improved and overall losses have narrowed significantly, which indicates that unit economics at the individual project level are becoming healthier. At the current scale of roughly RMB 15 billion in revenue, we break down improvements in unit economics into 3 main variables: product structure optimization, controlling explicit costs such as materials, labor efficiency and delivery efficiency, and the reduction of implicit costs, including rework, up sales issues and the reputation-related losses.

In 2025, our primary focus was the cost side, on explicit costs. Centralized procurement across the supply chain has helped to optimize our material cost structure. We have completed the centralized national or regional procurement tenders for approximately 80% of our key materials and about 60% of our auxiliary materials. This has strengthened our buying power, improved long-term product quality stability and reduced exposure to the price volatility.

At the same time, through the improvement in work order mismatch mechanism and also adoption of the digital design and modular tools, along with regular admission certification and rating system, we are building a dedicated pool for high-quality delivery teams. This has meaningfully improved the productivity of both project managers and designers. On interest and costs, we are even more focused on long-term fulfillment quality through measures such as fund escrow, service commitments and the greater standardization of an event collision detection, new design fees, we aim to reduce reward and delivery variability at the source, thereby improving the stability of the profitability at the project level.

Looking into 2026, as unit economics continue to improve and our delivery capability become solidified, we plan to widen our funnel for the scale expansion in a disciplined manner. Our core approach is not simply to increase traffic, but to improve the traffic conversion efficiency. First, we will continue to optimize our product portfolio so that our offerings more precisely match the needs of different customer segments. Second, we will replicate the high conversion showroom model built around our selling centers, better connecting its in-home transaction with the renovation product experience and creating scenarios with higher certainty for decision-making.

Third, we will deliver the neighborhood-focused operating model into more cities, leveraging collaboration between the brokerage agents and the renovation service providers within specific districts to improve the overall agent conversion efficiency. At the same time, as delivery becomes more standardized and the EPC costs continue to decline, improvements in customer satisfaction and reputation will create a positive feedback loop, providing a stronger foundation for the future scale expansion. Of course, it will take some time for this improvement to be fully reflected in our financial statements.

Over the next 2 to 3 years, we will further integrate data flows across design, construction and operations. By leveraging BIM and the modular components and library to build product resource capability, we aim to gradually transform the home renovation from a project-based business into a replicable and scalable industrialized capacity system. Thank you.

Your next question comes from Brenda Zhao with CICC.

My question is related to the home rental business because in the past 2 years, the business has developed rapid profit growth, which has been a pleasant surprise. However, revenue has been contracted Q-on-Q due to the impact of the accounting treatment. I believe it may be fair to assess this business from the perspective of long-term unit economics. How does the company view the long-term UE trajectory and the potential for improvement in this business?

Thank you, Brenda. Regarding our rental business, I'd like to clarify 2 key aspects: the trend in business scale, and the profitability structure. First, from an accounting perspective, the short-term revenue contraction mainly results from the change in accounting treatment for the new product offering of our Carefree Rent business, which moved from gross revenue recognition to net revenue. Under in that method, we only recognize the service fee income, which more accurately reflect our growth as an asset management service provider. This accounting treatment, along with the lighter operating model and the substantially reduced risk profile under the new product offering. Importantly, this adjustment does not have a negative impact on our cash flow or the unit level profitability per managed of the property.

If we look at the underlying business fundamentals, the scale of our managed rental unit continues to grow rapidly, both historically and looking ahead, the core operating metrics for this business, the number of units under management has maintained a strong expansion. By the end of 2025, our managed home units exceeded 700,000, representing a year-over-year increase of 62%. This growth reflects improvement in product competitiveness and the expansion of the market demand rather than any accounting change.

Second, in terms of the profitability model, we focus more on the continuous improvement of the unit economics at the single unit level. In 2025, the rental business turned profitable for the full year after previous operating at a loss. The improvement in the profitability was not driven purely by the scale expansion. Looking ahead, we continue to see the room for the profit growth driven by the structural improvement in unit economics. This improvement mainly come from several factors.

First, workforce productivity improvement, particularly improvement for the productivity of our key role, the property manager. In 2025, the average monthly number of the units acquired per property manager increased by 7% year-over-year, while the number of units managed per person increased by 42%. Second, lower customer acquisition cost per unit. This is driven by the improvement in channel efficiency and higher net conversion rates as well as stronger post-rental service experience and higher customer satisfaction, which led to improved renewal rates among both landlords and tenants, thereby reducing the cost of acquiring new customers.

Third, optimization of the product structure. As a proportion of our life asset management product increased, risk-related costs declined significantly, in particular, the upgraded product structure has made our profitability model much less sensitive to rental price fluctuation. Overall, what we are seeing is a business where scale continues to grow rapidly, unit level profitability continue to improve and operational risk continues to decline.

Looking ahead, the long-term evolution of the unit economics in the rental business will primarily be driven by product structure, upgrades that improve profitability stability and risk resilience, workforce productivity improvement, better channel efficiency, optimization of the customer acquisition costs and the continued benefit of scale expansion. From a financial perspective, we are building the rental business into a segment that is characterized by sustained scale expansion, improving profitability quality and increasingly stable cash flow. Thank you.

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

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

Hello, ladies and gentlemen. Thank you for standing by for KE Holdings, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded.

I will now turn the call over to your host, Ms. Siting Li, IR Director of the company. Please go ahead, Siting.

Thank you, operator. Good evening, and good morning, everyone. Welcome to KE Holdings or Beike's Third Quarter 2025 Earnings Conference Call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website, investors.ke.com.

On today's call, we have Mr. Stanley Peng, our Co-Founder, Chairman and Chief Executive Officer; and Mr. Tao Xu, our Executive Director and Chief Financial Officer. Mr. Xu will provide an overview of our business updates and financial performance. Then Mr. Peng will share more on our strategic developments and innovative initiatives.

Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Please also note that Beike's earnings press release and this conference call include discussions 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 conference call are in RMB. Certain statistical and other information relating to the industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial sources. Neither the company nor any of its representatives has independently verified such data, which may involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information and estimates.

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

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

Thank you, Siting, and thank you, everyone, for joining our third quarter 2025 Earnings Conference Call. In Q3, under the strategy of balancing scale and efficiency, we further optimized our business structure, enhanced operational and middle and back office efficiency through AI technology and achieved city level profitability in both our home renovation and rental business before deducting headquarter expenses. The combined contribution profit to company's total gross profit reached a record high. The costs and expenses of our core business segments were further optimized. We also significantly enhanced the execution of shareholder returns with the single quarter share repurchase spending reaching its highest level in past 2 years.

Regarding our overall financial performance in Q3, our total GTV was RMB 736.7 billion, remaining flat year-over-year. Total revenues reached RMB 23.1 billion, up 2.1% year-over-year. Gross margin declined by 1.3 percentage points year-over-year to 21.4%. GAAP net income was RMB 747 million, down 36.1% year-over-year. Non-GAAP net income was RMB 1.29 billion, down 27.8% year-over-year.

With that overview, I'd like to provide some details on operational and financial performance for each segment. Looking at our housing transaction services, we have been continuously enhancing the productivity and operational performance through the application of AI and other technologies as well as in-depth operational optimization. For our existing home transaction services, we upgraded our AI tool, [indiscernible]. As of end of the third quarter this year, high-quality business opportunities identified though [indiscernible] account for only single-digit percentage of total potential lease, yet contribute over 50% of transaction volume on our platform. On the housing supply side, we launched innovations such as agent specialization module, which agents are sent to specially manage home listing or serve the buyer based on their expertise as well as innovative services, including home staging and open house events. These efforts have enhanced the buyer conversion and the marketing and the sell-through efficiency of the home listings. For our new home transaction services, we have also continuously iterate our AI agent [indiscernible] system for intelligent operations and marketing as well as AI assistant [indiscernible].

In terms of the financial performance, revenue from its in-home transactions reached RMB 6 billion in Q3, down 3.6% year-over-year and down 10.8% quarter-over-quarter. GTV was RMB 505.6 billion, up 5.8% year-over-year and down 13.3% quarter-over-quarter. The GTV growth outpaced revenue on a yearly basis, mainly due to a higher GTV contribution from its in-home transaction facilitated by connected agents for which revenues are recorded on a net basis.

While revenue performance outpaced the GTV quarter-over-quarter, mainly due to the structural shift as the revenue contribution from the rental brokerage services increased amid seasonal fluctuations, which have a relatively high take rate. The contribution margin of existing home business was 39% in Q3, a decline of 2 percentage points year-over-year, primarily due to the relatively stable fixed labor cost amid the revenue decline. Sequentially, the contribution margin declined by 1 percentage point due to the decline in revenue exceeding the fixed labor costs. Our new home GTV reached RMB 196.3 billion in Q3, down 13.7% year-over-year and 23.1% quarter-over-quarter. Revenue from the new home transactions was RMB 6.6 billion in Q3, decreasing by 14.1% year-over-year and 23% quarter-over-quarter. Revenue performance was in line with GTV performance both year-over-year and quarter-over-quarter, reflecting our steady monetization capability in new home business. The contribution margin from new home transaction services was 24.1%, down by 0.7 percentage points year-over-year due to an increase in variable costs resulting from our agent benefit improvement last year.

On a quarterly basis, the new home contribution margin fell by 0.3 percentage points, largely due to higher variable costs and a smaller decline in fixed labor cost compared with the revenue. For our home renovation and furniture services, we continued to strengthen our core capability to support the long-term sustainable growth. On the product side, we successfully replicated our productized showroom model in multiple cities.

On the supply chain side, we expanded our centralized procurement categories and adopt localized sourcing standards and selection process, further reducing the overall unit purchase price to enhance delivery quality with focus on improving construction quality, standardizing on-site management, laying the foundation for a unified system to exercise construction site quality.

In terms of the financial performance, revenue from our home renovation and furniture business was RMB 4.3 billion, remaining relatively flat year-over-year. Contribution margin for the segment reached 32%, up 0.8 percentage points year-over-year, primarily driven by the reduced procurement costs resulting from a larger proportion of centralized purchasing and decreased labor cost resulting from enhanced order dispatching efficiency. Sequentially, the contribution margin remained relatively stable. For our home rental service business, on product front, our new 09 products have been launched in 10 cities, offering property owners diversified service options. For unit sales and occupation, our improved operational efficiency through AI-powered housing condition assessment and intelligent pricing while further promoting our quality-based traffic allocation rules to achieve faster housing turnover.

In Q3, the conversion ratio of Carefree rent business opportunities to rental deals increased by more than 2 percentage points year-over-year. In terms of the operational management, we enhanced the productivity for the property managers and other personnel through further refinement of the role specialization of labor, the integration of operational process and the empowerment of AI technology.

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

As we continue to refine the business model, we have adopted a net revenue recognition approach based on service fees for the certain newly signed properties in line with the nature of the underlying service contracts.

In Q3, our revenue from emerging and other services decreased by 18.7% year-over-year and 8.4% quarter-over-quarter to RMB 396 million.

Now moving to the other financial metrics in Q3, including other costs and expenses, profitability and cash flow. Our store costs reached RMB 663 million in Q3, decreasing by 5.8% year-over-year and 13% quarter-over-quarter, mainly due to the lower store rental costs. Gross profit dropped by 3.9% year-over-year to RMB 4.9 billion. Gross margin was 21.4%, down 1.3 percentage points year-over-year. The decline was mainly due to the structural impact from a lower revenue proportion of existing home and the new home business, which had relatively high contribution margins as well as the decrease in contribution margin from the existing home business. This was partially offset by the increase in contribution margin from the home rental services. Gross margin declined by 0.5 percentage points quarter-over-quarter in Q3, mainly due to the structural impact as the revenue contribution of new home transaction service declined.

In Q3, our GAAP operating expenses totaled RMB 4.3 billion, down 1.8% year-over-year and 6.7% quarter-over-quarter. Notably, G&A expenses were RMB 1.9 billion, relatively flat year-on-year and down by 10.3% quarter-over-quarter, primarily attributable to the decreased bad debt provisions and reduced share-based compensation expenses. Sales and marketing expenses were RMB 1.7 billion, down 10.7% year-over-year, mainly due to the lower personnel expense and reduced advertising and promotion expenses under the efficiency enhancement strategy.

On a quarterly basis, the sales and marketing expenses were down 9%, mainly driven by a reduction in labor-related costs. Our R&D expenses were RMB 648 million, up 13.2% year-over-year and 2.3% sequentially, largely driven by higher personnel expenses.

In terms of the profitability, GAAP income from operations totaled RMB 608 million in Q3, down 16.4% year-over-year and 42.6% quarter-over-quarter. GAAP operating margin was 2.6%, dropping by 0.6 percentage points from Q3 2024 and 1.4 percentage points quarter-over-quarter. The non-GAAP income from operations totaled RMB 1.17 billion, decreasing 14% year-over-year and 27% quarter-over-quarter. Non-GAAP operating margin was 5.1%, down 1 percentage point from Q3 2024, mainly due to the decline in gross margin. Non-GAAP operating margin was down 1.1 percentage points from the previous quarter, mainly due to the increase in operating expenses ratio sequentially. GAAP net income totaled RMB 747 million in Q3, down 36.1% year-over-year and 42.8% quarter-over-quarter. Non-GAAP net income was RMB 1.29 billion, falling 27.8% year-over-year and 29.4% quarter-over-quarter.

Moving to our cash flow and the balance sheet. We generated net operating cash inflow of RMB 851 million in Q3. New home DSO remained at a healthy level with 54 days in Q3. In addition to spending approximately USD 281 million in share repurchase during Q3, our total cash liquidity, excluding customer deposits payable remained at around RMB 70 billion. facing the short-term business challenges brought by external fluctuation and internal strategic transformation, we support and reward our shareholders through consistently active share repurchase to improve the efficiency of the capital operations. From the first to third quarter of this year, we spent USD 139 million, USD 254 million and USD 281 million on share repurchase, respectively, with a cumulative amount of approximately USD 675 million in this year, up 15.7% year-over-year.

As of the end of Q3, the number of repurchased shares account for about 3% of the company's total issued shares at the end of 2024. Since the launch of our share repurchase program in September 2022, we had repurchased around USD 2.3 billion worth of shares as of the end of September this year, accounting for about 11.5% of our total issued shares before the program began. We have made progress in Q3 this year in proactively optimizing our business structure, strengthening technology empowerment and enhancing shareholder return. Our forward-looking layout of the home renovation and furniture services and home rental services have both achieved profitability at the city level before deducting headquarter expenses in third quarter. The AI capabilities have shown initial results in driving the business development and improving the work efficiency of the service provider and the middle and back office personnel. We are also fulfilling our shareholder return commitment with greater intensity, repurchasing USD 281 million in a single quarter, increasing 38.3% year-over-year as the industry enters a new stage of high-quality development while taking initiatives in building a residential service ecosystem. With our combination of technological innovation, anticyclical business portfolio and highly efficient and well-structured operating system, we are well positioned to deliver great value to both customers and investors.

Thank you. Next, I would like to turn the call to our Chairman and CEO, Stanley.

Thank you, Tao. For sharing our business and financial developments for the third quarter, we are strategically shifting our growth engine from scale to efficiency. Today, I'd like to highlight some innovative initiatives we have rolled out across businesses to advance this shift.

First, in terms of our core business transaction services, externally, we see new demand from both buyers and sellers under the new norm for China housing market. Home sellers expect stronger marketing capabilities from us. Buyers are counting on us for customer-oriented insights to support their decision-making in areas such as timing, asset planning and listing comparisons. These trends place new requirements on our traditional agent skill model and agents who are great at supporting both buyers and sellers are extremely rare. Since midyear, we have been working to restructure our capabilities across both buyer and seller agents. In Shanghai, we piloted a seller and buyer agent specialization mechanism to enhance our marketing and operating excellence on the home sellers agent side first. The mechanism redefines organizational roles, commission structures and performance initiatives and offer supporting tech products. This in turn allowed buyer-side agents to prioritize quality listings and improve transaction conversion. The underlying logic is that high-quality home listings by engineers not ready made. They require skilled agents to mass market analytics, pricing, property staging, owner engagement and decision-making, precision marketing; second, inventory quality drives customer acquisition. Superior listings inherently attract more serious buyers, driving transaction speed and our brand reputation, which in turn attracts better talent to join us. Therefore, we did several things to implement this.

First, we adjusted our organizational structure and incentive mechanisms. We shifted some senior agents into hybrid roles that combine management and home seller focused responsibilities, giving them the authorities to form and lead their own teams dedicated to listing management. Under the ACN commission allocation mechanism, we raised the selling agent share from 40% to over 50%. We are maximizing incentives for top-performing agents to focus on marketing high-quality home listings. This group of home seller focused agents can earn around 25% more than before, assuming our market share remains stable. To mitigate potential pressure on buyers' agents, we reduced the mandatory [indiscernible] commission split, raised the minimum commission for selling agents and offered extra incentives for selling high score listings.

Second, we provided agents with systematic [indiscernible] and digitalized products to help them manage listings. In the past, homeowners relationship management, listing presentation and marketing relied on agents' personnel experience that made it hard to replicate and scale. We have built an AI-powered listing score system that captures and codifies the know-how required in 6 key areas: Home listing maintenance completeness; homeowner engagement depth; property condition, for example, renovation recency; listing cross-channel marketing performance; AI-powered pricing competitiveness; buyers' interest, for example, the listings online, offline viewings. These metrics have agents clearly understand what defines a high-quality listing and how to better present and market homes. Homebuyer agents can also focus on selling high score listings to drive better sales conversions.

In terms of results, in September, high score listings accounted for more than 75% of transactions. Our average market coverage in Shanghai hit record high in Q3, increased 1.2 percentage points year-over-year and 2.6 percentage points quarter-over-quarter. The experience of homeowners looking to sell quickly also improved. Many homeowners reached out to us proactively to learn how to raise their listing scores. Buyers also naturally prefer high scoring listings, creating a positive cycle that benefits everyone involved. The home seller/buyer side agent specialization in Shanghai is an important initiative designed to meet the changing needs of our customers and marks a milestone in our shift from scale to efficiency. We will continue to track its progress and explore new initiatives on the homebuyers agent side. In addition, we tried innovative approaches to make our new business more efficient. For example, in our home rental business, Q2 marked the first time we excluded headquarter costs from breakeven at the city level and Q3 is expected to contribute over CNY 100 million in profits. Carefree rent, our decentralized long-term rental business, housing businesses inherently faces challenges, including relatively low average selling prices, nonstandardized products and services, extensive service coverage and high maintenance costs, traditionally requiring heavy manpower and variable cost investment for scaling and operating. This sector has struggled with economics of scale industry-wide with no established best practices yet. As newcomers, we embraced this as an opportunity to build an AI-native operation from inception, enabling parallel development of business capabilities, frontline operations and AI intelligence. Through our organizational restructuring, process optimization and AI strategy and products, we are pioneering an AI [indiscernible] efficiency, economically sustainable model. Early results demonstrate significant improvements, offering valuable insights for our other platform business.

I'll walk you through 3 major AI-driven breakthroughs across different dimensions. First, AI has been fully integrated into our rental services business, enabling end-to-end intelligent decision-making and business operations. For rental unit sign-ups, AI now powers critical processes, including property lead identification, personnel management and deployment, property evaluation, pricing strategies and homeowner communication. For example, previously, personnel management and operational relied heavily on the various level with supervisors deciding which agent will be responsible for which area. Now through AI-driven grid management supported by our unique dynamic domain data and modeling capabilities, AI can make data-driven determinations. It evaluates factors such as the number and quality of property leads, local supply and demand relationships and personnel capabilities models. Based on this data set, it determines the optimal personnel assignments, regional coverage and organizational structure. AI can simulate up to 90,000 design scenarios per minute, automatically generating the most efficient staffing and operational strategies. This has greatly improved how we allocate our service personnel deployment, configuration and operational scope. We also use AI to guide and execute our core business strategies and that is helping us move forward fully intelligent operations. For rental unit sign-up, we rolled out AI-powered rental unit sign-up assistant that uses real-time data and algorithms to predict market demand, property inventory and price trends. It generates automated sign-up strategies and dynamic pricing recommendations, delivering tailored plans for each property through adaptive decision models as market conditions change, such as customer demand, property inventory and pricing. AI can guide our operations team to make timely adjustments. For example, when there is an oversupply of 3 bedroom units in a certain area, the system automatically triggers price controls and sign-up restrictions. When unit types are in short supply, AI reactivates dormant property leads. Our upcoming AI cloud bot will also automatically contact homeowners of these reactivated properties.

In Ningbo, where we began pilot operations in August, our workforce decreased by 10%, while new rental sign-up units grew up 10% even in the off-peak season. For rental unit leasing, our AI inventory management system frequently monitors inventory and checks over managing high-risk or low maintenance properties. It dynamically adjusts pricing and targeted discounts while optimizing traffic to speed up leasing. In Q3, these capabilities accelerated the lease-out of 350,000 units across 11 cities with 90% price adjustment adoption. These efforts generated over RMB 100 million in nationwide cost savings.

Second, we use AI and technology to solve the industry's long-standing problems with nonstandardization, enable high-quality, scalable growth. The home rental industry has several characteristics. Home listings are scattered and each home has different and complex internal conditions, making the products nonstandard. Service providers are many and their levels vary. So the workforce is also nonstandard. Market price fluctuates and traditional pricing relies on frontline staff's on-site judgment leading to nonstandard pricing. Operational processes are mostly offline and complex, making sales strategies and service execution nonstandard as well. There are the traditional constraints of the industry, but with the progress of AI, we see changes to achieve both standardization and personalization at the same time. At the property quality and risk assessment stage, we have achieved human AI integration with AI now leading the entire unit sign-up workflows. Our AI property evaluation assistant uses visual recognition and multimodel analysis to intelligently capture indoor features, assess property conditions and evaluate potential risks. It also incorporates market data to generate intelligent AI-driven pricing recommendations. Beyond analyzing photos, the system can interpret property attributes holistically, helping address challenges such as consistent product standards, varying personnel capabilities and pricing accuracy.

In the homeowner communication phase, we launched the AI negotiation assistant. This tool packages AI-driven property assessment, dynamic pricing and competitive market data into tailored home sign-up strategies and negotiation scripts, helping our service providers communicate and negotiate with homeowners more effectively. This provides a more professional and friendly experience for our clients, equipping new service providers with the tools they need to grow quickly and learn how to address nonstandard sales issues. We piloted this future in Ningbo and unit sign-up productivity rose by over 10 percentage points in Q3 compared with Q2, ranking #1 nationwide.

Third, we achieved a leap in efficiency by adopting different AI applications. During the sign-up stage, our AI reviews system has replaced manual reviews, enabling fully automated risk control. As of September, the AI review function cover 11 cities, processing each case in just 20 seconds on average, making a 60-fold efficiency gain, saving more than 33,000 work hours and intercepting more than 16,000 risky properties. In the leasing stage, we use AI to power content lead marketing, expanding lead generation while reducing labor needs. AI intelligently analyzes and identifies high-quality leads, enhancing leasing efficiency. The AI-driven operational system in our home rental services has enabled us to see the possibility of scalable, yet personalized services for previous fragmented nonstandardized demand, demonstrating the potential for traditional industries to overcome these economics of scale through technological innovation. We now integrate AI across our entire home rental services process and are replicating the system across 13 key cities. Only through continuous innovation can we navigate industry cycle. By implementing home buyer/seller agent specialization and AI-driven home rental operations. We have forged a new path that re-engineers workflows through technology and fuels scale through efficiency.

Moving forward, we will deepen AI integration across business scenarios to advance both service providers' capabilities and consumer experiences. As China's housing service industry undergoes this next evolution, we are afforded a historical opportunity to further its transformation guided by our commitment to technology power, high-quality growth and its potential to unlock infinity possibilities for modern living services.

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

[Operator Instructions] Your first question comes from John Lam with UBS.

[Foreign Language] So let me translate my questions. So for the new home business, in the past, the company has been achieving or outperforming the market in terms of the alpha. But it seems that the magnitude of the alpha has been diminishing. May I know what's the reason why? And also, how should investors look at the company new home business growth potential?

[Foreign Language] Although the near-term performance of our new home transaction business has been affected by the market volatility, we remain confident in its ability to outperform the market in the long run. China's new home market has gradually matured in the past 2 years with supply side risks steadily easing. Against this backdrop, we have shifted from a cautious approach to a more growth-driven strategy. Our new home transaction business has significantly outperformed the broader market in the past few quarters until this second quarter with a higher brokerage penetration in the industry, our broader housing transaction service network and more collaborative projects.

In this Q3, our year-over-year growth narrowed relatively to the market, mainly due to the several factors. First, customers on our platform often look at both new and existing home before making a purchase decision. Recently, the prices of existing homes have been considerably more attractive than the prices of comparable of new homes, leading both first-time buyers and the home upgrader to choose existing homes.

Second, this is a base effect. The platform's new home transaction had a relatively higher base in last Q3 as many policy-driven new home subscriptions in Q2 were transacted in Q3, causing a timing mismatching with the market data.

Third, of course, it is important to note that in recent years, our new home business has grown rapidly from a lower base as we made significant gains in brokerage penetration. The scale of our collaborative projects and our sales through network and capabilities, we estimate the brokerage channel penetration ratio in the new home market has grown to over 50% this year from approximately 30% a few years ago. In cities we operate in, the coverage of our collaborative project has expanded to over 70% from roughly 39% in 2023.

To achieve further growth in a higher base, we have several key opportunities. First, we plan to expand into more cities and broaden our target market. Second, broker channel penetration in China still lags behind developed markets, leaving ample room for growth. Third, we leverage refined operation management to enhance the service capability for the new home customers and sales efficiency as well as improve our coverage and sell-through capability for high-end products.

Now let's take a closer look at the details. First, we are piloting lighter product offerings to tap in some lower-tier cities through what we call B+ products. Our platform business still has over 150 feature and country-level market now yet to be covered. Building on our commitment to authentic listings, the B+ pilot equips local brokerage stores and agents in more cities with system capability, traffic support and commercialization tools. This lighter operational approach enables more flexible collaboration on home listings and sales and new home sales with our channel partners. As of September 2025, our B+ business has been piloted in 4 cities, and we plan to expand to over 30 cities by end of the year, unlocking additional market opportunities.

Second, we see room to grow our sales opportunity with collaborative projects. On to customer end, we will optimize content development and operational strategy for our new home business to reach more buyers and increase conversion rates. On to customer end, we will iterate our partnership models under product offerings to developers.

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

Your next question comes from Griffin Chan with Citi.

[Foreign Language] Yes, I'm going to translate my question. So this is Griffin from Citi Property Team. So how did the leasing service business managed to turn last year losses into the operating profit by third quarter this year? And what opportunity remains further improvement going forward?

Yes. Thank you, Griffin. The profitability of our home rental services improved significantly this year. Excluding headquarter locations, city level operating profit breakeven in Q2 and become profitable in fiscal Q3. First, we benefited from economies of scale from rapid growth in both SKU and revenue. The total number of managed units exceeding 660,000 by end of Q3, up 75% year-over-year. Revenue from our home rental service business reached RMB 5.7 billion in Q3, up 45.3% year-over-year. The contribution profit from our home rental services also rose significantly to nearly 500 million in Q3, up 186% year-over-year with contribution margin of 8.7%, up 4.3 percentage points year-over-year.

On one hand, the light asset model of our Carefree rent business has given us a higher margin, lower risk rental structure. Starting in Q3, the revenue from newly added rental units and renewed existing unit under Carefree rent has been accounted on a net basis.

In Q3, rental units under the net revenue accounting method made up 25% of the total units under management, up 10 percentage points quarter-over-quarter, contributing approximately RMB 470 million in revenue. This structural shift drove RMB 130 million increase in Carefree rent's Q3 contribution profit and lifted its contribution margin by 3 percentage points. At the same time, 2025 has been a year of improving operational efficiency. Streamlined and highly efficient operation have driven the reduction in several cost ratio, adding about RMB 170 million to contribution profit and increasing contribution margin by roughly 1.5 percentage points. Excluding rental costs recognized on a gross basis, the main cost of Carefree rent are labor cost, channel cost, post-rental installation and default costs. The improvement was mainly driven by the optimized operation labor cost.

In Q3, the average monthly number of units managed per property manager exceeded 130 compared with over 90 in the same period last year. In the first 3 quarters of this year, average monthly efficiency in unit sales and occupancy rose by approximately 10% and 28% year-over-year, respectively. The default cost ratio declined by 0.1 percentage points, benefiting from our strong leasing capability.

In Q3, initial leasing success rate improved by 0.9 percentage points year-over-year. So far this year, contribution profit from our Home Rental Business segment has grown much faster than operating expenses. These expenses mainly comprise headquarter and city level staff compensation and R&D with a quite low expense ratio. A series of operating management tools have consistently improved the productivity of our middle and back office personnel. The average number of units under management by each middle and back office personnel rose by 7.5% year-over-year, while the overall operating expense ratio declined year-over-year.

In the coming years, there is a significant room to continuously improve the contribution margin in our Carefree rent business. The key drivers will be the continuous growth potential of the rental unit scale of the Carefree rent and the ongoing improvement of our operational efficiency. From a per UE optimization perspective, we are diversifying our channels for renting out our property to reach broader tenant demographics, increasing the share of our in-house rental occupancy team and reducing reliance on the concentrated broker channels. This is expected to lower the per unit channel cost ratio. In addition, labor costs remain a large part of per unit UE and there is still room for further reduction of the cost ratio. We see the potential to nearly double the number of units managed per property manager, moving towards to an average over 200 units per person. Furthermore, we will keep exploring and expanding diverse value-added services with the home rental ecosystem. We will continue to invest in AI and online digital capability within our home rental service, while other operating expenses should stay relatively stable. As the business continues to scale and we further optimize per unit UE, we expect our home rental service to maintain a strong operating leverage in the year ahead. Thank you.

Your next question comes from Jiong Shao with Barclays.

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

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

In 2024, we recorded approximately 1 million existing home transactions outside Beijing and Shanghai. In these cities, home renovation contract orders generated through our agent network only accounted for around 30% of overall home renovation contract orders. Our conversion rate from existing home transaction to home renovation contract in these cities were just less than 5% compared to over 20% and 10% in Beijing and Shanghai, respectively. Our strategic rationale is clear. Larger scale expansion into additional cities will only picking once the home renovation business underlying operational capability are mature. And the model has been fully proven in the core cities. Therefore, our resources are highly concentrated in core cities at this moment, and we have not yet made a big effort to drive traffic for our home renovation business through non-Lianjia agent channel in the second and third-tier cities so far. This approach is to ensure that every step of our growth is solid and sustainable. Meanwhile, we put in place a multidimensional systematic operational framework to engage with and motivate non-Lianjia agents. It includes 3 components.

First, we aim to deepen our operation team's understanding and expertise in home renovations. Our operation teams have also shared knowledge and a proven operational capability to connect the store owners and agents, fostering an ecosystem marked by professional collaboration and shared competency.

Second, we rolled out innovative incentive program to build an online brand promotion metrics. By offering incentives such as bigger coins, we encourage more connected store agents to visit our offline home renovation stores and showcase our service through the short video, which then will also upload to the leading social media platforms such as Douyin. Since launch of this program in the late April of this year, more than 30,000 agents in over 30 cities have uploaded over 50,000 short videos. This has cultivated a positive environment of full participation and widespread promotion. Lastly, on top of improving agent capability, we are leveraging AI to boost the contract conversion efficiency. Using AI, we access key attributes of the property within the store owners coverage area such as property age, layout, condition and quantitative scores. This allows us to accurately identify high-scoring homes with a higher likelihood of generating home renovation business. Feedback from the pilot cities has been extremely positive. While high-scoring homes constitute only low single digit of the total home renovation lease, they contribute to over 20% of preliminary home renovation contracts, underscoring AI's value in boosting our operational efficiency.

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

Our next question comes from Timothy Zhao with Goldman Sachs.

My question is about your cost and expenses. Could you further elaborate what are the measures for the company to control costs and any effect or outcome that you have seen so far? And what we should expect from this cost and expenses line going forward?

Yes. Thank you, Timothy. Under the strategic guidance of operational efficiency enhancement, all businesses have ultimately implemented a series of optimization measures and achieved the phased results. Now I'd like to elaborate on the cost reduction, achievements of each business line and overall operating expenses in the third quarter of 2025. For our existing home transaction services, we continue to boost the productivity of our Lianjia team and organizational optimization has driven a notable decline in labor cost. Organizational optimization has directly led to a cost reduction with fixed labor costs in Q3 decreasing by more than 20% compared with the peak in Q4 last year. And the labor efficiency has been continuously improving.

For new home transaction services, we have both streamlined fixed labor costs and the variable cost structure through streamlining the organizational structure of new home operation team. We have achieved a reduction of more than 40% relatively in relevant fixed labor cost compared to the peak in Q4 last year.

On the variable cost side, the gross profit margin per project has been steadily increased by focusing sales strategy to maximize unit sales per single housing project. The commission speed of non-Lianjia channels has decreased by more than 1 percentage point from the peak in Q1 this year. For our home renovation and furniture business, we have effectively lowered the material cost through supply chain integration. By streamlining partner brand selection and SKU counts, we have achieved significant cost savings in procurement. Our centralized purchasing category has expanded from 4 as of Q2 to 13 as of Q3, covering core categories such as wooden doors, flooring and towels. The procurement unit price of some products has decreased by over 20%. The effectiveness of the cost optimization has been reflected in the financial report with the proportion of material-related costs as a percentage of revenue in Q3 decreasing by about 1 percentage point compared to last year's average.

For our home rental services, cost reduction has been driven by both technological empowerment and the business model refinement. We have improved the efficiency of the rental housing channel management through AI empowerment and the task specialization of the service providers. The proportion of operating labor cost to revenue in Q3 decreased by around 1 percentage point year-over-year. For store cost, we have reduced fixed expenses through the refined management and closed underperforming stores. The number of actively [indiscernible] stores has been decreased from around 5,600 as of Q4 last year to less than 5,200 at the end of Q3, a decrease of around 8%. Meanwhile, we have actively promoted the rent negotiation with existing industrial owners and achieved average rent reduction of over 10%.

Regarding the control of the operating expenses and R&D investments, for G&A expenses, we have achieved efficient cost control through the organizational optimization. On a non-GAAP basis, the G&A expenses of the home renovation business have decreased by more than CNY 100 million compared to the peak in Q3 last year. This was mainly due to the adjustment of the organizational structure. The headquarter's G&A has also been optimized based on the market conditions.

For sales and marketing expenses, both marketing spending optimization and the improvement of the labor efficiency have been implemented. On a non-GAAP basis, the sales and marketing expenses of the housing transaction business have decreased by around RMB 90 million compared to the peak in Q3 last year, mainly through the optimization of the advertising and the marketing placements. The related advertising and promotion expenses have declined by more than 20% compared to the peak in Q3 last year. The sales and marketing expenses for home renovation business have decreased more significantly by more than RMB 100 million compared to the peak in Q3 last year.

The core driving factors, including AI technology enhancing the operational efficiency of the containers and other front-end staff as well as organizational optimization that improved the workforce structure. For R&D expenses, on the non-GAAP basis, the expenses in Q3 increased by around RMB 79 million year-over-year as the scale of R&D team has expanded steadily. As of Q3, there were more than 2,300 R&D-related personnel, an increase of more than 100 compared with Q3 last year, among which the number of AI-related R&D personnel exceed 600, doubling compared to the same period last year. R&D resources continue to be tilted towards the core areas with R&D investment related to AI in Q3 exceeding RMB 150 million, nearly doubling compared to the same period last year. Our operational efficiency enhancement strategy has a clear execution path. We firmly believe that with the market environment stabilized, our continuous operation optimization will fully release the operating leverage effort.

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

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