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 prepared remarks and Q&A session, will all be in Chinese.

Simultaneous interpretation in English will be available on a separate line. To access the call in Chinese, you will need to dial in the Chinese line.

At this moment, all participants are in listen-only mode. Today's conference call is being recorded.

The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website. With us today, we have Mr.

Stanley Peng, our co-founder, Chairman, and Chief Executive Officer; and Mr. Xutao Xu, our Executive Director and CFO.

Mr. Xu will provide an overview of our business updates and financial performance, then Mr.

Peng will share more on our strategic transformation and insights. 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 their original language will prevail.

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

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 1.67 billion RMB, 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 seven quarters.

The optimization of our cost and expense structure in 2025 has been reflected in our operating profit in Q1 this year, and is expected to provide long-term positive support to our operating performance going forward. Guided by the strategic focus on balancing scale and efficiency, we have rolled out initiatives, including refining depth operations 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 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 profitability 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, reflecting the effectiveness of our refined management and cost 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 further release of operating leverage with the non-GAAP net profit margin hitting a record high for the past seven quarters.

In addition, we continue to deliver on our commitments to shareholders. During the quarter, we spend around $195 million on share repurchases, an increase 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 711.2 billion RMB, down 15.6% year-over-year.

The revenue was 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 3.5 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 1.26 billion RMB, up 46.7% year-over-year, while the non-GAAP net income was 1.61 billion RMB, 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 534.4 billion RMB, down 7.9% year-over-year and up 10.9% quarter-over-quarter.

Revenue from existing home transaction services reached 6.1 billion RMB, 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 as platform services fees.

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%, the highest level in past seven quarters. It was up 3.2 percentage points year-over-year, mainly attributable to the decline in the fixed labor cost driven by the optimization of 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 remained 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 145.9 billion RMB, down 37.2% year-over-year and 29.5% quarter-over-quarter. New home business revenue was 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 new home business was 25.7%, up 2.3 percentage points year-over-year, benefiting from cost structure optimization brought by refined operations.

It fell 2.6 percentage points quarter-over-quarter, mainly due to the high base caused by the one-off factors in the previous quarter. For home renovation and furnishing services, Q1 revenue reached 2.3 billion RMB, down 20.6% year-over-year and 35.3% quarter-over-quarter.

The year-on-year and quarter-over-quarter revenue decline was due to our proactive exit from low-quality, inefficient customer acquisition channels, as well as cities with poor UE models. The contribution margin of home renovation and furnishing business was 36.2% in Q1, up 3.6 percentage points year-on-year, mainly driven by material cost savings from our continuous efforts in centralized purchasing and tender-based local procurement, as well as labor cost 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 5 billion, 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 a lighter and lower-risk product model, with a higher proportion of 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 trajectory of our managed rental units and service capability.

As of the end of 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 the net revenue basis, which have higher contribution margins, continued to increase; second, labor costs 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 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 571 million, down 20.3% year-over-year and 19.6% quarter-over-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 4.6 billion RMB 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 three factors: first, improvement in rental services contribution margin; second, favorable mix toward 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 home revenue and improvement in existing home contribution margin.

Q1 total GAAP operating expenses were 3.3 billion RMB, reaching the lowest level in nearly three years, down 22.3% year-over-year. This was mainly attributable to the operating leverage released from improved organizational efficiency, strengthened financial discipline, and optimized marketing spending efficiency.

Operating expenses decreased by 33% quarter-over-quarter, partly due to the high base from one-time expenses related to the organizational efficiency improvement and resource allocation in the prior quarter. Specifically, general and administrative expenses were 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 base of one-time expenses in the prior quarter and lower expenses driven by the improved organizational efficiency. Sales and marketing expenses were 1.1 billion, down 39% year-over-year, mainly driven by improved organizational 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 seasonal factors and a high base of one-time expenses in the prior quarter. R&D expenses were 493 million, down 15.6%, mainly due to improved organizational efficiency and lower technical services fees.

On a quarter-over-quarter basis, R&D expenses decreased by 31.1%, primarily due to the high base one-time expenses in the prior quarter. Moving to our bottom-line performance, our GAAP operating profit was 1.27 billion RMB in Q1, compared with a profit of 591 million RMB in Q1 2025 and a loss of 147 million RMB 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 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 gross margin, and a sequential increase of 7.4 percentage points, mainly due to the decrease in the operating expense ratio and the increase in the gross margin. Finally, GAAP net income totaled 1.26 billion in Q1, up 46.7% year-over-year and 1,425% quarter-over-quarter.

Non-GAAP net income was 1.61 billion, up 15.7% year-over-year and 211.5% quarter-over-quarter. In terms of cash flow and balance sheet, we recorded a net operating cash outflow of 1.5 billion in Q1.

Our operating cash flow was lower than our profit 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 $195 million on share repurchases during this quarter, our broader cash balances, excluding customer deposits, remained at approximately 65.6 billion RMB.

Supported by our solid cash reserves, we place great importance on shareholder returns. In the first quarter, we spend around $200 million on share repurchases, with the 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 $2.7 billion on share repurchases, with the 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 will 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, avoid pursuing local optimums and short-term gains.

At the same time, we will use data and business fundamentals as basis for decision-making, maintain our clear ROI discipline for key investments, direct resources toward areas where we can better enhance customer experiences and service provider efficiency. Now, I'll hand over the call to our CEO.

Thank you, Mr. Tao...

Xu. Now, I'd like to welcome all of you for joining us at KE Holdings' 2026 first quarter earnings call.

In first quarter, we saw some encouraging early signs across property market. The existing home market, in particular, experienced a noticeable spring rebound after Chinese New Year, with transaction momentum, viewing-to-deal conversion, buyer decisiveness, and seller sentiment all improving.

In some key cities, price expectations are moderating toward rational levels, and previously pent-up move-up and trade-up demand is now beginning to clear the market in an orderly manner. That said, divergence across cities and market segments remains pronounced, and we are still in a 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 toward 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 three 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-capita commission increased 20% year-on-year, comfortably outperforming local real estate transaction markets.

Second, no compromise on scale: our platform's existing home transactions grew 12% year-on-year, non-Lianjia 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 500 million RMB year-on-year. These measurable Q1 improvements 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 scarcest. For years, China's housing market was defined by rapid growth, tight supply, and strong expectations of rising prices.

Listings were 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. The earlier brokerage industry organized naturally around listings.

For KE Holdings, we are trying to make sure that the industry's core is now within our adjustment, and listings used to be what matter most, and now it is the ability to guide decisions. Value creation is upgrading from organizing supply to delivering decision support and housing advisory services.

What consumers really need today is to make sure that they make the right decisions with high tickets, risks, and sorted information, so that they can make well-informed decisions. For buyers, decision support means helping them understand whether, where, and what truly fits.

For owners, consumers' 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 commute and living comfort? These two units each have their strengths, and which one should I get?'

For buyers, decision support means helping them understand whether to buy or not, where to buy, and what truly fits. For owners, it means helping them understand how to present value, price right, find the right buyer, and increase closing certainty.

AI will accelerate this shift. It'll rapidly commoditize pure information sorting and shallow matchmaking, while further amplifying the value of service providers who can guide decisions.

It can also turn top agents' expertise into platform capabilities. For us, our real-world scenarios, service network, transaction loops, and continuous data feedback give us the opportunity to combine with AI and build a deep moat.

The strategic restructuring we launched 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 era. Here, the key is to be more professional.

Professionalism for us is simple: it is decision support. What exactly does it take to be more professional?

Three things. First, the key organizational change toward better professionalism is to get managers back to the front lines.

We have 500 core managers and 2,534 directors who are, in theory, our most capable, highest-leverage people. Yet today, many spend over half of their time in meetings, parsing 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 consumer's real needs risks becoming an end in itself. That is why a critical part of this transformation is sending managers back to the front lines to re-understand consumers, re-understand what service provider means, and redefine their own professional values.

In Beijing, our Regional Director Zhang has done a lot of 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 owner interviews; every Saturday, he holds office at the finding. Every time he was involved, efficiency improves.

There was an owner and an agent deadlocked over a small price gap, and the deal stuck for ages. When Zhang stepped in, he stopped talking about a price and started asking, 'Why are we selling?

Where are you heading next? What is this money used for?'

He discovered that owner didn't need a better price, they need a trade-up plan. He helped them rethink their housing options, ultimately driving both the new home purchase and the existing home sale.

He feeds store and competitor data into AI to generate diagnostic reports, shifting from reading metrics to prescribing solutions. Oversight has given way to spotting specific problems and helping fix them.

Next, he's building a knowledge base across districts, store, and individual tiers, codifying 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.

The model worked when listings were scarce and deals moved fast. Today, AI is rapidly flattening the traditional agent's 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 disposition, leasing, renovation, etc., each demands a different knowledge base, service approach, and trust-building process.

True professionalism in the future will be defined by three things AI cannot do: understanding a client's real pain points and needs; decision support, helping them think through the tradeoffs—this is analytical and proposal capabilities; and delivering reliable, accountable recommendations—this is accountability for high-stakes decisions. These three capabilities can only grow in real-world scenarios.

To make our service providers more professional, first we need to do is to train them from tacit knowledge to hands-off drills and case-based reviews. The system will also capture frontline best practices and, with AI, structure them for people to study and benchmark against.

Second, judging whether a service provider is 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 non-standard 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 codify this expertise into product, tools, and processes, 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, agents can craft sharper sales plans. After listing, we feedback information that actually matters to that specific property, helping owners make informed calls on pricing, pacing, and strategy.

For owners with different needs, we are testing differentiated products through owner segmentation and listing tiering. For example, community open days, concentrated exposure, and buyer feedback.

For owners ready to sell and entering price negotiations, Commit to Sell uses 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's Desheng district had a property worth over 10 million. She was unsure in price, but more anxious about locking in a sale before months end.

In the past, this meant endless showings, price ping-pong, and stalled deals. Commit to Sell compressed everything into a clear window.

The owner put down a deposit, the listing got concentrated promotion, 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 Friday evening and closed at the owner's price.

The buyer saw an opportunity, the seller got certainty. No price slashing, just a product mechanism that 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-driven pre-decision phase long before they need an agent.

They search everywhere, but credible, neutral, structured guidance is very scarce. They need professional support as a reference in their decision-making.

We're putting our frontline leaders—managers, directors, and district heads who know the market and consumer best—on the front lines of content creation, 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, listings, transactions, and clients already in their head.

Simultaneously, before the client reaches the agent, we're 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 will 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 visits surpassing 4.12 million. This proves that tools originating from the front lines are being utilized by the business, and organizational resources will naturally flow toward real problems.

Furthermore, one city is piloting a new collaboration model: business experts define the scenarios, function staff design the skills, and the scenario engineers provide tool and API support. A three-person squad can simultaneously advance over 20 specific scenarios.

In the past, business proposed needs and waited for the development. Now, whoever best understand the scenario participates in its definition and rapid iteration.

In this way, the frontline expert's 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 and channels since last year, coupled with the new home market volatility that also impacts demand. However, we are more focused on the underlying capabilities and 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 losses narrowing significantly. For the past year, we have done substantial fundamental work in product modularization, digitalization of tools, supply chain centralized procurement, and other types of works, driving the business from being highly non-standardized toward becoming more stable, replicable, and manageable.

For leasing business, units under management reached 740,000 in Q1, maintaining rapid growth. The share of net method products rose quickly.

The profit margin contribution from Carefree Rent increased from 6.7% in the same period last year to 14.8%. Behind all these are product structure optimizations, UE management, AI empowering, and organizational process restructuring.

The leasing business proves that a seemingly fragmented, operationally heavy business can also enhance efficiency and gradually form economies of scale through AI and a process restructuring. Looking further ahead, we aim to center our efforts on communities to reconstruct long-term operational capabilities.

Stores in the future will gradually upgrading to community housing service nodes, and agents will also evolve from single-transaction roles into client managers capable of deploying platform capabilities across existing homes, new homes, leasing, renovation, design, delivery, etc., and etc. 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, the productization of buyer and seller services; number four, the adoption of AI across the organization and also its improvements on customer experience and also 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. Goals cannot be accomplished in a single quarter.

We are planning this round of transformation across a multi-year cycle. Our principles are clear: pilots come first without blind expansion; we're going to have prudent operations, ensuring core business operational quality and cash flow remains stable; and continuous iteration, constantly optimizing service provider division of labor, resource allocation, AI tools, health service products, buyer decision service layers, and etc.

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 transactions to supporting higher-quality residential decisions. 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 Q&A session.

Thank you, Stanley. As a reminder, we only accept questions on the Chinese language line.

If you would like to ask a question, please press *1 and wait for your name to be announced. If you would like to cancel your request, please press the pound key.

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

All right. First question comes from Thomas Chong from Jefferies.

Please go ahead.

Good evening, management. Thank you for taking my questions.

We noticed that the existing home market saw a spring rally in Q1. What were the main drivers, and how does it compare to previous years?

Also, is this trend sustainable?

Thank you, Thomas, for your question. Compared with previous rebounds, this round of recovery stands out in three ways.

First, it's not just a short-term volume bump driven by policy stimulus; it reflects genuine demand being released as price corrections have lowered the price barrier to homeownership. Second, it's not only a simple case of trading price for volume; we are seeing prices stabilize at this stage.

Third, it's not only buyers coming back to the market; seller expectations and supply mix are also showing incremental improvements. This recovery is more resilient than we have seen in the past.

Looking at volume and price performance, first, existing home transactions on our platform grew 12% year-over-year in Q1, and March set a new all-time monthly record, up 21% year-over-year. At the same time, core cities showed clear signs of 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 three factors driving this shift. First, it's the policy: the government signal to stabilize the housing market has been clear; measures such as tax optimization and housing provident fund adjustment 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 basis points year-over-year to 2.8%, and the spread versus mortgage rates continued to narrow.

Housing is gradually regaining its appeal. Third, on the demand side, a combination of policy support and the lower price brought previously hesitant buyers back to the market, driving the recovery in transactions.

More importantly, we're seeing market expectations and supply-demand structure improving on the margins. On the one hand, buyers are making decisions faster.

The conversion rate from viewings to transaction has improved. On the other hand, seller expectations are stabilizing, and pressure to cut prices has eased.

In Q1, the share of sellers willing to offer sharp discount for a quick sale fell by 3 percentage points quarter-over-quarter, and new listings in March were down 14% year-over-year. Looking at the transaction mix, upgrade demand remains a long-term driver.

In Q1, seasonal factors like residential registration and school enrollment, combined with 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% and became a core driver for 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.

As for 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 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-sized and mid- to high-priced homes have accounted for slightly higher share of transactions across 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 more months of data to confirm.

Thank you. Next question comes from Jiantong at CITIC Securities.

Please go ahead.

Congratulations on the non-cyclical revenue uptick for the past quarter. Here's my question for the management.

The company is advancing its strategic transformations. We noticed that you have been piloting a program called Commit to Sell in Beijing.

Could you share an update on that progress? Are there any cases that validate the impact, and can it effectively improve the transaction efficiency?

Thank you.

Thank you for the question. Some investors may not be familiar with this product yet.

Changyimai or Commit to Sell is one of the products under our homeowner side of service transformation in Beijing. It's still in its early pilot stage.

It's not a simple auction-style listing. It's a matching tool designed to help both buyers and sellers cut down on the back and forth in negotiating.

The sellers set a reserve price online, and buyers place bids backed by a deposit, and the system 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 provided some incredible valuable insights that feeds the sellers into making better decisions going forward. We have noticed that early signs are encouraging: transaction cycles have been shortened, homeowner satisfaction have been high.

That said, the sample size is still quite small, 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 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. 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, 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, we are identifying seller objectives, expectations, and property characteristics, and rebuilding our services across the entire selling lifecycle, covering listing, pricing, marketing, exposure, viewing, feedback, and bid negotiation. Commit to Sell is one of the pilot products designed for a specific group of sellers.

These products aren't a fixed lineup. 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 through 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 are 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, we will continue tracking key operating metrics, including product adoption rates, transaction efficiency, and agent productivity.

On the agent side, I want to make one point especially clear: this new model doesn't diminish the value of agents, it amplifies it. It elevates the agent's role from passing along information and relaying offers to helping sellers assess price, identify genuine buyers, and build trust and 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 small-scale piloting, continuous iteration, and data-driven validation. Over the long run, if we can keep improving the decision quality of both sellers and buyers, there is a significant room to expand the service penetration and efficiency.

The next question comes from Timothy Zhao at Goldman Sachs.

Thank you for giving me this opportunity to raise a question. My question is about the home renovation and furnishing business.

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 of the recent tendencies in this business?

Given the current KPIs of this part of the business, what exactly are the major KPIs you're focusing, and what progress have you made in that regard? Thank you.

Thank you for the question. I want to explain three reasons.

First is our business changes: we have shut down some of our traditional business parts, and 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.

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. About how do we read this decline?

As you said, this year, our focus this year is not to focus on the scale. Also, instead, we're focusing on optimizing the business model around healthy and sustainable profitability, personalized offerings under a well-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, improve conversion, and gradually enhance revenue performance.

This year, we are focused on three key areas: improving product capabilities, standardization, construction fulfillment and delivery, and upgrading our design tools to improve efficiency. On the product side, our approach is not to view customer demand as a simple tradeoff between standardization and personalization; instead, is using a two-dimensional product matrix to better address different customer needs.

Vertically, we design different packages based on budget level and service depth, covering customers with different needs, from those seeking practical solutions to those looking to upgrade their living quality. Horizontally, we break down customer highest-frequency lifestyle needs into modules such as style, storage, and soft furnishing.

This allows customers to combine modules within a 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 reuse and SKU concentration, design tools, and standardized delivery process.

In terms of construction fulfillment and delivery standardization, this year, we have extended professionalization of project managers to the worker level. For certain key types of workers, we are moving away from a relatively loose labor cooperation model to a model-based platform selection, platform evaluation, and platform coordination dispatch.

Workers with stronger delivery performance and better customer feedback can receive more jobs. At the same time, this helps us build a more stable delivery workforce, creating a positive cycle among service quality, worker income, and delivery consistency.

In March, among these professionalized workers, plumbing and electrical workers saw their average monthly order volume increase 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 and design tools.

We are promoting the full process digitalization of floor plan import, solution design rendering, online quotation, and construction drawing output. This enables us to build a closed data loop on the platform, which in turn supports the continuous iteration of our BIM tools 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 and furnishing business can stabilize and return to quality growth.

Now,

the next question, please.

Congratulations on the positive trend. We've seen clear year-over-year improvement in profit margins across the company's businesses in Q1.

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.

Gross margin reached 24.1%, up 3.5 percentage points year-on-year, and non-GAAP operating margin reached 8.8%, up 3.9 percentage points, both at seven-quarter highs. This margin improvement wasn't driven by any single business or one-off factors.

It is the result of a series of proactive optimizations 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 Lianjia agent productivity. Fixed labor costs in existing home transactions were down 24% year-on-year in Q1, which was a key driver of the margin expansion.

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, etc. In the long run, further upside will come from continued gains in Lianjia store and agent productivity and resource conversion efficiency as our business transformation goes forward.

In new home business, more refined operational management brought the overall variable cost ratio down 3.7 percentage points. Going forward, we'll innovate our service model by providing developers with full lifecycle 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 bidding.

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.

Looking ahead, as supply chain scale benefits continue to materialize and service provider productivity further improves, there's still room to optimize the unit economics of our home renovation business. In home rental services, contribution margin improved quarter-over-quarter, mainly driven by better unit economics in our Carefree Rent and a structural shift toward rental units accounted under a net accounting method, which carries a higher gross margin.

As of the end of March, 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 channel costs and streamlined operational labor; better supply chain pricing, which lowered maintenance cost ratio; and some seasonal factors as well.

Looking forward, although 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 unit economics in rental services. On the expense side, total operating expenses in Q1 hit a near three-year low.

The decline across all three expense lines was driven by improvements in organizational productivity and disciplined financial management, including refined control of marketing expense. On AI, we're maintaining a disciplined investment approach.

We continue to scale up investment in core business channels in foundational AI capabilities, while actively reviewing and reallocating resources from lower ROI projects to areas with higher long-term value creation. This allows us to keep investing in long-term capabilities on a solid financial foundation, support sustainable fashion, and continue opening up new and more efficient avenues for growth.

For the whole year, our home transaction business has built 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 stay confident in year-on-year margin improvement for the full year.

Thank you.

Thank you, Mr. Xu.

With that, we conclude our Q&A session. Thank you once again for joining today's conference call.

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 earning call to a close.

We look forward to connecting with you again next quarter. Thank you, and goodbye.