Ke Holdings Inc

HKEX:2423

Hello, ladies and gentlemen. Thank you for standing by for KE Holdings, Inc.'s Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. Please note that today's call, including the management's prepared remarks and question-and-answer session will all be in English. Simultaneous interpretation in Chinese is available on a separate line for the duration of the call. [Operator Instructions]

Today's conference call is being recorded.

I'll 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. or Beike's Fourth Quarter and Fiscal Year 2024 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. Peng will provide an overview of our strategies and business development, and Mr. Xu will provide additional details on the company's financial results.

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 have 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 Chairman and CEO, Mr. Stanley Peng. Please go ahead, Stanley.

Thank you, Siting. Hello, everyone. Thank you for joining Beike's Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. Over the past year, China's real estate industry has much growing faster. We have seen accelerated changes, some changes are abrupt. For the past 30 years, the decision-making process for buying a home is relatively simple and the risk of making the wrong decisions were low.

The main concerns for buyers was speed. When a home become available, the question was simple, whether they could secure it. In this kind of market, brokerage companies grow by scaling up because the larger the network, the easier it was to access information, connect buyers and sellers and close deals. Buyers didn't worry much about who they are -- who they were buying from. Getting the home was what matters.

But now that home prices are no longer on a runway upward trajectory, there is more uncertainty in customer decision-making and the cost of making the wrong decision are much higher. Because of this, buyers' needs have changed. First, they want to minimize the risk of buying a home and seek greater certainty in their purchasing decisions. Second, they prioritize living well, a subject experience and feeling that's harder to capture and measure. Everyone is looking for the best possible solution.

Our job, first and foremost, is to build the capability to reduce customer decision-making risks and help them find the best option. This is also how we see AI technology, both in terms of its potential and how we apply it. Whether though AI or other tools, our goal is to help customers make the best decisions and guiding them to address various life challenges through better living solutions. Second, from the service provider standpoint, a lot of the experience and knowledge they have built up in the past no longer applies.

Consumers are asking us more questions and their concerns are more complex. They also care more about who they are buying through, how knowledgeable they are and whether or not they are reliable industry professionals. Service providers must be able to address these issues for their customers. The old approach of merely pushing listings to sell home is no longer available. Our assessment on the industry is that customers will become more selective about who they work with. Top-tier agents will increasingly replace low-performing ones and technology will give the best services providers an even greater age, accelerating industry changes. These 3 forces will reshape the market faster than ever.

Top-tier services providers will reap the rewards of great brand premium and increased efficiency gains. At the same time, the industry will invest more in those service providers to ramp up their skills. The future isn't about rely on past experiences. The growth potential of the industry lies in the new paradigm, enhancing service quality and empowering top-performing agents. This presents both an opportunity and a new demand for the platform, requiring us to more effectively support service providers and store owners in improving efficiency.

Over the past years, we have achieved scale and made efforts to improve efficiency. On one hand, we are strong in our scientific management approach. We set clear goals, break them down into precise steps and focus on key factors that are driving results. We have embedded this in our system and use digital tools to streamline management and boost efficiency. Now we need to bring these capabilities to store owners and our new businesses.

On the other hand, while the industry's digitalization still has a long way to go, breakthroughs in AI technology have opened up exciting possibilities. We now see future potential to reshape service providers' capabilities, enhance the customer experience and significantly improve our platform operational efficiency. In 2024, we launched an active platform growth strategy. As a result, the number of active stores grew by 18.3% year-over-year, reaching nearly 49,700. Our agent count rose to 445,000, increasing 12.1% year-over-year despite major fluctuations in the real estate market. The number of stores and agents connected to our platform both reached record highs in 2024, allowing us to reach more customers than ever before.

In 2024, we served 8.6 million customers. That means, on average, every hour of the year, approximately 1,000 families across the country both rented or renovated a property with our hub, having Chinese people to live well is a mission that truly matters. For the full year, our GTV totaled RMB 3.35 trillion. Total revenue hit a record high of RMB 93.5 billion, growing over 20% year-over-year.

Notably, our Existing Home Transactions businesses also reached an all-time high with GTV rising nearly 11% year-over-year to RMB 2.25 trillion. Meanwhile, despite market adjustments backed by strong trust from developers and customers. Our New Home Transaction Business generated RMB 917 billion in GTV for the year, down just 3.3% year-over-year, while total revenue grew by 10% year-over-year. Our one body, three wings strategy has achieved interim success for our home renovation and furnishing business.

We continue to pursue scale growth in 2024, while establishing a positive cycle of scale, quality and efficiency in Beijing. We completed renovation services for nearly 60,000 homes across more than 40 cities nationwide in 2024, connected with over 70,000 home renovation workers, 8,000 designers and 5,000 project managers. Our home renovation and furnishing business achieved total revenue of RMB 40.8 billion for the year, a year-over-year increase of 36% by enhancing supply chain fulfillment management and improving our systems order dispatch capabilities.

In Q4, we successfully reduced the home renovation construction time line by over 10 days compared with last year. Additionally, our enhanced in-house aftersales maintenance capabilities enable us to continuously elevate customer experience. In our home rental services, the number of rental units under management surpassed 430,000 in 2024, our revenue surged by 135% year-over-year to RMB 40.3 billion.

In terms of quality and efficiency, we have improved the experience of property owners and tenants by reshaping roles and responsibilities through refined operations. We saw significant improvements across various efficiency metrics, including the efficiency of second-time rentals and the average number of rental units manager per property manager. Regarding our Beihaojia business, we acquired land in several cities last year. We do not intend to become developers and build many houses ourselves. Our business logic aligned closely with our insights about the industry. By exploring this business, we aim to address the high decision-making risks faced by both developers and customers during the home buying process while meeting customer demand for [indiscernible]. We are committed to promoting the development of major high-quality homes within China's residential industry while mitigating project level risks for developers and other participants in the industry. This requires us to build capabilities in areas such as precise customer demand insights, deep end user engagement and data-driven decision-making.

For instance, by aggregating characteristics and needs of home sinking customers, we provide developers with targeted customer demand, enabling them to tailor their offerings accordingly and apply C2M customization. We will also set limits on heavy asset investment and gradually shift our business model towards a more ideal platform-based light asset model. In November last year, we successfully launched our product solution services project in Xi'an, the first case in which we generated service revenue through our product solution services.

In 2024, we have also made substantial efforts in improving our relationships with various partners throughout the entire ecosystem. I believe these efforts will lay a solid foundation for our long-term success. Looking ahead, we need to be more technology-driven and more human-centric. On the technology side, the rapid advancement of technologies, particularly AI is set to transform many aspects of work study and daily life, including reshaping relationships with others, altering organizational structures and changing hiring philosophies, all of which may undergo transformations.

As the interactions between people become more increasingly valuable, the essence of genuine services embordering the interest of I understand you will become even more crucial. Addressing the industry current pain points such as the shifting needs of customers for residential services, heightened decision-making uncertainty and increased expectations for service providers' capabilities, we firmly believe that advancements in AI and other technologies will effectively help us tackle these challenges. With these tools, we will be better equipped to understand customers' personalized needs, broaden the knowledge and information available to individuals and comprehensively enhance our service quality.

We will apply AI more intensively across both external and internal operations, supporting services providers in achieving high-quality interactions. This approach will enable us to deliver genuine services while also upgrading the interface through which we provide such services. On the humanistic side, we recognize that we operate within a service industry where the value of empathy, customer care and a commitment to services are paramount with wide technology can facilitate these values. It is essential that each service providers actually embodies the spirit of self-reliance, self-improvement and self-respect by providing exemplary support to frontline agents who in turn take excellent care of customers we can assure our self-worth through customer satisfaction and recognition of their needs.

The virtuous cycle translates into practice that are not only ethical but also creative. This humanistic quality will offer a new dimension to industry evolution and development, making it possible to elevate consumer experience to 10x better, increase service providers' efficiency tenfold and enhance the value created by our platform 10x greater.

Thank you. Next, I would like to turn the call over to our CFO, Xu Tao, to review our fourth quarter and fiscal year 2024 financials.

Thank you, Stanley, and thank you, everyone, for joining us. Before we dive into our Q4 performance, I'd like to briefly touch on some updates for the housing market in past year. In 2024, although the annual transaction volume of the New Home sales market was estimated to have declined by around 18%. The Chinese real estate market witnessed a significant recovery in the first quarter following the stimulus practice policies in September. According to National Bureau of Statistics, New Home sales rose by nearly 30% quarter-over-quarter and achieved a 4% year-on-year growth in fourth quarter. Meanwhile, the Existing Homes demonstrate homebuyer preference with the proportion in total real estate market transaction continuously rising, thanks to readily available feature as well as flexible supply and price adjustment mechanism.

According to Beike Research Institute, the proportion of the home GTV in total market GTV has risen from 40% in 2023 to 46% in 2024, following an increase of nearly 30% year-over-year in 2023 as the number of transactions in the New Home sales market further grew by more than 10% in 2024. Although the national transaction price of Existing Homes still declined year-on-year in 2024, the price rose by only 0.2% sequentially in fourth quarter, indicating a changing trend. With the support of the policy aimed at stabilizing in the market, home upgrade demand have become stronger or solid Existing Homes, the average area and the proportion of homes with 3 buy room and above, both have increased year-on-year in key cities.

The opportunities in the market and the Beike positive long-term growth strategy enabled us to continue making the breakthroughs in scale in 2024. Our full year revenue reached RMB 93.5 billion, up 20.2% year-over-year. Revenue from existing and New Home Transaction Services both grew year-over-year, reflecting our home transaction service solid fundamentals. Our home renovation and furniture, home rental services, emerging and other services act as a new growth engine with combined revenue rising by 64.2% year-over-year, contributing 33.8% of our total revenue in 2024, up 9.1 percentage points from 2023.

In particular, revenue from the renovation and furnishing business was RMB 14.8 billion, growing by 36.1% year-over-year and the revenue from our home rental services reached RMB 14.3 billion, up 135% year-over-year. While achieving breakthroughs in scale, we also continuously increased our investment in improving the service quality, infrastructure and researching and developing advanced technologies. We believe these efforts will lay a solid foundation for our long-term development and continue to yield returns going forward.

In 2024, our gross margin was 24.6%, and our adjusted operating expense ratio was 70.7% with an adjusted operating margin of 7.4% for the year. Our adjusted net margin reached 7.7%, bringing our full year adjusted net income to RMB 7.21 billion. Earnings quality improved as well. Our net operating cash inflow in 2024 was RMB 9.4 billion, 1.3x of our adjusted net income for the year, and DSO fell by 3 days year-over-year to 42 days.

Turning to our financial performance in Q4. Our total GTV was RMB 1,143.8 billion, representing a year-over-year increase of 55.5%. Net revenue reached RMB 31.1 billion, up 54.1% year-over-year. Gross margin declined by 2.4 percentage points year-over-year to 23%. GAAP net income was RMB 578 million, showing a year-over-year decrease of 13.8%. Non-GAAP net income reached RMB 1.34 billion, reflecting a year-over-year decrease of 21.6%.

Looking at our housing transaction services. Revenue from in-home transactions reached RMB 8.9 billion in Q4, up 47.5% year-over-year and 43.5% quarter-over-quarter. GTV was RMB 744.8 billion, rising by 59.1% year-over-year and 55.9% quarter-over-quarter. GTV growth surpassed revenue year-over-year, largely as a result of downsizing of value-added services for the homeowners. GTV outperformed revenue sequentially, mainly due to the structural change that is the revenue share of the rental broking service declined due to the seasonality.

The contribution margin from both Existing Home Transaction Services was 40.4% in Q4 representing a decline of 4.1 percentage points year-over-year, primarily due to the increased labor costs related to our efforts to improve agents' welfare and a decline of 0.6 percentage points quarter-over-quarter, mainly resulting from the strategic initiatives that increased agent incentive and variable costs.

In terms of the New Home Transaction Services, we significantly outperformed the market across various metrics. CRRC shows that the sales from the top 100 developers were relatively stable year-over-year and increased by around 6% sequentially in Q4. In comparison, our New Home GTV reached RMB 355.3 billion in Q4, up 49.3% year-over-year and 56.2% quarter-over-quarter, consistently and significantly outperforming the industry. This was mainly due to the deepening of our collaboration with developers as well as our robust and fine-tuned operational capability.

Revenue from New Home Transaction was RMB 13.1 billion in Q4, rising by 72.7% year-over-year and 69.2% from the previous quarter. Revenue outperformed GTV both year-over-year and sequentially, once again, demonstrating our strong and steady monetization capabilities in New Home Transactions. The contribution margin from the New Home Transaction services grew by 0.8 percentage points year-over-year to 25.6%, largely resulting from the strategic increase in variable commissions as we placed greater emphasis on building a harmonious ecosystem and delivering better rewards to the agent.

Sequentially, the New Home contribution margin grew by 0.9 percentage points, thanks to the leverage we gained from the revenue growth. In Q4, SOE developers contributed 58% of our New Home sales revenue. Revenue from the home renovation and furnishing, home rental services, emerging and other services grew by 38.7% year-over-year in Q4, amounting for 29.3% of our total revenue. The contribution profit of accounted for 24.3% of our total gross profit. Our home renovation and furnishing business maintained a steady growth.

In Q4, contracted sales reached RMB 5.3 billion, up 34.7% year-over-year. Revenue reached RMB 4.1 billion, increasing 12.8% year-over-year. Our contracted sales growth rate outpaced our revenue growth rate, driven by a sharp increase in concrete sales with the real estate market recovering this Q4. While revenue recognition lagged behind, the contribution margin for the home renovation and furniture business reached 29.8%, up 1.9 percentage points year-over-year, led by gross margin improvement in our furniture and home furnishing retail.

Sequentially, the contribution margin for the home renovation and furnishing business declined 1.5%, mainly due to the decline in the proportion of high-margin home renovation revenues. Contracted sales of furniture and housing furnishing retails, which are not included in our home renovation package reached RMB 1.7 billion in Q4, making up approximately 31.7% of the total contracted sales, an improvement of 4.2 percentage points from the same period of 2023.

Our home rental services business continued to grow at an accelerated pace in Q4 as revenue reached RMB 4.6 billion, up 108.7% year-over-year, benefiting from the rapid growth in the number of rental units under management. By end of Q4, the number of rental units under management exceeded 430,000 compared with over 200,000 in the same period of 2023. The contribution margin for home rental services held relatively stable at 4.6% compared with the previous quarter. In Q4, our revenue from emerging and other services decreased by 31.1% year-over-year and 9.9% quarter-over-quarter to RMB 439 million.

Next, let's move on to our other costs and expenses in Q4. Our store cost reached RMB 786 million, remaining generally stable year-over-year and growing by 11.8% quarter-over-quarter. This quarter-over-quarter increase was mainly due to the increase in the cost associated with the store renovation and maintenance. Other costs were RMB 747 million, up 36.3% year-over-year and 48.8% quarter-over-quarter, primarily driven by the increase in tax and surcharge, financial service reserves and credit losses. Gross profit rose by 39.4% year-over-year to RMB 7.2 billion. Gross margin was 23%, down 2.4 percentage points year-over-year.

The primary reason for the decline was the year-over-year decrease in contribution margins from emerging and other services and Existing Home Transaction Services. This was partially offset by stronger leverage from the relatively stable store cost and increased total revenue. Gross margin climbed by 0.3 percentage points sequentially in Q4, mainly due to the increased contribution margin from the New Home Transaction Services. In Q4, our GAAP operating expenses totaled RMB 6.2 billion, up 15.8% year-over-year and 39.7% sequentially.

G&A expenses were RMB 3 billion, increasing 11.8% year-over-year due to the increase of the personnel expenses. G&A expense by 55.8% quarter-over-quarter, mainly due to the high personnel expenses and increased bad debt provision. Sales and marketing expenses increased by 12.7% year-over-year to RMB 2.3 billion as the increase in sales and marketing expenses for home renovation and furniture business. Quarter-over-quarter, sales and marketing expenses rose by 21.2%, mainly due to the growth in marketing expenses for housing transaction services and the increase in the personnel expenses.

Our R&D expenses were RMB 739 million, up 38.4% year-over-year and 28.9% sequentially, primarily attributable to the increase in R&D for our housing transaction services and increased investments in some pioneer research projects. In terms of the profitability, GAAP income from operations totaled RMB 1 billion in Q4, turning positive from a loss in the same period of last year, an increasing of 39.1% sequentially. GAAP operating margin was 3.2%, increasing 4.1 percentage points from Q4 2023 and remaining flat sequentially. Non-GAAP income from operations totaled RMB 1.8 billion, growing 105.1% from the same period of last year and increasing 28.7% quarter-over-quarter.

Non-GAAP operating margin reached 5.6%, up 1.4 percentage points from Q4 2023 due to the decrease of our operating expenses year-over-year and down 0.4 percentage points from Q3 2024 attributable to the increase of operating expenses quarter-over-quarter. GAAP net income totaled RMB 578 million in Q4, decreasing 13.8% year-over-year and 15.5% quarter-over-quarter. Non-GAAP net income was RMB 1.3 billion, down 21.6% year-over-year and 24.6% quarter-over-quarter.

Moving to our cash flow and the balance sheet. Net operating cash inflow was RMB 5.2 billion in Q4. The New Home DSO was 34 days in Q4, which is a testament to our effective risk management. On top of approximately USD 132 million allocated to the share repurchase during Q4, our total cash liquidity remained at a high level of RMB 78.7 billion, which excludes customer deposit payable. With our robust cash reserves, we continue to reward our shareholders who have grown reserves through the active share buyback, enhancing capital operating efficiency and sharing the benefits of our development with investors.

In 2024, we repurchased around USD 760 million worth of shares which accounts for around 3.9% of the company's total share outstanding at the end of 2023. We have consistently delivered our promise to reward shareholders. Since the launch of our share repurchase program in September 2022, we have repurchased roughly USD 1.63 billion in shares at the end of 2024, accounting for about 8.6% of total company shares outstanding before program began.

Using our commitment to shareholder returns, we are pleased to announce that our Board approved a final cash dividend for 2024 of USD 0.12 per ordinary share or USD 0.36 per ADS to ordinary shareholders and ADS holders of record as of April 9, 2025. The total expected dividend payment will be approximately USD 0.4 billion and will be funded from our surplus cash on our balance sheet. With this, our total shareholder returns for 2024 will significantly exceeded our net income, representing around 130% of our net income of the year.

We intend to provide shareholders with comprehensive returns in the long term, proactive and stable manner, aiming to share the value we create together with our long-term shareholders. As we advance through 2025, our financial strategy will accelerate value creation through three imperatives.

First, ensure we make effective capital allocation to drive investment to one body, three wings strategic initiatives and technology advancements and drive sustainable growth. Second, better deploy technology to drive high financial and risk management efficiency. Third, deliver consistent and sustainable returns to our shareholders, ensuring that our growth translates into tangible value to those who invest in our vision. This is how we manage durability. We'll make sure the money we return to get future through this framework. It will simultaneously give innovation engines, having competitive moat and compound value to all of our shareholders. This concludes my prepared remarks for today.

Operator, we are ready to take questions. Thank you.

[Operator Instructions]

Your first question comes from Jizhou Dong with Nomura.

My question is about the utilization of the technology for Beike. So just now, Stanley has mentioned that Beike is able to empower its offline stores and increase its operational efficiency through technology tools such as AI property, consultant property, sourcing assistance, et cetera. So can I ask, is the management considering further introducing or collaborating with advanced AI large models such as DeepSeek to enhance and optimize the business operations of the company? Like for example, how can AI be leveraged across the different business areas such as home renovation, property recommendations and customer services to further increase the user experiences?

Okay. Thank you for your question for how AI might impact our industry by enhancing efficiency and user experience. We can think about this from three perspectives. The first is the service side and the second is supply side and the third is the platform side. From a consumer service perspective, buying and selling real estate has become more challenging for today's clients due to increased uncertainty and risk in decision-making. As a result, clients need access to data, knowledge, know-how and what we now refer to as intelligence.

AI can effectively address this issue, customer face, leading us to conclude that AI can significantly optimize the customer experience and greatly improve the quality of service on the demand side. And secondly, from the supply side perspective, we believe that AI will enhance the capabilities of skilled agents and accelerate the industry focus on high-quality supply. For the third one, from a platform perspective, AI provides platforms with more opportunity to address efficiency changes through innovation. We also emphasize that the core elements of the industry are quality, scale and efficiency.

Historically, our strategies through authentic property listing, building housing [indiscernible], standardization and our platform model have resolved quality issues on the services side. We also tackle challenges of scalability on the supply side through adoption of platform business model. However, the industry most significant challenges remain efficiency. If efficiency issues are not resolved, the profitability will also be a challenge. The emergency of AI can be seen as a production factor integrated into the value chain, potentially having us tackle quality and scale problems while also addressing efficiency challenges. This can create new opportunities for the entire platform and increase its value.

So given this conclusion, we place great importance on the capabilities and the potential of AI, and we have initiated a series of explorations. We have integrated our own residential industry data with advanced foundational model to develop our large language model [indiscernible] Home and our image large model, Dream Home, we are iterating on these models and expanding our capabilities to support a variety of applications.

Here are a few examples of the application can show for you. For the customers, we are currently conducting great box testing for put AI-powered home sinking assistant built on DeepSeek [indiscernible] and big data and our own knowledge graph with plans to open for trial in March. This 24 and 7 home seeking AI assistant combines deep industry expertise with rapid accurate understanding our user demand and ability to customize real-time solutions. It will help users to overcome the initial challenges of high early-stage decision-making costs in home searching while also helping agents to clarify client needs and improve operational efficiency.

In the real CVR home to scenario through the combination of the high precision imaging of the new generation [indiscernible] P4 camera and the Deep-Seek driven intelligence model, we can leverage a more refined special understanding capability to enhance the intelligence assessment ability for houses and improve the user experience in VR home selection and home tour.

And for the business partners, we have built a comprehensive solutions. For example, for property agents, we have conducted Xiaobei testing for AI assistant like AI property selector and AI property listing maintenance assistance in several cities. We have also launched AI-powered tools like AI marketing assistant and home sales training camp to enhance agent capabilities in client acquisition, demand identification and then personalized solutions for home renovation and furnishing businesses.

We have implemented studio, the AI design tools that can automatically generate design plans for marketing visuals, and we have our self-developed Beike system with AI-driven delivery management. We also have our cloud-based intelligence construction system that can carry our AI automated construction management monitoring, AI intelligent inspection and acceptance tools, creating almost fully AI embedded digital loop.

For organizational efficiency, we have deployed 5 digital AI agents, including, [indiscernible] achieving efficiency breakthroughs in areas such as business analysis and operational strategy support.

Let me also share some results of these applications. One, the first, our AI property service management manager already automatically handled 60% of rental property owner management tasks during the testing. Second, digital AI agents like [indiscernible] have analyzed saving 85% of their time and nearly 20% of time for operational strategy teams. The third, AI programming tools also assist in generating 30% of R&D costs. For 2025, we plan to increase our AI investment to further strengthen the foundational capabilities of our model, data and solutions while accelerating the curative applications research and development. These guys will make our various AI assistant smarter and further promote AI integration and AI native innovation capabilities throughout the organization.

Finally, AI facilitates a more efficient flow of information and knowledge, which will speed up the end of old model that rely on scale to exploit information gaps we must also break our reliance on scale. On the other hand, AI achievements make it possible for us to enter a new era. We are far from where we need to be with the developments and our advantages lies in years of accumulated industry data assets, extensive application scenarios and business validation development and early strategic planning in the industry.

In the future, we will continually expand AI's role in deeply reshaping the entire residential services process. We believe this [indiscernible] responsibility as an architect of the residential industry digital infrastructure and crucial to creating long-term value for the industry. That's my answer.

Your next question comes from Timothy Zhao with Goldman Sachs.

[Foreign Language]

[Interpreted] My question is regarding the property market outlook. As we have seen a pretty strong rebound of the property market since last September. Just wondering if management can share any insights on the recovery sustainability, especially regarding the trend year-to-date? And how management team think about the market outlook for this year? And are we going to turn more optimistic about the market?

Thank you, Timothy. In 2024, the market saw many changes. This can be summarized representative policy stimulus, new positive signals in Q4 and accelerated structural change. Let's look at this change in more detail. On positive front, 2024 has been a stronger-than-expected positive impact. Particularly the central government had the policy pivot on September 26 for stabilize the property market with more intense systematic and swiftly implement measures than before being rolled out. This policy efforts brought market resilience. In 2024, the in-home market nationwide saw decreased price for the increase in volume. According to estimates from the Beike Research Institute, in 2024, the number of in-home transaction units in China rose by around 15% year-over-year, while total GTV grew by around 2% due to the price factors, particularly with the release of this new policies on September 26, the transaction recovered quickly.

In Q4, Existing Home GTV on our platform rose around 60% year-over-year, making a stronger and more sustained rebound than ever before. Also, the price stabilized somewhat, picking up 0.2% in December compared to September, making the first quarter increase in nearly 2 years. In 2024, the New Home market nationwide continue to face challenges. According to official data, national New Home sales declined by 18%, while the New Home GTV of CRRC top 100 developers dropped by 28% in 2024. However, a robust rebound in the New Home GTV during Q4 helped bolster the market throughout the year.

Regarding the transaction structure, it is increasingly dominated by the Existing Home. In 2024, the proportion of Existing Home GTV nationwide increased to 46%, up 5 percentage points compared to the year of 2023. Notably, this percentage exceeded 50% in top 30 -- in the 30 top-tier cities. This was mainly due to the rapid decline in Existing Home prices, which made more attractive to home buyers. Meanwhile, readily available Existing Homes have diverted demand away from the New Home.

On the demand mix, the rise of nearly New and Existing Homes met increased demand of home upgrades, which is the largest segment of buyers. According to Beike transaction data, the percentage of Existing Home sales from -- with 3 bedrooms and above grew from 30% in 2020 to 55% in 2024. The proportion of nearly New Homes built with the last 10 years jumped from 27% in 2020 to 43% in 2024.

Regarding the recent market updates, let me talk about the home market first. Based on our platform data, the Existing Home market has sustained the momentum when the transaction volume rebounded mostly expected after Chinese New Year. To specifically look at the in-home transaction volume, during the 4 weeks following the spring festival, the transaction volume of it in home rose by around 40% year-over-year, among which the Tier 1 cities grew by 50%, while Tier 2 cities such as Chengdu, Ningbo and Tianjin both had a robust growth.

Notably, the big weekly transaction volume surpassed the October high following the September 26 policy stimulus, reaching the highest level since March 2023, with the market experienced a pent-up demand driven rebound. Overall, the market follows the seasonal trends with the momentum starting to moderate in the fourth week after Spring Festival, while decline was marginal, sustaining a high level. Regarding the home prices, in February, the Existing Home prices slightly decreased by 0.4 percentage month-over-month with the [indiscernible] between the notable smaller than average month decline in 2024.

We can refer to Beike Sentiment index, which we compiled based on the proportion of price increase adjustment among all listing price adjustments made by homeowners. The impact rebounded rapidly in October last year. After reaching a low point during the Spring Festival, it has been gradually recovering with 4-tier cities showing relatively higher sentiment levels and exceeding 15%. New Home market recovered mildly in the traditional off-season. During the 4 weeks after holidays, New Home subscriptions increased over 10% year-over-year. Price-wise, the New Home price stabilized sequentially in September.

Regarding the market outlook in the year of 2025, we believe market may start to bottom out in 2025. In our view, the prerequisite of overall market stabilization is achieving stability in home price. According to our survey, insufficient confidence in housing price expectations is the biggest obstacle preventing people from purchasing homes. We believe the stabilization of Existing Home price depends on two factors: first, a balanced supply and demand dynamic with healthy market liquidity. Second, increased homeowners' confidence with less people cutting prices steeply due to the urgent sales. The Beike Sentiment Index as a leading indicator would be a useful tool in this regard. The index above 20 for at least 6 months would demonstrate a market consensus on the price stabilization.

The further policy refinement will stimulate homebuyers demand, driving transaction volume recovery. In some cities, the market will shifting from price hard for volume to increase transaction with stable prices. Our recent survey indicated that proportion of buyers planning home purchase within a year has risen to a 2 years high. This reflects stronger market confidence in short term. We will continue to monitor home viewing activity and a transaction volume as the key indicators.

At last, stable Existing Home price will also help stabilize the price of New Homes, coupled with the policy optimizing New Home supply and Housing Repurchase program. This will support New Home sales and investment recovery, helping to restore developers' investment and development capability. achieving this stabilization trend will require more conventional countercyclical policies in the macro economy and the real estate sector to restore consumers' confidence and expectations.

In a neutral scenario, we expect the New Home market to realize a modest recovery in 2025, while the New Home market adjustment may continue due to some complexity of the risks, but its year-over-year decline may narrow. Meanwhile, we expect further structural divergence in the housing transaction in 2025, reinforcing the dominance of these New Homes. In particular, larger, relatively new secondary New Homes that meet buyers' home up needs will become top choices. The New Home market will accelerate supply side innovation, offering upgraded products that match the evolving demand. Thank you.

Your next question comes from Griffin Chan with Citi.

[Foreign Language]

I'm going to translate my questions. So it's about the agency business. The number of agents and store on Beike platform continues to grow. The company has made a lot of effort and investment and it is quite aggressive. What kind of growth have the company achieved in the year of 2024 with such investment? And for the year of 2025, will Beike follow the same path for growth? Or will we consider some other like AI improving the efficiency as well as having a higher growth?

Thank you, Griffin. In 2024, the main focus of the Housing Transaction Services were promoting growth and optimizing the ecosystem. With that in mind, we achieved a remarkable growth in our performance, demonstrating our ability to continuously outperform the market. Our success also helps agent and store owners in our platform partially offset the impact of market transactions. One of our key focus last year was expanding the agent and store network. We introduced the target incentive package tailored to stores of different size to attract industry players.

At the end of 2024, the number of active non-Lianjia stores on our platform exceeded 44,000 and that of active non-Lianjia agents reached 331,000, up 20% and 11% year-over-year, respectively. Notably, four big new brands joined the platform, each with over 100 stores. Our goal in expanding our network is to enable industry participants to enhance our operational efficiency. That is by leveraging our customer traffic cooperation network practically for operations and management and diversified business opportunity within the broader residential service sector.

Within 3 months of journey, the per agent efficiency of newly connected store reached over 80% of the efficiency level of those already connected stores. Also around 13% of newly connected stores could double average productivity level of the platform existing stores within 6 months when they joined the platform, becoming high productivity stores. Thus our store network function has delivered a strong investment return. The payback period for the investment for the new store connected in the first half of the year was at 6 months, with a cumulative store attrition rate of only 5% within the 6 months after the connection. With a larger network of store agents, we leveraged the digitalized scientific management to help store owners expand the home listing coverage and improve the conversion rate.

As the scale of our agent store network continue to expand, it becomes even more critical to deepen ecosystem governance and strengthen our relationship with all stakeholders. On our governance mechanism, we expanded the operation of our regional core governance council, enabling store owners to better practice in decision-making of some platform rules and enhancing engagement.

Additionally, our store point-based reward program was successfully rolled out in [indiscernible] cities. And by year-end, 46% of connect store received work benefit, average [indiscernible] in equivalent value per store. We also create tools like online store owner workshop to simplify their management process with functions such as dashboard and traffic lead management. The satisfaction level of the connect store and the store improved throughout the year, rising by 4% from Q1 to Q4.

Additionally, the monthly store attrition rate in cities, excluding Beijing and Shanghai, declined by 0.2 percentage points in 2024 compared with the year of 2023, while monthly agent attrition rate dropped by 1.7 percentage points year-over-year. [indiscernible] continues to serve as the key growth engine, a talent hub and an innovation leader in the industry will further solidify the positioning of Lianjia in 2024.

By end of the year of 2024, Lianjia had over 114,000 active agents, making a net increase over 16,000 agents, up 17% year-over-year. The average monthly attrition rate of Lianjia agents nationwide decreased by 0.7 percentage points year-over-year to a lower level of 3.4%. As transactions slowed and requirement for agents become more demanding, our solution was to leverage the large store model to enhance organization efficiency. This model was first implemented in Lianjia with average number of agents per store rising to 20 at the end of 2024.

Store structure continued to optimize with the proportion of the large store reaching over 50%, an increase of 8.6 percentage points year-over-year. The average commission per Lianjia store reached 2.53x as of the connected stores, reflecting a 5.9% year-over-year growth. Talent development remains a key investment area for Lianjia. We launched a 3-year leadership development program for Lianjia store managers. This initiative will strengthen store efficiency and help enhance the platform ability to retain top-performing store managers.

In 2025, growth and ecosystem will continue to the keywords for our housing transaction services. Meanwhile, we also strive to enhance efficiency. We will continue to ensure the steady growth in our store and agent network. Meanwhile, we will increasingly drive business growth through efficiency improvements, leveraging ecosystem collaboration and digital tools. This includes implementing a comprehensive long-term store incentive program such as a point-based reward system to convert scale advantage to efficiency gain.

Also, by utilizing more refined management tools, we will empower store owners with enhanced operational capability, improving regional penetration and helping more agents and stores to increase their income. Regarding Lianjia development, we will continue to strengthen the large store model by getting its scalability with Lianjia and promoting it to those connected stores. At the same time, Lianjia will further support growth of our 3 wings business, achieving the breakthroughs in the community-focused model for home renovation and rental services in Beijing and Shanghai, setting industry benchmark. Thank you.

Your next question comes from Eddy Wang with Morgan Stanley.

[Foreign Language]

My question is about the Home Rental business. We have achieved rapid growth in the Home Rental business. What's the key advantage to drive this strong growth? We observed that the Home Rental market remained challenging with declining rents and the persistent oversupply. How can we maintain the stability of the Home Rental business and at the same time, to enhance the profitability under such conditions?

Thank you, Eddy. In 2024, In 2024, our Home Rental business achieved a significant scale up and operational breakthroughs, particularly in our Carefree Rent services. Centered in the service and efficiency, we established a solid fundamental framework for our business model. Scale-wise, revenue of our Home Rental services reached RMB 14.3 billion, growing 135% year-over-year, primarily driven by the expansion of our Carefree rent. The number of rental units under Carefree Rent exceeded 420,000 by end of 2024 compared to over 200,000 a year ago.

As we operate a large scale of properties, we have developed a deeper understanding of the high-frequency nonstandard nature, long cycle and the complexity of the rental services. To address this, we have broken down the non-rental services to standard actions undertaken by service providers who are assigned to specific roles through the specialization, thereby improving efficiency. For instance, offline rental services such as property hover, rental inspection and face-to-face key exchange are handled by rental rewards to ensure standardized hover procedures.

While Rental Service managers handling the tenant request through centralized online measurement, providing 24/7 support. By year-end, lifetime service order accounted for over 15%, aligning better with the tenant schedules. We also deployed AI emotion reader tools to detect tenant defection and proactively improve the service mechanism. With that our property managers can focus on the rental units and occupancy without being distracted by the rental affairs.

By end of 2024, the efficiency for the [indiscernible] increased around 29% year-over-year, driving rapid growth in total housing units of Carefree Rent. Beyond organizational capability, we have developed the [indiscernible] utilizing AI technology to empower operations. From the pricing strategy for the property acquisition into management to leasing strategy, we deploy intelligent algorithms to dynamically manage traffic, pricing and the marketing strategy and enhancing labor efficiency and asset turnover. For example, [indiscernible] cities, the system has increased operating efficiency of the service providers and the managers by around 30%, improved the property turnover rate by 7.7% and shortened the turnover cycle by 11.3% since its launch.

From a financial perspective, our Rental business saw a sequential improvement in contribution margin in Q4. As the impact of the Q3 summer rental peaked [indiscernible], the Carefree Rent experienced a quarter-over-quarter decline in new home signups and leasing. This led to a decline in expense for the operational staff as a percentage of net rental income, resulting in a marginal improvement. On a full year basis, core operational metrics of the Carefree Rent improved significantly. Enhanced tenant service boosted the customer retention. The customer compliance rate at the end of the year decreased by more than 20% compared to the beginning of 2024.

And we also conducted cost structure optimizing, improved the service quality drove the 2024 tenant renewal rate to 54.4% and a 2 percentage point increase year-over-year, reducing the channel cost of re-leasing. Regarding the management of the rental cost due to the vacancies, on one hand, we focus on enhancing rerenting capability. This helped significantly reduce turnover time -- even in the Q4 off season, the average vacancy period decreased from nearly 15 days at the beginning of the year to under 12 days in Q4.

On the other hand, we continuously upgrade our product model. The coverage of new product model, which incur no vacancy period continued to rise in Q4. This model enhanced our resilience against the rental price volatilities and reduced the vacancy risk. The deposit cost per unit of our Carefree rent model also dropped. This was mainly due to the increased initial leasing success rate, which rose to over 80% in 2024, up by 8 percentage points year-over-year.

For the year of 2025, first of all, we still have the high hope for the number of rental units managed under Carefree rent. Meanwhile, we will continue to balance scale and operation. To that, we need to strengthen our value proposition for both tenants and property owners. This key lies in heightening our service quality and boosting renting efficiency. For tenants, we will further refine our low specialization model and tailored service standards for different customer segments. For leasing efficiency, we will focus on the tenant development in leasing channels, leverage AI to enhancing sector leasing efficiency and expanding traffic channels and value-added services such as cosmetic housing decoration to increase the leasing certainties. Thank you.

Your next question comes from Sophie Zhang with CICC.

[Foreign Language]

My question is regarding the Home Renovation business. The Home Renovation segment has maintained solid growth during the past year after surpassing the revenue threshold of RMB 10 billion in 2023. So could management share the main drivers behind the growth and also the strategic plan for the business segment in 2025?

Thank you, Sophie. In 2024, our Home Renovation and Furniture business achieved robust growth. In terms of scale, our revenue reached RMB 14.8 billion in 2024, up 36.1% year-over-year. Contracted sales amounted to RMB 16.9 billion, making a year-over-year increase of 27.3%. Contracted sales exceeded RMB 3 billion in Beijing, RMB 2 billion in Hangzhou and RMB 1 billion in Shanghai and Chengdu. 5 other cities also achieved contracted sales over RMB 500 million each. As for the profitability, the contribution margin for the Home Renovation and Furnishing business reached 30.7% in 2024, an improvement of 1.7 percentage points compared to the same period last year.

Taking Beijing showcase, in 2024, the contribution margin for the Home Renovation and Furniture business reached approximately 35% and the pretax profit margin, excluding headquarter cost charge reached over 5%. The breakthroughs in our Home Renovation and Furniture business are primarily attributable to the highly efficient synergies between our Housing Transaction Services and the new business as well as our enhanced construction delivery capability and support from our underlying digital platform.

Let me share some additional details. First, deeper integration of our Housing Transaction Services and Renovation Services significantly strengthened our customer acquisition ability and drove the rapid growth in contracted sales. We encouraged our agents to recommend our new business by a point-based incentive model. As a result, this has been an increase in the proportion of the concrete sales that agent referrals to the total concrete sales. Second, as our contracted sales grow, we need to strengthen our delivery capabilities. To accomplish this, we optimize dispatch efficiency and workflow, further shortening the contracting time lines. Our average construction time from 94 days in Q4 2024, representing a decline of over 10 days in the same period of last year.

Meanwhile, we continue to integrate our home star system and launched version 2.5 nationwide. Nationalizing the product management and the unifying draw rules, we have improved the system underlying data foundation. This ultimately enables us to produce ultimate design construction drawing and price codes and unified online material scheduling. About the business outlook for the year of 2025, we have achieved further breakthroughs in business scale last year and introduce our core goal for our full service renovation business is to enhance product strength and improve delivery quality with a customer-centric approach and improve management and operational efficiency.

To that end, we intend to implement the following key initiatives. First, improve product strength with this model integration and a showroom upgrade. We plan to establish a strong brand image as a full-service home renovation provider. Based on our insight into the customer needs, we aim to provide a comprehensive renovation solutions rather than simply selling the different products. At the same time, we expect to upgrade our showrooms. We plan to implement showroom as a core display of our offline store. We will collaborate with professional designers to create related showroom and display various rendering to enhance the offline experience for the customers.

Second, enhance delivery capability and promote professional of the product managers. We believe that long-term stable cooperation with project managers is a fundamental guarantee for the quality of the home renovation delivery. We intend to take the full-time project manager as a core to enhance delivery quality, and we will motivate the initiatives through the order allocation incentive mechanism to improve the service provider delivery satisfaction and reduce customer compliance rates. Meanwhile, project managers should be responsible for the delivery quality and orders recommended by customers.

Third, we enhanced the operational efficiency. We have found previously there were service providers connecting with the customer but leading the key person in charge. With that, we have defined the store manager as the first manager who is fully responsible for the customer needs, conversion, cost delivery and business management, achieving an end-to-end management loop. We further defend designer as the first person in charge of the renovation solutions and the conversation. We will strengthen designer training and conduct a professional certification to enhance the capability of the full-service home renovation design skills.

We also defined the project manager as the first person in charge of the cost delivery that will focus more on the overall management of project construction period and construction quality. At the same time, we place greater emphasis on cultivating business districts. We intend to focus on key business history, gain thorough understanding of the house layout structure and common renovation programs in advance and make the service scope of centers and project manager more concentrated, thereby improving the service efficiency and quality. We have always believed that quality is the foundation of the Home Renovation and Furniture business. On our solid foundation and a strong and long-lasting building be constructed, we will continue to move forward in our pursuit of quality with even greater determination and confidence in our future development path. Thank you.

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

Thank you, operator. 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.