BEKE (Minutes): Will eliminate and optimize inefficient stores and agents in Beijing and Shanghai
The following is the$KE(BEKE.US) FY25 Q2 Earnings Call Minutes. For earnings interpretation, please refer to "Beike: The Real Estate Market Cools Again, Can Beijing and Shanghai's 'Relaxation of Purchase Restrictions' Turn the Tide?"
I. Review of Core Financial Information
1. Shareholder Return Plan: As of the end of June 2025, the company has repurchased $2 billion worth of shares, approximately 10.3% of the total outstanding shares before the buyback plan began. The Board of Directors has approved an increase in the authorized amount for the new share repurchase plan to $5 billion, with an extension planned until August 31, 2028. The company will continue to return value to shareholders who grow and share in the value created.
2. Business Advancement Pace:
a. In the second quarter of 2025, the real estate market continued the recovery momentum from the first quarter but slowed down in the second quarter, recording a year-on-year decline.
b. The company's platform, patents, and store network continue to expand, accompanied by refined operations and ecosystem improvements.
c. In the first half of the year, the company's existing home and new home businesses significantly outperformed the market.
d. Non-housing transaction service revenue accounted for 41% of total revenue in the second quarter, highlighting the company's diversified growth drivers.
e. Home decoration and furnishing business and housing rental services both achieved high-quality growth.
f. The company faces the challenge of shifting its growth engine from scale to efficiency, aiming to maintain the scale of broker and store networks while improving productivity per store and per broker, as well as platform efficiency.
3. Guidance:
a. Looking ahead, the company, with its solid business fundamentals and diversified product portfolio, expects to achieve revenue performance that significantly outperforms the market.
b. AI-driven refined operations and ecosystem optimization are continuously unlocking the platform's long-term potential.
c. The company will invest effort and resources in reshaping the growth path by centralizing community operations to reshape service interfaces, leveraging AI to unleash organizational efficiency, rebuilding product logic with a customer-centric approach, and continuously shaping new paradigms in the residential service industry.
II. Detailed Content of the Earnings Call
2.1 Key Information from Executive Statements
1. Business Growth Drivers
a. Platform Network Expansion: The number of active stores on the company's platform increased by 30% year-on-year in the first half, with active non-Lianjia stores growing by 36.8% year-on-year. The number of active brokers on the platform increased by 19.5% in the first half, with non-Lianjia brokers growing by nearly 24%.
b. Existing Home Business Performance: In the first half, the number of existing home sales on the company's platform grew by 26%, outperforming the Beike Research Institute's estimated market growth rate of 19%. The share of existing home sales in total housing transaction orders on the platform increased from 51% in the first half of 2021 to 76% in the same period this year.
c. New Home Business Performance: In the first half, the transaction volume of new homes on the company's platform grew by 19%, outperforming the Beike Research Institute's estimated market decline rate of 6%.
d. Growth in Non-Housing Transaction Services: Home decoration and furnishing business and housing rental services both achieved high-quality growth. As of the end of the second quarter, the housing rental service managed over 590,000 rental units, achieving rapid growth from over 310,000 units in the same period in 2024.
2. Home Decoration Business
a. Operating Model: The strategy revolves around community-centric operations and a full-service high-end store model, with the first full-service home decoration high-end store piloted in Beijing. Designers, project managers, and workers are dedicated to specific communities, gaining deep insights into local properties and customer needs.
b. Products and Services: By analyzing customer data and insights, master design and R&D are conducted to launch flexible, quickly iterated home decoration modules, providing one-stop home decoration solutions. Community model room design and pre-contract measurement and drawing address customer pain points of uncertainty.
c. Supply Chain Optimization: Digital infrastructure significantly simplifies the selection of partner brands and SKU combinations, with a significant increase in centralized procurement ratio and a notable decrease in overall unit procurement prices.
d. Project Management and Delivery: Over 2,600 quality project managers have been identified, improving their efficiency and income. Workflows have been reshaped, introducing early-stage on-site measurements, enhancing operational efficiency.
3. Rental Services
a. Products and Technology: Products are continuously iterated to meet the diverse needs of homeowners. AI is applied to reconstruct business processes and operational funnels, including rapid collection and identification of rental conditions, intelligent pricing, and optimization of resource scheduling, inventory, housing matching, and occupancy.
b. Organization and Model: The organizational structure has been reorganized, transitioning from a "universal steward" model to six specialized roles to enhance professional skills. The product model has been optimized, shifting from a high-risk, non-standardized model to a stable rent transfer model with unified service fees.
c. Efficiency Improvement: Personal productivity significantly increased in the first half, with the average number of rental units managed per property manager significantly rising, and single-store sales in June growing by over 50% compared to the same period last year.
4. Application of Artificial Intelligence Technology
a. Overall Efficiency Improvement: The company utilizes AI-driven technology applications to enhance the productivity of stores and brokers in the listing, customer acquisition, and conversion processes.
b. New Home Business: AI-driven broker platforms optimize new home project management, and AI assistants stimulate customer demand and improve matching efficiency.
c. Housing Rental Services:
- AI is applied to reconstruct business processes and operational funnels.
- AI capabilities are used for rapid collection and identification of rental conditions and intelligent pricing.
- AI's powerful computing capabilities optimize resource scheduling, inventory, housing matching, and occupancy.
- SaaS systems are used to digitize processes, accumulating structured data to drive AI applications.
- AI-human collaboration models are deployed, where AI handles standardization, pricing, auditing, and 24/7 virtual services, aiming for AI to cover 80% of standardized work.
- The company's vision is to build an AI-driven rental platform by integrating AI, IoT, hardware, and operational processes.
d. Beike Home Business: Leveraging strong data and AI capabilities, including pricing, forecasting, floor plan optimization, and potential customer insights, to deeply understand target customer needs.
2.2 Q&A Session
Q: Could management provide an overview of the second-quarter secondary housing market and how we should anticipate the trend for the second half of the year?
A: In the second quarter, the momentum of the secondary housing market significantly slowed, with the transaction volume growth rate dropping to 2%, and the number of transactions declining by 12%. In June, transaction volume decreased by 8% year-on-year, and housing prices fell by 1.7% month-on-month. The overall national housing transactions remained stable, but market differentiation intensified, with new home sales declining by 5.2% year-on-year in the first half. Market sentiment is weak, with new policy stimulus effects diminishing, and the combined downward pressure from US-China trade tensions and price decline expectations. In July, the market downturn accelerated, with secondary housing transaction volume declining by over 5% month-on-month, and new home subscription volume dropping by 25% month-on-month. Future trends will depend on policy pace and improvements in supply-demand balance.
Q: What policy tools can we expect in the second half of the year?
A: Stronger policy support is expected in the second half. On the demand side, key cities are likely to further relax home purchase restrictions, combined with urban renewal, relocation settlement vouchers, and home purchase subsidies to release potential demand. On the supply side, the supply of high-quality housing such as fourth-generation housing and near-new stock housing will be realized, and sales restrictions may be relaxed to boost market sentiment and transaction volume. These positive policies aim to counteract the market downturn and support a shift towards recovery.
Q: In the context of the real estate industry's downturn, what has the management team done to provide value to investors, particularly in terms of market share, broker productivity, or store productivity?
A: In the context of the real estate downturn, we are committed to shifting from scale growth to efficiency and sustainability to create value for investors. By strengthening property customer management, collaboration, and matching processes, we enhance store competitiveness. Key initiatives include a points-based store incentive system and quality business district management, making the productivity of quality business district stores 1.44 times that of ordinary stores. We actively apply AI technology to enhance total factor productivity, having developed AIGC marketing and AI-driven CRM products. The intelligent AIGC marketing assistant and ARCIM system significantly improve broker customer acquisition and conversion efficiency. For example, the AI-driven CRM product "Like" is used by over 335,000 brokers in 59 cities, with penetration rates exceeding 75% in Beijing and Shanghai. In Xi'an, brokers who frequently use "Like" have a 30% higher client commission conversion rate and a 20% higher viewing conversion rate. Additionally, the Pudding AI online service system has 780,000 monthly active users in C-end gray testing, with business opportunity transaction volume growing by 59%.
Q: How does management view the growth strategy for the number of brokers and stores?
A: We will slow down the growth rate of stores and brokers, focusing more on efficiency and sustainability. Strategies will vary by city: in areas with high store network coverage, higher quality and return on investment requirements will be imposed on new stores. In a few cities with low coverage, strategic investment will continue. By the end of this year, the number of stores and brokers outside Beijing and Shanghai is expected to remain stable. In Beijing and Shanghai, inefficient stores will be integrated, and inefficient brokers will be gradually phased out.
Q: How will new real estate development models (such as corporate property sales or the promotion of quality properties) create new opportunities for Beike?
A: New real estate development models accelerate the promotion of high-quality residential and fully furnished new homes, creating new opportunities for Beike. The new models place higher demands on developers in terms of funding, project returns, demand understanding, positioning, pricing, and sales marketing, highlighting the value of Beike's full project lifecycle management services. Although the brokerage sales ratio and commission rate for new standard products in pilot cities may be lower than the old standards, as the penetration rate of new standard product brokerage sales increases, the overall impact gradually diminishes. When new standard products account for more than 30% of new project launches, the overall commission rate is expected to be on par with old standard products. Beike aims to collaborate deeply with developers, going beyond traditional brokerage channel sales to provide customized services, thereby enhancing the value of the Beike Home business.
Q: How does Beike empower developers in demand forecasting and product design?
A: Beike empowers developers in demand forecasting and product design through system modeling methods and machine learning algorithms. By eliminating subjective factors in pricing models and conducting comparable price trend analysis based on real existing home data, we help developers objectively assess price trends, set accurate prices, avoid profit loss due to mispricing, and enhance project cost-effectiveness positioning. New standard products in Nanjing and Wuhan have demonstrated independent pricing trends.
In floor plan combination forecasting, we apply machine learning algorithms, combined with potential customer behavior and historical transaction data, to predict customer demand, aiming for full product and market coverage by 2026, assisting developers in more accurately planning floor plan combinations to avoid inventory backlog. We also use potential customer models to precisely target high-intent buyers in specific areas and their demand profiles, helping developers optimize product design, reduce post-adjustment costs, and enhance product-market demand alignment.
Q: The gross margin of the home decoration and furnishing business has significantly improved year-on-year, with healthy revenue growth. What are the main growth drivers behind this?
A: The home decoration and furnishing business achieved revenue of RMB 7.51 billion in the first half of this year, a year-on-year increase of 16.5%. The gross margin reached 32.3%, up 1.3 percentage points year-on-year. The main growth drivers are the significant improvement in operational efficiency, especially at the city level. We have implemented a series of initiatives, including enhancing product and delivery capabilities, streamlining organizational structure, and amplifying management and operational efficiency. These efforts have led to continuous performance improvement, with Beijing's revenue exceeding RMB 1.5 billion in the first half, a year-on-year increase of over 30%, and continuous improvement in gross margin and city operating profit margin.
Q: Is there further room for cost optimization in the home decoration and furnishing business, and what are the strategies for city coverage or store network optimization?
A: There is significant room for cost optimization in the home decoration business. Through centralized procurement to integrate material brands and SKUs, the centralized procurement rate for main and auxiliary materials exceeded 60% in the second quarter of 2025. Labor costs have been optimized by concentrating order scheduling and project manager service areas, doubling the average monthly order volume per project manager. Sales and marketing expenses have significantly decreased due to organizational transformation and the application of digital tools, with designers' average monthly order volume increasing to over 1.2 orders. In terms of store network, we have closed underperforming large stores and piloted small high-end home decoration stores, exploring a "one-stop full-service home decoration" model to reduce store costs, increase sales per unit area, and enhance business synergy. The number of orders supported by back-office personnel increased by 70% year-on-year, and the customer complaint rate dropped to below 10%. Future focus will shift to continuous innovation in business models, products, and technology.
Q: Based on the operational experience accumulated over the past year or so, can management share Beike Home's future plans, particularly the business model to be adopted?
A: The strategic direction for Beike Home's future is to clearly adhere to a light asset business model without becoming a developer. Except for the Chengdu Financial City project and the Shanghai Fengxing New City project, the company will no longer independently operate other projects. The C2M model does not provide funding solutions. We will continue to explore a platform model, providing a full range of services from front-end to back-end for developers, construction contractors, homeowners, and other partners, including AI and Beike data-based product solutions (such as C2M product positioning and design) and integrated online and offline marketing services to achieve more efficient customer acquisition.
Q: Will there be a cap on the investment budget for individual Beike Home projects?
A: Regarding the investment budget for individual projects, we have set strict limits on the peak total investment of our own funds. Based on the amount deployed by the group as of June 30, after exiting the two self-developed projects in Chengdu and Shanghai, the company will not invest more than RMB 1 billion of its own funds. The capital occupation limit for this business will be reduced by the investment amount of these two projects, further lowering the total cap of our own funds.
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