Operator: Hello, ladies and gentlemen. Thank you for standing by for KE Holdings Inc. First Quarter 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. To access the call in Chinese, you will need to dial into the Chinese language line. At this time all participants are in listen-only mode. Today's conference call is being recorded. I would now turn the call over to your host, Ms. Siting Li, IR Director of the company. Please go ahead, Siting.

Siting Li: Thank you, operator. Good evening, and good morning, everyone. Welcome to KE Holdings, or Beike's first quarter 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. For today's call, management will use English as 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.

Stanley Peng : Thank you, Siting. Hello, everyone. Thank you for joining Beike's first quarter 2024 earnings conference call. In the first quarter of 2024, the transaction volume of existing homes on our platform prevailed, surpassing that of new homes in 74 cities despite a high base rate in the first quarter of last year. The existing home transaction continued to show year-over-year growth in 15 cities. The steady growth in the existing home [Audio Gap] RMB 630 billion in the first quarter, down 35% year-over-year. At the same time, GTV on existing home and new home transactions declined by 32% and 45% year-over-year, respectively. The overall performance is expected to improve in the coming quarters. At the end of the first quarter, the total number of active stores on our platform reached over 42,500, an addition of nearly three solid stores compared with last year, primarily attributable to a substantial increase in number of net stores, in particular. Our strategy on active partnering with connect stores has paid off, with additional key partner brands joining us across Wuhan, Xiamen, Nanjing, Jilin and other cities. It also demonstrated that more industry partners are finding in rules to improve efficiency now-a-days. Since the fourth quarter of 2023, the performance of newly connected stores had also exceeded our expectations. There has also been a positive surprise in agent productivity in the new connected stores with only a handful of employees compared to those of large stores, having withdraws major market fluctuations. These smaller stores, boosted operational efficiency and community of rich capabilities far beyond our expectations. Their performance also motivated to improve our service competencies to better serve the diversified type of stores. The scaling up of agent and store network also further enhances the most fundamental infrastructure of our one-stop residential services. On the agent and store front, Lianjia Shanghai has adopted innovative business for mass to achieve growth. Looking back to 2022, our home listing coverage rate in Shanghai was around 35%. This told us there was room for improvement in our community outreach and that our traditional large store model was too heavy handed and impersonal. We advocate to a limited agent store model. We are stores and service providers with strong community ties and extensible strategic components. Over the years, we have explored many ways to make improvement on agent size. And in 2023, Lianjia Shanghai discovered more possibilities on store front, exploring various innovative practices under the large strong model with introducing nearly 60% of community mini services outlets derived from these large stores, which we call community mini stores. This streamlined approach included providing local convenience services such as printing at various small stores or mobile service kiosks and reception points located in high-traffic areas like community centers, shopping malls and subway stations. By deepening our exposure in neighborhood and establishing a close community of rational presence, we strengthened customers as well as agents' sense of security. We have achieved deeper community coverage and better identify local customer needs. In 2003, our coverage of the 3.5 million target residential households rose to 95% compared to 87% in 2022. And our home listing coverage rate in Shanghai shot from 65% to 84%. We also made new attempts to enhance the customer endurance in housing transactions. In terms of online operations, the rise of new media platform over the past few years has led more engines to leverage those channels to acquire and engage customers. Capitalize on this trend, agent and store owners of our platform also begun using tools like short videos and live streaming to present home listings, introduced residential neighborhoods and share real estate knowledge. Despite these early efforts, the lack of a new media strategy resulted in consistent customer acquisition efficiency. In response, we kicked off the Galaxy initiatives in 2022, incubating and empowering more agents and store owners to acquire customers through short videos and live streaming. By the end of the first quarter of this year, our improved in store network has grown to over 12,000 with almost 36 million followers, making it one of the largest real estate MCN networks nationwide. The traffic led to thousands of transactions last year. More importantly, this can better satisfy customer needs. Service providers can connect with a wide audience via those new media platforms which offer potential customers, more impartial interaction compared with traditional online methods. This approach gives agents edge in uncovering heightened customer needs, plus the emergence of this real estate content. Influencers is not just a trend of a result of technological advancement. Rather it reflects and results from the further specification of buyers and sellers agents within the industry. As for our offline operations, we are advancing the iteration of a series of services that directly improve customers' experience. This includes a direct connection with the housing provided fund to facilitate easier access. We also implemented measures that enhanced customer endurance by elevating our business partners' engagement such as public supervision and control program to enhance ecosystem governance and entire agent operations. Taking the [Winthrop] transaction services model, we implemented in Suzhou, as an example. Historically, customers need to go to four separate places to complete the required procedures for existing home transactions and often hand pressed to schedule appointments in advance. This internalized process also hindered our ability to ensure a seamless endurance throughout the entire transaction. So we saw ways to streamline this endurance by promoting collaboration among the government agencies, banks and related enterprises in Suzhou, alongside our technology support. All this effort provided one-store wholesale services for existing home transaction, covering transactions funds escrow, face-to-face bank mortgage, sign-ups, home title transfers, tax payments and in connection of property ownership certificates. As Suzhou successfully pioneer the one-store services model with an end-to-end wholesales transaction process. For existing homes, we plan to replicate its model in more cities and significantly improve customer endurance going forward. Regarding customer endurance in our new initiatives, there is still ample room for improvement as we delve deeper into customer needs and iterate our service products. For example, new home rental services last year, we conducted a survey involving the needs of 100,000 tenants and identified several major pinpoints, such as delay service response, non-standard housing, amenities after moving in, the high cost of changing rentals and a lack of lease termination guarantees. As a response, on March 16, 2023, we upgraded our services to include seven service offerings: timely repair; housekeeping; broadband setup; smart door lock; worry free rental change; flexible payments; and dedicated bounties. Also, we implemented fire service communities three day on conditional reform upon lease termination, guaranteed reform for rental change, a home security guarantee, compensation for unsatisfactory rental variances and the timely deposit reforms. These services benefits and guarantees are specifically designed to address customer most critical pain points. We have created a standard service fulfillment processes based on best practice in this area. The result has been a notable improvement in the standardized services, fulfillment rate, high customer satisfaction rates three days after moving and a better customer recommendation rate. The area I have just touched uncover some of these key initiatives we have been preparing over the quarters. What we are working toward is assembling a group of people to force a better pace forward. That enables us to navigate the changing times. We are looking to involve our aging store model for housing transaction services, enhance the quality and efficiency of our new initiatives and elevate overall big platform to new heights, striving to meet and address opportunities presented by the new era in China's housing market. Thank you. Next, I would like to turn the call over to our CFO, Xu Tao, to review our first quarter financials.

Tao Xu: Thank you, Stanley, and thank you, everyone, for joining us. Before we dive into the performance of Q1, I would like to quickly touch upon some updates on recent housing marketing. The housing market saw a year-over-year decline in Q1, primarily due to the high base effect from the release of the pent-up demand early last quarter, or early last year, following the dynamic. However, compared with the typical first quarter market performance, the new home market was fairly stable in this Q1. Some cities transaction volumes exceed those of the same period last year. This improvement can be partly attributable to the city specific policy optimization that further relaxed the criteria of the home buyers' eligibility. The other reason is the active entry of the first-time home buyers into the market, primarily driven by the reduced mortgage rates and the housing price adjustments. These factors further lower the home purchase cycles and costs. At the same time, due to home buyers' performance for readily available existing homes, more demand was met at existing home market. Turning to our performance in Q1. Our revenue reached RMB16.4 billion compared with RMB20.3 billion in the same period last year. Gross margin stood at 25.2% compared with 31.3% in Q1 last year. GAAP net income reached RMB432 million compared with RMB2.75 billion in the same quarter last year. And non-GAAP net income was RMB1.39 billion compared with RMB3.56 billion in the same period last year. Our Q1 performance was weaker than the same period last year, mainly due to the higher base performance from the one-time impact. It can be partly attributable to the concentrated release of pent-up demand in the same period last year. The other reason was the optimistic expectations for housing market continued to surge demand in Q1 last year. At the same time, the new home market continues experience depression. We believe the first two factors are one-time impact. And our future performance will be better reflected our business operation. Regarding the home transaction services in Q1, both new and existing home markets show a year-over-year decline, primarily due to the higher base performance from the one-time impact, as I previously mentioned. Revenue from existing home transactions reached RMB5.7 billion, down 37.6% with GTV reaching RMB453.2 million, down 31.8% based on year-over-year basis. GTV outperformed the revenue year-over-year, mainly due to a higher contribution from the GTV of the existing home transaction services facilitated by the connected agents. The revenue was recorded on a net basis. Our strategic expansion of the more connected stores played a key role in driving this growth. The contribution margin from the existing home transaction services reached 44.5%, remaining steady quarter-over-quarter, but dropped 4.6 percentage points year-over-year. The change was mainly due to the increase of fixed labor costs related to the growth of the number of Lianjia agents as the negative leverage influence from the reduced revenue. In terms of the new home transaction services, the industry is still in a risk clearance phase with supply and demand dynamics remaining subdued. CRIC shows that the sales from the top 100 developers decreased by nearly 50% year-over-year in this Q1. Since the sustained refinement of our new home business operations, we have expanded our channel partnership with upholding our risk set code. In Q1, new home GTV reached RMB151.8 billion, down 45.4% year-over-year. Revenue from new home transaction was RMB4.9 billion, dropping by 41.5% year-over-year. The outperformance of revenue over GTV year-over-year was due to our strong monetization capabilities. The contribution margin for new homes transaction services was 22.3%, falling by 4.1 percentage points quarter-over-quarter and 4.8 percentage points year-over-year. The decline was attributable to the rise in the variable commission and the negative leverage influence due to the relatively stable fixed labor costs and the lower revenue. In Q1, the commission income percentage from SOE developers was around 49%, maintaining a relatively high level. Revenue for home renovation and furniture business, home rental services, emerging and other services grew by 112.9% year-over-year in Q1, accounting for an increasing portion of our total revenue at 35% and surging by 21.7 percentage points from the same period of 2023. Our home renovation and furniture business continued to grow at a fast pace. In Q1, contracted sales reached RMB3.4 billion, up 26.1% year-over-year. Revenue reached RMB 2.4 billion, rising by 71.1% year-over-year. The growth rate of revenue outpaced that of the contracted sales. This was primarily due to the concentrated release of the pent-up demand after the lifting of the pandemic restriction in the same period last year, leading to a substantial rise in contracted sales and creating a high base of GTV, but due to insufficient delivery capacity, the revenue recognition was slow in the same period last year, led to a lower base of revenue. In terms of the highlights in the first quarter, total contracted sales in March reached nearly RMB2 billion, up around 53% year-over-year. Particularly noteworthy was the record-breaking March contracted sales in Beijing, surpassing RMB400 million. The contribution margin for the home renovation and the furniture business was 30.6%, remaining flat year-over-year and up 2.8 percentage points sequentially. This was mainly attributable to the rebound in gross margin of furniture and home furnishing quarter-over-quarter. The percentage of contracted sales contributed by our home transaction services continued to increase, representing around 51% of total GTV in Q1, making an 11 percentage points increase year-over-year. It further highlights the synergies between our housing transactions and other residential services. Moreover, our home renovation and furniture business has grown more diverse. Furniture and the home furnishing sales reached around RMB940 million in Q1, accounting for around 27.8% of total contracted sales, representing a 5.1 percentage points improvement from the same period of 2023. The contracted sales of the furniture and home furnishing retail which are outside of our home renovation package reached around RMB882 million in Q1, accounting for around 26% of total contracted sales, representing a 4.7 percentage points improvement from the same period of 2023. Starting from this year, we have begun to disclose the financials of our home rental services due to their growing skills and the significance in our business. And the revenue from this service accounted for over 10% of total revenue in the first quarter. In Q1, revenue from our home rental services reached RMB2.6 billion, up 189.3% year-over-year, mainly due to the rapid growth of the numbers of the rental units under our management. At the end of Q1, the number of units managed by our home rental services exceeded 250,000, reflecting 159.1% rise year-over-year. With the revenue generated from our home rental services, our decentralized rental management services, collected rent contributed to more than 95% of total. Other revenue sources include centralized rental apartment services, monetization of platform traffic and online rental management services. In Q1, our net revenue from emerging and other services increased by 85.3% year-over-year to RMB700 million. Next, let's move on our other costs and expenses in Q1. Our store costs totaled RMB685 million in Q1, remaining stable overall compared with the same period of 2023. Other costs decreased by 20.7% year-over-year to RMB379 million, primarily due to the reduction in taxes and the surcharges. As a result of our decreased operating leverage, our gross profit dropped by 35.1% year-over-year to RMB4.1 billion, with gross margin of 25.2%, down 0.3 percentage points quarter-over-quarter, remaining relatively stable. Year-over-year gross margin fueled by 6.1 percentage points, mainly due to the lower contribution margin from the existing and the new home transactions along with the decreasing share of the revenue from the existing home transaction. This decline in gross margin was partially offset by the larger portion of revenue from our home renovation and furniture business. In Q1, our GAAP operating expenses totaled RMB4.1 billion, showing a 21.9% year-over-year increase and 22.7% quarter-over-quarter decrease. Specifically, G&A expenses climbed by 24.5% year-over-year to RMB2 billion, driven by the higher personnel costs associated with our home renovation and home transaction services. The rise in G&A expenses on a year-over-year basis was mainly due to the provision for the bad debt, totaling approximately RMB19 million in Q1, whereas around RMB127 million of the provision for bad deb were reversed in the same period of last year. Sales and marketing expenses grew by 25.5% year-over-year to RMB1.6 billion, propelled by the rapid dysfunction of our home renovation and furniture business. Our R&D expenses amounted to RMB467 million with only a slight change compared with the first quarter last year. In terms of the profitability, GAAP income from operations totaled RMB12 million in Q1 compared with RMB2.98 billion from the same period of 2023. GAAP operating margin was 0.1% compared with 14.7% from the Q1 2023. Non-GAAP income from operations amounted to RMB960 million compared with RMB3.83 billion from the same period of 2023. Non-GAAP operating margin was 5.9% compared with 18.9% from Q1 2023. The year-over-year decline in operating margin was mainly due to the lower gross margin and the higher operating expenses ratio. GAAP net income totaled RMB432 million in Q1 compared with RMB2.75 billion from the same period of 2023. Non-GAAP net income amounted to RMB1.39 billion compared with RMB3.56 billion from the same period of 2013. Shifting to cash flow and the balance sheet metrics. We realized the net operating cash outflow of RMB950 million in Q1, largely due to the seasonal impact of the bonds payment during this Q1. On top of that, USD220 million allocated towards the share repurchase during the first quarter. Our total cash liquidity which excludes customer deposits payable, reached RMB75.6 billion. This year the EU market remains challenging. And internally, that is the year we will increase our strategic investment. Under the circumstance, we remain committed to enhancing shareholder returns, refining the company's capital structure and optimizing capital operations. Our goal is to provide shareholders with consistent returns, enabling them to navigate the economic cycles along sellers. Our actions demonstrate that we have delivered on our promise. Throughout 2023, we allocated around USD790 million to the share buyback program and recently completed the payment of the final cash dividend plan, distributing around USD400 million in aggregate. Our total shareholder returns from repurchase and dividends significantly exceeded our net income, accounting for around 159% of our net income in 2023. In 2024, as of May 10, we have allocated around USD344 million for the share repurchase. And the number of the repurchase share accounted for around 2% of the total shares at the beginning of the year. This year we are focusing on strategic investments to expand our store network, enhancing training for the frontline service providers, iterate the product technology, upgrade card services and improve middle to back office operations for our emerging business. This initiative requires more efficient financial management. As such, we are committed to supporting our business in optimizing financial resources allocation and making our efforts to help our business to achieve long-term development. Simultaneously, we will maintain our high standards for risk management and the capital allocation efficiency to ensure our investment generates better returns in the future and create long-term value to our shareholders. Thank you.

Siting Li: Operator, we can move to Q&A session.

Operator: [Operator Instructions] Your first question comes from Sophie Xiaodan Zhang with CICC.

Sophie Xiaodan Zhang : I got two questions here. First of all, could you please share your views on recent policies as well as market outlook? And secondly, since the customer acquisition channels are becoming increasingly diverse for real estate agencies, how are you going to ensure your efficiency in online traffic acquisition and especially regarding the new home transaction services? Developers started to allocate part of their sales and marketing budget on emerging media platform. So I wonder if the company has considered about investing more in video-based products or content to better reactivate used traffic.

Tao Xu : Regarding your first question, despite ongoing price adjustments in the existing home market, the overall transaction volume has remained relatively stable. The market performance in some cities even exceeded the expectations, which made us cautiously optimistic about future existing home market. Nevertheless, the new home market is still somewhat sluggish with the rollout of the policies aimed on inventory reduction. We anticipate improved liquidity on the new home market supply side and the recovery in market confidence. Let me have some further elaboration. Regarding the policies in this year, the positive policies can be classified into three categories. Firstly, policies aimed at releasing and attracting buying power such as the consolidation of the optimization of the purchase restriction in cities like Hangzhou, Chengdu and Shenzhen and removing the minimum mortgage rate. Secondly, policies facilitating their old homes for new ones and the government buying unsold homes to help adjust inventory. Thirdly, policies to optimize the supply of new homes such as directive to limit residential land supply in areas with high inventory levels. The policies are very supportive to the existing housing market. Since the beginning of the year, GTV for its new home has remained largely stable. Also not matching the higher base that as the release of the pent-up demand in the first quarter last year. It also has showed the recovery in March of the spring festival, followed by a normal seasonal adjustment in April. In April, the number of existing home transactions on our platform did not experience the rapid decline during the same period of last year, instead recording a year-over-year increase of 14%. Cities such as Shanghai, Shenzhen, Nanjing, Hangzhou, Changsha, Wuhan, Xiamen showed a notable increase. At the same time, the recent trend indicates that the weekly transaction volume has now continued to decline sequentially. The total number of the new home transaction on our platform increased by over 20% year-over-year for the first three weeks of May, while the GTV increased by over 10%, higher than the level of the decline from the higher base in the same period of last year. Meanwhile, existing home prices are still in displacement, while the market is in a state of decreasing price for increasing volume. Looking at the leading indicators, across the volume of the home chores were higher than last year's average, indicating that buyers are actively seeking to purchase homes. Meanwhile, so far in this year, the growth rate of both month-over-month and year-over-year in home listings in the top 50 key cities have a slowdown unlike in September of last year, with numbers of listing surge under the more policy loosening. There has been no similar service in this year. Overall, people in the market have become more rational. In terms of the transaction structure, the proportion of the home purchase by the first-time buyers has increased in the short-term, driving from around 30% to around 35%. This is partly due to the price adjustments and the easing policies, which have lowered the barriers of the cost for buyers, which need to, like school enrollment hierarchy of the residential permit through reregistration. In addition, issues with new home pre-sales, making of effective supply and a trend towards the luxury housing have pushed some first-time home buyers out of the new home market. Positive trends in the first-time buyers entering the market are also aiming at the front end of the how-to-upgrade chain, increasing the customer accumulation and activation. For new home market, the new home market continued to see weakness in supply and demand with low expectation. From January to April, GTV of top 100 real estate developers declined by around 47% year-over-year. This is historical low. On the demand side, potential buyers with home upgrade demand are more focused on large-sized homes. Data from China Index indicates that in key cities the proportion of the new home unit with four or more rooms has increased from 21% in 2020 to 25% this year. Additionally, a substantial demand for other type of new homes is flowing into the existing home market. On supply side, in light of taking new home sales, developers are adopting pre-cyclical business strategy, getting back from the land auction and project launch within insufficient new factory supplier and high inventory levels at the end of March 2024. Further CRIC data shows that the average inventory turnover period for the new homes in 80 cities was extended to 24.4 months. With the strengthening of policies, we believe that the expectation for new home market will improve. For your second question, this year, one of Beike's key focus areas is the construction of online infrastructure at the customer front end and the business needs acquisition. In the past, we formally invested in solving the pain points that the customers encounter when actively searching for homes through our authentic listing and the home listing centric emphasis. In today's bearish market, customers have a wider range of choices and longer decision-making periods, making it even more crucial to start from the customer perspective. We aim to provide the real and effective information and better understand and translate customer needs. Therefore, we are updating our ways of connecting with customers, our service models and the online content that we provide. Regarding the user connection methods, previously, user which is only connect with the arm of APP when they're needed. Now we have added proactive ways to connect with users, helping to better utilize both internal and external traffic channels to proactively reach out to them. For example, we use live streaming and short videos, which better language user habits. In terms of the service models, we are making service provider rather than the house itself, the first online content point for the customer. We believe that only by doing so can we better explore and understand customer needs and provide better services. On this approach, we have introduced the new online roles for the service providers, such as streamers, house selection consultants. This will help build personal brands and attract customers. On the content front, in addition to share for sale information display, we have diversified our content, including market trends in commercial area, land auction information and the property analysis. We’ve done property listing and provide professional home buying consultation services to show videos and the live streaming. One of our initiatives is Galaxy plant just as our Chairman interviewed in his letter, which aims to cultivate the new media talent from the store owners and agents on our platform, helping them acquire customers to show video and live streaming on external video platforms, enhancing both agents and the platform transaction activity. Currently, the desk planning Beike powers the 63 cities nationwide, empowering a total of over 12,000 people. The influencer network has accumulated tens of millions of the followers with more than 600 agents having over 10,000 followers each. In the first quarter of 2024, a total over 2,000 housing transactions were achieved by the influencers through the new media customer acquisition, increasing by 103% year-over-year. We have also established a comprehensive employment system for the online influencers, including online and offline courses systems and the mentorship program. This system covers the various stage of empowerment from the comp incubation through long-term operation efficiency -- efficient conversion. In terms of the content, Beike's massive housing resources provide a strong content support for the agents. Meanwhile, we're imparting agents to improve their online influence through the various methods such as the sector analysis, property valuation, dynamic maps and skills in popular tools and also the copyright. We also created accounts based on the indicators such as the followers' numbers, conversion rate and the performance matching with their traffic support and other incentive mechanisms to give more streamer sustained growth on the long-term return opportunities.

Operator: Your next question comes from Timothy Zhao with Goldman Sachs.

Timothy Zhao : I have two questions here. The first one is regarding our investments into the core home transition business. I was just wondering can management share any color on what is our key focus for this year in terms of investments and how to evaluate the ROI of investments? And we used to mention that for this year one of the big key focus is to increase the number of connected stores. Just wondering what is the latest updates? And how do you think about the efficiency impact on the existing stores from increasing connected store number? And the second question is on our outlook for the new home sales, or the new home GTV on the platform after a relatively weak first quarter. Just wondering what is your outlook here?

Stanley Peng : For your first question, in this year, we are majorly focused on the growth with enhanced quality and efficiency with our housing transaction business, actively connecting with more high-quality brands, stores and agents is one of our main investment directions. The results have surpassed our expectation in both scale and efficiency. On store connection, we have been proactively connecting with stores to our network since September last year. By end of the first quarter, the number of active stores increased by 1.4% compared to the previous quarter. In addition, over 1,000 new stores, including those being prepared for opening or signed in the first quarter. The 90-day retention rate of those newly connected stores remained at a high level of around 98%. Our market penetration has further improved, showing considerable gains in cities, for example, in Bo'ao and Yantai. Regarding the efficiency, we have not lowered entry barrier of the threshold or so-called to sacrifice quality for the sake this function. The average number of agents per new store is slightly lower than that of the platform is in stores, but it maintains steady growth. The efficiency of newly connected stores continued to rise rapidly. Other stores connected to since last September and up to March of this year. The average revenue per store was increased by 100% within six months of the operation. Moreover, by end of March, the productivity per agent in these newly signed stores reached over 90% of that in the -- in stores on the platform. In addition, we are seeing that in the newly connected stores, some small stores such as family operated stores with around the two agents have performed well due to their deep community involvement, especially considering for capital efficiency. Within three months of the connecting to network, the agent productivity into small stores was a 15% higher than the average of agent productivity of stores connected during the same period. Those competitive small stores also inspire us to further connect with the various types of stores, enhancing our ability to serve them on the platform. We aim to implement more refined stores tier management. We also achieved better-than-expected ROI for those investments for oral perspective. The stores newly connected in Q4 2023 achieved a positive ROI by March of this year. In supporting our growth in scale, we are also very cautious with our investment strategy. We primarily provide performance-based support, such as the funding, store front renovation and business development to newly connected stores rather than increasing personnel. This ensures the flexibility in our investment and streamlines our operation. For your second question, the new home market has remained tough since start of the year. In Q1, our new home GTV reached RMB151.8 billion, a 45% drop year-over-year, but still better to the market. Revenue from new home transaction was RMB4.92 billion, down 41.5% from the same period of last year. This smaller decline compared to the GTV shows our stronger monetization capabilities. We believe our new home business will continue to show greater resilience and solid performance. In Q1, we showcased the strength in multiple ways. Number one, we made a significant breakthrough in our channel service operation capabilities. This year the number of developers that achieved the strategic cooperation increased by 20% from the same period of last year. And the quality of those collaborations continued to improve, as we are expanding our coverage to most core and the large-scale state owned developers. We have already established strategic partnerships with the six out of the top 10 developers. Those high level of in-depth cooperation has facilitated our local teams to more actively pursue regional business expansion. We also made new breakthroughs in our core operating terms. This includes not only strategic initiative from the past, but both the new guaranteed payment terms that ensure the improved cash collection from our new home business. Based on those improvements, our new home collaboration project coverage ratio was 55% in Q1, an increase of 25% year-over-year. This has also led to a more stable supply of new homes. Number two, regarding our channel sell-through capability, as I mentioned earlier, we integrated our new and existing home business to develop an innovative model that make it easier for consumers to replace their old apartments with new ones. Considering customer needs, we also introduced a service like worry free repayment and the carefree renovation, collaborating with developers, banks and others to boost new home sales and drive customers' home purchase challenges. Number three, we're also strictly adhered to the risk control and the disciplined management. In Q1, new home DSO was 69 days. The commissioning advance model covered 46 of the total commission being at a high level. The percentage of commission from SOE developers remains at high at around 50%.

Operator: Your next question comes from Griffin Chan with Citi.

Griffin Chan : So my question is about home replacement policies. The whole government rolled out replacement policies to support upgrade demand. How does the management view the effect on overall housing demand? And how will Beike as a service leader in the new and existing home market to participate?

Tao Xu : So first on inventory reduction, I was very focused on the inventory reduction of so-called destocking policy, which is a positive approach in response to evolving supply and demand dynamics. The destocking policy has been reintroduced since its last implementation in the year of 2016. A new round of inventory reduction efforts is expected to help rebalance market supply and demand and improved market sentiment also stabilized the price system in the market. It will also help developers to sell of inventory and improve liquidity, supporting stabilization in the new home market and ensuring project condition. Government led the repurchase of the homes for the conversion into affordable housing will also better met the housing needs of the new urban residents. Currently, the relevant supporting policies are still in the formation stage. For example, the Central Bank will provide CNY300 billion in relending forms to support the local governments in acquiring some unsold homes and to convert them into affordable housing. More time is needed to observe the scope and impact of this policy's implementation. The other one is the major policy innovation this year regarding the destocking is initiatives to encourage residents to replace their old homes with new ones. This is the first time a policy has linked to provide the independent decision and the new homes market. This intent to stimulate the transactions and contributed the stability of the market going forward. As of now, over six cities had introduced the housing old for new policies, generally falling into two categories that is brokerage agency-led models and the government-led models through the subsidy or the acquisition of the old home through the state-owned enterprise or developers. Regarding the Beike's participation opportunities, we would like to say well developer agents and the homebuyer and agreement and also under this model. This will promote the old homes and the buyer looking in the new home listing. We have been deeply involved and actively promoting this implementation. We pioneered old for new models in Qingdao in the year of 2022 in collaboration with developers and the stores on our platform. This initiative brought innovative practice to local government by activating transactions and has inspired other city governments and the industrial association to reference and promote the Qingdao model. In Qingdao, our model has also received government endorsement and a substantial support in the form of one-stop administrative services. With our strong capabilities in its in-home sell-through and the courage of the homeowners for sell one and buy one transaction, we helped developers attract additional and incremental buyers to accelerate the sales of new homes and [indiscernible], offering a more efficient and lower rate of housing exchange experience to the client. Under our innovative, sell old homes for new one model in Qingdao in the year of 2023, we completed nearly 200 transactions. Original dormant deals were activated under this model. Currently, such model now has a worry free change has already been introduced in 12 cities. We're also engaging with developers in more cities to iterate and innovate on this model. Looking forward, we hope to explore more new methods with the government and developers to accelerate the inventory reduction.

Operator: Your next question comes from John Lam with UBS.

John Lam : Could management share a bit about decoration business and also the window home services business in terms of the progress and also any highlights?

Stanley Peng: Let me talk about the home renovation and furniture services. We achieved strong growth in our home renovation and the furniture business in Q1. As for scale, our contract sales reached RMB3.4 billion, up 26% year-over-year, with revenue growing by 71% to reach RMB2.4 billion. In March, the total contract sales reached nearly RMB2 billion, up around 53% year-over-year. The March contracted sales in Beijing achieved a historical breakthrough. On the operations side, the contribution of the contract sale attributable to the customer referral from our real estate agents in Q1 also hit its record high. This achievement resulted from the improvement of our customer acquisition ability and also the stronger delivery capability. Let me elaborate on that. First, better integration for our housing transaction and the home renovation services, highly improved our customer acquisition capability. In 2023, we aligned with our organizational structure, enabling each renovation business unit to work with brokerage stores. New return, renovation business also helps some home transactions. Customers received a rough plan and package for the home renovation before the housing transactions are completed. Our one-store residential service model is taking initial shape. Meanwhile, the improving customer acquisition requires strong delivery capabilities. Our great efforts in delivery capability over the past few years have paid off. For instance, our average construction time line dropped to 104 days in this Q1, decreasing by around 18 days compared to the same period of last year. We used a strategy that encourages healthy competition to ensure sufficient labor capabilities. We also managed key process points strictly, including identifying potential delay risks ahead of time to resolve the problem quickly under wide delays. In this year, while ensuring steady growth in our business scale, we will focus on enhancing quality by implementing one store site management services and online quality control. We aim to proactively prevent issues, reduce their occurrence and improve customer satisfaction. Regarding the Beike rental business, in Q1, revenue from Beike rental services reached RMB2.63 billion, increasing by 189.3% year-over-year, mainly due to direct increase in SKU of rental property management services. Under our Carefree Rent model, we are managing over 240,000 units by end of this Q1 compared to over 90,000 in the same period of last year. As of now, we have a total of nearly 270,000 units managed by Carefree Rent. The number of units managed under the centralized long-term apartment exceeded 11,000 by end of Q1 compared to around 7,000 in the same period of last year. In terms of efficiency improvements and the operational rate control, the occupancy rate for Carefree Rent model increased by around 2.7 percentage point year-over-year to 96.5% at the end of Q1. We significantly reduced the rate of the vacancies by increasing coverage of low-rate Carefree Rent model and better for long term within the properties. Also at the end of the first quarter, the occupancy rate of our self-operated apartments that have opened for over six months increased by around 3.8 percentage points year-over-year, reaching 94.8%.

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

Siting Li: 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.