Earnings Call: Q2 2021

Aug 11, 2021

Earnings release

Hello, ladies and gentlemen. Thank you for standing by for KE Holdings, Inc. 2nd Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Matthew Zhao, IR Director of the company. Please go ahead, Matthew. Good evening and good morning, everyone. Welcome to KE Holdings Inc. Our Baker's 2nd quarter 2021 earnings conference call. The company's financial and operating results were published in the press release earlier today and we are posted on the company's IR website, www.investors. Ke. Call. On today's call, we have Mr. Stanley Yongdong 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 developments, 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 Baker'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. With that, I will now turn the call over to our Chairman and CEO, Mr. Stanley Peng. Please go ahead, sir. Thank you, Messer. Hello, everyone. Thank you for joining us on our conference call today regarding our performance in the Q2 of 2021. This is our first earnings call since the passing of our visionary Founder and the Permanent Chairman, I'm Reuters Mr. Zuo, who was also referred to as Nao Zuo throughout the industry. And that has been the most significant event that took place in the Q2 of Weibo. We mourn his loss not only because he has been a founder who set a mission to our company, but also because we have such an inspirational leader and trailblazer who ask us To explore the future and create value for the housing industry, Luo Zu has been an invaluable asset With a clear focus on promoting industry progression, Pei took decisive actions as an industry Practitioner and he was a true leader who had urged us to reckon the more meaningful questions Like how we can change the industry and how we create value for consumers and the society, Laozhu has inspired us to self improve the visionary, net In memory of Lazzuo, we will continue to make dedicated efforts to fulfill our mission to providing admirable service, Joyful Living. We are deeply grateful for and motivated by the condolences and the support we received following Laozhou's pricing. We also appreciated Laozhou's family for their trust to the management by granting the irrevocable POA of the voting rights of their Class B ordinary shares to the company, Baihui Partnership, to which Ms. Yigang Shen and myself serve as initial partners. Laozhou's family, together with executive directors and the core management members, I have also agreed to a 1 year voluntary share lockup of their holding. After the law was passed, we fully understand our goal And we will rise to face a challenger and we will continue to create value for our consumers, service providers, Employees and shareholders, turning to our business operations. Let's first look at take a look At the micro policy and market environment, in the past quarter, regulatory authorities expressed their views and opinions in various areas such as antitrust and data security and issued a series of policies and guidance opinions in multiple industries. During this period, we have been honored to have multiple opportunities to communicate directly with the relevant government authorities and have gained their recognition and respect for our efforts to improve the industry throughout the interactions. At the same time, we have taken the opportunity to look internally and engage in self reflection and introspection. As a result, We have further solidified our ongoing belief that our business model will not be feasible without the benefits from being in such a great country and in this great era. As we move forward, we will continue to reflect our thoughts on the 2 key questions, namely how we can change the industry and how we can take on more social responsibilities. Regarding the housing industry, recently many cities and regions have introduced various pool cooling measures such as loan quarters, price caps, Panching of the housing market in various cities, the path of existing home sales growth in many cities Started to slow down since May, singularly the beginning of a market correction cycle and a more stabilized growth period For the company, the rapid development of China's economies over the past 30 years spurred fast Growth in new and existing home sales as well as demand for home renovation services with overlapping and Interconnected waves of the growth among segments in a time with more balanced housing demand And supply and more stabilized market expectation for property price, we expect 3 major structural trends and opportunities, including the industry's focus on shift from houses To customers and from transactions to services and demand from consumer Has moved from home purchases to high quality living. In the housing industry, relative inefficiencies Continue to persist with overall low user satisfaction and lingering problems such as lack of standardization, digitalization and the Internet penetration. In light of this, we do not expect Short term market or corrections to affect the continued long term firm demand for housing consumers' aspiration For more joyful living conditions, our journey over the past 20 years tell us that market corrections create In 2008, we introduced comprehensive scientific management For our organization, in 2011, we spread head incentive listing. In 2014, we initiated our nationwide expansion. And in 2017, we launched The platform strategy, whenever the industry goes through a transformation phase, we ask ourselves If the industry would be the same with or without Baker and make decisions from a long term perspective, Clearly, the industry will not be where ADE is today without its market corrections and the advancement that follow. During the industry inflection, we are again looking inward, like what we have been doing over the past 20 years To seek strength and explore opportunities to withstand market validates And create lasting future value, we will prove to the market that we are building a capable, Sustainable and social responsible enterprise that upholds an uplifting culture And we aim to create value for consumers and our industry despite the relative market We believe we can generate more and more values In the housing domain, we hope our long term commercial values that are built around hope will continue to bring 1 stop shop Quality housing services for the 300,000,000 plus families in China. Next, Let's look at our business progress in the second quarter and the first half of twenty twenty one. The number of stores on our platform increased to 15,268 in the 2nd quarter, representing 25% year over year growth. Approximately 30% of new stores opens Both were from our current Canadian store owners. The number of stores with a trailing 12 month GTV of over RMB50 1,000,000 exceeded 19,500, Accounting for 37% of the total stores, an increase of 10% quarter over quarter. In the first half For 2021, the 2 year quarter of GTV per store, both the Loyola stores and 3rd party Canadian stores were 20.3% and 15.1%, respectively, as we shifted our focus in the second quarter To talent retention of the peak recruiting season in Q4, we grew the number of agents by 20% year over year to 548,000. The agent attrition rate Internet stores on the platform dropped to 8.1% in the first half of twenty twenty one from 9 0.6% in the first half of twenty eighteen. The enhanced store management and agent retention. We helped 45% of Canadian stores to fulfill more than 30,000 store assistant positions. In the first half of twenty twenty one, we implemented agent support initiatives for agents on our platform, which helped improve agent satisfaction and retention. In the Q2, according to our survey, The number of agents that feel safe to work on the platform with others and the compliance to platform rules increased were 12% compared with that at the end of 2020. Average MAUs, including our MAU on platform, apps And WeChat Mini Programs reached RMB 52,100,000 in the 2nd quarter, up 33.5 percent from which same period last year as we continue to improve our brand recognition. Turning to our existing home transaction services. According to Big Research Institute, nationwide GTV Our existing home transaction market in the first half of twenty twenty one increased by 41% year over year and decreased by 8% compared to second half of twenty twenty. In comparison, DTV with the ZeeHome transaction on vehicles Platform rose to RMB1.33 trillion in the first half of twenty twenty one, representing 17.1% growth Year over year, YOG TV, our existing home transactions for Kannada stores increased by 89.6% year over year, reflecting our resilience during the early stage In a fast growing market, agents tend to focus on closing deals. Market downturn, however, provides a better environment for us to refine management and enhanced quality and efficiency. By the end of June 2021, we opened 287 Contract service centers in certain major cities in China, so that more customers can enjoy enhanced experience And transaction security during the signing process, we continue to promote our agent specialization strategy. As of June 30, 2021, our aging specialization strategy has covered over 61% of stores In 'twenty one of the 30 core cities we operate in, in the second quarter, transactions completed Collaboratively by specialized agents on our platform accounted for 40.4% of total transactions In the stores that implemented this strategy, a 7.7% increase from the Q1, which indicated More frequent collaborations among our agents, most notably, in Chengdu, 21.7% of transactions were completed collaboratively among specialized agents Install efficiency increased on average of 17% at the end of the second quarter, Comparing Restores, not implementing specialization strategy. We also continue to develop new to empower the agent to our platform. For example, we are testing a new application named Base Impact, Bixin, which we piloted in Shanghai in the Q2. BEST Impact is a digital interactive tool to have agents interact With customers presenting structure and a visualized information at a glance On a large pay screen when they are communicating face to face, face impact significantly promoted agent operations and enhanced offline information and services, prolong overall customer interaction at 29% and accelerating the process of building mutual trust between agents and customers. With these benefits, by the end of second quarter, over 30% of agents have as their main offline service tool in Shanghai. With respect to new home transactions, According to the National Bureau of Statistics, GTV, our new home transaction market in the first half of twenty twenty one increased of 39% year over year and was down 13% compared to the second half of twenty twenty. In this context, GTV of new home transaction services reached RMB800 RMB41.7 billion in the first half of twenty twenty one, up 77% year over year and the GTV of connected stores increased by 85.4% year over year. During the past quarter, We continue to enrich online content for new homes by the end of June. We have enriched online content For all new home projects on our platform with a minimum of 100 description fields completed for each new home listings. As part of commitment to providing authentic and a comprehensive housing information, we also added a model describing our favorable factors of new home projects, facilitating more in firm purchasing decision. We are also making steady progress With our New Home Business Conduct Improvement Plan, we also endeavor to offer 5 dopes Commitment to developers, including no customer journey hijacking, no customer's making, no bribery, No collection of consumer funds, no fake in anniversary. As of June 13, 97.4% Our partners, developers, in entering into Fowdong's commitment agreement with us. Moving to our emerging services. In early June, we were thrilled to announce the acquisition of Chengdu Home Renovation. We first tapped into the home renovation industry in 2019 through the launch Our home renovation brand, Beihua, as we continue to deepen our understanding of this industry, we have developed An even stronger belief in the vast growth potential of China's home renovation market. The home renovation industry is of a Considerable size, approximately RMB7 1,000,000,000,000 in total. However, there is capacity of high quality services providers and the lack of industry standardization and scientific management. As a result, it is difficult for the industry participants to effectively scale and earn profits, And they have 2 fights for survival in the industry, being capable of meeting consumers' increasing high demand for quality. As housing transactions shift from new homes to existing homes, the industry customer base also changed From new home buyers to existing home buyers and the residents in existing home, Adding more complexity and costs for conventional renovation companies to acquire customers. Despite the industry backdrop, Chengdu is one of the very few high quality companies in this industry Founded in 2002 and headquartered in Hangzhou, Chengdu has a long Operating track record and a large customer base in Eastern China along with our experienced management team The significant industry know how, in addition, as one of the earlier practitioners of the full service module In the home renovation industry in China, Chengdu And also in supply chain management and execution, with strong management and robust internal control, Xiongnu promotes The core value of taking good care of customers, which strongly resonates with ours As the existing home market become more active, consumers' demand for high quality products and service increase And technologically empowerment growth, we believe that the industry is not And our critical is now at a critical turning point by seamlessly integrating the rich experience of Chengdu's team in the industry With our customer acquisition capabilities, self developed standardized data infrastructure and our belief and the credit to promote development through vertical penetration and horizontal expansion. We are looking forward to making a difference for consumers and service providers in home renovation industry. At the same time, our in house As MVP maintained robust growth in Beijing, we were completed 8 34 home renovations in the 2nd quarter, an increase of more than 10 fold year over year. R and D is also Our top priority and we continue to make key investment to upgrade our technology to further Streamline our process and enhance digitalization. For example, in the second quarter, we launched Home SaaS System Version 1 that provides support through 5 modules, sales, beam design, Delivery, supply chain and the middle office management, further enhancing the end to end standardization and digitalization for our home renovation services. In summary, Bighe is firmly upholding and supporting China's policy and local regulations' opinion. Housing is for living, not for speculation. We are also cooperating with regulatory authorities in dismantling false Listing and discouraging speculative purchase, which helps stabilize land price, Housing price and the market's expectations and promotes the steady and healthy development of housing market According to Baeko Research Institute, which credit tighten and control measures such as Price caps in various regions. Overall home sales, I expect, to slow down Further in the second half of twenty twenty one, over 20 years operating history has proven that a market with balanced supply and demand provides the best foundation for our company's long term With our mission of promoting admirable service, joyful living and our funding principle To pursue a better industry structure, we will take on more social responsibilities. We will empower agents and First, a friendly environment for communities, and we are committed to helping younger Generation with affordable living through rental and other innovation solutions, we strive to fulfill more social responsibilities with a long term goal to have industry progress, thereby creating long term value for the broader communities. Without noting, we are approaching the first Anniversary of Baker's U. S. IPO. As you remember, the nature enrolled to the entire Baker family On the listing day last year, I mentioned in the letter that all institutions have their own ups and downs. The calmer and institution we have during glorious moments, the stronger and more capable It will become when weathering difficult times. Looking back, the capital market Have been volatile in the past year and went through waves of fluctuation As an witness of all these ups and downs, we are more firmly Believing in the power of our mission, admirable services, joyful living, we will continue to always look inward To search for new areas of improvements, create values for the Thank you all very much. With that, I would like to turn the call over to our CFO, Ji Tao, for a closer review of our Q2 financials. Thank you. Thank you, Stanley. Thank you everyone for joining us. I would like to provide a brief overview for the Q2 of 2021 financial results. Before we discuss financial results, I would like to reiterate what we mentioned in last Q4 and the Q1 earnings call. Since our business operation had been seriously negatively impacted by COVID-nineteen outbreak in Q1 of last year, A meaningful portion of transaction had been shipped to Q2 of last year. We suggest that investors to look at and compare our financial performance Therefore, I will discuss both Q2 and the first half financial performance here. Our net revenue increased by 20 RMB24.2 billion in Q2 from RMB28.1 billion in the same period of last year, exceeding both high end Our guidance and the strategic consensus, the increase was driven by total GTV growth of 22.2% to RMB1.2 trillion in Q2 from RMB1.0 trillion in the same period last year. For the first half of twenty twenty one, Our net revenue increased by 64.6 percent to RMB44.9 billion from RMB27.3 billion in the same period of last Jurenbai's total GTV growth of 72.3 percent to RMB4.3 trillion from RMB1.3 trillion in the same period last year. In particular, our net revenue from music and home transaction services increased by 4.9% to RMB9.6 of RMB83.5 billion in the same period of last year. For the first half of twenty twenty one, our net revenue from leasing home transition services increased by 57.9 percent to RMB19.8 billion from RMB12.6 billion in the same period of last year, driven by a 70.1% increase in GTV of existing home transaction to RMB1.3 trillion from RMB709.2 RMB79.2 billion in the same period of last year. Our net revenue from new home construction services increased by 31.9 percent to RMB13.9 billion in Q2 from RMB10.5 billion in the same period of last year, primarily attributable to an increase of 32.3 percent in GTV of new home transactions to RMB498.3 Our net revenue from new home consulting services increased by 70.4 percent to RMB23.8 billion from RMB14 1,000,000,000 in the same period of last year, driven by a 17.7% increase in GTV of new home transaction to RMB8 RMB41.7 billion from RMB493.1 billion in the same period of last year. Our net revenue from emerging and other services increased by 50.6 percent to RMB0.7 billion in Q2 from RMB0.4 billion in the same period of last year. The increase was primarily attributable to the increase of our penetration level in the company's financial services around the housing transaction services The increased number of home renovation units completed through the company's platform. For the first half of twenty Net revenue from emerging and other services increased by 68.9 percent to RMB1.2 billion from RMB0.7 billion in the Cost of revenues increased by 38.6 percent year over year to RMB18.8 billion in Q2 for RMB13.6 billion in the same period of last year. Gross profit was RMB5.3 billion in Q2 compared to RMB6.6 billion in the same period of last year. Gross margin was 22.1% in Q2 compared to 32.5% in the same period of last year. The decrease in gross margin was mainly because 1, Marketing in Q2 of 2021 had a more ordinary performance compared to the same period of last year as a significant portion of transactions, In Q2 of 2021, the existing home sales market was affected by a series of market cooling measures that led to a relatively low Proportional new home consumption driven by client agent and other sales channel increased in Q2 compared increased by 43.9 percent to RMB10.1 billion from RMB7.1 billion in the same period of last year. Operating expenses were RMB4.2 billion in Q2 compared to RMB3.3 billion in the same period of General documentation expenses were RMB2.2 billion in Q2 compared to RMB2.0 billion in the same period of last Mainly due to an increase in share based compensation expenses. Sales and marketing expenses were RMB1.2 RMB775,000,000 in Q2 compared to RMB524,000,000 in the same period of last year, mainly due to the increase of Hikang experienced R and D personnel and increased share based compensation expenses. Total share based compensation expenses were RMB436.2 million in Q2 compared to none in the same period of last year. Income from operations was RMB1.1 billion in Q2 compared to RMB3.3 billion in the same period of last year. Operating margin was 4.6% in Q2 compared to 16.3% in the same period of last primarily due to the relatively higher gross profit margin in the Q2 of last year as we discussed gross profit. Underlying operating expenses incurred in the period due to travel and offline vendor restrictions. For the first half of twenty twenty one, income from operations increased by 28.6 percent to RMB2.1 billion from RMB1.7 billion in the same period of last year. Excluding non GAAP items, our adjusted income from Operations was RMB1.7 billion in the future compared to RMB3.4 billion in the same period of last year. Adjusted operating margin was 6.9% in Q2 compared to 17.1% in the same period of last year. Adjusted EBITDA was RMB2.6 billion in Q2 compared to RMB3.8 billion in the same period of last For the first half of twenty twenty one, adjusted income from operations increased by 64.6 was RMB1.1 billion in Q2 compared to RMB2.8 billion in the same period of last year. Excluding non GAAP items, Our adjusted net income was RMB1.6 billion in Q2 compared to RMB3.0 billion in the same period of last year. For the first half of twenty twenty one, adjusted net income increased by 68.8 percent to RMB3.1 billion from RMB1.9 billion in the same period last year. Net income attributable to A. D. Holding to shareholders increased by 5.6% to RMB1.11 billion in Q2 from RMB1.05 billion in the same period last year. Adjusted net income attributable to keying, Inc. Was RMB1.6 billion in Q2 compared to adjusted net income attributable to KA Holdings Inc of RMB2.9 billion in the same period of last year. For the first half of twenty twenty one, adjusted net income attributable to KEI Holdings Inc. Increased by 68.7 percent to RMB3.1 billion from RMB1.9 billion in the same period of last year. Diluted net income per ADS attributable to KT Holdings Inc. Ordinary shareholders was RMB0.93 in compared to RMB2.12 in the same period of last year. Adjusted diluted net income per ADS to KB Holdings Inc. Ordinary shareholders was RMB1.37 in Q2 compared to RMB2.23 in the same period last year. As of June 30, 2021, the combined balance of our cash, cash equivalents, Restricted cash and short term investments amounted to RMB59.2 billion or US9.2 billion dollars Additionally, as of June 30, 2021, the balance of our long term cash items mainly include in long term investment amounted to RMB8.8 billion or US1.4 billion dollars During the second A slew of city specific policies and the severe market cooling measures were rolled out in order to effectively stabilize the land price, We expect the second half of this year to be one of the most stringent periods in past In terms of unprecedented additions such as intensified of policy launching, The variety of tools supply and the number of regulatory involved from supply side, Three rail lines to developers, two rail lines to financial institutions, concentrate land auction in 22 cities and the reference price for home listing have impacted both new home and new home transactions. Tightening up the mortgage practice and the last needs approval period has significantly retained the transaction cycle, While insurance of reference price and the purchase restriction has led to cooling down of consumer expectations, Those matters will promote stable and healthy development of the rail market in the long run, while that will also bring the short term uncertainties. As a result, we expect the growth in the market will cool down moderately in the second half of this year. In the face of this challenge, we formally uphold those policy and measures and support government to crack down on housing speculation We believe the longing for the joyful living and better housing creates a firm demand From the customers, we have experienced several times of market offset balancing past 2 defects. Nevertheless, The company always become better and stronger when it passes those cycles. This is also the root cause why Baker and the Yanjia could be divided According to Baker Research Institute, nationwide GTV of the same home sales market It's despite to fall over 40% year over year in the Q3. We will advance our agent's specialization strategy We believe with market expectations stabilize after rounds of measures issued as well as increasing sales through demand from Based on our expectations, looking forward to the Q3 of 2021, We expect our net revenue to be between RMB14.5 billion and RMB15.5 billion, representing a decrease of approximately 24.6 percent to 29.4% from the same quarter of 2020. This forecast consists of potential impact of recent real estate related policies and measures and the current and preliminary view of this It's slowing down mainly due to its normal circumstance. We are confident that our strong moat in the collaborating network we uphold In quality services and the input efficiency will help us to continuously outperform the market. The foundation to pursue the downturn depends on the face of the team, Weizhouwei believe we have the ability to change the color. Weizhouwei believes that speaking to our professionalism will eventually fail. Whether we believe the aspirational call will drive us out of starting space, this kind of phase is We will continue to put our efforts into the company's infrastructure and emerging business. We will increase our support to agents through incubation standing out in the industry and the goal through this difficult time together. We will also contribute more value to for young people and new city drivers. Therefore, we recently all see that we will make more investment into our new In summary, although our performance cannot go against the market general momentum in short term, We're still strongly in what Lalu mentioned in our prospectus. We're focused on endogenous factors We devote more efforts in developing and investing in our long term capabilities even though it might take time to achieve Financial returns on those investments. In fact, the longer it takes and the more difficult it is, That concludes our prepared remarks. We would like now to open the call to questions. Operator, please go ahead. Thank you. We will now begin the question and answer And if you have any additional questions, you can re enter the queue. If you are going to ask the questions in Chinese, please follow with English translation. Please standby while we compound the Q and A roster. First question comes from the line of Liping Zhao of CICC. Please go ahead. Good morning, Stanley and Touge. My question is related to the commercial rate. There were some rumors circling around market saying That there might be some limit on the agent commission rate. So how should we expect what's the view from management and how should we expect The commission rate in coming quarters? Thank you. Thank you, Liping. This is Hu Tao. Regarding the recent rumors, There have been lots of rumor about the King Home sales commission rate recently, especially the WeChat Moments Screenshot which was widely sparked in many social network group 3 weeks ago. The rumor was sent by a junior person from a Meanwhile, we have been in close communication with the relevant authority and actively reporting related issue The clear response from the Ministry of Housing and Urban Rural Development is that so far That's a loan such information in restricting housing transaction commission fee. I hope it makes this clear. So, I know we also we do think Being a fair and public service is the key to education sector while the housing for living, not for speculation, It's a key for the housing sectors. Therefore, reducing building our long term mechanics in housing market to contain housing price from excessive hikes this quarter rather than containing housing transaction and related services. On one hand, the stabilization of the housing price aim to surprise and while it spikes and avoid impact of people's livelihood and On the stable housing price and long term supply demand by this market, we enable a wider range of consumer to live better and continuously improves our living conditions, which is a solid foundation of sustainable and healthy growth of population. Therefore, we believe our market environment, which is benefiting from Baker's long term development, remains unchanged. In summary, as I mentioned this point for several times, I want to make clear again, the commission rate reflects the service quality, Protection efficiency and service commitment, charging unreasonable rate without quality, service commitment is the whole proposition, slight water Going forward, the faithful will continuously invest our infrastructure and agents' professional training In order to Next question comes from the line of Piyush Mubai from Goldman Sachs. Please ask your question. Thank you for taking my question. Your company has been through 20 years in the real estate market We'd be grateful if you could take us through some of the past cycles that you've been through and how long it has Taken you to come out of those cycles from a negative growth rate to a positive growth rate. And if you could spell that through on a quarter by quarter basis, I. E, How long can the quarter be how many quarters can the negative growth rate be before you come out based on, let's say, the last 2 or 3 cycles? That would be very useful for us to better understand. And while we completely understand that you're in sync with the government objective For pricing and price stability in the market, if you could just go through where the vulnerable points have been, where the volumes have declined very sharply And where those points will start to stabilize, I. E, we start to see no more no further declines coming through. And if you could take us through where you are in Okay. Thank you, Piyush. Because this first half is a very booming season in 2021, so after the over booming Q1 and the credit starts to tightened in the Q2 and many regulatory policies were introduced in some overseas cities like Shenzhen, which has led to a start of the market downturn. For the second half of this year, we expect the overall market to continue cooling Currently, we recently foresee the property market will be under more pressure in Q3 compared to Q2 and the last Q4. In terms of credit supply, we expect the regulation to remain tight in the second half of this year, resulting in continuously rising mortgage rates, For the extended loan approval and the lending cycle, for existing home sales market, we expect to We largely flagged in this Q3 by credit rating and other regulations such as the reference price cap taking effect, Causing overall is the new home sales market GTV in the second half to slow down. And in terms of the new home sales market, Q3 is a traditional wake season coupled with impact from loan restriction and insufficient new We believe the new home sales might take a slowdown quarter over quarter in this Q3, but we did recover in this Q4, Supported by the seasonal strength, we expect second half GTV for the new home sales market to steep by 10% year over year for the market. Developers will be more reliant on the broader channels in second half of this year given the slowing down of Yixinhong transaction, which add to difficulties in different customer acquisition. So for Biguan and Lianjia, we have a 20 years We have undergone at least 7 times market cycles and ups and downs. So I want to invite our Chairman of Sports, Stanley, to give Yes. This is Danny. Let me to answer your question in terms of the cyclical trend and how we view those kind of cyclical impact to our Yes. When we IPO, we actually have been discussed a lot with the investors In terms of how we can view our business cycle, right, whether we should look at that in a quarterly basis or in an annual basis In the even like a 3 year basis, we truly believe the 3 years is pretty much like a cyclical which is more represent of our business cycle. I think in terms of our business momentum, so a lot of the analysts and investors is not Quite understand that. That is why when we're facing the first cycle after our IPO, so that people feel unsafe on that. So for me, I can explain that more details in terms of those kind of volatility, right? So When we look at each of the no matter which city or which industry, they all have their own growth path, right? So we look at The materiality are in a more macro of the models for our business. For example, in Beijing City, There are roughly like 8,000,000 to 9,000,000 of the existing homes. And if we look at the Tel, you're right. It's around like 1%. It normally represents it's a low level in the industry and 4% normally represented more like You know, highly traded of the market. So that actually also to be matched with the scalability Within that kind of market, for the normal conditions, normally we think for the Beijing, it's about 25,000 The transaction volume per month will be a more normalized of the level. If we look at a certain period, which is Significantly, it's a part of those 25,000 volumes. The housing price actually will hack very quickly. And then followed by that, the transaction volume will also will be followed. So in summary, See, in each of the cities, we have so called very normalized of the transaction volumes. And if the transaction volume significantly has been surpassed or lower than those kind of the market normal condition. The price will have We'll follow by that to have significant changes. When we look at the 3 year cycle, normally the 1st year and the second year, So transaction volume were relatively stable, but if there is a certain period, suddenly we see some of the Transaction volume increased followed by the price increase, then the price will significantly Increase compared with the 1st 2 of the years. Normally, it will be much higher than 8% Of the level, which is pretty much in line with the GDP growth, right? So what we normally monitor It's approaching to the 3rd year of every cycle. The price will significantly increase And then the transaction volume also will be impacted by that. So the authorities will be normally will have certain Kind of measures came out with those kind of situation and in order to cooling off of the price hike. So when we look at the overall trend in the 3 year cycle, normally it will be more like a very stable of the Overall transaction volume and with normalized price condition in the market. So that is why in the past decades we look at the similar kind of pattern in the year of 2018, 2011, 2014, 2017 and now is 2021. So approaching to those kind of year end, We're facing like a cyclical of the challenge. But there has 2 of the characteristics I want to mention here as well, right? So firstly, The housing price normally will remain in relatively stable in a relatively long Time horizon, but will continue goes up more orderly based on those kind of demands. And secondly, the materiality in those kind of cities or areas also will be changing, followed by the materiality of the market. For example, like maybe in the past of the cycle, 1% will be the stable level, but now may change to the 2% or even higher. In U. S. This year, we look at the 3.5% to 4% of the turnover rate, but it's I mean, the price is still Relatively stable. So that will be a very strong symbol for the maturity of this kind of industry. Yes. So I want to reiterate what we have been mentioning in the prepared remarks. So we think in the and we truly believe in the housing industry, The biggest key role from the government's perspective is remained the housing is for Leaving, not for speculation, right? So the purpose behind that is definitely related to the stable Price, but the stable price doesn't mean it will be not increasing. It's more represent for the Stable increasing, right. So it's not implied any impact of other and bring other social matters. So we have the example in the history. For example, like in Beijing, the last cycles Bring the very serious matters is because of Beijing's housing price actually has been up 62% within 16 month time. And for Shanghai, also the similar kind of trend is the housing price up to 65% within 18 months' times. So after that, it's all brought by the various theories of the management from the regulators. So that's also a very good testament, right? We truly believe for this industry, The biggest political and the biggest thing is how we can remain the whole industry, especially the housing price stable. And if we are not against this kind of trend, We believe we can take a benefit on that. And those kind of supply and demand balance market, it also will be the best So I can give you more examples in terms of how we can pass through all those kind of The cycles that make ourselves stronger, right? So as I mentioned in my prepared remarks, like our journeys over The past 20 years, tell us the market corrections always created opportunities. So if you look at our Normally in the 2nd year, when we experience those kind of cycles, so we can create some of the new Initiatives and doing the right thing even if it is difficult, right? For example, the cycle in the 2,008 and after that We introduced a comprehensive scientific management, right. And after 2011 cycle, in the year 2012, We promote authentic listings and after 2014 cycle in the year 2015, We initiate our nationwide exploration, etcetera, right? So and every time when we Go through the cycle, as I mentioned. So we always think about 2 things as a priority. So first thing is Whether we already have been done all the things we have been done and whether we are worth of what we truly believe ourselves, Right. Whether we are good enough to create value for the customers. And every time our answer is we can do better, right. So that's the first thing we always consider. And second thing is during those kind of cycles, that gave us opportunity how we look at the long termism In a more deep nature, right, and make us more and more believe of those kind of long termism will bring the long term benefit back to the company. So in the year of 2021, when we're facing this cycle, we also has more thinking around of the long term. For example, right, the services Behind of the home of the housing topic and the renovation services as well as how we can bring more social values When the companies become stronger and bigger and how we can repay back to the local community. So that's all the thinking and the considerations that brought us for this So that is why this year when we look at the Shenzhen's case, right, after of the Shenzhen It's been cracked down as well as other things bring a new rationale of the market for Shenzhen. And meanwhile, we also looked at the survey from the overall new home market, right? This year's overall, the transaction volume It's been up 30% and average of the price for the new phones in China also has been surpassed RMB10,000 RMB per square of the level, right? So that's all bring the of the enough of the reasons For the authorities, continue to apply some of the measurement to make sure of the stable Of the overall real estate market as well as the stable of the housing price. So again, when we talk about the housing price, it's not It doesn't mean, right, the hotspots will not go up. But behind that, we truly believe it's more like a moderate growth And with the moderate expectations, so all the things behind the whole philosophies will be quite important I would say the long term of the healthy condition for the industry. And meanwhile, we also mentioned there are a lot of rumors, Right. Whether this for example, like agents industry should be continue to exist or whether we'll have the further Perisher etcetera, but we truly believe those kind of rumors will be the totally $0.09 right? So as far as We can continue to provide the value to our customers as well as our the platform participants. So definitely, we can continue to bring the value to the communities, especially those kind of the Supply and demand balance market with very stable of the housing price is also the best of the environment for the bakers for the development. So we will continue support of those kind of policy and continue to create value based on those kind of market environment. So that's all the philosophies and my thinking is behind your questions. Back to you, operator. Thank you very much. Next question Thank you for taking my questions. My question is related to the liquidity issue and concerns that some of the top developers and some smaller ones are facing. So how should we size the potential impact on the account receivable risk for our new home sales business? Maybe how much debt provision you have recognized on your balance so far? And if this issue persists and escalates, would that affect the new home commission rates of our new home distribution business going forward. Thanks. Okay. Thank you, Steven. For our collection, the status is very healthy. If we look at the DSO of the company, In 2018, 2019 and 2020, our GTV of new home increased from RMB281 1,000,000,000 to RMB746 RMB1.4 trillion, respectively, but our DSO were 117 days, 96 days and 103 days respectively. So you will see even the total top line year over year we doubled, but our DSO continues to drop. Especially in this Q2, the GTV of the new home is almost RMB500 1,000,000,000, but our DSO further improved The reason behind that is that the company has stringent revenue recognition criteria for new home The company evaluates the historical payment rate for developers thoroughly and recognized the revenue for the high risk The company also adopts diversified measures to ensure the payment collection safety, including adoption of litigation preservation and other And we see continuous improvement in the accounts receivable collections. In this year, we recently foresee some developers, they may And some of them will identify as a high rate developers. I will not mention the name at this moment platform. And I can share with one number, the total receivable from the so called hybrid developer accounts receivable we reduced from RMB1.5 billion to around 800,000,000 by end of the second quarter. So everything continues to improve. And also I want to share with you, in BeiKe, we are currently we offer service for more than 7,000 projects And more than 240 developers across country by end of Q2. And the concentration rate is still healthy and the Top 10 developers accounts around over 25.5 percent of transaction volume and from the top 100 developers, That comes around 63%. So we have a very low degree of business concentration And the better risk for a single developer is relatively low. And also, what I want to share with you is the question is also related to our view to overall new home sales market trend. And I think recent restriction hurdle of the in home production will ultimately impact the new home sales market. In order to improve the potential consumer conversation and the cash collection, the developer there are more and more allocate Resources and inventory to the channel sales such as Baekho. So the higher demand of channel sales from developer will ultimately drive Baekho's growth for Our new home transaction service in the Q2 and from Bankers internally, we say the cash is the king. We put in tremendous efforts to The next question comes from Ashley Xu of Credit Suisse. Please ask your question. Thanks management for taking my questions. 2 from me. The first is about some initiative from some local government to establish a website where they require the brokers to Upload authentic listings to that website is still ongoing efforts, so early stage, but just want to Check on management view on how such efforts could potentially impact the way Beike functions or works. And second question is on regulations front, mainly both in antitrust and also data security. How is those how those regulations impact Baekho? Thank you. Thank you. Yes, we do where some of the news regarding the form of Xunjan They have so called short lived property platform. First, I need to I want to clarify The system is a regular e government information system. It's not a so called platform to do the transaction business. The key goal for this upgrade of the e government system is to obtain the first time information on property vesting to effectively carry out Regulation as a frontline watchtower to prevent the market from our aging. Actually, this is nothing new. In addition to Shenzhen, We noticed other cities who are leading in urban service also have the same practice and for Chongqing, Hangzhou, we see They have the similar function and feature on their systems. This is just announced the new things. Regarding of which New system or new format emerging, our key focus will always be a better customer experience, Transaction efficiency and whether the listing price is authentic. Our underlying operating logic is highly This so called e government systems because it will further enforce authentic listing and facilitate The cooperation among agents, this is also in line with our ACM because we see the ACM's culture of the transparency, collaboration and shared success And we in past decades, we introduced and they introduced to do that same thing. While those companies Regarding the fake listing, I'm not mentioning the convenience here and due to the skipping order, we'll face challenges. It's quite obvious Who will benefit and who will face challenges? We believe the launch of SaaS system will promote the healthy competition in the industry. So we are not worried about this and we are fully uphold and support this. Your second question is for antitrust. Okay. Regarding the antitrust, first, we would like to clarify again the news from Reuters related to Beike 2 months ago was a big news. And currently, the company is not under any formal investigation related to antitrust issues, especially after we timely submit our self inspection report like other 33 Speakers consistently operate within the bounds of laws, regulation and rules. We always prioritize the interest of user and spare no effort to achieve the winning results through the cooperative mechanism. We insist on our commitment to promoting the housing development of the industry, developing solving inauthentic property listing and striving to be an outstanding partner in full compliance with the rules and regulations. We are even more determined to take social responsibility as a top priority. At the same time, the government also gained a better understanding of Baker's business model and our contribution we have made to help industry grow and iterate in past 20 years. In addition, our diligent attitude in handling the self inspection and other related matters and the efforts And the contribution we made to industry progress was well recognized by the authority. For example, our investment brands of 700,000,000 in Shenzhen Huo brand of Weicham offers affordable and quality rental services for the young generation living in the large in the middle cities and create more social value for the total for local communication. 1 of its project has been featured and reported by CCTV News, Xinliangbo on 31st July, which demonstrates the highly recognition from the authority. Okay. I hope this clarifies the full question. Thank you. We're now approaching the end of the conference call. I'll now turn the call over to your speaker host today, Mr. Matthew Chang, for closing remarks. Thank you, operator. Thank you once again, everybody, for joining us Today, if you have any further questions, please feel free to contact Vapus 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.