Total GTV: RMB844.2 billion, a 34% year-over-year increase. Net Revenue: RMB23.3 billion, up 42.4% year-over-year. Gross Margin: 28.7%, a decline of 4.5 percentage points year-over-year. GAAP Net Income: RMB855 million, a 97.9% year-over-year increase. Non-GAAP Net Income: RMB1.39 billion, stable year-over-year. In-Home Transaction Revenue: RMB6.9 billion, up 20% year-over-year. New Home Transaction GTV: RMB232.2 billion, up 53% year-over-year. New Home Transaction Revenue: RMB8.1 billion, up 64.2% year-over-year. Home Renovation and Furniture Revenue: RMB102.9 billion, up 22.3% year-over-year. Home Rental Services Revenue: RMB5.1 billion, up 3.8% year-over-year. Cash Liquidity: RMB74.3 billion. Share Repurchase: USD 139 million worth of shares repurchased in Q1.

Warning! GuruFocus has detected 3 Warning Sign with BEKE.

Release Date: May 15, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

KE Holdings Inc (NYSE:BEKE) reported a 34% year-over-year increase in total Gross Transaction Value (GTV) for the first quarter of 2025. Revenue rose by 42.4% year-over-year, reaching RMB23.3 billion, indicating strong financial performance. The number of active stores surpassed 55,200, a record high, with a significant increase in connected stores. The company achieved a 97.9% year-over-year increase in GAAP net income, demonstrating improved profitability. AI tools have been effectively integrated into operations, enhancing efficiency and service quality for agents and customers.

Negative Points

GTV for the new home transaction business decreased by 53% year-over-year, indicating challenges in this segment. Gross margin declined by 4.5 percentage points year-over-year to 28.7%, reflecting increased costs or pricing pressures. The contribution margin from in-home transaction services dropped by 6.4 percentage points year-over-year. Revenue from emerging and other services decreased by 50% year-over-year, highlighting potential issues in diversification efforts. The company experienced a net operating cash outflow of RMB4 billion in Q1, which could impact liquidity.

Q & A Highlights

Q: What is the outlook for the property market considering the latest macro dynamics and the impact from the US tariff? A: Tao Xu, Chief Financial Officer, explained that the in-home market saw a strong recovery post-Chinese New Year, driven by government efforts to stabilize the realty market. The market is expected to see a slight increase in transaction volume year-over-year, supported by higher transaction volumes and increased supply of high-quality homes. However, uncertainties such as geopolitical tensions may affect buyer expectations. The market outlook will depend on international trade frictions and domestic countermeasures, with potential for further supportive policies in the second half of the year.

Story Continues

Q: Could you elaborate on the expansion plan for housing agents and agency stores, and how will you improve efficiency? A: Tao Xu stated that KE Holdings will continue to promote healthy growth of its agency store network, focusing on cost-effectiveness and efficiency. The number of active stores and agents increased significantly year-over-year. The company aims to enhance efficiency and income for platform stores and agents by increasing agent stability and providing better services. The focus will be on developing high-performance stores and leveraging AI to improve service quality and efficiency.

Q: Can you provide specifics on the home renovation and furniture business's performance and future margin outlook? A: Tao Xu highlighted that the home renovation and furniture business achieved a 22.3% year-over-year revenue growth in Q1, with a record-high contribution margin of 32.6%. The company is deepening AI applications in contract conversion, construction processes, and internal management to enhance efficiency and service quality. Future AI efforts will focus on better understanding customer demands and improving design efficiency.

Q: How does Beihaojia contribute to new home development, and what is the status of the C2M business? A: Tao Xu explained that Beihaojia provides new home product solutions using data-driven insights to guide project positioning and design. It has participated in multiple projects, demonstrating its capability to enhance sales and operational certainty. The C2M model leverages customer insights and market knowledge to optimize project planning and improve product offerings. The company is refining its tools and expanding customer engagement through innovative methods.

Q: What are KE Holdings' strategies and investment plans for AI in the coming quarters? A: Tao Xu emphasized that AI is integral to KE Holdings' strategy, with applications across various business segments to drive efficiency and service quality. The company is investing in AI to enhance customer insights, streamline operations, and improve service delivery. The focus is on developing AI tools that support service providers and redefine service capabilities, aiming for significant efficiency gains over the next few years.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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