KE Holdings Inc. Fourth Quarter and Fiscal Year 2025 Earnings Conference Call

Hello, ladies and gentlemen. Thank you for standing by for Cahey Holdings, Inc. fourth quarter and fiscal year 2025 earnings conference call. Please note that today's call, including management's prepared remarks and question and answer session, will all be available 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 will now turn the call over to your host, Ms. Siting Lee, IR Director of the company. Please go ahead, Siting.

Thank you, Operator. Good evening and good morning, everyone. Welcome to KE Holdings Incorporated, Baker's fourth quarter and fiscal year 2025 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, investus.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. Xu will provide an overview of our business updates and financial performance that Mr. Peng will share more on our strategic updates and thinking. Before we continue, I refer you to our sales partner 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 unnoticed GAAP financial information as well as unnoticed non-GAAP financial measures. Please refer to the conference press release which contains a reconciliation of the unnoticed non-GAAP measures to comparable GAAP measures. Lastly, unless otherwise stated, all figures mentioned during this conference call are in RMB. Certain statistical and other information relating to the industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial sources. Neither the company nor Therefore any of these representatives have independently verified such data, which may involve a number of assumptions and limitations, and you are cautioned not to give undue way to such information and estimates. For today's comment, we will use English as the main language. Please note that the Chinese translation is for convenience purposes 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 CFO, Mr. Tao Xu. Please go ahead.

Thank you. Hello everyone. Thank you for joining our 2025 Q4 and the full year earnings call. To begin, I would like to provide a summary of our financial highlights for the fiscal year of 2025. In 2025, in response to evolving customer needs, we initiated a strategic pivot from self-driven to efficiency-driven growth. To optimize our business model, as a leverage technology of our cost structure and unit economics, we implemented a series of initiatives. These efforts are laying the foundation for more sustainable growth, while strengthening the stability and flexibility of our learning model. Our fuel revenue remains relatively stable amid market fluctuations, outperforming the broader industry trends. This performance was underpinned by a more diversified and counter-stectical business structure. Revenue from non-housing transaction business accounted for a record high of 41% of total revenue. The internal structure of the housing transaction services with the Stingholm GTV accounting for 67.6% of our total GTV reflecting our focus on market segments with greater structural growth potential. Notably, the GTV contribution from connected brands further increased to approximately 63% of our in-home GTV, indicating higher contribution of revenue with lighter business models. In-home platform service revenue was basically stable in young years, also demonstrating the resilience of our operational efficiency improved and cost structure was optimized, laying foundation for future profit dysfunction. In our existing home business, fixed labor costs recorded a sequential decline for the full consumption, significantly enhanced the profit elasticity of its thin home business. In our new home, its contribution margin rising by 0.7% of the year-on-year revenue with our

transaction structure is evolving. The share of existing home transaction in China's housing market continues to increase. In 2025, the number of existing home transactions nationwide hit the new home market is also seeing greater depreciation with higher quality and new standard projects attracting stronger market demand. More and more young people are choosing to rent while rental yields are gradually improved transaction behavior is also changing housing information is becoming increasingly abundant yet the decision-making process is becoming more complex both buyers and sellers are thinking are taking longer to complete transactions the cost of making a mistake is much higher now buying a home used to be a relatively easy decision today, a careful reallocation of family assets. At the same time, some things have not changed. The overall demand for better living remains stable and consumers demand for safe, professional, transparent and reliable sources. By looking at what has changed and what has stayed consistent, we can tell two very important things. First, China's residential market remains largest and most valuable housing market in the world. Second, the housing service industry has made a fundamental shift in its approach. Today, the consumer needs more professional services that offer certainty in decision making. The industry is entering a new stage where core competency will no longer be defined by resource scale, but by service capability and operational efficiency. Ultimately, creating value for customers will be the only stable source of our long-term growth. In this trend, they could continue to evolve in 2025. First, we improve our operational governance, creating more rooms for long-term strategic transformation and enabling us to continued driving progress across the residential service industry. Second, we upgraded our strategy. Leveraging data and AI, we are rebuilding our service logic around consumer, customer value. Through greater value creation, we aim to improve the platform overall customer coverage, resource conversion efficiency, and unit outputs. Our growth model is therefore shifting from when driving primarily by the scale of agents and stores to when driving by efficiency and value creation. In the past, we focused on expanding the numbers of stores, listing coverage, and lead volume. Going forward, we will focus more on delivering greater certainty in transactions for customers, improving matching precision, and strengthening the unit economics. not economics. Specifically, we are working in four key areas. First, upgrading transaction sources into full process decision support services. Improving professionalism and uncertainty in the service process. Second, optimizing resource allocation through data and AI so consumers can receive high quality, better matching services. Third, in embedding AI capabilities into our service workflows, helping service providers and the platform deliver more professional, people-centric services. Fourth, building diversified service capabilities across the broader residential ecosystem to meet customers' full range of housing needs. Next, I will walk you through the progress of our major business segments in 2025 and share some of our thinkings. For existing home business, the platform facilitated R&B 2.15 trillion in GTV from the existing home transaction in 2025. Within that total, the number of existing home sales transactions increased by more than 10% year-over-year, reaching a record high. At the same time, transaction volume from platform canary stores increased by 15% year-over-year. These two fingers highlight the resilience demand in the existing home market and the strengthening of our platform model. The overall scale of agents and stores on the platform remains stable, with more than 58,000 Canadian stores and over 445,000 agents at the near end. In terms of productivity, in 2025, the average number of existing home transactions per canary agents increased by 6% year-over-year, rising from less than two transactions per agent in 2022 to more than three. For our directory operation operating lean job business, we are proactively optimized for network and agent structure in 2025. We focus on high efficiency capability and deeper operations in core cities. After these adjustments, lean jobs per agent productivity in core cities improve, indicating we are gradually achieving a healthier balance between skill, discipline, and productivity improvement. Operationally, we upgraded our lead allocation mechanisms and refined church services, ensuring that high-quality clients receive services better matched to their needs. We also continue upgrading our service model to adopt a more consultative approach, moving beyond simple property tools and matchmaking towards deeper support for decision-making. In today's market environment, customers do not lack information. In today's market environment, customers are not short of information. What they lack is assistance in making judgment. AI is becoming a new productivity engine for our industry. Property transactions are not standardized commodity transactions. They involve both rational analysis and emotional judgment. They require both data support and real-world offline experience. In the past, the industry has not done a good job of structuring the rational parts of the process, nor has it placed the emotional aspects where they create the most value. In some cases, emotional judgment has even been used to replace decisions that should have been made rationally. When these two elements become in to win, it inevitably leads to a loss of efficiency. AI can make the rational process of the process extremely rational, while amplifying the value of the human and emotional aspects that must be handled by people. In our industry, machines can process data by the true judgment, explanation, and trust still need to come from people. AI cannot be ignored, nor can humans be replaced. This is why our strategy is to combine human expertise with AI capabilities. We are embedded AI directly into our core operational scenarios across the platform. For example, in our housing transaction business, they are making marketing assistance help agents automatically generate marketing materials. AI simulates tools also help service providers practice through customer interaction scenarios and continuously improve their professional capabilities. Going forward, AI will attract as a co-pilot for service providers across the entire customer life cycle. This includes demand identification, precise matching between agents, homes and customers, pricing decision support and process automation. Over time, we will have packaged the expertise of those top performers, performing service providers so that these professional skills can be shared and used across the platform. New home business, transitioning from channel dividend to structural efficiency. In our new home business, we are shifting from relying on channel distribution advantages to driving growth through structural efficiency improvement. In 2025, Baker facilitated RMB 890.8 billing in new home GTV. Despite a volatile market environment, we we strive to outperform the broader market, building on our green listing supply and channel sales scale. We are now driving sustainable growth by improving structural efficiency. This includes optimizing the mix of customers, projects, and service providers, as well as improving matching precision. For home buyers, we are strengthening capabilities in customer demand identification, cross-project comparison, service providers' matching and decision support. For developers, we are beginning to provide early-stage project positioning insights while also offering integrated marketing and sales services in the later stage of project sales For service providers, we continue to refine evaluation systems and operational tools and refine our resource allocation mechanisms ensuring that agents with stronger conversion capabilities are matched with the right resources. Our goal is to upgrade the new home business from a model focused on traffic distribution to when that delivers greater certainty of results for all participants in the ecosystem. New business from scale exploration to profit quality and sustainable models beyond brokerage services our home renovation and furnishing and home rental business both enter enter a healthier stage of develop development in 2025 across both business both business segments we are placing great emphasize on profit quality and on building sustainable and replicable operating models. This is the foundation for this business to scale over time. In the home renovation and furnishing segment, full-year revenue grew by 4.4 percent to RMB 15.4 billion while profitability improved meaningfully. Contribution margin increased to 31.4 percent up 0.7 percentage points year over year and operating losses narrow significantly. Over the past year we have focused on advancing product standardization and design digitalization through a system of packages and modularized product offerings as well as an AI and being enabled online design workflow we are gradually turning design capabilities into system capabilities this have reduced service variance and improved conversion efficiency at the same time we have been at the white advancing supply chain integration and the building standardization standardized delivery systems while improving the customer experience these efforts have also enhanced profitability while growth margin increase losses narrowing significantly and the home renovation business is evolving from a project based model reliant on individual experience to a more scalable and applicable service model we have also established a clear path toward long-term profitability you know home rental services segment the number of manager units you can see 700,000 by year-end representing our 62 percent year-over-year increase the business achieved full year profitability with contribution margin improved to 8.6 percent, up 3.6 percentage points year-over-year, demonstrating a meaningful improvement in profitability. We continue to upgrade the product structure to a lighter, more resilient, and more controllable models, while strengthening unit economics at the individual property level. By redesigning our work workflows and introducing specialized roles, the operational efficiency of call service providers continue to improve. AI capabilities are gradually being embedded into key areas including property sign-up, pricing support, leasing management and operating strategy. This helps reduce operational risk including increase leasing efficiency and optimized cost structures. With this improvement our rental business is forming a more stable profitability profile and more consistent cash flow overall our new business moving from a phase of scale exploration into a stage focus on business model validation and a profitability improvement and this models mature and technology adoption increase that will further diversify our revenue structure, strengthening resilience across market cycle and a better server consumer broader residential needs. At the organizational level, we are also advancing structural optimization and rebuilding capabilities. The purpose of our organization is not simple to manage metrics but to continuously improve the customer experience. We are streamlining organizational structures, simplifying management layers that do not directly create customer value, and encourage managers to move closer to the front line to better understand and create customer value in real operating scenarios. In terms of capital allocation, while maintaining a strong cash provisioning and the ability to invest for the long term we continue to deliver meaningful returns to shareholders in 2025 we repurchased approximately us 920 million in shares representing about 4.15 percent of our total shares outstanding at the end of 2024 we also announced a final cash dividend In total, shareholder return for the year was approximately US$1.22 billion, significantly exceeding our non-GAAP net income for the year. I believe our long-term advantage lies in the combination of organizational efficiency and capital efficiency. For 2026, we maintain a neutral market view. Given the scale of China's real estate market and the continued depreciation in demand structures, long-term value will not be driven by just buying traffic or adding more labor. Instead, it will be determined by how deeply we understand customer needs and about the systematic service capabilities we build around the entire customer lifecycle. For Baker, 2036 will be a year of validating our decision support service model. We will focus on testing how this model improves conversion rates and unit economics. 2036 will also be a year of strengthening our service and organizational capabilities. This capability will allow us to demonstrate greater operational resilience as the industry stabilizes. In a new cycle, true leadership will not come from skill, but from capability. And the foundation of capability, we believe, ultimately lies in only one thing. That is, continuously creating a real and verifiable value for our customer. With that, we can now move to the Q&A session. Thank you.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. As a reminder, we only accept questions on the English language line. For the benefit of all participants on today's call, please limit yourself to one question. And if you have additional questions, you can re-enter the queue. If you are going to ask a question in Chinese, please follow with an English translation. Your first question comes from Timothy Zhao with Goldman Sachs.

Thank you very much for taking my question. My question is regarding our operating efficiency enhancement on the store level and agent level. I was wondering after the restructuring and adjustments, have we helped there with any change in terms of agent efficiency? And if this year the oil market recovers, do we have enough power to gain share? And going forward, what are our execution plans in terms of future efficiency-driven growth strategies?

Thank you, Timothy. First, strategic upgrade from skill-driven assumption to efficiency-driven growth is a natural and inevitable outcome of the evolution of a platform business. What this transition really means is upgrade in the way value is created. By creating great value for customers, we aim to improve the penetration of community-based residential services, increase the commercial efficiency of resources and ultimately drive the business growth. This is the opposite of a logic of simply cutting capacity or contracting the business. To understand this evolution, we need to ask more fundamental questions. What truly determines the capacity in our industry? What are the core production factors and the production function? What customers truly need is not simply more agents or more stores, but a higher quality and more reliable decision support. This includes more precise matching, more effective marketing solutions, and more comprehensive home buying planning. What we are doing is reallocating resources from nominal capacity, concentrating our organizational efforts are the areas that generally source customers. Against this backdrop, in 2025, we have taken several steps around our engine and store network. First, we have concentrated resources on high-performing stores and engines to improve operational efficiency. Going forward, we will further strengthen our management structure so that managers with the strongest customer service capability can stay closer to the front line to create value, at the same time while codifying and embedding the high coding service capabilities rather than leaving them. On the broader platform side, we continue to respond to the scale of data and stores, but with a greater emphasize on the quality and efficiency. By the end of 2025, the number of active connected stores continue to grow significantly year-on-year, increasing by 21% and 7% respectively. At the same time, we are optimizing the structure of the network by identifying and amplifying the value of high-performing, high-rated store and agents. In the first quarter, agent activity improved sequentially. In cities, including Beijing and Shanghai, the lead to conversion rate for its in-home sales increased by around 8% quarter of quarter, while average per-agent mission income from existing and new home transactions increased by 2% sequentially, while also improving the efficiency of platform-based capabilities including AI-driven tools. So data and AI are the most important drivers behind this evolution. like reaching our data and AI capabilities while redesigning many aspects of the platform, including resources allocation mechanism, the division of growth among service providers and the service process in many areas that potentially increases market turnover, effectively responding to funds and earnings in other markets.

Your next question comes from Zen Guao with Guangfa Securities.

Thank you. Let me translate my question. My question is about a new home business. The new home market is facing multiple pressures, including developer struggle with sell-through, declining profitability, and the increasing market concentration among state-owned companies. Management mentioned innovations in marketing models in the new home business. How will this innovation change the company dynamics and the relationship with the company, with the developers. How will the performance of the new home business be suspended?

Our view on the new home business starts from the structural change in industry. The level of the digital penetration in the new home sector remains relatively low. In the past, our operating model for the new home business was largely based on the traditional channel sales logic this involved allocating resources around commissions and the traffic and the leveraging our massive channel traffic to solve developers sales through issue for the core projects this model was effectively this model was effective during the market's function phase but under current conditions its boundary are more limited it can only serve certain projects and certain buyers and the value creation for developers and especially for home buyers is relatively constrained we believe the new home market is entering a new stage for home buyers the concerns not whether there's enough information but whether they can be more certain about the purchase decision for developers the key concern is no longer simply gaining an other sales channel, but whether they can achieve more predictable sales results within a constrained budget. Accordingly, we are upgrading the role of our new home business from a channel player to an integrated capability platform and digitalization in the new home segment remains relatively low. We are working to enhance our stronger data and our data and assistance.

Your next question comes from Miranda Zong with B of A Securities. 晚上好,管理层,感谢接受我的提论。 我的问题是跟AI相关。 随着AI能力最近的快速发展,请问公司怎么看待AI在房地产领域的一些可能的影响? 另外,在备合公司层面,AI赋能不同业务线的进展如何? 那我翻译一下。 Thank you for taking my question. My question is about AI. So with the recent rapid advancement of AI, how does the company view the potential impact of AI on the real estate sector? For Baker company, how is AI being used to empower the different business minds and what are the progress so far? Thank you.

Thank you, Miranda, for your question. Recently, there have been many discussions about whether AI will bring a revolutionary impact to real estate brokerage industry. My view is that the key question is not whether AI will replace real estate agents, but rather how it will reshape the division of labor, value creation, and organizational structure of the industry. A housing transaction is fundamentally not a short, standardized consumption decision. Instead, it's a long cycle, multi-state, and a high complex position-making process. From searching for a property to making a decision to completing the transaction and then to move in, upgrading the property and improving the living experience, there are many stages along the way where AI can significantly improve efficiency and in some cases even automate the process. For example, information gathering, demand matching, process reminders, document generating, preliminary risk check, and the workflow coordination are all standards and repetitive tasks clear rules. In this area, AIR can deliver significant productivity gains. We have already begun to see some very tangible changes internally. For example, in housing transaction services agents previously spend on a large amount of time organizing property information creating marketing materials and responding to repetitive inquiries with AI we can now automatically generate a VR video explanations probably interoperations and a communication materials for clients allowing agents to focus more of their time, understanding customer needs, and supporting transaction decisions. In our rental business, AI is also beginning to participate in property acquisition decisions, rental pricing recommendations, and leads and matching. By analyzing historical transaction data, regional supply and demand, and property characteristics, AI helps our operators more quickly determine whether a property is suitable for acquisition, recommend a reasonable rental range, and improve leasing efficiency while strengthening risk identification. Together, these capabilities essentially allow standard tasks to be handled by the system, enabling service professionals to focus more on complex decision-making and client service. At the same time, they are part of this value chain that are more easily replaced by AI. In fact, these areas may become even more important as AI develops. For example, some ones do need to determine whether what a client says they want truly reflects their underlying needs. Someone needs to make pricing judgments to dynamically coordinate between buyers, sellers, mortgage providers, title transferring process, and fulfillment risks. And someone needs to stabilize expectations and feeling at the final stage of a transaction. And ultimately someone needs to take responsibility. The core of this task is not simply information processing but judgment, coordination, trust, and accountability. This is where human value continues to lie. Therefore our view is that AI will effectively split the workflow of this industry into two parts. One part will become highly automated with efficiency improving rapidly. The other part will increasingly concentrate on professional expertise, accountability, and high-value services. From this perspective, the value of the traditional information intermediary will diminish while the value of transaction responsibility and housing service infrastructure will become even more important. For Beike, this does not mean that opportunity becomes smaller, it actually becomes larger. Because what Beike aims to build is not simply AI-driven efficiency. Our goal is to leverage AI to further upgrade ourselves into a comprehensive housing service infrastructure on one hand we want information matching processes and the collaboration to become far more inefficient efficient on the other hand we want transaction responsibility fulfillment assurance and and service delivery to become more reliable there is also another important characteristics of this industry first First, demand on the consumer side is difficult to fully articulate. Many clients cannot clearly express what they truly want at the beginning. Second, supply is highly non-standard. Homes are not fully standardized or commoditized products. Their pricing, suitability, and risk level all contain significant uncertainty because demand is difficult to articulate and supply is highly non-standard. This industry inherently requires people to interpret, explain, match, coordinate, and ultimate take responsibility. looking further ahead AI's impact goes beyond this as AI significantly improve the efficiency or standardized process people will increasingly become the key variable that are determined of upper bound of efficiency in the past inefficiency was often constrained by process tools and information but as these constraints are optimized by AI. The ultimate limit of the organization will increasingly depend on the capabilities of the service professionals themselves. Moreover, the improvement in service professionals' capabilities is no linear. It has clear leverage effects. As AI raises the efficiency baseline of the system, stronger service professionals can generate disproportionately greater marginal value. In other words, AI does not weaken service professionals, it differentiates them, amplifies the best ones and makes the upgrading of service capabilities itself one of the most important growth levels. So for organizations, the real question is no longer whether they have AI, but whether they can organize people and organize people together with AI in such an environment organizational capabilities collaboration mechanisms culture and value become increasing importance in highly efficient transparent and collaborative systems it becomes even more critical to have a stable set of value judgments unify service standards and a trusted behavior norms to connect every service professionals, every operational stage and every interaction with customers. From this perspective, the continued evolution of this industry will not be driven by a single force but by four forces working together. The power of technology which drives efficiency improvements and the capability expansion, the professionalism of service providers, which determines judgment and service quality in complex scenarios. Customer trust, which determine whether transaction can actually be complete and whether long-term relationship can be formed. And organizational culture and values, which determine whether the previous three forces can be continuously integrated into a stable, scalable, and evolving system. In this sense, AI will indeed reshap the industry. It will eliminate information asymmetry, compress low-value competitive work, and amplify the value of professional services, transaction responsibility, customer trust, and housing service infrastructure. Ultimately, what determines how far a platform can go is not simply whether it has AI, but whether it can truly integrate AI, professional service providers, customer trust, and the organizational culture into a continuously evolving model. Thank you.

Your next question comes from John Lam with UBS.

So my question is regarding the new media, so how does the company look at the new media? also how does the company look at some of the KOL utilizing new media to facilitate the public transaction thank you John for the question regarding the influence of influencers and public accounts on the company my view is that

whenever our phenomena continue to attract the attention of customers it usually reflects some real demand so rather than judging whether it is positive or negative the more useful question is that needs it is actually serving which customers it resonates with in which situations and what needs may not have been well addressed before in my view this also reflects a broader shift in the industry in the past the real estate industry was largely center around the property itself at that stage the key question for many customers was simply whether there was a suitable home available and where and whether they could buy it the property was the primary scarf resource and a customer decision often revolved around the house itself the personal the personal needs and circumstances behind the decision were not always fully reflected in the process. Today the situation is changed. The industry is moving from being centered on properties to being centered more on people. Customers are not just home buyers in an abstract sense. Each decision reflects a set of real-life considerations, including family structure, budget constraints, lifestyle preference, education needs, computing patterns, risk tolerance, and plans for improving or relocation. Buying, renting, or upgrading a home may appear to be a real estate decision, but in many cases it is essentially a decision about how people want to organize their lives. From this perspective, housing transactions have always involved complex decisions. For a long time, however, the industry handles them more as a relatively light matchmaking process as customer needs become more complex and personalized. The decision is returning to its original nature. It requires understanding, explanation, judgment, and trade-offs. Against this backdrop, the rise of self-media, influencers, and public accounts is not simply about new media channels. What they provide is a different form of value their focus is not just on the properties itself but on the person behind the decision through a content perspectives and explanations they have customers better understand the market compare up options and reflect on their own needs in doing so they can help reduce decision costs and anxiety in making decisions customers follow them not just not simple to obtain more information but because they hope someone can help them make judgment compare alternatives and way different trade-offs for company this phenomenon is both a reminder and an opportunity but remember that we should no longer see ourselves simply as an information platform that matches people with listings you say we need to become truly customer center and focus on understanding the person behind the transaction. The opportunity that if we can combine content capabilities, professional service capabilities, execution capabilities, and customer trust, we may be able to build a more durable and a deeper competitive advantage. Influencers can provide our perspectives and influence, but in complex transactions the responsibilities for execution risk management and service delivery ultimately depending on a professional service system so fundamentally I I do not think we the key question is whether self-media will negative impacts or not company like ours rather what is a phenomenon remind us is that customer today need more than probably information. What they increasingly need is decision support, professional judgment, and trustworth services centered around the individual. Companies that can better meet these needs will be a better position in the long run.

Your next question comes from Eddie Wang with Morgan Stanley.

Thank you, management, for taking my question. My question is regarding the renovation and furnishing business. We see the business has experienced slower revenue growth in 2025, while its growth margin improved. What's the current status of the development in supply chain centralized procurement and the standardization execution. When shall we expect to see the inflection point for the probability in the home renovation business? Thank you.

Thank you, Eddie. The slow revenue growth in 2025 was the result of our deliberate decision to control the pace of expansion. Home renovation is a delivery incentive business. If the underlying unit economy are not stable, aggressive dysfunction itself becomes a risk. The liquidity challenges of certain industry players in 2025 further reinforce this pain point for us. As a result, last year was repairing and validating the underlying portfolio structure of the business. From the results we have seen so far, the contribution margin has improved and overall losses have narrowed significantly, which indicates that the Unieconomics at the individual project level are becoming healthier. At the current scale of roughly RMB 15 billion in revenue, we break down improvements in Unieconomics into three main variables. Product structure optimization, controlling explicit costs such as materials, labor efficiency, and delivery efficiency, and the reduction of implicit costs, including rework, upsell issues, and reputation-related losses. In 2025, our primary focus was the cost side. Explicit costs optimize our material cost structure. We have completed centralized national or regional procurement enders for approximately approximately 80% of our team materials and about 60% of the long-term productivity. At the same time, through the improvement and also adoption of the digital design and the modular tools, along with the certification and the rating system, we are building a dedicated pool for high-quality delivery teams. This has meaningfully improved the productivity of both project managers and designers. On implicit costs, we are even more focused on long-term fulfillment quality. Through the measures such as funds and scroll, service commitments, and the greater standardization of collision detection in design phases, we aim to reduce reward and delivery variability at the source, thereby improving the stability of the profitability at the project level. Looking into 2026, as unique economies continue to improve and our delivery capability becomes solidified, we plan to widen our funnel for the scale expansion in a disciplined manner. Our core approach is not simply to increase traffic, but to improve the traffic conversion.

Your next question comes from Brenda Zhao with CICC.

Thank you. 是不是,比如说换一个长期优异的这个角度去看这个业务可能会更加fair一些? 那怎么样去思考这个业务长期优异变化的逻辑和改善的空间? So Stanley and Taoga, thanks for taking my questions. My question is related to the home rental business. Because in the past two years, the business has developed a rapid profit growth, which has been a pleasant surprise however revenue has been contracted Q on Q due to the impact over the accounting treatment I believe it may be Sarah to assess this business from the perspective of long-term unique economics how does the company view the long-term UE trajectory and the potential for improvement in this business thank you I'd like to clarify

two key aspects the trend in business scale and the profitability structure first from accounting perspective the short-term revenue contraction mainly results from the change in accounting treatment for the new product offering of our carefree run business which moves from gross revenue recognition to net revenue recognition other demand methods will only recognize the service fee income, which more accurately reflects our roles as an asset management service provider. This accounting treatment, along with the lighter operating model, and substantially reduced risk. Importantly, if we look at the other rental units, it continues to grow rapidly and has maintained a strong effect of 2025. Our managed home units exceeded a year-over-year increase. This growth demands rather than any accounting tree. In terms of the profitability model, it continues to improve the single unit level. In 2025, the rental business, the improvement in the profitability was now the driven monthly number of the unit acquired by property manager.

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

Thank you once again for joining us today and providing it on our website.