KE Holdings Inc. Sponsored ADR Class A ((BEKE)) has held its Q2 earnings call. Read on for the main highlights of the call.
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KE Holdings Inc. recently held its earnings call, revealing a mixed sentiment in its financial performance. The company showcased significant revenue growth across various sectors, including home rental services and an expanded agent network. However, challenges such as a decline in net income and gross margins were evident, attributed to a slowdown in the real estate market and rising costs. Despite these hurdles, KE Holdings demonstrated resilience and strategic expansion, painting a balanced picture of its current business climate.
Revenue and GTV Growth
KE Holdings reported a notable increase in total revenues, reaching RMB26 billion, an 11.3% rise year-over-year. The total Gross Transaction Value (GTV) also saw a 4.7% increase, amounting to RMB878.7 billion. This growth underscores the company’s ability to maintain momentum in a challenging market environment.
Home Rental Services Expansion
The company achieved record revenue from home rental services, reaching RMB5.7 billion in Q2, marking a 78% increase year-over-year. The number of rental units under management surged to over 590,000, showcasing KE Holdings’ successful expansion in this sector.
Diverse Growth Drivers
Revenue from non-housing transaction services accounted for 41% of total revenues in Q2, highlighting the company’s diversified growth strategy. This diversification is crucial in mitigating risks associated with the real estate market.
Agent and Store Network Expansion
KE Holdings expanded its network significantly, with active stores increasing by 30% in the first half of the year. Active non-Lianjia stores grew by 36.8%, and the number of active agents rose by 19.5%, reflecting the company’s strategic focus on broadening its market presence.
Home Renovation and Furnishing Services Growth
The home renovation and furnishing segment saw a 13% year-over-year revenue increase, with a contribution margin of 32.1%. This growth highlights the company’s successful ventures beyond traditional real estate services.
Shareholder Returns and Buyback Program
In a move to enhance shareholder value, KE Holdings’ board approved an expansion of its share repurchase program to US$5 billion, extending to August 31, 2028. This decision underscores the company’s commitment to returning value to its shareholders.
Decline in GAAP and Non-GAAP Net Income
The company faced a decline in both GAAP and non-GAAP net income, with GAAP net income falling by 31.2% to RMB1.31 billion and non-GAAP net income decreasing by 32.4% to RMB1.82 billion. These declines reflect the financial pressures faced by KE Holdings in the current market.
Gross Margin Decline
KE Holdings experienced a 6 percentage point decline in gross margin, now at 21.9%, primarily due to reduced contribution margins from existing home transaction services. This decline highlights the challenges posed by the current real estate market conditions.
Existing Home Transaction Services Revenue Drop
Revenue from existing home transactions decreased by 8.4% year-over-year, reaching RMB6.7 billion in Q2. This drop is indicative of the broader slowdown in the real estate market.
Real Estate Market Slowdown
The real estate market faced a year-over-year decline in Q2, influenced by international trade friction and the diminishing impact of earlier policy measures. This slowdown presents ongoing challenges for KE Holdings and the industry as a whole.
Forward-Looking Guidance
Looking ahead, KE Holdings provided extensive guidance on its financial and operational performance. The company anticipates continued growth in its home renovation and furnishing business, with a focus on maintaining an asset-light model. The expansion of the share repurchase program to US$5 billion further emphasizes its commitment to shareholder returns.
In conclusion, KE Holdings Inc.’s earnings call painted a picture of both growth and challenges. While the company has achieved significant revenue increases and strategic expansions, it faces financial pressures from a slowing real estate market. The forward-looking guidance suggests a focus on diversification and shareholder value, offering a balanced outlook for the future.