KE Holdings Inc. Earnings Call: Mixed Sentiments and Strategic Focus

KE Holdings Inc. Sponsored ADR Class A ((BEKE)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for KE Holdings Inc. Sponsored ADR Class A revealed a mixed sentiment, showcasing both commendable achievements and areas of concern. The company celebrated significant strides in operational efficiency and growth within its rental business, yet faced challenges with declining gross margins and new home transaction revenues.

Record Contribution Profit in Home Renovation and Rental Business

KE Holdings reported a record high in contribution profit from its home renovation and rental business, achieving city-level profitability before deducting headquarters expenses. This milestone underscores the company’s strategic focus on these sectors, highlighting their potential as key growth drivers.

Home Rental Services Surge

Revenue from home rental services soared to RMB 5.7 billion in the third quarter, marking a 45.3% increase year-over-year. This impressive growth was attributed to the expansion of rental units under management, which now exceed 660,000, demonstrating the company’s robust performance in this segment.

Improved Efficiency and Shareholder Returns

The company enhanced its operational efficiency through the integration of AI technology, which contributed to improved shareholder returns. Notably, KE Holdings executed significant share repurchases, with spending reaching its highest level in two years during a single quarter.

Decline in Gross Margin and Net Income

Despite operational successes, KE Holdings experienced a decline in gross margin by 1.3 percentage points year-over-year, settling at 21.4%. Additionally, GAAP net income fell by 36.1% to RMB 747 million, reflecting financial pressures that the company needs to address.

Decrease in New Home Transaction Revenue

The company saw a 14.1% year-over-year decrease in revenue from new home transactions, alongside a 23% drop quarter-over-quarter. This decline highlights challenges in the new home market, which may require strategic adjustments moving forward.

Emerging Services Revenue Drop

Revenue from emerging and other services decreased by 18.7% year-over-year and 8.4% quarter-over-quarter, totaling RMB 396 million. This downturn signals a need for innovation and adaptation in these areas to regain momentum.

Forward-Looking Guidance

Looking ahead, KE Holdings remains focused on enhancing business efficiency and profitability. The company maintained a stable Total Gross Transaction Value (GTV) of RMB 736.7 billion year-over-year, with total revenues increasing by 2.1% to RMB 23.1 billion. Despite a decline in gross margin and net income, the company is optimizing costs and expenses across core segments and enhancing shareholder returns through substantial share repurchases.

In summary, KE Holdings Inc.’s earnings call presented a balanced view of its current standing, with notable achievements in operational efficiency and rental business growth, countered by declines in gross margin and new home transaction revenue. As the company continues to navigate these challenges, its strategic focus on efficiency and shareholder returns remains pivotal.