KE Holdings Inc. (BEKE) Earnings Call Transcript & Summary

Hello, ladies and gentlemen. Thank you for standing by for KE Holdings, Inc.'s Third Quarter 2024 Earnings Conference Call. Please note that today's call, including the management's prepared remarks and question-and-answer session will all be in English. Simultaneous interpretation in Chinese is available on a separate line for the duration of the call. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Ms. Siting Li, IR Director of the company. Please go ahead, Siting.

Thank you, operator. Good evening, and good morning, everyone. Welcome to KE Holding's, or Beike's Third Quarter 2024 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 investors.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. Peng will provide an overview of our strategies and business development; 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 Beike'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. 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 resources. Neither the company nor any of its 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 estimation. For today's call, management will use English as the main language. Please note that the Chinese translation is for convenience purpose only. In case of any discrepancy, management statements in their original language will prevail. With that, I will now turn the call over to our Chairman and CEO, Mr. Stanley Peng. Please go ahead, Stanley.

Thank you, Siting. Hello, everyone. Thank you for joining Beike's Third Quarter 2024 Earnings Conference Call. In the third quarter, we continued demonstrating our dynamics and sustainable growth momentum. Despite challenges in the market, each of our business segments delivered solid results. GTV for our existing home transaction business reached RMB 477.8 billion in the third quarter, up 8.8% year-over-year. According to the estimate from data disclosed by the housing bureaus and housing associations of the fourth first-tier cities, total number of online registered transactions for existing home grew by about 21% year-over-year in the third quarter. While the number on Beike platform saw by 44% year-over-year for reference. For new home transactions, GTV on Beike platform increased by an impressive 18% to RMB 227.6 billion in the third quarter, while new home transaction GTV or CRIC top 100 developer declined 29% year-over-year. In the third quarter, our home renovation and furnishing and home rental services revenue grew year-over-year by around 33% and 118%, respectively. At the end of Q3, a noticeable shift in policy also posted a solid market rebound. In this market cycle, one thing we have become increasingly certain about is the importance of thinking long term. We are going to deeply understanding the power of our long-term perspective for our organization survival and development are our core imperatives. Among this, our foremost priority is to survive, enduring and surviving, therefore, our focus is not just how to navigate next year, but on how to become a company that can survive for 30, 40 or even 100 years. The greatest threat to our company's longevity and rigidity, bureaucracy and loss of vitality to grow and innovate. To threat us, a company needs 2 things. the first is integrity, doing the right things and create value for society. And second, creativity. Every step we take today is guided by these principles, doing the right things, even if it's difficult and fostering creativity. This is how we will become a company that can stand the test of time. Let me share how we are putting this vision into action. For any large organization, the biggest threat is lack of growth. The priority of business growth strategy we put in place this year has yielded remarkable results. In terms of scale, by the end of the third quarter, we have increased the number of active stores on our platform by 14.6% year-over-year, with a net additional almost 6,000 stores compared with the same period last year. We now have more than of 46,800 active stores. The number of active agents also grew to over 420,000, which means we added 24,000 agents since the third quarter of last year. Our strategic collaboration in the new home markets growth than all top-tier developers. In August, the number of transactions from our strategic product developers accounted for 26% of our total new home transactions. We also made strides in improving store and platform operating efficiencies. In the third quarter, the average revenue per store on our platform, excluding Beijing and Shanghai, surpassed levels from the same period in previous years. The support ratio of platform staff to frontline agents also reached a record high. We also maintained robust risk control and strive for higher service quality. The right mechanisms are also crucial for fostering organizational creativity. In the third quarter, we officially established a small leadership committee as an innovative step towards rethinking large organizations governance. It's a governance system that ensure forward-thinking and our long-term outlook. After a year of trial implementation, the committee is now officially in place. It consists of the leaders of our main business lines as well as the head of our finance and HR departments; Xu Wangang, [indiscernible] Xu Tao, Yongdong Peng. The committee will report directly to me and is tasked with carefully considering and planning the company's key strategies and initiatives. Its goal is to ensure collaborating with leadership, clear accountability and continuous self reflection. By design, this model brings together diverse perspectives to help us make better decisions and strengthening our unity as a team. In the future, we will continue to refine and promote the innovation of our company's governance mechanism to further strengthen our leadership framework. In addition, we officially appointed the CEOs of our new initiative businesses. Xu Wangang, who had already been serving as the COO of Beihaojia will now also lead our home renovation and furnishing business. [indiscernible], head for our new -- for our home rental services business, and also continue in his role as a CEO of Lianjia. They will both report to me. These appointments reflect our committee commitment to tackling future changes and our focus on aligning resources to achieve greater synergies across the group. With development over the past few years of home renovation and furnishing and home rental services business have achieved several key milestones. In the first 3 quarters of this year alone, revenues from our home renovation and furnishing business surpassed RMB 10 billion across more than 45,000 projects. Revenue from our home rental services business approached RMB 10 billion during the first 3 quarters, with the number of rental units managed on the Carefree Rent exceeding 360,000. I'm truly grateful to our excellent team for fostering these achievements. That said, we have more work to do. There are still many fundamental unresolved problems in the industry. We will iterate our scientific management and other capabilities to address the industry underlying issues related to quality and commitment among others. We hope that when people talk about this industry and our brand in a few years, they will say your quality is exceptional. Today, we are at a pivotal moment in this undertaking. Over the next 2 years, we will strengthen our core capability to reach our vision. For our platform ecosystem, we are more committed than ever to working with store owners and store managers. They are the high-frequency players in this low-frequency industry. Our top priority is helping them achieve better returns. If they adopt a long-term mindset, our platform can achieve lasting growth. In the third quarter. we introduced new operational mechanisms to support this goal. We launched our store points incentive program that rewards store owners for long-term platform loyalty, strong performance, integrity and innovative business practices. This initiative is to significantly enhance store owners satisfaction and allegiance to our platform. In Q3, we distributed around RMB 18 million in cash equivalent incentives to store owners in pilot cities. Take Shenzhen, one of our pilot cities, as an example, over the past 2 to 3 years, more than 1000 new stores have joined our network in Shenzhen while growing in scale. These new stores face 3 major challenges insufficient emphasize on existing home transactions, slow progress in the new initiatives like home renovation and rentals and a weak collaboration across the platform with relatively high post-transaction customer complaint rates. We tailor specific incentives within the store point system to address these issues and motivate positive change. Stores can now increase 20% after bonus points for completing existing home listing transactions. They also receive 2 to 3x bonus points for conducting nonhousing transaction businesses. Stores are also awarded separate bonus points if they have been in our network for a long time and have a history of compliance and collaboration. stores owners can convert their points into additional benefits. In October, stores owners in Shenzhen received a total of RMB 2.49 million equivalent incentives and 930,000 points, with top single store receiving RMB 210,000 equivalent incentives. Notably, the platform's profit sharing payouts to store owners boosted their income, offsetting the cost of renting our storefronts. At the same time, we effectively address the 3 core problems, mostly existing home transaction began to recover an increase by 12% sequentially. In September, number of units leased out on the Carefree Rents grew by 21% in Q3 compared with Q2, and across our existing home transaction reached 74.5% of total transaction, a record high. Of course, these metrics only indicate short-term achievements. More importantly, our goal is to use a strong membership point system to encourage store owner to long-term share value with them and provide a clear development path on the platform, driving growth for both stores and the platform. Moving on to Lianjia, we have continued to advance its take-off plan this year. Our decision to invest in Lianjia during tough market adjustments is also firmly rooted in our long-term vision. First, Lianjia is the cornerstone of our One Body, Two Wings strategy. Maintain Lianjia solid fundamentals is crucial while we promote its expansion based on sustainable operations and ongoing efficiency. Lianjia also need to lead the way in innovation and be the frontrunner in tackling industry changes, reconstructing operational organizational capabilities and advancing agents professional development. The number of Lianjia's active agents grew by almost 30% -- 13% year-over-year, exceeding 110,000. Lianjia agent attrition rate in cities, excluding Beijing and Shanghai, dropped to 4.4% at end of September, down 0.4 percentage points from 2023. In addition, we also continue to make headway in the large store model with an average number of agents per store across Lianjia nationwide climbing to 19.2%. As of September, nearly 3,800 Lianjia management level employees and above have trained in the Lianjia large store leadership development program. To sustain creativity, we will constantly map out new opportunities and possibilities for the future. We cannot afford to wait until growth slow down to start innovation -- innovating, nor should we fall into complacency or simply defend what we have. Instead, we must plan ahead, remain open to embracing new ideas and invest in long-term strategies. That said, we want to make blind base, each segment in our industry is substantial. And entering any new venture requires intensive decision-making process. Our approach includes extensive forces, pilot trails by dedicated teams and a deep engagement through understanding is essential before taking any action. We don't rush. That's our underlying rationale for exploring Beihaojia business opportunities. Lastly, we are greatly encouraged by the central government's recent positive statements and series of coordinated quality measures to support stabilize the property market since the end of September. The market reaction has been strong and far reaching. We are now seeing signs of market recovery with regards to both volume and prices. As we navigate through higher and lows, we must remain calm at the peak, steadfast at the truth and grounded in reality in return. This is how we find true stability with the broad environment improving. The truth we have during this period of market adjustments are clear, steering committed to long term, maintaining opportunism, fostering resilience and unity. These truths and all efforts we made in challenging times will enable us to go even further in a more favorable environment. Thank you. Next, I would like to turn the call over to our CFO, Xu Tao, to review our third quarter 2021 financials.

Thank you, Stanley, and thank you, everyone, for joining us. Before we dive into our Q3 performance, I'd like to briefly touch on some updates in the housing market. The market's performance in Q3 was in line with our previously projections. The market experienced gradually retreated for the following pulse-like rebound, fueled by intensive positive policy released in May. Particularly in September, the year-over-year decline in market performance widened due to higher base. In Q3, the existing home market was relatively stable with year-over-year increase in transaction volume. This was primarily attributable to homebuyers preference for the readily available homes. In comparison, the new home market was still in a bottoming out stage with weak supply and demand. As it would take time to resolve the real estate developers at risk. By end of September, there was an intensive array of the real estate policies from the central and local authorities. This included a lowering interest rate, reducing mortgage rates for its new homes, underlining the minimum down payment ratio for the first-time and second-time homebuyers. These policies for the stimulated housing demand, encouraging more people to enter the market. Meanwhile, other macroeconomy policies such as mandatory policies indirectly fuels the market confidence, which stimulated the market activities. We are highly anticipating the market performance after third quarter. Turning to our financial performance in Q3. Our total GTV reached RMB 736.8 billion, up 12.5% year-over-year. Net revenue was RMB 22.6 billion, representing a year-over-year increase of 26.8%. Gross margin declined by 4.7 percentage points year-over-year to 22.7%. GAAP net income reached RMB 1.2 billion, showing a year-over-year decrease of 0.2%. Non-GAAP net income reached RMB 1.8 billion, reflecting a year-over-year decrease of 17.5%. Non-GAAP net income exceeded market consensus. Moving to our home transaction services. Revenue from existing home transaction reached RMB 6.2 billion, down 1.4% year-over-year and 15.2% quarter-over-quarter. GTV was RMB 477.8 billion, up 8.8% year-over-year and down 16.3% quarter-over-quarter. Our GTV and revenue showed similar sequential declines, keeping our market our monetization rate relatively stable. Year-over-year, GTV growth surpassed revenue, which was mainly due to the higher contribution from the GTV of existing home transaction facilitated by the connected agent. The revenue was recorded on a net basis. The contribution market from the existing home transaction services reached 41%, a decline of 7.7 percentage points year-over-year and a 6.5 percentage point quarter-over-quarter. This decrease was primarily due to the increased fixed labor cost related to increased number of agents and improved welfare of agent under the retreated market circumstance. In terms of the new home transaction services, although market remained sluggish, we significantly outperformed the market across all metrics. CRIC shows that the sales from the top 100 developers decreased by around 29% year-over-year and around 27% sequentially in Q3. In contrast, our new home GTV reached RMB 227.6 billion in Q3, up 18.4% year-over-year, while down 3.3% quarter-over-quarter. This remarkable performance, notably above the industry was mainly compiled by deeper cooperation with developers and our refined operation that strengthened our capabilities. Revenue from new home transactions rose by 30.9% year-over-year to RMB 7.7 billion, but dropped around 2.6% from the previous quarter. Revenue outperformed GTV, both year-over-year and sequentially, once again, demonstrating our strong and steady monetization capability in new home transactions. The contribution margin from new home transaction services fell by 0.4 percentage point year-over-year to 24.8%, largely as a result of a strategic increase in variable commissions due to greater emphasis on building harmonious ecosystem and better rewards to our agents. Sequentially, the new home contribution margin declined by 0.3 percentage points due to the increase in the fixed labor costs. In Q3, the commission income percentage from SOE developers rose to 58% and the proportion of the commission in advanced project maintained a relatively high level at 44%. Revenue from the home renovation and furniture business, home rental services, emerging and other services grew by 54.3% year-over-year in Q3, accounting for a portion of our total revenue at 38.3% with a record high and surging by 6.8 percentage points from the same period of 2023. Our home renovation and furniture business maintained steady growth. In Q3, contracted sales reached RMB 4.1 billion, up 24.6% year-over-year. Revenue amounted to RMB 4.2 billion, rising by 32.6% year-over-year. The revenue growth rate outpaced that of the contracted sales, mainly due to the higher delivery efficiency. The contribution margin for the home renovation and furniture business reached 31.2%, up 2.1 percentage points year-over-year and relatively flat sequentially. This was primarily driven by gross margin improvement in our home renovation business. The contracted sales of furniture and home furnishing retail, which are outside of our home renovation package, reached approximately RMB 1.1 billion in Q3, accounting for approximately 28.1% of the total contracted sales, improving by 2.1 percentage points from the same period of 2023. Our home rental services business continued to grow at an accelerated pace. In Q3, its revenue reached RMB 3.9 billion, up 118.4% year-over-year, benefiting from the rapid growth in the number of rental units under management. By end of Q3, the number of units managed by our home rental services exceeded 370,000. In particular, the number of the rental units managed under our Carefree Rent exceeded 360,000 compared with around 160,000 in the same period of last year. The contribution margin was 4.4%, declined by 1.4 percentage points sequentially. This was mainly due to the higher commission expenses due to the seasonality. In Q3, our net revenue from emerging and other services decreased by 21.5% year-over-year to RMB 487 million. Next, let's move on our other costs and expenses in Q3. Our store costs and other costs remained generally stable year-over-year and quarter-over-quarter at RMB 703 million and RMB 502 million, respectively. Gross profit rose by 5.2% year-over-year to RMB 5.1 billion. Gross margin was at 22%.7%, down 4.7 percentage points year-over-year and 5.2 percentage points sequentially. The primary reason for the decline was the falling contribution margin of the existing home transaction service, led by the increased fixed labor costs. In Q3, our GAAP operating expenses were RMB 4.4 billion, up 11% year-over-year and down 2.1% sequentially. G&A expenses were relatively stable year-over-year at RMB 1.9 billion while falling sequentially by 8.6%. This was mainly attributable to the reduction in the share-based compensation. Sales and marketing expenses grew by 18.6% year-over-year to RMB 1.9 billion as we invest in the rapid expansion of our home renovation and furniture business, increasing associated sales and marketing expenses quarter-over-quarter, sales and marketing expenses rose by 2.8%, remaining largely stable. Our R&D expenses were RMB 573 million, rising by 21.5% year-over-year and 13.6% sequentially, primarily due to the increased R&D spend in our home transaction services and higher expenses of exploration for some advanced R&D projects. In terms of the profitability, cash income from operations totaled RMB 727 million in Q3, down 20.2% year-over-year and 63.9% sequentially. GAAP operating margin was 3.2%, a decrease of 1.9 and 5.4 percentage points from the Q3 2023 and Q2 2024, respectively. Non-GAAP income from operations totaled RMB 1.4 billion, declining by 27.7% from the same period of last year and 51.5% quarter-over-quarter. Non-GAAP operating margin reached 6%, down 4.6 and 6 percentage points from Q3 2023 and the Q2 2024, respectively. The decline in operation margin was mainly due to the lower gross margin. GAAP net income totaled RMB 1.2 billion in Q3, showing a year-over-year decrease of 0.2%, while dropping by 38.5% quarter-over-quarter. Non-GAAP net income reached RMB 1.8 billion, down 17.5% year-over-year and 33.8% quarter-over-quarter. Moving to our cash flow and balance sheet. We rolled out the net operating cash inflow of RMB 449 million in Q3. The new home DSO was 47 days in Q3, which is a testament to our effective risk management. On top of approximately USD 204 million allocated to the share repurchase during Q3. Our total cash liquidity remained at a high level of RMB 76.3 billion which excludes customer deposit payable. With our robust cash results, we continue to reward our shareholders who have grown with us through the active share buybacks enhancing capital operation efficiency and sharing the benefits of our development with investors. At the end of Q3, we had repurchased around USD 784 million worth of shares this year, which accounted for around 3.3% of company's total share outstanding at end of 2023. We have consistently delivered on our promise to reward shareholders. Since the launch of our share repurchase program in September 2022, we have repurchased around USD 1.49 billion worth of shares at the end of Q3, which accounted for around 8.1% of the company's total share outstanding before the program began. As our business becomes more diverse and expand in scale, we have set higher requirements for the reasonable allocation of resources and financial prudence. Our financial strategy is to focus on the essence of the operations and support the growth of our One Body, Three Wings business, but strictly controlling our risk threshold and maintaining a healthy cash flow for our housing transaction services, on the situation of our store expansion strategy, we have implemented a comprehensive upgrade of the financial accounting model. Regarding our home renovation and furniture business, while upgrading our centralized purchasing module nationwide, we'll have further enhanced the level of automation in our business and the financial process. But for our home rental services, with the continuous iteration of our business model and the rapid scale up in the number of the management properties, we continue to come through and update our business and financial process to facilitate business development. Regardless how external environment changes, we will remain true to our original intentions, facilitating customers better living, enabling service provider's bright prospects, promoting industry's advancement and building harmonious ecosystem. We believe we will gain huge potential growth in vast market and advance towards one-stop residential service platform. That concludes my prepared remarks for today. Operator, let's open for the questions.

[Operator Instructions] Your first question comes from John Lam with UBS.

[Foreign Language] So maybe I translate my question in English. So my question is more regarding on the recent property policy. So how does the management view about this policy versus in the past? And so far, how you see effect from the policy? How is the sustainability and also what kind of market forces is required in order to have a market stabilization?

Thank you, John. In Q3, overall our market performance was muted, as the effect of the May 17 policies restated, coupled with the low summer season, the existing home transaction market shows a month-by-month decline in July, August and September. For the new home market, the year-over-year decline in GTV of CRIC top 100 real estate developers also worsened month by month in Q3, even after seasonal improvement middle year. However, since the launch of the policy package at the end of September, transaction volume in existing and the new home market surged nationwide. Tier 1 cities led this jump. Meanwhile, with a huge transaction volumes, home prices also show signs of temporary stabilization. Overall, this round of policies has driven stronger market recovery than last 2 previous rounds on August 31 last year and May 17 this year. For details, this round of the policy exceeded the last 2 rounds in both scope and intensity. Unlike previous relaxation in either purchase restriction or mortgage condition, this round of policy introduced a whole package of the countercyclical policies, directly initiated by the Politburo in response to new issues in the current market economy combined with greater credit support from the Central Bank and the swift implementation of purchase restriction relaxation in Tier 1 cities that led to the market outperformance. In particular, the Politburo making explicitly emphasize the first time to stop decline of the real estate market. This work shows the country's commitment to stabilizing the housing market that leads to a stronger recovery in market expectation compared to previous 2 rounds. For existing home market, following this round of policies, transaction volumes have increased significantly across first, second and third-tier cities. This contrast with post May 17 policy response, where the rebound was only in the fourth-tier cities. In October, the number of existing home transaction on our platform marks the highest monthly level, rising by over 70% year-over-year and 30% from September. Notably, the transaction volume in Tier 1 cities saw year-over-year, increase is over 100%, with Shenzhen up by over 250%. In October, Shenzhen average daily transaction volume reached the highest level in nearly 4 years. Year-over-year growth in Beijing and Shanghai was also more than 120%. For Tier 2 and Tier 3 cities, transaction volumes saw a year-over-year growth of more than 60%. Regarding existing home prices, a positive signal is that October saw a month-by-month price stabilization with a slight 0.3% increase, thanks to the surge in transaction volume and the improving market sentiment. This marks a notable improvement from the 2.1% decline in September and is the first increase since the beginning of 2023. Prices in Beijing, Shanghai and Shenzhen were up 2.2%, 2% and 0.7%, respectively, compared with September. This was mainly due to the fewer homeowners are rushing to sell at the steep discounts. This shift is reflected in the Beike's prospective impact, which tracks the percentage of the price increase in all price adjustment of listed homes on Beike platform. After hovering below 10 since it rise early this year, the index recently recovered to 14. In Tier 1 cities, this rose to 19, with Shenzhen jumping to 32 to a relatively active range. This shift indicates an incremental increase in the number of homeowners rising their home listing prices. Regarding transaction structure, the market was primarily led by home upgrades, who had previously been viewing properties, but were in a wait and see mode. According to Beike Research Institute survey, after policy rollout, the proportion of consumers looking to buy a home quickly increased by 5 percentage points. In Tier 1 cities, this grew from the 17% to 31%. The proportion of the wait and see consumer decreased. Regarding the new home market, the latest round of policies also led to a rebound in the new home market. In October, the GTV of CRIC top 100 developers increased by 73% from September and 7% from the same time last year. New home subscriptions on our Beike platform during National Day holiday nearly matched the subscription level for the entire month of September. New home experienced a greater month-by-month rebound in existing homes. One reason is the lower base in September, the other reason is that the new policies mitigates the consumers' concern about the home delivery issues and developers' active promotion during the National Day holiday also helped boost the new policy effectiveness and accelerate sell-through. Regarding the market outlook in the future, the latest round of policy has more enduring effect on housing market, given its wider scope and the intensity compared to previous ones. It is worth noting that since October and through the first 2 weeks of November, the weekly existing home transaction volume on the platform have remained stable at a high level, demonstrating a strong short-term momentum. We expect the market to be relatively stable in the fourth quarter. For existing home prices, they are remaining stable in the short term, but their sustainability requires further observation. However, we want to boost to the sentiment, the further recovery of the economy fundamental is key to ensure the property market bottom out. This relies on enhanced policy focused on the overall macroeconomic improvement. On top of policy stimulating housing demand to further roll out of the measures on supply side such as the support for developers and inventory reduction will help rebalance supply and demand in new home market and revitalize the industry. Continued favorable policy for the real economy will also provide greater support for residents' income expectations and purchasing power, fundamentally stabilizing the real estate market. Thank you.

Your next question comes from Timothy Zhao with Goldman Sachs.

Great. My question is regarding your home renovation and furnishing business. As we have seen signs of recovery in the home transactions in both existing home and new home markets in September, how should we think about the growth outlook for home renovation business? Could you share some recent progress on this business line such as how you managed to improve the operating efficiency?

Thank you, Timothy. In Q3, our home renovation and furniture business achieved steady growth. At full scale, our contracted sales reached RMB 4.1 billion, making a year-over-year increase around 25%, with revenue rising to RMB 4.2 billion, up 33% year-over-year. Our cities, such as Beijing, Guangzhou, Zhengzhou and Nanchang performed especially well and each achieved over 50% year-over-year growth in contracted sales. As for the profitability, home renovation contribution margin reached 31.2% in Q3, showing an improvement compared to the same period last year That's mainly due to the following factors. First, we focus on reformed operation management. Since the home renovation construction involves lots of complex steps, we conduct a thorough review of each phase to identify key areas for the improvement. For example, when we noticed access materials, we quickly address our construction price and strengthen internal control to minimize the material waste. We also continue to updating our product package. During the initial design phase we carefully analyze the cost and the construction standards for each type of product. Running profitability model to ensure that each package maintained a reasonable gross margin during the initial development phase. Additionally, we increased the proportion of a centralized purchasing. For products with a high degree of standardization, we scale up the centralized purchasing at a group level. The centralized procurement ratio for both maintain and supplementary material reached over 30% in this quarter -- in third quarter while it was over 20% in the second quarter. As our home renovation business has expanded rapidly, we not only increase the purchase volume from existing products, but also renegotiate unit prices to reflect our large scale. While strengthening the profitability management, we also continuously focus on improving our operational process and models to enhance quality and boost customer satisfaction. For terminal channel management, we further shortened the construction time lines by optimizing workflow and dispatch efficiency. This brought the combined time line for basic construction and preliminary material to average around 99.5 days in Q3 compared to 109.3 days in the same period last year. Regarding after sales, while implementing proactive maintenance services, we expanded our in-house aftersales team nationwide. Our aftersales team grew from over 200 people at the end of last year to over 500 at the end of September this year. This team remotely and carefully what drives customer repair requirements and further enhance our customer satisfaction. In our home renovation business model of the quality, scale and efficiency, quality remains as a core. We will continue to iterate and invest in building our infrastructure and the capability to strengthen quality foundation, which is essential to our -- to remained competitive in the future. Thank you.

Your next question comes from Griffin Chan with Citi.

[Foreign Language] This is Griffin from Citi. I will translate my own questions. Beike has outperformed the market for both existing and new home business. Would the management have confidence in sustaining this outperformance? Besides, we know Beike has been actively expanding store this year. Would management please share your plan going forward?

Thank you, Griffin. This year, we're focused on agent and store network expansion and ecosystem development. And proactively strengthening high-level collaborations with developers in new home business. These efforts have all paid off, enabling us to continuously outperform the market. Regarding scaling our platform, our agent store network continued to expand. By end of Q3, the total number of active monthly in just stores on our platform was more than 41,000, and the number of active monthly agents was 315,000, up 16% and 4% year-over-year, respectively. We provided brands with fee discounts, installment plans and other support to attracting to join our network. And in a volatile market, our platforms reach customer resources, intensive cooperation network, professional empowerment and a diversified service such as new home and home renovation had a stronger appeal to store outside of network. Returns from our investment in store expansion have remained good. From the platform perspective, by end of September, newly same store in Q1 this year had a positive ROI with, all regions covering their cost. As we made steady progress in connecting stores, we have further shifted our strategy in the second half of this year from connecting small and scattered community stores to large stores. Accordingly, we raised the threshold of the average number of agents per store performance requirements and incentives. Our goal was to attract more quality store in the industry to join Beike to boost overall scale and efficiency. Regarding the store network operation, we adopt a more refined strategy at each individual business district level. For the areas fully covered by our network. We place more emphasis on ecosystem optimization. We helped store owner and agent retain more income through a series of platform benefits and supportive measures. Store productivity in these commercial areas was 1.2x as high as other commercial areas. In areas where our store collaboration was insufficient, we focus on target management and empowerment through the platform data analysis, problem diagnosis and the strategic support aligned with the involvement of the store owner or governance council. We promoted the focus on the home listings, enhance sell-through and boosted cooperation among stores. In areas with insufficient network coverage, we actively connect to the new stores through various type of store expansion package. For existing stores, we pilot a point-based incentive system in Q3 to multiple stores to enhance efficiency and optimize our ecosystem. This system is essentially a membership program for the store owners through which the platform giving back returns as incentive to outstanding stores. This was aimed to achieving share value and win-win between the platform stores. Amongst 9 pilot cities in Q3, the platform issues over CNY 18 million in equivalent cash benefit to store owners with 30% of store receiving this reward. The incentive system will bring more flexibility to our housing transaction business operations, while motivating store owners to engage more in our new business, including renovation and rentals. In our new home business, we continue to outperform the industry. In Q3, our new home GTV reached RMB 227.6 billion, up 18.4% year-over-year compared with 29% decline in the GTV of pilot developers development. Meanwhile, our monetization rate continued to increase in Q3, the proportion of revenue from commissions -- in our new home business outperformance mainly come from continuous increase in the number of core projects, which was a high of over 8,000 in Q3. In September, the number of our core new projects accounted for 64% of all new home projects across cities where we operate, excluding Beijing and Shanghai compared with 53% in the same period of last year. This was a result of growing recognition among developers for our sales capability as well as a proactive effort to respond to collaborations. We continue to make the breakthrough in strategic collaboration. We have already covered the 7 out of 10 top developers. Strategic collaboration differ from the top single project cooperation, which typically featured a competitive relationship between the 2 sides. In strategic collaboration, the 2 sides work as partner to enhance a mutual understanding. We informed our corporate partner of the operations and the needs of our agents, market dynamics and additional service and value our platform efforts beyond the broker channel. Through the top-down promotions of such warning in real estate companies, we helped overcome difficulties in negotiation of city-level projects, leading to more core projects. Through the strategic collaboration, we can also better protect agents' rights. For instance, we incorporate customer private phone number protection and eco protection period into the strategic collaboration framework to promote the fair cooperation. Moreover, we enhanced the business conduct, governance to improve operational transparency, putting developers minds at ease in their cooperation with us. Our stable monetization and receivables collection also motivate agents to work more actively on the new home sales, boosting our new home sell-through. Meanwhile, the agents' operational ecosystem has continued to improve the penetration of the customer profit from number protection rose to 67% in Q3, up by [indiscernible] from Q2, bringing more sense of security of agent, which also improves our willingness to sell the new homes. Thank you.

Your next question is from Thomas Chong with Jefferies.

[Foreign Language] My question is about our home rental business. As we see our Carefree Rent is undergoing fast growth pace. While this business requires quite a lot of involvement in operation, can management share about how we are different from others in terms of operations?

Thank you, Thomas. In Q3, our revenue from our home rental services reached RMB 3.94 billion, up 118.4% year-over-year. It's mainly due to the continuous increase in the number of the home unit under our management. By end of Q3, we were managing over 360,000 units on our Carefree Rent model compared to over 160,000 in Q3 last year. The contribution margin of our home rental services built slightly quarter-over-quarter in Q3 due to the seasonality. In the summer peak season of July and August, our Carefree Rent saw a rapid growth in unit sales and occupancy, which increased commission costs for the channel referrals and related personnel, which impacts contribution margin. Excluding the system impact, the core metrics of the Carefree Rent improved significantly year-over-year from January to September. Our operations focus on quality and efficiency have yield good results. On improving services to customers, we provide premoving inspections, standardized handover services and the tenant side property transfer services with a cumulative service comp exceeded 970,000, provide a series of the core increase in guarantees to our tenants. Also, we centralized the management of the 2 type of the property managers, tenant service manager and property service manager to realize the centralized empowerment and standardized services. This has enhanced our post-lease service capabilities and quality while also leading to a continuous decrease in customer compliance rate. In terms of the operational efficiency, we're continuing to increase the percentage of the lease renewals, which helps reduce the channel costs associated with the rerenting and finding new tenants. We achieved this through improved post-lease services, leading to increased tenant satisfaction and user retention. At the same time, we're actively engaged with tenants prior to lease expiration to discuss renewals, thereby boosting the renewal rate. By end of Q3, the lease renewal rate was around 52% compared to 48% in the same period last year. Regarding management in rental cost due to the vacancies, we shortened the days needs to rent out the properties through the refined operations. The time required to rent out the property for the second time, decreased to 7.5 days at the end of Q3 from 14.7 days at the beginning of the year. We also continue to optimize and upgrade our product module. The coverage of our new product model, which includes no vacancy period continue to rise in Q3. This model enhance our resilience against the rental price volatility and reduce the vacancy costs. The deposit cost per unit of our new Carefree Rent product module also dropped. This was mainly due to the improvement in a successful rate of the first-time rentals, which rose to 82% at end of Q3 from 76% in the same time of last year, driven by higher personnel productivities. We continue to build our own rental occupancy team with enhanced leasing efficiency, while keeping overall cost lower than the channel cost. By end of Q3, the rental opportunity contribution by this team was at 19%, up 5 percentage points from the same period last year. In addition, regarding Q3 operations, we took targeted measures to ensure the health and efficiency of our business in peak and the light sites, respectively. The specialization strategy for the service providers based on their roles significantly boost our efficiency, leading to large scale growth and incremental profit margin. In the peak season of July and August, in particular, the personnel productivity of the unit and occupancy improved notably year-over-year. Since entering the off season in September, we have implemented multiple strategies, including strengthening the rental occupancy mix through our self-build team and agent and improving their productivity, using various marketing measures for the targeted customers, continuously manage lease with renewals and the second-time leasing presales, and focusing on keys areas of the housing units out and effectively manage inventory. Thank you.

Your next question comes from Miranda Zhuang with Bank of America Securities.

[Foreign Language] My question is about Beihaojia. We see the news that Beihaojia has successfully outbid line in Chengdu City. So can management share with us about the project and the rationale about it? And then what's company's business model for the Beihaojia?

Thank you, Miranda. Our new business, Beihaojia won a piece of land through the auction in Chengdu core areas of Jinjiang District, Financial City Phase III in September. We undertook this project after carefully review and the selection and it will be operated by Beihaojia team independently. We aim to use the pilot project like this to better validate our ability to implement our C2M solutions at every stage, including the land auction, product positioning, design and marketing. By creating model projects, we can build trust with future partners such as developers, contractors and property owners towards our business model and the product solution, ultimately helping us achieving a long-term light asset service platform model. But it is very clear that we do not intend to become a real estate developer. In terms of our long-term business model, we will not use our own capital for larger scale heavy assets investment. We positioned Beihaojia as a data agreement residential development service platform achieved through our 1 + 2 business model. This includes C2M product solutions supported by our accumulated user insight and big data and complemented by efficient customer acquisition and the marketing capability. This empower all partners in that chain to create homes that are well suited to customers. C2M will be our core capability. It leveraged the vast amount of data and AI technology to ensure the customer preference and demand are reflected in the new home plans such as possible. Regarding commercialization, we will charge service fees for offering an integrated set of solutions, including product positioning, initial and in-depth design rather than through the large capital contribution or earning investment returns. Lastly, we were fortunate to acquire the land on September 20, right before the government roll out the subsequent bundle of favorable policies. This has made the land acquisition price highly competitive. We believe this project will serve us the test bed for our capabilities, allowing us to accumulate know-how to support the realization of our long-term platform model.

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

Thank you once again for joining us today. If you have any further questions, please feel free to contact Beike's 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.