KE Holdings Inc. Announces Fourth Quarter and Fiscal Year 2022 Unaudited Financial Results

BEIJING, China–(BUSINESS WIRE)–KE Holdings Inc. (�Beike” or the “Company”) (NYSE: BEKE and HKEX: 2423), a leading integrated online and offline platform for housing transactions and services, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2022.

Business and Financial Highlights for the Fourth Quarter and Fiscal Year 2022

• Gross transaction value (GTV)¹ in 2022 was RMB2,609.6 billion (US$378.4 billion), a decrease of 32.3% year-over-year. GTV of existing home transactions was RMB1,576.5 billion (US$228.6 billion), a decrease of 23.4% year-over-year. GTV of new home transactions was RMB940.5 billion (US$136.4 billion), a decrease of 41.5% year-over-year. GTV of home renovation and furnishing was RMB5.4 billion (US$0.8 billion), compared to RMB213 million in 2021. GTV of emerging and other services was RMB87.3 billion (US$12.7 billion), a decrease of 53.2% year-over-year.
  
  In the fourth quarter of 2022, GTV was RMB647.0 billion (US$93.8 billion), a decrease of 11.7% year-over-year. GTV of existing home transactions was RMB359.9 billion (US$52.2 billion), an increase of 1.5% year-over-year. GTV of new home transactions was RMB263.5 billion (US$38.2 billion), a decrease of 26.1% year-over-year. GTV of home renovation and furnishing was RMB2.0 billion (US$0.3 billion), compared to RMB61 million in the same period of 2021. GTV of emerging and other services was RMB21.7 billion (US$3.1 billion), an increase of 3.5% year-over-year.
• Net revenues in 2022 were RMB60.7 billion (US$8.8 billion), a decrease of 24.9% year-over-year.
  
  In the fourth quarter of 2022, net revenues were RMB16.7 billion (US$2.4 billion), a decrease of 5.8% year-over-year.
• Net loss in 2022 was RMB1,397 million (US$203 million), compared to net loss of RMB525 million in 2021. Adjusted net income² in 2022 was RMB2,843million (US$412 million), compared to adjusted net income of RMB2,294 million in 2021.
  
  In the fourth quarter of 2022, net income was RMB372 million (US$54 million), compared to net loss of RMB933 million in the same period of 2021. Adjusted net income was RMB1,547 million (US$224 million), compared to adjusted net income of RMB42 million in the same period of 2021.
• Number of stores was 40,516 as of December 31, 2022, a 20.6% decrease from one year ago. Number of active stores³ was 37,446 as of December 31, 2022, a 17.4% decrease from one year ago.
• Number of agents was 394,020 as of December 31, 2022, a 13.3% decrease from one year ago. Number of active agents⁴ was 349,681 as of December 31, 2022, a 14.0% decrease from one year ago.
• Mobile monthly active users (MAU)⁵ averaged 36.6 million in the fourth quarter of 2022, compared to 37.4 million in the same period of 2021.

Mr. Stanley Yongdong Peng, Chairman of the Board and Chief Executive Officer of Beike, commented, “Amid the challenging housing market in 2022, we underwent a strategic transformation from high-speed to high-quality growth, which not only enabled us to continue outperforming the market in GTV growth and cultivate new growth engines, such as home renovation and furnishing, but also delivered contribution margin expansion in both our existing and new home transaction services in 2022.”

“In the fourth quarter, our GTV of existing home transactions increased year-over-year against the prevailing market decline, as we drove more value for users through our effective ACN and fostered the development of high-quality stores and agents by providing effective tools such as better lead allocation and stringent ecosystem governance. In the new home market, alongside our successful “Commission in Advance” program, we actively promoted sales conversions while increasing the contribution from our collaborations with state-owned developers. The combined effect of these initiatives drove strong results without sacrificing operational and financial safety in exchange for growth. Our home renovation and furnishing business also outpaced the industry, led by the strength of our full-service model, strong traffic referrals from our core business, rapid increase in home furnishing sales, and solid improvement in the infrastructure that we built to support quality delivery.”

“The measures that we enacted in 2022 have expanded our revenue streams, lowered our expenses and reduced our risks, enabling us to be more efficient, more diversified, and healthier. With active real estate policy support and signs of market recovery, we are poised to bring further value to our customers, service providers, and China’s broader housing industry in 2023. In the meantime, we will adhere to our long-term approach and a market-neutral view, striving to transcend the short-term fluctuations and grow inclusively and sustainably,” concluded Mr. Peng.

Mr. Tao Xu, Executive Director and Chief Financial Officer of Beike, added, “For the whole year of 2022, the market and our business experienced a wide range of challenges from the COVID-19 pandemic to spillover risks of developers. Facing the predicament, we took forceful actions to prioritize cost management and efficiency optimization, maximizing the value of our platform to improve the retention and acquisition of high-quality service providers. We achieved net revenues of RMB60.7 billion, down by 24.9% year-over-year, a smaller contraction compared with the decline of the market. Moreover, we reported notable improvements in multiple financial metrics, including contribution margin for both existing and new home transaction services, gross margin and adjusted net income, as well as a stronger free cash flow, demonstrating our successful shift of focus from high-speed to high-quality growth, and further strengthening our leading position in the market. As we look ahead into 2023, the advancement of our “One body, two wings” strategy will drive more diversified development and have higher requirements for operational stability and profitability. As such, with the optimized costs and expenses structure that we built in 2022, we will aim to maintain a dynamic balance among efficiency, risk management and scale expansion, to support our sustained business growth and improvement of service quality.”

Fourth Quarter 2022 Financial Results

Net Revenues

Net revenues decreased by 5.8% to RMB16.7 billion (US$2.4 billion) in the fourth quarter of 2022 from RMB17.8 billion in the same period of 2021, with total GTV declining by 11.7% to RMB647.0 billion (US$93.8 billion) in the fourth quarter of 2022 from RMB732.4 billion in the same period of 2021, which was primarily attributable to the decline in GTV of existing home transactions in top-tier cities and new home transactions, due to the disruption to China’s housing market recovery by COVID-19 flare-ups and soft market sentiment towards new home sales. The decrease of net revenues was partially offset by the increase of net revenues from home renovation and furnishing.

• Net revenues from existing home transaction services decreased by 11.8% to RMB5.3 billion (US$0.8 billion) in the fourth quarter of 2022, compared to RMB6.0 billion in the same period of 2021, primarily due to the decrease of commission revenue which was partially offset by the increase of the revenues derived from platform service, franchise service and other value-added services. GTV of existing home transactions increased by 1.5% to RMB359.9 billion (US$52.2 billion) in the fourth quarter of 2022 from RMB354.6 billion in the same period of 2021, primarily attributable to the increase of GTV served by connected agents on the Company’s platform, which was partially offset by the decrease of GTV served by Lianjia brand year-over-year. The different trend between net revenues and GTV of existing home transaction services was primarily attributable to a higher contribution from GTV of existing home transaction services served by connected agents on the Company’s platform, for which revenue is recorded on a net basis from platform service, franchise service and other value-added services, while for GTV served by Lianjia brand, the revenue is recorded on a gross commission revenue basis.

  Among that, (i) commission revenue decreased by 16.6% to RMB4.4 billion (US$0.6 billion) in the fourth quarter of 2022 from RMB5.3 billion in the same period of 2021, primarily due to a decrease in GTV of existing home transactions served by Lianjia stores of 17.2% to RMB161.4 billion (US$23.4 billion) in the fourth quarter of 2022 from RMB194.9 billion in the same period of 2021, resulting from the surge of COVID-19 cases especially in top-tier cities during the fourth quarter of 2022; and

  (ii) revenues derived from platform service, franchise service and other value-added services, which are mostly charged to connected stores and agents on the Company’s platform, increased by 25.2% to RMB0.9 billion (US$0.1 billion) in the fourth quarter of 2022, from RMB0.7 billion in the same period of 2021, mainly due to a 24.3% increase of GTV of existing home transactions served by connected agents on the Company’s platform to RMB198.5 billion (US$28.8 billion) in the fourth quarter of 2022 from RMB159.7 billion in the same period of 2021, which was primarily due to recovery for existing home sales market in certain second-tier cities along with more supportive policies, and a relatively low base in the same period of 2021.

• Net revenues from new home transaction services decreased by 26.8% to RMB8.3 billion (US$1.2 billion) in the fourth quarter of 2022 from RMB11.3 billion in the same period of 2021, primarily due to the decrease of GTV of new home transactions of 26.1% to RMB263.5 billion (US$38.2 billion) in the fourth quarter of 2022 from RMB356.8 billion in the same period of 2021. Among that, the GTV of new home transactions completed on Beike platform through connected agents, dedicated sales team with the expertise on new home transaction services and other sales channels decreased by 28.4% to RMB212.3 billion (US$30.8 billion), compared to RMB296.4 billion in the same period of 2021, while the GTV of new home transactions served by Lianjia brand decreased by 15.1% to RMB51.3 billion (US$7.4 billion) in the fourth quarter of 2022, compared to RMB60.4 billion in the same period of 2021.
• Net revenues from home renovation and furnishing were RMB2.1 billion (US$0.3 billion) in the fourth quarter of 2022, compared to RMB58 million in the same period of 2021, primarily because the Company completed the acquisition (“Shengdu Acquisition”) of Shengdu Home Renovation Co., Ltd. (“Shengdu”), a full-service home renovation service provider in China, and began to consolidate its financial results during the second quarter of 2022 and the organic growth of the GTV for home renovation and furnishing business.
• Net revenues from emerging and other services increased by 152.0% to RMB1.1 billion (US$0.2 billion) in the fourth quarter of 2022 from RMB0.4 billion in the same period of 2021, primarily attributable to the increase of net revenues from rental property management services and financial services.

Cost of Revenues

Total cost of revenues decreased by 14.9% to RMB12.7 billion (US$1.8 billion) in the fourth quarter of 2022 from RMB14.9 billion in the same period of 2021.

• Commission – split. The Company’s cost of revenues for commissions to connected agents and other sales channels was RMB6.0 billion (US$0.9 billion) in the fourth quarter of 2022, compared to RMB7.7 billion in the same period of 2021, primarily due to the decrease in GTV of new home transactions completed through connected agents and other sales channels in the fourth quarter of 2022 compared with the same period of 2021.

• Commission and compensation – internal. The Company’s cost of revenues for internal commission and compensation was RMB4.2 billion (US$0.6 billion) in the fourth quarter of 2022, compared to RMB5.4 billion in the same period of 2021, primarily due to the decrease in the fixed compensation costs of Lianjia agents, dedicated sales team with the expertise on new home transaction services and other front line operation staff along with the drop in the headcount, and the decrease in variable commission as a result of the decreased GTV of existing home transactions and new home transactions completed through Lianjia agents.

• Cost of home renovation and furnishing. The Company’s cost of revenues for home renovation and furnishing was RMB1.5 billion (US$0.2 billion) in the fourth quarter of 2022, compared to RMB61 million in the same period of 2021, which was primarily attributable to Shengdu Acquisition and the organic increase of net revenues from home renovation and furnishing.

• Cost related to stores. The Company’s cost related to stores decreased by 26.1% to RMB0.8 billion (US$0.1 billion) in the fourth quarter of 2022 compared to RMB1.0 billion in the same period of 2021, mainly due to the decrease in the number of Lianjia stores along with market downtrend in the fourth quarter of 2022 compared to the same period of 2021.

• Other costs. The Company’s other costs decreased to RMB0.2 billion (US$23 million) in the fourth quarter of 2022 from RMB0.6 billion in the same period of 2021, mainly due to a decrease of business taxes and surcharges along with the decrease of net revenues, the decreased funding costs and the decreased human resources related costs.

Gross Profit

Gross profit increased by 40.4% to RMB4.1 billion (US$0.6 billion) in the fourth quarter of 2022 from RMB2.9 billion in the same period of 2021. Gross margin was 24.4% in the fourth quarter of 2022, compared to 16.4% in the same period of 2021. The increase in gross margin was primarily due to: a) a shift of revenue mix towards the existing home transaction services and home renovation and furnishing with relatively higher contribution margins than new home transaction services; b) a higher contribution margin for existing home transaction services led by the decreased fixed compensation costs for Lianjia agents along with the decreased number of Lianjia agents; c) a higher contribution margin for new home transaction services as a result of an increased number of projects with higher margins, and a relatively lower percentage of fixed compensation costs of net revenues from new home transaction services; and d) a relatively lower percentage of costs related to stores and other costs of net revenues in the fourth quarter of 2022 compared to the same period of 2021.

Income (Loss) from Operations

Total operating expenses decreased by 9.6% to RMB3.7 billion (US$0.5 billion) in the fourth quarter of 2022 from RMB4.1 billion in the same period of 2021.

• General and administrative expenses decreased by 18.6% to RMB1,792 million (US$260 million) in the fourth quarter of 2022 from RMB2,202 million in the same period of 2021, mainly due to the decrease of provision for credit loss along with the decreased accounts receivable balance and the decrease of personnel costs and overheads along with the reduction of the headcount, which was partially offset by the increase of share-based compensation in the fourth quarter of 2022 compared to the same period of 2021.

• Sales and marketing expenses were RMB1,333 million (US$193 million) in the fourth quarter of 2022, compared to RMB809 million in the same period of 2021, mainly due to the increase in sales and marketing expenses for home renovation and furnishing services as the financial results of Shengdu were consolidated since the second quarter of 2022.

• Research and development expenses decreased by 31.1% to RMB509 million (US$74 million) in the fourth quarter of 2022 from RMB738 million in the same period of 2021, mainly due to the decrease of personnel costs and share-based compensation as a result of decreased headcount in research and development personnel in the fourth quarter of 2022 compared to the same period of 2021.

Income from operations was RMB387 million (US$56 million) in the fourth quarter of 2022, compared to loss from operations of RMB1,184 million in the same period of 2021. Operating margin was 2.3% in the fourth quarter of 2022, compared to negative 6.7% in the same period of 2021, primarily due to: a) a relatively higher gross profit margin, and b) improved operating leverage, primarily due to personnel severance in the first half of 2022 and optimized resource utilization in the fourth quarter of 2022 compared to the same period of 2021.

Adjusted income from operations⁶ was RMB1,339 million (US$194 million) in the fourth quarter of 2022, compared to adjusted loss from operations of RMB398 million in the same period of 2021. Adjusted operating margin⁷ was 8.0% in the fourth quarter of 2022, compared to negative 2.2% in the same period of 2021. Adjusted EBITDA⁸ was RMB2,164 million (US$314 million) in the fourth quarter of 2022, compared to RMB484 million in the same period of 2021.

Net Income (Loss)

Net income was RMB372 million (US$54 million) in the fourth quarter of 2022, compared to net loss of RMB933 million in the same period of 2021.

Adjusted net income was RMB1,547 million (US$224 million) in the fourth quarter of 2022, compared to RMB42 million in the same period of 2021.

Net Income (Loss) attributable to KE Holdings Inc.’s ordinary shareholders

Net income attributable to KE Holdings Inc.’s ordinary shareholders was RMB377 million (US$55 million) in the fourth quarter of 2022, compared to net loss attributable to KE Holdings Inc.’s ordinary shareholders of RMB930 million in the same period of 2021.

Adjusted net income attributable to KE Holdings Inc.’s ordinary shareholders⁹ was RMB1,552 million (US$225 million) in the fourth quarter of 2022, compared to RMB45 million in the same period of 2021.

Net Income (Loss) per ADS

Basic and diluted net income per ADS attributable to KE Holdings Inc.’s ordinary shareholders¹⁰ were RMB0.32 (US$0.05) and RMB0.31 (US$0.04) in the fourth quarter of 2022, respectively, compared to RMB0.78 for both basic and diluted net loss per ADS attributable to KE Holdings Inc.’s ordinary shareholders in the same period of 2021.

Adjusted basic and diluted net income per ADS attributable to KE Holdings Inc.’s ordinary shareholders¹¹ were RMB1.31 (US$0.19) and RMB1.29 (US$0.18) in the fourth quarter of 2022, respectively, compared to RMB0.04 for both adjusted basic and diluted net income per ADS attributable to KE Holdings Inc.’s ordinary shareholders in the same period of 2021.

Cash, Cash Equivalents, Restricted Cash and Short-Term Investments

As of December 31, 2022, the combined balance of the Company’s cash, cash equivalents, restricted cash and short-term investments amounted to RMB61.1 billion (US$8.9 billion).

Fiscal Year 2022 Financial Results

Net Revenues

Net revenues decreased by 24.9% to RMB60.7 billion (US$8.8 billion) in 2022, compared to RMB80.8 billion in 2021. The decrease was primarily attributable to the decline in the total GTV by 32.3% to RMB2,609.6 billion (US$378.4 billion) in 2022 from RMB3,853.5 billion in 2021 due to soft market sentiment and the disruption of the resurgences to the Company’s operations caused by COVID-19 in 2022.

• Net revenues from existing home transaction services decreased by 24.5% to RMB24.1 billion (US$3.5 billion) in 2022, compared to RMB31.9 billion in 2021, primarily due to a 23.4% decrease in GTV of existing home transactions to RMB1,576.5 billion (US$228.6 billion) in 2022 from RMB2,058.2 billion in 2021.

  Among that, (i) commission revenue decreased by 27.3% to RMB20.6 billion (US$3.0 billion) in 2022 from RMB28.4 billion in 2021, primarily due to a decrease in GTV of existing home transactions served by Lianjia stores of 27.9% to RMB746.4 billion (US$108.2 billion) in 2022 from RMB1,034.8 billion in 2021; and

  (ii) revenues derived from platform service, franchise service and other value-added services decreased by 2.5% to RMB3.5 billion (US$0.5 billion) in 2022 from RMB3.6 billion in 2021, as the GTV of existing home transactions served by connected agents on the Company’s platform decreased by 18.9% to RMB830.1 billion (US$120.3 billion) in 2022 from RMB1,023.4 billion in 2021, which was partially offset by a moderate increase in existing home transaction commission rate charged by connected stores and the increased penetration level of value-added services.

• Net revenues from new home transaction services decreased by 38.3% to RMB28.7 billion (US$4.2 billion) in 2022 from RMB46.5 billion in 2021, primarily due to the decrease of GTV of new home transactions of 41.5% to RMB940.5 billion (US$136.4 billion) in 2022 from RMB1,608.6 billion in 2021. Among that, the GTV of new home transactions completed on Beike platform through connected agents, dedicated sales team with the expertise on new home transaction services and other sales channels decreased by 42.3% year-over-year to RMB770.5 billion (US$111.7 billion) from RMB1,334.6 billion in 2021, while the GTV of new home transactions served by Lianjia brand decreased by 38.0% year-over-year to RMB170.0 billion (US$24.6 billion) from RMB274.1 billion in 2021.
• Net revenues from home renovation and furnishing were RMB5.0 billion (US$0.7 billion) in 2022, compared to RMB197 million in 2021, primarily because the Company completed the acquisition of Shengdu, and began to consolidate its financial results during the second quarter of 2022 and the organic growth of the GTV for home renovation and furnishing business.
• Net revenues from emerging and other services increased by 33.4% to RMB2.8 billion (US$0.4 billion) in 2022 from RMB2.1 billion in 2021, primarily attributable to the increase of net revenues from rental property management services which was partially offset by the decrease of net revenues from financial services.

Cost of Revenues

Total cost of revenues decreased by 27.8% to RMB46.9 billion (US$6.8 billion) in 2022 from RMB64.9 billion in 2021, primarily due to the decrease in both split commissions to connected agents and other sales channels, and internal commission and compensation.

• Commission – split. The Company’s cost of revenues for commissions to connected agents and other sales channels decreased by 35.2% to RMB20.5 billion (US$3.0 billion) in 2022 from RMB31.6 billion in 2021, primarily due to the decrease in the GTV of new home transactions completed through connected agents and other sales channels in 2022 compared to 2021.

• Commission and compensation – internal. The Company’s cost of revenues for internal commission and compensation decreased by 32.1% to RMB17.9 billion (US$2.6 billion) in 2022 from RMB26.3 billion in 2021, primarily due to the decrease in the fixed compensation costs of Lianjia agents, dedicated sales team with the expertise on new home transaction services and other front line operation staff along with the drop in the headcount, and the decrease in variable commission as a result of the decreased GTV of existing home transactions completed through Lianjia agents and new home transactions completed through Lianjia agents and dedicated sales team with the expertise on new home transaction services.

• Cost of home renovation and furnishing. The Company’s cost of revenues for home renovation and furnishing was RMB3.6 billion (US$0.5 billion) in 2022, compared to RMB0.2 billion in 2021, which was primarily attributable to Shengdu Acquisition and the organic increase of net revenues from home renovation and furnishing.

• Cost related to stores. The Company’s cost related to stores decreased by 12.2% to RMB3.3 billion (US$0.5 billion) in 2022 compared to RMB3.8 billion in 2021, mainly due to the decrease in the number of Lianjia stores along with market downtrend in 2022 compared to 2021.

• Other costs. The Company’s other costs decreased by 45.

Contacts

For investor and media inquiries:

In China:

KE Holdings Inc.

Investor Relations

Siting Li

E-mail: ir@ke.com

The Piacente Group, Inc.

Yang Song

Tel: +86-10-6508-0677

E-mail: ke@tpg-ir.com

In the United States:

The Piacente Group, Inc.

Brandi Piacente

Tel: +1-212-481-2050

E-mail: ke@tpg-ir.com

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