KE Holdings Inc. Announces Second Quarter 2022 Unaudited Financial Results

BEIJING–(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 second quarter ended June 30, 2022.

Business and Financial Highlights for the Second Quarter of 2022

• Gross transaction value (GTV)¹ was RMB639.5 billion (US$95.5 billion), a decrease of 47.6% year-over-year. GTV of existing home transactions was RMB393.5 billion (US$58.7 billion), a decrease of 39.6% year-over-year. GTV of new home transactions was RMB222.7 billion (US$33.3 billion), a decrease of 55.3% year-over-year. GTV of home renovation and furnishing was RMB1.3 billion (US$0.2 billion), compared to RMB47 million in the same period of 2021. GTV of emerging and other services was RMB22.0 billion (US$3.3 billion), a decrease of 68.8% year-over-year.
• Net revenues were RMB13.8 billion (US$2.1 billion), a decrease of 43.0% year-over-year.
• Net loss was RMB1,866 million (US$279 million). Adjusted net loss² was RMB619 million (US$92 million).
• Number of stores was 42,831 as of June 30, 2022, a 19.0% decrease from one year ago. Number of active stores³ was 41,118 as of June 30, 2022, a 16.2% decrease from one year ago.
• Number of agents was 414,915 as of June 30, 2022, a 24.4% decrease from one year ago. Number of active agents⁴ was 380,284 as of June 30, 2022, a 23.9% decrease from one year ago.
• Mobile monthly active users (MAU)⁵ averaged 43.0 million for the three months ended June 30, 2022, compared to 52.1 million in the same period of 2021.

Mr. Stanley Yongdong Peng, Chairman of the Board and Chief Executive Officer of Beike, commented, “In the second quarter of 2022, promising changes began to take place in China’s real estate market. The existing home market, in particular, benefited from the easing on home purchase restrictions and effective pandemic prevention and control measures. We focused on strengthening our unique products and services to empower our service providers and serve customers in broader and deeper ways, pivoting our growth trajectory for the long-term.”

“As we weathered industry headwinds, our total GTV decreased by 47.6% year-over-year to RMB639.5 billion in the second quarter of 2022. We responded to the macro environment with comprehensive improvements to our operating efficiency and simultaneously stabilized the scale of agents and stores on our platform. For existing home sales, we continued to iterate our ACN’s business leads allocation mechanism to strengthen our infrastructure and prioritize operating efficiency and profitability for Lianjia. For new home sales, we actively carried out corporate-to-corporate cooperation with selected developers and promoted commission-in-advance and other focused sales strategies to accelerate sell-through, becoming both promoter and benefactor of the rising brokerage concentration for new home transactions in this round of market adjustments. Our home renovation and furnishing services once again bucked market trends and achieved robust growth, owing to its full-service business model and the advantages on customer trust and traffic which we’ve built through our core businesses.”

“Leveraging our inclusive infrastructure along with our network of community-based service providers and stores, and with an unwavering and strengthened commitment to help service providers, we are well positioned to capture the upside of market recovery and serve the society as the one-stop platform for ‘living services’ that makes home a better place,” concluded Mr. Peng.

Mr. Tao Xu, Executive Director and Chief Financial Officer of Beike, added, “During the second quarter, we achieved net revenues of RMB13.8 billion, beating both the high-end of our guidance and the street consensus. Despite the rocky market recovery, we were able to take a series of cost-management measures and allocate resources more efficiency-oriented in order to enhance profitability. As a result, we’ve gained a larger operating leverage for our housing transaction services business against the challenging market environment, and we believe our profitability for the housing transaction services will gradually recover in the second half of this year. We will also continue to make necessary investment in home renovation and furnishing services and Beike rental services. We’d like to highlight that with home prices stabilizing and the need for better living of the Chinese people continuing to increase, the demand for home upgrade will serve as a prominent driver, turbocharging a continued expansion of the market and resulting higher derived demand for a range of services including home renovation and furnishing, and rental services. We firmly believe our unique competencies and solid business layout in those sectors will support us to take the fast ride and achieve rapid growth in the long run.”

Second Quarter 2022 Financial Results

Net Revenues

Net revenues decreased by 43.0% to RMB13.8 billion (US$2.1 billion) in the second quarter of 2022, compared to RMB24.2 billion in the same period of 2021. The decrease was primarily attributable to the decline in total GTV. Total GTV was RMB639.5 billion (US$95.5 billion) in the second quarter of 2022, representing a 47.6% decrease compared to RMB1,220.8 billion in the same period of 2021 due to the disruption on the recovery of the market for existing home transactions caused by the emergence of COVID-19 in certain regions and the corresponding restrictive measures in the second quarter of 2022, and the market for new home transactions remained weak since the second half of 2021 as many real estate developers were facing liquidity and delivery challenges.

• Net revenues from existing home transaction services decreased by 42.5% to RMB5.5 billion (US$0.8 billion) in the second quarter of 2022, compared to RMB9.6 billion in the same period of 2021, primarily due to a 39.6% decrease in GTV of existing home transactions to RMB393.5 billion (US$58.7 billion) in the second quarter of 2022 from RMB652.0 billion in the same period of 2021.
  
  Among that, (i) commission revenue decreased by 45.9% to RMB4.6 billion (US$0.7 billion) in the second quarter of 2022 from RMB8.5 billion in the same period of 2021, primarily due to a decrease in GTV of existing home transactions served by Lianjia stores of 47.2% to RMB163.5 billion (US$24.4 billion) in the second quarter of 2022 from RMB309.5 billion in the same period of 2021; and
  
  (ii) the 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, decreased by 16.5% to RMB0.9 billion (US$0.1 billion) in the second quarter of 2022, from RMB1.1 billion in the same period of 2021, mainly due to a 32.9% decrease of GTV of existing home transactions served by connected agents on the Company’s platform to RMB229.9 billion (US$34.3 billion) in the second quarter of 2022 from RMB342.5 billion in the same period of 2021. The lower decline rate of revenues derived from platform service, franchise service and other value-added services compared to that of the GTV of existing home transactions served by connected agents was partially attributable to the increased penetration level of value-added services.
• Net revenues from new home transaction services decreased by 52.0% to RMB6.7 billion (US$1.0 billion) in the second quarter of 2022 from RMB13.9 billion in the same period of 2021, primarily due to the decrease of GTV of new home transactions of 55.3% to RMB222.7 billion (US$33.3 billion) in the second quarter of 2022 from RMB498.3 billion in the same period of 2021. Among that, the GTV of new home transaction services completed on Beike platform through connected agents, dedicated sales team with the expertise on new home transaction services and other sales channels was RMB183.8 billion (US$27.4 billion), compared to RMB414.5 billion in the same period of 2021, while the GTV of new home transactions served by Lianjia brand was RMB38.9 billion (US$5.8 billion) in the second quarter of 2022, compared to RMB83.8 billion in the same period of 2021.
• Net revenues from home renovation and furnishing were RMB1.0 billion (US$0.2 billion) in the second quarter of 2022, compared to RMB43 million in the same period of 2021, primarily because the Company completed the 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.
• Net revenues from emerging and other services decreased by 9.6% to RMB557 million (US$83 million) in the second quarter of 2022 from RMB616 million in the same period of 2021, primarily attributable to the decrease of net revenues from financial services which was partially offset by the increase of net revenues from rental property management services.

Cost of Revenues

Total cost of revenues decreased by 41.3% to RMB11.1 billion (US$1.7 billion) in the second quarter of 2022 from RMB18.8 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 RMB4.7 billion (US$0.7 billion) in the second quarter of 2022, compared to RMB9.4 billion in the same period of 2021, primarily due to the decrease in the GTV of new home transactions completed through connected agents and other sales channels in the second 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 RMB4.3 billion (US$0.6 billion) in the second quarter of 2022, compared to RMB7.6 billion in the same period of 2021, primarily due to the decrease in the GTV of exiting home 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 RMB724 million (US$108 million) in the second quarter of 2022, compared to RMB43 million in the same period of 2021, primarily because the Company completed the acquisition of Shengdu and began to consolidate its financial results during the second quarter of 2022.
• Cost related to stores. The Company’s cost related to stores decreased by 6.0% to RMB876 million (US$131 million) in the second quarter of 2022 compared to RMB931 million in the same period of 2021, mainly due to the decrease in the number of Lianjia stores in the second quarter of 2022 compared to the same period of 2021.
• Other costs. The Company’s other costs decreased by 35.7% to RMB543 million (US$81 million) in the second quarter of 2022 from RMB844 million 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 provisions related to financial services and the decreased offline activities costs due to COVID-19 outbreaks in certain regions in the second quarter of 2022.

Gross Profit

Gross profit was RMB2.7 billion (US$0.4 billion) in the second quarter of 2022, compared to RMB5.3 billion in the same period of 2021. Gross margin was 19.7% in the second quarter of 2022, compared to 22.1% in the same period of 2021. The decrease in gross margin was mainly due to a relatively higher percentage of cost related to stores of net revenues as a result of the decrease of net revenues in the second quarter of 2022 compared to the same period of 2021.

Income (Loss) from Operations

Total operating expenses remained flat at RMB4.2 billion (US$0.6 billion) in the second quarter of 2022 compared to the same period of 2021.

• General and administrative expenses were RMB2,250 million (US$336 million) in the second quarter of 2022, compared to RMB2,202 million in the same period of 2021, mainly due to the increase of share-based compensation expenses and additional severance costs incurred in the second quarter of 2022, which was partially offset by the decrease of recurring personnel costs and overheads along with the decreased headcount, as well as conferences and travel expenses as a result of the COVID-19 outbreaks in certain regions in the second quarter of 2022 compared to the same period of 2021.
• Sales and marketing expenses were RMB1,122 million (US$167 million) in the second quarter of 2022, compared to RMB1,241 million in the same period of 2021, mainly due to the decrease of the brand advertising and promotional marketing expenses for housing transaction services, which was partially offset by sales and marketing expenses of Shengdu.
• Research and development expenses were RMB779 million (US$116 million) in the second quarter of 2022, unchanged from RMB775 million in the same period of 2021, mainly due to additional severance costs incurred in the second quarter of 2022, which was mainly offset by the decrease of recurring personnel costs and share-based compensation as a result of decreased headcount in research and development personnel in the second quarter of 2022 compared to the same period of 2021.

Loss from operations was RMB1,518 million (US$227 million) in the second quarter of 2022, compared to income from operations of RMB1,116 million in the same period of 2021. Operating margin was negative 11.0% in the second quarter of 2022, compared to 4.6% in the same period of 2021, primarily due to a) a relatively lower gross profit margin, b) an increase of the percentage of total recurring operating expenses of net revenues in the second quarter of 2022, primarily due to decreased net revenues and c) additional severance costs of RMB438 million incurred in the second quarter of 2022 compared to the same period of 2021.

Adjusted loss from operations⁶ was RMB690 million (US$103 million) in the second quarter of 2022, compared to adjusted income from operations of RMB1,669 million in the same period of 2021. Adjusted operating margin⁷ was negative 5.0% in the second quarter of 2022, compared to 6.9% in the same period of 2021. Adjusted EBITDA⁸ was negative RMB104 million (US$16 million) in the second quarter of 2022, compared to RMB2,555 million in the same period of 2021.

Net Income (Loss)

Net loss was RMB1,866 million (US$279 million) in the second quarter of 2022, compared to net income of RMB1,116 million in the same period of 2021.

Adjusted net loss was RMB619 million (US$92 million) in the second quarter of 2022, compared to adjusted net income of RMB1,638 million in the same period of 2021.

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

Net loss attributable to KE Holdings Inc.’s ordinary shareholders was RMB1,868 million (US$279 million) in the second quarter of 2022, compared to net income attributable to KE Holdings Inc.’s ordinary shareholders of RMB1,112 million in the same period of 2021.

Adjusted net loss attributable to KE Holdings Inc.’s ordinary shareholders⁹ was RMB622 million (US$93 million) in the second quarter of 2022, compared to adjusted net income attributable to KE Holdings Inc.’s ordinary shareholders of RMB1,635 million in the same period of 2021.

Net Income (Loss) per ADS

Diluted net loss per ADS attributable to KE Holdings Inc.’s ordinary shareholders¹⁰ was RMB1.57 (US$0.23) in the second quarter of 2022, compared to diluted net income per ADS attributable to KE Holdings Inc.’s ordinary shareholders of RMB0.93 in the same period of 2021.

Adjusted diluted net loss per ADS attributable to KE Holdings Inc.’s ordinary shareholders¹¹ was RMB0.52 (US$0.08) in the second quarter of 2022, compared to adjusted diluted net income per ADS attributable to KE Holdings Inc.’s ordinary shareholders of RMB1.37 in the same period of 2021.

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

As of June 30, 2022, the combined balance of the Company’s cash, cash equivalents, restricted cash and short-term investments amounted to RMB50.0 billion (US$7.5 billion).

Business Outlook

For the third quarter of 2022, the Company expects total net revenues to be between RMB16.5 billion (US$2.5 billion) and RMB17.0 billion (US$2.5 billion), representing a decrease of approximately 6.1% to 8.8% from the same quarter of 2021. This forecast considers the potential impact of the recent real estate related policies and measures, the emergence of COVID-19 in certain regions and the corresponding restrictive measures which remains uncertain and may continue to adversely affect the Company’s operations, and the Company’s current and preliminary view on the business situation and market condition, all of which are subject to change.

Change in Segment Reporting

Subsequent to the acquisition of Shengdu on April 20, 2022, the Company changed its organizational structure, resulting in four reportable segments: existing home transaction services, new home transaction services, home renovation and furnishing, and emerging and other services. Prior period segment results have been recast to conform to the current presentation. Please see the “Unaudited Segment Contribution Measure” included in this press release for segment contribution results.

Annual General Meeting

On August 12, 2022, the Company held its annual general meeting of shareholders (the “AGM”), together with the respective class meetings of holders of Class A ordinary shares and Class B ordinary shares (the “Class Meetings”) in Beijing, China. Each of the proposed resolutions submitted for shareholders’ approval was adopted at the AGM and the Class Meetings, following which the Sixth Amended and Restated Memorandum and Articles of Association were adopted, a general mandate was granted to the directors of the Company to issue shares, and a general mandate was granted to the directors of the Company to repurchase its shares (the “Repurchase General Mandate”).

Share Repurchase Program

The Company proposed to establish a share repurchase program under which the Company may purchase up to US$1 billion of its Class A ordinary shares and/or ADSs over a 12-month period. Following the approval of the Repurchase General Mandate at the AGM, the Company expects to carry out the repurchases as soon as legally permissible. The Company’s proposed share repurchases under the program may be effected from time to time in the open market at prevailing market prices and/or through other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations. The Company plans to fund any such repurchases from its existing cash balance.

Conference Call Information

The Company will hold an earnings conference call on 8:00 AM U.S. Eastern Time on Tuesday, August 23, 2022 (8:00 PM Beijing/Hong Kong Time on Tuesday, August 23, 2022) to discuss the financial results.

For participants who wish to join the call, please complete online registration using the link provided below at least 20 minutes prior to the scheduled call start time. Upon registration, participants will receive the conference call access information, including dial-in numbers, a PIN and an e-mail with detailed instructions to join the conference call.

PRE-REGISTER LINK: https://register.vevent.com/register/BI1d14ef6c91f44696a550e19cd58f0d36

A live and archived webcast of the conference call will also be available at the Company’s investor relations website at https://investors.ke.com.

Exchange Rate

This press release contains translations of certain RMB amounts into U.S. dollars (“US$”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB6.6981 to US$1.00, the noon buying rate in effect on June 30, 2022, in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release.

Non-GAAP Financial Measures

The Company uses adjusted income (loss) from operations, adjusted net income (loss), adjusted net income (loss) attributable to KE Holdings Inc.’s ordinary shareholders, adjusted operating margin, adjusted EBITDA and adjusted net income (loss) per ADS attributable to KE Holdings Inc.’s ordinary shareholders, each a non-GAAP financial measure, in evaluating its operating results and for financial and operational decision-making purposes. Beike believes that these non-GAAP financial measures help identify underlying trends in the Company’s business that could otherwise be distorted by the effect of certain expenses that the Company includes in its net income (loss). Beike also believes that these non-GAAP financial measures provide useful information about its results of operations, enhance the overall understanding of its past performance and future prospects and allow for greater visibility with respect to key metrics used by its management in its financial and operational decision-making. A limitation of using these non-GAAP financial measures is that these non-GAAP financial measures exclude share-based compensation expenses that have been, and will continue to be for the foreseeable future, a significant recurring expense in the Company’s business.

The presentation of these non-GAAP financial measures should not be considered in isolation or construed as an alternative to gross profit, net income (loss) or any other measure of performance or as an indicator of its operating performance. Investors are encouraged to review these non-GAAP financial measures and the reconciliation to the most directly comparable GAAP measures. The non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to the Company’s data. Beike encourages investors and others to review its financial information in its entirety and not rely on a single financial measure. Adjusted income (loss) from operations is defined as income (loss) from operations, excluding (i) share-based compensation expenses, (ii) amortization of intangible assets resulting from acquisitions and business cooperation agreement, and (iii) impairment of goodwill, intangible assets and other long-lived assets. Adjusted operating margin is defined as adjusted income (loss) from operations as a percentage of net revenues. Adjusted net income (loss) is defined as net income (loss), excluding (i) share-based compensation expenses, (ii) amortization of intangible assets resulting from acquisitions and business cooperation agreement, (iii) changes in fair value from long term investments, loan receivables measured at fair value and contingent consideration, (iv) impairment of goodwill, intangible assets and other long-lived assets, (v) impairment of investments, and (vi) tax effects of the above non-GAAP adjustments. Adjusted net income (loss) attributable to KE Holdings Inc.’s ordinary shareholders is defined as net income (loss) attributable to KE Holdings Inc.’s ordinary shareholders, excluding (i) share-based compensation expenses, (ii) amortization of intangible assets resulting from acquisitions and business cooperation agreement, (iii) changes in fair value from long term investments, loan receivables measured at fair value and contingent consideration, (iv) impairment of goodwill, intangible assets and other long-lived assets, (v) impairment of investments, (vi) tax effects of the above non-GAAP adjustments, and (vii) effects of non-GAAP adjustments on net income (loss) attributable to non-controlling interests shareholders.

Contacts

For investor and media inquiries:

In China:

KE Holdings Inc.

Investor Relations

Matthew Zhao

Siting Li

ir@ke.com

The Piacente Group, Inc.

Yang Song

+86-10-6508-0677

ke@tpg-ir.com

In the United States:

The Piacente Group, Inc.

Brandi Piacente

+1-212-481-2050

ke@tpg-ir.com

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