Ke Holdings Inc (BEKE) 2020 Q4 法說會逐字稿

Hello ladies and gentlemen, thank you for standing by for KE Holdings Inc fourth quarter and Fiscal Year 2020 Earning's Conference Call. At this time all participants are in a listen only mode. Today's conference call is being recorded. I will now turn the caller over to your host Mr. Matthew Zhao, IR Director of the Company, please go-ahead Matthew.

Thank you operator. Good evening and good morning everyone. Welcome to KE Holdings Inc [Beike] fourth quarter and Fiscal Year 2020 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, www.investors.ke.com.

On today's call we have Mr. Stanley Yongdong Peng, our Co-founder and Chief Executive Officer and Mr. Tao Xu our Chief Financial Officer. Mr. Peng will provide an overview of our strategies and business developments and Mr. Xu will provide additional details on the Company's financial results and discuss the financial outlook.

Before we continue, I refer you to our safe harbor statement, in our earnings press release which apply to this call as we will make forward looking statements. Please also know that Beike's earning's press release and this conference call include discussions of unaudited GAATP financial information as well as unaudited non-GAAP financial matters.

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. With that, I'll now turn the call over to our CEO, Mr. Stanley Peng, please go-ahead Sir.

Thank you Matthew. Hello everyone and thank you for joining us today on our fourth quarter and our fiscal year 2020 Earning's Conference Call. We achieved exceptional growth in 2020, closing the year with strong fourth quarter operational and financial results.

Our massive scale, operating efficiency and quality services, combined with strong network effects have created a self-reinforcing virtuous cycle. It drove our full year GTV to increase 64. 5% to reach a historical high of RMB3. 5 trillion and helped us solidify our leadership position as the largest housing transactions and services platform in China, and the second largest commerce platform across all industries in China.

2020 marked the 19th anniversary of Lianjia's operations and the third year since the Beike platforms inception. The ground we have covered over the past years as well as our outstanding results in 2020, have provided further affirmation of our belief that the path we are taking in doing the right thing, even if it is difficult, is the right path. It also brings us closer to our vision of providing comprehensive and trusted housing services to 300 million families in China.

I would now like to provide you with a closer look at exactly what we accomplished over the past year. Looking back 2020 was a challenging year for our business and for the world. Facing the COVID19 pandemic, we worked hand in hand with the connected brand, stores, agents, developers and other platform participants to overcome these tremendous obstacles and emerge stronger. We carried out a series of measures to have our own and connected agents persist during this difficult period. These included fee waivers, timely payments, supporting brand owners and store owners to ensure their agents continued to be paid, and etc.

With off line activities severely hampered by the pandemic, we promoted to online agent training, online VR property showing and online property sales, when the pandemic just broke out. These initiatives supported agents best capabilities to continue to push forward online, lock in sales opportunities and build out the inventory of potential buyers during the period, and the impacts from COVID19 started to ease in China.

The sales performance of connected stores and the agents on our platform recovered rapidly, demonstrating the significant value of our platform. This period of shared adversity enhanced trust to brand owners, store owners and agents in the Beike platform which in turn contributed to accelerated momentum and improved operational efficiencies.

In 2020 we focus on expanding the skill of our ACN network with quality growth. The total number of connected stores grew by 25. 1% year over year, reaching 46. 9 thousand by the end of 2020, among which over 30% of stores have annual GTV of RMB50 million or more, which we believe is an adequate level to support sustainable growth of the stores compared to only 19% in 2019.

The total number of agents on the Beike platform grew by 37. 9% to 493. 1 thousand by the end of 2020. More than 30% of the agents in our ACN have college backgrounds. 75% of the total existing home transactions were completed through cross store collaborations, while connected stores contributed over 81% of existing home listings, indicating continuously enhanced cooperation on the platform.

Our offline expansion was underpinned by increasing industry digitalization along with our green online presence. We recorded data for almost 240 million homes in our housing dictionary and VR data for more than 9 million homes. More than 73% of our existing home listings were covered by VR property showing by the end of 2020.

The number of VR properties showings exceeded 66 million in 2020, compared with 3. 9 million in 2019. Total MAUs of our platform's apps and the WeChat mini programs increased by 88. 3% to 48. 2 million in the fourth quarter of 2020. While Beike scores reviewed online more than 1. 1 billion times, growing almost 150 times year-on-year, which implies the increasing significance of the Beike score in assessing service quality for both consumers and agents.

Next let me give you more colors in terms of our existing home transaction services business.

In the past year, we further solidified our comparative advantages in the existing home transactions market, continued enhancing consumer experience and empowering brands, stores and agents to improve productivity and service quality, and achieved substantial growth on multiple fronts. According to Beike's research institute, GTV of existing home transaction in China grew 6. 7% to RMB9 trillion in 2020. While including RMB7. 5 trillion of existing home sales, increasing 11. 8% year-over-year. On our platform, GTV of existing home transactions grew 49. 5% to RMB1. 94 trillion in 2020. GTV of connected stores grew 109. 9% year-over-year, accounting for 48% of total GTV from existing home transactions, compared with 34% in 2019. As third-party stores are increasingly playing a vital role on our platform.

We always focus on creating value for our customers and providing them with a wide range of commitments as well as value adding services. We endeavor to promote the 8 core commitments including authentic listing guarantees, no mark-up in pricing, transaction fund escrow and etc. 84% of stores in top 30 major cities pledged to honor these 8 core commitments in the fourth quarter of 2020. 100% of these stores have endorsed the most foundational commitments such as authentic listing guarantees.

Given that consumers' funds safety has been one of the biggest concerns in home transactions. We strengthened the escrow services for transaction funds which covered more than 80% of transactions non-mortgage payments volume at the end of December.

In terms of value-added services, one particularly noteworthy was the premium package for home seller services, through which 45,000 housing transactions were completed.

Our focus on quality services brought us not only recommendation from customers and agents, but also financial rewards. As a result, in 2020, the commission rate of our existing home transaction services increased slightly for both Lianjia and connected stores. Meanwhile rents, stores and agents on our platform increasingly benefit from efficiency improvement, as our ACN network effects play out.

In terms of operational enhancement, we vigorously promoted the stores scoring a ranking system to find and reward the finest service providers and supporting them to flourish. We also deployed a series of digital operational tools to help both brand owners and store owners carry out systematic business analysis and measures. As a result unit store GTV of existing home sales of both Lianjia and connected stores achieved the mid to high teens percentage growth rates in 2020.

Turning to the new home transaction services business. According to National Bureau of Statistics, GTV or China overall, new home transactions grew by 10. 8% to RMB15. 5 trillion in 2020. Our new home transaction services business delivered robust all-around results, reaching annual GTV of RMB1. 38 trillion with 85% year-over-year growth. This solid performance was primarily driven by the strong GTV growth of connected stores and other channels. In order to take better care of our customers in 2020, we focused on advocating the 3-day Free Return commitment to new home sales, which we collaborated with developers to pioneer.

In the fourth quarter this commitment was offered in 100 cities. We put a considerable effort to support brands, store owners and agents and improve their experience in the new home transaction services. Thanks to our advanced risk control mechanism. Our AR turnover in new home transactions was 103 days in 2020, only slightly increased from 2019, which was an achievement given that the GTV for our new home transactions grew 85% from 2019, and the industry was still impact from COVID19 pandemic. As such, agents on our platform have been able to receive their commissions on a timely basis.

Meanwhile to further support the agents, the commission advances we intend to cover more than 40% of the new home sales commission split. We successfully brought to the whole commission advance progress online and enabled the 24 hours commission advances payment for operational enhancement in new home sales. We invested new online infrastructure and equipped agents with advanced tools and methodologies. Leveraging our stronger capability to mobilize agents, we made a concentrated sales forces possible for certain projects in order to increase productivity and project sell-through certainty. These initiatives led to continuously improve capabilities of both our own and connected agents, and resulted in more than 20% growth in term of unit store GTV on new homes sales.

We have built relationships with an increasing number of real estate developers and have provided more tailored and efficient services. As of the end of 2020, the number of new home projects on sale listed on our platform which [reached] 8,600 compared with 7,700 at the end of 2019. In the second half of 2020, we directed our emphasis to our accelerate new home sales through promoting and implementing cross city and cross region sales. We are pleased that our efforts are bearing fruits and our market share and leadership position in the new home transaction services market have gone from strength to strength.

A few comments on our emerging services. Regarding our new home renovation services in 2020. We are focused on Beijing market to expand our capabilities and produced meaningful results. We developed the beta version of the in-house SaaS platform for service providers and an app for consumers, as well as detailed as SOPs management. We completed more than 1,200 projects and connected more than 400 foremen, 5000 workers and 200 designers at the end of 2020. For real estate financial services, we have been continuously upgrading products and offerings to optimize customer experience and encouraging financial advisors to interact with customers at an earlier stage of the transaction process, to improve penetration and customer experience.

In 2020 the penetration of our financial services averaged 8. 4% and it reached 10. 5% in the fourth quarter.

Looking to 2021, we have five key focus areas steeped in taking care of the customers, supporting the service providers, nurturing our emerging services, creating social value and fostering the critical role of technology plays in the broad market opportunity. First, we continue to see clear sign of the rising power of customers. To embrace this we have unwavering commitment to consistently refining the consumer experience through increased digitalization and enhanced service quality.

In 2021, we will leverage our capabilities in systematic data collection and add artificial intelligence as well as our extensive offline network to enrich the content offering in new home sales to meet consumers' demand for our abundant and accurate online information for new homes.

We will start by building up the housing dictionary for new homes -- new house. Even house will have more than -- each house will have more than 200 description fields that incorporate basic housing information as well as details that our user inside tools have identified as particularly important to Chinese customers. Leveraging our AI technology, we can provide more extensive information, even pinpointing the lighting and noisy conditions on different floors.

In terms of service quality, we intended to provide our customers and platform participants with even more security and quality through the continuous construction of our platform's infrastructure. Specifically, we plan to make all customer complaints public to increase transparency and further improve customer satisfaction.

Second, we are increasingly convinced of the tremendous value of service providers. Through tools that we plan to launch in 2021, such as 30 day churn rate, early warning and an intervention model and the professional scoring ranking and the training framework for more platform participants. We aspire to identify and retain the finest service providers including brand owners, store owners and agents and empower them to flourish.

Third, we will nurture the healthy development of emerging and other services. Our focus will be on building out our core competencies. New home renovation services. To achieve multi-faceted customer satisfaction improvement by providing a seamlessly integrated transaction experience.

Meanwhile, we will continuously upgrade the products and service offerings and increase our service efficiency of our real estate financial services. For example, we will launch the system to bring all of the financial advisor, advisor's daily operations online in 2021.

Fourth, we are committed to creating more social value. We believe it is our corporate responsibilities to assist in building a stable real estate market characterized by a neutral market view. Our social responsibilities is extended -- intends to facilitate transition in the residential real estate market from opportunistic one to a more orderly and a sustainable one.

Meanwhile, we aim to fulfil our broader social responsibilities through a series of initiatives in 2021. For example, our platform, we offer agent recruiting and a returning program to provide more job opportunities to the community, especially for new graduates. We will continue to upgrade our rental services offering young tenants more convenience and affordable experience.

Furthermore, since our deeply rooted community-centric stores and agents have gradually become gathering points for local residents, we will continue to contribute in community services across the country. For example, we will continue the smart phone training sessions, volunteer our agents, which we offer to more than 140,000 elderly citizens in the past year.

Lastly, on the technology front in 2021, we will continue to leverage our massive and authentic housing and transaction data and our deep understanding of business scenarios to innovate AI driven technologies that drive optimal alignment between agents, consumers and home. Service-matching and personal accommodations in housing transaction.

This will be implemented with products including our AI assistant, Xiaobei, Beike's Pick, VR and et cetera. We will also push forward data and AI-driven intelligence operations such as the intelligence operations of Beike Coin in order to improve the overall platform operation's efficiency.

In summary, the market is rich with opportunity. By ensuring consumer's needs are met but while simultaneously supporting service providers online and offline, we are driving transformational industry change. That progress we met in 2020 show us we are on the right path. We are confident in our growth trajectory forward as we continue to expand our self-reinforcing network. That is greater than the sum of its parts.

With this in mind, we will work to create further value for the consumers, agents, store owners, brands, real estate developers and all other platform participants. With that, I would like to turn the call over to our CFO, Xu Tao, for a closer review of our first quarter and the full year financials. Thank you.

Thank you Stanley. Thank you everyone for joining us. I would like to provide a brief overview for our fourth quarter and the fiscal year 2020 financial results.

We are pleased to deliver another strong quarter of financial results marked by high revenue growth and strong profitability.

Our net revenues reached a historical high of first quarter of 2020, driven by strong GTV growth. Our net revenue increased by 57. 6% year-over-year to RMB22. 7 billion in Q4. Exceeding both the high end of our guidance and the street consensus. The rapid growth of net revenue was driven by solid GTV growth of 65. 4% year-over-year to RMB1. 12 trillion.

Along with increased productivity and the continuously improved service quality on our platform. In particular, our net revenue from the in-home transaction services increased by 56. 1% year-over-year to RMB9. 2 billion in Q4. Mainly due to a 69. 8% year-over-year increase in GTV of existing home transaction to RMB584. 7 billion in Q4.

Our net revenue for new home transaction services increased by 58. 8% year-over-year to RMB12. 9 billion in Q4, primarily due to a 55. 5% year-over-year increase in GTV of new home transactions to RMB469. 2 billion in Q4. Our net revenue for emerging and other services increased by 58. 1% year-over-year to RMB0. 6 billion in Q4. The increase was primarily due to the increase of penetration level in the Company's financial services around our housing transaction services as well as an increased number of home decoration units completed through the Company's platform.

Cost of revenues increased by 48. 2% year-over-year to RMB17. 2 billion in Q4. Gross profit increased by 97. 4% year-over-year to RMB5. 4billion in Q4. Gross margin increased to a 23. 9% from 19. 1% in the same period of 2019. The increase of gross margin was mainly due to the decrease of internal commission and the compensation as percentage of net revenues from the existing home transaction services completed through Lianjia brand as well as the decrease of commission split as a percentage of net revenue from new home transaction services completed through connected agents and other sales channels.

Operating expenses were RMB4. 2 billion in Q4 compared to RMB5. 9 billion in the same period of 2019. General and administrative expenses were RMB1. 88 billion, compared to RMB4. 56billion in the same period of 2019, mainly due to the decrease of share-based compensation expenses.

Sales and marketing expenses were RMB1. 32, compared to RMB831 million in the same period of 2019. Mainly due to the increase of the brand advertising and promotional marketing activities.

Research and development expenses were RMB714 million in Q4 compared to RMB478 million in the same period of 2019, mainly due to the increase of share-based compensation expenses.

Income from operations was RMB1. 27 billion in Q4 compared to a loss from operations of RMB3. 12 billion in the same period of 2019. Operating margin was 5. 6% in Q4, compared to negative 21. 7% in the same period of 2019, primarily due to the decrease of share-based compensation expenses.

Excluding non-GAAP items, our adjusted income from operations were RMB2. 23 billion in Q4 compared to negative RMB80 million in the same period of 2019. Adjusted operating margin was 9. 8% in Q4 compared to negative 0. 6% in the same period of 2019. Mainly attributable to increased gross margin and the improvement of operating leverage.

Adjusted EBITDA increased by 2,183. 9% year-over-year to RMB2. 9 billion in Q4. Net income was RMB1. 1 billion in Q4 compared to net loss of RMB3.1 million (corrected by company after the call) in the same period of 2019. Excluding non-GAAP items, our adjusted net income increased by 4,424. 8% year-over-year to RMB2 billion in Q4.

Net income attributable to KE Holdings Inc. 's ordinary shareholders was RMB1. 1 billion in Q4, compared to RMB3. 7 billion in the same period of 2019.

Adjusted net income attributed to KE Holdings Inc. increased by 4,508. 2% year-over-year to RMB2 billion in Q4. For the fourth quarter of 2020, diluted net income for ADS attributable to KE Holding Inc. 's ordinary shareholders was RMB0. 93, compared to negative RMB7. 99 in the same period of 2019.

Adjusted diluted net income per ADS attributable to KE Holdings Inc. 's ordinary shareholders was RMB1. 71 compared to negative RMB1. 15 in the same period of 2019.

As of December 31, 2020, the combined balance of our cash, cash equivalents, restricted cash and short investments amounted to RMB65. 2 billion or US$10 billion. For the full year of 2020, our business achieved a robust operation and financial growth and our GTV increased by 64. 5% year-over-year to hit a total high of RMB3. 5 trillion from RMB2. 13 trillion, enabling us to remain -- to second largest commerce platform across all industry in China as the third largest spending platform globally.

Our net revenue increased by 53. 2% year-over-year to historical high of RMB70. 5 billion from RMB46 billion. Our net income reached a total high of RMB2. 78 billion, compared to net loss of RMB2. 18 billion in 2019.

Our adjusted net income increased by 245. 4% to year-over-year, to hit a total high of RMB5. 72 billion from RMB1. 66 billion.

Looking forward to our first quarter of 2021, we expect our net revenue to be between RMB18. 5 billion RMB19. 5 billion, representing an increase of approximately 159. 8% to 173. 9% from the same quarter of 2020.

The relatively high year-over-year growth rate of our revenue guidance mainly due to the significant and negative impact of COVID-19 for our business in the same period last year, with the result the meaningful portion of transactions shift from Q1 to Q2 last year. The business outlook reflects the Company's current and preliminary view of the business situation and market conditions, which is subject to change.

Last but not least, we believe that in the long run under the principle of houses are for living, not for speculation. The real estate market in China will continue to shift toward a more stable and steady growth. This in turn will create a more favorable environment for us to carry out our commitment to reinvest in industry and deliver the highest-quality service to 300 million families in China.

Going forward, we will remain the focus on taking better care of the consumer and support platform participants such as brokerage brands, store owners, agents, and real estate developers to take better care of the consumers while continuously strengthening our competitive loans and our growing business at a fast pace.

As we continue to reinvest in our agent cooperation network infrastructure, user base expansion and services function and innovative A. I. technologies, we are confident we will further enhance our monetization capability and deliver sustainable growth.

That concludes our prepared remarks. We would like to now open the call to questions. Operator, please go ahead.

Thank you so much. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions)

Your first question comes from the line of Elsie Cheng from Goldman Sachs. Elsie, your line is now open.

Thank you. [Interpreted] Thank you, Management, for taking my questions and congratulations on the strong result again. I have three questions here.

One is really about the changing macro environment and tightening regulation in housing industry in China, how does it impact Beike and its operations in major cities and how should we think about the impact to our full-year results?

The second is on the comparative landscape. It has been a while since WUBA got privatized and we also observed some developers are proactively building their own digitalized team, so can Management share a little bit more color on your observation of the key trends in the industry and Beike's strategy in sustaining the competitive moat?

The last one is about the emerging businesses. We continue to see the GTV and revenue scale robustly in the segment. Can Management share a little bit more color into the progress of operations in our home decoration and financial services? Thank you.

Thank you Elsie. Let me address your first two questions. When we talk about some policy recently,

China's housing policy is aimed at promoting houses for living, curbing speculation, and preventing financial systemic risks arising from the real estate market, with layered measures and city-specific policies. In Chinese, we call this (spoken in Chinese).

A stable real estate market is beneficial for the sustainable development of Beike and the industry as a whole.

So far, policies we saw are to slow the market from overheating by using a relatively mild regulations and will implement in a timely manner to prevent more severe regulation measures and a greater market fluctuation down the road.

As part of the long-term mechanism to maintain an effective housing market, it also can smooth the volatility of the real estate market that was often seen in the past, and make the competitive landscape more about scale, quality, and efficiency, and create a favorable environment for Beike and the whole industry.

From our observation, the recent housing policy has no significant or direct impact on the national real estate transactions momentum, nor brought product has significantly changes in(inaudible) overall market price or transaction volume. Since the policy has been delivered to some over 50 cities, like Shenzhen and Shanghai, but the housing is still necessary and a rigid demand in China.

Let me talk about Shenzhen. In Beike, actually we have business presence in 100+ cities and all of our incremental revenue mainly came from our newly connected platform business.

Shenzhen is the star city of Beike. Its market share improved almost 70% from 2018 when we launched Beike to 29% in 2020. That still only accounted for low single-digits percentage of Beike total GTV in 2020.

So，we would like to say, at present we don't have centralization problem for specific cities, and Beike is a platform company and our nationwide platform is able to mitigate the downside risk or the deviation from any particular cities.

Also, for Shanghai. Shanghai is the largest existing home sales market in China with the largest housing stock over 2 million. Measures in Shanghai are relatively mild with limited impact on the transaction volume, and we believe the city will return to a housing market that was active trading in due time.

As you see that the recent measures in Shanghai are not as strong as Shenzhen as the impact on the transaction volume and the price will be relatively mild. This is for your first question.

Regarding some competition, yes, we do notice some peers step into this area. Normally, we do not comment on other peers' performance directly, but two things are very certain. The first, Beike's IPO has inspired so many people and there will be more players and capital starting flowing into the residential real estate market.

The second, Beike is very confident and is very happy to see new industry entrants to step into this area and allowing us to further enhance our capability to be the leader of the industrial internet, and think deeply about our strategy, that is how to take care of our clients and help platform participants to take better care of our clients.

Regarding the market conditions, I would like to say directly that there is still some competition amongst among developers. The developers maybe hesitate to use somebody else's one (inaudible) channel due to the competition or might worry about the customer laundering, which makes a cooperation mechanism even unlikely.

Beike will host a different and better proposition, and is against to set target or make a promise on the future evaluations in the Office beginning of Entrepreneurship Beike's business strategy has never been changed, and as I just reiterated again, our strategy is to take care of our customers and have service providers to take care of our customers.

So, from the financial number and this performance perspective, no impact to Beike. If you look at the GTV, our take rate and contribution margin and DSO in the past three years, the GTV increased from RMB280 billion to RMB747 billion and last year we further increased to RMB1. 38 trillion.

On the take rate for the new home sales, we had a modest increase, so our take rate increased from 2. 66% to 2. 71% and last year it increased to 2. 74%. The contribution margin for the new home continues to improve. and improved from $3 billion to RMB4. 9 billion and the last year is RMB8. 2 billion.

The DSO we also, although our scale doubled year-over-year, but our DSO has improved -- in 2018, 117 days and to 2019, 96 days. Last year we have slightly increased,103 days just as the combined impact of COVID-19, if you look at the Q3 and Q4 numbers, we are reduced to 87 days, but there is no (inaudible) impact.

Last question regarding our business strategy for the new business, I would like to invite our CEO Stanley to give the answer.

[Interpreted] This is Stanley. Let me address your question in terms of the emerging business services development. The next month we will enter three years of anniversary for the Beike platform as well as Lianjia, almost like a 20-year anniversary.

In the past 20 years, we actually accumulated a lot of experience, especially during our procedures to restructuring of the housing transaction industries. We really focus on how we can build up the overall standard to the industry. What we gathered from the past 20 years' experience is we need to do the business vertically (corrected by company after the call) firstly to iterate SOPs and establish standardization (added by company after the call).

So then after that, when we get to know the knowhow of the industry, we can start to do the platform business horizontally (corrected by company after the call). That is also what we gather take, and we noticed for a lot of different kinds of businesses, such as housing transactions, or the decoration as well as the furniture. Each of them has a significant potential market size, so we will continue developing for the opportunities there.

We are looking for the opportunities in the industrial internet going forward. When we look at the potential sectors to develop, we always look at the following characteristics. Firstly, the industry should be big enough.

The second is we also look at how we can replicate our capabilities from the past years of operational experience. Thirdly, we also look at the potential opportunities within that track. From that perspective, I can give you two examples going forward in terms of our continued development. So first is about the decoration business and second it's about the financial business.

For the decoration business we will -- in the year of 2021 as I described in the prepared remarks we will continue to focus on the Beijing market. We will focus to build up the SOP for this industry and build up the SaaS system as well as continue to iterate the systems capabilities to facilitate industry digitalization, and create a brand new business model for the industry (added by company after the call). So we'll focus on the workers management as well as the overall industrial supply chain management in order to further build up our capability within the decoration business in Beijing.

In terms of financial business for this year we will continue to improve our capability to promote the online process. We will try to build up the system for the financial advisors to ensure the working procedures can be completed online.

Meanwhile in terms of the customer side we are also trying to promote the value-added products such as the safeguards (spoken in Chinese) products for the home sellers mortgage redemption needs, and to connect the buyer's mortgage bank with the seller together to further improve transaction efficiency and (added by company after the call) user experience. So in the future as I mentioned looking to 2021 we will continue to explore the best practices as well as other explorations within the financial services. Thank you.

(Spoken in Chinese)

Thank you so much. Your next question comes from the line of Binbin Ding from JP Morgan. Binbin your line is now open.

(Interpreted) So my question is about the pricing strategy. I notice that recently Beike has gradually raised the secondary home transaction commission rates to 3% in some cities. So I was wondering, number one is, in how many cities have we started to adopt the 3% commission rate. Second is in each city how do they differentiate the pricing of our in-house Lianjia stores with the third party connected store?

The third one is, are we going to further expand the 3% pricing to more cities in China and how should we look at the secondary home commission take rate in the rest of the year. A related question is, do we have any plans to increase the commission rate in new home transactions in the near future? Thank you very much.

Okay thank you, let me address your question. So for our commission rate for the new homes, actually we want to clarify the level of commission rate reflects service quality and transaction efficiency. The market of new home sales is a market with full competition and balanced supply and demand.

Raising commission without being justified by service quality or transaction efficiency is just like water without source and the tree without roots. In other words, it's not sustainable. So with the neutral market view, our platform will actively explore a bilateral commission model to balance the financial burden between the buyers and the sellers, while striving to improve overall service quality, commitment coverage and the ability to identify customers with strong purchasing power in order to support the local brand to increase our bargaining power.

So the basic infrastructure of Beike is community-centric store network. So to balance our existing home and new home sales is very crucial. We encourage our agents to take part in community services, know the clients better and service the clients better and to build up long term commitments and professional dignity to continuously improve our service quality, efficiency and offer the most guarantees.

So if you look at our take rate for our existing home sales in the past three years. There's a feeling of modest increase for our proprietary brand of Lianjia. In the past three years the commission rate went from 2. 32% to 2. 38% and the last year it is 2. 4%. For our franchised brand of Deyou, Lianjia the commission rate [fluctuated] up and down in the very limited range. So it varies from ---- it is paid changed from 2. 15% and 1. 99% and last year is 2. 00%.

For our connected brand in Beikei platform, of 278 brands. So on (inaudible) average, the take rate had a modest increase from 1. 89% to 1. 92% and last year is 2. 07%. So in conclusion, as far as existing home commission rate we expect a steady growth in Lianjia, Deyou and our connected stores.

The existing home sales commission rates represented more commitment are covered and quality of service are improved and this will be a benefit from our platform. For the new home commission rate -- actually the new home sales market is also a 2B market in which we play an important and equal role with the developers.

This is a perfect market, and the high commission rate reflects our high efficiency, fast cash collection as well as high level of customer recognition. So in the long run, for the new home commission rate, in order to maintain a mutual and beneficial and sustainable relationship with the real estate developer we expect commission rates to remain stable at around the 2. 77%. Thank you.

Thank you very much.

Thank you so much. Your next question comes from the line of Steven Tsai from Morgan Stanley. Steven, your line is now open.

(Interpreted) Thank you management for taking my question. My question is related to the sale efficiency improvement for the connected stores. You previously mentioned that on the cohort basis third party stores improved GTV per store by 100% and 26% in their first and second year respectively on the platform. So just wondering if there is any difference for the stores that joined later in the second half of 2019 or first half of 2020 in terms of the sales improvement trend you have observed so far. Thanks.

Okay, thank you. We would like to say in 2020 Beike connected more than 47,000 stores and 493,000 agents. Our GTV year-over-year, as I mentioned just now increased 64. 5%. Among these incremental facts we always emphasize the importance of our operating system, namely ACN, the agent cooperation network to promote the healthy platform development and prevent the vicious competition through ecosystem governance.

So in 2020 using Beike platform, more than 81. 5% listings actually came from third party stores and more than 75% with a cross store transaction and more than 36% with cross brand collaboration. So as a consequence of this, if you look at our numbers, the per store efficiency, namely annual GTV per store.

In 2020 this is the total number, the big picture for our preferred brand of Lianjia year-over-year increased 21. 2%. For our franchised brand of Deyou year-over-year increased 18. 7%. For our connected brand on Beike platform year-over-year efficiency increase by 17. 2%. This is the big picture. If you look at the cohort basis, at the cohort basis year-over-year increased over 26%. Thank you.

Thank you. It's very clear.

Thank you so much. Your next question comes from the line of John Lam from UBS. John your line is now open.

Thank you management. (Interpreted) There are two questions from me. Number one is about what do we see in terms of the GTV trend for the primary and also secondary transactions? Also do we have the guidance for 2021 GTV? My second question is regarding margins. We see that in the fourth quarter adjusted net margin is up 6. 8%. Which city has the highest adjusted net margin? What is the national net margin? Thank you.

Thank you John. Let me address your question. So we see steady growth especially for the existing home sales sector. This will all be reflected in our outlook for the first quarter. As I mentioned just now we expect that revenue for the first quarter of 2021 will reach RMB18. 5 billion to RMB19. 5 billion. So we cannot give a very detailed number for Q1 because Q1 is still in progress.

So regarding your second question which city's margin is high. So let me clarify internally we do not measure our financial performance by city. We just consolidate [at the headquarter](inaudible). Also we just can't comment on margins for cities, internally we have measurement， managerial measurement, like the store efficiency. As I just talked with the last analyst we measure the store efficiency by different city, different brand. So this is our internal measurement.

So far we -- we can see Shanghai city store efficiency is very good because where we have our business we have been reform in Shanghai for three years. We continue to recruit new graduates from colleges. Also in Shanghai our local management team issued so many service guarantees and so many codes of conduct for the Lianjia agents. So overall the client satisfaction has improved. API has continuously improved. So efficiency of stores as a consequence continues to improve as well. Thank you.

Thank you so much. Our last question comes from the line of Thomas Chong from Jefferies. Thomas, your line is now open.

(Interpreted) Thanks management for taking my questions and congratulations for a strong set of results. My question is more about the long term outlook. Can management talk about how we should think about the long term trends in terms of the GTV and profitability? Are we getting a bit, even more optimistic about the outlook, in the next few years? And on the other hand, can you comment about any type of logical upgrade that we should be aware? With regard to our back end ecosystem? Thank you.

Thank you for that question, let me address your first question. Regarding our long term GTV and the profitability projection, actually last year when we prepared for IPO, we have an IPO model and released it to the market. So we still keep our IPO model unchanged. In that mode, in 2024, we see the GTV will be RMB7. 6 trillion and revenue will be over RMB161 billion and that adjusted net profit will be a -- adjusted net profit will be RMB18 billion. So, so far we will not change this projection because we need to balance our investment in future and also our profitability, and but the management of Beike(inaudible), we have a strong confidence to beat and raise on this.

Regarding your second question, I will invite our CEO to give some further explanation.

(Interpreted) This is Stanley, let me address your second question. So since we actually has been accumulating huge amounts of data in our operational history, in terms of the ACN evolution this year, we will continue using the technology to, as well as the AI capability to continually iterate our products and to further help the agents to get better services as well as serve better to our customers.

So we will use a lot of different types of tools as I mentioned before, such as, Beike's Pick as well as our AI assistant Xiaobei which has helped the agents to continue optimize and improve their efficiency as well as productivity. So in the previous of the experience in terms of the industrial internet, we fully believe, you know, the engineers capability definitely can help of the service as well as the service providers within of the industry can bring better.

So definitely in the future we will combine the true part of the culture and our capability together to continue improve the efficiency and the productivity for the ACN network. Thank you.

Thank you.

Thank you so much and due to the time limits, I will now turn the call over to your speaker host today, Mr. Matthew Zhao for closing remarks.

Yes thank you Operator. Thank you once again for joining us today. If you have further questions, please feel free to contact the investor relation teams through the contacting 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.

That does conclude our conference for today. Thank you for participating. You may all now disconnect.