Ke Holdings Inc (BEKE) 2020 Q3 法說會逐字稿

Hello ladies and gentlemen. Thank you for standing by for KE's third quarter 2020 earnings conference call. (Operator Instructions) This conference call is being recorded. I will now turn the call 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. [or Beike's], third quarter 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 strategy and business development. 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 are tied to this call as we will make forward-looking statements. Please also note that Beike's earnings press release and this conference call including discussions of [unaudit] GAAP financial information as well as [unaudit] non-GAAP financial measures. Please refer to Beike's press release which contains a reconciliation of the audited non-GAAP measures to comparable GAAP measures.

Lastly, unless otherwise stated all figures mentioned during this conference call are in Renminbi.

With that, I will now turn the call over to our CEO, Mr. Stanley Peng. Please go ahead sir.

Thanks Matthew. (Inaudible) and thank you for joining us today, our first earning call as a public Company. We appreciate having the opportunity to speak directly with all of you and to share our (inaudible) on how we are doing in continuously fulfilling our mission of transforming the housing transactions and services industry in China.

We always uphold the strong conviction of doing the right thing even if it is difficult so that we can achieve long term success. We are committed to reinventing the industry and strive to take good care of housing customers and service providers as well as other platform participants in all aspects.

While we believe [tech knowledge] and our value proposition are the two pillars underpinning our advancement in fulfilling our mission through continuous development of our infrastructure including our operating system, the Agent Cooperation Network, or ACN, as well as the (inaudible) community [centric] touch points and data driven products and solutions.

We further promote standardization and digitization across data transaction process and service quality in our industry. As a result we delivered a robust performance both operationally and financially in the third quarter. We achieved total revenue of RMB20.5 billion. This represents an increase of 70.9% year-over-year driven by solid growth transaction volume or GTV growth of 87.2% to RMB1.05 trillion. Along with healthy [tech] rates on our platform. Meanwhile in the third quarter our adjusted net income [reach] went from RMB858 million (sic - see press release, "RMB1,858 million), an increase of 210.6% year-over-year.

Next, let me give you more color in terms of our recent business updates. Firstly, in the third quarter we continued putting housing infrastructure on our platform for ACN through rules and protocols, clearly defined rules and our commission -- our location mechanism, social trust, built upon bigger [score].

This enables information and results sharing, promotes trust between participants, fosters cross-brand and cross-store collaborations and creating a professional network for service providers to get connected and engage on the platform. At the end of the third quarter more than 44,800 stores were connected on the Beike platform with 477,000 agents.

Our (inaudible) scale also comes with enhanced quality. Over 30% of total existing home transactions were completed through cross-store collaborations while connected stores contributed nearly 80% of the existing home listings as of September 30, 2020. We vigorously promoted stores scoring system on the platform which helps build trust between stores and agents, improve the operational efficiency and healthiness of our ACN.

By the end of the third quarter 25.7% of stores on our platform achieved a higher -- highest A rating. We are also pleased to have more agents with higher education backgrounds joining the platform.

While we expanded our community-centric network we also continue to increase our online presence through both organic growth and marketing activities. Our average monthly active users [or apps] and WeChat mini program increased by 82.1% year-over-year to RMB47.9 million in the third quarter leading to more transactions and (inaudible) from online leads. Our housing [dictionary] covers 233 million homes which is over 50% of all the housing stock in China.

By the end of the third quarter our VR database accumulated 3D data on 7 million homes compared with 5 million by the end of the previous quarter. Our continuous digitization of the industry and data collection is (inaudible).

Next moving to our existing home transaction service business. According to [Beike] Research Institute China's overall investing home transaction market grew by 22.6% year-over-year. Much of this growth was actually attributable to the release of pent-up demand as well as low base in the second half of 2019.

On our platform the total GTV of existing home transactions which RMB576.1 billion for the third quarter representing an increase of 71.8% year-over-year. In the third quarter we launched several initiatives to optimize customer billings and enhance transaction efficiency. For example, we scaled up our online mortgage processing services which makes the post sales contract [from] transaction process more intuitive and efficient.

Through our collaboration with leading commercial banks and our online mortgage service applications we moved the entire mortgage process online. We helped customers reduce the time between signing of sales contracts and mortgage interviews by [19%]. We note that the COVID-19 pandemic substantially accelerated the adoption of our services since people tried to minimize face to face interactions.

In the third quarter almost 30% of commercial mortgage loans facilitated by us were processed through our online mortgage processing services. By the end of September the online mortgage processing service on Beike's platform covered 45 cities and more than 1000 bank branches from [six] collaborating banks nationwide.

Another example of the premium package for home sellers -- as supply and demand in the housing market becomes more balanced, to meet the rising demand for quality services and urgent home sales as well as attract more quality home listings and facilitates more efficient matching.

In the third quarter premium package for home sellers expanded on the platform under these services guarantee of property sales within a certain time period as well as (inaudible) service commitments and value-adding services are offered to home sellers.

We believe those premium services demonstrate our ability to leverage AI and big data to drive [intelligence] matching and sales. By the end of the third quarter more than 20,000 listings on the premium package for home sellers agreements were signed up in [33] cities.

[Certainly] turn to our new home transaction services. In the third quarter, according to the national bureau of statistics China's overall new home sales market grew by 21.4% year-over-year. On the supply side, developers enhanced their sales efforts including partnership with brokerage services in order to accelerate [sell through] and cash cycle. We grew our GTV of new home transaction services by 105.7% to RMB420.7 billion in the third quarter of 2020.

Our accounts receivable collection period also improved in the third quarter. During the third quarter we also adopted a series of measures to fully improve customer experience and solidify our core competencies. We partnered with developers and pioneered the 3-Day Free Return policy to new home sale customers, to ensure adequate levels of customer protection.

The new home transaction service industry has led [flying] behind other consumer verticals, which has the widely applied 3-Day Free Return policies (inaudible). Our 3-Day Free Return policy on our platform has over 3000 projects cumulatively by the end of September, in more than [70] cities.

Meanwhile 42 developers, out of a total of 50 developers in China, have partnered with us, on the commitments. Meanwhile, we have also upgrade our new home risk control mechanism, supported by our database our (inaudible) transaction and (inaudible) data, we are able to implement precautious control measures to each developers, each projects and even to cash transactions.

Our customer are better (inaudible) while we achieve and improve AI to a newer level and are confident to offer [companies] commission, an advantage to our agents.

Fourthly, as to our continued effort on our standardization and the digitalization, I would like to give you an update on our technical innovation. During the third quarter, we [fully] upgrade our AI-assistant Xiaobei, working through to standardized agents service process by supporting the entire work flow.

The collected data through Xiaobei will feed back to agent training and the product interaction. Meanwhile, we have made solid progress in VR by widely adopting VR Lite, a lighter version application, with [lite] to make it cost reduced to VR camera (inaudible) for rental market in third quarter. In the past September, our VR property showings accounted over 40% of total online and offline agent guided tours.

In addition, we continue to attract top talent to join force. Dr. [JRT Mia], Professor of the University of Michigan, a (inaudible) and top expert in the fields of machine learning and data monitoring and analysis, was recently appointed as our Chief Scientist and Head of AI technical centers to lead our AI led research on the applications.

Lastly, to summarize, as people spend more time at home this year, we are seeing people become more focused on better living conditions, as well as pursuing quality services and personalized [experience] when they navigate and proceed housing transactions. The recent trend resonates well with our long-term dedications and our mission of a reliable service, joyful living, leading to the phenomenal growth of our platform today.

We believe most recent trends represent the certain future, as we further (inaudible) our strategical initiatives, centering on our conviction of take care of the consumer and supporting our service providers. We remain excited about our [growth task] and are confident that we can create sustainable value for our housing customers, service providers and our platform participants over the long run.

With that, I would like to turn the call over to our CFO, Tao Xu, for our global review of our financials. Thank you.

Thank you, Stanley. Thank you, (inaudible) for joining us. I would like to give a brief overview of our third quarter 2020 financial results. We achieved robust operational and the financial growth in the third quarter. Our net revenue increased by 70.9% year-over-year, to RMB20.5 billion, exceeding (inaudible) [higher than three percentage]

The rapid growth of net revenue was driven by the solid GTV growth of 87.2% year-over-year, to RMB1.05 trillion. Along with an increase of productivity and the continuous input of service quality of our platform. In particular, our revenue from existing home transaction services increased by 46.2% year-over-year, to RMB8.8 billion in Q3, mainly due to a 71.8% year-over-year increase in GTV of new home transactions to RMB576.1 billion in Q3.

Our revenue from new home transaction services increased by 95% year-over year, to RMB11.1 billion in Q3, primarily due to 105.7% year-over-year increase in GTV of new home transactions to RMB420.7 billion in Q3.

Our revenue from emerging and other services increased by 116.6% year-over-year to RMB625 million in Q3. The increase was primarily due to the increase of a penetration level of financial services round our housing transaction services.

Cost of revenue increased by 78.0% year-over-year to RMB16.2 billion in Q3. Gross profit increased by 49.1% year-over-year to RMB4.4 billion in Q3. Gross margin was 21.3%, compared to 24.4% in the same period last year. The decrease in gross margin was mainly due to the increase of share-based compensation expenses as the new home transaction was [facilitated] by connected store and agents and other sales channels.

Operating expenses increased by 75.8% year-over-year, to RMB4.5 billion in Q3. General and administrative expenses was RMB2.65 billion, compared to RMB1.37 billion in the same period last year, mainly due to the increase of share-based compensation expenses and the number of supporting staff in the city-level.

Sales and the marketing expenses were RMB1.03 billion, compared to RMB737 million in the same period last year, mainly due to the increase of brand advertising and promotional marketing activities and the share-based compensation expenses.

Research and development expenses were RMB789 million in Q3, compared to RMB436 million in the same period last year, mainly due to the increase of share-based compensation expenses.

Loss from operations was RMB81 million in Q3, compared to the income from operations of RMB400 million in the same period last year. Operating margin was negative 0.4% in Q3, compared to 3.3% in the same period last year. This is primarily due to the increase of share-based compensation expenses.

Excluding non-GAAP items, our adjusted income from operations increased by 185.1% year-over-year, to RMB1.74 billion in Q3. Adjusted operating margin increased to 8.5% in Q3 from 5.1% in the same period last year. Adjusted EBITDA increased by 122.3% year-over-year, to RMB2.25 billion in Q3.

Net income was RMB75 million in Q3, compared to RMB384 million in the same period last year. Excluding non-GAAP items, our adjusted net income increased by 210.6% year-over-year, to RMB1.86 billion in Q3.

Net loss attributable to KE Holdings Inc.'s ordinary shareholder was RMB271 million in Q3, compared to RMB77 million in the same period last year. Adjusted net income attributable to KE Holdings Inc. increased by 212.3% year-over-year, to RMB1.86 billion in Q3.

The third quarter of 2020 diluted the net loss for ADS as attributable to KE Holdings Inc.'s ordinary shareholders was RMB0.33 compared to RMB0.17 in the same period last year. Adjusted diluted net income per ADS attributable to KE Holdings Inc.'s ordinary shareholders increased by 762.5% to RMB1.38 from RMB0.16 in the same period last year.

As of September 2020, the combined balance of cash, cash equivalents, restricted cash and short-term investments amounted to RMB59.2 billion.

Looking ahead to our first quarter of 2020, we expect net revenue to be between RMB19.2 billion and to RMB20.2 billion. This is representing the increase of approximately 33.5% to 40.5% year-over-year. This business outlook reflects the Company's current and preliminary view of the business situation and the market conditions, which is subject to change.

Looking ahead, (inaudible) our infrastructure data, we endeavor to [integrate and define] our (inaudible) in purchase period. In reconstructing and in streamlining the complex housing transaction, we will continue to grow in all fronts and refine our business offerings across housing related product services.

We remain strongly committed to our mission of attainable service (inaudible) for [living] and the reshaping the industry, while capturing the tremendous opportunities, along with all our (inaudible) platform participants.

On a (inaudible) note, as you may already aware of, we have announced today for the [intention] to offer [to sell] 35.4 million of our [API]. More details about offerings can be found on our investor relations website. That concludes our prepared remarks. We would like now to open the call to questions. Operator, please go ahead.

Thank you, Xu. Ladies and Gentlemen, we'll now begin the question and answer session. (Operator Instructions). The first question we have is from the line of Elsie Cheng from Goldman Sachs. Your line is now open.

(Spoken in a foreign language). Thank you, Management, for taking my questions and congratulations again on the strong results. I have two quick questions here. One is on the GTV per store improvement. Our F1 has been just closing about 13.4% of GTV per store at the Lianjia and just wondering what's that number for the connective stores and what are the major drivers for the GTV per store improvement, at both Lianjia and the connected store site.

The second question is about our new businesses development. We have been talking about the financial business being ramping up being the major driver for the new business GTV. Just to understand a little bit more in terms of the products on the financial side. As we looking at a high single digit of penetration for the service right now, what are some of the long-term or target that you could be thinking about down the road. Thank you. (Spoken in a foreign language).

Okay. Thank you, Elsie. For our connect store and Lianjia store their efficiency improve year-over-year. When we talk about our connect store, store efficiency, for the store when they joined beike platform, at a cohort basis. So, first year, up to a 12 month, their store efficiency increases around 98%. On the second year, from fourth to the eighth quarter, their efficiency increased around the 26%. And for our Lianjia, because Lianjia is very mature and their annual store efficiency increased around 15%. This is in answer to your first question.

Regarding your second question for our emerging others, let me talk on the financial business and decoration separately. For financial business, in the short and the middle term, we maintain the existing home business and help proceed the completion of existing home transactions.

The penetration rate of financial service in Q3 has improved very well. The penetration rate increased from Q2 6.1% to 8.6% in Q3. The increase in the penetration rate was largely due to the platform improved customer experience, including the introduction of diversified, flexible product design and the combinations that are more closely aligned to the customer needs, and working with a wide range of financial institutions to provide online assistance which is more user friendly.

For the decoration and renovation, so far we focused on deepening the penetration in Beijing and have entered into the top tier of the market. At this moment, there are more than a thousand projects in the construction of the process. So we are doing the decoration in Beijing because we want to build the standardization of the workers of the service and as a standard of the procedure.

Also, we use Beijing to build our industrial knowhow for Beike decoration departments. At this moment, we do not have any sales pressure because all of the traffic on our hands. What we are focused on is focused on the cost of the delivery and the continuously improve the NPS[].

Got it, thank you very much.

Thank you. (Operator instructions). The next one we have is from Binbin Ding from JP Morgan. Your line is now open.

Good morning, Management, thanks for taking my question and congratulations on a very strong quarter. My first question is on the commission rate. So can you give us some color regarding the commission rate for both existing-home and new-home segments in the next few quarters?

In the third quarter, it seems your new home commission rate has declined sequentially slightly. So what is the reason behind that and whether this will continue in the next quarter?

My second question is on your operating efficiency. It seems your operating expenses, excluding the share-based compensation, has decreased sequentially in the third quarter. So I assume this is mostly coming from the G&A expenses, as normally (inaudible) goes into the G&A line mostly. So can management comment whether this is going to continue in the next few quarters?

(Spoken in foreign language)

Okay, thank you. Let me talk about our commission rate. For our existing-home commission rate, actually, this is very stable and had a modest increase. Because the philosophy behind the commission rate for the existing home sales is the service guarantee.

For example, in Beijing, our take rate for the existing home sales is higher because in Beijing there is more than 20 service guarantee. Since the Beike launch, the weighted average take rate for the existing home (inaudible) is around 2.2 to 2.3.

For the new home, since Beike launched in 2018, our stability increased a lot, together with a very stable and very healthy take rate. In 2018, our GTV is RMB281 billion and our take rate is 2.66.

Last year, the scalability increased 2.8 times, increased to RMB748 billion, and our commission rate for new homes increased 2.71. In this year, by end of September, the year to date, our GTV for new-home sales, already RMB914 billion and our take rate further increased to 2.74.

So because [of the some-level seasonality], so normally the commission rates have some fluctuation. But we are foresee in this year our take rate for new homes still will be stable and a little bit higher than 2019.

Also, onto your second question for the share-based compensation. So in this quarter, we booked the share-based compensation is RMB1.67 billion. Of which for the cost of goods sold is around RMB435 million, because we grant share options to our regional, like the city manager and the product manager and regional head.

Also, for the sales & marketing, the share-based compensation, is RMB47 million, and G&A is RMB901 million, and for R&Dit's RMB284 million. Hopefully, this clarifies. Thank you.

That's very helpful, thank you.

Thank you. The next question we have is from the line of Steven Tsai from Morgan Stanley. Your line is now open.

(Spoken in foreign language). My first question is related to the recent Antitrust regulation on the internet platforms in China. Could Management share with your view regarding whether regulation will affect the competitor landscape for Beike and whether or not this will affect our future growth potential and our ability to raise commission rate and take rate over the longer term?

My second question is regarding the next-year outlook. Because this year the pandemic made both developers and real estate brokers increase collaboration with Beike, and on the demand side, favorable credit created environment triggered strong home purchase demand.

These two factors may not continue next year. So just wondering, should we expect a meaningful growth slowdown on both existing home and new home side into 2021? Any color would be great, thank you.

Okay, thank you. Let me address the Anti-monopoly law impact. So, so far, the draft guidance is not a new regulation. That's in line with the existing antitrust rules. We believe this release is to serve as the more detailed interpretation of existing rules and provide guidance on their future implementation.

At this moment, we believe the draft guidance is to focus on mega internet companies which with very high market share, and for Beike, we just launched for two and a half years.

So our total addressable market is 32 trillion to 35 trillion and our market share in 2018 is only 5.3%. Last year, our top-line doubled our market share, only 9.1%. In this year, [we can] foresee further growth, but our market share is still around 12% to 13%. So still a lot of room for us to grow.

Beike has closely watched and monitored anti-trust rules, as well as the regulators and we have complied with all of the antitrust requirements and protocols. Beike provides transparency and an improvement in service quality in our markets through the data and the technology which benefit our customers benefit platform participants, instead of hurting them. This is the answer to your first question.

Regarding this outlook in 2021, since we are still finalizing our next year's budget, it's a little bit early to talk about the detail for next year. But the clearest sign on the national policy is the housing for living [inaudible] is the reformed national policy.

So we are in front of a very balanced market. In this market, the brokerage value are rising. So we are very confident we could play an important role to conduct service providers and customers, and bring more value to industries, and provide comprehensive service to 300 million families in China. Thank you.

Thanks for that. Very helpful, thank you.

Thank you. The next question we have is from the line of Liping Zhao from [CICC]. You may now proceed with your question.

(Spoken in foreign language). Thank you, Management, for taking my questions. I have two questions for you. The first, could the Management elaborate the impact of the new policy for developers on our new home sales in coming quarters?

The second question is, will we see commissions take rate pressure due to future competition from other competitors like TMall, like 5i5j, etc?

Okay, thank you. Let me answer your first question regarding three redline or we believe the three redline will further constrain the borrowing the growing capability of developers and also affect the property sale to some extent.

Developers are now under increasing pressure to destock and increase cash collection. This is fueling demand for channel services to sell the new home. Beike, as the leader in the new home distribution market, therefore can leverage its economy of scale and the service capability to seize more market share and help service the developers to unload their inventories and collect back cash in a more efficient manner.

This regulation and three redline with other (inaudible) for this policy. [We state] the transaction period will provide a buffer for developers to make the necessary adjustments. But no matter before or after or during the interim, Beike will be the partner of choice for the developers and help them to quickly reach out to clients, adjust inventory and (inaudible) back cash.

The second question I will invite our CEO, Stanley, to give the interpretation. Thank you, Stanley.

(Interpreted) What we have seen and heard is that the competition in this area is not that competitive. This is what happens right now, but this is mainly due to the special characteristics of the real estate housing transaction service industry. But we have seen new entrants into this industry and we think it is a good thing, but we still think the competition focuses on mainly two areas.

Firstly, the first one we still focus on the quality service that we can provide to the customers. And secondly, most importantly, we think what we can provide for the service providers is very important. So those are the key points we will continue to focus on, are the key points for the competition-wise.

We think the entry barrier focus on quite a few points. Firstly, still the connection between the buyers and the sellers of house transactions and secondly, the matching between the customers and the home sellers. Thirdly, to mobilize all the channel sales, so how we mobilize everyone on the platform to do the right thing and to sell all the homes and find customers. Fourthly, to the management and the control of the platform, so how we can manage everyone on the platform to do the right thing.

Lastly, as we talked about before in the IPO period, some of the new home customers come from the community-centric customers from existing home customers, so these two industries are actually connected. We can't look at them separately. As we have already over 44,000 stores and over 470,000 agents in our community-centric stores, we can see that we are able to find more customers for the new home transactions.

Also, as Stanley mentioned before, we offer the three-day refund policy for new home sales and this is how we can bring quality service to the [housing] customers. We think these are the main barriers and we are confident that we can work well in this industry and it is still a very large industry.

So we believe there are a few points that we want to mention. Firstly the synergy of our platform, so we believe our one plus one is over two, the efficiency that the synergy brought. Secondly, because the housing transaction service industry is a very low-frequency industry, so we think subsidies to customers will work in the short term, but not in the long term.

Thirdly, because the transaction is very long, so we focus on [inaudible]management and control from traffic of funds funneled from the top line traffic, all the way down to contract signing and transaction closing. We focus on the full service during the transaction, but not only on the traffic side. Because this long transaction, low frequency leads to a very complicated transaction process in this industry, we believe we are still confident enough to do well and do good things for the customers.

The last question is from Leif Chang from Nomura. Your line is now open.

Hi, thank you for taking my questions. So regarding to my two questions, number one is can management share their expectation for the new home brokerage penetration in coming quarters and what is the estimated penetration in third quarter?

A follow-up question is regarding to the contribution margin for the new home business, notice there is a drop for contribution margin in third quarter, so besides from the change of the channel mix, is it also because of an increase of commission sharing in the third quarter and what is the outlook?

My second question is regarding to the shares offering. You still have the RMB46 billion cash at hand, so I just wonder what is the rationale behind the offering, so why do this now? Thank you.

Okay, thank you. Let me talk about the penetration rates in the new home through brokerage channel. First, I want to give you a big picture instead of the quarter, because China is shifting from the new home business to the existing home business. So with new homes, several years ago is very little sales, so the penetration rate is very low. So before 2015, it is almost zero and the until 2017, the penetration rate grew from 17.5% to 26% in 2019. (

In 2016 the penetration rate from 2006 have risen foresee to overall market penetration rate of will be increase 43% , positive effects of the China new home market.

For our Q3, our new home contribution margin, percentage we have some decline. This is mainly due to the structural change. That is a bit of decrease on contribution margin because we have majority of our new home revenue was contributed by our connect store and agent instead of Lianjia store. So for Lianjia store, our margin percentage is around the 43% and for connect store , margin percentage is around 18% to 21%, so this is a combination too.

Even our margin percentage declined but absolute dollar amount of the contribution for the new home sales, we have an increase. We also beefed up for professional, also beefed up for the promotional measures in the third quarter to further enhance the synergy for connect store and other sales channel. This is for the long-term investment for the future.

Also I want to share some, the purpose of this follow-on and use of the proceeds, because we want to, you know a China housing transaction service industries remains under developed. There is still a long, long way for Beike to grow. We plan to use this fund raising to invest in three areas: 40% in business development, we will keep iterating our SKUs and strengthen our infrastructure, is our third offering and entry into new growth areas.

The second 40% for potential strategic opportunities. Beike will strategic opportunities to strengthen our market leadership position and facilitate the development of our core business. The remaining 20%, it will be for general corporate purpose and for the working capital. Thank you.

Thank you.

Thank you. We have the next question from Zhou Yating. Your line is open.

(Not interpreted).

Thank you, Yating. First of all we would like to say after the Beike IPO there are two things we are very sure of and will definitely happen. The first thing is there will be strong competitors step into the housing transaction market. The second thing, there will be more capital investing in this area. We would like to say that both things are good to Beike.

We welcome new players, as a new business model and a new market player in this market, will help Beike and its management team to continue to improve our service quality, discover our potential weakness and consequently, motivate our team member and achieve faster evolution for our operations.

We respect all of the competitors as long as their initiative will help agents to improve their professional dignities and facilitate the transaction to the customer with high quality of services. So in spite of we don't comment on other peer's performance directly, but for Beike, we would like to say we believe our strong online offline operating infrastructure has built up a strong moat for us, which is very hard to copy.

With this model, the high subsidy is not sustainable and only attract speculative brokers who are not Beike's target group and also Beike were using 19 years of build ACN. The ACN is a culture of transparency, collaboration and shared success. Agents collaborate with each other and the efficiency is very high. It cannot be simply beaten by this model so-called combination of online traffic and low price.

I would like to share the number for reference. For Beike. Our philosophy is that [spoken in foreign language]. We are not only focused on the scalability increase, but we also emphasize the service quality and vision. Moreover, we always emphasize the health indicator of our new home business, for example, the DSO.

I would like to share the numbers, in 2018, our GTV when Beike launch, our new home GTV 281billion and our take rate is 2.66. And last year, our scalability increased 2.8 times and our GTV increased to [RMB746 billion]. This year, the first nine months of GTV already achieved [RMB914 billion]. And our [take rate], last year 2.71, this year, like year-to-date, 2.74.

But the DSO we improve a lot. In 2018, it's 117 days. Last year, improved to 96 days and this year, in Q3, further decreased to 87 days. So this is our philosophy for when doing the business for the new home. Thank you.

Thank you. We are now approaching the end of the conference call. I will now turn the call over to your speaker host today, Mr. Matthew Zhao for closing remarks.

Thank you operator. Thank you once again for all joining us today. If you have any further questions, please feel free to contact us. This concludes today's call and we look forward to speaking with you again next quarter. Thank you and goodbye.

Thank you. Ladies and gentlemen, this concludes our conference for today. Thank you all for participating. (Operator instructions).