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01/11 03:21
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed outlook. Positive aspects include strong growth in home rental services and cost control measures. However, the decline in gross profit and operating margins, coupled with unclear guidance on new home business growth, tempers enthusiasm. The Q&A section reveals concerns about market volatility and management's vague responses, which may cause investor uncertainty. The expanded share repurchase program is a positive signal, but without market cap information, the overall impact remains neutral.
Total GTV RMB 736.7 billion, remaining flat year-over-year.
Total revenues RMB 23.1 billion, up 2.1% year-over-year.
Gross margin 21.4%, declined by 1.3 percentage points year-over-year. The decline was mainly due to the structural impact from a lower revenue proportion of existing home and new home business, which had relatively high contribution margins, as well as the decrease in contribution margin from the existing home business. This was partially offset by the increase in contribution margin from the home rental services.
GAAP net income RMB 747 million, down 36.1% year-over-year. The decline was attributed to lower gross margin and increased operating expenses.
Non-GAAP net income RMB 1.29 billion, down 27.8% year-over-year. The decline was attributed to lower gross margin and increased operating expenses.
Existing home transaction revenue RMB 6 billion, down 3.6% year-over-year. The decline was due to a higher GTV contribution from connected agents for which revenues are recorded on a net basis.
Existing home transaction GTV RMB 505.6 billion, up 5.8% year-over-year. The growth was due to a higher GTV contribution from connected agents.
Existing home business contribution margin 39%, declined by 2 percentage points year-over-year. The decline was primarily due to relatively stable fixed labor costs amid the revenue decline.
New home transaction GTV RMB 196.3 billion, down 13.7% year-over-year. The decline was due to market conditions and structural shifts.
New home transaction revenue RMB 6.6 billion, down 14.1% year-over-year. The decline was in line with GTV performance, reflecting steady monetization capability.
New home business contribution margin 24.1%, down 0.7 percentage points year-over-year. The decline was due to an increase in variable costs resulting from agent benefit improvements last year.
Home renovation and furniture business revenue RMB 4.3 billion, relatively flat year-over-year.
Home renovation and furniture business contribution margin 32%, up 0.8 percentage points year-over-year. The increase was driven by reduced procurement costs from centralized purchasing and decreased labor costs due to enhanced order dispatching efficiency.
Home rental services revenue RMB 5.7 billion, up 45.3% year-over-year. The growth was driven by rapid growth in the number of rental units under management.
Home rental services contribution margin 8.7%, up 4.3 percentage points year-over-year. The increase was largely driven by improved gross margin from the Carefree rent business.
Emerging and other services revenue RMB 396 million, down 18.7% year-over-year.
Store costs RMB 663 million, down 5.8% year-over-year. The decline was mainly due to lower store rental costs.
Gross profit RMB 4.9 billion, down 3.9% year-over-year. The decline was due to lower gross margin.
GAAP operating expenses RMB 4.3 billion, down 1.8% year-over-year. The decline was due to lower personnel expenses and reduced advertising and promotion expenses.
G&A expenses RMB 1.9 billion, relatively flat year-over-year. The stability was due to decreased bad debt provisions and reduced share-based compensation expenses.
Sales and marketing expenses RMB 1.7 billion, down 10.7% year-over-year. The decline was due to lower personnel expenses and reduced advertising and promotion expenses.
R&D expenses RMB 648 million, up 13.2% year-over-year. The increase was largely driven by higher personnel expenses.
GAAP income from operations RMB 608 million, down 16.4% year-over-year. The decline was due to lower gross margin and increased operating expenses.
GAAP operating margin 2.6%, down 0.6 percentage points year-over-year. The decline was due to lower gross margin and increased operating expenses.
Non-GAAP income from operations RMB 1.17 billion, down 14% year-over-year. The decline was due to lower gross margin and increased operating expenses.
Non-GAAP operating margin 5.1%, down 1 percentage point year-over-year. The decline was due to lower gross margin and increased operating expenses.
Net operating cash inflow RMB 851 million in Q3.
AI-powered tools for housing transactions: Upgraded AI tools for identifying high-quality business opportunities, contributing over 50% of transaction volume despite being a single-digit percentage of total leads.
Home renovation and furniture services: Replicated productized showroom model in multiple cities and expanded centralized procurement categories to reduce costs and improve quality.
Home rental services: Launched new 09 products in 10 cities, offering diversified service options and improving operational efficiency through AI-powered tools.
Expansion in home renovation and furniture services: Replicated productized showroom model in multiple cities and adopted localized sourcing standards.
Growth in home rental services: Increased rental units under management to over 660,000, up from 370,000 in 2024, with revenue reaching a record high of RMB 5.7 billion.
AI integration in operations: AI-driven tools improved efficiency in housing transactions, home renovation, and rental services, including pricing, property evaluation, and marketing.
Cost optimization: Reduced procurement and labor costs in home renovation services and improved gross margin in rental services.
Shift from scale to efficiency: Focused on enhancing operational efficiency and profitability through AI and restructuring.
AI-driven home rental operations: Integrated AI across rental services, achieving significant efficiency gains and cost savings.
Decline in Gross Margin: Gross margin declined by 1.3 percentage points year-over-year to 21.4%, primarily due to structural impacts from lower revenue proportions in high-margin segments like existing and new home businesses.
Revenue Decline in Key Segments: Revenue from existing home transactions decreased by 3.6% year-over-year and 10.8% quarter-over-quarter. Revenue from new home transactions also fell by 14.1% year-over-year and 23% quarter-over-quarter.
Profitability Challenges: GAAP net income dropped by 36.1% year-over-year and 42.8% quarter-over-quarter, while non-GAAP net income fell by 27.8% year-over-year and 29.4% quarter-over-quarter.
High Fixed Labor Costs: Contribution margins in existing and new home businesses declined due to relatively stable fixed labor costs amid revenue declines.
Economic and Market Fluctuations: The company faces short-term business challenges due to external market fluctuations and internal strategic transformations.
Operational Efficiency Risks: Efforts to optimize operational efficiency through AI and restructuring may not yield expected results, posing risks to cost management and profitability.
Non-Standardization in Home Rental Services: The fragmented and non-standardized nature of the home rental industry presents challenges in achieving scalable and efficient operations.
Increased R&D Expenses: R&D expenses rose by 13.2% year-over-year, driven by higher personnel costs, which could pressure margins if not offset by revenue growth.
Dependence on AI Integration: Heavy reliance on AI for operational improvements and decision-making introduces risks if the technology fails to deliver expected efficiencies or faces implementation challenges.
Shift from scale to efficiency: The company is strategically shifting its growth engine from scale to efficiency, focusing on innovative initiatives to enhance operational and marketing excellence.
AI integration in home rental services: AI has been fully integrated into the rental services business, enabling end-to-end intelligent decision-making and business operations. This includes AI-powered property evaluation, pricing strategies, and operational optimization, which have led to significant cost savings and efficiency improvements.
Home seller and buyer agent specialization: The company is piloting a seller and buyer agent specialization mechanism in Shanghai to enhance marketing and operational excellence. This initiative includes redefining roles, commission structures, and performance incentives, supported by AI-powered tools.
Expansion of AI-driven operations: AI applications are being expanded across various business dimensions, including property evaluation, pricing, and operational processes, to address nonstandardization and improve scalability.
Profitability in home renovation and rental services: Both home renovation and rental services have achieved profitability at the city level before deducting headquarter expenses, with the rental services contributing over RMB 100 million in profits in Q3.
AI-powered rental unit sign-up assistant: The company has rolled out an AI-powered rental unit sign-up assistant that predicts market demand, property inventory, and price trends, enabling dynamic pricing and operational adjustments.
AI-driven efficiency in home rental services: AI-driven operational systems in home rental services have led to scalable and personalized services, overcoming traditional industry constraints and achieving significant efficiency gains.
Future focus on AI integration: The company plans to deepen AI integration across business scenarios to enhance service providers' capabilities and consumer experiences.
Share Repurchase Spending: The single quarter share repurchase spending reached its highest level in the past 2 years, amounting to approximately USD 281 million in Q3 2025.
Cumulative Share Repurchase in 2025: From Q1 to Q3 2025, the company spent a cumulative amount of approximately USD 675 million on share repurchases, up 15.7% year-over-year.
Total Share Repurchase Since Program Launch: Since the launch of the share repurchase program in September 2022, the company has repurchased around USD 2.3 billion worth of shares, accounting for about 11.5% of the total issued shares before the program began.
The earnings call presents a mixed outlook. Positive aspects include strong growth in home rental services and cost control measures. However, the decline in gross profit and operating margins, coupled with unclear guidance on new home business growth, tempers enthusiasm. The Q&A section reveals concerns about market volatility and management's vague responses, which may cause investor uncertainty. The expanded share repurchase program is a positive signal, but without market cap information, the overall impact remains neutral.
The earnings call presents a mixed picture. While there are positive aspects like growth in new home transactions and home renovation revenue, there are significant declines in gross margin and net income. The Q&A highlights management's focus on efficiency and AI, but also reveals concerns over policy uncertainties and vague responses on future market trajectories. The shareholder return plan and cash liquidity are positives, but the overall sentiment, considering the market outlook and financial metrics, remains neutral.
The earnings report shows mixed signals: strong revenue growth and a significant increase in net income, but a decline in gross margins and net operating cash outflow raise concerns. The Q&A section reveals cautious optimism with some uncertainty in the housing market due to international trade frictions. The share repurchase program is a positive, but the lack of clear guidance on market impact and future margins tempers enthusiasm. Overall, the sentiment remains balanced, leading to a neutral prediction for stock price movement.
Despite some challenges like supply chain issues and economic factors, the company's strong financial performance, including significant revenue growth and a robust share repurchase program, indicates a positive outlook. The AI integration and expansion plans further bolster this sentiment. The Q&A section highlighted positive growth expectations and strategic focus on efficiency, which should support stock price appreciation. However, margin declines and operational cash outflow are concerns, but optimistic guidance and strategic initiatives should mitigate these. Overall, the stock is likely to see a 2% to 8% increase.
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