Xunlei Limited (NASDAQ:XNET) Q1 2021 Results Earnings Conference Call May 20, 2021 8:00 AM ET Company Participants Mengnan Gao - Manager of Investor Relations Eric Zhou - Chief Financial Officer Jinbo Li - Chairman, Chief Executive Officer Conference Call Participants Operator Good day, ladies and gentlemen and thank you for your patience. You have joined Xunlei's first quarter of 2021 earnings conference call. At this time, all participants are in a listen-only mode. There will be a Q&A session after the m ...

```markdown PART I [Item 3. Key Information](index=6&type=section&id=Item%203.%20Key%20Information) This section summarizes Xunlei's key financial data and outlines significant risks related to its business, operations, and ADSs [Selected Financial Data](index=6&type=section&id=A.%20Selected%20Financial%20Data) This section presents key financial data, highlighting fluctuating revenues, narrowing net losses, declining total assets, and consistent negative operating cash flow Selected Consolidated Statements of Operations Data (in thousands of US$) | Indicator | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | **Net revenues** | 230,604 | 180,665 | 186,371 | | **Gross profit** | 114,937 | 80,752 | 93,734 | | **Operating loss** | (44,329) | (56,422) | (18,793) | | **Net loss from continuing operations** | (40,793) | (53,415) | (14,140) | | **Net loss attributable to Xunlei Limited** | (39,278) | (53,169) | (13,840) | | **Net loss per ADS (Basic & Diluted)** | (0.59) | (0.79) | (0.21) | Selected Consolidated Balance Sheet Data (in thousands of US$) | Indicator | As of Dec 31, 2018 | As of Dec 31, 2019 | As of Dec 31, 2020 | | :--- | :--- | :--- | :--- | | **Cash and cash equivalents** | 122,930 | 162,465 | 137,248 | | **Total current assets** | 362,899 | 316,583 | 302,282 | | **Total assets** | 455,431 | 424,687 | 415,605 | | **Total current liabilities** | 108,035 | 111,286 | 103,276 | | **Total liabilities** | 111,251 | 129,144 | 125,232 | | **Total shareholders' equity** | 344,180 | 295,543 | 290,373 | Selected Consolidated Statements of Cash Flows Data (in thousands of US$) | Indicator | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | **Net cash used in operating activities** | (35,608) | (45,649) | (13,911) | | **Net cash (used in)/generated from investing activities** | (69,357) | 79,260 | (20,756) | | **Net cash generated from financing activities** | 929 | 12,177 | 2,679 | [Risk Factors](index=9&type=section&id=D.%20Risk%20Factors) This section outlines significant business, corporate structure, China-specific, and ADS-related risks, including model transition, regulatory uncertainty, and potential delisting under the HFCA Act - The company identifies its business model is undergoing significant innovation and transition, with new ventures in cloud computing and blockchain technology facing **substantial uncertainties and unproven profitability**[31](index=31&type=chunk)[32](index=32&type=chunk) - The subscriber base for its traditional PC-based download acceleration has **declined**, from **4.4 million** in 2014 to **3.8 million** as of December 31, 2020, partly due to intensified government scrutiny of internet content[33](index=33&type=chunk) - The company faces risks from the Holding Foreign Companies Accountable Act (HFCA Act), as its China-based auditor is not currently inspected by the PCAOB, which could lead to the **delisting of its ADSs** from U.S. exchanges if the situation persists for three consecutive years[246](index=246&type=chunk)[247](index=247&type=chunk) - The company believes it was a **Passive Foreign Investment Company (PFIC)** for the 2020 tax year and will likely be one for 2021, which could result in **adverse U.S. federal income tax consequences** for U.S. investors[287](index=287&type=chunk)[288](index=288&type=chunk) [Item 4. Information on the Company](index=61&type=section&id=Item%204.%20Information%20on%20the%20Company) This section details Xunlei's corporate history, business overview, organizational structure, and property, including its evolution, core products, and VIE structure [History and Development of the Company](index=61&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) This section outlines Xunlei's history from its 2003 founding, its 2014 NASDAQ IPO, and strategic shifts like the 2015 sale of its video streaming business - The company commenced operations in **January 2003** through Shenzhen Xunlei, which is now its Variable Interest Entity (VIE), with the current holding company, Xunlei Limited, established in the **Cayman Islands** in **February 2005**[290](index=290&type=chunk) - Xunlei completed its **initial public offering** of ADSs on the **NASDAQ Global Select Market** under the symbol "XNET" in **June 2014**[297](index=297&type=chunk) - In a strategic move to streamline its business and focus on mobile internet, the company **sold its entire stake** in the Xunlei Kankan online video business in **July 2015** for **RMB 130.0 million**[298](index=298&type=chunk) [Business Overview](index=63&type=section&id=B.%20Business%20Overview) Xunlei is a leading innovator in shared cloud computing and blockchain, offering cloud acceleration services to approximately **52 million** monthly unique visitors and monetizing through subscriptions, advertising, and value-added services - Xunlei's core product, Xunlei Accelerator, had approximately **52 million** monthly unique visitors in December 2020[300](index=300&type=chunk) - The company's mobile strategy includes a **partnership with Xiaomi** to pre-install its Mobile Xunlei acceleration plug-in on Xiaomi phones sold in China, enhancing user traffic generation[303](index=303&type=chunk) - Xunlei has developed a **shared cloud computing business**, using devices like OneThing Cloud to crowdsource idle bandwidth and storage from users, which it then sells as CDN services to enterprise clients like iQiyi and Xiaomi[304](index=304&type=chunk) - In 2018, the company launched **ThunderChain**, a high-performance open blockchain platform for enterprise users, followed by a **BaaS (Blockchain as a Service) platform** in 2020[305](index=305&type=chunk)[306](index=306&type=chunk) Revenue Breakdown by Service (FY 2020) | Service | Revenue (US$ million) | % of Total Revenue | | :--- | :--- | :--- | | Cloud acceleration subscription services | 84.3 | 45.1% | | Online advertising services | 13.2 | 7.1% | | Cloud computing and other IVAS | 87.8 | 47.0% | | Sales of cloud computing devices | 1.4 | 0.8% | [Organizational Structure](index=99&type=section&id=C.%20Organizational%20Structure) Xunlei operates in China via a Variable Interest Entity (VIE) structure, where its PRC subsidiary controls the operating entity through contractual agreements for effective control and economic benefits - The company utilizes a **VIE structure** where its PRC subsidiary, Giganology Shenzhen, has **contractual arrangements** with the VIE, Shenzhen Xunlei, and its shareholders[483](index=483&type=chunk) - Key agreements providing **effective control** include a **Business Operation Agreement**, **Equity Pledge Agreement**, and **irrevocable Powers of Attorney** from Shenzhen Xunlei's shareholders to Giganology Shenzhen[483](index=483&type=chunk)[484](index=484&type=chunk)[485](index=485&type=chunk) - **Economic benefits** are transferred to the company through **Exclusive Technology Support, Consulting, and License agreements**, which entitle Giganology Shenzhen to a significant portion of Shenzhen Xunlei's earnings[486](index=486&type=chunk)[487](index=487&type=chunk)[488](index=488&type=chunk) - An **Equity Interests Disposal Agreement** gives Giganology Shenzhen an **exclusive option to purchase all equity** in Shenzhen Xunlei for a **nominal price**, solidifying its **long-term control**[490](index=490&type=chunk) [Property, Plant and Equipment](index=102&type=section&id=D.%20Property%2C%20Plant%20and%20Equipment) The company leases principal offices in Shenzhen and Beijing, hosts servers in third-party data centers, and is constructing a new headquarters building expected by late 2021 or early 2022 - The company's main offices are leased in Shenzhen and Beijing, totaling over **17,000 square meters**[495](index=495&type=chunk) - Xunlei is constructing a **new headquarters building**, with expected completion by the **end of 2021 or early 2022**, after which it will relocate its principal executive offices[495](index=495&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=103&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section analyzes Xunlei's financial performance, highlighting increased revenues, improved profitability, narrowed net loss, and sustained negative operating cash flow, while affirming sufficient liquidity [Operating Results](index=103&type=section&id=A.%20Operating%20Results) In 2020, total revenues increased by **3.0%** to **$186.7 million**, driven by cloud computing and subscriptions, leading to improved gross profit margins and a narrowed operating loss due to reduced expenses Revenue by Segment (in thousands of US$) | Segment | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | Subscriptions | 81,877 | 81,532 | 84,299 | | Online advertising | 27,781 | 15,643 | 13,206 | | Product revenue | 54,604 | 8,269 | 1,412 | | Cloud computing and other IVAS | 67,870 | 75,823 | 87,766 | | **Total** | **232,132** | **181,267** | **186,683** | - Revenue from cloud computing and other internet value-added services **increased by 15.8%** in 2020, primarily due to increased demand for shared cloud computing services[543](index=543&type=chunk) - Product revenue **decreased by 82.9%** in 2020 due to a decline in sales of OneThing Cloud hardware[544](index=544&type=chunk) - Gross profit margin **improved from 44.5% to 50.2%** in 2020, driven by the revenue mix shift towards higher-margin cloud computing and subscription services[546](index=546&type=chunk) - Operating expenses **decreased by 18.0%** in 2020, mainly due to reduced office lease expenses, optimized labor costs, and fewer marketing activities[548](index=548&type=chunk) [Liquidity and Capital Resources](index=123&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) As of December 31, 2020, Xunlei held **$255.1 million** in cash and investments, experienced negative operating cash flow for three years, and faces PRC restrictions on asset transfers, yet believes current liquidity is sufficient - As of December 31, 2020, the company held **$255.1 million** in cash and cash equivalents and short-term investments[606](index=606&type=chunk) Summary of Cash Flows (in thousands of US$) | Activity | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (35,608) | (45,649) | (13,911) | | Net cash (used in)/generated from investing activities | (69,357) | 79,260 | (20,756) | | Net cash generated from financing activities | 929 | 12,177 | 2,679 | - Net cash used in operating activities was **$13.9 million** in 2020, an improvement from a **$45.6 million** outflow in 2019, primarily due to a smaller net loss[613](index=613&type=chunk) - The company's PRC subsidiaries, VIE, and VIE's subsidiaries had **restricted net assets of $168.5 million** as of December 31, 2020, which are **not readily transferable** to the parent company as cash dividends, loans, or advances due to PRC regulations[607](index=607&type=chunk) [Research and Development](index=126&type=section&id=C.%20Research%20and%20Development) Xunlei maintains a strong commitment to research and development, employing **336** engineers as of December 31, 2020, to drive innovation and market leadership - As of December 31, 2020, the company employed a team of **336 engineers** for research and development[621](index=621&type=chunk) [Trend Information](index=126&type=section&id=D.%20Trend%20Information) The company is unaware of any significant trends, uncertainties, or events from 2020 that would materially affect its future financial condition or operations beyond what is already disclosed - The company is not aware of any specific trends, uncertainties, or commitments from 2020 that would materially affect future results beyond what has been disclosed elsewhere in the report[622](index=622&type=chunk) [Off-Balance Sheet Arrangements](index=126&type=section&id=E.%20Off-Balance%20Sheet%20Arrangements) Xunlei has not entered into any off-balance sheet arrangements, financial guarantees, or derivative contracts that could materially impact its financial condition - The company has **no off-balance sheet arrangements**, financial guarantees, or variable interests in unconsolidated entities[623](index=623&type=chunk) [Contractual Obligations](index=126&type=section&id=F.%20Contractual%20Obligations) As of December 31, 2020, total contractual obligations were **$11.7 million**, primarily for bandwidth leases and capital expenditures, with most due within one year Contractual Obligations as of December 31, 2020 (in thousands of US$) | Obligation Type | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Bandwidth lease obligations | 3,794 | 3,388 | 406 | — | — | | Capital obligations | 7,953 | 7,040 | 913 | — | — | | **Total** | **11,747** | **10,428** | **1,319** | **—** | **—** | [Item 6. Directors, Senior Management and Employees](index=127&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section details the company's directors, senior management, compensation, board practices, and employee breakdown, including the adoption of a new share incentive plan in 2020 [Directors and Senior Management](index=127&type=section&id=A.%20Directors%20and%20Senior%20Management) The board comprises eight directors, including Chairman and CEO Jinbo Li and co-founders Sean Shenglong Zou and Hao Cheng, supported by an experienced management team - Jinbo Li has served as **Chairman and Chief Executive Officer since April 2020**, was part of Xunlei's founding team, and is also the founder, chairman, and CEO of Itui International Inc[628](index=628&type=chunk) - **Co-founders** Sean Shenglong Zou and Hao Cheng continue to serve as directors on the board[629](index=629&type=chunk)[630](index=630&type=chunk) [Compensation](index=129&type=section&id=B.%20Compensation) In FY2020, executive officers received **$1.9 million** in cash compensation, and the company adopted a new 2020 Share Incentive Plan, authorizing up to **31 million** common shares for awards - In FY2020, aggregate cash compensation for executive officers was approximately **US$1.9 million**, and for non-executive directors was approximately **US$0.1 million**[640](index=640&type=chunk) - In June 2020, the company adopted a **new 2020 Share Incentive Plan**, authorizing up to **31,000,000 common shares** for future awards[641](index=641&type=chunk)[642](index=642&type=chunk) - As of March 31, 2021, there were **10,862,500 restricted share units** granted and outstanding under the 2020 Plan[643](index=643&type=chunk) [Board Practices](index=131&type=section&id=C.%20Board%20Practices) The eight-member board has established Audit, Compensation, and Nominating and Corporate Governance committees, with the Audit Committee comprising two independent financial experts - The board has **three primary committees**: Audit, Compensation, and Nominating and Corporate Governance[655](index=655&type=chunk) - The audit committee consists of **two independent directors**, Jenny Wenjie Wu (Chair) and Ya Li, both of whom are determined to be **audit committee financial experts**[656](index=656&type=chunk)[750](index=750&type=chunk) [Employees](index=133&type=section&id=D.%20Employees) As of December 31, 2020, Xunlei had **595** employees, with the majority (**444**) dedicated to research and development, reflecting its focus on technology Employee Breakdown by Function (as of Dec 31, 2020) | Function | Number of Employees | | :--- | :--- | | Research and Development | 444 | | General Administration | 92 | | Sales and Marketing | 59 | | **Total** | **595** | [Item 7. Major Shareholders and Related Party Transactions](index=134&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section details Xunlei's ownership structure, with Itui International Inc. as the largest shareholder, and outlines significant related party transactions, including VIE arrangements and agreements with Xiaomi and Itui [Major Shareholders](index=134&type=section&id=A.%20Major%20Shareholders) As of March 31, 2021, directors and executive officers collectively owned **47.7%** of shares, with Itui International Inc. as the largest shareholder at **39.7%** Principal Shareholders (as of March 31, 2021) | Shareholder | Beneficial Ownership % | | :--- | :--- | | Itui International Inc. (controlled by Jinbo Li) | 39.7% | | Sean Shenglong Zou (Co-founder) | 6.9% | | Morgan Stanley entities | 5.3% | | All directors and executive officers as a group | 47.7% | [Related Party Transactions](index=135&type=section&id=B.%20Related%20Party%20Transactions) The company engages in significant related party transactions, including VIE contractual arrangements, mobile pre-installing services with Xiaomi, and advertising outsourcing and cloud computing services with Itui International Inc - The primary related party transactions are the contractual arrangements that establish and maintain the company's **VIE structure**[675](index=675&type=chunk) - The company has a **mobile pre-installing services agreement with a Xiaomi group company**, recognizing **$2.5 million** in revenue from this arrangement in 2020[688](index=688&type=chunk) - In May 2020, Xunlei entered into a **user traffic monetization agreement with Itui**, its largest shareholder, **outsourcing its advertising operations**, and recognized a net revenue of **$7.3 million** from this agreement in 2020[690](index=690&type=chunk) - The company also provides **cloud computing services** to both the Xiaomi group and Itui, generating revenues of **$2.2 million** and **$1.1 million** respectively in 2020[689](index=689&type=chunk)[691](index=691&type=chunk) [Item 8. Financial Information](index=138&type=section&id=Item%208.%20Financial%20Information) This section covers legal proceedings, including the dismissal of a U.S. class action lawsuit, and outlines the company's policy of not paying dividends to retain earnings for business expansion - A putative shareholder class action lawsuit filed in the U.S. in 2018, alleging that the company's OneCoin (LinkToken) was an illegal initial coin offering, was **dismissed with prejudice in September 2019**[696](index=696&type=chunk) - The company has a **policy of not paying dividends** and intends to **retain future earnings** to fund business development and growth[698](index=698&type=chunk) [Item 11. Quantitative and Qualitative Disclosures about Market Risk](index=147&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are foreign exchange fluctuations between RMB and USD, impacting ADS value, and interest rate risk on cash deposits, with no current use of derivative hedging instruments - The company faces **significant foreign exchange risk** as its business is effectively denominated in RMB, while its ADSs are traded in U.S. dollars, and fluctuations in the **RMB/USD exchange rate** can impact the value of investments in its ADSs[732](index=732&type=chunk) - As of December 31, 2020, the company held **RMB 632.9 million** in RMB-denominated cash and short-term investments and **US$157.8 million** in USD-denominated cash and short-term investments[735](index=735&type=chunk) - **Interest rate risk** is primarily related to the interest income from its cash and cash equivalents held in interest-bearing bank deposits[736](index=736&type=chunk) PART II [Item 15. Controls and Procedures](index=150&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020, a conclusion attested to by the independent auditor - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2020[742](index=742&type=chunk) - Based on the COSO framework, management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2020[745](index=745&type=chunk) - The independent registered public accounting firm, PricewaterhouseCoopers Zhong Tian LLP, audited and **confirmed the effectiveness** of the company's internal control over financial reporting[747](index=747&type=chunk) [Item 16. Other Information](index=151&type=section&id=Item%2016.%20Other%20Information) This section covers governance, including audit committee financial experts, a code of ethics waiver for the CEO, a **$4.5 million** share repurchase in 2020, and the company's use of home-country practices for NASDAQ compliance - The board of directors has determined that independent directors Ms. Jenny Wenjie Wu and Mr. Ya Li are both **audit committee financial experts**[750](index=750&type=chunk) - The board **granted a waiver from its code of ethics** to CEO Jinbo Li, allowing him to simultaneously serve as CEO of both Xunlei and its principal shareholder, Itui International Inc[752](index=752&type=chunk) - In 2020, the company **repurchased 1,191,392 ADSs** for a total cost of approximately **$4.5 million**, as part of a **$20 million share-buyback program**[758](index=758&type=chunk)[759](index=759&type=chunk) - As a **foreign private issuer**, the company follows certain **Cayman Islands home-country practices** in lieu of NASDAQ rules, including not having a majority-independent board of directors and having an audit committee with two members instead of the required three[761](index=761&type=chunk)[762](index=762&type=chunk) PART III [Item 18. Financial Statements](index=154&type=section&id=Item%2018.%20Financial%20Statements) This section presents Xunlei's audited consolidated financial statements for 2018-2020, with an unqualified opinion from PricewaterhouseCoopers Zhong Tian LLP, highlighting goodwill impairment as a critical audit matter - The independent auditor, PricewaterhouseCoopers Zhong Tian LLP, issued an **unqualified opinion** on the consolidated financial statements and the **effectiveness of internal control over financial reporting** as of December 31, 2020[776](index=776&type=chunk)[777](index=777&type=chunk) - The auditor identified the **goodwill impairment assessment as a Critical Audit Matter** due to the **significant management judgment** involved in estimating the fair value of the reporting unit, particularly concerning assumptions about revenue forecasts, operating margins, and discount rates[785](index=785&type=chunk)[786](index=786&type=chunk) ```

Financial Data and Key Metrics Changes - Total revenues for Q4 2020 were $50.3 million, representing a 15% sequential increase, driven by revenue increases across business segments [6][15] - Gross margin expanded to 53.3% from 51.9% in the previous quarter, reaching a record high for the past three years [7][17] - Net profit for Q4 2020 was $4.6 million, compared to a net loss of $1.5 million in the previous quarter [18][24] - Total revenues for 2020 were $186.7 million, a 3% year-over-year increase [19][24] Business Line Data and Key Metrics Changes - Revenues from cloud computing and other IVAS services reached $25.9 million, a 22% sequential increase, with cloud computing revenue at $18.9 million, increasing 20.2% sequentially [6][15] - Subscription revenues were $20.7 million, a 5.5% increase from the previous quarter, with approximately 3.83 million subscribers [15][19] - Online advertising revenues were $3.8 million, representing a 27.6% sequential increase [16][19] Market Data and Key Metrics Changes - Bandwidth costs in Q4 2020 were $15.2 million, representing 30.2% of total revenue, down from 35.1% in the previous quarter [16][19] - Revenues from cloud computing services grew by 51% in 2020 due to new client sign-ups and increased demand from existing clients [10] Company Strategy and Development Direction - The company aims to achieve business breakthroughs through product innovation and is focusing on developing new social and entertainment products [27] - Plans to expand into selected overseas markets and enhance cloud computing capabilities through technological innovation [10][27] - The company is committed to becoming a leading player in selective vertical sales and achieving growth prospects [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2021, anticipating significant events such as the completion of the headquarters building, which will improve financial metrics [12][24] - The company expects to continue improving operating efficiency and exploring growth opportunities, although no annual guidance was provided [35] Other Important Information - The company has made strides in blockchain technology, collaborating with universities on research projects to address data security and user privacy [11][39] - The headquarters building is approximately 65,000 square meters with a total investment budget of about CNY600 million [31] Q&A Session Summary Question: Insights on business development for 2021 - Management aims for business breakthroughs through product innovation and is analyzing user behavior to set product strategy, including new social and entertainment products [27] Question: Short form video business - Management acknowledged the potential of short form video as a promising field and plans to disclose more information in the future [28] Question: Headquarters building size and investment - The headquarters building is approximately 65,000 square meters with a total investment of about CNY600 million [31] Question: Profitability expectations for fiscal year 2020/2021 - Management has higher expectations for 2021 and anticipates it will be a year of progress and accomplishments, but no annual guidance was provided [35] Question: Continued investment in blockchain - The company will continue to invest in blockchain technology and research, with ongoing projects aimed at improving data security and user privacy [39]

Xunlei Limited (NASDAQ:XNET) Q2 2020 Results Earnings Conference Call August 25, 2020 8:00 AM ET Company Participants Megnen Gau - Investor Relations Manager Jinbo Li - Chief Executive Officer Eric Zhou - Chief Financial Officer Conference Call Participants Janet Zhang - China Evergreen Asset Management Operator Good day, ladies and gentlemen, and thank you for your patience. You’ve joined Xunlei’s Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. We wil ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Title of each class Name of each exchange on which registered Ticker symbol American depositary shares, each representing five common shares The NASDAQ Stock Market LLC (The NASDAQ Global Select Market) XNET FORM 20-F (Mark One) ¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ende ...

Xunlei Limited (NASDAQ:XNET) Q4 2019 Earnings Conference Call March 12, 2020 8:00 AM ET Company Participants Charlene Lu - Investor Relations Manager Lei Chen - Chief Executive Officer Eric Zhou - Chief Financial Officer Conference Call Participants Trista Yang - Noah Hong Kong Operator Good day, ladies and gentlemen and thank you for your patience. You've joined Xunlei's Fourth Quarter and Full Year 2019 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. We will hav ...

Financial Data and Key Metrics Changes - Total revenue for Q3 2019 was approximately $43.8 million, down 8.3% from the previous quarter, primarily due to lower subscription and live streaming revenues [5][23] - Subscription revenues were $19.2 million, a decrease of approximately 10% from the previous quarter, with the subscriber base declining from 4.3 million to 3.8 million [21][23] - Average revenue per subscriber increased to RMB35.1 from RMB33.9 in the previous quarter [21] - Gross profit was $19.3 million, down 13.6% from the second quarter, with a gross margin of 44.1% compared to 46.7% in the previous quarter [24] - Net loss for Q3 was approximately $24.6 million, compared to a net loss of $2 million in the previous quarter [26] Business Line Data and Key Metrics Changes - Revenues from cloud computing and other IVAS combined were $20.9 million, representing a decrease of 7.4% sequentially, mainly due to reduced promotional activities affecting live streaming revenues [23] - Revenues from online advertising were $3.7 million, down 4.4% from the previous quarter, primarily due to a decline in mobile advertising revenues [21][23] - Live streaming revenues declined due to seasonal conditions and fewer promotional activities [20] Market Data and Key Metrics Changes - Demand for cloud computing services remained strong, driven by enterprise clients such as Baidu, Youku, iQiyi, and Xiaomi [12] - The company anticipates significant growth in the IoT space and related industries, which will drive demand for edge computing [13] Company Strategy and Development Direction - The company is focusing on building its presence in the cloud computing market, which is seen as a high growth opportunity [6] - Xunlei is committed to advancing its mission of empowering individuals through technological innovation and the development of a shared cloud computing and blockchain-based ecosystem [7] - The company aims to leverage shared cloud computing and AI technologies to provide efficient and cost-effective solutions for enterprise users [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential of shared cloud computing and blockchain technology, highlighting the importance of these areas for long-term growth [11][22] - The company is aware of the challenges in the blockchain space, including the need for high performance, data protection, and regulatory compliance [16][31] - Management expects total revenues for Q4 2019 to be between $45 million and $50 million, indicating a quarter-over-quarter increase of about 8.4% [26] Other Important Information - The company successfully dismissed a securities class action complaint against it, which was filed in January 2018 [10] - The company has obtained blockchain registration numbers from the Cyberspace Administration of China for its key blockchain projects [9][18] Q&A Session Summary Question: Has the company generated any material income from blockchain-related products? - Management indicated that while blockchain technology provides potential business benefits, income from blockchain has not yet become a large portion of total revenue [30][31] Question: When does the company expect to generate material revenues from the blockchain business, and what are the major obstacles? - Management highlighted the need for government policy support and industry motivation to upgrade existing business structures as key obstacles to widespread blockchain adoption [31][32] Question: Can the company disclose the number of enterprise customers using ThunderChain? - Management mentioned several enterprise customers leveraging ThunderChain technology but did not disclose specific numbers [35]

Xunlei Limited (NASDAQ:XNET) Q2 2019 Results Conference Call August 14, 2019 8:00 AM ET Company Participants Charlene Lu - Investor Relations Manager Lei Chen - Chief Executive Officer Eric Zhou - Chief Financial Officer Conference Call Participants Operator Good morning and thank you for standing by for Xunlei's Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. We have a Q&A session after a few management's remarks. I will now turn the turn the call ove ...

Xunlei Limited (NASDAQ:XNET) Q1 2019 Results Earnings Conference Call May 13, 2019 8:00 AM ET Company Participants Charlene Lu - Manager, Investor Relations Lei Chen - Chief Executive Officer Eric Zhou - Chief Financial Officer Conference Call Participants Operator Good morning and thank you for standing by for Xunlei's First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will have a question and answer session after a few management's remarks. I will now ...

User Growth and Engagement - Xunlei reported a significant increase in daily active users, reaching 10 million, representing a 25% year-over-year growth[10] - Xunlei's premium acceleration service subscribers grew to 2 million, up 30% from the prior year[10] - The platform had approximately 128.4 million monthly unique visitors in December 2018, highlighting significant user engagement[38] Financial Performance - The company achieved a revenue of $150 million for the fiscal year, marking a 15% increase compared to the previous year[18] - Xunlei's operating margin improved to 25%, an increase of 5 percentage points from the previous year[18] - Xunlei's cash flow from operations was reported at $30 million, reflecting a 20% increase year-over-year[18] - Net revenues for 2018 were $230,604 thousand, an increase of 15% compared to 2017's $200,583 thousand[19] - Gross profit for 2018 reached $114,937 thousand, representing a gross margin of approximately 50%[19] - Operating loss for 2018 was $44,329 thousand, a decrease from the operating loss of $54,201 thousand in 2017[19] - The net loss attributable to Xunlei Limited in 2018 was $(39,278) thousand, compared to $(37,822) thousand in 2017[19] - Basic net loss per share attributable to Xunlei Limited from continuing operations was $(0.12) in 2018, compared to $(0.13) in 2017[19] Investment and Development Plans - The company plans to invest $20 million in new product development and technology enhancements in the upcoming fiscal year[13] - The company plans to invest a total of RMB600.0 million ($87.4 million) in constructing a new research and development center and headquarters, with a loan facility agreement in place for up to RMB400.0 million ($58.2 million)[114] - The company has invested significantly in research and development to maintain technology leadership, with expectations of increased R&D expenses in the near term[107] Market Expansion and Strategy - Xunlei aims to expand its market presence in Southeast Asia, targeting a 10% market share by 2025[13] - The company has initiated a strategic partnership with a leading gaming company to enhance its digital media content offerings[13] - The company established a joint venture in Thailand in July 2018 to expand its business into overseas markets, facing risks such as increased competition and compliance with foreign laws[51] Regulatory and Legal Challenges - Regulatory uncertainties regarding LinkToken operations may adversely affect business and results of operations[29] - The company faces ongoing copyright infringement claims, which could divert management's attention and financial resources[41] - The company was required to compensate MPAA for a total of RMB1.4 million (US$0.2 million) due to copyright infringement on 28 video products[43] - The company has faced multiple copyright infringement lawsuits in China, with ongoing claims that may divert management's attention and financial resources[44] - The legal environment in China may limit the company's ability to enforce contractual arrangements, affecting operational control[173] Operational Risks - System failures and cyber-attacks pose risks to user satisfaction and could materially affect the company's financial condition[81] - The company may face significant administrative burdens and litigation risks related to intellectual property infringement claims[61] - The company relies on third-party payment systems for revenue collection, and any failures or security breaches in these systems could adversely affect its business results[124] - The company does not maintain insurance for network system losses, which could lead to material adverse impacts on revenues in case of system failures[83] Competition and Market Dynamics - The live video industry is highly competitive, and the company may struggle to compete effectively and achieve continued growth[71] - The company faces significant competition in the cloud acceleration market, particularly from major players like Tencent and Baidu, which could impact its market position and subscriber retention[119] - The traditional PC-based download acceleration subscriptions have experienced declines due to changing user behaviors and increased government scrutiny[28] Financial Health and Liquidity - The company had net operating cash outflows of $14.2 million in 2017 and $35.6 million in 2018, indicating potential liquidity pressure in the future if sufficient cash from operating activities cannot be generated[112] - As of December 31, 2018, the company had cash, cash equivalents, and short-term investments totaling $319.5 million, but may face liquidity challenges if operating cash flows do not improve[114] - The company may face limitations on making loans to its PRC subsidiaries, which could adversely affect its liquidity and ability to fund operations[183] Intellectual Property and Compliance - The company relies on a combination of patent, trademark, copyright, and trade secret protections, but the effectiveness of these protections in China may be limited compared to other jurisdictions[202] - The company has implemented internal procedures for copyright protection but may still face challenges in identifying infringing content due to the volume of digital media available[60] - Protecting intellectual property rights is costly and time-consuming, and any significant impairment could harm competitiveness[66] User Retention and Advertising - The subscriber base decreased from 4.4 million as of December 31, 2014, to 3.8 million as of December 31, 2018, indicating a decline in user retention[28] - Online advertising revenue decreased from US$38.4 million in 2014 to US$4.8 million in 2015, but increased to US$27.8 million in 2018 due to optimized pricing strategies[86] - The number of advertisers using online advertising services decreased from 252 in 2014 to 89 in 2018, indicating a significant loss of advertising partners[86] Future Outlook and Challenges - The company expects to maintain a revenue growth rate of 12-15% for the next fiscal year[13] - Future financing for business expansion is uncertain and dependent on market conditions and the company's financial health[104] - The enactment of the PRC Foreign Investment Law may introduce uncertainties regarding the company's corporate structure and governance[189]