Financial Data and Key Metrics Changes - Total revenue for Q2 2021 reached $55.2 million, representing a 3.6% growth sequentially [6][13] - Net income was $5.8 million, down from $6.8 million in the previous quarter, while non-GAAP net income was $1.3 million compared to $7.4 million previously [17] - Gross profit for Q2 was $29 million, with a gross margin of 52.5%, down from 53.7% in the previous quarter [15] Business Line Data and Key Metrics Changes - Subscription business accounted for approximately 41.2% of total revenues, achieving 3% growth sequentially and 9.8% year-on-year, despite a slight decrease in the number of subscribers [7][13] - Cloud computing and other internet value-added services (IVAS) grew 5.8% sequentially, accounting for approximately 52.4% of total revenues, driven by live streaming products [8][13] - Online advertising revenue declined 8.7% sequentially, accounting for approximately 6.4% of total revenues, primarily due to reduced advertising placements and regulatory scrutiny [10][14] Market Data and Key Metrics Changes - The number of subscribers decreased from 4.05 million to 3.96 million, but the average revenue per subscriber increased from RMB 35.5 to RMB 36.9 [13] - Bandwidth costs included in cost of revenues were $18.5 million, representing 33.6% of total revenues, compared to $17.7 million or 33.2% previously [14][15] Company Strategy and Development Direction - The company is focusing on advancing decentralized networking technology and exploring blockchain-based key technologies for big data asset management [11] - Management emphasized the importance of long-term investments to improve user experience and social value in product decisions [11] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about future demand for cloud computing products, particularly due to the popularity of video streaming [9] - The company anticipates continued challenges in the advertising business due to regulatory scrutiny, leading to a short-term decline [10] Other Important Information - Research and development expenses increased to $15.2 million, representing 27.5% of total revenues, due to merit salary adjustments and increased headcount [15][16] - Sales and marketing expenses rose to $6.7 million, representing 12.1% of total revenues, attributed to more promotional activities [16] Revenue Guidance - For Q3 2021, the company expects total revenues to be between $54 million and $58 million, indicating a potential increase of approximately 1.4% at the midpoint [18] Q&A Session Summary - No questions were raised during the Q&A session, and the call concluded without further inquiries [19]

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) Q3 2020 Results Earnings Conference Call November 12, 2020 8:00 AM ET Company Participants Megnen Gau - Investor Relations Manager Eric Zhou - Chief Financial Officer Conference Call Participants Trista Yang - Venture Smart Operator Good day, ladies and gentlemen, thank you for your patience. You’ve joined Xunlei’s Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will have a Q&A session after a few management remarks. I wo ...

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 ...

Xunlei Limited (NASDAQ:XNET) Q1 2020 Earnings Conference Call May 14, 2020 8:00 AM ET Company Participants Charlene Lu - Manager, IR Jinbo Li - CEO Eric Zhou - CFO Conference Call Participants Trista Yang - Noah Group Operator Good day, ladies and gentlemen. And thank you for your patience. You've joined Xunlei's First Quarter of 2020 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. We will have a Q&A session after few management remarks. I would now like to turn t ...

Part I [Key Information](index=8&type=section&id=Item%203.%20Key%20Information) This section presents selected historical financial data for the five years ended December 31, 2019, highlighting revenue decline and widening net loss, alongside significant business and regulatory risks [Selected Financial Data](index=8&type=section&id=A.%20Selected%20Financial%20Data) Selected Consolidated Statements of Comprehensive Income/(Loss) Data (in thousands of US$) | (in thousands of US$) | 2015 | 2016 | 2017 | 2018 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues, net** | 104,837 | 140,985 | 201,911 | 232,132 | 181,267 | | **Gross profit** | 45,271 | 60,278 | 82,707 | 114,937 | 80,752 | | **Operating loss** | (31,521) | (41,502) | (54,201) | (44,329) | (56,422) | | **Loss from continuing operations** | (18,567) | (30,806) | (44,216) | (40,793) | (53,415) | | **Net loss** | (14,466) | (24,183) | (37,809) | (39,490) | (53,415) | | **Net loss attributable to Xunlei Limited's common shareholders** | (13,167) | (24,111) | (37,822) | (39,278) | (53,169) | | **Net loss per ADS (Basic & Diluted)** | (0.20) | (0.36) | (0.57) | (0.59) | (0.79) | Selected Consolidated Balance Sheets Data (in thousands of US$) | (in thousands of US$) | 2015 | 2016 | 2017 | 2018 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total assets** | 538,361 | 509,795 | 533,437 | 455,431 | 424,687 | | **Total liabilities** | 93,680 | 103,545 | 150,600 | 111,251 | 129,144 | | **Total shareholders' equity** | 446,749 | 408,238 | 384,997 | 345,296 | 296,878 | Selected Consolidated Statements of Cash Flows Data (in thousands of US$) | (in thousands of US$) | 2015 | 2016 | 2017 | 2018 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- |\n| **Net cash from/(used in) operating activities** | 13,764 | 16,970 | (14,216) | (35,608) | (45,649) | | **Net cash (used in)/generated from investing activities** | (54,982) | (158,335) | 35,208 | (69,357) | 79,260 | | **Net cash generated from/(used in) financing activities** | 5,030 | (11,041) | 2,561 | 929 | 12,177 | [Risk Factors](index=10&type=section&id=D.%20Risk%20Factors) - The company's business model is undergoing significant innovation and transition towards mobile internet, cloud computing, and blockchain technology. Historical growth may not be indicative of future performance, and new business initiatives face substantial uncertainties and risks[32](index=32&type=chunk)[33](index=33&type=chunk) - The emerging blockchain industry in China is subject to developing and evolving laws. Failure to comply with current or future regulations, such as the Blockchain Provisions, could materially and adversely affect the business[34](index=34&type=chunk)[35](index=35&type=chunk) - The company faces risks of copyright infringement claims. As of the report date, it was involved in **20 copyright lawsuits** in China with total claimed damages of approximately **RMB54.2 million (US$7.8 million)**[49](index=49&type=chunk)[51](index=51&type=chunk) - The company's ability to retain its large user base (**88.3 million monthly unique visitors** in Dec 2019) and convert them to subscribers is a key risk. The subscriber base decreased from **4.4 million** in 2014 to **4.0 million** as of Dec 31, 2019, partly due to intensified government scrutiny of internet content[34](index=34&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - The company's corporate structure relies on contractual arrangements with its Variable Interest Entity (VIE), Shenzhen Xunlei, due to PRC restrictions on foreign investment in internet businesses. This structure carries risks related to enforceability and potential conflicts of interest[172](index=172&type=chunk)[174](index=174&type=chunk) - The company believes it was a Passive Foreign Investment Company (PFIC) for the 2019 tax year and will likely be a PFIC for 2020, which could result in significant adverse U.S. federal income tax consequences for U.S. investors[303](index=303&type=chunk)[304](index=304&type=chunk) [Information on the Company](index=62&type=section&id=Item%204.%20Information%20on%20the%20Company) Xunlei, a Chinese innovator in shared cloud computing and blockchain, operates an internet platform through a VIE structure, focusing on mobile and ThunderChain development [History and Development of the Company](index=62&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) - Commenced operations in January 2003 through Shenzhen Xunlei. Established Xunlei Limited as a Cayman Islands holding company in February 2005[306](index=306&type=chunk)[307](index=307&type=chunk) - Completed its Initial Public Offering (IPO) on the NASDAQ Global Select Market under the symbol "XNET" in June 2014[316](index=316&type=chunk) - As part of a strategy to streamline its business and focus on mobile internet, the company completed the sale of its entire stake in Xunlei Kankan in July 2015 for **RMB 130.0 million**[317](index=317&type=chunk) - Expanded overseas by establishing a subsidiary in Thailand in July 2018 to engage in cloud computing and blockchain business[315](index=315&type=chunk) [Business Overview](index=63&type=section&id=B.%20Business%20Overview) - Xunlei is a leading innovator in shared cloud computing and blockchain technology in China, providing services like cloud acceleration, blockchain platforms (ThunderChain), live streaming, and online games[320](index=320&type=chunk) - The core product, Xunlei Accelerator, had approximately **88.3 million monthly unique visitors** in December 2019. The subscriber base for premium services was **4.0 million** as of December 31, 2019[321](index=321&type=chunk)[340](index=340&type=chunk) - The company is transitioning to mobile, with its Mobile Xunlei app having an average of **6.6 million daily active users** in 2019. A key partnership with Xiaomi involves pre-installing the mobile acceleration plug-in on Xiaomi phones[324](index=324&type=chunk)[325](index=325&type=chunk) - A key strategy involves crowdsourcing idle bandwidth and storage from users via hardware like OneThing Cloud to power its Content Delivery Network (CDN) services and reduce bandwidth costs[326](index=326&type=chunk) - Launched ThunderChain in 2018, a high-performance blockchain open platform enabling enterprise users to develop and manage blockchain applications, capable of processing over **a million transactions per second**[328](index=328&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk) Revenue Breakdown (2017-2019) | Revenue Source | 2017 (US$M) | 2018 (US$M) | 2019 (US$M) | | :--- | :--- | :--- | :--- | | Subscriptions | 85.0 | 81.9 | 81.5 | | Online advertising | 22.5 | 27.8 | 15.6 | | Product revenue | 32.9 | 54.6 | 8.3 | | Cloud computing & other IVAS | 61.6 | 67.9 | 75.8 | | **Total** | **201.9** | **232.1** | **181.3** | [Organizational Structure](index=97&type=section&id=C.%20Organizational%20Structure) - Xunlei Limited is a Cayman Islands holding company that operates its PRC business primarily through a Variable Interest Entity (VIE) structure to comply with Chinese regulations restricting foreign investment in internet and telecommunications services[498](index=498&type=chunk)[762](index=762&type=chunk) - The VIE is Shenzhen Xunlei Networking Technologies Co., Ltd. The structure is maintained through a series of contractual arrangements between the wholly-owned subsidiary Giganology (Shenzhen) Ltd. and Shenzhen Xunlei and its shareholders[499](index=499&type=chunk)[500](index=500&type=chunk) - Key contractual agreements that provide effective control and transfer economic benefits include: Business Operation Agreement, Equity Pledge Agreement, Powers of Attorney, Exclusive Technology Support and Services Agreements, and Equity Interests Disposal Agreement[500](index=500&type=chunk)[501](index=501&type=chunk)[502](index=502&type=chunk)[503](index=503&type=chunk)[508](index=508&type=chunk) - As of the report date, Mr. Sean Shenglong Zou, a co-founder and director, owned **76.0%** of Shenzhen Xunlei's equity interests[499](index=499&type=chunk) [Property, Plant and Equipment](index=101&type=section&id=D.%20Property%20Plant%20and%20Equipment) - The company's principal executive offices are leased in Shenzhen, comprising approximately **7,575 square meters**. It also leases office space in Beijing, Xian, and Hong Kong[514](index=514&type=chunk) - Servers are primarily hosted at internet data centers owned by major domestic providers, with hosting agreements typically having one-year terms[514](index=514&type=chunk) [Operating and Financial Review and Prospects](index=101&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) Fiscal year 2019 saw total revenues decrease by **21.9%** to **$181.3 million**, leading to a wider operating loss and persistent negative operating cash flow [Operating Results](index=102&type=section&id=A.%20Operating%20Results) Revenue by Segment (2017-2019, in thousands of US$) | Revenue Segment | 2017 (in thousands of US$) | 2018 (in thousands of US$) | 2019 (in thousands of US$) | | :--- | :--- | :--- | :--- | | Subscriptions | 84,956 | 81,877 | 81,532 | | Online advertising | 22,484 | 27,781 | 15,643 | | Product revenue | 32,894 | 54,604 | 8,269 | | Cloud computing and other IVAS | 61,577 | 67,870 | 75,823 | | **Total** | **201,911** | **232,132** | **181,267** | - **2019 vs. 2018:** - **Total Revenues** decreased by **21.9%** from **$232.1M** to **$181.3M**, mainly due to a sharp decline in OneThing cloud hardware sales and reduced demand for online advertising services[564](index=564&type=chunk)[573](index=573&type=chunk)[574](index=574&type=chunk)[583](index=583&type=chunk) - **Gross Profit** decreased by **29.7%** from **$114.9M** to **$80.8M**. Gross margin fell from **49.5%** to **44.5%**[564](index=564&type=chunk)[573](index=573&type=chunk)[574](index=574&type=chunk)[583](index=583&type=chunk) - **Operating Expenses** decreased by **13.9%** to **$137.2M**, driven by lower R&D and sales & marketing costs[564](index=564&type=chunk)[573](index=573&type=chunk)[574](index=574&type=chunk)[583](index=583&type=chunk) - **Operating Loss** widened from **$44.3M** to **$56.4M**[564](index=564&type=chunk)[573](index=573&type=chunk)[574](index=574&type=chunk)[583](index=583&type=chunk) - **Net Loss Attributable to Xunlei Limited** increased from **$39.3M** to **$53.2M**[564](index=564&type=chunk)[573](index=573&type=chunk)[574](index=574&type=chunk)[583](index=583&type=chunk) - **2018 vs. 2017:** - **Total Revenues** increased by **15.0%** from **$201.9M** to **$232.1M**, driven by product sales, live streaming, and mobile advertising[584](index=584&type=chunk)[593](index=593&type=chunk)[594](index=594&type=chunk)[601](index=601&type=chunk) - **Gross Profit** increased by **39.0%** from **$82.7M** to **$114.9M**. Gross margin improved from **41.0%** to **49.5%** due to high-margin product sales and lower bandwidth costs[584](index=584&type=chunk)[593](index=593&type=chunk)[594](index=594&type=chunk)[601](index=601&type=chunk) - **Operating Expenses** increased by **16.3%** to **$159.3M**, due to investment in cloud computing and blockchain, and higher staff costs[584](index=584&type=chunk)[593](index=593&type=chunk)[594](index=594&type=chunk)[601](index=601&type=chunk) - **Operating Loss** narrowed from **$54.2M** to **$44.3M**[584](index=584&type=chunk)[593](index=593&type=chunk)[594](index=594&type=chunk)[601](index=601&type=chunk) - **Net Loss Attributable to Xunlei Limited** increased slightly from **$37.8M** to **$39.3M**[584](index=584&type=chunk)[593](index=593&type=chunk)[594](index=594&type=chunk)[601](index=601&type=chunk) [Liquidity and Capital Resources](index=122&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) - As of December 31, 2019, the company had **$265.3 million** in cash, cash equivalents, and short-term investments[663](index=663&type=chunk) Summary of Cash Flows (in thousands of US$) | (in thousands of US$) | 2017 | 2018 | 2019 | | :--- | :--- | :--- | :--- | | **Net cash used in operating activities** | (14,216) | (35,608) | (45,649) | | **Net cash from/(used in) investing activities** | 35,208 | (69,357) | 79,260 | | **Net cash from financing activities** | 2,561 | 929 | 12,177 | - The company has experienced persistent negative cash flow from operating activities, worsening from **-$14.2 million** in 2017 to **-$45.6 million** in 2019[669](index=669&type=chunk)[670](index=670&type=chunk) - The ability to transfer funds from PRC subsidiaries is restricted. As of December 31, 2019, the amount of restricted net assets (registered capital and statutory reserves) was **US$245.9 million**[665](index=665&type=chunk) [Contractual Obligations](index=125&type=section&id=F.%20Contractual%20Obligations) Contractual Obligations as of December 31, 2019 (in thousands of US$) | Obligation Type | Total (in thousands of US$) | Less than 1 year (in thousands of US$) | 1-3 years (in thousands of US$) | 3-5 years (in thousands of US$) | More than 5 years (in thousands of US$) | | :--- | :--- | :--- | :--- | :--- | :--- | | Bandwidth lease obligations | 12,033 | 7,918 | 4,115 | — | — | | Capital obligations | 22,510 | 21,453 | 1,057 | — | — | | **Total** | **34,543** | **29,371** | **5,172** | **—** | **—** | [Directors, Senior Management and Employees](index=126&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section details the company's leadership, compensation, and board practices, including executive compensation and share incentive plans - As of the report date, Jinbo Li was Chairman and CEO, Sean Shenglong Zou and Hao Cheng were Co-Founders and Directors, and Naijiang (Eric) Zhou was CFO[687](index=687&type=chunk) - For fiscal year 2019, aggregate cash compensation paid to executive officers was approximately **US$0.6 million**, and **US$0.1 million** was paid to two non-executive directors[698](index=698&type=chunk) - The company has three active share incentive plans: the 2010 Plan, 2013 Plan, and 2014 Plan, used to grant options and restricted shares to employees, directors, and consultants[699](index=699&type=chunk) - As of December 31, 2019, the company had **1,070 employees**, with the majority (**839**) in research and development[747](index=747&type=chunk) [Major Shareholders and Related Party Transactions](index=135&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section outlines major shareholders, with Itui International Inc. as the largest, and details significant related party transactions, particularly through the VIE structure and Xiaomi affiliations Principal Shareholders as of April 15, 2020 | Shareholder | Number of Shares | Percentage Ownership | | :--- | :--- | :--- | | **Directors and executive officers (as a group)** | **161,997,127** | **47.7%** | | Jinbo Li (beneficial owner) | 135,320,239 | 39.8% | | Sean Shenglong Zou | 22,931,611 | 6.8% | | **Principal Shareholders (>5%)** | | | | Itui International Inc. | 135,320,239 | 39.8% | | Yong Rong (HK) Asset Management Limited | 49,398,310 | 14.5% | - The company's operations are conducted through contractual arrangements with its VIE, Shenzhen Xunlei, which constitutes a significant related party relationship[762](index=762&type=chunk) - Significant related party transactions exist with Xiaomi-affiliated companies. In 2019, Xunlei recognized **US$2.5 million** in revenue from Guangzhou Millet for technology solution services and **US$2.7 million** in cloud computing revenue from Beijing Xiaomi and Xiaomi Technology[776](index=776&type=chunk)[777](index=777&type=chunk) [Financial Information](index=140&type=section&id=Item%208.%20Financial%20Information) This section covers legal proceedings, including copyright infringement and a dismissed U.S. shareholder class action, and states the company's policy of not paying cash dividends - The company is frequently involved in legal proceedings, primarily related to alleged copyright infringement in China[779](index=779&type=chunk) - A putative shareholder class action lawsuit filed in the U.S. alleging that its OneCoin (LinkToken) was a disguised "initial coin offering" was dismissed with prejudice in September 2019[779](index=779&type=chunk) - The company has not declared or paid cash dividends and does not plan to in the foreseeable future, intending to retain earnings for business operations and expansion[781](index=781&type=chunk) [Additional Information](index=142&type=section&id=Item%2010.%20Additional%20Information) This section outlines the company's tax obligations in the Cayman Islands and PRC, including preferential rates for HNTEs, and notes its likely PFIC status for U.S. investors - **Cayman Islands Taxation:** The company is not subject to taxes on profits, income, or capital gains in the Cayman Islands[790](index=790&type=chunk) - **PRC Taxation:** The standard Enterprise Income Tax (EIT) rate is **25%**. However, qualified "High and New Technology Enterprises" (HNTEs) can enjoy a reduced rate of **15%**. Several of the company's PRC entities, including Shenzhen Xunlei and Xunlei Computer, qualified for this preferential rate[1094](index=1094&type=chunk)[1096](index=1096&type=chunk)[1097](index=1097&type=chunk) - **U.S. Federal Income Tax:** The company believes it was a Passive Foreign Investment Company (PFIC) for its 2019 taxable year and likely will be for 2020. This status can have significant adverse tax consequences for U.S. Holders of its ADSs or common shares[801](index=801&type=chunk)[807](index=807&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=148&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are foreign exchange risk due to RMB-USD fluctuations and interest rate risk from cash deposits, with significant cash balances held in both currencies - The primary market risk is foreign exchange risk due to the fluctuation of the RMB against the U.S. dollar, as revenues are denominated in RMB while ADSs are traded in USD[819](index=819&type=chunk) - As of December 31, 2019, the company held RMB-denominated cash, cash equivalents, and short-term investments of **RMB 345.8 million** (approx. **US$49.6 million**) and U.S. dollar-denominated balances of **US$218.4 million**[821](index=821&type=chunk) - Interest rate risk is mainly related to interest income from bank deposits and is not considered a material risk[824](index=824&type=chunk) Part II [Controls and Procedures](index=150&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management and the independent auditor concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - Management concluded that as of December 31, 2019, the company's disclosure controls and procedures were effective[830](index=830&type=chunk) - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2019[834](index=834&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 as of December 31, 2019[835](index=835&type=chunk) [Corporate Governance](index=153&type=section&id=Item%2016G.%20Corporate%20Governance) As a foreign private issuer, Xunlei follows Cayman Islands corporate governance practices, deviating from NASDAQ rules regarding annual meetings, board independence, and committee composition - Xunlei follows its home country (Cayman Islands) practices in lieu of certain NASDAQ corporate governance requirements[849](index=849&type=chunk) - Key deviations from NASDAQ rules include: - Not required to hold an annual shareholder meeting[849](index=849&type=chunk)[850](index=850&type=chunk)[851](index=851&type=chunk)[852](index=852&type=chunk) - Board of directors is not required to have a majority of independent directors[849](index=849&type=chunk)[850](index=850&type=chunk)[851](index=851&type=chunk)[852](index=852&type=chunk) - Audit committee has two members instead of the required three[849](index=849&type=chunk)[850](index=850&type=chunk)[851](index=851&type=chunk)[852](index=852&type=chunk) - Nominating and compensation committees are not composed solely of independent directors[849](index=849&type=chunk)[850](index=850&type=chunk)[851](index=851&type=chunk)[852](index=852&type=chunk) Part III [Financial Statements](index=154&type=section&id=Item%2018.%20Financial%20Statements) This section presents the audited consolidated financial statements for 2017-2019, prepared under U.S. GAAP, including the independent auditor's unqualified opinion and key financial statements - The report includes the audited consolidated financial statements for the years ended December 31, 2017, 2018, and 2019[858](index=858&type=chunk) - The independent registered public accounting firm, PricewaterhouseCoopers Zhong Tian LLP, issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting[866](index=866&type=chunk)[867](index=867&type=chunk) Consolidated Balance Sheet Summary (in thousands of US$) | (in thousands of US$) | Dec 31, 2018 | Dec 31, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | 362,899 | 316,583 | | **Total Assets** | 455,431 | 424,687 | | **Total Current Liabilities** | 108,035 | 111,286 | | **Total Liabilities** | 111,251 | 129,144 | | **Total Shareholders' Equity** | 344,180 | 295,543 | Consolidated Statements of Comprehensive Loss Summary (in thousands of US$) | (in thousands of US$) | 2017 | 2018 | 2019 | | :--- | :--- | :--- | :--- | | **Net Revenues** | 200,583 | 230,604 | 180,665 | | **Gross Profit** | 82,707 | 114,937 | 80,752 | | **Operating Loss** | (54,201) | (44,329) | (56,422) | | **Net Loss Attributable to Xunlei Limited** | (37,822) | (39,278) | (53,169) |

Financial Data and Key Metrics Changes - Total revenues for Q4 2019 were $48.3 million, up 10.2% from the previous quarter [21] - Revenues from cloud computing and IVAS were $24.6 million, representing an increase of 18% sequentially [21] - Net loss for Q4 2019 was approximately $18.1 million, an improvement from a net loss of $24.6 million in the previous quarter [26] - For the full year 2019, total revenues were $181.3 million, down 21.9% year-over-year [27] Business Line Data and Key Metrics Changes - Revenues from subscriptions in Q4 2019 were $19.8 million, a 2.9% increase from the previous quarter, with subscribers increasing from 3.8 million to 4.0 million [7][22] - Online advertising revenues were $3.9 million, up 3.9% from the previous quarter, but down 43.7% year-over-year [8][28] - Revenues from cloud computing and IVAS declined 31.3% year-over-year, primarily due to reduced OneThing Cloud hardware sales [6][27] Market Data and Key Metrics Changes - The company reported strong operational execution in cloud computing, with significant growth in bandwidth sales, which more than doubled compared to the previous year [9][37] - The online advertising segment faced challenges due to reduced demand from the mobile gaming industry [8] Company Strategy and Development Direction - The company is transitioning to shared cloud computing and blockchain technologies to meet emerging user needs and has developed competitive strengths in these areas [9][10] - Xunlei aims to expand its shared cloud computing capacity and implement a hybrid development strategy to reduce reliance on traditional bandwidth suppliers [16][44] - The company is focusing on maintaining high-caliber research and development to enhance its competitive edge in cloud computing and blockchain [12][13] Management's Comments on Operating Environment and Future Outlook - Management noted that the coronavirus situation has limited business visibility but has not significantly impacted operations, with some positive effects observed in cloud computing and subscription services [35][36] - The company expects total revenues for Q1 2020 to be between $47 million and $51 million, indicating a quarter-over-quarter increase [32] Other Important Information - The company has established partnerships with leading internet companies in China and has made progress in blockchain development, including collaborations with government bodies [10][12] - Xunlei has been recognized for its innovation in AI and cloud computing technologies, winning several awards [13] Q&A Session Summary Question: Exposure to COVID-19 and its impact on business - Management confirmed no direct exposure to the epicenter and noted that operations have not been significantly affected in the short term, with some positive impacts on cloud computing and subscription services [35][36] Question: Expectations for growth in 2020 - Management expressed confidence in growth driven by distributed computing technologies and noted that while revenues declined in 2019, bandwidth sales have been growing rapidly [37] Question: Competitive advantage in the cloud market - Management highlighted the unique approach of utilizing small hardware devices to collect bandwidth and computing power, differentiating from larger competitors like Alibaba and Tencent [41][42] Question: Ability of established players to replicate Xunlei's strategy - Management stated that they do not comment on competitors but emphasized their established market leadership and ongoing investment in technology and resources [46]

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]