Xunlei Ltd. Q3 FY2024 earnings call

• In Q3 2024, Xunlei achieved continued profitability despite a 4.9% decline in total revenues, due to lingering impact from domestic audio live streaming business downsizing and cloud computing market changes.
• Subscription business: $33.2 million revenue, up 15.6% y-o-y; premium subscribers accounted for 78% of paying users. Plan to explore synergy within product ecosystem, e.g., collaboration with cell phone maker for pre-installed product use.
• Cloud computing business: Revenue down 14.4% y-o-y; expects headwinds from intense competition and evolving regulations; will evaluate options to stabilize the business.
• Live streaming and IVAS: $21.6 million revenue, q-o-q increase 6.7% due to overseas growth, but y-o-y down 16.7% due to domestic downsizing; incubating new products to minimize operational risks.
• Emphasizes continuing to invest in R&D and explore untapped potential to create value for shareholders.

In the third quarter of 2024, Xunlei's total revenues were $80.1 million. The subscription business generated $33.2 million in revenue, up 15.6% year-over-year, contributing approximately 41.4% to total revenues. The cloud computing business had revenue of $25.3 million, a 14.4% year-over-year decrease, contributing about 31.6% to total revenues. The live streaming and IVAS business had revenue of $21.6 million, a 16.7% year-over-year decrease, contributing around 27% to total revenues. The number of subscribers was 5.51 million as of September 30, 2024, up from 5.02 million in the same period last year, and average revenue per subscriber increased due to a higher proportion of premium membership users.

• For Q4 2024, Xunlei estimates total revenues to be between $77 million and $82 million, with the midpoint representing a quarter-over-quarter decrease of approximately 0.7%. This is management's preliminary view as of the call, subject to change.

• Lingering impact from last year's downsizing of domestic audio live streaming business.
• Changing market conditions and evolving regulations affecting cloud computing sales.
• Uncertainties in achieving growth targets for user base expansion.
• Fluctuations in market and regulatory environment potentially affecting share price and business performance.

Q: Congrats on maintaining a double digit year-over-year growth rate in subscription business. Can the company sustain its growth trend in the subscription business for future quarters? And how to overcome the bottleneck of reaching an 6 million subscribers?

A: Our subscription business has kept growth momentum with user base between 5M and 6M since early this year. Premium subscribers proportion increased from ~60% in Q3 last year to ~78% in Q3 this year, and average revenue per subscriber rose. We intend to expand marketing channels, improve user benefits/experience, and conduct more promotional campaigns to acquire new users to break through user base bottleneck.

Q: The Chinese government implemented policies to stimulate stock market, and would like to know if Xunlei has strategies to enhance its share price and address undervaluation?

A: We noticed favorable market policies. We will prioritize business development, continue share buybacks, enhance communication with capital market, actively monitor market and regulatory environment, and adopt corresponding strategies to generate value for shareholders.