Xunlei Limited

Welcome, ladies and gentlemen, and thank you for your patience. You have joined Shunlei's fourth quarter and fiscal year 2025 earnings conference call. At this time, all participants are in listen-only mode. Please be advised that this conference has been recorded. I would now like to turn the call over to the host, Investor Relations Manager, Ms. Luhan Tang. Please go ahead.

Good morning, everyone, and thank you for joining Stringlight Q4 and the Fiscal Year 2025 Earnings Conference Call. With me today are Jinbo Li, Chairman and CEO, Eric Zhou, CFO, and Li Li, Vice President of Finance. Our IR website has our earnings press release to supplement our prepared remarks during the call. Today's agenda includes a prepared opening remarks from Chairman and CEO, Mr. Jinbo Li, on Q4 operational highlights. followed by CFO Eric Zhou's presentation of financial results details of Q4 and fiscal year before we open up the floor to your questions in the Q&A session. Please note that this call is recorded and can be replayed on our investor relations website at rr.shimlai.com. Before we get started, I would like to take this opportunity to remind you that the discussion today will contain certain statements made under the safe harbor provisions of the US Private Security Litigation Reform Act of 1995. Such statements are based on our management's current expectations under existing market conditions that are subject to risk and uncertainty that are difficult to predict. which may cause actual results to differ materially from those made in the forward-looking statement. Please refer to our SEC filing for a more detailed description of the risk factors that may affect our results. We assume no obligations to update any forward-looking statement except as required under applicable laws. This call will be using both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to comparable GAAP measures can be found in our earnings press release. Please note that all numbers are in the U.S. dollars unless otherwise stated. Now, the following is prepared statements by Mr. Jim Bowley, Chairman and CEO of Streamlight Limited. Good morning and good evening, everyone. Thank you all for joining us today. We're extremely pleased to wrap up 2025 with exceptional fourth quarter and full year operating results. which not only met but exceeded our expectations and demonstrated the strong momentum of our strategic transformation. 2025 has been a year of remarkable growth, strategic refinement, and value creation that marked by robust performance across all core business segments, successful strategic transactions, and significant progress in optimizing our business portfolio. A key milestone of our success for the year is the consistent double-digit growth across our major business lines, a testament to the effectiveness of our ecosystem-driven strategy, our focus on core competencies, and our ability to adapt to evolving market dynamics. Now, I'd like to share with you detailed insight about our operations in Q4 2025 and full fiscal year. which underscores the strength of our business model and success of our strategic initiatives. First, our subscription business continues to serve as a stable core asset and reliable growth driver for the company, demonstrating strong resilience and growth momentum. In the fourth quarter, we generated $42.1 million in subscription revenue, representing a solid 22.4% year-over-year increase. For the full year 2025, subscription revenue reached $154.8 million, up 15.8% from 2024. This sustained growth is underpinned by two key pillars. First, our deeply integrated business ecosystem continue to deliver value and the high proportion of paying subscribers opting for our premium subscription business, which integrates internet browsing, high-speed downloading tools, extended storage, and value-added features to enhance user engagement and retention. And second, our strategic alliance with leading mobile manufacturers and platform partners expanded our user reach. enabling us to tap into a new user group and drive organic growth. Moving forward, we will continue to integrate advanced smart features, optimize our product experience, and expand our market presence to drive further growth in our subscription business. Next, our cloud computing business achieved a turnaround and delivered significant growth in 2025. In Q4, cloud computing revenue was $46.1 million. representing an increase of 102.7% year-over-year. For the full year, cloud computing revenues reached $137.4 million, up 31.4% from 2024. This growth was driven by the increased demand for our cost-effective solutions. As you might learn from our announcement last week, we realigned and strengthened our strategic focus and sold 50% of our stake in one thing, the operating entity of our cloud computing business. We believe that the equity divestiture will support business optimization and leverage our partners' expertise to advance OneThings Edge computing and CDN services. Meanwhile, Xunlei will reallocate its resources to core growth drivers, subscription, and overseas live streaming, while retaining a minority stake in OneThings to capture future upside, if any. We believe that the transaction will have no significant negative impact on our core operations, cash flow, or profitability, and instead, it may improve our capital efficiency and strategic clarity in the long run. Our live streaming and other internet value-added services have emerged as a key growth engine, delivering rapid growth in 2025. In Q4, this segment generated $55.1 million in revenues. representing a 102.8% year-over-year increase. For the full year, live streaming and other IVAS revenues reached $170.2 million, a remarkable 97.5% increase from 2024. This exceptional growth validates our strategic purpose in late 2023 to exit low-margin volatile domestic markets and focus on high-growth emerging regions such as Southeast Asia and the Middle East and North Africa. By leveraging our strengths in product refinement, user engagement, and monetization, we have achieved significant growth in our overseas audio live streaming business. Additionally, the integration of Hoopoo, which we'll acquire in 2025, generated synergies to our business, with Hoopoo contributing to our advertising revenue through its vibrant and highly engaged community. Reviewing our overall financial performance for 2025, we delivered substantial results across the board. Total revenues for Q4 2025 reached $143.3 million, a 70% year-over-year increase, reflecting the strong growth of all our core business segments. For the full year 2025, total revenue hit $462.4 million, representing a 42.5% increase from 2024. This robust revenue growth is a clear indication of the success of our strategic transformation, which has focused on strengthening core businesses, optimizing product portfolio, and exploring high growth opportunities. Additionally, our investment in Arashibation has generated significant unrealized capital gains and may further enhance our financial strength and capital flexibility. To conclude, 2025 has been a transformative year transformative year fortunately, marked by strong financial performance, successful strategic transactions, and significant progress in our core businesses. We have demonstrated our ability to adapt to market changes, optimize our portfolio, and drive growth through strategic focus and innovation. With our clear strategic direction, strong business momentum, and enhanced captive flexibility, we believe we will well We are well positioned to capitalize on market opportunities and deliver sustained growth in 2026 and beyond. And we remain committed to create long-term value for our shareholders. With that, I'll now pass the call over to Eric. Eric will give a detailed review of our Q4 and fiscal year financial results.

Thank you, Rohan. Thank you all for participating in today's conference for today. I will now walk you through our financial results for the fourth quarter and the full fiscal year of 2025. Let's begin with the fourth quarter of 2025 results. Total revenues for the fourth quarter were $143.3 million. This represents an increase of 38% compared to the same period last year. This growth was primarily determined by higher revenue from our cloud computing and live streaming business Looking at our revenue streams in more details Revenue from subscriptions reached 42.1 million, up 22.4% year-over-year This increase was mainly due to higher demand for our subscription services Revenues from live streaming and other RDAs were $55.1 million, up 102.8% year-over-year. This significant growth was driven by the expansion of our overseas audio live streaming business, as well as growth in our advertising business, largely resulting from our acquisition of UPPO. Revenues from cloud computing were $46.1 million, up 102.7% year-over-year. This increase was due to greater demand from our major customers for cloud computing services Moving to costs and profitability Cost of revenues were $80.8 million representing 56.4% of our total revenues This compares to $40.4 million or 47.9% of total revenues in the same period of 2024 The increase was mainly due to higher revenue sharing costs for live streaming business and increased bandwidth costs associated with high demand for cloud computing services. Growth profit for the quarter was $61.7 million, an increase of 41.5% year-over-year. Growth profit margin was 43% compared to 51.7% in the fourth quarter of 2024. While gross profit dollars increased driven by our subscription and overseas audio live streaming business, the margin decreased. This was primarily because a larger portion of our revenue now comes from our overseas audio live streaming and cloud computing business, which carried lower gross profit margins while the proportion of revenues from our higher margin subscription business decreased. Turning to operating expenses, R&D expenses were 21.9 million or 15.3% of total revenues, up from 18.7 million last year. The increase was primarily due to higher labor costs. Sales and marketing expenses were 23.2 million or 16.2% of total revenues, up from 12.5 million. This was driven by the expansion of marketing campaigns for our subscription and overseas audio live streaming business. G&A expenses were 12.4 million or 8.6% of total revenues, compared to 12.1 million last year. The slight increase was due to higher legal expenses during the quarter. As a result, operating income was $4.7 million, which is a significant improvement from an operating loss of $20.5 million in the same period of last year. The turnaround was primarily due to the absence of a goodwill impairment charge of approximately $20.7 million that were incurred in the fourth quarter of last year. Net loss for the quarter was $228.9 million, compared to a net loss of $9.9 million in the same period last year. The increase in net loss was primarily due to other losses net, which totaled $232.6 million. This compares to other income of $1.5 million last year. The change was mainly due to a decrease in the fair value of our long-term investment in Arusha Vision following its IPO in June 2025, on a non-GAAP basis which excludes the impact of share-based competition and certain other items. Net income for the first quarter was 4.8 million, compared to 11.3 million in the same period of 2024. Diluted loss per eight years was 3.64 dollars, compared to a loss of 16 cents in the fourth quarter of 2024. Non-GAAP diluted earnings per 8 years were $0.08 compared to $0.18 in the same period last year Turning to our balance sheet, as of December 30, 2025, we had cash, cash equivalents and short-term investments of $305.2 million This compares to $284.1 million as of September 30, 2025 The increase was mainly due to the net cash inflow from operating activities and an increase in proceeds from bank borrowings. Now let's move to our four-year 2025 financial results. For the four-year, total revenues were $462.4 million, an increase of 42.5% compared to the previous year. This growth was attributable to revenue increase across all of our major business segments, breaking down the four-year results. Subscription revenues were 154.8 million, up 15.8% year-over-year, driven by increased demand Revenues from large streaming and other RBS were $117.2 million, an increase of 97.5% year-over-year, primarily due to the growth of our overseas audio large streaming business and advertising business following the Kutu acquisition. Cloud computing revenues were $137.4 million up 31.4% year-over-year due to increased demand for our services Costs of revenues for the year were $242.9 million representing 52.5% of total revenues This compares to $155.6 million or 48% of total revenues in 2024 The increase was mainly due to higher demand for cloud computing services and increased revenue sharing costs from the expansion of OTC's order large trading business. Gross profit for the year was $217.5 million, an increase of 29.8%. Gross profit margin was 47% compared to 51.7% in the previous year. The increase in gross profit dollars was driven by our subscription and live streaming businesses, partially offset by a decrease in gross profit from cloud computing. The margin decline, similar to the quarter, reflects a shift in revenue mix towards our lower-margin overseas audio live streaming and cloud computing businesses. Looking at full-year operating expenses, R&D expenses were $80 million, or 17.3% of total revenues, up from $71.6 million last year, primarily due to higher labor costs. Sales and marketing expenses were 86.3 million or 18.7% of total revenues, up significantly from 44.8 million. This was driven by expanded marketing campaigns for our subscription and live streaming businesses, as well as higher labor costs. G&A expenses were 44.9 million, or 9.7% of total revenues, compared to 45.8 million last year Operating income for the year was 6.6 million, a significant improvement from an operating loss of 15.7 million in 2024 This was primarily due to the increase in gross profit and the absence of the one-time goodwill impairment recorded at the end of 2024 Net income for the year was approximately $1.05 billion, compared to $0.7 million in the previous year This large increase was primarily driven by high gross profit and other income during the year. On a non-GAAP basis, net income was $18.5 million in 2025 compared to $23.9 million in 2024. Diluted GAAP earnings per eight years were $16.56 compared to $0.02 in the previous year. Non-GAAP diluted earnings per 8 years were $0.30 compared to $0.38 in the previous year. Our year-end cash position remains strong. As of December 31, 2025, we had cash, cash equivalents, and short-term investments of $305.2 million, compared to $287.5 million at the end of 2024. was mainly due to less cash inflow from operating activities and proceeds from bank borrowings, partially offset by the payment of the acquisition of RuPo. Finally, a quick update on our share of assets. As of December 31st, 2025, we had spent approximately $1 million to repurchase about 435,000 ADS during 2025. Since the inception of this program on June 4, 2024, we have spent a total of about $6.5 million on share of buybacks. This concludes our prepared remarks for today. Okay, we are now ready to open the line for the questions.

Thank you so much, dear participants. As a reminder, if you wish to ask a question, please press star 1-1 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star 1 and 1 again. Once again, if you'd like to ask a question, please press star 1. This will take a few moments. And now we're going to take our first question. And it takes from the line of Dan D. It is a retail investor. Please ask your question.

Hello, everyone. I'd like to ask a question. You sold the cloud computing business. How are you going to spend the money? Hello.

The investor is asking you... I'm sorry.

The investor is asking what's our plan for... for the cash consideration obtained from the transaction.

Our cash will be used for the transaction. The core is our cloud storage and acceleration business. In terms of overseas cloud socialization, we are developing a relatively fast business of product delivery and promotion. We will also optimize the operating structure of the company, and improve the overall liquidity and risk resistance of the company.

Thank you. So, Mr. Gimboli, as answering, we're going to use the cash consideration for the development of the company's core businesses, specifically including the R&D in technology, as well as the integration of upgrades for our products. For example, the club acceleration and overseas audio live streaming businesses. Besides that, we also will use the money on the market expansion and a brand promotion in increasing the market share of our products and at the same time optimize the company's operating capital structure and enhance overall operational liquidity. Thank you.

我还有一个问题。 请问。 讯雷跟金山云是关联方吧?

你们为什么要卖给金山云呢?

So he's asking if the Kingsoft Cloud, the related quality to Xunlei and why you're selling the stick to them.

Yes, if we don't have one, the only choice is Jinshan Yu. In the past two years, we have looked into a possible seller. In the end, we chose Jinshan Yu mainly because, for us, one, our profit is the largest. The other one is that Jinshan Yun and NetEase can have a lot in common. Jinshan Yun's advantages in cloud infrastructure, technology development, and industry solutions can provide NetEase with better support. This will help to strengthen its market competitiveness and management after NetEase independence.

So to answer this question, Mr. Jimboley says, so Kingsoft cloud is not the only one option that we were looking for. In the past two years, we have been looking for the buyers, and we did a lot of market research, and we finally decided to choose a Kingsoft software cloud for the two reasons. One is it has the maximum return for Shunlei and the second reason is because Kingsoft Cloud has the advantage in the cloud infrastructure and the cloud technology R&D and industry solutions. So they will offer support for one thing, business development and the contribution to the enhancement for the one-thing market competitiveness and operating performance in the future.

Excuse me, Dan. Any further questions? Thank you. Thank you. No. Dear participants, as a reminder, if you would like to ask a question, please press star 1-1 on your telephone keypad and wait for your name to be announced. Yes, because we will just give a moment to our participants to press star 1 1. Luhan, please be advised, we have another line to ask in the question. And if you don't mind, please, can you announce these participants?

Please go ahead to ask your question.

My apologies, this person just put his name in Mandarin, so therefore I cannot even pronounce his name.

Yeah, I tried to speak Mandarin to her, I guess.

The line is open.

I think it's on mute or something.

My apologies, dear participants, I will read the email, fsgianjinlei at 163.com. Your line is open. If you would like to ask a question, please ask your question. My apologies, there are no questions from this line. Okay. Once again, dear participants, if you would like to ask a question, please press star 11. Dear speakers, there are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks. Oh, my apologies. Now we have another question to come through. Would you like to take it?

Yes, please.

Of course. Lovely. Just give us a moment. And the question comes from the line of Jeff Shang from Stonehill Capital Management. Your line is open. Please ask your question.

Hi there, congrats on the great results. I just wanted to quickly ask Mr. Cimboli, what is the company's plan and the board's plan with the Arashi vision stake once the lockup expires? And how should shareholders think about potential shareholder return and the size of potential shareholder return?

Thank you.

Our investor's question is to ask Yu Jingbo about the plan after the temporary suspension and how to do the shareholding.

We hope that BANA can be used to develop new technologies and explore new fields and BANA can be more valuable to the company. At that time, we will also evaluate the possible solutions to create value for shareholders. At that time, we will also decide the speed of deceleration according to the development of the company's business and the market situation of capital. We have many choices to make. Specifically, we will decide the speed of deceleration. Thank you.

So Mr. Timberlake answered the first question about how we, after this invest, how are we going to allocate the funds? He said we intend to allocate the funds towards the R&D of emerging technologies and also the exploration for the new business initiatives and may create opportunities the initiatives that create significant value for the company. At the same time, we will also assess all the feasible options to reward shareholders. We will determine the pace of divesting from Yinshi based on the company's business development and also the capital market condition at the time. We will have a lot of options to choose from. So please stay tuned for the disclosure during that time. He actually answered a question about the return. He said, we will please stay tuned for the further disclosure during that time.

Excuse me, Jeff. Any further questions?

No, that's it for me. Thank you. Thank you very much.

Thank you so much. And now we're going to take another question. The question comes from Fujitsubo Shihon. Your line is open. Please ask a question. There is no answer from this line. Thank you. Dear speakers, there are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks.

Okay, then we conclude, prepare the maps for the conference call, and I think that's all for today. For any callers, if you have any questions in the future, please feel free to contact us. Okay, now we can close this conference.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Have a nice day.