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Operator: Welcome, ladies and gentlemen, and thank you for the patience. You’ve joined Xunlei’s First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. I would now like to turn the call over to the host, Investor Relations Manager, Ms. Luhan Tang. Please go ahead.

Luhan Tang: Good morning, everyone, and thank you for joining Xunlei’s Q1 2025 earnings conference call. With me today are Eric Zhou, CFO and [Li Li] (ph), 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 Q1 operational highlights. Followed by CFO, Eric Zhou’s presentation of financial results, details of Q1 2025 and the revenue guidance for the Q2 2025 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 ir.xunlei.com. Before we get started, I would like to take this opportunity to remind you that the discussion today will contain certain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Such statements are based on our management’s current expectations under existing market conditions and are subject to risks and uncertainties that are difficult to predict, which may cause actual results to differ materially from those made in the forward-looking statements. Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results. Xunlei assumes no obligations to update any forward-looking statements, except as required under applicable laws. On this call, we 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 U.S. dollar unless otherwise stated.

Now the following is the prepared statement by Mr. Jinbo Li. Chairman and CEO of Xunlei Limited.

Jinbo Li: [Interpreted] Good morning and good evening, everyone. Thank you all for joining us today. We’re delighted to report that we have successfully delivered an expected quarterly revenue in Q1 to kick off 2025, marking a year-over-year top line growth of 10.5% to $88.8 million. This positive outcome reflects the hard work and dedication of our team, as well as the trust and support from our valued users and clients. The growth we achieved is primarily attributable to two key areas: our subscription business and our overseas audio live streaming operations. Specifically, subscription revenue increased by 7.7% year-over-year to $35.7 million, while the total number of subscribers grew by 5% year-over-year to $6.04 million.

This robust growth can be attributed to our intensified efforts in diversifying marketing channels for new user acquisition. Through innovative strategies such as targeted advertising, intense social media engagement and strategic partnerships with well-known mobile phone manufacturers, we successfully expanded our reach to a broader audience. Moreover, we will continue to focus on creating more convenient and innovative features, while enhancing service efficiency. Our goal is to ultimately elevate the overall user experience and strengthen user retention, thereby ensuring long-term sustainability. In addition to our subscription business, we observed a significant 66% year-over-year growth in revenue from live streaming and other services.

Notably, overseas audio live streaming revenue increased by 79.2% year-over-year, reflecting the recovery from the [downstanding] (ph) of our domestic audio live streaming business and a significant increase in overseas revenue demonstrates that our efforts to adapt to international markets are yielding tangible results. Over the past year, we have intensified our focus on expanding and strengthening our presence in overseas regions. A key component of this strategy has been the implementation of a more refined and targeted marketing approach. By customizing our service to align with the specific preferences and the cultural nuances of users in different regions, we have been able to effectively engage with the broader and more diverse user base.

However, our cloud computing business has been facing significant challenges due to intensified competition and pricing pressures within the rapid evolving industry environment since the latter part of 2024. As a result, in Q1, revenue from the cloud computing business declined by 18% year-over-year to $24.7 million. Looking ahead, we intend to proactively address these challenges, we will explore all viable options to minimize the impact of the cloud computing business on the company’s overall performance. To conclude, I think this year will be pivotal year for Xunlei. Our strategic priorities are centered on fostering growth through innovation, while exploring business restructuring opportunities to enhance focus and operational dynamism.

In January, we announced the acquisition of Hupu with the aim of expanding our market presence and diversifying our service offerings. Additionally, we are actively developing AI-driven applications, leveraging large language models to broaden our product portfolio and unlock new growth opportunities. Supported by strong capital structure and robust financial liquidity, our objectives are to deliver enhanced user value, capitalize on our technological expertise and generate sustainable long-term value for shareholders. With that, I’ll now pass the call over to Eric. Eric will give a detailed review of our Q1 2025 financial results and provide revenue guidance for the second quarter of 2025.

Eric Zhou: Thank you, Luhan. Thank you all again for participating in Xunlei’s conference call to discuss the financial results of the first quarter of 2025. In the first quarter, our total revenues were $88.8 million, representing an increase of 10.5% year-over-year. The increase in total revenues was mainly attributable to the increased revenues from our subscription business, as well as overseas audio livestreaming business. Revenues from subscription were $35.7 million, representing an increase of 7.7% year-over-year. The increase in subscription revenues was mainly driven by the increase in the number of subscribers. The number of subscribers was 6.04 million as of March 31, 2025, compared with 5.76 million as of March 31, 2024.

The average revenue per subscriber for the first quarter of 2025 was RMB14.9, compared with RMB39.5 in the same period last year. The higher average revenue per subscriber was due to the increased proportion of premium subscribers, which have higher average revenue per subscriber. Revenues from livestreaming and other services were $28.4 million, representing an increase of 66% year-over-year. The increase in livestreaming and other services revenues was mainly due to the increase in revenues from our overseas audio livestreaming business. Revenues from cloud computing were $24.7 million, representing a decrease of 18% year-over-year. The decrease in cloud computing revenues was mainly due to the reduced sales of cloud computing services and hardware services as a result of heightened competition, pricing pressure and evolving regulatory environment.

Costs of revenues were $44.4 million, representing 50% of our total revenues, compared with $37.1 million or 46.2% of the total revenues in the same period of 2024. The increase in cost of revenues was mainly attributable to the increase in revenue sharing expenses in our overseas audio livestreaming operations, which were consistent with the growth in livestreaming and other services revenues. Gross profit for the first quarter of 2025 was $44.1 million, representing an increase of 2.9% year-over-year. Gross profit margin was 49.7% in the first quarter, compared with 53.3% in the same period of 2024. The increase in gross profit was mainly driven by the increase in gross profit generated from our overseas livestreaming business and subscription business.

The decrease in gross profit margin was mainly attributable to the decreased gross profit margin of our cloud computing business. Research and development expenses for the first quarter of 2025 were $18.7 million, representing 21.1% of our total revenues, compared with $17.6 million or 22% of our total revenues in the same period of 2024. The increase was primarily due to the increased labor costs incurred during the quarter. Sales and marketing expenses for the first quarter were $15.5 million, representing 17.5% of our total revenues, compared with $10.1 million or 12.5% of our total revenues in the same period of 2024. The increase was primarily due to more marketing expenses incurred during the first quarter of 2025 for our subscription and overseas audio livestreaming business as part of our ongoing efforts on user acquisition.

G&A expenses for the first quarter of 2025 were $11.8 million, representing 13.3% of our total revenues, compared with $11.1 million or 13.9% of our total revenues in the same period of 2024. Operating loss was $1.9 million, compared with an operating income of $4 million in the same period of 2024. The decrease in operating income was primarily attributable to the decrease in gross profit margin and the increase in sales and marketing expenses during the quarter. Net loss was $0.9 million, compared with net income of $3.6 million in the same period of 2024. The net loss was primarily due to the increase in operating loss, partially offset by the increased other income. Non-GAAP net income was $0.1 million in the first quarter of 2025, compared with $4.5 million in the same period of 2024.

Diluted loss per ADS in the first quarter of 2025 was $0.01, compared with diluted earnings per ADS of $0.06 in the first quarter of 2024. Non-GAAP diluted earnings per ADS was $0.004 in the first quarter, compared with non-GAAP diluted earnings of $0.07 per ADS in the same period of 2024. As of March 31, 2025, the company had cash, cash equivalents and short-term investments of $274.6 million, compared with $287.5 million as of March 31, 2024. The decrease in cash, cash equivalents and short-term investments was mainly due to the first tranche of payment for the acquisition of Hupu, spending on share repurchase and repayment of bank loans during the quarter, partially offset by the net income inflow from operating activities. On June 4, 2024, Xunlei announced that its Board of Directors had authorized a new plan for the repurchase of up to $20 million of its ADS or shares of the 12-months net borrowings.

As of March 31, 2025, the company had spent $6.5 million on share buybacks under the new share repurchase program, of which about $0.09 million was spent in the first quarter of 2025. Now let’s turn to the guidance for the second quarter of 2025. For the second quarter of 2025, Xunlei estimates total revenues to be between $91 million and $96 million, and the midpoint of the range represents a quarter-over-quarter increase of approximately 5.3%. This estimate represents management’s preliminary view as of the date of this press release, which is subject to change and any change could be material. Now we conclude the prepared remarks for the conference call. Operator, we are ready to take questions.

Operator: Thank you. [Operator Instructions]

Jinbo Li: [Interpreted] Hello? You can.

Unidentified Analyst: Hello? Can you hear me?

Jinbo Li: Yes.

Unidentified Analyst: [Foreign Language]

Eric Zhou: I may recall that from the press release that Xunlei developing some AI products. And award, they are and what the status of this exploration. And thanks for asking that currency. Our team is engaging, developing and testing a AI-driven applications products, leveraging mainstream large language models. The products under development include an AI-powered auto editing tool and effective AI companion as well as an AI integrated to a solution. While these products are currently under development and testing, we were launching when ready and [Indiscernible] updated. We appreciate our interest and encouraging to stay tuned for further upgrades.

Jinbo Li: [Foreign Language]

Operator: Thank you. [Operator Instructions] There are no further question at this time. So, I will hand the conference back to the speakers.

Eric Zhou: Thank you, again, for your time and participation. If you have any questions, please feel free to visit our website at ir.xunlei.com or send e-mails to our Investor Relations. Have a good day. Operator, we conclude today’s conference call. Thank you.

Operator: Thank you. This concludes today’s conference call. Thank you for participating, and you may now disconnect.