Xunlei Ltd (XNET) Q4 2025 Earnings Call Transcript

Welcome, ladies and gentlemen, and thank you for your patience. You have joined Xunlei's fourth quarter and fiscal year 2025 earnings conference call. At this time, our participants are in listen-only mode. Please be advised that this conference is being recorded. I would 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 Xunlei's Q4 and fiscal year 2025 earnings conference call. With me today are Jing Buoli, Chairman and CEO, Eric Zhou, CFO, and Li Li, Vice President of Finance. Our IR website has our earnings press release supplement our prepared remarks during the call. Today's agenda includes a prepared opening remarks from Chairman and CEO, Mr. Jing Buoli, on Q4 operational highlights, followed by CFO Eric Zhou's presentation of financial results details of Q4 and fiscal a year before we open up the floor to your questions in a Q&A session. Please note that this call is recorded and can be replayed on our investor relations website at rr.shunlei.com. Before we get started I would like to take this opportunity to remind you that the discussion today will contain certain volume statements made under the safe harbor provisions of the US Private Security Litigation Reform Act of 1995. Such statements are based on our management 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 forelooking statement please refer to our SEC filing for a more detailed description of the risk factors that may affect our results should we assume no obligations to update any forelook statement except as required under applicable law 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 statement by Mr. Jimbo Lee, Chairman and CEO of Xunlei 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 a full year of 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 involving market dynamics. Now, I'd like to share with you detailed insight about our operations until 4-2025 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 underpained by two key pillars. First, our deeply integrated business ecosystem continues to deliver value and the high proportion of paying subscribers opting for our premium subscription business, which integrates internet browsing, high-speed downloading tools, extensive 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 worth $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 partner's expertise to advance One Thing's edge computing and CDN services. Meanwhile, Xinlei will reallocate its resources to core growth drivers, subscription and overseas live streaming while retaining a minority stake in one thing 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 pivot 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 Hupu, which we acquired in 2025, generated synergies to our business, with Hupu 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 and 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 our reservation has generated significant unrealized capital gains and may further enhance our financial strength and a capital flexibility. To conclude, 2025 has been a transformative year virtually, 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 capital flexibility, we believe 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 will now pass the call over to Eric. Eric will give a detailed review of our Q4 and fiscal year financial rebuild.

Thank you, Rohan. Thank you all for participating in the series conference for today. Our and our work built through our financial results for the fourth quarter and the full fiscal year of 2025. Let's begin with the fourth quarter of 2025's results. Total revenues for the fourth quarter were 143.3 million hours. This represents an increase of 38% compared to the same period last year. This growth was primarily given by higher revenue from our cloud computing and live streaming Looking at our revenue streams in more details, revenues from subscriptions reached at 42.1 million, up 22.4% in OBS. This increase was mainly due to higher demand for our subscription services. Revenants from live streaming and other IDAS were 55.1 million dollars, up 102.8% in OBS. This significant growth was driven by the expansion of our OFC audio live streaming business as well as growth in our advertising business largely resulting from our acquisition output. 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 percent of our total revenues. This compares to 40.4 million or 47.9 percent 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-purpose 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-purpose 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 large streaming business. GNA 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 return around was primarily due to the absence of a goodwill employment 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 Arashia Beijing 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 eight years were 8 cents compared to 18 cents 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 4-year 2025 financial results. For the 4-year, total revenues were 462.4 million, an increase of 42.5% compared to the previous 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 live 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 live streaming business and at the present is this following the acquisition. Cloud computing revenues were 137.4 million up 31.4 percent 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 our 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 our OTC's audio large streaming 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 office expenses, our energy expenses were $80 million dollars or 17.3% of our 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. That 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 eight years were $0.30 compared to $0.38 in the previous year. Our year-end cash production remains strong as of December 31st, 2025. We had cash, cash equivalents, and short-term investments of $305.2 million, compared to $287.5 million at the end of 2024. The increase was mainly due to net cash inflow from operating activities and proceeds from bank borrowings partially offset by the payment of the acquisition of before. Finally, a quick update on our share of our values. 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 4th, 2024, we have spent a total of about 6.5 million dollars on share of biobets. These concludes our prepared remarks for today. I pray 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 while Westenbauer compile the Q&A QDs will take a few moments. And now we're going to take our first question. And it takes for a line of Dan D from it is a retail investor. Please ask your question.

Hello. I'm sorry.

The investors asked what's our plan for the cash consideration obtained from the transaction?

Thank you.

So Mr. Jimbole, 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.

I have a question. Yes, I have a question.

Please.

Shun Lai and Jin Sanyun are a partner. Why do you sell it to Jin Sanyun?

So he's asking if the Kingsoft Cloud related quality to Shun Lai and why you're selling the stake to them?

anno 一个是我们的获益是最大化的 另外一个的话呢 就是金山云跟网新 这个能够有比较多的父母 那个金山云在云基础设施 技术研发行业解决方案方面的优势 能给网新提供更好的一个支持 那个这个将会有助于 在网新独立之后 增强它的一个市场竞争点和经营

So to answer this question, Mr. Jimbo Lee 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 a reason is because King South cloud has the advantage in the cloud infrastructure and the cloud technology R&D and industry solutions so after to so they will offer support for one things 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. No. No. Dear participants, as a reminder, if you would like to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. Because we will just give a moment to our participants to press star 11. Lujan, please be advised we have another line to asking 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 I think it's on mute or something.

My apologies, dear participants, await the email at fsjianjinlee 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 one one there's because there are no further questions for today i would not like to hand the conference over to their management team for any closing remarks oh my apologies uh 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 land of Jeff Shang from Stonehill Capital Management. Your line is open. Please ask a question.

Hi there. Congrats on the great results. I just wanted to quickly ask Mr. Jimbo Lee, 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.

For example, we will be able to create a potential value for investors to create a value of value for investors. In the meantime, we will also be able to determine the development of the company's business and the capital market. We will be able to determine the speed of investors. We have a lot of choice. In general, we will be able to determine the speed of investors. Thank you.

So, Mr. Timboli answered the first question about how we, After Disinvest, 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 the initiatives that create significant value for the company. At the same time, we will also assess all the physical options to reward shareholders. We will determine the pace of divesting from Yingshu 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. oh he actually answered a question about the return he said um uh we will uh please stay tuned for the further uh disclosure during the 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 uh the question comes line of 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 the remarks for the conference call and we are, I think that's all for today and for any, you know, 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 may now all disconnect have a nice day