Q1 2026 Xunlei Limited Earnings Conference Call

Welcome ladies and gentlemen and thank you for your patience. You've joined Xunlei's first quarter 2026 earnings conference call. At this time all participants are in listen-only mode. Please be advised that today's conference is being recorded. I'll now like to turn the call over to the host Investor Relations Manager Ms. Luhan Peng. Thank you. Please go ahead.

Good morning everyone and thank you for joining Shunwei's Q1 2026 earnings conference call. With me today are Eric Jo, 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 remark from Chairman and CEO Mr. Jingboa Li on Q1 operational highlights, followed by CFO's Eric Joe's presentation of financial results details of Q1 before opening up the floor to your questions in the Q&A session. Please note that this call is recorded and can be replayed in our investor relations website at ir.shinlein.com. Before we get started, I would like to take this opportunity to remind you that the discussion today will contain certain forward statements made under the safe harbor provisions of the US private security litigation reform act of 1995 that statements are based on our management's current expectations under existing market conditions that are subject to risks and uncertainties that are difficult to predict which may cause actual results to differ materially from those making the full legacy was referred to our SEC filings for a more detailed description of the risk factors that may affect our results Chinle assumed no obligations to update any forelooking statements except as required under applicable law. This call will be using both GAAP and non-GAAP financial measures. A recalculation of non-GAAP to comparable GAAP measures can be found in our earnest press release. Please note that all numbers are in US dollars unless otherwise stated. Now the following is the prepared statement by Mr. Kim Wolde, Chairman and CEO of Streamland Limited. Good morning and good evening everyone. Thank you for joining us today. We're excited to begin 2026 with a strong first quarter, one defined by discipline execution, strategic clarity, and tangible progress in our business transformation. Q1 was a period of decisive action. We delivered robust revenue growth across our core segments, completed a successful corporate restructuring, and concentrated our focus on our highest potential business area after carefully balancing our resources and the business opportunities. Total revenue for Q1-2026 reached $98.6 million and significant 54.1% increase year over year. This growth was driven by our strategic emphasize on consumer RN said businesses particularly our two key growth engine subscription services and overseas audio live streaming business now let me share with you some insights on these two vital business lines for our subscription business it remains truly stable cornerstone delivering consistent cash flow and steady growth in Q1 subscription revenue reached 45 million dollars a solid 26.2 percent year-over-year increase. This performance reflects our two focused efforts. Firstly, by thoughtfully enhancing the premium subscription experience, listening closely to user feedback, and refining features, we have attracted a record number of users to use our premium services. Their trust is both our motivation and our greatest reward. And secondly, through constructive long-term collaborations with leading mobile phone manufacturers and internet platform partners, we have expanded our reach naturally and inclusively, bringing our services to new communities while staying true to our mission of enriching everyday digital life. Looking ahead, we're excited to introduce new features designed to make every interaction more intuitive, joyful, and personal. With your continuous support, we are confident in sustaining this purposeful growth. Our overseas live streaming business and other services have merged as a powerful growth engine, delivering results in line with our expectations. In Q1, this segment generated $53.6 million in revenue, also an 89.3% year-over-year increase. This exceptional growth validates our strategic focus on overseas markets, especially high growth emerging regions such as Southeast Asia and the Middle East. These markets benefit from supportive platform policies and growing user demand. We have leveraged our strengths in product refinements, user engagement, and monetization to enhance local operations. The diverse user base, high engagement levels, and increasing willingness to pay in these regions create substantial opportunities. Our ability to adapt services to local market preference, combining geographic and cultural insights with digital entertainment consumption is a key driver for this remarkable growth. We will continue to intensify our overseas expansion, exploring new markets and optimizing service offerings to sustain momentum. That said, given the ever changing competitive landscape, our rapid growth may experience a modest slowdown in future quarters. In conclusion, Q1-2026 was the transformative period of Xunlei. We achieved strong financial results, executed a strategic restructuring to concentrate fully on QC operations, and saw our overseas live streaming business emerge as a leading growth driver. We have demonstrated our ability to make both strategic positions adapt to market dynamics and drive growth through focus and innovation with a clear strategic direction robust business momentum and optimized resource allocation we believe we will we are well positioned to capture growing opportunities in the Tuesday market sustain our growth trajectory and create long-term value for our shareholders. We remain committed to executing our strategy with discipline and agility and we're excited about the future ahead. I will now hand the call over to our CFO for a detailed review of our Q1-2026 financial results.

Thank you Wuhan and thank you all for participating in today's conference call. I will now walk you through our financial results for the first quarter of Please note that in K1, we restructured our cloud computing business, and it's no longer consolidated in our financial statements. Hence, the following financials exclude discontinued operations. For the first quarter of 2026, our total revenues came in at 98.6 million, up 54.1% year-over-year. This strong top-line growth was mainly driven by higher revenue from our subscription business and swept with solid gains from our overseas audio live streaming business. Breaking down our revenue performance, subscription revenues reached $45 million, representing a 26.2% year-of-year increase. This growth reflects stronger user demand for subscription offerings. Our live streaming and other services delivered 53.6 million hours in revenue, jumping 89.3% year-over-year, thanks primarily to the robust expansion of our overseas audio live streaming business. Our cost of revenues were 40.4 million in a quarter, making up 41% of total revenues. For comparison, we recorded 24.1 million or 37.8% of total revenues in the same period of 2025. The higher cost of revenues aligned closely with our live streaming revenue growth, driven mainly by increased revenue sharing expenses for our overseas audio live streaming operations. The remaining portion of revenue costs mainly came from payment handling fees and bandwidth expenses. Moving to profitability, we generated 57.7 million in gross profit this quarter, up 45.1 percent year-over-year. Our gross margin stood at 58.5 percent, compared to 61.9 percent in the private year quarter. The gross profit improvement was fueled by both our OXY's audio live streaming business and our subscription business. The slight margin decline was a structural mixed change. Live streaming, which carries a lower gross margin than subscription, now accounts for a larger share of our total revenues, which compressed our overall gross margin modesty. On the expense front, our R&D expenses were $20.2 million in K01 2026 representing 20.4% of total revenues. This compares with $16 million for 25.1% of total revenues in the first quarter of 2025. The year-over-year increase was mainly due to higher labor costs this quarter. Sales and marketing expenses rose to $22.4 million this quarter, flat as a percentage of revenue at 22.8%, compared with 14.5 million or 22.7% of our total revenues. The high absolute spending this year reflects increased marketing investments across our subscription and overseas audio lab streaming business as we continue to prioritize user acquisition. GNA expenses came in at $10.9 million, equal to 8.5% of our total revenues, versus $10 million, or 15.7% of total revenues, in Q1 2025. The increase was primarily driven by high share-based compensation expenses. On an operating level, we delivered operating income of $4.3 million this quarter, improving from an operating loss of $1 million in the prior year period. This turnaround was largely driven by stronger growth profits across our core businesses. changes. We recorded a net-other loss of $195.1 million this quarter, compared with a net-other income of $1.1 million in Q1 2025. This year-over-year shift was mainly attributable to the fair value changes related to our long-term investment in Aresha Vision Inc, which completed its IPO back in June 2025, turning to discontinued operations, which relates entirely to our Seng-Seng-Wang-Seng business, which we reorganized in March and recognized income of $17.7 million in K1-2026, which comprised the operating loss of $1.8 million from discontinued operations and a disposal gain of $4.3 million, as well as the income tax benefits related to the disposal of $15.2 million. Our net loss from continuing operations was 192.4 million this quarter, compared with net loss of 0.2 million in K01 2025. The large net loss was mainly due to the net other loss we just discussed, partially offset by our improved operating performance. On a non-GAAP basis, we achieved solid growth in non-GAAP net income from continuing operations, which rose to $4.1 million, up from $0.9 million in the prior year period. On a per-share basis, our diluted loss per ADS from continuing operations was 3.06 for quarter compared with a diluted EPS of zero in K01 2025. Our non-GAAP diluted earnings per ADS from continuing operations increased to $0.07 versus $0.02 in the same quarter last year. Finally, on the balance sheet, as of March 31st, Our cash, cash equivalents and short-term investments totaled $303.6 million up from $283.5 million as of December 31st, 2025. The increase was primarily driven by positive operating cash flows and proceeds from the disposal of our 50% equity stake in Xin Xin Guang Xin. these gains were partially offset by deferred consideration payments for our HuPo acquisition. This concludes our prepared remarks. All right, we are now ready to take questions.

Thank you. We will now begin the question and answer session. To ask a question, please press star one and one and wait for our name to be announced. To cancel your request, please press star one and one again. One moment for the first question. You have a question from the line of George Keane.

Please ask your question. 管理长你好,去年我看到你们和NBA存在这个商标的纠纷,而且被起诉一千多万,但是在年报上没有看到这个能否提供更多的细节,这个起诉会不会对公司的一些业务产生重大的影响,谢谢。 the dissemination of NBA game content and the unauthorized use of the NBA

trademark and the claim the damage amounted to approximately 12.1 million US in total and he would like us to provide more details regarding such copyright litigation and he wants to know if the if it has if it will have any material impact on this business and thanks for for the question and as it is an ongoing case we can't comment on it right now but that said we have set aside some allowances to cover any potential expenses related to this application and we don't expect this case will have a significant impact on on our operations. Thank you. And the second question is, he mentioned that, you know, there's a 1940 investment act that requires companies to maintain the ratio of investment income to total assets below a certain threshold and it is expected that equity gains will exceed that ratio and he would like to know you know if any measures the company would take to address this regulation by ACC and this is good question and you are correct you know we will continue to monitor our holdings of of our appreciated assets in Arisha Inc and we've been consulting with relevant advisors and if needed we will gradually and the six to adjust our holdings so that Xunlei will hold investment securities with a value not exceeding 45% of the company's total assets, excluding government securities and cash items, in line with the company's intention to mainly engage in our core 2C business. And in fact, we never intend to be an investment company.

Thank you. 专注于核心2C业务的发展目标相引致 实际上我们从未打算成为一家投资公司 谢谢您的问题

谢谢 Thank you for the questions Once again if you'd like to ask questions Please press star 1 and 1 At this time no further questions from the line Allow me to hand a call back to Eric for closing Thank you again for your time and participation If you have any questions, please visit our website at irxunli.com or send emails to our investors relations.

Have a good day. All right, we conclude today's conference call. That does conclude today's conference call. Thank you for your participation.

You may now disconnect.