Xunlei Limited (“Xunlei” or the “Company”) (Nasdaq:XNET), a leading
cloud-based acceleration technology company in China, today
announced its unaudited financial results for the third quarter
ended September 30, 2017.
Third Quarter 2017 Financial Highlights:
- Total revenues were US$47.3 million, an 15.6%
increase from the corresponding period of last year and up 14.0%
from the previous quarter.
- Online advertising revenues (revenues primarily from
mobile advertising) were US$5.7 million, a 22.9% increase
from the corresponding period of last year and a 9.7% increase from
the previous quarter.
- Other internet value-added services (“IVAS”)
revenues were US$20.8 million, a 64.9% increase
from the corresponding period of last year and a 32.4% increase
from the previous quarter. IVAS consists of cloud computing and
services other than subscription and advertising.
Recent Developments:
- Received value-added telecommunication services license, which
covered the provision of CDN services, from the Ministry of
Industry and Information Technology of P.R.C. (MIIT).
- Successfully launched OneThing Cloud, an intelligent private
cloud hardware, on JD.com and other e-commerce platforms in
September. It received nearly 100% positive reviews and the
accumulated reservations have lately exceeded 8 million units.
- Awarded information security certification issued by Shenzhen
municipal government for OneThing CDN systems.
- Started to expand the applications of crowd-sourced computing
beyond the CDN market.
Mr. Lei Chen, Chief Executive Officer of Xunlei,
commented: “We are pleased that our cloud computing business
continued to expand at a fast pace and gain market recognition
during the third quarter of 2017. Our total revenues for the past
quarter exceeded the high end of our guidance range. We expect the
growth momentum to continue into the fourth quarter of 2017 with
improvement in both the top and the bottom lines.”
“Xunlei is transforming itself from a traditional
internet service provider of membership subscription to a
growth-oriented company developing innovative cloud computing
products and exploring emerging blockchain technology. Our
crowd-sourced computing technology utilizes idle computing power
including bandwidth, storage and CPU from individual bandwidth
contributors to make internet more affordable to everyone. Our
clients and strategic partners include some of the household names
in China. We believe this is a testimony of the power of shared
economy,” continued Mr. Lei Chen.
“We believe blockchain technology today is
reminiscent of the internet technology in the 80’s when the users
of the internet were primarily enterprises. With millions of DAUs
of Xunlei APPs and subscription members, we have the natural
advantage of developing blockchain technology and exploring its
applications to the mass markets. Although it is of great
challenge, we are hopeful and excited about our potential
contribution to the internet industry,” concluded Mr. Lei Chen.
Third Quarter 2017 Financial
Results
Total Revenues
Total revenues were US$47.3 million, up 15.6% on a
year-over-year basis, and increased 14.0% sequentially. The
increase in total revenues on a year-over-year basis was mainly
attributable to the growth of cloud computing, live video and
mobile advertising businesses.
Subscription: Revenues from subscriptions were
US$20.8 million, down 12.1% on a year-over-year basis and up 1.0%
sequentially. The year-over-year decrease in subscription revenue
was primarily attributable to decline in the number of subscribers.
The number of subscribers1 was 4.18 million as of September 30,
2017, up from 4.09 million as of June 30, 2017 but down from 4.37
million as of September 30, 2016. The average revenue per
subscriber for the third quarter was RMB33.2, down from RMB34.4 as
of June 30, 2017 and RMB36.1 as of September 30, 2016.
Online advertising (including mobile advertising):
Revenues from online advertising were US$5.7 million, up 22.9% on a
year-over-year basis and up 9.7% sequentially. Mobile advertising
revenue increased 22.7% on a year-over-year basis.
IVAS: Revenues from IVAS (internet value-added
services including revenues from cloud computing) were US$20.8
million, up 64.9% on a year-over-year basis and up 32.4%
sequentially. Cloud computing revenues grew by 104.2% and 24.4% on
a year-over-year basis and sequentially, respectively.
Cost of Revenues
Cost of revenues was US$28.8 million, representing
60.8% of total revenues. The balance included an accelerated
depreciation of servers in an aggregate amount of US$1.3 million,
which was one-time in nature.
Bandwidth costs: Bandwidth costs were US$17.1
million, representing 36.2% of total revenues, compared with
US$18.8 million or 45.3% of total revenues in the previous
quarter.
Gross Profit and Gross Margin
Gross profit for the third quarter was US$18.3
million, up 7.1% sequentially. Gross margin was 38.6%, compared
with 41.1% in the previous quarter. The decrease of gross margin
was mainly due to an accelerated depreciation of servers incurred
during the quarter, which was one-time in nature.
Research and Development
Expenses
Research and development expenses for the third
quarter were US$16.0 million, representing 33.9% of total revenues,
compared with US$15.4 million or 37.2% of total revenues in the
previous quarter.
Sales and Marketing Expenses
Sales and marketing expenses for the third quarter
were US$5.8 million, representing 12.2% of total revenues, compared
with US$4.6 million or 11.1% of total revenues in the previous
quarter. The increase was primarily due to more marketing and
promotion expenses incurred during the quarter.
General and Administrative
Expenses
General and administrative expenses for the third
quarter were US$13.3 million, representing 28.1% of total revenues,
compared with US$8.3 million or 19.9% of total revenues in the
previous quarter. The increase was primarily due to write-offs in
an aggregate amount of US$6.9 million mainly related to a business
(Kankan) the company had sold before and other prior business
transactions, which were one-time in nature.
Impairment of assets
Impairment of assets for the third quarter was
US$13.6 million, accounting for 28.6% of total revenues. The amount
represented assets written-offs after impairment and recoverability
assessment. Approximately US$8.8 million of the assets
impairment was related to the Kankan business the company had sold
before and US$4.8 million related to the intangible assets from a
prior acquisition of Kuaipan Personal, which were one-time in
nature.
Operating Loss
Operating loss was US$30.4 million, compared with
operating loss of US$11.3 million in the previous quarter. The
increase was mainly due to several write-offs in an aggregate
amount of US$21.8 million, of which approximately US$11.8 million
was due to the Kankan business the company sold before, US$4.8
million due to write-off of the intangible assets for a prior
business acquisition of Kuaipan Personal, and US$1.3 million for
accelerated depreciation of servers, which were one-time in
nature.
The company continued to invest in a range of new
technologies and services, including cloud computing, which had not
yet reached profitability.
Net Loss
and Loss Per Share
Net loss from continuing operations was US$25.6
million in the third quarter of 2017, compared with US$9.7 million
in the previous quarter. Non-GAAP net loss from continuing
operations was US$23.4 million in the third quarter of 2017,
compared with a loss of US$7.5 million in the previous quarter. The
increased net loss from continuing operations and non-GAAP net loss
from continuing operations were primarily due to several write-offs
as discussed above, which were one-time in nature.
Diluted loss per ADS from continuing operations in
the third quarter of 2017 was US$0.38 as compared with a loss of
US$0.11 in the same period last year and a loss of $0.15 in the
second quarter of 2017.
Cash Balance
As of September 30, 2017, the Company had cash,
cash equivalents and short-term investments of US$357.7 million,
compared with US$381.5 million as of December 31, 2016.
Guidance for
Fourth Quarter
2017
For the fourth quarter 2017, Xunlei estimates total
revenues to be between US$55 million and US$60 million, and the
midpoint of the range represents a year-over-year increase of
approximately 46%. This estimate represents management’s
preliminary view as of the date of this release, which is subject
to change and any change could be material.
Conference Call Details
Xunlei's management will host a conference call at
8:00 a.m. U.S. Eastern Time on November 16, 2017 (9:00 p.m.
Beijing/Hong Kong Time), to discuss its quarterly results and
recent business activities.
To participate in the conference call, please dial
the following number five to ten minutes prior to the scheduled
conference call time:
China: |
400-120-0654 |
Hong
Kong: |
+
852-3018-6776 |
United
States: |
+1-855-500-8701 |
International: |
+65
6713-5440 |
Passcode: |
9599667 |
|
|
The Company will also broadcast a live audio
webcast of the conference call. The webcast will be available at
http://ir.xunlei.com.
Following the earnings conference call, an archive
of the call will be available by dialing:
China: |
400-602-2065 |
Hong
Kong: |
800-963-117 |
United
States: |
+1-855-452-5696 |
International: |
+61-2-9003-4211 |
Replay
Passcode: |
9599667 |
Replay
End Date: |
November
24, 2017 |
|
|
About Xunlei
Xunlei Limited ("Xunlei") is a leading cloud-based
acceleration technology company in China. Xunlei operates a
powerful internet platform in China based on cloud computing to
provide users with quick and easy access to digital media content
through its core products and services, Xunlei Accelerator and the
cloud acceleration subscription services. Xunlei is increasingly
extending into mobile devices in part through potentially
pre-installed acceleration products in mobile phones. Benefitting
from the large user base accumulated by Xunlei Accelerator, Xunlei
has further developed various value-added services to meet a fuller
spectrum of its users' digital media content access and consumption
needs.
Safe Harbor Statement
This press release contains statements of a
forward-looking nature. These statements are made under the "safe
harbor" provisions of the U.S. Private Securities Litigation Reform
Act of 1995. You can identify these forward-looking statements by
terminology such as "will," "expects," "believes," "anticipates,"
"future," "intends," "plans," "believes," "estimates" and similar
statements. Among other things, the management's quotations, the
"Outlook" and "Guidance" sections in this press release, as well as
the Company's strategic, operational and acquisition plans, contain
forward-looking statements. These forward-looking statements
involve known and unknown risks and uncertainties and are based on
current expectations, assumptions, estimates and projections about
the Company and the industry. Forward-looking statements involve
inherent risks and uncertainties, including but not limited to: the
Company's ability to continue to innovate and provide attractive
products and services to retain and grow its user base; the
Company's ability to keep up with technological developments and
users' changing demands in the internet industry; the Company's
ability to convert its users into subscribers of its premium
services; the Company's ability to deal with existing and potential
copyright infringement claims and other related claims; the
Company’s ability to react to the governmental actions for its
scrutiny of internet content in China and the Company's ability to
compete effectively. Although the Company believes that the
expectations expressed in these forward-looking statements are
reasonable, it cannot assure you that its expectations will turn
out to be correct, and investors are cautioned that actual results
may differ materially from the anticipated results. Further
information regarding risks and uncertainties faced by the Company
is included in the Company's filings with the U.S. Securities and
Exchange Commission. All information provided in this press release
is as of the date of the press release, and the Company undertakes
no obligation to update any forward-looking statements to reflect
subsequent occurring events or circumstances, or changes in its
expectations, except as may be required by law.
About Non-GAAP Financial
Measures
To supplement Xunlei's consolidated financial
results presented in accordance with United States Generally
Accepted Accounting Principles ("GAAP"), Xunlei uses the following
measures defined as non-GAAP financial measures by the United
States Securities and Exchange Commission: (1) non-GAAP operating
income/(loss), (2) non-GAAP net income/(loss) from continuing
operations, (3) non-GAAP basic and diluted earnings per share for
common shares attributable to continuing operations, and (4)
non-GAAP basic and diluted earnings per ADS attributable to
continuing operations. The presentation of the non-GAAP financial
information is not intended to be considered in isolation or as a
substitute for the financial information prepared and presented in
accordance with GAAP.
Xunlei believes that these non-GAAP financial
measures provide meaningful supplemental information to investors
regarding the Company’s operating performance by excluding
share-based compensation expenses, which is not expected to result
in future cash payments. These non-GAAP financial measures also
facilitate management's internal comparisons to Xunlei's historical
performance and assist the Company’s financial and operational
decision making. A limitation of using these non-GAAP financial
measures is that these non-GAAP measures exclude share-based
compensation charge that has been and will continue to be for the
foreseeable future a significant recurring expense in Xunlei’s
results of operations. Management compensates for these limitations
by providing specific information regarding the GAAP amounts
excluded from each non-GAAP measure. The accompanying
reconciliation tables at the end of this release include details on
the reconciliations between GAAP financial measures that are most
directly comparable to the non-GAAP financial measures the Company
has presented.
_______________________
1 The calculation is based on the number of users
who can assess our premium acceleration services, including
accounts temporarily suspended but excluding sub-accounts and
accounts on a trial basis. In order to promote customer loyalty, we
may elevate the VIP levels of our subscribers if they actively
engage in our services, for example, frequently participating in
reviewing and rating of our products. Once upgraded to certain
higher VIP levels, our subscribers may be offered additional
independent accounts, internally termed as sub-accounts. Such
sub-accounts allow users to access to our premium acceleration
services, at no additional charges. Average revenues per subscriber
refer to subscription revenues for the quarter divided by the
number of subscriber as of the quarter end.
|
XUNLEI
LIMITED |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
(Amounts expressed in thousands of USD, except for
share, per share (or ADS) data) |
|
September
30, |
December
31, |
|
2017 |
2016 |
|
US$ |
US$ |
Assets |
|
|
|
|
|
Current assets: |
|
|
Cash
and cash equivalents |
152,176 |
|
199,504 |
|
Short-term investments |
205,487 |
|
181,960 |
|
Accounts receivable, net |
29,570 |
|
14,536 |
|
Inventories |
475 |
|
374 |
|
Deferred tax assets |
- |
|
1,221 |
|
Due
from related parties |
1,076 |
|
1,097 |
|
Prepayments and other current assets |
8,180 |
|
13,593 |
|
Total current assets |
396,964 |
|
412,285 |
|
|
|
|
|
|
Non-current assets: |
|
|
Long-term investments |
43,910 |
|
40,792 |
|
Deferred tax assets |
8,135 |
|
3,272 |
|
Property and equipment, net |
23,932 |
|
21,016 |
|
Intangible assets, net |
5,265 |
|
10,746 |
|
Goodwill |
21,424 |
|
20,497 |
|
Other
long-term prepayments and receivables |
421 |
|
1,187 |
|
Total assets |
500,051 |
|
509,795 |
|
|
|
|
|
|
Liabilities |
|
|
Current liabilities: |
|
|
Accounts payable |
46,240 |
|
33,376 |
|
Due
to a related party |
14 |
|
45 |
|
Deferred revenue and income, current portion |
27,487 |
|
24,532 |
|
Income tax payable |
4,552 |
|
2,321 |
|
Accrued liabilities and other payables |
36,875 |
|
33,131 |
|
Total current
liabilities |
115,168 |
|
93,405 |
|
|
|
|
Non-current
liabilities: |
|
|
Deferred revenue and income |
3,886 |
|
4,082 |
|
Deferred tax liability, non-current portion |
- |
|
635 |
|
Due
to related parties, non-current portion |
4,686 |
|
4,537 |
|
Other
long-term payable |
915 |
|
886 |
|
Total liabilities |
124,655 |
|
103,545 |
|
|
|
|
Equity |
|
|
Common shares (USD0.00025 par value, 1,000,000,000 shares
authorized, 368,877,209 shares issued and 330,545,000 shares
outstanding as at December 31, 2016; 368,877,209 issued and
332,708,795 shares outstanding as at September 30, 2017) |
83 |
|
83 |
|
Additional paid-in-capital |
459,597 |
|
453,347 |
|
Accumulated other comprehensive loss |
(8,652 |
) |
(13,629 |
) |
Statutory reserves |
5,132 |
|
5,132 |
|
Treasury shares (38,332,209 shares and 36,168,414 shares as at
December 31, |
9 |
|
9 |
|
2016
and September 30, 2017, respectively) |
Accumulated deficits |
(78,665 |
) |
(36,704 |
) |
Total Xunlei Limited's shareholders'
equity |
377,504 |
|
408,238 |
|
Non-controlling
interests |
(2,108 |
) |
(1,988 |
) |
Total liabilities and shareholders'
equity |
500,051 |
|
509,795 |
|
|
|
XUNLEI LIMITED |
Unaudited Condensed Consolidated Statements of
Income |
(Amounts expressed in thousands of USD, except for
share, per share (or ADS) data) |
|
|
Three months ended |
|
Sep 30, |
Sep 30, |
Jun 30, |
|
2017 |
2016 |
2017 |
|
US$ |
US$ |
US$ |
Revenues, net of rebates and discounts |
47,318 |
|
40,928 |
|
41,519 |
|
|
|
|
|
|
|
|
Business taxes and surcharges |
(262 |
) |
(205 |
) |
(238 |
) |
Net
revenues |
47,056 |
|
40,723 |
|
41,281 |
|
Cost
of revenues |
(28,790 |
) |
(21,088 |
) |
(24,228 |
) |
Gross profit |
18,266 |
|
19,635 |
|
17,053 |
|
|
|
|
|
Operating expenses |
|
|
|
Research and development expenses |
(16,023 |
) |
(17,836 |
) |
(15,425 |
) |
Sales
and marketing expenses |
(5,788 |
) |
(5,027 |
) |
(4,623 |
) |
General and administrative expenses |
(13,299 |
) |
(7,413 |
) |
(8,262 |
) |
Impairment of assets |
(13,557 |
) |
- |
|
- |
|
Total operating expenses |
(48,667 |
) |
(30,276 |
) |
(28,310 |
) |
|
|
|
|
Operating loss |
(30,401 |
) |
(10,641 |
) |
(11,257 |
) |
Interest income |
399 |
|
417 |
|
485 |
|
Interest expense |
(60 |
) |
(60 |
) |
(60 |
) |
Other
income, net |
2,068 |
|
1,421 |
|
1,648 |
|
Share of
loss from equity investee |
(75 |
) |
(4 |
) |
(140 |
) |
Loss from continuing operations before income
taxes |
(28,069 |
) |
(8,867 |
) |
(9,324 |
) |
Income tax (expenses)/benefits |
2,515 |
|
1,314 |
|
(351 |
) |
Net loss from continuing operations |
(25,554 |
) |
(7,553 |
) |
(9,675 |
) |
|
|
Discontinued operations |
|
|
|
Loss
from discontinued operations before income taxes |
- |
|
- |
|
- |
|
Income tax benefit |
- |
|
- |
|
- |
|
Net loss from discontinued operations |
- |
|
- |
|
- |
|
|
|
|
|
Net loss |
(25,554 |
) |
(7,553 |
) |
(9,675 |
) |
Less:
net profit/(loss) attributable to non-controlling interest |
5 |
|
(18 |
) |
7 |
|
Net loss attributable to common shareholders |
(25,559 |
) |
(7,535 |
) |
(9,682 |
) |
|
|
|
|
|
|
|
|
|
Three months
ended |
|
Sep 30, |
Sep 30, |
Jun 30, |
|
2017 |
2016 |
2017 |
|
US$ |
US$ |
US$ |
Loss per share for common shares, basic |
|
|
|
Continuing operations |
(0.0769 |
) |
(0.0227 |
) |
(0.0292 |
) |
Discontinued operations |
- |
|
- |
|
- |
|
Total
loss per share for common shares, basic |
(0.0769 |
) |
(0.0227 |
) |
(0.0292 |
) |
|
|
|
|
Loss per share for common shares, diluted |
|
|
|
Continuing operations |
(0.0769 |
) |
(0.0227 |
) |
(0.0292 |
) |
Discontinued operations |
- |
|
- |
|
- |
|
Total
loss per share for common shares, diluted |
(0.0769 |
) |
(0.0227 |
) |
(0.0292 |
) |
|
|
|
|
Loss per ADS, basic |
|
|
|
Continuing operations |
(0.3845 |
) |
(0.1135 |
) |
(0.1460 |
) |
Discontinued operations |
- |
|
- |
|
- |
|
Total
loss per ADS, basic |
(0.3845 |
) |
(0.1135 |
) |
(0.1460 |
) |
|
|
|
|
Loss per ADS, diluted |
|
|
|
Continuing operations |
(0.3845 |
) |
(0.1135 |
) |
(0.1460 |
) |
Discontinued operations |
- |
|
- |
|
- |
|
Total
loss per ADS, diluted |
(0.3845 |
) |
(0.1135 |
) |
(0.1460 |
) |
|
|
|
|
Weighted average number of common shares used in
calculating continuing operations: |
|
|
|
Basic |
332,273,676 |
|
331,259,073 |
|
331,069,120 |
|
Diluted |
332,273,676 |
|
331,259,073 |
|
331,069,120 |
|
|
|
|
|
Weighted average number of ADSs used in calculating
continuing operations : |
|
|
|
Basic |
66,454,735 |
|
66,251,815 |
|
66,213,824 |
|
Diluted |
66,454,735 |
|
66,251,815 |
|
66,213,824 |
|
|
|
|
|
|
XUNLEI LIMITED |
Reconciliation of GAAP and Non-GAAP Results (Excluding
discontinued operations) |
(Amounts expressed in thousands of USD, except for
share, per share (or ADS) data) |
|
|
Three months ended |
|
Sep 30, |
Sep 30, |
Jun 30, |
|
2017 |
2016 |
2017 |
|
US$ |
US$ |
US$ |
|
|
|
|
GAAP
operating loss |
(30,401 |
) |
(10,641 |
) |
(11,257 |
) |
Share-based compensation expenses |
2,111 |
|
2,253 |
|
2,172 |
|
Non-GAAP operating loss |
(28,290 |
) |
(8,388 |
) |
(9,085 |
) |
|
|
|
|
GAAP
net loss from continuing operations |
(25,554 |
) |
(7,553 |
) |
(9,675 |
) |
|
|
|
|
|
|
|
Share-based compensation expenses |
2,111 |
|
2,253 |
|
2,172 |
|
|
|
|
|
|
|
|
Non-GAAP net loss from continuing operations |
(23,443 |
) |
(5,300 |
) |
(7,503 |
) |
|
|
|
|
GAAP loss per share for common shares attributable to
continuing operations: |
|
|
|
Basic |
(0.0769 |
) |
(0.0227 |
) |
(0.0292 |
) |
Diluted |
(0.0769 |
) |
(0.0227 |
) |
(0.0292 |
) |
|
|
|
|
GAAP loss per ADS attributable to continuing
operations: |
|
|
|
Basic |
(0.3845 |
) |
(0.1135 |
) |
(0.1460 |
) |
Diluted |
(0.3845 |
) |
(0.1135 |
) |
(0.1460 |
) |
|
|
|
|
Non-GAAP loss per share for common shares attributable to
continuing operations: |
|
|
|
Basic |
(0.0706 |
) |
(0.0159 |
) |
(0.0227 |
) |
Diluted |
(0.0706 |
) |
(0.0159 |
) |
(0.0227 |
) |
|
|
|
|
Non-GAAP loss per ADS attributable to continuing
operations: |
|
|
|
Basic |
(0.3530 |
) |
(0.0795 |
) |
(0.1135 |
) |
Diluted |
(0.3530 |
) |
(0.0795 |
) |
(0.1135 |
) |
|
|
|
|
Weighted average number of common shares used in
calculating: |
|
|
|
Basic |
332,273,676 |
|
331,259,073 |
|
331,069,120 |
|
Diluted |
332,273,676 |
|
331,259,073 |
|
331,069,120 |
|
|
|
|
|
Weighted average number of ADSs used in
calculating: |
|
|
|
Basic |
66,454,735 |
|
66,251,815 |
|
66,213,824 |
|
Diluted |
66,454,735 |
|
66,251,815 |
|
66,213,824 |
|
|
|
|
|
|
|
|
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