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, 2018.
Third Quarter 2018
Financial Highlights:
- Total revenues were US$45.3 million,
representing an increase of 1.1% from the same period of 2017.
- Cloud computing and other internet value-added services
(“Cloud computing and IVAS”) revenues were US$19.8
million, representing an increase of 8.3% from the same period of
2017.
- Subscription revenues were US$19.1 million,
representing a decrease of 8.0% from the same period of 2017.
- Online advertising revenues (consisting
primarily of revenues from mobile advertising) were US$6.4 million,
representing an increase of 11.3% from the same period of
2017.
- Gross profit was US$23.8 million, representing
an increase of 50.0% from US$15.9 million in the same period of
2017.
- Gross margin was 52.7% in the third quarter of
2018, compared with 35.5% in the same period of 2017.
Recent Developments:
- Formed a partnership with Newland Hi-Tech Group Co., Ltd.,
a leading international provider of integrated electronic payment
service; and as part of the partnership, announced restructuring of
LinkToken operations;
- Entered into a strategic cooperation agreement with People
Daily’s Online to establish a technology innovation laboratory as
part of People Capital’s Blockchain Research Institute; and
- Reward and recognition: selected as one of the 2018 Top 100
internet companies in China by the Internet Society of China and
the Information Center of the Ministry of Industry and Information
of the People’s Republic of China (MIIT); and Shenzhen Onething
Technologies Co., Ltd., one of our operating subsidiaries in China,
was selected as a corporate model for blockchain development
by the Institute of New Economy and Industry of China Academy of
Management Science.
Mr. Lei Chen, the Chief Executive Officer of
Xunlei, stated: “The third quarter of 2018 was a quarter of
continued development and transformation. During the quarter, we
increased investments in shared computing and blockchain, and
deepened the cooperation with our enterprise partners. We believe
blockchain represents a technology capable of changing our lives,
and we strive to develop it in a simple and cost-effective
manner.”
“From historic perspective, most technological
breakthroughs are by no means easy endeavors. Innovation brings us
both challenges and opportunities. We have lately seen reduced
enthusiasm from both investors and consumers in blockchain. But we
are confident of the long-term prospect of blockchain technology
and committed to building a cloud computing and blockchain
infrastructure to benefit all stakeholders.” Concluded Mr.
Chen.
Third Quarter
2018 Financial
Results
Total Revenues1
Total revenues were US$45.3 million, representing
an increase of 1.1% on a year-over-year basis.
Revenues from cloud computing and IVAS combined
were US$19.8 million, representing an increase of 8.3% on a
year-over-year basis. Cloud computing revenues grew by 1.5% on a
year-over-year basis.
Revenues from subscriptions were US$19.1 million,
representing a decrease of 8.0% on a year-over-year basis. The
average revenue per subscriber for the third quarter of 2018 was
RMB38.5, compared with RMB33.2 as of September 30, 2017. The number
of subscribers was 3.40 million as of September 30, 2018, compared
with 4.18 million as of September 30, 2017. The increase in average
revenue per subscriber was mainly attributable to the increasing
popularity of our premium subscription packages.
Revenues from online advertising were US$6.4
million, representing an increase of 11.3% on a year-over-year
basis, mainly due to an increased demand for our mobile advertising
business.
Cost of Revenues
Total cost of revenues was US$21.2 million,
representing 46.8% of our total revenues.
Bandwidth costs were US$10.2 million, representing
22.6% of our total revenues, compared with US$17.1 million or 38.2%
of the total revenues in the same period last year. The decrease
was mainly attributable to an increase in the lower cost
crowdsourced bandwidth capacity obtained through our cloud
computing services.
The remaining cost of revenues mainly consisted of
the manufacturing costs for our OneThing Cloud smart device and the
revenue-sharing costs for our live streaming product.
Gross Profit and Gross Margin
Gross profit for the third quarter was US$23.8
million, representing a year-over-year increase of 50.0%. Gross
margin was 52.7% in the third quarter, compared with 35.5% in the
same period of 2017.
Research and Development
Expenses
Research and development expenses for the third
quarter of 2018 were US$19.7 million, representing 43.4% of our
total revenues, compared with US$15.5 million or 34.6% of our total
revenues in the same period of 2017. The increase was mainly
because we continued to hire employees to strengthen our
competitive position and expand our product and service
offerings.
Sales and Marketing Expenses
Sales and marketing expenses for the third quarter
of 2018 were US$10.0 million, representing 22.1% of our total
revenues, compared with US$5.5 million or 12.2% of our total
revenues in the same period of 2017. The increase was mainly
because we conducted marketing and promotion activities for our
products.
General and Administrative
Expenses
General and administrative expenses for the third
quarter were US$12.4 million, representing 27.3% of our total
revenues, compared with US$13.2 million or 29.5% of our total
revenues in the same period of 2017.
Operating
Income/(Loss)
Operating loss was US$18.2 million, compared with
operating loss of US$31.8 million in the same period of 2017. The
decrease was mainly because we recorded a one-off assets impairment
of US$13.6 million in the same period of 2017.
Net
Income/(Loss)
and
Earning/(Loss)
Per Share
Net loss from continuing operations was US$15.9
million in the third quarter of 2018, compared with a net loss of
US$26.8 million in the same period of 2017. Non-GAAP net loss from
continuing operations was US$14.5 million in the third quarter of
2018, compared with a net loss of US$24.7 million in the same
quarter of 2017.
Diluted loss per ADS from continuing operations in
the third quarter of 2018 was US$0.24, compared with a loss of
US$0.40 in the same period last year.
Cash Balance and
Short-Term Investments
As of September 30, 2018, the Company had cash,
cash equivalents and short-term investments of US$331.3 million,
compared with US$345.0 million as of June 30, 2018. The decrease
was primarily due to the operating loss in the third quarter of
2018.
Guidance for Fourth
Quarter 2018
For the fourth quarter of 2018, Xunlei estimates
total revenues to be between US$40 million and US$45 million, and
the midpoint of the range represents a year-over-year decrease of
approximately 48.4%. 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 14, 2018 (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: |
3997175 |
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: |
3997175 |
Replay End Date: |
November 22, 2018 |
|
|
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
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, |
|
2018 |
|
2017 |
|
US$ |
|
US$ |
Assets |
|
|
|
|
|
|
|
Current
assets: |
|
|
|
Cash and cash
equivalents |
115,845 |
|
233,479 |
Short-term
investments |
215,498 |
|
138,915 |
Accounts receivable,
net |
32,462 |
|
40,632 |
Inventories |
10,384 |
|
3,879 |
Due from related
parties |
1,392 |
|
6,986 |
Prepayments and other
current assets |
9,709 |
|
6,866 |
Held-for-sale
assets |
- |
|
26 |
Total current
assets |
385,290 |
|
430,783 |
|
|
|
|
|
|
|
|
Non-current
assets: |
|
|
|
Long-term
investments |
39,075 |
|
42,741 |
Deferred tax
assets |
5,446 |
|
6,072 |
Property and equipment,
net |
21,254 |
|
24,685 |
Intangible assets,
net |
10,343 |
|
5,511 |
Goodwill |
20,669 |
|
21,760 |
Other long-term
prepayments and receivables |
610 |
|
1,885 |
Total
assets |
482,687 |
|
533,437 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
27,465 |
|
49,819 |
Due to a related
party |
39 |
|
10 |
Deferred revenue and
income, current portion |
28,273 |
|
28,046 |
Income tax payable |
2,691 |
|
3,128 |
Accrued liabilities and
other payables |
42,027 |
|
59,871 |
Held-for-sale
liabilities |
- |
|
822 |
Total current
liabilities |
100,495 |
|
141,696 |
|
|
|
|
Non-current
liabilities: |
|
|
|
Deferred revenue and
income |
2,063 |
|
3,242 |
Due to related parties,
non-current portion |
4,887 |
|
4,737 |
Deferred tax
liabilities |
1,404 |
|
- |
Other long-term
payable |
954 |
|
925 |
Total
liabilities |
109,803 |
|
150,600 |
|
|
|
|
Equity |
|
|
|
Common
shares (US$0.00025 par value, 1,000,000,000 shares authorized,
368,877,209 shares issued and 333,643,560 shares outstanding as at
December 31, 2017; 368,877,209 issued and 335,991,495 shares
outstanding as at September 30, 2018) |
84 |
|
83 |
Additional
paid-in-capital |
465,201 |
|
461,330 |
Accumulated other
comprehensive loss |
(14,954) |
|
(7,031) |
Statutory reserves |
5,132 |
|
5,132 |
Treasury shares
(35,233,649 shares and 32,885,714 shares as at December 31, 2017
and September 30, 2018, respectively) |
8 |
|
9 |
Accumulated
deficits |
(81,627) |
|
(74,526) |
Total Xunlei
Limited's shareholders' equity |
373,844 |
|
384,997 |
Non-controlling
interests |
(960) |
|
(2,160) |
Total
liabilities and shareholders' equity |
482,687 |
|
533,437 |
|
|
|
|
|
|
|
|
XUNLEI LIMITED |
Unaudited Condensed Consolidated Statements of
Income |
(Amounts expressed in thousands of USD, except for share, per
share (or ADS) data) |
|
|
|
|
|
Three months ended |
|
Sep
30, |
|
Jun
30, |
|
Sep
30, |
|
2018 |
|
2018 |
|
2017 |
|
US$ |
|
US$ |
|
US$ |
Revenues, net of rebates and discounts |
45,292 |
|
65,776 |
|
44,810 |
Business
taxes and surcharges |
(264) |
|
(385) |
|
(256) |
Net
revenues |
45,028 |
|
65,391 |
|
44,554 |
Cost of
revenues |
(21,179) |
|
(30,705) |
|
(28,650) |
Gross profit |
23,849 |
|
34,686 |
|
15,904 |
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
Research
and development expenses |
(19,662) |
|
(19,198) |
|
(15,497) |
Sales
and marketing expenses |
(10,030) |
|
(9,515) |
|
(5,456) |
General
and administrative expenses |
(12,358) |
|
(9,707) |
|
(13,216) |
Assets
impairment loss |
- |
|
- |
|
(13,556) |
Total operating expenses |
(42,050) |
|
(38,420) |
|
(47,725) |
|
|
|
|
|
|
Operating income/(loss) |
(18,201) |
|
(3,734) |
|
(31,821) |
Interest
income |
215 |
|
327 |
|
399 |
Interest
expense |
(60) |
|
(60) |
|
(60) |
Other
income/(loss), net |
2,093 |
|
3,818 |
|
2,068 |
Share of
loss from equity investee |
(21) |
|
(44) |
|
(75) |
Income/(loss) from continuing operations before income
taxes |
(15,974) |
|
307 |
|
(29,489) |
Income
tax (expenses)/benefits |
121 |
|
392 |
|
2,728 |
Net income/(loss) from continuing operations |
(15,853) |
|
699 |
|
(26,761) |
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
Income
from discontinued operations before income taxes |
- |
|
- |
|
1,420 |
Gain on
disposal |
- |
|
- |
|
- |
Income
tax expense |
- |
|
- |
|
(213) |
Net income from discontinued operations |
- |
|
- |
|
1,207 |
|
|
|
|
|
|
Net income/(loss) |
(15,853) |
|
699 |
|
(25,554) |
Less:
net profit/(loss) attributable to non-controlling interest |
(25) |
|
3 |
|
5 |
Net income/(loss) attributable to common
shareholders |
(15,828) |
|
696 |
|
(25,559) |
|
|
|
|
|
|
|
|
|
Three months ended |
|
Sep 30, |
|
Jun 30, |
|
Sep 30, |
|
2018 |
|
2018 |
|
2017 |
|
US$ |
|
US$ |
|
US$ |
Earnings/(loss) per share for common shares,
basic |
|
|
|
|
|
Continuing operations |
(0.0472) |
|
0.0021 |
|
(0.0805) |
Discontinued operations |
- |
|
- |
|
0.0036 |
Total
earnings/(loss) per share for common shares, basic |
(0.0472) |
|
0.0021 |
|
(0.0769) |
|
|
|
|
|
|
Earnings/(loss) per share for common shares,
diluted |
|
|
|
|
|
Continuing operations |
(0.0472) |
|
0.0021 |
|
(0.0805) |
Discontinued operations |
- |
|
- |
|
0.0036 |
Total
earnings/(loss) per share for common shares, diluted |
(0.0472) |
|
0.0021 |
|
(0.0769) |
|
|
|
|
|
|
Earnings/(loss) per ADS, basic |
|
|
|
|
|
Continuing operations |
(0.2360) |
|
0.0105 |
|
(0.4027) |
Discontinued operations |
- |
|
- |
|
0.0182 |
Total
earnings/(loss) per ADS, basic |
(0.2360) |
|
0.0105 |
|
(0.3845) |
|
|
|
|
|
|
Earnings/(loss) per ADS, diluted |
|
|
|
|
|
Continuing operations |
(0.2360) |
|
0.0105 |
|
(0.4027) |
Discontinued operations |
- |
|
- |
|
0.0182 |
Total
earnings/(loss) per ADS, diluted |
(0.2360) |
|
0.0105 |
|
(0.3845) |
|
|
|
|
|
|
Weighted average number of common shares used in
calculating continuing operations: |
|
|
|
|
|
Basic |
335,566,140 |
|
334,454,484 |
|
332,273,676 |
Diluted |
335,566,140 |
|
338,706,744 |
|
332,273,676 |
|
|
|
|
|
|
Weighted average number of ADSs used in calculating
continuing operations : |
|
|
|
|
|
Basic |
67,113,228 |
|
66,890,897 |
|
66,454,735 |
Diluted |
67,113,228 |
|
67,741,349 |
|
66,454,735 |
|
|
|
|
|
|
|
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, |
|
Jun
30, |
|
Sep
30, |
|
2018 |
|
2018 |
|
2017 |
|
US$ |
|
US$ |
|
US$ |
|
|
|
|
|
|
GAAP operating
income/(loss) |
(18,201) |
|
(3,734) |
|
(31,821) |
Share-based
compensation expenses |
1,375 |
|
1,281 |
|
2,108 |
Non-GAAP
operating income/(loss) |
(16,826) |
|
(2,453) |
|
(29,713) |
|
|
|
|
|
|
GAAP net income/(loss)
from continuing operations |
(15,853) |
|
699 |
|
(26,761) |
Share-based
compensation expenses |
1,375 |
|
1,281 |
|
2,108 |
Non-GAAP net
income/(loss) from continuing operations |
(14,478) |
|
1,980 |
|
(24,653) |
|
|
|
|
|
|
GAAP
earnings/(loss) per share for common shares attributable to
continuing operations: |
|
|
|
|
|
Basic |
(0.0472) |
|
0.0021 |
|
(0.0805) |
Diluted |
(0.0472) |
|
0.0021 |
|
(0.0805) |
|
|
|
|
|
|
GAAP
earnings/(loss) per ADS attributable to continuing
operations: |
|
|
|
|
|
Basic |
(0.2360) |
|
0.0105 |
|
(0.4027) |
Diluted |
(0.2360) |
|
0.0105 |
|
(0.4027) |
|
|
|
|
|
|
Non-GAAP
earnings/(loss) per share for common shares attributable to
continuing operations: |
|
|
|
|
|
Basic |
(0.0431) |
|
0.0059 |
|
(0.0742) |
Diluted |
(0.0431) |
|
0.0058 |
|
(0.0742) |
|
|
|
|
|
|
Non-GAAP
earnings/(loss) per ADS attributable to continuing
operations: |
|
|
|
|
|
Basic |
(0.2155) |
|
0.0295 |
|
(0.3710) |
Diluted |
(0.2155) |
|
0.0290 |
|
(0.3710) |
|
|
|
|
|
|
Weighted
average number of common shares used in calculating: |
|
|
|
|
|
Basic |
335,566,140 |
|
334,454,484 |
|
332,273,676 |
Diluted |
335,566,140 |
|
338,706,744 |
|
332,273,676 |
|
|
|
|
|
|
Weighted
average number of ADSs used in calculating: |
|
|
|
|
|
Basic |
67,113,228 |
|
66,890,897 |
|
66,454,735 |
Diluted |
67,113,228 |
|
67,741,349 |
|
66,454,735 |
|
|
|
|
|
|
CONTACT: Investor RelationsXunlei LimitedEmail:
ir@xunlei.comTel: +86 755 86338443Website:
http://ir.xunlei.com
________________________________1 Due to the strategic
shift of our operations, we entered into agreement to sell our web
game business in December 2017. According to applicable
accounting standards, assets and liabilities related to web game
business, including comparatives, are reclassified as
assets/liabilities held for sale, while the result related to web
game business, including comparatives, are reported as discontinued
operations. Figures presented in this earning release are
related to continuing operations only and exclude results from web
game business unless indicated otherwise. We believe the
disposal can allow us to better manage our internal resources,
including internal traffic referral and corporate allocation, and
focus on the Company’s current strategy. The disposal was completed
in January, 2018.
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