• Total Revenue: $18.1 million, a decrease of 4.9% year over year.
• Subscription Revenue: $33.2 million, an increase of 15.6% year over year.
• Cloud Computing Revenue: $25.3 million, a decrease of 14.4% year over year.
• Live Streaming and IVAS Revenue: $21.6 million, a decrease of 16.7% year over year.
• Gross Profit: $40.5 million, an increase of 7.8% year over year.
• Gross Profit Margin: 50.5%, compared to 44.6% in the same period of 2023.
• Operating Loss: $0.2 million, compared to an operating loss of $2.5 million in the same period last year.
• Net Income: $4.4 million, unchanged from the third quarter of last year.
• Non-GAAP Net Income: $4.9 million, compared to $5.5 million in the same period of 2023.
• Cash, Cash Equivalents, and Short-term Investments: $272 million as of September 30, 2024.
• Share Repurchase: $1.5 million spent on buybacks, with 588,025 ADSs repurchased for $1 million.
• Q4 2024 Revenue Guidance: Estimated between $77 million and $82 million.

• Warning! GuruFocus has detected 6 Warning Signs with XNET.

Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Xunlei Ltd (NASDAQ:XNET) achieved continued profitability in Q3 2024 despite a 4.9% decline in total revenues.
• The subscription business saw a 15.6% year-over-year revenue increase, reaching $33.2 million, driven by improved user engagement and premium membership purchases.
• Premium subscribers accounted for 78% of total paying users, up from 60% in the same period last year.
• Gross profit increased by 7.8% year over year, with a gross profit margin of 50.5%, primarily due to the higher weighting of subscription revenues.
• The company has a strong cash position with $272 million in cash, cash equivalents, and short-term investments as of September 30, 2024.

Negative Points

• Total revenues decreased by 4.9% year over year, mainly due to declines in live streaming and cloud computing business revenues.
• Cloud computing revenue declined by 14.4% year over year, facing challenges from intense market competition and regulatory changes.
• Live streaming and IVAS revenue decreased by 16.7% year over year, impacted by the downsizing of domestic audio live streaming operations.
• Operating loss was $0.2 million, although improved from a $2.5 million loss in the same period last year.
• Sales and marketing expenses increased to 14.3% of total revenues, up from 11.3% in the same period last year, due to higher marketing costs for subscription and overseas live streaming businesses.

Q & A Highlights

Q: Can the company sustain its growth trend in the subscription business for future quarters, given the flat sequential growth and the challenge of reaching six million subscribers? A: Eric Zhou, Chief Financial Officer: Our subscription business has maintained growth momentum, with a user base between five and six million. We have seen continuous year-over-year growth in active paying users. The portion of premium subscribers increased, leading to a rise in average revenue per subscriber. We plan to expand marketing channels, improve user benefits, and conduct promotional campaigns to acquire new users, aiming for breakthroughs in our user base.

Q: With recent Chinese government policies to stimulate the stock market, does Xunlei have strategies to enhance its share price and address stock undervaluation? A: Eric Zhou, Chief Financial Officer: We are aware of the favorable policies aimed at boosting investor confidence. We will prioritize business development, continue share buybacks, enhance communication with the capital market, and monitor the market and regulatory environment to adopt necessary strategies, ultimately generating value for shareholders.

Q: What measures are being taken to address the challenges faced by the cloud computing business, given the revenue decline? A: Eric Zhou, Chief Financial Officer: The cloud computing business faces significant challenges due to intense market competition and regulatory changes. We are evaluating options to stabilize this business and minimize the impact of revenue reduction on our total revenues and bottom line.

Q: How is the company planning to leverage its overseas operations to mitigate the impact of domestic business downsizing? A: Jinbo Li, Chairman and CEO: We are expanding our overseas operations, particularly in live streaming, to counterbalance the downsizing of our domestic audio live streaming business. Our new product mix is positioned to tap into existing and new markets, allowing us to explore different avenues while minimizing potential setbacks.

Q: What is the company's outlook for the fourth quarter of 2024 in terms of revenue guidance? A: Eric Zhou, Chief Financial Officer: For the fourth quarter of 2024, we estimate total revenues to be between $77 million and $82 million, with the midpoint representing a quarter-over-quarter decrease of approximately 0.7%. This estimate reflects management's preliminary view and is subject to change.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.