Xunlei - Q4 2025

Transcript

Operator (participant)

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, all participants are in listen-only mode. Please be advised that this conference is being recorded. I would now like to turn the call over to the host, Investor Relations Manager, Ms. Luhan Tang. Please go ahead.

Luhan Tang (IR Manager)

Good morning, everyone, and thank you for joining Xunlei's Q4 and fiscal year 2025 earnings conference call. With me today are Jinbo Li, Chairman and CEO, Eric Zhou, CFO, and Li Li, Vice President of Finance. Our IR website has our earnings press release, supplements our prepared remarks during the call. Today's agenda includes a prepared opening remarks from Chairman and CEO, Mr. Jinbo Li, on Q4 operational highlights, followed by CFO Eric Zhou's presentation of financial results, details of Q4 and the fiscal year before we open up the floor to your questions in the Q&A session. Please note that this call is recorded and can be replayed on our investor relations website at ir.xunlei.com.

Before we get started, I would like to take this opportunity to remind you that the discussion today will contain certain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such 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 made in the forward-looking statements. Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results. Xunlei assumes no obligation to update any forward-looking statements except as required under applicable laws. On this call, we'll 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 statements by Mr. Jinbo Li, 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 full year 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 evolving market dynamics. Now, I'd like to share with you detailed insight about our operations in Q4 2025 and full fiscal year, which underscore 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 underpinned by two key pillars. First, our deeply integrated business ecosystem continues to deliver value and a high proportion of paying subscribers opting for our premium subscription business, which integrates internet browsing, high-speed downloading tool, extensive storage, and value-added features to enhance user engagement and retention. 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 was $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 Onething, 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 Onething's edge computing and CDN services. Meanwhile, Xunlei will reallocate its resources to core growth drivers, subscription, and overseas live streaming. While retaining a minority stake in Onething 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 strength 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, a 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 capital flexibility. To conclude, 2025 has been a transformative year for Xunlei, 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. We remain committed to create long-term value for our shareholders.

With that, I'll now pass the call over to Eric. Eric will give a detailed review of our Q4 and fiscal year financial results.

Naijiang Zhou (CFO)

Thank you, Luhan. Thank you all for participating in Xunlei's conference call today. I will now walk you through our financial results for the fourth quarter and full fiscal year of 2025. Let's begin with the fourth quarter of 2025 results. Total revenues for the fourth quarter were $143.3 million. This represents an increase of 70% compared to the same period last year. This growth was primarily driven by higher revenue from our cloud computing and live streaming businesses. Looking at our revenue streams in more details. Revenues from subscriptions reached $42.1 million, up 22.4% year-over-year. This increase was mainly due to higher demand for our subscription services. Revenues from live streaming and other IVAS were $55.1 million, up 102.8% year-over-year.

This significant growth was driven by the expansion of our overseas audio live streaming business, as well as growth in our advertising business, largely resulting from our acquisition of Hupu. 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% of our total revenues. This compares to $40.4 million or 47.9% of total revenues in the same period of 2024. The increase was mainly due to higher revenue sharing costs for our live streaming business and increased bandwidth costs associated with high demand for our cloud computing services.

Gross profit for the quarter was $61.7 million, an increase of 41.5% year-over-year. Gross profit margin was 43%, compared to 51.7% in the fourth quarter of 2024. While gross profit 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 carry lower gross profit margins. While the proportion of revenues from our higher margin subscription business decreased. Turning to operating expenses, our G&A 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 live streaming business. G&A 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. This is a significant improvement from an operating loss of $20.5 million in the same period of last year. The turnaround was primarily due to the absence of a goodwill impairment 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 Arashi Vision following its IPO in June 2025. On a non-GAAP basis, which excludes the impact of share-based compensation and certain other items, net income for the fourth quarter was $4.8 million, compared to $11.3 million in the same period of 2024. Diluted loss per ADS was $3.64, compared to a loss of $0.16 in the fourth quarter of 2024.

Non-GAAP diluted earnings per ADS were $0.08, compared to $0.18 in the same period last year. Turning to our balance sheet. As of December 30th, 2025, we had cash equivalents, and short-term investments of $305.2 million. This compares to $284.1 million as of September 30th, 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 full year 2025 financial results. For the full year, total revenues were $462.4 million, an increase of 42.5% compared to the previous year. This growth was attributable to revenue increase across all of our major business segments. Breaking down the full year results.

Subscription revenues were $154.8 million, up 15.8% year-over-year, driven by increased demand. Revenues from live streaming and other IVAS 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 advertising business following the Hupu acquisition. Cloud computing revenues were $137.4 million, up 31.4% 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 overseas audio live 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 operating expenses, R&D expenses were $80 million or 70.3% 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 we recorded at the end of 2024. Net 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 ADS were $0.1656 compared to $0.02 in the previous year. Non-GAAP diluted earnings per ADS were $0.30 compared to $0.38 in the previous year. Our year-end cash position remains strong. As of December 31, 2025, we had 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 the proceeds from bank borrowings, partially offset by the payment of the acquisition of Hupu.

Finally, a quick update on our share buybacks. As of December 31, 2025, we had spent approximately $1 million to repurchase about 435,000 ADS during 2025. Since the inception of this program on June 4, 2024, we have spent a total of about $6.5 million on share buybacks. This concludes our prepared remarks for today. Operator, we are now ready to open the line for the questions.

Operator (participant)

Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, if you'd like to ask a question, please press star one. System board will compile the Q&A queue. This will take a few moments. Now we're going to take our first question, and it's from Len of Dundee, a retail investor. Please ask your question.

Speaker 5

Uh,

Luhan Tang (IR Manager)

The investor is asking what's our plan for the cash consideration obtained from the transaction.

Speaker 5

Um,

Luhan Tang (IR Manager)

Mr. Jinbo Li is answering we're gonna 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 cloud acceleration and overseas audio live streaming businesses. Besides that, we also will use the money on the market expansion and the brand promotion aimed at increasing the market share of our products and at the same time optimize the company's operating capital structure and enhance overall operational liquidity. Thank you.

Speaker 5

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

Luhan Tang (IR Manager)

Please ask.

Speaker 5

Okay.

Luhan Tang (IR Manager)

He's asking if the Kingsoft Cloud related party to Xunlei and why you're selling the stake to them.

Jinbo Li (Chairman and CEO)

Yes. We don't have this anymore. The only option is Kingsoft Cloud. 在过去两年，我们可能的一个这个售卖的买卖方。最后的话呢，我们选择金山云，这个主要还是出于的话呢，对于我们来讲，一个是我们的获益是最大化的。另外一个的话呢，就是金山云跟了网心，这个能够有比较多的互补。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，能给网心呢提供更好的一个支持。那个这个会有助于在网心独立之后，增强它的一个市场竞争力和经营业绩。

Luhan Tang (IR Manager)

To answer this question, Mr. Jinbo Li says, Kingsoft Cloud is not the only one option that we're 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 decide to choose Kingsoft Cloud for the two reasons. One is it has the maximum return for Xunlei. The second reason is because Kingsoft Cloud has advantage in the cloud infrastructure and the cloud technology R&D and industry solutions. They will offer support for Onething business development and the contribution to the enhancements for the Onething market competitiveness and operating performance in the future.

Operator (participant)

Excuse me, done. Any further questions? Thank you.

Speaker 5

No. Yep.

Operator (participant)

Dear participants, as a reminder, if you would like to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. Dear speakers, we will just give a moment to our participants to press star one one. Luhan, please be advised, we have another line to ask you the question, and if you don't mind, please, can you announce these participants?

Luhan Tang (IR Manager)

Please go ahead to ask your question.

Operator (participant)

My apologies. This person just put his name in Mandarin, so therefore I cannot even pronounce his name.

Luhan Tang (IR Manager)

Yeah, I tried to speak Mandarin to her, I guess. 你好，请您

Operator (participant)

The line is open.

Luhan Tang (IR Manager)

请藤壶资本的这位投资人提问。

Jinbo Li (Chairman and CEO)

Her line is mute.

Luhan Tang (IR Manager)

I think he's on mute or something.

Operator (participant)

My apologies. Dear participants, with the email, [email protected]. 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.

Luhan Tang (IR Manager)

Okay。

Operator (participant)

Once again, dear participants, if you would like to ask a question, please press star one one. 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. Oh, my apologies. Now we have another question to come through. Would you like to take it?

Jinbo Li (Chairman and CEO)

Yes, please.

Operator (participant)

Of course. Lovely. Just give us a moment. The question comes from the line of Jeff Shang from Stonehill Capital Management. Your line is open. Please ask your question.

Jeff Sheng (Analyst)

Hi there. Congrats on the great results. I just wanted to quickly ask Mr. Jinbo Li, what is the company's plan and the board's plan with the Arashi Vision stake once the lock-up expires? And how should shareholders think about potential shareholder return and the size of potential shareholder return? Thank you.

Jinbo Li (Chairman and CEO)

我能回吗？我代表他问一个。

Luhan Tang (IR Manager)

投资人的问题是想要问一下李金波，我们的减持——减持之后的这个计划，以及怎么来做这股东回报。

Jinbo Li (Chairman and CEO)

我们希望把现金用于研发新技术和探索新领域，以及对公司更有价值的其他领域。我们届时也会全面评估为股东创造价值的可能的方案。届时，我们也会根据公司业务发展和资本的市场状况，决定减持的速度。我们有很多可做的选择，具体就是以我们减持时的公告为准。好，谢谢。

Luhan Tang (IR Manager)

Mr. Jinbo Li answered the first question about, after this investment, how we are gonna 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 may create significant value for the company. At the same time, we will also assess all the feasible options to reward shareholders. We will determine the pace of divesting from Yingxiu based on the company's business development and also the capital market condition at the time. We'll have a lot of options to choose from, so please stay tuned for the disclosure during that time. He actually answered a question about the return.

He said, please stay tuned for the further disclosure during the time.

Operator (participant)

Excuse me, Jeff. Any further questions?

Jeff Sheng (Analyst)

No, that's it for me. Thank you. Thank you very much.

Operator (participant)

Thank you so much. Now we'll take another question. The question comes from the line of [audio distortion]. Your line is open. Please ask your question. Your line is open. Please ask your question.

Luhan Tang (IR Manager)

We cannot hear you.

Operator (participant)

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.

Naijiang Zhou (CFO)

Okay. Well, great. Then we conclude prepared remarks for the conference call, and I think that's all for today. For any, you know, callers, if you have any questions in the future, please, you know, feel free to contact us. Okay. Now we can close this conference. Thank you.

Operator (participant)

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.