Xunlei Limited
Q4 2020 Earnings Call Transcript

Published: 16 Mar 2021

[Operator:]

Good day, ladies and gentlemen, and thank you for your patience. You’ve joined Xunlei’s Fourth Quarter and Full Year of 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a Q&A session after the management remarks. I would now like to turn the call over to your host, Investor Relations Manager, Ms. Mengnan Gao.

[Mengnan Gao:]

Thank you. Good morning, and good evening. Thank you for joining Xunlei’s fourth quarter and full year of 2020 earnings conference call. Our agenda today Mr. Jinbo Li, our CEO will provide brief overview of our strategies and financial performance. After that Ms. Eric Zhou, our CFO will provide additional details on the financial results and wrap up with our revenue guidance for the first quarter of 2021. We’ll be happy to take your questions after our management remarks. Please limit to two questions at a time. So others can get their question in as well.

[Jinbo Li:]

Good morning, and good evening, everyone. Welcome to Xunlei’s fourth quarter and full year 2020 earnings conference call. Completing the year of 2020 with a strong fourth quarter, we’re happy to share with you the company’s recent developments and outlook. The fourth quarter of 2020 was a quarter of accomplishments and progresses would be the high end of revenue guidance with $50.3 million for the revenue, a 15% growth sequentially. In particular, we have steadily improved the both gross margin and a pretty operational efficiency. As a result, we achieved the profitability in the fourth quarter and ended the quarter with a higher cash position than previous quarter. I believe Xunlei the well-positioned to cope with challenges and capturing growth opportunities. Now, I like to give you a recap of the financial highlights of the fourth quarter and full year of 2020. Our total revenues in the fourth quarter were $50.3 million, representing 15% increased sequentially, which was driven by revenue increases across our business segment. Especially revenues from our cloud computing and other IVAS services grew by 22% sequentially as a result of the revenue demand from our enterprises clients. Revenues for our subscription business reached $20.7 million to a number of operational optimization initiatives. Our online advertising business rebounded with 27.6% sequential increase. The overall gross margin expanded to 53.3% from 51.9% in previous quarter, reaching a record high level for the past three years.

[Eric Zhou:]

Thank you, Jinbo. Hello, everyone. And thank you again for joining Xunlei’s fourth quarter and the full year of 2020 conference call. I’ll go through the details of our financial results and wrap up with our revenue guidance for the first quarter of 2021. Total revenues for the fourth quarter of 2020 were $50.3 million representing an increase of 15% from the previous quarter. The increase was primarily driven by the increase of revenues from each of our major product lines. Revenues from cloud computing and other IVAS combined where $25.9 million, representing an increase of 22% from the previous quarter. The cloud computing revenue was $18.9 million, increasing 20.2% sequentially. The increased cloud computing and other IVAS revenues were primarily due to increased sales of our cloud computing services and the refinement of operating models for our other IVAS services during the quarter. Revenues from subscription were $20.7 million, a 5.5% increase from the previous quarter. The number of subscribers was approximately 3.83 million as of December 31, 2020, compared with 3.75 million as of September 30, 2020. The average revenue per subscriber for the fourth quarter was RMB35.4, a slight decrease from RMB35.9 for the previous quarter. Revenues from online advertising were $3.8 million, representing an increase of 27.6% from the previous quarter. The increase was mainly due to seasonality and optimized operations primarily attributable to the application of precision targeting algorithm. Cost of revenues was $23.3million, representing 46.4% of our total revenues, compared with $21 million or 48.1% of the total revenue in the previous quarter. The increase was mainly due to the increased sales of our cloud computing and IVAS services. Bandwidth costs in the fourth quarter of 2020 were $15.2 million, representing 30.2% of our total revenue, compared with $15.4 million or 35.1% of the total revenues in the previous quarter. The decrease was primarily due to increased capacity of our cloud computing nodes and improved bandwidth procurement.

[Operator:]

Your first question comes from the line of Jing Liao of SinosafeCapital. Please ask your question.

[Jing Liao:]

So the question is about corporate business development. So can the management share some insights about some important aspects of business development in year 2021?

[Jinbo Li:]

So our goal in the New Year is to do business breakthroughs through product innovation. We believe that we are – we have a compelling growth prospect and diverse application scenarios for our 2C business. To achieve this, we have made comprehensive and deep analysis for our users’ behavior and demand to set product strategy. We are considering developing new social and entertainment products as our next move. Meanwhile, we will set sight around selected overseas markets for our incubated new products to pave way for growth. For our cloud computing business, we still try to achieve economic subscale and product growth by technology-powered in computing segment. Our resource tool is still expanding with more nodes and increase node stability through partnerships and technology conversation. Based on our current client base, we will also explore business activities in other vertical sectors in order to acquire more enterprise clients from various fields. Thank you for your question. So next question.

[Operator:]

Your next question comes from the line of Chu Jiu . Please ask your question.

[Unidentified Analyst:]

[Jinbo Li:]

So the question is about our short form video business of the company. So we think that short form video from video sector is one now our business innovation in this year, and we currently, we don’t have made a quiet disclosure about this project. But we will make required enclosure pass on the future and communicate with the investor community. So it’s based on our current portfolio – product portfolio. So we think that’s for short form video is still one promising field and generate synergies in our ways – on our current product portfolio. Thank you for question.

[Operator:]

Your next question comes from the line Trista Yang of VSFG. Please ask your question.

[Trista Yang:]

Hi, this is Trista from VSFG, Hong Kong. So I’d love to congratulate on a good quarter of yours. I have a question about Xunlei headquarters building. What’s the size of this building and what is the total investment for the building?

[Eric Zhou:]

Nice question, Trista. We will try to explore our headquarter building first, approximately 65,000 square meters. And it is total investment budget is about CNY600 million and it is located in the Nanshan District of Shenzhen and we expect to complete the building in the near future and on the budget. Thank you.

[Trista Yang:]

Thank you.

[Operator:]

Your next question, please announce your first and last name and the company you’re calling from. Your line is now open. Please announce your first and last name and the company you’re calling from. Your line is now open. Your next question comes from the line of Steve Chen of Stellar Chain Capital. Please ask your questions.

[Steve Chen:]

Thanks for taking my call. And my question is given the current the feasibility, do you project a profitability or turnaround of the full year fiscal year 2020/2021.

[Eric Zhou:]

As we mentioned in a press release, we have higher expectations for 2021, and we were continued to improve operating efficiency. And at the same time, explore growth and explore growth opportunities, but we do not provide an annual guidance. But we anticipate that this year will be a year of progress and accomplishments. Thank you for your question.

[Steve Chen:]

Thank you. And also a follow-up question regarding the progresses on the blockchain side, so previously you mentioned that there’s a few projects like collaborations with certain university in Guangdong and also some progresses on those like security side. So do you expected you – the company will continue in investing on the blockchain side and to echoing the current progresses of the blockchain and the cryptocurrency as a general.

[Eric Zhou:]

What’s your last question, Steve?

[Steve Chen:]

Yes. Would you expected to keep investing in the blockchain business and to actually echoing to stay in – stay actually in line with the current upbeat trend of the blockchain and the cryptocurrency as a general.

[Eric Zhou:]

Okay, yes. Probably, some of us may know and assume this targeted to develop blockchain products in around 2017 and over the years, it’s a blockchain technology and as soon as some of that have been used for a number of applications, including shared cloud computing, media products, charity fund, copyright publication, supply chain, et cetera. Last year, we launched a blockchain as a service platform with us. To further facilitating blockchain technology to serve the real economy, our best platform is a high performance blockchain technology platform based on our in structure of our some of the chain and with one stop blockchain service solutions, it is designed to free developers from complicated technical issues when deploying and deploying blockchain applications. And we believe there are still a lot need to be done to improve blockchain technology and it will easier to serve our real economy. A couple of months ago at Xunlei and several leading Chinese universities and institutions were awarded a research project on Blockchain and Fintech technology, which was sponsored by the Department of Science and Technology of Guangdong Province. The research project seeks to address a number of technical issues such as data security and user privacy protection in the application of blockchain. We will continue to invest in blockchain technology, research and capability. We also plan to explore other activities in the blockchain space. And we will be happy to share with you our progress in the coming days. Thank you for your question.

[Steve Chen:]

Thank you.

[Operator:]

There are no further questions. I will now turn the call over to the management for the closing remarks.

[Eric Zhou:]

All right. Operator, we conclude today’s conference call and please feel free to contact us if you have any questions. Have a good day.

[Operator:]

Thank you for your participation in today’s conference. You may now disconnect. Good day.