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Xunlei Announces Unaudited Financial Results for the Third Quarter Ended September 30, 2016

- Total revenues rose by 22.1% on a year-over-year basis and 7.4% sequentially.

- Cloud computing revenues increased by 131.5% on a year-over-year basis and 26.7% sequentially.

- Mobile advertising revenues increased 26.1% compared to the previous quarter.

SHENZHEN, China, Nov. 09, 2016 (GLOBE NEWSWIRE) -- 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, 2016.

Mr. Sean Zou, Chairman and Chief Executive Officer of Xunlei, commented on the financial results: “We continue to make progress in cloud computing, the most strategic investment for Xunlei. We are particularly pleased with progress in the live videos segment, one of the fastest growing segments for our cloud computing services.”

Third Quarter 2016 Financial Highlights

  • Total revenues were US$40.9 million, a 22.1% increase from the corresponding period of last year and a 7.4% increase from the previous quarter.
  • Subscription revenues were US$23.7 million, a 16.3% increase from the corresponding period of last year and a 4.7% increase from the previous quarter.
  • Online advertising revenues (revenues primarily from mobile advertising1) were US$4.7 million, a 337.3% increase from the corresponding period of last year and a 23.4% increase from the previous quarter.
  • Other internet value-added services revenues (“IVAS”) were US$12.6 million, representing a 4.2% increase from the corresponding period of last year and a 7.4% increase from the previous quarter. IVAS consists of services other than subscription and advertising and includes cloud computing.

1 In the fourth quarter of 2015, the Company started to monetize the mobile traffic through advertising sales and generated its first mobile advertising revenues.

Third Quarter 2016 Results

Total Revenues

Total revenues were US$40.9 million, up 22.1% on a year-over-year basis and 7.4% sequentially. The increase in total revenues on a year-over-year basis was mainly attributable to the growths in revenues from mobile advertising, subscription, and cloud computing.

Subscription: Revenues from subscriptions were US$23.7 million, up 16.3% on a year-over-year basis and up 4.7% sequentially. The increase in subscription revenue was primarily attributable to growth in average revenue per subscriber. The average revenue per subscriber for the third quarter was RMB30.7, up from RMB28.2 of the previous quarter. The subscribers’ number was 5.14 million as of September 30, 2016, down from 5.26 million as of June 30, 2016 and up from 4.94 million as of September 30, 2015.

Online advertising (including mobile advertising): Revenues from online advertising were US$4.7 million, up 337.3% a year-over-year basis and up 23.4% sequentially. Mobile advertising revenue increased 26.1% on a sequential basis.

Other internet value-added services (“IVAS”): Revenues from other internet value-added services (including revenues from cloud computing) were US$12.6 million, up 4.2% on a year-over-year basis and up 7.4% sequentially. Cloud computing revenues grew by 131.5% and 26.7% on a year-over-year and sequential basis, respectively. Online games, however, declined on both periods, bringing down overall IVAS growth rate.

Cost of Revenues

Cost of revenues was US$21.1 million, representing 51.5% of total revenues.

Bandwidth costs: Bandwidth costs were US$15.5 million, representing 37.9% of total revenues, compared with 32.4% in the previous quarter.

Gross Profit and Gross Margin

Gross profit for the third quarter was US$19.6 million, up 1.7% sequentially. Gross margin was 48.0%, compared with 50.6% in the previous quarter.

Operating Expenses

Total operating expenses for the third quarter were US$30.3 million, representing 74.0% of total revenues, compared with 63.2% in the previous quarter.

Research and Development Expenses

Research and development expenses for the third quarter were US$17.8 million, representing 43.6% of total revenues, compared with 34.4% in the previous quarter. The increase on a sequential basis was due to increase in employee compensation and other IVAS development costs.

Sales and Marketing Expenses

Sales and marketing expenses for the third quarter were US$5.0 million, representing 12.3% of total revenues, compared with 13.1% in the previous quarter.

General and Administrative Expenses

General and administrative expenses for the third quarter were US$7.4 million, representing 18.1% of total revenues, compared with 15.7% in the previous quarter.

Operating Loss

Operating loss was US$10.6 million, compared with operating loss of US$4.8 million in the previous quarter. The company continues to invest in a range of new technologies and services, including cloud computing, which is still loss-making.

Loss from discontinued operations was nil in the third quarter of 2016, compared with a loss of US$58,000 in the previous quarter.

Net Loss and Loss Per Share

Net loss from continuing operations was US$7.6 million in the third quarter of 2016, compared with US$4.0 million in the previous quarter. Non-GAAP net loss from continuing operations was US$5.3 million in the third quarter of 2016, compared with a loss of US$2.0 million in the previous quarter.

Diluted loss per ADS from continuing operations in the third quarter of 2016 was US$0.1135. Non-GAAP diluted loss from continuing operations per ADS in the third quarter of 2016 was US$0.0795.

Cash Balance

As of September 30, 2016, the Company had cash, cash equivalents and short-term investments of US$391.4 million, compared with US$432.1 million as of December 31, 2015. The decline in cash equivalents and short-term investments was primarily due to strategic investments the Company made during the period and Company’s on-going share repurchase program.

Guidance for Fourth Quarter 2016

For the fourth quarter 2016, Xunlei estimates total revenues to be between US$38 million to US$43 million, the midpoint of the range representing a year-over-year increase of 15.4%. This estimate represents the 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. US Eastern Time (9:00 p.m. Beijing/Hong Kong Time) on November 10, 2016, 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:10540757

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:10540757
Replay End Date:November 17, 2016

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,
2016 2015
US$US$
Assets
Current assets:
Cash and cash equivalents 202,226 361,777
Short-term investments 189,216 70,328
Accounts receivable, net 15,530 11,266
Inventories 609 480
Deferred tax assets 1,262 689
Due from related parties 2,122 45
Prepayments and other current assets 13,885 13,068
Total current assets 424,850 457,653
Non-current assets:
Long-term investments 38,231 11,319
Deferred tax assets 4,268 8,593
Property and equipment, net 19,878 18,036
Intangible assets, net 11,493 13,433
Goodwill 21,292 21,896
Other long-term prepayments and receivables 1,495 7,431
Total assets 521,507 538,361
Liabilities
Current liabilities:
Accounts payable 33,632 21,736
Due to a related party 46 38
Deferred revenue and income, current portion 27,584 25,113
Income tax payable 2,340 2,470
Accrued liabilities and other payables 27,000 27,379
Total current liabilities 90,602 76,736
Non-current liabilities:
Deferred revenue and income 6,128 5,383
Deferred tax liability, non-current portion 2,772 6,378
Due to related parties, non-current portion 4,487 4,337
Other long-term payable 876 846
Total liabilities 104,865 93,680
Equity
Common shares (USD0.00025 par value, 1,000,000,000 shares authorized, 368,877,209 shares issued and 339,319,115 shares outstanding as at December 31, 2015; 368,877,209 issued and 330,222,545 shares outstanding as at September 30, 2016) 83 85
Additional paid-in-capital 451,681 458,270
Accumulated other comprehensive loss (8,451) (4,152)
Statutory reserves 5,132 5,132
Treasury shares (38,654,664 shares and 29,558,094 shares as at September 30, 2016 and December 31, 2015, respectively) 10 7
Accumulated deficits (29,741) (12,593)
Total Xunlei Limited's shareholders' equity 418,714 446,749
Non-controlling interests (2,072) (2,068)
Total liabilities and shareholders' equity 521,507 538,361


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,
2016 2016 2015
US$US$US$
Revenues, net of rebates and discounts 40,928 38,113 33,510
Business taxes and surcharges (205) (177) (93)
Net revenues 40,723 37,936 33,417
Cost of revenues (21,088) (18,637) (15,752)
Gross profit 19,635 19,299 17,665
Operating expenses
Research and development expenses (17,836) (13,117) (9,235)
Sales and marketing expenses (5,027) (4,999) (3,867)
General and administrative expenses (7,413) (5,969) (6,518)
Total operating expenses (30,276) (24,085) (19,620)
Operating loss (10,641) (4,786) (1,955)
Interest income 417 547 1,291
Interest expense (60) (60) (60)
Other income/(loss), net 1,421 1,659 (2,198)
Share of income/(loss) from equity investee (4) 57 45
Loss from continuing operations before income taxes (8,867) (2,583) (2,877)
Income tax (expenses)/benefits 1,314 (1,459) (407)
Net loss from continuing operations (7,553) (4,042) (3,284)
Discontinued operations
Income/(loss) from discontinued operations before income taxes - (68) 695
Income tax (expenses)/benefits - 10 (1,199)
Net loss from discontinued operations - (58) (504)
Net loss (7,553) (4,100) (3,788)
Less: net loss attributable to non-controlling interest (18) (8) (230)
Net loss attributable to common shareholders (7,535) (4,092) (3,558)
(Loss)/earnings per share for common shares, basic
Continuing operations (0.0227) (0.0120) (0.0091)
Discontinued operations - (0.0002) (0.0015)
Total loss per share for common shares, basic (0.0227) (0.0122) (0.0106)
(Loss)/earnings per share for common shares, diluted
Continuing operations (0.0227) (0.0120) (0.0091)
Discontinued operations - (0.0002) (0.0015)
Total loss per share for common shares, diluted (0.0227) (0.0122) (0.0106)
(Loss)/earnings per ADS, basic
Continuing operations (0.1135) (0.0600) (0.0453)
Discontinued operations - (0.0010) (0.0075)
Total loss per ADS, basic (0.1135) (0.0610) (0.0528)
(Loss)/earnings per ADS, diluted
Continuing operations (0.1135) (0.0600) (0.0453)
Discontinued operations - (0.0010) (0.0075)
Total loss per ADS, diluted (0.1135) (0.0610) (0.0528)
Weighted average number of common shares used in calculating continuing operations:
Basic 331,259,073 335,716,857 337,070,061
Diluted 331,259,073 335,716,857 337,070,061
Weighted average number of ADSs used in calculating continuing operations :
Basic 66,251,815 67,143,371 67,414,012
Diluted 66,251,815 67,143,371 67,414,012

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,
2016 2016 2015
US$US$US$
GAAP operating loss (10,641) (4,786) (1,955)
Share-based compensation expenses 2,253 2,033 2,627
Non-GAAP operating income/(loss) (8,388) (2,753) 672
GAAP net (loss)/income from continuing operations (7,553) (4,042) (3,284)
Share-based compensation expenses 2,253 2,033 2,627
Non-GAAP net (loss)/income from continuing operations (5,300) (2,009) (657)
GAAP (loss)/earnings per share for common shares attributable to continuing operations:
Basic (0.0227) (0.0120) (0.0091)
Diluted (0.0227) (0.0120) (0.0091)
GAAP (loss)/earnings per ADS attributable to continuing operations:
Basic (0.1135) (0.0600) (0.0453)
Diluted (0.1135) (0.0600) (0.0453)
Non-GAAP (loss)/earnings per share for common shares attributable to continuing operations:
Basic (0.0159) (0.0060) (0.0013)
Diluted (0.0159) (0.0060) (0.0013)
Non-GAAP (loss)/earnings per ADS attributable to continuing operations:
Basic (0.0795) (0.0300) (0.0063)
Diluted (0.0795) (0.0300) (0.0063)
Weighted average number of common shares used in calculating:
Basic 331,259,073 335,716,857 337,070,061
Diluted 331,259,073 335,716,857 337,070,061
Weighted average number of ADSs used in calculating:
Basic 66,251,815 67,143,371 67,414,012
Diluted 66,251,815 67,143,371 67,414,012


CONTACT: IR Contact: Xunlei Limited Email: ir@xunlei.com Tel: +86 755 26035888-8893 Website: http://ir.xunlei.com

Source:Xunlei Limited