Good morning and thank you for standing by for Xunlei's Third Quarter of 2018 Earnings Conference Call. At this time all participants are in listen only mode. After management’s presentation there’ll be a question-and-answer session. Today's conference call is being recorded. I would now like to turn the call over to your host today, Ms. [Charlene Hue], IR Manager of Xunlei.

Thank you. Good morning, and good evening. Welcome to Xunlei third quarter of 2018 earnings call. I'm [Charlene Hue], Investor Relations Manager at Xunlei. With me today on the call are Mr. Lei Chen, Chief Executive Officer; and Mr. Eric Zhou, Chief Financial Officer. Today's conference call is being recorded, and a replay of the call will be available on our IR website following the call. Our earnings press release was distributed earlier today and is now also available on our IR website. Before we get started, please note that the discussions today will contain certain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to the risk and uncertainties that may cause actual results to differ materially from our current expectations. Please refer to our SEC filings for more detailed descriptions of the risk factors that may affect our results. We do not assume any obligations to update any forward-looking statements, except as required under applicable laws. During this call, we will refer to both GAAP and non-GAAP financial measures and the non-GAAP measures are reconciled to the comparable GAAP measures in the table attached to our earnings press release, which can also be found on our website. Please note that all numbers are in U.S. dollars, unless otherwise stated. Before starting the question-and-answer session, I would now turn the call over to our CEO, Mr. Lei Chen, for prepared remarks.

Good morning, and good evening, everyone. Thank you all for joining our Third Quarter of 2018 Earnings Conference Call today. Let me first provide some general information on our financial results of this quarter. Our total revenue was $45.3 million, representing an increase of 1.1% year-over-year. We significantly increased gross margin to 52.7% in the third quarter of 2018 from 35.5% in the same period last year. And the gross profits in the third quarter of 2018 were $23.8 million compared with $15.9 million in the same quarter last year. The improved gross profits were mainly due to changes in the product mix, where sales of higher-margin products accounted for a larger percentage of total revenue than the same period last year. Net loss was $15.8 million compared with a net loss of $25.6 million in the third quarter of 2017. Before we go through the performance of our major business segments, I'd like to summarize our recent major corporate developments. During the quarter, we established a strategic partnership with Newland Hi-Tech Group Corporation Limited. Newland Group is a highly respected company with several subsidiaries, including a listed company in China. It is a leading international provider of integrated electronic payment service and one of the top global suppliers of POSTs, point of service terminals. Newland also works on national projects and participating developing China's digital economy. With this partnership, we will explore a variety of opportunities for large-scale blockchain applications together. And we think this will give us opportunities to further develop our leadership in blockchain technology. Subsequent to the strategic partnership, we have further restructured operations of LINK token program. With this move, we will put more focus on research and development of the underlying blockchain technology and infrastructure such as ThunderChain and ThunderChain File System. The third…

Thank you, Lei. Hello, everyone, and once again, thank you for joining Xunlei's Third Quarter of 2018 Conference Call. And now, I'd like to go through the details of our financial results. Our total revenues were $45.3 million, representing an increase of approximately 1.1% as compared with the same period last year. Revenues from cloud computing and Internet value-added services were at $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 $19.1 million, representing a decrease of 8% on a year-over-year basis. The year-over-year decrease in subscription revenues was mainly attributable to several factors. First, RMB depreciated against the U.S. dollars during the period; secondly, decreased number of subscription members; and finally, the impact of foreign exchange and membership was partially offset by increased average revenue per subscriber. The average revenue per subscriber for the third quarter of 2018 was RMB38.5 and increase from RMB33.2 for the same period last year. The number of subscribers were 3.4 million as of September 30, 2018, decreased from 4.18 million as of September 30, 2017. Revenues from online advertising were $6.4 million, representing an increase of 11.3% on a year-over-year basis, mainly due to increased demand for our mobile advertising business. Cost of revenues were $21.2 million, representing 46.8% of our total revenues. The decreased amount of cost of revenues was mainly due to reduced bandwidth costs. Bandwidth costs in the third quarter of 2018 were $10.2 million, representing 22.6% of our total revenues compared with $17.1 million or 38.2% of the total revenues in the same period last year. The decrease was mainly attributable to the use of crowd source bandwidth capacity. The remaining cost of revenues was largely revenue-sharing costs for our growing live streaming…

[Operator Instructions] We have our first question from the line of Chang Wei. Please go ahead.

[Foreign Language]

Okay, the first question is whether the management is satisfied with this quarter's financial performance? And whether there is plan to improve financial performance for the coming quarters? In this quarter, we're seeing reduced enthusiasm from both investors and consumers in blockchain. This has affected part of our business performance, impacted our short-term financial performance especially in the sales of OneThing Cloud product. However, we remain confident of the long-term prospect of the blockchain technology as well as our ability to continue to perform well in this particular domain. We will continue to innovate our products and enhance customer experience. We believe customers will then tender interest in OneThing Cloud in the foreseeable future. The second question Mr. Chang asked was what is management's perspective on OneThing Cloud sales decline and whether there is decline in the online units? If it is true that OneThing Cloud's sales did decline in this quarter, but the online -- number of online units of OneThing Cloud is very steady. The reasons for the decline in OneThing Cloud sales, I've just mentioned before, it is true that we're seeing reduced enthusiasm from investors and consumers in the blockchain space. But again, we're confident that for the long-term, we'll be able to continue our progress in the blockchain industry -- in the blockchain space. The third question was how we evaluate the value of OneThing Cloud, the large number of OneThing Cloud that has been online and -- for the past year? So OneThing Cloud is a very important component of our cloud computing business and is our -- it is our first application and endeavor in blockchain application domain. It is a pretty large-scale blockchain application indeed. The distributed OneThing Cloud collected redundant computing resources from the society and provided the basis of our…

I will now take the next questions from the line of [Steven Chen].

My first question is regarding your partnership with the Newland Group. And can you elaborate more on your opinion for this partnership? And my second question is regarding about company's growth. Do you have any plans to explore the growth opportunities overseas for blockchain?

Xunlei is a technology company and have always been perceived by our users as a company who has very strong technological capabilities. By partnering with Newland and restructuring our LINK token business, we will be fully committed to becoming a dedicated provider of the underlying blockchain technology and infrastructure such as ThunderChain and the ThunderChain File System. We're also working together with our partners to leverage these technologies and to explore further applications of blockchain technology. Newland Group is a highly respected company with several subsidiaries, including a listed company in China. It is a leading international provider of integrated electronic payments service and one of the top global suppliers of point of service terminals. Newland also works on some national projects and participates in developing China's digital economy. We believe with this partnership, we have opportunity to explore a variety of possible domains for large-scale blockchain application. And we regard Newland as a very reliable and a strategic partner, while Newland realized our solid payment expertise and extensive network. Our expertise in blockchain technology will play a complementary role in bringing blockchain technology into Newland's business. So this is a mutually beneficial partnership. The second question was how we are doing in exploring overseas opportunities. Well, blockchain is a global technology. Many countries put strong emphasis on blockchain technology as part of their long-term development strategies. We're actively seeking opportunities in some of these countries as we are seeing increased demand for blockchain technology in both the public and private sectors in the overseas markets. However, it is still at a very early stage of our exploration and business development in these markets. We will continue to explore potential opportunities and make relevant update as a corporate in the coming days. Again, thank you very much for the questions.

I will now take the next questions from the line of Larry law.

[Foreign Language]

I'll as one thing very quickly. Question to English first, now I'll answer it. [indiscernible] if the blockchain space and the capital market going to [indiscernible] winter and the capital market becomes, the resources become less available, will it affect our operations and will Xunlei need to issue stocks with money? And his second question is, if Renminbi continues to devaluate, will it affect Xunlei's financial strength? I think at the end of the third quarter, we had approximately $331 million in cash and short-term investments. We believe they will enable us to operate for the foreseeable future, and we believe we have very good financial strength to meet any foreseeable changes in the near future. Second is for the evaluation of Renminbi. If it happens, I think it's won't affect us, because out of the $331 million in cash, more than two third of the cash positions are in U.S. dollars. So if Renminbi devaluates, I don't think it will affect our financial strength. On the contrary, it may give us more Renminbi, should we convert them into Renminbi. Thank you.

I'll just add a little bit to the answer. So the second question also addressed the issue of foreign markets. So given that RMB may devaluate, whether or not we can -- whether or not it affect our performance in the foreign market. As Eric has explained, we have very strong cash position in US dollars. So when we come back to business in the overseas market, we don't think it will be affected by positions of RMB, whether it's increased or -- or whether the value increase or decrease. Thank you very much for question.

[Operator Instructions] There are no more questions at this time. May I hand the call back to the management for closing.

Okay. Thank you again for your kind attention and we look forward to speaking with you again next time. Goodbye.