Ladies and gentlemen, thank you for standing by and welcome to the Xunlei's Third Quarter of 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will have a Q&A session after management remarks. I will now turn the conference over to your host today, our IR manager, Ms. Charlene Lu. Please go ahead, Ma'am.

Thank you. Good morning and good evening and thank you all for joining us today. Welcome to Xunlei third quarter of 2019 earnings conference call. I'm Charlene Lu, Investor Relations Manager at Xunlei. With me today are Mr. Lei Chen, our CEO, and Mr. Eric Zhou, our CFO. We will be happy to take your questions after our presentations. Please be limited to two questions at a time, so others can get their questions in as well. Today's conference call is being recorded and a replay of the call will be available on our IR website afterwards. Our earnings press release was distributed earlier today and is now also available on our IR website. Before we get started, please know 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. Such statements are based on management's current expectations under current market conditions and are subject to the risk 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 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. A reconciliation of non-GAAP to the comparable GAAP measures can be found in our earnings press release. Please note that all numbers are in U.S. dollars unless otherwise stated. With that, let me hand over to our CEO, Mr. Lei Chen, for prepared remarks.

Good morning and good evening, everyone. Thank you all for joining us today. Let me start with our recent corporate developments and the financial highlights of the third quarter of 2019. Then Eric will provide more details on the financial results and take you through the guidance for the fourth quarter of 2019. Our total revenue was approximately $43.8 million in this quarter, which is below our quarterly earnings guidance range. This was mainly due to lower than expected subscriptions revenues and the live streaming revenue due to seasonal factors and the lack of promotional activities. However, we are delighted to see that cloud computing revenues remain strong and continue to increase, driven by a growing demand for our shared cloud computing resources. Going forward, we will focus our resources on further building our presence in the cloud computing market where we see high growth opportunities and great potential in accompanying our enterprise clients and their course of development. Xunlei is deeply committed to our strategic initiatives for business development and transformation, and we will continue to advance our mission to empowering individuals through technological innovation and development of a shared cloud computing and the blockchain-based ecosystem. Shared uplink capacities, our valuable resources that we target to commercialize and utilize through technological innovation. Recently our phone-based shared cloud computing smart device, OneThing Cloud mini, went through public beta testing. This device can be easily plugged into use to mobile phones and leverages this phone's idle computing resources including bandwidth, CPUs and storage. Previously, OneThing Cloud mini was a twice a pick -- twice picks a words winner at CES 2019. We also conducted research in developing machine learning and AI models in our shared cloud computing and the blockchain ecosystem. Recently, we were recognized by the first china artificial intelligence…

Thank you, Lei. Hello, everyone and thank you again for joining Xunlei's third quarter 2019 conference call. And now I would like to go through the details of our financial results. Total revenues were $43.8 million, down 8.3% from the previous quarter. Revenues from cloud computing and other IVAS combined to $20.9 million representing a decrease of 7.4% on a sequential basis. This decrease was mainly due to a decline in our other IVAS income from reduced promotional activities and seasonal factors impacting our live streaming revenues. Revenues from subscriptions were 19.2 million, down 9.9% from the previous quarter. The number of subscribers was 3.8 million as of September 30, 2019 compared to 4.3 million as of June 30, 2019. And the average revenue per subscriber was RMB35.1 compared with RMB33.9 in the previous quarter. Revenues from the advertising were US$3.7 million, down 4.4% from the previous quarter. Cost of revenues was US$24.5 million, representing 55.8% of our total revenues. Bandwidth costs in the third quarter of 2019 were US$15.8 million, representing 36.1% of our total revenues, compared with US$12.7 million or 26.6% of the total revenues in the previous quarter. The remaining cost of revenues mainly made up of cloud computing products costs and revenue sharing costs for our live streaming products. Gross profit for the third quarter was US$19.3 million, down 13.6% from the second quarter. Gross margin was 44.1% in the third quarter compared with 46.7% in second quarter. The decrease in gross margin and the gross profit was mainly due to the drop in our subscription revenues. Research and development expenses for the third quarter of 2019 was US$17.6 million, representing 40.1% of our total revenues, compared with US$17.8 million, or 37.3% of our total revenues in the previous quarter. Sales and marketing expenses for the…

Thank you, sir. [Operator Instructions] We have our first question coming from the line of Steve Chang, an Investor. Please go ahead, sir.

Thank you for taking my question. I have two questions. First, have you already generating any material incomes from the blockchain related products, blockchain business. Secondly, based on your current visibility, when do you expected from a company's perspective and also from industry perspective, we can see that we are generating material revenues from the blockchain business. And what are the major roadblocks, major obstacles to reach such a sizable large application blockchain to the real economy? Thank you.

Thank you very much, sir. Let me take this chance to express our view on blockchain and its ability to generate income. Blockchain technology provides many potential business benefits, including greater transparency, enhanced security and improved visibility, increase the efficiency and speed up transactions, and reduce costs and so on. As a integral part of our cloud computing ecosystem, blockchain technology has helped us generate revenues, while our blockchain based products and services such as StellarCloud, OneThing Cloud and ThunderChain Open Platform. As one of the early starters in cloud computing and blockchain, we are dedicated to exploring practical adoptions of blockchain in a number of industries and sectors, and in providing tools, frameworks and guidance and guidelines for blockchain development. So far we have provided for, and as this, dozens of blockchain applications developed. The business model of blockchain services is somewhat, I think it can be categorized or at least very similar to a SaaS deployment for customer. So in the beginning of the project there is a project fee that’s as the -- as part of the development of the application per se. And then in the long run, there's the technical maintenance fee usually charged for a variety of different applications. So we have provided the pricing information on our company's product website, but we don't currently segment the income from blockchain. So far the income from blockchain is -- it has not being very large. Has not become a large portion of the -- of our revenue. So after increased transaction volume, our blockchain projects, however we have not yet generated material revenues for us. We’ve been continually improving the performance of ThunderChain and the proposed multi cryptography algorithms and zero knowledge proof of ThunderChain, which can validate transactions without revealing personal and private information.…

Thank you for the answer. I have a follow-up question. Previously you mentioned blockchain business very similar to the SaaS business model. So is there any number you can disclose here regarding the enterprise cloud customers have already been on ThunderChain?

I’m not sure whether I completely -- can you repeat the question. In Chinese first, then English.

The audio is not very -- its not perfect. I probably missed a couple of words during a sentence. I’m sorry.

Okay. Let me repeat my question. So can you discuss the number of the enterprise class customers who have already been on your ThunderChain?

So the -- so the ThunderChain Open Platform provides blockchain solutions to primarily enterprise customers. We currently don't disclose all the enterprise customers that we have, but in the prepared remarks I’ve talked about a few. For example, the National Computer Network Emergency Response Technical Team, Coordination Center of China, High Link Digital Solutions Corporation Limited, the Copyright Protection Center of China, the Guangdong South New Media Corporation Limited and we also have clients in Thailand, which is also enterprise customers. So all the customers leverage our ThunderChain technology for their enterprise through our ThunderChain Open Platform, those customers are - I think can all be categorized as enterprise or institutional customers. By the way the blockchain technology in Xunlei has two different roles when it comes to revenue generation. The ThunderChain Open Platform, as I said, it is somewhat SaaS business model where we take income from project fees as well as the maintenance fees. But also blockchain technology is part of our shared computing ecosystem. It complements our shared cloud computing system. So it also has helped us to generate revenue from our cloud computing business as well. Hopefully that answers your question?

Yes. Thank you.

Thank you very much.

Thank you, sir. [Operator Instructions] Pardon me, we do not have any further questions at this point. Back to you sir.

With no further questions, I think we will conclude our call today. Thank you very much for your interest in Xunlei.

Thank you, sir. Ladies and gentlemen, that does conclude our conference for today. Thank you all for your participation. You may disconnect now.