Good day, ladies and gentlemen and thank you for your patience. You've joined Xunlei's Fourth Quarter and Full Year 2019 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. We will have a Q&A session after a few management remarks. I'd now like to turn the call over to your host Investor Relations Manager, Mr. Charlene Lu.

Thank you, Amber. Good morning and good evening and thank you all for joining us today. We welcome you to this conference call to discuss Xunlei fourth quarter's and full year's of 2019's earnings. For our agenda today, Mr. Lei Chen, our CEO, will provide a brief overview of the key strategy and financial performance. After which, Mr. Eric Zhou, our CFO, will provide additional details on the financial conditions, wrapping up with our financial outlook for the next quarter. We will be happy to take your questions after our management's remarks. Please be limited to three questions at a time, so others can get their question 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 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. Such statements are based on management's current expectations under current market conditions and are subject to the risks and uncertainties that are difficult to predict, which may cause actual results to differ materially from those made in forward-looking statements. Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results. We do not undertake any duty 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 the 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. And with that, let me pass to our CEO, Mr. Lei Chen, for prepared remarks.

Good morning and good evening, everyone. Welcome all of you to our conference call today to discuss our fourth quarter and full year 2019 earnings. I'm delighted to share with you the company's recent achievements and outlook. The results for this quarter show a general improvement compared to the previous quarter's results. In particular, one of the positive trends in this quarter was the consecutive revenue growth of our StellarCloud cloud computing and the related products and services. This growth, along with improved live streaming revenues from enhanced seasonal marketing activities, led to an approximately 18% sequential quarter-over-quarter revenue growth in our cloud computing and other IVAS activities. When compared with the fourth quarter of 2018, the quarterly revenue in this segment grew about 36%. On annual basis, revenue from cloud computing and IVAS declined 31.3%, mainly due to reduced OneThing Cloud hardware and the live streaming revenues, partial offset by a strong growth of our StellarCloud IaaS sales. With strong operational execution, our cloud accelerating business continued its profitability and provided us with stable cash flow. Revenues from subscriptions in the fourth quarter of 2019 were $19.8 million, which is a 2.9% increase from the previous quarter. Our subscriber base as of December 31, 2019, increased from 3.8 million to 4.0 million compared to the previous quarter. In fiscal year 2019, our membership subscription business provided us with stable cash flows and accounted for approximately 45% of our total revenues. Revenues from online advertising did not change much this quarter, which were $3.9 million, representing an increase of 3.9% from the previous quarter. However, for fiscal 2019 this segment was adversely affected by reduced demand from the mobile gaming industry and experienced a decline in revenue of 43.7% on a year-over-year basis. We are seeking ways to diversify our…

Thank you, Lei. Hello, everyone and thank you again for joining Xunlei's fourth quarter and fiscal year 2019 conference call. And now I'll like to go through the details of our financial results and wrap up with our financial outlook for the first quarter of 2020. Total revenues for the fourth quarter of 2019 were $48.3 million, up 10.2% from the previous quarter. The increase in total revenues was mainly attributable to increased revenues from cloud computing and other IVAS business. Revenues from cloud computing and other IVAS combined to $24.6 million, representing an increase of 18% on a sequential basis. This increase was mainly due to increased sales of our cloud computing products and services expanded offerings of our other IVAS services and enhanced seasonal marketing activities for our live streaming platform during the quarter. Revenues from subscriptions were $19.8 million, up 2.9% from the previous quarter. The number of subscribers was four million as of December 31, 2019, up from 3.8 million as of September 30, 2019. The average revenue per subscriber for the fourth quarter of 2019 was RMB35.1, same as that in the previous quarter. Revenues from online advertising were $3.9 million, representing an increase of 3.9% from the previous quarter. Cost of revenues was $30.3 million, representing 62.7% of our total revenues, compared with $24.4 million or 55.8% of our total revenues in the previous quarter. The increase was mainly attributable to increased capacity and sales of our cloud computing products and services. Bandwidth costs in the fourth quarter of 2019 were $17.8 million, representing 36.8% of our total revenues compared with $15.8 million or 36.1% of the total revenues in the previous quarter. The increase was mainly due to an increased capacity of our cloud computing nodes. The remaining cost of the revenues mainly…

Thank you. [Operator Instructions] The first question comes from the line of [Indiscernible] from Nova Hong Kong. Please go ahead. Since we are not getting a response, we will move on to next question. [Operator Instructions] Thank you. Question is coming from Ms. Trista Yang from Noah Hong Kong. Please go ahead.

Hi. Can you hear me?

Yes.

Hi. Okay great. This is Trista Yang from Hong Kong. I have a couple of questions. First you mentioned that because of the novel coronavirus situation business visibility is limited. So can you tell us you have any direct exposure to the epicenter of COVID-19? And how it will affect your business in short-term and long term? And second, revenues from all your product lines declined in 2019 do you expect any growth this year? Thank you.

Thank you very much, Ms. Young. About the situation with coronavirus, we are headquartered in Shenzhen Guangdong province. So we do not have any offices in Wuhan or Hubei province. Our employees today are not personally affected by the coronavirus so far. Our employees started working from home online since February 10 and resumed the normal operation on-site about two weeks ago. In the short term, we have not seen any significant negative impact of the coronavirus on our operations as our users are all over the country. We actually saw some positive impact as part of our business particularly in cloud computing and the subscription business as people stayed at home more. But in the longer term, we are unable to predict any future impact as the coronavirus situation evolves. Ensuring the health and safety of our employees is always our top priority. We are strictly following the guidance issued by the local government authority and provided our employees with masks and other protective equipment and guidance during this period of time, while paying close attention to the development of the virus and will act accordingly to maintain normal operations of the company. As to growth, Xunlei has been dedicated to the distributed computing technologies and is widely recognized in the cloud-accelerated products and services market in China. We lately embarked on transition to shared cloud computing and blockchain to meet individual and enterprise users emerging and changing needs. Comparing to 2018, the decrease in revenue primarily was contributed to the sales of OneThing Cloud hardware product, which we sold very well in 2018, but not – haven't sold a lot of units in the – in 2019. But other aspects of the cloud computing business is growing in particular our bandwidth business has been growing very fast in 2019. We believe shared cloud computing will be an important industry trend and a key driver for our long-term growth. Demand for our cloud computing services remain very strong, driven by our success in steadily growing our enterprise client base. This is reflected in the continued growth of our bandwidth sales over the last several quarters. As I mentioned in the prepared remarks, our sold bandwidth in December was more than doubled as compared with the previous year. Ms. Young, hopefully that answers all of questions?

Thank you very much.

Thank you. Our next question comes from Alex Yu. Please go ahead.

Hi. Are you guys able to hear me?

Yes. Hi, Alex.

Okay. So I am a private investor, and I have a question for you guys. And so my question is what competitive advantage does Xunlei have to help it to become the winner of the next cloud war? And the reason, I'm asking this is as you all know that Xunlei is not the first company investing heavily into the cloud. And the big guys Amazon, Tencent, Alibaba they are investing heavily into this the [Indiscernible] they are investing a lot in the blockchain they invest a lot in the -- I'm not sure if they have invested already in the distributed computing. But I do see they have a lot of tremendous advantage on this. Let's give an example -- for example Alibaba they have a huge network. So for them to sell a hardware for them to use the [Indiscernible] space and then collect them and push it into the enterprise clients, it's very easy for them to do this. So I guess what Xunlei has to -- what do you think that you guys have to help you to win this war because I think a cloud to what I have seen so far is the winner takes off. So if you're a big guy you're fast enough you can get all -- where you can get most of the market share. So I guess that's what my question is.

Thank you very much Alex. If I hear you correctly, you're asking what is the competitive advantage for our cloud computing business? So in the cloud computing business what -- we're providing a very different style or different type of products to the market comparing to the Alibaba and Tencent Cloud and so on. What we are doing is, we're using small hardware devices to collect bandwidth and other computing power that is at people's homes, so we're reusing redundant computing power and using them in such a way that we can provide high-quality cloud computing service as if, we're building our cloud computing network from industry strength bandwidth and competent resources. So our technology will -- allows us to use more distributed, smaller granularity and less reliable computing resources including bandwidth, including storage and CPU and so on to build high-quality industry strength, cloud computing solutions to our enterprise customers. So that has recently developed into a niche market today and we're seeing new companies entering this market. A few years back where -- when we initially launched this product we are -- we need to educate or we need to convince the enterprises that our product is industry's strength and that takes some time. But today I think with our asserted effort this particular market has been established. We are the leader in this market which is providing lower cost cloud computing as a replacement of the -- of a normal if you will cloud computing developed from the Tencent cloud and so on. So that's our strength that's the -- that's what we have so far. So going forward -- sorry -- actually I probably should let you continue with your question please.

No please just go ahead. Yes.

So going forward we will continue to expand our shared cloud computing capacity to realize the benefits of the economies of scale. We look forward to implementing a hybrid development strategy to utilize cloud-sourced uplink capacities to reduce our purchase bandwidth from traditional suppliers. So we have also cooperated with different third-party service providers to help us scale up our cloud computing capacity in China. And ultimately these efforts contributed to a solid StellarCloud sales growth in 2019. I'm not sure whether that completely answered your question, but thank you very much for asking.

Thank you again for answering that. Just as a follow-up question, I do understand that your business model is to collect the idle bandwidth and then you are supply it to enterprise clients. So -- but I guess my question is, do you think the established players especially like Alibaba they are able to replicate your strategy? For example, they have existing network. If they want to sell the hardware, they can sell this hardware to everybody in their network the e-commerce platform they can get everybody to use their own hardware. So that way they can just copy your strategy again. So I guess, do you have any ways to defend these guys?

So we don't comment on other players in the industry and we don't want to think about their strategy. And -- but what we know so far is that the market that we're in today we're the leader in this specific market today. And we have established during the past few years strength in both technology and resource availability, because we have built a significant network of bandwidth capacities and computing devices throughout China. And I think the only way to ensure our success is to continue investment and continually developing our strength both in technology itself as well as the cloud network that we currently -- has already established.

All right. Thank you very much. Yeah, thanks.

Thank you.

Thank you. [Operator Instructions] Well there are no further questions at this time. Presenters, please continue.

All right, that's all for today and thank you again for your kind attention. Please contact us if you have any questions. Have a good day. Thank you. Bye-bye.

This does conclude our conference for today. Thank you for participating. You may all disconnect.