Good morning. And thank you for standing by for Xunlei's Third Quarter 2014 Earnings Conference Call. At this time all participants are in listen-only-mode. After managements prepared remarks there will be a question-and-answer-session. As a reminder today's conference call is being broadcast live via webcast. In addition, the replay of the call will be available on our website following the call. Our press release for the third quarter financial results was distributed on November 25, 2014 after market closed Eastern Time and is now available on the Investor Relations section of Xunlei's website ir.xunlei.com. Before we get started, let me review the Safe Harbor Statement regarding this conference call. Please note that the discussion 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 risks and uncertainties that may cause actual results to differ materially from our current expectations. To understand the factor that could cause results to materially differ from those in the forward-looking statements, please refer to our prospectus filed with the Securities and Exchange Commission's on June 24, 2014. We do not assume any obligations to update any forward-looking statements except as required under applicable law. During this call we will be referring to both GAAP and non-GAAP financial measures and the non-GAAP measures are reconciled most result directly comparable to GAAP measures in this tables attached to our earnings release which can be filed on our Investor Relations website. Please note that all numbers are in US dollars unless otherwise stated. Today's conference call is being recorded. I would now like to turn the meeting over to you host today Ms. Vicki Feng [ph] Vice President Finance of Xunlei.

Thank you, operator. Good morning and evening. Welcome to Xunlei's third quarter earnings call. I am Vicki, Finance VP of Xunlei. With me today on the call are Sean Zou, our Chairman and CEO, and Tao Wu, our CFO. Now, I will turn the call over to Sean.

Thank you, Vicki. Good morning and good evening everyone. Thank you for joining us today for our second earnings call as a public company. Let me start by briefly commenting our financial results. Our revenues of $49.2 million where we exceed the guidance range we provided for the street. The results were currently impacted by the current market environment, but we were pleased that we were able to deliver revenues growth both on a sequential basis and on a year-over-year basis. Tom will provide more details on financial results in his section. Now let me again start by briefing you on the top two strategic initiatives for the company. Our mobile initiative through our cooperation with Xiaomi and our continued innovation in Project Crystal both of which are critical to the future growth of Xunlei. Our cooperation with Xiaomi has continued to divest since the end of the second quarter. A few weeks ago our acceleration software was officially adopted by MIUI 6. As you may know, MIUI is strongest operating system for its smartphones and MIUI 6 is the latest version. While sharing software will continue to improve and evolve, the official adoption by MIUI 6 was a milestone for us, both in terms of our product development for the mobile phones and our cooperation with Xiaomi. Our installed base have now reached $28 million of Xiaomi's smartphones. Part of the growth comes from the MIUI 6 launch since the end of October. Let me just be clear, all of the MIUI 6 users comes from system upgrade from MIUI 5 Xiaomi will start to ship new phones, including MIUI 4 with MIUI 6 in near future. However, we are very pleased to notice that the very active user is sure are the MIUI 6 users appears to be…

Thank you, Sean. Good morning and good evening everyone. Again we would like to welcome all of you to our second earnings call, since we became a public company. I would also like to highlight a couple of metrics before we delve into our financials. First of all, our user base. Our user base or MUV as of the end of the September was roughly about 309 million according iResearch. This continues to rank Xunlei as one of the top 10 internet platforms in terms of user traffic. Obviously this will provide us with further monetization opportunities going forward. Second, I would also like to reinforce Sean's earlier comments on our mobile initiatives and Project Crystal, while these initiatives have not produced meaningful financial impact they ARE undoubtedly the two most important strategic initiatives for the company. In terms of financials, all of the growth rates and comparison that are besiding [ph] will be on a year-over-year basis unless indicated otherwise. As Sean mentioned, our revenues for the quarter was $49.2 million which in line with our own guidance range. The current operating environment has obviously impacted our existing businesses, but we were pleased that we delivered both positive growth on a year-over-year basis and sequential basis. Advertising and IVAS revenues both grew offsetting a moderate decline in subscription revenues on a sequential basis. Let me now go through each of the businesses. Subscription revenues continue to be the most important segment for us, representing about 51% of our total revenues. As expected, subscription revenues declined on a sequential by about 1.7%. Number of subscribers at the end of the quarter was $5.1 million, down by about 3% or above 150,000 subscribers on a quarter-over-quarter basis. And quarterly ARPU was RMB29.4 moderately lower than that of the previous quarter. We…

Thank you. [Operator Instructions] Your first question comes from the line of Ella Ji from Oppenheimer. Please ask your question.

Yes. Good evening, Sean and Tom. Thank you for taking my question. So my first question is actually relating to the active users for your – your active users that you have acquired through Xiaomi. What are the primary purposes to use Xunlei when they use their cell phone? You mentioned that apps downloads, are there any other things that they do a lot when they use your app?

Thanks, Ella. I will translate the question for Sean and – or address your question. [Foreign Language]

[Foreign Language]

Yes. Thanks, Ella for question. Let me just make couple of points. One is that as you know our acceleration software is embedded in MIUI 6 operating system. As I mentioned that this past quarter marked a milestone for us because we were officially adopted by MIUI 6 and as an engineer it means a lot because as I mentioned it not only signifies the product development progress that we made, but also our cooperation with Xiaomi. But now in terms of your actual question, once the value add or what's the functionality of our software embedded in the smartphones, and I wanted just to go over on based to value proposition very quickly. One is that, whether on PC or for that matter our mobile devices, Xunlei's core value proposition has always been content delivery in terms of speed, okay, that acceleration. So, what I mentioned on the previous call is that based on the technology that we have adopted we can accelerate download speed anywhere from about 89%, okay. So, in addition to being able to accelerate apps downloads there are number of tasks that users would benefit from the use of a software, for example Max, for example downloading games or system upgrade. I think I may have quoted some figures on the previous call that if you do a system upgrade without software that we have it may take you 20, 25 minutes, but with the software that we have you know, you could probably reduce that to almost by half, to about 10 to 15 minutes. So, let me just wrap my answer. So the value proposition remains the same. The value proposition is access of content in a very efficient manner. So, specifically its speed and acceleration. I hope I've addressed your – some of your questions.

Yes. Thank you. That’s very helpful. Then my second question is relating to international market opportunity. As we know, Xiaomi is expanding to other Asian, other Asian countries. I wonder if you can talk about maybe the market situation in those other countries like India and using this also strong opportunities for Xunlei to also maybe add more users in those Asian countries?

Right. Thanks. I'll translate this question for Sean. [Foreign Language]

[Foreign Language]

Thanks, for your question Ella. That’s an excellent question. Just a couple of points. One is that the cooperation of pre installation agreement we have with Xiaomi is a global agreement. And second is that, if you look at the growth plans for Xiaomi, obviously we don’t want to diverge unnecessary information here. But most of their growth next year at least will be taken place in China. I think it’s about 80% of the growth is in China. So, for Xunlei our focus will first and foremost remain in China for obviously – for obvious reasons. One is that, the size of opportunities at home, and second we have relative competitive advantages, that along the legacy business that we have. But make no mistake about it, as we stabilize the technology, as we demonstrate our value add of our product offering, it is a global agreement with Xiaomi and in the future we look forward to assisting Xiaomi as part of their global expansion as well.

Got it. Thank you again. If I can sneak in one more, and I'll get back to the queue. Relating to your advertising revenue, we are seeing a nice trend-up sequentially. Can you provide some colors and that do you can also expect these advertising revenue will continue to go up in the following quarters? Thank you very much.

Right. If I may, I'll take a stab at the question and then I'll see if Sean will have addition. You're absolutely correct, the ad revenue increased on a quarter-by-quarter basis, I believe by 20%. Let me just explain why it increased. And I've stated this in my script; it grew by essentially two reasons. Number one is seasonality. Third quarter typically is when advertisers allocate a lot of their advertising budget dollars for the year. So there is a seasonality issue there. And second is that, as I mentioned that we continue to invest in content, according to our plan, okay. So let me be clear about it though, in India forecast that we have provided for the fourth quarter of $44 million to $47 million, what has been based in is actually sequential decline of advertising dollars, okay. It’s for several reasons. Number one is that essentially by now we have fairly good visibility of the advertising dollar as the annual budget of these advertisers. So we don’t see that to increase for the fourth quarter. And second, by now content, content market for the entire year essentially is near an end. So we do not expect that to be a growth driver for us, for the fourth quarter. And I – let me pause and see if there are any comments Sean wants to make on that.

No, I don’t have anything to add.

Okay. Operator, next question please?

Thank you. The next question comes from the line of Alex Yao from JPMorgan. Please ask your question.

Hi, good evening everyone. Thank you for taking my question. The first question is on the sales and marketing expense for the quarter, which seems to increase pretty strongly in 3Q. What other areas that you guys are spending, what are the key focus area in terms of investments? Thank you.

Yes. Thanks for that question. I'll take a stab at it, because it’s primarily related to financials. I think most of the increases in sales and marketing as in other fixed cost components comes primarily from a staff, okay. So what we are doing is a number of things. So not only on the sales and marketing side of it for subscription, but for all of the other businesses that we have. But in a nutshell, its staff compensation, as you know that the competition for talent is strong and its entirely coming from mostly staff compensation increases.

What type of staff are you hiring during the quarter?

What type of staff? I think the number of employees – I need to double check the number a little bit Alex. The number of employees doesn’t necessarily increase that much and third quarter is our annual salary increase if you will. So a lot of that is from the annual increase that we implemented early part of August. So it’s fairly broad based, rather than particular area of concentration.

Okay. Got it. The second question is about the monetization initiative on the new user clauses through the Xiaomi cooperation, any initiative you guys are doing or sourcing to the coming quarters? Thank you.

Yes. I'll translate that question for Sean [Foreign Language]

[Foreign Language]

I'll translate Sean's. Yes. Thanks, Alex. It’s a great question. Perhaps I can step back a little bit in terms of our overall strategies before I talk about monetization opportunities. We've said this and we've said this consistently. We have four pronged strategy on our mobility transfer. Number one is really the technology and demonstrate our value add and user experience. So obviously I cannot over emphasize the importance of being accepted as part of MIUI 6 recently. It certainly is a milestone. So that’s the first phase. And the second phase is really to expand our installed base. As I mentioned just now, we've now reached $28 million total installed base and we are quite optimistic about the growth trajectory of that installed base. I believe the Xiaomi plan for next year maybe close to $80 million if not $100 million and most of which is I mentioned earlier in my question, my answer to Ella about 80% will be in China. So installed base, we continue to be very optimistic about this. And the third aspect is really user traffic. So I mentioned that for the MIUI 6 users, we've noticed that actually an elevated user active – active user ratio and my personal take on that is why its more active compared to what we have observe over last three to six months, is that, that once we're actively upgrading to MIUI 6 arguably are the most internet savvy users, therefore our tools, our value add is more obvious to these people, okay. So, acquiring traffic, focusing on active ratio that’s certainly the third focus. And I've said this many times, if you have a killer app, if you have the traffic monetization with come, but that’s not the focus certainly for the next quarter or two. As far as public markets are concerned, we think we want to lay the solid foundation of technology installed base and active ratio before we venture into monetization effort. I hope that answers some of your questions.

Yes, it does. Just quick follow up question. You guys right now have a $28 million user from Xiaomi cooperation, is that number entirely driven by the smartphone user or does that number also includes some of the Xiaomi router or TV user? Thank you.

I'll answer that question. It’s entirely smartphone users, not including other devices.

Okay. Got it. Thank you very much.

Thank you for the question. [Operator Instructions]

I guess operator, if there are no further questions, should we pause for another few seconds or so? End of Q&A

If not, both Sean and I would thank you for your participation. Thanks for you support and we look forward to updating you in a timely basis going forward. Thank you and good evening and good morning.

Thank you very much.

Thank you, ladies and gentlemen. That concludes our conference for today. Thank you for your participation. You may now disconnect the lines.