LightInTheBox Holding Co., Ltd. (LITB) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Third Quarter 2020 Earnings Conference Call sold LightInTheBox Holding Company Limited. Today's conference is being recorded. At this time, I'd like to turn the call over to Mr. Tip Fleming for opening remarks and introductions. Please go ahead, sir.

Thank you, operator. Hello, everyone, and welcome to LightInTheBox's Third Quarter 2020 Earnings Conference Call. The company's earnings results were released earlier today and are available on the company's IR website as well as through PR newswire. Today, you will hear from LightInTheBox's CEO, Mr. Jian He, who will give an overview of the company's strategies and recent developments, followed by Ms. Yuan Jun Ye, the company's Chief Financial Officer, who will go over the financial results. Together with them today is Ms. Wenyu Liu, the company's Chief Growth Officer. All will be available for Q&A at the end. Before we proceed, I would like to remind you of the safe harbor statement. Please note that the discussion today may contain certain forward-looking statements made under the safe harbor provisions of the U.S. Securities 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 the company's current expectations. To understand the factors that could cause results to materially differ from those in the forward-looking statements, please refer to the company's Form 20-F filed with the Securities and Exchange Commission on May 1, 2020. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. With that, I'd like to turn the call over to Mr. Jian He. Please go ahead.

Thanks, Steve, and thank you, everyone, for joining us today. We are pleased to report another solid quarter, as total revenue reached $100 million, up 67% year-over-year, in line with our prior guidance. We continue to see healthy demand of our value for money products across the regions that we operate, including North America, Europe and Southeast Asia. Benefiting from our consistent efforts to optimize our supply chain and product mix, we maintained our gross margin at a healthy level, achieving 43% during the quarter compared with 42% the same period of last year. We maintained profitability, net income for the quarter was at $7.3 million. Our stated financial performance reflects the successful execution of our strategy as we better position ourselves in the [indiscernible] and commodity cross-border in commerce. We [ relent ] in this, we focused on a number of key initiatives. For example, optimizing product and category mix, enhancing supply chain management and improving customer satisfaction to increase new and repeat matches on our platform. Best to our supply chain management, situation in -- from our commodity and advantages in supply chain has always been pursued ours, providing over each consumers with value for money products is the foundation of our business expansion. Therefore, we continue to deepen our relationship with premium suppliers and it steadily increased our order volumes. So as to continue to reduce costs, while ensuring product quality, this cost saving benefit customers, thereby enhancing the commodities of our products. Second, we continue to focus on variety and the relevance, our [ proform ] is committed to providing consumers with a full range of products, including apparel of hospital [indiscernible] towels and the hobbies products in the center. So as to provide one-stop shopping experience. In addition, we continue to capitalize more cross-sale opportunities, not only at least allow us to track sales from each shopper, thus encouraging customers' lifetime value but also enhance long-term customer relationships and improves our operational condition. Third, while we continue to drive revenue growth, we also maintained a reasonable [ letter ] of operating expenses. We have built up a healthy and solid foundation for future growth like on the heels of achieving [indiscernible] quarters of GAAP profitability for the third quarter of 2019. Looking ahead, we expect to continue to achieve sustainable and profitable growth. For cross-border in commerce, the strongest sales season has [ revived ], we have loaded -- they also called that [ landing ] your highly affecting some countries and regions. Consumer demand for value for money products is still strong. Therefore, we demand optimal speaker about hard in season. I will now hand the call over to Yuan Jun to go through the financial for the quarter.

Thank you, Mr. He, and thank you, everyone, for joining the call. I will now review our financial results for the -- of the third quarter. Let me remind you that all numbers quoted are in U.S. dollars. Total revenue was $100 million, up 67% year-over-year from $59.9 million in the same quarter of 2019. This was mainly driven by strong growth of product sales, which were $95.4 million versus $58.1 million in the same period in 2019 and growth in services and others, which were $4.6 million increased 161.6% year-over-year. Gross profit was $43.1 million compared with $25.3 million during the same period last year. Gross margin was 43.1% compared with 42.3% in the same quarter of 2019, primarily due to our continued efforts to optimize the supply chain and product mix. Total operating expenses in the third quarter were $41.5 million compared with $25.7 million during the same quarter of 2019. The increase was primarily due to an increase in selling and marketing expenses. Operating expenses, fulfillment expenses were $6.7 million compared with $6.8 million in the same quarter of 2019. As a percentage of total revenues, fulfillment expenses were 6.7% compared with 11.3% in the same quarter of 2019 and 6.5% in the second quarter of 2020. Selling and marketing expenses were $26.9 million compared with $12.4 million in the same quarter of 2019. As a percentage of total revenue, selling and marketing expenses were 26.9% compared with 20.8% in the same quarter of 2019 and 23.3% in the second quarter of 2020. G&A expenses were $7.9 million compared with [ $6.5 million ] in the same quarter of 2019. As a percentage of total revenue, G&A expenses were $7.9 million compared with $10.8 million in the same -- 10.8% in the same quarter of 2019 and 6.6% in the second quarter of 2020. Included in the G&A expenses, R&D expenses were $3.5 million compared with $4.9 million in the same quarter of 2019 and $3.3 million in the second quarter of 2020. Adjusted EBITDA, which represents a gain or loss from operations before the share-based compensation expense, change in fair value of convertible profit note, interest income, interest expense, income tax expense and depreciation and amortization expenses, was $12.7 million in the third quarter of 2020 compared with [ $0.5 million ] in the same quarter of 2019. Net income was $7.3 million compared with $10 million in the same quarter 2019. Net income per ADS was $0.07 compared with $0.50 in the same quarter of 2019. As of September 30, 2020, we had cash and cash equivalents, and restricted cash of $48.2 million compared $55 million with as of June 30, 2020. For the fourth quarter of 2020, based on current information available and business seasonality, we expect net revenue to be between $120 million and $135 million, representing a growth rate between 61% and 81% in compared with the fourth quarter of 2019. This concludes our prepared remarks. At this point, we are ready to take some questions. Operator?

[Operator Instructions] Your first question comes from the line of [ Mavi Lason ].

A nice quarter and the forward guidance is attractive also. I got a question for you. Your sales have done extremely well versus previous years. And I think maybe more people are buying online because of COVID, certainly that's the case with U.S. race to online retailers. But has there been a product mix that has accounted for increased sales? I mean, have you -- your business as your -- I guess, your -- the products that you're selling as it attracted more buyers? And is that one of the reasons why your sales have done so well?

Thank you for the question. Allow me to introduce myself first. This is Wenyu Liu, I'm the CGO of LightInTheBox. Appreciate you're asking this question. First of all, yes, this is a good quarter, and we do see that our sales revenue increased very healthy for the past 2 quarters. And in terms of product mix, right now, LightInTheBox is focusing on those products -- those consumer products that can satisfy customers' daily demand like serving home and [ garden ], sports-related products. So in terms of product mix, I believe this is not particularly cater for COVID period, but we do see that these products can have a long run that can service by customers' demand.

Okay. And I see that your cash balance, which had grown in the second quarter, declined somewhat in the third. Is that seasonal? Or is there a reason for that since your sales continue to do well?

This is seasonal, you said?

I'm sorry, it's seasonal?

It is seasonal.

Got you. Okay. And -- okay. That's -- and finally, your company has been public for many years, I remember when you went public, frankly. And it's nice to see that you've got some very strong growth that has helped your stock as well. But is there any research coverage that your company enjoys so that more investors can be aware of your company's success?

Yes, we are in the preparation of having all the [indiscernible] to make more investors understand our business well.

Your next question comes from [ David Su ] from Trust China.

This is David from Trust China. There are 2 questions. The first question is, I'm just curious about the Europe and North American market. Would you eliminate the business performance of the company in these 2 major areas during the recent quarter? And the second question is, how much percentage of these 2 areas have contributed to the total revenue in recent quarters?

Thank you for your question. Let me answer your first question. And as mentioned by Mr. He, we have been working on our supply chain and keep on providing customers more variety and value for money products. So in fact, during the past few quarters, all the markets, all the regions are growing very, very healthily. Of course, in terms of North American and Europe markets are the 2 key markets that we do see very steady growth. And your second question is how many percent these 2 regions actually contributed to our total revenue? About 2/3, roughly.

[Operator Instructions] As there are no question. I'll now hand the call back to Mr. Fleming for his closing remarks. Please go ahead.

Thank you. This concludes our third quarter 2020 earnings conference call. Thank you for your participation and ongoing support of LightInTheBox. We look forward to providing updates on the business in the coming weeks and months ahead. Have a good day.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.