蘭亭集勢 (LITB) 2014 Q3 法說會逐字稿

Good morning, everyone, and welcome to the LightInTheBox third quarter 2014 earnings conference call.

Today's conference is being recorded.

At this time, I want to turn the call over to Mr. Christian Arnell for opening remarks and introduction.

Please go ahead, sir.

Thank you.

Hello, everyone, and welcome to LightInTheBox's third quarter 2014 earnings conference call.

The Company's third quarter earnings results were released a few hours ago and are available on the Company's IR website as well as PR Newswires' wire services.

Today, you will hear from LightInTheBox's Chairman and CEO, Mr. Alan Guo, who will give an overview of the Company's strategies and recent developments, followed by Mr. Robin Lu, the Company's Chief Financial Officer, who will go over the financial results in more detail.

Before we proceed, I would like to remind you of our Safe Harbor statement.

Please note that the discussion today may contain certain forward-looking statements made under the Safe Harbor provisions of the US 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 factors that could cause the results to materially differ from those in the forward-looking statements, please refer to our Form 20F filed with the Securities and Exchange Commission on April 28, 2014.

We do not assume any obligation to update any forward-looking statements except as required under applicable law.

At this point, I would like to turn the call over to LightInTheBox's Chairman and CEO, Mr. Alan Guo.

Alan, please go ahead.

Thanks, Christian.

Welcome, everyone, to our third quarter call.

We are pleased to report a great quarter with strong performance.

We continue to re-accelerate our top-line growth with net revenues increasing significantly by 45.3% year over year, while our apparel business grew 103.9% year over year.

We improved our marketing efficiency, gained the leverage on G&A cost, and grew more repeat and mobile purchases.

We also made major progress in our overseas logistics operations through which we achieved greater customer satisfaction.

Apparel is a huge market globally and it is also a major category of our business.

We believe it is undergoing a paradigm shift in many ways as companies develop new ways to use the Internet and mobile devices to reach and engage global consumers.

Such a change also means leveraging big data and user generated leads to better source merchandise, and adopting better supply chain integrated marketing vehicles such as the flash sale model, to better manage inventory and supply chain efficiency for the industry.

We believe our strength in big data and supply chain management is an important advantage to help us successfully embrace these trends.

As we articulated before, over the past 12 months we have successfully developed our ready-to-wear apparel business.

We offer global consumers access to a large variety of the emerging or factory brands, providing both great selection and attractive prices.

We have adopted the flash sale model to help our suppliers to clean up their excessive inventory at deep discount, which also help us quickly test a large number of brands to determine if their product styles match our customer base in a scalable way without inventory risk to LightInTheBox.

We also use big data technology and user generated product leads to help vendors improve their merchandising attractiveness.

In addition, ready-to-wear apparel also helped us generate more repeat purchasing for our customers in the wedding dress category.

Our wedding category was also growing year-over-year in Q3, as our investment in the product design team started to pay off with more original proprietary designs being introduced, which has already showed early signs of greater customer attraction.

In Q3, our other general merchandise category also had a faster year-over-year growth rate than Q2.

We believe it was due to a combination of improved overall retail and supply chain management, as well as improved customer acquisition strategy.

Internet, as well as mobile Internet, is a very fast changing industry, especially in terms of where the users go and how to acquire them.

Customer acquisition strategies and capabilities in many ways determine the scalability of our business.

We acquired more customers than ever during Q3 while selling and marketing expenses as a percentage of total net revenues and selling and marketing expenses per customer both decreased.

Social networks are rapidly becoming many people's primary source of information through personalized information feeds.

As we stated before, we have put more emphasis on acquisition channels outside web search, especially in social networks for quite a while, and it's starting to pay off in Q3.

Acquired customer from social networks reached a historic high during the quarter both in absolute and percentage terms.

We also started to develop direct business relationship with companies who have a strong and active user base globally.

For instance, we recently entered into a mobile distribution deal with Baidu Dianxin, a business unit of Baidu.

Mobile Internet is one of the most important forces to shape the future world.

We believe it creates both opportunities and challenges for all Internet companies as it requires more complex technology platforms, different engagement tools and user experiences.

LightInTheBox is striving to become a leader in global mobile e-commerce, which is still in its very early days.

We have increased R&D investment in mobile, and have established a new mobile R&D center, which is working on a number of major android app product launches in Q3.

In Q3, we also launched several upgrades for our iOS products, with an innovative real-time personalized product recommendation engine, which led to a higher conversion rate.

We are very committed to continuously increase our mobile innovation and penetration in the coming quarters.

Customer satisfaction is the ultimate test for an e-commerce company.

Our data shows that the No.

1 customer complaint is product delivery.

This is why we have been very determined to significantly improve our global delivery experience by setting up overseas fulfillment centers that are much closer to our customers in a cost-effective way.

In Q3, our fulfillment center in Europe continued to scale up well to offer European customers, our largest geographic market, faster delivery time and better experience.

We shipped more than 127,000 packages from our self-operating European fulfillment center during the quarter.

And our customer survey data for these packages have shown very encouraging improved customer satisfaction ratings.

We believe our business made significant progress during the quarter as a direct result of our strategic focuses.

The solid execution of our apparel business, development of new customer acquisition channels, innovations on our mobile apps, and improved global logistics infrastructure are important contributing factors.

As I said we live in a very fast changing industry and we believe as a company, LightInTheBox has a "DNA" for fast adaptation to business and industry changes, which will help us to continue to grow and embrace new mega trends in the future.

I will now turn the call to Robin, who will take you through our 2014 third quarter financial results.

Thank you, Alan, and thanks to everybody for joining us on the call.

As I review the financial results, I'd like to remind you that all percentage changes refer to year-over-year unless otherwise noted.

Net revenues increased 45.3% to $99.0 million, primarily driven by strong performance in our apparel category, increasing contribution from repeat customer purchase, and accelerated growth in other general merchandise, as well as mobile commerce business.

Total orders grew 57.1% year-over-year to 2.5 million and the total number of customers who made a purchase in the quarter increased 53.9% to 1.9 million.

Repeat customer purchases accounted for 41.1% of total net revenues, up from 35.0%, while mobile revenue as percentage of total revenue, increased to 26.5% from 21.5% year-over-year and 26.2% from the second quarter of 2014.

Revenue in apparel category was up 103.9% year-over-year to $37.0 million, reflecting the Company's continued success in significantly growing this category.

In between, flash sale model has been playing a more important role to drive business and become integral part of our apparel business.

As a percentage of total net revenues, apparel revenue was 37.4%, compared with 26.6% one year ago.

Revenues generated from other general merchandise increased by 24.0% to $62.0 million.

With quarters of hard strategic execution we started to enjoy accelerated growth in this quarter.

Geographically, revenues from Europe increased 47.6% to $59.1 million, representing 59.7% of total net revenues.

Revenues in North America increased by 57.1% to $20.4 million; revenues from North America accounted for 20.6% of total net revenues.

Revenues from other countries increased by 28.9% to $19.5 million, representing 19.7% of total net revenues.

We experienced unfavorable foreign currency exchange impact this quarter due to the stronger US dollar.

Gross profit was $36.6 million, up 22.6% from $29.9 million and gross margin was 37.0%.

The gross margin change was due to change in product mix and pricing strategy to expand market share and grow our customer base, as well as the impact of stronger US dollar.

Fulfillment expenses increased 56.4% to $5.9 million from $3.8 million, primarily reflecting the increase in sales volume and number of orders fulfilled, as well as ramping up of our overseas fulfillment center.

Fulfillment expenses per order improved to $2.38 from $2.51 from the same quarter of 2014.

As a reminder, fulfillment expenses also include payment processing fees.

Selling and marketing expenses were $25.6 million, compared with $21.6 million, reflecting the Company's efforts to grow its customer base and market share.

As a percentage of total net revenues, selling and marketing expenses were 25.9%, an improvement from 31.7% a year ago, and 27.7% from the second quarter of 2014, reflecting the Company's commitment to optimize online marketing efforts and diversify traffic acquisition channels.

Selling and marketing expenses per order improved to $10.2 from $13.6 a year ago, and from $11.4 from the second quarter of 2014.

Excluding an accrual of $1.0 million charge for the settlement of a class action lawsuit, G&A expenses were $11.2 million or 11.4% of total net revenues, compared with $11.5 million, or 12.9% of total net revenues last quarter, reflecting the growth of the Company's business operations and the Company's commitment to future growth.

This includes $4.1 million in technology investment compared with $3.7 million in the second quarter of 2014.

In total, operating expenses as a percentage of revenue was 44.3% down sequentially from 46.6%, and down from 48.4% a year ago.

On a non-GAAP basis, which excludes the impact of approximately $0.6 million in share-based compensation expense and an accrual of $1.0 million charge for the settlement of our class action lawsuit, net loss attributable to ordinary shareholders was $4.6 million, an improvement of about $1 million over the second quarter of 2014.

Non-GAAP net loss per ADS was $0.09, compared with net loss per ADS of $0.11 last quarter.

As of September 30, 2014, the Company had cash, term deposit and restricted cash of $88.8 million, equivalent to roughly $1.79 per ADS.

On December 16, 2013, the Company announced a share repurchase program to repurchase up to $20 million of its ADS shares.

As of September 30, 2014, the Company had repurchased a total $5.7 million of its ADSs.

For the fourth quarter of 2014, the Company expects net revenues to be between $109 million to $111 million, representing a year-over-year growth rate of approximately 38% to 41%.

These forecasts reflect the Company's current and preliminary view on the market and operational conditions, which are subject to change.

This concludes our prepared remarks.

At this point, we are ready to take some questions.

(Operator Instructions).

Dick Wei, Credit Suisse.

We have seen various ecommerce companies launch a single state campaign on November 11, so can management provide some guidance on what's the traffic impact to LITB?

That's our first question.

And my second question is on the logistics side.

Besides the Europe new logistics center, could management provide some color on your logistic and warehouse building plan in 2015 and 2016?

Thank you very much.

This is Alan.

We actually made a separate press release about the11/11 promotion date, super sale day.

We made $1.9 million of sales in that day, which was a historical high for the Company single day sales.

We did realize that it was not a traditional shopping day for the rest of the world.

It was a Chinese phenomenon to start with, but a number of Chinese retailers who are selling out of China, including LightInTheBox, was trying to make it international, particularly this year.

So we definitely see more attractions from [show person] global to actually participate, which is very encouraging.

But still, we believe the Thanksgiving and the Christmas shopping day would still be the primary dominant, the largest shopping event for the global customers after China.

That's the first question.

The second question, I think the European warehouse was very important because it was the first time we actually self-operate our overseas warehouse and it was actually executed, in many ways, in a flawless way.

We were very successful in establishing this warehouse in Poland and both build backbone logistic solutions from China to Poland, and also our logistic solutions from Poland warehouse to consumers.

We don't actually operate those logistic routes, we actually operate-- we only operate the warehouse -- well, we integrate the logistic route and the warehouse together so it really delivers that interim experience to consumers.

It's much faster than if we deliver directly from China to the European customers.

It's also much more [asset light] in a sense that the products already within the European Union zone, so there's no other frictions or hassles, which was much more smooth from the customer point of view.

So we were very excited about the establishment of that and also very excited about it scaling up.

We definitely have plans to establish more overseas warehouses following this model.

We have plans to open a US warehouse; we are in a final negotiation stage in with some landlords in the States.

I think it's safe to expect them happening the first quarter of 2015.

We also are looking to a possibility for South America, but that probably will be slightly after we successfully operate the US ones.

One thing I want to add is, how we are operating warehouses is very cost effective.

If you look at our Q3 financials, we actually don't have much CapEx, even though we actually were very successful in scaling up our warehouse.

It was due to our model.

We don't actually buy any land; we actually enter leases.

And the location we choose typically are already established warehouses, so there is not too much operate modeling or constructions that need to be put there.

Also, all the software that's used in the warehouse is developed by ourselves, on top of the open source stack, so we don't actually need to pay any third-party major loyalty -- software usage loyalty as well.

So all of those things combined together really give us a very asset light way of establishing physical infrastructures which is very different compared with some other companies.

We think it's a much more asset light way of doing it, so that's my summary of the operation of fulfillment center.

Got it.

Thank you very much for the color.

George Askew, Stifel.

Just a couple of quick questions.

On seasonality, can you address -- you mention the Christmas, Thanksgiving holiday timeframe would be biggest driver, but looking at your product categories ready-to-wear, apparel, wedding, other general merchandise, how does the fourth quarter seasonality affect those categories?

Yes.

So in general, I would say, other than weddings, in general Q4 is a big quarter, but there is more lifting in some categories than others.

Electronics is certainly a very big quarter in Q4; apparel is actually, too.

It's a combination of Christmas shopping season and the fact that the winter clothing is more expensive than summer clothing by nature.

There is some lifting in home decors; some lifting in small accessories; definitely, slowest season for weddings.

The Q1 and Q2 are the top seasons for weddings.

So that's kind of my quick summary of the Q4 in general.

Yes, I just add one part.

Traditionally for weddings, we have slow season in the next half of the year; the first half of the year will be better for weddings.

Yes.

Okay, excellent.

And then on the Baidu arrangement, how does that -- you called it a strategic partnership in the press release.

How does it differ from a normal commercial relationship with mobile ads on distributed mobile apps that is entered into every day?

What's different with this agreement that makes it a strategic partnership?

First of all, the partnership we entered it with Baidu Dianxin, which is a unit of Baidu that is focused on mobile app development and also, and has more than 200 million installment basis outside China.

Secondly, when we refer to the partnership, it's not open platform, so it's a direct relationship between two companies to enter; that's number two.

And number three is, the agreement leaves both of us a lot of potential to exploit [talent] many different ways to expose our app download exposures or product exposures.

So under the agreement, I think both of us can have a lot of opportunity to be creative and in a way, that being how we actually leverage the platform.

Okay, got it.

Thank you for that.

And then just lastly, can you talk about a path to profitability?

We saw the weakness in gross margin due, in part, to the product mix shift, which seems like it may continue, where's the leverage in the model?

When can we see positive EBITDA, positive operating income?

Yes, I can answer this question, George.

Basically, when we look at our model and our position in the market, we think that our premier goal at this moment is to drastically drive up our revenue so that we can have more market share and acquire more customer base.

As you can see our result in the third quarter, we have a high percentage growth in both orders and customer base.

I think that, of course, is our priority because you know this market is in the very early stage and very fragmented, we must build up our position for the future.

About the gross margin, when we look into the gross margin, I think there are three factors in this quarter.

The first one is the currency headwinds; other international companies always report these headwinds.

The second one is the product mix change; we shift our percentage in the category in some extent this quarter.

And the third one is the pricing strategy.

When we do the analysis for that, I think currency headwinds is the first factor and product mix is the second factor, while the pricing strategy is the least factor.

When we look forward to the gross margin, I think our growth driver, the apparel ready-to-wear business, has very stable across quarters because we are using our product selection, plus the velocity of the sales to drive, up our revenue rather than by the low price.

So another way is, when we look at our volume increase, I mean the revenue increase, we have a better position with suppliers and we can achieve the economic scales.

So in the long run, we are very confident it should stabilize the gross margin in the long time.

About profitability, I think I already answered the question because our primary goal is to acquire the market and, on the other hand, we tightly come through our cost.

As I said, the overseas fulfillment center and we utilize the asset light model to run that.

So in the future, we are confident on that too.

George, this is Alan.

[Just a bit on] top up Robin, just from a strategic point of view, as a Company, we certainly take our profitability very seriously.

We are very carefully crafting our strategy to our path to profitability, but we also are very aware of how early we are in this market and we are still a relatively small revenue size Company in the ecommerce road.

So we definitely want to keep our growth momentum, while gradually improve our bottom line.

That's the strategy we take.

Okay, great.

Thank you very much.

Cheng Cheng, Pacific Crest.

My question's on, geographically, the other geography has seen two strong quarters of growth.

I'm just wondering if you can provide more color on a breakdown and where exactly you're seeing it and maybe which categories.

Cheng Cheng, it's Robin.

I think there are two reasons to drive up the revenue in the other countries.

One is, we have a better product selection; the other one is our more effective customer acquisition channel.

Regarding the other countries, we see the growth in general across the countries, and South America and Russia is big growth driver in this category.

In general, I think we greatly improve our platform capabilities; that's why we can see we have growth across categories and growth across the countries.

But we still primarily focus on our two major markets, North America and Europe, which achieve much larger growth percentage than the other countries.

Okay, great.

And just to follow up a little bit on the gross margin question.

You mentioned a couple of reasons and you ranked them from one, two, three.

I was wondering if there was any more color on magnitude for things like currency, mix change, pricing strategy to that sequential decline in gross margins.

Basically, for the currency headwinds, we calculated as we have $1.7 million unfavorable impact our revenue, of course, is directly affect our gross margin.

Excluding that, our gross margin would be 38.1% this quarter.

And other than that, we have both product mix change and pricing change.

We don't disclose what components for that, but I should say, the product mix change is the major driver in the gross margin.

Okay, that's great.

Thank you.

Jiong Shao, Macquarie Research.

This is (inaudible) [Chang] calling on behalf of Jiong Shao, and I have a question on the marketing expense.

We see that the marketing expense [only] reduced [nicely] and I was just wondering, for the marketing spend, what the mix amount, social media, ad networks and mobile app distributions from a quarter ago and also from one year ago?

What do you see this change in the spend mix?

And that's the first one.

And just on top that, you have a partnership with Baidu and you're trying to distribute more of the mobile apps through it.

How should we think about the impact to the marketing expense, if you can share on that?

Actually, I can answer the first question.

Of course, in our prepared remarks we mentioned about how important the social media channel is at this moment.

When you look at the fans in Facebook, we can see we have a great increase about the number of fans in Facebook.

Of course, from the marketing side, we switched our expense to the social media and for that, for some [strategic] products, we can achieve better and cost effective results for that.

I think that's the answer for your first question.

Yes, for the Baidu Dianxin partnership, I think it's still too early to tell; we just signed the contract.

I think we will engage in a number of experiments with them and figure out the right way for the right product.

I think it's premature to give you any direction or indications on the actual dollar impact at this moment in time.

Okay.

And another question will be on the consumer behavior between the users on your PC side and also on the mobile app side.

If you can share a little bit more, for example on the order size, the conversion rate and so on, that would be helpful?

We think mobile is very important, from two different perspectives.

Number one is, consumer is definitely moving towards mobile in a sense of the mobile, how many hours they are spending on their mobile devices versus on their PCs.

So from this perspective, it's absolutely very important.

And also, number of units of devices shipped, number of android unit devices or iOS unit devices shipped, every quarter versus number of new PCs, there is a very clear adoption curve factor in mobile compared with PC.

And number two is, their usage patterns.

In PC, it's much more task-orientated, while in mobile it's more applied lifestyle-orientated in the sense that people use a lot of their -- a fraction of their time of a couple of minutes to browsing through their mobile apps at any potential time while they are waiting for the subway or they are sitting in a taxi or other things.

Our goal of the mobile app development is certainly to make the user experience so easy and so compelling so it's not only at a time where you have a specific purchase need you actually come to the app.

Rather it become part of your lifestyle, you actually explore product and the interesting part of ideas while you may not actually have had a particular demand, so that there's a huge demand creation opportunity on the mobile as well.

Okay, that's very helpful.

Thank you very much.

Sisi Lu, China Renaissance.

My question is regarding to the marketplace strategy.

Can I have a quick update on that strategy and how we're going think that it will affect our gross margin in the future?

Thank you.

As we articulated before, in addition to our retail business we are engaging -- we have started to engage in the open platform strategy.

It's still very early.

We are working in progressing, developing our platform, increase our platform features.

We have a very basic feature today that we can offer, but we think in order to scale up this business we need richer features.

We are also on track with acquiring a trial -- [holding] for trial customers, meaning platform sellers.

We already have a number of them who are trying out our platform and generating orders every day.

But for Q3 it's immaterial for our financials, but we think it's very important in the coming years.

Great.

Thank you.

Xiaonan Bian, CITIC Securities.

First, congratulations to the very exciting results.

We see a very positive trend that fulfillment expense for order has kept going downwards since Q1.

What is driving this trend?

And with the launch of European fulfillment center put a pressure on the expense side.

So you're talking about fulfillment, right?

Yes.

Okay.

I think that we made progress with that.

With the increased orders we make the progress for the cost effective, especially for the fulfillment cost per order.

And we also, as I stated before, we have a very strict process to set up our overseas fulfillment centers.

And we also strictly select what products we put in the overseas shipment so that you can say both our inventory and our fulfillment costs didn't ramp up for that.

And also, I should say in the fulfillment cost we still have a payment process which is almost [variable] to the orders we processed.

And in general, we see we can have a better -- I mean the per order fulfillment cost.

Okay, thank you very much.

And just to follow up, I noticed that there is a $4 million cash outflow from operating activities.

Is there any comment on this cash flow [commissions]?

Sure.

Q4 is a big season for us so we have a $1 million inventory increase which possibly help our cash outflow for that.

Another one is, we have $1.7 million unfavorable ForEx which really give us another impact in our cash outflow.

In total that's about $2.7 million in that.

And the other $1.3 million just like routine operations.

Okay.

Thank you very much.

(Operator Instructions).

Rui Guo, China International Corporation.

I have one question.

We know that, from your third quarter results, your revenue from repeat customers is increasing, the YoY number I mean.

So in the long run whether it still has the upside room.

This is my question, thanks.

Okay, repeat customer, as you know, that's a very important metrics we measure the success of our model.

We have a continuous improve about our repeat customer quarter over quarter.

And comparing, or look at our position as [we still have] space to improve, but we still make hard work to do that which is our, I think, the most important metrics inside the Company.

Okay, got it.

Thanks, Robin.

Daniel Jacobs, Kora.

I think my question is mostly answered, but if you could just spend a little bit more time talking about your partnership with the Baidu subsidiary, and how you think that potentially changes your growth profile?

Thank you.

This is Alan.

I think, as we said, it's a distribution deal with potentials.

It's focused on our overseas customers and mobile app.

We will trial a number of different innovating ways to see which one has most attraction.

We think it's very mutually beneficial.

We think it's a very good example for our direct partnership with traffic source providers outside open platforms that we engage in with [that].

We think we will try looking for -- and they have an installment base, it's more than 200 million outside China, which is significant.

I think it's also a good role model that, if it works very successful we will definitely looking for other partners in the future as well.

But it's still very early, so it would be very premature to quantify financial impact at this moment in time.

But then also, this is a very -- the mobile it's one of our most important strategy as a Company.

Got you.

And if you just look out to 2015, I know you commented that your focus is on growth, not profitability, but do you expect either in 2015 or 2016 that you will achieve profitability?

It looks like you're still reinvesting pretty heavily in achieving the growth figures you're achieving.

Thank you.

As I commented just now, the top-line growth is our primary goal, and we don't provide guidance beyond that.

But what I should say, we are committed to lower our cost as much as possible in the consideration of our future growth and the baseline setup.

And if I can add on top of Robin and since this question has come up quite a [few] times, is if you look at the percentage of loss compared with our total revenue it's actually decreasing, and it's actually not a significant percentage.

So that means we are not that far off from break even or profitability.

I think that, number one, that is a direct result of our attractive margin profile to start with.

We have more than 37% of gross margin.

That has always been a huge leverage for us to crafting our business plan to become a profitable business.

It's also a direct result of our business model which has a very natural scale of economy by definition for both retail business and, more important, for Internet business.

And thirdly, we also have very good inventory turns, so our working capital is actually positive while we're growing outside the operation loss, which is also very good metrics for us.

So if you combine all the three things together, we feel very confident about our growth, as we've given for the Q4 guidance.

And we also believe that we have a business model and a plan that eventually will lead us to profitability.

But certainly, we feel it's premature, at this moment in time, to give a very specific timeline on which quarter it will actually happen.

But when we feel ready, we will certainly, in the future, give you guys more color on that.

Okay.

Thank you.

Rick Shea, Vardon Capital.

Could you give us a little more color on how broad based the apparel growth is?

Is this happening in one category; is it happening across different classifications; is it regionally concentrated?

Just maybe a little more color there.

Thank you.

I think qualitatively, I will say the apparel business, especially the ready-to-wear apparel business, is really very significantly fast growing in a very pervasive way in a sense that we're actually gaining attractions from many geographic markets and also, from many subcategories.

Also, we have an opportunity to actually have new subcategories that are still in early stage of development, for example, the kids' apparel.

And we think overall apparel is a gigantic market in both market size and also in the number of subcategories.

So we think that we are still very early in our own growth profile in this category, and we are also still very small from the whole market potential perspective as well.

Great.

Thank you very much.

Haoran Lin, Guotai Junan Securities.

I have one question.

We hear about the Company's construction of warehouses around the world.

Can you introduce the Company's plans in this field?

Thank you.

So the overseas warehouse?

We hear about the Company's construction of warehouses around the world.

Can you introduce the Company's plans in this field?

Yes, actually, I think you're talking about overseas fulfillment center.

Just now, we just stated, we don't construct these warehouses.

We enter into the lease with landlord or we just utilize the asset-light model to do that with the most cost-effective way.

Okay.

Thank you.

[John Harrell, Harrell & Associates].

I'm wondering about the hiring of the two former executives that used to work with Amazon and exactly what they did for the Company during their brief stay at LightInTheBox and the real reason for their departure.

Can you just touch upon how they helped you and why they may have left so early?

So just to clarify, one of them is still working in the Company.

We previously made an announcement about their departure.

Other than that, we don't think there's any additional color we want to add.

Also, it's been many months since the announcement.

Thank you.

There are no further questions at this time.

Christian, are there any closing remarks?

Yes.

This concludes our third quarter 2014 earnings conference call.

Thank you for your participation and ongoing support of LightInTheBox.

We look forward to providing you with updates of our business in the coming weeks and months ahead.

Thank you very much.

Have a good day.

This does conclude today's conference.

You may now all disconnect.