蘭亭集勢 (LITB) 2017 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the LightInTheBox Second Quarter 2017 Earnings Conference Call.

(Operator Instructions) I must advise you that this conference is being recorded today, Monday, the 18th of September 2017.

I would now like to hand the conference over to your first speaker today, Christian Arnell.

Please go ahead.

Thank you, operator.

Hello, everyone, and welcome to LightInTheBox' Second Quarter 2017 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' 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 address financial results in more detail.

Before we proceed, I'd 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 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 factors that could cause results to materially differ from those in the forward-looking statements, please refer to our Form 20-F filed with the U.S. Securities and Exchange Commission on March 30, 2017.

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

At this point, I'd like to turn the call over to Alan.

Alan, please go ahead.

Thanks, Christian, and thank you, everyone, for joining us today.

We are happy to report a strong jump in second quarter revenue, which came in at USD 78.5 million, representing an increase of 19.6% year-over-year and at the high end of our previous guidance, while also returning to profitability with USD 0.3 million net income on a non-GAAP basis.

Total number of product orders also increased to 1.7 million, a strong rebound sequentially and year-over-year.

This is our third consecutive quarter of revenue growth on a year-over-year basis and our highest year-over-year growth rate in the last 2 years.

I believe these results are directly attributable to the effectiveness and persistent execution of our strategy to strengthen supply chain management, improve customer satisfaction, leverage big data-enabled product merchandising, expand into emerging markets with small localized product offerings and service solutions and focus on mobile Internet opportunities.

Growth was primarily driven by a significant increase in product sales as the number of customers and orders increased year-over-year, particularly in clothing, shoes, sports as well as toys and hobby categories.

Geographically, European and South American markets as well as India generated significant growth momentum for us during the quarter.

Both our gross margin rate and gross profit increased on a sequential basis.

G&A expenses as a percentage of revenue came in at a historical low of 9.1%, demonstrating higher level of operating efficiency and the business automation.

We were impacted by the significantly depreciating British pound over the past year, resulting in an unfavorable ForEx impact of $1.6 million.

We continued to make product accessible to our global customer base at affordable prices.

Our post-sales return and refund rates dropped to a historical low during Q2 as our primary focus remained on continuously improving our supply chain by fine-tuning new vendor acquisition practices, implementing stronger product quality control and developing an incentive system which segment suppliers according to product defect rates, on-time fulfillment rates and out-of-stock ratios.

This effort has resulted in the continued decrease in post-sales returns and refunds, especially with regard to product quality issues, demonstrating the effectiveness of our supply chain management initiatives and improving customer satisfaction.

As the next step in taking advantage of our stronger supply chain, we have successfully launched a number of OEM and ODM products marketed under the LightInTheBox associated brands in the electronics accessories category, such as mobile power banks and cables, which are generating exciting initial sales results with higher customers conversion and satisfaction rates.

During the quarter, we established a new OEM/ODM business unit by recruiting expert talents in the OEM/ODM business.

We will continue to invest in developing our OEM/ODM business in an effort to turn this business into a growth driver moving forward.

We continued to make great progress in increasing our mobile penetration rate.

Both user visits and revenue from mobile platforms hit another historical high during the quarter.

This was a direct result of our mobile-focused Facebook marketing initiatives and a number of new features incorporated into our mobile apps, such as an improved personalized product recommendation engine.

We also made good progresses in expanding into new emerging markets.

Our expansion into India is moving rapidly as number of orders there continued to grow.

We formed a strategic business partnership with Gati during the quarter to further expand our presence in this rapidly growing market.

Gati's customized cross-border logistic solutions between China and India would significantly improve the speed, reliability and cost of delivery of our parcels to India.

We officially launched our tailor-made website in Arabic for members of the Gulf Cooperation Council, which offers targeted products to the region.

We also began using videos and online opinion leaders marketing to Russia, Brazil and a number of Mid East markets especially targeting younger audiences, which we believe can potentially generate a higher return on investment.

We also developed more localized payment options in emerging markets by offering younger generations there with offline payments and installments, which increase our payment success rate significantly in markets such as Brazil and Russia.

We opened a number of online outlet stores and local third-party e-commerce platforms in markets such as Brazil, France and Japan during the quarter, which offer selected products tailored to local needs and tastes.

In addition, we established multiple specialized shipment routes to Russia, the Mid East and Brazil, enabling us to shorten door-to-door delivery times without impacting shipping cost.

Overall, we continue to develop new ways to access and serve global customers in different countries and regions with more and more localized approach.

In summary, we are pleased with the continued progress we have made during the quarter as we drive revenue growth.

Our strategy is clearly beginning to bear fruit.

We are confident with our strategy and executional strength as we see longer-term growth opportunities in global cross-border e-commerce.

I will now turn the call over to Robin to go through the financials for the quarter.

Thank you, Alan.

As I review our financial results, let me remind you about a few things.

All numbers quoted are in U.S. dollars.

All percentage changes refer to year-over-year unless otherwise noted.

So to start, net revenues increased 19.6% to $78.5 million for the second quarter of 2017.

Net revenues from product sales was $73.7 million compared with $59.4 million in the same quarter of 2016.

Net revenues from service and others were $4.8 million compared with $6.2 million in the same quarter of 2016.

As a percentage of net revenues, service and others accounted for 6.2% in the quarter.

Total orders of product sales were 1.7 million compared with 1.4 million in the same quarter of last year while total number of product sales customers in the quarter were 1.4 million compared with 1.2 million in the same quarter of 2016.

Product sales in the apparel category was $27 million compared with $24.1 million in the same quarter of 2016.

As a percentage of product sales, apparel revenues accounted for 36.6% compared with 40.6% in the same quarter of 2016.

Product sales from other general merchandise were $46.7 million for the second quarter of 2017.

Looking at our business geographically, product sales from Europe were $37.4 million for the second quarter of 2017 compared with $32.9 million in the same quarter of last year, representing 50.7% of total product sales for the second quarter of 2017.

Product sales from North America were $19.2 million compared with $19 million in the same quarter of last year, representing 26.1% of total product sales for the second quarter of this year, while product sales from other countries was $17.1 million, representing 23.2% of total product sales for the same quarter.

Total cost of revenues were $50.9 million, an increase from $41.1 million in the same period last year.

Cost of products sales were $46.2 million compared with $35.4 million during the same period last year, and the cost of service and others were $4.7 million compared with $5.8 million during the same quarter of 2016.

Gross profit was $27.6 million, and the gross margin was 35.2% compared with 37.2% in the same quarter of last year.

Fulfillment expenses, which include payment processing fees, were $4.3 million compared with $4.1 million in the same quarter of last year.

Selling and marketing expenses were $18.1 million compared with $14.1 million in the same quarter of last year.

G&A expenses were $7.2 million, a decrease from $8.3 million in the same quarter of 2016.

G&A expenses includes $2.7 million in technology investments compared with $3.1 million during the same quarter of last year.

Net loss was $1.8 million compared with net loss of $1.9 million a year ago.

Non-GAAP net profit was $0.3 million compared with non-GAAP net loss of $1 million in the same quarter of 2016.

Net loss per ADS was $0.03 compared with net loss per ADS of $0.03 in the same quarter of last year.

As of June 30, 2017, we had cash and cash equivalents and restricted cash of USD 79.9 million.

For the third quarter of 2017, based on our current estimate and the business seasonality, we expect net revenues to be in the range of $75 million to $78 million, representing an increase of 16.5% to 21.2% year-over-year.

This forecast reflects the company's current and preliminary view on the market and operational conditions, all of which are subject to change.

This concludes our prepared remarks.

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

Operator?

(Operator Instructions) There are no further questions at this time.

I would now like to hand the conference over -- back to today's presenter.

Please continue.

Thank you, operator.

This concludes the second quarter 2017 earnings conference call.

Thank you for your participation and ongoing support of LightInTheBox.

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

If you have any questions or concerns, please don't hesitate to contact Investor Relations.

Thank you, and have a good night.

Bye-bye.

Ladies and gentlemen, that does conclude our conference for today.

Thank you for participating.

You may all disconnect.