蘭亭集勢 (LITB) 2017 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the LightInTheBox Third Quarter 2017 Earnings Conference Call. (Operator Instructions) I must advise you that this conference is being recorded today, December 13, 2017.

I would now like to hand the conference over to your first speaker today, Mr. Christian Arnell. Thank you. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to LightInTheBox's Third 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's Chairman and CEO, Mr. Alan Guo, who will give you 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 would like to remind you of our safe harbor statement. Please note that the discussion today may contain 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 may cause results to differ materially from those in the forward-looking statements, please refer to our Form 20-F filed with the Securities and Exchange Commission on March 30, 2017. We do not assume any obligation to update any forward-looking statements, except 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 our fourth consecutive quarter of revenue growth. Net revenues increased 19.8% to USD 77.1 million.

Total orders of product sales and the customers grew year-over-year. We are striking a careful balance between growing our top line and the bottom line and are pleased to see revenue grow at a faster pace than expenses.

As a percentage of revenue, fulfillment and the G&A expenses decreased on a year-over-year basis. Our growth continues to be driven by our strategy to strengthening supply chain management, improved customer satisfaction, enhance the mobile user experience on our platforms and expand into emerging markets with more localized product offerings and service solutions, such as our logistic partnership with Gati in India and the cash-on-delivery options for Gulf Cooperation Council countries.

We continue to make great progress in increasing our mobile penetration rate and enhance the mobile user experience. We significantly improved the personalized part of the recommendation engine in our mobile app with machine learning and by closely analyzed traffic sources, user-browsing habits and in-app behavior.

Leveraging our deep experience in Big Data analytics, we have been able to use this information to roll out initiatives aimed at converting new and returning customers. These initiatives focus on offering new customers free shipping and discount coupons and returning customers with push notifications to alert them to discount customer service responses, order tracking status and an in-app community, through which they can share their experiences with our product and interact with other customers.

We also expanded the use of online video and the key opinion leaders to drive more traffic to our platform and specifically target certain demographics which generate a much higher return on investment in emerging markets such as Brazil, India and Gulf Cooperation Council countries.

In this strategically important emerging market, customers tend to be younger than our traditional developed markets in Europe and North America. We'll be actively expanding the social media platforms we use to attract this younger generation by approaching key opinion leaders from these emerging markets whose preferred medium tends to be online video and live streaming. These key opinion leaders are also able to post in our in-app community.

These overall improvements to our mobile user experiences have resulted in solid improvements in user engagement and sales through our apps as well as growth in numbers of followers in our social media accounts, including Facebook and Instagram.

We made a significant progress in enhancing our supply chain management and the back-end system to improve operational efficiency during the quarter. We'll reduce the time needed to process an order before shipment and expanded the margin we make on [shipping costs] (corrected by company after the call) by optimizing our back-end order management system and improving our inventory strategy.

Post sales refund rate decreased to 2.5% from 4.2% during the same period last year, especially, with regards to product quality issues, demonstrating the effectiveness of our supply chain management initiatives, improving customer satisfaction and enhancing quality.

We also expanded the number of logistical partners we work with to reduce delivery time and the cost per kilo as well as expanding the variety of products we are able to deliver to include things like portable cellphone, power banks and the liquids.

Leveraging our Big Data analytical capabilities, we're also developing our fraud detection system, which reduced the credit card fraud rates and bank chargebacks.

All these improvements to our systems and the mobile user experience has also helped us expand further into strategic emerging markets. Our expansion into India is making good progress with a number of orders originated there grow by over 10x from the small base we had last year.

Sales from Brazil grew 117% year-over-year as we developed more localized payment options as well as off-line payment through Boleto and payment by installments to increase payment success rates, average order size and the conversion rates.

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

To conclude, I'm pleased with the progress we have made during the quarter. After 2 quarters of revenue upsells and marketing expenses which helped us consolidate revenue at a higher level year-over-year, we are also carefully balancing top line growth with our bottom line. Our strategy allows us to maintain the corporate flexibility to rapidly adapt to different market environment and offer localized product offerings and service solutions.

We will continue to diligently work on our strategy to expand our presence in strategically important emerging markets with localized products and services, enhance our mobile platforms and the user experience.

Currently with the social media and the video marketing channels and optimized supply chain efficiency, I'm confident in the future potential of our business and in the long-term growth opportunity in the 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 the percentage changes refer to year-over-year unless otherwise noted.

So to start, net revenues increased 19.8% to $77.1 million for the third quarter of 2017.

Net revenues from product sales was $72.4 million compared with $56 million in the same quarter of 2016.

Net revenues from service and others were $4.7 million compared with $8.4 million in the same quarter of 2016.

As a percentage of net revenues, service and others accounted for 6.1% in the quarter.

Total orders of product sales were 1.7 million compared with 1.4 million in the same quarter of 2016 with total number of product sales customers in the quarter with 1.3 million compared with 1.1 million in the same quarter of 2016.

Product sales in the apparel category was $25.7 million compared with $19.1 million in the same quarter of 2016.

As a percentage of product sales, apparel revenues accounted for 35.5% compared with 34.1% in the same quarter of 2016.

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

Looking at our business geographically, product sales from Europe were $38.4 million for the third quarter of 2017 compared with $28.8 million in the same quarter of 2016, representing 53% of total product sales for the third quarter of 2017. Product sales from North America was $17.7 million compared with $16.5 million in the same quarter of 2016, representing 24.5% of total product sales for the third quarter of 2017. While product sales from other countries were $16.3 million, representing 22.5% of total product sales for the same quarter.

Total cost of revenues was $50.5 million, an increase from $41.8 million in the same period of last year.

Cost of product sales was $46 million compared with $34 million during the same period of last year, and the cost of service and others were $4.5 million compared with $7.8 million during the same quarter of 2016.

Gross profit was $26.6 million compared with $22.5 million in the same period of 2016. And the gross margin was 34.5% compared with 35% in the same quarter of 2016.

Fulfillment expenses, which include payment processing fees, were $4.2 million compared with $3.9 million in the same quarter of 2016.

Selling and marketing expenses were $17.8 million compared with $13.3 million in the same quarter of 2016.

G&A expenses were $6.6 million, a decrease from $7.8 million in the same quarter of 2016. G&A expenses include $2.5 million in the technology investments compared with $3.1 million during the same period of 2016.

Net loss was $1.8 million compared with net loss of $2.3 million a year ago. Non-GAAP net loss was $2.9 million compared with non-GAAP net loss of $1.1 million in the same quarter of 2016.

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

As of September 30, 2017, we had cash and cash equivalents and restricted cash of $71.1 million.

For the fourth quarter of 2017, based on our current estimate and business seasonality, we expect net revenue to be in the range of $97 million to $100 million, representing an increase of approximately 2% to 5% year-over-year. This forecast reflects the company's current and preliminary views on the market and operational conditions, all of which are subject to change.

This concludes our prepared remarks. At this point, we're ready to take some questions. Operator?

(Operator Instructions) We have a question from David Ellis, a private investor.

For your website, for your Chinese market, I think, it's ouku.com. How is that doing? And I was wondering how much concentration they can give that Chinese market. It seems like it would serve you very well?

Our primary revenue now come from our cross-border e-commerce business from the China outbound to the outside China. The Ouku business we acquired long time ago remain to be a very small portion of our business, which is immaterial. We also have our B2B business, which -- involving some cross-border e-commerce from outside the China to China. We think it's a good complement to our cross-border e-commerce from China to outside.

(Operator Instructions) We don't have any questions as of the moment. Please continue.

Thank you, operator. This concludes our third quarter 2017 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. If you have any questions or concerns, please don't hesitate to reach out to Investor Relations. Thank you very much. Have a good night.

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