蘭亭集勢 (LITB) 2020 Q3 法說會逐字稿

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 where 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 solid financial performance reflects the successful execution of our strategy as we better position ourselves in the intensely competitive cross-border e-commerce. We relentlessly 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 purchases on our platform.

First, I'll address supply chain management. Strengthening our competitive advantages in supply chain has always been a pursuit of ours. Providing overseas consumers with "value-for-money" products is the foundation of our business expansion. Therefore, we continue to deepen our relationship with premium suppliers and steadily increased our order volumes, so as to continue to reduce costs, while ensuring product quality, this cost saving benefit customers, thereby enhancing the competitiveness of our products.

Second, we continued to focus on variety and relevance, our platform is committed to providing consumers with a full range of products, including apparel, houseware, electronic, sports, toys and hobby products etc., so as to provide a one-stop shopping experience.

In addition, we continued to capitalize more cross-sale opportunities. Not only does this allow us to maximize sales from each shopper, thus increasing customer lifetime value, but it also enhances long-term customer relationships and improves our operational efficiency.

Third, while we continued to drive revenue growth, we also maintained a reasonable level of operating expenses. We have built up a healthy and solid foundation for future growth, right on the heels of achieving 5 consecutive 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 e-commerce, the strongest sales season has arrived. We have noticed that although COVID_19 is still heavily affecting some countries and regions, consumer demand for "value-for-money" products is still strong. Therefore, we remain optimistic about the holiday season.

I will now hand the call over to Yuanjun 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 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% compared with 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 $0.15 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 with $55 million 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 Matthew from Larson.

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 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 continued 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 gotten 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 (inaudible) to make more investors understand our business well.

Your next question comes from David Feng from First Trust China.

This is David from First Trust China. There are 2 questions. The first question is, I'm just curious about the Europe and North American market. Would you illuminate 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 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.