蘭亭集勢 (LITB) 2020 Q2 法說會逐字稿

Good morning, everyone, and welcome to the Second Quarter 2020 Earnings Conference Call for LightInTheBox Holding Co.

Ltd.

Today's conference is being recorded.

At this time, I would like to turn the call over to Mr. Rene Vanguestaine for opening remarks and introductions.

Please go ahead, sir.

Thank you, Rachel.

Hello, everyone, and welcome to LightInTheBox Second 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 CEO, Mr. Jian He, who will give an overview of the company's strategies and recent developments; followed by Ms. Yuanjun 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 the Q&A after the prepared remarks.

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 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 Securities and Exchange Commission on May 1, 2020.

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 Mr. He.

Mr. He, please go ahead.

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

Despite the continued macroeconomic uncertainty, we are proud of achieving a significant milestone in the second quarter in relation to our operational and financial performance.

Total revenue were $113.9 million in the second quarter, nearly doubling the second quarter in 2019 driven by the increase in new customers and more orders from existing customers across all the core operating regions like North America, Europe and the Southeast Asia countries.

Gross margin also improved year-over-year as a result of our ability to optimize our product mix and leverage the depth of our relationships with suppliers.

At the same time, we achieved a net income of $8.5 million in comparison to net income of $0.7 million in the preceding quarter and a net loss of $7.3 million in the same period of last year mainly due to our economies of scale and the disciplined management of costs.

These results reflected the success of our revamped strategy, which is to focus on optimizing product and category mix, enhancing supply chain management and driving customer engagement.

In the past few quarters, we made significant progress in implementing our growth strategy by not only responding to the immediate needs of our customers but also consistently improving our operations.

To ensure that our strategy can be successfully executed, we focused on a number of key areas.

First, we utilized our underlying technology-driven infrastructure to optimize our supply chain management.

Although we have always benefited from long-standing relationships with suppliers and we've worked tirelessly to strengthen those partnerships during the second quarter.

It was our ability to use our expertise to identify suitable suppliers for each merchandise category and our use of real-time data to inform suppliers of changes in demand that proved critical.

As a result, we were able to leverage this capability to place large volume orders with better unit economics, which strengthened the relationships with our premium suppliers, improve gross margins and create better value for money options for our end customers.

Second, we optimized overall product mix with the specific goal of improving margins and increasing the order value.

Among many changes made to the algorithms that power our online stores, we paid particular attention to our cross-sell efficiency and capabilities.

As we continue to better understand the needs and the purchasing patterns of our customers, we offered users relevant and related products that complemented their existing orders.

Our ability to successfully execute this strategy had the right impact on the perceived value of our platform and was a driver of higher order volumes and greater user growth.

Third, we further integrated our customer-first mindset across every part of our business, which allows us to better satisfy the real needs of customers and, as a result, cultivate a more loyal customer base and an overall higher retention rate.

Keen attention to our customers' needs during this crisis enabled us to uncover opportunities in real time across the regions where we operate as people continued to spend more time at home.

The change is consumption habits and reliance on online shopping channels further enabled us to mobilize our supply chain resources and keep up with demand in a timely and cost-effective manner.

I'm confident that our current strategy places us on the right path to sustainable and profitable growth, and I'm excited about our achievements as we navigate the crisis and our future opportunities as we emerge from it.

Our solid performance this quarter shows that our rapid response to the adverse operating conditions caused by COVID-19 has been a success, and there have been encouraging signs that the revamp of the strategies we laid out last year is, in fact, getting strong results as we focus on driving long-term sustainable value for shareholders.

Our ability to drive greater operating leverage, expand our user base and generate more order flow from our existing users is the product of our team's tremendous commitment, focus and hard work, and I'm very proud of their work so far in 2020.

As we look ahead to more progress in the third quarter.

I'm confident that we are well positioned to scale the business further, improve profitability to drive top line growth in years to come.

I will now turn the call over to Yuan Jun Ye to go through the financials for the quarter.

Thank you, Mr. He, and thank you, everyone, for joining the call.

I will now review our financial results for the second quarter.

Let me remind you that all numbers quoted are in U.S. dollars.

As Mr. He mentioned, we continued to implement our strategies and demonstrated strong execution, which led to significantly improved top and bottom line performance.

Not only are our strategic decisions enabling us to fully navigate the adverse impact of COVID-19, but they are positioning us well for sustainable growth beyond the crisis.

We are confident that our current operations and growth trajectory will yield further increase in profitability when taking seasonality into account.

Now let me walk you through the key financial results for the second quarter.

Total revenue was $113.9 million, up 95.9% year-over-year from $58.1 million in the same quarter of 2019.

This was mainly driven by strong growth of product sales, which were $107.2 million versus $57.1 million in the same period in 2019, and growth in services and others, which were $6.7 million, increased more than 5x year-over-year.

Gross profit was $49.6 million compared with $24.4 million during the same period last year.

Gross margin was 43.5% compared with 41.9% in the same quarter of 2019 primarily due to our continued efforts to drive revenue growth from categories with higher gross margins.

Total operating expenses in the second quarter was $41.4 million compared with $26.9 million during the same quarter of 2019.

The increase was primarily due to an increase in selling and marketing expenses.

Of operating expenses, fulfillment expenses were $7.4 million compared with $4.9 million in the same quarter of 2019.

As a percentage of total revenues, fulfillment expenses were 6.5% compared with 8.4% in the same quarter of 2019 and 9.8% in the first quarter of 2020.

Selling and marketing expenses were $26.5 million compared with $11.5 million in the same quarter of 2019.

As a percentage of total revenues, selling and marketing expenses were 23.3% compared with 19.8% in the same quarter of 2019 and 28.7% in the first quarter of 2020.

Our focus on growth throughout 2020 will result in higher marketing expenses, but we will continue to exercise cost discipline so that selling and marketing expenses as a percentage of total revenues will remain relatively stable.

G&A expenses were $7.5 million compared with $10.5 million in the same quarter of 2019.

As a percentage of total revenues, G&A expenses were 6.6% compared with 18.1% in the same quarter of 2019 and 14.1% in the first quarter of 2020.

Included in the G&A expenses, R&D expenses were $3.3 million compared with $4.1 million in the same quarter of 2019.

Adjusted EBITDA, which represents a gain or loss from operations before share-based compensation expense, change in fair value of convertible promissory notes interest income, interest expense, income tax expense and depreciation and amortization expenses, were $9.1 million in the second quarter of 2020 compared with $0.9 million in the same quarter of 2019.

Net income was $8.5 million compared with a net loss of $7.3 million in the same quarter of 2019.

Net income per ADS was $0.08 compared with net loss per ADS of $0.11 in the same quarter of 2019.

As of June 30, 2020, we had cash and cash equivalents and restricted cash of $55 million compared with $35.6 million as of March 31, 2020.

The increase in the company's cash position for the second quarter is attributed to cash inflow generated from its operating activities.

For the third quarter of 2020, based on current information available and business seasonality, the company expects net revenues to be between $95 million and $110 million, representing a growth rate between 59% and 83% compared with the third quarter of 2019.

This concludes our prepared remarks.

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

Operator?

(Operator Instructions) There are no question at this time.

I would now like to hand the conference back to Mr. Rene Vanguestaine for the concluding remarks.

Thank you, Rachel.

This concludes our second quarter 2020 earnings conference call.

Thank you all for your participation and ongoing support of LightInTheBox.

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

Have a good day or good night.

Thank you all.

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

Thank you for participating.

You may now all disconnect.