LightInTheBox Holding Co., Ltd.

Good morning, everyone, and welcome to the third quarter 2020 earnings conference call for Light in the Box 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 Light in the Box'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 Light in the Box's 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 him 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 the discussion today may contain certain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Mitigation 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, materially differ from those in the forelooking statements, please refer to the company's Form 20F filed with the Securities and Exchange Commission on May 1, 2020. The company does not assume any obligation to update any forelooking statements except as required under applicable law. With that, I'd like to turn the call over to Mr. Ho. Mr. Ho, please go ahead.

Thanks, Stephen, 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 as a health deliverer, achieving 43% during the quarter, compared with 42% the same period of last year. We maintained a profitability net income for the quarter of $7.3 million. Our standard financial performance reflects successful execution of our strategy as we better position ourselves in the intensive and competitive cross-border 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 patches on the platform. Best IOIG's supply chain management. Stationing from our competitiveness advantages in supply chain has always been a pursuit of ours. Providing overseas consumers with valuable money for us is the foundation of our business expansion. Therefore, we continue to deepen our relationship with premium suppliers and specifically increase our order volumes So as to continuously reduce costs, we are ensuring product quality. This costs the saving benefit customers, thereby enhancing the competitiveness of our products. Second, we continue to focus on variety and relevance. Our firm is committed to providing consumers with a full range of products. including apparel, horsewear, electronics, sports, toys, and hobbies products, et cetera. So as to create a one-stop shopping experience, in addition, we continue to capitalize on more cross-sell opportunities. Not only does this allow us to maximize sales from each shopper, but increasing customers' lifetime value but it also enhances long-term customer relationships and improves our operational efficiency. Third, while we continue to drive revenue growth, we also maintain a reasonable level of operating expenses. We have built up a healthy and solid foundation for future growth right on the heels of achieving biocompatibility requirements of GAAP. profitability from 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 highly affecting some countries and regions, consumer demand for value for money products feel strong. Therefore, please remain optimistic about the holiday season. I will now turn the call over to Yuanjun 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 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 the 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 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. Of 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, book viewing 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 revenues, 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 revenues, GNN expenses were $7.9 million compared with 10.8% in the same quarter of 2019 and 6.6% in the second quarter of 2020. Included in the GNN 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 through interest income, interest expense, income tax expense, and depreciation and amortization expenses, was $12.7 million in the third quarter of 2020, compared with $45 million in the same quarter of 2019. Net income was $7.3 million. compared with 10 million in the same quarter of 2019. Net income per ADS was seven cents compared with 15 cents in the same quarter of 2019. As of September 30th, 2020, we had a cash and cash equivalents and restricted cash of 48.2 million compared with 55 million as of June 30th, 2020. the fourth quarter of 2020. Based on current information available in business seasonality, we expect net revenue to be between $120 million and $135 million, representing a growth rate between 61% and 81% compared with the fourth quarter of 2019. This concludes our prepared remarks. At this point, we are ready to take some questions. Operator,

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question now, please press star 1 on your telephone and light for your name to be announced. If you wish to cancel your request, please tap on the hash key. Once again, ladies and gentlemen, if you wish to ask a question now, please press star 1 on your telephone now. Your first question comes from the line of Matthew Larson. Please ask your question.

Hello. Good evening. Thanks for taking my call. Nice quarter and the forward guidance is attractive also. Got a question for you. You know, your sales have done extremely well versus previous years and I think maybe You know, more people are buying online because of COVID. Certainly that's the case with U.S.-based online retailers. But has there been a product mix that has accounted for, you know, increased sales? I mean, have you – is your business – is your, I guess – the products that you're selling, has it attracted more buyers, and is that one of the reasons why your sales have done so well?

Hi, thank you for the question. Allow me to introduce myself first. This is Wenyu Liu, MBC CEO of Light in the Box. I appreciate you 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 two quarters. And in terms of product mix, right now, like in the box, it's focusing on those products, those consumer products that can satisfy customers' daily demands, like so being home and garden, sports-related products. So in terms of product mix, I believe this is not particularly catered for COVID periods, but we do see that these products can have a long run that can satisfy customers' demands.

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, you know, continue to do well?

This is in seasonal effect.

I'm sorry, it's seasonal?

Yes, it is seasonal.

Gotcha, okay, and... Okay, 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 got some very strong growth that has helped your stock as well. 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 this kind of research done to make more investors understand our business well.

Okay, thank you.

Thank you. Your next question comes from David So from First Trust China. Please ask your question.

Good evening, management. This is David from First Trust. Thanks a lot for taking my question. Here are two questions. The first question is, I'm just curious about the Europe and North American markets. Would you illuminate the business performance of the company in these two major areas during the recent quarter? And the second question is, how much percentage of these two areas have contributed to the total revenue in recent quarter? Thank you.

Thank you for your question. Let me answer your first question. 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 two key markets that we do see very steady growth. And your second question is how many percent of these two regions actually contributed to our total revenue? About two-thirds, roughly.

Okay, got it. Thank you.

Thank you.

Once again, ladies and gentlemen, if you wish to ask a question now, please press style 1 on your telephone keypad. 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, so thank you for your participation and ongoing support of Light in the Box. We look forward to providing updates and visits 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.