LightInTheBox Holding Co., Ltd.

Good morning, everyone, and welcome to the fourth quarter and full year of 2020 earnings conference call for Light in the Box Holding Company Limited. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. Rene van der Steen for opening remarks and introductions. Please go ahead, sir.

Thank you, Annie. Well, hello, everyone, and welcome to the 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 our CEO, Mr. Jian He, who will give an overview of the company's strategies and recent developments, followed by Ms. Yang Yun, our Chief Financial Officer, who will go over financial results. Together with them today is Min Wenyu, you, our Chief Growth Officer. All will be available for Q&A at the end. 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 US Private Securities Integration 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 1st, 2020. We do not assume any obligation to update any forward-looking statements, except as required under applicable law. At this point, I would like to turn the call over to Mr. He. Mr. He, please go ahead.

Thank you everyone for joining us today. We ended 2020 with the strongest quarter ever in terms of revenues, which grew by 78% year-over-year to $133 million. For the fourth year of 2020, total revenues reached $398 million, up 63% from 2019, an all-time high in our operating history. Fueled by robust top-line performance, our profitability also increased significantly. Adjusting demand and net income in 2020 reached $22.8 million and $13.3 million, respectively. In comparison, we adjusted EBITDA loss of $9.1 million and net income of $1.1 million in 2019. The fourth quarter is generally the biggest decision for retail sales. During this past record-breaking fourth quarter in the financial year, we delivered over 12 million and 37 million product respectivities to shoppers worldwide. It should be noted that due to the increase of orders in the fourth quarter of 2020, we have orders worth approximately $18 million in currency at the 2020 year end, compared with approximately $8.8 million at the 2019 year end. The $18 million worth of orders will be recognized as revenue in our first quarter. 2020 based upon customers' acceptance on delivery. One more highlight I would like to mention is our total cash balance at the 2020 year end will increase by 25 million from the end of 2019. After I was appointed CEO of our company in December 2018, I emphasized the two key aspects to turn the business around after six years of consecutive losses since letting the Vox IPO in 2013. One aspect was to keep improving operation efficiency to control costs and narrow losses. The other was to build a stronger foundation for cross-border e-commerce. Our efforts included upgrading the supply chain to lower product pricing and provide the best value for money products, reducing logistics shipping duration to increase fulfillment speed, and investing in R&D to provide a better user experience for both customers and their suppliers. We have increased our R&D investment from 10.6 million in the top year of 2018 to $17.9 million in 2019, the first year of managing to break even in our operating history. Our revamped strategy and R&D investments have resulted in our improved financial performance. In the second quarter of 2019, adjusted EBITDA turned positive for the first time. The US GAAP-led income turned positive from the third quarter of 2019. In the recent four years of 2020, we hit a record high total revenue of $398 million, which is $22.8 million in adjusted EBITDA. We are now on the runway for sustainable and healthy growth. So from this year onwards, while we will still be disciplined on the cost side, our top priority will be on revenue growth. and improving the overall user experience. As people increasingly embrace the digital economy and become familiar with online shopping around the world, we see huge market potential. CGS sees the growing market opportunity to enlarge our customer pool, better engage with our existing customers by continuously optimizing our supply chain and product mix. and therefore better fulfill and drive customers' diverse demands. Our strategic selection process on suppliers and quality checks on products will help us perfect our offering in the long run and provide better customer satisfaction, which translates into higher repeat purchase rates that can effectively bring down our marketing costs. At the same time, We will continue to strive for higher user engagement by investing in our R&D team. We aim to provide a seamless shopping experience that integrates across our websites and apps. We will increase average basket size by improving the accuracy of our product recommendations and search results. Technology can also help us spot the latest trends and predict consumer demand. which will help our suppliers plan production better. Our R&D capability is at the core of our competitiveness that allow us to best serve our customers and support long-term growth. In summary, we will continue to push forward our proven strategy to better strengthen our product portfolio and enhance the customers' shopping experience. Most importantly, We will continue to focus on revenue growth while keeping a firm eye on profitability and enhance user experience this year. I will now turn the call over to Yuanjun to go through the financial results.

Thank you, Mr. He. And thank you, everyone, for joining the call. I will now review our financial results of the fourth quarter. Let me remind you that all numbers voted are in U.S. dollars. Total revenue was $134.7 million, up 77.7% year-over-year from $74.7 million in the same quarter of 2019. This was mainly driven by strong growth in product sales, which were $129.5 million versus $71.7 million in the same period in 2019. and the growth in services and others, which were 3.2 million compared with 3 million in the same quarter of 2019. Due to the increase of our orders, over 18 million worth of orders were in transit at the end of the fourth quarter of 2020. This has doubled to approximately 8.8 million at the end of 2019. This revenue will be recognized in the first quarter of 2021. upon the customer's acceptance of delivery. Gross profit was $59.6 million, compared with $30.2 million during the same year last year. Gross margin was 44.9%, compared with 40.4% the same quarter of 2019, primarily due to our continued efforts to optimize the supply chain and product mix. Total operating expenses were $65. compared with $34.5 million during the same quarter of 2019. The increase was primarily due to an increase in selling and marketing expenses. Operating expenses were $8.8 million compared with $8 million in the same quarter of 2019. As a percentage of total revenue, Reviewing expenses were 6.7% compared with 10.7% in the same quarter of 2019 and 6.7% in the third quarter of 2020. Selling and marketing expenses were $44 million compared with $17.9 million in the same quarter of 2019. As a percentage of total revenue, selling and marketing expenses were 33.1% compared with 23.9% in the same quarter of 2019 and 26.9% in the third quarter of 2020. G&A expenses were 10.5 million compared with 80.8 million in the same quarter of 2019. As a percentage of total revenue, G&A expenses were 7.9% compared with 11.8% in the same quarter of 2019 and 7.9% in the third quarter of 2020. Included in the G&A expenses, R&D expenses were 4.8 million compared with 4.6 million in the same quarter of 2019 and 3.5 million in the third quarter of 2020. Net loss was $3.2 million compared with net income of $12.5 million in the same quarter of 2019. Net loss per ADS was $0.03 compared with net income per ADS of $0.07 in the same quarter of 2019. Adjusted EBITDA, which represents loss from operations before share-based compensation expense, change in fair value of convertible promise renewals, interest, income, interest expense, income tax expense, and depreciation and amortization expenses, with $4.5 million in the fourth quarter of 2020, compared with $2.6 million the same quarter of 2019. As of December 31, 2020, we had cash and cash equivalents and restricted cash of $65.5 million, compared with $48.2 million as of September 30, 2020. Now let me walk you through our 2024 year financials very briefly. Total revenue increased by 63.4% year-over-year to $398.2 million. Revenue generated from product sales was $382.1 million compared with $236.7 million in 2019. Revenues from services and others were $15.1 million compared with $6.9 million in 2019. Gross profit for the full year was $176.2 million compared with $97.6 million in 2019. Gross margin was 44.2% for the full year of 2020 compared with 40.1% in 2019. Total operating expenses for the full year was 172.3 million compared with 113.6 million in 2019. Net income was 13.3 million compared with 1.1 million in 2019. Net income per ADS was 12 cents compared with 1 cent in 2019. Adjusted EBITDA was 22.8 million for the full year of 2020. compared with a lot of $9.1 million in 2019. Cash balance, including cash equivalents and restricted cash, increased by $25.1 million from $40.4 million at December 31, 2019 to $65.5 million at December 30, 2020, mainly contributed by operating activities Finally, for the first quarter 2021 guidance, based on information currently available and business visionality, we expect total revenues to be between $110 million and $125 million, representing a growth rate between 114 and 146% compared with the first quarter of 2020. This concludes our prepared remarks. At this point, we are ready to take some questions. Operator?

Thank you. Ladies and gentlemen, we'll now begin the question and answer session. And for your questions, please press star and the number 1 and wait for your name to be announced. And to cancel the request, please press the pound or hash key. Once again, for your questions, please press star and the number 1 for your questions. Once again, if you have questions, please press star and the number one and wait for your name to be announced. If you have questions, once again, on your telephone keypads, please press star and the number one. All right, for participants, please press star one on your telephone keypads for your questions. Once again, it is star and the number one for your questions. All right, investors, please press part one for your telephones on your telephone keypads for your questions. No question answered this time. Please continue.

Thank you, Annie. This concludes our conference call. Thank you for your participation and ongoing support of Light in the Box. We look forward to providing of our business in the coming weeks and months ahead. Have a good day. Goodbye.

Thank you, ladies and gentlemen. That concludes the conference for today, and thank you for participating. You may now all disconnect.