speaker
Operator

Good morning, everyone, and welcome to the third quarter 2021 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 Ms. Sophie Tang for opening remarks and introductions. Please go ahead, Sophie.

speaker
Sophie Tang

Thank you, Annie. Hello, everyone, and welcome to Light in the Box third quarter 2021 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 a Box CEO, Mr. Jianhe, who will give you 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 financial results. Together with them today is Ms. Yuanjun Yu, the Company's Chief Growth Officer. All of them will be available for the Q&A session 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 U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risk 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 April 21, 2021. 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.

speaker
Annie

Thanks, Sophia, and thank you, everyone, for joining us today. We had a challenging third quarter with much uncertainty in turbulent markets. and the decelerating growth of the global e-commerce industry as a result of uneven pace of market reopening and global supply chain challenges. Total revenues decreased slightly year-over-year to $98.7 million in the third quarter. While for the first nine months of 2021, total revenue increased 25.5% year-over-year Gross profit margin improved to 44.5% from 43.1% in the third quarter of 2020. During the third quarter, we experienced several cost pressures from various markets. Cost of digital advertising increased much higher than what we anticipated due to the widening effects of the APOS APB checking transparency feature since April release of iOS 14.5. Since then, the new privacy feature has allowed users to control how their data is used for online advertising. Cost of shipping and delivery continued to raise. The fluctuation in foreign exchange rates also increased our operation costs. At the same time, Europe countries implemented the new VAT rules from July 1st, which basically removed the tax exception on small consignments. Meanwhile, since July 16th, the new market surveillance regulation has also increased the compliance and the product safety requirements on imported products into Europe. which has increased costs for manufacturers. As a result, we had to remove uncompliance products from our product listing and partially raise some of our prices, which impaired our competitiveness in the short term and had a certain negative impact on our top line. To confront these challenges, We continue to optimize our product mix with a particular focus on the apparel categories because of higher margins compared to standard categories like electronics. With our wide exposure and experience in apparel, we can also respond much quicker to market demand and fashion trends and adjust our strategies to counteract different kinds of uncertainties. In Q3, apparel sales represented 64.5% of total product sales, up by 39.6% from $44.4 million in 2020 Q3 to $61.9 million in 2021 Q3. The year-over-year growth in apparel sales has been the most successful result from our continuous efforts and investments R&D. Our in-depth research provides designers and suppliers with powerful insights on fast-changing fashion trends, which has actually helped us mitigate the impact from online advertising prejudice mentioned earlier on. As fashion is one of the largest B2C market segments for the e-commerce industry and also for our platforms, We will continue to leverage on the capabilities we have developed to meet our customers' evolving needs and optimize practical decision-making down to the design, style, and even fabric materials. In conclusion, the overall macroeconomic environment in 2021 has been more challenging, which in turn generated higher requirements for our operations compared to a year ago. Our continuous investment into R&D and ability to optimally balance our apparel product mix to appeal to different markets have all proven to be highly effective in responding to these new challenges. We will continue to achieve better growth momentum through optimizing our platforms to showcase the best curated and most comprehensive variety of quality and trending products sourced globally. As always, we remain firmly committed to provide our customers with value-added service to stand out as a reliable shopping destination. I will now turn the call over to Yuanjun to go through the financial results.

speaker
Sophia

Thank you, Mr. He, and thank you everyone for joining the call. I will now review our financial results for the third quarter. Please be reminded that all numbers quoted are in US dollars. Total revenues were 98.7 million, down slightly year over year from 100 million. Product sales were 96 million versus 95.4 million in the same period of 2020. Revenues from services and others were 2.7 million, compared with 4.6 million included in product sales. Revenues from apparel increased to $61.9 million in the third quarter of 2021, compared with $44.4 million in the same quarter of 2020. Gross profit was $43.9 million, compared with $43.1 million during the same period last year. Gross margin was 44.5%, up from 43.1% in the same quarter of 2020. primarily due to our continued efforts to optimize the supply chain and product mix. Total operating expenses were $50.5 million, compared with $41.5 million during the same quarter of 2020. The increase was mainly due to an increase in selling and marketing expenses. Fulfillment expenses were $7.2 million, compared with $6.7 million the same quarter of 2020. As a percentage of total revenues, human expenses were 7.3%, compared with 6.7% in the same quarter of 2020 and 6.2% in the second quarter of 2021. Selling and marketing expenses were $34 million, compared with $26.9 million in the same quarter of 2020. As a percentage of total revenues, selling and marketing expenses were 34.4%, compared with 26.9% in the same quarter of 2020, and 35.6% in the second quarter of 2021. The increase was due to the high expenses for online advertising from leading ad providers. G&A expenses were 9.3 million, compared with 7.9 million the same quarter of 2020. As a percentage of total revenues, G&A expenses were 9.4%, compared with 7.9% in the same quarter of 2020 and 7.8% in the second quarter of 2021. Included in G&A expenses, R&D expenses were 5.5 million compared with 3.5 million in the same quarter of 2020 and 5.1 million in the second quarter of 2021. Adjusted EBITDA, which representing confirmed operations before share-based compensation expense, interest expense, income tax expense, and depreciation and amortization expenses was negative $5.1 million in the third quarter of 2021 compared with $12.7 million in the same quarter of 2020. Net loss was $6.1 million compared with net income of $7.3 million in the same quarter of 2020. Net loss per ADS was $0.05, compared with net income per ADS was $0.07 in the same quarter of 2021. As of September 30, 2021, we had cash and cash equivalents and restricted cash of $50.2 million, compared with $65.5 million as of December 31, 2020. This concludes our prepared remarks. At this point, we are ready to take some questions. Operator?

speaker
Operator

Yes, thank you. As a reminder, to ask a question, you will need to press the star and the number one on your telephone. To withdraw your question, please press the pound or hash key. And please stand by while we compile the Q&A roster. Once again, to ask a question, please press star one on your telephone. Once again, to ask a question, please press star and then number one on your telephones and wait for your name to be announced. And to withdraw your question, please press the pound or hash key. To ask a question, please press star and then number one. For your questions, please press star and then number one. and wait for your name to be announced. As there are no questions, I'd like to hand the conference back to Ms. Sophie Tang for closing remarks.

speaker
Sophie Tang

This concludes our third quarter 2021 earnings conference call. Thank you for your participation and ongoing support for Light in Box. We look forward to providing you with updates of our business in the coming weeks and months. Have a good day.

speaker
Operator

Thank you. This concludes today's conference call. Thank you for participating.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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