LightInTheBox Holding Co., Ltd.

Everyone, and welcome to the second quarter 2022 earnings conference call for Light in the Box Holding Co. Limited. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. Rene Vangesson for opening remarks and introductions. Please go ahead.

Thank you, Andrea. Hello, everyone, and welcome to Light in the Box second quarter 2022 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. On the call from life in the box are Mr. Jian He, CEO, Ms. Yanjun Ye, Chief Financial Officer, and Ms. Wendy Yu, Chief Growth Officer. Mr. He will give an overview of the company's strategies and recent developments, followed by Mr. Ye, who will go over the financial results. They will all be available for the Q&A session that will follow. Before we proceed, I would like to remind you of our safe harbor statement. Please note that the discussions 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 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. 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, Raina, and thank you everyone for joining us today. We delivered a solid financial performance in the second quarter of 2022. Despite challenges caused by the research of the coal mine in many parts of China, unfavorable impact on volatility in foreign exchange rates, changes in global economic conditions and customer demand and spending, and world events. Notably, our revenue returned to the growth check, increasing 8% year-over-year to $132 million and 17% over 2021 Q4. And as we improved the product mix and operating efficiency, our loss narrowed significantly on a quarter-over-quarter basis. These results demonstrated the strong capabilities of our team, giving us more confidence to continue to execute our proven strategy in the near future. As we consistently migrated our product mix to higher margin categories, Apparel has become our most popular category, representing 82% of total revenues, up from 62% a year ago. Revenues from apparel increased 44% year-over-year to $109 million, lifting our overall gross margin to 55%, compared with 47% a year ago. We have seen obvious improvements in our supply chain and logistics in the first half of 2022. We believe owning those players is an effective strategy. Their managed operations and robust supply chain can stand out among peers, given these difficult economic times. Therefore, we will continue to invest to improve our operational efficiency and customer experience and the sum of our spending this past quarter and in the coming quarters reflects this. We believe this is critical for us to be ready to accelerate growth and build a stronger brand when the economic situation improves. I will now turn the call over to Yuanjun to go through the financial results.

Thank you, Mr. He. Let me start with the financial highlights for the quarter. In the second quarter, our total revenues were $132 million, up 8% year-over-year from $122 million. Revenues from apparel increased by 44% to $109 million, representing 82% of total revenues, compared with 62% in the same quarter of 2021. Gross margins for the second quarter improved to 55% from 47% a year ago as a result of higher margins from apparel sales. Total operating expenses were $76 million compared with $61 million during the same quarter of 2021. Selling and marketing expenses were $58 million, an increase of $15 million year over year. as we continue to invest to drive top-line expansion in a highly competitive market against a challenging macroeconomic environment. Total fulfillment and G&E expenses remain stable at $17 million, as the percentage of total revenue both decreased to 13% from 14% a year ago, even though our total revenues grew by 8% in the same period. This demonstrates our efficient control on operation efficiency. Included in operating expenses, R&D expenses also remain stable at $5 million from a year ago, as continuous investment in our R&D function is critical to increase our customer shopping experience on a long-term basis. Despite the challenges in the second quarter, we managed to narrow our net loss on a sequential basis to 2 million. Our cash level remained healthy with 66 million at the end of the quarter, an increase of 6 million from last year end. With the improvement in the macro environment entering the third quarter, we are confident of steady growth in our top line in the second half of the year. This concludes our prepared remarks At this point, we are ready to take some questions. Operator?

Thank you. If you wish to ask a question, please press star then 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then 2. If you are on a speakerphone, please pick up the handset to ask your question. And our first question will come from Matt Lee of CRS Capital.

Please go ahead.

Yeah, hi there. Good morning. Thanks for taking my question. Actually, I have two questions if that's okay. So first you mentioned world events and I was wondering whether you could comment a bit on whether you see some of these world events, particularly conflict in Europe, impacting revenue in terms of the category mix or maybe the regional mix as well. And then for the second question, I think you mentioned that your marketing expenses increased quite a lot. And I was just wondering whether you could elaborate on the reasons for that in a little more detail. Thanks.

Okay, thank you for the question. For the first question, Yes, there are some more events happening, but despite all the events and challenges, we still manage to see rapid growth in European markets as well as the North American markets. And in terms of category, apparel is still the best performing category among all. For the second question regarding the marketing expenses, that's due to reasons like, for example, there are some board events and there are some challenges and competition and we are investing in our apparel category. But as we keep investing in our apparel category and keep having more and more repeated purchase customers, we will be able to manage to or cut on the marketing expenses in near future.

Okay, thank you.

Once again, if you would like to ask a question, please press star, then 1. There are no further questions at this time. I'll now hand it back to Mr. Rene Vaghistan for closing remarks.

Hello.

This concludes our second quarter 2022 earnings conference call. Thank you for your participation and ongoing support of Life in the Box. We look forward to providing you with updates of our business in the coming weeks and months ahead. Have a good day all. Thank you.

That does conclude our conference for today. Thank you for attending and you may now disconnect.