LightInTheBox Holding Co., Ltd.
Q3 2020 Earnings Call Transcript

Published: 7 Dec 2020

[Operator:]

Good morning, everyone, and welcome to the Third Quarter 2020 Earnings Conference Call for LightInTheBox Holding Company, Ltd. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. Tip Fleming for opening remarks and introductions. Please go ahead, sir.

[Tip Fleming:]

Thank you, operator. Hello, everyone, and welcome to LightInTheBox'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 LightInTheBox'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 financial results. Together with them today is Ms. Wenyu Liu, the company's Chief Growth Officer. All will be available for the Q&A at the end.

[Jian He:]

Thanks, Steve, and thank you, everyone, for joining us today. We are pleased to report another solid quarter as total revenue reached $100 million, up 57% year-over-year in line with our prior guidance. We continued to see healthy demand of our value for money products across the regions where we operate, including North America, Europe and Southeast Asia. Benefitting from our consistent efforts to optimize our supply chain and product mix, we maintained our gross margin at a healthy level, achieving 43% during the quarter compared with 42% in the same period of last year. We maintained profitability. Net income for the quarter was $7.3 million. Our solid financial performance reflects successful execution of our strategy as we better position ourselves in the intensive and competitive cross-border e-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 purchase on our platform. First, I will address supply chain management. Benefitting from our competitive advantages in supply chain has always been pursued ours, providing overseas consumers with value for money products is the foundation of our business expansion. Therefore, we continued to deepen our relationship with premium suppliers and have steadily increased our order volumes, so as to continuously reduce costs, while ensuring product quality. This cost saving benefit customers, thereby enhancing the competitiveness of our products. Second, we continue to focus on variety and relevance. Our platform is committed to providing consumers their full range of products, including apparel wholesale, electronics, sports, cars and hobbies products in the center, so as to provide a one-stop shopping experience.

[Yuanjun Ye:]

Thank you, Mr. He, and thank you, everyone, for joining the call. I will now review our financial results for the – of 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 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 and 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. 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, fulfillment 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.

[Operator:]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. . Your first question comes from the line of . Please ask your question.

[Unidentified Analyst:]

Hello, good evening. Thanks for taking my call. Nice quarter, and the forward guidance is attractive also. I got a question for you. Your sales have done extremely well versus previous years. And I think maybe more people are buying online because of COVID. Certainly, that's the case with U.S. race to online retailers. But has there been a product mix that has accounted for increased sales? I mean, have you – your business as 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?

[Wenyu Liu:]

Hi. Thank you for the question. Allow me to introduce myself first. This is Wenyu Liu. I'm the CGO of LightInTheBox. 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.

[Unidentified Analyst:]

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 continue to do well?

[Wenyu Liu:]

This is a seasonal effect.

[Unidentified Analyst:]

I'm sorry, it's seasonal?

[Wenyu Liu:]

Yes, it is seasonal.

[Unidentified Analyst:]

Gotcha. Okay. And – okay. That’s – 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. But is there any research coverage that your company enjoys, so that more investors can be aware of your company's success?

[Yuanjun Ye:]

Yes. We are in the preparation of having all the to make more investors understand our business well.

[Unidentified Analyst:]

Okay. Thank you.

[Operator:]

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

[Unidentified Participant:]

Good evening, management. This is David from First Trust, and 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 market. Would you illuminate business performance of the company in these two major areas during the recent quarter? And the second question is, how much percentage of the two areas have contributed to the total revenue in recent quarter? Thank you.

[Yuanjun Ye:]

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 America and Europe markets are the two key markets that we can 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.

[Unidentified Analyst:]

Okay, got it. Thank you.

[Yuanjun Ye:]

Thank you.

[Operator:]

. As there are no further question, I'll now hand the call back to Mr. Fleming for his closing remarks. Please go ahead.

[Tip Fleming:]

Thank you. This concludes our third quarter 2020 earnings conference call. Thank you for your participation and ongoing support of LightInTheBox. We look forward to providing updates and visits in the coming weeks and months ahead. Have a good day.

[Operator:]

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.