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Edited Transcript of LITB earnings conference call or presentation 16-Mar-17 12:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 LightInTheBox Holding Co Ltd Earnings Call

Beijing Mar 16, 2017 (Thomson StreetEvents) -- Edited Transcript of LightInTheBox Holding Co Ltd earnings conference call or presentation Thursday, March 16, 2017 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christian Arnell

LightInTheBox Holding Co., Ltd. - Christensen IR

* Alan Guo

LightInTheBox Holding Co., Ltd. - CEO

* Robin Lu

LightInTheBox Holding Co., Ltd. - CFO

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by and welcome to the LightInTheBox fourth quarter of 2016 earnings conference call. (Operator Instructions). I must advise you that this conference is being recorded today, March 16, 2017.

I would now like to hand the conference over to your first speaker today, Mr. Christian Arnell. Thank you. Please go ahead.

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Christian Arnell, LightInTheBox Holding Co., Ltd. - Christensen IR [2]

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Thank you. Hello, everyone, and welcome to LightInTheBox's fourth-quarter 2016 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 Chairman and CEO, Mr. Alan Guo, who will give you an overview of the Company strategies and recent developments; followed by Mr. Robin Lu, the Company's Chief Financial Officer, who will address financial results in more detail.

Before we proceed, I would like to remind you of our Safe Harbor Statement.

Please note that the discussion today may contain forward-looking statements made under the Safe Harbor provisions of the US 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 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 US Securities and Exchange Commission on April 29, 2016. 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 Alan. Alan, please go ahead.

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Alan Guo, LightInTheBox Holding Co., Ltd. - CEO [3]

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Thanks, Christian, and thank you, everyone, for joining us today.

I'm pleased with our performance during the fourth quarter, with revenue beating the high end of our guidance of $93 million. More importantly, revenue increased 8.8% year over year, a major improvement when compared to the third quarter of 2016. This was a direct result of strong sales during Black Friday and the Christmas holiday season, as well as the increased traction that our logistics and warehousing platform and services are getting.

We believe this marks a milestone, as we have reversed our top line trend, and are regaining growth momentum again.

This demonstrated our persistence, and the effectiveness of our strategy to strengthen our core business through improved supply chain management and customer satisfaction, to develop new business growth engines and to continuously innovate.

We continue to persistently execute our strategy to improve our supply chain management and customer satisfaction. Throughout the year, customer complaints about the product quality steadily decreased. We believe the improved customer satisfaction leads to revenue growth in a number of key categories, including sports and hobbies; home decor; customized apparel; and wig and hair extensions.

During the quarter we deployed an upgraded version of an intelligent quality-assurance system, which is able to digest twice amount of data we have collected; and with increased precision, predict [card card] quality deficiency prior to being shipped to customers.

We have also significantly improved our data-driven merchandising infrastructure. Our IT systems are able to [crowd] index, and understand a wider variety of websites to more precisely identify emerging product trends.

We have also leveraged the online behavior -- behavioral and demographic data of our users, to enhance the personalized search -- personalized recommendation engine on our website, direct email and mobile app.

We believe that intelligent merchandising using big data has enabled us to gain momentum during the quarter in a number of geographic markets, such as the UK, Brazil and Australia.

With big data in our corporate DNA, we are naturally progressing towards become a new type of online retail Company, with sophisticated machine learning and AI tools, to make intelligent decisions on almost all aspects of our online retail business, such as merchandizing, quality assurance and personal recommendations.

We are still in the very early stage of the AI era, but we strive to build a long-term, competitive advantage as we enter the early stage of the AI adoption lifecycle in a global ecommerce.

Our improved supply chain management is creating opportunities for us to introduce more of our OEM products, marketed during -- under LightInTheBox associate private label brands beyond the wedding category. This gives us more margin expansion opportunities and allows us to develop new sales channels outside of our website and app.

While still early on, some of our OEM products in the home decor category have begun to gain traction on Amazon platforms globally.

As China's manufacturing industry moves from product imitator to product innovator in many sectors, we are developing ways to connect innovative domestic manufacturers across a variety of different categories with the global consumer market under our own brand.

The rapid adoption and the penetration of mobile Internet has developed in tandem with the growth of ecommerce in major emerging markets, such as India. This has created new opportunities for us, given our knowledge of China ecommerce market development, as many lessons learned in China can be applied directly or indirectly to India and other emerging markets.

We think our strong consumer value proposition, such as price to quality, trendy selection and large variety, can directly appeal to Indian Internet users. We are leveraging this experience to develop an all-encompassing solution, specifically tailored to the Indian market, as one of our major focuses in 2017.

Our logistics and warehousing platform has become an important growth driver. We are exploring value-added services that leverage our overseas warehousing in Europe and North America.

Our self-developed and proprietary cloud-based ERP system is now officially launched. We are now working with our strategic partner, Zall Development, to roll it out in their wholesale ecosystem. We believe that our cloud software will be a very important, long-term strategy for us in the years ahead.

I'm pleased with what we have accomplished this quarter. I'm confident in our ability to effectively execute our strategy and look forward to further improving our business and developing new initiatives in 2017.

I will now turn the call over to Robin to go through the financials for the quarter.

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Robin Lu, LightInTheBox Holding Co., Ltd. - CFO [4]

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Thank you, Alan. As I review our financial results, let me remind you about a few things. All numbers quoted are in US dollars. All the percentage changes refer to year over year, unless otherwise noted.

Net revenues starting in fourth quarter of 2016 will be classified into two categories: net revenues from product sales and net revenues from service and others.

So, to start. Net revenues increased 8.8% to $95.2 million. Net revenues from product sales were $84.7 million, compared with $80.9 million in the same quarter of 2015.

Net revenues from service and others were $10.5 million, compared with $6.6 million in the same quarter of 2015. As a percentage of net revenues, service and others accounted for 11%.

Total orders of product sales were 2.2 million and the total number of product sales customers in the quarter were 1.7 million.

Product sales in the apparel category were $24.1 million, compared with $25.2 million in the same quarter of 2015. As a percentage of product sales, apparel revenues accounted for 28.5%, compared with 31.1% in the same quarter of 2015.

Product sales from other general merchandise was $60.6 million for the fourth quarter of 2016.

Looking at our business geographically, product sales from Europe were $47 million for the fourth quarter of 2016 compared with $48 million in the same quarter of 2015, representing 55.4% of total product sales for the fourth quarter of 2016.

Product sales from North America were $22.7 million compared with $24.4 million in the same quarter of 2015, representing 26.8% of total product sales for the fourth quarter of 2016. While product sales from other countries were $15 million, representing 17.8% of total product sales for the same quarter.

Total cost of revenues was $63.4 million, an increase from $56.6 million in the same period last year. Cost of product sales was $53.6 million compared with $50.5 million during the same period last year, and the cost of service and others was $9.8 million compared with $6.1 million during the same quarter of 2015.

Gross profit was $31.8 million and the gross margin was 33.4% compared with 35.3% in the same quarter of 2015.

Fulfillment expenses, which include payment processing fees, decreased to $4.6 million from $5.2 million. Selling and marketing expenses were $19.5 million, a decrease [of] $20.4 million in the same quarter of 2015.

G&A expenses were $10.1 million compared with $8.6 million in the same quarter of 2015. G&A expenses include $3.1 million in the technology investment compared with $3.3 million during the same quarter of 2015.

Net loss was $2.4 million compared with net loss of $3.5 million a year ago. Non-GAAP net loss was $0.7 million compared with non-GAAP net income of $5.5 million in the same quarter of 2015. Net loss for ADS was $0.04 compared with net loss of ADS of $0.07 in the same quarter of last year.

As of December 31, 2016 we had cash and cash equivalents and restricted cash of $91.1 million.

As of December 31, 2016 the Company has repurchased a total of $0.8 million US dollars of ADS as a part of $10 million share repurchase program announced on June 8, 2016.

For the first quarter of 2017, based on our current estimate and the business seasonality, we expect net revenues to be in the range of $70 million to $72 million, representing an increase of 4% to 7% year over year. This forecast reflects the Company's current and preliminary views on the market and operational conditions, all of which are subject to change.

This concludes our prepared remarks.

At this point, we are ready to take some questions. Operator?

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Operator [5]

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(Operator Instructions). There are no further questions as of the moment. You can -- please continue.

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Christian Arnell, LightInTheBox Holding Co., Ltd. - Christensen IR [6]

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Thank you. That concludes today's call. If you have any questions or comments, or would like to come visit the Company in China, please don't hesitate to reach out to anyone on the IR team.

This concludes the call. Thank you for joining. Have a good night. Bye bye.