Margaret Shi - Investor Relations Alan Guo - Chairman and Chief Executive Officer Robin Lu - Chief Financial Officer.

Sisi Lu - China Renaissance George Askew - Stifel Nicolaus Eric Wen - China Renaissance Securities Yujie Li - RHB Rick Shea - Vardon Capital Management Ryan Roberts - China Stock Research.

Ladies and gentlemen, thank you for standing by and welcome to the Quarter Two of 2014 LightInTheBox Holding Co. Limited Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session.

(Operator Instructions) I must advise you that this conference is being recorded today Wednesday, 20th of August 2014. I'd now like to hand the conference over to your first speaker today, Ms. Margaret Shi. Thank you. Please go ahead..

Thank you, operator. Hello everyone and welcome to LightInTheBox second quarter 2014 earnings conference call. Our second quarter earnings results were released earlier today and are available on our IR website as well as on newswire services. Today you will hear from our Chairman and CEO Mr.

Alan Guo who will give an overview of company’s strategies and recent developments, followed by Mr. Robin Lu, our Chief Financial Officer, who will address the financial results in greater detail. 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 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 April 28, 2014. 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 LightInTheBox’s Chairman and CEO, Mr. Alan Guo. Alan, please go ahead..

Thanks, Margaret. Welcome everyone to our call. We are pleased to report that we have re-accelerated revenue growth. Revenues were US$ 89.8 million for the second quarter of 2014, which was a 24.3% rise over last year and add of our raise guidance of US$ 86 million to US$ 88 million.

Total number of orders increased by 52.4% year-over-year while orders from mobile devices increased by 175% accounting for 28.2% of total orders. Revenue from repeat customers rose to 40.4% of total net revenue compared to 32.5% a year ago. Selling and marketing expenses as a percentage of total net revenue improved sequentially to 27.7% from 31.8%.

We believe the better than expected performance was a direct result of the last strategic plan we set forth a few quarters ago and the hard work and solid execution of our team. Robust growth in revenue came primarily from three sources. Strong growth from mobile, fast growth from apparel and continued growth of repeat customers.

Mobil has changed the way global consumers shop and this transition to a new mobile-centric era offers a huge opportunity for us. We regularly upgrade our three primary mobile applications for our co-verticals including LightInTheBox, Mini and Flash.

These apps have gained increasing traction with consumers with the revenue growing at even faster rate than overall mobile revenue growth. We will continue to invest heavily in our mobile growth strategy. Revenue from apparel for the second quarter of 2014 grew by 43.5% year-over-year.

We achieved a solid rebound in wedding and customized apparel and gained extraordinary growth in ready to wear apparel. For wedding and customized apparel we have made changes to the management, improved merchandize and established an in-house design team and more competitive pricing strategy.

All of which led to a fast rebound in our wedding dress business. Our ready to wear business continued to grow very fast. We have successfully leveraged our existing wedding customers base to satisfy their ongoing day-to-day closing needs.

We have also increased the flash sales model for our ready to wear apparel, offering customers deeply discounted prices for a wide range of selection. This is all also helping our suppliers to dispose of excessive inventory when necessary.

We launched our open platform for third-party apparel sellers to sell directly on LightInTheBox during the quarter. While it is still at a early stage, we have seen a strong increase from merchants and brands.

Our marketing efficiency has improved primarily driven by increased customer -- repeat customer purchases and our effort to diversify our traffic channels in order to optimize our return on investment.

During the quarter our marketing spending on non-search channels had increased significantly, including social media, affiliate networks and other such channels. Our European fulfillment center in Poland has been scaling up nicely to all of our customers in Europe, our largest graphic market with faster lead time and a better customer experience.

We are working hard to further increase the number of European direct deliveries from the center in the in coming quarters. Global e-commerce is still at its early stage and has huge market potential.

We are fully focused on satisfying customers globally and on developing and strengthening our distinctive advantages in supply chain management, global customer reach and the fulfillment capabilities, big data analytics and mobile commerce. We feel fully confident with our strategy and ability to capture the global market opportunity presented to us.

I will now turn the call to Robin, our CFO, who will take you through our 2014 second quarter financial results.

Robin?.

Thank you, Alan and thanks to everybody for joining us on the call. This is my first official earnings call as CFO of LightInTheBox. I look forward to meeting and get to know you in the quarters ahead. As I review the financial results, I’d like to remind that all percentage changes refer to year-over-year changes unless otherwise noted.

Net revenues increased 24.3% to $31.8 million on the back of strong performance in our apparel category, increasing contribution from our mobile commerce business and a strong repeat customer repurchase. Total orders grew 52.4% year-over-year to 2.2 million and the total number of customers how made a purchase increased 44.2% to 1.7 million.

Repeat customer orders accounted for 40.4% of total net revenue, significantly up from 42.5% while mobile orders were up to 28.2% of total number of orders compared with 15.8%. Apparel revenue increased to 43.5% to $35.4 million, reflecting our initial success at re-igniting growth in this category.

The strong performance was largely attributable to strong growth in ready-to-wear apparel, while our customized wedding business enjoyed another quarter of solid recovery. As a percentage of total net revenues, apparel revenues was approximately 40%, compared with 34% last year.

Revenues generated from electronics and other general merchandize increased by 14.3% to $54.4 million. Geographically, revenues from Europe increased 25.7% to $55.4 million, representing 62% of total net revenues. Revenues from North America increased by 40% to $20 million, representing 22% of total net revenues.

While revenues from other countries increased by 3.7% to $14.4 million, representing 16% of total net revenue. Gross profit rose 6.8% to $35.5 million and gross margin declined to 39.5% from 46%. These changes were largely due to shifts in product mix and the pricing strategy as we continue to expand our market share and grow our customer base.

Fulfillment expenses increased 46.2% to $5.5 million, primarily reflecting the increase in sales volume and the number of orders fulfilled. As a percentage of total net revenues, fulfillment expenses increased to 6.1% from 5.2% based on smaller average order size compared with a year ago.

Fulfillment expenses per order improved to $2.5 from $2.6 a year ago. As a reminder, fulfillment expenses also include payment processing fees. Selling and marketing expenses were $24.8 million, compared with $19.6 million, reflecting our effort to grow both customer base and market share.

However, as a percentage of total net revenues, selling and marketing expenses improved sequentially to 27.7% from 31.8% and remained stable year-over-year. This reflects our commitment to optimize online marketing and diversify traffic acquisition channels.

Selling and marketing expenses per order improved to $11.4 from $13.7 a year ago and also improved sequentially from $13.2 last quarter. G&A expenses were $11.5 million, compared with $8.8 million, reflecting the growth of our business operations and our commitment to future growth.

This includes $3.7 million in technology investments compared with $2.4 million in the year ago. As a percentage of total revenues, G&A expenses were 12.9%, down sequentially from 14% and almost flat compared with a year ago. Total operating expenses as a percentage of revenue was 46.6%, down sequentially from 51.9% and up from 44.5% a year ago.

Loss from operations was $6.3 million, compared with operating income of $1.1 million a year ago. The operating loss narrowed sequentially by $2.3 million due to our progress in streamlining business operations, controlling cost and our commitment to improve our bottom line.

This (indiscernible) we will continue to invest in our long-term strategy to strengthen our distinctive global e-commerce platform. We believe this investment in our strategy will pay us in the future. Net loss attributable to ordinary shareholders was $5.7 million compared with $0.04 million in the same quarter of 2013.

Net loss per ADS was $0.11 compared breakeven in the same quarter of 2013. Each ADS represents two ordinary shares.

On a non-GAAP basis, adjusting net loss attributable to ordinary shareholders which excludes the impact of approximately $0.1 million in share-based compensation expense, was $5.6 million compared with $2.8 million in adjusted income a year ago.

Cash flows from operations were negative $0.5 million as operating losses were partially offset by cash from working capital. As of June 30, 2014, the company had cash, term deposits and restricted cash of $95.8 million, equivalent to roughly $1.93 per ADS. This compares with $99.7 million as of March 31, 2014.

On December 16, 2013, the company announced a share repurchase program of up to $20 million. As of June 30, 2014, we had repurchased a total of $2.6 million of ADS. Now let me turn to guidance. For the third quarter of 2014, we expect net revenue to be between $92 million to $94 million, representing a year-over-year growth of approximately 35% to 38%.

These forecasts reflect our current and preliminary views on market and operational conditions, which are subject to change. With that I will conclude our prepared remarks. At this point we are ready to take your questions.

Operator?.

(Operator Instructions) Your first question comes from the line of Sisi Lu from China Renaissance. Please ask your question..

So my question is regarding, on the marketing cost. Actually, I think I noticed that the marketing cost per customer has reduced quite nicely both on a year-on-year basis and quarter-on-quarter basis this quarter.

So could you help me understand better on the drivers behind? And also may I know the percentage of traffic from [ICM] (ph) model versus the other channels right now? And also could you please comment on future trend of the customer acquisition cost? Thank you..

Hey, this is Alan. Thanks for the question. I think as you see, we have improved sequentially on our marketing spending as a percentage of our revenue. I think it's a result of increased repeat customers and also increased marketing efficiency by diversifying traffic source.

Traditionally we have spent heavily on search marketing which was our primary driver of traffic but this Q2 we were able to diversify our traffic source to social media, to more affiliate networks and also to more mobile app installation.

So I think that's a very important driver for the reduced marketing cost as a percentage of revenue and also increase the efficiency on marketing..

And (indiscernible)....

Yes. Actually we don't guide the marketing expense and even though I should say continuous leveraging the marketing expense and improved marketing efficiency is our goal on a daily to daily basis to work out..

Thank you. Your next question comes from the line of George Askew from Stifel. Please ask your question..

Thank you for taking the question and congratulations on the strong revenue. I guess I have a couple of questions. First, you noted the wedding apparel rebound. How much of that is seasonal? I know the second quarter is a pretty important quarter there.

Is there a seasonal benefit that you are seeing here that may not repeat itself, say next quarter or beyond?.

Hey George, this is Alan. You know we actually are doing year-over-year comparison internally for wedding dress revenue and also number of dresses we sold during the quarter.

So while we are doing the year-over-year comparison there is no seasonality factors baked in and based on those numbers, I think while we are not disclosing, it's safe to say that we see growth in both our revenue coming from the wedding business and also the number of dresses we sold year-over-year during the same quarter of Q2.

And I said I think that was -- the rebound of the wedding was a combination of a right strategy, of focus on merchandising, focus on design, strengthening supply chain, tightened management, more competitive pricing and also a kind of very solid execution by the team during the past four quarters..

Got it. Okay, that's great. Thank you for that.

Can you, kind of shifting to a little bigger picture, what does your margin model look like going forward?.

Robin, can you take that question?.

Yes, let me take this question. Actually you know, regarding the gross margin I should say, our gross margin overall is much higher than the other e-commerce players. The gross margin, really is a combination of like a product mix change and competitive pricing.

As far as we, our standing in this industry, we are still in the very early stage so we could top that growth to expand our customer base and our -- the more orders is our first priority. So based on that, of course pricing is one of the instruments for us to implement our strategy.

And in the daily basis we evaluate our gross margin and use that to develop our strategy. Another thing, I think we focus on the collaboration between the marketing expense and the cost of product. When you look at the numbers in combination you can say we made a achievement this quarter in the percentage wise..

Okay. So there is no sort of target percentage model at this juncture? At one point I thought you guys were sort of working toward a certain margin structure sustainable over time.

Is there any kind of update on that or outline of how we should think about that?.

So George, this is Alan. No, Robin, go ahead..

Okay. Internally, as I said, we evaluate the gross margin in the operation space but we don't provide guidance for the gross margin..

Okay. I guess just a statement here, kind of interested in how the model looks. What is the path to profitability? Obviously you are driving revenue, you are letting -- profit really has turned negative here. That's fine, it's been for a couple of quarters, revenue growth is what matters.

But I think investors will care over time what the profitability model is and that's the reason for the question. But I kind of -- I think I've got the answer, at least the answer I'll get..

So George let me -- at one point after you give some more background on your question, I think I do want to encourage you to think about even with the reduced pricing in terms of just increased competitiveness, overall we still have a very attractive gross margin structure for any traditional or online retail measure. That's number one.

And number two is, we certainly know that after we are gaining more and more market share, there will be opportunity for us to retaining the margins. Because in the end of day, if you look at the categories we are playing, it's really still a lot of private-label product. It's not, say, commodity product. It's not very high branded product.

The business model has not changed. So that we certainly will enjoy a better than average margin, gross margin structure going forward. I think we are kind of playing a better trade-off between marketing efficiency and the gross margin profile during the last quarter compared with second half of last year..

Okay. That's helpful. That clarifies some things. Last question. You had some management changes here in the first half of 2014 including the departure of your President, Mark, after a fairly short tenure.

Can you just sort of frame what is -- I know everybody leaves for personal reasons and all that but at the end of the day, what holes remain in the management structure? Why have things changed as they have changed?.

So, George, as a very fast growing global e-commerce company, we constantly our building up our management benches, particularly we have been focused on that after IPO. So as part of that we bring a number of senior talents.

We acknowledge the fact that Mark left the company and the Q announced his departure even though he is still working tirelessly on his job until the end of the year.

But while we are feeling very confident with the current leadership of the company with a good combination of the founders and the new executive management joined and also homegrown management that has been working with the company for the past 6-7 years.

We feel very strong about our team and I think the financial performance actually speaks by itself, shows the effectiveness of the team. We think the success of last quarter was primarily as a result of that and also that will reflect into our Q3 guidance and so on and so forth..

Your next question comes from the line of [Yu Kna from ICBC International] (ph). Please ask your question..

Congratulations on the strong earnings. I have two questions here. First is a broader question regarding the market for Alan. Could you give us some updates about your pricing strategy to acquire market share for the coming quarters and also could you give us some updates about your Flash sale business.

Earlier, company mentioned that your strategy is to open platform for third-party merchandise sales. Any updates about this? Thank you..

Yes. So the first question is actually our pricing strategy. I think we definitely want to deliver a lot of value to consumers, that's number one. And secondly we want to be very -- we want to be very cautious about our margin so that we will have a path to profitability. And thirdly, we think we want to be gaining market share over time.

So the second question is actually about the Flash sale business. I think the Flash sale business, yes, it's a very important driver for us in the past couple of quarters for the apparel business. I think it has a very unique model. So it's attractive for consumers for pricing and also for supplies for their -- to dispose their inventory.

We think it will continue to be a driver for ready to wear apparel business.

Sorry, I missed the -- what's the third question?.

The open platform for third-party merchandise sales. Some updates about that..

Yes. The open platform strategy, I think it's a proven strategy for many kind of b2c companies gradually moving to a open platform. For us it's a natural extension of opening our customer base to third-party merchants to directly selling their products in a more flexible way.

At the same time we want to make sure the same level of customer satisfaction and our end to end accountability to consumers. So we require the merchants to actually put product through our fulfillment network. So that when they come to our warehouse we will do quality check and they will be able to leverage our infrastructure.

We think this is very attractive to merchants in China who doesn't speak English and who doesn't able to, kind of manage the global logistic network themselves. But in term of its development, we just launched this quarter. We think it's very early. So I think we are not ready to give any numbers at this time..

Thank you.

So does the company have any figure about the Flash sale given its revenue contribution?.

Robin?.

Yes, that's my question.

Yes, we have the Flash sales business in our apparel business but basically you want to look at the exact number or?.

I just want to know what's the revenue contribution that company can share.

The revenue contribution from Flash sales?.

Yes, that's my feedback. We really don't breakup the revenue from Flash based sale but we do use this model in our sales..

Okay, thank you. I have one quick follow-up regarding to the mobile side. Do you have a breakdown of mobile orders by category? What's the top three category for the mobile orders, if you can share something about this.

Just trying to figure out if there are any differences from PC side?.

You know what I can say is, we had like a order increase in overall and which we disclosed. But for mobile, mobile of course is our strategy but we don't break the order for mobile..

Okay.

So are...?.

I think you know that mobile adoption is still in the early stage in our industry. So when the time is appropriate we can share more with you..

Your next question comes from the line of Eric Wen from China Renaissance. Please ask your question..

I just have a quick question regarding your overseas warehouse.

Can you walk through your strategy in overseas warehouse? How would that benefit you in improving your consumer experience and how do you decide to spend the money to build a warehouse? I noticed that your CapEx actually has not increased that much in the last two quarters and how would you manage the risk associated with the inventory risk about this strategy? Thanks..

Hey, Eric, this is Alan. So I think, there are a couple of things. As for overseas warehouse, our view is, we don't want to introduce a large number of them. We probably initially are going to build one for each continent. So basically we call it continental warehouse like the Poland warehouse covers the whole EU countries. The U.S.

warehouse covers North America and so on and so forth. So that actually is the baseline that we will not actually in current a lot of CapEx. Secondly, in terms of the model, we are not acquiring land our building buildings ourselves. We try to leverage existing facilities as much as we could, in an incremental basis.

And we only kind of -- and also because we actually develop all the software ourselves. So when we launch a new facility, there is no additional loyalty fees or consulting fees we need to pay to anyone.

So there is also -- so that also makes a huge difference compared with some other companies may outsource their software for warehousing and logistics management. So thirdly for the inventory management, I think we are very data driven.

We have been -- we have a very sophisticated data mining team in China and we also acquired a very experienced supply chain oriented data expert in Seattle. So both teams have been working together to build a big data driven inventory model.

So we don't actually -- there will be certainly some level of increase of inventory for this two tier model but we should not expect the inventory increase change the overall nature of kind of character of our business.

And also that being said, I think with additional inventory potential, additional inventory increase, we will also have an opportunity to increase our accounts payable from the suppliers so that we will still run a cash positive, working capital cash positive business as our nature.

And lastly, I think from a consumer perspective, the biggest wing is actually delivery speed from the time they make a order at the time they receive the order. And the second wing is the shipping cost the consumer is going to owe us, LightInTheBox is going to occur. So I think it has both benefit in terms of shipping speed and also shipping costs.

And in addition it will also help the consumers for returning the goods. Any of the consumers, they don't have written back to China, they just return to our fulfillment center in Europe.

I think over time you can actually think of our continental fulfillment centre not only as a warehouse but also a comprehensive service compound where we can do some alterations for the dress and some basic exchange of the parts for the goods. So basically that's kind of the modeling we are envisioning.

We think over time it's going to become huge barrier to enter and a very distinctive advantage for a company who want to have a global presence.

And I would even go further to say, there hasn't -- probably it hasn't been many companies, especially e-commerce companies in the world, have been able to establish this level of, this type of infrastructure in the past.

We really think it's a very -- it's the infrastructure we are referring to, it's not talking about buildings and lands, it's actually the service and software and the process we design on top of those..

I guess, I have some more comments. In summary, with a tight control of inventory management overseas, I think our primary goal is to improve our customer satisfaction with this type of solid infrastructure which is extremely important in the long run to conquer the market for their. Of course with some additions of cost savings..

Your next question comes from the line of Yujie Li from RHB. Please ask your question..

Thanks for taking my questions and congratulations, your mobile revenue was very strong this quarter. So could you please give us some updates on your mobile initiatives? Thank you..

You know as I said in my earlier script, I think we certainly have mobile first strategy for the company. If you think about last year, our mobile strategy was primarily focused on developing our very good mobile web experience. This year it's really about developing a mobile app experience.

Because we believe with an app installed in consumers desktop and mobile, we will be able to better engage with consumers in a very personalized way with push messages, with personal recommendations and so on and so forth.

And also we think mobile is very important for demand generation in the sense that the consumers can use a lot of, a small fraction of their time to browsing, "window shopping" on the mobile app. So I think it's going to build a very good repeat browsing and purchase behavior.

That also kind of go hand-in-hand with daily Flash sale business model and personalized recommendation model. We also realize that in mobile people want each app does only one thing and do it very well. So that's why we actually launched much more apps, each one with a very specific category or kind of promotional focus, such as Mini, such as Flash.

Lastly, we think mobile commerce is still very early so we are open to all kinds of innovation internally at the small scale trials. So we think we may want to explore continuous innovations in mobile beyond what we have been offering. That will be also a part of the business that we plan to invest in term of our future mobile direction..

Your next question comes from the line of (indiscernible) from Stifel. Please ask your question..

Congratulations, strong revenue guidance for 3Q. Just a quick one. You mentioned repeat customers contributed 40% of your total revenues.

I wonder, out of a total orders, what percentage came from repeat customers?.

Robin can take that..

Yes, I will take this question. Actually, I think you can do some calculations for this one but we generally don't disclose those numbers..

Okay. So, like is it higher or lower? Just wanted to get a general sense..

Actually, with the numbers we provide you may get a hint about these numbers..

Your next question comes from the line of Rick Shea from Vardon Capital. Please ask your question..

Just wanted to get a little more detail on the third-party business and how we should think about that opportunity.

How you are approaching that business, the number of people, the sales process and what are your plans for growing that business and then what the margin structure looks like compared to the base business?.

Hey, Rick. This is Alan. I think it's still very early. This call is certainly not the best time. We layout a very comprehensive strategy to people on the third-party platform. And also I have -- it's safe to say, it was not a material part of our Q2 financials.

I think we are still internally baking the exactly right process, percentage cut and all those things for different type of merchants. So I just view it's kind of premature to discuss this in length this time..

(Operator Instructions) We appear to have no further questions at this time, I will now like to -- I do apologize, we have last-minute questions from the line of Ryan Roberts from China Stock Research. Please go ahead..

So (indiscernible) give us some color on kind of ports going on in non-apparel.

It looks like sales have been kind of drifting lower the past couple of quarters and I was wondering if we could kind of give an update on what's happening there?.

Alan, you want to take this question?.

Sorry, the voice cut off.

Which part of the business are you referring to?.

I'm just looking for an update, some kind of information on what's going on in non-apparel sales. It looks like it's been drifting lower the past couple of quarters, quarter-on-quarter.

Just kind of curious about what's going on there?.

So actually if you compare year-over-year growth, the Q2 year-over-year is actually slightly higher than Q1 year-over-year growth. It has been our strategy in this year, the beginning of this year, we laid out our strategic focus of growth will be in the apparel, which we have been executing.

And also you have to kind of remember that when we think of the non-apparel business, it's a conglomerate of a larger number of categories. So within the conglomerate we actually are doing out adjustments over time. Some of the category is growing faster, for example, home decoration.

And some of the categories we feel in the longer term, it might not be as attractive as other categories. So we don't want to kind of become our strategic focus. So it's safe to say, there is lot of activity going on to recalibrate different subcategories within the conglomerate.

And we feel good about our progress, we feel good about identifying additional growth drivers within such as home décor. So that's kind of our take on that..

And then could you kind of -- just to follow-up on that.

Kind of give us a sense of where you are along in that process of kind of recalibrating, re-thinking that non-apparel stuff? Just qualitatively, how would you say you -- how would you gauge your progress?.

You know we think -- Robin, go ahead..

I think at a different stage we grow the different categories at different times. I mean we are primarily focused on apparel at this moment and we do see the great result for that. And as Alan mentioned just now, we identified some potential growth drivers in the non-apparel sector. We are preparing for the growth for that.

So it's still in the process as you know..

Well, I think the point being we are a company that run in multiple categories over time and you can almost think of it as a horse race and we will dynamically allocate our resources including marketing dollars essential to the emerging, naturally emerging categories or strategically focused categories.

So I would say that's the kind of the way we run the business. I guess that's all I had..

But I feel we still gain like a 14% growth which is in line with our plan for this category, non-apparel category..

Thank you for the questions. I will now like to hand the call back to your presenter. Ms. Margaret Shi, for the closing remarks..

This concludes our second quarter 2014 earnings conference call. Thank you for your participation and ongoing support of LightInTheBox. We look forward to providing you with more updates of our business in the coming weeks and months ahead. Have a good day. Thank you..

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect your lines..