Christian Arnell - Christensen Investor Relations Group Alan Guo - Chairman, CEO, Co-Founder Robin Lu - CFO.

Cheng Cheng - Pacific Crest George Askew - Stifel Jane Zhu - CICC.

Ladies and gentlemen, thank you for standing by and welcome to the LightInTheBox 2015 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation there will be a question-and-answer session.

[Operator Instructions] I must advise you that this conference is being recorded today, Friday 5, June 2015. I would now like to hand the conference over to Mr. Christian Arnell from Christensen for opening remarks. Thanks..

Thank you, Operator. Hello, everyone. And welcome to the LightInTheBox's first quarter 2015 earnings conference call. The company's results were released earlier today and are available on the company's IR Web site, as well as PRNewswire services. Today you will hear from LightInTheBox's Chairman and CEO, Mr.

Alan Guo, who will give an overview of the company's strategy 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 the 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 17, 2015. 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 Christian. Welcome everyone to our first quarter call. We made a substantial progress during this quarter despite continued foreign exchange turbulence in many of our markets particularly in Europe. Net revenue grew year-over-year 7.4% on a GAAP basis and 21.5% on a non-GAAP basis excluding the impact of the Forex fluctuations.

Revenue from North America grow year-over-year 36.2% on a GAAP basis and now accounts for 25.5% of our total revenue up from 20.1% a year ago as we continue to rebalance sales geographically to mitigate currency fluctuations. Our apparel business continued to perform strongly with revenue up 29.6% on a GAAP basis year-over-year.

Revenue from repeat customers as a percentage of our total revenue continued to grow and reached new historical high. More importantly, we acted very quickly to take a number of measures to improve the efficiency as a response to the Forex turbulence.

These measures cover almost every aspects of our business and already started to have a positive effect in Q2 and it will continue to improve our financial performance in the in coming quarters. We made major progress in lowering our cost of good sold by realigning and streamlining our supply chain.

We launched a new supplier breeding system to increase competition among our suppliers. Eliminated many sort agencies – sorting agencies to go straight to the source. We list a number of new suppliers with better price quality ratio, as a result, we have a much more competitive supply chain and expect higher margins in Q2 and beyond compared with Q1.

We negotiated with our shipping partners to lower our shipping cost per each unit and introduced a number of innovations in our packaging program to further reduce shipping costs.

We further improved our CIM systems to shuffle our focus on nurturing and remarketing to our existing customer base to increase repeat orders while become more selective in acquiring new customers in strategic categories and the geographic, as a result we expect marketing as a percentage of revenue will drop significantly in Q2 from Q1 this year.

We implemented a number of programs and system enhancement in our warehouse operations, so productivity and the efficiency will improve and we negotiate better rates with payment vendors to lower our transaction cost in Q2 as well.

We also streamlined our organizational structure and optimized our staff allocation which will lead to significant lower G&A cost in Q2.

In the meanwhile, we are identifying a number of key employees and provide them better performance incentives including stock options from our existing [WeStore] [ph] program to further boost productivity and loyalty. We are part of the new economy which is not only evolving rapidly, but growing very fast with the expanding opportunities.

Beyond improvements in our near-term performance, we are also focused on cashing new opportunities such as mobile. Last month, we launched WeStore a new global social network oriented ecommerce platform which enables small sellers to quickly open their social mobile stores at no cost to easily promote their product through social networks.

We also absorbed that increasingly different players around the Internet with different skill sets and capabilities start to be very creative and constructive to form strategic partnerships to create synergies and expanding business prospects.

So as a company, we are also actively considering opportunities for strategic business alliances and partnerships to further strengthen our business growth prospect. In summary, we believe, we are strongly positioned to going into the rest of this year as we continue to face currency and the macro economic uncertainty.

We are working fast to better balance revenue and expenses with a long term growth and innovation mindset. We will now turn the call over to Robin, who will take you through our financial results. Thank you..

Thank you, Alan. As I mentioned in my remarks during the last earnings call, we expected continued currency challenges to have one of the worst effect on our business in Q1. March was in fact the worst performing month in Q1 for the euro adding to our challenges in managing the turnaround of the business.

Despite this, today we believe we have turned the corner. We are fully focused on the execution of the measures Alan mentioned and have recently started to see the benefit flow through our P&L.

We expect a stronger performance next quarter with higher quality revenue improved gross margins, lower margin spending as a percentage of revenue and a significant reduction in operational loss while we compare to the first quarter of 2015. As I review my financial results, let me remind you about a few things. All numbers quoted are in U.S.

dollars, all the percentage changes refer to year-over-year, unless otherwise noted. Net revenues increased 7.4% to $87.6 million, primarily driven by the strong performance of the apparel category, increasing contribution of repeat and a new customers and our growing mobile commerce business.

Considering the $11.7 million unfavorable impact from year-over-year change in foreign exchange rates throughout the quarter, non-GAAP net revenues would have been $99.3 million. Total orders grew 43.6% year-over-year to $2.8 million and the total number of customers who made a purchase in the quarter increased by 32.4% to $2 million.

Repeat customer purchase accounted for 46% of total net revenue, up from 37.8% a year ago, while mobile revenue as a percentage of total revenue was up 30.4% from 23.8% year-over-year. Revenue in the apparel category was up 29.6% year-over-year to $31.7 million, reflecting the strong performance from our ready to wear apparel business.

As a percentage of total net revenues, apparel revenue was 36.2%, compared with 30% a year ago. Revenues generated from other general merchandise were down slightly to $55.9 million due to substantial exposure to Europe.

Looking at our business geographically, revenues from Europe were up slightly to $54.3 million representing 51.9% of total net revenues. Revenues in North America were up by 36.2% to $32.3 million.

Revenues from North America accounted for 25.5% of total net revenues up from 20.1% a year ago, which resulted from our strategy to rebalance revenue to mitigate the impact of the euro. Revenues from other countries were up slightly to $11 million, representing 12.6% of total net revenues.

Gross profit was $29.8 million and gross margin was 34% down from last year's gross margin of 41.3%, excluding $11.7 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, non-GAAP gross margin would have been 41.7%.

Fulfillment expenses increased to $6.9 million from $5 million during the same period last year primarily reflecting the increase in sales volume and the number of orders fulfilled, as well as the ramping up our overseas fulfillment centers. Fulfillment expenses per order were $2.46 down from $2.52 from last year.

As a reminder, fulfillment expenses also include payment processing fees. Selling and marketing expenses were $31.5 million, compared with $25.9 million last year. This reflects a strategic decision to invigorate sales in the face of a weaker environment in Europe. Going forward, we expect marketing cost as a percentage of revenue to decrease.

Selling and the marketing expenses per order improved to $11.2 from $13.2 a year ago. G&A expenses were $12.8 million or 14.6% of total net revenues compared with $11.4 million or 14% of total net revenues last year.

G&A expenses include a one-time severance cost of $0.9 million and also include $5.1 million in technology investments compared with $3 million during the same quarter last year. The consistent investment in technology reflects our confidence in the future of our business and the need to continue to build up our core competencies.

Non-GAAP net loss was $8.7 million compared with non-GAAP net loss of $7.6 million in the first quarter of 2014. Non-GAAP net loss per ADS was $0.18 compared with net loss per ADS of $0.15 the same quarter of last year. As of March 31, 2015, we had cash from deposits and restricted cash of $67.7 million equivalent to roughly $1.41 per ADS.

As of March 31, 2015, we have to repurchase a total of $13.9 million of our ADS as part of our share repurchase program which was extended to an additional 12 month period through December 15, 2015. For the second quarter of 2015, based on our estimate of foreign exchange depreciation against the U.S.

dollar, we expect net revenues to be between $78 million and $81 million. This forecast reflects the company's current preliminary review on the market and operational conditions which are subject to change. This concludes our prepared remarks. At this point, we are ready to take some questions.

Operator?.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Cheng Cheng from Pacific Crest. Please ask the question..

Thank you.

Two quick questions from me, first one, on your 2Q guidance, I'm just wondering if you can provide some more color on how much of a foreign currency exchange impact is baked in there? And maybe the second question, it looks like in Q2, you are also expecting some increasing operating efficiency or decreasing cost, I'm just wondering, you can provide a lot more color and the magnitude of the improvement in your cost structure.

Thank you..

Hi, Cheng Cheng, it's Robin. Actually excluding the impact of Forex change based on our best current estimate, the revenue is roughly be almost remind the same as way compared with the same period of last year. And regarding the cost structure, we reduced the cost in both shipping and the packaging also reduced cost in the G&A cost.

As we mentioned in the last conference call and also we try to improve our marketing efficiency, what I can say is, we will have a much better gross margin in Q2 and also we would have more efficient marketing spending in Q2 as well as some other cost structures..

Okay.

As a quick follow up to that, I was wondering, have you guys done or are you guys planning to do any pruning of your product offering in terms of removing any lower margin products from your portfolio I guess?.

Cheng Cheng, this is Alan. Yes. We certainly have done a number of the initiative being our part of assortments, merchandising and also the supply chain, as you suggested, we are certainly focused on – from part of the ranking perspective, I certainly recommend users with both attractive and high margin product to expand the margin.

But more importantly is to actually identify popular items and try to find alternatives of new suppliers who actually source with better price to quality ratio. We have done a very extensive number of those initiatives in this quarter.

I can tell you that, we actually list unprecedented number of new suppliers this quarter with much more competitiveness in that regard to actually expand our margin in Q2. Just to build on Robin's point, I want you guys to think about our Q2 is, while our revenue if we normalize the euro or Forex impact would be essentially similar to last year.

But, the quality of revenue is much better, on one hand we have – we will have extended margin compared with Q1, and on other hand, we will also have much lower marketing cost since revenue compared with Q1 and we also made the major progress in the cost cutting G&A as well.

So adding all those things together, we think we will have a very significantly reduced loss in Q2. It's going to be – so that's why Robin was referring this Q2 as turning of the corner – quarter plus in term of improving profitability..

Great. Thank you..

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

Yes. Good afternoon. Thanks for taking the question.

On currency hedging, did you do any currency hedging in the first quarter; do you have any plans for that going forward?.

Yes. We have a plan for that. And we are continuously evaluate the currency hedging metrics and we talk with the companies for that. In Q1, we did something for this, but as you know in the overall situation this kind of like the euro is in the above like 20% down versus last year same period. So we do see the negative impact of the euro..

Right. Yes. It seems impressive and for sure. Alan, you just addressed the notion of higher quality revenue in the second quarter, the way you described it, it sounds like higher quality gross profit.

I mean you got the new suppliers, you are getting better pricing from them, what are you seeing in kind of like better pricing from consumers as well, is that part of what's going on or is it just higher price points of your assortment.

Can you just describe a little bit more what's going on?.

Yes, George. I first want to answer the timing on the Forex hedging question you asked Robin. I think the way we think about it is, one, Forex situation is very stable then you enter into a hedging program, the cost is very low.

But, if you have not entered a program in that situation, when it becomes very turbulent and then the cost of hedging is actually very high. So that's why, the Q1 – last Q4 and Q1 the way it became very turbulent.

It's almost impossible to actually hedging it with the hedging program if that hasn't been done let's say 6 months or 12 months back when things are stable. So with that, it's very minimal that we could actually hedging those risks during the turbulent.

I do think in the future that when the situation become more stabilized it's actually make sense for the company to actually looking into some longer term Forex hedging programs that while things are stabilizing.

But, now, it still not the best time to actually due to the large scaling permutation of those hedging programs after we actually talking with a number of providers of this program including banks and payment companies et cetera. That kind of just where we are. So that's the kind of add-on top of what Robin just said.

The second, yes, to my comments on the quality of the revenue, I think its actually came into a couple of different angles, the first is certainly higher margin revenue, which actually means – actually two things; a) is expansion of streamlining of supply chain which give us lower cost of good sold while not sacrificing product quality, and secondly, certainly, our primary pricing currency showing to consumers U.S.

dollar. But, consumers paying us in euro most of them in euros, so we will actually frequently update the euro to U.S. dollar exchange ratio which means, one, the euro is still down relative to U.S. dollars, with the updated exchange rate, those consumers in Europe will actually see higher price reported in euro.

But, that actually does not expanded our margin when we convert the revenue back to U.S. dollar. So I just want to kind of explain that that does not actually cost of expansion of the margin first in GAAP basis. On the other hand, when the economy is hurting, it's almost impossible for us to further increase price in U.S.

dollar terms so that the European customer will give the double dipping of price increase will actually drastically hurt our conversion rate and the ability of generate revenue in those markets.

So I think the primary driver of the margin expansion that's happening in Q2 is actually a supply chain efficiency improvement not the pricing strategy change. But, that being said there is also a focus of where we are spending our marketing dollar and our overall marketing effort.

So in Q2, we are certainly actually switching the whole marketing team much more focused on CIM program, which generate revenue more revenues from repeat customers. I do want to kind of guide people to look at our historical trend. We always had our continuous growth of repeating customer as percentage of revenue in many quarters in the past.

But, we do think we actually will have accelerated growth of repeat customers as there will be in Q2 this quarter due to our improved CIM systems and more focus on the marketing tools, our existing customers.

For example, we actually have cash reward programs which we will from time to time to actually selectively identify loyal customers and life time [awarded] [ph] customers actually using our CIM program to give them those reward, so that to recall them back to actually repurchase, we certainly actually have done more of those activities in Q1 compared with last quarter.

And we are also certainly more sophisticated in giving out those rewards which actually demonstrate much, much higher return on investment comparing with – by new customers. So that also kind of what I refer as higher quality revenues.

And thirdly, there is also a strategic choice of which categories and which geographic we want to acquire a new customers and new revenues.

As you can see in Q1, our revenues from North America actually expanded significantly from a year ago because we believe that over time it make more sense actually to make more sustainable balance that business across different geographic, we are definitely don't want to be too heavily loaded in Europe in the coming years in term of revenue distribution.

And also category wise, our apparel continue to grow fast and I can also say that within our apparel the ready to wear apparel actually grow faster than weddings.

It's almost like two-thirds [Technical Difficulty] two-thirds of our revenue from apparel now is actually coming from ready to wear apparel, which we believe is a much bigger market than the traditional wedding business. And also we will actually generate more repeat purchase behaviors from our consumers as well.

So I do think the quality of revenue also have elements of the strategic choice and target that we focus on..

Got it. That's very, very helpful. Thank you.

Just two last quick ones in this; it's what you are talking about as well, what are your repeat customer statistics for mobile?.

So we don't actually break down that but qualitatively we do see actually a higher life time value in a mobile user compared with PC users. We actually do see more frequent engagement from our mobile users. For example, in many of – significant portion of our revenue actually came from CIM programs.

And we do observe that most people actually open their emails from their handsets, which will actually leads to our mobile Web site, which will actually promote them to install mobile app. So then after they install mobile app, they will actually engage more frequently with us.

So we do think that, we will continue to invest heavily in mobile in term of the R&D, we actually mentioned in the last calls that we actually established a mobile R&D center in Chengdu, which has a lower labor cost for the software engineers and also has a lot of mobile R&D talents.

We think those investment in the last year actually really paid out. I guess we do want to kind of say that we believe overall we were in a very kind of a well planned path for growth and the profitability but it was kind of interrupted by the euro prices.

But, the company reacted very quickly, the labor cost cutting was a very significant and we were very determined in turning the corner plus we understand it was a very – the magnitude of those Forex exchange was unprecedented not only in the company's history but also actually in the past 12 years of euros history.

So the company and the Board was very decisively make those decisive and difficult [marriage] [ph] in term of cutting cost and streamline operations and support.

But, I think we have made very big progress in last 90 days and now I think it's a kind of set-up in a much better position now compared with last quarter earning call in term of where the company is in term of its – it's healthy of the operational margins and hence on its course..

Okay. Great.

And then just very last question, there is – in the cash flow, is it a long-term investment $2.1 million, does that represent an acquisition of some sort or is that something else happening?.

It was minority investment into a company which is very relevant to the cross border ecommerce. We for competitive reasons and also because it's a material, so we decide not to disclose that company's name. But it's minority investment..

Got it. Okay. Thank you for all this. Appreciate it..

Thank you, George..

Thank you. Your next question comes from the line of [indiscernible] from Oriental Securities. Please ask your question..

Thank you. I have one question. Considering the current capital market change and trend so called Internet plus in China, do you have some idea for your company? Thank you..

Yes. As we mentioned earlier to this, we are considering the opportunities and being the strategy and partnership, actually, as usual the management and the Board regularly review our business strategy and the capital market strategy in the light of evolving business and the marketing environment.

If we decided to any of this nature, we will obviously update the market in compliance with the security laws and regulations..

Yes. So just on top of what Robin just said, we do think now there is a lot of opportunities to acquire company partnership which can be very powerful and create a lot of synergies and values and business prospect. So if anything, I think the company is more active in seeking business partnership [indiscernible] than in the past..

Thank you..

Thank you. Your next question comes from the line of Jane Zhu from CICC. Please ask your question..

Hello, management, thanks for taking my question. I just have one question. Do you think you have any business opportunities in domestic China based on your technology expertise? Thank you..

So we actually – so the business model – so LightInTheBox has always been a leader of cross-border ecommerce, our business model and set-up certainly does not prohibit us from doing cross-border ecommerce – reverse cross-border ecommerce i.e., selling foreign goods back in the China market. We have not made major investment in those efforts.

We also – but we are very closely monitoring the policy changes and also the market changes in this and we remain to be very open minded in that regard.

And I also want to remind you that we have overseas warehouse and we also have overseas offices which we think – if we ever decide to actually enter that business would be a very good asset for us to doing that. But, as of today, we have not made any major investment into that market – that business yet. But we remain to be very open-minded..

Okay. Got it. Thank you..

Thank you. Unfortunately that's all the time we have today. I will now pass the call back to Christian..

Thank you. This concludes our first quarter 2015 earnings conference call. Thank you for your participation and your ongoing support of the company. We look forward to providing you with updates of our business in the coming weeks and months ahead. Have a good day. This concludes the call..

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