Good morning everyone, and welcome to the Second Quarter of 2021 earnings conference call for LightInTheBox Holding, Co, Limited. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. Rene Vanguestaine for opening remarks and introductions. Please go ahead, Sir..

Thank you, Rae(ph). Hello, everyone, and welcome to LightInTheBox Second Quarter 2021 earnings conference call. The Company's earnings results were released earlier today and are available on the Company's website, [Indiscernible] through PR Newswire. Today you will hear from LightInTheBox CEO Mr.

Jian He who will give an overview of the Company's strategies and recent developments, followed by Ms. Yuan Jun Ye, the Company's Chief Financial Officer, who will go over the financial results. Together with them today is Wenyu Liu the Company's Chief Growth Officer. All will be available for the Q&A after the prepared remarks.

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 21, 2021. 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 (ph). Mr. He (ph), please go ahead..

Thank you, Rene. Thank you, everyone for joining us today. Following the start of the first quarter, we continued to achieve stable year-over-year growth in the second quarter. Total revenue reached 122.2 million, up 7.3% from the same period of 2020. Our gross profit margin in Q2 was 46.8%, higher than 43.5% in that same period of 2020.

Adjusted EBITDA grow by 59% year-over-year. Total revenues from -- for the first half of this year grow 200 and that's 324.2 million, representing a 41.6% increase from the first half of 2020.

From the macro perspective, as of estimation rates around the world includes people are engaging in more outdoor and the social activities with family and the friends, as well as offline shopping at the retail stores and the malls, is a good phenomena and we are pleased to see this happen.

In the long run, we believe that online and offline shopping can complement each other for a better shopping experience. Although speaking, our sales in Q2 continued to sustain a healthy growth momentum.

Product sales increased by 11% year-over-year [Indiscernible] apparel sales increased by 149%, and it's all over 12 categories, contributing 62% of the total product sales in Q2 compared with 28% in Q2 last year. For the First Half of the year apparel sales grew by 56% from the same period of last year.

To study performance is attributable to all that we have reached and then select for the portfolio, and all our continuous efforts in enhancing our customer's shopping experience. On the other hand, we believe to the investing in R&D is a critical element to the [Indiscernible] of a solid position to stand out from the [Indiscernible] competition.

Our R&D expense increased by 52% year-over-year to 5.1 million in Q2, as we continued to strengthen our R&D capabilities. The pandemic had accelerated and the shift towards online shopping but at the same time, it has attracted more competition to the e-commerce space from new and established players.

Right now, we are still facing the economic uncertainties partly due to the resurgence of Coronavirus in a number of countries.

We will continue, as in the past quarters, to implement that strategies to enhance our platform, to be more responsive and user friendly so that our customers will enjoy the comprehensive [Indiscernible] and the convenience of online shopping even more on our websites and mobile app.

I will now turn the call over to Yuan Jun (ph) to go through the financial results..

Thank you, Mr. He. And thank you, everyone, for joining the call. I will now review our financial results for the second quarter. Please be reminded that all numbers quoted are in U.S. dollars.

Total revenue was 122.2 million up 7.3% year-over-year for 113.9 million This was mainly driven by strong growth in product sales, which were 119.3 million versus 107.2 million in the same period in 2020. Revenues for our services and others was 2.9 million compared with 6.7 million.

Included in product sales, revenues from apparel increased by 149% to 40 -- 74 million in the second quarter of 2021, compared with 29.7 million in the same quarter of 2020. Gross profit was 57.1 million, compared with 49.6 million during the same period last year.

Gross margin was 46.8% up from 43.5% the same quarter of 2020, primarily due to our continued efforts to optimize the supply chain economy. Total operating expenses was 60.6 million compared with 41.4 million during the same Quarter of 2020. The increase was mainly due to an increase in selling and marketing expenses.

Fulfillment expenses was 7.6 million compared with 7.4 million in the same Quarter of 2020. As a percentage of total revenues, Fulfillment expenses were 6.2% compared with 6.5% in the same Quarter of 2020 and 6.5% in the First Quarter of 2021. Selling and marketing expenses were 43.5 million, compared with 26.5 million the same quarter of 2020.

As a percentage of total revenue, selling and marketing expenses were 35.6% compared with 23.3% in the same quarter of 2020, and 31.8% in the first quarter of 2021. The increase was due to the high expenses for online advertising from leading ad provider. G&A expenses were 9.5 million, compared with 7.5 million in the same quarter of 2020.

As a percentage of total revenue, G&A expenses were 7.8% compared with 6.6% in the same quarter of 2020 and 7.5% in the first quarter of 2021. Included in the G&A expenses, R&D expenses were $5.1 million compared with $3.3 million in the same quarter of 2020 and $4.9 million in the first quarter of 2021.

Other income net in the second quarter of 2021 was $17.2 million compared with 0.3 million in the same quarter of 2020. Included in other income net, in the second quarter of 2021, $17.1 million was derived from change in fair value on our equity investment.

The gain in fair value change on our equity investment after respective income tax of $4.2 million, was $12.9 million. Net Income was 9.5 million compared with 8.5 million in the same quarter of 2020. Net income per ADS was $0.8 compared with $0.8 in the same quarter of 2020.

Adjusted EBITDA, which represents income from operations before share-based compensation expense, interest income, interest expense, income tax expense, depreciation, and amortization expenses, were 14.5 million in the second quarter of 2021 compared with 9.1 million the same quarter of 2020.

As of June 30, 2021, we have a cash and cash equivalent, restricted cash of 58.2 million compared with 65.5 million as of December 31, 2020. Our revenue growth and net income in the past quarters have validated our well-established growth strategy.

As we continue to maintain business continuity in [Indiscernible] to time over the next quarters, we expect to continue to face challenges in highly competitive markets, and we will continue to implement our long-term growth strategy to optimize user experience across our platforms and mobile apps.

The commitment of our experienced management team, leading our operations and our R&D and technology innovation has given us the solid foundation we need to stay well-positioned in the industry.

However, it is unlikely to reasonably determine whether any business fluctuations in the midst of the current economic dynamics, are likely to materially affect our operations. To focus on long-term goals and avoid overly underlying short-term objectives, we will not provide revenue guidance for the Third Quarter of 2021.

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] The first question comes from the line of Matthew Larson from Martial. Please go ahead..

Okay. Hi, thanks for taking my call. Good evening to you all. Okay. It was nice to see the top-line growth and the bottom line. I guess the bottom line, a lot of it is derived from a derivative revaluation.

What does that emanate from?.

It is the investment gain..

On what? I guess, what's the investment?.

Hi, Mr. Matthew Larson. This is an investment in a Company that we invested in several years ago whose business was selling cosmetic products..

Okay, so it's a related business. It's retail.

And do you maintain that business investment exposure so that could impact, hopefully positively in the future just as it did this quarter?.

We are just a shareholder. We do not maintain the business in this investment acuity..

Okay. Right. But as a shareholder of a retail type of business which you're familiar with, it's cosmetics, so it's part of the assets on your balance sheet. Is that in addition to the cash of that -- the 50 somewhat million you have in cash? You also have securities in this business as well.

Is that accurate?.

Okay. This investment gain is based on the Company which raised capital and our initial investment gained this -- the full value was increased according to the new equity raised in this Company..

Right. But the gain is quite nice and there's nothing -- it's always good to have investments in addition to cash because you have plenty of cash on the balance sheet, but the investment seems to be working quite well. I'm trying to get a sense of what you have -- assets on the balance sheet since you don't have any debt.

You have cash, you have this investment in this Company.

And what is the total value of your investment if you could gauge it based on the end of the Second Quarter?.

The total value of this Company, I think is not available information that we could disclose. The long-term investments that you are seeing on our Balance Sheet were valued according to the U.S. GAAP with the relative methodology. It's not totally equivalent to the value of these investment Companies..

Okay. But it went up 12,13 million, so it must -- in the aggregate, the value in the investment must be more than that. So it just allows me to get a better sense of the value of your Company, in addition to the operating value that you could be -- that we can place on you all because of your revenue-generating capabilities..

Yes. As we are only a manage shareholder, and we are in different markets, so the methodology behind is -- it's quite different. It's really hard to explain or to compare the value of this investment Company..

Okay, very well --.

But what you can see -- Okay, please go ahead..

Well, I was just saying that if we could get a sense of the value of your investments, that you might have made a while ago, the current value based on a GAAP accounting, we would be able to add that to -- in your book value or just as an investor, that I represent a number of investors that have pretty good exposure to your Company and this is a plus.

I didn't know you had other assets that could really help the overall value of LightInTheBox in addition to the cash you have and the top-line operating capabilities of your firm. And so this was a plus that obviously is working well for you. Okay. So in addition, the guidance, you're not going to put it out.

As you said, it's very competitive, and things in the PRC are still being impacted like they are elsewhere with COVID and things like that. But Retail is a very competitive business anyway. You all have done extremely well over the last year, you've had four quarters, I believe in a row where you doubled your previous year's revenues.

This year, you did not because last year was a tough comparison, but you still did better, which is very nice. On an operating basis, you had a small loss and the breakout that I could see was that the SG&A went up to 43.5 from 26.5. Obviously, that's up quite a bit.

Is that due to higher costs for sourcing because of shipping costs and other things like that, that might abate so that the SG&A might be less of a percentage going forward?.

Okay. Into the [Indiscernible], yeah, hi. Okay. For G&A expenses, the absolute value will remain -- most likely stay low. So if the revenue continues to grow in terms of G&A expenses, the percentage will definitely decrease..

Yeah, because the revenue grew 7%, which was great because last year it was up 100% maybe. And so -- but last year you were able to achieve that with SG&A of $26.5 million. This quarter, it was $43.5 million. So there was a big jump there and of course that hurts your bottom line.

But is the SG&A in the future expected to maybe be more contained relative to your revenue, your top line capabilities? So can we expect that to be less as a percentage of overall sales?.

Yes, we can..

Okay. All right. Again, just so I'm very clear, you said -- you're -- these releases are pretty basic. The SG&A jumps $17 million from 26.5% to 43.5%, which was up 60% or 70%. Sales were up 7%. Is the jump in SG&A for what reasons? I know here in the U.S. that there are bottlenecks and the costs of containers of ships coming from Asia, China, to the U.S.

carrying goods have jumped considerably in price, so costs have gone up, which it is for everybody.

Is that the case with you? And if so, if these -- if the tightness for many things slows down, would your SG&A become less of a percentage of your overall sales so that it could fall -- your sales could fall to the bottom line and we could see greater profitability?.

Okay. For the absolute value as you have mentioned, this jump, as compared to last year, there are 2 reasons. One was because last year we had some subsidies from the government due to COVID19. But this year, there's no more that kind of subsidy. The other reason was caused by R&D expenses, as mentioned, just now..

Okay. All right. That makes sense to me. The R&D went up fractionally and it's important that you continue to invest in your platform..

Yes. This number then should be stable..

This number, what I'm sorry?.

This member will remain stable in the future, at least for this year..

Okay..

For this year..

Okay. Well, that's good to know. If you can continue to grow -- what I am driving at is your Company after many years after you went public kind of flat line. But you're -- all of a sudden you're topline growth, your revenue has been excellent. And so you're benefiting from more and more people focusing on making purchases online versus elsewhere.

Now you did with little guidance, is it just because it's hard for you to figure it out or is -- you're just -- is it slowing down, or what was the reason why [Indiscernible] in the past, you've been able to give guidance and we're already almost at the end of the quarter?.

Okay. For this quarter, honestly speaking, there are some uncertainties we are facing right now, as mentioned just now by our CFO. So it's -- yeah, unlikely we can provide accurate guidance right now..

Okay. And when you do have that ability, will you announce it prior to earnings announcements of -- but you can give guidance, you can pre-announce those types of things..

I think we are not planning to have another release, but we will try to have an early release for Q3 Quarterly Report..

Okay.

And then maybe finally, do you expect to be profitable for the year or is that based also on the other investments that change in value?.

We can't predict the final profitability for the whole year. What we know now is the first 2 quarters' result..

I see. Okay. You only know what you've done so far, but you can't predict the rest of the year.

And is that your Company or is that you find with a lot of online retail companies like yourselves in the PRC? Is that just what most of your competitors are probably not able to do?.

Maybe -- okay, allow me to give you a few reasons. First of all, as mentioned just now, due to the macro environment, the vaccine -- vaccination rate keeps increasing and people are more engaged in outdoor activities. As a result, I believe the online portion gets affected. In fact, other players also observe a similar trend. This is one reason.

The second reason will be, as you have mentioned, there are many new players joining the cross-border e-commerce industry which did impose some new challenges as the [Indiscernible] competition. Besides, we are also facing some uncertainties in certain countries due to the impact of COVID-19.

As a result, it's a bit hard for us to predict the guidance for Q3, as well as the whole year..

Okay. But you do expect to be profitable for the whole year --.

No. We can't make --.

-- because you're already at $0.10?.

We can't make this conclusion right now..

You can't make any predictions?.

Yes, we can't..

Okay. Alright, but as you know, your Company is extremely undervalued relative to many other online merchants. The value of your Company is only about 1/4 to 1/3 of sales, which is really unusual. I mean, generally, companies in your -- with your business model trade at 2 or 3 times sales.

And in addition, you have a very, very solid and robust, very -- an excellent balance sheet so that that is very comfortable for investors. It's just a question of you all being able to pull your top-line sales to the bottom line because the value of your stock is so low. Let me ask a final question.

Are the principles of the firm -- are you all happy with your stock price, or do you want it to go up? Is that an interest of yours? Because it is down 70% or 80% from its high. Even though your revenues continue to grow. And you have a very clean balance sheet.

Do you have any interest in trying to get the stock price higher through buybacks or other measures, acquisitions?.

Okay. First of all, Matthew, I think we do appreciate that you have done a lot of analysis on this Company, as far as this market. We do appreciate that. And I do appreciate that you see the value in this Company. But for the stock price, we don't have any comments right now. As for whether we want to transact the stock price, I think it's another topic.

Yeah, this is a difficult question, and we will -- we will bring this to our board and initiate some discussion. At the same time, I think if you have any further questions, we can keep in touch after the call. You can find our email address on IR's website. We do appreciate whatever you have asked or whatever you have suggested..

Okay. I'll appreciate that. I'll let somebody else jump in here if there are people waiting. Thank you for your time. Good luck..

Thank you so much..

Thank you. [Operator Instruction] Thank you, I will now hand the call back to Rene Vanguestaine for any closing remarks. Sir, please go ahead..

Thank you, Ray (ph). This concludes our call for today. Thank you for your participation and ongoing support of LightInTheBox. We look forward to providing you with updates on our business in the weeks and months ahead. Have a good day..

Thank you. Bye bye..

Thank you. That concludes your conference for today. Thank you for your participation. You may all disconnect your lines now. Thank you..