LightInTheBox(LITB) - 2023 Q1 - Quarterly Report

Company Overview & Highlights LightInTheBox Holding Co., Ltd. announced its unaudited financial results for Q4 and full year 2022, achieving record revenue and gross margin despite a significant non-cash impairment charge Report Announcement LightInTheBox Holding Co., Ltd. released its unaudited financial results for the fourth quarter and full year ended December 31, 2022, on March 20, 2023 - LightInTheBox Holding Co., Ltd. (NYSE: LITB) announced its unaudited financial results for the fourth quarter and full year 2022[1] Financial Highlights The company achieved record revenue growth and improved gross margin in Q4 and full year 2022, but net income was significantly impacted by a $56 million non-cash impairment charge on an equity investment Financial Performance Summary (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | YoY Change | 2021 Full Year | 2022 Full Year | YoY Change | | :----------------------------- | :------ | :------ | :--------- | :------------- | :------------- | :--------- | | Total Revenues | 113.2 | 156.4 | 38.2% | 446.1 | 503.6 | 12.9% | | Apparel Sales | 77.9 | 123.9 | 59.2% | 274.2 | 399.5 | 45.7% | | Apparel Sales / Total Revenues | 68.8% | 79.3% | | 61.5% | 79.3% | | | Gross Margin | 47.2% | 53.9% | | 46.3% | 54.6% | | | Net Income / (Loss) | 8.7 | (48.3) | | 13.5 | (56.6) | | | Adjusted EBITDA | 16.2 | (3.8) | | 27.9 | (9.5) | | | Cash and Cash Equivalents | 59.6 | 94.6 | | | | | - The company recognized a $56 million one-time non-cash impairment charge on an equity investment and received a $13 million income tax benefit in Q4 2022, resulting in a net impact of $43 million, due to the investee's significant operational deterioration under unfavorable market conditions[2] - Despite global inflation, economic uncertainties, and pandemic-related supply chain disruptions, total revenues in Q4 2022 increased by 38% to a record $156 million, full year revenues exceeded $500 million for the first time, and apparel sales approached $400 million, with gross margin improving from 46% to 55% in 2022[2] Fourth Quarter 2022 Financial Results The company reported its financial performance for Q4 2022, detailing revenue, costs, operating expenses, and net loss, significantly impacted by an investment impairment Revenues Total revenues for Q4 2022 increased by 38.2% to $156.4 million, with apparel sales growing 59.2% to $123.9 million, comprising 79.3% of total revenue Revenues (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | YoY Change | | :----------------------------- | :------ | :------ | :--------- | | Total Revenues | 113.2 | 156.4 | 38.2% | | Apparel Sales | 77.9 | 123.9 | 59.2% | | Apparel Sales Percentage | 68.8% | 79.3% | | Cost of Revenues & Gross Profit Q4 2022 cost of revenues was $72.0 million, resulting in a gross profit of $84.4 million and a gross margin increase to 53.9% from 47.2% in the prior year Cost of Revenues and Gross Profit (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | | :----------------------------- | :------ | :------ | | Cost of Revenues | 59.8 | 72.0 | | Gross Profit | 53.4 | 84.4 | | Gross Margin | 47.2% | 53.9% | - The increase in gross margin is attributed to the higher proportion of apparel sales, which rose from 68.8% to 79.3% and typically carry higher gross margins[4] Operating Expenses Total operating expenses for Q4 2022 increased to $89.3 million, driven by higher selling and marketing expenses, partially offset by reduced general and administrative costs Total Operating Expenses (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | | :----------------------------- | :------ | :------ | | Total Operating Expenses | 60.9 | 89.3 | Fulfillment Expenses Fulfillment expenses for Q4 2022 were $8.9 million, representing 5.7% of total revenues, a decrease from 6.7% in the same period last year Fulfillment Expenses (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | | :----------------------------- | :------ | :------ | | Fulfillment Expenses | 7.5 | 8.9 | | Percentage of Total Revenues | 6.7% | 5.7% | Selling and Marketing Expenses Selling and marketing expenses for Q4 2022 increased to $72.3 million, accounting for 46.2% of total revenues, up from 36.3% in the prior year Selling and Marketing Expenses (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | | :----------------------------- | :------ | :------ | | Selling and Marketing Expenses | 41.1 | 72.3 | | Percentage of Total Revenues | 36.3% | 46.2% | General and Administrative Expenses General and administrative expenses for Q4 2022 decreased to $8.3 million, representing 5.3% of total revenues, while research and development expenses slightly increased General and Administrative and R&D Expenses (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | | :----------------------------- | :------ | :------ | | General and Administrative Expenses | 12.5 | 8.3 | | Percentage of Total Revenues | 11.1% | 5.3% | | Research and Development Expenses | 4.9 | 5.3 | Loss from Operations Operating loss for Q4 2022 narrowed to $4.9 million, an improvement from the $7.5 million loss reported in the same period of 2021 Operating Loss (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | | :----------------------------- | :------ | :------ | | Operating Loss | (7.5) | (4.9) | Other Income / (Expense), Net Q4 2022 saw a net other expense of $0.008 million, a significant change from the $21.7 million net other income in 2021, primarily due to the absence of fair value changes in equity investments Other Income / (Expense), Net (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | | :----------------------------- | :------ | :------ | | Other Income / (Expense), Net | 21.7 | (0.008) | Impairment Loss on Investment An impairment loss of $56.1 million was recognized in Q4 2022, primarily on an equity investment in Shenzhen Maikailai Technology Co., Ltd., due to deteriorating market conditions Impairment Loss on Investment (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | | :----------------------------- | :------ | :------ | | Impairment Loss on Investment | 0 | 56.1 | - The impairment loss resulted from the unexpected and sudden significant deterioration of the investee company Maikailai's operating conditions in Q4 2022 due to unfavorable market conditions, with no anticipated recovery[7] Income Tax Expense / (Benefit) Q4 2022 recorded an income tax benefit of $12.7 million, mainly from the reversal of unrecognized tax benefits, contrasting with an expense of $5.5 million in the prior year Income Tax Expense / (Benefit) (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | | :----------------------------- | :------ | :------ | | Income Tax Expense / (Benefit) | (5.5) | 12.7 | Net Income / (Loss) & EPS Q4 2022 resulted in a net loss of $48.3 million, compared to a net income of $8.7 million in 2021, primarily driven by the investment impairment loss, with basic and diluted EPS at -$0.43 Net Income / (Loss) and EPS (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | | :----------------------------- | :------ | :------ | | Net Income / (Loss) | 8.7 | (48.3) | | Basic EPS per ADS | 0.08 | (0.43) | | Diluted EPS per ADS | 0.07 | (0.43) | Weighted Average ADSs for EPS Calculation | Indicator | 2022 Q4 | | :----------------------------- | :---------- | | Weighted Average ADSs for Net EPS Calculation | 113,250,066 | Adjusted EBITDA Adjusted EBITDA for Q4 2022 was a negative $3.8 million, a decrease from a positive $16.2 million in the same period of 2021 Adjusted EBITDA (million US dollars) | Indicator (million US dollars) | 2021 Q4 | 2022 Q4 | | :----------------------------- | :------ | :------ | | Adjusted EBITDA | 16.2 | (3.8) | Cash and Cash Equivalents As of December 31, 2022, cash, cash equivalents, and restricted cash totaled $94.6 million, an increase from $59.6 million at the end of 2021 Cash, Cash Equivalents, and Restricted Cash (million US dollars) | Indicator (million US dollars) | December 31, 2021 | December 31, 2022 | | :----------------------------- | :---------------- | :---------------- | | Cash, Cash Equivalents, and Restricted Cash | 59.6 | 94.6 | Full Year 2022 Financial Results The company's full year 2022 financial performance showed revenue growth and improved gross margin, but a significant net loss due to an investment impairment Revenues Total revenues for full year 2022 increased by 12.9% to $503.6 million, with apparel sales growing 45.7% to $399.5 million, representing 79.3% of total revenue Revenues (million US dollars) | Indicator (million US dollars) | 2021 Full Year | 2022 Full Year | YoY Change | | :----------------------------- | :------------- | :------------- | :--------- | | Total Revenues | 446.1 | 503.6 | 12.9% | | Apparel Sales | 274.2 | 399.5 | 45.7% | | Apparel Sales Percentage | 61.5% | 79.3% | | Cost of Revenues & Gross Profit Full year 2022 cost of revenues was $228.5 million, yielding a gross profit of $275.1 million and an improved gross margin of 54.6% from 46.3% in 2021 Cost of Revenues and Gross Profit (million US dollars) | Indicator (million US dollars) | 2021 Full Year | 2022 Full Year | | :----------------------------- | :------------- | :------------- | | Cost of Revenues | 239.4 | 228.5 | | Gross Profit | 206.7 | 275.1 | | Gross Margin | 46.3% | 54.6% | - The increase in gross margin is attributed to the higher proportion of apparel sales, which rose from 61.5% to 79.3% and typically carry higher gross margins[10] Operating Expenses Total operating expenses for full year 2022 increased to $289.3 million, primarily due to higher selling and marketing expenses, partially offset by lower general and administrative costs Total Operating Expenses (million US dollars) | Indicator (million US dollars) | 2021 Full Year | 2022 Full Year | | :----------------------------- | :------------- | :------------- | | Total Operating Expenses | 222.8 | 289.3 | Fulfillment Expenses Fulfillment expenses for full year 2022 were $30.6 million, representing 6.1% of total revenues, a slight decrease from 6.6% in the prior year Fulfillment Expenses (million US dollars) | Indicator (million US dollars) | 2021 Full Year | 2022 Full Year | | :----------------------------- | :------------- | :------------- | | Fulfillment Expenses | 29.6 | 30.6 | | Percentage of Total Revenues | 6.6% | 6.1% | Selling and Marketing Expenses Selling and marketing expenses for full year 2022 increased to $222.6 million, accounting for 44.2% of total revenues, up from 34.6% in 2021 Selling and Marketing Expenses (million US dollars) | Indicator (million US dollars) | 2021 Full Year | 2022 Full Year | | :----------------------------- | :------------- | :------------- | | Selling and Marketing Expenses | 154.2 | 222.6 | | Percentage of Total Revenues | 34.6% | 44.2% | General and Administrative Expenses General and administrative expenses for full year 2022 decreased to $36.3 million, representing 7.2% of total revenues, while research and development expenses slightly declined General and Administrative and R&D Expenses (million US dollars) | Indicator (million US dollars) | 2021 Full Year | 2022 Full Year | | :----------------------------- | :------------- | :------------- | | General and Administrative Expenses | 39.7 | 36.3 | | Percentage of Total Revenues | 8.9% | 7.2% | | Research and Development Expenses | 20.3 | 19.4 | Loss from Operations Operating loss for full year 2022 narrowed to $14.2 million, an improvement from the $16.1 million loss reported in 2021 Operating Loss (million US dollars) | Indicator (million US dollars) | 2021 Full Year | 2022 Full Year | | :----------------------------- | :------------- | :------------- | | Operating Loss | (16.1) | (14.2) | Other Income, Net Full year 2022 net other income significantly decreased to $1.0 million from $39.3 million in 2021, primarily due to a substantial reduction in fair value changes of equity investments Other Income, Net (million US dollars) | Indicator (million US dollars) | 2021 Full Year | 2022 Full Year | | :----------------------------- | :------------- | :------------- | | Other Income, Net | 39.3 | 1.0 | Impairment Loss on Investment An impairment loss of $56.1 million was recognized for full year 2022, primarily on an equity investment in Shenzhen Maikailai Technology Co., Ltd., due to deteriorating market conditions in Q4 Impairment Loss on Investment (million US dollars) | Indicator (million US dollars) | 2021 Full Year | 2022 Full Year | | :----------------------------- | :------------- | :------------- | | Impairment Loss on Investment | 0 | 56.1 | - The impairment loss resulted from the unexpected and sudden significant deterioration of the investee company Maikailai's operating conditions in Q4 2022 due to unfavorable market conditions, with no anticipated recovery[12] Income Tax Expense / (Benefit) Full year 2022 recorded an income tax benefit of $12.7 million, mainly from the reversal of unrecognized tax benefits, contrasting with an expense of $9.8 million in 2021 Income Tax Expense / (Benefit) (million US dollars) | Indicator (million US dollars) | 2021 Full Year | 2022 Full Year | | :----------------------------- | :------------- | :------------- | | Income Tax Expense / (Benefit) | (9.8) | 12.7 | Net Income / (Loss) & EPS Full year 2022 resulted in a net loss of $56.6 million, compared to a net income of $13.5 million in 2021, primarily due to the investment impairment loss, with basic and diluted EPS at -$0.50 Net Income / (Loss) (million US dollars) | Indicator (million US dollars) | 2021 Full Year | 2022 Full Year | | :----------------------------- | :------------- | :------------- | | Net Income / (Loss) | 13.5 | (56.6) | EPS and Weighted Average ADSs | Indicator | 2021 Full Year | 2022 Full Year | | :----------------------------- | :------------- | :------------- | | Basic EPS per ADS | 0.12 | (0.50) | | Diluted EPS per ADS | 0.12 | (0.50) | | Weighted Average ADSs for Net EPS Calculation | 112,153,059 | 113,124,300 | Adjusted EBITDA Adjusted EBITDA for full year 2022 was a negative $9.5 million, a decrease from a positive $27.9 million in 2021 Adjusted EBITDA (million US dollars) | Indicator (million US dollars) | 2021 Full Year | 2022 Full Year | | :----------------------------- | :------------- | :------------- | | Adjusted EBITDA | 27.9 | (9.5) | Unaudited Financial Statements Note The full year financial statements in the press release are unaudited and may differ from the audited statements in the company's Form 20-F - The full year financial statements in the press release are unaudited or unreviewed and may differ from the audited statements disclosed in the company's Form 20-F[14] Business Outlook The company anticipates net revenues for Q1 2023 to be between $135 million and $145 million, representing a year-over-year growth of 44% to 54% Q1 2023 Business Outlook (million US dollars) | Indicator (million US dollars) | 2023 Q1 Forecast | | :----------------------------- | :--------------- | | Net Revenues | 135 - 145 | | YoY Growth | 44% - 54% | Non-GAAP Financial Measures The company utilizes Adjusted EBITDA as a supplementary non-GAAP metric to assess operational performance and strategic planning, excluding specific non-cash and non-recurring items Definition and Rationale Adjusted EBITDA is used to evaluate operational performance and identify underlying business trends by excluding equity-settled share-based compensation, depreciation, amortization, impairment, interest, and income tax - The company uses Adjusted EBITDA as a supplementary non-GAAP measure to evaluate operating performance and formulate business plans, helping to identify underlying business trends[16][17] - Adjusted EBITDA excludes equity-settled share-based compensation expenses, depreciation and amortization expenses, impairment loss on investment, interest income, interest expenses, and income tax expenses[16] Limitations Non-GAAP financial measures have limitations as they are not defined by US GAAP, do not reflect all revenues and expenses, and may not be comparable to other companies' metrics - Non-GAAP financial measures are not defined by US GAAP, do not reflect all revenues and expenses, and may not be comparable to non-GAAP information used by other companies, thus comparability may be limited[18] - The company mitigates these limitations by providing reconciliations to the most directly comparable US GAAP performance measures and encourages investors to review all financial information comprehensively[18] Conference Call Information The company will host a conference call on March 20, 2023, at 8:00 AM ET to discuss its results, with pre-registration, dial-in, and webcast details provided - The company will host a conference call on March 20, 2023, at 8:00 AM U.S. Eastern Time (8:00 PM Beijing/Hong Kong Time on the same day)[20] - Participants can pre-register via a specified link to receive dial-in numbers, an event passcode, and a unique registrant ID; a telephone replay will be available until March 27, 2023, and a webcast will be accessible on the company's investor relations website[21] About LightInTheBox LightInTheBox is a global online retail company offering a wide range of cost-effective products directly to consumers in over 140 countries through its multilingual websites and mobile applications - LightInTheBox is a cross-border e-commerce platform that offers a wide range of cost-effective products directly to consumers in over 140 countries through its websites (e.g., www.lightinthebox.com, www.miniinthebox.com, www.ezbuy.sg) and mobile applications in 20 major languages[22] Forward-Looking Statements This announcement contains forward-looking statements protected by the "safe harbor" provisions of the US Private Securities Litigation Reform Act of 1995, which involve inherent risks and uncertainties - This announcement contains forward-looking statements protected by the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995[23] - Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially, including but not limited to the company's goals and strategies, future business development, market growth, ability to attract customers, supply chain efficiency, product demand and market acceptance, competition, and macroeconomic conditions[24] Financial Statements This section presents the company's condensed consolidated balance sheets and statements of operations, along with reconciliations of GAAP to non-GAAP results Condensed Consolidated Balance Sheets As of December 31, 2022, total assets were $164.8 million, total liabilities were $160.9 million, and total equity was $3.9 million, with cash and cash equivalents increasing to $88.6 million Condensed Consolidated Balance Sheets (thousand US dollars) | Indicator (thousand US dollars) | 2021 | 2022 | | :------------------------------ | :------- | :------- | | Cash and Cash Equivalents | 55,942 | 88,575 | | Restricted Cash | 3,660 | 5,993 | | Inventories | 11,997 | 14,260 | | Total Assets | 195,366 | 164,813 | | Accounts Payable | 23,535 | 26,518 | | Advances from Customers | 24,789 | 32,241 | | Accrued Expenses and Other Current Liabilities | 57,819 | 90,357 | | Total Liabilities | 131,487 | 160,937 | | Total Equity | 63,879 | 3,876 | Condensed Consolidated Statements of Operations Q4 2022 total revenues were $156.4 million with a net loss of $48.3 million, while full year total revenues were $503.6 million with a net loss of $56.6 million, showing narrowed operating losses Condensed Consolidated Statements of Operations (thousand US dollars) | Indicator (thousand US dollars) | 2021 Q4 | 2022 Q4 | 2021 Full Year | 2022 Full Year | | :------------------------------ | :------- | :------- | :------------- | :------------- | | Total Revenues | 113,150 | 156,418 | 446,103 | 503,568 | | Cost of Revenues | (59,750) | (72,033) | (239,393) | (228,490) | | Gross Profit | 53,400 | 84,385 | 206,710 | 275,078 | | Loss from Operations | (7,473) | (4,905) | (16,112) | (14,240) | | Impairment Loss on Investment | 0 | (56,083) | 0 | (56,083) | | Income Tax Expense / (Benefit) | (5,542) | 12,716 | (9,802) | 12,707 | | Net Income / (Loss) | 8,740 | (48,261) | 13,454 | (56,582) | | Basic EPS per ADS | 0.08 | (0.43) | 0.12 | (0.50) | Reconciliations of GAAP and Non-GAAP Results This table provides a reconciliation of GAAP net income/(loss) to non-GAAP Adjusted EBITDA, detailing adjustments for share-based compensation, depreciation, amortization, investment impairment, interest, and income tax Reconciliations of GAAP and Non-GAAP Results (thousand US dollars) | Indicator (thousand US dollars) | 2021 Q4 | 2022 Q4 | 2021 Full Year | 2022 Full Year | | :------------------------------ | :------- | :------- | :------------- | :------------- | | Net Income / (Loss) | 8,740 | (48,261) | 13,454 | (56,582) | | Less: Interest Income | 12 | 20 | 59 | 57 | | Interest Expense | (2) | (1) | (13) | (5) | | Income Tax Expense / (Benefit) | (5,542) | 12,716 | (9,802) | 12,707 | | Depreciation and Amortization | (817) | (844) | (3,299) | (3,371) | | EBITDA | 15,089 | (60,152) | 26,509 | (65,970) | | Less: Impairment Loss on Investment | 0 | (56,083) | 0 | (56,083) | | Equity-settled Share-based Compensation | (1,127) | (265) | (1,382) | (340) | | Adjusted EBITDA | 16,216 | (3,804) | 27,891 | (9,547) |