LightInTheBox(LITB) - 2023 Q3 - Quarterly Report

Executive Summary LightInTheBox reported significant revenue growth for both Q2 and H1 2023, primarily driven by apparel sales, alongside improved gross margins, reduced net losses, and a stronger cash position Financial Highlights Overview LightInTheBox reported significant revenue growth for both Q2 and H1 2023, primarily driven by apparel sales, alongside improved gross margins, reduced net losses, and a stronger cash position | Metric | Q2 2022 (Millions $) | Q2 2023 (Millions $) | YoY Change % | H1 2022 (Millions $) | H1 2023 (Millions $) | YoY Change % | | :----------------------------------------- | :------------------- | :------------------- | :----------- | :------------------- | :------------------- | :----------- | | Total Revenues | 132.4 | 191.8 | 44.9% | 226.1 | 339.5 | 50.2% | | Apparel Sales | 108.7 | 163.2 | 50.1% | 175.9 | 282.5 | 60.5% | | Apparel Sales/Total Revenues | 82.1% | 85.1% | 3.0% pts | 77.8% | 83.2% | 5.4% pts | | Gross Margin | 55.3% | 57.5% | 2.2% pts | 53.4% | 56.7% | 3.3% pts | | Net Loss | (2.4) | (1.5) | | (7.9) | (5.4) | | | Adjusted EBITDA | (1.5) | (0.7) | | (6.1) | (3.8) | | | Cash, cash equivalents and restricted cash | 65.7 (as of Jun 30, 2022) | 94.6 (as of Jun 30, 2023) | | | | | CEO Commentary The CEO expressed satisfaction with the strong operational and financial performance in Q2 2023, highlighting record quarterly revenue driven by apparel sales and improved operating efficiency. Despite anticipated macroeconomic challenges and seasonality in Q3, the company remains committed to its business strategy - Achieved the highest quarterly revenue in company history, primarily driven by 50% apparel sales growth year-over-year[2] - Operating efficiency improved, with fulfillment and G&A expenses as a percentage of revenue reaching an all-time low[2] - Cash balance stood at $95 million at quarter-end, illustrating robust free cash flow generation ability[2] - Acknowledged macroeconomic turbulence and normal seasonality impacting Q3 top-line performance, but committed to executing proven business strategy and refining operations[3] Second Quarter 2023 Financial Performance The company achieved substantial revenue growth and improved gross margins in Q2 2023, while also reducing net loss and enhancing operating efficiency across various expense categories Revenue and Gross Profit Total revenues for Q2 2023 increased by 44.9% year-over-year to $191.8 million, with apparel sales growing 50.1% and accounting for 85.1% of total revenues. Gross profit rose to $110.2 million, and gross margin improved to 57.5%, primarily due to the higher proportion of apparel sales | Metric | Q2 2022 (Millions $) | Q2 2023 (Millions $) | YoY Change % | | :----------------- | :------------------- | :------------------- | :----------- | | Total Revenues | 132.4 | 191.8 | 44.9% | | Apparel Sales | 108.7 | 163.2 | 50.1% | | Apparel % of Total | 82.1% | 85.1% | 3.0% pts | | Total Cost of Revenues | 59.2 | 81.6 | 37.8% | | Gross Profit | 73.2 | 110.2 | 50.5% | | Gross Margin | 55.3% | 57.5% | 2.2% pts | - The increase in gross margin was a result of the increase in the percentage of sales represented by apparel, which typically has higher margins[4] Operating Expenses Total operating expenses increased to $111.8 million in Q2 2023. Fulfillment and G&A expenses decreased as a percentage of total revenues, indicating improved efficiency, while selling and marketing expenses increased as a percentage of total revenues | Expense Category | Q2 2022 (Millions $) | Q2 2023 (Millions $) | YoY Change % | Q2 2022 (% of Rev) | Q2 2023 (% of Rev) | Change (% pts) | | :------------------------- | :------------------- | :------------------- | :----------- | :----------------- | :----------------- | :------------- | | Total Operating Expenses | 75.6 | 111.8 | 47.9% | | | | | Fulfillment Expenses | 7.8 | 9.9 | 26.9% | 5.9% | 5.2% | -0.7% | | Selling & Marketing Expenses | 58.2 | 94.0 | 61.5% | 44.0% | 49.0% | 5.0% | | G&A Expenses | 9.7 | 8.2 | -15.4% | 7.3% | 4.3% | -3.0% | | R&D Expenses (part of G&A) | 4.7 | 5.1 | 8.5% | | | | Profitability and Cash Position LightInTheBox significantly reduced its net loss in Q2 2023 to $1.5 million from $2.4 million year-over-year, with net loss per ADS improving to $0.01. Adjusted EBITDA also improved to negative $0.7 million. The company's cash and cash equivalents increased to $94.6 million | Metric | Q2 2022 (Millions $) | Q2 2023 (Millions $) | | :----------------- | :------------------- | :------------------- | | Loss from Operations | (2.5) | (1.6) | | Net Loss | (2.4) | (1.5) | | Net Loss per ADS | (0.02) | (0.01) | | Adjusted EBITDA | (1.5) | (0.7) | - Cash, cash equivalents and restricted cash increased to $94.6 million as of June 30, 2023, compared with $65.7 million as of June 30, 2022[7] First Half 2023 Financial Performance For the first half of 2023, the company demonstrated strong revenue and gross profit growth, alongside improved operating efficiency and a narrowed net loss Revenue and Gross Profit For the first half of 2023, total revenues increased by 50.2% year-over-year to $339.5 million, with apparel sales growing 60.5% and representing 83.2% of total revenues. Gross profit reached $192.7 million, and gross margin improved to 56.7%, driven by the increased proportion of higher-margin apparel sales | Metric | H1 2022 (Millions $) | H1 2023 (Millions $) | YoY Change % | | :----------------- | :------------------- | :------------------- | :----------- | | Total Revenues | 226.1 | 339.5 | 50.2% | | Apparel Sales | 175.9 | 282.5 | 60.5% | | Apparel % of Total | 77.8% | 83.2% | 5.4% pts | | Total Cost of Revenues | 105.5 | 146.9 | 39.2% | | Gross Profit | 120.7 | 192.7 | 59.6% | | Gross Margin | 53.4% | 56.7% | 3.3% pts | - The increase in gross margin was a result of the increase in the percentage of sales represented by apparel, which grew from 77.8% to 83.2%[8] Operating Expenses Total operating expenses for H1 2023 increased to $198.2 million. Fulfillment and G&A expenses decreased as a percentage of total revenues, while selling and marketing expenses increased as a percentage of total revenues. R&D expenses saw a modest increase | Expense Category | H1 2022 (Millions $) | H1 2023 (Millions $) | YoY Change % | H1 2022 (% of Rev) | H1 2023 (% of Rev) | Change (% pts) | | :------------------------- | :------------------- | :------------------- | :----------- | :----------------- | :----------------- | :------------- | | Total Operating Expenses | 129.5 | 198.2 | 53.0% | | | | | Fulfillment Expenses | 14.6 | 18.5 | 26.7% | 6.5% | 5.5% | -1.0% | | Selling & Marketing Expenses | 97.3 | 163.2 | 67.7% | 43.0% | 48.0% | 5.0% | | G&A Expenses | 17.7 | 17.2 | -2.8% | 7.8% | 5.1% | -2.7% | | R&D Expenses (part of G&A) | 9.3 | 10.3 | 10.8% | | | | Profitability The net loss for the first half of 2023 significantly narrowed to $5.4 million from $7.9 million year-over-year, with net loss per ADS improving to $0.05. Adjusted EBITDA also improved to negative $3.8 million | Metric | H1 2022 (Millions $) | H1 2023 (Millions $) | | :----------------- | :------------------- | :------------------- | | Loss from Operations | (8.9) | (5.6) | | Net Loss | (7.9) | (5.4) | | Net Loss per ADS | (0.07) | (0.05) | | Adjusted EBITDA | (6.1) | (3.8) | Corporate Actions & Business Outlook The company initiated a share repurchase program and provided revenue guidance for Q3 2023, reflecting anticipated business seasonality Share Repurchase Program The Company's board of directors authorized a share repurchase program of up to $10 million of its ordinary shares in the form of ADSs, to be completed by December 31, 2023. As of September 12, 2023, approximately $0.7 million worth of ADSs had been repurchased - Board authorized a share repurchase program of up to $10 million of ordinary shares in the form of ADSs, to be completed by December 31, 2023[12] - As of September 12, 2023, the Company had repurchased 517,240 ADSs with a total aggregate value of approximately $0.7 million[12] Business Outlook For the third quarter of 2023, LightInTheBox expects net revenues to be between $145 million and $160 million, taking into account current information and business seasonality - Expected net revenues for the third quarter of 2023 are projected to be between $145 million and $160 million[13] Non-GAAP Financial Measures Explanation This section defines Adjusted EBITDA as a key non-GAAP metric used by management to assess operational performance and business trends Adjusted EBITDA Definition and Purpose Adjusted EBITDA is a non-GAAP measure utilized by management to evaluate operating performance and formulate business plans. It excludes specific non-cash and non-operating items to provide a clearer view of underlying business trends, though it has limitations as an analytical tool - Adjusted EBITDA is a non-GAAP measure used by management to evaluate operating performance and formulate business plans[15] - It excludes share-based compensation expenses, depreciation and amortization expenses, interest income, interest expenses, and income tax expense[14] - The Company believes Adjusted EBITDA helps identify underlying trends in its business and enhances the overall understanding of its past performance and future prospects, despite its limitations as an analytical tool[15][16] Additional Company Information This section provides details on the earnings conference call, company overview, investor relations contacts, and important forward-looking statements Conference Call Details LightInTheBox held an earnings conference call on September 15, 2023, at 8:00 a.m. Eastern Time. Preregistration was required to obtain dial-in details, and a telephone replay and webcast archive were made available - Earnings conference call held on September 15, 2023, at 8:00 a.m. Eastern Time[18] - Participants could preregister to receive dial-in numbers, an event passcode, and a unique registrant ID[19] - A telephone replay was available through September 22, 2023, and a live and archived webcast was accessible on the Company's investor relations website[19] About LightInTheBox Holding Co., Ltd. LightInTheBox is a global apparel e-commerce retailer focused on middle-aged and senior customers. It leverages its global supply chain, logistics, R&D, and design capabilities to offer a wide selection of apparel across various websites and mobile applications in over 140 countries and regions - LightInTheBox is an apparel e-commerce retailer that ships products to consumers worldwide, with a focus on serving its middle-aged and senior customers[20] - Leverages its global supply chain and logistics networks, along with in-house R&D and design capabilities, to offer a wide selection of apparel[20] - Operates through www.lightinthebox.com, www.miniinthebox.com, www.ezbuy.sg, and other platforms, available in over 20 major languages and 140+ countries and regions[20] Investor Relations Contact Contact information for investor relations is provided through LightInTheBox's internal team and external financial communications firm, Piacente Financial Communications - Investor Relations contact for LightInTheBox Holding Co., Ltd. is available via email: ir@lightinthebox.com[21] - Additional investor relations contacts are Jenny Cai and Brandi Piacente of Piacente Financial Communications, reachable via email: lightinthebox@tpg-ir.com or Tel: +1-212-481-2050[22] Forward-Looking Statements This announcement contains forward-looking statements made under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties, and actual results may differ materially due to various factors. The company does not undertake to update these statements unless required by law - Statements are made under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995[23] - Forward-looking statements involve inherent risks and uncertainties, and actual results could differ materially due to factors such as business development, market growth, customer attraction, supply chain efficiency, competition, and general economic conditions[24] - LightInTheBox does not undertake any obligation to update any forward-looking statement, except as required under applicable law[24] Unaudited Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and reconciliations of GAAP to non-GAAP results Unaudited Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity as of June 30, 2022, and June 30, 2023, showing changes in current assets, total assets, current liabilities, and total equity/deficit | Metric | As of June 30, 2022 (Thousands $) | As of June 30, 2023 (Thousands $) | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | ASSETS | | | | Cash and cash equivalents | 88,575 | 88,157 | | Restricted cash | 5,993 | 6,451 | | Total current assets | 115,975 | 123,579 | | TOTAL ASSETS | 164,813 | 167,599 | | LIABILITIES AND EQUITY / (DEFICIT) | | | | Accounts payable | 26,518 | 38,981 | | Advance from customers | 32,241 | 27,559 | | Total current liabilities | 154,109 | 166,395 | | TOTAL LIABILITIES | 160,937 | 170,765 | | TOTAL EQUITY / (DEFICIT) | 3,876 | (3,166) | | TOTAL LIABILITIES AND EQUITY / (DEFICIT) | 164,813 | 167,599 | Unaudited Condensed Consolidated Statements of Operations This section details the company's financial performance for the three and six months ended June 30, 2022, and 2023, covering revenues, cost of revenues, gross profit, operating expenses, and net loss, along with per share data | Metric | Three Months Ended June 30, 2022 (Thousands $) | Three Months Ended June 30, 2023 (Thousands $) | Six Months Ended June 30, 2022 (Thousands $) | Six Months Ended June 30, 2023 (Thousands $) | | :----------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total revenues | 132,355 | 191,767 | 226,123 | 339,548 | | Total Cost of revenues | (59,197) | (81,577) | (105,451) | (146,856) | | Gross profit | 73,158 | 110,190 | 120,672 | 192,692 | | Total operating expenses | (75,634) | (111,788) | (129,530) | (198,248) | | Loss from operations | (2,476) | (1,598) | (8,858) | (5,556) | | Net loss | (2,396) | (1,457) | (7,908) | (5,413) | | Net loss per ADS — Basic | (0.02) | (0.01) | (0.07) | (0.05) | | Net loss per ADS — Diluted | (0.02) | (0.01) | (0.07) | (0.05) | Unaudited Reconciliations of GAAP and Non-GAAP Results This section provides a reconciliation of GAAP net loss to non-GAAP Adjusted EBITDA for the three and six months ended June 30, 2022, and 2023, detailing the adjustments made for interest, income tax, depreciation, amortization, and share-based compensation | Metric | Three Months Ended June 30, 2022 (Thousands $) | Three Months Ended June 30, 2023 (Thousands $) | Six Months Ended June 30, 2022 (Thousands $) | Six Months Ended June 30, 2023 (Thousands $) | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net loss | (2,396) | (1,457) | (7,908) | (5,413) | | Less: Interest income | 7 | 143 | 17 | 173 | | Interest expense | (1) | (1) | (3) | (2) | | Income tax expense | (9) | - | (9) | (48) | | Depreciation and amortization | (861) | (826) | (1,719) | (1,655) | | EBITDA | (1,532) | (773) | (6,194) | (3,881) | | Less: Share-based compensation | (30) | (78) | (66) | (83) | | Adjusted EBITDA* | (1,502) | (695) | (6,128) | (3,798) |