LightInTheBox Holding Co., Ltd. (NYSE:LITB) Q3 2022 Results Conference Call November 25, 2022 8:00 AM ET
Company Participants
Rene Vanguestaine – Investor Relations
Jian He – CEO and Director
Yuan Jun Ye – CFO
Operator
Good morning, and welcome to the Third Quarter 2022 Earnings Conference Call for LightInTheBox Holding Co., Ltd. Today’s conference is being recorded.
At this time, I’d like to turn the call over to Mr. Rene Vanguestaine for opening remarks and introductions. Please go ahead, sir.
Rene Vanguestaine
Thank you, Nick. Hello, everyone, and welcome to LightInTheBox’s third quarter 2022 earnings conference call.
The company’s earnings results were released earlier today and are available on the company’s IR website as well as through PR Newswire.
On the call from LightInTheBox are Mr. Jian He, CEO; Ms. Yuan Jun Ye, Chief Financial Officer; and Ms. Wenyu Liu, Chief Growth Officer. Mr. He will give an overview of the company’s strategies and recent developments, followed by Ms. Ye, who will go over the financial results. They will all be available for the Q&A session that will follow.
Before we proceed, I would like to remind you of your 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. 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.
Mr. He, please go ahead.
Jian He
Thanks, Rene, and thank you, everyone, for joining us today. We delivered a solid financial performance in the third quarter of 2022, despite a continued challenging global macroeconomic environment. Our revenue growth accelerated up 23% year-over-year to $121 million compared to growth of 8% in the previous quarter. Thanks to our strategic changes in product mix and improving operating efficiency. We are able to further lower our operating loss and deliver positive adjusted EBITDA. We are pleased with our execution as we further execute on our proven growth strategy in the coming quarter.
As indicated during our previous earnings calls, we have determined that apparel is the most important category for us, and we have deployed our resources to improve all aspects to our operations, resulting in remarkable growth in apparel sales. During the third quarter, revenues from apparel increased 61% year-over-year to $100 million, representing 82% of total revenues up from 63% in the same quarter of 2021. This lifted our overall gross margin to 58% compared with 45% a year ago.
In summary, there are still uncertainties, which may impact the development of our industry in the short term, including foreign exchange volatility and the market global economic outlook. We are confident in our prospects and the execution capabilities, as we already excludes some severe tests in the past few quarters. We aim to invest more for the benefit of our customers over the long term while driving operational efficiency improvements.
Looking forward, business growth and the customer experience improvements remain our priorities. We are [indiscernible] in online and continue to reposition our brand among our valued customers in line with our product strategy, focusing mainly on apparels.
I will now hand the call over to Yuan Jun to go through the financial results.
Yuan Jun Ye
Thank you, Mr. He. Let me start with the financial highlights for the quarter. In the third quarter, our total revenues were $121 million, up 23% year-over-year from $99 million. Revenues from apparels increased by 61% to $100 million, representing 82% of total revenues compared with 63% in the same quarter of 2021. Accordingly, gross margin for the third quarter improved to 58% from 45% a year ago as a result of higher margin from apparel sales.
Total operating expenses were $70 million, compared with $50 million during the same quarter of 2021. Selling and marketing expenses were $53 million, an increase of $19 million year-over-year as we continue to invest to drive top line expansion to stand out of the competitive market amidst the macro headwinds.
Fulfillment expenses remained stable at $7 million, while G&A expenses increased by $1 million year-over-year to $10 million in the third quarter, due to an increase of $1 million in foreign exchange. Included in operating expenses, R&D expenses were stable at $5 million on a sequential basis. We remained focus on the user experience leverage and continuous innovation.
Despite the challenges in the third quarter, we further narrowed our net loss on a sequential basis to $0.4 million, close to a breakeven. Adjusted EBITDA was $0.4 million compared with a loss of $5 million in the same quarter last year.
On the balance sheet, as of September 30, 2022, we had cash and cash equivalents and restricted cash of $57 million compared with $50 million a year ago. Despite the uncertainty in the macro environment, we are confident of steady growth in our top line in the coming quarters.
This concludes our prepared remarks. At this point, we are ready to take some questions.
Operator?
Question-and-Answer Session
Operator
[Operator Instructions] At this time, first question will be from Matt Lee of CRS Capital. Please go ahead.
Unidentified Analyst
Can you hear me all right?
Yuan Jun Ye
Yes, we can hear you.
Unidentified Analyst
Okay. Yes, I had a couple of questions just about profitability. So if I’m not mistaken, you’ve lost money every quarter since Q3 last year. This quarter, you said that adjusted EBITDA has turned positive despite the challenging environment you talked about. So can you elaborate a little bit on how you achieved that? And then do you have any expectations for Q4 and into 2023 in terms of profitability? And I guess, just generally, what do you think is your path to sustained profitability going forward?
Yuan Jun Ye
Talking about the profitability, I think we have a lot to share. As you remember, last year from Q3, our adjusted EBITDA turned negative from positive due to a lot of factors that were out of our control. For example, the tax policy change in European Union and the tightened rules on selling of consumer products in our major markets, the post-pandemic, reopened workplaces and malls, increased social activity globally that caused demand change from online back to offline. And this year, more global events occurred actually.
As we all know, the war, the energy shortage issue, inflation in many countries that affected people’s purchasing power and discretional spending. So from last year’s third quarter until now, we have been facing a lot of challenges and we tried our best to adjust our operations to mitigate the impact. As mentioned by Mr. He, we invested formally on apparel, which we identified as the most important category for us, and we successfully shifted our product mix towards apparel, which, in turn, significantly increased our gross margin.
We also constantly improve our customer’s shopping experience to engage repeated purchase. All these efforts lead to top line growth and higher contribution margin. Besides that, we didn’t forget about the bottom line either. We reviewed and cut down our redundancies constantly. We increased operational efficiencies every quarter to improve our profit and loss. So after almost a year of proactive actions, we reached EBITDA profit again.
Talking about the near future, we will still stick to our growth strategy. As long as we can maintain the growth momentum, we will see positive cash inflow. For our business, positive cash inflow is always the most important factor, which is even more important than profit itself. But having said that, we will also be mindful on the growth as the macro environment is still unstable, a healthy and sustainable growth is what we are expecting. So I hope all this answers your questions. We will try to stick to our growth path and try to have the momentum go on. Thank you.
Operator
[Operator Instructions] There are no further questions at this time. I’ll now hand the call back over to Mr. Rene Vanguestaine for closing remarks.
Rene Vanguestaine
Thanks, Nick. 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 coming weeks and months. Have a good day.
Operator
That does conclude our conference for today. Thank you for participating. You may now disconnect.
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