Orchid Pavilion Set Potential company net revenue for the second quarter of 72.2 million U.S.

Orchid Pavilion (NYSE:LITB) today released its second-quarter financial results for the 2013 fiscal year. The report showed the company's net revenue for the second quarter was $72.2 million, a 52.6% increase from 47.3 million trillion dollars in the same period last year, and a net profit of $600,000, with a net loss of 1.4 million dollars over the same period last year.

After the release, Orchid Pavilion set potential CEO Guo to disease and CFO Shire attended the conference call, interpretation of earnings points, and answer analyst questions.

The following analysis is the main part of the question and answer session:

Analyst: How is the company's three-quarter revenue forecasts calculated from the bottom up?

Guo to disease: Orchid Pavilion set potential from different dimensions of the calculation of quarterly revenue forecasts. The company will collect operational data sets from different regions for forecasting, commodity category forecasts and marketing cost forecasts. Management will assemble these three independent data for two predictions, and the company's executives discuss these forecasts and agree on a final forecast. Finally, executives will discuss these forecasts with the board.

Analyst: Does the company follow this procedure when it forecasts the two quarter? Why did the weak performance of June take the company by surprise?

Guo's disease: two things in the two quarter have affected the company's earnings, first, internal implementation, the company's two-quarter user conversion rate is consistent with the actual results, and last year's two quarter and the first quarter of the number of similar, this forecast is also related to seasonality, but we do not anticipate the June conversion rate of decline, Part of the reason is that the company's commodity strategy too much focus on high-end products, low attention to low-end products; second, competitors have reacted to the company's IPO in an unprecedented intensity, by slashing prices and scrambling for traffic to crush the pavilion, but the company believes that these competitive actions are unsustainable. The company's experience is that in future forecasts, not only to consider the internal situation of the company, but also to consider the external situation and how the departments will be through the operation of the expected revenue. The company has taken these factors into account when it comes to third-quarter revenue forecasts.

Analyst: The company's revenue in North America grew 16% in the two quarter? Shouldn't North America be the fastest growing market in the Blue Pavilion? In my opinion, this speed is a little low. Is this a drag on the clothing business?

Guo Goes to disease: Yes, first of all, North America's offline wedding dress market is very developed, their pricing strategy against us, second, the company's Chinese competitors, can provide English-language services in the wedding dress more than other languages, so there are many competition from the domestic. These are the reasons for slower growth in North America.

Analyst: Will the company's four quarterly revenue be flat with the three quarter?

Guo's disease: The company does not currently provide four quarterly revenue forecasts.

Analyst: What is the most important reason for the three-quarter revenue forecast to show that the company's growth will continue to slow down? Is it a costume? In addition, when will this slowing trend improve? Brilliantly quarter or longer?

Guo to disease: three quarters of revenue forecasts mainly reflect the company's vision of the apparel business; Orchid Pavilion is focused on solving internal problems, to deal with competitors in the apparel market challenges. In addition, the market for clothing, especially wedding dresses and prom dresses is very seasonal, and the company expects performance to improve in the first quarter and two quarters next year.

Oppenheimer analyst Andy Yeung: The first question is, why is it that companies in the North American, European and South American markets have seen their revenues fall in other areas?

Shire: In the second quarter, North America, South America and Europe rose 16.3%, 196.9% and 105.4%, respectively, from a year earlier. In addition to these three regions, the company has also grown in other regions, with a smaller increase, as well as a small contribution to corporate revenue in the region, with revenues exceeding 90% per cent in North America, Europe and South America in the second quarter.

Guo's disease: Europe has been the company's largest market, the increase in the number of European languages since last year has strongly promoted the company's growth in the region. South America represents the emerging markets, and companies are growing very rapidly in the region. In addition, the consumer acceptance curve in South America is about to show an upward inflection point.

Oppenheimer analyst Andy Yeung: Does the company's three-quarter expansion plan include opening new language services and entering new countries?

Guo's disease: several new language services will be opened in the second half of the year, but as these services are being developed, it is not possible to determine the timing of the release. Shortening the distance with the consumer by increasing the language type will always be the company's strategy of increasing users and developing markets.

Oppenheimer analyst Andy Yeung: just mentioned that the company plans to build a global product network, the first center in Korea, then the center has no specific product planning? What are the plans for future development?

Guo to disease: the company's global supply chain strategy to ensure the breadth of supply, the first center is located in South Korea because the country's clothing and jewelry suppliers have a unique design capabilities, the future will be expanded.

Alicia Yap, Barclays Capital analyst,: What is the proportion of the company's revenue from Western Europe and Eastern Europe to European revenue? When did the company enter the Brazilian market?

Shire: This ratio is not available, for example, the largest contributor to the company's European revenues is the French market, which accounts for about 20% to 25%, because French is the second language service offered by the Orchid Pavilion after English. Since then, the company has also started offering several language services in German, Spanish, Portuguese, Dutch and Scandinavian Pen..

Guo's disease: the company launched its Portuguese-language service in 2011 and also entered the Brazilian market that year.

Barclays Capital analyst Alicia Yap: Can you introduce the gross profit margin of garments, gadgets and electronic products?

Shire: Because of the competition reason, the company does not disclose this kind of data, but the clothing, the accessories, the ornament and the fashionable goods these kinds of goods gross profit margin is higher than other category.

Alicia Yap, Barclays Capital analyst,: Will the company's current slowdown in apparel affect its forecasts for three-quarter gross profit margins?

Shire: The company's three-quarter gross profit outlook unchanged, in the solution of internal implementation problems, the company will focus on optimizing the supply chain and improve operational efficiency.

Barclays Capital analyst Alicia Yap: Can you tell me about the off-season and the peak season when the difference?

Shire: Four Quarter is the company's peak season, first quarter and two quarter is the wedding dress and prom dress season. The third quarter is off season.

Maria Xin, Huaxing Capital analyst: The company's two-quarter gross profit margin rose 4%, is seasonal or product mix change? What are the future trends?

Guo to disease: there are several reasons, one is the scale effect of the company, the size of the company, bargaining power and purchasing power to improve, the second is the company adjusted the product mix, increased the proportion of small accessories and accessories, these are high margin goods, the third is the improvement of operational efficiency.

Maria Xin, Huaxing Capital analyst, said the two-quarter apparel sales accounted for only 30% of total revenue, is it due to the slowdown in North America? In addition, parts of the refinement of the category of goods, which one of the development potential is relatively large?

Guo went to the disease: The two quarterly revenue was not up to expectations because of the clothing business, mainly the slowdown in wedding dresses and prom dress sales. The slowdown in North America was due to a year-on-year decline in clothing revenues, usually in North America, where more clothing was sold than elsewhere. In addition, the company for small accessories and jewelry business has set up a website, www.miniinthebox.com, refinement categories have the iphone shell, adapters, protection equipment, data lines, travel kits and so on; the company believes that many categories have tremendous growth potential.

Maria Xin, Huaxing Capital analyst: is the Orchid Pavilion's huge growth in South America due to a small base in the region before?

Guo's disease: The company's growth in this area is mainly for two reasons, one is that the company's global platform to sell goods directly to consumers, and second, because these countries are about to usher in the big development of electricity business. In addition, the company provides a good user experience and reasonable prices. The situation in Russia is similar to that of Brazil.

Maria Xin, Huaxing Capital analyst: What is the trend in the second half of corporate user acquisition costs? How many of the 1.4 million active users in the two quarter are new users?

Shire: The cost of user acquisition, in dollars, this year than last year to spend a little more. The company does not count how many active users are new to the user.

Standard Chartered analyst: The company's logistics costs in the total revenue of the smaller competitors, how to do this?

Shire: The logistics cost of Orchid Pavilion is mainly in two parts, which is different from the competitors of the company in China. The first is to pay the third party the cost of the service provider, the second part of the company's internal logistics operating costs. There is no distribution and other logistics costs in the company's physical costs.

Analyst: Does the company have plans to increase product categories and expand new markets? Are there any timetable?

Guo to disease: first, the new added goods must be easy to use express, postal transport to overseas goods, second, the new increase in the category of goods must be no brand-led industry, third, the new increase in the category of goods must be consumers are willing to accept a variety of goods categories. In addition, if the goods can be customized, so good. Another point is that the added goods must be made in China, because most of the company's products are from Chinese producers. In the discussion of increasing the category of goods, we should pay attention to two points, one is to enrich the categories, the second is to carefully choose new categories. The company plans to classify the fashion jewelry subcategories as the new major category, and the company is also planning to join the Enterprise Gift customization service. These plans will take several quarters to implement.

Analyst: What kind of fashion jewelry category and enterprise gift customization product category will contribute to the company's revenue next year? In addition, the company's wedding dress market share can continue to grow?

Guo's disease: The company is currently unable to predict the development of these planned category businesses next year. In addition, our survey shows that the wedding dress market space is still very large, far from saturation. Only because of the company's implementation problems, the two-quarter wedding dress business appeared a little temporary difficulties.

Scafell Securities analyst: The company previously mentioned that the two quarter has 1.2 million users in the Orchid Pavilion set potential list?

Shire: Yes.

Scafell Securities Analyst: If 32% of the company's revenue comes from repeat customers ' contributions, does it mean that 32% of users are repeat customers?

Shire: Repeat customers mainly focus on the purchase of small accessories and jewelry categories of goods, these goods average price is lower, order volume is relatively small.

Scafell Securities analyst: What was the previous mention of the IPO thing?

Shire: Yes, I mentioned earlier that there was an IPO-related 2 million dollar option reward awarded to an outstanding employee. Most of them are restricted.

Scafell Securities Analyst: What are the motives of the company's IPO? How does the company look at IPOs?

Guo to disease: we communicate with managers, we all have the experience of the enterprise model and core competitiveness expressed confidence, in addition, we have the confidence to change the current reliance on a single product category to generate income problems, and have planned to promote expansion plans. (Tian Heng)