GigaCloud Technology Inc

Ladies and gentlemen, thank you for standing by. Welcome to Giga Cloud Technology's second quarter 2022 earnings conference call. During today's call, all participants will be in the listen-only mode. This conference is being recorded today, Friday, September 30th, 2022. Joining us today from Giga Cloud Technology, the company's founder, Chairman of the Board of Director and Chief Executive Officer, Mr. Larry Lei Wu. The company's Chief Financial Officer, Mr. David Lau. On our call today, Mr. Wu will give you an overview of the company's performance. Mr. Lau will share the details of the company's operational and financial results. After that, we will conduct a question and answer session to take your questions. Before we continue, I'd like to remind you that some information discussed on this call will contain certain fault-looking statements. These fault-looking statements involve known and unknown risks and uncertainties. Although the company believes that expectations expressed in these fault-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct. and the company cautions investors that actual results may differ materially from the anticipated results, and encourages investors to review other factors that may affect future results in the company's registration statement and other filings with the SEC. This call includes discussion of certain non-GAAP financial measures, such as adjusted EBITDA, Please refer to our earnings press release for more information on the non-GAAP financial measures. With that, I'll now turn the call over to Mr. Wu, the company's founder, chairman of the board of directors, and chief executive officer. Mr. Wu, please go ahead.

Thank you, operator, and everyone for joining GigaCloud's second quarter of 2022 earnings conference call today. We are pleased to deliver a robust financial and operational result in our first quarterly earning release as a public company. Our NASDAQ listing in August represented a key milestone for our company and years of hard work, commitment, and dedication from our shareholders, management team, and employees. Despite the macroeconomic challenges that we face, we continued to deliver a solid year-over-year revenue and GMV growth. We are proactively adjusting our operations to adapt to these challenges and continue to focus on our long-term strategy by strengthening our capability to create value for our customers. By leveraging our data-driven technology and our logistics solutions, we are well positioned to increase our overall market share in the B2B large parcel market. Thank you for your continued support to the company. Next, I will turn the call over to our Chief Financial Officer, Mr. Lau, for a closer review of our operational and financial results. Mr. Lau, please go ahead.

Thank you, Larry, and good morning, everybody. Now I'll go over our operational and financial results. Our Giga Cloud Marketplace GMV was 458.8 million in the 12 months ended June 30, 2022. And that's up 43.8% year over year. We had 452 active three-piece sellers in the 12 months ended June 30, 2022. And that's up 67.4% year over year. We have 4,061 active buyers in 12 months ended June 30, 2022, up 58.9% year over year. Spend per active buyer was $112,987 in the 12 months ended June 30, 2022, and that's down 9.5% year-over-year. Our 3P seller, Giga Cloud Marketplace, GMB, was $196.7 million in the 12 months ended June 30, 2022, and that's up 71.1% year-over-year. Now let's look at our financial results for the second quarter of 2022. Total revenues were 124 million for the second quarter of 22, and that's up 11% year over year. That's mainly due to increase in our service revenue from Giga Cloud 3P and product revenue from our Giga Cloud 1P, but partially offset by the decrease in product revenue from our off-platform e-commerce channel. Service revenue from Giga Cloud 3P was 32.8 million in the second quarter of 22, up 39.4% year over year. That's primarily due to an increase in revenues from our last mile delivery fees and fulfillment fees for other freight services, such as delivery of products via our ocean transportation services. Product revenue from Giga Cloud 1P was $60.7 million in the second quarter of 22, and that's up 15.4% year over year, mainly due to an increase in the number of active buyers and better selection of products catering to buyers' preferences. Product revenue from off-platform e-commerce was $30.5 million in the second quarter of 2022, and that's down 14.4% year-over-year, primarily due to an overall decrease in sales on certain third-party off-platform e-commerce as consumer demand slowed down on such platform. Cost of revenues was $107 million in the second quarter of 2022, up 29.1% year-over-year, primarily due to an increase in ocean freight costs compared to the second quarter of 2021, and such increase is expected to stabilize in the rest of 2022. Gross profit was $17 million in the second quarter of 22, down 41.1% year over year. Gross margin was 13.7% in the second quarter of 22, compared to 25.9% in the second quarter of 21. Total offering expenses were $8.8 million in the second quarter of 22, down 28.3% year over year. Selling and marketing expenses were $5.5 million in the second quarter of 22, down 20.2% year over year, primarily due to a decrease in staff costs as the sales commission decreased. General and admin expenses were 3.3 million in the second quarter of 22, down 38.6% year over year, primarily due to a decrease in our professional services fees. Operating income was 8.2 million in the second quarter of 22, down 50.5% year over year. Net income was 6.1 million, with a basic and dilute earnings per share of $0.15 in the second quarter of 2022 compared to a net income of $13.6 million with a basic and diluted earnings per share of $0.43 in the second quarter of 2021. Adjusted EBITDA was $7.8 million in the second quarter of 2022 compared to $16.6 million in the second quarter of 2021. So now let's look at the financials on a six-month ended basis. Total revenues were $236.5 million in the six months ended June 30, 2022, up 14.6% year-over-year, primarily due to an increase in service revenues from our GigaCloud 3P and product revenues from our GigaCloud 1P, but partially offset by the decrease in product revenue from our off-platform e-commerce. Service revenue from GigaCloud 3P was $64 million in the six months ended June 30, 2022, up 45.7% year-over-year, primarily due to an increase in revenues from our last mile delivery fees and fulfillment fees for other freight services, such as delivery of products via ocean transportation. Product revenue from Giga Cloud 1P was $115 million in the six months ended June 30, 2022, up 21.2% year over year, primarily due to an increase in the number of active buyers and our better selection of products catering to buyers' preferences. Product revenue from off-platform e-commerce was 57.4 million in the six months ended June 30, 2022, down 14.9% year-over-year, primarily due to an overall decrease in sales on certain third-party off-platform e-commerce as consumer demand slowed down on such platform. Cost of revenues was 202.6 million in the six months ended June 30, 2022, up 29.4% year-over-year, primarily due to an increase in ocean freight costs compared to the six months ended June 30, 2021, and such increase is expected to stabilize in the rest of 2022. Gross profit was $33.9 million in the six months ended June 30, 2022, down 31.9% year-over-year. Gross margin was 14.3% in the six months ended June 30, 2022, compared to 24.1% in the same period of 21. Total operating expenses were $18.2 million in the six months ended June 30, 2022, down 19.4% year-over-year. Selling and marketing expenses were $11 million in the six months ended June 2022, down 22.4% year-over-year, primarily due to a decrease in staff costs as the sales commission decreased. General and admin expenses were $7.2 million in the six months ended June 2022, down 14.4% year-over-year, primarily due to a decrease in our professional services fees. Operating income was $15.7 million in the six months ended June 2022, down 42.3% year-over-year. Net income was $10.8 million, with a basic undiluted earnings per share of $0.28 in the six months ended June 3, 2022, compared to a net income of $21.6 million, with a basic undiluted earnings per share of $0.67 in the same period of 21. Adjusted EBITDA was $14.7 million in the six months ended June 30, 2022, compared to $26.7 million in the same period of 21. As of June 30, 2022, the company had cash of 49.2 million with a restricted cash of 1.5 million. Net cash used in our operating activities was 10.3 million in the six months ended June 30, 2022, compared to 11.7 million in the six months ended June 30, 2021. Net cash used in investing activities was 0.1 million in the six months ended June 30, 2022, compared to 0.6 million in the six months ended June 30, 2021. Net cash used in financing activities was $0.6 million in the six months ended June 3, 2022, compared to $0.9 million in the six months ended June 30, 2021. We remain confident in our business and our potential to grow, and we expect our total revenues to be between $122 million and $127 million for the next quarter. Now I'd like to turn the call over to the operator for questions and answer sessions, please. Thank you.