Q1 2023 GigaCloud Technology Inc. Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by welcome to the <unk>.
Technologies' first quarter 2023 earnings conference call.
During today's call all participants will be in a listen only mode.
Joining us today from gigabit Phy technology are the companies find a chairman of the board and Chief Executive Officer, Larry way there.
The company's Chief Financial Officer, David low.
The company's President Delta Imams Schrock.
On today's call Larry will keeping those a few of the company's performance.
I will provide details of the Companys operational results and David will share the company's financial results.
After that we will conduct a question and answer session.
To remind that this conference call contains statements about future events and expectations, which are forward looking in nature statements on this call may be deemed as forward looking and actual results may differ materially.
Today's call and webcast will include.
non-GAAP financial measures within the meaning of S. E C regulation G. When required reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release.
That's why this the company web site.
With that I would like to turn the call over to lobby the companies find a chairman of the board and Chief Executive Officer. Harry. Please go ahead.
Thank you operator.
Thanks to everyone for joining <unk> first quarter 2023 earnings conference call today.
First and foremost I want to express my pride in the entire Giga home family on another remarkable quarter, where we continued to revolutionize the industry with our innovative business model and state of art technology.
She is our most profitable quarter ever with a $15 $9 million and net income.
27, 8% quarter over quarter increase.
And an impressive 236% increase year over year.
The $19 $8 million and adjusted EBITDA, which represents a 37 quarter over quarter increase above our fourth quarter results last year.
We also witnessed the encouraging revenue growth.
Ceded upper end.
Projected outlook, which came in at $127 8 million for Q1 versus all of our brands.
127 to 120 $123 million to $127 million for the quarter.
We're confident of outcomes from.
Ongoing improvements further strengthening our position as market leader.
I would like to thank the entire veeva called team for their tireless work as well as the stake holders for their continued support for the company.
Now I would like to turn the call over to Imam to go over some of the operational highlights from this quarter.
Okay.
Profit.
Our gross margin was 23, 1% for the first quarter up a full 54% year over year.
We believe that this moderation in ocean shipping rates should remain in place for at least the foreseeable future and expect our second quarter results to also benefit from this tailwind.
Now, let's walk through some of the operational results.
In the first quarter ended March 31st our Giga cloud marketplace, GMB grew 26, 3% year over year to 553 and a half million.
The platform saw a 46, 8% year over year increase in active three P salaries ending the quarter at 602.
And as Larry just mentioned, we saw a 12 and a 5% year over year rise in active buyers to end the quarter at 4255.
Spend per active buyer also increasing by 12, 3% year over year to 130 $330083 in the 12 months ended March 31 2023.
They're three P seller Giga cloud marketplace G. M D grew.
62, 2% year over year to $285 $2 million, representing 51.5% of the total gigawatt.
Giga cloud marketplace GMB for the 12 months ended March 31.
As I mentioned on our last call in the fourth quarter of our gigabit class in the fourth quarter, our Giga cloud three P seller GMB surpassed our one P. G M b as a percentage of total marketplace GMB.
That trend continued into the first quarter, while our one P approach remains an integral part of our business strategy. Ultimately, we believe that the growth of our three P. J M. B will be very important to the scaling of our business and we see positive momentum in our SVP growth rates.
To drive a larger and more productive marketplace.
We remain focused on building the best bidder b marketplace in the world for buyers and sellers to come together and grow their respective businesses by improving our effectiveness and increasing.
<unk> of our ecosystem the success of our customers is ultimately the success of our own business and we believe that we are well positioned to capitalize on this growing opportunity going forward. Our first quarter results were very encouraging and evidence that our <unk>.
Going investments into the platform should continue to provide positive profitable results from our balanced growth strategy now I would like to turn the call over to our CFO David for a closer look at our financial results.
Thank you Larry in your mind and good morning, everybody I'm pleased to share our outstanding financial results for the first quarter of 2023.
The company generated $127 8 million in revenue in the first quarter of 2023, which represents a 13, 7% growth from $112 4 million in the year prior.
As Larry mentioned it was above the high end of our outlook range for the quarter, which was between 123 and $127 million.
Our gross profit was $29 6 million, an increase of 75, 3% year over year and resulting in gross margin of 23, 1% for the first quarter compared to gross margin and then your prior off 15%.
This improvement was largely the result of improved ocean shipping rates, which contribute to increased three P seller activity as well as improving our overall margin for our <unk> business.
Our supplier fulfill retailing model provides end to end logistics services to our customers and as ocean shipping rates have declined steadily over the last year, our revenue generated from ocean shipping accounts for a smaller percentage of total revenue in first quarter 2023, and led to a substantial margin expansion opportunity in the quarter.
On the bottom line, we generated $18 9 million and net income in the first quarter, representing an increase of 236, 4% from $4 7 million in the year prior.
Adjusted EBITDA was $19 8 million in the first quarter, representing an increase of 186, 5% from $6 9 million in the first quarter of 2022.
We're also incredibly pleased to announce that this was our most profitable quarter in the history of Giga cloud so far.
More importantly, we generated $20 3 million in operating cash flow in the first quarter of 2023 compared to $14 5 million in net cash outflow in our operating activities in the first quarter of 2022.
This results in a $164 2 million in cash balance at the end of the first quarter.
Further enhancing our balance sheet and positioning the company well for additional investments into our platform or any potential M&A activity that may align with our business strategy.
Additionally, we have a $50 million revolving credit facility with Wells Fargo Bank that can be drawn upon shall we need to fund any additional expansion of our investment.
As the amount of looted art Giga cloud marketplace is rapidly shifting to become a pretty stellar dominated platform.
Which we believe is the result of the investment into the platform for our buyers and sellers as well as the continued adoption of our cell supplier fulfills retailing model.
Our operating expenses rose slightly on both a dollar and on a percentage of total revenue basis, which finished the quarter at $11 7 million or nine 2% of total revenue versus $9 4 million or eight 4% of total revenue in the year prior.
The increase was due to a higher research and development expense as we continue to invest in our platform.
Which was slightly offset by lower sales and marketing and general and admin expenses.
Finally for the second quarter of 2023, we expect the company to generate between 140 and $145 million in revenue.
And with that operator, I would like to open a lifetime questions. Thank you.
Thank you as a reminder to ask a question that you will need to press star one and one on your telephone.
Wait for your name to be announced to withdraw your question. Please press star one and one again.
Okay.
We will take our first question.
And the question comes from the line of Oscar Tracey, who is a private investor. Please go ahead. Your line is open.
Yeah.
Thank you for your presentation and congratulations all around.
My first class I have two questions two follow up on it first of all it's very impressive to see that your revenue gross profit net income and adjusted EBITDA also realistic.
Increases in the first quarter. So what are what were the main drivers of them do you expect this trend to continue in coming quarters. Thank.
Thank you.
Yeah. Thank you very much very quick question.
Goodbye.
Overall ocean shipping rate is starting to normalize through pre pandemic level.
When ocean shipping rate is at the current level, our <unk> seller. It is more active than sending products or warehouse, which in terms drives more activity on our platform that lets to overall growth in user account users spend on <unk>. So.
On the other hand.
Climbing ocean shipping rate environment will naturally presents any margin expansion opportunity for our <unk> business, because the ocean shipping rate itself as a part of our product costs.
I think more importantly is aside from ocean shipping rates are supplier fulfilled retailing is offering a very unique solution to traditional retailers to reduce costs and help them to effectively and efficiently manage the entire supply chain from the manufacturing source all the way to the end consumer so.
I think this is a very strong testament of the value that we offer to the market and I think the market is starting to realize.
The unique opportunity that.
Percentage of on the table here.
Thank you.
I have my second question is that I would also like to know what the components of that plan.
But what does that not all of 2023.
Specific in our state of strategy the company, let's focus on to drive that.
Was it the value.
Okay.
Okay.
And you wanted to Bella.
Yes, but I'm not sure I understood. The question could you. Please.
We said that question one more time.
Sure I.
We would like to know like what will be any specific initiative or strategy for the company.
To conduct for the remaining of 2023.
It should drive the growth in the value.
Sure So our economy our.
System is currently connecting thousands and thousands of participants.
And on a recurring daily business through a.
Multifactor that software that is giving visibility as David mentioned to their entire supply chain.
End to end logistics inventory management, and also acting as a payment gateway.
Going forward, we do have a few R&D projects in the mix.
That is going to help us make this system, even more efficient and also we are exploring the possibility.
A potential M&A to help us improve those capabilities to expand our service offerings to the market marketplace participants, but without a doubt a huge focus will also be placed on recruiting new sellers and expanding the availability of existing products through one peer in the marketplace. So that.
It can supplement.
Of buyers so we can.
<unk> continued to growth.
Thank you.
Thank you we will take our next question.
Okay.
Your next question comes from the line of Eva Moore, who is a private investor. Please go ahead. Your line is open.
Hi, Good morning management I have two questions today. The first one is a company had over 160 million cash at March 31, two and three what are your plans for utilizing this capital in the next 20 Mt 12 mode.
Thank you.
Sure.
Sure.
Evaluating projects in alternatives, where we're going to deploy cash creates value for our customers and shareholders.
We're obviously constantly opportunistically evaluating potential inorganic targets that aligns with our business strategy. So we have a very healthy balance sheet positioned today, that's going to allow us to grow and expand in multiple areas to capture market opportunities.
So as long as we find a.
That makes sense.
And Ali to us.
We're always ready to deploy our cash to make it work.
Thank you and the second one is with <unk>.
<unk> operational highlights and does it makes me Ken gross gains GMB and Q3.
<unk> seller active buyer and spend more per active buyer.
How do you plan to maintain this growth and to continue attracting more sellers and buyers to our platform.
<unk>.
So it's.
As far as.
Recruiting sellers and buyers.
The focus remains the same our focus will always remain on.
Inviting more and more sellers into the platform, allowing them to take advantage of the software and hardware that we're just enabling them with to make trade and in turn make the product more available for the participants on the other end, which would be the buyers transacting and as I alluded.
Two earlier in answering the previous question.
Increasing the recruitment of three P. Sellers will remain a huge focus for us. So we'll increasingly skew density using our <unk> to make product availability and that in return would result in us recruiting more active buyers.
In addition.
We want to continue to educate the market about the benefits of our very unique super effective business model, what we call suppliers fulfilled retailing that helps.
Improve the efficiency across the board have lowered the risk for the entire system and make the process more transparent.
Less prone to damages and waste of resources.
In addition to all of those there is a huge focus within our organization on.
<unk> engineering, and improving algorithms and machine learning and that is going to continue because that is the path forward as we are revolutionizing the wholesale end of that big and bulky market.
Thank you.
Thank you we will take our next question.
Your next question comes from the line of Rommel Dionisio from Aegis capital. Please go ahead. Your line is open.
Thank you and good morning.
No service revenue from <unk> has definitely been a focus area for your growth.
You had strong last mile delivery growth service revenues strong growth in warehouse services, but I noticed there was a drop in ocean transportation services is about 78% and I know obviously you.
Ocean freight costs have come down and prices have come down, but it just seems like a big drop was there something else unusual happening there or just I just wanted to clarify that thank you.
Yes, no problem.
No I think you hit the nail it.
It's because.
The ocean shipping rates have come down drastically.
From where it was a year ago, we provide end to end logistics for our customers. So when ocean shipping rates are high.
Recognize that as part of our revenue.
When it normalizes that part of the revenue as a percentage of our total revenue it becomes a much smaller.
So it's because of macro cost factor that caused.
Revenue.
Next.
Shift quite drastically from where it was from a year ago. So your understanding is absolutely correct.
Okay, and just a quick follow up if I could.
You'll see the strong growth in <unk>.
Your threep seller relationships.
Wonder if you could just clarify that says the loyalty the retention rates still open, but we managed to maintain a very high rate close to $85, 90% that you've had historically thank you.
Yeah.
So we don't typically disclose this but yes, that's remained very high for us. So that's because of the unique solution that we offered to suppliers.
And in Asia, where we provide the end to end logistics payment gateway.
Multiple distribution channels, all through one easy to use platform.
Okay, great congratulations on the quarter great quarter. Thank you.
Thank you.
Thank you once again, if you wish to ask a question. Please press star one.
On your telephone.
We will take our next question just a.
The question comes from the line of Irina Melton, who is a private investor. Please go ahead. Your line is open.
Thank you. My question is could you. Please provide update sure Youll know your technology technological upgrades on your platform.
And how they contribute to the long term success.
Okay.
Sure I'll take this question David.
A lot of the technology technological investments this year will be centered around optimizing the buyer and the seller data exchanges to streamline the overall efficiency of the marketplace.
We are in the <unk> sector. So there are recurring transactions and data and machine learning can improve that process and make it more efficient and with that being said.
Machine learning in the algorithm.
Ill go rhythms are a huge huge part of what we do.
<unk>.
Unlike any other company, we optimize the process.
Some end to end.
<unk>.
With that I alluded to this as well earlier over a quarter of our entire workforce.
Is dedicated to engineering and they're all dedicated their daily activities into making this process.
Mission and as effective as possible.
In our quest to make the cross border <unk> be even better.
Thank you for that.
I also thought of one more question so about your vision.
Luke you mentioned that there's a revenue range for the second quarter of 2022, each so what sectors or in market conditions are influencing this forecast and what key initiatives our strategy well you're implementing to achieve these revenue targets.
Yeah.
We took into account a number of factors and arriving our current outlook for Q2.
I think under the current economic environment, we see a lot of traditional retailers are struggling from overvalued inventory that caused by a surge in ocean shipping rates during the pandemic.
Sure.
As more and more of our customers are paying closer attention to efficiently manage supply chain and inventory management.
This presented us with a very unique opportunity given our business model can effectively remove the inventory risks in associated costs from carrying inventory directly and then also as demand alluded.
<unk> got a lot of.
Tailwind.
Through the normalization of ocean shipping rates so.
That's how we arrived in our outlook for second quarter of 2023.
Okay. Thank you very much.
Okay.
Seems to be no further questions at this time I will hand back for closing remarks.
Thank you very much for joining this conference call. If you have any further questions. Please contact us through E Mail and we'll respond to your question as soon as possible. We appreciate your interest and support and Giga cloud and we look forward to speaking with you again next time. Thank you very much.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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