Q3 2023 GigaCloud Technology Inc Earnings Call
Please in our year over year adjusted EBITDA.
As we mentioned in our press release this marks our third consecutive quarter of record profitability showcasing the incredible earning potential and flexibility of our supplier fulfilled the retailing business model.
Keep in mind that these results are purely organic as we did not cause either acquisition within the period.
And our result of our unwavering commitment to ensuring the success of our cloud marketplace participants.
As demand will speak to shortly.
Our acquisition of Noble House will provide additional scale diversity of product supply chain enhancement.
Why.
Okay.
<unk> penetrated.
Brick and mortar market with the launch of our new <unk> IQ package.
And with that I would like to turn the call over to amongst truck President forgive a cloud for a more detailed discussion on the quarter and our tuitions.
Thank you Larry and thanks again, everyone for joining us our results this quarter speaks for itself by the appeal, the earning potentials of our supply fulfilled retailing model, a big Testament to the commitment and execution of the entire Giga cloud team will continue to revolutionize the.
<unk> of transacting big and bulky products in a cross border landscape through our innovative technology platform and we are seeing continuum continued momentum on this front.
Before we go through some of our operational highlights for this quarter I first wanted to discuss our two acquisitions noble house in one of their site in more detail, let's start with noble House, which closed on October 31 for a purchase price of $85 million, we acquired Wonder house through a bankruptcy process, where we.
Wired substantially all assets and this transaction noble house is a leading BTB furniture distributor with over 8000, skus across 100 categories covering both indoor and outdoor furniture. In addition to providing you'll get cloud with an extensive network of third party channel partners and suppliers.
Around the World Noble House will provide significant warehouse expansion and synergistic cost savings for both <unk> and Threep shipping volume.
This additional supplier diversity and sourcing coverage will significantly strengthen our supply chain and expand our product offerings in newness and diversity, which we believe is essential to attracting new high quality buyers and sellers to the beat of the marketplace.
Further the acquisition expands our existing network of warehouses by $2 3 million square feet, serving to enhance our fulfillment infrastructure and ensure timely accurate deliveries as well as allowing giga cloud to expand our operations into Canada and add a new sourcing.
Origin in India.
Finally, noble house provides relationships with top retailers, including Amazon target way fair Lowes beyond formerly known as Overstock and Walmart the greatly expand the ability of our sellers to reach their target customers moving on would like to delve deeper into the strategic acquisition of <unk>.
<unk> concluded on November 16th for a total consideration of $10 million in cash.
Wonder signed a Tampa, Florida based innovator in cloud powered digital signage and electronic catalog management.
Set to brought in Giga clouds footprint within the physical retail sector.
Integration is pivotal and the launch of our new oven Guard Giga IQ package, leveraging Wonder science established network of over 2500 retail locations. The Giga IQ package is designed to offer consumers a streamlined experience to explore select and transact giga clouds diverse product.
Offerings through our retail partners outlets in stores.
These purchases will be processed by the physical store with Giga class facilitating the order fulfillment and drop shipping process mirroring the efficiency of our <unk> marketplace operation the intent behind acquiring <unk> is to transition the giga cloud marketplace and intuitive.
End user oriented platform enhancing the transactional journey for both marketplace the affiliate and the retail clientele.
Together, we are confident that the acquisition of noble house on one of their sign will enhance giga cloud scale volume and reach beyond our organic growth. These integrations aimed to further accelerate our momentum offering customers with more diverse ways to connect and transact ultimately position.
Turning us as a leader in global <unk> landscape.
Now, let's walk through some of the organic operational highlights of the quarter.
Our giga cloud marketplace, <unk> grew approximately 41% year over year to $684 $8 million.
And the TTM period.
On the seller side the platform saw an approximate 43% year over year increase in active sellers, which ended at 741 for the quarter as I mentioned last quarter, we see the expansion of our threep ecosystem as a crucial part of our platform expansion and achieving scale.
In our supplier fulfilled retailing model, while we continue to devote.
A significant amount of time and resources into quickly letting in Onboarding, New three third party sellers to our platform. We also expect to see the acquisition of Noble House.
Add a significant significant number of sellers.
We continue to see our <unk> seller marketplace GMB growth accelerated in the third quarter, increasing 67% year over year to $369 5 million in the TTM period, which accounted for 54% of our total marketplace <unk> in the same period as I.
On our prior calls while our <unk> approach remains an integral part of our business strategy. Ultimately, we believe that the growth of our organic <unk> will be very important to the scaling of our business and we see positive momentum in our organic <unk> growth rate continuing to continuing to drive.
A larger and more productive marketplace moving on to the buyer side that we saw active buyers increased to $4 six.
<unk> two and the 12 months ended September 32023, an increase of approximately 10% from the year prior period with average spend per active buyer, making a significant.
8.5% jump from the year prior period to approximately $149000. We continue to see growth in the number of high quality high volume buyers that seek to.
We seek to attract to the platform as demonstrated by the significant increase in the average buyer spend we will continue to invest in our platform and believe there is a still a wrong a long runway of organic growth that can be achieved as we penetrate new markets around the world clearly.
This was a blockbuster quarter of organic results for Giga cloud and subsequently a transformative one in the fourth quarter, which we saw Giga cloud closed two important acquisitions noble house in one of their side. We believe that these these moves have provided giga cloud the additional scale and the reach its needed to position.
The company for success and additional market share in the near and long term as.
As Larry mentioned, we posted our third consecutive quarter of record profit, resulting in year to date net income of 50 $858 $5 million as of September 30th.
Organically, we are seeing promise promising growth across all kpis with the rise of approximately 41% of total GMB from comparable TTM period.
Proximately, 10% more active buyers in the comparable TTM period, an increase of 28, 5% and average spend per active buyer over the comparable TTM and with that I would like to turn the call over to David Lau CFO for a more detailed overview of third quarter.
Thank you.
Thanks, Ron before we discuss our financials in details I would like to share with you some important corporate initiatives in the quarter.
Our share repurchase program, which we had announced on June 14 of this year.
Order of directors have authorized a share repurchase program under which the company may purchase up to $25 million of its class a ordinary shares and a 12 month period.
I'm very pleased to share that for the launch of our share repurchase program through September 30 of 2023.
Purchased approximately 215000 class a ordinary shares in the open market for total price of approximately $1 6 million.
With approximately $23 $4 million remaining on the share repurchase authorization, we'll continue to look to repurchase shares when valuation level warrants.
Second on our transition from a foreign private issuer RF pie two S. Filer status, we will have the same reporting and disclosure obligation as domestic companies.
<unk> report that we're on track to transition to an S. Filer on churn for 2024, which is when can you climb will be subject to the same reporting disclosure and filing obligations has other S form issuers. Starting next year you can expect the same cadence of funneling, such as 10, Ks and 10-Qs. We believe this will this move will continue to build confidence and then take a cost story and will continue to.
We focus on shareholder engagement and transparency.
Now I'd like to walk you through our third quarter numbers in more detail.
As Larry mentioned I'd like to reiterate that the numbers I'll be discussing our organic account numbers. Neither acquisitions pension had closed in the period ending September 32023.
Our total revenues for the third quarter were $178 2 million, which was an increase of 39, 2% year over year, and 16, 4% quarter over quarter Brickman.
Breaking this down for the third quarter service revenue from <unk> cloud <unk>.
27, 2% year over year increase to $51 5 million product revenue from <unk> cloud <unk> saw a 38, 1% year over year increase to $80 4 million.
Revenue from off platform E Commerce saw a 58% year over year increased to $46 3 million.
These increases correspond with three 8% year over year gain in total market <unk>, which ended the third quarter at $684 8 million on a TTM basis.
Our revenue growth is a testament also continue adoption of our supplier fulfilled retailing business model.
Moving onto our gross profit for the third quarter was $48 9 million, which was an increase of 117, 3% year over year and resulted in gross margin of 27, 4% versus.
17, 6% in the year prior period.
These increases in gross margin were largely a result of the continued return to normalization of ocean shipping rates from the all time highest in the first six months of 2022.
Our total operating expense for the third quarter were $17 2 million, which was a decrease of 6% year over year from $18 3 million.
Breaking this down for the third quarter, selling and marketing expenses increased 61, 8% year over year to $11 million.
General and admin expenses decreased 49, 6% year over year to $5 8 million.
Research and development costs were $4 million in the third quarter of 2023 versus none in the third quarter of 2022.
The increases were due to an increase in staff costs relating to selling and marketing personnel and increase in platform services fees that we incurred certain third party E Commerce website, and systemwide acknowledgeable upgrades on <unk> marketplace to support the company's growth.
These were offset by the decrease in G&A expenses, which was primarily due to a decrease in share based compensation expenses.
Bottom line, our net income for the third quarter was 20, $24 2 million, which was an increase of approximately 3357, 1% year over year from $7 million.
This resulted in basic and diluted earnings.
Shares of 59 per share versus <unk> 10 per share a year ago our.
Our share based comp expense in the third quarter was 317000 versus $8 9 million and a year prior as I mentioned in our previous call. We incurred a large onetime SBC charge of $8 $9 million related to our IPO.
Third quarter 2020.
Our SBC charges will be more evenly space.
Going forward and we do not expect to see a single quarter with such SBC charge in that magnitude in the future.
This resulted in adjusted EBITDA for third quarter of 2020, $29 8 million, an increase of 154% year over year from $11 9 million.
Moving onto our balance sheet, we ended the third quarter with $214 million in cash a net increase of approximately $70 5 million from the third quarter.
Sorry from the quarter ended December 31, 2022, an increase of $32 5 million for the quarter ended June 32023.
As a mountain and Larry mentioned subsequent to the quarter, we acquired noble house for approximately $85 million and wonder signed for approximately $10 million. Both of these acquisitions were funded exclusively with cash off our balance sheet.
Finally, I want to briefly mentioned our financial outlook for the fourth quarter. We're now expecting total revenues in the range of $217 million to $223 million, which would represent an approximately 75% gain over the your prior periods at the midpoint.
Do you all for joining with that I'd like to ask the operator to open the line for questions.
Thank you.
To ask a question. Please press star, one and one and your telephone and wait for your name to be announced until we've got your question. Please press star one and one again once again, please press star one and one on your telephone and wait for your name to be announced.
We are now going to proceed with our first question.
And the question is come from the line of Matt Koranda from Roth. Please ask your question.
Hey, guys good morning.
Just wanted to see if you could unpack the fourth quarter revenue outlook that you provided a bit more detail. So the $2 17 to $2 <unk>.
<unk> three <unk>.
Of that outlook is the organic services and products business.
And how much is coming from the noble House acquisition, maybe also if you could speak to wander sign.
Thats contributing anything to your revenue outlook for the fourth quarter.
Hey, Matt it's David here, so for the fourth quarter, we didn't.
Our noble house acquisitions until November one.
And we anticipate approximately $30 million of our revenue guidance will be contributed by noble house, but going forward, we don't plan to provide.
Two separate rare.
Our revenue guidance in our press release.
The way we look at it is we're going to provide a single combined revenue number as we're trying to integrate the noble house business.
So it's going to be increasingly difficult for us to just single out what the noble house revenue guidance is going to be.
And then on <unk>.
Even kind of.
The size of <unk> relative to our overall financial profile, we didn't account for any revenue guidance in the quarter.
Yeah.
Yeah.
Yeah.
Does that answer your question Matt.
Sorry about that I was on mute so the I guess that implies a core.
Revenue outlook for the fourth quarter of $190 million.
Maybe could you speak to what's driving that.
The growth outlook and the organic business first and then I wanted to come back to noble and kind of talk about <unk>.
The ability and the expectations there.
Sure.
I think as you can see.
You see in this quarter third quarter are you seeing more in mortgage reserves already.
Signed up and on boarded on our platform users are starting to understand and appreciate the value we bring through our supplier fulfilled retailing model.
This directly enhance sellers or suppliers profitability and for buyers, which is retailers and resellers. They are able to operate in a more asset light fashion, particularly in a challenging microeconomic environment helps them streamline their operating costs. So this is a win win situation for all of our marketplace participants.
And then for our <unk> business, which is the product business, we continue to increase and diversify our SKU count, which is a key growth driver for our product business.
We continue to dedicate our focus to recruit sellers on a global basis and once you start to onboard more users.
Part two.
See more volume coming in.
You start to see it gives you an edge in our overall logistics offering and mix or pricing more competitive. So once you start seeing volume and traction kind of three pieces will feed into each other and then the growth momentum will continue and that's what we're expecting in the fourth quarter and beyond.
Okay, I guess, what I'm trying to get at is it's like no.
North of 50% year over year growth Mark that you're that you're guiding to for the fourth quarter. So just trying to get to sort of which component of the business is driving that it sounds like probably both sides any way to think about breaking out product revenue outlook, which has been.
Over the last couple of quarters.
The service revenue.
That you would expect.
We don't really provide guidance to that level.
What I could say is so right now the split.
Is 70% <unk>, 30%, our three P. So without.
Consolidating the noble house deal I think that.
Split we will continue to carry on.
So I hope that kind of.
Answers to questions that you have in mind.
Yes.
Directionally helpful.
And then on noble I guess, just making sure that we're thinking about this correctly noble house will likely fall into the lumpy product revenue side of the business.
I would assume and then maybe could you speak to sort of how we should be thinking about gross margins operating margins for noble house in the fourth quarter, but also would like sort of just a general commentary on how to think about profitability of that business as you plug it into your system.
Yes.
I think right now it's.
Pretty hard and early on to really talk about what the overall profitability is going to look like.
I think the management team right now is strong all of our attention and energy to integrate the business.
We're trying to realize the synergies through kind of revenue expansion opportunities and cost cutting initiatives.
We have a number of levers to pull in the medium to long term to increase profitability.
Or trying our utmost effort and our number one priority to integrate and recognize all of the potential synergies in the next couple of quarters.
I don't know if Larry I'll remind if you have anything more specific that we can share.
With Matt.
No I think that was a good response and obviously this acquisition is.
A substantial acquisition for the <unk> team and.
We're putting in our best effort behind it.
Create synergies and to take out redundancies and the goal is to.
Within the next few quarters to try to do our best to turn things around and we will update the investor community as to that progress.
Okay.
Im trying to model profitability from noble as we plug it into your model should we assume it's dilutive to EBITDA margins for the initial few quarters and then we.
We sort of.
The synergies that Youre alluding to.
Within 2024 just.
Maybe just directionally qualitatively or however, you want to do it just help folks kind of plug that into the model that you guys have the core model, which is already relatively profitable how should we do that switch.
Okay.
Well by the virtue of.
Noble House being where it was the initial impact will be dilutive of course, but like I said, our best effort is behind it we have a lot of management bandwidth.
A lot of team members working really really hard to try to bring the operation to profitability as soon as possible and like I said, we're going to inform the community the investor community quarter by quarter and.
Youre going to get our best effort to try to turn things around within the next few quarters.
Okay and last one from me just maybe could you speak to how we should think about.
What.
<unk> does for your marketplace metrics that you report.
Particularly curious about sort of how it's going to impact.
Active buyers and sellers, probably more buyers than sellers in the acquisition.
Maybe if you could just speak to how we should think about.
Those metrics on a go forward basis, they've obviously been growing very nicely in the last couple of quarters, but how should we.
Anticipated noble impact those key metrics in the fourth quarter and beyond.
Sure I mean noble house.
A very reputable.
<unk> furniture distributor in the U S and they have an extensive.
Collection of outdoor and indoor home furnishings across basically the full home segment that includes decor and accessories.
So.
From our standpoint that gives you a cloud marketplace and our logistics network will help streamline and optimize the sales process storage and distribution of the product, making them perfect acquisition candidates because they can benefit from our robust network and business strategy.
Yeah.
Additionally, like noble House has extensive sales channels, which will give us a solid foothold.
Any massive revenue opportunity for our sellers to access.
<unk> listed a few like Amazon and target.
And further to that the <unk> acquisition.
Not only provides us with scale, we need to attract new buyers and sellers, but also it helps us expand our supplier base and give us opportunities to enter into.
New furniture markets.
US that is India for sourcing, which is going to be a big emphasis going forward in attracting sellers and obviously the Canadian market for BW Congress as they have a presence in that market as well.
Okay I'll take the Rosemont offline thanks, guys. Thank.
Thank you.
Thank you we are now going to proceed with our next question.
And the question is come from the line of Romo Dr. Nieto from Aegis capital. Please ask your question. Your line is open.
Alright, good morning, Thanks for taking my question could.
I Wonder you touched on it a little bit just now but could you just expand the theme of the cross selling synergies that you may have with <unk>.
Noble House, taking your product line to Canada, and there is pretty much. It. So some of your customers and how you guys think about the opportunities there in 'twenty four and beyond thank you.
Thank you Remo.
So so basically.
With regards to noble house.
We are trying to use the power of the marketplace.
That includes all the synergies that I discussed when it comes to logistics to distribution the load balancing but above that.
The powerful.
Ways of the supplier fulfilled retailing business model that has been successful for us as you guys see in the numbers that are.
<unk> provided to you as far as the performance.
With three quarters of record profitability and its back.
Trying to use those synergies to turn this operation around and.
By default a lot of SKU diversity will be available.
On a marketplace there is dynamic interaction between sellers and buyers. So the more diversity of newness that you have on the marketplace. It allows you to track.
More buyers.
By the means of giving them more choices and thats something that we achieved through the noble House acquisition.
To that.
We're talking about scale here.
Noble House will give us the needed scale to basically.
Gain additional market share, while also giving us the chance to tap into their supply chain, which is pretty substantial as far as the number of.
Manufacturing partners that they had the retail partners that they had and the two new markets that I mentioned, India for sourcing and then also Canadian <unk> E Commerce.
Yes, Manav I can add.
On the product side Theres, a lot of complementary value that we can extract from the noble House acquisition.
We're adding around 8000 skus right off the bat.
And a more a slightly more premium segment and we are.
The product quality.
So there is a lot of.
Synergies that we can extract by just learning.
Know, how their product designs or QC process.
We cannot obviously reflect that from our own lumpy business from our <unk> products.
And then on top of all the synergies that newmont over it.
I want to make sure that the product.
Value is being delivered and shared with you all.
Great. Thanks, very much congratulations on the acquisitions in the quarter.
Youre welcome. Thank you very much.
Thank you we are not going to proceed with our next question.
And that question comes from the line of Jamie <unk> from <unk>. Please ask your question. Your line is open.
Hi management.
Can hear me right.
Yes.
Okay. Thank you for giving me the opportunity and congrats on the strong result, I got two questions. So first of all a noble house deal. Although you talk about it in the framework.
Can you give us more color on the deal like looking forward to what management action plan.
Integrate this company into our existing system. Thank you.
Okay.
Hey, Mike do you want to take that one.
Sure.
After the acquisition, we've acted swiftly to identify redundancies and staffing.
And cost synergies that are both.
Having short term and long term effects on the profitability for the combined entities at the same time, we're always looking to explore strategic options to restructure the legacy business segments that novo dabbled in which included manufacturing retail and D to C component.
To drive the strategic growth.
And focus on the core function of the business.
Obviously, we're still in the midst of executing on these particular actions.
But we strongly believe that we're on the right track and headed in the right direction and we're going to continue to make progress in the coming quarters.
Like I said with our plan.
Being to turn things around within the next few quarters will be.
Bringing more updates to the investor community on a quarter by quarter basis.
Yeah.
Okay. Thank you and.
Second one is can you share some color on the Black Friday sales this year.
And she said you do any.
Promotions on this event.
Well, obviously we.
We haven't even gotten into the numbers that far ahead, but I can share with you I saw in the news that Black Friday was very strong for online E Commerce partners, but that was a general metric not broken down by anybody in particular.
Okay. Thank you thanks.
Yeah.
And maybe if I can add a little bit more color around that question obviously.
Obviously, when we're projecting and budgeting with our Q4 guidance it looks like we'll take into account of what we think.
How we performed in November.
Obviously, the black Friday sales so if.
If I can kind of steer you to look at our guidance I think that's probably a pretty good indication.
Where we think.
Our quarter is going to look like.
Thank you we have no further questions at this time I will now hand back to you for closing remarks.
Great.
Thank you all for joining.
If you have any questions. Please feel free to write an email for IR E Mail address will respond to you as soon as we can and we look forward to talking to you in our next earnings call and happy holidays to everybody.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect your lines. Thank you.
Thank you and happy holidays everybody.
Thank you.
Yeah.
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Good day and thank you for standing by welcome to thank you've got cloud technologies third quarter 2023 earnings call and webcast.
Joining us today from <unk> technology, and the company's founder Chairman and CEO, Larry will the company's President Doctor inbound truck and the Companys Chief Financial Officer, David low.
On today's call Ron will give an overview of the company's performance and details of the Companys operational results and David Lee The Companys financial results. After that we'll conduct a question and answer session.
To ask a question during the session you need to press star one and one of your telephone.
He had run at debated message advising you of Hindus raised to withdraw your question. Please press star one and one again.
As a reminder, this call. This conference contains statements about future events and expectations, which are forward looking in nature statements on this call maybe 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 SEC regulation G. When.
When required reconciliation of all non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP can be found on today's press release as well as on the company's website.
Please note that today's conference is being recorded I would now like to the conference over to our speaker, Mr. Larry with Chairman and CEO. Please go ahead Sir.
Thank you operator, and thank you everyone for joining with us today.
First I want to express my gratitude to the entire Giga family for another remarkable quarter.
The dedication you have shown each grow to the continued success of <unk> go cloud and it won't be the same without it.
Since we have spoken last Google cloud not only posted three consecutive quarters of record breaking results. We have also closed on two strategic acquisitions.
Accelerate both our growth in our b to b ecosystem as well as to strengthen our penetration into brick and mortar channels.
Before turning to <unk> to discuss these two acquisition in details.
High level.
We could not be more pleased with our results in the quarter, which featured approximately 40% year over year increase in our total revenue.
And an incredible 150% increase in our year over year adjusted EBITDA.
As we mentioned in our press release this marks our third consecutive quarter of record profitability showcasing the incredible earning potential and flexibility of our supplier fulfilled the retailing business model.
Keep in mind that these results are purely organic as we did not cause either acquisition within the period.
And our result.
Unwavering commitment to ensuring the success of our cloud b to B marketplace participants.
As he will speak to shortly or acquisition of noble House will provide additional scale diversity of product supply chain enhancement.
Yeah.
Wow.
Walker.
Hello.
Eric and mortar market with the launch of our new <unk> IQ package.
And with that I would like to turn the call over to Yvonne Schrock President for Google Cloud for a more detailed discussion on the quarter and our two divisions.
Thank you Larry and thanks again, everyone for joining us our results this quarter speaks for itself by the appeal, the earning potentials of our supply fulfilled retailing model, a big Testament to the commitment and execution of the entire Giga cloud team will continue to revolutionize the.
Way of transacting big and bulky products in a cross border landscape through our innovative technology platform and we are seeing continuous continued momentum on this front.
Before we go through some of our operational highlights for this quarter I first wanted to discuss our two acquisitions noble house and longer sign in more detail, let's start with noble House, which closed on October 31 for a purchase price of $85 million we.
Wonder house through a bankruptcy process, where we acquired substantially all assets and this transaction noble house is a leading BTB furniture distributor with over 8000, skus across 100 categories covering both indoor and outdoor furniture. In addition to providing gigabit cloud with an extensive net.
A third party channel partners and suppliers from around the World Noble House will provide significant warehouse expansion at synergistic cost savings for both <unk> and Threep shipping volume.
This additional supplier diversity and sourcing coverage will significantly strengthen our supply chain and expand our product offerings in newness and diversity, which we believe is essential to attracting new high quality buyers and sellers to the beat of the marketplace.
Further the acquisition expands our existing network of warehouses by $2 3 million square feet, serving to enhance our fulfillment infrastructure and ensure timely accurate deliveries as well as allowing giga cloud to expand our operations into Canada and add a new sourcing.
Origin in India.
Finally, noble house provider relationships with top retailers, including Amazon target waste, there lowes beyond formerly known as Overstock and Walmart the greatly expand the ability of our sellers to reach their target customers moving on would like to delve deeper into the strategic acquisition of <unk>.
<unk> concluded on November 16th for a total class a duration of $10 million in cash.
Wonder signed a Tampa, Florida based innovator in cloud powered digital signage and electronic catalog management.
Set to brought in Giga clouds footprint within the physical retail sector.
Integration is pivotal and the launch of our new oven Guard Giga IQ package, leveraging wonder size established network of over 2500 retail locations. The Giga IQ package is designed to offer consumers a streamlined experience to explore select and transact giga clouds diverse product.
<unk> through our retail partners outlets and stores.
These purchases will be processed by the physical store with Giga class facilitating the order fulfillment and drop shipping process mirroring the efficiency of our b to b marketplace operation the intent behind acquiring wonder Sun is to transition the giga cloud marketplace and intuitive.
End user oriented platform enhancing the transactional journey for both marketplace, the affiliates and the retail clientele.
Together, we are confident that the acquisition of noble house in one of their sign will enhance giga cloud scale volume and reach beyond our organic growth. These integrations aimed to further accelerate our momentum offering customers with more diverse ways to connect and transact ultimately.
Joining us as a leader in global beta the landscape.
Now, let's walk through some of the organic operational highlights of the quarter.
Our giga cloud marketplace, <unk> grew approximately 41% year over year to $684 $8 million.
And at TTM period.
On the seller side the platform saw an approximate 43% year over year increase in active sellers, which ended at 741 for the quarter as I mentioned last quarter, we see the expansion of our threep ecosystem as a crucial part of our platform expansion and achieving scale.
In our supply fulfilled retail model, while we continue to dig it out.
A significant amount of time and resources into quickly vetting and Onboarding, New three third party sellers to our platform. We also expect to see the acquisition of noble house to add a significant significant number of sellers.
We continue to see our <unk> seller marketplace GMB growth accelerated in the third quarter, increasing 67% year over year to $369 5 million and the TTM period, which accounted for 54% of our total marketplace <unk> in the same period as I am.
Mentioned on our prior calls while our <unk> approach remains an integral part of our business strategy. Ultimately, we believe that the growth of our organic <unk> will be very important to the scaling of our business and we see positive momentum in our organic <unk> growth rate continuing to continuing to drive.
A larger and more productive marketplace.
Moving on to the buyer side that we saw active buyers increased to 4602.
The 12 months ended September 32023, an increase of approximately 10% from the year prior period with average spend per active buyer, making a significant.
8.5% jump from the year prior period to approximately $149000. We continue to see growth in the number of high quality high volume buyers that seek to.
That we seek to attract to the platform as demonstrated by the significant increase in the average buyer said, we will continue to invest in our platform and believe there is still a wrong a long runway of organic growth that can be achieved as we penetrate new markets around the world clearly.
This was a blockbuster quarter of organic results for Giga cloud and subsequently a transformative one in the fourth quarter, which we saw.
Cloud closed two important acquisitions <unk> Hudson Wonder side, we believe that these these moves have provided giga cloud the additional scale and the reach its needed to position the company for success and additional market share in the near and long term.
As Larry mentioned, we posted our third consecutive quarter of record profit, resulting in year to date net income of 50, $858 5 million as of September 30.
Organically, we are seeing promise promising growth across all kpis with the rise of approximately 41% of total GMB from comparable TTM period.
Proximately, 10% more active buyers in the comparable TTM period, an increase of 28, 5% and average spend per active buyer over the comparable TTM and with that I would like to turn the call over to David Lau CFO for a more detailed overview of third quarter.
Thank you.
Thanks, Brian before we discuss our financials in details I'd like to share with you some important corporate initiatives in the quarter.
Our share repurchase program, which we had announced on June 14th of this year.
Order of directors have authorized a share repurchase program under which the company may purchase up to $25 million of its class a ordinary shares and a 12 month period.
I'm very pleased to share that for the launch of our share repurchase program through September 30 of 2023.
Purchased approximately 215000 class a ordinary shares in the open market for a total price of approximately $1 $6 million with approximately $23 $4 million remaining on the share repurchase authorization. We will continue to look to repurchase shares when valuation level warrants.
On our transition from a foreign private issuer RF pie two S. Filer status, where we'll have the same reporting and disclosure obligation estimates. The companies. We're pleased to report that we're on track to transition to an S. Filer on churn for 2024, which is once you get cloud will be subject to the same reporting disclosure and filing obligations has other S form issuers.
Starting next year you can expect the same cadence of funneling, such as 10, Ks and 10-Qs We believe this will.
This move will continue to build confidence and that could get class story and will continue to be focus on shareholder engagement and transparency.
Now I'd like to walk you through our third quarter numbers in more detail.
As Larry mentioned I'd like to reiterate that the numbers I'll be discussing our organic our cloud numbers. Neither acquisitions mentioned that closed in the period ending September 32023.
Our total revenues for the third quarter were $178 2 million, which was an increase of 39, 2% year over year, and 16, 4% quarter over quarter.
Breaking this down for the third quarter service revenue from <unk> cloud <unk> saw a 20.
27, 2% year over year increase to $51 5 million product revenue from <unk> cloud <unk> saw a 38, 1% year over year increased to $80 4 million product revenue from off platform E. Commerce saw a 58% year over year increased to $46 3 million.
These increases correspond with 48% year over year gain in total market <unk>, which ended the third quarter at $684 8 million on a TTM basis.
Our revenue growth is a testament of the continued adoption of our supplier fulfilled retailing business model.
Moving onto our gross profit for the third quarter was $48 9 million, which was an increase of 117, 3% year over year and resulted in gross margin of 27, 4% versus.
17, 6% in the year prior period.
These increases in gross margin were largely a result of the continued return to normalization of ocean shipping rates from the all time highest in the first six months of 2022.
Our total operating expense for the third quarter were $17 2 million, which was a decrease of 6% year over year from $18 3 million.
Breaking this down for the third quarter, selling and marketing expenses increased 61, 8% year over year to $11 million Gen.
General and admin expenses decreased 49, 6% year over year to $5 8 million.
Research and development costs were $4 million in the third quarter of 2023 versus none in the third quarter of 2022.
The increases were due to an increase in staff costs relating to selling and marketing personnel and increase in platform services fees that we incurred certain third party E Commerce web site and system wide acknowledgeable upgrades on gigaflop marketplace to support the company's growth.
These were offset by the decrease in G&A expenses, which was primarily due to a decrease in share based compensation expenses.
On the bottom line, our net income for the third quarter was 20, $24 2 million, which was an increase of approximately 3357, 1% year over year from $7 million.
This resulted in basic and diluted earnings.
Shares of 59 per share versus <unk> 10 per share a year ago our.
Our share based comp expense in the third quarter was 317000 versus $8 9 million and a year prior as I mentioned in our previous call. We incurred a large onetime SBC charge of $8 9 million related to our IPO.
Third quarter 2022.
Our SBC charges will be more evenly space.
Going forward and we do not expect to see a single quarter with such a SBC charges in that magnitude in the future.
This resulted in adjusted EBITDA for third quarter of 2020, $29 8 million, an increase of 154% year over year from $11 9 million.
Moving onto our balance sheet, we ended the third quarter with $214 million in cash a net increase of approximately $75 million from the third quarter.
Sorry from the quarter ended December 31, 2022, an increase of $32 5 million for the quarter ended June 32023.
As the mountain and Larry mentioned subsequent to the quarter, we acquired noble house for approximately $85 million and wonder signed for approximately $10 million. Both of these acquisitions were funded exclusively with cash off our balance sheet.
Finally, I want to briefly mentioned our financial outlook for the fourth quarter. We're now expecting total revenues in the range of $217 million to $223 million.
Which will represent approximately 75% gain over the year prior period at the midpoint.
Thank you all for joining with that I'd like to ask the operator to open the line for questions.
As a reminder to ask a question. Please press star one and one on your telephone and wait for your name to be announced until we withdraw. Your question. Please press star one and one again once again, please press star one and one on your telephone and wait for your name to be announced thank you.
Now going to proceed with our first question.
And the question is come from the line of Matt Koranda from Roth. Please ask your question.
Hey, guys good morning.
Just wanted to see if you could impact the fourth quarter revenue outlook that you provided a bit more detail. So the $2 17 to $2 23, how much of that outlook is the organic services and products business.
And how much is coming from the Noble House acquisition, maybe also if you could speak to wonder sign.
That's contributing anything to your revenue outlook for the fourth quarter.
Hey, Matt it's David here, so for the fourth quarter.
Didn't.
Clothes are noble house that questions until November <unk>.
And we anticipate approximately $30 million of our revenue guidance will be contributed by noble house.
Going forward, we don't plan to provide.
Two separate.
Revenue guidance in our press release.
The way we look at it is we're going to provide a single combined revenue number as we're trying to integrate the noble house business.
So it's going to be increasingly difficult for us to just single out what noble house revenue guidance is going to be.
And then on <unk>.
Even kind of the size of <unk> relative to our overall financial profile, we didn't account for any revenue guidance in the quarter.
Yeah.
Okay.
Does that answer your question Matt.
Sorry about that I was on mute so.
The I guess that implies a core.
The revenue outlook for the fourth quarter of $190 million.
Maybe could you speak to what's driving the growth outlook and the organic business first and then I wanted to come back to noble and kind of talk about profitability and the expectations there.
Sure.
I think as you can see.
Do you see in this quarter third quarter are you seeing more and more users.
Signed up and on boarded on our platform users are starting to understand I appreciate the value we bring through our supplier fulfill retailing model.
This directly enhance sellers or suppliers profitability and for buyers, which is retailers and resellers. They are able to operate in a more asset light fashion, particularly in a challenging microeconomic environment helps them streamline their operating cost. So this is a win win situation for all of our marketplace participants.
And then for our <unk> business, which is the product business, we continue to increase and diversify our SKU count, which is a key growth driver for our product business.
We continue to dedicate our focus to recruit sellers on a global basis and once you start to onboard more users you start too.
See more volume coming in.
You start to see it gives you an edge in our overall logistics offering and mix or pricing more competitive. So once you start seeing volume and traction kind of three pieces will feed into each other and then the growth momentum will continue and that's what we're expecting in the fourth quarter and beyond.
Okay, I guess, what I'm trying to get at is.
North of 50% year over year growth Mark that you're there.
Riding two for the fourth quarter.
Just trying to get to sort of.
Which component of the business is driving that it sounds like probably both sides any way to think about breaking out product revenue outlook, which has been accelerating over the last couple of quarters.
Versus the service revenue.
But you would expect.
We don't really provide guidance to that level, but what I could say is so right now the split.
70% <unk>.
30% or three P. So without.
Consolidated Noble House deal I think that.
Split will continue to carry on.
So I hope that kind of.
Some questions that you have in mind.
Yes.
Directionally helpful.
And then on noble I guess, just making sure that we're thinking about this correctly noble house will likely fall into the one P product revenue side of the business.
I would assume and then maybe could you speak to sort of how we should be thinking about gross margins operating margins for noble house.
The fourth quarter, but also.
Like sort of just general commentary on how to think about profitability of that business as you plug it into your system.
Yeah.
Yes.
I think right now it's.
Pretty hard and early on to really talk about what the overall profitability is going to look like.
I think the management team right now is strong all of our attention and energy and your great business.
We're trying to realize the synergies through kind of revenue expansion opportunities and cost cutting initiatives.
We have a number of levers to pull in the medium to long term to increase profitability.
Or trying our utmost effort and our number one priority to integrate and recognize all of the potential synergies in the next couple of quarters.
I don't know if Larry I'll remind if you have anything more specific that we can share.
With Matt.
No I think that was a good response and obviously this acquisition is.
Substantial acquisition for the <unk> team and.
We're putting in our best effort behind it.
To create synergies.
To take out redundancies and the goal is to.
Within the next few quarters to try to do our best to turn things around and we will update the investor community as to that progress.
Okay, but if I'm trying to model profitability from noble as we plug it into your model should we assume it's dilutive to EBITDA margins for the initial few quarters and then we.
We sort of get the synergies that you are alluding to.
Within 2024, just maybe just directionally qualitatively or however, you want to do it.
Just help folks kind of plug that into the model that you guys have the core model, which is already relatively profitable how should we do that switch.
Okay.
Well by the virtue.
Noble House being where it was the initial impact would be dilutive of course, but like I said, our best ever.
It is behind it we have a lot of management bandwidth.
Lot of team members working really really hard to try to bring the operation to profitability as soon as possible and like I said, we're going to inform the community the investor community quarter by quarter and.
Youre going to get our best effort to try to turn things around within the next few quarters.
Okay and last one from me just maybe could you speak to how we should think about.
What noble does for your marketplace metrics that you report.
Particularly curious about sort of how it's going to impact active buyers and sellers, probably more buyers than sellers in the acquisition, but.
Maybe if you could just speak to how we should think about.
Those metrics on a go forward basis, they've obviously been growing very nicely in the last couple of quarters, but how should we.
Anticipate noble impact those key metrics in the fourth quarter and beyond.
Sure I mean.
<unk> is a very reputable VW.
<unk> furniture distributor in the U S and they have an extensive.
Collection of outdoor and indoor home furnishings across basically the full home segment that includes decor and accessories. So.
Yeah.
From our standpoint that gives you a cloud marketplace and our logistics network will help streamline and optimize the sales process storage and distribution of the product, making the perfect acquisition candidates because it can't benefit from our robust network and business strategy.
Additionally, like Noble House has extensive sales channel, which will give us a solid foothold.
Any massive revenue opportunity for our sellers to access.
<unk> listed a few like Amazon and target.
And further to that the <unk> acquisition.
Not only provides us with scale, we need to attract new buyers and sellers, but also it helps us expand our supplier base and give us opportunities to enter into.
New furniture markets for us that is India for sourcing, which is going to be a big emphasis going forward in attracting sellers and obviously the Canadian market for BW Congress as they have a presence in that market as well.
Okay, I'll take that offline thanks, guys.
Yes.
Thank you Anna.
To proceed with our next question.
And the questions come from the line of <unk> from Aegis capital. Please ask your question. Your line is open.
Alright, good morning, Thanks for taking my question.
Wonder if you touched on it a little bit just now but could you just expand the theme of the cross selling synergies that you may have with.
Noble House, taking your product line to Canada, and their screen up to some of your customers and how you guys think about the opportunities there in 'twenty four and beyond thank you.
Thank you Remo.
So basically.
With regards to noble house.
We are trying to use the power of the marketplace.
That includes all the synergies that I discussed when it comes to logistics to distribution the load balancing but above that.
They're powerful.
Ways of the supplier fulfilled retailing business model that has been successful for us as you guys see in the numbers that are.
<unk> provided to you as far as the performance.
With three quarters of record profitability and its back.
Trying to use those synergies to turn this operation around and.
By default a lot of SKU diversity will be available.
On our marketplace.
Is dynamic interaction between sellers and buyers. So the more diversity of newness that you have on the marketplace. It allows you to attract.
More buyers.
By the means of giving them more choices and thats something that we achieved through the noble House acquisition.
To that.
Sure.
We're talking about scale here.
Noble House will give us the needed scale to basically.
Gain additional market share, while also giving us the chance to tap into their supply chain, which is pretty substantial as far as the number of.
Manufacturing partners that they had the retail partners that they had in the two new markets that I mentioned, India for sourcing and then also Canadian <unk> E Commerce.
Yes, Manav I can add.
I think on the product side, there is a lot of complementary value that we can extract from the noble House acquisition.
We're adding around 8000 skus right off the bat.
And a more a slightly more premium segment and we are.
Our product quality.
So there is a lot of.
Synergies that we can extract by just learning.
Know, how their product designs or QC process.
We cannot obviously reflect that from our own lumpy business from our <unk> products.
And then on top of all the synergies that amount of it.
I want to make sure that the product.
Value is being delivered and shared with you all.
Great. Thanks, very much congratulations on the acquisitions in the quarter.
Youre welcome. Thank you very much.
Thank you we are not going to proceed with our next question.
And our question comes from the line of Jamie <unk> from <unk>. Please ask your question. Your line is open.
Hi management.
Can hear me right.
Yes.
Okay. Thank you for giving me the opportunity and congrats on the strong without a I got two questions. So first of all a noble house deal. Although you talk about it in the framework.
Can you give us more color on the deal like looking forward to what management action plan.
Integrated company into our existing system. Thank you.
Okay.
Hey, Mike do you want to take that one.
Sure.
After the acquisition, we've acted swiftly to identify redundancies and staffing.
And cost synergies that are both.
Having short term and long term effects.
On the profitability for the combined entities at the same time.
We're always looking to explore strategic options to restructure the legacy business segments that novo dabbled in which included manufacturing retail and D to C component.
To drive strategic growth.
Focus on the core function of the business.
Obviously, we're still in the midst of executing on these particular actions.
But we strongly believe that we're on the right track and headed in the right direction and we're going to continue to make progress in the coming quarters.
<unk>.
Like I said with our plan.
Being to turn things around within the next few quarters will be.
Bringing more updates to the investor community on a quarter by quarter basis.
Okay. Thank you and the second one is can you share some color on the Black Friday sales this year.
And she said you do.
Any kind of.
Promotions on this event.
Well obviously.
We haven't even gotten into the numbers that far ahead, but I can share with you I saw in the news that Black Friday was very strong for online E Commerce partners, but that was a general metric not broken down by anybody in particular.
Okay. Thank you thanks.
Yeah.
And maybe if I can add a little bit more color around that question.
Obviously, when we're projecting and budgeting, what our Q4 guidance it looks like we'll take into account of what we think.
How we performed in November.
Obviously, the black Friday sale so if.
If I can kind of steer you to look at our guidance I think that's probably a pretty good indication.
Where we think.
Our quarter is going to look like.
Thank you we have no further questions at this time I will now hand back to you for closing remarks.
Great.
Thank you all for joining.
If you have any questions. Please feel free to write an email for IR E Mail address will respond to you as soon as we can.
We look forward to talking to you in our next earnings call and happy holidays to everybody.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect your lines. Thank you.
Thank you and happy holidays everybody.