Q2 2024 GigaCloud Technology Inc Earnings Call
Speaker Change: Thank you all for standing by. Welcome to Gigacloud Technology's second quarter 2024 earnings conference call.
Unknown Executive: Quarter, 2024 earnings conference call. During today's call, all participants will be in listen-only mode.
Speaker Change: During today's call all participants will be in listen-only mode.
Unknown Executive: Joining us today from Gigacloud Technology, other companies' founder, chairman and CEO, Larry Wu, its president, Dr. Iman Schrock, and its chief financial officer, David Lau. Iman will give a performance and operational overview, and David will share the financial results.
Speaker Change: Joining us today from Gigacloud Technology are the company's founder, chairman and CEO , Larry Wu, its president, Dr. Iman Schrock, and its chief financial officer, David Lau.
Speaker Change: Iman will give a performance and operational overview and David will share the financial results. After that there will be a question and answer session.
Unknown Executive: After that, there will be a question and answer session.
Unknown Executive: As a reminder, this conference call contains statements about future events and expectations that are forward-looking in nature, and actual results may differ materially. Additionally, today's call and webcast will include non-GAAP financial measures within the meaning of SEC Regulation G.
Speaker Change: As a reminder, this conference call contains statements about future events and expectations that are forward looking in nature and actual results may differ materially.
Speaker Change: Additionally, today's call and webcast will include non-GAAP financial measures within the meaning of SEC Regulation G.
Unknown Executive: When required, reconciliation of all non-GAAP financial measures to the most direct comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release as well as on the company's website.
Speaker Change: When required, reconciliation of all non-GAAP financial measures to the most direct comparable financial measures, calculated and presented in accordance with GAAP, can be found in today's press release as well as on the company's website.
Larry Wu: With that, I would like to turn the call over to Larry for opening remarks. Please go ahead. Thank you, operator, and welcome everyone to today's call.
Operator: 2024 Earnings Conference Call During today's call, all participants will be in listen-only mode. Joining us today from Gigacloud Technology are the company's Founder, Chairman, and CEO, Larry Wu, its President, Dr. Iman Schrock, and its Chief Financial Officer, David Lau. As a reminder, this conference call contains statements about future events and expectations that are forward-looking in nature, and actual results may differ materially. Additionally, today's call and webcast will include non-GAAP financial measures within the meaning of SEC Regulation G. When required, reconciliation of all non-GAAP financial measures to the most direct, comparable financial measures, calculated and presented in accordance with GAAP, can be found in today's press release as well as With that, I would like to turn the call over to Larry for his opening remarks. Please go ahead.
Speaker Change: With that, I would like to turn the call over to Larry for opening remarks. Please go ahead.
Larry Wu: Thank you, operator, and welcome everyone to today's call. This quarter marks a significant milestone for our company as we achieve record revenue growth for the sixth consecutive quarter. Additionally, despite the industry-wide challenge, including 7% year over year decline in retail furniture sales in the first half of 20.4 in the United States and elevated ocean shipping costs, our adjusted EBITDA increased substantially. Approximately $57 million in GMV.
Larry Wu: This quarter marks the significant milestone for our company as we achieve the record revenue growth for the six consistent quarters. Additionally, despite the industry-wide challenge, including seven percent a year-over-year decline in retail furniture sales in the first half of the 214 in the United States, and the elevated ocean shipping cost, are adjusted EBITDA increase substantially. These results underscore the strong demand for our marketplace and the disability to streamline the efficiency of the wholesale global supply chain.
Larry: Thank you operator and welcome everyone to today's call. This quarter markets a significant milestone for our company as we achieve the record revenue growth for the sixth consecutive quarter.
Speaker Change: Additionally, despite the industry-wide challenge including 7% year-over-year decline in retail furniture sales in the first half of the 20.4 in the United States
Speaker Change: and the elevated ocean shipping cost, our adjusted EBITDA increased substantially.
Speaker Change: These results underscore the strong demand for our marketplace and its ability to streamline the efficiency of the wholesale global supply chain.
Larry Wu: And while we connect the buyer and sellers of a large non-standard item seamlessly around the globe, our acquisition of the Noble House and the Wondersign and the launch of our first industry first, the BAS, or Branding the Service, are already contributing to our success. In the second quarter, we successfully introduced Noble House related SKUs to our marketplace, which contributed approximately $57 million in GMV.
Speaker Change: and why we connect the buyers and sellers of large non-standard items seamlessly around the globe.
Speaker Change: Our acquisition of Noble House and WonderSign, and the launch of our first industry-first baths, or
Speaker Change: Branding the Surveys.
Speaker Change: are already contributing to our success. In the second quarter, we successfully introduced Novahouse-related SKUs to our marketplace with the contributed.
Speaker Change: Approximately 57 million dollars in GMV.
Larry Wu: The first half of this year has been extremely productive, and the way our thriving continue the progress sustainable and the profitable growth as a leader and the destructor of the BE commerce technology solution.
Speaker Change: The first half of this year has been extremely productive and we are driving continued progress, sustainable and profitable growth as a leader and disruptor of the e-commerce technology solution.
Larry Wu: We were honored to be added to the Russell 2000 Index through their recent reconstitution.
Speaker Change: We were honored to be added to the Russell 2000 Index.
Iman Schrock: Now I will turn the call over to the amount to provide more color and our operational highlights. Thanks, Larry. I'd like to add my welcome to those joining us today. We are happy to share that for the first time in our history, our Giga Cloud marketplace GMV reached and surpassed $1 billion in the 12 months and the June 30. Let's dig into that. For the trailing 12 months as of June 30, Giga Cloud Marketplace GMV increased by over 80%, eclipsing our first quarter growth by approximately 17 percentage points. This momentum was driven by a remarkable increase in our buyer and seller base.
Speaker Change: through their recent reconstitution.
Speaker Change: Now I will turn the call over to Iman to provide more color and our operational highlights.
Iman: Thanks Larry. I'd like to add my welcome to those joining us today. We are happy to share that for the first time in our history, our Gigacloud Marketplace GMV reached and surpassed 1 billion dollars in the 12 months ended June 30th. Let's dig into that.
Larry Wu: Let's dig into that. For the trailing 12 months as of June 30, Gigacloud Marketplace GMV increased by over 80%, eclipsing our first quarter growth by approximately 17 percentage points. We welcomed 265 new sellers and 2906 new buyers on a net basis, expanding our 3p seller community by nearly 40% to a total of 930 and our buyer base by a record-breaking 67% year over year to 7257 at the end of the second quarter.
Speaker Change: For the trailing 12 months as of June 30, Gigacloud Marketplace GMB increased by over 80%, eclipsing our first quarter growth by approximately 17 percentage points.
Speaker Change: This momentum was driven by a remarkable increase in our buyer and seller base.
Iman Schrock: We welcomed 265 new sellers and 2,906 new buyers on a net basis, expanding our 3P seller community by nearly 40% to a total of 930 and our buyer base by a record breaking 67% year over year to 7,257 at the end of the second quarter. Furthermore, average buyer spending climbed 8.3% to more than $150,000, demonstrating the increasing engagement of our marketplace participants and the additional value our platform provides. By all metrics, our marketplaces thriving, and we see many opportunities to continue this trajectory. Our average buyer spend as a whole decreased slightly over compared to Q1 due to the uptick in recent growth, as we have observed a significant influx of over 900 buyers to our marketplace in the last quarter, whom we typically expect to start at lower initial trading volume.
Speaker Change: We welcome 265 new sellers and 2,906 new buyers on a net basis, expanding our 3P seller community by nearly 40% to a total of 930.
Speaker Change: and our buyer base by a record-breaking 67% year-over-year to $7,257 at the end of the second quarter.
Larry Wu: Furthermore, average buyer spending climbed 8.3% to more than $151,000, demonstrating the increasing engagement of our marketplace participants and the additional value our platform provides. However, our average buyer spend as a whole decreased slightly compared to Q1 due to the uptick in recent growth, as we have observed a significant influx of over 900 buyers to our marketplace in the last quarter, whom we typically expect to start at lower initial trading volume.
Speaker Change: Furthermore, average buyer spending climbed 8.3% to more than $151,000, demonstrating the increasing engagement of our marketplace participants and the additional value our platform provides.
Speaker Change: By all metrics, our marketplace is thriving, and we see many opportunities to continue this trajectory.
Speaker Change: Our average
Speaker Change: Buyer spend as a whole decreased slightly over compared to Q1 due to the uptick in recent growth as we have observed a significant influx of over 900 buyers to our marketplace in the last quarter whom we typically expect to start at lower initial trading volume.
Iman Schrock: Average spend per buyer for participants that join us prior to Q2 have continued to increase on a sequential basis. GMV and our 3P marketplace grew 76% from a year ago and totaled approximately $572 million for the trading 12 months and the June 30, 2024. Three-piece sellers accounted for 52.1% of our total marketplace GMV for the same period. Combined with our one-piece strategy, we have the pieces in place to continue growing the Giga Cloud marketplace while further improving efficiency and value for all participants. As I mentioned last quarter, our growth resulted from Giga Cloud's highly robust technology suite that transforms and facilitates the way suppliers and retailers of large parcel and non-standard items connect and transact.
Larry Wu: Average spend per buyer for participants that joined us prior to Q2 continued to increase on a sequential basis. GMV and our 3P marketplace grew 76% from a year ago and totaled approximately $572 million for the trailing 12 months ended June 30, 2024. 3P sellers accounted for 52.1% of our total marketplace GMV for the same period.
Speaker Change: Average spend per buyer for participants that joined us prior to Q2 have continued to increase on a sequential basis.
Speaker Change: GMV in our 3P marketplace grew 76% from a year ago and totaled approximately $572 million for the trailing 12 months ended June 30, 2024.
Speaker Change: Three-piece sellers accounted for 52.1% of our total marketplace GMV for the same period. Combined with our one-piece strategy, we have the pieces in place to continue growing the Gigacloud marketplace while further improving efficiency and value for all participants.
Larry Wu: As I mentioned last quarter, our growth resulted from Gigacloud's highly robust technology suite that transforms and facilitates the way suppliers and retailers of large parcel and non-standard items connect and transact. Now, I'd like to give you a progress update on our BAS offering, which was officially launched in the second quarter with our ecosystem brand Christopher Knight Home. We built this unique solution to provide furniture suppliers with a streamlined and efficient way to build their brands, which has been a longstanding challenge throughout the industry.
Speaker Change: As I mentioned last quarter, our growth resulted from GigaCloud's highly robust technology suite that transforms and facilitates the way suppliers and retailers of large parcel and non-standard items connect and transact.
Iman Schrock: Now I'd like to give you a progress update on our bass off-rank, which was officially launched in the second quarter with our ecosystem brand Christopher Knight Home. We built this unique solution to provide furniture suppliers with a streamlined and efficient way to build their brands, which has been a longstanding challenge throughout the industry. We have observed significant enthusiasm and interest in our bass program since we announced it. We have successfully launched the initial pilot phase with a carefully selected group of eight marketplace sellers. The overall level of additional strong interest from both existing and new sellers has far exceeded our expectations.
Speaker Change: Now I'd like to give you a progress update on our BaaS offering which was officially launched in the second quarter with our ecosystem brand Christopher Knight Home.
Speaker Change: We built this unique solution to provide furniture suppliers with a streamlined and efficient way to build their brands, which has been a long-standing challenge throughout the industry.
Larry Wu: We have observed significant enthusiasm and interest in our BaaS program since we announced it, and we have successfully launched the initial pilot phase with a carefully selected group of eight Marketplace sellers. The overall level of additional strong interest from both existing and new sellers has far exceeded our expectations. This early momentum reinforces our belief that BaaS will be a powerful tool in strengthening and expanding our service offerings, empowering marketplace participants with a diverse toolbox to drive growth and success.
Speaker Change: We have observed significant enthusiasm and interest in our BASC program since we announced it.
Speaker Change: We have successfully launched the initial pilot phase with a carefully selected group of aid marketplace sellers.
Speaker Change: The overall level of additional strong interest from both existing and new sellers has far exceeded our expectations.
Iman Schrock: This early momentum reinforces our belief that bass will be a powerful tool in strengthening and expanding our service offerings and power marketplace participants with a diverse toolbox to drive growth and success.
Speaker Change: This early momentum reinforces our belief that BaaS will be a powerful tool in strengthening and expanding our service offerings, empowering Marketplace participants with a diverse toolbox to drive growth and success.
Iman Schrock: Last quarter, we discussed addressing accelerating demand through the expansion of our fulfillment to footprint. Our global fulfillment network has 42 prime locations in five countries, comprising of more than 10 million square feet of fulfillment space. We are driving efficiencies in transactions among marketplace participants and our established fulfillment centers across the U.S. are averaging over 90% utilization. and we are actively seeking additional space to accommodate continued rapid growth. Our integrations of Noble House unwondersign are moving forward nicely and as planned. In the second quarter, we introduced Noble House-related skews to our marketplace, which contributed to approximately $57 million a GMV in the three months ended June 30, 2024.
Larry Wu: Last quarter, we discussed addressing accelerating demand through the expansion of our fulfillment footprint. Our global fulfillment network has 42 prime locations in five countries, comprising more than 10 million square feet of fulfillment space. We are driving efficiencies and transactions among marketplace participants, and our established fulfillment centers across the U.S. are averaging over 90 percent utilization. Our integrations of Noblehouse and Wondersign are moving forward nicely and as planned. In the second quarter, we introduced Noblehouse-related SKUs to our marketplace, which contributed approximately $57 million of GMV in the three months ended June 30, 2024.
Speaker Change: Last quarter, we discussed addressing accelerating demand through the expansion of our fulfillment footprint.
Speaker Change: Our Global Fulfillment Network has 42 prime locations in five countries, comprising of more than 10 million square feet of fulfillment space. We are driving efficiencies in transactions among marketplace participants, and our established fulfillment centers across the U.S. are averaging over 90% utilization rate.
Speaker Change: And we are actively seeking additional space to accommodate continued rapid growth.
Speaker Change: Our integrations of Noble House and Wondersign are moving forward nicely and as planned.
Speaker Change: In the second quarter, we introduced Noble House-related SKUs to our marketplace, which contributed approximately $57 million of GMV in the three months ended June 30, 2024.
Larry Wu: Currently, only 5% of the SKUs are accessible to our external buyers, with the majority remaining with the original Noblehouse channels. As communicated previously, we expect to achieve breakeven with Noblehouse later this year, with anticipated profitability in the first half of 2025. We are extremely bullish on our marketplace and the opportunities ahead. Gigacloud disrupted the B2B online marketplace with a unique business model that connects buyers and sellers of large parcel merchandise to efficiently grow their own businesses in a cost-effective way. Now, I will turn the call over to David for a more detailed review of our financial results. David.
Iman Schrock: Currently, only 5% of the skews are accessible to our external buyers, with the majority remaining with the original Noble House channels. Moving forward, we plan on gradually opening up these skews to external participants. As communicated previously, we expect to achieve break even with Noble House later this year, with anticipated profitability in the first half of 2025. We are extremely bullish on our marketplace and the opportunities ahead. Gigacloud disrupted the B2B online marketplace with a unique business model that connects buyers and sellers of large parts of merchandise to efficiently grow their own businesses in a cost-effective way.
Speaker Change: Currently, only 5% of the SKUs are accessible to our external buyers, with the majority remaining with the original Noble House channels.
Speaker Change: Moving forward, we plan on gradually opening up these SKUs to external participants.
Speaker Change: As communicated previously, we expect to achieve break-even with Noble House later this year with anticipated profitability in the first half of 2025.
Speaker Change: We are extremely bullish on our marketplace and the opportunities ahead. Gigacloud disrupted the B2B online marketplace with a unique business model that connects buyers and sellers of large parts of merchandise to efficiently grow their own businesses in a cost-effective way.
David Lau: Now I will turn the call over to David for a more detailed review of our financial results. David, thanks, man. I'll now walk through our second quarter numbers in more detail.
Speaker Change: Now I will turn the call over to David for a more detailed review of our financial results, David
David Lau: Please note that all fingers quoted have been rounded. Our second quarter results demonstrate strong execution against our growth strategy. Total revenues more than double year over year to $311 million in Q2. An increase roughly of 24% on our sequential basis. This is the record result of our ongoing efforts to expand our marketplace product and service offerings and have our ability to capture growing market opportunities. Having deeper into the revenue specifically, service revenues from Gigacloud 3P grew more than 97% to 85 million. A direct reflection of enhanced engagement of our marketplace participants. Product revenues grew more than 105% to $225 million in Q2.
David: Thanks Iman. I'll now walk through our second quarter numbers in more detail. Please note that all figures quoted have been rounded.
David Lau: Our second quarter results demonstrate strong execution against our growth strategy. Total revenues more than doubled year over year to $311 million in Q2, an increase of roughly 24% on our sequential basis. Product revenues grew more than 105% to $225 million in Q2. We're pleased to report that our strategic investments from the previous year are yielding strong revenue returns.
David: Our second quarter results demonstrate strong execution against our growth strategy. Total revenues more than doubled year-over-year to $311 million in Q2, an increase roughly of 24% on a sequential basis.
David: This is a direct result of our ongoing efforts to expand our marketplace product and service offerings and of our ability to capture growing market opportunities.
David: Diving deeper into the revenue specifically, service revenues from Gigacloud 3P grew more than 97% to $85 million, a direct reflection of enhanced engagement of our Marketplace participants.
David: Product revenues grew more than a hundred and five percent to two hundred and twenty five million dollars in Q2. We're pleased to report that our strategic investments from the previous year are yielding strong revenue returns.
David Lau: We're pleased to report that our strategic investments from the previous year are yielding strong revenue returns. The impressive performance of the Noble House outdoor product line contributed significantly to our second quarter sales, highlighting the effectiveness of our growth strategy. Furthermore, our fastest growing European markets continue to lead the way in product sales growth, achieving 139% year-over-year growth. Cost of revenues were $234 million for the second quarter compared with $113 million, while the absolute amount increased as a reflection of the investment we've made to support the soaring demand of our marketplace. The percentage to total revenues of 75% remained relatively stable for the second quarter compared to last year, demonstrating our ability to manage cost effectively in this rapid growth and changing environment.
Speaker Change: The impressive performance of Noble House Outdoor product line contributed significantly to our second quarter sales, highlighting the effectiveness of our growth strategy. Furthermore, our fastest-growing European markets continue to lead the way in product sales growth, achieving 139% year-over-year growth.
David Lau: The cost of revenues was $234 million for the second quarter compared to $113 million. While the absolute amount increased as a reflection of the investment we've made to support the soaring demand of our marketplace, the percentage to total revenues of 75% remained relatively stable for the second quarter compared to last year, demonstrating our ability to manage costs effectively in this rapid growth and changing environment. Gross profit for the second quarter increased approximately 90% to $76 million. Gross margin percentage contracted slightly as we continue to build our fulfillment infrastructure with newly leased centers ramping up to full operational efficiency.
Speaker Change: Cost of revenues were $234 million for the second quarter compared with $113 million.
Speaker Change: While the absolute amount increased as a reflection of the investment we've made to support the soaring demand of our marketplace, the percentage to total revenues of 75% remained relatively stable for the second quarter compared to last year, demonstrating our ability to manage costs effectively in this rapid growth and changing environment.
David Lau: Gross profit for the second quarter increased approximately 90% to $76 million. Gross margin percentage contracted slightly as we continued to build our fulfillment infrastructure with nearly least centers ramping up to full operational efficiencies. Additionally, increased delivery costs and temporary industry trade rates spiked in late April and May. However, we observed a moderation in rates during July and remained vigilant in monitoring this dynamic.
Speaker Change: Gross profit for the second quarter increased approximately 90% to $76 million. Gross margin percentage contracted slightly as we continued to build our fulfillment infrastructure with newly leased centers ramping up to full operational efficiencies.
Speaker Change: Additionally, increased delivery costs and temporary industry-wide ocean freight rates spiked in late April and May. However, we observed a moderation in rates during July and remain vigilant in monitoring this dynamic.
David Lau: Total operating expenses amounted $49 million for the second quarter compared with $17 million. Such expenses are associated with our ongoing infrastructure development required to meet growing demand of our B2B platform. Bricking this down further, selling and marketing expenses were at $19 million, compared with $10 million for being mainly by higher staffing-related costs, higher commissions, and advertising costs in higher platforms to service fees paid to certain third-party e-commerce websites. General and admin expenses totaled $26 million compared with $7 million last year. This increased primarily with due to the concentrated granting investing of our share-based awards, higher staffing costs, including R&D efforts to accommodate expansion of our business, higher professional service fees and increase in rental expense related to fulfillment centers, and also the set of expense required to bring our new fulfillment centers fully operational.
Speaker Change: Total operating expenses amount to $49 million for the second quarter compared with $17 million. Such expenses are associated with our ongoing infrastructure development required to meet growing demand of our B2B platform.
Speaker Change: Pricking this down further, selling and marketing expenses were $19 million compared with $10 million driven mainly by higher staffing related costs, higher commissions and advertising costs and higher platform service fees paid to certain third-party e-commerce websites.
Operator: General and admin expenses total $26 million compared with $7 million last year. This increase primarily was due to the concentrated granting investing of our share based awards, higher staffing costs, including R&D efforts to accommodate the expansion of our business, higher professional service fees, an increase in rental expense related to fulfillment centers, and also the set of expenses required to bring our new fulfillment centers fully operational. A major component of our G&A expense is related to our people-centric approach.
Speaker Change: General and admin expenses totaled 26 million dollars compared with seven million dollars last year. This increase primarily was due to the concentrated granting investing of our share base awards.
Speaker Change: Higher staffing costs including R&D efforts to accommodate expansion of our business. Higher professional service fees and increase in rental expense related to fulfillment centers. And also the set of expense required to bring our new fulfillment centers fully operational.
David Lau: Major component of our G&A expenses related to our people-centric approach; we believe our employees are our greatest asset, and we strategically invest in their development and growth. To attract, retain and incentivize top talents, our compensation programs include share-based awards, which have traditionally been granted in the second quarter of each fiscal year, with the majority of granting investing immediately in the same quarter upon grant. Share-based awards expense total, $13.9 million compared to $1.5 million last year as a company share-pricing increase significantly year-over-year. The impact of these strategic investments and the industry-wide ocean shipping costs is reflected in our net income margin.
Operator: We believe our employees are our greatest asset, and we strategically invest in their development and growth. To attract, retain, and incentivize top talent, our compensation programs include share-based awards, which have traditionally been granted in the second quarter of each fiscal year, with the majority of grants investing immediately in the same quarter upon grant. Share-based awards expense total $13.9 million compared to $1.5 million last year as the company's share price increased significantly year over year.
Speaker Change: A major component of our G&A expense is related to our people-centric approach. We believe our employees are our greatest asset, and we strategically invest in their development and growth.
Speaker Change: To attract, retain, and incentivize top talents, our compensation programs include share-based awards, which have traditionally been granted in the second quarter of each fiscal year with the majority of granting investing immediately in the same quarter upon grant.
Speaker Change: Share base awards expense total 13.9 million dollars compared to 1.5 million dollars last year as a company share price increased significantly year over year.
Speaker Change: The impact of these strategic investments and the industry-wide ocean shipping costs is reflected in our net income margin.
David Lau: We remain confident in our ability to deliver sustained profitability, as our financial performance remains strong across key metrics. Our net income grew nearly 47% to $27 million; adjusted EBITDA demonstrated robust growth, increasing approximately 72% to $43 million in the second quarter. Adjusted EBS for the quarter increased 69% to $1.3. We're strong in our cash positions and continue to generate positive cash flows with our effective cash managed strategy. At the end of June, our cash, cash equivalents, restricted cash, and investments position was $209 million. We have strategically allocated $10 million in CapEx during the second quarter, which primarily relates to facility preparation to enhance our global fulfillment capabilities.
Speaker Change: We remain confident in our ability to deliver sustained profitability as our financial performance remains strong across key metrics.
Speaker Change: Our net income grew nearly 47% to $27 million. Adjusted EBITDA demonstrated robust growth, increasing approximately 72% to $43 million in the second quarter. Adjusted EBS for the quarter increased 69% to $1.03.
Operator: We're strong in our cash positions and continue to generate strong positive cash flows with our effective cash management strategy. At the end of June, our cash equivalents, restricted cash, and investments position was $209 million. We have strategically allocated $10 million in CapEx during the second quarter, which primarily relates to facility preparation to enhance our global fulfillment capability. We remain debt-free with no outstanding borrowings, and the liabilities on our balance sheet are primarily related to our fulfillment center leases, which have increased considerably to support our substantial growth.
Speaker Change: We are strong in our cash positions and continue to generate strong positive cash flows with our effective cash managed strategy.
Speaker Change: At the end of June , our cash equivalents, restricted cash, and investments position was $209 million. We have strategically allocated $10 million in CAPEX during the second quarter, which primarily relates to facility preparation to enhance our global fulfillment capabilities.
David Lau: We remain debt-free with no outstanding borrowings, and the liabilities on our balance sheet are primarily related to our fulfillment center leases, which have increased considerably to support our substantial growth.
Speaker Change: We remain debt-free with no outstanding borrowings and the liabilities on our balance sheet primarily related to our fulfillment center leases which have increased considerably to support our substantial growth.
David Lau: I'll wrap things up with our outlook for the third quarter, where we anticipate revenues will be in the range of $266 million to $282 million.
Speaker Change: I'll wrap things up with our outlook for the third quarter, where we anticipate revenues will be in the range of $266 million to $282 million. Thank you all for joining us today, Operator. We're ready for questions. Thank you.
Unknown Executive: Thank you all for joining us today, Operator. We're ready for questions. Thank you.
Operator: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your questions. The first question comes from Ryan Myers from Lake Street Capital Markets. Please go ahead.
Unknown Executive: If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question.
Speaker Change: Thank you. If you wish to ask a question please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request please press star 2.
Ryan Meyers: The first question comes from Ryan Mayas from Lake Street Capital Markets. Please go ahead. Thank you for taking my question. First one for me, I just kind of want to unpack the second quarter revenue number. Obviously, you guys came in well ahead of your expectations. Maybe just kind of walk us through, provide a little bit more detail on what you saw during the quarter where ultimately you were able to report numbers that were a bit better than what you originally expected. Yeah, absolutely.
Speaker Change: If you're on a speakerphone, please pick up the handset to ask your question.
Speaker Change: Your first question comes from Ryan Myers from Lake Street Capital Markets. Please go ahead.
Ryan Myers: Hey guys, thank you for taking my question. First one for me, I just kind of want to unpack the second quarter revenue number. Obviously, you guys came in well ahead of your expectations. Maybe just kind of walk us through, provide a little bit more detail on what you saw during the quarter, where you were able to report numbers that were a bit better than what you originally expected.
Larry Wu: Yeah, absolutely. Perhaps I'll take a stab, and others, please feel free to chime in.
Ryan Myers: Hey guys, thank you for taking my question. First one for me, I just kind of want to unpack the second quarter revenue number. Obviously you guys came in well ahead of your expectations. Maybe just kind of walk us through, provide a little bit more detail on what you saw during the quarter, where ultimately you were able to report numbers that were a bit better than what you originally expected.
Larry Wu: Like I said earlier, we're integrating the noble house business, and noble house is very strong in the outdoor section. And we are able to increase that portion into our entire SKU portfolio. And we mentioned earlier that noble house-related SKUs were added to the B2B marketplace. And that amounts to roughly 57 million in GMB. And that's really kind of what kind of blew out the quarter for us.
Unknown Executive: Perhaps I'll pick a stab, and others please feel free to chime in. Like I said earlier, we're integrating the Noble House business, and Noble House is very strong in the outdoor section, and we are able to increase that portion into our entire SKU portfolio. And we mentioned earlier that Noble House related SKUs were added into the B2B marketplace, and that amounts roughly 57 million in GMV, and that's really kind of blew out the quarter for us. Okay. Got it. That's helpful.
Speaker Change: Yeah, absolutely. Perhaps I'll take a stab and others please feel free to chime in.
Speaker Change: Like I said earlier, we're integrating the Noble House business and Noble House is very strong in the outdoor section. And we are able to increase that portion into our entire SKU portfolio.
Speaker Change: And we mentioned earlier that noble house related SKUs were added into the B2B marketplace and that amounts to roughly $57 million in GMB. And that's really kind of what kind of blew out the quarter for us.
Unknown Executive: And then kind of thinking about that as well as we think about the third-quarter guidance. I mean, what would you need to maybe see the coming up high end of that range, or even better than that initially guided range? Is it more noblehouse integration, or is it just an improvement in the overall kind of GMB across the business? Just kind of help me think about that. Yeah, I guess it's all the above. I think when we were projecting how Q3 is going to look like for us, we incorporate what we think Noblehouse is going to contribute to the quarter.
Speaker Change: Okay, got it. That's helpful. And then kind of thinking about that as well as we think about the third quarter guidance I mean, what you know What would you need to maybe see to come in at the high end of that range or even better than that initially guided range? Is it more noble house integration or is it just an improvement in the overall kind of GMB across the business? Just kind of help me think about that
Speaker Change: Yeah, I guess it's all of the above. I think when we were projecting how Q3 is going to look like for us,
Speaker Change: We incorporate what we...
Unknown Executive: And obviously, the evolution and the growth and the expansion of the B2B, the organic marketplace. So I guess it's both organic and organic growth that we put into consideration when we projected our Q3 outlook. Okay. Got it.
Speaker Change: I think Nopal Howe is going to contribute to the quarter.
Speaker Change: and obviously the evolution and the growth and the expansion of the B2B, the organic marketplace.
Speaker Change: So, I guess it's both organic and inorganic growth that we put into consideration when we projected our Q3 outlook.
Unknown Executive: And then, last question for me: I know freight rates have been a drag on the gross margins. Just kind of walk us through maybe how we should be thinking about gross margins for Q3 and Q4, and freight rates are probably changing for you guys. Yeah, I think if you look at the current freight rate, you'll see that it's actually gradually normalizing. It's still on the higher end. And we had a fixed rate contract that we mentioned in our last earnings call that is already in place and in execution. So I think there will be some compression to margin overall, but we don't expect that to be significant in magnitude.
Speaker Change: Okay got it and then last question for me I know you know freight rates have been a drag on the gross margins just kind of walk us through maybe how we should be thinking about gross margins for Q3 and Q4 as freight rates are probably changing for you guys.
Unknown Speaker: Unknown Speaker Yeah, I think if you look at the current freight rate, you'll see that it's actually gradually normalizing. It's still on the higher end. And we had a fixed rate contract that we mentioned in our last earnings call that is already in place and in execution. So I think there will be some
Speaker Change: Yeah, I think
Speaker Change: Well, I think if you look at the current freight rate, you'll see that it's actually gradually um...
Speaker Change: normalizing. It's still on the higher end. And we had a fixed rate contract that we mentioned in our last earnings call, that is already in place and in execution. So I think there will be some
Speaker Change: compression to margin overall, but we don't expect that to be significant in magnitude.
Unknown Executive: Okay. Got it.
Unknown Executive: Thank you for taking my question. Absolutely. Thank you.
Speaker Change: Okay, got it. Thank you for taking my questions.
Unknown Executive: Once again, if you wish to ask a question, please press star one on your telephone.
Speaker Change: Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone. Your next question comes from Matt Koranda from Roth Capital. Please go ahead.
Operator: Your next question comes from Matt Koranda from Roth Capital. Please go ahead.
Matthew Koranda: Your next question comes from Matt Caranda from Ross Capital. Please go ahead. I guess some noblehouse, you mentioned, I guess 5% of the SKUs available to buyers in the marketplace, and that's generating already I guess 57 million in GMB.
Unknown Speaker: Unknown Speaker I guess, some noble house. You mentioned, I guess, 5% of the SKUs available to buyers in the marketplace, and that's already generating, I guess, 57 million in GMB. So how long until we see 100% of the SKUs available on the marketplace? And then, you know, should we assume our, sort of, a rateable revenue improvement once we make all of those SKUs available to the marketplace?
Matt Koranda: Some noble house, you mentioned, I guess, 5% of the SKUs available to buyers on the marketplace, and that's generating
Unknown Executive: So how long until we see 100% of the SKUs available on the marketplace? And then should we assume sort of a rateable revenue improvement once you make all of the SKUs available to the marketplace?
Matt Koranda: Already, I guess, 57 million in GMB. So how long until we see 100% of the SKUs available on the marketplace?
Speaker Change: And then, you know, should we assume sort of a rateable revenue improvement once you make all of those SKUs available to the marketplace?
Unknown Executive: You want to take that one? Sure.
Unknown Executive: Hi, Matt. So, with Noblehouse, the intention is to preserve the existing sales channel as of right now. So we're slowly and gradually utilizing the marketplace to open up the SKUs in a calculated way to the marketplace participants. And we have ongoing plans to do this on a regular basis. And you should see like, you know, more of the top line kind of slowly, you know, contribute in that sense. Okay. Maybe I think the idea we're having is we're trying to balance utilizing the marketplace to help Noblehouse product to, you know, to generate incremental growth in their sales.
Speaker Change: Iman, you want to take that one?
Iman: Sure. Hi, Matt.
Iman: So with Notebook House, the intention is to preserve the existing sales channel, as of right now. So we're slowly and gradually utilizing the marketplace to open up.
Iman: the SKUs and a calculated way to the marketplace participants. And we have ongoing plans to do this on a regular basis. And you should see more of the top line kind of slowly, you know, contribute in that sense.
Unknown Executive: Okay.
Unknown Executive: Yeah, maybe I'll chime in Larry. I think the idea we're having is we're trying to balance, utilizing the marketplace to help Nobel House product to, you know, you know, to generate, you know, incremental growth in their sales. But at the same time, we're also trying to prioritize our relationship with, you know, the major B2B channels that the Nobel House used to have a strong relationship with. So the idea is, I think probably we're going to make 20-30% of the Nobel House products available on the marketplace, but we're trying to keep the majority of them with the major B2C partners we have.
Iman: End.
Iman: Okay.
Speaker Change: Yeah, maybe I assume in that area. I think the idea we're having is that we're trying to balancing
Unknown Executive: But at the same time, we're also trying to prioritize our relationship with the major B2B channels that the Noblehouse used to have both strong relationship with. So the idea is I think probably we're going to make 20, 30% of the Noblehouse products be available on the marketplace. But we're trying to keep the majority of them with the major B2C partners we're having.
Speaker Change: At the same time, we are also trying to...
Speaker Change: prioritize our relationship with you know the major B2B channels that the Nobel House used to have a strong relationship with. So the idea is I think probably we're going to
Speaker Change: make 20-30% of the Nobel Hauser products be available on the marketplace, but we're trying to keep the majority of them with the major, you know, B2C partners we're having.
Larry Wu: Okay, all right, that's awful. Thanks, Larry. And then just, I guess inventory is building a little bit more quarter of a quarter, and just wanted to hear sort of the drivers there. I would assume you're bringing in additional views from Noble House, but maybe just talk about what you're doing on the inventory front with Noble House and the core business. Yeah, this is Larry. I will take this one. I think the, we understand, although the turn of the Noble House product is usually because it's a little bit slower than the big product, but we still placed a pretty sizable order to the whole supply chain of the Noble House, because we understand just because the bankruptcy, our vendors need those kind of a funding, and also the same time that we also try to provide the confidence to our channel partners, but we will gradually try to improve the turn of the Noble House product, try to get those to turn efficiency to be close to our traditional giga products as closely as possible.
Speaker Change: Okay, all right. That's helpful. Thanks, Larry. And then just, I guess inventory is building a little bit more.
Speaker Change: Quarter of a quarter and just wanted to hear sort of the drivers there. I would assume you're bringing in additional SKUs From Noble House, but maybe just talk about what you're doing on the inventory front with Noble House and the core business
Speaker Change: Yeah, this is Larry. I will take this one. I think the
Speaker Change: We understand although the turn of the noble house of product usually because it's a little bit slower than the bigger product, but we still placed.
Speaker Change: Pretty sizable order to the whole supply chain of the noble house because you know we
Speaker Change: understand just because the bankruptcy our vendors need those kind of a funding and also the same time that we also try to provide the confidence to our you know channel partners
Speaker Change: But, you know, we will gradually try to improve the turn of the know-hows of the product, you know, product, try to get those to turn, you know, efficiency to be close to our traditional Giga products as
Larry Wu: The other reason is on, usually when the ocean shipping price goes up, because of the cost we're paying for the ocean product, although the quantity of the products keep the same, that you're really because of the increase of the ocean shipping, the dollar value could increase for that reason. That also happened for the last time when the ocean shipping cost went up. You can check our historical data to get the idea of that mechanism.
Speaker Change: know closely as possible. The other reason is on yearly when the ocean shipping price goes up in because of the
Speaker Change: The cost we're paying for an ocean product, although the quantity of the products keep the same, but really because of the increase of ocean shipping, the dollar value could, you know, increase.
Speaker Change: for that reason. That also happened for the last time when the ocean shipping cost went up. You can check our historical data to get the idea of that mechanism.
Unknown Executive: On the outlook, I guess, maybe I'll ask it this way. One, why the sequential revenue decline in the third quarter relative to the second? I guess that breaks the trend that you guys have been on, the nice trend over the last couple of years, so maybe just speak to sort of why we see that declining sequentially. And then also, maybe if you could, I'd love to hear you just break out service versus product expectations, just because product does seem to be becoming a little bit more important with Noble House, and you guys generating more revenue both on and all platform from Noble House.
Speaker Change: Okay, all right, got it. On the Outlook, I guess maybe I'll ask it this way.
Speaker Change: One, why the sequential revenue decline in the third quarter relative to the second? I guess that breaks the trend that you guys have been on, the nice trend over the last couple of years. So maybe just speak to sort of why we.
Speaker Change: why we see that declining sequentially.
Speaker Change: I'd love to hear you just break out service versus product expectations just because product does seem to be becoming a little bit more important with Noblehouse and you guys generating more revenue both on and off platform from Noblehouse.
Unknown Executive: I think the first thing is I need to point out, you know, Noble House business has a strong seedinality because they're strong with outdoor furniture, so the contribution for Q2 is a very significant from their legacy business, but the definitely for that part is, you know, where we're seeing the Q3 sales number won't be as strong as Q2 for the Noble House product. At the same time, I think, you know, everybody understand that the whole industry have been experiencing very strong, have been so quite, you know, a while in the past. I think more than one year, so for the furniture industry as a whole, we're very cautious about, you know, managing our growth, you know, and also the resources that we're putting in. So that is the reason you're seeing the sequential, you know, gross, you know, where we're providing.
Speaker Change: So the contribution for Q2 is very significant from their legacy business. But definitely for that part is...
Speaker Change: You know where we're seeing the Q3 sales number won't be as strong as Q2 for the noble house product.
Unknown Executive: more than one year. So for the furniture industry as a whole, we're very, you know, cautious about, you know, managing our growth, you know, and also the resources that we're putting in so that the reason you're seeing the sequential growth, you know, of what we're providing.
Speaker Change: More than one year. So for the furniture industry as a whole, that we're very, you know, cautious about, you know, managing our growth, you know, and also the resources that we're putting in so that that is
Speaker Change: The reason you're seeing the sequential, you know, growth, you know, what we're providing.
Unknown Executive: Okay, got it. Maybe last one really quickly, just if you could touch on the margin trajectory into the third quarter, maybe what the outlook may imply in their. David, earlier you mentioned. You don't expect as much of an impact from the recent ocean freight increase. Maybe can you just put a finer point on why not this, you know, why, why, why things are a little bit different this time around. Yeah, Matt, as I mentioned, we have a fixed rate contract that we signed with various shipping companies, which we never had. I guess two years ago when we saw ocean shipping rates surge, so this time we're different, we're hedge, we're protected.
Unknown Executive: Okay, got it. Maybe last one really quickly, just, um, if you could touch on the margin trajectory into the third quarter, maybe what the outlook may imply. I know, David, earlier you mentioned that you don't expect as much of an impact from the recent ocean freight increase. Uh, maybe, can you just put a finer point on why not this, you know, why, why, why things are a little bit different this time around
Speaker Change: Okay, got it. Maybe last one really quickly, just, um...
Speaker Change: If you could touch on...
Speaker Change: the margin trajectory into the third quarter, maybe what the outlook may imply. I know, David, earlier you mentioned you don't expect as much of an impact from the recent ocean freight increase.
David Lau: Yeah, Matt. As I mentioned, we have a fixed rate contract that we signed with various shipping companies, which we never had, I guess, two years ago when we saw ocean shipping rates surge. So this time, we're different, we're hedged, we're protected. Obviously, we're not hedged 100% of the volume. But because we have some of these fixed rate contracts, we're better protected against any further surge in ocean shipping rates
Speaker Change: Yeah, Matt, as I mentioned, we have a fixed rate contract that we sign with various shipping companies.
Speaker Change: Which we never had
Matt: I guess two years ago when we saw ocean shipping rates surge.
Unknown Executive: Obviously, we're not hedge 100% of the volume, but because we have some of these fixed rate contracts, we're better protected on any further surge in ocean shipping rates. And how far any any characterization of how far our hedge. I would assume these are annual sort of contracts, so maybe it works out through this year, but may. Any any company and broad folks around sort of timing duration of that hedge. I'm not sure if I could disclose too much. I mean, obviously, these are pretty sensitive contracts. But what I can say is we have a pretty sizable of our volume being hedged using these fixed price contracts.
Speaker Change: I'm not sure if I could disclose too much. I mean, obviously, these are pretty sensitive contracts.
David Lau: But what I can say is that a pretty sizable amount of our volume is being hedged using these fixed price contracts.
Speaker Change: but what I can say is we have a pretty good experience using these fixed price contracts.
Unknown Executive: Yeah, I think you know, several things were that, you know, have, you know, happened just because of the hatching mechanism. One is obviously that there's a good chance that we can see that the ocean shipping, you know, revenue that the margin, there's a chance that we can see improvement, because of the difference of spot rates and contract rates is getting wider. So it's the same time that for our, you know, one key business, the cost is, you know, kind of what be negatively impacted, you know, for the one key cost. But at the same time, we will try to, you know, introduce new product and try to get the opportunity to, you know, do the pricing based on, you know, the updated or new ocean shipping cost. That’s the few things that will happen the same time.
Unknown Executive: Okay, got it. Yeah, I think, you know, several things were that, you know, have, you know, happens because of the hedging mechanism. One is obviously that there's a good chance that we can see that the ocean shipping, you know, revenue, the margin, there's a chance that we can see improvement because of the difference of spot rates and contract rates is getting wider. So, but it's the same time that for our, you know, 1P businesses, the cost is, you know, kind of will be negatively impacted, you know, for the 1P cost, but at the same time, we will try to, you know, introduce new product and try to get the opportunity to, you know, do the pricing based on, you know, the updated or new ocean shipping cost that that's the
Speaker Change: Okay, got it. Yeah, I think, you know, several things were that, you know, have, you know, what happens is because of the hedging mechanism. One is, obviously, that there's a good chance that we can see that the ocean.
Speaker Change: shipping, you know, revenue, the margin, there's a chance that we can see improvements because of the difference of, you know, spot rate and contract rate is getting
Speaker Change: introduce new product and try to get the opportunity to, you know, do the pricing based on, you know, the updated or new ocean shipping costs that that's the
Unknown Executive: So a little bit kind of, you know, complicated situation, but you try to sum up everything that we see, you know, probably moderate and kind of pressure of the margin. But because the, the, the, the, the, the, the, the, the, the, the pricing, repricing opportunity and the different direction that the, the, the one p and three p business margin will, you know, go, I, I think, you know, that's a reason that the David.
Speaker Change: the fielded things that will happen at the same time. So a little bit kind of, you know, complicated situation, but you try to sum up everything that we see, you know, probably moderate and kind of, you know, pressure of the margin.
Speaker Change: But because the hashing mechanism and the pricing, repricing opportunity, and different direction that the 1P and 3P business margin will, you know, go, I think, you know, that's a reason that they've been
Speaker Change: expect, you know, that the change won't be as crazy as we saw in the last time that the ocean shipping rate went up.
Eric: Okay, helpful Eric, thank you.
Unknown Executive: Thank you once again. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced.
Operator: Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced.
Speaker Change: Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced.
Thomas Forte: Your next question comes from Thomas Forte from Maxim Group. Please go ahead. Great, thanks. So congrats, Larry and Steve, on the quarter. I have three questions. I'll go one at a time. For my first question, I wanted to ask the one I get asked most often by investors. What is enabling you to outperform the category by such a large margin? Your sales growth in the second quarter is more than 100%, and the home category is down more than 10%. And then what gives you confidence, you can continue to take market share in the future.
Speaker Change: Your next question comes from Thomas Forte from Maxim Group. Please go ahead.
Unknown Attendee: Great, thanks. So congrats, Larry and Sian on the quarter. I have three questions. I'll go one at a time.
Thomas Forte: Great, thanks. So, congrats, Larry and team, on the quarter. I have three questions. I'll go one at a time.
Unknown Attendee: For my first question, I wanted to ask the one I get asked most often by investors. What is enabling you to outperform the category by such a large margin? Your sales growth in the second quarter was more than 100%, and the home category was down more than 10%. And then what gives you confidence you can continue to gain market share in the future?
Thomas Forte: For my first question, I wanted to ask the one I get asked most often by investors. What is enabling you to outperform the category by such a large margin? Your sales growth in the second quarter is more than 100%, and the home category was down more than 10%.
Speaker Change: And then what gives you confidence you can continue to take market share in the future?
Larry Wu: I think the key reason is we're introducing a new business model that obviously proved us to be a one that's providing better efficiency and supply chain. I think that's the key reason that we don't do business in the way that most of the business companies are doing it. I think that's the most fundamental reason, but obviously that you see those kind of a difference in the efficiency from company to company. So, you know, the quality of the management also, you know, a contributor to those of difference. I think, you know, the major one is a business model.
Larry Wu: I think the key reason is that we're introducing a new business model that, obviously, it's, you know, proved to be one that's providing better efficiency in the supply chain. I think that's the key reason that we don't do business in the way that, you know, most businesses, companies are doing it. I think that's the most fundamental reason. But obviously, you see that kind of difference in efficiency from company to company.
Speaker Change: I think the key reason is we're introducing a new business model that obviously, you know, it's a, you know,
Speaker Change: are proven to be a one that's providing better efficiency and the supply chain. I think that's the key reason that we don't do business in.
Speaker Change: The way that, you know, most of the companies
Speaker Change: doing it. I think I think that's the most fundamental reason but obviously that the you
Speaker Change: see those kind of a difference in the efficiency from company to company. So, you know, the quality of management also.
Larry Wu: So, you know, the quality of management is also, you know, a contributor to those. I think the major one is the business model. The minor one would be, I think, the way we'll manage the company.
Speaker Change: I think the major one is a business model. The minor one would be, I think, the way we manage the company, I would say that.
Unknown Executive: The minor one would be, I think, that the way we manage the company, I would say that. Thanks very much.
Unknown Attendee: Thanks, Larry, for that. On my second question, you noticed gross margin pressure from new warehouse additions. Historically, how has optimization improved over time for new warehouses?
Unknown Executive: On my second question, you noticed gross margin pressure from new warehouse additions historically housing optimization approved over time for new warehouses.
Speaker Change: Thanks, Larry, for that. On my second question, you noticed gross margin pressure from new warehouse additions. Historically, how has optimization improved over time for new warehouses?
Unknown Executive: Maybe I can take a stab at this one. Typically, with the new least facility, the four becomes fully operational. It takes approximately four to six months for us, you know, as far as the racking and the whole process goes. And that includes like oldest, you know, shelving the forecast, the rental staffing, and there's a ramp up here in the four to six months, I would say. Excellent.
Speaker Change: Maybe I can take a stab at this one. Typically, with a new leased facility, before it becomes fully operational,
Speaker Change: It takes approximately four to six months for us, you know, as far as the racking and the whole process goes and that includes like all this, you know shelving, the forklifts, the rentals, staffing and there's a ramp-up period of four to six months, I would say.
Unknown Attendee: And then, for my third and final question, can you give your current thoughts on strategic M&A, both from the opportunity standpoint and your own strategy?
Larry Wu: And then from my third and final question, can you give your current thoughts on strategic MNA, both from the opportunities standpoint and your strategy? Yeah, this is Larry; maybe I take this one. I think, you know, we'll be focusing on looking for opportunity that either can help grow the volume in the ecosystem or to help us to, you know, expand the reach of our ecosystem. I think Nova House and Wonderson are two very good examples for that kind of idea. I think Nova House was the one that. to help us to, you know, bring in a lot of new SKU that we are not, we were not as strong with, especially outdoor.
Speaker Change: Excellent. And then for my third and final question, can you give your current thoughts on strategic M&A both from the opportunity standpoint and your strategy?
Speaker Change: Yeah, Larry, maybe I'll take this one. I think, you know, we'll be focusing on...
Larry: looking for opportunity that either can help grow the volume in the ecosystem
Speaker Change: or to help us to, you know, expand the reach of our ecosystem. I think Noble House and Wondersign are two very good examples for that kind of idea. I think Noble House was the one that
Speaker Change: help us to, you know, bring in a lot of new SKUs that we were not strong with, especially outdoor.
Larry Wu: And the wonder sign is, you know, a solution company that will help our, you know, customer, you know, to, you know, get a better reach that they didn't have to before. I think that's too, you know, a very good example that we had with our M&A strategy.
Speaker Change: And the wonder sign is...
Speaker Change: you know, a solution company that will help our, you know, customer, you know, to, you know, get a better reach that they didn't have to before. And I think that's two, you know, very good example that we had with our M&A strategy.
Unknown Executive: Great. Thank you, Larry. Thank you.
Larry: Great. Thank you, Larry.
Operator: Thank you. Your next question comes from Sean Liu from Panoramic Capital. Please go ahead.
Sean Liu: Your next question comes from Sean Liu from Panoramic Capital. Please go ahead. Hi, Larry. You mentioned an increase in stock-based awards earlier. Can you talk a bit more on this? Seems like it's concentrating too, but want to just want to make sure and start. And correctly, are we expecting the same awards in the fall in quarters? Usually, you know, in the majority of the stock-based compensation, what happened in Q2, because, you know, most of those stock compensation is, you know, highly kind of a performance-based. So when we have access to, you know, all the, you know, the data from the previous year, that we will, you know, reward those contributors in the team based on that, you know, performance data.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question comes from Sean Liu from Panoramic Capital. Please go ahead.
Sean Liu: Hi Larry, you mentioned an increase in stock-based awards earlier. Can you talk a bit more on this? Seems like it's concentrated in Q2, but want to just want to make sure I understand it correctly. Are we expecting the same awards in the following quarters?
Larry: I know usually, you know, the majority of the stock-based compensation will happen.
Speaker Change: In Q2, because, you know, most of those stuff in compensation is, you know, highly kind of a performance-based.
Speaker Change: So when we have access to, you know, all the, you know, the data from the previous year that we will, you know,
Speaker Change: reward those contributors in the team based on that, you know, performance data. That's the reason why that you're seeing majority of the stock base of concentration.
Larry Wu: That's the reason why that you're seeing majority of the stock base of concentration, a stock base of compensation that happened, you know, kind of a concentrate in Q2. So, as David explained that, I think that the increase is, you know, most of them were caused by the increase of the stock price. Although, you know, the shares, you know, awarded them didn't chant too much, but actually, you know, because of the stock price went up so much so that that's absolute number increase.
Speaker Change: A stock based conversation that happened, you know, kind of a concentrated in Q2. So, as...
Speaker Change: the increase of the stock price, although, you know, the shares, you know,
Larry Wu: And then another reason is, actually, I didn't, you know, pay myself, you know, stock stock in the previous year, because, you know, as a CEO, I just feel I should be responsible for the relatively, you know, not really kind of, you know, very exciting result for the, you know, the 2022 as a CEO. I think that I should, you know, take that for responsibility. So I didn't get any stock base of compensation for that year, but for 2023, I think we, you know, we delivered pretty impressive financial results. Also, I also, you know, got compensated for the performance of, you know, I did for 2023.
Unknown Speaker: are, you know, not really a kind of
Speaker Change: relatively, you know, not really kind of
Speaker Change: you know, very exciting result for the, you know, the 2022 as a CEO , I think I should, you know, take that risk of possibility. So I didn't get, you know, any
Speaker Change: stock-based conversation for that year, but for 2023,
Unknown Executive: I think these are the two major, you know, factors that, you know, to impact the stock base of compensation number. Thank you, Larry. Thank you.
Speaker Change: you know, you know, factors that, you know, to impact the stock based compensation number you're seeing.
Unknown Executive: There are no further questions at this time.
David Lau: I'll now head back to David for closing remarks. Great. Thank you all for your continued support. We're excited about our recent growth and future prospects, and we look forward to speaking to you again next quarter. If you have any questions, please feel free to reach out to the team. Thank you all. Thank you.
Speaker Change: Thank you. There are no further questions at this time. I'll now hand back to David for closing remarks.
Unknown Speaker: Great. Thank you all for your continued support. We're excited about our recent growth and future prospects, and we look forward to speaking with you again next quarter. If you have any questions, please feel free to reach out to the team.
Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Unknown Executive: That does conclude our conference for today. Thank you for participating.
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Unknown Executive: You may now disconnect.
Speaker Change: The Artefact of Hawthorne The Artefact of Hawthorne