Q3 2024 GigaCloud Technology Inc Earnings Call
Rfang Hsiao, Sze Chau K. Lau Ysimeng Chen Aria R. Da Nicholas Cuan Daniel Yun Chanyi
Speaker Change: Thank you all for standing by. Welcome to Giga Cloud Technologies third quarter 2024 earnings conference call. During today's call all participants will be in listen-only mode.
Speaker Change: Joining us today from Giga Cloud are the company's founder, chairman, and CEO Larry Wu, its president Dr. Iman Schrock, and its interim chief financial officer Erica Wei.
Speaker Change: Iman will provide an overview of our performance and operations, and Erica will discuss our financial results. After that, there will be a question and answer session.
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. Additionally, today's call will include non-GAAP measures.
within the meaning of SEC Regulation G.
Speaker Change: When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release, as well as on the company's website. With that, I would like to turn the call over to Larry for his opening remarks. Please go ahead, sir.
Larry Wu: Thank you, Operator, and welcome everyone to today's call. The third quarter built upon the very strong growth path we have followed since the launching of our B2B online marketplace.
Larry Wu: Despite the continued industry headwinds, we are successfully navigating these challenges.
Larry Wu: This is shown by the new record high in net income and adjusted EBITDA and the growing numbers of marketplace participants due to its unique ability to streamline operations and enhance efficiency for buyers and sellers of big, bulky, nonstandard items globally.
Larry Wu: Among other accomplishments, our acquisition of a noble house is on track to reach break-even by the end of this year. Additionally, we are enhancing our technology through WonderSign, expanding its capability to better serve the brick-and-mortar stores.
Larry Wu: We believe that GigaCloud's current evaluation doesn't fully capture the progress we have made or the exciting paths ahead.
Larry Wu: To demonstrate our confidence in the future, on September 3rd, 2024, our board authorized a $46 million share repurchase program.
Larry Wu: As of November 6, 2024, we have repurchased and aggregated approximately 467,000 Class A ordinary shares in the open market.
Larry Wu: at a total of a consideration of $11.4 million pursuant to a repurchase plan under Rule 10b-5-1.
Larry Wu: Our approach to creating lasting shareholder value is anchored in the strong operational performance and the disciplined strategic capital decisions. In line with this commitment,
Larry Wu: We plan to retire the shares we have repurchased, effectively reduce our total issued shares. This step shows our belief in Giga Cloud's long-term potential and strengthens each shareholder's stake in that journey.
Larry Wu: We view this as one of many actions aligned with our vision for sustainable growth, and we are dedicated to building on our momentum in the quarters ahead.
Larry Wu: We maintain a very strong balance sheet with no debt and are generating positive cash flow from operations, allowing us to fund future profitable growth.
Larry Wu: We are extremely proud of what we have been able to accomplish this year to date, and we'll continue driving progress as a leader and innovator of B2B e-commerce technology solutions.
Speaker Change: Thank you everyone for joining us. Now I will turn the call over to Iman.
Iman Schrock: Thanks Larry. I'd like to add my welcome to those joining us today. It was another great quarter for GigaCloud. We're especially gratified by our ability to continue growing at a fast clip, even as we manage through those industry headwinds Larry mentioned.
Iman Schrock: Because our B2B platform has become a powerful and proven way for buyers and sellers of non-standard items to seamlessly transact, our Gigacloud Marketplace GMV continued to grow for the trailing 12 months end of September 30, 2024. Specifically,
Iman Schrock: Gigacloud Marketplace GMB increased by more than 80% year-over-year, keeping pace with our second quarter growth. We continue to see significant increases in our buyer and seller bases, which drove overall GMB growth. Our active 3p seller
Iman Schrock: has crossed a thousand mark for the first time, now standing at 1051. Meanwhile, our active buyer base has grown to 8535. These milestones reflect our platform's growing momentum and appeal.
Iman Schrock: Our plans to further increase participation in our marketplace include adding 3P sellers through geographical expansion, enhanced outreach, and marketing initiatives.
Iman Schrock: We expect to increase active buyers through a combination of onboarding brick-and-mortar retailers that are subscribed to the Wunderstein catalog kiosk, enhancing our marketplace product categories, and leveraging referrals from existing users, among others.
Iman Schrock: GMV in our 3P seller marketplace grew 72% from a year ago.
Iman Schrock: and was $635 million for the trading 12 months into September 30, 2024. This represents a healthy 51.5% of our total marketplace GMB.
Iman Schrock: Our combined 1P and 3P strategies are helping us build critical mass, enhancing the network effects that drive incremental value for all participants.
Iman Schrock: While average buyer spending saw a modest 2.9% decrease compared to Q3 of last year,
Iman Schrock: primarily reflecting the recent onboarding of a large number of over 1,000 buyers who typically begin with a lower trading volume as they familiarize themselves with the platform.
Iman Schrock: We're encouraged by the continued expansion of our marketplace, which is becoming a central and dynamic hub for buyers and sellers of large parcel goods to connect and transact.
Iman Schrock: As more participants experience the benefits of our supplier-fulfilled retailing model, we're confident this ecosystem will continue to grow, empowering businesses to drive efficiency and profitability.
Speaker Change: I also want to call attention to the strong momentum we're building in the European market. Diversifying across different regions is one of GigaCloud's core strengths, creating a balanced approach that benefits both our market reach and our marketplace ecosystem.
Speaker Change: Revenue from Europe has grown organically by 140% year-over-year for Q3 and we're excited about this region's further growth potential. Now I'd like to spend a few minutes on Noble House. We're on track to reach break-even for Noble House by the end of this year.
Speaker Change: Here's a recap of what we've done so far and how it will impact us going forward.
Speaker Change: After closing the acquisition during Q4 of last year, we prioritized placing large orders for existing SKUs.
Speaker Change: This helps support our existing vendor base, many of which had been hit hard by the bankruptcy process, and build up inventory for off-platform sales as we begin the integration process.
Speaker Change: While these existing SKUs have made meaningful top-line contributions to the company in 2024 and helped diversify our product offerings, the operation has not been making bottom-line contributions yet.
Speaker Change: Having a well-prepared portfolio of products and a steady supply of new offerings is critical to profitability.
Speaker Change: During its bankruptcy process, Noble House experienced an extended period of approximately a year without development of new SKUs, which significantly harmed profitability and further diminished vendors' capacity to collaborate effectively with the company in meeting new development needs.
Speaker Change: As such, the second phase of our integration effort focused on developing new SKUs, and we submitted our first production orders in Q2 of this year.
Speaker Change: As of today, I am pleased to share that we have developed approximately 300 new SKUs and continue to develop more. Do keep in mind that furniture typically has a long manufacturing and fulfillment cycle that requires one to two months at each stage of design, sampling, manufacturing, and ocean shipment.
Speaker Change: Order deliveries for our newly developed products have started trickling in starting October, and this starts phase three of our integration plan.
Speaker Change: Phase 3 will focus on identifying winning products and capturing profitability.
Speaker Change: Sales in the coming months will help us identify successful products and focus on those with larger reorder sizes, which will typically take another three to five months to be ready for sales.
Speaker Change: We expect to begin seeing more substantial bottom line contribution from the legacy noble house operation beginning in the third quarter of 2025 that will initiate a productive cycle of profitability and new product growth.
Speaker Change: I also want to take a moment to talk about how WonderSign strengthens our already solid tech-driven model here at GigaCloud.
Speaker Change: It's a natural addition that enhances our platform's power and efficiency.
Speaker Change: particularly for our brick-and-mortar clients. Wondersign is a part of a broader upgrade to our tech advancement facilitating smoother transactions and driving more value across the board. Right now we're focused on advancing Wondersign's
Speaker Change: Tech Stack and aligning it with our own so we were even better equipped to meet our client needs in the coming months We'll be rolling out detailed detailed updates to the market with key functionality upgrades including Advancement with Wondersign. Please keep an eye for that what's ahead
Our unique business model is a proven success.
Speaker Change: and we plan to continue our growth trajectory by adding new products, buyers and sellers through the Gigacloud Marketplace.
Speaker Change: for buyers and sellers of big and bulky items. Now, I will turn the call over to Erika for a more detailed review of our financial results.
Thank you for watching!
Erika: Thank you, Iman, and thanks to everyone joining us today. As I review our third quarter results, please keep in mind that all figures I'll be referencing are rounded for clarity.
Erika: Our third quarter and year-to-date financial results continue to exemplify our ability to successfully execute our growth strategy, even amid heavy industry headwinds that is outside of our control.
Erika: Before diving into the quarterly details, I'd like to briefly touch on our anticipated growth trajectory and the impact of seasonality to our business.
Erika: As we look forward, it's important to recognize that while GigaCloud has experienced rapid expansion, the pace of growth will naturally moderate as we reach larger scales.
Erika: This trend reflects the typical progression for companies reaching critical mass and it reinforces the stability and resilience of our business as we mature.
Erika: Total revenues grew 70% for the third quarter to $303 million.
Erika: The improvements were primarily driven by the increased market recognition and scale of our marketplace.
Erika: which resulted in increases to our marketplace GMB, sales volume, and the number of active sellers and buyers.
breaking down our third quarter revenue.
Erika: In the third quarter, we saw significant growth across our revenue stream, underscoring the strength and adaptability of our platform.
Erika: Service revenue from our 3P business grew substantially to $100 million, reflecting strong marketplace demand and continued engagement from our participants.
Erika: We also saw a significant increase in service revenue margin of 8.7% sequentially from Q2, as we have utilized more fixed-rate ocean freight contracts this quarter that stabilizes costs in a heightened freight environment.
Erika: On the product side, revenue growth of over 60% speaks of enhanced reach of our product offerings.
Erika: Sales from our Gigacloud 1P delivered healthy year-over-year growth as we continue to scale naturally with the growth of our marketplace.
our off-platform product
Erika: of 110 percent, driven by an increase in both sales channels and volume across third-party e-commerce platforms.
Erika: The balanced growth reinforces the resilience of our business model, positioning us effectively as we deepen our engagement with the platform and expand our presence in external markets.
Erika: Product revenue margins decreased 1.6% sequentially due to higher procurement costs incurred that are accounted for as part of cost of goods sold.
Erika: This is because products sold during the third quarter were procured during the second quarter where ocean freight costs were elevated and our use of fixed rate contracts were limited.
Erika: When looking at our cost structure into the future, we are expecting increased ground shipping costs of potentially up to four and a half million during the upcoming holiday season.
that would temporarily compress margins.
Erika: We expect those costs to decrease starting from the first quarter of next year once peak season ends.
Erika: In response, we're implementing a targeted approach to manage these fluctuations and strengthen our relationships with providers to secure favorable rates and mitigate volatility.
Erika: Driven by our rapid growth and higher business volume, operating expenses increased compared to prior year as we invested strategically to expand our fulfillment network.
Erika: Breaking that down by expense category, selling and marketing expenses have remained stable at approximately 6% of revenue.
Erika: General and administrative expenses amounted to $15 million compared to $6 million last year, primarily due to an increase in rental and insurance expenses relating to excess capacity in newly leased fulfillment centers this year.
Erika: Third quarter net income grew more than 68% year-over-year to $41 million and increased 62% year-over-year to $95 million for the first nine months of 2024.
Erika: For the third quarter, foreign currency exchange gains, on a net basis, were approximately 3 million, primarily attributable to the depreciation of U.S. dollars against the Japanese yen and euros.
Erika: We ended Q3 with a liquidity of approximately $260 million, which includes cash, cash equivalents, restricted cash, and investments.
Erika: We encourage $14 million in CapEx for the third quarter, primarily for the purchase of equipment and rafting to be used in our Fulfillment Center infrastructure.
Speaker Change: As Larry mentioned earlier, we remain debt-free with no outstanding borrowing, and the primary liabilities on our balance sheet relate to our fulfillment centers.
Speaker Change: We know that tariffs remain a central topic of interest and want to take a minute to talk about how these would impact our business.
Speaker Change: We began our supply chain diversification journey several years ago to manage potential risks arising from tariffs and changing political landscapes.
Speaker Change: We are happy to share today that more than half of our One Piece supply chain servicing the US market is coming from Southeast Asia.
Speaker Change: By continuously diversifying our supply chain, we limit our exposure from overconcentration and potential impact from tariff increases.
Speaker Change: When it comes to our 3P business, where we are connecting suppliers and resellers, the Giga Cloud Marketplace is providing a strong, diversified supply chain foundation and ecosystem that empowers our customers to stay flexible and make adjustments as the market evolves.
Speaker Change: We are confident that the solutions and infrastructure provided by GigaCloud puts us in a good position to manage potential tariff impacts effectively, while continuing to deliver value across our marketplace.
Speaker Change: I'll close my remarks today with our outlook for the fourth quarter.
Speaker Change: We expect total revenues to range between $275 million and $290 million.
Speaker Change: As you consider this, please keep in mind the temporary margin impact from the profitability leverage that I mentioned earlier.
Speaker Change: Nevertheless, we are confident in our ability to drive sustained long-term profitability.
Speaker Change: The GigaCloud team continues to work toward our common goals, and I sincerely believe that we can continue to grow our leadership in the global B2B e-commerce landscape.
Speaker Change: While we continue to face a macro headwind that may persist for a little bit longer, we are extremely confident that the resiliency in our model and believe our significant expertise will help us successfully navigate those temporary challenges.
Speaker Change: Thank you for all joining us today. Operator, we're ready for questions.
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. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Matt Karanda with Roth Capital.
Thank you for watching!
Hey guys.
Speaker Change: So maybe just starting off on the outlook for the fourth quarter wanted to get a sense for
the
Speaker Change: breakdown between service and product revenue in the fourth quarter just looks like pretty big deceleration on a year-over-year basis. And if I
Speaker Change: sort of assume that Noble House gives you a full contribution in the fourth quarter of this year. Organically, that might imply a little bit more deceleration, maybe just what's going on there, and then the mix between service and product.
Yeah. Hi, Matt. Thanks for the question.
Speaker Change: So, in terms of looking forward, a few things to think about, so service and product proportionally, we expect to somewhat stay similar to Q3.
and then specifically on your question towards Noble House.
So, Noble House, from a product perspective,
is contributing.
Speaker Change: somewhere between 15-20% of product revenue, even though we don't do a separate breakout in terms of disclosures.
Speaker Change: and that will likely continue for Q4. Do keep in mind when comparing Q4 this year against Q4 last year that Q4 of 2023 had two months of Noble House included already.
For more information visit www.FEMA.gov
Speaker Change: Okay, got it. And then maybe just on the service side, a pretty decent step up in onboarding buyers onto the platform. Maybe just where did you see success? Could you talk a little bit about like sort of where we're
essentially getting growth out of the buyer ecosystem.
Go on.
Speaker Change: So I think a big part of it has to do with the market.
Speaker Change: the furniture sector getting a better understanding of who we are and what we do.
Speaker Change: So, it's very much a combination of our go-to-market efforts, including direct outreach.
Speaker Change: and it's also equally important word-of-mouth, referrals that we're receiving, folks that are receiving more efficiency, more cost savings, more efficient solutions, especially right now when the environment is quite challenging.
Speaker Change: Yeah, where are those buyers mostly sort of reselling? I'm just curious. You guys probably have good data on that, I would assume, but maybe just platforms where they're sort of plugged into where they're seeing growth and success.
Speaker Change: Yeah, so it's a lot of folks that are on the...
Speaker Change: commerce platforms, right? So those are the big players that folks like you and I would be shopping from. There's a lot of that. There's also, some of these are also vendors to those larger platforms. We also have a smaller number of
Speaker Change: non-large-scale e-commerce such as smaller independent stores and a very small number of brick-and-mortar as well.
Speaker Change: Okay, got it. Then maybe just on the product revenue side, curious...
Speaker Change: how like last quarter I think you mentioned trying to get more noble house product as 1p on the giga cloud platform maybe just speak to success there
Speaker Change: how we've seen that progress over the last quarter or so.
Speaker Change: We expect to see more and more of that revenue shifting from off-platform into our 1P revenue stream. This also goes hand-in-hand with what Iman had talked about earlier in terms of new product development.
Speaker Change: So, right now we're seeing the initial influx of, in terms of deliveries, and we expect to see sale pickup and diversification pickup more next year.
Speaker Change: Okay, got it. On the TerraFront, I guess the address part of it up front there, what I'm curious about, I guess, is
Speaker Change: If we think about the impact to the sellers on the marketplace, your third-party sellers, maybe just talk about sort of
how much of their capacity
Speaker Change: Do you have a view into how much of their capacity comes out of China? And then maybe just refresh everybody on how tariffs would even flow through the marketplace in a typical transaction. I guess you don't take title of the inventory. I assume you don't pay import duties. So does it just...
Speaker Change: take effect as sort of a higher potential order value on the marketplace, and you would take great on that. So it may even be beneficial. Maybe just walk us through the mechanics of how that works.
Speaker Change: Sure. So, a few questions packed into one there. I'll try to answer them one by one in order.
So, first off, from a Scheller perspective,
Speaker Change: Yes, on the 3P side, we're seeing more that's coming out of China compared to Southeast Asia, right? So the platform is something that gives kind of all participants a little more flexibility and we are also encouraging our
Speaker Change: our clients or our customers to think about the potential impact and accordingly as well. However, I do want to clarify that because of a lot of the inherent limitations, it's not
Speaker Change: We're seeing a lot of folks make a move in terms of where the supply chain is located, but it's not something that could 100% be moved, nor is it a terribly easy thing.
Speaker Change: Right, and then in terms of mechanically, how this flows to us.
Speaker Change: So, if we think about the typical three-piece seller who's listing on the marketplace,
Speaker Change: That would include a component of the product cost itself, leaving the manufacturing facility. There would be a tariff added to that cost.
Speaker Change: and Ocean Freight added to that product, right? And then there would be warehousing costs that's incurred and dredge services incurred.
Speaker Change: 25% tariff to maybe 50 or 60. And you think about the percentage of the product itself, which is what the tariff would be applied to.
Speaker Change: and the fraction of that against the entire cost when you throw in fulfillment.
It's not a terribly large percentage, right?
Thank you for watching!
[inaudible]
Speaker Change: So the question becomes, when the seller is facing the buyer, which is the retailer, especially when considering the margin a typical seller would expect.
Speaker Change: how impactful is that increase in tariff. It's not as large as what it sounds.
Speaker Change: if we're thinking about a number of 60. Does that make sense?
Speaker Change: Yeah, I think I have the mechanics of it. Maybe I'll take the rest of mine offline around tariffs, and I'll turn it over to whoever wants to ask other questions here. Thank you.
Thank you, Matt.
Speaker Change: Your next question comes from Ryan Myers with Lake Street Capital Markets.
Hey guys, thanks for taking my questions.
Speaker Change: If you think about the guidance that you gave for Q4 here, I mean obviously if you think about the guidance that you gave for the third quarter here, you came in well ahead of that expectation.
Speaker Change: So, you know, maybe what would you need to see if you come in at the high end of the guide for next quarter or even kind of be like you guys have sort of, you know, shown a history of doing?
Mm-hmm.
Speaker Change: Thank you for the question. So there's a big component of that is how the market performs. So given that we have a very large number of market participants that are really covering all major channels when it comes to furniture e-commerce, our exposure is really...
Speaker Change: and Pyrite, right? Obviously we're growing very, very quickly with the newcomers and new additions, but that would be offset by, partially, by any softness that is experienced by all of our clients.
Speaker Change: So to answer your question, depending on how the market performs, how all of the retailers, the suppliers, how their results are in the quarter, that would directly impact us.
Speaker Change: Okay, got it. So it sounds like it's mainly just kind of a demand type thing is where a lot of that would come from.
Speaker Change: of drive that maybe upside. That's a big part of that. Okay.
Speaker Change: Yeah, okay, that makes sense. And then, you know, it sounds like...
Speaker Change: There'll be some nuances kind of on the margin side in Q4 here, but maybe can you provide a little bit of commentary on, you know, what we should be expecting as far as, you know, margins in 2025, you know, especially there's some of the initiatives, investments that you guys are making, just kind of how we think that margin should show in 2025.
So,
Speaker Change: Right, I'm sure you know we don't typically give year-long or beyond the quarter guidance, but we can kind of maybe talk about the color or what we're seeing a little bit.
Speaker Change: So, we do expect positive things from Noble House, right, as our newly developed SKUs come in. We expect to see better margins on that front.
Speaker Change: but when it comes to the bigger market it's hard to say at this point what exactly would happen. We definitely think in the near term, including maybe the beginning of next year, there are still going to be strong headwinds that's going to make it a little tougher on the margin side for everybody, including us.
Speaker Change: Towards the later of the year, it's going to depend on a number of things, including how the economy is doing and the demand side, especially the housing market. If we see differences there, that could really drive up demand for us.
Sure. Okay. All right. Thanks for taking my questions.
Of course.
Your next question comes from Thomas Forte with Maxim Group.
Speaker Change: Great. So first off, Larry and team, congrats on the quarter. I have five questions. I'll go one at a time. So the first question is, can you talk about the ability to grow the business by ramping existing categories such as home, exercise equipment, versus adding new categories such as auto parts or other bulky items?
Thank you.
Thank you for watching!
Speaker Change: Hey Tom, thanks for the question. Iman, you want to take that one?
Thank you.
Sorry, I had to unmute. Absolutely.
So basically
Speaker Change: We have to discuss the TAM when it comes to furniture alone.
Speaker Change: for the Furniture Industry on the Wholesale Front is about $60 billion a year. And like a quick back of the napkin math will kind of show you that we're presenting a small fraction of that as of right now. So there's a lot of runway. And absolutely, the platform is optimized for big and bulky non-standard products. So, but...
Speaker Change: At the same time, while they're not the core focus because we're so dialed in on becoming more meaningful player in the furniture industry and home furnishings, the other categories are starting to trickle in by default.
Speaker Change: Okay and then for my second question, can you talk about what's driving the impressive growth in Europe?
Thank you. It's a pleasure. Thank you.
Hey Tom, I'll take that one.
Speaker Change: So, Europe is, we're still quite small in Europe, right? The scale is nowhere near what the United States is, so...
Speaker Change: We've kind of entered a phase where things have fallen in line. The infrastructure is at a good place and we've also attracted enough attention for ourselves.
Speaker Change: So, combining those factors with a small base or small denominator, that's very, very fast year-over-year growth. And we do feel quite positive on the outlook there, right? We feel like Europe is, in terms of potential market size, quite close to the U.S.
Speaker Change: and in terms of how fragmented it is, it actually seems to be a little more which really adds on to how much value add Giga Cloud could provide to the market. So hopefully good things there for us.
Great. And then for my next one.
I wanted to talk about
Speaker Change: The last few years, for example, Amazon has had big fall sales in October in addition to Prime Day, which is
Speaker Change: usually June, July, and then you saw from Target, Walmart, and others, others having big sales in October. How, if at all, is that impacting your results, and do you see that as kind of a pull forward in sales, or do you see that as a creative?
Speaker Change: So this this time of year compared to some of the more the recurring holiday seasons that we see in promotions that we see this year feels a little softer and it's not necessarily limited to any specific channel it's kind of across the board
Speaker Change: and it's hitting a lot of folks. The names you mentioned earlier are part of that list. So, in terms of would it be a pull forward, it kind of depends on where we land early next year and how things develop from here. It's very hard to say exactly what the impact is right now.
Speaker Change: Alright so last two and thanks again for taking my questions. Can you give your current thoughts on strategic M&A following the very successful deals you've had to date?
Speaker Change: Yes, absolutely. So, we're always on the look. We're always on the lookout for the right opportunities. There's kind of, I like to call it, the three buckets that we are interested in.
Speaker Change: Bucket one is going to be a target that complements our existing businesses on the product side. So a target that will fit in nicely
and Enhance Our Portfolio offerings.
Speaker Change: both on the product side and in terms of the market connections from a channel and supplier perspective. So think Noble House here. It's a good example. Also, brands such as Christopher Knight are also very nice additions that help us broaden our market presence a little.
Speaker Change: The second category would be a technology target that helps us execute our long-term goals.
Speaker Change: So, this is someone that would help us both understand and reach the brick-and-mortar market a little bit better, so WonderSign here is the good example.
Third bucket we're interested in is Europe.
Speaker Change: So Europe obviously right now is our fastest growing market and we are very confident in good things that will happen in the future.
Speaker Change: So, from that perspective, we're looking for a target that will help us accelerate our growth a little more in terms of infrastructure and connections locally.
Speaker Change: but I was wondering if you have any pricing power and ability to pass on any of that.
Speaker Change: Yeah, so direct and short version is yes, we do. However, it's very, very important to consider market conditions and the strength of demand, right? So it's always a balance and right now the market is a little harder.
Speaker Change: But on the topic of ocean freight specifically, I think Tom you're thinking of the sequential decline and product margin
Speaker Change: So important thing to keep in mind there is a specific comment of like five million dollars or something like that
and the fourth quarter, I believe.
Speaker Change: Oh, I see. Yes, so that's referring to ground delivery, not ocean freight.
Speaker Change: On the ocean freight front, we're using a lot more of it. Okay, so in general, do you have a resolution to take price to offset any of that inflation of freight costs?
Speaker Change: So we don't feel like right now is necessarily the best time to be pushing costs downstream. Alternatively, our strategy on this front is going to be more focusing on managing cost.
and limiting the volatility there to the extent we can.
Speaker Change: So that would entail us working with different partners and strengthening the relationships and contracts there, similar to how we did with our ocean freight.
Thank you for watching!
Thanks, Erica. Thanks for taking all my questions.
Of course.
Speaker Change: There are no further questions at this time. I'll hand back to Miss Erica Wei for closing remarks.
Thank you for watching!
So thank you everyone for joining the call today.
Speaker Change: The future looks extremely bright as we work to bring even more value to our marketplace participants and our investors. We will speak to you again next quarter, but in the meantime don't hesitate to reach out to our team if you have additional questions. Thank you and take care.
Thank you for watching!
Thank you for watching!
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Speaker Change: Thank you all for standing by. Welcome to Giga Cloud Technologies third quarter 2024 earnings conference call. During today's call all participants will be in listen-only mode.
Speaker Change: Joining us today from Lugacloud are the company's founder, chairman, and CEO, Larry Wu, its president, Dr. Iman Schrock, and its interim chief financial officer, Erica Wei.
Speaker Change: Iman will provide an overview of our performance and operations, and Erica will discuss our financial results. After that, there will be a question and answer session.
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. Additionally, today's call will include non-GAAP measures,
within the meaning of SEC Regulation G.
Speaker Change: When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release, as well as on the company's website. With that, I would like to turn the call over to Larry for his opening remarks. Please go ahead, sir.
Larry Wu: Thank you, operator, and welcome everyone to today's call. The third quarter built upon the very strong growth path we have followed since the launching of our B2B online marketplace.
Larry Wu: Despite the continued industry headwinds, we are successfully navigating these challenges.
Larry Wu: This is shown by the new record high in net income and adjusted EBITDA and the growing numbers of marketplace participants due to its unique ability to streamline operations and enhance efficiency for buyers and sellers of big, bulky, nonstandard items globally.
Larry Wu: Among other accomplishments, our acquisition of a novel house is on track to reach break-even by the end of this year. Additionally, we are enhancing our technology through WonderSign, expanding its capability to better serve the brick-and-mortar stores.
Larry Wu: We believe that GigaCloud's current evaluation doesn't fully capture the progress we have made or the exciting paths ahead.