GigaCloud(GCT) - 2024 Q2 - Quarterly Report

Introduction This section introduces the report's conventions and includes a special note regarding forward-looking statements Conventions that Apply to this Quarterly Report This section defines key terms used throughout the quarterly report, including operational metrics and company references - Defines "3P seller GigaCloud Marketplace GMV" as the total gross merchandise value of transactions sold through the GigaCloud Marketplace by 3P sellers, before any deductions[11] - Defines "Active 3P sellers" as sellers who have sold a product in GigaCloud Marketplace within the last 12-month period[11] - Defines "Active buyers" as buyers who have purchased a product in the GigaCloud Marketplace within the last 12-month period[11] - Defines "Spend per active buyer" as the total GigaCloud Marketplace GMV within the last 12-month period divided by the number of active buyers[11] Special Note Regarding Forward-Looking Statements This section cautions readers about forward-looking statements, their inherent risks, and the company's non-obligation to update them - Forward-looking statements relate to the company's goals, business strategies, financial condition, revenues, costs, dividend policy, marketing, customer relationships, industry trends, market position, technology, regulatory changes, competitive environment, employee retention, capital markets, economic fluctuations, and COVID-19 impact[16] - Actual results could materially differ from expectations due to various risks and factors detailed in the 2023 Form 10-K and this quarterly report[18] - The company undertakes no obligation to publicly update or revise any forward-looking statements, except as legally required[20] PART I FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements This section presents GigaCloud Technology Inc.'s unaudited condensed consolidated financial statements and detailed notes Condensed Consolidated Balance Sheets This section presents the company's condensed consolidated balance sheets as of December 31, 2023, and June 30, 2024 | ASSETS | Dec 31, 2023 | June 30, 2024 | | :-------------------------------- | :----------- | :------------ | | Cash and cash equivalents | $183,283 | $185,623 | | Restricted cash | $885 | $905 | | Investments | — | $22,197 | | Accounts receivable, net | $58,876 | $69,615 | | Inventories | $132,247 | $197,554 | | Prepayments and other current assets | $17,516 | $17,476 | | Total current assets | $392,807 | $493,370 | | Operating lease right-of-use assets | $398,922 | $495,435 | | Property and equipment, net | $24,614 | $22,721 | | Intangible assets, net | $8,367 | $7,279 | | Goodwill | $12,586 | $12,586 | | Deferred tax assets | $1,440 | $7,854 | | Other non-current assets | $8,173 | $15,778 | | Total non-current assets | $454,102 | $561,653 | | Total assets | $846,909 | $1,055,023 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Accounts payable | $69,757 | $79,855 | | Contract liabilities | $5,537 | $6,497 | | Current operating lease liabilities | $57,949 | $76,404 | | Income tax payable | $15,212 | $14,498 | | Accrued expenses and other current liabilities | $57,319 | $71,754 | | Total current liabilities | $205,774 | $249,008 | | Operating lease liabilities, non-current | $343,511 | $440,595 | | Deferred tax liabilities | $3,795 | $3,335 | | Finance lease obligations, non-current | $111 | $196 | | Non-current income tax payable | $3,302 | $3,470 | | Total non-current liabilities | $350,719 | $447,596 | | Total liabilities | $556,493 | $696,604 | | Treasury shares, at cost | $(1,594) | $(1,594) | | Class A ordinary shares | $1,584 | $1,676 | | Class B ordinary shares | $466 | $403 | | Additional paid-in capital | $111,736 | $125,922 | | Accumulated other comprehensive income | $526 | $150 | | Retained earnings | $177,698 | $231,862 | | Total shareholders' equity | $290,416 | $358,419 | | Total liabilities and shareholders' equity | $846,909 | $1,055,023 | - Total assets increased by 24.6% from $846.9 million as of December 31, 2023, to $1,055.0 million as of June 30, 2024[25] - Total liabilities increased by 25.2% from $556.5 million as of December 31, 2023, to $696.6 million as of June 30, 2024[28] - Total shareholders' equity increased by 23.4% from $290.4 million as of December 31, 2023, to $358.4 million as of June 30, 2024[32] Condensed Consolidated Statements of Comprehensive Income This section presents the company's condensed consolidated statements of comprehensive income for the periods ended June 30, 2024 | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service revenues | $43,278 | $85,378 | $78,374 | $152,793 | | Product revenues | $109,852 | $225,489 | $202,553 | $409,151 | | Total Revenues | $153,130 | $310,867 | $280,927 | $561,944 | | Total cost of revenues | $112,766 | $234,420 | $210,989 | $418,949 | | Gross Profit | $40,364 | $76,447 | $69,938 | $142,995 | | Total operating expenses | $16,964 | $48,999 | $28,682 | $80,730 | | Operating Income | $23,400 | $27,448 | $41,256 | $62,265 | | Income before income taxes | $22,659 | $29,034 | $42,356 | $62,354 | | Income tax expense | $(4,269) | $(2,065) | $(8,025) | $(8,190) | | Net Income | $18,390 | $26,969 | $34,331 | $54,164 | | Net income per ordinary share —Basic | $0.45 | $0.65 | $0.84 | $1.32 | | Net income per ordinary share —Diluted | $0.45 | $0.65 | $0.84 | $1.32 | | Comprehensive Income | $18,083 | $26,705 | $33,830 | $53,788 | - Total revenues for the three months ended June 30, 2024, increased by 103.0% YoY to $310.9 million[35] - Net income for the three months ended June 30, 2024, increased by 46.6% YoY to $27.0 million[35] - Diluted EPS for the three months ended June 30, 2024, increased by 44.4% YoY to $0.65[35] Condensed Consolidated Statements of Changes In Shareholders' Equity This section presents the company's condensed consolidated statements of changes in shareholders' equity for the period ended June 30, 2024 | Metric | Balance as of January 1, 2024 | Net Income | Share-based compensation | Re-designated ordinary shares from B to Class A | Balance as of June 30, 2024 | | :----------------------------------- | :---------------------------- | :--------- | :----------------------- | :---------------------------------------------- | :-------------------------- | | Class A ordinary shares (value) | $1,584 | — | $28 | $63 | $1,676 | | Class B ordinary shares (value) | $466 | — | — | $(63) | $403 | | Additional paid-in capital | $111,736 | — | $14,187 | — | $125,922 | | Accumulated other comprehensive income | $526 | — | — | — | $150 | | Retained earnings | $177,698 | $54,164 | — | — | $231,862 | | Total shareholders' equity | $290,416 | $54,164 | $14,215 | — | $358,419 | - Total shareholders' equity increased from $290.4 million as of January 1, 2024, to $358.4 million as of June 30, 2024, primarily driven by net income and share-based compensation[46] - 1,250,000 Class B ordinary shares were converted into an equivalent number of Class A ordinary shares in March 2024[46][104] Condensed Consolidated Statements of Cash Flows This section presents the company's condensed consolidated statements of cash flows for the periods ended June 30, 2024 | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------------------------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $38,641 | $34,417 | | Net cash used in investing activities | $(158) | $(30,403) | | Net cash used in financing activities | $(1,054) | $(1,149) | | Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash | $(101) | $(505) | | Net increase in cash, cash equivalents and restricted cash | $37,328 | $2,360 | | Cash, cash equivalents and restricted cash at the beginning of the period | $145,076 | $184,168 | | Cash, cash equivalents and restricted cash at the end of the period | $182,404 | $186,528 | - Net cash provided by operating activities decreased by 11.0% YoY to $34.4 million for the six months ended June 30, 2024[55] - Net cash used in investing activities significantly increased from $(0.2) million in the six months ended June 30, 2023, to $(30.4) million in the six months ended June 30, 2024, primarily due to purchases of investments and property and equipment[55][225] - Cash, cash equivalents, and restricted cash at the end of the period increased slightly to $186.5 million[59] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations for the financial statements, covering accounting policies, fair value, and revenue recognition Summary of Significant Accounting Policies This note outlines the company's business, organizational structure, basis of presentation, and policies for cash, risk, and segment reporting - GigaCloud Technology Inc. is principally engaged in large parcel merchandise sales and e-commerce solutions for small cross-border business owners utilizing its online platform and fulfillment centers primarily located in the United States, Japan, and Europe[62] - In January 2024, the Company terminated Account Control Agreements with four consolidated VIEs and acquired 100% equity interest in these entities, resulting in no consolidated VIEs as of June 30, 2024[63] - The Group's chief operating decision maker has identified the company as having one operating segment, reviewing consolidated results for resource allocation and performance assessment[72] Long-lived assets by geographic region (In thousands) | Region | Dec 31, 2023 | June 30, 2024 | | :-------------------- | :----------- | :------------ | | The United States | $400,554 | $490,358 | | Others | $22,982 | $27,798 | | Total long-lived assets | $423,536 | $518,156 | Revenues by geographic regions (In thousands) | Revenue Type/Region | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service revenues | $43,278 | $85,378 | $78,374 | $152,793 | | Hong Kong (Platform commission) | $2,591 | $4,479 | $4,893 | $8,077 | | United States (Ocean trans.) | $3,892 | $15,436 | $6,655 | $25,177 | | United States (Warehousing) | $5,111 | $9,326 | $10,531 | $18,416 | | United States (Last-mile) | $22,027 | $38,090 | $40,036 | $66,578 | | United States (Packaging) | $3,684 | $6,921 | $6,376 | $12,674 | | Product revenues | $109,852 | $225,489 | $202,553 | $409,151 | | United States | $79,583 | $169,067 | $150,088 | $309,388 | | Japan | $11,383 | $10,579 | $21,574 | $20,520 | | Germany | $13,923 | $40,092 | $23,263 | $69,365 | | Total revenues | $153,130 | $310,867 | $280,927 | $561,944 | - The FASB issued ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures), effective for annual periods beginning after December 15, 2023, and December 15, 2024 (for public business entities), respectively, which the Group is currently evaluating for potential effects[79][80] Fair Value Measurements This note describes the fair value hierarchy for financial instruments, including investments and cash equivalents measured at fair value - Fair value measurements are categorized into Level 1 (unadjusted quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[83][84] - As of June 30, 2024, investments on the condensed consolidated balance sheets include time deposits and U.S. treasury securities, with cash equivalents including money market instruments, all measured at fair value on a recurring basis[84] Fair Value Measurements as of June 30, 2024 (In thousands) | Item | Balance Sheet Location | Cost or amortized cost | Fair value (Level 2) | | :----------------------- | :----------------------- | :--------------------- | :------------------- | | Money market instruments | Cash and cash equivalents | $50,000 | $50,232 | | U.S. treasury securities | Investments | $11,991 | $11,993 | | Time deposits | Investments | $10,000 | $10,204 | | Total | | $71,991 | $72,429 | Accounts Receivable, Net This note details the composition and movement of accounts receivable, net, which increased to $69.6 million by June 30, 2024 Accounts Receivable, Net (In thousands) | Metric | Dec 31, 2023 | June 30, 2024 | | :---------------------------- | :----------- | :------------ | | Accounts receivable | $59,376 | $70,422 | | Less: allowance for doubtful accounts | $(500) | $(807) | | Accounts receivable, net | $58,876 | $69,615 | Movement of Allowance for Doubtful Accounts (In thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance as of the beginning of the period | $(292) | $(563) | $(237) | $(500) | | Additions charged to bad debt expense | $52 | $(244) | $(3) | $(307) | | Balance as of the end of the period | $(240) | $(807) | $(240) | $(807) | Inventories This note provides a breakdown of inventories, which increased to $197.6 million by June 30, 2024, due to more products available for sale Inventories (In thousands) | Metric | Dec 31, 2023 | June 30, 2024 | | :-------------------- | :----------- | :------------ | | Products available for sale | $92,059 | $147,600 | | Goods in transit | $40,188 | $49,954 | | Inventories | $132,247 | $197,554 | Leases This note details the Group's operating and finance leases, with total right-of-use assets and lease liabilities increasing by June 30, 2024 - The Group leases its office space, fulfillment centers, and other facilities under non-cancelable operating leases, and equipment under non-cancelable finance leases[92] Gross Amounts of Assets and Liabilities Related to Leases (In thousands) | Metric | Dec 31, 2023 | June 30, 2024 | | :-------------------------- | :----------- | :------------ | | Operating lease right-of-use assets | $398,922 | $495,435 | | Finance lease right-of-use assets | $8,616 | $5,890 | | Total right-of-use assets | $407,538 | $501,325 | | Current operating lease liabilities | $(57,949) | $(76,404) | | Finance lease liabilities (current) | $(1,666) | $(549) | | Non-current operating lease liabilities | $(343,511) | $(440,595) | | Finance lease liabilities (non-current) | $(111) | $(196) | | Total lease liabilities | $(403,237) | $(517,744) | Lease Cost Components (In thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $7,626 | $26,560 | $15,875 | $48,508 | | Finance lease cost (Amortization of right-of-use assets) | $167 | $140 | $334 | $271 | | Finance lease cost (Interest on lease liabilities) | $236 | $44 | $331 | $105 | | Short-term lease costs | $29 | $292 | $93 | $410 | | Total | $8,058 | $27,036 | $16,633 | $49,294 | Weighted Average Lease Terms and Discount Rates | Metric | December 31, 2023 | June 30, 2024 | | :-------------------------------- | :------------------ | :------------ | | Weighted average remaining lease term (years): Operating leases | 6.45 | 5.79 | | Weighted average remaining lease term (years): Finance leases | 0.84 | 1.59 | | Weighted average discount rate: Operating leases | 3.23% | 3.58% | | Weighted average discount rate: Finance leases | 18.18% | 13.44% | Ordinary Shares This note details changes in ordinary shares, including warrant exercises and the conversion of Class B to Class A shares in March 2024 - In February 2024, the Underwriter exercised 29,400 warrants for 13,372 Class A ordinary shares, with all warrants exercised as of June 30, 2024[103] - In March 2024, 1,250,000 Class B ordinary shares were converted into an equivalent number of Class A ordinary shares[104] Share-Based Compensation This note summarizes restricted shares and restricted share units activity, with $3.474 million in unrecognized compensation expenses for unvested RSUs Restricted Shares (RS) Activity (Number of shares) | Metric | Outstanding as of April 1, 2024 | Vested | Outstanding as of June 30, 2024 | | :-------------------------------- | :------------------------------ | :----- | :------------------------------ | | Number of shares | 9,877 | (8,406) | 1,471 | Restricted Share Units (RSU) Activity (Number of shares) | Metric | Outstanding as of January and April 1, 2024 | Granted | Forfeited | Outstanding as of June 30, 2024 | Exercisable as of June 30, 2024 | | :---------------------------------------- | :------------------------------------------ | :------ | :-------- | :------------------------------ | :------------------------------ | | Number of shares | 412,397 | 558,101 | (4,241) | 966,257 | 815,997 | - As of June 30, 2024, unrecognized compensation expenses of $3.474 million relating to 150,260 unvested RSUs are expected to be recognized in the next twelve months[111] Income Tax This note reports the income tax provision and effective tax rates, with a 16.1% effective rate for the six months ended June 30, 2024 - The Company's provision for income tax for the six months ended June 30, 2024, was $10.026 million, representing an effective income tax rate of 16.1%[112] - The difference between the PRC income tax rate of 25.0% and GigaCloud Technology's overall income tax rate was primarily due to an income tax benefit on a favorable foreign rate differential and GigaCloud Suzhou's certificate for Advanced Technology Service Enterprise (ATSE) qualification, which entitles the company to the preferential tax rate of 15%[112] Net Income Per Ordinary Share This note provides basic and diluted net income per ordinary share computations, both at $1.32 for the six months ended June 30, 2024 Net Income Per Ordinary Share (In thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $18,390 | $26,969 | $34,331 | $54,164 | | Weighted average number of ordinary shares outstanding used in computing net income per ordinary share - Basic | 40,896,423 | 41,295,216 | 40,806,959 | 41,041,937 | | Weighted average number of ordinary shares outstanding used in computing net income per ordinary share - Diluted | 40,941,904 | 41,407,207 | 40,852,439 | 41,150,585 | | Net income per ordinary share attributable to ordinary shareholders - Basic | $0.45 | $0.65 | $0.84 | $1.32 | | Net income per ordinary share attributable to ordinary shareholders - Diluted | $0.45 | $0.65 | $0.84 | $1.32 | Potential Dilutive Securities Included in Diluted EPS Calculation | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | RSU | 45,481 | 107,590 | 45,480 | 104,094 | | RS | — | 4,401 | — | 4,554 | Revenues This note disaggregates revenues by product/service lines and timing of recognition, with total revenues at $561.9 million for the six months ended June 30, 2024 Revenues by Major Products/Services Lines (In thousands) | Major products/services lines | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service revenues | $43,278 | $85,378 | $78,374 | $152,793 | | Platform commission | $2,591 | $4,479 | $4,893 | $8,077 | | Ocean transportation service | $3,936 | $15,504 | $6,707 | $25,305 | | Warehousing service | $5,304 | $9,589 | $10,961 | $18,916 | | Last-mile delivery service | $22,916 | $41,550 | $41,524 | $72,305 | | Packaging service | $3,920 | $7,686 | $6,788 | $13,965 | | Others (Service) | $4,611 | $6,570 | $7,501 | $14,225 | | Product revenues | $109,852 | $225,489 | $202,553 | $409,151 | | Product sales to B | $14,743 | $73,968 | $27,544 | $125,402 | | Product sales to C | $25,352 | $48,857 | $43,815 | $90,769 | | Off-platform ecommerce | $40,095 | $122,825 | $71,359 | $216,171 | | GigaCloud 1P | $69,757 | $102,442 | $131,194 | $192,601 | | Total revenues | $153,130 | $310,867 | $280,927 | $561,944 | Timing of Revenue Recognition (In thousands) | Timing of revenue recognition | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue from goods or services transferred to customers over time | $34,776 | $71,403 | $63,173 | $126,018 | | Revenue from goods or services transferred to customers at a point in time | $118,354 | $239,464 | $217,754 | $435,926 | | Total Revenues | $153,130 | $310,867 | $280,927 | $561,944 | Contract Liabilities (In thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance as of beginning of the period | $2,126 | $7,554 | $2,001 | $5,537 | | Revenue recognized from opening balance of contract liabilities | $(2,126) | $(7,554) | $(2,001) | $(5,537) | | Increase due to cash received | $96,416 | $158,619 | $178,448 | $280,650 | | Revenue recognized from cash received during the period | $(94,316) | $(152,113) | $(176,351) | $(274,116) | | Foreign exchange effect | $(7) | $(9) | $(4) | $(37) | | Balance as of end of the period | $2,093 | $6,497 | $2,093 | $6,497 | Commitments and Contingencies This note discloses lease commitments and a fire incident in Japan, resulting in $2.0 million inventory losses, partially offset by insurance recovery - A fire at one of the fulfillment centers in Japan in March 2024 destroyed inventories, leading to recognized losses of $2.0 million[126] - The Group recorded an insurance receivable and insurance recovery of $1.7 million for the six-month period ended June 30, 2024, as partial recovery of incurred losses is probable[126] - The Group does not expect liabilities arising from reconstruction efforts, net of insurance recoveries, to materially adversely affect its unaudited condensed consolidated results of operations or financial condition[127] Subsequent Events The Group evaluated subsequent events up to the financial statement issuance date and identified no events requiring adjustment or disclosure - The Group evaluated subsequent events and transactions that occurred up to the date the unaudited condensed financial statements were issued and did not identify any requiring adjustment or disclosure[129] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial performance, liquidity, capital resources, and critical accounting estimates Overview GigaCloud Technology Inc. provides end-to-end B2B e-commerce solutions for large parcel merchandise through GigaCloud 3P, GigaCloud 1P, and off-platform e-commerce - The company generates revenues primarily through three streams: GigaCloud 3P (service revenues from marketplace transactions), GigaCloud 1P (product revenues from sales of own inventory on the marketplace), and Off-platform ecommerce (product revenues from sales through third-party e-commerce websites)[131] - GMV from GigaCloud 3P and GigaCloud 1P together constitute the GigaCloud Marketplace GMV, and these three revenue streams complement each other to enhance value for sellers and buyers[131] Key Financial and Operating Metrics This section presents key financial and operating metrics, including total revenues, gross profit, operating income, net income, EPS, Adjusted EBITDA, and Adjusted EPS Key Financial Statement Metrics (In thousands, except for per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $153,130 | $310,867 | $280,927 | $561,944 | | Gross profit | $40,364 | $76,447 | $69,938 | $142,995 | | Operating income | $23,400 | $27,448 | $41,256 | $62,265 | | Net income | $18,390 | $26,969 | $34,331 | $54,164 | | Net income per ordinary share – Basic | $0.45 | $0.65 | $0.84 | $1.32 | | Net income per ordinary share – Diluted | $0.45 | $0.65 | $0.84 | $1.32 | | Adjusted EBITDA | $24,869 | $42,744 | $44,716 | $77,241 | | Adjusted EPS – diluted | $0.61 | $1.03 | $1.09 | $1.88 | Key Operating Metrics | Metric | 12 Months Ended June 30, 2023 | 12 Months Ended June 30, 2024 | Change (%) | | :------------------------------------------ | :---------------------------- | :---------------------------- | :--------- | | GigaCloud Marketplace GMV (in $ thousands) | $607,524 | $1,097,808 | 80.7% | | Active 3P sellers | 665 | 930 | 39.8% | | 3P seller GigaCloud Marketplace GMV (in $ thousands) | $324,664 | $571,913 | 76.1% | | Active buyers | 4,351 | 7,257 | 66.8% | | Spend per active buyer (in $) | $139,629 | $151,276 | 8.3% | - GigaCloud Marketplace GMV increased by 80.7% to $1,097.8 million for the 12 months ended June 30, 2024, primarily due to increased sellers and buyers, and an increase in spend per active buyer, with Noble House-related SKUs contributing approximately $56.6 million of GMV in Q2 2024[136] - The number of active 3P sellers increased by 39.8% to 930, and active buyers increased by 66.8% to 7,257 for the 12 months ended June 30, 2024[137][139] - Spend per active buyer increased by 8.3% to $151,276, driven by an expanded product catalog, increased mix of higher-priced products, improved shopping experience, and enhanced supply chain capabilities[140] Key Factors Affecting Our Results of Operations This section discusses factors influencing financial results, including seller/buyer retention, acquisitions, economic trends, service offerings, and infrastructure investments - The number of active 3P sellers increased by 39.8% to 930 in the 12 months ended June 30, 2024, attributed to growing marketplace recognition, comprehensive fulfillment and logistics network, and geographic expansion[142] - Acquisitions of Noble House and Wondersign in 2023 are expected to attract more sellers and buyers by supplementing supply chain, fulfillment, logistics capabilities, and cloud-based interactive digital signage/e-catalog management[144][147] - Revenues generated by GigaCloud Marketplace grew quickly, representing 61.5% of total revenues in the six months ended June 30, 2024, demonstrating the success of expanding service offerings[149] - As of June 30, 2024, the company leased 40 fulfillment centers with approximately 10.5 million square feet and two other facilities, indicating significant investment in infrastructure and technology platform[151] - Sales of home furniture and other large parcel items are subject to modest seasonality, with the last quarter of the year typically being the most active due to holiday sales[152] Key Components of Results of Operations This section details the components of revenues, cost of revenues, gross profit, operating expenses, and other income/expense items Breakdown of Revenues (In thousands, except percentages) | Revenue Type | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service revenues | $43,278 (28.3%) | $85,378 (27.5%) | $78,374 (27.9%) | $152,793 (27.2%) | | Product revenues | $109,852 (71.7%) | $225,489 (72.5%) | $202,553 (72.1%) | $409,151 (72.8%) | | Total revenues | $153,130 (100.0%) | $310,867 (100.0%) | $280,927 (100.0%) | $561,944 (100.0%) | Breakdown of Cost of Revenues (In thousands, except percentages) | Cost Type | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Services | $34,782 (22.7%) | $74,040 (23.8%) | $63,549 (22.6%) | $128,471 (22.9%) | | Product sales | $77,984 (50.9%) | $160,380 (51.6%) | $147,440 (52.5%) | $290,478 (51.7%) | | Total | $112,766 (73.6%) | $234,420 (75.4%) | $210,989 (75.1%) | $418,949 (74.6%) | Gross Profit and Gross Margin (In thousands, except percentages) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross Profit | $40,364 | $76,447 | $69,938 | $142,995 | | Gross margin (%) | 26.4% | 24.6% | 24.9% | 25.4% | Breakdown of Operating Expenses (In thousands, except percentages) | Operating expenses | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Selling and marketing expenses | $9,535 (6.2%) | $19,460 (6.3%) | $16,431 (5.8%) | $34,040 (6.1%) | | General and administrative expenses | $6,897 (4.5%) | $26,280 (8.5%) | $11,047 (3.9%) | $41,669 (7.4%) | | Research and development expenses | $532 (0.3%) | $3,097 (1.0%) | $1,204 (0.4%) | $4,853 (0.9%) | | Losses on disposal of property and equipment | — (0.0%) | $162 (0.1%) | — (0.0%) | $168 (0.0%) | | Total operating expenses | $16,964 (11.1%) | $48,999 (15.8%) | $28,682 (10.2%) | $80,730 (14.4%) | Results of Operations This section provides a detailed comparison of financial performance for the three and six months ended June 30, 2024, versus 2023 Summary of Unaudited Condensed Consolidated Results of Operations (In thousands, except percentages) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $153,130 (100.0%) | $310,867 (100.0%) | $280,927 (100.0%) | $561,944 (100.0%) | | Total cost of revenues | $112,766 (73.6%) | $234,420 (75.4%) | $210,989 (75.1%) | $418,949 (74.6%) | | Gross profit | $40,364 (26.4%) | $76,447 (24.6%) | $69,938 (24.9%) | $142,995 (25.4%) | | Total operating expenses | $16,964 (11.1%) | $48,999 (15.8%) | $28,682 (10.2%) | $80,730 (14.4%) | | Operating income | $23,400 (15.3%) | $27,448 (8.8%) | $41,256 (14.7%) | $62,265 (11.1%) | | Net income | $18,390 (12.0%) | $26,969 (8.7%) | $34,331 (12.2%) | $54,164 (9.6%) | - Total revenues increased by 103.1% from $153.1 million in Q2 2023 to $310.9 million in Q2 2024, driven by increased market recognition and scale of the GigaCloud Marketplace[185] - Service revenues from GigaCloud 3P increased by 97.2% to $85.4 million, with ocean transportation services growing by 297.4% and last-mile delivery services by 81.7%[185][186] - Product revenues from GigaCloud 1P increased by 46.7% to $102.4 million, and product revenues from off-platform ecommerce increased by 206.2% to $122.8 million in Q2 2024[186] - Cost of revenues increased by 107.8% to $234.4 million in Q2 2024, primarily due to increases in delivery, rental, and product costs[187][188] - Gross profit increased by 89.1% to $76.4 million, but gross margin slightly decreased from 26.4% to 24.6% in Q2 2024, mainly due to higher ocean freight and rental costs[189] - Selling and marketing expenses increased by 105.3% to $19.5 million, general and administrative expenses increased by 281.2% to $26.3 million, and research and development expenses increased by 520.0% to $3.1 million in Q2 2024, largely due to increased staff costs, share-based compensation, and expansion[190][191][192] - Net income for the six months ended June 30, 2024, increased by 57.8% to $54.2 million[211] Non-GAAP Financial Measure This section presents non-GAAP financial measures, Adjusted EBITDA and Adjusted EPS – diluted, which exclude specific non-operating and non-cash items - Adjusted EBITDA and Adjusted EPS – diluted are non-GAAP financial measures used to understand and evaluate core operating performance, excluding interest, income taxes, depreciation and amortization, share-based compensation expenses, and non-recurring items[216] Reconciliation of Adjusted EBITDA (In thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $18,390 | $26,969 | $34,331 | $54,164 | | Add: Income tax expense | $4,269 | $2,065 | $8,025 | $8,190 | | Add: Interest expense | $804 | $59 | $917 | $140 | | Less: Interest income | $(484) | $(2,244) | $(1,074) | $(3,853) | | Add: Depreciation and amortization | $380 | $2,064 | $760 | $4,145 | | Add: Share-based compensation expense | $1,510 | $13,872 | $1,757 | $14,147 | | Add: Non-recurring items | — | $(41) | — | $308 | | Adjusted EBITDA | $24,869 | $42,744 | $44,716 | $77,241 | Reconciliation of Adjusted EPS – Diluted | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income per ordinary share – diluted | $0.45 | $0.65 | $0.84 | $1.32 | | Adjustments, per ordinary share: Income tax expense | $0.10 | $0.05 | $0.20 | $0.20 | | Adjustments, per ordinary share: Interest expense | $0.02 | — | $0.02 | — | | Adjustments, per ordinary share: Interest income | $(0.01) | $(0.05) | $(0.03) | $(0.09) | | Adjustments, per ordinary share: Depreciation and amortization | $0.01 | $0.05 | $0.02 | $0.10 | | Adjustments, per ordinary share: Share-based compensation expenses | $0.04 | $0.33 | $0.04 | $0.34 | | Adjustments, per ordinary share: Non-recurring items | — | — | — | $0.01 | | Adjusted EPS – diluted | $0.61 | $1.03 | $1.09 | $1.88 | Liquidity and Capital Resources This section discusses the company's liquidity, cash position, credit facility, share repurchase program, and capital expenditures - As of June 30, 2024, the company had $185.6 million in cash and cash equivalents and $0.9 million in restricted cash[219] - The $50 million credit facility agreement with Wells Fargo Bank was renewed in July 2024, extending the maturity date to June 30, 2026, with no drawdowns made to date[219] Summary of Condensed Consolidated Statement of Cash Flow Data (In thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------------------------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $38,641 | $34,417 | | Net cash used in investing activities | $(158) | $(30,403) | | Net cash used in financing activities | $(1,054) | $(1,149) | | Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash | $(101) | $(505) | | Net increase in cash, cash equivalents and restricted cash | $37,328 | $2,360 | | Cash, cash equivalents and restricted cash at the beginning of the period | $145,076 | $184,168 | | Cash, cash equivalents and restricted cash at the end of the period | $182,404 | $186,528 | - Net cash provided by operating activities for the six months ended June 30, 2024, was $34.4 million, attributable to net income and non-cash adjustments, partially offset by an increase in inventory[224] - Net cash used in investing activities for the six months ended June 30, 2024, was $30.4 million, primarily due to purchases of investments ($21.8 million) and property and equipment ($10.2 million)[225] - The company repurchased approximately 215,000 Class A ordinary shares for $1.6 million under a $25.0 million share repurchase program approved in June 2023, with no repurchases made in Q2 2024[228] - Capital expenditures increased from $0.2 million in the six months ended June 30, 2023, to $10.2 million in the six months ended June 30, 2024[229] Contractual Obligations This section details the company's contractual obligations, primarily lease commitments, totaling $583.8 million as of June 30, 2024 Contractual Obligations as of June 30, 2024 (In thousands) | Obligation Type | Total | Within 2024 | 2025 – 2027 | After 2028 | | :-------------------- | :-------- | :---------- | :---------- | :--------- | | Operating leases | $583,005 | $43,464 | $311,183 | $228,358 | | Finance leases | $836 | $552 | $209 | $75 | | Total | $583,841 | $44,016 | $311,392 | $228,433 | Off-Balance Sheet Commitments and Arrangements This section confirms the absence of financial guarantees, third-party payment obligations, derivative contracts, or retained interests in unconsolidated entities - The company has not entered into any financial guarantees or other commitments to guarantee the payment obligations of any unconsolidated third parties[231] - The company has not entered into any derivative contracts indexed to its shares or that are not reflected in its unaudited condensed consolidated financial statements[231] - The company does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity, or market risk support, nor any variable interest in such entities[231][233] Holding Company Structure GigaCloud Technology Inc. is a Cayman Islands holding company relying on subsidiaries for operations, with dividend payments dependent on subsidiary distributions - GigaCloud Technology Inc. is a Cayman Islands holding company with no material operations of its own, conducting operations primarily through its principal subsidiaries[234] - The company's ability to pay dividends depends upon dividends paid by its subsidiaries, which may be restricted by local regulations, governmental control of currency conversion, or debt instruments of the subsidiaries[234] Trend Information This section states no new material adverse trends or events are identified beyond those already disclosed for the six months ended June 30, 2024 - No known trends, uncertainties, demands, commitments, or events for the six months ended June 30, 2024, are reasonably likely to have a material adverse effect on net revenues, income, profitability, liquidity, or capital resources, or cause a material change in the relationship between costs and revenues, beyond what is already disclosed[235] Critical Accounting Estimates No new critical accounting estimates with material impact were identified for Q2 2024, and no material changes to policies since the 2023 Form 10-K - For the fiscal quarter ended June 30, 2024, no critical accounting estimates involving a significant level of estimation uncertainty that would have a material impact on results were identified[236] - There have been no material changes to the critical accounting policies and estimates as compared to those disclosed in the 2023 Form 10-K[236] Recent Accounting Pronouncements This section refers to Note 1 of the financial statements for a list of recently issued accounting pronouncements relevant to the company - A list of recently issued accounting pronouncements that are relevant to the company is included in Note 1 "Recent accounting pronouncements" to the unaudited condensed consolidated financial statements[237] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes in the company's exposures to market risk since December 31, 2023 - There have been no material changes in the company's exposures to market risk since December 31, 2023[238] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of June 30, 2024, due to material weaknesses in financial reporting personnel and journal entry review - Management concluded that disclosure controls and procedures were not effective as of June 30, 2024[240] - Two material weaknesses were identified: (i) lack of sufficient financial reporting and accounting personnel with appropriate U.S. GAAP and SEC reporting knowledge, and (ii) inadequate design and implementation of internal control over the independent review of journal entries due to the absence of formalized accounting policies and procedures, and inappropriate segregation of duties[240] - The company is implementing measures to address these weaknesses, including hiring additional personnel, expanding training, establishing clear roles and procedures, and designing effective monitoring and oversight controls[240] - No changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[241] PART II OTHER INFORMATION This part provides additional information, including legal proceedings, risk factors, equity sales, and other disclosures Item 1. Legal Proceedings This section details a putative securities class action lawsuit alleging false statements, which the company believes is without merit and will seek dismissal - A putative securities class action lawsuit, In Re GigaCloud Technology Inc Securities Litigation, was filed alleging false and misleading statements concerning the company's use of artificial intelligence and machine learning, and revenue of the GigaCloud Marketplace[243][244] - The company believes the claims asserted in the second amended complaint are without merit and will seek their dismissal[244] - Based on information presently known to management, the company does not believe that the legal matters are likely to have a material impact on its financial condition[244] Item 1A. Risk Factors This section notes no material changes to risk factors from the 2023 Form 10-K, with added emphasis on logistics dependence and fixed-rate contract impacts - There have been no material changes in the company's risk factors previously disclosed in the 2023 Form 10-K, except as presented in this quarterly report[245] - The company's dependence on third-party trucking and freight service companies exposes it to shipping delays or disruptions caused by factors like inclement weather, natural disasters, system interruptions, political instability, military conflicts (e.g., Red Sea disruptions), labor activism, and health epidemics[245] - Fixed-rate contracts with third-party transportation service providers, while mitigating cost increases, may negatively impact costs and profitability if prevailing market ocean freight rates decline below contracted rates[245] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no recent unregistered sales and details the ongoing share repurchase program, with no repurchases in Q2 2024 - There were no recent unregistered sales of equity securities[246] - The board of directors approved a share repurchase program in June 2023 to repurchase up to $25.0 million of Class A ordinary shares over a 12-month period[247] - From the launch of the share repurchase program to June 30, 2024, approximately 215,000 Class A ordinary shares were repurchased in the open market for a total consideration of approximately $1.6 million, with no repurchases made during the second quarter of 2024[248] Item 3. Defaults Upon Senior Securities This item is not applicable to the company - This item is not applicable[249] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[249] Item 5. Other Information This section discloses that CTO Mr. Xin Wan adopted a Rule 10b5-1 trading arrangement to sell up to 150,000 Class A ordinary shares by December 31, 2024 - On June 26, 2024, Mr. Xin Wan, Chief Technology Officer, adopted a Rule 10b5-1(c) trading arrangement to sell up to 150,000 Class A ordinary shares by December 31, 2024[249] - No other director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2024[249] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate documents and certifications - Exhibits filed include the Eighth Amended and Restated Memorandum and Articles of Association, Section 302 and 906 certifications by the Principal Executive Officer and Principal Financial Officer, and various Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File)[250] Signatures The report was signed by Larry Lei Wu, CEO, and Kwok Hei David Lau, CFO, on August 6, 2024 - The report was duly signed on behalf of GigaCloud Technology Inc by Larry Lei Wu, Chief Executive Officer, and Kwok Hei David Lau, Chief Financial Officer, on August 6, 2024[254][255]