Good day, ladies and gentlemen, and thank you for joining us for GigaCloud Technologies' Second Quarter and Half Year 2023 Earnings Conference Call. Joining us today are the company's Founder, Chairman, and Chief Executive Officer, Larry Wu; President, Dr. Iman Schrock; and Chief Financial Officer, David Lau. On this call, Iman will provide an overview of the company's performance and operating results, while David will share the financial results. Following that, we will have a question-and-answer session. Please note that this conference contains forward-looking statements about future events and expectations, which may differ from actual results. Today's call and webcast will include non-GAAP financial measures as defined by SEC Regulation G, and a reconciliation of these measures to the most comparable GAAP measures can be found in today's press release and on the company's website. With that, I would like to turn the call over to Larry for your opening remarks. Please go ahead.

Thank you, operator, and thank you, everyone, for joining us here today. I want to start off today by expressing my heartfelt thanks to the entire GigaCloud family for their diligent efforts across the board. As Iman will speak to, our results continued to demonstrate positive momentum led by an over 200% period-over-period increase in net income in the first half of 2023. We continue to exceed our own expectations across the board and our team is committed to delivering these results to our stakeholders. Our third-party sellers and platform-wide buyers continue to recognize the inherent value in our supply fulfilled retailing model, and we are continuing to onboard new buyers and sellers as we reinvest earnings into accelerating our organic growth. Our strong balance sheet and fresh cash flow generation provide us with the flexibility to pursue various strategies to grow the business. Additionally, we are adding several corporate positions and key decision-making roles to our headquarters in Walnut, California, supplementing our established overseas back office personnel. We see this as a key part of our global strategy and will expand GigaCloud's footprint and talent pool. Finally, we are thrilled to welcome two new board members, Mr. John William Visser and Ms. Lorri Kelly, who will bring deep industry expertise and diverse perspectives to our Board. Now I would like to turn the call to Dr. Iman Schrock, President of GigaCloud. Iman?

Thank you, Larry, and thanks again to everybody for joining us. We could not be more pleased with our second quarter results. I want to start by thanking the entire GigaCloud team for their tireless work and execution. We are dedicated to changing the way suppliers and resellers do business in buying, selling and shipping all things large and bulky through state-of-the-art technology and innovation. We believe this message and mission are resonating well given the success of our marketplace. Our exceptional profitability resulted in an ending cash balance of $181.5 million, up from $143.5 million as of December 31, 2022. As we have mentioned in the past, the strength of our balance sheet gives us the ability to evaluate targets for tuck-in acquisitions. Our benchmarks for potential targets range from companies that would further penetrate our existing target markets, add new capabilities to our already robust technology stack, or penetrate a new segment of market or technology that would further enhance our users' experience on GigaCloud platform. Our cash balance also gives us the ability to strategically move on our share repurchase plan, which was approved for $25 million in June. While we did not repurchase any shares in the second quarter, the approval for the repurchase runs through June 2024. We will update the investment community on this initiative as appropriate. We are carefully evaluating the use of the repurchase plan to ensure we strike the right balance between creating shareholder value and protecting our stock fundamentals. Now let's walk through some of the operational highlights for the quarter. Our GigaCloud Marketplace GMV grew approximately 32% year-over-year to $607.5 million in the TTM period. On the seller side, the platform also saw an approximately 47% year-over-year increase in active third-party sellers, ending the total number for the quarter at 6,650, which was also a 10% sequential increase. Organically, expanding our ecosystem of third-party sellers is crucial to achieving scale in our supply fulfilled retailing model. We continue to devote significant time and resources into quickly vetting and onboarding new third-party sellers and adding new SKUs to our platform. While buyers may churn on and off the platform or consolidate the number of accounts they work with, we see the number of third-party sellers on the platform as a more important indicator of a healthy marketplace, providing buyers with a variety of SKUs to choose from. The trend of our third-party sellers' Marketplace GMV expanding only accelerated in this quarter, increasing 65% year over year to $324.7 million, now making up approximately 53% of our total GMV. As I mentioned on our last call, our first-party approach remains an integral part of our business strategy, yet we believe the growth of our organic third-party GMV will be crucial to scaling our business, as we see positive momentum in our organic third-party growth rate continue to drive a larger, more productive marketplace. On the buyer side, we saw active buyers increasing by over 7% year-over-year, ending the quarter at 4,351, with average spend per buyer increasing by 24% year-over-year to $139,629. The increase in average spend indicates that we are attracting more high-quality, high-volume buyers to the platform. These buyers tend to be very dedicated in their adoption of the platform and growth in their average spend can quickly fuel growth in our results. We will continue to invest in our platform, and we believe there is still a strong runway of organic growth that we can achieve as we penetrate new markets worldwide. One area that we continue to invest heavily in is building out continued momentum in organic growth in our marketing and advertising, particularly to brick-and-mortar retailers of furniture, who historically enjoy a large market share in the furniture space and have significant inventory requirements. We continue to specifically target this segment of resellers through additional advertisement and media campaigns, seeing a significant opportunity for our business to continue to expand into this market. I would also like to discuss GigaCloud's transition from a Foreign Private Issuer (FPI) to following the same reporting and disclosure obligations as domestic companies. As many of you have already seen, on July 3, we issued a press release announcing that as of the end of the second quarter, it was determined that GigaCloud no longer qualifies as an FPI. Practically, what that means for GigaCloud and the investment community is that starting January 1, 2024, GigaCloud will be subject to the same reporting, disclosure, and filing obligations as other S-Form issuers. Starting next year, you can expect the same cadence of filings, such as 10-K and 10-Q. As a domestic NASDAQ-listed company, we believe this is a critical step forward in building confidence in our story for investors, and we are laser-focused on becoming even more engaged and transparent with our shareholders and potential shareholders. We are also adding a number of corporate positions and key decision-making roles to our headquarters in Walnut, California, supplementing our mature overseas back office personnel. We also announced several changes to our Board of Directors on August 10, including the addition of two new independent directors, John Visser and Lorri Kelly. Mr. Visser is currently the Vice President of Logistics at doTERRA International, while Mrs. Kelly has previously held a number of senior roles in the furniture industry, most recently as the President of BDI Furniture before founding her own strategic consulting firm. Both Mr. Visser and Ms. Kelly bring critical industry experience and new diverse insights, and we are excited to have them come on board. Clearly, we are dedicated to building out our global presence and expanding GigaCloud's footprint worldwide. We believe these moves are strong steps in the right direction to fostering a stronger connection with the investment community in the U.S. and other nations. Overall, we are encouraged by our progress in the second quarter, and we believe we are making significant strides in our mission to build the world's best B2B large parcel shopping experience for both buyers and sellers. We are thrilled by our second consecutive quarter of record profit, and we believe our gross margin will support a similar level of profitability for the remainder of the year. Our industry-leading marketplace saw significant growth in this quarter, with total GMV increasing by 32% year-over-year, active buyers increasing by over 7%, and average spend per active buyer increasing by 24% in the same period. Our balance sheet provides us the flexibility to pursue potential M&A targets as well as support a steady pace of organic growth. Finally, our move to become an S filer demonstrates our commitment to the international capital markets and increases transparency for shareholders and potential shareholders. And with that, I would like to turn the call over to David for a closer review of our second quarter and first half numbers. David?

Thanks, Iman. Let me walk you through our second quarter and first half numbers in more detail. Our total revenues for the second quarter were $153.1 million, which was an increase of 23.5% year-over-year and approximately 20% sequentially. For the first half, we generated $280.9 million for the six months ended June 30, '23, an 18.8% increase compared to the same period last year. Breaking this down for just the second quarter, service revenue from GigaCloud's third-party operations saw a 31.9% year-over-year increase to $43.3 million. Product revenue from GigaCloud's first-party operations saw a 14.9% year-over-year increase to $69.8 million, and product revenue from off-platform e-commerce saw a 31.6% year-over-year increase to $40.1 million. As Iman mentioned, these increases correspond with a 32.2% year-over-year gain in total market GMV, which ended the second quarter at $607.5 million on a TTM basis. Our gross profit for the second quarter was $40.4 million, which represented an increase of 137.1% year-over-year and resulted in a gross margin of 26.4% compared to 13.7% for the same period last year. On a first-half basis, gross profit increased by 106.4% to $69.9 million for the six months ended June 30, '23, resulting in a gross margin of approximately 25% compared to 14.3% in the prior year. These increases in gross margin were largely a result of the return to normalized ocean shipping rates from the all-time highs in the first half of '22. As a result, our cost of revenues increased only 5.4% to $112.8 million for the quarter. We expect ocean shipping rates to remain stabilized for the rest of the year. Our total operating expenses for the second quarter were $17 million, which was an increase of 93% year-over-year from $8.8 million. On a first-half basis, total operating expenses amounted to $28.7 million, which was an increase of 57.8% from $18.2 million in the same period last year. Breaking this down further for just the second quarter, selling and marketing expenses increased 74.9% year-over-year to $9.5 million. General and administrative expenses increased 106.7% year-over-year to $6.9 million. Research and development costs were $0.5 million in the second quarter of '23 versus none in the same period of 2022. These increases were due to additional headcount to support our growing organization, a larger advertising spend, and more trade show participation to bolster organic growth and reinvestment in our technological platform to continuously improve our user experience. On the bottom line, our net income for the second quarter was $18.4 million, which was an increase of approximately 202% year-over-year from $6.1 million. This resulted in basic and diluted earnings per share of $0.45 compared to $0.15 in the prior year. On a six-month basis, net income stood at $34.3 million for the period ending June 30, '23, resulting in a basic and diluted earnings per share of $0.84 versus net income of $10.8 million in the same period last year, which resulted in basic and diluted earnings per share of $0.28. The adjusted EBITDA for the second quarter of '23 was $24.9 million, representing an increase of 219.3% year-over-year from $7.8 million. On a first-half basis, we generated adjusted EBITDA of $44.7 million for the six months ended June 30, '23, an increase of 203.9% compared to $14.7 million in the prior year. Moving on to our balance sheet. We ended the second quarter with $181.5 million in cash, marking a net increase of approximately $38 million from the quarter ended December 31, '22, and an increase of $18.8 million from the quarter ended March 31, '23. Finally, I want to touch on our financial outlook. For the third quarter of '23, we are now expecting total revenues in the range of $162 million to $167 million, which represents an approximately 28.5% gain over the previous year at the midpoint. Additionally, in the third quarter of '22, as a result of the successful completion of our IPO, we recorded a one-time stock-based compensation expense of $8.9 million. The SBC expense for Q2 was $1.5 million, and we expect our SBC expense to be more evenly spread out going forward.

Just wanted to cover the third quarter outlook for revenue in a bit more detail. Is there a way you could provide a breakdown between the product and marketplace revenue that you're assuming in that third quarter outlook, it looks like a nice acceleration that you're planning on? So just wondering where that sort of coming from, first of all? And then maybe just on the gross margin commentary as well, you mentioned a similar level of profit through the rest of the year. Just wanted to see if you could comment on sort of does that mean we can stick with the mid-20% gross margin you published in the second quarter for the third and the fourth? Maybe just a little bit more color on that as well.

Matt, it's David. Perhaps I'll address your question around our margin profile. I think we are quite comfortable with our margin profile today. Depending on how the outlook for the second half of the year looks, given where ocean shipping rates are today, I think it's safe to assume that we can maintain this trajectory for the second half of the year. Regarding your first question, the breakup between our product and service revenue has been approximately 60% to 40%. I think going forward, that's likely to remain the same trajectory as well.

Okay. All right. Got it. 60-40. That's helpful. And then just digging into the services revenue line for the second quarter, you mentioned a nice step-up in last mile as a driver of growth on a year-over-year basis. So I just wanted to see if you could maybe unpack that, discuss the types of last mile services that your sellers are paying you for, what's that a function of maybe just, I would assume, a better rate card versus your smaller sellers on the platform, but maybe if you could just kind of explain the drivers of that nice year-over-year growth.

Iman, do you want to handle that one?

Matt, could you kindly repeat that question? I was trying to write.

Sure. Yes. So just the step-up in last mile services revenue was notable in the second quarter. So I just wanted to see if you could discuss the drivers of that nice acceleration on a year-over-year basis.

Yes, maybe I can take this one. This is Larry Wu. I think in the past, due to restrictions that many of the shipping partners we have, they had limited capacity which prevented our customers from shipping their products that were not transacted through our marketplace. However, we understand that our customers consistently need to get their products, whether they are selling on their own or through other channels. As we are seeing most of our shipping partners relaxing those restrictions, we are now allowing our customers to ship products that are not transacted on our marketplace, providing them the flexibility to utilize the marketplace in diverse ways. I definitely believe that we are offering more value by being able to provide that service.

Okay. That's helpful. And then just on the seller growth, it was pretty robust year-over-year at 47%. Just wanted to hear maybe a bit more detail on where you're seeing success in adding sellers. And then I noticed a bit of an uptick in the sales and marketing line. So I just wanted to see, are we spending into seller acquisition to get that acceleration? Just maybe a bit more detail on sort of the dynamics of seller acquisition that you're seeing?

Matt. Sorry, I was talking on mute. And thank you, Larry, for taking that question. As I mentioned earlier, bringing in organic seller growth is going to be a clear indicator of a healthy marketplace. So we're investing a lot of energy into recruiting sellers of different kinds that could come to the marketplace. Many of these sellers bring with them unique offerings. A significant portion of our recruitment efforts lately has focused on sellers who handle last mile delivery and value-added services, which relates back to your first question. We're committed to investing in recruiting sellers, and we anticipate that trend to continue, as they will introduce a variety of SKUs, attracting more buyers to the platform.

Okay. Great. And then just to that end, I guess, wondering on the spend per buyer, which took a notable step up. Maybe wanted to see if you could talk about whether we are adding larger buyers, whether the assortment is growing allowing for more spend per average buyer, or if we are converting marginal buyers. Just some insight into the movements underneath the hood in terms of the spend per buyer.

If I may take that question, we're kind of seeing both, Matt. Some buyer consolidation is occurring because some of the buyers operate multiple accounts, which sometimes consolidate into a larger one. Conversely, better competition may lead to the churn of less suitable buyers. This is advantageous for the marketplace as it is becoming a space for higher-quality players that can produce results. Thus, we observe both dynamics occurring concurrently, which is beneficial as the average spend growth indicates the marketplace is becoming stickier.

Okay. Excellent. Maybe one more from me, then I'll leave it to others. But regarding the M&A pipeline, you've mentioned some potential activities in your prepared remarks. I'm curious if there is anything in the pipeline that seems to be maturing? How should we be contemplating capital deployment towards M&A for the remainder of the year?

Matt, it's David. Unfortunately, I don't think we'll be able to disclose anything further at this point in time. At the appropriate time, we will provide information to the market. We view M&A as a tool for us to quickly enter and expand into areas we are targeting. We're searching for the right targets, particularly in channels and product portfolio expansion. As you know, we operate in a fragmented market, and M&A is an excellent avenue for us to consolidate and integrate parties into our marketplace.

Could you discuss the growth you experienced in the quarter in relation to the core U.S. business versus other markets, especially Europe, considering your significant focus on that region?

I can take that one. The European market is currently an important focus for us. We have seen significant growth acceleration in the quarter from there. Unfortunately, I cannot provide a breakdown, as that is not something we track, but we do see strong acceleration in Europe during this quarter.

Okay. Fair enough. And just a follow-up, if I could. During the call, you mentioned your focus on furniture retailers. I wonder if you could talk about the difference in your marketing platform and what it will take to maintain growth in that segment? Will you need to shift strategies, bring in additional hires, or change your marketing platform? Or will you continue with your current approach, which seems to be working very well?

Rommel, as we mentioned earlier, expansion into brick-and-mortar is crucial to our future growth plans. We will actively engage in recruiting and advertising. There is substantial opportunity available, particularly now. Many furniture brick-and-mortar retailers face significant challenges that we can address through our marketplace and supply-chain solutions. Thus, this will be a major focus for us moving forward.

Congratulations on a strong quarter. I have two questions. First, we noticed that you announced a repurchase program. We are just wondering if you have repurchased shares after that announcement. The second question is about the Q3 outlook. We noted that you had two consecutive quarters of profitability, yet you're guiding higher for Q3 revenue. Can you provide more color on the outlook for Q3 and beyond?

Sorry, I was on mute. I will address your outlook for the rest of the year. If you take a closer look at our 2022 Q3 earnings, you will notice our net income was slightly under $1 million due to one-off stock-based charges, which resulted from our IPO at that time. As I mentioned earlier, we expect our stock-based compensation charges to be more evenly distributed going forward. Therefore, that's about all I can share in terms of profitability for the second half of the year. Regarding your earlier question about the repurchase program, as Iman mentioned, we did not repurchase any shares in the open market in our second quarter. However, we executed a repurchase agreement with a broker by the end of Q2 to facilitate open market purchases, and we will share updates as possible with the market.

Yes. Nice to talk to you. I have two questions. Some of this was broadly addressed, but I'd like to ask anyway. I'm curious about the company’s efforts toward organic growth versus inorganic growth. Specifically, are there geographic or product verticals beyond furniture that you are considering going into 2024 to sustain top-line growth?

I can address your first question. We are ramping up our sales and marketing spend focused on brick-and-mortar retailers. Currently, many in the industry face large inventory challenges, which presents us with an opportunity to penetrate and capture market share. Digital-only retailers continue to gain traction; however, the majority of future sales occur in physical locations, thus gaining market share will require our focus on brick-and-mortar connections. The opportunity will also remain heavily with that side of the market in the future.

What do you think your penetration rate is in that segment if you think it's so under-penetrated?

I can provide you with an idea of the total addressable market within that category. The big and bulky market is exceptionally fragmented. For us, it includes not just furniture, but also home fitness, gardening, and even auto parts, alongside other categories that qualify as big and bulky. Furniture represents the largest segment, with the total addressable market in the U.S., our biggest market, valued at about $60 billion annually in wholesale volume.

I'd say you're pretty under-penetrated, but okay.

Exactly. So there is a significant runway ahead of us.

What about the variability introduced by shipping rates affecting margins?

If you closely review our financials, you will see that ocean shipping rates peaked in the first half of 2022. Throughout that time, we maintained profitability, albeit with some correlation to those high rates, which can affect our profitability. That said, we managed to navigate through those challenging times while maintaining profitability. I hope that clarifies your inquiry.

Lastly, can you discuss who your main competitors are in the space and why your clientele chooses you over them?

If you focus on what we do, the core value that we deliver, I don't see any significant competitors because we are focused on large and bulky goods in the wholesale sector, which gives us an advantage. Regarding the competitive landscape, there's a privately-owned company based in Silicon Valley called Fair.com, which operates in a similar concept but focuses on smaller items. However, we believe that the value and competitive advantage we hold lie in our handling of big and bulky goods, which are non-standard items. Fair.com currently holds a valuation of $12 billion.

I just have a very quick question. I noticed that the company is bringing in two new U.S.-based directors to the Board. Are you guys trying to be a bit more Americanized from a governance perspective?

Yes, I can address that question. Actually, no, as the majority of our Board members are already U.S. persons. The reason for this restructuring is primarily operational and diversity considerations. John has over 19 years of experience at Walmart and is currently the Vice President of Global Logistics at doTERRA International, which will provide us with invaluable experience for our growth in the U.S. and internationally. Laurie has extensive experience in the U.S. furniture industry. She established a consulting firm, providing advisory services to top U.S. furniture companies. We are confident that our proposed Board will offer fresh insights and diverse perspectives on our business.

Thank you, everyone, for joining our earnings call today. If you have any further questions for the management team, feel free to e-mail us. We look forward to speaking with you again. Thank you, everybody.

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.