GigaCloud Technology Inc (GCT) 2024 Q2 法說會逐字稿

Thank you all for standing by. Welcome to GigaCloud Technologies second quarter 2024 Earnings Conference Call. (Operator Instructions) Joining us today from GigaCloud Technology are the company's Founder, Chairman and CEO, Larry Wu; its President, Dr. Iman Schrock; and its Chief Financial Officer, David Lau.

謝謝大家的支持。歡迎參加 GigaCloud Technologies 2024 年第二季財報電話會議。（操作說明）今天加入我們的是GigaCloud Technology公司的創辦人、董事長兼執行長Larry Wu；主席 Iman Schrock 博士；及其財務長劉大衛。

Iman will give performance and operational overview, and David will share the financial results. After that, there will be a question-and-answer session.

伊曼將提供業績和營運概況，大衛將分享財務表現。之後，將進行問答環節。

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.

提醒一下，本次電話會議包含有關未來事件和預期的陳述，這些陳述本質上是前瞻性的，實際結果可能存在重大差異。

Additionally, today's call and webcast will include non-GAAP financial measures within the meaning of SEC Regulation G. When required, reconciliation of all non-GAAP financial measures to the most direct comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release as well as on the company's website. With that, I would like to turn the call over to Larry for opening remarks. Please go ahead.

此外，今天的電話會議和網路直播將包括 SEC G 條例含義內的非 GAAP 財務指標。稿以及公司網站上。說到這裡，我想將電話轉給拉里，請他致開幕詞。請繼續。

Thank you, operator, and welcome, everyone, to today's call. This quarter marks a significant milestone for our company as we achieved the record revenue growth for the sixth consecutive quarter. Additionally, despite the industry-wide challenge, including 7% year-over-year decline in retail furniture sales in the first half of the 2024 in the United States and the elevated ocean shipping costs, our adjusted EBITDA increased substantially.

謝謝接線員，歡迎大家參加今天的電話會議。本季標誌著我們公司的一個重要里程碑，我們連續第六個季度實現了創紀錄的收入成長。此外，儘管全行業面臨挑戰，包括 2024 年上半年美國零售家具銷售額年減 7%，以及海運成本上升，但我們調整後的 EBITDA 仍大幅成長。

These results underscore the strong demand for our marketplace and its ability to streamline the efficiency of the wholesale global supply chain. And [that is a reason] why we connect the buyer and seller of large nonstandard item seamlessly around the globe.

這些結果凸顯了對我們市場的強勁需求及其簡化全球批發供應鏈效率的能力。[這就是]為什麼我們將全球大型非標準物品的買家和賣家無縫連接起來的原因。

Our acquisition of Noble House and Wondersign and the launch of our first -- industry first BaaS or brand as a service are already contributing to our success. In the second quarter, we successfully introduced Noble House related SKUs to our marketplace, which contributed approximately $57 million in GMV.

我們收購了 Noble House 和 Wondersign，並推出了業界首個 BaaS 或品牌即服務，這些都為我們的成功做出了貢獻。第二季度，我們成功地將 Noble House 相關 SKU 引入我們的市場，為 GMV 貢獻了約 5700 萬美元。

The first half of this year has been extremely productive, and we are driving continued progress, sustainable and profitable growth as a leader and the disruptor of the e-commerce technology solution. We were honored to be added to the Russell 2000 Index through their recent reconstitution. Now I will turn the call over to Iman to provide more color on our operational highlights.

今年上半年非常富有成效，作為電子商務技術解決方案的領導者和顛覆者，我們正在推動持續進步、永續和獲利成長。我們很榮幸透過最近的重組被納入羅素 2000 指數。現在我將把電話轉給伊曼，以提供更多有關我們營運亮點的資訊。

Thanks, Larry. I'd like to add my welcome to those joining us today. We are happy to share that for the first time in our history, our GigaCloud Marketplace GMV reached and surpassed $1 billion in the 12 months ended June 30. Let's dig into that.

謝謝，拉里。我謹對今天加入我們的人表示歡迎。我們很高興與大家分享，在截至 6 月 30 日的 12 個月內，我們的 GigaCloud Marketplace GMV 達到並超過了 10 億美元，這在我們歷史上首次。讓我們深入探討一下。

For the trailing 12 months as of June 30, GigaCloud Marketplace GMV increased by over 80%, eclipsing our first quarter growth by approximately 17 percentage points. This momentum was driven by a remarkable increase in our buyer and seller base.

截至 6 月 30 日的過去 12 個月，GigaCloud Marketplace GMV 成長了 80% 以上，比第一季的成長高出約 17 個百分點。這一勢頭是由我們的買家和賣家基礎顯著增加所推動的。

We welcome 265 new sellers and 2,906 new buyers on a net basis, expanding our 3P seller community by nearly 40% to a total of 930 and our buyer base by a record-breaking 67% year-over-year to 7,257 at the end of the second quarter.

我們迎來了265 名新賣家和2,906 名新買家，使我們的3P 賣家群體擴大了近40%，達到930 名，而截至2017 年底，我們的買家數量同比創紀錄地增長了67%，達到7,257 名。

Furthermore, average buyer spending climbed 8.3% to more than $151,000, demonstrating the increasing engagement of our marketplace participants and the additional value our platform provides. By all metrics, our marketplace is thriving, and we see many opportunities to continue this trajectory.

此外，平均買家支出攀升 8.3%，超過 151,000 美元，這表明我們市場參與者的參與度不斷提高，以及我們平台提供的附加價值。從所有指標來看，我們的市場都在蓬勃發展，並且我們看到了許多繼續這一發展軌蹟的機會。

Our average buyer spend as a whole decreased slightly compared to Q1 due to the uptick in recent growth as we have observed a significant influx of over 900 buyers to our marketplace in the last quarter, whom we typically expect to start at lower initial trading volume.

與第一季相比，我們的平均買家支出總體上略有下降，這是由於近期增長有所上升，因為我們觀察到上個季度有超過900 名買家大量湧入我們的市場，我們通常預計這些買家的初始交易量會較低。

Average spend per buyer for participants that joined us prior to Q2 have continued to increase on a sequential basis. GMV in our 3P marketplace grew 76% from a year ago and totaled approximately $572 million for the trailing 12 months ended June 30, 2024. 3P sellers accounted for 52.1% of our total marketplace GMV for the same period. Combined with our 1P strategy, we have the pieces in place to continue growing the GigaCloud marketplace while further improving efficiency and value for all participants.

在第二季之前加入我們的參與者的每位買家的平均支出持續較上季成長。截至 2024 年 6 月 30 日的過去 12 個月，我們 3P 市場的 GMV 較去年同期成長 76%，總額約 5.72 億美元。同期，3P 賣家占我們市場總 GMV 的 52.1%。結合我們的 1P 策略，我們已準備好繼續發展 GigaCloud 市場，同時進一步提高所有參與者的效率和價值。

As I mentioned last quarter, our growth resulted from GigaCloud's highly robust technology suite that transforms and facilitate the way suppliers and retailers of large parcel and nonstandard items connect and transact.

正如我上季度提到的，我們的成長得益於 GigaCloud 高度強大的技術套件，該套件改變並促進了大包裹和非標準物品的供應商和零售商的連接和交易方式。

Now I'd like to give you a progress update on our BaaS offering, which was officially launched in the second quarter with our ecosystem brand Christopher Knight Home. We built this unique solution to provide furniture suppliers with a streamline and efficient way to build their brand, which has been a long-standing challenge throughout the industry.

現在我想向您介紹我們的 BaaS 產品的最新進展，該產品已於第二季度與我們的生態系統品牌 Christopher Knight Home 一起正式推出。我們建構這個獨特的解決方案是為了為家具供應商提供一種簡化、高效的方式來打造他們的品牌，這一直是整個產業長期面臨的挑戰。

We have observed significant enthusiasm and interest in our BaaS program since we announced it. We have successfully launched the initial pilot phase with a carefully selected group of marketplace sellers. The overall level of additional strong interest from both existing and new sellers has far exceeded our expectations. This early momentum reinforces our belief that BaaS will be a powerful tool in strengthening and expanding our service offerings, empowering marketplace participants with a diverse toolbox to drive growth and success.

自從我們宣布 BaaS 計劃以來，我們發現了人們對它的極大熱情和興趣。我們已經與一群精心挑選的市場賣家成功啟動了初始試點階段。現有賣家和新賣家的額外強烈興趣的總體水平遠遠超出了我們的預期。這一早期勢頭強化了我們的信念，即 BaaS 將成為加強和擴展我們服務產品的強大工具，為市場參與者提供多樣化的工具箱，以推動成長和成功。

Last quarter, we discussed addressing accelerating demand through the expansion of our fulfillment footprint. Our global fulfillment network has 42 prime locations in 5 countries, comprising of more than 10 million square feet of fulfillment space. We are driving efficiencies and transactions among marketplace participants and our established fulfillment centers across the US are averaging over 90% utilization rate, and we are actively seeking additional space to accommodate continued rapid growth. Our integrations of Noble House and Wondersign are moving forward nicely and as planned.

上季度，我們討論了透過擴大履行範圍來解決不斷增長的需求。我們的全球履行網路在 5 個國家擁有 42 個黃金地段，包括超過 1,000 萬平方英尺的履行空間。我們正在提高市場參與者之間的效率和交易，我們在美國各地建立的履行中心的平均利用率超過 90%，我們正在積極尋求額外的空間來適應持續的快速成長。我們對 Noble House 和 Wondersign 的整合正在按計畫順利推進。

In the second quarter, we introduced Noble House related SKUs to our marketplace, which contributed approximately $57 million of GMV in the 3 months ended June 30, 2024. Currently, only 5% of the SKUs are accessible to our external buyers with the majority remaining with the original Noble House channels.

第二季度，我們向市場引入了 Noble House 相關 SKU，在截至 2024 年 6 月 30 日的三個月內貢獻了約 5700 萬美元的 GMV。目前，只有 5% 的 SKU 可供外部買家使用，其中大部分仍透過原始的 Noble House 管道獲得。

Moving forward, we plan on gradually opening up these SKUs to external participants. As communicated previously, we expect to achieve breakeven with Nobel House later this year with anticipated profitability in the first half of 2025.

展望未來，我們計劃逐步向外部參與者開放這些 SKU。正如之前所傳達的，我們預計今年稍後將與 Nobel House 實現收支平衡，並預計在 2025 年上半年實現盈利。

We are extremely bullish on our marketplace and the opportunities ahead. GigaCloud disrupted the B2B online marketplace with a unique business model that connects buyers and sellers of large parts of merchandise to efficiently grow their own businesses in a cost-effective way. Now I will turn the call over to David for a more detailed review of our financial results. David?

我們非常看好我們的市場和未來的機會。GigaCloud 憑藉獨特的商業模式顛覆了 B2B 線上市場，該模式將大部分商品的買家和賣家聯繫起來，以經濟高效的方式有效地發展自己的業務。現在我將把電話轉給大衛，讓他更詳細地審查我們的財務表現。大衛？

Thanks, Iman. I'll now walk through our second quarter numbers in more detail. Please note that all figures quoted have been rounded. Our second quarter results demonstrate strong execution against our growth strategy. Total revenues more than doubled year-over-year to $311 million in Q2, an increase roughly of 24% on a sequential basis. This is a direct result of our ongoing efforts to expand our marketplace product and service offerings and have our ability to capture growing market opportunities.

謝謝，伊曼。現在我將更詳細地介紹我們的第二季數據。請注意，所有引用的數字均已四捨五入。我們第二季的業績顯示我們的成長策略得到了強而有力的執行。第二季總營收年增一倍多，達到 3.11 億美元，季增約 24%。這是我們不斷努力擴大市場產品和服務範圍並有能力抓住不斷增長的市場機會的直接結果。

Diving deeper into the revenue specifically, service revenues from GigaCloud 3P grew more than 97% to $85 million, a direct reflection of enhanced engagement of our marketplace participants. Product revenues grew more than 105% to $225 million in Q2. We're pleased to report that our strategic investments from the previous year are yielding strong revenue returns.

具體深入研究收入，GigaCloud 3P 的服務收入成長了 97% 以上，達到 8,500 萬美元，這直接反映了我們市場參與者參與度的提高。第二季產品營收成長超過 105%，達到 2.25 億美元。我們很高興地報告，我們去年的策略投資正在產生強勁的收入回報。

The impressive performance of Noble House outdoor product line contributed significantly to our second quarter sales, highlighting the effectiveness of our growth strategy. Furthermore, our fastest-growing European markets continue to lead the way in product sales growth, achieving 139% year-over-year growth.

Noble House戶外產品線的出色表現對我們第二季度的銷售做出了巨大貢獻，凸顯了我們成長策略的有效性。此外，我們成長最快的歐洲市場持續引領產品銷售成長，年增 139%。

Cost of revenues were $234 million for the second quarter compared with $113 million, while the absolute amount increased as a reflection of the investment we've made to support the soaring demand of our marketplace. The percentage to total revenues of 75% remained relatively stable for the second quarter compared to last year, demonstrating our ability to manage cost effectively and this rapid growth and changing environment.

第二季的收入成本為 2.34 億美元，而第二季的收入成本為 1.13 億美元，而絕對金額的​​增加反映了我們為支持市場不斷增長的需求而進行的投資。與去年相比，第二季佔總收入的比例為 75%，保持相對穩定，這表明我們有能力有效管理成本以及快速成長和不斷變化的環境。

Gross profit for the second quarter increased approximately 90% to $76 million. Gross margin percentage contracted slightly as we continue to build our fulfillment infrastructure with newly leased centers ramping up to full operational efficiencies.

第二季毛利成長約 90%，達到 7,600 萬美元。隨著我們繼續建設履行基礎設施，新租用的中心全面提高營運效率，毛利率略有下降。

Additionally, increased delivery costs and temporary industry-wide ocean freight rates spiked in late April and May. However, we observed a moderation in rates during July and remain vigilant in monitoring this dynamic.

此外，四月下旬和五月，運輸成本增加，整個產業的臨時海運運費飆升。然而，我們觀察到 7 月利率有所放緩，並保持警惕監測這一動態。

Total operating expenses amounted to $49 million for the second quarter compared with $17 million. Such expenses are associated with our ongoing infrastructure development required to meet growing demand of our B2B platform.

第二季的總營運支出為 4,900 萬美元，而第二季的營運支出為 1,700 萬美元。此類費用與我們持續進行的基礎設施開發有關，以滿足我們 B2B 平台不斷增長的需求。

Breaking this down further, Selling and marketing expenses were $19 million compared with $10 million driven mainly by higher staffing-related costs, higher commissions and advertising costs and higher platforms, service fees paid to certain third-party e-commerce websites.

進一步細分，銷售和行銷費用為 1,900 萬美元，而 1,000 萬美元主要是由於人員相關成本、佣金和廣告成本以及支付給某些第三方電子商務網站的平台、服務費增加所致。

General and admin expenses totaled $26 million compared with $7 million last year. This increase primarily was due to the concentrated granting in vesting of our share-based awards, higher staffing costs, including R&D efforts to accommodate expansion of our business, higher professional service fees and increase in rental expense related to fulfillment centers and also the set of expense required to bring our new fulfillment centers fully operational.

一般及管理費用總計 2,600 萬美元，而去年為 700 萬美元。這一增長主要是由於集中授予我們的股票獎勵、更高的員工成本（包括適應業務擴展的研發工作）、更高的專業服務費以及與履行中心相關的租金費用以及一系列我們的新履行中心全面投入營運所需的費用。

A major component of our G&A expense is related to our people-centric approach. We believe our employees are our greatest asset, and we strategically invest in our development and growth. To attract, retain and incentivize top talents, our compensation programs include share-based awards, which have traditionally been granted in the second quarter of each fiscal year with the majority of granting and vesting immediately in the same quarter upon grant.

我們的一般管理費用的一個主要組成部分與我們以人為本的方法有關。我們相信員工是我們最大的資產，我們對我們的發展和成長進行策略性投資。為了吸引、留住和激勵頂尖人才，我們的薪酬計劃包括基於股票的獎勵，傳統上在每個財政年度的第二季度授予，其中大部分在授予後立即在同一季度授予和歸屬。

Share-based awards expense totaled $13.9 million compared to $1.5 million last year as the company's share price increased significantly year-over-year.

由於該公司股價年比大幅上漲，股票獎勵費用總計 1,390 萬美元，而去年為 150 萬美元。

The impact of these strategic investments and the industry-wide ocean shipping cost is reflected in our net income margin. We remain confident in our ability to deliver sustained profitability as our financial performance remains strong across key metrics.

這些策略投資和全產業海運成本的影響反映在我們的淨利潤率。我們對實現持續獲利的能力仍然充滿信心，因為我們的財務表現在關鍵指標上仍然強勁。

Our net income grew nearly 47% to $27 million. Adjusted EBITDA demonstrated robust growth, increasing approximately 72% to $43 million in the second quarter. Adjusted EPS for the quarter increased 69% to $1.03. We are strong in our cash positions and continue to generate strong positive cash flows with our effective cash managed strategy. At the end of June, our cash, cash equivalents, restricted cash and investments position was $209 million.

我們的淨利潤成長了近 47%，達到 2700 萬美元。調整後 EBITDA 呈現強勁成長，第二季成長約 72%，達到 4,300 萬美元。該季度調整後每股收益成長 69%，達到 1.03 美元。我們的現金狀況強勁，並透過有效的現金管理策略持續產生強勁的正現金流。截至 6 月底，我們的現金、現金等價物、限制性現金和投資部位為 2.09 億美元。

We have strategically allocated $10 million in CapEx during the second quarter, which primarily relates to facility preparation to enhance our global fulfillment capabilities. We remain debt-free with no outstanding borrowings and the liabilities on our balance sheet, primarily related to our fulfillment center leases, which have increased considerably to support our substantial growth. I'll wrap things up with our outlook for the third quarter, where we anticipate revenues will be in the range of $266 million to $282 million.

我們在第二季度策略性地分配了 1000 萬美元的資本支出，主要用於設施準備，以增強我們的全球履行能力。我們仍然沒有債務，資產負債表上沒有未償還的借款和負債，主要與我們的履行中心租賃有關，這些租賃已大幅增加以支持我們的大幅成長。我將總結我們對第三季的展望，我們預計第三季的營收將在 2.66 億美元至 2.82 億美元之間。

Thank you all for joining us today. Operator, we're ready for questions. Thank you.

感謝大家今天加入我們。接線員，我們準備好回答問題了。謝謝。

(Operator Instructions)

（操作員說明）

Ryan Meyers, Lake Street Capital Markets.

瑞安·邁耶斯（Ryan Meyers），湖街資本市場。

For me, I just kind of want to unpack the second quarter revenue number. Obviously, you guys came in well ahead of your expectations. Maybe just kind of walk us through and provide a little bit more detail on what you saw during the quarter, where ultimately you were able to kind of report numbers that were a bit better than what you originally expected.

對我來說，我只是想了解第二季的收入數據。顯然，你們的表現遠遠超出了你們的預期。也許只是向我們介紹一下，並提供有關您在本季度看到的情況的更多詳細信息，最終您能夠報告比您最初預期的更好的數字。

Yes, absolutely. Perhaps I'll take a stab and others, please feel free to chime in. Like I said earlier, we're integrating the Noble House business and Noble House is very strong in the outdoor section, and we are able to increase that portion into our entire SKU portfolio. And we mentioned earlier that Noble House related SKUs were added into the B2B marketplace and that amounts to roughly $57 million in GMV, and that's really kind of what kind of blew out the quarter for us.

是的，絕對是。也許我會嘗試一下，其他人也請隨意插話。正如我之前所說，我們正在整合 Noble House 業務，而 Noble House 在戶外領域非常強大，我們能夠將該部分增加到我們整個 SKU 產品組合中。我們之前提到，Noble House 相關的 SKU 被添加到 B2B 市場中，GMV 約為 5700 萬美元，這確實是我們本季業績的亮點。

Okay. Got it. That's helpful. And then kind of thinking about that as well as we think about the third quarter guidance, I mean what would you need to maybe see to come in at the high end of that range or even third then that initially guided range? Is it more Noble House integration? Or is it just an improvement in the overall kind of GMV across the business? Just kind of help me think about that.

好的。知道了。這很有幫助。然後考慮這一點以及我們對第三季度指導的思考，我的意思是，您可能需要看到什麼才能達到該範圍的高端，甚至是最初指導範圍的第三個？是不是更融入貴族之家？或者這只是整個業務整體 GMV 的改善？只是幫助我思考一下。

Yes. I guess it's all of the above. I think when we were projecting how Q3 is going to look like for us, we incorporate what we think Noble House is going to contribute to the quarter. And obviously, the evolution and the growth and the expansion of the B2B, the organic marketplace. So I guess it's both organic and organic growth that we put into consideration when we projected our Q3 outlook.

是的。我想以上就是這些了。我認為，當我們預測第三季的情況時，我們考慮了 Noble House 將為該季度做出的貢獻。顯然，B2B（有機市場）的演變、成長和擴張。因此，我認為在預測第三季前景時，我們考慮了有機成長和有機成長。

Okay. Got it. And then last question for me. Freight rates have been a drag on the gross margin. Just kind of walk us through maybe how we should be thinking about gross margins for Q3 and Q4 as freight rates are completely changing for you guys?

好的。知道了。然後是我的最後一個問題。運費一直拖累毛利率。請告訴我們，隨著運費對你們來說完全改變，我們應該如何考慮第三季和第四季的毛利率？

Yes. I think -- well, I think if you look at the current freight rate, you'll see that it's actually gradually normalizing. It's still on the higher end. And we had a fixed rate contract that we mentioned in our last earnings call that is already in place and in execution. So I think there will be some compression to margin overall, but we don't expect that to be significant in magnitude.

是的。我認為——嗯，我想如果你看看目前的運費，你會發現它實際上正在逐漸正常化。它仍然處於高端。我們在上次財報電話會議中提到了一份固定利率合同，該合約已經到位並正在執行。因此，我認為整體利潤率將會受到一些壓縮，但我們預計壓縮幅度不會很大。

Got it, thank you for taking my question.

明白了，謝謝你回答我的問題。

(Operator Instructions)

（操作員說明）

Matt Koranda , ROTH Capital.

馬特·科蘭達，羅斯資本。

Just on Noble House, you mentioned, I guess, 5% of the SKUs available to buyers in the marketplace and that's generating already, I guess, $57 million in GMV. So how long until we see 100% of the SKUs available on the marketplace. And then should we assume sort of a ratable revenue improvement once you make all of the SKUs available to the marketplace.

就在 Noble House 上，您提到，我猜，市場上有 5% 的 SKU 可供買家使用，我猜這已經產生了 5700 萬美元的 GMV。那麼我們需要多長時間才能看到市場上 100% 的 SKU 可用。然後，一旦您將所有 SKU 推向市場，我們是否應該假設收入會有所改善。

Iman, you want to take that one?

伊曼，你想拿那個嗎？

Sure. Matt, so with Noble House, the intention is to preserve the existing sales channel as of right now. So we're slowly and gradually utilizing the marketplace to open up the SKUs and it calculated the way to the marketplace participants. And we have ongoing plans to do this on a regular basis. And you should see like more of the top line kind of slowly contribute in that sense.

當然。Matt，因此，Noble House 的目的是保留目前現有的銷售管道。因此，我們正在慢慢地、逐步地​​利用市場來開放SKU，並計算出市場參與者的方式。我們有持續的計劃定期這樣做。從這個意義上說，你應該看到更多的頂線慢慢做出了貢獻。

I think the idea we're having is that we're trying to balancing utilizing the marketplace to help in the Noble House product to generate incremental growth in their sales. But at the same time, we're also trying to prioritize our relationship with the major B2B channels that Noble House used to have a strong relationship with.

我認為我們的想法是，我們正在努力平衡利用市場來幫助 Noble House 產品實現銷售的增量成長。但同時，我們也在努力優先考慮與 Noble House 曾經有過密切關係的主要 B2B 管道的關係。

So the idea is, I think probably we're going to make 20%, 30% of the Noble House product to be available in the marketplace, but we're trying to keep the majority of them with the major B2C partners we're having.

所以我們的想法是，我認為我們可能會將 20%、30% 的 Noble House 產品投放到市場上，但我們正在努力將其中的大部分保留在我們所合作的主要 B2C 合作夥伴手中。

Okay. All right. That's helpful. And then just, I guess, inventory is building a little bit more quarter-over-quarter and just wanted to hear sort of the drivers there. I would assume you're bringing in additional SKUs from Noble House. So maybe just talk about what you're doing on the inventory front with Noble House and the core business.

好的。好的。這很有幫助。然後，我想，庫存環比增加一點，我只是想聽聽那裡的驅動因素。我假設您從 Noble House 引入了額外的 SKU。因此，也許只是談談您在 Noble House 的庫存方面和核心業務方面所做的事情。

Yes. This is Larry. I'll take this one. I think we understand, although the turn of the Noble House product, yearly -- because it's a little bit slower than the bigger product, but we still place a pretty sizable order to the whole supply chain of the Noble House because we understand just because the bankruptcy, our vendors need those kind of funding and also at the same time that we also try to provide the confidence to our channel partners, but we will gradually try to improve the turn of the Noble House product, try to get the those return efficiency to be close to our traditional GIGA products as closely as possible.

是的。這是拉里。我要這個。我想我們理解，雖然每年諾布爾之家產品的輪換——因為它比更大的產品慢一點，但我們仍然向諾布爾之家的整個供應鏈下了相當大的訂單，因為我們理解只是因為破產後，我們的供應商需要這些資金，同時我們也盡力為我們的通路夥伴提供信心，但我們會逐步嘗試提高Noble House產品的周轉率，努力獲得這些回報效率盡可能接近我們傳統的GIGA產品。

The other reason is on early on the ocean shipping price goes up because of the cost we're paying for an ocean product, although the quantity of the products keep the same year because of the increase of ocean shipping, the dollar value could increase for that reason. That's also happened for the last time when the ocean shipping cost went up where you can check our historical data to get the idea of that mechanism?

另一個原因是早期海運價格上漲，因為我們支付海運產品的成本，儘管由於海運增加，產品數量保持不變，但美元價值可能會增加那個原因。上次海運成本上漲時也發生過這種情況，您可以查看我們的歷史數據以了解該機制嗎？

Okay. All right. Got it. On the outlook, I guess, maybe I'll ask it this way. One, why the sequential revenue decline in the third quarter relative to the second? I guess that breaks the trend that you guys have been on the nice trend over the last couple of years. So maybe just speak to sort of why we see that declining sequentially? And then also maybe if you could love to hear you just break out service versus product expectations just because product does seem to be becoming a little bit more important with Noble House and you guys generating more revenue, both on and off platform from Noble House?

好的。好的。知道了。就前景而言，我想，也許我會這樣問。一、為何第三季營收較第二季季減？我想這打破了你們過去幾年一直處於良好趨勢的趨勢。那麼也許只是談談為什麼我們看到這個數字連續下降？然後，也許您願意聽到您將服務與產品期望進行比較，只是因為產品似乎對 Noble House 變得更加重要，並且你們在 Noble House 平台內外都產生了更多收入？

Yes, I think the first thing is, I need to point out, Noble House business has a strong seasonality because they are strong with outdoor furniture. So the contribution for Q2 is a very significant from their legacy business. But definitely for that part is where we're seeing the Q3 sales number won't be as strong as Q2 for the Noble House product.

是的，我認為首先我需要指出的是，Noble House業務具有很強的季節性，因為他們以戶外家具為主。因此，第二季的貢獻來自他們的傳統業務，非常重要。但毫無疑問，我們看到 Noble House 產品第三季的銷售數字不會像第二季那麼強勁。

At the same time, I think everybody understands that the whole industry have been experiencing very strong headwinds of quite a while in the past, I think, more than 1 year. So for the furniture industry as a whole, that we are very cautious about managing our growth, and also the resources that we're putting in so that the reason you're seeing the sequential growth what we're providing.

同時，我想每個人都明白，整個產業在過去很長一段時間（我想，一年多了）經歷了非常強勁的逆風。因此，對於整個家具行業來說，我們對管理我們的成長以及我們投入的資源非常謹慎，以便您可以看到我們所提供的連續成長。

Okay. Got it. Maybe last one really quickly, just if you could touch on the margin trajectory into the third quarter, maybe what the outlook may imply. And I know David earlier, you mentioned you don't expect as much of an impact from the recent ocean freight increase. Maybe can you just put a finer point on why not this why things are a little bit different this time around?

好的。知道了。也許最後一個真的很快，只要你能觸及第三季的利潤軌跡，也許前景可能意味著什麼。我早些時候認識大衛，您提到您預計最近的海運費成長不會產生那麼大的影響。也許你可以更詳細地解釋為什麼這次事情有點不同？

Yes, Matt. As I mentioned, we have a fixed rate contract that we signed with various shipping companies, which we never had, I guess, 2 years ago when we saw ocean shipping rates surge. So this time, we're different, we're hedged, we're protected. Obviously, we're not hedged 100% of the volume. But because we have some of these fixed rate contracts were better protected on any further storage in ocean shipping rates.

是的，馬特。正如我所提到的，我們與多家航運公司簽訂了固定費率合同，我想，兩年前我們看到海運費率飆升時，我們從未有過這種合約。所以這次，我們有所不同，我們受到對沖，我們受到保護。顯然，我們並沒有對沖 100% 的交易量。但因為我們有一些固定費率合約在海運費率的任何進一步儲存中得到了更好的保護。

Then how far -- any characterization of how far out we're hedged. I would assume these are annual sort of contracts, so maybe it works out through this year, but any color you can provide folks around sort of timing duration of that hedge?

然後是多遠——任何關於我們被對沖多遠的特徵。我認為這些是年度合同，所以也許今年會有效，但是您可以為人們提供有關對沖時間期限的任何顏色嗎？

I'm not sure if I could disclose too much. I mean, obviously, these are pretty sensitive contracts. But what I can say is we have a pretty sizable of our volume being hedged using these fixed price contracts.

我不確定我是否可以透露太多。我的意思是，顯然，這些都是非常敏感的合約。但我可以說的是，我們有相當大的交易量是使用這些固定價格合約來避險的。

Okay. Got it.

好的。知道了。

Yes. I think several things that happened is because of the hedging mechanism. One is, obviously, there is a good chance that we can see that our ocean shipping revenue, the margin, there's a chance that we can see improvement. This is because of the difference of spot rate and the contract rate is getting wider. So -- but at the same time, that for our 1P business, the cost is kind of a what be negatively impacted for the 1Q cost.

是的。我認為發生的幾件事都是由於對沖機製造成的。一是，顯然，我們很有可能看到我們的海運收入、利潤，我們有機會看到改善。這是因為即期匯率與合約匯率的價差越來越大。因此，但同時，對於我們的 1P 業務來說，成本會對 1Q 成本產生負面影響。

But at the same time, we will try to introduce new products and try to get the opportunity to do the pricing based on the update that were new ocean shipping costs. That's a few things that will happen at the same time.

但同時，我們將嘗試推出新產品，並嘗試有機會根據新的海運成本的更新進行定價。這是同時發生的幾件事。

So a little bit kind of complicated situation, but you try to sum up everything that we see probably moderate kind of pressure of the margin. But because the hedging mechanism and the pricing -- repricing opportunity and a different direction that the 1P,3P business margin will go. I think that's the reason that the David expect that the trend won't be as crazy as we saw in the last time that the ocean shipping already went up.

情況有點複雜，但你試著總結我們看到的一切，可能是適度的保證金壓力。但由於對沖機制和定價——重新定價機會和1P、3P業務利潤率走向不同的方向。我認為這就是大衛預計這一趨勢不會像我們上次看到的海運業已經上漲那樣瘋狂的原因。

(Operator Instructions)

（操作員說明）

Thomas Forte from Maxim Group.

來自馬克西姆集團的托馬斯福特。

Congrats, Larry and team on the quarter. I have 3 questions. I'll go one at a time. For my first question, I wanted to ask the one I get asked most often by investors. What is enabling you to outperform the category by such a large margin? Your sales growth in the second quarter is more than 100% and the home category was down more than 10%. And then what gives you confidence, you can continue to take market share in the future.

恭喜拉里和他的團隊在本季的表現。我有 3 個問題。我一次就去一個。對於第一個問題，我想問投資人最常問我的問題。是什麼讓你們能夠以如此大的優勢超越同類產品？你們第二季的銷售額成長超過100%，而家居類別則下降超過10%。然後，什麼給了你信心，你就可以在未來繼續佔據市場份額。

I think the key reason is, we're introducing a new business model that obviously proved to be one that is providing better efficiency in the supply chain. I think that's the key reason that we don't do business in the way that most of the companies are doing. I think that's the most fundamental reason. But obviously that you see those kind of a difference in the efficiency from company to company. So the quality of management also a contributor to those differences. I think the major one is the business model. The minor one would be, I think the way we manage the company, I will say that.

我認為關鍵原因是，我們正在引入一種新的商業模式，事實證明這種模式可以提高供應鏈的效率。我認為這是我們不像大多數公司那樣開展業務的關鍵原因。我認為這是最根本的原因。但顯然，你會發現不同公司的效率有差異。因此，管理品質也是造成這些差異的因素。我認為最主要的是商業模式。次要的一點是，我認為我們管理公司的方式，我會這麼說。

My second question, you noticed gross margin pressure from new warehouse additions. Historically, how has the optimization improved over time for new warehouses?

我的第二個問題，您注意到新倉庫增加帶來的毛利率壓力。從歷史上看，隨著時間的推移，新倉庫的優化是如何改進的？

Maybe I can take a stab at this one. Typically, with the new leased facility before it becomes fully operational, it takes approximately 4 to 6 months for us as far as the racking and the whole process goes. And that includes like all the shelving, the forklifts, the rental staffing and there's a ramp-up period of 4 to 6 months, I would say.

也許我可以嘗試一下這個。通常，新租賃的設施在全面投入營運之前，我們大約需要 4 至 6 個月的時間來完成貨架和整個流程。我想說，這包括所有的貨架、堆高機、租賃人員以及 4 到 6 個月的準備期。

Excellent. And then for my third and final question, can you give your current thoughts on strategic M&A, both from an opportunity standpoint and your strategy?

出色的。然後，對於我的第三個問題，也是最後一個問題，您能否從機會和策略的角度談談您目前對策略併購的想法？

Yes. This is Larry. Maybe I'll take this one. I think we'll be focusing on looking for opportunity that either can help grow the volume in the ecosystem or to help us to expand the reach of our ecosystem? I think Nobel House and Wondersign are 2 very good examples for that kind of idea.

是的。這是拉里。也許我會選擇這個。我認為我們將專注於尋找機會，既可以幫助增加生態系統的規模，也可以幫助我們擴大生態系統的覆蓋範圍？我認為 Nobel House 和 Wondersign 是這種想法的兩個很好的例子。

I think Noble House was the one that helped us to bring in a lot of new SKU that we are not -- we were not strong with, especially outdoor. And Wondersign is a solution company that will help our customer to get a better reach that they didn't have before. I think that's a very good example that we had with our M&A strategy.

我認為 Noble House 幫助我們引進了很多我們不擅長的新 SKU，尤其是戶外產品。Wondersign 是一家解決方案公司，將幫助我們的客戶獲得前所未有的更好影響力。我認為這是我們併購策略的一個很好的例子。

[Shawn liu] from Panoramic Capital.

[Shawn liu]來自全景資本。

Hi Larry, you mentioned an increase in stock-based awards earlier. Can you talk a bit more on this? It seems like it's concentrated in Q2, but I want to just want to make sure I understand it correctly, are we expecting the same awards in the following quarters?

你好，拉里，你之前提到了股票獎勵的增加。你能多談談這個嗎？看起來它集中在第二季度，但我只想確保我理解正確，我們是否期望在接下來的幾個季度獲得相同的獎項？

No. Yearly majority of the stock-based compensation will happen in Q2 because most of those stock-based compensation is highly kind of performance based. So when we have access to all the data from the previous year that we will reward those contributors in the team based on that new performance data. That's the reason why that you're seeing majority of the stock-based compensation that happened kind of concentrated in Q2.

不。每年大部分基於股票的薪酬將在第二季度發生，因為大多數基於股票的薪酬都是高度基於績效的。因此，當我們能夠存取上一年的所有數據時，我們將根據新的績效數據來獎勵團隊中的貢獻者。這就是為什麼你會看到大部分以股票為基礎的薪酬集中在第二季。

So as David explained that I think the increase is most of them were caused by the increase of the stock price, although the shares awarded didn't change too much, but actually because the stock price went up so much. So that's absolute number increase.

所以正如David解釋的那樣，我認為增加的大部分是由股價上漲引起的，雖然授予的股票沒有太大變化，但實際上是因為股價上漲了很多。這就是絕對數量的成長。

And another reason is -- actually, I didn't pay myself stock in the previous year because as a CEO, I just feel I should be responsible for the relatively not really kind of very exciting results for the 2022 as a CEO, I think I should take that responsibility.

另一個原因是——實際上，我在前一年沒有給自己支付股票，因為作為首席執行官，我只是覺得我應該為2022 年作為首席執行官的相對不那麼令人興奮的結果負責，我認為我應該承擔這個責任。

So I didn't get any stock-based compensation for that year. But for 2023, I think we've delivered pretty impressive financial results. So I also got compensated for the performance of -- I did for '23. I think these are the 2 major factors to impact the stock-based compensation number you're seeing.

所以那一年我沒有得到任何股票補償。但對於 2023 年，我認為我們已經取得了相當令人印象深刻的財務表現。所以我也因為 23 年的表現而得到了補償。我認為這是影響您所看到的基於股票的薪酬數字的兩個主要因素。

There are no further questions at this time. I'll now hand back to David for closing remarks.

目前沒有其他問題。現在我將請大衛致閉幕詞。

Great. Thank you all for your continued support. We're excited about our recent growth and future prospects, and we look forward to speaking with you again next quarter. If you have any questions, please feel free to reach out to the team. Thank you all.

偉大的。感謝大家一直以來的支持。我們對最近的成長和未來前景感到興奮，並期待下季再次與您交談。如果您有任何疑問，請隨時與團隊聯繫。謝謝大家。

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

謝謝。我們今天的會議到此結束。感謝您的參與。您現在可以斷開連線。