UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-Q
_____________________
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2024
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ________ to ________
Commission file number: 001-41454
_____________________
(Exact Name of Registrant as Specified in its Charter)
_____________________
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices, including zip code)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | x | ||||||||||||
| Non-accelerated filer | o | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
The number of outstanding shares of the issuer’s ordinary shares as of July 26, 2024 was 41,362,894 , consisting of 33,286,162 Class A ordinary shares, par value $0.05 per share, issued and outstanding (which had excluded an aggregate of 56,056 Class A ordinary shares issued and reserved for future allocation upon exercise or vesting of awards granted under our share incentive plans; and 215,201 Class A ordinary shares issued and repurchased but not yet cancelled) and 8,076,732 Class B ordinary shares, par value $0.05 per share, issued and outstanding.
GIGACLOUD TECHNOLOGY INC
FORM 10-Q — QUARTERLY REPORT
For the Quarterly Period Ended June 30, 2024
TABLE OF CONTENTS
Item 3. | ||||||||
Item 4. | ||||||||
i
INTRODUCTION
Conventions that Apply to this Quarterly Report
Throughout this quarterly report, we use a number of terms which are defined as follows:
•“3P seller GigaCloud Marketplace GMV”: the total gross merchandise value of transactions sold through our GigaCloud Marketplace by 3P sellers, before any deductions of value added tax, goods and services tax, shipping charges paid by buyers to sellers and any refunds;
•“Active 3P sellers”: sellers who have sold a product in GigaCloud Marketplace within the last 12-month period, irrespective of cancellations or returns;
•“Active buyers”: buyers who have purchased a product in the GigaCloud Marketplace within the last 12-month period, irrespective of cancellations or returns;
•“Cayman Islands holding company”: GigaCloud Technology Inc, our Cayman Islands holding company and its predecessor entity;
•“China” and the “PRC”: the People’s Republic of China; “mainland China”: the People’s Republic of China excluding, for the purposes of this quarterly report only, Taiwan, the Hong Kong Special Administrative Region and the Macao Special Administrative Region; in this quarterly report, any PRC laws, rules, regulations, statutes, notices, circulars and judicial interpretation or the like refer to those currently in force, published for comments (if specifically stated) or being promulgated but have not come into effect (if specifically stated) and publicly available in mainland China as of the date of this quarterly report.
•“Class A ordinary shares” or “our Class A ordinary shares”: the Class A ordinary shares, par value $0.05 per share, of GigaCloud Technology Inc;
•“Class B ordinary shares” or “our Class B ordinary shares”: the Class B ordinary shares, par value $0.05 per share, of GigaCloud Technology Inc;
•“Fulfillment centers”: our warehouses that are strategically located, designed and equipped to manage inventory and to fulfill customer orders and other needs;
•“GigaCloud Marketplace GMV”: the total gross merchandise value of transactions ordered through our GigaCloud Marketplace including GigaCloud 3P and GigaCloud 1P, before any deductions of value added tax, goods and services tax, shipping charges paid by buyers to sellers and any refunds;
•“GMV”: the total gross merchandise value of transactions;
•“HK$” the legal currency of Hong Kong;
•“Hong Kong”: Hong Kong Special Administrative Region of the People’s Republic of China;
•“Hong Kong Subsidiary”: GigaCloud Technology (HongKong) Limited, a wholly-owned subsidiary of GigaCloud Technology Inc in Hong Kong principally for operating the B2B GigaCloud Marketplace;
•“off-platform ecommerce”: the sale of our own inventory to and through third-party ecommerce platforms;
•“PRC Subsidiaries”: the operating subsidiaries of GigaCloud Technology Inc in mainland China principally for procurement and providing inter-group services to the group companies;
•“RMB” and “Renminbi”: the legal currency of China;
•“shares,” “our shares” “ordinary shares” or “our ordinary shares”: our Class A ordinary shares and Class B ordinary shares, par value $0.05 per share;
•“SKU”: the stock keeping unit for our inventory;
•“Spend per active buyer”: the spend per active buyer that is calculated by dividing the total GigaCloud Marketplace GMV within the last 12-month period by the number of active buyers as of such date;
•“US$,” “$” and “U.S. dollars”: the legal currency of the United States, or the U.S.;
•“VIEs”: our former variable interest entities that entered into account control agreements with GigaCloud Technology Inc; and
1
•“we,” “us,” “our company,” “the Company,” “our,” “our group” or “GigaCloud Group” refer to GigaCloud Technology Inc, our Cayman Islands holding company, its predecessor entity, together as a group with its subsidiaries.
We have made rounding adjustments to reach some of the figures included in this quarterly report. Consequently, numerical figures shown as totals in some tables may not be arithmetic aggregations of the figures that precede them.
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements about our current expectations and views of future events. These forward-looking statements relate to events that involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from those expressed or implied by these statements.
You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “could,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “propose,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. The forward-looking statements included in this quarterly report relate to, among other things:
•our goals;
•our business and operating strategies and plans for the development of existing and new businesses, ability to implement such strategies and plans and expected time;
•our ability to realize the expected benefits of our acquisitions;
•our expectation regarding the prospects of our business model;
•our future business development, financial condition and results of operations;
•expected changes in our revenues, costs or expenditures;
•our dividend policy;
•our expectations regarding the effectiveness of our marketing initiatives and the demand for and market acceptance of our products and services;
•our expectations regarding our relationships with customers and business partners;
•the trends in, expected growth in and market size of our industry globally;
•our ability to maintain and enhance our market position;
•our ability to continue to develop new technologies and/or upgrade our existing technologies;
•developments in, or changes to, laws, regulations, governmental policies, incentives and taxation affecting our operations, in particular in the markets we are in;
•relevant governmental policies and regulations relating to our businesses and industry;
•competitive environment, competitive landscape and potential competitor behavior in our industry; overall industry outlook in our industry;
•our ability to attract, train and retain executives and other employees;
•our proposed use of proceeds from any of our future offerings;
•the development of the global financial and capital markets;
•fluctuations in inflation, interest rates and exchange rates;
•the impact of the COVID-19 pandemic, or other pandemics or epidemics, to our business operations and the economy in the U.S. and elsewhere generally;
•general business, political, social and economic conditions in the U.S. and other markets we have business; and
•assumptions underlying or related to any of the foregoing.
3
These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in “Summary of Risk Factors,” “Item 1A. Risk Factors,” “Item 1. Business,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission, or the SEC, on March 27, 2024, or the 2023 Form 10-K, and other sections in this quarterly report. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. You should read thoroughly this quarterly report and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.
This quarterly report may contain information derived from various government and private publications. These publications include forward-looking statements, which are subject to risks, uncertainties and assumptions. Although we believe the data and information to be reliable, we have not independently verified the accuracy or completeness of the data and information contained in these publications. Statistical data in these publications also include projections based on a number of assumptions. Our industry may not grow at the rate projected by market data, or at all. Failure of the market to grow at the projected rate may have a material and adverse effect on our business and the market price of our Class A ordinary shares. In addition, projections or estimates about our business and financial prospects involve significant risks and uncertainties. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. See “Item 1A. Risk Factors—Risks Related to Our Class A Ordinary Shares—This annual report may contain certain industry data and information that were obtained from third-party sources and were not independently verified by us” in the 2023 Form 10-K. Therefore, you should not place undue reliance on these statements.
You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements in this quarterly report are made based on events and information as of the date of this quarterly report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this quarterly report and the documents that we refer to in this quarterly report and have filed as exhibits to this quarterly report, completely and with the understanding that our actual future results or performance may materially differ from what we expect.
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
GigaCloud Technology Inc
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except for share data and per share data)
(unaudited)
| December 31, 2023 | June 30, 2024 | |||||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Current assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||||||||
| Restricted cash | ||||||||||||||||||||
| Investments | ||||||||||||||||||||
| Accounts receivable, net | ||||||||||||||||||||
| Inventories | ||||||||||||||||||||
| Prepayments and other current assets | ||||||||||||||||||||
| Total current assets | ||||||||||||||||||||
| Non-current assets | ||||||||||||||||||||
| Operating lease right-of-use assets | ||||||||||||||||||||
| Property and equipment, net | ||||||||||||||||||||
| Intangible assets, net | ||||||||||||||||||||
| Goodwill | ||||||||||||||||||||
| Deferred tax assets | ||||||||||||||||||||
| Other non-current assets | ||||||||||||||||||||
| Total non-current assets | ||||||||||||||||||||
| Total assets | $ | $ | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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GigaCloud Technology Inc
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except for share data and per share data)
(unaudited)
| December 31, 2023 | June 30, 2024 | ||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||
| Current liabilities | |||||||||||||||||
Accounts payable (including accounts payable of VIEs without recourse to the Company of $ | $ | $ | |||||||||||||||
Contract liabilities (including contract liabilities of VIEs without recourse to the Company of $ | |||||||||||||||||
Current operating lease liabilities (including current operating lease liabilities of VIEs without recourse to the Company of $ | |||||||||||||||||
Income tax payable (including income tax payable of VIEs without recourse to the Company of $ | |||||||||||||||||
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of VIEs without recourse to the Company of $ | |||||||||||||||||
| Total current liabilities | |||||||||||||||||
| Non-current liabilities | |||||||||||||||||
Operating lease liabilities, non-current (including operating lease liabilities, non-current of VIEs without recourse to the Company of $ | |||||||||||||||||
| Deferred tax liabilities | |||||||||||||||||
| Finance lease obligations, non-current | |||||||||||||||||
| Non-current income tax payable | |||||||||||||||||
| Total non-current liabilities | |||||||||||||||||
| Total liabilities | $ | $ | |||||||||||||||
| Commitments and contingencies | $ | $ | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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GigaCloud Technology Inc
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except for share data and per share data)
(unaudited)
| December 31, 2023 | June 30, 2024 | ||||||||||||||||
| Shareholders’ equity | |||||||||||||||||
Treasury shares, at cost ( | $ | ( | $ | ( | |||||||||||||
Class A ordinary shares ($ | |||||||||||||||||
Class B ordinary shares ($ | |||||||||||||||||
| Additional paid-in capital | |||||||||||||||||
| Accumulated other comprehensive income | |||||||||||||||||
| Retained earnings | |||||||||||||||||
| Total shareholders’ equity | |||||||||||||||||
| Total liabilities and shareholders’ equity | $ | $ | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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GigaCloud Technology Inc
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands except for share data and per share data)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2024 | 2023 | 2024 | ||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Service revenues | $ | $ | $ | $ | |||||||||||||||||||
| Product revenues | |||||||||||||||||||||||
| Total revenues | |||||||||||||||||||||||
| Cost of revenues | |||||||||||||||||||||||
| Services | |||||||||||||||||||||||
| Product sales | |||||||||||||||||||||||
| Total cost of revenues | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Selling and marketing expenses | |||||||||||||||||||||||
| General and administrative expenses | |||||||||||||||||||||||
| Research and development expenses | |||||||||||||||||||||||
| Losses on disposal of property and equipment | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Foreign currency exchange gains (losses), net | ( | ( | ( | ||||||||||||||||||||
| Government grants | |||||||||||||||||||||||
| Others, net | ( | ( | |||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Income tax expense | ( | ( | ( | ( | |||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Net income attributable to ordinary shareholders | |||||||||||||||||||||||
Foreign currency translation adjustment, net of | ( | ( | ( | ( | |||||||||||||||||||
Net unrealized gains on available-for-sale investments | |||||||||||||||||||||||
Total other comprehensive loss | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive Income | $ | $ | $ | $ | |||||||||||||||||||
| Net income per ordinary share | |||||||||||||||||||||||
| —Basic | $ | $ | $ | $ | |||||||||||||||||||
| —Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average number of ordinary shares outstanding used in computing net income per ordinary share | |||||||||||||||||||||||
| —Basic | |||||||||||||||||||||||
| —Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
GigaCloud Technology Inc
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands except for share data)
(unaudited)
| Class A ordinary shares | Class B ordinary shares | Treasury Shares | Subscription receivable from ordinary shares | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings | Total shareholders’ equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of ordinary shares | Number of ordinary shares | Number of ordinary shares | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment, net of | — | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | ( | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A ordinary shares | Class B ordinary shares | Treasury Shares | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings | Total shareholders’ equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of ordinary shares | Number of ordinary shares | Number of ordinary shares | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2024 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares held for share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | — | — | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Re-designated ordinary shares from Class B to Class A | ( | ( | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment, net of | — | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized gain on available-for-sale investments | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
9
GigaCloud Technology Inc
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands except for share data)
(unaudited)
| Class A ordinary shares | Class B ordinary shares | Treasury shares | Subscription receivable from ordinary shares | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings | Total shareholders' equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of ordinary shares | Number of ordinary shares | Number of ordinary shares | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of April 1, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment, net of | — | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | ( | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A ordinary shares | Class B ordinary shares | Treasury shares | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings | Total shareholders' equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of ordinary shares | Number of ordinary shares | Number of ordinary shares | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of April 1, 2024 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares held for share-based compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment, net of | — | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized gain on available-for-sale investments | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
| Six Months Ended June 30, | |||||||||||
| 2023 | 2024 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Allowance for doubtful accounts | |||||||||||
| Inventory write-down | |||||||||||
Loss on other assets | |||||||||||
| Deferred tax | ( | ( | |||||||||
| Share-based compensation | |||||||||||
| Depreciation and amortization | |||||||||||
| Loss from disposal of property and equipment | |||||||||||
| Operating lease | |||||||||||
| Unrealized foreign currency exchange gains | ( | ( | |||||||||
| Others | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Inventories | ( | ( | |||||||||
| Prepayments and other assets | ( | ( | |||||||||
| Accounts payable | |||||||||||
| Contract liabilities | |||||||||||
| Income tax payable | ( | ||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Cash paid for purchase of property and equipment | ( | ( | |||||||||
| Cash received from disposal of property and equipment | |||||||||||
| Purchases of investments | ( | ||||||||||
| Net cash used in investing activities | $ | ( | $ | ( | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
11
GigaCloud Technology Inc
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
| Six Months Ended June 30, | |||||||||||
| 2023 | 2024 | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Repayment of finance lease obligations | $ | ( | $ | ( | |||||||
| Repayment of bank loans | ( | ||||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Net increase in cash, cash equivalents and restricted cash | |||||||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | |||||||||||
| Cash, cash equivalents and restricted cash at the end of the period | $ | ||||||||||
| Supplemental disclosure of cash flow information | |||||||||||
| Cash paid for interest expense | $ | ||||||||||
| Cash paid for income taxes | $ | ||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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GigaCloud Technology Inc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
GigaCloud Technology Inc (the “Company”), a limited liability company based in the Cayman Islands, with its subsidiaries (collectively referred to as the “Group”, “we” or “our”) are principally engaged in large parcel merchandise sales and the provision of ecommerce solutions for small cross-border business owners utilizing the Group’s online platform (“GigaCloud Marketplace”) and fulfillment centers primarily located in the United States, Japan and Europe.
Organization
The consolidated financial statements as of December 31, 2023 in the 2023 Form 10-K included the financial statements of the Company, its subsidiaries and consolidated VIEs.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Group have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the 2023 Form 10-K.
There were no significant changes to our significant accounting policies as disclosed in the 2023 Form 10-K.
Cash, Cash Equivalents and Restricted Cash
Investments with original maturities of 90 days or less qualify as cash equivalents. Cash that is restricted for withdrawal or use is reported separately on the unaudited condensed consolidated balance sheets. The Group’s restricted cash represents security deposits held in designated bank accounts for issuance of letters of guarantee.
A reconciliation of cash, cash equivalents and restricted cash in the unaudited condensed consolidated balance sheets to the amounts in the unaudited condensed consolidated statements of cash flows is as follows:
| December 31, 2023 | June 30, 2024 | ||||||||||
| (In thousands) | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Total cash, cash equivalents and restricted cash in the unaudited condensed consolidated statements of cash flows | $ | $ | |||||||||
13
GigaCloud Technology Inc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Concentration and Risk
Concentration of customers and suppliers
No customers individually represented greater than 10.0% of total revenues of the Group for the three and six months ended June 30, 2023 and 2024.
One customer individually represented greater than 10.0 % of total accounts receivable balance of the Group as of December 31, 2023 and two customers individually represented greater than 10.0 % of total accounts receivable balance as of June 30, 2024.
| December 31, 2023 | June 30, 2024 | ||||||||||
| proportion of total accounts receivable balance | proportion of total accounts receivable balance | ||||||||||
| Customer A | % | % | |||||||||
| Customer B | * | % | |||||||||
*Less than 10.0% of total accounts receivable balance as of the period end.
During the three and six months ended June 30, 2024, one service provider individually represented 20.6 % and 19.2 % of total purchase, and no other vendor accounted for 10% or more of total purchases.
Concentration of credit risk
Financial instruments that potentially expose the Group to concentrations of credit risk consist principally of cash, cash equivalents, restricted cash, investments, accounts receivable, and amounts due from third-party payment platforms.
The Group’s investment policy requires cash, cash equivalents, restricted cash and investments to be placed with high quality financial institutions and to limit the amount of credit risk from any one institution. The Group regularly evaluates the credit standing of the counterparties or financial institutions.
Segment Reporting
The Group’s chief operating decision maker has been identified as the chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group. For the purpose of internal reporting and management’s operation review, the Group’s chief executive officer and management personnel do not segregate the Group’s business by revenue stream or geography. Management has determined that the Group has one operating segment.
14
GigaCloud Technology Inc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Long-lived assets consist of property and equipment and operating lease right-of-use assets. The geographic information for long-lived assets as of December 31, 2023 and June 30, 2024 was as follows:
| December 31, 2023 | June 30, 2024 | ||||||||||
| (In thousands) | |||||||||||
| The United States | $ | $ | |||||||||
| Others | |||||||||||
| Total long-lived assets | $ | $ | |||||||||
Revenues reported are attributed to geographic areas based on locations of the Company’s fulfillment centers, except for platform commission revenues which are attributed to Hong Kong, where the server of the GigaCloud Marketplace is located. Revenues by geographic regions for the three and six months ended June 30, 2023 and 2024 were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2024 | 2023 | 2024 | ||||||||||||||||||||
| Revenues by geographic regions: | (In thousands) | ||||||||||||||||||||||
| Service revenues | $ | $ | $ | $ | |||||||||||||||||||
| Platform commission | |||||||||||||||||||||||
| Hong Kong | |||||||||||||||||||||||
| Ocean transportation service | |||||||||||||||||||||||
| United States | |||||||||||||||||||||||
Others(1) | |||||||||||||||||||||||
| Warehousing service | |||||||||||||||||||||||
| United States | |||||||||||||||||||||||
Others(1) | |||||||||||||||||||||||
| Last-mile delivery service | |||||||||||||||||||||||
| United States | |||||||||||||||||||||||
Others(1) | |||||||||||||||||||||||
| Packaging service | |||||||||||||||||||||||
| United States | |||||||||||||||||||||||
Others(1) | |||||||||||||||||||||||
| Others | |||||||||||||||||||||||
| United States | |||||||||||||||||||||||
Others(1) | |||||||||||||||||||||||
| Product revenues | |||||||||||||||||||||||
| United States | |||||||||||||||||||||||
| Japan | |||||||||||||||||||||||
| Germany | |||||||||||||||||||||||
Others(1) | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
(1) No other individual region’s revenues exceeded 10% of the Company’s total revenues for the three and six months ended June 30, 2023 and 2024
15
GigaCloud Technology Inc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to update reportable segment disclosure requirements. The amendment is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied retrospectively to all prior periods presented in the financial statements. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our consolidated financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, amending existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. For public business entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption permitted and can be applied on either a prospective or retroactive basis. The Group is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures.
16
GigaCloud Technology Inc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
2. FAIR VALUE MEASUREMENTS
The Group utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Group determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. The carrying amounts for the Group’s cash, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short-term maturities. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
•Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities.
•Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full-term of the asset or liability.
•Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
Investments and cash equivalents are measured at fair value on a recurring basis. As of June 30, 2024, investments on the condensed consolidated balance sheets include time deposits and U.S. treasury securities, with maturity of three months to twelve months . Cash equivalents on the condensed consolidated balance sheets include money market instruments.
Treasury securities are classified as available-for-sale with unrealized gains and losses included in “accumulated other comprehensive income (loss)”. The related unrealized gains recorded in accumulated other comprehensive income were nil and $2 thousand as of June 30, 2023 and 2024. No one year .
| As of June 30, 2024 | |||||||||||||||||
Balance Sheet Location(1) | Cost or amortized cost | Fair value (Level 2) | |||||||||||||||
| (In thousands) | |||||||||||||||||
Money market instruments | Cash and cash equivalents | $ | $ | ||||||||||||||
U.S. treasury securities(2) | Investments | ||||||||||||||||
Time deposits | Investments | ||||||||||||||||
| $ | $ | ||||||||||||||||
_____________________
(1) Balance sheet location is determined by the length to maturity at date of purchase and whether the assets are restricted for particular use.
(1) Balance sheet location is determined by the length to maturity at date of purchase and whether the assets are restricted for particular use.
(2) Fair value determined using broker quotes reflecting current market conditions.
3. ACCOUNTS RECEIVABLE, NET
Accounts receivable, net, consisted of the following:
| December 31, 2023 | June 30, 2024 | ||||||||||
| (In thousands) | |||||||||||
| Accounts receivable | $ | $ | |||||||||
| Less: allowance for doubtful accounts | ( | ( | |||||||||
| Accounts receivable, net | $ | $ | |||||||||
17
GigaCloud Technology Inc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The movement of the allowance for doubtful accounts is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2024 | 2023 | 2024 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Balance as of the beginning of the period | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Additions charged to bad debt expense | ( | ( | ( | ||||||||||||||||||||
| Balance as of the end of the period | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
4. INVENTORIES
Inventories consisted of the following:
| December 31, 2023 | June 30, 2024 | ||||||||||
| (In thousands) | |||||||||||
Products available for sale | $ | $ | |||||||||
Goods in transit | |||||||||||
Inventories | $ | $ | |||||||||
5. LEASES
The Group leases its office space, fulfillment centers and other facilities under non-cancelable operating leases with various expiration dates. The Group also has equipment that is leased under non-cancelable finance leases. The Group considers various factors such as market conditions and the terms of any renewal options that may exist to determine whether it will renew or replace the lease. In the event the Group is reasonably certain to exercise the option to extend a lease, the Group will include the extended terms in the operating lease right-of-use asset and operating lease liability. Certain fulfillment center storage shelves are leased under finance leases, which have a fixed lease term of three years from the lease commencement dates. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Group recognizes lease expense for these leases on a straight-line basis over the lease term.
The gross amounts of assets and liabilities related to both operating and finance leases were as follows:
| December 31, 2023 | June 30, 2024 | |||||||||||||
| Balance Sheet Caption | (In thousands) | |||||||||||||
| Assets: | ||||||||||||||
| Operating lease right-of-use assets | Operating lease right-of-use assets | $ | $ | |||||||||||
| Finance lease right-of-use assets | ||||||||||||||
| Total right-of-use assets | $ | $ | ||||||||||||
18
GigaCloud Technology Inc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| December 31, 2023 | June 30, 2024 | ||||||||||||||||
| Balance Sheet Caption | (In thousands) | ||||||||||||||||
| Liabilities: | |||||||||||||||||
| Current: | |||||||||||||||||
| Operating lease liabilities | Current operating lease liabilities | $ | ( | $ | ( | ||||||||||||
| Finance lease liabilities | ( | ( | |||||||||||||||
| Non-current: | |||||||||||||||||
| Operating lease liabilities | Operating lease liabilities, non-current | ( | ( | ||||||||||||||
| Finance lease liabilities | Finance lease obligations, non-current | ( | ( | ||||||||||||||
| Total lease liabilities | $ | ( | $ | ( | |||||||||||||
The components of lease cost were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2024 | 2023 | 2024 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Finance lease cost | |||||||||||||||||||||||
| Amortization of right-of-use assets | |||||||||||||||||||||||
| Interest on lease liabilities | |||||||||||||||||||||||
| Short-term lease costs | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Lease terms and discount rates are as follows:
| December 31, 2023 | June 30, 2024 | ||||||||||
| Weighted average remaining lease term (years): | |||||||||||
| Operating leases | |||||||||||
| Finance leases | |||||||||||
| Weighted average discount rate: | |||||||||||
| Operating leases | % | % | |||||||||
| Finance leases | % | % | |||||||||
19
GigaCloud Technology Inc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Future minimum lease payments as of June 30, 2024, including rental payments for lease renewal options the Group was reasonably certain to exercise, were as follows:
Operating leases | Finance leases | ||||||||||
| (In thousands) | |||||||||||
| Maturity of Lease Liabilities | |||||||||||
Remainder of 2024 | $ | $ | |||||||||
Year Ended December 31, 2025 | |||||||||||
Year Ended December 31, 2026 | |||||||||||
Year Ended December 31, 2027 | |||||||||||
Year Ended December 31, 2028 | |||||||||||
| Thereafter | |||||||||||
| Total lease payments | |||||||||||
| Less: imputed interest | ( | ( | |||||||||
| Present value of lease liabilities | $ | $ | |||||||||
6. ORDINARY SHARES
On July 1, 2022, the Group entered into an agreement with Aegis Capital Corp. (the “Underwriter”), pursuant to which, the Group agreed to issue warrants to the Underwriter upon the completion of its Initial Public Offering (the “IPO”) as additional compensation for the Underwriter’s services, which entitles the Underwriter to purchase up to 1.0 % of Class A ordinary shares sold in the IPO in the par value of $0.05 per share, at the exercise price of 150 % of the public offering price of $12.25 per share.
In February 2024, the Underwriter exercised 29,400 of its warrants under cashless exercise for the Company to issue 13,372 Class A ordinary shares in aggregate. The shares were issued on February 16, 2024, February 23, 2024 and February 28, 2024. All warrants of the Underwriter have been exercised as of June 30, 2024.
7. SHARE-BASED COMPENSATION
Restricted shares (the “RS”)
A summary of the Company’s restricted shares for the three and six months ended June 30, 2024 were presented below:
| Number of shares | Weighted average grant date fair value | ||||||||||
| Outstanding as of April 1, 2024 | |||||||||||
| Vested | ( | ||||||||||
| Outstanding as of June 30, 2024 | |||||||||||
| Expect to be vested at June 30, 2024 | |||||||||||
20
GigaCloud Technology Inc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Number of shares | Weighted average grant date fair value | ||||||||||
| Outstanding as of January 1, 2024 | $ | ||||||||||
| Vested | ( | ||||||||||
| Outstanding as of June 30, 2024 | |||||||||||
| Expect to be vested at June 30, 2024 | $ | ||||||||||
As of June 30, 2024, unrecognized compensation expenses with trivial amount relating to the remaining 1,471 unvested restricted shares would cliff and cumulatively vested upon the satisfaction of the service condition.
Restricted share units (the “RSU”)
On April 1, 2024 and April 10, 2024, the Company granted 558,003 RSUs with no exercise price to employees with two types of vesting schedules of (1) vesting immediately after the grant or (2) vesting 50 % immediately after the grant and cliff vesting the other 50 % upon the satisfaction of one year service with the Group after the grant. Each of the RSUs granted is stipulated to vest following either of the two.
On June 26, 2024, the Group granted 98 RSUs to its employee with no exercise price. All of these RSUs vested on the grant date with no service condition stipulated.
A summary of the Company’s RSU activities for the three and six months ended June 30, 2024 were presented below:
| Number of shares | Weighted average grant-date fair value | ||||||||||
| Outstanding as of January and April 1, 2024 | |||||||||||
| Granted | |||||||||||
| Forfeited | ( | ||||||||||
Outstanding as of June 30, 2024 | |||||||||||
Exercisable as of June 30, 2024 | |||||||||||
As of June 30, 2024, unrecognized compensation expenses of $3,474 thousand relating to the 150,260 unvested RSUs would be recognized in next twelve months .
8. INCOME TAX
The Company’s provision for income tax in estimating the annual effective tax rate for the six months ended June 30, 2023 and 2024 was $8,025 thousand and $10,026 thousand respectively, representing effective income tax rates of 18.9 % and 16.1 %, respectively. Certain tax filing differences are not considered in estimating the effective income tax rate applied year to date.
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 %.
21
GigaCloud Technology Inc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
9. NET INCOME PER ORDINARY SHARE
The following table sets forth the basic and diluted net income per ordinary share computation and provides a reconciliation of the numerator and denominator for the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2024 | 2023 | 2024 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
Weighted average number of ordinary shares outstanding | |||||||||||||||||||||||
| - Basic | |||||||||||||||||||||||
| - Diluted | |||||||||||||||||||||||
| Net income per ordinary share attributable to ordinary shareholders | |||||||||||||||||||||||
| - Basic | $ | $ | $ | $ | |||||||||||||||||||
| - Diluted | $ | $ | $ | $ | |||||||||||||||||||
For the three and six months ended June 30, 2023, 14,958 7.48
For the three and six months ended June 30, 2023 and 2024, the potential dilutive securities that have been included in the calculation of diluted net income per ordinary share are presented as follow:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2024 | 2023 | 2024 | ||||||||||||||||||||
RSU | |||||||||||||||||||||||
RS | |||||||||||||||||||||||
22
GigaCloud Technology Inc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
10. REVENUES
The Group’s revenues are disaggregated by major products/service lines and timing of revenue recognition. Detailed information is specified as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| Major products/services lines | 2023 | 2024 | 2023 | 2024 | |||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Service revenues | |||||||||||||||||||||||
| Platform commission | $ | $ | $ | $ | |||||||||||||||||||
| Ocean transportation service | |||||||||||||||||||||||
| Warehousing service | |||||||||||||||||||||||
| Last-mile delivery service | |||||||||||||||||||||||
| Packaging service | |||||||||||||||||||||||
| Others | |||||||||||||||||||||||
| Total service revenues | |||||||||||||||||||||||
| Product revenues | |||||||||||||||||||||||
| Product sales to B | |||||||||||||||||||||||
| Product sales to C | |||||||||||||||||||||||
| Off-platform ecommerce | |||||||||||||||||||||||
| GigaCloud 1P | |||||||||||||||||||||||
| Others | |||||||||||||||||||||||
| Total product revenues | |||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| Timing of revenue recognition | 2023 | 2024 | 2023 | 2024 | |||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
| Revenue from goods or services transferred to customers over time | $ | $ | $ | $ | |||||||||||||||||||
| Revenue from goods or services transferred to customers at a point in time | |||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||||||||
23
GigaCloud Technology Inc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Contract Liabilities
Changes in the contract liabilities balances were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2024 | 2023 | 2024 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Balance as of beginning of the period | $ | $ | $ | $ | |||||||||||||||||||
| Revenue recognized from opening balance of contract liabilities | ( | ( | ( | ( | |||||||||||||||||||
| Increase due to cash received | |||||||||||||||||||||||
| Revenue recognized from cash received during the period | ( | ( | ( | ( | |||||||||||||||||||
| Foreign exchange effect | ( | ( | ( | ( | |||||||||||||||||||
| Balance as of end of the period | $ | $ | $ | $ | |||||||||||||||||||
Contract liabilities relate to considerations received in advance for merchandise sales and services provided on GigaCloud Marketplace for which control of the services occur at a later point in time. The contract liabilities will be recognized as revenue when the Group fulfills its performance obligations to transfer the promised products or services to customers, which is expected to occur within one year .
11. COMMITMENTS AND CONTINGENCIES
The Group leases offices and fulfillment centers under non-cancelable operating lease agreements. Future minimum lease payments under these noncancelable lease agreements with initial terms longer than three months are disclosed as maturity of lease liabilities in Note 5.
On March 9, 2024, one of our fulfillment centers in Japan experienced a fire. The fire destroyed our inventories located within the fulfillment center. The Group recognized losses of $2.0 million as a result of the fire. Based on the provisions of our insurance policies, the gross losses have been reduced by the estimated insurance proceeds expected to be received from our insurance carrier. The Group has determined that partial recovery of the incurred losses is probable and therefore recorded an insurance receivable and insurance recovery of $1.7 million for the six-month period ended June 30, 2024.
The Group may incur certain costs in connection with the reconstruction efforts of the leased fulfillment center following the fire. Notably, our insurance coverage extends to damages incurred by third parties. As of the date the unaudited condensed financial statements were issued, the Group is unable to reasonably estimate the extent of these costs. Consequently, no specific provision has been accrued in our financial statements related to the reconstruction efforts of the leased fulfillment center. We remain committed to monitoring the situation closely and will adjust our estimates accordingly as more information becomes available in subsequent reporting periods. As of June 30, 2024, the Group did not expect liabilities arising from reconstruction efforts, net of insurance recoveries, to materially adversely affect the Group’s unaudited condensed consolidated results of operations or its financial condition.
12. SUBSEQUENT EVENTS
24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with the 2023 Form 10-K and the unaudited condensed consolidated financial statements and related notes thereto included in this quarterly report on Form 10-Q.
In addition to historical information, this report contains forward-looking statements that involve risks and uncertainties which may cause our actual results to differ materially from plans and results discussed in forward-looking statements or those implied in historical results and trends. We encourage you to review the risks and uncertainties discussed in the sections entitled Item 1A. “Risk Factors” and “Forward-Looking Statements” included in the 2023 Form 10-K and this quarterly report on Form 10-Q.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
Overview
We are a pioneer of global end-to-end B2B ecommerce solutions for large parcel merchandise. We generate revenues primarily through three revenue streams:
•GigaCloud 3P: generates service revenues, including revenues from platform commission, ocean transportation service, warehousing service, last-mile delivery service, packaging service and others, by facilitating transactions between sellers and buyers in our GigaCloud Marketplace.
•GigaCloud 1P: generates product revenues through the sale of our inventory in our GigaCloud Marketplace.
•Off-platform ecommerce: generates product revenues through the sale of our inventory to and through third-party ecommerce websites.
GMV from GigaCloud 3P and GigaCloud 1P together make up our GigaCloud Marketplace GMV, and GMV from off-platform ecommerce and GigaCloud Marketplace GMV together make up our total GMV across the platforms. These three revenue streams complement each other to improve our value proposition to sellers and buyers in our GigaCloud Marketplace.
Key Financial and Operating Metrics
We monitor the following key financial and operating metrics to evaluate the growth of our GigaCloud Marketplace, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. The financial impact from the acquisitions of Noble House and Wondersign was reflected in our unaudited condensed consolidated financial results since the completion of the acquisitions in the fourth quarter of 2023. In the second quarter of 2024, we introduced Noble House-related SKUs to our GigaCloud Marketplace, which contributed to a one-time uplift in our operating metrics. The operating impact from these acquisitions has been reflected in the operating metrics in our GigaCloud Marketplace since April 1, 2024.