Ladies and gentlemen, thank you for standing by. Welcome to GigaCloud Technology's Q4 2022 Earnings Conference Call. During today's call, all participants will be in the listen-only mode. This conference is being recorded today, Friday, March 17th, 2023. Joining us today from GigaCloud Technology are the company's Founder, Chairman of the Board of Directors, and Chief Executive Officer, Larry Wu. The company's Chief Financial Officer, David Lau, and Dr. Iman Schrock, President of the company.
On our call today, Larry will give you an overview of the company's performance, Iman will provide the details of the company's operational results, and David will share the details of the company's financial results. After that, we will conduct a Q&A session to take your questions. Before we continue, I would like to remind you that some information discussed on this call will contain forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties.
Although the company believes that the expectation expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct. The company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the company's registration statement and other filings with the SEC.
This call includes discussion of certain non-GAAP financial measures, such as Adjusted EBITDA. Please refer to the company's earnings press release for more information on the non-GAAP financial measures. With that, I'll now turn the call over to Larry, the company's founder, chairman of the board of directors, and Chief Executive Officer. Larry, please go ahead.
Thank you, operator, and everyone for joining GigaCloud's Q4 of 2022 Earnings Conference Call today. First of all, I would like to express how proud of the entire GigaCloud family I am for delivering another outstanding quarter, leading the way in transforming the industry with a pioneering business model and cutting-edge technology. Looking back to 2022, we achieved a significant milestone by completing our IPO and becoming a U.S.-listed company, while also improving our operational and financial metrics.
As part of our effort to create an exclusive ecosystem, we have prioritized enhancing our platform's user experience, optimizing operational efficiency and technological upgrades. These initiatives are expected to strengthen our long-term market leading position. We are glad to see our brand has a strong market demand from our loyal global customers on the marketplace. Please allow me to introduce our President, Dr. Iman Schrock, an insightful and innovative leader with intensive domestic and international management experience.
As an industry veteran, Iman has proven ability to improve performance and productivity and profitability through effective implementation of process, programs, and policies. I would like to highlight that is Iman's first time joining our earnings call, and he will be presenting the operational results of the company. Thank you for your continuous support to the company. I would like to turn the call to Iman for closer operational view.
Thank you, Larry. Good morning, everyone. As we reflect back on the past year, we acknowledge that 2022 presented us with several challenges, including currency depreciation against U.S. dollars in all the markets that we operate in, and the skyrocketing ocean shipping rates. Despite these difficulties, our team at GigaCloud put forth significant effort to navigate through the storm and drive our business forward. Through strategic planning, effective execution, and steadfast commitment, we have successfully overcome obstacles and achieved significant progress.
Let's now walk through the operational results of the GigaCloud. In the 12 months that ended December 31st, 2022, our GigaCloud Marketplace GMV grew 25.1% year-over-year to $518.2 million. The platform saw a 46.6% year-over-year increase in active 3P sellers to 560, and a 16.5% year-over-year rise in active buyers to 4,156, with spending per active buyer also increasing by 7.4% year-over-year to $124,692, the 12 months that ended December 31st, 2022.
Furthermore, 3P seller GigaCloud Marketplace GMV surged 64.3% year-over-year to $257.7 million, representing approximately 50% of the total GigaCloud Marketplace GMV for the 12 months ended December 31st, 2022, serving as a strong indication of the impactful value we provide the industry. For the first time ever since the launch of the marketplace, our GigaCloud 3P seller GMV surpassed GigaCloud 1P GMV as a percentage of total marketplace GMV in Q4 2022. This underscores the growing dominance of 3P sellers on the marketplace, showcasing our scale and market recognition as a thriving 3P seller dominated platform.
As we look forward to 2023, our focus remains on executing our strategic plan with the goal of expanding our business, enhancing pro-profitability, and capitalizing on emerging opportunities. These impressive growth highlight our ongoing success as we remain committed to providing buyers and sellers with a robust and efficient ecosystem to connect and grow their businesses. We strive to keep up with the ever-changing market demands and expectations of our customers, while also elevating our global brand recognition. Looking ahead, we are confident in our ability to maintain this upward trajectory. I would like to turn the call over to our Chief Financial Officer, David, for a closer look at our financial results.
Thank you, Larry and Iman, good morning, everybody. I'm pleased to share our outstanding financial results for the Q4 of 2022. The company generated $125.6 million in Q4 2022, which represents a 20.5% growth from $104.2 million in the Q4 of 2021. On the bottom line, we generated $12.5 million in net income in Q4 2022, representing an increase of 34.2% from $9.3 million in Q4 of 2021. Adjusted EBITDA was $15.2 million in the Q4 2022, representing an increase of 34.9% from $11.3 million in Q4 2021.
The company generated $49.7 million in cash flow in 2022 compared to $8.6 million in 2021. In addition, the company had $143.5 million cash balance as of December 31, 2022. As you can see, our company had delivered an exceptional Q4 result in 2022. The growth is attributed to the continued adoption of our Supplier Fulfilled Retailing model that allows products to be fulfilled by fewer touch points, which leads to lower cost and higher margin for both buyers and sellers.
As Iman already alluded, our GigaCloud Marketplace is becoming a 3P seller dominated platform in Q4 2022, which is a huge testament of the value we're offering. Our overall profitability had improved significantly in Q4 2022 due to ocean shipping rates has largely normalized, along with our continued focus on user quality, building deeper user engagement, continued efforts to offer more value-added services and enhance operating efficiencies. The surge in ocean shipping rates in end of 2021 had compressed the margin in our 1P business in first half of 2022, as products typically need two to three months to arrive at our warehouse from its origin, which in turn impacts our profitability for the same period.
Similarly, 3P sellers are more cautious in sending products overseas as they will have to directly bear the ocean shipping costs. As ocean shipping rates stabilize, our profitability in second half of 2022 had largely recovered. Our operating expense has remained stable for the Q4 as well as for the full year 2022 at around 9% of our total revenues. As we're in the process of implementing a system-wide technological upgrade on our marketplace platform to enhance on user experience and inventory management capabilities, we have started to incur some research and development expense in the Q4, 2022.
The significant improvement in cash flow generation was a result of effective business management, cost optimization, and the continued growth of our GigaCloud Marketplace. We have $143 million of cash with essentially no debt on the balance sheet as of December 31st, 2022. We also have a credit facility of $50 million with Wells Fargo Bank that we can draw to fund our expansion plan. Our healthy balance sheet allows us to be actively exploring potential M&A opportunities to enhance our product development and distribution capabilities.
We will share more details when the timing is right. Perseverance and determination were the key factors to our success in 2022, especially during a challenging period where supply chain constraints had driven up the overall ocean shipping rates. We're very confident with the year ahead as we see continued growth in our active user count, as well as the growth in our 3P seller GMV. We expect the company to generate $123 million-$127 million in revenue for the Q1 of 2023. I'd like to turn back to the operator to answer any questions on the floor. Thank you.
Thank you. We will now begin the Q&A session. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Katherine Ross. Please ask your question, Katherine.
Great presentation. I have two questions related to the company's future plans and the market trends. Could you share with us some insights into your business plans for 2023? Thank you.
Sure. Maybe I'll take a first crack, and Iman and Larry, please feel free. We are a pioneer in the industry to rolling out what we call a Supplier Fulfilled Retailing model that connects buyers and seller, and GigaCloud provides a full service end-to-end logistics fulfillment. We is one of the few companies that provides this service, and we're helping the market to educate of what the value that we offer from such service.
We had a pretty challenging economy in 2022. What we're trying to do is we're trying to provide effective solution to both the suppliers and buyers on our platform and help them to, you know, cut costs and improve their margin profile. We're really working hard to educate the market on the value that we can bring to the table.
Thank you. Great. I'm also interested in learning something more about the demand for the company's product category. Has the demand for the different product categories remained constant, or have you observed any variation? Also more, moreover, do you expect any changes in the coming year? Thank you.
Iman, you wanna take that one?
Sure. I'll be more than happy to. What we're expecting is a slowdown in the overall consumer spending, regardless of the category. But with our business model, just like David alluded to earlier, we are confident that Supplier Fulfilled Retailing not only will cut costs, but it will also remove touch points, creating a more efficient system. We're gonna continue to educate the industry about the benefits of adopting such robust business model, as you guys just saw with the financials. We are confident that we can outperform the industry, and we're gonna continue to do so.
Thank you.
Thank you. Our next question comes from the line of Irina Rabano. Please ask your question, Irina.
Thank you for your presentation. It's very informative. I think it's good to see your revenue and profit keep growing. I want to ask if you anticipate any challenges to this kind of growth in 2023. What would be your plan to cope with these challenges? Thank you.
Sure. This kinda ties into the first question. We know we are expecting an industry slowdown, we're gonna continue to expand on our adoption of Supplier Fulfilled Retailing across the industry. It's a business model that we're pioneering, it allows for savings and efficiency across the board. Obviously, one of the challenges is that, you know, we have the first movers advantage, and being the pioneers of this new business model, there's an educational curve because we have to take that model and educate our customers in its adoption.
That's something that we're gonna work on improving. We're gonna continue to maintain a strong balance sheet and maintain positive cash flow. That's something that, you know, we're challenging ourselves with in 2023. Like I alluded to earlier, you know, we're planning on outperforming the market, you know, within the industry by providing a sound business plan that is efficient and results driven.
Iman, if I can add to that.
Sure.
I also mentioned earlier that we have a very healthy balance sheet. As you can see, as of December 31st, we have roughly $143 million cash, essentially no debt. We're very healthy from a balance sheet standpoint, and we're trying to leverage this cash balance to actively look for M&A opportunities that can help us to grow, both on the product development capability standpoint as well as our distribution capabilities.
Another point I wanna highlight is that the company is in the process of converting to becoming an S filer or becoming a domestically listed company instead of a foreign private issuer. That's because, if you look at our business today, most of our assets are based in the U.S., and our shareholder profile are mostly based in the U.S. It will make more sense for us to become a domestically listed company rather than listed as a FPI. This will be in the process, and we expect that conversion to take place on the first day of 2024.
Thank you. Great information.
Our next question comes from the line of Eva Hurst. Please ask your question, Eva.
Thanks, management team. It looks like the revenue from off-platform ecommerce is decreasing in the first three quarters, but it increased during the Q4. Can you share more details about that?
Yeah, sure. I'm more than happy to. Q4 is typically one of the highest performing quarter for us, you know, given the traditional retail consumption season or sales particularly in the US. You know, you have your Black Friday, Thanksgiving, Christmas holiday, where typically consumptions are being made during those time. Typically that's where we see a lot of growth. I think, you know, especially in Western countries, in the United States, I think a lot of the consumer had a lot of pent-up demand that they didn't get to spend during COVID. Now that COVID has subside, a lot of the shoppers are back. And starting to make their purchases during the Q4 of 2022.
Okay, thank you. I gotcha. I still have another one.
Sure.
I noticed that you have research and development expenses this quarter. Could you provide more information on your R&D project?
Yeah, sure. I talked a little bit about this earlier. We have started to book a R&D expense in Q4 2022. We are continuing to focus on upgrading our technology. You know, a quarter of our employees today are IT staff, so we're consistently and constantly making upgrades to make sure that our marketplace is serving our customers in an impeccable and seamless way as possible. We're starting to, you know, upgrade our facilities, upgrading our technological capabilities to hopefully help our marketplace to be easier for our users to use and help us enhance profitability.
Okay, thank you.
If I may add to that, you guys might know that more than a quarter of the workforce for the company are stationed in engineering and IT, and we have a lot of initiatives across, you know, what David just spoke of, AI and machine learning focus, driven, you know, approaches to drive those efficiencies.
Okay, that's cool. Thank you.
Thank you.
All right. Thank you. Our next question comes from the line of Rommel Dionisio from Aegis Capital. Please ask your question, Rommel.
Thank you. Good morning. I thought particularly noteworthy in the quarter was your growth in service revenue. you know, up, I think 36% from the year ago quarter. I wonder if you could just delve into a little more there that I know you provide third-party logistics services to your customers and you could talk about the drivers that really drove that growth and the outlook for service revenue continued growth and that acceleration in 2023 and beyond. Thank you.
Sure. I think the service revenue component is growing a component of our revenue generation. As you can see, our GigaCloud Marketplace GMV, you know, is growing pretty fast, and we have a active user growth that's also doing very well. We're taking market share, we're growing that piece of business. You alluded earlier about, you know, third-party logistics.
We, because of COVID, had to stop and prioritize our logistics capabilities to deliver and fulfill for the users that transact on our marketplace. As, you know, COVID subsided and we start regaining, you know, our distribution and fulfillment capabilities, we started to offer, you know, our third-party logistics services to other customers, and this will continue to be a growth for us looking into 2023. I know, Larry, if you have any other inputs to that.
I'm good with it. Thank you.
Okay. Thank you very much.
Thank you, Rommel.
Thank you. Once again, to ask a question, please press star one one on your telephone. A reminder, to ask a question, please press star one one on your telephone. Right. I'm showing no further question and that concludes the Q&A session. Let me turn the call over to David for closing remarks.
Sure. Thank you very much for joining this conference call. If you have any questions, please contact us through emails. Management will respond to your questions as soon as possible. We appreciate your interest in supporting GigaCloud, and we look forward to speaking with you again next time. Thank you very much.
Thank you again for attending GigaCloud's Q4 of 2022 Earnings Conference Call. This concludes our call today, and we thank you all for listening in. Goodbye.