Item 1. Business.
Overview
We are a fast-growing U.S.-based warehousing and logistics service provider that offers a comprehensive package of supply-chain solutions relating to warehouse management and order fulfillment.
With the boom of e-commerce and Internet technology, along with the development of global supply chains, a growing number of merchants are seeking to sell their products through international e-commerce platforms, such as Amazon and eBay. These merchants, however, are confronted with major logistical challenges because of the complexities involved in shipping goods across borders. Specifically, when a foreign consumer places an order online, it can take a long time for the goods to be delivered from one country to another (especially for bulky items), while facing high damage rates and congestion during peak seasons. One of the solutions to such problems is to set up overseas warehouses, which are local storage facilities established in a foreign country where the cross-border merchants intend to sell their goods. Cross-border e-commerce merchants can export goods in batches in advance to overseas warehouses, which can then be delivered to overseas consumers once orders are placed via e-commerce platforms. As a result, the delivery time and the rate of damaged and lost packages may be reduced significantly, therefore enhancing the shopping experience of consumers.
We provide one-stop warehousing and logistics services to cross-border e-commerce merchants outside the U.S. who seek to sell in the U.S. market. We currently operate nine warehouses across the country, with an aggregate gross floor area of approximately 2,765,667 square feet. Aside from a nationwide footprint and large storage space, our warehouses are equipped with automated sorting systems, heavy-duty forklifts, and pallets and trays that are suitable for processing bulky items. As a one-stop warehousing and logistics service provider, we offer a full spectrum of services, including (i) customs brokerage services; (ii) transportation of merchandise to U.S. warehouses; and (iii) warehouse management and order fulfillment services, which further include (a) product storage and retrieval, (b) product packing and labeling, (c) kitting and repackaging, (d) order assembly and load consolidation, (e) inventory management and sales forecasting, (f) third-party distribution coordination, and (g) other value-added services. We also provide warehousing and logistics services to our U.S.-based commercial customers, who are typically domestic e-commerce merchants seeking efficient and reliable warehousing and logistics solutions to support their operations. In general, the warehousing and logistics services we provide to our domestic customers are similar to those we provide to our overseas customers. This allows us to provide integrated solutions for our customers, whether they need domestic or international warehousing and logistics support. As of June 30, 2024 and 2023, we had an active customer base of 105 and 83, respectively, for our warehousing and logistics services.
We have experienced rapid growth since our inception. For the fiscal years ended June 30, 2024 and 2023, we had total revenue of $167.0 million and $135.0 million, respectively, and net income of $7.4 million and $13.9 million, respectively. While we do not have any subsidiaries, assets, or employees in the PRC, we generate a significant part of our revenue from customers based in China. During the fiscal years ended June 30, 2024 and 2023, we generated approximately 96% and 96% of our revenue from PRC-based customers, respectively.
Our Competitive Strengths
We believe the following competitive strengths are essential for our success and differentiate us from our competitors:
Quality Warehousing and Logistics Services that Meet ISO 9001 Standards
We provide our customers with quality warehousing and logistics services with high inventory accuracy and 24/7 customer support, which are especially suitable for the e-commerce of bulky items. Our operations span across the West Coast, Midwest, and East Coast of the U.S., with a total of nine warehouses under management, including one of the only 23 eBay-certified third-party warehouses in the country. Specifically, certain items, such as furniture or large home appliances, require special logistics facilities for storage, fulfillment, and shipping because of their size and weight. As a result, traditional warehousing and logistics service providers may find it difficult to offer integrated one-stop solutions. The nine warehouses we operate not only provide large storage space, but are also equipped with forklifts, pallets, and trays for processing bulky items. In addition, inventory accuracy is a metric that measures the difference between our records of warehouse stock and actual stock. Inventory accuracy is critical for preventing stockouts, shortages, shrinkage, controlling inventory quality, and maintaining a positive customer experience. In this regard, our operations achieved an average of 99.72% inventory accuracy during the fiscal year ended June 30, 2024. Moreover, our customer service team provides full support to our customers’ business throughout the entire process, from recommendations on e-commerce infrastructure to sharing experience in security and compliance practices and to optimizing warehousing and logistics costs for our customers. Leveraging our expertise in the warehousing and logistics industry as well as our 24/7 online customer support in over 30 languages, we are also able to respond quickly to special circumstances.
The warehousing and logistics services we provide meet ISO 9001 standards, which are a set of international standards for quality management systems. These standards are issued by the International Organization for Standardization (“ISO”), a non-governmental organization that develops and publishes standards across a wide range of industries, including warehousing and logistics services. ISO 9001 standards provide a framework for managing and improving quality in a systematic and structured manner. ISO 9001 standards are rooted in a set of fundamental principles, such as prioritizing customer needs, exhibiting strong leadership, pursuing continuous improvement, and making data-driven decisions. To ensure that our warehousing and logistics operations meet the highest quality standards, we have implemented ISO 9001 standards into our quality management system. To accomplish this, we have implemented ISO 9001-compliant policies and procedures, including procedures for managing inventory, handling and storing goods, and transporting goods, as well as procedures for continuous improvement and customer feedback mechanism. Incorporating ISO 9001 into our warehousing and logistics services may give us a competitive advantage by ensuring we meet the highest quality standards. Customers are increasingly seeking suppliers and service providers with quality management systems, so we believe that ISO 9001 certification can be a key differentiator for us in a competitive market.
Reasonable Service Fees and Delivery Fees due to the Large Volume of Goods We Process
Considering the large volume of merchandise we process, we are able to offer relatively inexpensive service fees and affordable delivery fees. We rely on third-party logistics providers, such as FedEx and UPS, for end-to-end delivery, as we do not have our own in-house delivery team or vehicles. Despite this, we offer transportation rates based on a long-term agreement between our nine warehouses and third-party logistics service providers. The volume of packages we send often entitles us to large discounts from third-party logistics providers. As a result, we have been able to provide our customers with stable and reasonable transportation rates. Additionally, we are able to overcome the surge charges for oversized items and peak season fees by leveraging our logistics management tools to achieve lower freight charges. As such, we believe our service fees are reasonable and affordable.
Capability of Providing Efficient and Low-error Warehousing Services by Leveraging Warehouse and Order Management Technology
We have developed a platform, primarily including our Armlogi order management system (“OMS”), which provides a comprehensive and integrated solution for warehouse and logistics management. See “— Technology and Intellectual Property.” Our platform is built on the Amazon Web Services cloud computing infrastructure, which provides high security, reliability, and scalability. This allows us to easily deploy and manage virtual servers, and to quickly add or remove resources, as needed. The platform is also accessible through a web-based interface, so that our customers and staff can access the platform from anywhere with an Internet connection.
Our platform enables us to manage all incoming shipments from the moment they are received at the warehouse until they are delivered to the customer. This includes tracking the status of each shipment and providing real-time updates to our customers. The platform also allows our truck drivers to upload real-time images of their trucks for verification, ensuring that only authorized vehicles are used for deliveries. In addition, our platform includes tools for data input, log tracking, translations, and customer support. This allows us to quickly and accurately process orders and to provide our customers with the information they need to manage their supply chain.
By leveraging our platform, rather than traditional software, we believe we have reduced our operating costs and user workload, and have increased our efficiency and control over workflows, which, in turn, has enabled us to deliver a higher level of service to our customers while reducing the risk of human error. We have also been able to add new features and modules to the platform as needed, without incurring high upfront costs and long implementation times associated with traditional software.
An Experienced Management Team with Strong Financial and Operational Expertise
Our management team consists of executives with decades of supply chain, warehousing, and logistics industry as well as other corporate functions experience. As a co-founder of Armstrong Logistic Inc. (“Armstrong Logistic”) and our Chief Executive Officer, Mr. Aidy Chou, is responsible for high-level strategizing and business planning, as well as the overall financial management and investment management of our Company. From September 2003 to May 2023, Mr. Chou served as the chief executive officer and chief financial officer at Advance Tuner Warehouse Inc. (“Advance Tuner”), a major automobile accessories company. Mr. Tong Wu, our Secretary, Treasurer, and director, is also a co-founder and serves as the chief administrative officer of Armstrong Logistic, and is responsible for the management of day-to-day operations and overseeing specific departments, such as sales, marketing, and human resources. Mr. Wu has extensive experience in the warehousing and logistics industry.
Our Growth Strategies
We intend to develop our business and strengthen brand loyalty by implementing the following strategies:
Expand and Diversify Our Customer Base and Geographic Coverage
We are dedicated to growing and diversifying our existing customer base. For the fiscal years ended June 30, 2024 and 2023, we had 105 and 83 customers, respectively, with 59% and 63% of them based in mainland China. We are looking to continue to grow our customer base in China and also expand into Southeast Asia including Vietnam, Thailand, Indonesia, and the Philippines, and Mexico. Moreover, our success is largely based on our warehouse management capabilities enabled by our warehousing network, which covers the West Coast, Midwest, and East Coast of the United States. As of the date of this annual report, we operate nine warehouses in the U.S., and plan to continue expanding our geographic footprint in key markets. We plan to build out additional infrastructure in key markets in the U.S., including California, Georgia, Tennessee, Florida, and Arizona. A variety of funding sources could be utilized to lease additional warehouse space, including cash reserves, loans from financial institutions, and investor fundraising. Before choosing the right funding source, we will carefully consider our financial position, creditworthiness, and other factors. A complex process of leasing additional warehouse space requires careful planning and execution, involving the identification of suitable locations, negotiation of lease terms, and logistics management for moving equipment and inventory. In addition, the recruitment and training of personnel for the new warehouses may also be challenging. All of these endeavors involve risks and will require significant management, financial, and human resources. We cannot assure you that we will be able to effectively manage our growth or to implement our strategies successfully.
Enhance Our Customers’ Supply Chain Efficiency by Expanding the Breadth and Depth of Our Solutions and Services
In order to provide our customers with even greater value, we endeavor to continually expand our solutions and services. We launched our international ocean freight services in January 2023 and are actively expanding and refining these offerings, which have enabled us to further improve supply chain efficiency for our customers. With this new addition, we can now offer our manufacturer customers a comprehensive one-stop logistics solution, covering the entire journey from their overseas factory door to the doorstep of the end consumer in the United States. These overseas manufacturers need a comprehensive solution that streamlines their supply chain and simplifies logistics. By integrating ocean freight into our existing services, we can offer a broader range of options to meet the diverse needs of our customers. All aspects of the shipping process will be handled by our professional team, including coordination with the factory, arranging for transportation, customs clearance, and final delivery. Our customers can focus on manufacturing quality products for consumers by delegating their logistics to us. With our new international ocean freight services, we look forward to expanding our business and building lasting relationships with manufacturers worldwide. We plan to refine and optimize these services over the next two years, with an estimated cost of $3 to $4 million. To finance the expansion of our services, we are exploring a range of funding options, which may include utilizing our existing cash reserves, seeking loans from financial institutions, or securing investor capital. The actual funding source chosen will be determined by our current financial position, creditworthiness, and other factors. Building up our expertise and capabilities in this area may require significant resources. Additionally, shipping goods across international borders may present regulatory and legal challenges, complicating the expansion process. In addition, we plan to continue to develop comprehensive and sophisticated solutions and services that span the entire supply chain, from ocean freight to distribution and delivery. This will enable us to offer a full range of value-added services to our customers, including sales forecasts and inventory planning. We also plan to develop modular solutions and services that can be easily adopted by our customers, which are expected to improve their experience and allow us to expand more rapidly and cost-effectively.
Further Invest in Supply Chain Technologies to Drive Sustainable Growth
We plan to further invest in supply chain technologies to facilitate the adoption and implementation of advanced technologies to improve the efficiency, transparency, and sustainability of our supply chain solutions. Our focus will be on fundamental technologies, including artificial intelligence, data analytics, and supply chain planning and optimization algorithms, as well as smart systems, such as ocean freight tracking and management, automated sales forecasting and inventory management, and real-time data analysis. We anticipate that investing in supply chain technologies will not only enhance our ability to provide smart supply chain solutions and offer valuable data insights to customers across diverse industries, but will also bring a multitude of benefits, such as improved inventory management, faster delivery times, reduced operational costs, increased supply chain transparency, enhanced sustainability, and improved overall customer satisfaction. In addition, we plan to further open up our technology platforms to our customers and partners to accelerate the digitization and streamlining of their supply chains. We believe this will enhance collaboration, innovation, and efficiency across the supply chain ecosystem. Some challenges can arise when implementing supply chain technologies, including high costs, a shortage of skilled workers, and data security concerns. Overall, we believe that further investing in supply chain technologies to drive sustainable growth can help us sustain our competitive advantage and contribute to our long-term success while also advancing sustainable practices.
Pursue Additional Strategic and Financially Attractive Acquisitions
We endeavor to identify, acquire, and integrate businesses that will expand our supply-chain-related warehousing and logistics business, while achieving synergies and generating attractive returns that exceed our cost of capital. Using our disciplined approach to screening and evaluating potential opportunities, we intend to seek strategically and financially attractive acquisition targets that provide us with new capabilities. We have significant internal resources dedicated to tracking potential acquisition prospects which are formally reviewed by senior management on a regular basis. Since we are a fast-growing warehousing and logistics solution provider with a wide network of contacts, we believe we will be an acquirer of choice in our industry and will be able to transact with smaller players at attractive valuations.
Organizational Structure
Armstrong Logistic was incorporated on April 16, 2020 under the laws of the State of California, which holds 100% of the equity interests in the following entities: (i) Armlogi Truck Dispatching LLC (“Truck Dispatching”), a limited liability company wholly owned by Armstrong Logistic, which was organized on February 26, 2021 under the laws of the State of California; (ii) AndTech Trucking LLC (“Andtech Trucking”), a limited liability company wholly owned by Armstrong Logistic, which was organized on May 7, 2021 under the laws of the State of California; (iii) Amlogi Trucking LLC (“Armlogi Trucking”), a limited liability company wholly owned by Armstrong Logistic, which was organized on March 25, 2021 under the laws of the State of California; (iv) Armlogi Group LLC (“Armlogi Group”), a limited liability company wholly owned by Armstrong Logistic, which was organized on October 19, 2021 under the laws of the State of California; and (v) AndTech Customs Broker LLC (“Andtech Customs Broker”), a limited liability company wholly owned by Armstrong Logistic, which was organized on June 8, 2021 under the laws of the State of California.
In connection with our initial public offering (“IPO”), we have undertaken a reorganization of our corporate structure in the following steps:
On May 15, 2024, we closed our IPO of 1,600,000 shares of common stock at a price of $5.00 per share. In connection with the IPO, the shares of common stock began trading on the Nasdaq Global Market under the symbol “BTOC” on May 14, 2023.
Our Business Model
We provide our customers, comprising both international cross-border e-commerce merchants (primarily from the PRC) and domestic customers, with a package of warehousing and logistics services to select from, including (i) facilitating overseas transportation of goods to the U.S.; (ii) customs brokerage services; (iii) transportation of goods to U.S. warehouses; and (iv) warehouse management and order fulfillment services. While our one-stop warehousing and logistics services cover a broad range of offerings, we recognize revenue from the following three sources for accounting purposes: