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GigaCloud Technology (GCT) Q1 2025 Earnings Call May 12, 2025 06:30 PM ET Company Participants Larry Wu - Founder, Chairman, Director & CEOIman Schrock - PresidentErica Wei - CFO Conference Call Participants Ryan Meyers - Senior Research AnalystTom Forte - Managing Director & Senior Consumer Internet AnalystMatthew Koranda - MD & Senior Research Analyst Operator Welcome to Giga Cloud Technologies First Quarter twenty twenty five Earnings Conference Call. Joining us today from Giga Cloud are the company's Fo ...

Financial Data and Key Metrics Changes - Total revenues grew 8% year over year to $272 million, driven by increased market recognition and growth in the data cloud marketplace [18][20] - Service revenue increased approximately 23% year over year to $94 million, while product revenue grew by about 2% year over year to $178 million [19][20] - Net income for the first quarter was $27 million, a decrease from 10.8% in the prior year period [24] Business Line Data and Key Metrics Changes - The Giga Cloud marketplace GMV grew more than 56% to $1.4 billion, with active 3P seller base increasing over 33% to 1,154 [11][12] - GMV from 3P sellers increased 50% year over year to $734 million, accounting for about 52% of total marketplace GMV [11] - The fulfillment center opened in Bremen, Germany supports growth initiatives across continental markets, contributing to strong performance in Europe with over 80% GMV growth [12][13] Market Data and Key Metrics Changes - Europe saw robust growth, with GMV increasing by over 70% year over year, while domestic U.S. markets experienced a 17% year over year decrease [20][21] - The buyer base grew more than 81% year over year, reaching nearly 10,000 for the first time [12] Company Strategy and Development Direction - The company is focused on disciplined and sustainable growth, with ongoing integration of Noble House and introduction of new SKUs while optimizing procurement costs [5][6] - The launch of the Wonder app aims to enhance efficiency in retail management and improve supplier engagement [15][16] - The company is exploring strategic M&A opportunities, particularly in Europe, to support growth and better service the brick-and-mortar space [40][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from recent tariff developments and the high level of uncertainty in global trade but expressed confidence in the company's ability to adapt [7][8] - The company expects near-term disruptions due to macro and industry headwinds but believes its platform positions it to capture long-term opportunities [9][10] - For Q2, the company anticipates total revenue between $275 million and $305 million, with expectations of a sequential deceleration in revenue growth [25] Other Important Information - The company repurchased approximately 3.7 million shares for about $61.8 million as part of its stock repurchase program [24] - The integration of Noble House is in Phase three, focusing on refreshing the product catalog and retiring underperforming SKUs [13][21] Q&A Session Summary Question: What drove results ahead of expectations? - Management noted strong growth in service and European markets as key factors [28] Question: What to expect for gross margin in Q2? - Management indicated uncertainty due to the dynamic environment and the time required for new SKUs to ramp up sales [29][30] Question: How does the marketplace empower buyers and sellers in Europe? - The marketplace offers flexibility and reach, allowing sellers to enter new markets without significant capital investment [34][35] Question: How do tariffs translate into higher prices? - Management clarified that tariffs do not directly translate to a dollar-for-dollar price increase for consumers [36] Question: Current thoughts on strategic M&A? - The company is interested in opportunities that support growth in Europe and enhance service to brick-and-mortar customers [40][41] Question: Clarification on product revenue reclassification? - Management confirmed that product revenues were reclassified into service revenues for better transparency [44][45] Question: Guidance for Q2 and expected deceleration in revenue growth? - The deceleration is primarily due to the integration of Noble House and softness in certain U.S. channels [49][50]

Core Viewpoint - GigaCloud Technology Inc. reported quarterly earnings of $0.68 per share, exceeding the Zacks Consensus Estimate of $0.46 per share, but down from $0.84 per share a year ago, indicating a 47.83% earnings surprise [1] Financial Performance - The company achieved revenues of $271.91 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 5.64% and up from $251.08 million year-over-year [2] - Over the last four quarters, GigaCloud has exceeded consensus EPS estimates two times and topped revenue estimates four times [2] Stock Performance - GigaCloud shares have declined approximately 21.7% since the beginning of the year, compared to a 3.8% decline in the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $0.64 on revenues of $308.1 million, and for the current fiscal year, it is $2.90 on revenues of $1.2 billion [7] Industry Outlook - The Technology Services industry, to which GigaCloud belongs, is currently ranked in the top 27% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Performance - Total revenues for Q1 2025 reached $271.9 million, a 8.3% increase from $251.1 million in Q1 2024[38] - Service revenues increased to $94.1 million, up 22.7% from $76.6 million year-over-year[38] - Product revenues were $177.8 million, slightly up from $174.5 million in the same period last year[38] - Gross profit for Q1 2025 was $63.7 million, compared to $66.5 million in Q1 2024, reflecting a decrease of 4.0%[38] - Operating income decreased to $28.3 million, down 18.7% from $34.8 million in Q1 2024[38] - Net income for Q1 2025 was $27.1 million, a slight decrease from $27.2 million in Q1 2024[38] - Adjusted EBITDA for the three months ended March 31, 2025, was $33.2 million, a decrease from $34.5 million in the same period of 2024[116] - Net income for the three months ended March 31, 2025, was $27,146, compared to $27,195 for the same period in 2024, reflecting a slight decrease of 0.2%[49] Assets and Liabilities - Total assets increased to $1,091.0 million as of March 31, 2025, compared to $1,070.5 million at the end of 2024[34] - Total liabilities rose to $678.1 million, up from $665.3 million at the end of 2024[31] - Shareholders' equity increased to $412.9 million, compared to $405.2 million at the end of 2024[33] - Accounts receivable, net, increased to $67,000 thousand as of March 31, 2025, from $57,313 thousand at the end of 2024, reflecting a growth of 16.5%[87] - Total inventories rose to $204,854 thousand as of March 31, 2025, compared to $172,489 thousand at the end of 2024, indicating an increase of 18.7%[88] Cash Flow - Net cash provided by operating activities decreased to $9,433 from $15,309, a decline of 38.1% year-over-year[49] - Cash, cash equivalents, and restricted cash at the end of the period were $252,408, down from $260,444 at the beginning of the period, a decrease of 3.9%[52] - Net cash provided by operating activities for the three months ended March 31, 2025, was $9.4 million, down from $15.3 million in the same period of 2024[194] - Net cash used in financing activities for the three months ended March 31, 2025, was $22.8 million, mainly from the repurchase of ordinary shares totaling $22.7 million[199] Share Repurchase and Equity - The company repurchased 1,400,986 shares, resulting in a treasury share cost of $34.6 million[42] - The company executed share repurchase transactions totaling approximately $15.9 million as of May 12, 2025[109] - The board of directors approved a new share repurchase program allowing for the purchase of up to $62 million of Class A ordinary shares, with the program running through August 28, 2025[200] Revenue Breakdown - GigaCloud Marketplace GMV increased to $1.42 billion for the 12 months ended March 31, 2025, representing a growth of 56.1% from $907.7 million in the prior year[119] - The number of active 3P sellers rose to 1,154, a 33.4% increase from 865 in the previous year[121] - Active buyers increased to 9,966, reflecting an 81.4% growth compared to 5,493 in the prior year[123] - Spend per active buyer decreased to $142,156, down 14.0% from $165,239 in the previous year[124] - GigaCloud Marketplace revenues grew to 64.5% of total revenues in Q1 2025, up from 62.8% in Q1 2024[136] Operating Expenses - Cost of revenues increased to $208.2 million in Q1 2025, representing 76.6% of total revenues, compared to 73.5% in Q1 2024[148] - Operating expenses rose to $35.4 million in Q1 2025, accounting for 13.0% of total revenues, compared to 12.6% in Q1 2024[152] - Selling and marketing expenses rose by 27.4% to $18.6 million in Q1 2025, primarily due to a 27.3% increase in platform service fees to $8.4 million[173] - General and administrative expenses totaled $14.3 million in Q1 2025, down from $15.4 million in Q1 2024[157] - Research and development expenses increased by 42.0% to $2.5 million in Q1 2025 from $1.8 million in Q1 2024[168] Tax and Interest - The provision for income taxes for the three months ended March 31, 2025, was $5,359 thousand, with an effective tax rate of 16.5%, down from $6,125 thousand and 18.4% in 2024[100] - Interest income increased to $2.6 million in Q1 2025 from $1.6 million in Q1 2024[168] - The company reported foreign currency exchange gains of $0.8 million in Q1 2025, compared to losses of $2.7 million in Q1 2024[168] Future Outlook - The company plans to continue evaluating opportunities for future acquisitions to enhance its service offerings and operational capabilities[132] - The company plans to fund future capital expenditures with existing cash balances and anticipated cash flows from operations[203] - The company is subject to trade restrictions that could materially affect its business, particularly with proposed tariff increases between the U.S. and China[223]

Financial Performance - Total revenues for Q1 2025 were $271.9 million, an increase of 8.3% year-over-year[5] - Gross profit was $63.7 million, a decrease of 4.2% year-over-year, with a gross margin of 23.4% compared to 26.5% in Q1 2024[5] - Net income was $27.1 million, consistent with the prior-year period, resulting in a net income margin of 10.0%[5] - Total revenues for Q1 2025 reached $271,906,000, a 8.2% increase from $251,077,000 in Q1 2024[22] - Service revenues increased to $94,068,000, up 22.7% from $76,623,000 year-over-year[22] - Product revenues were $177,838,000, slightly up from $174,454,000, indicating a 2.0% growth[22] - Gross profit for Q1 2025 was $63,726,000, down from $66,548,000, reflecting a decrease of 4.0%[22] - Operating income decreased to $28,323,000 from $34,817,000, a decline of 18.7%[22] - Net income for Q1 2025 was $27,146,000, a slight decrease from $27,195,000 in Q1 2024[22] - Adjusted EBITDA for Q1 2025 was $33,183,000, down from $34,497,000, a decrease of 3.8%[25] - Cash provided by operating activities was $9,433,000, compared to $15,309,000 in Q1 2024, a decline of 38.5%[23] Market Activity - GigaCloud Marketplace GMV increased 56.1% year-over-year to $1,416.7 million for the 12 months ended March 31, 2025[5] - Active buyers rose by 81.4% year-over-year to 9,966 for the 12 months ended March 31, 2025[5] - Active 3P sellers increased by 33.4% year-over-year to 1,154 for the 12 months ended March 31, 2025[5] - Spend per active buyer was $142,156 for the 12 months ended March 31, 2025[7] Cash and Shareholder Returns - As of March 31, 2025, cash and cash equivalents totaled $287.5 million, a decrease of 5.1% from December 31, 2024[5] - Cash, cash equivalents, and restricted cash at the end of the period totaled $252,408,000, down from $260,444,000 at the beginning of the period[23] - The company repurchased ordinary shares worth $22,734,000 during the quarter[23] - The share repurchase program was increased to $78 million, with approximately 3.7 million shares repurchased for $61.8 million as of May 12, 2025[9] Future Outlook - The company expects total revenues to be between $275 million and $305 million in Q2 2025[8]

Core Viewpoint - GigaCloud Technology Inc continues to demonstrate resilience and growth in its B2B marketplace despite industry challenges, driven by the effectiveness of its Supplier Fulfilled Retailing (SFR) model [4][6]. Financial Highlights - Total revenues for Q1 2025 reached $271.9 million, an increase of 8.3% year-over-year [6]. - Gross profit was $63.7 million, down 4.2% year-over-year, resulting in a gross margin of 23.4%, compared to 26.5% in Q1 2024 [6]. - Net income was $27.1 million, consistent with the prior year's figure, yielding a net income margin of 10.0% [6]. - Diluted EPS increased by 3.0% year-over-year to $0.68 [6]. - Adjusted EBITDA for the quarter was $33.2 million, a decrease of 3.8% year-over-year [6]. Operational Highlights - GigaCloud Marketplace GMV grew by 56.1% year-over-year to $1,416.7 million for the 12 months ending March 31, 2025 [6]. - GMV from 3P sellers increased by 49.9% year-over-year to $734.3 million, representing 51.8% of total GMV [6]. - Active 3P sellers rose by 33.4% year-over-year to 1,154, while active buyers surged by 81.4% to 9,966 [6]. Share Repurchase Program - The Board approved a share repurchase program initially set at $46 million, later increased to $62 million in March 2025, and further raised to $78 million in May 2025 [7][8]. - Approximately 3.7 million shares have been repurchased for $61.8 million, representing nearly 150% of the gross proceeds from the IPO [4][7]. Business Outlook - The company anticipates total revenues between $275 million and $305 million for Q2 2025, reflecting current market conditions [5].

Company Performance - GigaCloud Technology Inc. closed at $13.84, with a daily increase of +0.54%, outperforming the S&P 500's gain of 0.44% [1] - Over the past month, the company's shares have increased by 16.75%, surpassing the Business Services sector's gain of 11.73% and the S&P 500's gain of 10.62% [1] Earnings Forecast - The upcoming earnings report is scheduled for May 12, 2025, with an expected EPS of $0.46, reflecting a 45.24% decrease from the same quarter last year [2] - Revenue is forecasted to be $257.4 million, which is a 2.52% increase from the prior-year quarter [2] Annual Estimates - For the full year, earnings are projected at $2.90 per share, showing a decline of -4.92%, while revenue is estimated at $1.2 billion, indicating a growth of +3.33% from the previous year [3] Analyst Sentiment - Recent changes in analyst estimates are crucial as they reflect near-term business trends, with positive revisions indicating optimism about the company's outlook [3] Valuation Metrics - GigaCloud Technology Inc. has a Forward P/E ratio of 4.75, which is significantly lower than the industry's average Forward P/E of 18.15 [6] - The Technology Services industry, part of the Business Services sector, holds a Zacks Industry Rank of 62, placing it in the top 26% of over 250 industries [6][7]

Core Insights - GigaCloud Technology Inc. received two Gold Stevie Awards in 2025 for "Fastest Growing Company of the Year" and "Achievement in Growth" at the American Business Awards, marking the third consecutive year of recognition in multiple categories [1][2][3] Company Performance - The company has shown significant growth momentum, having previously won a Silver Stevie Award in 2024 and a Bronze Stevie Award in 2023, indicating a consistent track record of industry recognition [2] - GigaCloud's revenue has reached $1 billion annually, with a global fulfillment footprint exceeding 10 million square feet, showcasing its rapid ascent in the B2B ecommerce sector [3] Business Model and Strategy - The company's B2B Marketplace integrates various services, including discovery, payments, and logistics, facilitating efficient cross-border transactions primarily between manufacturers in Asia and resellers in the U.S., Asia, and Europe [5] - GigaCloud's "Branding-as-a-Service" initiative is highlighted as a forward-thinking strategy that supports scalable growth and innovation in the large-parcel supply chain [3]