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]

Financial Data and Key Metrics Changes - The company reported a 5.1% revenue growth for the full year, with constant currency revenue growth of 4.8%, slightly below guidance due to sluggish category growth [34] - Adjusted EBITDA for the fourth quarter was a loss of CHF 6.1 million, and for the full year, it was a loss of CHF 35.3 million, which was at the favorable end of the guidance range [34][35] - Gross margin expanded by 9.3 percentage points year-over-year, reaching 28.7% for the full year [34][70] Business Line Data and Key Metrics Changes - Each of the three operating segments reported profitable growth for the second consecutive quarter, with solid volume growth in both the fourth quarter and full year [37] - The Barista portfolio remains the largest business and growth driver, with North America reporting 10% growth and Europe and International reporting 13% growth in 2024 [15][18] Market Data and Key Metrics Changes - North America experienced double-digit revenue growth in retail and 8% growth in foodservice, with foodservice sales growing by 22% when excluding the largest customer [16][19] - Greater China posted strong double-digit growth in the second half of the year after a strategic reset, driven by an expanded presence in the foodservice channel [16][87] Company Strategy and Development Direction - The company aims to ignite category momentum by increasing relevance and attacking barriers to conversion from dairy, while also driving efficiencies [13][14] - A focus on supply chain simplification has been emphasized, with the closure of the Singapore facility and discontinuation of a second Chinese facility, maintaining five global manufacturing plants [9][30] Management's Comments on Operating Environment and Future Outlook - Management expects to enter a profitable growth era in 2025, with constant currency revenue growth projected between 2% to 4% [7][41] - The company anticipates a 300 basis point headwind to growth from sourcing changes at its largest U.S. customer, but underlying growth remains healthy [7][41] Other Important Information - The company achieved a 99% customer fill rate in 2024, indicating improved operational efficiency [9] - Free cash flow improved significantly, with a $156 million use of cash for the year, marking the best performance since the IPO [39] Q&A Session Summary Question: What are the drivers within gross margin improvement? - Management highlighted optimizing production footprint, maximizing global sourcing resources, and managing product mix as key drivers for gross margin improvement [50][51] Question: What is the outlook for promotional activity in the U.S.? - Management acknowledged recent volatility in promotional activity but emphasized solid consistent velocities in core portfolio products and expected steady growth trajectory [52][55] Question: What is the risk associated with the largest customer in the U.S.? - Management noted that the largest customer represents only 20% of U.S. sales and 7% of total company sales, indicating a reduced exposure and ongoing efforts to drive growth outside this customer [58][83] Question: How has the outlook for the Chinese market changed? - Management confirmed that the business in Greater China is showing positive trends, with profitable growth reported since Q3 2024, and plans to enter the club channel in 2025 [86][87] Question: How confident is the company in achieving the low end of EBITDA guidance for 2025? - Management expressed confidence in the plans being fully resourced and emphasized a disciplined approach to cost and capital allocation to achieve the guidance [92][96]