Welcome to GigaCloud Technologies Fourth Quarter and Year End 2024 Earnings Conference Call. Joining us today from GigaCloud are the company’s Founder, Chairman and CEO, Larry Wu; its President, Dr. Iman Shrock; and its Chief Financial Officer, Erica Wei. Larry will start with a brief introduction, Iman will provide an overview of the company’s operations, and Erica will discuss the financial results. After that, there will be a question-and-answer session. As a reminder, this conference call contains statements about future events and expectations that are forward-looking in nature and actual results may differ materially. Additionally, today’s call will include non-GAAP measures within the meaning of SEC Regulation G. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in the press release issued today by GigaCloud, as well as on the company’s website. I would now like to turn the call over to Larry for his opening remarks. Please go ahead, sir.

Thank you, operator, and welcome, everyone to today’s call. 2024 was a landmark year for GigaCloud as we continue to enhance and diversify our robust B2B online marketplace. Not only did marketplace GMV grow almost 70%, but also for the first-time in our history, GigaCloud surpassed $1 billion in total revenue for the year. And we did it despite that industry and the macroeconomic headwinds that are impacting so many. I’m incredibly proud of the GigaCloud team for this milestone, but we are not in the business of standing still. There’s still tremendous opportunity ahead and we’re pursuing it with the right strategy and the right platform and right execution. In times of uncertainty, true strength is revealed. While the macroeconomic climate remains challenging, giga cloud continue to stand strong, demonstrating resilience, adaptability and the long term vision. By enabling our participant to streamline operations, enhancing efficiency and the scale seamlessly, we have created cohesive ecosystem built for sustained success. We’re pleased with our progress on Noble House turnaround efforts with Iman and Erica will discuss in more detail about shortly. Meanwhile, one sign is to be rebranded as Wonder to reflect its evolution from Kiosk app to a comprehensive sales enablement platform for brick-and-mortar retailers. A key part of this transformation is the launch of the Wonder App, a mobile first solution designed to streamline training, engagement and performance for retail sales associate. Iman will dive deeper into these developments later in the call. Our balance sheet remains a pillar of strength. With zero debt and strong cash flow generation from operations, we’re well equipped to execute our strategic initiatives and invest in future growth. Beyond financial performance, GigaCloud’s leadership was widely recognized across the industry. We just secured the number one spot on Forbes America’s Most Successful Small…

Thanks, Larry, and congratulations to Erica on her appointment as CFO. Everyone at GigaCloud is proud of what we accomplished in 2024, but as Larry said, there’s always more work to be done, growth is more than what we achieved. It’s about what comes next. We continue to diversify our marketplace across geographies, product categories and participants while making strategic investments to enhance our services and strengthen our platform. These efforts are designed to drive consistent profitable growth positioning us for long term value creation. Before diving into marketplace metrics, I want to take a moment to address the broader macroeconomic environment. Conditions remain challenging, especially for the furniture industry, which is closely tied to consumer discretionary spending. High interest rates, persistent inflation and shifting consumer priorities have created a more cautious spending landscape. As a result, furniture demand has softened. According to Smith Leonard, new orders in November declined 9% year-over-year and full year orders trailed 2023 levels. While these headwinds present a short term challenge, GigaCloud is built for resilience. Even against this backdrop, the GigaCloud marketplace is still growing. Here are some notable stats. For the trailing 12 months ended December 31, 2024, GigaCloud marketplace GMV grew almost 70% to $1.3 billion as we empowered buyers and sellers of non-standard items to transact seamlessly on a highly efficient global platform. Growth in the number of marketplace participants also saw continued expansion with our active 3P seller base hitting more than 1,100 and our active buyer base growing to more than 9,300. It is becoming clear that a wide variety of buyers and sellers see the immense value we have built into the platform and the increasing recognition of our supplier fulfilled retailing model. GMV in our 3P seller marketplace grew 63% from one year ago and totaled…

Thank you, Iman. As Larry and Iman mentioned, 2024 was a real milestone year for us. We saw strong growth across key metrics, including GMV, market participant numbers and a strengthening geographic footprint. On top of that, I’m pleased to share that we have fully remediated the previously identified material weaknesses in our internal controls, reinforcing our commitment to operational excellence and sound corporate governance. Before diving into our financials, I’d like to provide important context for our year-over-year comparisons. In Q4 of fiscal year 2023, we completed the acquisitions of Noble House on November 1 and Wondersign on November 15. As a result, our reported figures for the first three quarters of 2024 reflect both organic and inorganic growth, while Q4 mostly reflects organic performance. This is a key distinction to keep in mind when evaluating our year-over-year trends. Now let’s get into our financials. Please note that all figures I’ll be discussing today have been rounded for clarity. Total revenues grew 21% year-over-year for the fourth quarter to $296 million, principally driven by ongoing market recognition and increases in the number of active participants on our platform. Our annual revenues have exceeded $1.1 billion, which represents a 65% increase from 2023 levels. Approximately one-third of our overall year-over-year growth was inorganic with the remaining two-thirds being organic. Let’s take a closer look by revenue stream and start with services. In the fourth quarter, service revenues exceeded $97 million representing a 40% year-over-year increase, driven by strong demand and heightened engagement across our platform. For the full year, service revenues reached $350 million marking a 76% increase year-over-year. Our service margin was 19.5% in the fourth quarter, expanding approximately 2 percentage points year-over-year, but declining 2.5 percentage points sequentially. As discussed during our previous earnings call, we experienced high…

Thank you. [Operator Instructions] Your first question comes from Ryan Meyers from Lake Street Capital Markets. Please go ahead.

Hey, guys. Thanks for taking my questions. First one for me. So obviously the implied guidance for the first quarter is kind of a low to mid-single digit growth rate, which is a bit of a deceleration based on what we’ve seen, at least here in Q4 from an organic growth rate basis. I’m just wondering, if you can kind of call out what the main drivers are there. Is it predominantly just a softer macro environment and you guys are trying to look at that conservatively? And then even if we think about the commentary, Erica, that you just gave on the second quarter, how much of that is that sort of SKU rationalization versus how much of that is just kind of overall macro softness that you’re expecting to see?

Yeah, absolutely. Thank you, Ryan. So there’s a few items to be considered there. The overall environment or macro environment you mentioned is definitely one of them. Other factors are, so we have some specific channel partners that have been hit a little harder during this time, given that we do have buyers that have strong relationships with them and ourselves as well, that does create a temporary negative impact. And then, the main player for Q2 is the Noble House integration. So as you know, Noble House’s strongest quarter is typically Q2 given the outdoors focus. As we move into Phase Three of the execution plan and we have successfully developed a number of new SKUs that are being scaled for order sizes, it’s now time to really scale back and retire on a lot of the older less profitable SKUs. So considering the timing of peak sales and the seasonality, that’s why you’ll see a slower growth in the first two quarters and especially Q2.

Got it. Makes sense. And then, if we think about the gross margins, at least for the first quarter and as we progress through 2025, I think you had provided some commentary that you expect things to be somewhat similar to what we saw here in the fourth quarter. So should we expect to see improvement in gross margins as we progress through the year? Any commentary there would be helpful.

Yeah. Great question. So with all the different moving parts, especially in the macro environment, it’s hard for us to give specific guidance on that. However, the key things to consider here, similar to revenue, we are experiencing the same pressure points for margin on Q1 and Q2. The other special component for Q1 is, we still have some of the higher capitalization ocean freight inventory that needs to be moved through in Q1. These are inventory that were purchased in Q2 during the very high spot rates. So if you recall, we started using our fixed rate contracts in large scale starting Q3. So moving forward, we won’t really experience the same issue, but we do have to kind of take that pressure in Q1.

Got it. Thank you for taking my questions.

Of course.

Thank you. Your next question comes from Matt Koranda from Roth Capital. Please go ahead.

Hey, guys. Just can we talk a little bit more about the impact from Noble House that’s built into the first quarter guide? I guess, any color on sort of the amount of SKUs that you’re scaling back that are legacy SKUs that are impacting the product revenue guide for the first quarter?

Yes. Great question. Thank you, Matt. So we don’t have a fixed target number of exact amount of SKUs we are looking to retire. This is more of a dynamic process. So as new developed products are coming in, we send them to market to identify based on market feedback, which ones are what we call winners, the ones that we believe will show good sales results and good margin results. Those are sent back for scaled larger size reorders for future profitability capture. This process does take time though. If you think about how long it takes for a new order to be manufactured and then shipped, this takes up to several months. And as we identify more of more and more of these winners, we kind of remove roughly a similar amount from the old pile of SKUs that are less possible. Does that make sense?

Yeah. I guess I’m just looking for something more simple to quantify the headwind here because it’s a big step down in terms of growth rate to sort of the 3% at the midpoint of the guide. So I’m just trying to figure out how much of this is sort of a headwind from Noble House and can we quantify it? I think last year, you guys haven’t provided a lot of data on what Noble House contributed, but I would assume it contributed north of $30 million of revenue in the first quarter last year. So what do you have it sort of contributing in the first quarter or maybe what is the -- what’s the drop in Noble House revenue that we’re assuming in the first quarter?

So I would say, roughly speaking, we expect Q1 for Noble House to maybe be flat or a little bit lower depending on how much of the SKUs we retire. This also depends on Noble House’s channel partners performance. So compared to GigaCloud, the Noble House channels are a little more concentrated. So it really depends on their performance as well.

Okay. All right. Got it. And then maybe just since tariffs are a bit of hot topic for the last week plus or several weeks plus, maybe just wanted to give you guys a chance to address sort of how we built that into the first quarter guide, how we’re thinking about the impact of tariffs both for your 1P business where I think you’re probably less exposed and then the 3P business, how that sort of will impact your third-party sellers?

Yeah. Great question. So we have -- we don’t really expect any terribly material impact from tariffs directly. I think we had this discussion last quarter. So since we last spoke, it’s been or since the new administration, it’s been a 10% increase to the already 25% for the category. If you think about the cost structure of large and bulky such as furniture, it’s a very non-value dense category, which means impact from the increase to cost, which usually takes up around maybe half of the total COGS stack when you add on margins and convert that to retail pricing impact converts to a very, very low-single digit. And given the infrequent purchase nature of this category, we don’t particularly expect very strong negative push down. And similarly from our seller group that’s on our platform, we haven’t at this point observed any amount of meaningful pull forward on the inventory as you would during times such as high ocean freight, where folks are worried about the uncertainty down the line. And in terms of 3P, GigaCloud is really here to provide a platform or a solution for folks to transact across borders more seamlessly. We’re channel agnostic and this solution is not really fixated on a specific route. So during times like this, I think GigaCloud would be a good partner to provide support for folks who are looking to change or maneuver with their supply chain as they need. During times like this, this could mean a U.S. based retailer potentially looking to source more from Southeast Asia or China based factory looking maybe to export more to Europe.

Okay. Got it. I’ll take the rest offline. Thanks, guys.

Thank you.

Thank you. Your next question comes from Thomas Forte from Maxim Group. Please go ahead.

Great. So first-off, Larry, I hope you and your colleagues are okay when it comes to the California wildfires. I think you’re more than a million in donations for those affected is very admirable. And then second, congratulations, Erica, on being named CFO. So I have one question and one follow-up. I’ll ask my question and then wait for the answer and then ask my follow-up. So Larry, it seems like the number of major sales in e-commerce space has increased over time. Amazon Prime Day used to be a single event. Now it seems like that company holds multiple Prime Day type sales during the year. I think we could say the same thing for Wayfair with Way Days. What are the implications to you from more big sales events in e-commerce, to what extent is that opportunity, and then to what extent is it incremental competition?

Go ahead.

Go ahead.

Yeah. It’s definitely we see this space really becoming more and more competitive. And like you said, a lot more sales have been observed during this time. To us, it really does seem like the consumers are showing a little more price sensitivity, right? So the sales have been really big driver -- sales events have been really big drivers in the last few periods, and we do see differences when there are and are not. So for us, I think a few things. The platform or the marketplace is really a place that offers retail operators, whether e-commerce or not, to find ways to find more efficiency from supply chain and also a more diversified and less reliant or concentrated form of sourcing.

Okay. And then -- thank you, Erica. My follow-up is, can you give your current thoughts on strategic M&A? You have a very strong balance sheet and I imagine you’re being presented with a lot of opportunities.

Yes, we are. Great question. Thank you, Tom. So we are still looking for the right M&A opportunity. We are very open to different ideas and have been presented with a number of different things in the past period. So similar to what we discussed last quarter, this really focuses on how the right target could help GigaCloud expand in the right way, meaning a few things. So Europe, for example is growing very, very quickly. And we would like to see infrastructure that’s very strong. This includes not only just a fulfillment network, but relationships that are strong and support better pricing, more efficiency that in turn supports better margins for us. Other than the Europe specific focus, we’re also open to other forms of targets that really expand our reach to ultimate participants of the marketplace. So for example, brick-and-mortar penetration is something we’re always very interested in. This doesn’t necessarily mean restriction to product type sector focused businesses such as Noble House. Something like Wondersign, a SaaS company that provides a reach to that buyer base is something we’re also very interested in.

Great. Thank you for taking my questions.

Of course.

Thank you. I’d now like to turn the call back to Erica for closing comments.

Thank you all for your continued support. We believe the future continues to look extremely bright for GigaCloud as we work to bring even greater value to all of our stakeholders. We look forward to speaking to you again after our first quarter. But in the meantime, please don’t hesitate to reach out to us, if you have any additional questions. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.