GigaCloud Technology Inc. (GCT) Q4 2025 Earnings Report, Transcript and Summary

Welcome to GigaCloud Technology Inc.'s fourth quarter and full year 2025 earnings conference call. Joining us today from GigaCloud Technology Inc. are the company's Founder and Chief Executive Officer, Larry Wu, its President, Iman Schrock, and its Chief Financial Officer, Erica Wei. Larry will provide opening remarks, Iman will discuss the company's operational progress, and Erica will review financial results. After that, we will open the call to questions. As a reminder, this conference call contains statements about future events and expectations that are forward-looking in nature. Actual results may differ materially. Additionally, today's call will include a discussion of 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 Technology Inc., which is posted on the company's website. I would now like to turn the call over to Larry Wu. Please go ahead, sir.

Thank you, Operator, and good morning, everyone. 2025 marked a defining chapter for us: record revenue, record EPS, and a level of performance that underscores not only the strength of our model, but also our resilience and adaptability when facing challenges. In a year when the macro backdrop was anything but predictable, our agility and operational discipline powered strong double-digit growth and positioned us to accelerate even further. From the beginning, we understood the importance of building new growth vectors for sustainable long-term value creation; that strategy continues to pay off. We have expanded our geographic reach, scaled our marketplace, and strengthened our platform through targeted acquisitions. In doing so, we have built not just a thriving company, but an ecosystem designed to lead the next phase of growth. Our acquisition of Noble House is a great example of how we are building our growth vectors into businesses and how those vectors are already driving momentum. In under two years, we took a bankrupt company to a profitable and growing portfolio. Our work took discipline and patience. We broadened our product line, expanded our channel reach, and enhanced our operational efficiency. More importantly, we built a repeatable playbook for M&A integration that sets us up for long-term success. Now we are applying the same playbook to our new acquisition, New Classic Home Furnishing. This move positions us to serve every corner of our industry with even greater depth and capability. Iman and Erica will get into the details shortly, but the headline is simple: We are genuinely excited about the value New Classic unlocks for our marketplace, our partners, and our shareholders. Our success in Europe is another clear validation of this approach, and it reflects the value of long-term strategic positioning. With 68% revenue growth from 2024 to 2025, we expanded our presence in a measured, strategic way, extending the reach of our marketplace and giving our buyers and sellers around the world a more efficient way to transact. Our performance has also given us the financial flexibility to be disciplined with our capital. Investing in growth where we see the highest-conviction opportunities while continuing to return capital through ongoing share repurchases is a core part of how we create durable value. We feel confident in what we have built and where we are headed. We believe this is a business that can perform across cycles, supported by strong execution, a portfolio of durable growth vectors, and disciplined capital management. Now, I would like to turn the call over to Iman for a discussion of our continued progress.

Thank you, Larry. Hello, everybody. Our marketplace continues to deliver impressive momentum, posting another period of substantial growth. Over the trailing 12 months ended December 31, 2025, marketplace GMV increased approximately 18%, reaching a record of nearly $1.6 billion. Sellers continue to join our marketplace at a strong pace, with our 3P seller base expanding 17% year-over-year on a trailing 12-month basis, reaching 1,299 as of December 31. More encouragingly, GMV from this base grew by 23% to $851 million, as our sellers continued to find success on the marketplace. We added nearly 2,800 new buyers in 2025 on a net basis, bringing our total buyer base to 12,089. By increasing efficiencies and lowering transaction risk, our marketplace is an even more compelling solution for participants looking to operate confidently in a volatile global environment. While global macro trends and policy shifts remain outside of our control, we can and do control the flexibility and responsiveness of our model. We operate with the expectation that conditions will change, and we are structured to adapt quickly. Europe is a clear example. Our focus on Europe as a key growth vector continues to deliver. By shifting more resources and focus to Europe, in light of softness in the U.S. market, we drove tangible results. Europe delivered 68% revenue growth on an annual basis, a key contributor to our double-digit global growth for the full year. This is exactly the kind of agility we built into our model: the ability to identify where growth is happening and redeploy resources accordingly. To build on this momentum, we strengthened our marketplace operations and expanded our infrastructure to seven facilities in Europe. We are building a truly global business. Europe proves that our model travels and that the growth vectors we planted years ago are now delivering. For us, that is the value of long-term strategic positioning: placing disciplined bets, giving them time, and letting the results speak. This is not just about geography. We are applying the same lens across the business, broadening our product offerings, and strengthening our distribution channels. With that in mind, I would like to share an update on Noble House and provide additional context on our more recent acquisition of New Classic. It has been two years since our acquisition of Noble House in Q4 of 2023, and I would like to take a moment to look back on how far we have come. We acquired Noble House out of bankruptcy, a business that was losing close to $40 million a year. We began leaning on GigaCloud Technology Inc.'s superior marketplace model and operational expertise to trim fat and streamline the business. From there, we executed a complete overhaul of Noble House's portfolio offerings, rationalizing SKUs to focus on what works. The process took patience and discipline, and the results speak for themselves. The Noble House portfolio turned to profitability during the earlier half of 2025 and returned to growth in the third quarter of this year. I am pleased to share that we have stabilized the portfolio as of Q4 2025, slightly ahead of our original goal of Q2 2026. Moving forward, we expect to continue refreshing the portfolio through a disciplined cadence of regular new SKU introductions and selective rationalizations, consistent with how a healthy portfolio evolves rather than the comprehensive overhaul we executed in 2025. As of today, all elements of operations for the Noble House portfolio have been fully integrated into GigaCloud Technology Inc. On a go-forward basis, legacy Noble House will be managed as part of GigaCloud Technology Inc.'s larger, growing portfolio. Given the completion of our integration efforts, we do not plan on providing portfolio-specific updates in future calls. The acquisition and integration of Noble House brought us new product capabilities, especially in the outdoor space, as well as wider and deeper distribution channels. It also reinforced what is possible when we apply patience, discipline, and the full weight of our operational expertise and the marketplace model, even in challenging conditions. With our acquisition of New Classic, we see a similar opportunity. On January 1 of this year, we completed the acquisition of New Classic, funded with $18 million cash on hand. The acquisition broadens our product offerings and strategically deepens our foothold in brick-and-mortar distribution, an area where we see meaningful growth potential. We are eager to get to work, apply the same disciplined approach, and capture the value we know is there. On the integration front, we are off to a strong start. The New Classic team brings deep expertise and relationships in the brick-and-mortar space, and we have been working closely to ensure a smooth transition. Similar to Noble House, New Classic will be integrated directly into GigaCloud Technology Inc. rather than being run as a distinct subsidiary. Our focus is on preserving New Classic's strong distribution channels and relationships while thoughtfully layering in GigaCloud Technology Inc.'s marketplace model and operational capabilities with a target integration period of six quarters. We are excited about the growth potential that will come from combining New Classic and GigaCloud Technology Inc. On the revenue side, we see two clear and immediate opportunities. First, we will leverage GigaCloud Technology Inc.'s vast nationwide fulfillment network to expand New Classic's geographic reach, moving beyond the constraints of its current two-facility footprint. Second, we plan to leverage GigaCloud Technology Inc.'s deep supply chain routes and new product development capabilities to widen New Classic's assortment, driving increased volume through its brick-and-mortar channels. We are energized by what lies ahead. Our team is focused on executing with patience and precision, and we believe we are well positioned for the future. With that, I will turn things over to Erica for a discussion of our fourth quarter financial results.

Thank you, Iman, and hello, everybody. A quick note before we get into our results: All figures I cover today are rounded, and unless otherwise noted, comparisons are against the same period last year. Now, let us take a look at our results. We delivered strong fourth quarter and full year results, breaking several records. Fourth quarter revenue was $363 million, up 23% against the prior-year quarter, and full year revenue rose 11% to $1.3 billion. Quarterly diluted EPS grew 37% on a quarterly basis to $1.04 per share, and full year diluted EPS increased 18% to $3.59 per share. Now, let us dig in a bit deeper, starting with service revenue. Service revenue increased 21% year-over-year to $129 million for the fourth quarter. Growth was driven by strong demand from our marketplace participants, including higher last-mile activity, along with higher packaging service revenue and commissions, reflecting larger transaction volumes and increased use of our fulfillment services. These gains were partially offset by a decline in ocean service revenue, resulting from ocean spot rates being meaningfully lower in Q4 2025 than they were in Q4 2024 due to softer overall demand for ocean shipping after Liberation Day across the broader economy. Q4 service margin declined by three percentage points sequentially to 6%, primarily due to cost increases related to peak-season ground fulfillment surcharges, as expected during the holiday season and similar to prior years. Service margin also saw modest sequential pressure from the lower ocean spot rates. Turning to product revenue, product revenue increased by 24% year-over-year in the fourth quarter to $234 million, driven by growth across all operational regions. Breaking that down further, U.S. product revenue totaled $121 million, up 3% year-over-year against a challenging backdrop. We continue to remain disciplined in the current volatile environment, prioritizing profitable revenue over empty volume that does not translate into earnings. Consistent with this approach, we had intentionally paced top-line revenue for the Noble House portfolio earlier this year as we rationalized SKUs to protect bottom-line integrity. I am pleased to share that our efforts are paying off. The Noble House portfolio saw over 40% year-over-year growth on a quarterly basis in Q4, driven by new products and SKUs introduced this year. We are encouraged by the results of our turnaround efforts and are optimistic about the portfolio's future. As Iman mentioned earlier, given the portfolio's full integration, this will be our last standalone update on the Noble House portfolio. Europe product revenue continued to be a strong contributor. Product revenue for the region increased by 64% year-over-year to $98 million total. Product margins increased 220 basis points sequentially to 32.1%. The expansion was driven by several factors, including targeted pricing actions aimed at capitalizing on strong fourth quarter demand, growth in off-platform sales, which typically carry higher gross margins to offset higher selling expenses, as well as benefits from lowered ocean shipping costs. While declining ocean spot rates can negatively impact service margins, they also translate to cost reduction on the product front, supporting product margin expansion. Combining the above, total gross margin for the quarter was 22.9%. Diving into our expense categories, sales and marketing costs for the fourth quarter totaled $29 million and represented 8% of total revenue, compared with 6% for last year's fourth quarter. The increase was due to higher channel-related advertising spend and staffing costs associated with our European expansion. G&A was $11 million, or 3% of total revenue, down from 6% last year due to increased warehouse utilization rates and lower stock-based compensation and administrative compensation compared with the prior-year quarter. Combined, net income margin for the fourth quarter was 10.6%, and net income was $38.5 million, a 24% increase from the prior-year quarter. Our net income growth was further amplified by share buybacks, translating to a 37% year-over-year increase in diluted quarterly EPS to $1.04. We generated $64 million in operating cash flows during Q4, ending the quarter and year with total liquidity, which includes cash equivalents, restricted cash, and short-term investments, of $417 million. We remain debt-free. Our capital allocation plans remain consistent as previously communicated: strategic M&A on an opportunistic basis and returning capital to shareholders through ongoing buybacks. On the buyback front, since the announcement of our latest $111 million share repurchase program in August of 2025, we have executed $33 million in share buybacks at a weighted average price of $31.60 per share, representing 30% of the approved plan. Finishing up with our first quarter outlook, revenue is expected to be between $330 million and $355 million. Operator, we are now ready to begin the Q&A session.

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw, please press star and then two. Our first question comes from Ryan Meyers with Lake Street Capital Markets. Please go ahead.

Hey, guys. Thanks for taking my questions, and congratulations on the strong results and the strong quarter. First question for me: thinking about where revenue ended up coming in well ahead of guidance that you previously gave, what were the sources of upside? How should we think about that as a potential lead-in for what you gave for the second quarter guidance and then the range that you gave there?

Hey, Ryan. Thanks for the question. This is Erica. Yes, in Q4, our strongest drivers of year-over-year growth were, A, Europe, which we have seen very strong performance from for the last several quarters, and looking forward, we expect that to continue in the near future. Now, I do want to be clear, we do not expect the region to indefinitely grow at close to 70%. A year from now, we should see some gradual slowing down. The other big grower was Noble House. I think we have talked about this on previous calls several times. There was actually a decline in the first half of 2025 because we were doing a complete overhaul of the SKUs in that portfolio. What that meant exactly was we had, at the time, taken out a lot of the SKUs that were not performing as well, not quite as profitable as we would like them to be, and replaced them with new SKUs. There was a period where revenue was down, and Q3 and Q4 were when the new SKUs that we introduced really started kicking in, or the efforts started paying off, and we saw really quite strong growth of over 40% in Q4 of this year. Looking ahead to Q1, I would also expect strong contribution from that portfolio and, down the line, that will tend to taper off slowly as we become more and more stable.

Okay, makes sense. Gross margin, I think you briefly had called it out. It came down a little bit from last quarter but was up year-over-year. What were the main drivers of that? How should we think about the gross margin in the first quarter here?

For overall margin, you really do have to look at product and service separately. If we look at service first, the main driver, if we are looking at year-over-year, the biggest one is for sure ocean, right? We all know what happened there. Ever since April, overall demand for ocean services globally has been down, and I am not talking about GigaCloud Technology Inc. or even the furniture industry. I am talking about the broader economy. Spot rates are a lot lower than what they were in 2024. We actually moved more containers this year than last year, but because of the lowered price per unit, overall revenue and margin from that piece are down. If we look at it sequentially, usually we do see a bit of compression coming out of Q4 because of last-mile surcharges that our vendors charge, and these tend to go away around mid-January. Product-wise, we did see very strong performance. Europe was for sure our strongest region. Then, for all of our geographical regions, we also saw stronger or higher off-platform channel sales. Usually, those have higher gross margins because of the higher sales and advertising expenses that come with them. Does that answer your question, Ryan?

Nope, that does. That makes sense. Thank you.

Thank you.

The next question comes from Joseph Gonzalez with Roth Capital Partners. Please go ahead.

Good morning, guys, and congratulations on another good quarter. This was already asked, but approaching it from a different angle, as we look to your 1Q sales outlook, is there any way you can break out service versus product here in growth? Also, any color on New Classic contributions as we look into 1Q?

Yes, thank you for the question. We do not really have a breakdown specifically for product and service, but overall, we do expect the trend—or kind of that they were growing at similar speeds this quarter—to continue for the coming quarter, and the guidance that was given does indeed include New Classic. For Q1, we expect revenue from that portfolio to be in the probably mid-teens.

Got it. Okay. Again, just looking as we look into 1Q, thoughts on service gross margin recovery. It looks like services came in at roughly 6%. I know you just answered that it is mainly coming from ocean spot rates. Any color as we are heading into 1Q in 2026 on gross margin expansion on that front?

Sequentially, I do expect a bit of recovery, mainly because of the change in last-mile costs. Usually between November and mid-January, we see increased costs from our vendors because of the holiday season and the very high volume. Once that goes away, in Q1, usually last-mile margins recover a bit, and then on top of that, we have also been conducting a little bit of pricing increases in Q1.

Okay, got it. Thank you. If I could just squeeze one more in here, any preliminary thoughts on ocean freight? I know we have seen compression in 2025. I just want to see what your preliminary thoughts are on service gross margin this year and how it may be impacted.

Great question. Unfortunately, I am not able to really predict the future when it comes to ocean spot rates. I really wish I could. With that said, what we are seeing at the moment is things seem to be pretty stable, and they are at a point that I would consider fairly low if we look back at the last two years.

All right. Got it. We will go ahead and take the rest offline. Thank you again.

Thank you.

This concludes our question-and-answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.