GigaCloud (GCT) Q3 2025 Earnings Call Transcript

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DATE

Thursday, November 6, 2025 at 6 p.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Larry Wu
• President — Iman Schrock
• Chief Financial Officer — Erica Wei

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TAKEAWAYS

• Total Revenue -- $333 million for Q3 2025, reaching a new quarterly record.
• Quarterly EPS -- $0.99 per share for Q3 2025, a company high, supported by focused execution and share repurchases.
• Gross Margin -- 23.2% gross margin for Q3 2025, representing a 70 basis point sequential decline in gross margin driven by higher last-mile U.S. delivery costs and service margin compression.
• Product Revenue Growth -- 16% year-over-year product revenue growth in Q3 2025, fueled by 69% growth in Europe and offset by a 5% decline in the U.S.
• Service Revenue -- Decreased 2% year-over-year, primarily due to lower U.S. ocean shipping and drayage demand.
• Service Margin -- 9.1%, down 2.3% sequentially, attributed to increased U.S. ground fulfillment costs after pricing adjustments by partners.
• Active 3P Seller Base -- Rose 17% year-over-year for the trailing twelve months ending September 30, 2025 to 1,232, with their GMV up over 24% to exceed $790 million on a trailing twelve-month basis ending September 30, 2025.
• Buyer Growth -- Increased 34% to 11,419 buyers as more businesses looked for new efficiencies and risk optimization in a challenging environment.
• European Market Revenue -- Up 70% year-over-year in Europe for Q3 2025, to a record $100 million
• Product Margin -- Expanded 70 basis points sequentially in Q3 2025 to 29.9%, led by higher-margin channels and reduced ocean shipping costs.
• Operating Expenses -- to 11% of revenue, with reduced general and administrative expenses and selling and marketing costs flat at 8% of sales.
• Net Income -- $37 million net income for Q3 2025, representing 11.2% of revenue, and a 50 basis point net income margin increase sequentially.
• Operating Cash Flow -- Operating cash flows of $78 million were generated during the quarter.
• Total Liquidity -- $367 million including cash, cash equivalents, restricted cash, and short-term investments; company remains debt-free.
• Share Repurchase -- $16 million bought back since August 2025 under a $111 million plan, representing 15% of the new plan; Cumulative repurchases total $87 million since IPO in 2022.
• Pending Acquisition -- Announced agreement to acquire New Classic Home Furnishing, expected to close January 1, 2026, adding 1,000-plus retailer relationships and 2,000 SKUs in the U.S. brick-and-mortar channel.
• Noble House Portfolio Optimization -- Introduced 2,300 new SKUs and retired 1,100 underperforming SKUs since last quarter, returning the segment to profitability.
• Q4 Revenue Guidance -- Revenue for Q4 2025 is forecasted to be between $328 million and $344 million.

SUMMARY

The company highlighted its consistent execution on strategy, including disciplined SKU management, successful integration of acquisitions, and a strong balance sheet supporting both organic and inorganic growth. Management explicitly linked the 10% revenue increase and record financial performance to diversification, especially the resilience of international and European operations as a hedge against weaker U.S. demand, and emphasized the value-creation achieved through the Noble House turnaround. Strategic clarity was established around the upcoming New Classic acquisition as a deliberate expansion into brick-and-mortar channels, designed to further diversify revenue and distribution mix and position the company for multichannel evolution.

• President Schrock emphasized the marketplace's scalability and highlighted the trailing-twelve-month GMV reaching nearly $1.5 billion, up 21% year-over-year for the period ending September 30, 2025.
• Chief Financial Officer Wei confirmed operating leverage through lower sequential expenses, flat marketing costs, and positive margin preservation despite tariff and last-mile cost pressures.
• Management said, "M&A as a cornerstone of our long-term growth," and linked past success with Noble House directly to current and future acquisition strategy.
• The guidance for the next quarter reflects confidence in sustained diversified growth, with management noting that Europe remains a primary driver and that newly optimized segments are contributing profitable expansion.
• Management repeatedly outlined that "Diversification and having a balanced portfolio is a core tenet of our strategy," emphasizing risk management through geographic and channel mix.
• The company affirmed its ongoing capital allocation framework, stating buybacks will remain a flexible tool alongside M&A for shareholder value creation.

INDUSTRY GLOSSARY

• Drayage: Short-distance ground transport of shipping containers, typically from port to warehouse or distribution center.
• SKU: "Stock Keeping Unit"; a unique identifier for each distinct product or item offered for sale.
• GMV: "Gross Merchandise Value"; the total value of goods sold via a marketplace over a period.
• 3P Seller: Third-party seller operating on the company's e-commerce marketplace platform.

Full Conference Call Transcript

Larry Wu: Thank you, operator, and welcome, everybody, to today's call. This quarter's performance is a strong testament to GigaCloud Technology Inc.'s resilience and adaptability. Despite the challenges brought by global trade uncertainties, a cooling housing market, and wavering consumer confidence, we delivered a robust 10% year-over-year growth, returning to a two-digit increase and setting a new record of $333 million in quarterly revenue, and 99¢ in quarterly EPS. These results reflect our ability to move fast, stay lean, and execute with precision, even in the face of macroeconomic headwinds. We are navigating today's environment with confidence, guided by the disciplined execution of our long-term strategy. Staying agile and continuing to diversify for resiliency, our Noble House optimization is delivering strong results.

Strategically adding new products and phasing out underperformers has fueled our first year-over-year revenue growth since we completed the acquisition. We are excited for the future value that we expect this portfolio to unlock as we continue our optimization efforts. As we have discussed many times before, we view M&A as a part of our long-term growth strategy. Noble House is a powerful validation of this strategy.

By combining product channels, vendor resources from Noble House with operational efficiency and the transformative marketplace of GigaCloud Technology Inc., we have not only been able to turn a bankrupt company losing nearly $40 million in 2023 into a profitable growing asset in less than two years, but also expanded our product line and channel outreach. This result is exactly why we view M&A as a cornerstone of our long-term growth. As we look forward, this successful playbook gives us tremendous confidence in our strategy to continue unlocking new value for the future. With that said, I am very excited to share our plan to acquire New Classic Home Furnishing, scheduled to close on January 1, 2026.

As a traditional brick-and-mortar-focused wholesaler, New Classic is a perfect strategic fit for GigaCloud Technology Inc. to further diversify our business and reach beyond e-commerce. Historically, as many of you know, the GigaCloud Technology Inc. ecosystem has been more concentrated towards e-commerce of big and bulky items. This acquisition represents our strategic move to recalibrate our focus, making brick-and-mortar wholesale a more significant and complementary part of our ecosystem, an area we see tremendous opportunities in. We have already proven the viability of our marketplace. The next step of evolution naturally is to bridge the digital and physical worlds for a truly channel-agnostic ecosystem that empowers buyers and sellers to trade seamlessly with unparalleled reach and flexibility.

Executing this next phase of evolution in the current economic climate is a deliberate choice. While no company is immune to macro pressures, our focused execution, strong balance sheet, and use of diversification as a hedging strategy allow us to navigate this turbulence more effectively than most. This will fuel our next chapter of growth, securing competitive advantages today. To that end, I will now turn the call over to Iman Schrock, who will provide a more detailed update on the progress we are continuing to make against our key operational goals.

Iman Schrock: Thank you, Larry. Hello, everybody. Our marketplace continues to gain momentum, delivering another strong quarter of growth. For the trailing twelve months ending September 30, 2025, we achieved a 21% increase, reaching nearly $1.5 billion, underscoring the scalability and resilience of our platform. Our active 3P seller base continues to expand, up 17% year-over-year to 1,232, with GMV for this cohort climbing more than 24% on a trailing twelve-month basis to over $790 million. Buyer growth also accelerated, increasing 34% to 11,419 as more businesses looked for new efficiencies and risk optimization in a challenging environment. Our global revenues increased by 10% in the third quarter on a year-over-year basis.

While the domestic U.S. markets faced headwinds, our international markets acted as a powerful hedge, driving growth and offsetting domestic softness. Diversification and having a balanced portfolio is a core tenet of our strategy, ensuring we are not overly reliant on any single market. Europe continues to be a powerful growth engine, with year-over-year revenues up 70% to a record $100 million, marking a major milestone in our global expansion. Our diversification efforts, however, are not limited to geographical expansion. We are also looking to create a more dynamic marketplace supported by a broader range of product offerings and distribution channels. To accelerate this strategy, we leverage M&A to acquire key capabilities.

Our playbook has a two-pronged approach: deepening our core capabilities through acquisitions and leveraging our ecosystem to make the acquired asset more efficient, competitive, and profitable. Our 2023 acquisition of Noble House is a prime example. It is not just an addition but a strategic integration that deepens our product catalog and capabilities. We have made substantial progress with our Noble House portfolio optimization. Since last quarter, we have introduced another 2,300 new SKUs and retired 1,100 underperforming SKUs, shaping a more streamlined, high-performing portfolio built to scale. As shared earlier this year, our SKU rationalization efforts have successfully returned the portfolio to profitability.

While temporarily impacting our top line, I am pleased to report that in Q3, this disciplined approach has paid off, with the portfolio not only maintaining its profitability but also returning to growth. We have effectively reset our foundation and are now reigniting growth from a much healthier foundation. Looking ahead, we plan to build on this momentum. Our strong balance sheet positions us to be highly active and disciplined in pursuing inorganic opportunities that align with our long-term strategic goals, and our pending acquisition of New Classic is a great example of the type of value-creating asset we are looking for. New Classic is a well-respected, long-standing U.S. wholesaler with deep roots in the brick-and-mortar furniture space.

The company has over 1,000 primarily brick-and-mortar retailer relationships, over 2,000 active SKUs, a high-performing team, and a wide network of vendors that specialize in products tailored for this specific channel. The acquisition is strategically targeted to dramatically widen our distribution and channel reach. By pairing New Classic's network with GigaCloud Technology Inc.'s marketplace ecosystem and logistics capabilities, we can accelerate growth and unlock new efficiencies. We expect to close the transaction early in 2026 and expect four to six quarters of strategic initiatives to be reflected in our financial performance. Now, I will turn things over to Erica Wei for a discussion of third-quarter financials.

Erica Wei: Thank you, Iman, and hello, everybody. 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's take a look at this quarter's results. We delivered a great quarter, including double-digit growth revenue of 10% to $333 million, a new quarterly high. Now let's break this down by revenue streams. Our service revenues declined 2% year-over-year, primarily driven by reduced U.S. ocean shipping and drayage revenues. The uncertainties seen in recent months have resulted in significant declines in the demand for ocean shipping services to the U.S. for many industries.

Lower demand has suppressed ocean spot rates, which translates to lowered service revenues for us. U.S. revenue pressures were partially offset by strong year-over-year growth in similar services delivered to our European market sellers. Service margin came in at 9.1%, down 2.3% sequentially, primarily driven by higher last-mile delivery costs in the U.S. following pricing adjustments implemented by some of our ground fulfillment partners. In response, we are actively recalibrating client pricing to reflect these updated cost structures. Total product revenue grew 16% year-over-year, driven by our strong performance of 69% growth in Europe. Growth was partially offset by a 5% decline in the U.S., which is reflective of the challenging macroeconomic pressures in the region.

But more importantly, it is a direct outcome of our disciplined strategy. As communicated last quarter, we have implemented targeted price increases to address rising tariff costs. Our strategy is to prioritize margin integrity over pure volume, ensuring the growth we deliver is sustainable and valuable. Our commitment to margin integrity was put to the test this quarter and proved effective. We faced a significant margin headwind from the sale of products sourced in Q2 under tariffs exceeding 100%, which we successfully navigated with strategic price increases, protecting our baseline profitability.

Beyond this mitigation, we delivered a sequential product margin expansion of 70 basis points to 29.9% as we grew our higher product margin channels and benefited from lowered ocean shipping costs. For GigaCloud Technology Inc. as a whole, gross margin was 23.2% for the third quarter, a 70 basis point sequential decline from 2025. Operating expenses declined 1.7% sequentially to 11%, primarily driven by lower G&A expenses. This is a reflection of lower stock-based compensation this quarter, as most stock-based comp is granted and vested in the second quarter of each year. Selling and marketing expenses remained flat sequentially at 8% of sales.

This brings net income to $37 million or 11.2% of revenue, an expansion of 50 basis points sequentially. I am also pleased to report a new record for quarterly EPS of $0.99 per share, driven by our team's focused execution and amplified by our ongoing share repurchase efforts. For the third quarter, we generated operating cash flows of $78 million, ending the quarter with total liquidity, which includes cash, cash equivalents, restricted cash, and short-term investments, of $367 million. We remain debt-free and continue to execute on our capital allocation strategy of pursuing strategic acquisitions such as New Classic, while simultaneously returning capital to shareholders through buybacks.

Since the announcement of our $111 million share buyback plan in August, we have executed approximately $16 million in buybacks to date, or 15% of our latest plan limits. This brings our cumulative buyback total to $87 million as of date since our IPO in 2022, and we plan on continuing to execute opportunistically using buybacks as a flexible tool to return value to our shareholders. Finishing with our fourth-quarter outlook, revenue is expected to be between $328 million and $344 million. Operator, we are now ready to begin the Q&A session.

Operator: We will now begin the question and answer session. 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 your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Your first question today comes from Tom Forte from Maxim Group. Please go ahead.

Tom Forte: Great. Thanks. Congratulations on the quarter. I have one question and one follow-up. So you talked about a new M&A acquisition. Can you talk about your thoughts on additional M&A acquisitions? Recently, you have talked about looking for opportunities to expand in Europe and then also looking for, I think, to add technology perhaps on the software side, things of that nature. So that is my first question.

Larry Wu: Yeah. We are keep looking, you know, different opportunity by focusing on, you know, any opportunity can bring us, you know, more product or the fulfillment capability. But right now, I think we are more focusing on, you know, concluding the closing of New Classic. But our team is definitely concurrently looking for a new opportunity. But it is unlikely that this can happen, you know, in the coming few months because we will be focusing on, you know, New Classic for this at some moment.

Tom Forte: Okay. And then for my second question, and thank you, Larry, for the answer on that one. The good news for the housing market is that the site has now had multiple rate cuts. I recognize that the housing market is still very challenged. Do you think any of these rate cuts are starting to translate into greater interest in home merchandise and then the possibility for some sort of sales catalyst over the next twelve months?

Larry Wu: Yeah. That is obviously this is Larry. We were, you know, hopeful about the, you know, the bouncing back of the housing market. But, we are trying to keep ourselves more focused on the execution on a micro level, you know, because we do have the toolbox of, you know, more diversified revenue avenues that we can really enjoy the flexibility. Avoid any kind of, you know, reliance on any of the macro, you know, positive or factor to happen to really provide the opportunity to grow. We are trying to deliver the growth regardless of what the macroeconomics is doing.

Tom Forte: Thank you, Larry. Thanks for taking my questions.

Operator: Thank you. Once again, if you have a question, please press star then 1. Your next question comes from Joseph Gonzalez from ROTH Capital Partners. Please go ahead.

Joseph Gonzalez: Hi, guys. Thank you for taking my question. It is great to see you guys kind of transform Noble House. I want to see if you guys can unpack that here a little bit. Is there any chance you can just give us a cadence of how the quarter went and kind of the drivers for that growth there in 3Q?

Larry Wu: Thanks, Joseph.

Erica Wei: Yeah. Q3, I think, overall went really well. The main drivers here are Noble House outperforming in the U.S. and also Europe, it is nothing new, continuing to perform very strongly.

Joseph Gonzalez: Got it. And as a potentially your core business like, excluding Noble House, any drivers there you would like to unpack for us as you come out, you know, with about double-digit growth in the fourth quarter through your guidance. Just kind of what you guys are seeing in your early innings of 4Q and the confidence there.

Erica Wei: I think as of today, we are seeing kind of Q4 going well, kind of as expected, and this is reflected in the guidance that we gave just now. And this is, of course, inclusive of the expectation of Europe, which is mostly it is entirely organic, continuing to perform strongly, Noble House, and then, of course, our original acquired parts of the business, all three combined.

Joseph Gonzalez: Got it. It is good to hear you guys are able to navigate during a dynamic environment. We will go ahead and leave it there. Thank you, guys.

Erica Wei: Thank you.

Operator: Thank you. There are no further questions at this time. And with that, that does conclude our question and answer session. This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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