GigaCloud Technology (GCT)

I am interested to get the board’s feedback on GigaCloud Technology (GCT). They are a business to business retailer of large and bulky goods, the primary one being furniture. They have a third party marketplace for sellers and buyers, and additionally first party products for selling SKUs themselves.

The company is becoming a market leader in a industry where others are losing share and going out of business. I believe this company has the potential to scale up considerably based on current prospects.

The acceleration of the revenue is somewhat incredible over the last eight quarters, along with the percentage year over year increases.

112M → 128M → 126M → 128M → 153M → 178M → 244M
19% → 11% → 23% → 21% → 14% → 23% → 39% → 95%

They’ve gone from a tight range of about a 20% grower, all the way up to growing almost 100% yoy in the last quarter! To be fair I’m still new to this business and I’m not completely sure what’s driving the massive accelerations across the business. I’ve been checking on in on this company for the last couple quarters as they seem to be beat and raise expectations nearly every quarter recently.

This past Q4 saw the following metrics,

  • Originally guided Q4 revenue to be 217-223M, actual was 244M (+95%)
  • Gross profit 70M, +161%
  • Gross margin, 28.5% vs 21.2% last year
  • Net income, 35.6M + 185%
  • Cash on hand, 183M vs 143M last year, no debt
  • Adj EBITDA 43.8M, +188%
  • Expected analysis Adj EPS 0.58, actual 0.87
  • FY revenue was 703M, +46%
  • FY Gross profit 188.6M, +127%
  • FY net income 94.1M, +292%
  • FY net income margin, 13.4%, up from 4.9%
  • FY Adj EBITDA 118.3M, +183%
  • GigaCloud Marketplace GMV 794M, +53%
  • Active 3P (3rd party marketplace) sellers 815, +45.5%
  • Active 3P buyers 5010, +20.5%
  • Spend per active buyer 158k vs 125k year ago, +27%
  • 3P seller GigaCloud Marketplace GMV 426M, + 65%

To be fair, costs are up big as well, but seems growth is accelerating faster than costs. In some cases the company is ramping up new areas like R&D and advertising promotions.

  • Cost of revenue 175M, +77% (vs 95% revenue growth)
  • Cost of service +91%, delivery cost +98%, rental costs +65%
  • Staff costs +115%
  • Cost of product sales 70.4%
  • Increase in product costs 67%
  • Rental costs +184%
  • Delivery costs +20.4%
  • Operating expenses 37.2M, +181%
  • Sales and marketing +122%
  • Advertising promotion, 2.2M, +340%
  • R&D 2.3M, +64%
  • Professional service expense +311%, 3.7M, for financial and legal advice

The company has two recent acquisitions,

  1. Noble House, from cash/operations for 77.6M, added to inventory, warehouse leases, and tech assets. Adds 6 warehouses, 2.4M sqft in US, and 1 warehouse in Canada. Increases product SKUs, particularly outdoor furnishings. Canada will expand markets serviced and attract more buys and sellers to marketplace.
  2. Wondersign, 10M from cash/operations, cloud based digital signage and e-catalog SaaS. Access to thousands of storefronts across USA.

Some commentary from the most recent Q4 earnings,

  • “We have jumped in order of magnitude in the scale of our business and the potential of our supplier fulfilled retail model”
  • Will file first 10-K within the month
  • Revolutionizing the way suppliers and resellers manage big and bulky items
  • Noble House acquisition expands sourcing origin to India and operations into Canada
  • New global third party sellers with product origins in Mexico, Colombia, and Turkey
  • Expanded warehouse footprint by over 100%, ending year with 8.2M sqft of inventory space across 33 warehouses globally
  • First party selling remains an integral part of business strategy
  • Service revenue from GigaCloud third party grew 92% yoy
  • Most of volume is US based, routes from Asia to Europe effected by Red Sea incidents was minimal
  • Not yet realized cost synergies from Noble House at this time
  • Europe has been a tremendous market of growth, US still the primary market though
  • Organically we are going to see an interest coming from a lot of the global suppliers in the region we do not currently operate in into becoming members

A few potential yellow flags,

  • Provided favorable cash on delivery terms to several Noble House supplies which were facing financial difficulties, anticipate this to start stabilizing in Q1 (I’m not sure if the company expected is or not, still an outstanding question)
  • Roughly 30k of service revenue coming in was from Noble House (so part of quarter had revenue from them, but they didn’t calculate operating metrics with Noble House, and Noble House standalone metrics will be in the 10K)
  • Also facing some macro challenges like softening of housing market, elevated shipping rates

The CFO said with their business model, they are really well positioned in a very low growth market. I’m not completely sure what to make of that, they are taking over market share from others and the business is growing extremely fast. I think what he is getting at, is that others in the industry is not growing while they are rapidly taking over large segments of the market.

The CEO says they “transformed the industry into making it more seamless end-to-end” for trading of big and bulky. I see GigaCloud having the potential to expand greatly beyond furniture soon, which could increase the TAM.

The price of the stock has been hugely variant and all over the place. I think the market is having trouble processing these results and numbers because they are large and growing fast in an industry where you wouldn’t typically expect to see this type of acceleration.


I find that one of the most difficult parts of researching a new company is figuring out how the acquisitions are affecting things. My gut says the acquisitions are what’s causing the revenue and expenses to soar right now. Let us know if you get any clarity from the 10k!

But in general a low-gross margin retailer of large and bulky goods sounds like a tough business.