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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the consolidated financial statements and related notes thereto included in this annual report on Form 10-K.

In addition to historical information, this report contains forward-looking statements that involve risks and uncertainties which may cause our actual results to differ materially from plans and results discussed in forward-looking statements. We encourage you to review the risks and uncertainties discussed in the sections entitled Item 1A. “Risk Factors” and “Forward-Looking Statements” included at the beginning of this annual report . The risks and uncertainties can cause actual results to differ significantly from those forecast in forward-looking statements or implied in historical results and trends.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Overview

We are a pioneer of global end-to-end B2B ecommerce solutions for large parcel merchandise. We generate revenues primarily through three revenue streams:

•GigaCloud 3P: generates service revenues, including revenues from platform commission, ocean transportation service, warehousing service, last-mile delivery service, packaging service and others, by facilitating transactions between sellers and buyers in our GigaCloud Marketplace.

•GigaCloud 1P: generates product revenues through the sale of our inventory in our GigaCloud Marketplace.

•Off-platform ecommerce: generates product revenues through the sale of our inventory to and through third-party ecommerce websites.

GMV from GigaCloud 3P and GigaCloud 1P together make up our GigaCloud Marketplace GMV, and GMV from off-platform ecommerce and GigaCloud Marketplace GMV together make up our total GMV across the platforms. These three revenue streams complement each other to improve our value proposition to sellers and buyers in our GigaCloud Marketplace. Noble House primarily contributes product revenues to our off-platform ecommerce revenue streams, while Wondersign primarily contributes service revenues from its catalog subscription services, and other product revenues from the sales of its Catalog Kiosk display units.

The financial impact from the acquisitions of Noble House and Wondersign was reflected in our financial results in the fourth quarter and full year of 2023. The operating impact from these acquisitions has not been reflected in the operating metrics in our GigaCloud Marketplace in this annual report.

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The following graphic shows the revenues and GMV contribution from these revenue streams in 2021, 2022 and 2023:

Year ended December 31,

(In thousands)

Service Revenues Product Revenues

GigaCloud 3P GigaCloud 1P Off-Platform Ecommerce Others

(In thousands)

We are focused on facilitating B2B ecommerce transactions in our GigaCloud Marketplace. We built the GigaCloud Marketplace to democratize access and distribution globally so that manufacturers, who are typically sellers in our marketplace, and online resellers, who are typically buyers in our marketplace, can transact without borders. Manufacturers view our marketplace as an essential sales channel to thousands of online resellers in the U.S., Asia and Europe. Our GigaCloud Marketplace enables manufacturers to deliver their products around the world. Additionally, online resellers may lack the resources and infrastructure to manage a global supply chain and support international distribution. Our integrated ecommerce solutions allow online resellers to offer products and services comparable to those offered by large ecommerce platforms by giving them access to a large and growing catalog of products at wholesale prices, supported by industry-leading global fulfillment capabilities.

To enhance our marketplace experience, we also sell our own inventory, or 1P products, through the GigaCloud Marketplace and to and through third-party ecommerce websites such as Rakuten in Japan, and Amazon, Walmart, Home Depot, Overstock and Wayfair in the U.S. and OTTO in Germany. These product revenues expand our market presence, reduce inventory and logistics risk for suppliers, create more products for buyers, drive volume-based cost efficiencies for sourcing products and provide us with data and increase the velocity of sales on our marketplace. Product revenues through the GigaCloud Marketplace and to and through third-party ecommerce websites represented 76.3%, 71.3% and 71.7% of total revenues in 2021, 2022 and 2023, respectively. As we focus on expanding our GigaCloud Marketplace into a leading global large parcel B2B marketplace, we expect service revenues from 3P to grow faster than product revenues from 1P in the future, but we expect 1P to remain an important distribution channel for our own inventory.

Our service revenues totaled $98.3 million and product revenues totaled $315.9 million in 2021, representing a 63.5% and 46.7% increase over 2020, respectively. Our service revenues totaled $140.6 million and product revenues totaled $349.4 million in 2022, representing a 43.0% and 10.6% increase over 2021, respectively. Our service revenues totaled $199.2 million and product revenues totaled $504.6 million in 2023, representing a 41.7% and 44.4% increase over 2022, respectively. In 2021, 2022 and 2023, our total GMV was $541.8 million, $636.0 million and $999.1 million,

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respectively, of which GigaCloud Marketplace GMV was $414.2 million, $518.2 million and $794.4 million, respectively, and off-platform ecommerce GMV was $127.6 million, $117.8 million and $204.6 million, respectively.

On August 22, 2022, we completed our initial public offering of 3,381,000 Class A ordinary shares, including the additional shares sold pursuant to the over-allotment option which we granted to the underwriter. On August 18, 2022, we listed our Class A ordinary shares on the Nasdaq Global Market under the symbol “GCT.” We raised approximately $33.4 million from our initial public offering in net proceeds after deducting underwriting commissions and the offering expenses payable by us.

In June 2023, we established a share repurchase program under which we may purchase up to $25.0 million of its Class A ordinary shares, par value $0.05, over a 12-month period. As of December 31, 2023, we repurchased an aggregate of approximately 215,000 Class A ordinary shares in the open market at a total consideration of approximately $1.6 million pursuant to the share repurchase program.

In October 2023, we completed the acquisition of Noble House, a leading B2B distributor of indoor and outdoor home furnishings, for an aggregate consideration of approximately $77.6 million. The Noble House acquisition was funded using cash on hand from operations. The acquisition added valuable assets, including but not limited to, inventory, warehouse leases, intangible assets such as technology assets, and other assets which can be further utilized and to supplement our B2B ecommerce ecosystem. For more details, see Note 3, Business Combinations, in the notes to the consolidated financial statements included elsewhere in this annual report.

In November 2023, we completed the acquisition of a 100% equity interest of Wondersign, for an aggregate purchase price of approximately $10.0 million. The Wondersign acquisition was funded using cash on hand from operations. Wondersign is a cloud-based interactive digital signage and e-catalog management SaaS company headquartered in Tampa, Florida with access to thousands of storefronts across the United States through its customers. Wondersign develops and maintains “Catalog Kiosk,” a leading digital catalog software that allows retailers to display an endless aisle of products and better connect with today’s omni-channel shoppers. For more details, see Note 3, Business Combinations, in the notes to the consolidated financial statements included elsewhere in this annual report.

The acquisitions of Noble House and Wondersign had no impact on our Group’s weighted-average shares as no shares were issued.

Noble House primarily contributes product revenues to our off-platform ecommerce revenue streams, while Wondersign primarily contributes service revenues from its catalog subscription services, and other product revenues from the sales of its Catalog Kiosk display units.

Our Business Model

The GigaCloud Marketplace, our global B2B ecommerce platform, integrates all aspects of a transaction from product discovery to payments to logistics tools into one easy-to-use platform. Sellers and buyers from our targeted markets around the world leverage our cross-border fulfillment network, which is optimized for large parcel products, in order to trade with each other while saving costs. Underpinned by a network of strategically placed warehouses and supply chain capabilities, our marketplace is designed to simplify and mitigate logistics and inventory requirements for both our sellers and buyers.

Once we attract new sellers and buyers to our marketplace, we leverage our technology and supply chain solutions to drive retention. We provide value-added services like product sales forecasts to our sellers to allow them to more efficiently manage inventory and reduce costs. Our integrated supply chain also offers manufacturers and online resellers in our marketplace enhanced visibility into product inventory, reducing inventory turnover and associated transaction costs. The value of our model is demonstrated by the growth in GMV from our new and existing sellers and buyers.

In 2021, 2022 and 2023, GigaCloud Marketplace had 382, 560 and 815 active 3P sellers, and 3,566, 4,156 and 5,010 active buyers, respectively. Sellers in our marketplace are typically manufacturers based in Asia, who are able to

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leverage our supply chain capabilities to establish overseas sales channels without having to invest in their own logistics or rely on intermediaries. The buyers in our marketplace are typically resellers based in the U.S., Asia and Europe that procure products at wholesale prices and subsequently sell on third-party B2C platforms.

GigaCloud 3P

Through GigaCloud 3P, we generate service revenues through the various 3P activities of sellers and buyers in our GigaCloud Marketplace, which result in revenues from platform commission, ocean transportation service, warehousing service, last-mile delivery service, packaging service and others. When a seller and buyer enter into a transaction in GigaCloud Marketplace, we generate revenues from platform services by earning a percentage commission depending on the transaction value. The standard commission ranges between 1% and 5% depending on the size of the transaction. We charge fees for ocean transportation services such as delivery of products via ocean and other modes of transportation, warehousing fees in connection with the storage of products in our warehouses, and last-mile delivery fees if the buyer requires last-mile delivery services. We also charge packaging fees in connection with merchandise that we pack and ship.

From time to time in 2021, 2022 and 2023, when we had excess fulfillment capacity, we utilized such excess fulfillment capacity and our extensive logistics network to offer third-party logistics services to customers to help fulfill their large parcel transportation needs. As we continue to grow our GigaCloud Marketplace, we expect to dedicate our logistics capacity to products sold on our own marketplace, and will only opportunistically provide third-party logistics services when there is excess capacity within our network.

The chart below displays the quarterly GigaCloud Marketplace GMV of our 3P sellers in our GigaCloud Marketplace in 2021, 2022 and 2023. 2021 3P Sellers, 2022 3P Sellers and 2023 3P Sellers represent the groups of sellers who first sold products in our GigaCloud Marketplace in 2021, 2022 and 2023, respectively. The Active 3P Sellers shows the total number of sellers who had sold at least one item in our GigaCloud Marketplace in the last 12 months. 2021 3P Sellers, 2022 3P Sellers and 2023 3P Sellers have demonstrated attractive consistent growth in both number of sellers and GigaCloud Marketplace GMV, as shown below:

3P Seller GMV in GigaCloud Marketplace

($ in thousands, except for number of Active 3P Sellers)

The chart below displays the quarterly GigaCloud Marketplace GMV of our buyers in our GigaCloud Marketplace in 2021, 2022 and 2023. 2021 Buyers, 2022 Buyers and 2023 Buyers represent the groups of buyers who first purchased products in our GigaCloud Marketplace in 2021, 2022 and 2023, respectively. The Active Buyers shows the

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total number of buyers who had made at least one purchase in our GigaCloud Marketplace in the last 12 months. Our number of buyers and buyer GMV have grown consistently since inception, as shown below:

All Buyer GMV in GigaCloud Marketplace

($ in thousands, except for number of Active Buyers)

GigaCloud 1P

Through GigaCloud 1P, we further enhance our marketplace experience by selling our own inventory. Our 1P business creates more products for buyers, gives us insights into seller needs, provides us with proprietary data and increases the velocity of sales in our marketplace. Through GigaCloud 1P, we generate revenues from product sales.

Off-platform Ecommerce

In addition to facilitating transactions in our GigaCloud Marketplace, we also procure highly rated products directly from manufacturers and sell them directly to and through third-party ecommerce websites such as Rakuten, Amazon, Walmart, Wayfair, Home Depot and OTTO. Off-platform ecommerce sales deepen our relationships with suppliers and provide us with proprietary data. Through off-platform ecommerce, we generate revenues from product sales.

COVID-19 Pandemic

The COVID-19 pandemic negatively impacted the global economy, disrupted consumer spending and global supply chains and created significant volatility and disruption of financial markets. The COVID-19 pandemic and the various responses to it globally created significant volatility, uncertainty and economic disruption. During the COVID-19 pandemic, authorities across the U.S. and the globe implemented varying degrees of restriction on social and commercial activities. While these restrictions were largely lifted in 2023, some regions have seen a resurgence of COVID-19 cases resulting in consideration of reinstitution of certain protectivemeasures.

During this time, our focus remains on serving our customers and on promoting the health, safety and financial security of our employees. We have taken a number of precautionary measures as may be required, including enhancing cleaning measures, instituting COVID-19 testing in our facilities, suspending all non-essential travel, transitioning a large portion of our employees to working-from-home arrangements and developing no-contact delivery methods. While the COVID-19 pandemic has not had a material adverse impact on our operations to date and we believe the long-term opportunities for large parcel merchandise remains unchanged, it is difficult to predict all of the positive or negative impacts that the COVID-19 pandemic will have on our business over the short and long term. See “Item 1A. Risk Factors—Risks Related to Our Business and Industry—The COVID-19 pandemic, and any future outbreaks or other public health emergencies, could materially affect our business, liquidity, financial condition and operating results.”

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Key Financial and Operating Metrics

We monitor the following key financial and operating metrics to evaluate the growth of our GigaCloud Marketplace, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. The financial impact from the acquisitions of Noble House and Wondersign was reflected in our financial results in the fourth quarter and full year of 2023. The operating impact from these acquisitions has not been reflected in the operating metrics in our GigaCloud Marketplace in this annual report.

The following tables set forth our key financial and operating metrics for the periods indicated:

For the Year Ended December 31,

GigaCloud Marketplace GMV

The growth in GigaCloud Marketplace GMV, including GMV from both GigaCloud 3P and GigaCloud 1P, reflects our ability to attract and retain sellers and buyers in the GigaCloud Marketplace. The revenues we generate in our marketplace are highly correlated to the amount of GMV transacted in the GigaCloud Marketplace.

GigaCloud Marketplace GMV increased from $414.2 million in 2021 to $518.2 million in 2022, representing a growth of 25.1% year-over-year, and further increased to $794.4 million in 2023, representing a growth of 53.3% year-over-year, primarily due to the continued increase in the numbers of sellers and buyers transacting in our marketplace and an increase in spend per active buyer as our marketplace continued to gain scale and market position.

GigaCloud Marketplace GMV by Quarter

($ in thousands)

Active 3P Sellers

The number of active 3P sellers in the GigaCloud Marketplace has been increasing every quarter since the first quarter of 2020. We had 382 active 3P sellers in 2021, 560 active 3P sellers in 2022 and 815 active 3P sellers in 2023.

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We view active 3P sellers as a key driver of the product catalog in our marketplace, which helps attract and retain buyers. The GigaCloud Marketplace offers SKUs across furniture, home appliances, fitness equipment and other large parcel categories from our active 3P sellers. The number of SKUs increased from 6,334 as of December 31, 2021 to 12,312 as of December 31, 2022, and further increased to 22,101 as of December 31, 2023. We expect continued growth in the number of active 3P sellers through expansion into new markets, reaching out to suppliers of the brick-and-mortar channels that we connected through the Wondersign acquisition, internal sales initiatives, referrals by existing users and word-of-mouth. We leverage our 1P inventory to help establish and validate markets for new sellers, helping them onboard to our marketplace.

Active Buyers

The number of active buyers in the GigaCloud Marketplace has been increasing in almost every quarter since the first quarter in 2020. We had 3,566 active buyers in 2021, 4,156 active buyers in 2022 and 5,010 active buyers in 2023. We view the number of active buyers as a key driver of our GigaCloud Marketplace GMV and revenue growth, and a key indicator of our ability to attract and engage buyers in our marketplace. We expect continued growth in the number of active buyers by attracting the new brick-and-mortar retailers that are using the services from Wondersign to becoming our buyers, internal sales initiatives, referrals by existing users, word-of-mouth and direct visits to our website.

Spend Per Active Buyer

The spend per active buyer in our GigaCloud Marketplace were $116,150 in 2021, $124,692 in 2022, representing an increase of 7.4% from 2021 and $158,569 in 2023, representing an increase of 27.2% from 2022. We view spend per active buyer as a key driver of our GigaCloud Marketplace GMV and revenue growth. Spend per active buyer is driven by expanding the product categories, increasing the frequency of buyer purchases and growing the average price per purchase. Spend per active buyer increased in 2023, primarily due to our expanded product catalog, increase in the mix of higher priced products, introduction of new value-added services to improve the shopping experience and our enhanced supply chain capabilities for better fulfillment.

3P Seller GigaCloud Marketplace GMV

3P Seller GigaCloud Marketplace GMV represents the GMV our 3P Sellers transact on our GigaCloud Marketplace. 3P Seller GigaCloud Marketplace GMV was $156.9 million in 2021 and $257.7 million in 2022, representing an increase of 64.3% from 2021, and $426.3 million in 2023, representing an increase of 65.4% from 2022. 3P Seller GigaCloud Marketplace GMV represented 37.9%, 49.7% and 53.7% of total GigaCloud Marketplace GMV in 2021, 2022 and 2023, respectively.

Key Factors Affecting Our Results of Operations

Key factors affecting our results of operations include the following:

Our Ability to Attract and Retain Sellers

Sellers in our marketplace are typically manufacturers based in Asia who are able to use our supply chain capabilities to establish overseas sales channels without having to invest in their own logistics or warehouses overseas. We are focused on growing and retaining the number of sellers who choose to list their large parcel merchandise in our marketplace and utilize our logistics network for the shipping and handling of their products.

Our number of active 3P sellers was 382 in 2021, compared to 560 in 2022 and 815 in 2023, representing an increase of 46.6% from 2021 and an increase of 45.5% from 2022. We believe this increasing trend will continue because of the growing recognition of our marketplace, our seller-friendly comprehensive logistics network enabling hassle-free delivery of large parcel merchandise and our expansion into new markets.

Using our marketplace, sellers are able to quickly gain access to key global markets in which we operate, including the U.S., the U.K., Germany, Japan and Canada. We provide a flat rate program for shipping and handling, and sellers are able to utilize our warehouse space. We also create sales analytics which provide valuable information as sellers determine which products to bring to market.

We attract new sellers predominantly through organic channels such as referrals by existing users, word-of-mouth, or direct visits to our website. In 2023, we completed the acquisitions of Noble House and Wondersign, which

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supplemented our supply chain, fulfillment and logistics capabilities and we expect to attract more sellers and buyers onto our GigaCloud Marketplace after these strategic acquisitions. We also plan to augment organic customer acquisition by adding additional sales and marketing employees to enhance seller and buyer growth.

Our Ability to Attract and Retain Buyers

Buyers in our marketplace are typically resellers based in the U.S., Asia and Europe who procure large parcel merchandise to resell to end customers. Our marketplace is attractive to buyers because we minimize inventory risk from our buyers’ business operations. Our buyers can browse a product in our marketplace and list the product on their preferred ecommerce websites such as Rakuten, Amazon, Walmart, Wayfair, Home Depot and OTTO, or their own store prior to procuring and storing the product in a warehouse or shop. Once a sale to the end customer takes place, buyers can order the product in our marketplace and we will handle the fulfillment directly to the end customer.

In 2021, we had 3,566 active buyers in our marketplace with an average $116,150 spend per active buyer, representing a 117.4% increase in active buyers and 3.0% increase in spend per active buyer compared to the previous year. In 2022, we had 4,156 active buyers in our marketplace with an average $124,692 spend per active buyer, representing a 25.1% increase in active buyers and 7.4% increase in spend per active buyer compared to the previous period. In 2023, we had 5,010 active buyers in our marketplace with an average $158,569 spend per active buyer, representing a 20.5% increase in active buyers and 27.2% increase in spend per active buyer compared to the previous period, primarily attributable to increased scale and recognition of our marketplace and an increase in the number of global sales channels for buyers to resell products to end customers.

Since 2021, we have provided a remorse protection program, which can be purchased by the buyers in our GigaCloud Marketplace for a fee calculated based on the underlying purchase price of products purchased from our 3P business or 1P sales. The remorse protection program aims to cover a portion of the buyer’s risk when its customers seek compensation or discounts on certain items for non-product quality reasons and when actual losses are incurred. The program seeks to compensate the buyers for a portion of these actual losses for up to 60 days from the shipment of the product. We require evidence of actual loss to the products prior to any compensation. The fee we charge is based on our historical experience, buyers’ acceptance and the loss that we are willing to accept versus the benefits of the program. This is a service that we provide for our buyers to complement the service offerings in our GigaCloud Marketplace, on which buyers do not have to handle the logistics of product returns themselves or be subject to consumer remorse risks without any recourse. While the remorse protection program represents a small portion of our business operations thus far, it is an attractive service offering to our buyers who face product return risks.

Recent and Future Acquisitions

In addition to organic growth, we have grown through acquisitions that have deepened and expanded our presence in current markets and facilitated entry into attractive new markets.

In 2023, we completed the acquisition of Noble House, a leading B2B distributor of indoor and outdoor home furnishing, for an aggregate consideration of approximately $77.6 million, and the acquisition of Wondersign, a cloud-based interactive digital signage and e-catalog management SaaS company, for an aggregate purchase price of approximately $10.0 million.

Following the acquisitions, our results of operations are affected by the newly acquired businesses or operations, the purchase accounting for the acquisition, any debt incurred in connection with the acquisitions and expenditures made to integrate the newly acquired businesses or operations. As a result of our acquisitions and the consolidation of our operating subsidiaries’ financial results into our consolidated financial results, the periods presented in our historical financial statements may not be comparable to one another and our future results of operations and financial results may also differ.

Overall Economic Trends

The overall economic environment and related changes in customer behavior have a significant impact on our business. Customer spending on our products and services is primarily discretionary, and therefore positive economic conditions generally drive stronger business performance.

Recent global economic uncertainties, inflation, higher interest rates, lower consumer confidence and demand for discretionary goods, and geopolitical events such as recent international trade disputes and the ongoing wars in Ukraine

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and in Israel and Gaza, including the related disruptions to international shipping in the Red Sea could impact the demand of products and shipping and freight rates. Other macroeconomic factors that can affect customer spending patterns include employment rates, availability of customer credit, interest rates, tax rates and energy costs.

Our Ability to Broaden Service Offerings

Our results of operations are also affected by our ability to introduce new service offerings. We have a history of expanding our service offering to enhance our customer experience and to increase revenues. We started our business by primarily selling our own self-procured large parcel merchandise directly to end customers. We expanded our service offerings and launched our GigaCloud Marketplace in 2019, and the revenues generated by GigaCloud Marketplace quickly grew to represent 69.2%, 76.0% and 70.9% of our total revenues in 2021, 2022 and 2023, respectively. We continue to evaluate opportunities to launch additional services. Since 2021, we have provided a remorse protection program that covers a portion of the buyer’s risk when its customers seek compensation or discount on certain items for non-product quality reasons and when actual losses are incurred for up to 60 days, which is an attractive service offering to our buyers. The remorse protection program can be purchased by the buyers in our GigaCloud Marketplace for a fee calculated based on the underlying purchase price of products purchased from our 3P business or 1P sales. As SKUs in our marketplace grows, we are also looking to roll out paid advertising tools that promote products based on search results. Additionally, we are leveraging our data analytics capabilities to develop new tools for users to improve their marketplace experience.

Our Ability to Effectively Invest in our Infrastructure and Technology Platform

Our results of operations depend in part on our ability to invest in our infrastructure and technology platform to cost-effectively meet the demands of our anticipated growth. As of December 31, 2023, our global logistics network included 33 warehouses with an aggregate gross floor area of approximately 8.2 million square feet in five countries. Additionally, we maintain partnerships with several major shipping, trucking and freight service providers to supplement our transportation network and shipping requirements.

Our ability to improve our operational efficiency depends on our ability to invest in our technology infrastructure and platform, including our virtual warehousing solution and AI technology. We also invest in our research and development personnel for the design, development, and testing of our platform, and incur software development costs for the internal-use software and our Group's websites. We successfully improved our warehouse management solutions over the past years.

Seasonality

We believe that sales of home furniture and other large parcel items are subject to modest seasonality. We expect the last quarter of the year to be the most active.

Our GigaCloud Marketplace GMV is usually the largest in the fourth quarter of a year and we experienced increased year-over-year sales volume in the first, second and third quarters. It is uncertain whether this is an indicator of industry trends going forward.

Key Components of Results of Operations

Revenues

We generate service revenues from our GigaCloud 3P business, and product revenues from our GigaCloud 1P, off-platform ecommerce businesses and others. Service revenues from GigaCloud 3P, including revenues from platform commission, ocean transportation service, warehousing service, last-mile delivery service, packaging service and others is generated by facilitating transactions between sellers and buyers in our GigaCloud Marketplace. Product revenues from GigaCloud 1P is generated through the product sales of our inventory through our GigaCloud Marketplace, and

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product revenues from off-platform ecommerce is generated from product sales of our inventory to and through third-party ecommerce websites.

The following table sets forth the breakdown of our revenues, both in absolute amount and as a percentage of our total revenues, for the periods presented:

For the Year Ended December 31,

$ % $ % $ %

(In thousands, except for percentages)

Revenues

Service revenues

Product revenues

Others — — — — 95 —

Revenues reported are attributed to geographic areas based on locations of our warehouses, except for platform commission revenues which are attributed to Hong Kong, where the server of GigaCloud Marketplace is located. Revenues by geography for the years ended December 31, 2021, 2022 and 2023 is as follows:

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Year ended December 31,

(In thousands)

Service revenues:

(1) No other individual region's revenues exceeded 10% of the Company's total revenues for the years ended December 31, 2021, 2022 and 2023.

Service Revenues—GigaCloud 3P

We derive service revenues primarily through the various 3P activities of sellers and buyers in the GigaCloud Marketplace, including revenues from platform commission, ocean transportation service, warehousing service, last-mile delivery service, packaging service and others. When a seller and buyer enter into a transaction in GigaCloud Marketplace, we generate revenues from platform services by earning a percentage commission depending on the transaction value. The standard commission ranges between 1% and 5%. Additionally, we charge a fulfillment fee for other freight services such as delivery of products via ocean transportation. We charge the sellers a flat, per day warehouse fee for storage of inventory in our warehouses, which varies by the size of the products, and we charge buyers a flat fee for last-mile delivery services for delivery of products to end customers directly from our warehouses, which varies by the weight and destination of the products. We also charge packaging fees in connection with merchandise that we pack and ship.

From time to time in 2021, 2022 and 2023, when we had excess fulfillment capacity, we utilized such excess fulfillment capacity and our extensive logistics network to offer third-party logistics services to customers to help fulfill their large parcel transportation needs. As we continue to grow our GigaCloud Marketplace, we expect to dedicate our logistics capacity to customers using our marketplace and to products sold on our own marketplace, and will opportunistically provide third-party logistics services when there is excess capacity within our network.

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Product Revenues—GigaCloud 1P

We derive product revenues from the sales of products through selling our own inventory on our marketplace. This 1P business creates more products for buyers, gives us insights into seller needs, provides us with proprietary data and increases the velocity of sales in our marketplace.

Product Revenues—Off-platform Ecommerce

We derive product revenues primarily from the sales of our own inventory through two sales models, which are (i) product sales made to third-party ecommerce websites, or Product Sales to B, such as Wayfair, Walmart, Home Depot, Target and Overstock; and (ii) product sales to individual customers through third-party ecommerce websites, or Product Sales to C, such as Rakuten, Amazon and OTTO, where end customers can visit our online stores and purchase directly from us. Regarding Product Sales to B, as expenses charged by these websites are not in exchange for a distinct good or service, the payments to these websites are not recognized as expenses but as recorded net of revenues. With respect to Product Sales to C, expenses incurred for product sales made through these websites are recorded as selling and marketing expenses.

Cost of Revenues

Our cost of revenues primarily consists of cost of services and cost of product sales. The following table sets forth the breakdown of our cost of revenues, both in absolute amount and as a percentage of our total revenues, for the periods presented:

For the Year Ended December 31,

$ % $ % $ %

(In thousands, except for percentages)

Cost of revenues

Cost of Services

Cost of services primarily consists of domestic delivery costs, an allocated portion of warehouse rental

expenses, and costs associated with the operation of the GigaCloud Marketplace.

Cost of Product Sales

Cost of product sales primarily consists of the purchase price of merchandise, shipping and handling costs for self-owned merchandise, warehouse rental expenses excluding the portion allocated to cost of service revenue and abnormal capacity, packaging fees and personnel related costs. Shipping and handling costs primarily consist of those costs incurred during the process of delivery in North America and markets in other regions, including the expenses attributable to shipment and handling activities, when we deliver a good to a customer.

Gross Profit and Margin

The table below sets forth a breakdown of our gross profit and gross profit margin for each of the periods presented:

For the Year Ended December 31,

(In thousands, except for percentages)

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Operating Expenses

Our operating expenses consist of selling and marketing expenses, general and administrative expenses, research and development expenses and losses on disposal of property and equipment. The following table sets forth the breakdown of our operating expenses, both in absolute amount and as a percentage of our total revenues, for the periods presented:

For the Year Ended December 31,

$ % $ % $ %

(In thousands, except for percentages)

Operating expenses

Losses on disposal of property and equipment — — — — 3,236 0.5

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Selling and Marketing Expenses

Our selling and marketing expenses primarily consist of platform service fees charged by third-party ecommerce websites arising from Product sales to C on Off-platform ecommerce channels, advertising expenses, and payroll and related expenses for personnel engaged in selling and marketing activities, and rental and depreciation expenses relating to facilities and equipment used by those employees. Advertising expenses include advertisements through various forms of media and marketing and promotional activities.

The following table sets forth the breakdown of our selling and marketing expenses, both in absolute amount and as a percentage of our total revenues, for the periods presented:

For the Year Ended December 31,

$ % $ % $ %

(In thousands, except for percentages)

Selling and marketing expenses

General and Administrative Expenses

Our general and administrative expenses primarily consist of share-based compensation, payroll and related costs for employees involved in general corporate functions, rental and depreciation expenses associated with the use of facilities and equipment by these employees, professional fees, and other general corporate expenses.

The following table sets forth the breakdown of our general and administrative expenses, both in absolute amount and as a percentage of our total revenues, for the periods presented:

For the Year Ended December 31,

$ % $ % $ %

(In thousands, except for percentages)

General and administrative expenses

Research and Development Expenses

Our research and development expenses primarily consist of IT- and platform-related personnel costs, including share-based compensation expense associated with our engineering, programming, data analytics, and product development personnel responsible for the design, development, and testing of our platform, rental and depreciation expenses associated with the use of facilities and equipment of research and development personnel, and information technology costs.

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Losses on Disposal of Property and Equipment

Our losses on disposal of property and equipment primarily consist of the losses on the disposal of old and obsolete property and equipment.

Interest Expense

Our interest expense primarily consists of our financial lease interest expense for warehouses and facilities in the U.S.

Interest Income

Our interest income primarily consists of interest income from bank deposits.

Foreign Currency Exchange Gains (Losses), Net

Our foreign exchange gains and losses represent the gains or losses due to appreciation or depreciation of the U.S. dollar against Japanese Yen, the Euro, Canadian dollar and the British Pound.

Government Grants

Our income from government grants primarily consists of industry related government subsidies.

Income Tax Expense

Our income tax expense primarily consists of current tax expense, deferred tax expense and uncertain tax positions, primarily related to uncertainty of our subsidiaries and any former consolidated VIEs in mainland China with regard to the tax impact of transfer pricing adjustments.

Taxation

Cayman Islands

Under the current laws of the Cayman Islands, we are not subject to tax on income or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.

Hong Kong

Under the current Hong Kong S.A.R. Inland Revenue Ordinance, our subsidiary in Hong Kong S.A.R. is subject to Hong Kong S.A.R. profits tax at the rate of 16.5% on its taxable income generated from the operations in Hong Kong S.A.R. The first HK$2 million of assessable profits earned by a company will be taxed at 8.25% whilst the remaining profits will continue to be taxed at 16.5%. There is an anti-fragmentation measure where each group will have to nominate only one company in the group to benefit from the progressive rates.

The Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced income) Bill 2022, or the new FSIE regime, has been enacted in Hong Kong on December 14, 2022 and will have effect from January 1, 2023 onwards. This is to address the EU’s inclusion of Hong Kong in the “grey list” in concern of any risk of double non-taxation arising from the tax exemption of offshore passive income for companies in Hong Kong without substantial economic substance. From January 1, 2023, offshore passive income (including interest income, dividend income or gain on disposal of equity interest (where applicable)), that is received or deemed to be received in Hong Kong (i.e., identical to the “received” concept in Singapore), would need to meet additional requirements, including, amongst others, the economic substance requirements (i.e. similar to offshore jurisdictions like Cayman Islands, British Virgin Islands, etc.) in order to continue to be entitled to the offshore income tax exemption in Hong Kong.

Mainland China

Under the PRC Enterprise Income Tax Law, domestic companies are subject to enterprise income tax at a uniform rate of 25%. Our PRC Subsidiaries are subject to the statutory income tax rate at 25%, unless a preferential enterprise income tax rate is otherwise stipulated.

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On December 24, 2019, our wholly-owned subsidiary, GigaCloud Technology (Suzhou) Co., Ltd. (formerly known as Oriental Standard Network Technology (Suzhou) Co., Ltd.), or GigaCloud Suzhou, obtained a certificate from related authorities of local government for “Advanced Technology Service Enterprise”, or ATSE, qualification. This certificate entitled GigaCloud Technology (Suzhou) Co., Ltd. to enjoy a preferential income tax rate of 15% for a period of three years from 2020 to 2022 if all the criteria for ATSE status could be satisfied in the relevant years. Subsequently, GigaCloud Suzhou renewed and obtained the ATSE certificate in early 2023, which entitles GigaCloud Suzhou to the preferential tax rate of 15% from 2022 to 2024 if all the criteria for ATSE status could be satisfied in the relevant year.

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside China with a “place of effective management” within China is considered a China resident enterprise for Chinese enterprise income tax purposes. A China resident enterprise is generally subject to certain Chinese tax reporting obligations and a uniform 25% enterprise income tax rate on its worldwide income. The implementation rules to the PRC Enterprise Income Tax Law provide that non-resident legal entities are considered PRC residents if substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc., of an enterprise occur within mainland China. Despite the present uncertainties resulting from the limited PRC tax guidance on the issue, we do not believe that the legal entities organized outside the PRC should be treated as residents for the purposes of the PRC Enterprise Income Tax Law. If the PRC tax authorities subsequently determine that our company and our subsidiaries registered outside the PRC are deemed resident enterprises, our company and our subsidiaries registered outside of mainland China will be subject to the PRC income tax at a rate of 25%.

Dividends paid to non-PRC resident corporate investors from profits earned by our PRC Subsidiaries after January 1, 2008 would be subject to a withholding tax. The PRC Enterprise Income Tax Law and its relevant regulations impose a withholding tax at 10%, unless reduced by a tax treaty or agreement, for dividends distributed by a PRC resident enterprise to its non-PRC resident corporate investors for earnings generated beginning on January 1, 2008. As of December 31, 2021, 2022 and 2023, earnings from all foreign subsidiaries and VIEs will be indefinitely reinvested. Hence, our Group has not provided for deferred tax liabilities on undistributed earnings for PRC subsidiaries.

Germany

Under the current laws of Germany, our German subsidiaries are subject to income tax at a standard rate of 15% (15.825% including solidarity surcharge), plus municipal trade tax of 14%-17%.

U.S. Federal Income Taxation

Our U.S. subsidiaries are subject to U.S. federal income taxes and state and local income taxes. In connection with the U.S. tax legislation enacted in December 2017, the federal income tax rate for corporations changed to 21% beginning from January 1, 2018, while state income tax rates generally remained the same as in previous years. The U.S. federal income tax rules also provide for enhanced accelerated depreciation deduction by allowing the election of full expensing of qualified property, primarily equipment, through 2023. In 2023, the enhanced accelerated depreciation deduction decreased to 80% and will continue to decrease by 20% per year thereafter until complete phase out.

Dividends received from U.S. corporation are U.S. source and would be subject to 30% withholding tax, unless reduced by a tax treaty or agreement.

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Results of Operations

The following table sets forth a summary of our consolidated results of operations, both in absolute amount and as a percentage of our total revenues, for the periods presented. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The results of operations in any period are not necessarily indicative of our future trends.

For the Year Ended December 31,

$ % $ % $ %

(In thousands, except for percentages)

Revenues

Cost of revenues

Operating expenses

Losses on disposal of property and equipment — — — — 3,236 0.5

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Revenues

Our revenues, which primarily consist of service revenues generated from GigaCloud 3P and product revenues generated from GigaCloud 1P and off-platform ecommerce sales, increased by 43.6% from $490.1 million in 2022 to $703.8 million in 2023. This increase was primarily due to the increased market recognition and scale of our GigaCloud Marketplace, leading to increases in our GigaCloud Marketplace GMV, sales volume and number of sellers and buyers.

•Service Revenues from GigaCloud 3P. Our service revenues increased by 41.7% from $140.6 million in 2022 to $199.2 million in 2023. The increase was attributable to (i) an increase in revenues from last mile delivery services by 69.1% from $62.7 million in 2022 to $106.0 million in 2023 as our GigaCloud Marketplace GMV and delivery volume continued to increase, (ii) an increase in revenues from packaging service by 124.7% from $7.7 million in 2022 to $17.3 million in 2023, which was consistent with the increase in sales

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volume, and (iii) an increase in revenues from other services by 126.4% from $9.1 million in 2022 to $20.6 million in 2023. These increases were partially offset by a decrease in revenues from ocean transportation services by 48.2% from $38.0 million in 2022 to $19.7 million in 2023, primarily due to the decrease in the pricing of ocean transportation services in 2023.

•Product Revenues from GigaCloud 1P. Our product revenues from GigaCloud 1P increased by 29.4% from $231.7 million in 2022 to $299.9 million in 2023. The increase was primarily due to increases in the number of buyers and spend per active buyer as our marketplace continued to grow in scale.

•Product Revenues from Off-platform Ecommerce. Our product revenues from off-platform ecommerce increased by 73.7% from $117.8 million in 2022 to $204.6 million in 2023. The increase was primarily due to increases in sales channels and sales volume in certain third-party off-platform ecommerce.

Cost of Revenues

Our cost of revenues increased by 26.6% from $407.0 million in 2022 to $515.2 million in 2023.

•Our cost of services increased by 34.2% from $120.1 million in 2022 to $161.2 million in 2023, primarily due to an increase in delivery cost by 25.1% from $97.1 million in 2022 to $121.5 million in 2023, consistent with the increase in our sales, an increase in staff cost by 154.0% from $5.0 million in 2022 to $12.7 million in 2023 as the number of staff in warehouses and operations increased, and an increase in rental cost by 41.4% from $15.2 million in 2022 to $21.5 million in 2023 as we increased the number of warehouses to 33 globally in 2023.

•Our cost of product sales increased by 23.4% from $286.9 million in 2022 to $354.0 million in 2023, primarily due to an increase in product cost by 22.3% from $219.7 million in 2022 to $268.8 million in 2023, an increase in delivery cost by 29.7% from $33.3 million in 2022 to $43.2 million in 2023 consistent with the increase in our product revenues, and an increase in rental cost by 20.4% from $20.6 million in 2022 to $24.8 million in 2023, as we increased the number of warehouses to 33 globally in 2023.

Gross Profit and Gross Margin

As a result of the foregoing, our gross profit increased by 127.0% from $83.1 million in 2022 to $188.6 million in 2023. Our gross margin increased from 17.0% in 2022 to 26.8% in 2023, primarily due to a slower rate of costs increase, particularly considering the decrease in ocean freight costs in 2023.

Selling and Marketing Expenses

Our selling and marketing expenses increased by 72.5% from $24.0 million in 2022 to $41.4 million in 2023, which was primarily due to an increase in platform service fee we incurred on certain third-party ecommerce websites by 82.3% from $9.6 million in 2022 to $17.5 million in 2023 as sales volume and sales channels both increased, an increase in staff cost related to selling and marketing personnel by 53.7% from $12.1 million in 2022 to $18.6 million in 2023 as we increased the number of sales and marketing personnel and the commission paid to them, and an increase in advertising expense by 160.0% from $1.5 million in 2022 to $3.9 million in 2023.

General and Administrative Expenses

Our general and administrative expenses increased by 32.7% from $22.6 million in 2022 to $30.0 million in 2023, which was primarily due to an increase in professional service expense by 150.0% from $3.0 million in 2022 to $7.5 million in 2023 as we engaged professional services for our financial and legal advisors in 2023, and an increase in rental expense by 314.3% from $0.7 million in 2022 to $2.9 million in 2023, primarily due to fees related to certain vacated warehouses were included in general and administrative expenses instead of cost of revenues in 2023, and the upgrade of our corporate offices.

Research and Development Expenses

Research and development expenses increased by 178.6% from $1.4 million in 2022 to $3.9 million in 2022. The increase was primarily due to our dedication in expanding our research and development efforts, including an increase in the number of research and development projects and the number of employees to perform research and development function in 2023.

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Losses on Disposal of Property and Equipment

We had losses on disposal of property and equipment of $3.2 million in 2023, primarily attributable to disposal of old and obsolete property and equipment. We did not incur such losses in 2022.

Interest Expense

We had interest expenses of $568 thousand in 2022 and $1.2 million in 2023. The increase was primarily attributable to increase in our financial lease interest expense for warehouses in the U.S.

Interest Income

We had interest income of $472 thousand in 2022 and $3.3 million in 2023. The increase was primarily attributable to higher average bank deposits and interest rates in 2023.

Foreign Currency Exchange Gains / (Losses), Net

We had foreign currency exchange losses, net of $4.9 million in 2022 and foreign currency exchange gains, net of $2.1 million in 2023, primarily attributable to the appreciation of the U.S. dollar against Japanese Yen, the Euro and the British Pound in 2023, as compared to depreciation in 2022.

Government Grants

We had government grants of $1.1 million in 2022 and $0.9 million in 2023, primarily attributable to industry related government subsidies that we received in 2023.

Income Tax Expense

We had income tax expense of $7.2 million in 2022 and $20.9 million in 2023. The increase was primarily attributable to an increase in our income before taxes from $31.2 million in 2022 to $115.0 million in 2023.

Net Income

As a result of the foregoing, our net income was $24.0 million in 2022 and $94.1 million in 2023.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Revenues

Our revenues, which consist of service revenues generated from GigaCloud 3P and product revenues generated from GigaCloud 1P and off-platform ecommerce sales, increased by 18.3% from $414.2 million in 2021 to $490.1 million in 2022. This increase was primarily due to an increase in service revenues from GigaCloud 3P and product revenues from GigaCloud 1P, and partially offset by a decrease in product revenues from off-platform ecommerce.

•Service Revenues from GigaCloud 3P. Our service revenues increased by 43.0% from $98.3 million in 2021 to $140.6 million in 2022. The increase was attributable to (i) increase in revenues from last mile delivery services by 86.2% from $33.7 million in 2021 to $62.7 million in 2022 due to increases in the provision of third-party logistics services to certain existing and new customers and (ii) increase in sales generated from warehousing services by 54.7% from $10.5 million in 2021 to $16.2 million in 2022 due to increase in the number of warehouses from 19 in 2021 to 21 in 2022.

•Product Revenues from GigaCloud 1P. Our product revenues from GigaCloud 1P increased by 23.1% from $188.3 million in 2021 to $231.7 million in 2022. The increase was primarily due to an increase in the number of active buyers from 3,566 in 2021 to 4,156 in 2022 and better selection of products catering to buyers’ preference leading to an increase in spend per active buyer from $116,150 in 2021 to $124,692 in 2022.

•Product Revenues from Off-platform Ecommerce. Our product revenues from off-platform ecommerce decreased by 7.7% from $127.6 million in 2021 to $117.8 million in 2022. The decrease was primarily due to

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an overall decrease in sales on certain third-party off-platform ecommerce as consumer demand slowed down over the full year of 2022.

Cost of Revenues

Our cost of revenues increased by 25.4% from 324.6 million in 2021 to $407.0 million in 2022, primarily attributable to the overall increase in our revenue, as well as an increases in product cost, delivery cost and warehouse cost.

•Our cost of services increased by 41.8% from 84.7 million in 2021 to $120.1 million in 2022, primarily due to (i) increase in last mile delivery cost by 89.1% from $30.4 million in 2021 to $57.5 million in 2022 due to an increase in the deliveries of merchandise that we handled from and to sellers and buyers in our marketplace, and (ii) increases in rental costs of the portion allocated to our 3P business by 77.9% from $8.5 million in 2021 to $15.2 million in 2022 as we increased the number of warehouses from 19 in 2021 to 21 in 2022.

•Our cost of product sales increased by 19.6% from $239.9 million in 2021 to $286.9 million in 2022, primarily due to (i) increase in product costs by 22.8% from $179.0 million in 2021 to $219.7 million in 2022 as we increased our GigaCloud 1P sales and (ii) increase in rental costs of warehouses that were allocated to 1P products.

Gross Profit and Gross Margin

As a result of the foregoing, our gross profit decreased by 7.2% from $89.6 million in 2021 to $83.1 million in 2022. Our gross margin decreased from 21.6% in 2021 to 17.0% in 2022, primarily due to the fact that the cost of revenue increased at a faster pace than revenue, as shipping and handling costs, particularly ocean freight costs, increased significantly compared to the previous period.

Selling and Marketing Expenses

Our selling and marketing expenses decreased by 6.6% from $25.7 million in 2021 to $24.0 million in 2022, which was mainly due to (i) a decrease in platform service fees we paid to certain third-party ecommerce websites from $11.0 million in 2021 to $9.6 million in 2022, (ii) a decrease in staff cost, including shared-based compensation expenses, related to selling and marketing personnel from $12.2 million in 2021 to $12.1 million in 2022, as well as (iii) a decrease in advertising expense on certain third-party ecommerce websites from $1.9 million in 2021 to $1.5 million in 2022.

General and Administrative Expenses

Our general and administrative expenses decreased by 7.7% from $24.5 million in 2021 to $22.6 million in 2022, which was mainly due to (i) decrease in professional service expense from $4.9 million in 2021 to $3.0 million in 2022 and (ii) decrease in staff costs, including share-based compensation expenses, related to general and administration personnel from $15.7 million in 2021 to $15.0 million in 2022.

Research and Development Expenses

Research and development expenses were $1.4 million in 2022, while we did not have research and development expenses in 2021. The change was primarily due to system wide technological upgrades in our GigaCloud Marketplace to support our growth.

Interest Expense

We had interest expenses of $309 thousand in 2021 and $568 thousand in 2022. The increase was primarily attributable to the increase in our financial lease interest expense for warehouses in the U.S.

Interest Income

We had interest income of $537 thousand in 2021 and $472 thousand in 2022. The decrease was primarily attributable to a decrease in interests collected from accounts receivable overdue.

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Foreign Currency Exchange Gains / (Losses), Net

We had foreign currency exchange losses, net of $2.0 million in 2021 and $4.9 million in 2022, primarily attributable to appreciation of the U.S. dollar against the British Pound, Euro and the Japanese Yen.

Government Grant

We had government grant of nil in 2021 and $1.1 million in 2022, primarily attributable to industry related government subsidies that we received in 2022.

Income Tax Expense

We had income tax expense of $8.5 million in 2021 and $7.2 million in 2022. The decrease was primarily attributable to a decrease in our income before income taxes from $37.7 million in 2021 to $31.2 million in 2022.

Net Income

As a result of the foregoing, our net income was $29.3 million in 2021 and $24.0 million in 2022.

Segment Information for Fiscal Years 2021, 2022 and 2023

For the purpose of internal reporting and management's operation review, we do not segregate our business by revenue stream or geography. Our management has determined that our company has one operating segment. See Note 2, Segment Reporting, in the notes to the consolidated financial statements included elsewhere in this annual report.

Long-lived assets consist of property and equipment and operating lease right-of-use assets. The geographic

information for long-lived assets as of December 31, 2022 and 2023 is as follows:

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December 31,

(In thousands)

Year ended December 31,

(In thousands)

Service revenues:

(1) No other individual region's revenues exceeded 10% of the Company's total revenues for the years ended December 31, 2021, 2022 and 2023.

Non-GAAP Financial Measure

To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use Adjusted EBITDA, which is net income excluding interest, income taxes and depreciation, further adjusted to exclude share-based compensation expenses, a non-GAAP financial measure, to understand and evaluate our core operating performance. Non-GAAP financial measures, which may differ from similarly titled measures used by other

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companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. The table below sets forth a reconciliation of Adjusted EBITDA from net income for the periods indicated:

For the Year Ended December 31,

(In thousands)

Liquidity and Capital Resources

Liquidity

To date, we have financed our operating and investing activities mainly through cash generated from our business. As of December 31, 2023, we had $183.3 million in cash and $0.89 million in restricted cash.

In July 2022, we entered into a two-year credit facility agreement with Wells Fargo Bank, National Association, under which we are able to borrow up to $50 million during the term of the facility. The credit facility also requires us to comply with various customary covenants and other restrictions. As of the date of this annual report, we have not made any draw down from this credit facility.

We believe our cash on hand will be sufficient to meet our current and anticipated needs for general corporate purposes for at least the next 12 months. We may, however, need additional cash resources in the future if we experience changes in business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue opportunities for investment, acquisition, capital expenditure or similar actions. If we determine that our cash requirements exceed the amount of cash we have on hand, we may seek to issue equity or equity-linked securities or obtain debt financing. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

Prior to completion of our corporate restructuring, we consolidated the results of our consolidated VIEs but we only had access to the assets or earnings of our consolidated VIEs through our contractual arrangements with our consolidated VIEs and their shareholders (as applicable). As of the date of this annual report, we have completed our corporate restructure and our corporate structure does not contain any VIEs. For restrictions and limitations on liquidity and capital resources as a result of our corporate structure, see “—Holding Company Structure.”

As a Cayman Islands exempted company and offshore holding company, we are permitted under PRC laws and regulations to provide funding to our PRC Subsidiaries only through loans or capital contributions, subject to relevant approval, filing and/or reporting with respect to government authorities and limits on the amount of capital contributions and loans. This may delay us from making loans or capital contributions to our PRC Subsidiaries, if any. See “Item 1A. Risk Factors—Risks Related to Doing Business in China—PRC regulation of loans to, and direct investments in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us to make loans or additional capital contributions to our PRC Subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”

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The following table sets forth a summary of our cash flows for the periods presented:

For the Year Ended December 31,

(In thousands)

Summary of Consolidated Statement of Cash Flow Data:

Net cash provided by (used in) financing activities (2,956) 31,887 (4,003)

Operating Activities

Net cash provided by operating activities in 2023 was $133.5 million, as compared to $49.7 million in 2022. This was attributable to net income of $94.1 million in 2023, compared to net income of $24.0 million in 2022. Net income was primarily adjusted by (i) loss from disposal of property and equipment of $3.2 million in 2023, (ii) depreciation and amortization of $2.9 million, (iii) share-based compensation of $2.5 million in 2023, and (iv) operating lease of $2.5 million in 2023; and the changes in working capital, which primarily consisted of (i) an increase of $20.2 million in accrued expenses and other current liabilities, and (ii) an increase of $26.0 million in accounts payable.

Net cash provided by operating activities in 2022 was $49.7 million, as compared to net cash provided by operation activities of $8.6 million in 2021. This was attributable to net income of $24.0 million in 2022, compared to net income of $29.3 million in 2021. Net income was primarily adjusted by (i) $9.2 million share-based compensation in relation to employee benefits to our employees and non-employee service providers recognized in 2022 and (ii) $2.4 million of operating lease; and the changes in working capital, which primarily consisted of (i) an increase of $14.4 million in accrued expenses and other current liabilities due to increases in refundable deposits in GigaCloud Marketplace and other payables, (ii) an increase in accounts receivable of $9.2 million due to increase in sales, and (iii) an increase in accounts payable of $6.6 million due to increase in our costs to procure inventories.

Net cash provided by operating activities in 2021 was $8.6 million. This was attributable to net income of $29.3 million, adjusted primarily by (i) $9.7 million of share-based compensation in relation to share options granted to our employees and non-employee service providers which was only recognized in 2021, and (ii) $2.0 million of unrealized foreign currency exchange losses due to appreciation of the U.S. dollar against the Euro and the Japanese Yen, and (iii) $1.3 million of inventory write-down due to certain slow-moving merchandise and damaged goods as we increased our own inventory which also led to increased write-down; and the changes in working capital, which primarily consisted of (i) an increase of $47.1 million in inventories, due to a significant increase in our own inventory for our 1P sales as consumer demand continued to increase in 2021, as well as an increase in shipping costs to procure our inventories, particularly ocean freight costs, (ii) an increase of $6.3 million in accounts payable as our sales increased, driven by the increased numbers of sellers and buyers in our GigaCloud Marketplace, and (iii) a decrease of $5.9 million in accounts receivable as we had better collection in 2021.

Investing Activities

Net cash used in investing activities in 2023 was $90.5 million, primarily consisting of acquisitions, net of cash acquired of $86.6 million and cash paid for purchase of property and equipment of $4.4 million.

Net cash used in investing activities in 2022 was $709 thousand of cash paid for purchase of property and equipment, as compared to net cash used in investing activities of $1.8 million of cash paid for purchase of property and equipment in 2021.

Net cash used in investing activities in 2021 was $1.8 million, primarily consisting of cash paid for purchase of property and equipment.

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Financing Activities

Net cash provided by financing activities in 2023 was $4.0 million, primarily attributable to (i) repayment of finance lease obligations of $2.2 million and (ii) payment of share repurchase of $1.6 million.

Net cash provided by financing activities in 2022 was $31.9 million, primarily attributable to (i) proceeds from initial public offering, net of IPO costs of $34.2 million, (ii) proceeds from prepaid consideration of restricted shares of $1.6 million, and (iii) cash paid for capital lease obligations of $3.6 million.

Net cash used in financing activities in 2021 was $3.0 million, primarily attributable to cash paid for capital lease obligations of $2.5 million and repayment of bank loans of $0.4 million by our subsidiaries in Japan and the U.K.

Share Repurchase Program

In June 2023, we announced that our board of directors approved a share repurchase program to repurchase up to US$25.0 million of our Class A ordinary shares over the next 12 months. Under the share repurchase program, we may purchase our ordinary shares through various means, including open market transactions, privately negotiated transactions, block trades, any combination thereof or other legally permissible means. We may effect repurchase transactions in compliance with Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The number of shares repurchased and the timing of repurchases will depend on a number of factors, including, but not limited to, price, trading volume and general market conditions, along with our working capital requirements, general business conditions and other factors. Our board of directors will review the share repurchase program periodically, and may modify, suspend or terminate the share repurchase program at any time. We plan to fund repurchases from our existing cash balance. During the fourth quarter of 2023, we did not make any repurchase of our Class A ordinary shares. As of December 31, 2023, we repurchased an aggregate of approximately 215,000 Class A ordinary shares in the open market at a total consideration of approximately $1.6 million pursuant to the share repurchase program.

Capital Resources

Our capital expenditures consist primarily of purchase of property and equipment. Our capital expenditures were $1.8 million, $0.5 million and $4.4 million in 2021, 2022 and 2023, respectively. We intend to fund our future capital expenditures with our existing cash balance, short-term investments and anticipated cash flows from operations. We will continue to make well-planned capital expenditures to meet the expected growth of our business.

Contractual Obligations

The following table sets forth our contractual obligations as of December 31, 2023:

Total Less than 1 Year 1 – 3 Years More than 3 Years

(In thousands)

Lease commitment(1)

_____________________

(1)Lease commitment consists of the commitments under the lease agreements for our warehouses and storage shelves.

Except for those disclosed above, we did not have any significant capital or other commitments, long-term obligations, or guarantees as of December 31, 2023.

Off-Balance Sheet Commitments and Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any unconsolidated third parties. In addition, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any

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unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.

Internal Control Over Financial Reporting

Prior to our initial public offering, we were a private company with limited accounting personnel and other resources with which we address our internal control over financial reporting. We and our independent registered public accounting firm identified two material weaknesses in our internal control over financial reporting as of December 31, 2023. As defined in the standards established by the PCAOB, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. For details of the material weaknesses, see “Item 9A - Controls and Procedures.”

As a company with less than $1.235 billion in revenues for the fiscal year ended December 31, 2023, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise generally applicable to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. See “Item 1A. Risk Factors—Risks Related to Our Class A Ordinary Shares—We are an emerging growth company, and the reduced disclosure requirements applicable to emerging growth companies may make our Class A ordinary shares less attractive to investors.”

Holding Company Structure

The Cayman Islands currently has no exchange control regulations or currency restrictions which may affect the import or export of capital, including the availability of cash and cash equivalents for use by our company, or the remittance of dividends, interest or other payments to non-resident holders of our securities.

Our company, GigaCloud Technology Inc, is a holding company incorporated in the Cayman Islands with no material operations of its own and is not a direct Chinese or Hong Kong operating company. We conduct our operations primarily through our principal subsidiaries . As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries . If our subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.

In addition, as determined in accordance with local regulations, our subsidiaries in certain of our markets may be restricted from paying us dividends offshore or from transferring a portion of their assets to us, whether in the form of dividends, loans or advances, unless certain requirements are met or regulatory approvals are obtained. In addition, our subsidiaries may be restricted in their ability to pay dividends or distributions or make other transfers to us as a result of the laws of their respective jurisdictions of organization and agreements of our subsidiaries . See “Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Dividends.” Even though we currently do not require any such dividends, loans or advances from our entities for working capital and other funding purposes, we may in the future require additional cash resources from them due to changes in business conditions, to fund future acquisitions and development, or merely to declare and pay dividends or distributions to our shareholders.

Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any known trends, uncertainties, demands, commitments or events for the year ended December 31, 2023 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that are reasonably likely to cause a material change in the relationship between costs and revenues, or that would cause reported financial information to be not necessarily indicative of future operating results or financial conditions.

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Critical Accounting Estimates

We prepare our financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires our management to make estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. For the year ended December 31, 2023, we have not identified critical accounting estimates that involve a significant level of estimation uncertainty and would have a material impact on our results.

Critical Accounting Policies

We believe that the following accounting policies reflect the significant judgments, estimates and assumptions used in the preparation of our consolidated financial statements. The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included elsewhere in this annual report. When reviewing our financial statements, investors should consider (i) our selection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies, and (iii) the sensitivity of reported results to changes in conditions and assumptions.

Business Combinations

We apply the provisions of ASC 805, Business Combinations ("ASC 805"), in accounting for our acquisitions. ASC 805 requires that we evaluate whether a transaction pertains to an acquisition of assets, or to an acquisition of a business. A business is defined as an integrated set of inputs and processes that is capable of being conducted and managed for the purpose of providing an output, or a return to investors. Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets acquired and liabilities assumed on a relative fair value basis, whereas the acquisition of a business requires us to recognize separately from goodwill the assets acquired, and the liabilities assumed at the acquisition date fair values. Judgment is required when we evaluate and determine whether an input and a substantive process exists following ASC 805. Whether the acquired set is a business or a group of assets, is an important determination, given the different accounting models for the acquisition of a group of assets versus a business.

Recent Accounting Pronouncements

A list of recently issued accounting pronouncements that are relevant to us is included in Note 2 “Recent accounting pronouncements” to our consolidated financial statements included elsewhere in this annual report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks from inflation, foreign exchange rates and changes in interest rates. All of these market risks arise in the ordinary course of business, as we do not engage in speculative trading activities. The following analysis provides additional information regarding these risks.

Inflation

In the U.S., in 2023, as well as presently, we have experienced inflationary pressures across various parts of our business and operations, including but not limited to rising costs across our supply chain. We continue to monitor the impact of inflation in order to minimize its effects through revisions in our budgeting, strategy and procurement efforts. We have entered into a number of contracts with third-party transportation service providers to mitigate the impact against any further increase in ocean freight costs in the short term.If our costs were to be subject to more significant inflationary pressures, we may not be able to fully offset such higher costs through price increases or other cost efficiency measures. Our inability or failure to do so could harm our business, financial condition and results of operations.

Foreign Currency Exchange Rate Risk

We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk. Although our exposure to foreign exchange risks should be limited in general, the value of your investment in our Class A ordinary shares will be affected by the exchange rate

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between U.S. dollar and the local currency in the markets in which we operate because the value of our business is effectively denominated in the local currency, while our Class A ordinary shares will be traded in U.S. dollars.

To the extent that we need to convert U.S. dollars into the local currency for our operations, appreciation of the local currency against the U.S. dollar would reduce the local currency amount we receive from the conversion. Conversely, if we decide to convert the local currency into U.S. dollars for the purpose of making payments for dividends on our ordinary shares, servicing our outstanding debt, or for other business purposes, appreciation of the U.S. dollar against the local currency would reduce the U.S. dollar amounts available to us.

Interest Rate Risk

We do not have any borrowings as of December 31, 2023. If we were to renew these borrowings, we may be subject to interest rate risks.

We have not been exposed to material risks due to changes in market interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure. However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rate in the future.

After the completion of our initial public offering, we invested the net proceeds we received from the offering in interest-earning instruments. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.

Item 8. Financial Statements and Supplementary Data

Index to the Consolidated Financial Statements

CONTENTS PAGE(S)

Report of Independent Registered Public Accounting Firm (PCAOB ID: 1186) 106

Notes to Consolidated Financial Statements 116

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

GigaCloud Technology Inc:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of GigaCloud Technology Inc, subsidiaries and consolidated VIEs (the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2022 due to the adoption of Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as amended.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG Huazhen LLP

We have served as the Company’s auditor since 2020.

Shanghai, People’s Republic of China

March 27, 2024

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GigaCloud Technology Inc

CONSOLIDATED BALANCE SHEETS

(In thousands except for share data and per share data)

December 31,

ASSETS

Current assets

Prepayments and other current assets 6 7,566 17,516

Non-current assets

Intangible assets, net 8 — 8,367

The accompanying notes are an integral part of these consolidated financial statements.

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GigaCloud Technology Inc

CONSOLIDATED BALANCE SHEETS

(In thousands except for share data and per share data)

December 31,

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Current portion of long-term borrowings 9 $ 207 $ —

Non-current liabilities

Finance lease obligations, non-current 12 867 111

Commitments and contingencies 20

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GigaCloud Technology Inc

CONSOLIDATED BALANCE SHEETS

(In thousands except for share data and per share data)

December 31,

Shareholders’ equity

Subscription receivable from ordinary shares (81) —

Accumulated other comprehensive income 804 526

Total liabilities and shareholders’ equity $ 418,600 $ 846,909

The accompanying notes are an integral part of these consolidated financial statements.

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GigaCloud Technology Inc

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands except for share data and per share data)

Year ended December 31,

Revenues 2(ad), 2(q), 19

Cost of revenues

Operating expenses

Research and development expenses — 1,426 3,925

Losses on disposal of property and equipment — — 3,236

Foreign currency exchange gains (losses), net 2(aa) (2,012) (4,854) 2,086

Accretion of Redeemable Convertible Preferred Shares 13 (1,500) (941) —

Foreign currency translation adjustment, net of nil income taxes 123 969 (278)

Total other comprehensive income (loss) 123 969 (278)

Net income per ordinary share

The accompanying notes are an integral part of these consolidated financial statements.

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GigaCloud Technology Inc

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands except for share data)

Number ofordinaryshares Numberofpreferredshares

Share-based compensation 15 — — — — — 9,681 — 9,681

Accretion of Series E Preferred Shares 13 — — — — — — — (1,500) (1,500)

Exercise of vested share-based awards 15 1,587,086 79 (79) — — — — — —

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GigaCloud Technology Inc

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands except for share data)

Share-based compensation 14, 15, 16 — — — — — — — — — — — 9,893 — — 9,893

Accretion of Series E Preferred Shares 13 — — — — — — — — — — — — — (941) (941)

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GigaCloud Technology Inc

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands except for share data)

Number of ordinary shares Number of ordinary shares Number of ordinary shares

Shares held for share-based compensation — — — — 68,283 — — — — — —

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GigaCloud Technology Inc

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year ended December 31,

Cash flows from operating activities:

Allowance for doubtful accounts 87 86 263

Loss from disposal of property and equipment — 4 3,236

Unrealized foreign currency exchange gains (losses) 2,012 2,126 (972)

Interest expense of capital leases (ASC 840) 198 — —

Changes in operating assets and liabilities, net of businesses acquired:

Cash flows from investing activities:

Cash paid for purchase of property and equipment (1,825) (709) (4,380)

Cash received from disposal of property and equipment — — 462

Acquisitions, net of cash acquired — — (86,629)

Net cash used in investing activities $ (1,825) $ (709) $ (90,547)

The accompanying notes are an integral part of these consolidated financial statements.

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GigaCloud Technology Inc

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year ended December 31,

Cash flows from financing activities:

Repayment of finance lease obligations (2,526) (3,624) (2,212)

Payment of share repurchase — — (1,594)

Proceeds from prepaid consideration of restricted shares — 1,578 —

Proceeds from initial public offering, net of IPO costs — 34,245 —

Net cash provided by (used in) financing activities (2,956) 31,887 (4,003)

Supplemental disclosure of cash flow information

Non-cash investing and financing activities:

Purchase of property and equipment under finance leases 4,086 2,719 —

Reversal of subscription receivable from ordinary shares — — 312

Fair value of assets acquired by acquisition — — 273,086

Cash paid for business combinations and asset purchases — — 87,568

Liabilities assumed by acquisition — — (185,518)

The accompanying notes are an integral part of these consolidated financial statements.

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GigaCloud Technology Inc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND ORGANIZATION

Description of Business

GigaCloud Technology Inc (the “Company”), a limited liability company based in the Cayman Islands, with its subsidiaries and consolidated variable interest entities (“VIEs”) (collectively referred to as the “Group”, "we" or "our") are principally engaged in large parcel merchandise sales and the provision of ecommerce solutions for small cross-border business owners utilizing the Company’s online platform (“GigaCloud Marketplace”) and warehouses primarily located in the United States, Japan and Europe.

Organization

The accompanying consolidated financial statements include the financial statements of the Company, its subsidiaries and consolidated VIEs.

In 2017 and 2018, the Company entered into Account Control Agreements with its VIEs and their respective nominal shareholders in the United States, Japan, the United Kingdom, Germany and the People’s Republic of China (“China” or “PRC”), respectively, to facilitate operations in these jurisdictions.

The functions of the VIEs include operating accounts registered on third-party ecommerce websites to sell merchandise to local individual customers, or providing warehousing and logistic services to users’ registered on GigaCloud Marketplace, by utilizing the Group’s cross-border trading experience, international logistic network and the Company’s own online platform. All of the VIEs’ nominal shareholders are employees of the Group. The Company has funded, through either direct capital contribution or intercompany loans, substantially all of the VIEs’ capital and operational funds. The Company has information right, management right and control right of daily operation of the VIEs.

The Account Control Agreements, with the consolidated VIEs and their shareholders, allow the Company to (i) exercise effective control over the consolidated VIEs, (ii) receive substantially all of the economic benefits of the consolidated VIEs, and (iii) have an exclusive option to purchase all or part of the equity interests in the consolidated VIEs when and to the extent permitted by the applicable laws.

The Company is regarded as the primary beneficiary of the consolidated VIEs, and the Company treats the VIEs as consolidated entities under U.S. GAAP. The Company has consolidated the financial results of the VIEs in the consolidated financial statements in accordance with U.S. GAAP. However, the control over the VIEs through contractual arrangements may not be as effective as direct ownership. In addition, uncertainties exist as to whether the Company’s operation of the business in these jurisdictions through the consolidated VIEs would be found not in compliance with existing or future respective local laws.

The equity interests of the VIEs are legally held by their nominee shareholders. Through the Account Control Agreements, which were entered into among the Company, the VIEs and the nominee shareholders of the VIEs, the nominee shareholders of the VIEs have granted all their legal rights including voting rights and disposition rights of their equity interests in the VIEs to the Company. The nominee shareholders of the VIEs do not participate significantly in income and loss and do not have the power to direct the activities of the VIEs that most significantly impact their economic performance. Accordingly, the VIEs are considered variable interest entities.

Under the terms of the Account Control Agreements, the VIEs’ nominee shareholders have no rights to the net assets nor have the obligations to fund the deficit, and such rights and obligations have been vested to the Company. All of the deficit (net liabilities) and net loss of the VIEs are attributed to the Company.

The principal terms of the Account Control Agreements are as follows:

1) Account Management

The Company shall be entitled to information rights, management rights and control rights of daily operation of the VIEs, especially with respect to all of the bank accounts and operating accounts with relevant e-commerce platforms established or to be established in the name of, or for the benefit of the VIEs.

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GigaCloud Technology Inc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The VIEs and their shareholders shall act in good faith under instructions of the Company and shall not damage the control and management of the Company or affect its financial results and consolidation of such result.

2) Sale and Purchase of Equity Interest

The Company has irrevocable and exclusive right to purchase the equity interests in the VIEs held by each shareholder of such VIEs, once or at multiple times at any time in part or in whole, at the Company’s sole discretion. Except for the Company and its designee(s), no other person shall be entitled to such option or other rights to purchase the equity interests in the VIEs held by the shareholders of the VIEs.

The purchase price shall be the minimum price permitted by the local applicable laws. Pursuant to the Account Control Agreements, the VIEs and their shareholders shall not terminate the control agreement unilaterally in any event unless otherwise required by applicable laws.

3) Power of Attorney

The Company has sole and exclusive power of attorney to act on behalf of each shareholder of the VIEs with respect to all rights and matters concerning all equity interest held by such shareholder including exercising all of the shareholder’s rights and voting rights; deciding the sale, transfer, pledge or disposition of the shares of the VIEs; representing the shareholder to execute any resolutions and minutes as a shareholder (and director) of the VIEs; approving the amendments to the articles of association without written consent of such shareholder; approving any change of the share capital of the VIEs; appoint directors to the VIEs at the discretion of the Company.

Each shareholder of the VIEs waives all rights with respect to the equity interests in the VIEs held by him/her and shall not exercise such rights by himself/herself.

4) Equity Pledge

The VIEs’ shareholders agree to pledge all the equity interests to the Company as security for performance of the contract obligations under the Account Control Agreements. The VIEs and their shareholders shall complete all necessary registration and/or filings relating to the equity pledges required by the applicable laws in one month after the execution of the Account Control Agreements.

During the term of the Account Control Agreement, the VIEs and their shareholders shall deliver the share certificate or the like to the Company’s escrow within one week after the execution of the Account Control Agreements. In the event of the occurrence of any change of the share capital or the entrusted shareholding of the VIEs, the VIEs and their shareholders shall update the registration and/or filings relating to the equity pledges required by the applicable laws and deliver the updated share certificate or the like to the Company’s escrow.

5) Effective Date and Term

The Account Control Agreements became effective upon execution by the parties, and remain effective until all equity interests held by the VIEs’ shareholders have been transferred or assigned to the Company in accordance with the Account Control Agreements.

The Company relies on the Account Control Agreements to operate and control VIEs. All of the Account Control Agreements are governed by local laws and provide for the resolution of disputes through arbitration under local laws. Accordingly, these agreements would be interpreted in accordance with local laws and any disputes would be resolved in accordance with local legal procedures. Uncertainties in the local legal system could limit the Company’s ability to enforce these contractual arrangements. In the event that the Company is unable to enforce these contractual arrangements, or if the Company suffers significant time delays or other obstacles in the process of enforcing these Account Control Agreements, it would be difficult to exert effective control over VIEs, and the Company’s ability to conduct its business and the results of operations and financial condition may be materially and adversely affected.

In the opinion of management, the ownership structures of the Company and its VIEs, do not violate any applicable local laws, regulations, or rules currently in effect; the agreements among the Company, each of the VIEs and its

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GigaCloud Technology Inc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

shareholders, governed by local laws, as described above, are valid, binding and enforceable in accordance with their terms and applicable local laws, rules, and regulations currently in effect, and do not violate any applicable local laws, regulations, or rules currently in effect. However, there are substantial uncertainties regarding the interpretation and application of current and future local laws and regulations. Accordingly, if the local government finds that the contractual arrangements do not comply with its restrictions on foreign ownership of businesses, or if the local government otherwise finds that the Company and the VIEs are in violation of local laws or regulations or lack the necessary permits or licenses to operate the Company’s business, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:

•revoking the business and operating licenses of the Company;

•discontinuing or restricting the operations;

•imposing fines or confiscating any of VIEs’ income that they deem to have been obtained through illegal operations;

•imposing conditions or requirements with which the Group’s subsidiaries or the VIEs may not be able to comply;

•requiring the Company to restructure the ownership structure or operations, including terminating the contractual arrangements with the VIEs;

•restricting or prohibiting the Company’s use of the proceeds of overseas offering to finance the business and operations in these jurisdictions; or

•taking other regulatory or enforcement actions that could be harmful to the business.

If the imposition of any of these penalties or requirement to restructure the Company’s corporate structure causes it to lose the rights to direct the activities of the VIEs or the Company’s right to receive its economic benefits, the Company would no longer be able to consolidate the financial results of the VIEs in its consolidated financial statements. In the opinion of management, the likelihood of deconsolidation of the VIEs is remote based on current facts and circumstances.

In February 2021, the Company terminated the Account Control Agreement with one of its consolidated VIEs, Suzhou Dajianyun Transport Co., Ltd. (“Suzhou Dajianyun”). In connection with the termination of the Account Control Agreement, the Company, through its wholly-owned subsidiary GigaCloud Technology (Suzhou) Co., Ltd. (“Gigacloud Suzhou”, formerly known as Oriental Standard Network Technology (Suzhou) Co., Ltd.), acquired 100% of the equity interest in Suzhou Dajianyun which then became the Company’s indirect wholly-owned subsidiary.

In January 2023, the Company terminated the Account Control Agreements with two of its consolidated VIEs, Blitz Distribution GMBH and GIGA CLOUD LOGISTICS INC. In connection with the termination of the Account Control Agreement, the Company acquired 100% of the equity interest in these two companies which then became the Company’s direct wholly-owned subsidiary.

The Company’s involvement with the VIEs under the Account Control Agreements affected the Company’s consolidated financial position, results of operations and cash flows as indicated below. The following consolidated assets and liabilities information of the Group’s VIEs as of December 31, 2022 and 2023, and consolidated revenues, net income

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GigaCloud Technology Inc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(loss) and cash flow information for the years ended December 31, 2021, 2022 and 2023 have been included in the accompanying consolidated financial statements.

December 31,

(In thousands)

Amounts due from related parties* 1,249 3,071

Prepayments and other current assets 1,277 182

Property and equipment, net 548 275

Operating lease right-of-use assets 5,398 1,978

Other non-current assets 890 768

Current operating lease liabilities 1,864 1,305

Accrued expenses and other current liabilities 442 2,774

Operating lease liabilities, non-current 3,322 553

*As of December 31, 2022 and 2023, amounts due to and due from related parties represent the loans, receivables and payables that the VIEs had with the Company’s consolidated subsidiaries, which were eliminated in the Company’s consolidated financial statements.

Year ended December 31,

GCT US Equity

GCT · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data

GCT US Equity☆

GCT · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data

GCT US Equity