Pattern Group Inc.
11/06/2025 | Press release | Distributed by Public on 11/06/2025 05:04
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management's discussion and analysis of financial condition and results of operations for the year ended December 31, 2024 included in the Prospectus. The following discussion is intended to help the reader understand our company, our operations and our present business environment, and contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q and the Prospectus, particularly in the sections titled "Special Note Regarding Forward-Looking Statements" and "Risk Factors." Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
At Pattern, we are on a mission to help brands accelerate profitable growth on global ecommerce marketplaces. Our proprietary technology and on-demand experts operate across more than 60 marketplaces to increase product sales to consumers in more than 100 countries. We have gathered more than 46 trillion data points comprised of keyword, shipping, advertising, sales, market share, click, social, conversion, customer service and other data. Utilizing these data points and sophisticated machine learning and artificial intelligence ("AI") models, we strive to optimize and automate key levers of ecommerce growth, including advertising, content creation and management, pricing, forecasting and customer service.
Given the complexities that consumer brands face in scaling and accelerating global ecommerce, we have built a powerful ecommerce acceleration platform ("EXP," or "our technology") organized around a simple and intuitive formula, which we call the ecommerce equation:
EXP executes thousands of optimizations daily and drives the ecommerce equation across tens of thousands of products on marketplaces around the world. These optimizations include automated adjustments and recommendations powered by AI, machine learning and our massive flow of ecommerce data points, allowing brands to navigate the complexity of operating on global ecommerce marketplaces at scale.
Our technology, with a combined total of 29 issued patents and patents pending, is supported by approximately 400 software engineers, data scientists and other technology professionals who are dedicated to enhancing and innovating upon our technology to further increase our capabilities. We have a team that offers on-demand expertise and capabilities across marketplace management, marketing, fulfillment and brand protection on a global basis. We sell tens of thousands of products from more than 200 brands across different industries and geographies including the Americas, Europe, Australia and Asia. Our current brand partners' industry presence includes health and wellness, beauty and personal care, home and lifestyle, pet, sports and outdoors and consumer electronics.
Our Business Model
We generate the substantial majority of our revenue from consumer product sales on global ecommerce marketplaces. Pattern acquires inventory based on contractual relationships with brand partners and uses its platform to optimize the ecommerce equation by driving traffic, increasing conversion, managing price and maintaining product availability across global ecommerce marketplaces.
We target brand partners with a proven track record of selling highly rated products, a loyal customer base and growth potential, assessed through our proprietary scorecard. Using our extensive data, we identify potential brand partners, and our sales team efficiently markets to and signs new brand partners.
We have developed and maintain strong and long-lasting brand partner relationships. Revenue attributable to brand partners consists of consumer product sales and other revenue, including subscription and consulting fees. Our Net
Revenue Retention Rate ("NRR") was 122% for the period ended September 30, 2025. See the section titled below "-Key Business Metric and Non-GAAP Financial Measure" for information on how we define and calculate NRR.
Purchasing our brand partners' products offers several advantages, creating a mutually beneficial partnership that supports growth for both Pattern and our brand partners by:
•Providing a low-friction model where brands simply sell their products to Pattern at predetermined prices
•Reducing the need for brands to allocate technology and overhead budget
•Allowing Pattern to manage the marketplace experience and optimize the ecommerce equation
•Enabling Pattern to gather data, conduct real-time testing and enhance predictive models with AI
Our operating model capitalizes on global economies of scale to optimize costs while investing in future growth. By managing more brand partners, we streamline logistics, reducing delivery times and costs. As we enhance operational efficiencies, we remain committed to innovating our technology, expanding capabilities and offering new solutions to our partners. Investments in technology and warehouse automation have significantly boosted our operational efficiency and realize tangible economic benefits from scale.
Key Business Metric and Non-GAAP Financial Measure
We measure our business using both financial and operating metrics and use the following metric and measure to assess the near-term and long-term performance of our overall business, including identifying trends, formulating financial projections, making strategic decisions, assessing operational efficiencies and monitoring our business.
Net Revenue Retention Rate
NRR is an important metric to measure the long-term value of our brand partner relationships. In any given period, we calculate NRR by comparing total revenue attributable to all existing brand partners in the current trailing 12-month period to that of the previous trailing 12-month period. This metric, expressed as a percentage, provides valuable insight into the accelerated growth delivered through our platform, the effectiveness of our brand expansion strategies and our ability to deepen relationships with existing brand partners. For the purpose of our NRR calculation, we only include brand partners that, as of the measurement date, have been with Pattern for more than twelve months since we first generated over $1,000 in revenue attributable to such brand partner. Additionally, for those existing brand partners that, as of the measurement date, have been with Pattern for more than twelve full months but less than 24 full months since we first generated over $1,000 in revenue attributable to such brand partner, we only include current period revenue for the corresponding months in the current period for which the brand partner had attributable revenue in the previous period. For example, when calculating NRR as of September 30, 2025 for a brand partner that Pattern first generated over $1,000 of attributable revenue in March 2024, we would only include that brand partner's attributable revenue from March 2025 through September 2025 in the numerator and that brand partner's attributable revenue from March 2024 through September 2024 in the denominator. Current period revenue includes the impact of any expansion, contraction and attrition. NRR excludes revenue attributable to new brand partners during the current period. All revenue attributable to services relating to consulting and design are excluded.
| Nine Months Ended September 30, | ||||||||||||||
|
(in thousands)
|
2024 | 2025 | ||||||||||||
| Net Revenue Retention Rate | 113 | % | 122 | % | ||||||||||
Adjusted EBITDA
In addition to our results determined in accordance with accounting principles generally accepted in the United States ("GAAP"), we believe that Adjusted EBITDA, a non-GAAP financial measure, is useful in evaluating our operational performance. We calculate Adjusted EBITDA, a non-GAAP financial measure, as net income (loss) excluding depreciation and amortization; interest income (expense), net; provision (benefit) from income taxes; share-based compensation expense and related taxes; the stock amendment expense; indirect IPO costs; and other recurring and nonrecurring items that we do not consider representative of our underlying operations. We believe it is useful to exclude non-cash charges, such as depreciation and amortization and share-based compensation expense from our Adjusted EBITDA because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. We believe it is useful to exclude interest income (expense), net; provision (benefit) from income taxes; and other items that are not components of our core business operations. Non-GAAP financial measures such as Adjusted EBITDA should
not be considered in isolation or as an alternative to net income (loss) or any other measure of financial performance calculated and prescribed in accordance with GAAP. In addition, Adjusted EBITDA may not be comparable to similarly titled measures in other organizations because other organizations may not calculate Adjusted EBITDA in the same manner as we do, thus limiting its usefulness as a comparative measure.
The following table provides a reconciliation of non-GAAP Adjusted EBITDA to the most directly comparable financial measure presented in accordance with GAAP.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
|
(in thousands)
|
2024 | 2025 | 2024 | 2025 | |||||||||||||||||||
|
Net income (loss)
|
$ | 14,196 | $ | (59,059) | $ | 49,653 | $ | (12,476) | |||||||||||||||
| Add (deduct): | |||||||||||||||||||||||
| Depreciation and amortization | 3,825 | 4,262 | 10,864 | 12,547 | |||||||||||||||||||
| Interest income, net | (1,714) | (1,855) | (4,530) | (5,060) | |||||||||||||||||||
| Provision (benefit) for income taxes | 5,164 | (32,232) | 17,330 | (16,202) | |||||||||||||||||||
| Other: | |||||||||||||||||||||||
|
Share-based compensation and related taxes(1)
|
- | 91,708 | - | 91,708 | |||||||||||||||||||
|
Stock amendment expense(2)
|
- | 32,676 | - | 32,676 | |||||||||||||||||||
| Indirect initial public offering costs | 360 | 5,235 | 421 | 6,477 | |||||||||||||||||||
| Other | - | 319 | - | 319 | |||||||||||||||||||
| Adjusted EBITDA | $ | 21,831 | $ | 41,054 | $ | 73,738 | $ | 109,989 | |||||||||||||||
(1)Share-based compensation and related taxes include compensation expense for both stock and cash settled restricted stock units and the related employer taxes.
(2)Stock amendment expense represents a non-cash expense associated with the filing and effectiveness of our amended and restated certificate of incorporation in August 2025, which modified the terms of the Founder Voting and Non-Voting Preferred Stock ("the Founder Preferred Stock Amendment") as described under Note 7-Stockholders' Equity, in the section titled "Notes to Condensed Consolidated Financial Statements" included elsewhere in this Quarterly Report on Form 10-Q. This expense was specific to the amendment of the Founder Preferred Stock and is not expected to recur in future periods.
Components of Results of Consolidated Operations
Revenue
We derive revenue primarily from consumer product sales attributable to brand partners, across a number of categories including health and wellness, beauty and personal care, home and lifestyle, pet, sports and outdoors and consumer electronics, through both domestic and international ecommerce marketplaces. Revenue from the sale of products is recorded when products are shipped to the customer, net of returns allowances. Taxes collected from customers are excluded from revenue.
We also generate revenue through subscription and consulting fees for our comprehensive suite of ecommerce solutions, including advanced advertising and marketing technology, actionable business insights, compliance solutions, logistics and fulfillment support, creative design and strategic growth services.
Cost of Goods Sold
Cost of goods sold consists of the purchase price of inventory sold to customers. Shipping costs to receive products from our brand partners and costs to ship products to third-party fulfillment centers are included in our inventory and recognized as cost of goods sold upon sale of the products to customers.
Operations, General and Administrative
Operations, general and administrative expenses consist of third-party fulfillment costs; payroll and related expenses; warehousing costs; facilities and equipment, including depreciation and amortization, rent and other occupancy expenses; professional and legal fees; as well as costs associated with other general costs for corporate functions, including accounting, finance and human resources.
Fulfillment costs represent those costs incurred from third-party fulfillment centers and in operating and staffing our fulfillment centers, including costs related to buying, receiving, inspecting and warehousing inventories, picking, packaging and preparing customer orders for shipment.
Sales and Marketing
Sales and marketing expenses consist of third-party online marketplace commission fees, targeted online advertising and other marketing expenses, payroll and related expenses for personnel engaged in marketing and selling activities.
Research and Development
Research and development costs include payroll and related expenses for employees involved in the research and development of our technology, development and design of our websites and curation and display of products available on third-party marketplaces.
Stock amendment expense
In connection with the filing and effectiveness of our amended and restated certificate of incorporation in August 2025, the Company amended the conversion terms of its Founder Voting and Non-Voting Preferred Stock, as described under Note 7-Stockholders' Equity in the "Notes to Condensed Consolidated Financial Statements" section of this Quarterly Report on Form 10-Q. The amendment to the conversion terms represented a non-pro rata distribution to the Founder Preferred Stockholders. As a result, the Company recognized a non-cash expense of $32.7 million for the incremental fair value conveyed through the amended terms. This expense was specific to the amendment of the Founder Preferred Stock and is not expected to recur in future periods.
Results of Consolidated Operations
The following tables set forth our results of operations for the periods presented and express the relationship of certain line items as a percentage of net sales for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
|
($ in thousands)
|
2024 | 2025 | 2024 | 2025 | |||||||||||||||||||
|
Consolidated Statements of Operations
|
|||||||||||||||||||||||
| Revenues | $ | 439,395 | $ | 639,655 | $ | 1,280,696 | $ | 1,778,211 | |||||||||||||||
|
Operating expenses:
|
|||||||||||||||||||||||
|
Cost of goods sold
|
248,959 | 356,132 | 719,845 | 1,002,065 | |||||||||||||||||||
|
Operations, general and administrative
|
86,124 | 177,936 | 243,668 | 381,704 | |||||||||||||||||||
|
Sales and marketing
|
82,587 | 141,182 | 240,425 | 358,402 | |||||||||||||||||||
|
Research and development
|
4,071 | 24,584 | 12,700 | 36,682 | |||||||||||||||||||
|
Total operating expenses
|
421,741 | 699,834 | 1,216,638 | 1,778,853 | |||||||||||||||||||
|
Operating income (loss)
|
17,654 | (60,179) | 64,058 | (642) | |||||||||||||||||||
|
Stock amendment expense
|
- | (32,676) | - | (32,676) | |||||||||||||||||||
| Interest income, net | 1,714 | 1,855 | 4,530 | 5,060 | |||||||||||||||||||
|
Other income (expense), net
|
(8) | (291) | (1,605) | (420) | |||||||||||||||||||
|
Income (loss) before income taxes
|
19,360 | (91,291) | 66,983 | (28,678) | |||||||||||||||||||
| Provision (benefit) for income taxes | 5,164 | (32,232) | 17,330 | (16,202) | |||||||||||||||||||
|
Net income (loss)
|
$ | 14,196 | $ | (59,059) | $ | 49,653 | $ | (12,476) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (% of revenue) | 2024 | 2025 | 2024 | 2025 | |||||||||||||||||||
|
Revenues
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
|
Operating expenses:
|
|||||||||||||||||||||||
|
Cost of goods sold
|
56.7 | % | 55.7 | % | 56.2 | % | 56.4 | % | |||||||||||||||
|
Operations, general and administrative
|
19.6 | % | 27.8 | % | 19.0 | % | 21.5 | % | |||||||||||||||
|
Sales and marketing
|
18.8 | % | 22.1 | % | 18.8 | % | 20.2 | % | |||||||||||||||
|
Research and development
|
0.9 | % | 3.8 | % | 1.0 | % | 2.1 | % | |||||||||||||||
|
Total operating expenses
|
96.0 | % | 109.4 | % | 95.0 | % | 100.0 | % | |||||||||||||||
|
Operating income (loss)
|
4.0 | % | (9.4 | %) | 5.0 | % | 0.0 | % | |||||||||||||||
|
Stock amendment expense
|
0.0 | % | (5.1 | %) | 0.0 | % | (1.8 | %) | |||||||||||||||
| Interest income, net | 0.4 | % | 0.3 | % | 0.4 | % | 0.3 | % | |||||||||||||||
|
Other income (expense), net
|
0.0 | % | 0.0 | % | (0.1 | %) | 0.0 | % | |||||||||||||||
|
Income (loss) before income taxes
|
4.4 | % | (14.3 | %) | 5.2 | % | (1.6 | %) | |||||||||||||||
| Provision (benefit) for income taxes | 1.2 | % | (5.0 | %) | 1.4 | % | (0.9 | %) | |||||||||||||||
|
Net income (loss)
|
3.2 | % | (9.2 | %) | 3.9 | % | (0.7 | %) | |||||||||||||||
Comparison of the three months ended September 30, 2024 and 2025
Revenue
| Three Months Ended September 30, | |||||||||||||||||||||||
| ($ in thousands) | 2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
|
Revenues
|
$ | 439,395 | $ | 639,655 | $ | 200,260 | 45.6 | % | |||||||||||||||
The increase in revenue was primarily driven by the growth of consumer product sales attributable to existing brand partners, as evidenced by our NRR of 122% for the period ended September 30, 2025, as well as a 43% increase in revenue from Amazon marketplaces, a 90% increase in revenue from non-Amazon marketplaces and collectively a 72% increase in international revenue year-over-year.
Cost of Goods Sold
| Three Months Ended September 30, | |||||||||||||||||||||||
|
($ in thousands)
|
2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
| Cost of goods sold | $ | 248,959 | $ | 356,132 | $ | 107,173 | 43.0 | % | |||||||||||||||
The increase in cost of goods sold was primarily driven by an increase in revenue of 45.6%. The increase in cost of goods sold was smaller than the increase in revenue on a percentage basis, primarily driven by product and brand mix.
Operations, General and Administrative
| Three Months Ended September 30, | |||||||||||||||||||||||
| ($ in thousands) | 2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
|
Operations, general and administrative
|
$ | 86,124 | $ | 177,936 | $ | 91,812 | 106.6 | % | |||||||||||||||
The increase in operations, general and administrative expenses was primarily driven by the recognition of $44.3 million of stock-based compensation expense upon meeting the performance-based vesting condition for outstanding restricted stock units in connection with our IPO. Consumer product sales resulted in an increase in the associated fulfillment costs of $28.7 million. The remaining increase for the three months ended September 30, 2025 was primarily driven by an increase in corporate headcount and rent expense.
Sales and Marketing
| Three Months Ended September 30, | |||||||||||||||||||||||
|
($ in thousands)
|
2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
| Sales and marketing | $ | 82,587 | $ | 141,182 | $ | 58,595 | 70.9 | % | |||||||||||||||
The increase in sales and marketing expenses was primarily driven by an increase in marketplace commissions of $28.2 million, which grew in line with revenue on a percentage basis, and the recognition of $22.2 million of stock-based compensation expense upon meeting the performance-based vesting condition for outstanding restricted stock units in connection with our IPO. The remaining increase of $8.2 million related to other selling expenses that generally increased in line with revenue on a percentage basis. These costs included additional brand management, sales and marketing, advertising and creative headcount and other sales, marketing and advertising expenses.
Research and Development
| Three Months Ended September 30, | |||||||||||||||||||||||
| ($ in thousands) | 2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
| Research and development | $ | 4,071 | $ | 24,584 | $ | 20,513 | 503.9 | % | |||||||||||||||
The increase in research and development costs was primarily driven by the recognition of $18.2 million of stock-based compensation expense upon meeting the performance-based vesting condition for outstanding restricted stock units in connection with our IPO. The remaining increase was driven by the headcount increase of software engineers, data scientists and other technology professionals to drive new platform capabilities and enhanced features.
Stock amendment expense
| Three Months Ended September 30, | |||||||||||||||||||||||
| ($ in thousands) | 2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
|
Stock amendment expense
|
$ | - | $ | (32,676) | $ | (32,676) | NM | ||||||||||||||||
In connection with the filing and effectiveness of our amended and restated certificate of incorporation in August 2025, the Company amended the conversion terms of its Founder Voting and Non-Voting Preferred Stock, as described under Note 7-Stockholders' Equity in the "Notes to Condensed Consolidated Financial Statements" section of this Quarterly Report on Form 10-Q. The amendment to the conversion terms represented a non-pro rata distribution to the Founder Preferred Stockholders. As a result, the Company recognized a non-cash expense of $32.7 million for the incremental fair value conveyed through the amended terms. This expense was specific to the amendment of the Founder Preferred Stock and is not expected to recur in future periods.
Provision for Income Taxes
| Three Months Ended September 30, | |||||||||||||||||||||||
| ($ in thousands) | 2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
| Provision (benefit) for income taxes | $ | 5,164 | $ | (32,232) | $ | (37,396) | (724.2 | %) | |||||||||||||||
The change in provision (benefit) for income taxes was primarily driven by the Company's IPO and recognition of stock compensation expense for restricted stock awards at the time of the IPO. This benefit was offset in part by non-deductible executive compensation and non-deductible stock amendment expense.
Comparison of the nine months ended September 30, 2024 and 2025
Revenue
| Nine Months Ended September 30, | |||||||||||||||||||||||
| ($ in thousands) | 2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
|
Revenues
|
$ | 1,280,696 | $ | 1,778,211 | $ | 497,515 | 38.8 | % | |||||||||||||||
The increase in revenue was primarily driven by the growth of consumer product sales attributable to existing brand partners, as evidenced by our NRR of 122% for the period ended September 30, 2025, as well as a 38% increase in revenue from Amazon marketplaces, a 51% increase in revenue from non-Amazon marketplaces, and collectively a 61% increase in international revenue in year-over-year.
Cost of Goods Sold
| Nine Months Ended September 30, | |||||||||||||||||||||||
|
($ in thousands)
|
2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
| Cost of goods sold | $ | 719,845 | $ | 1,002,065 | $ | 282,220 | 39.2 | % | |||||||||||||||
The increase in cost of goods sold was primarily driven by an increase in revenue of 38.8%. The increase in cost of goods sold was in line with the increase in revenue on a percentage basis.
Operations, General and Administrative
| Nine Months Ended September 30, | |||||||||||||||||||||||
| ($ in thousands) | 2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
|
Operations, general and administrative
|
$ | 243,668 | $ | 381,704 | $ | 138,036 | 56.6 | % | |||||||||||||||
The increase in operations, general and administrative expenses was primarily driven by the recognition of $44.3 million of stock-based compensation expense upon meeting the performance-based vesting condition for outstanding restricted stock units in connection with our IPO. Consumer product sales resulted in an increase in the associated fulfillment costs of $68.5 million. The remaining increase for the nine months ended September 30, 2025 was primarily driven by an increase in corporate headcount and rent expense.
Sales and Marketing
| Nine Months Ended September 30, | |||||||||||||||||||||||
|
($ in thousands)
|
2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
| Sales and marketing | $ | 240,425 | $ | 358,402 | $ | 117,977 | 49.1 | % | |||||||||||||||
The increase in sales and marketing expenses was primarily driven by an increase in marketplace commissions of $71.7 million, which grew generally in line with revenue on a percentage basis, and the recognition of $22.2 million of stock-based compensation expense upon meeting the performance-based vesting condition for outstanding restricted stock units in connection with our IPO. The remaining increase of $24.1 million related to other selling expenses that generally increased in line with revenue on a percentage basis. These costs included additional brand management, sales and marketing, advertising and creative headcount and other sales, marketing and advertising expenses.
Research and Development
| Nine Months Ended September 30, | |||||||||||||||||||||||
| ($ in thousands) | 2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
| Research and development | $ | 12,700 | $ | 36,682 | $ | 23,982 | 188.8 | % | |||||||||||||||
The increase in research and development costs was primarily driven by the recognition of $18.2 million of stock-based compensation expense upon meeting the performance-based vesting condition for outstanding restricted stock units in connection with our IPO. The remaining increase was driven by the headcount increase of software engineers, data scientists and other technology professionals to drive new platform capabilities and enhanced features.
Stock amendment expense
| Nine Months Ended September 30, | |||||||||||||||||||||||
| ($ in thousands) | 2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
|
Stock amendment expense
|
$ | - | $ | (32,676) | $ | (32,676) | NM | ||||||||||||||||
In connection with the filing and effectiveness of our amended and restated certificate of incorporation in August 2025, the Company amended the conversion terms of its Founder Voting and Non-Voting Preferred Stock, as described under Note 7-Stockholders' Equity in the "Notes to Condensed Consolidated Financial Statements" section of this Quarterly Report on Form 10-Q. The amendment to the conversion terms represented a non-pro rata distribution to the Founder Preferred Stockholders. As a result, the Company recognized a non-cash expense of $32.7 million for the incremental fair value conveyed through the amended terms. This expense was specific to the amendment of the Founder Preferred Stock and is not expected to recur in future periods.
Provision for Income Taxes
| Nine Months Ended September 30, | |||||||||||||||||||||||
| ($ in thousands) | 2024 | 2025 |
$ Change
|
% Change
|
|||||||||||||||||||
| Provision (benefit) for income taxes | $ | 17,330 | $ | (16,202) | $ | (33,532) | (193.5 | %) | |||||||||||||||
The change in provision (benefit) for income taxes was primarily driven by the Company's IPO and recognition of stock compensation expense for restricted stock awards at the time of the IPO. This benefit was offset in part by non-deductible executive compensation and non-deductible stock amendment expense.
Liquidity and Capital Resources
Our principal sources of liquidity are cash and cash equivalents. At September 30, 2025, we had cash and cash equivalents of $312.8 million. We also have access to external sources of liquidity through our revolving credit facility as further described within "Credit Facility" below. In September 2025, we completed our IPO which resulted in aggregate cash proceeds of $135.0 million, after deducting approximately $10.5 million in underwriting discounts and commissions and $4.5 million in offering-related expenses.
We believe that our cash and cash equivalents, cash from operations and availability under our revolving credit facility will be sufficient to fund our working capital, capital expenditure requirements and contractual obligations for at least the next twelve months. Our opinions concerning liquidity are based on currently available information. To the extent our liquidity assumptions prove to be inaccurate, or if circumstances change, future availability of credit or other sources of financing may be reduced and our liquidity could be adversely affected. In addition, we may choose to raise additional funds at any time through equity or debt financing arrangements, which may or may not be needed for additional working capital, capital expenditures or other strategic investments. Our future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section titled "Risk Factors" included elsewhere in this Quarterly Report on Form 10-Q together with the risks and uncertainties previously disclosed in the section titled "Risk Factors" of the Prospectus. Depending on the severity and direct impact of these factors on us, we may be unable to secure additional financing to meet our operating requirements on terms favorable to us, or at all.
Historical Cash Flows
The following table sets forth a summary of our cash flow information for the periods presented:
| Nine Months Ended September 30, | ||||||||||||||
| (in thousands) | 2024 | 2025 | ||||||||||||
|
Net cash provided by operating activities
|
$ | 68,887 | $ | 90,913 | ||||||||||
|
Net cash used in investing activities
|
$ | (14,052) | $ | (15,192) | ||||||||||
|
Net cash provided by financing activities
|
$ | - | $ | 61,594 | ||||||||||
Operating Activities
Net cash provided by operating activities was $90.9 million for the nine months ended September 30, 2025, which primarily consisted of $12.5 million of net loss, $115.7 million of non-cash adjustments, such as stock-based compensation, the Founder Preferred Share Amendment, depreciation and amortization expense, and deferred income taxes, and an increase in income tax receivables of $17.6 million resulting from current period pre-tax losses and a cash increase of $5.3 million from the management of the remaining working capital accounts.
Net cash provided by operating activities was $68.9 million for the nine months ended September 30, 2024, which primarily consisted of $49.7 million of net income, $10.9 million of non-cash adjustments, such as depreciation and amortization expense, and a cash increase of $8.4 million from the management of working capital.
Investing Activities
Net cash used in investing activities was $15.2 million for the nine months ended September 30, 2025, primarily related to capital expenditures for our internally developed software and investments in machinery and leasehold improvements related to our North Las Vegas warehouse and other warehouse automation.
Net cash used in investing activities was $14.1 million for the nine months ended September 30, 2024, primarily related to capital expenditures for our internally developed software and investments in machinery and leasehold improvements related to our North Las Vegas warehouse and other warehouse automation.
Financing Activities
Net cash provided by financing activities was $61.6 million for the nine months ended September 30, 2025, primarily related to $135.0 million of proceeds from the sale of common stock, net of underwriting discounts and commissions and offering costs, partially offset by the payment of $73.1 million for taxes withheld upon the vesting of restricted stock awards.
Net cash provided by financing activities was $0 for the nine months ended September 30, 2024.
Credit Facility
As of September 30, 2025, we were party to a revolving credit facility with JPMorgan Chase Bank, N.A. and other lenders pursuant to the Credit Agreement dated September 4, 2025 (the "Credit Facility"). The Credit Facility provides for non-amortizing revolving loans in the aggregate principal amount of up to $150 million, with the option to increase the aggregate principal amount up to $250 million under certain conditions subject to lender approval. The Credit Facility matures in September 2030. The revolving line of credit bears interest at a variable base rate plus an applicable margin ranging from 0.50% to 2.00%. We are required to pay commitment fees on the unused portion that range from 0.20% to 0.25% per annum. Our obligations under the Credit Facility are guaranteed by certain of our subsidiaries and are secured by a first priority lien on substantially all of our tangible and intangible property.
We are required to maintain compliance as of the end of each calendar quarter with the following financial covenants:
•a consolidated fixed charge coverage ratio on a trailing 12-month basis of no less than 1.25 to 1.00; and
•a consolidated net leverage ratio on a trailing 12-month basis not greater than 4.00 to 1.00.
As of September 30, 2025, we had no outstanding borrowings under the Credit Facility and we had a $150 million borrowing capacity under the Credit Facility. As of September 30, 2025, we were in compliance with the related financial covenants under the Credit Facility. For additional information, see Note 5-Credit Facilities, in the section titled "Notes to Condensed Consolidated Financial Statements" included elsewhere in this Quarterly Report on Form 10-Q.
Contractual Obligations and Commitments
We have contractual obligations and other commitments that will need to be funded in the future, in addition to our working capital, capital expenditures and other strategic initiatives. Material contractual obligations relate to operating lease obligations for corporate offices and warehouses.
As of September 30, 2025, there have been no material changes to the contractual obligations or commitments from those described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Prospectus.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described below involve a significant level of estimation uncertainty and have the greatest potential impact on our financial condition and results of operations and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates, assumptions and judgments on an ongoing basis. Our actual results may differ from these estimates under different assumptions, judgments and conditions. Refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Prospectus for further information on our critical accounting estimates and policies.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements is included in Note 2-Summary of Significant Accounting Policies, in the "Notes to Condensed Consolidated Financial Statements" included elsewhere in this Quarterly Report on Form 10-Q.
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