Pattern Group Inc.

03/06/2026 | Press release | Distributed by Public on 03/06/2026 05:02

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

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 audited consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. 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 Annual Report on Form 10-K, particularly in the sections titled "Special Note Regarding Forward-Looking Statements" and Part I, Item 1A,Risk Factors. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
A discussion regarding our financial condition and results of operations from the year ended December 31, 2025 compared to the year ended December 31, 2024 is presented below. A discussion regarding our financial condition and results of operations for the year ended December 31, 2023 can be found in the section titled, "Management Discussion and Analysis of Financial Condition and Results of Operations" in our final prospectus, which was filed with the SEC on September 19, 2025 pursuant to Rule 424(b) of the Securities Act.
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 70 marketplaces to increase product sales to consumers in more than 100 countries. We have gathered more than 66 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 ("our technology") organized around a simple and intuitive formula, which we call the ecommerce equation:
Our technology 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 31 issued patents and patents pending, is supported by approximately 480 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 124% for the period ended December 31, 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.
Factors Affecting Our Performance
We believe that the growth and future success of our business depends on many factors. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth, improve our results of operations and maintain or increase profitability.
Retention and growth with our Existing Brand Partners
Our ability to retain and grow our revenue attributable to existing brand partners drives our overall revenue growth through continued optimization of the ecommerce equation. Additionally, as we accelerate brand partners' growth, they continue to grant us exclusive access to sell their products, and we seek to expand the number of different products that we are able to sell on an increasing number of marketplaces, which currently includes more than 70 marketplaces. For example, we partner with over 80 brands for which we sell products on five or more marketplaces. Our brand partners also fund advertising through our platform to drive traffic for consumer products on marketplaces. In the year ended December 31, 2025, our brand partners invested more than $220 million in advertising spend through our platform.
The chart below illustrates the annual revenue that Pattern generates from certain cohorts of brand partners. Each brand partner is placed in a cohort based upon the year in which we first generated revenue attributable to such brand partner. The annual revenue set forth below for each cohort represents the total revenue attributable to the brand partners in that cohort generated during the applicable year. The revenue we generate attributable to each cohort has generally increased in each year, demonstrating the predictable and resilient revenue that is the foundation of our financial model.
Identification and onboarding of new brand partners
Onboarding new brand partners is a driver of our growth and attracting brand partners from various geographies and across different categories is crucial to our success. We have made significant investments to create an efficient go-to-market strategy and focus on identifying and partnering with brand partners across a wide range of industries and regions. Our current brand portfolio, which includes over 200brand partners, represents only a small portion of the global ecommerce market that we believe can benefit from our solutions. Successfully tapping into this opportunity will depend on the effectiveness of our solutions, our ability to effectively sell inventory, the competitive landscape and the strength of our marketing efforts.
Investment in our technology
A key factor influencing our performance is our ongoing investment in our technology platform to optimize the ecommerce equation and enhance our ecommerce acceleration capabilities across global marketplaces. Currently, approximately 480 software engineers, data scientists and other technology professionalssupport our technology functions, and to date, we have invested over $160 millionin technology development and related acquisitions. These investments are crucial for optimizing the ecommerce equation and strengthening our proprietary data set consisting of more than 66 trillion data points.
We are also investing to accelerate our AI capabilities. AI is particularly well suited for ecommerce, given the global complexity, importance of content and of immense scale of user generated data points. We utilize AI in a number of areas in our business, including SEO, advertising, content generation and inventory management. Additionally, AI can help refine our pricing strategies by dynamically considering market conditions, competitor pricing and consumer demand.
Investment in future growth
While we have already made substantial investments in our business, we believe that the large and growing global market we are targeting is still in its nascent stages. To capitalize on this potential, we plan to continue investing in our business to drive growth, expand internationally, enhance our operations and boost revenue. Recognizing the significant opportunities for further expansion, we are committed to increasing our investments to enhance our presence on both existing and new global ecommerce marketplaces. We also see immense potential in global marketplaces and are dedicated to building localized teams that can leverage regional insights to accelerate the sales of our brand partners' products. Additionally, we are channeling resources to grow our direct sales team, enabling us to onboard more high-quality brand
partners and diversify our industry category mix over time. Furthermore, as we transition to becoming a public company, we anticipate incurring additional general and administrative expenses.
Operational capabilities and capital-efficient processes
A key factor influencing our performance is our ability to drive efficient operations and maintain capital-efficient processes. By concentrating on these areas, we aim to develop a scalable operation that supports our global growth objectives while maintaining high levels of customer satisfaction and operational efficiency.
To enhance capital efficiency, we prioritize optimizing our inventory levels and increasing inventory turns, which have improved from 4.4 in 2023to 5.0in 2025. Additionally, we seek to strategically avoid capital-intensive operations such as last-mile delivery and trucking, choosing instead to partner with leading third-party providers. We also take advantage of our scale to drive operational cost efficiencies. For example, because we process very high volumes, we batch our shipments, allowing us to ship more than 90%of our units in the United States in full truck loads,which have a shipping cost that is generally more than 75% below less-than-full truckloads.
Monetization of incremental solutions
We generate a substantial majority of our revenue from consumer product sales on global ecommerce marketplaces. We also continue to invest in new and innovative solutions to diversify our revenue mix. We are committed to enhancing our SaaS capabilities, with a particular focus on our Product Experience Management ("PXM") and Creators. These solutions enable brands to more easily generate optimized content across all ecommerce channels, while also supporting the expanding social commerce4sector by providing a centralized platform for recruiting, engaging and managing affiliate marketing campaigns. Additionally, we are investing in our fulfillment capabilities to accelerate our shipping processes and offer marketplace preparation services to other third-party sellers. We are also investing in expanding the reach of our middle mile solution to save on shipping costs into marketplaces. Furthermore, we are dedicated to enhancing our Services solutions, which deliver tailored consulting and design solutions to our brand partners.
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.
For the year ended December 31, 2025, we generated revenue of $2,501 million, representing a 39% increase from $1,796 million for the year ended December 31, 2024. During the same period, our net income decreased 76%, from $68 million to $16 million, and our Adjusted EBITDA increased 52%, from $101 million to $153 million.
Adjusted EBITDA is a non-GAAP financial measure. For additional information about our non-GAAP financial measure, including reconciliations of the non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP, see below.
4The practice of selling products and services directly through social media platforms, rather than redirecting users to a website.
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 December 31, 2025 for a brand partner that Pattern first generated over $1,000 of attributable revenue in June 2024, we would only include that brand partner's attributable revenue from June 2025 through December 2025 in the numerator and that brand partner's attributable revenue from June 2024 through December 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.
Year Ended December 31,
(in thousands)
2024 2025
Net Revenue Retention Rate 116 % 124 %
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, 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 items that we do not consider representative of our underlying operations. We believe it is useful to exclude 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.
Year Ended December 31,
(in thousands)
2023 2024 2025
Net income $ 41,264 $ 67,856 $ 16,246
Add (deduct):
Depreciation and amortization 12,102 14,811 16,800
Interest income, net (2,849) (6,066) (7,422)
Provision (benefit) for income taxes 15,077 23,379 (17,040)
Other:
Share-based compensation and related taxes(1)
(206) - 104,349
Stock amendment expense(2)
- - 32,676
Indirect initial public offering costs 729 718 6,477
Income from wind down of subsidiary (1,394) - -
Other - - 845
Adjusted EBITDA $ 64,723 $ 100,698 $ 152,931
_________________
(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 11-Stockholders' Equity, in the Notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K. 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 11-Stockholders' Equity in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K. 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 $32.7 million for the incremental fair value conveyed through the amended terms. This expense was specific to the amendment of the Founder Preferred Stock and is not expected to recur in future periods.
Results of Consolidated Operations
The following tables set forth our results of operations for the periods presented and express the relationship of certain line items as a percentage of net sales for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.
Year Ended December 31,
($ in thousands)
2024 2025
Consolidated Statements of Operations
Revenues $ 1,796,161 $ 2,501,315
Operating expenses:
Cost of goods sold
1,014,812 1,410,869
Operations, general and administrative
338,508 523,060
Sales and marketing
337,672 495,687
Research and development
17,987 46,293
Total operating expenses
1,708,979 2,475,909
Operating income 87,182 25,406
Stock amendment expense
- (32,676)
Interest income, net 6,066 7,422
Other expense, net
(2,013) (946)
Income (loss) before income taxes
91,235 (794)
Provision (benefit) for income taxes 23,379 (17,040)
Net income $ 67,856 $ 16,246
Year Ended December 31,
(% of revenue) 2024 2025
Revenues
100.0 % 100.0 %
Operating expenses:
Cost of goods sold
56.5 % 56.4 %
Operations, general and administrative
18.8 % 20.9 %
Sales and marketing
18.8 % 19.8 %
Research and development
1.0 % 1.9 %
Total operating expenses
95.1 % 99.0 %
Operating income 4.9 % 1.0 %
Stock amendment expense
0.0 % (1.3 %)
Interest income, net 0.3 % 0.3 %
Other expense, net
(0.1 %) 0.0 %
Income (loss) before income taxes
5.1 % 0.0 %
Provision (benefit) for income taxes 1.3 % (0.7 %)
Net income 3.8 % 0.6 %
Comparison of the years ended December 31, 2024 and 2025
Revenue
Year Ended December 31,
($ in thousands) 2024 2025
$ Change
% Change
Revenues
$ 1,796,161 $ 2,501,315 $ 705,154 39.3 %
The increase in revenue was primarily driven by the growth of consumer product sales attributable to existing brand partners5, which increased from $1,564.4 million to $2,219.0 million, or 41.9%, resulting in an NRR of 124% for the year ended December 31, 2025. New brand partner6revenue increased from $231.8 million to $282.3 million, or 21.8%, for the year ended December 31, 2025. Revenue from Amazon marketplaces increased $636.5 million, or 37.9%, year-over-year and revenue not attributable to Amazon increased $68.7 million, or 59.9%, year-over-year. Collectively, international revenue increased $102.5 million, or 62.8%, year-over-year.
Cost of Goods Sold
Year Ended December 31,
($ in thousands)
2024 2025
$ Change
% Change
Cost of goods sold $ 1,014,812 $ 1,410,869 $ 396,057 39.0 %
The increase in cost of goods sold was primarily driven by an increase in revenue of 39.3%. The increase in cost of goods sold was in line with the increase in revenue on a percentage basis.
Operations, General and Administrative
Year Ended December 31,
($ in thousands) 2024 2025
$ Change
% Change
Operations, general and administrative
$ 338,508 $ 523,060 $ 184,552 54.5 %
The increase in operations, general and administrative expenses was primarily driven by an increase of $102.1 million in fulfillment costs associated with the increase in consumer product sales and the recognition of $52.5 million of stock-based compensation expense upon meeting the performance-based vesting condition for outstanding RSUs in connection
5 Existing brand partners are brand partners that have been with Pattern for more than twelve months since Pattern first generated over $1,000 in revenue attributable to such brand partner.
6New brand partners are all other brand partners that are not existing brand partners.
with our IPO. The remaining increase for the year ended December 31, 2025 was primarily driven by an increase in corporate headcount and rent expense.
Sales and Marketing
Year Ended December 31,
($ in thousands)
2024 2025
$ Change
% Change
Sales and marketing $ 337,672 $ 495,687 $ 158,015 46.8 %
The increase in sales and marketing expenses was primarily driven by an increase in marketplace commissions of $99.3 million, which generally grew in line with revenue on a percentage basis, and the recognition of $24.7 million of stock-based compensation expense upon meeting the performance-based vesting condition for outstanding RSUs in connection with our IPO. Partner marketing and advertising expenses increased $15.3 million year-over-year and the remaining increase of $18.6 million primarily related to additional brand management, sales and marketing, advertising and creative headcount.
Research and Development
Year Ended December 31,
($ in thousands) 2024 2025
$ Change
% Change
Research and development $ 17,987 $ 46,293 $ 28,306 157.4 %
The increase in research and development costs was primarily driven by the recognition of $20.0 million of stock-based compensation expense upon meeting the performance-based vesting condition for outstanding RSUs in connection with our IPO. The remaining increase was driven by the headcount increase of software engineers, data scientists and other technology professionals to drive new platform capabilities and enhanced features.
Stock amendment expense
Year Ended December 31,
($ 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 11-Stockholders' Equity in the Notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K. 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 $32.7 million for the incremental fair value conveyed through the amended terms. This expense was specific to the amendment of the Founder Preferred Stock and is not expected to recur in future periods.
Provision (benefit) for income taxes
Year Ended December 31,
($ in thousands) 2024 2025
$ Change
% Change
Provision (benefit) for income taxes $ 23,379 $ (17,040) $ (40,419) (172.9 %)
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 our 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 December 31, 2025, we had cash and cash equivalents of $289.0 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. A portion of the net proceeds from our IPO were distributed to satisfy the tax withholding and remittance obligations related to the settlement of our outstanding RSUs for which the service-based
vesting condition has been satisfied and for which the liquidity-based vesting conditions was satisfied in connection with our IPO. Payment of taxes withheld upon vesting of RSUs totaled $81.0 million for the year ended December 31, 2025.
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 Part I, Item 1A, Risk Factors included elsewhere in this Annual Report on Form 10-K. 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:
Year Ended December 31,
(in thousands) 2024 2025
Net cash provided by operating activities $ 70,347 $ 99,406
Net cash used in investing activities $ (20,438) $ (39,770)
Net cash provided by (used in) financing activities $ (2,901) $ 53,711
Operating Activities
Net cash provided by operating activities was $99.4 million for the year ended December 31, 2025, which primarily consisted of $16.2 million of net income, $129.7 million of non-cash adjustments, such as stock-based compensation, stock amendment expense, depreciation and amortization expense and deferred income taxes, and an increase in income tax receivables of $16.2 million resulting from current period pre-tax losses and a cash decrease of $30.3 million from the management of the remaining working capital accounts.
Net cash provided by operating activities was $70.3 million for the year ended December 31, 2024, which primarily consisted of $67.9 million of net income, $13.6 million of non-cash adjustments, such as depreciation and amortization expense, and a cash decrease of $11.1 million from the management of working capital.
Investing Activities
Net cash used in investing activities was $39.8 million for the year ended December 31, 2025, primarily related to $20.5 million of 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 and $19.3 million for strategic business acquisitions.
Net cash used in investing activities was $20.4 million for the year ended December 31, 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 $53.7 million for the year ended December 31, 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 $81.0 million for taxes withheld upon the vesting of restricted stock awards triggered by our IPO.
Net cash used in financing activities was $2.9 million for the year ended December 31, 2024 related to the repurchase of 182,008 shares of common stock.
Credit Facility
As of December 31, 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 December 31, 2025, we had no outstanding borrowings under the Credit Facility and we had a $150 million borrowing capacity under the Credit Facility. As of December 31, 2025, we were in compliance with the related financial covenants under the Credit Facility. For additional information, see Note 8-Credit Facilities, in the Notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K.
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.
Operating lease obligations relate to corporate offices and warehouses under non-cancelable operating leases, which expire at various dates through 2037. As of December 31, 2025, operating lease obligations included minimum lease payments of $38.5 million. For additional information related to real estate and operating leases, see Note 7-Operating Leases, in the Notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K.
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 U.S. 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. See Note 2-Summary of Significant Accounting Policies, in the Notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K for a description of our significant accounting policies.
Revenue Recognition
We recognize revenue on a gross basis for consumer product sales generated through domestic and international ecommerce marketplaces. Determining whether to recognize revenue on a gross or net basis requires judgment in evaluating whether we are the principal or agent in contracts with both our customers and brand partners. We have concluded that in the vast majority of our contracts, we are the principal in the transaction and control the product before it is transferred to the customer. We control products when we are responsible for fulfilling the promise to the customer and take responsibility for the acceptability of the goods, assume inventory risk and have discretion in establishing prices on ecommerce marketplaces. We recognize revenue when control of the product passes to the customer, typically at the time of shipment. Revenues are presented net of customer returns.
Inventory Reserve
Our inventories represent finished good products that are available for sale. Inventory is accounted for using the average cost method and is stated at the lower of cost or net realizable value.
We periodically evaluate the composition of our inventory and recognize adjustments when the cost of inventory is not expected to be fully recoverable. The market value of inventory is estimated by considering current and anticipated demand based on historical sales, buying trends and the method of disposal for aged inventory, such as through sales to individual customers, returns to brand partners, liquidations and expected recoverable values of each disposition category.
Stock Based Compensation
We record compensation expense in connection with all stock-based awards based on the grant date fair value of the awards. Our stock-based awards granted prior to our IPO generally have both a service-based and performance-based vesting condition with expense recognized using the accelerated method. No stock-based compensation expense was recognized for these awards prior to our IPO as the performance condition was determined as not probable of being met. Our stock-based awards granted following our IPO generally have only a service-based vesting condition with expense recognized ratably over the service period. We have elected to account for forfeitures of awards as they occur. See Note 12-Stock-Based Compensation, in the Notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K.
Income Taxes
Estimates of deferred income taxes reflect management's assessment of actual future taxes to be paid on items reflected in the consolidated financial statements, giving consideration to both timing and the probability of realization. Actual income taxes could vary from these estimates due to future changes in income tax law, state income tax apportionment or the outcome of any review of our tax returns by the IRS or other government entities, as well as actual operating results that may vary significantly from anticipated results. For additional information on deferred tax assets and liabilities, see Note 13-Provision for Income Taxes, in the Notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements is included in Note 2-Summary of Significant Accounting Policies, in the Notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K.
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