PTRN

At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Hamish Chung, Vice President of Finance. Please go ahead.

Thank you, operator. Good afternoon, and thank you for joining Pattern's earnings call for the first quarter, 2026. Before we begin, I'd like to remind everyone that today's discussion may contain forward-looking statements based on our current expectations, assumptions, and forecasts about future events. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please refer to our latest filings with the Securities and Exchange Commission for more information on these risks and uncertainties. We may also refer to certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in our earnings release. We'll focus our remarks today on the key highlights and drivers. Additional detail is available in the earnings release.

Joining us today are Dave Wright, our Co-Founder and Chief Executive Officer, and Jason Beesley, our Chief Financial Officer. Today's earnings is being webcast, and a replay will be available on our investor relations website following the call. Following our prepared remarks, we will open the call to questions. I'll now turn the call over to our CEO, Dave Wright. Dave, please go ahead.

Thanks, Hamish, and good afternoon, everyone. We delivered another record quarter to start 2026. In Q1, revenue grew 43% year-over-year to $774 million. Adjusted EBITDA was $54 million, up 59% year-over-year. Before Jason walks through the financials, four metrics stand out to me. First, net revenue retention. We've said previously that NRR is one of the clearest indicators of the health and durability of our model. In Q1, NRR reached another record at 127%, up from 115% last year, reflecting the impact of optimization, marketplace expansion, and deeper brand relationships. Second, international growth. International revenue increased 101% year-over-year. We are beginning to convert international scale into improved efficiency and profitability, and we expect that to continue. Third, non-Amazon growth.

Non-Amazon revenue grew 119% year-over-year, with strengths across TikTok Shop, Walmart, and Coupang. Fourth, our other monetization strategies grew 173% year-over-year, reflecting continued momentum beyond our core marketplace offering. To understand the drivers behind these results, it's helpful to step back and look at the platform and data that power them. E-commerce performance is driven by 4 variables: traffic, conversion, price, and availability. The same e-commerce equation we've referenced previously. These levers are highly interdependent and continuously shifting as changes in one area, like price or availability, dynamically influence performance in others, like conversion or traffic. Optimizing them together is complex. With scale across brands, data, geographies, logistics, technology, and AI, that complexity becomes an advantage for us. Our platform is designed to operate across these variables simultaneously, marketplaces, geographies, and channels.

That scale allows us to improve outcomes for our brand partners while lowering costs across fulfillment, ad spend, and operations in ways that are difficult for a single brand to replicate. In our primary monetization model, we purchase inventory, which aligns our incentives with our brand partner's objective to grow consumer sales. We win when they win. The movement of physical goods under this model also creates a durable and competitive moat as AI continues to evolve. AI makes us more efficient rather than commoditizing what we do for brands. In simple terms, we break down a complex system into controllable levers at scale. That becomes both a growth driver and a cost advantage for our brand partners. Across brands, we see a consistent Pattern. When these levers are aligned, they can unlock a step function improvement in performance.

For example, when a premium haircare brand started with us, in-stock was 79.6%. Since then, we improved in-stock to 96.1%, increased conversion 23%, which resulted in revenue growth of more than 15x. For a global tools brand, we launched their products across 25 marketplaces in one year, generating millions in international revenue and selling more than 100,000 units. These outcomes are the result of coordinated optimization across availability, content, pricing, logistics, and marketplace execution. Once the foundation is in place, we expand where demand is shifting across geographies, marketplaces, social commerce, and AI-driven discovery. That is the brand journey on our platform, and it continues to evolve. Two areas changing quickly for brands are social commerce and AI-driven discovery. We were recently named TikTok Shop's strategic partner of the year, reflecting our leadership on the platform.

Over the last 12 months, we've launched more than 100 brands on TikTok Shop, activated over 365,000 creators, and grown our social commerce business triple digits again in Q1. One of the most competitive categories on TikTok Shop is beauty. Over the last few months, we've served as a launch partner for some of the largest beauty brands in the world. Social commerce has become a meaningful contributor for Pattern and the brands we work with. It has become an important entry point. As these brands grow with us, the opportunity to expand across marketplaces, geographies, and channels grows with them. LLMs are increasingly used at the start of product research. How consumers find, compare, and evaluate products before reaching a marketplace. Both channels operate on intent. Social commerce captures it through creators and content.

LLMs surface it through semantic understanding, interpreting what a customer means, not just what they typed. Pattern is built to win in both. While full agentic transactions are developing more gradually than we initially expected, their influence on the customer journey is already meaningful. There are varying ranges and some debate on what percentage of purchases are influenced by LLMs, but I don't think there's much debate on the fact that it's significant and growing. We approach this from a data-first perspective. We have deep bottom of funnel search and conversion data across categories, which allows us to identify where brands have the highest probability of winning in LLM-driven discovery. We also have a strong understanding of consumer personas and intent, which we use to map how products should be positioned in these LLM environments.

Taken together, this allows us to evaluate a brand's current presence versus its potential across LLM-driven surfaces and to optimize content positioning and availability accordingly. As agentic shopping develops, brand execution becomes even more important. Buyers' agents are likely to evaluate not only product relevance, but also whether a brand consistently delivers on what it promises, availability, delivery speed, customer service, returns, and overall brand experience. Those execution signals will have significant staying power in an LLM world, which will have meaningful influence on how products are surfaced and selected over time. We are laser-focused on these key metrics on behalf of our brand partners to ensure they perform well against these metrics for years to come. We are excited about the opportunities ahead and believe Pattern is well-positioned as commerce continues to evolve. With that, I'll turn it over to Jason.

Thanks, Dave, and thank you to everyone for joining us today. We entered this year with a high degree of confidence in our business. Q1 validated that. Revenue grew 43% year-over-year to $774 million, driven by continued new brand partner revenue growth and healthy expansion within our existing brand partners. What's particularly encouraging is that the strength was broad-based across many brand partners, geographies, and marketplaces. We're just starting the diversification journey. The growth we're seeing further validates the opportunity in front of us. This strong performance gives us confidence to raise our full-year outlook. I'll talk more about our biggest portion of revenue and biggest growth area, existing brand partner revenue. We believe the best measure of this is our NRR, which was 127% in Q1 compared to 115% last year.

We have three distinct drivers of that growth. First, technology-driven optimization. This remains the foundation of our growth formula and primary driver of our growth, representing approximately 3/4 of growth in Q1. Our unified AI native intelligence layer monitors and acts across every marketplace we operate in, driving stronger conversion, traffic, and availability. Because it operates across multiple variables simultaneously, the impact compounds. A fun example of how these optimizations work together are improvements in our supply chain or availability tech that continues to improve the proportion of same-day and one-day delivery times, which mathematically increases our conversion. Second, new marketplaces and geographies. In Q1, non-Amazon revenue grew 119%. Three regions we operated in grew over 100% in the quarter, and we had another quarter of triple-digit growth in several marketplaces, including TikTok Shop, Walmart, and Coupang. Third, product depth.

We also grow by expanding the product selection from our brand partners, either by bringing on more product lines or launching new products on existing marketplaces. We give brands visibility into consumer intent and category white space to help them innovate faster. These opportunities to expand product selection come every year but can vary in timing across quarters. Turning to operating expenses and profitability. Adjusted EBITDA was $54 million in Q1, representing 59% growth year-over-year, primarily driven by revenue growth, as well as some leverage in our sales, marketing, and operations costs, despite increased R&D spend. Excluding stock-based compensation, R&D was $10.1 million, up 77% year-over-year. We are doubling down on our tech spend, which includes AI token usage, and continue to expect R&D growth to outpace revenue growth. However, as our Q1 results indicate, we're doing so responsibly.

This spend, as well as our spend in sales and marketing and the startup costs related to our new East Coast facility, will create some timing variations when looking at quarterly adjusted EBITDA margin. For example, we will expense marketing spend related to our May Accelerate conference in the second quarter. Our variable cost components, cost of goods sold, marketplace commissions, and fulfillment grew slightly slower than revenue. This was primarily driven by revenue mix across various products and other monetization strategies. We generated $124 million of operating cash flow for the trailing 12 month period and $99 million of free cash flow. We ended Q1 with $344 million in cash and cash equivalents, no outstanding debt, and $150 million of borrowing capacity available under our revolving credit facility.

Before we turn to guidance, I want to briefly address the macro environment and what we're seeing. While the Middle East is an immaterial portion of our revenue today, geopolitical tensions have introduced volatility into global logistics and energy costs, as well as uncertainty around consumer sentiment. In response to increased energy costs, various marketplaces implemented fuel surcharges for sellers during the quarter. Generally, our agreements with brand partners allow us to pass through such cost changes for marketplaces, including fulfillment costs, providing a structural buffer against cost pressure. On the revenue side, we are not currently seeing any indication of meaningful consumer weakness in the categories or markets in which we operate. We believe our portfolio approach and category diversification leaves us well positioned to weather macro headwinds, including our position in non-discretionary categories, which we believe are less sensitive to potential changes in consumer spending.

We will continue to monitor developments across all regions we operate in, and we believe our Q1 results demonstrate our relative resilience. Turning to our outlook, we had an exceptional start to 2026 and are seeing strong and consistent momentum heading into the rest of the year. We are meaningfully increasing our full year outlook. We now expect revenue of approximately $3.3 billion, up 32% year-over-year, an increase from our prior guidance, which implied approximately 26% growth. We are also raising our full year adjusted EBITDA outlook to approximately $200 million, up 31% year-over-year at the midpoint, an increase from our prior guidance, which implied approximately 18% growth. Consistent with the guidance framework we laid out in March, there are a few things to keep in mind as you think about the shape of the year.

First, as a reminder, we will face stronger comps in the back half of the year as we lap the record growth rates, and therefore expect year-over-year growth to moderate in Q3 and Q4. Second, we are maintaining our middle-of-the-road approach on new brand partner revenue assumptions and new product expansions, given the inherent variability in these factors. Third, we will continue to invest in R&D ahead of revenue growth, consistent with our strategy of strengthening our technology moat and expanding our AI capabilities. We are extremely pleased with our NRR performance of 127%, and this updated outlook will elevate the ending point of NRR this year to approximately 119%, above our long-term target of 115%.

For the second quarter, we expect revenue in the range of $810 million-$820 million, representing 35%-37% growth year-over-year. We expect Q2 adjusted EBITDA in the range of $45 million-$46 million, up 30%-33% year-over-year. We expect to see incremental costs in the quarter related to Accelerate, our annual global e-commerce summit, our continued investment in R&D, and startup costs related to our East Coast facility. We're confident that these short-term investments will drive continued growth in the future. We are extremely pleased with the momentum we've seen so far this year. We believe our results and outlook reflect the durable compounding nature of this business. We continue to operate from a position of strength, supported by a healthy balance sheet and robust consumer demand within our categories. We remain fully committed to delivering long-term value to our shareholders. With that, I'll turn it back to Dave before we open the call for questions.

Thanks, Jason. Q1 was a strong start to the year and a quarter that continues to strengthen the foundation of our model. NRR at a record 127%, international doubling, non-Amazon up 119%, and our agentic investments are delivering. We enter Q2 with a pipeline and a platform we feel great about. E-commerce is being built around AI, how products are discovered, how decisions are made, how transactions are completed. Pattern is built to operate at the center of that stage. We remain focused on optimizing the e-commerce equation, removing friction for brands, and delivering measurable outcomes at scale. Thank you for your continued support. We'll now open the call for questions.

Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ralph Schackart of William Blair. Your line is now open.

Good afternoon. Thanks for taking the question. You know, maybe just kind of highlight, if you can, what drove the exceptionally strong performance in the quarter. Is it just a bunch of factors coming together, but the performance is really strong? Any color you could add there. And then, maybe on the non-Amazon channel, that growth was obviously very strong. Maybe talk about more specifically what's driving that. You mentioned some channel partners in the script, but just more colors around that and maybe some of the initiatives you have there to keep driving that growth further would be great. Thank you.

Thanks, Ralph. Thanks for the question. Q1 was a great performance. To give you a sense of what drove it was really hitting on all cylinders on the many levers we have for growth. I mentioned some of those in the prepared remarks, but with an existing brand, we can grow them with better tech, more marketplaces, more products, and then we're bringing on new brand partners all the time. You also mentioned there the non-Amazon marketplace growth. That hit in a really nice way as well. In terms of marketplaces, we called out some of the ones we already had in the prepared remarks, Coupang, TikTok, Walmart, specifically. All of those worked well. I think the biggest takeaway for me is this business model has a lot of ways to help brands grow across multiple vectors. When we hit on all of them, that gives us confidence to raise the outlook, and that's what we did, with the 32% growth for the full year.

Yeah, Ralph.

Thanks. Thanks, Jason.

I'll do a quick follow-on. I mean, it's just a tremendous business, quite frankly. There's very few businesses that have a pipeline of, you know, what we measure as $505 billion and growing. Now, of course, you know, that's a long-term pipeline. We're not making any immediate statements there. If we continue to execute like I know we're capable of, I think you just see measured improvement quarter-over-quarter, better execution, broader reach across geographies, across marketplaces. Then the technology is moving at a speed that we, of course, I never anticipated two years ago. You know, the roadmap and the deliverables that we're able to finish, sometimes we're able to complete things that used to take an entire sprint in hours. It's just acceleration on all levels. Much of it is just driven in advancements in technology, but then we're just positioned well, and we have the infrastructure and scale to take advantage of them.

That's great. Thanks, Dave. Thanks, Jason.

One moment for our next question. Our next question comes from the line of Eric Sheridan of Goldman Sachs. Your line is now open.

Thanks so much for taking the question. Maybe building on Ralph's question and asking it a little bit differently. When you look at the exit velocity of the business in Q1 and the backlog of both partners and platforms that you're discussing the business with longer term, how should we think about industry vertical diversification deeper into 2026 and platform diversification as we exit 2026 as well, how some of those could be drivers of the business or even how mix might change? Thanks so much.

We get a lot of questions on category. Internally, category diversification is not a primary focus. We're simply focused on the brands. The brands that would like our help, worldwide, we'll jump in. You know, when you think of the technology, of course, we like product sets that are good for e-com, but that set is widening quickly. You know, it used to be that, you know, there were some things that were just completely off-limits, like having, you know, your Diet Coke delivered to your doorstep. Many of those things are coming into focus for us. You know, every time we take another look at the pipeline, we can just see the categories and product sets expanding.

In terms of marketplaces, just to finish on that question there, Eric, you know, we are seeing our non-Amazon platform growth at very much larger rates than our Amazon growth. The good news is the Amazon growth is still very healthy at 38% in Q1. The non-Amazon growth you saw is over 100%. That will continue to diversify us as we go over time. We're pretty comfortable that we've got the right initiatives in place to continue that journey, and there's a lot of white space for brands to grow more, you know, everywhere across many marketplaces. We're pretty much just long term, our view is that however the consumers are spending online is what our revenue mix should look like long term.

One moment for our next question. Our next question comes from the line of Doug Anmuth of JPMorgan Chase. Your line is now open.

Great. Thanks for taking the questions. It's Brian Smiley on for Doug. You know, obviously good to see the continued supply chain efficiencies. I guess, Dave and Jason, can you just talk about how much more room there is to optimize inbound and outbound fulfillment? I think specifically, you know, Dave, you had mentioned same day and one-day delivery capturing a greater share of overall units. Could you just talk to the velocity of delivery speeds improving across the platform? I guess more broadly, how that could change with Amazon expanding more multi-channel fulfillment more broadly. Thank you.

Yeah. I love the question. Very insightful and something we focus on. So in terms of numbers, in Q1, we run at about, I think 37% of our, oh, actually, excuse me, 57% of our total clicks get a same day delivery, same or one day delivery. That's up from, you know, around 52%. We can see and the conversion rate in that group ranges at around 18%, versus if you go to two day or 2+, it comes in at around, you know, 9%. Of course, the closer you can get to the consumer, the better your conversion rate is. It's a dramatic focus for us.

You know, we're getting better coverage there, and at the same time, we're lowering days of inventory on hand, which was 62 this quarter, an exceptional quarter,-13 days from the same quarter last year. We're continuing to see just great progress across the logistics, which simply can't be done without scale. The bigger we get, the more opportunity we have to continually tune fine, just the fine pieces of that equation.

Maybe just to add briefly to that, we do see more room for optimization in the future. That's why we're launching our East Coast facility, which is going to build on the technology advances we had with our Las Vegas facility. We're really excited about how much even more efficient that'll be for ourselves and particularly for our brand partners.

Great. Thank you both.

One moment for our next question. Our next question comes from the line of Bernard McTernan of Needham & Company. Your line is now open.

Great. Thanks for taking the question. With the updated guidance range, I mean, you're gonna be pretty close to knocking on the door of doubling your revenue base from 2024-2026. What changed about the opportunity set in front of you with scale or any additional opportunities that you have with this kinda step function and scale within the business?

Yeah. There's some fun, some fun milestones coming up based on this new guidance. I'll talk about revenue and maybe just a little bit on adjusted EBITDA as well to get to your scale point. Yeah, 84% growth, if you take 2024 versus 2026 guidance, pretty impressive on the revenue side. It is really the factors that we talked about, taking brands to more marketplaces, more geographies. Particularly as of recently, Dave mentioned it briefly, the use of agentic tools to optimize the e-commerce equation is going really well for us and for our brand partners. On the EBITDA side, this is where the scale benefit comes in. Those same data points, 2024, we made $101 million in EBITDA, and our latest guidance has us at $200 million in EBITDA.

Basically double off of 84% revenue growth over that timeframe. That's really where you can see when you swoop out, you can see the benefits of the scale that comes as we keep growing. We're excited about both numbers, top and bottom line, of course.

Thanks, Jason.

There's very few places where you have a TAM the size of ours, which is largely all digital goods sold worldwide. In a way that's not much of an exaggeration. If we can perform every day we come into work and we say, "Okay, how do we make sure that the brand experience is amazing, that their revenue grows?" At a certain point of scale, we believe we can do it cheaper than a brand can do it themselves because of the combined logistics, the scale, you know, the difficulty, you know, the implementation, execution across global markets. If we can provide a service that is both better and less expensive with a TAM that is tremendous, I think we'll continue to surprise people on the growth for many years to come.

One moment for our next question. Our next question comes from the line of Justin Patterson of KeyBanc.

Great. Thank you very much, and good afternoon. Dave, I was hoping you could dive into AI and image generation in more detail. Obviously, the models continue to make very meaningful progress, even versus just a couple of months ago. I'm curious if we're now getting to a level where brands are more receptive to you toward working around just creative and hyper-personalization, and how you think that might help just aid international growth, where it seems like that could be pretty meaningful for localization. Thank you.

Yeah. Yeah. Great, great question. I mean, we continue to be just surprised at both what the models can do and what our teams are doing on that front. Conversion overall was up from 17% to 19% year on year, which is pretty phenomenal. We've introduced and talked about what we refer to as The Portal, which is where we do It's some hardware that we created where we'll take a product, and we will take It's almost like an AI photo studio where we will take imagery with the idea being we'll train a LoRA model, so a low-rank adaptation model.

Once we're done with, say, 50-80 images, we will have enough reference data to take that product globally in any setting, localize it, personalize it, and we're deploying those in our warehouses. At a fraction of cost, we can have AI-generated product photography that I believe is unmatched. I haven't heard or know of any place that could do that at the same level of quality. We have quite a bit of patents and interesting intellectual property on how we do that. It is an incredibly large opportunity for our brands worldwide. Great question.

Our next question comes from the line of John Colantuoni of Jefferies.

Hi, this is Chris on for John. I appreciate you taking the question. Can you double-click on how new brand partners performed in the quarter? I'm curious to hear more about the pace of new partner acquisition and specifically what you're seeing in the pipeline for the rest of the year. Thank you.

Thanks for the question. Yeah. New brand partner pipeline looks good. As Dave mentioned, we have an opportunity list of $505 billion in GMV that we've identified using our data set of brands that can specifically benefit from working from Pattern with identified scorecard e-commerce metrics that we can improve across the equation for them. In Q1, we had similar momentum to last year, kept up that same cycle. We continue to invest in sales and marketing resources to continue to drive that. I think when we talk about new brand partner revenue, it's important to remember that's just the first 12 months of our relationship with the brand, and there can be variation in any quarter versus the prior years first 12 months.

The vast majority of those brands stay with us and go into existing brand partner revenue, and then benefit from that NRR on average of 127%. That's why we like the investment in the sales and marketing. We like the progress that we're making in the pipeline, 'cause not only does it deliver revenue in the first year, but it continues for many years thereafter.

One moment for our next question. Our next question comes from the line of David Lustberg of BMO Financial Group.

Hi, can you hear me?

Yes.

Okay, great. It's Brian [audio distortion]. Thanks for the questions. On the success you're seeing off the Amazon Marketplace, can you help us understand how much is from international brands leaning in harder versus brands just starting international presence? Then, more broadly, you called out broad-based strength across existing brand partners. Maybe some additional color on the upside, you know, with different category demand, new product launches, market expansion, existing partner share gains, pricing, et cetera. Can you just help us parse apart that broad-based strength? Thanks.

Yeah. Yeah. You know, as you mentioned, the strength is quite broad. In early years for Pattern, it was almost entirely because our teams, the sales teams were in the U.S., the near entirety set of brands we found and started working with were U.S. brands. Then probably four or five years ago, we started to ramp teams that would sit internationally. We began a pretty Last year, we started an effort called East to West, we refer to it internally, which is we have teams that sit in the APAC regions and work with some phenomenal product manufacturers that deliver, you know, a large majority of the goods to U.S. consumers. We're helping them execute better.

As a matter of fact, that was our largest deal signed in 2025 last year came from that East to West effort. I think we're continuing now to get brands that are both, you know, U.S. headquartered, and now they're coming from all over the world.