Pattern Group (PTRN) Q2 2026 Earnings Call Transcript

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DATE

Wednesday, Aug. 5, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• VP of Finance - Hamish Chung
• Cofounder and Chief Executive Officer - David Wright
• Chief Financial Officer - Jason Beesley

TAKEAWAYS

• Revenue -- $877 million, representing 47% growth year over year driven by record performance in international and non-Amazon channels.
• Adjusted EBITDA -- $54 million, a 54% increase year over year reflecting the fourth consecutive quarter of adjusted EBITDA growth outpacing revenue.
• Net Revenue Retention (NRR) -- 129%, up from 118% in the same quarter last year and exceeding the long-term target of 115%.
• International Revenue -- $110 million, an 87% increase year over year and the first quarter in company history to exceed $100 million.
• Non-Amazon Revenue -- 93% growth year over year with significant volume across Tmall, TikTok Shop, Walmart, and Coupang.
• SaaS Logistics and Other Revenue -- $17 million, representing 123% growth year over year as the company expands monetization strategies beyond core marketplace sales.
• Full-Year Revenue Guidance -- $3.4 billion to $3.5 billion, representing an increase from previous estimates and 37% to 38% growth year over year.
• Full-Year Adjusted EBITDA Guidance -- $211 million to $213 million, representing approximately 38% to 40% growth year over year.
• Q3 Revenue Guidance -- $840 million to $860 million, representing 31% to 34% growth year over year.
• Q3 Adjusted EBITDA Guidance -- $51 million to $53 million, representing 25% to 29% growth year over year.
• Operating Cash Flow (TTM) -- $136 million, a 76% increase year over year.
• Free Cash Flow (TTM) -- $106 million, representing 92% growth year over year driven by improved inventory turns and stock-based compensation tax benefits.
• Cash and Equivalents -- $346 million as of June 30, with zero outstanding debt and $150 million in borrowing capacity.
• Data Scale -- 91 trillion data points, representing a 38% increase year to date across 13 years of execution.
• R&D Expense -- $12 million, an 89% increase excluding stock-based compensation, reflecting continued investment in data infrastructure and AI.
• Patent Portfolio -- 44 patents issued or pending, including a new U.S. patent awarded in the second quarter for True ROAS.
• Walmart Performance -- 3.4-fold revenue growth over the last two years, reflecting increased execution on the platform.
• Non-Amazon Revenue Share -- 9% of total revenue, up from 7% in the prior-year period.
• Promotional Event Shift -- 4 percentage points of growth shifted from the third quarter to the second quarter due to the timing of Amazon Prime Day and Walmart Deals.
• Global Return Rates -- 19.3% of goods globally are returned, a complex problem the company aims to solve through its commerce infrastructure as a service.
• Asia Marketplace Expansion -- 20 marketplaces currently active across China, Korea, Malaysia, Japan, and Singapore.

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RISKS

• Beesley warned that "year-over-year comps get harder in the second half" as the company laps record growth rates from the third and fourth quarters of the prior year.
• Beesley stated there is "seasonal pressure on EBITDA margin percentage" in the fourth quarter due to increased costs for holiday storage, logistics, and promotional funding.

SUMMARY

Management reported record second-quarter performance and increased the full-year outlook based on momentum in international markets and non-Amazon channels. The company highlighted the launch of Pattern Intelligence and its first patent for True ROAS as key technology milestones. The financial strategy focuses on adjusted EBITDA growth outpacing revenue, supported by a data moat accumulated across 13 years of execution. Leadership emphasized the transition toward agentic commerce and the expansion of fulfillment infrastructure to support multi-channel brand outcomes.

• CEO Wright stated, "The data gives us higher signal density, The scale gives us lower cost."
• CEO Wright noted that Pattern Intelligence "runs a sensor actor framework across those relationships and writes governed actions back to the marketplace."
• The company was named the only non-China based gold star service provider for the health category by Tmall.
• Brand partners can now advertise in ChatGPT via ROI Hunter, which the company acquired in December.
• A new fulfillment facility in Bethlehem, Pennsylvania, is now operational and reportedly increasing throughput twofold through hardware and software innovations.
• Management noted that social commerce, particularly TikTok Shop, has become a primary channel for new brand acquisition in beauty and fashion.
• CEO Wright reported that developer productivity has doubled year to date as the company adopts software factory models to accelerate product velocity.

INDUSTRY GLOSSARY

• Adjusted EBITDA: A non-GAAP financial metric that excludes interest, taxes, depreciation, amortization, and stock-based compensation to assess core operating performance.
• Agentic Commerce: AI-driven ecommerce where autonomous agents or models perform transactions and fulfill consumer intent.
• NRR (Net Revenue Retention): A metric measuring the year-over-year revenue growth from existing brand partners.
• Ontology: A robust data framework that maps relationships between entities like traffic, inventory, and conversion to make data ready for AI reasoning.
• PI (Pattern Intelligence): The company's proprietary execution layer that automates marketplace actions for brands.
• True ROAS: A patented methodology that isolates the actual return on ad sales by accounting for organic conditions and competitive dynamics.
• TTM: Trailing 12 months.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Pattern Second Quarter 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press *1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press *1 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, VP of Finance. Please go ahead.

Hamish Chung: Thank you, operator. Good afternoon, and thank you for joining Pattern's earnings call for the second quarter 2026. Before we begin, I would 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 will focus our remarks today on the key highlights and drivers, Additional detail is available in the earnings release. Joining us today are David Wright, our cofounder 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 will now turn the call over to our CEO, David Wright. David, please go ahead.

David Wright: Thank you, Hamish, and good afternoon, everyone. We delivered another record quarter. In Q2, revenue grew 47% year over year to 877 million. Adjusted EBITDA grew faster still, up 54% to 54 million. That is the fourth consecutive quarter of adjusted EBITDA outpacing revenue. Before Jason takes you through the details, let me start with net revenue retention. Then I will discuss the mix of that revenue. NRR is how we measure how well the machine is working. In Q2, NRR reached another record at 129%. Up from 127% last quarter, 118% a year ago. Against the long term target of 115%, those are pretty extraordinary numbers. We hold ourselves to NRR because it measures what matters most.

The outcomes we deliver for our brands, When our brands win, we win. They stay with us. They expand with us. And that record is the most persuasive thing our teams bring to the next brand considering pattern. Strong partner results create a reinforcing cycle, Rising revenue across new marketplaces and geographies generates both data and logistics scale. The data gives us higher signal density, The scale gives us lower cost. And faster transit times across the network. All of it starts and ends with being obsessed with our brands' outcomes. Inside the 47% revenue growth, 3 strategic highlights are worth calling out. First, international.

International revenue grew 87% year over year to 110 million, our first quarter ever above 100 million. Second, non Amazon. Non Amazon revenue grew 93% year over year with strength across Tmall, TikTok shop, Walmart, and Coupon. And third, SaaS logistics and other. That line grew 123% year over year to 17 million. It is still a small share of revenue, but it deepens what we do for each brand and gives us optionality as a business. In short, our model is working. We delivered another quarter of record results and we are again raising our outlook for the full year. Jason will walk you through the specifics. Since day 1, our objective has been the same.

Achieve exceptional brand outcomes by optimizing the 4 levers that drive commerce. Traffic, conversion, price, and availability. What makes that repeatable is an ontology, and we believe ours is 1 of the most robust in ecommerce. The AI models will keep improving, The ontology keeps compounding regardless. Our ontology has 3 layers. And 44 patents issued or pending across them. Number 1, the data layer. 91 trillion data points accumulated across 13 years of execution in hundreds of brands, geographies, and marketplaces. Second, the semantic layer. The entities and the map relationships between them. traffic against inventory, competitive position against conversion, This is what makes the data reasoning ready rather than merely stored. And third, the execution layer.

Pattern Intelligence or PI, which we launched in May, PI runs a sensor actor framework across those relationships and writes governed actions back to the marketplace. Millions a day. On behalf of our brand partners. With PI's release, brand partners also have interactive visibility into that execution. They can review, approve, and modify inputs. Measurement runs in the execution layer. As part of our advancement in that layer, in Q2, we were awarded a US patent covering True ROAS. Our true return on ad sales methodology. True ROAS isolates what an ad actually generated net of organic conditions, competitive dynamics, and long term incrementality, so actions can be graded on incrementality not just attribution.

True ROAS pairs with Destiny, our patented ad tech platform, measurement feeds allocation, and allocation drives durable organic ranking. In April, we were named TikTok shops strategic partner of the year. More than 100 of our brand partners now sell on TikTok shop. And that number is growing every quarter. Social commerce has become a meaningful channel for new brand partner acquisition particularly in beauty and fashion. As of last week, through ROI Hunter, which we acquired last December, our brand partners can advertise in ChatGPT. From a single platform, they can reach consumers across Meta, Google, Snap, TikTok, And now to ChatGPT. Now I would Like To Give You A Few Examples Of Brand Successes.

We Accelerated A US based prestige skincare brand from 5 million to 15 million in revenue over 3 years. These results were driven by a combination of improvements including increasing conversion from 9% to 13%, a 36% lift. Improving in stock from 91% to 99%, and subscribe and save revenue doubled. And 1 more example. A UK based sports nutrition brand started with us on a single marketplace in Australia. Today, we manage their ecommerce business across 13 countries, including their flagship market in The UK. that is a pattern we see consistently Brands start with us in 1 market and expand globally, as their confidence in pattern grows.

Zooming out to our long term strategic positioning, we are tracking the shift from discovery to transaction within LLMs closely. And we are making 2 long term investments to position Pattern to win in both. The first is commerce infrastructure as a service. Every agentic transaction has to be fulfilled. With real time inventory forward and reverse logistics, and customer interactions. We operate that layer today, and we are extending it to Agentic shopping. The second is our plan to continue expanding our brand, Agentic commerce acceleration capabilities. Which optimize brands for LLM surfaces and carries that same infrastructure underneath. Pattern is building for both. The intelligence to win on LLM surfaces and the infrastructure to meet customer expectations.

Before I hand it over to Jason, I will close with the point I care about most. Ecommerce is a team sport. As a matter of fact, all businesses are a team sport. Everything you heard today came from an exceptional team at Pattern. Culture and execution are the same thing. In the last few months, US News and World Report named Pattern 1 of the best companies to work for in 2026. We also ranked number 9 on America's top 100 most loved work places of 202 thousand. Our second year in the top 100. I am proud of what we are building and even more proud of the team building it. Jason, over to you.

Jason Beesley: Thanks, David, and good afternoon, everyone. Q2 was another record quarter for Pattern on many fronts. We continue to see broad based strength across brand partners, geographies, and marketplaces and delivered 877 million of revenue up 47% year over year. Adjusted EBITDA grew 54%, outpacing revenue growth for the fourth consecutive quarter. Our performance gives us confidence to increase our full year outlook for both revenue and adjusted EBITDA. Regarding Q2 growth, I will start with our biggest revenue driver, existing brand partner revenue. We are excited to report that we delivered another record NRR of 129% for our brand partners. Up from 127% in Q1 and 118% a year ago. We have 3 distinct drivers of that growth.

Technology driven optimization remains the foundation of our growth formula and primary driver. Our unified AI native intelligence layer monitors and acts across the marketplaces we operate in, driving stronger conversion traffic, and availability. Because it operates across multiple variables simultaneously, the impact compounds. We also grow by expanding marketplaces and geographies. Embedded in our international revenue growth of 87% to a $110 million in the second quarter is a milestone worth noting. This is our first quarter with international revenue above $100 million. 1 highlight across our international regions is Asia.

We entered our first Korean marketplace in 2019, and over the past 7 years, we have grown and now operate in 20 marketplaces across China, Hong Kong, Korea, Malaysia, Japan, and Singapore. Not only are we building on our success in existing markets, we are expanding into new markets and continuing to accelerate our growth. On top of our financial success in the region, we also established ourselves as a key partner for domestic marketplaces. For example, Pattern was the only non China based company named a gold star service provider for the health category by Tmall. Finally, expanding product selection from our brand partners, introducing more product lines and new products on existing marketplaces is another growth driver.

These opportunities come every year and can vary in timing across quarters. We are pleased with revenue growth related to new brand partners across many categories, which tracked at a similar pace to last year. We also grew SaaS logistics and other monetization revenue up 123% in Q2 to 17 million. Turning to operating expenses and profitability. Adjusted EBITDA $54 million in Q2, up 54% year over year. Of note, we realized costs in the quarter related to Accelerate, our annual global ecommerce summit, startup costs related to our East Coast facility, and increased R&D investment. Our East Coast fulfillment facility is now operational and early throughput is in line with our goals.

Excluding stock based compensation and related taxes, R&D expense was $12 million, up 89% year over year. We continue to invest ahead of revenue in our data infrastructure, PI expansion, and AI capabilities. While improving cost leverage in other areas. Variable cost components, cost of goods sold, marketplace commissions, and fulfillment, grew slightly slower than revenue. Consistent with Q1. This was primarily driven by revenue mix across various products and other monetization strategies. Turning to cash flow. For the trailing 12 months ended June 30, generated $136 million of operating cash flow, up 76% year over year, and $106 million of free cash flow, up 92% year over year.

This was driven by our operating results, improved inventory turns, and tax related benefits from the stock based compensation expenses recognized at last year's IPO. We ended Q2 with $346 million in cash and cash equivalents, no outstanding debt and $150 million of borrowing capacity. Our balance sheet continues to be a strategic asset. Turning to our outlook. The outperformance in Q2 was broad based. Existing brand partner revenue acceleration, new brand partner revenue growth, strong non Amazon international results, and overall healthy execution across the platform. Our recent performance and the momentum we are carrying into the back half gives us confidence to raise our full year outlook.

We now expect full year revenue in the range of $3.4 billion to $3.5 billion representing 37% to 38% growth year over year. As I mentioned previously, our year over year comps get harder in the second half, We will lap the record growth rates from last year in Q3 and Q4. And we expect year over year revenue growth to moderate to the 30% plus range. Which is reflected in our outlook. We are also raising our full year adjusted EBITDA outlook to approximately $211 million to $213 million representing approximately 38% to 40% growth year over year.

We are continuing to grow the company and balance and we expect full year adjusted EBITDA margin accretion even as we continue to accelerate our R&D investment. We are extremely pleased with our NRR performance of 129% and our updated outlook implies that the ending point of NRR this year will be 123% to 124%. Above our long term target of 115%. We continue to expect NRR to slowly moderate over the next few quarters based on the tougher comparables I already mentioned. When looking at Q3, it is important to note that Q2 benefited from large marketplace promotional events as Amazon Prime Day, Walmart deals, and Target Circle, moving from the third quarter into the second quarter this year.

This represented approximately 4 points of growth shift from Q3 to Q2 affecting both revenue and adjusted EBITDA. For the third quarter, we expect revenue in the range of $840 million to $860 million representing approximately 31% to 34% growth year over year. We expect Q3 adjusted EBITDA in the range of $51 to $53 million growing 25% to 29% year over year. In closing, this is our fourth quarter reporting earnings as a public company. And in that time, we delivered 4 consecutive quarters of 40-plus percent revenue growth with 50-plus percent adjusted EBITDA growth. Over that same last 12-month time period, our free cash flow has grown 92%.

We are delivering significant revenue growth outpaced by adjusted EBITDA and free cash flow growth. In a market with significant runway remaining. We believe this is a formula for long term value creation and puts us in a unique group of companies that grow sustainably at scale. At the end of the day, what matters most is that we are delivering growth for our brand partners. NRR at 129% reflects that. With that, I will turn it back to David before we open up the call for questions.

David Wright: Thanks, Jason. Q2 was our fourth consecutive quarter of 40% plus revenue growth. Also in Q2, NRR hit a record of 129%. International revenue was above 100 million for the first time. Pie is running at scale, and our brands can now reach consumers on ChatGPT. We enter Q3 with a platform and pipeline we feel great about. The surface area of ecommerce keeps expanding. And Pattern will continue to complement brands in their execution and management of these vast surface areas. Pattern is built for both the intelligence to win in that environment and the infrastructure to fulfill what it generates.

We remain focused on optimizing the ecommerce equation on behalf of brands removing friction for brands, and delivering measurable outcomes at scale. Thank you for your continued support, We will now open the call for questions.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by. Our first question comes from Brian Pitz from BMO Financial Group. Please go ahead.

Brian Pitz: Thanks for the questions. Maybe with P&G's announced acquisition of Thorn, you can discuss whether a change of control creates any considerations for your relationship with Thorne. And maybe more broadly, you think about customer retention when brands are acquired by larger strategic owners with more established distribution capabilities? And then I have a follow-up.

Jason Beesley: Thanks, Brian. Appreciate you for your question. First off, I want to start with the congrats to the Thorne team and the P&G team. Regarding the sale that was announced yesterday, we found out about that at the same time as the public and have no comments on the specifics of that transaction. However, it is important to note that we already work with other brands in the P&G portfolio. And, of course, we look forward to working with them in the future. We discussed this yesterday with Thorn Management. We both reiterated the importance of our partnership and our confidence in the future. What it means now is business as usual with Thorn.

To your specific question, Brian, there is no change of control provision in our agreement. And we believe we have got runway to demonstrate our value to the partnership going forward. I will turn it over to David for maybe the second part of your first question and probably a broader context.

David Wright: Yeah. Yeah. it is a great outcome. You know, if you step back up a little we often have we do what we call a joint business plan with brands. At the beginning of all significant time periods. And, of course, we have discussions with the brands to say, you know, what are your objectives? What are you hoping for? I think all brands, you know, would agree as they watch Thorne, this has been a successful outcome. And I believe we played a small part in that. The team has done a tremendous job.

1 of the things you know, over the years, we have worked with lots of brands who have had this type of success and have been acquired by larger CPG companies. Some of our best and longest partnerships are inside those you know, CPG conglomerates. Some of them started there, and some of them have landed there via acquisition successful brand outcomes, I believe. So, I mean, I guess 1 of the things we are excited about is when this happens, generally, you have significant knowledge, resources, investment, that go into the asset, into the teams. We expect that will you know, that will come from this partnership.

So we are not it is just a tremendous brand, high quality, I expect that they will continue to differentiate themselves with any brands that are just obsessed about, you know, their consumers. So I think at the end of the day, this will just be a great outcome for, you know, the consumers of Thorne. We are excited about the future, and we see it as business as usual. You mentioned the second question, Bryan?

Brian Pitz: Yeah. Just a real quick 1. As you look across your customer base, how are brands balancing either marketplace participation or DTC investment And what does that imply for the long term risk of client attrition or channel shift? Any insights there? Because there is there is obviously a lot of options for some of the brands that are out there.

David Wright: Yeah. I mean, there is some, of course, conversations you always have where you say, hey. Will 1 cannibalize the other? If a brand is successful, on a direct to consumer, their site, you know, will it, you know, will it cannibalize marketplace revenue and so forth? We just we have not seen that as yet. So we are generally highly you know, we are always encouraging that collaboration. We believe that, you know, when they are successful in any of their channels, it tends to raise marketplace awareness and tends to, you know, do a great job there. I do not know if that answers your question.

But, you know, I think our goal is just, you know, what is best for a brand in terms of their outcomes, and anything that we can do to support that is where we go. And it is usually best for Pattern as well. Thanks for the color.

Operator: Thank you. Our next question comes from Eric Sheridan from Goldman Sachs. Please go ahead.

Eric Sheridan: Thanks so much for taking the question. I know this is a topic we have talked about before, but maybe just to pull on the thread a little bit, given the results you keep putting up. The net revenue retention numbers just keep kind of moving up, kind of a 2 parter.

1, what is the signal you are getting about any ceiling that might exist in the business in terms of NRR among the existing and older cohorts that we should be thinking about Conversely, as the business becomes more diversified over time, away from Amazon into more international markets, how do we think about a countervailing factor of faster growth in newer cohorts or newer verticals as diluting NRR but also contributing wider to revenue growth for the platform. Thanks so much.

David Wright: Yeah. I mean, the NRR numbers are sort of astounding if you take a look back and you say, okay. Total digital growth is, say, 7% to 9%. And we are, you know, rolling at 129%, but have some help. I mean, the our ability to execute on a technology road map you know, we believe has approximately doubled our expectation from, say, 12 months ago. And that is essentially software factory you know, our ability to leverage AI in that process. And we can go into some details there if you are interested. So, overall, that allows us to hit more marketplaces.

If you think of the problem we are solving, we need to solve for a brand how do we optimize revenue, which will be traffic. Conversion, availability, price, of course, Globally, hundreds of countries, hundreds of marketplaces, So the further we can get down a very complex technology road map, the better for brands, better for pattern. And I think you will just continue to see acceleration there. Just have, you know, some tailwinds and some inflection that you know, most companies are probably experiencing right now with AI. We are we are just, you know, luckily, we are positioned to sort of naturally be good there.

From day 1, we had, you know, patents that were that we had submitted around, you know, what you would refer to as AI, you know, back then just classic machine learning. Before it even became interesting. So as those technology have progressed, we have naturally progressed rapidly with it. And we are just seeing that in the results.

Jason Beesley: Maybe, Eric, I will add just a little bit more on kind of the cohort question of existing and older cohorts and new cohorts. You know, it is We believe that 1 of the most powerful things about you know, Pattern is that even brands who have been with us for many, many years can still outgrow the market in a significant way. And that is a testament to what David talked about on technology optimizations as well as there are still so many levers to help brands grow by expanding in marketplaces and geographies.

To your question about kind of newer cohorts diluting NRR, you know, we are we are that is always a possibility, but we are not seeing anything meaningful there. And, again, we are just feeling like we are just getting started in a large opportunity set. So we are gonna keep going at it as fast as we can, you know, expanding and bringing on more brands and more marketplaces know, to keep that going.

Operator: Great. Thank you. Thank you. Our next question comes from Mark Stephen Mahaney from Evercore. Please go ahead.

Austin Riddick: Hey, guys. This is Austin Riddick on for Mark Stephen Mahaney. Thanks for taking the question. I just wanted to ask 1 in terms of Amazon concentration. I think non Amazon revenue of 82 million still implies over percent of total revenue still runs through Amazon. So I just wanted to get your thoughts on where do you see that non Amazon share going in 1 to 2 years? Any color there would be helpful. Thanks.

Jason Beesley: Okay. Austin, I will start with that It was a little hard to hear you, so I am gonna do my best to kind of fill in the gaps there. But sounded like you are asking about non Amazon revenue concentration. Where do we see it going? You know, generally speaking, we love operating on Amazon. it is a great platform, very innovative, great for consumers, great for sellers, things like that. But there obviously is a GMV split around the world that is lower in terms of Amazon's percentage of GMV than what we currently at. And so as we grow and go where the consumer is at, it is a natural thing.

For us to diversify away from Amazon. You know, I think some of the stats we shared in the prepared remarks, you know, is really strong non Amazon growth, really strong international growth. Those stats continue to be very strong. You know, huge double digits, sometimes triple digits, you know, on good numbers. And I think when you take a step back and even just look at a year ago, you know, our non Amazon revenue was 7%. Of our total business, and now it is 9% of our total business. And that is in just 1 year. You know?

We have got growth rates and everything excluding Amazon at double or sometimes triple, you know, what the growth on Amazon is. So we are not providing a specific projection on where that will go, but we like the trend. Primarily because it is where the customers are trending. We wanna help brands find customers wherever they are.

David Wright: Yeah. Maybe just 2 points of color I will I will throw out there. The biggest single line item of the non Amazon growth, if we break it down by individual marketplace and so forth, is quite simply our SaaS logistics and other bucket. So that continues at a at a pace that is tremendous gives us a lot of optionality. We are very excited about that piece. And then 1 thing, you know, that is just somewhat remarkable is to watch you know, a Walmart is making tremendous progress. From 2 years ago, our business on Walmart is up 3.4x what it was 2 years ago.

And that is a combination, of course, our ability to execute there, but Walmart continues to do amazing things. Know? So I guess it is just fun to watch the ecosystem evolve I think we will be talking more and more about LLMs, and agentic surfaces in the years to come. And I am sure there will be, you know, winners that we are talking about and to partner with. Again, the 1 of the key strategic points on Pattern is we are agnostic to the channel. We are helping we are primarily focused on a brand. So as the channel shift and folks you know, do a better job with the consumer, then they will grow.

And we will grow with them. And as that shifts, we expect to shift. And Jason's point on GMV, it is fantastic. Because if you look at GMV around the world, you will continue to see our diversification quite simply because that is where consumers are you know, we started in The US on Amazon largely, And as we continue to get larger and more scale and just more geographic reach. Then you will you will just continue to see those numbers diversify.

Operator: Thank you. Our next question comes from Ralph Schackart from William Blair. Please go ahead.

Ralph Schackart: Good afternoon. Thanks for taking the question. Just on the overall growth profile of the business that is really been exceeding expectations since you have gone public. Maybe if you could walk through where you are seeing, you know, the really strong outperformance, you know, through the categories that you outlined between technology the geography and marketplaces and selection. I think it would be kind of to understand, you know, what is driving that performance And then maybe a second question related to that is this business continues to scale rapidly. Can you just kind of walk us through the infrastructure needs that you will need and currently have to support the, the continued, you know, really strong growth?

Thank you.

David Wright: Yes. Thanks for thanks, Ralph. Great question. I mean, largely, the bulk of our performance always comes from the technology stack. there is just simply not a way to outperform a machine. You know, especially when you are talking about millions of actions taken a day, is just impossible to do. So it is not just about, hey. How much can we automate to reduce cost? But any automation is often better execution. And you just you see that in the results. Now in terms of infrastructure, we have a phenomenal team there, 1 of the best in the business, I believe.

And they are continuing to look forward on what is needed You saw that we launched our Bethlehem, Pennsylvania this year. We have some both hardware and software innovations there. That are increasing our throughput, what we believe is currently at 2x which is sort of astounding given, you know, where we already are. And those teams just continue to ideate and build technology around moving that forward. And we have pretty know, I would say you might look at it and call it aggressive, but the team make sure that they are they are measured. Growth in those areas.

I do not think you have ever seen us, you know, what you maybe refer to as an overbuild And I think that is just a tribute to that team. They do a phenomenal job there. So I think we are in a great spot on infrastructure. Now we are very bullish on the movement of boxes and this becoming a much more complex problem in the future. So the more surface area you get, the more people who win there, Think of forward logistics as 1 thing. But the number I have, you know, I do not believe it is been independently verified, is 19.3% of all goods globally are returned.

So that is a complex problem that, you know, a lot of market solved, and some are still working to solve it. As we move into an agentic surfaces, that problem has to be resolved. And that will that it is a very interesting problem, very fun problem to solve. And I think that, you know, our commerce infrastructure as a service, we are laying the foundation to do that. that is helpful.

Operator: Thank you. Thank you. Our next question comes from Douglas Anmuth from JPMorgan. Please go ahead.

Maggie: Hi, this is Maggie on for Douglas. Thanks for taking the question. Just following up on that, any chance you could provide some more color on the investments you are making across commerce infrastructure as a service? And then also those agentic commerce acceleration capabilities.

David Wright: Sure. Yeah. Thanks for the question. On the infrastructure piece, we are we are very excited about it. But it is an it is it is sort of a natural problem that we have to solve. it is it is not, you know, particularly interesting no 1's thought of. You know, if you go to buy a good, you know, if you think of what might surround that. Where is my inventory? What do my inventory pools look like? How many units do I have that are close to a consumer? And how fast can I get it there? Okay. Check that box.

Once you have it there, maybe a consumer maybe they need to redirect it so there is a process that would be involved there. And then and then they might decide, hey. I bought the wrong size. And that would just be an exchange, or maybe it is a full return. there is an entire process around that. Customer experience is very important. You know, that is infrastructure that we think will be more broadly used. And if you think of you know, some of the cost reductions that may come in the future, you know, think I mean, this is a bit down the line, but we like to think about them anyway.

You know, autonomous driving, robotics, believe there will be, you know, you know, better customer experiences in the future If you can imagine it, you know, there is already great experience that exists today, but we are we are investing to be prepared to service that infrastructure for people who are not quite as advanced as some of the most advanced marketplaces in the world. So that is commerce infrastructure. And then on the agentic commerce enablement and acceleration side, of course, we have some phenomenal advantages. If you think about that problem, it is more about semantic intent.

So what you will not find in the SEO world, what you can piece it together if you start concatenating SEO, But if someone say is I use the example of a blanket. They are like, hey. I wanna buy a blanket that fits underneath the seat of an airplane. Well, if you build the product descriptions and your product catalog for that blanket, if you do not include dimensions and size, and someone infers that as their intent to buy the blanket, you will get skipped in an LLM world.

So the mapping of that intent, which you can map, you know, as you start looking if you start really thinking deeply about our mode of data around SEO, it is incredibly useful to understand what that mapping might look like You can probably understand where I am going here with this. So we are positioned very well to help brands accelerate on those surfaces just from a data perspective. And then it is just execution. So we are very excited about the future there.

Operator: Okay. Thank you. Our next question comes from Bernie McTernan from Needham and Company. Please go ahead.

Bernard McTernan: Great. Excuse me. Thanks for taking the question. Just wanted to ask about margin trends. You mentioned 4 consecutive quarters of margin expansion with adjusted EBITDA growing faster than revenue I think the 3Q guide and the implied Q4 guide given the annual guidance implies, year over year margin contractions. So I just wanted to see if there is any specific drivers of those trends. Thank you.

Jason Beesley: Thanks for the question, Bernie. Appreciate it. You know, I think it is pretty important to just double click on what I mentioned in the prepared comments. About the calendar shift of marketplace events. That causes some noise between Q2 and Q3 on both the revenue and the EBITDA side. On, you know, a pretty, you know, flow through margin basis. When you control for that, both the growth rate in Q3 and the margin rate in Q3 make a lot more sense. And also, when you look at the growth rate in Q3 with that extra 4 points of growth, compared to the growth rate in Q3 last year of 46%.

It all starts to you know, line up with what we have been saying all year about tougher comps in the second half. Specifically, in the fourth quarter, there is always some seasonal pressure on EBITDA margin percentage. We see that every year. it is just a bit more expensive to do business in the holiday period. Whether that is, you know, storage or moving logistics, or promotional funding, things like that. So that is expected when you look at it from a Q3 to Q4 perspective. And then the only real drag year over year is what we have been saying kind of throughout the year increased investment in R&D faster than revenue. You know?

So overall, you take a step back, you look at the full year, and you are still looking at margin accretion on a full year basis. You know, with adjusted EBITDA growing faster than revenue. And interestingly, revenue growing almost at the same rate of what we grew revenue last year on a much smaller base. So feeling pretty good about the overall picture of it, and those are some explanations on your specific questions.

Operator: Awesome. Thanks, Jason. Thank you. As a reminder, to ask a question, you can press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our next question comes from Justin Patterson from KeyBanc. Please go ahead.

Justin Patterson: David, it looks like the number of data points on your platform has increased about 38% year to date to 91 trillion. Can you talk about how that drives the pace of the AB tests and feeds into product velocity across the business. It seems like that could be 1 of the key variables behind just the compounding of the business and the NRR And then for Jason, I was hoping you would talk a little bit more about vertical performance How's the health and wellness category comparing versus what the other verticals you are in? Thank you.

David Wright: Yeah. I mean, of course, we run AB test. I mean, what we might be best in the world at in ecom possibly is just building a framework for measurement. So, you know, if we do not know, I do not think anyone knows exactly what will work and will not in aggregate for a consumer. So, you know, you might target a given persona and say, hey. I think I know what will resonate best. If you have 5 to 10 personas in aggregate what is the messaging that will drive the most dollars? I mean, it is a very difficult problem to solve.

So, of course, the data and the data moat that we have you know, is invaluable at this point and is continuing to grow. And, of course, it just keeps compounding because, you know, as brands our brands have success with us, they expand with us. And then brands you know, other brands see that success and join the Pattern Pie platform. And that provides us more data. So it is almost you know, this virtuous cycle where we just get better and better can provide better outcomes for brands. Which strengthens the data moat. I mean, I think that is there is you know, everyone understands that.

Of course, exceptional nuance in the data, and we get better and better at running any, you know, AB tests. You know? But you almost have to think about them as aggregated AB tests. I think it just is showing the results.

Jason Beesley: Great. And then just on your question for me, Justin, As it relates to verticals or categories, just as a general reminder, you know, our focus is for every brand to just maximize the outcome that they are trying to get. Win whatever category they are in. So we are we are in no way managing the category mix from the standpoint of brand results. Even in the world of health and wellness, we still consider ourselves very small when you consider the total GMV, and we love that space. it is great for ecommerce, and obviously, you can see, you know, based on transaction yesterday that you know, there is a lot of interest in that premium space.

You know? I would say, you know, there is always great highlights about diversification. You know, 1 of the ones I would call out is beauty and TikTok. You know, we mentioned that we were named, you know, strategic partner of the year. We mentioned that a lot of our beauty inbound is coming through the TikTok channel. And the fun part about that is when we do very well for them on TikTok, then we can bring them into the other marketplaces that represent around the world on that side. You know, as of just a data point, you know, beauty grew in the quarter 85%. Pet supplies continues to be fun at over a 100% growth. You know?

And then in the new, you know, the new business side and again, I will just reiterate. This is happening naturally similar to our marketplace diversification. Because we are going after so much GMV, you know, we have a target opportunity list of 505 billion that we are attacking with many categories. But that new business, if you look at health and wellness as a percent of the new business, that is lower than the overall business. So it feels like all of the theses that we had, which is you get into a category, you establish yourself with a track record of performance, that yields a reputation within the category. That can take years.

But then as you have that flywheel of reputation, you sign more brands, you get better and better data and expertise in the category, and it keeps going we feel like those same green shoots and growth we had in health and wellness is happening across many other categories, and we and we like how the business is performing in that space.

Operator: Thank you. Our last question comes from Colin Sebastian from Baird. Please go ahead.

Colin: Guess 2 questions for me. First, David, on Amazon's call, they talked pretty positively about the performance of their first party AI interface in terms of conversion rates. And overall engagement. So curious just given some of your efforts with the Generative AI or search, if that is an area on the marketplace you are able to take advantage of And then as a second question on pattern intelligence, what is the near term road map there to drive more engagement brands? And is this something that we could see showing up as a measurable growth or margin lever in the in the relatively near term? Thank you.

David Wright: Yeah. I mean, our data confirms what Amazon, you know, indicated on the call. I guess it is not a surprise. It just allows you to get a better understanding of the consumer and what they are hoping the outcome is for the problem or solution they are looking to solve, you know, which will be a product. You know, the 1 thing that I think is important, you know, as a general call out for the future where I think that you will probably see a pretty incredible differentiation. The brands that are focused on quality, we are entering a world of much higher transparency.

So the brands that over the years have been obsessed about R and D customer experiences. They will be paid back at an, you know, I and I think it is probably part of the thesis of why, you know, P&G acquired Thorne to be a tremendous asset for them. Is that, you know, there is many other brands that all also fit that category of just over the years, they have focused on great customer experiences, great products, Now if you think of an LLM world, rather than surfacing hundreds of pages of search results, you are starting to narrow in on, okay. What did that customer really intend for?

And how might I shrink the surface area of what they have to review in order to make a decision. And product quality, all of those things, Also, the infrastructure bit, so say to factor on know, delivery time lines, the promise, those things will all become, I think, paramount, and they will stay with the brands for the long term. And will be harder to shake negative experiences. So I think where the world is going there will serve consumers better. And so I think that is where you are seeing Amazon's results. The more they invest there, the better their results will be. So that is been great to see.

Jason Beesley: Maybe specifically on your second question. In terms of pie, David, talked about a lot of the road map We are doing 24/7 feature offers a lot of outcomes happening. it is built on 13 years. Of everything we have built. it is a better interface layer for the brands with more transparency. Our focus is primarily the effectiveness that comes out of that. And driving revenue growth. But there will obviously be efficiencies that will come out of that in the future. We have not put specific numbers on it, but we just know as we automate and make everything much more agenetic, that will be a natural output.

And then what we do with those resources is completely up to us. Yeah.

David Wright: Yeah. I get it. Thank you. Now, 1 bit of color I might add on the PI point that Jason just overall development in general. A unit of work that we think about for a developer would be a pull request or a unit of work that a developer would accomplish. For us, we have doubled those units you know, year to date as of last year. So you are starting to see you know, software factories come into play and accelerate results in general.

So I think it will be it is just a fun place to be The digital economy is growing, and I think know, we could not be more excited about the future both for Pattern and consumers getting, you know, you know, over the next 3, 5, 10 years. Thanks then.

Operator: Thank you. This concludes the question and answer session. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

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