Pattern Group Inc. (PTRN) September 10, 2026 Conference Transcript

We're going to kick off day three.

Thanks, everyone, for coming. It's my pleasure to welcome the team from Pattern Group. David Wright, CEO. Dave, this is your first Communicopia. Thank you for coming to the conference. You were going through a process a year ago during this conference, and you've been a public company for just around a year now.

Yeah, yeah.

It's been a great journey. Well, welcome to the conference. Let me start by reading a safe harbor I have to read, and then we're going to get into a conversation. Before we begin, I'd like to remind everyone that today's presentation and webcast may contain forward-looking statements based on the company's current expectations and assumptions about future events. These forward-looking statements are subject to risks and uncertainties that could cause actual results that differ materially from what the company discusses today. Please refer to the company's latest filings with the SEC for more information on these risks and uncertainties. With that, let's get started. So I always like to take a step back before we take a step forward. You've been on a journey in terms of the company you've built and scaled. As you said, you've now been a public company for just about a year. Talk to us a little bit about setting the stage for the journey you've been on and what you've been trying to build and scale.

Well, you know, it's been quite fun, you know, but I just like solving problems. And so, you know, it seems very much the same as pre-IPO. You know, for all intents and purposes, we're doing the exact same thing. um matter of fact the stock will go up sometimes and stock will go down and we get praise when it goes up and we get you know hit when it goes down and i'm like we do the exact same thing as we did the whole time you know so it's been a lot of fun it's been an interesting journey um but the core of what we do if you think about it we are just trying to build a technology driven intelligence layer that's very thin operationally efficient for brands across digital surfaces And those surfaces are becoming broader than we ever expected back when we started. You know, when we started, I think 10%, because we help on the digital side, 10% of all goods were sold digitally when we started the company. Now it's, you know, 24%, 25%. So just that has been a boon for us. And then the surface areas got, you know, it used to be, even when we went public a year ago, we were 94% Amazon. If you think about your own purchase behavior, you probably are somewhat similar. This last quarter, we were 9.35. So almost 10% non-Amazon. And that surface area is complex and evolving quickly. So building technology around that and operational efficiency, moving the box is just a highly complex challenge that brands need to do at a price point they can afford.

So talk to us a little bit about that environment, right? Because as we look at it, the e-commerce landscape is only getting more complicated, not less complicated. So for your existing brands, and when you have conversations with where brands are today and coming into your ecosystem, what are you trying to solve for? What are the most often questions you get? Where do you think some of these solutions have to go to meet the landscape and the shifting of the sands?

Well, the core has just always stayed the same. You know, a brand has some product idea. They need to get it into the mind and the hands of a consumer through all means necessary. And that landscape is complex. And they need to be able to do it at the lowest possible price. So if you think of pattern, we track what we call internally, what we call cost to serve. So how much does it cost us to run $1 of revenue through the entire machine across all surface areas for a brand? And then, of course, I estimate, and we have some pretty good numbers on what it might cost a brand to do it on their own, because that's sort of who we compete with. And I don't believe at the scale we're at, a brand can do it at the same price point. I'll give you one example. If you just take logistics. You know, in many cases, a brand will do the final mile delivery, and in many cases, they'll send into a marketplace used like filled by Amazon or some network. For us, just that inbound process to just marketplaces, we do 95% of the time full truckloads at 11 cents a unit. If for that final 5%, it's split between partial and partial trucks, just partial trucks is 44 cents, 4x the cost so if you think if you're sitting in a brand shoes imagine a brand i don't think of one you know pandora jewelry um even to me luggage both of which are our brands that work with us they can rarely send in a full truckload to 18 locations a week it's near impossible so that thin layer becomes um we're just trying to do it as efficiently and and uh and in an optimized way for a brand at a price point they we don't believe they can do on their own right maybe just sticking with that as a theme and and just sticking with the framework of what you've

built talk to us a little about about what you do for those who less know it less what you do for brands on generating business for them helping on the inventory side of the equation helping them on the intelligence side of the equation running their business just so we can level set with some of the key kernels of where you touch these brands and how you help them grow and scale?

Yeah, maybe if we go back to the starting of the company, the start of the company was my cousin had this little girl's headband brand. And we got talking about how she might grow that brand. And it's quite simple. My background is all in the tech data side. I had never worked with a brand. I had never sold a widget. I didn't enjoy that work at I didn't think and then I got working on that and it was it was a formula it's revenue for the headbands is traffic how many eyeballs can you get to see a product times conversion times price times availability is the good available close to the consumer so our entire tech stack 44 patents either issued or pending now is built on that and that alone you know revenue for a brand is traffic conversion price. And then we just measure. We know if our machine works because our NRR, so net revenue retention of brands, which includes any brand that might leave us, is running now at 129%. That means that that optimization engine and the logistics engine and the price point that a brand is willing to pay and can pay is all working. So we focus on that number. If that NRR number is high, you will see us win for a very long time. Because for one, we don't have to go out and resell, you know, we haven't built in 30% growth or, you know, 29 or whatever it was last quarter. So, and then it's easy for a sales team to go and close deals because we can say the machine works. Understood.

You talked a little bit earlier about the percentage of the mix of the business that's Amazon today. Would you have faster growth in the non-Amazon part of the business? Another element of the e-commerce landscape is the rise of these other marketplaces, not only in the U.S., but globally. Talk a little bit about how the marketplace landscape is changing and how that opens up potential for you to work with brands as they think about changing their geographic skew and even their seller-based marketplace skew.

Yeah, there's a lot of, you know, marketplaces out there. There's some very interesting things. I mean, Walmart's one of them, been around for a very long time. They're making a play that's quite interesting. We've 3X'd on the platform in the last 12 months. And I think, based on talking to their leadership over the last while, I think they're going to be very interesting. But they're not alone. I mean, Coupang and South Korea, internationally, it's quite varied. And imagine if you're sitting in a brand seat and you say to yourself, okay, hey, Walmart is like 4% of your business. You're like, oh, okay, well, you know, what do I do with that? Well, I can't not run Walmart, so you've got to put people. You've got to run all of the advertising technology. Anything that Walmart comes up with, you need to build around. And then you need to layer that in with, you know, you've got TikTok. You've got social commerce. You've got all the LLM discovery elements that are coming up, the Gentic commerce. It doesn't matter if they're small amounts of revenue for a brand. They have to manage it. So all of those surface areas becomes a place where they say, OK, Pattern, we just we don't have enough people in seat to run that.

Understood. AI has certainly been central to what you've talked about with investors. You've introduced a lot of product innovation, especially at your own event earlier this year.

Talk a little bit about the impact that AI might have in terms of what you're building and scaling and how your platform might change as a result of it.

well i mean it's i mean we're betting uh you know you could say we're we're almost betting the farm on that but we sort of have been all along um we had patents on classic machine learning before ai was even relevant or anyone was even talking about it and that would fall under the ai umbrella but if you if you go forward a little bit on just building what we have to build or what brands have to build is traffic times conversion times price across all geographies and all marketplaces. And there's no way to shortcut it. You have to break down, okay, where are all the drivers of traffic? And what are the innovations all the marketplaces are thinking of? What are all the different ways people do discovery now in an agentic world? And then how do you convert them? And how, you know, now rather than just keywords, keyword phrases, SEO, you start have you know we're leaning into semantic intent i mean that that surface area is getting getting very complex the roadmap if you think globally for us was we figured seven to ten years um to even get parity with where we are just in the u.s and we've doubled our output on engineering software factory wise and um we expect that to accelerate even faster and be a massive enabler for brands at a very low price point. So very exciting where that's headed for us. Okay.

Understood. Talk to us a little bit. You talked earlier about net dollar retention. Talk to us a little bit about what you've learned about brands on the platform and how the relationships and the unit economics of those brands evolve as their relationship deepens with you. Day one versus how these relationships evolve into the second and third year of those relationships?

Yeah, I think everyone measures their concept of NPS. All of our metrics get better with time, which is interesting. So I don't know if that's, you know, maybe our sales guys could do a little better on the pitch, but overall the relationships get stronger and stronger. 53% of our revenue now comes from brands that have been with us longer than five years, which is up from every year. That number seems to climb, which you would expect now that we're 13 years in business as a company, as long as you build a machine that works. But if you look across the landscape of people we compete with, it is very hard to continue the innovation pipeline, to continue winning for a brand. A lot of companies will build or get a patent on a thing and win for a little while until you've exhausted that area of what you happen to be good at. And Pattern has demonstrated that year on year, but we just obsess on that formula and it's changing every day. And so that will lead to, you know, the longer you're in seat with us, the more trust you get that we're going to keep doing that. And that's where those numbers come from.

Understood. When you think about what you're building and where you sit in the ecosystem, how do you think about the competitive landscape, like who you're competing against? Because you touch a lot of different areas of the e-commerce ecosystem. And where do you find that where you sit within the broader competitive landscape and how you would assess who you're competing against right now?

Yeah, well, I guess there's a few areas where we try to stay out. You know, because we're a thin layer that sits on top of any marketplace, we don't care who it is. We don't really compete for the consumer, which is great when you're in the room with Amazon, TikTok, Walmart. They don't see us as a competitor as they do each other. So a lot of them are building tools to try to enable brands, but no one's building one layer down where it's just helping brands across, you know, any geography. If you take, you know, Mexico as an example, you know, Mercado Libre, Amazon is, you know, about 50-50 market share on each. From a Pandora perspective, you know, as an example, they don't really care which. they just want to sell more of their products regardless of of the platform that's where where pattern comes in so that's where we've we've decided we aren't going to compete we don't want to be a marketplace and and then if you think about our competitors we have a logistics arm and we have a technology arm the logistics arm you would see largely with distributors and whatnot but they rarely cross into the technology side. The opposite is also true. The people who are great at the technology rarely do anything on logistics. I think the technology folks will have to start moving a little bit more into the logistics side to protect their moat from an AI in a world where maybe, say, software becomes more commoditized. I think you will have to move atoms. um so pattern is it wasn't on purpose 10 years ago but now we've positioned ourself very well in that in that in that spot that um where scales begets lower costs lower costs means you sign more brands and keep more brands and it's a flywheel that i think is right now i can't see anyone that I'm scared of right now.

One of the other things that was unique as I learned more about the company is just the idea that in many ways you're trying to displace the idea that brands can do this for themselves. You have a lot of examples of brands that try, hire a couple of people, give it a go, and it's really, really difficult to manage internally. Talk a little bit about how the conversation develops of when a brand's new to you, new to your platform, of educating them about how you can deliver return to them relative to almost the alternative is you have to do it for yourself and manage selling across all these channels and geographies.

Well, the brands are incredibly smart, and they know what they're talking about. So I think, you know, premise number one is you almost have to start with this idea that the person across the table from you will understand very well what you do and what they are capable of doing and what they're not. And I think that has just continued to play out the more conversations we have. A lot of times we'll talk to our brand two years later, they'll call us up and they'll say, hey, you know, we just can't scale this like you guys can. But they're usually good at something that brings them hundreds of millions of dollars. A lot of these brands will be built on one channel, one expertise. It might be a dynamic TikTok brand that literally goes from zero to $100 million, and that's how they did it. And then they look around and they say, oh, now that we've built a real brand here, let's take it worldwide. Let's take it across the marketplaces. Maybe we get into retail. Some of those things, we help them. We don't help them get into retail. We help them with the digital side. But usually once they build a really innovative product, they do something, and then they realize, okay, we know what we're good at. Now we need help on the rest. And that's generally where we come in.

Sticking with that as a theme, though, and you talked about it earlier with relation to AI, when you have these conversations with brands and you think about where you want to take the platform for the longer term, What's some of the technology innovations or product roadmaps that you're the most excited about in terms of scaling and putting in front of brands the way you can when you think about how the nature of this business could change?

Well, probably two areas that I love right now. Well, there's a lot, but let's just take the advertising technology we've built. I think when you have a background just on the data side, you get talking to folks on the advertising side, and they start throwing around words like halo effect. It's like, don't worry. Throw up the road sign, and once people drive by it 17 times, something's going to click, and they're going to buy. That drives data people insane. and so we've spent many years trying to figure out what is the true return on ad spend and you know our business model our business model is generally not always but we'll buy the product and we will sell it across all these marketplaces so a take inventory model in those models we don't care if a brand spends 25% or 2% on ad spend we make no extra money that's all pure pass through so one of our You know, a chase that we've made some great progress on. We finally got a patent to go through on what we call true ROAS, so true return on ad spend. And I think we're one of the few companies on the planet that don't care about how much a brand spends on advertising because we make no money that way. So we're just trying to tell a brand, here's the answer. Here's the platform that we believe you're getting the best bang for your buck on. So the MMMs, we believe we have some very interesting technology there. but we also just don't have a dog in that fight. We don't take a percent of ad spend. So that's very exciting. The logistics side has become, is really heating up. We were quite anti-robotics and I guess warehouse automation because a lot of people, it's almost a cool factor. And we were more efficient than most everyone we talked to. and i mean our warehouses are quite automated in in terms of conveyance and whatnot but but we're starting to see some real progress on robotics that i think is is interesting and could lower costs it will only be for those at scale so it positions us very well there um and and then i guess lastly conversion you know when you get into the you know what causes a human or a robot, AI, an agent, to make a purchase, right? And so analyzing that and you have to cover all those surface areas has been very fun as well.

Understood. Sticking with this theme of fulfillment, talk to us a little bit about the competitive advantage that you think can be built around fulfillment over the medium and long term. from where you are today, where you want to take fulfillment, and how that feeds back into the level of service offering that you can bring to the brands.

Yeah, well, I guess the landscape, where the landscape is changing the most, probably in agentic commerce, even though it's a very small amount of purchases today. Well, I'll give you one example. We estimate about 20%, 19.3% of all goods purchased are returned. So say you're open AI or you're facilitating a transaction where you, unlike an Amazon where they have a machine around returns and whatnot, say there's 14, 20 LLMs where people make purchase decisions and possibly buy on those platforms. The rest of that infrastructure, so reverse logistics, consolidation. say you sell, you know, a t-shirt and you can return the product to, you know, you can send a used product to a consumer, but you need a lint remover. If you have to make one more hop in that process of returns, you zero out the shirt. It's worth zero versus being worth say 50 bucks. So, um, we believe that there's a pretty big opportunity there at scale, The whole reverse logistics piece, because we're calling it Commerce Infrastructure of Service. You probably, in our earnings, we're starting to talk about it more and more. So we believe that's interesting. Middle Mile is also interesting where, so if you take in the early days of when we started, you now have Amazon FBA, you have Fulfilled by TikTok, you have Fulfilled by Walmart. So if you're a brand, just FBA, which is one of those three big ones, on a weekly basis you have to send to it used to be you know one then it became three locations now it's 14 to 18 everyone's trying to get it closer to the consumer even fulfilled by tiktok is getting more complex um so if you're a brand you cannot afford to do that parcel or partial trucks has to be full trucks that will require pretty pretty incredible scale pattern will have that across its set of brands and then you go international so just those two things probably middle mile reverse logistics I think there's a big

opportunity there for a pattern okay good points um you sit at the intersection of what the consumer is doing there's been a healthy debate here about the state of the consumer at this conference we kicked it off with our global economist and he and I had a conversation from your vantage point what does the consumer look like to you right now in terms of behavior patterns and shopping habits it you know honest answer probably is i think you know we just it's hard to tell because we do um about three and a half billion in revenue and we have an entire machine about winning so the consumer looks very strong to us but it's a biased view because we're we're

optimizing traffic conversion so when we're talking everyone's very positive about the consumer we think is great but the broader you know we read all the same reports everyone reads and so far I mean everything looks pretty good um and and pretty healthy I think the main concern is just inflation you know I think uh we'll see where all that goes but if you from our lens which is a smaller piece of the big pie and it's a piece we are optimizing looks great so it's hard to dissect that and get a view on the broader landscape, if I'm being honest.

Okay. Totally understood. One of the debates into and out of the last earnings was we saw the acquisition of Thorne by P&G, and that raised some questions among investors about concentration of brands and what would happen if brands got acquired by larger companies. I thought you gave a really interesting answer to this on the last earnings call, but just to level set, because I think it does come up as an investor question. How do you think about the array of brands on the platform and what the life cycle of brands are and how to think about what those opportunities and challenges are? What do you think about the size and scope of brands inside the company?

Well, I think investors will probably go on the same journey I went on quite a few years ago. So I thought our platform would be geared towards small, mid-sized brands. I didn't really expect us to be able to provide a service at a price point where a Procter & Gamble, a Nestle, the big CPGs, the Panasonics. But we have a lot of those companies now working with us and have been. Like one of our other brands was acquired by Nestle in 2018, very large brand. and they're still with us today, almost a decade later, I expect the same. It's just when you get into the nuances of what we do, at the price point we do it, it's even for the mega CPGs, they're pretty happy with the results at that price point. And so I sort of expect us to expand into those areas more than to see any shrinkage. But it's a fair, you know, thought process an investor will have. I had it, you know, years ago. It's hard to imagine that, you know, a company of our size can provide that value. But I think we're going to prove it over time.

Maybe we only have a few minutes left, but maybe if I can squeeze in two more financial oriented questions. Obviously, you've been producing better growth and better revenue retention than what people thought a year ago. When you think about the incremental dollar of growth and the choices between growth investments into the company versus incremental margins, how do you think about striking the balance there in terms of producing outcomes for investors?

Well, I mean, the space is huge. I think at the end of the day, an investor wants gross dollars to go up. We're continuing to get operating leverage. We're doing all of it. I, you know, if you look at the numbers, you know, we're four straight quarters now of 40% revenue growth, about 50% EBITDA growth. And that is at a point where we're investing more heavily in the technology than we have ever invested in a pure percent, you know, of growth, I think 80, mid 80% tech investment growth. And at the same time, we're still getting better overall margins to investors as a percentage. It's not really our focus. The focus is we have, I mean, it's trillions of dollars of potential out there for us to chase. And if we provide a phenomenal solution at a great price point at scale, then investors will have the sheer dollar growth. I believe we can do all of it at the same time. But the focus is on tackling the market and producing the gross dollars for investors. But we might be able to do more of it than people think at the same time.

Maybe the last one for you, just building on that, when you think about the allocation of capital inside the business, maybe frame it as an end question as, What are you the most intrigued by investing in the business from a growth standpoint going forward? And the counterbalancing fact is how should investors and shareholders think about potentially getting capital return out of the business over the longer term?

Well, I mean, I think it's a pretty unique company if you look at it. For one, we have $346 million as of the end of last quarter on the balance sheet. We have zero debt. We have $150 million revolver that we could tap into on credit. So cash is not an issue. And then you have the opportunity, and we're continuing to win. So we're producing cash, free cash flow, growing 40%. I think it's one of the – and it's quite at scale. Now, you know, at one point I had, you know, our BlackRock guy, you know, do something because, you know, people like me love to compare themselves against other companies. So I'm like, hey, look at all the other public companies out there that are at scale. Let's call it, say, a billion in revenue. What would be considered, say, the top 5% in terms of growth keggers over, say, a three-year run once you hit that scale? And we estimate we're in the top few percent, and we're doing it with zero debt, free cash flow, and I think it's a very compelling story with a TAM that is enormous. And then you have a shift that is, hey, if I was pure software before, is that scary? Maybe, maybe not. But if you, 99% of our business is tied to moving at them. So we move the box for 98 point something percent of our revenue. So we are a bit AI proof wherever that goes. And I'm not making a prediction there, but regardless of which way it goes, I feel pretty good about where we sit. And so the overall thesis, I think, is just pretty strong.

All right. Well, I think we're going to leave it there. Thanks so much for being part of the conference. Hope this will be the first of many appearances at Communicope in the years ahead. Please join me in thanking Pattern for being part of the conference.