Vita Coco Company Inc

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this 10-K filing. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Except as otherwise noted, all references to 2023 refer to the year ended December 31, 2023, all references to 2022 refer to the year ended December 31, 2022 and all references to 2021, refer to the year ended December 31, 2021.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Except as otherwise noted, all references to 2024 refer to the year ended December 31, 2024, all references to 2023 refer to the year ended December 31, 2023 and all references to 2022, refer to the year ended December 31, 2022.

Previous wording

The Vita Coco Company is a leading platform for brands in the functional beverage category. We pioneered packaged coconut water in 2004 and have extended our business into other categories. Our mission is to deliver great tasting, natural and nutritious products that we believe are better for consumers and better for the world. We are one of the largest brands globally in the coconut and other plant waters category, and a large supplier of private label coconut water.

Current wording

The Vita Coco Company pioneered packaged coconut water in 2004 and we have extended our business into other categories. Our mission is to deliver great tasting, natural and nutritious products that we believe are better for consumers and better for the world. We are one of the largest brands globally in the coconut and other plant waters category, and a large supplier of private label coconut water.

Previous wording

Our branded portfolio is led by our Vita Coco brand, which is the leader in the coconut water category in the United States, and also includes coconut oil, juice, and milk offerings. Our other brands include Ever & Ever, a sustainably packaged water, and PWR LIFT, a protein-infused fitness drink. We also offered Runa, a plant-based energy drink inspired by the guayusa plant native to Ecuador, which we ceased selling in December 2023. We supply private label products to key retailers in both the coconut water and coconut oil categories. Additionally, we generate revenue from bulk product sales to beverage and food companies.

Current wording

Our branded portfolio is led by our Vita Coco brand, which is the leader in the coconut water category in the U.S., and also includes coconut oil, juice, and milk offerings. Our other brands include Ever & Ever, a sustainably packaged water, and PWR LIFT, a protein-infused fitness drink. We also previously offered Runa, a plant-based energy drink inspired by the guayusa plant native to Ecuador, which we ceased selling in December 2023. We supply private label products to key retailers in both the coconut water and coconut oil categories. Additionally, we generate revenue from bulk product sales to beverage and food companies.

Previous wording

We source our coconut water from a diversified global network of 14 factories across six countries supported by thousands of coconut farmers. As we do not own any of these factories, our supply chain is a fixed asset-lite model designed to better react to changes in the market or consumer preferences. We also work with co-packers in America and Europe to support local packaging and repacking of our products and to better service our customers’ needs.

Current wording

We source our coconut water from a diversified global network of 17 factories across seven countries supported by thousands of coconut farmers. As we do not own any of these factories, our supply chain is a fixed asset-lite model designed to better react to changes in the market or consumer preferences. We also work with co-packers across four countries to support local packaging and repacking of our products and to better service our customers’ needs.

Previous wording

Vita Coco is available in over 30 countries, with our primary markets in North America, the United Kingdom, and China. Our primary markets for private label are North America and Europe. Our products are distributed primarily through club, food, drug, mass, convenience, e-commerce, and foodservice channels. Our products are also available in a variety of on-premise locations such as corporate offices, fitness clubs, airports, and educational institutions.

Current wording

Vita Coco is available in over 35 countries, with our primary markets in North America, the U.K., and Germany. Our primary markets for private label are North America and Europe. Our products are distributed primarily through club, food, drug, mass, convenience, e-commerce, and foodservice channels. Our products are also available in a variety of on-premise locations such as corporate offices, fitness clubs, airports, and educational institutions.

Previous wording

Our global asset lite supply chain model has been an integral part of our ability to efficiently scale our business and compete in the marketplace, and to support our private label business. This asset-lite model allows us to effectively manage total delivery costs and afford greater ability to shift volume between our suppliers to optimize our supply chain, and better manage our supply levels. In addition, our scale of sourcing has allowed us to add capacity as needed and service retailers more reliably, and we believe that our global position as one of the largest and highest quality coconut water procurers in the world protects our customer and supplier relationships.

Current wording

Our global asset-light supply chain model has been an integral part of our ability to efficiently scale our business and compete in the marketplace, and to support our private label business. This asset-light model allows us to effectively manage total delivery costs and afford greater ability to shift volume between our suppliers to optimize our supply chain, and better manage our supply levels. In addition, our scale of sourcing has allowed us to add capacity as needed and service retailers more reliably, and we believe that our global position as one of the largest and highest quality coconut water procurers in the world protects our customer and supplier relationships.

Previous wording

We experienced significant inflation on transportation costs over the past three years, which affected our costs and margins significantly. Although we saw these transportation costs return to near pre-pandemic levels during 2023, we expect instability in pricing to continue in 2024 caused by recent geopolitical disruption of shipping lanes due to ocean carriers avoiding the Gulf due primarily to concerns that Houthi forces, based in Yemen, may attack freighters. We experienced spot cost increases for ocean freight routes from Asia, and then more significant cost increases when carriers began to route away from the Suez Canal. The changes in shipping container prices and service levels and cost increases in shipping and port congestion related costs have materially impacted our financial results in recent years. Due to the price sensitivity of our products, we may not be able to pass such increases on to our customers without impacting our volume, revenue, margins, and operating results and we have no certainty when these pressures may lessen. The Company is continuing to monitor the situation carefully to understand any future potential impact on its people and business.

Current wording

We experienced significant inflation and instability on transportation costs over the past three years, which affected our costs and margins significantly. Although we saw these transportation costs return to near pre-pandemic levels in the middle of 2023, in 2024, we saw significant cost increases and supply constraints caused by recent geopolitical disruption. We expect instability in pricing to continue caused by recent geopolitical disruption of shipping lanes due to ocean carriers avoiding the Gulf of Aden and Red Sea regions due primarily to concerns that Houthi forces, based in Yemen, may attack freighters. We experienced spot cost increases for ocean freight routes from Asia, and then more significant cost increases when carriers began to route away from the Suez Canal. As a result, beginning in the late spring of 2024 and for most of the summer, we were challenged to secure the ocean container capacity that we needed. In early October 2024, the east coast ports of the U.S. experienced a labor strike that temporarily shut those ports, resulting in some delays even after the ports reopened. While a deal has been announced to enter into a new labor agreement, and no port disruption is expected, it is unclear if a final agreement has been ratified, so some disruption risk remains. When disruptions like port strikes are anticipated, the ocean freight carriers may issue notices of impending surcharges to be applied if the disruption occurs, which creates uncertainty as to our actual expected costs. The changes in shipping container prices and service levels and cost increases in shipping and port congestion related costs have materially impacted our financial results in recent years. Due to the price sensitivity of our products, we may not be able to pass such increases on to our customers without impacting our volume, revenue, margins, and operating results and we have no certainty when these pressures may lessen. The Company is continuing to monitor the situation carefully to understand any future potential impact on its people and business.

Previous wording

Coconut water accounted for approximately 92% of our revenue for the year ended December 31, 2023 and we believe that sales of coconut water will continue to be a significant portion of our business in the foreseeable future. The coconut water category has been growing steadily in recent years and our Vita Coco brand has successfully gained over 50% market share in the US and over 80% market share in the UK in this category. We are also a significant supplier of private label coconut water and coconut oil products in the US and in Europe. Any material negative change to consumer demand for our products or coconut water generally, or failure to grow the coconut water category, could adversely affect our business. Consumer demand between branded products and private label may vary over time. In order to meet this consumer demand for our products, we also are subject to the risk of overly relying upon our largest customers for both our branded and private label business. In 2023, we announced changes to our supply relationship with a significant private label customer with the expected loss of a significant private label coconut oil business. Any loss of business or changes in our relationships with our key customers can impact our operating results in future periods, as may changes in consumer demand for private label versus branded products.

Current wording

Coconut water accounted for 96% of our revenue for the year ended December 31, 2024 and we believe that sales of coconut water will continue to be a significant portion of our business in the foreseeable future. The coconut water category has been growing steadily in recent years and our Vita Coco brand has successfully retained over 40% market share in the U.S. and over 82% market share in the U.K. in this category. We are also a significant supplier of private label coconut water and coconut oil products in the U.S. and Europe. Any material negative change to consumer demand for our products or coconut water generally, failure to grow the coconut water category, or loss of significant private label demand, could adversely affect our business. Consumer demand between branded products and private label may vary over time. In order to meet this consumer demand for our products, we also are subject to the risk of overly relying upon our largest customers for both our branded and private label business. For example, in 2023, we started the discontinuation of the private label coconut water and coconut oil supply relationship with one of our significant customers as the terms required to retain the business were contrary to our long term margin targets. While we continued the supply relationship for a significant portion of their private label coconut water needs in 2024 at the customer's request, we are expecting the loss of further regions that we serviced for this customer during 2024. We will continue to service their needs if we are asked and it aligns with our long-term margin targets. Any loss of business or changes in our relationships with our key customers can impact our operating results in future periods, as may changes in consumer demand for private label versus branded products.

Previous wording

The beverage industry is subject to shifting consumer preferences which present opportunities for new beverage occasions, tastes and functional benefits. Our future success is therefore partially dependent on our ability to identify these trends and develop products and brands that effectively meet those needs. We also invest in sales and marketing and execute our sales strategy to develop and deepen consumers’ connection to our brand and new products and to create category growth and increase our branded share. Our innovation efforts focus on developing and marketing product extensions, improving upon the quality and taste profiles of existing products, and introducing new products or brands to meet evolving consumer needs. For example, we introduced Vita Coco juice as our first broad based offering of coconut juice with pulp in cans. In 2023, we expanded distribution of Vita Coco juice, with a focus on convenience stores and, in 2024, we intend to continue to gain distribution in convenience, while expanding to select mass and food retailers.

Current wording

The beverage industry is subject to shifting consumer preferences which present opportunities for new beverage occasions, tastes and functional benefits. Our future success is therefore partially dependent on our ability to identify these trends and develop products and brands that effectively meet those needs. We also invest in sales and marketing and execute our sales strategy to develop and deepen consumers’ connection to our brand and new products and to create category growth and increase our branded share. Our innovation efforts focus on developing and marketing product extensions, improving upon the quality and taste profiles of existing products, and introducing new products or brands to meet evolving consumer needs. For example, in 2024 we introduced Vita Coco Treats, a refreshingly sweet, flavorful coconutmilk-based drink for consumers looking for an indulgent treat. In 2025, we intend to expand distribution of Vita Coco Treats to select retailers nationwide.

Previous wording

To aid the growth of our business, we intend to continue improving our operational efficiency and leverage our brand position across channels, and therefore have a balanced approach to investment and development of capabilities in retail and e-commerce execution. Our DSD network is an important asset in executing physical retail programs and ensuring product availability and visibility in the United States. In 2023, we offered more multi-packs in coconut water in US retail to increase consumption with core consumers, and increased distribution of our other product offerings. Managing our DSD network requires relationship building and communication as to plans, and alignment of goals and interests, and we are not always a top priority for our DSD network. We also continue to expand our business in e-commerce, including our DTC business, and look to adapt our approaches as consumer and retail behavior changes to ensure we remain competitive and visible regardless of channel.

Current wording

To aid the growth of our business, we intend to continue improving our operational efficiency and leverage our brand position across channels, and therefore have a balanced approach to investment and development of capabilities in retail and e-commerce execution. Our DSD network is an important asset in executing physical retail programs and ensuring product availability and visibility in the U.S. In 2024, we offered more multi-packs in coconut water in U.S. retail to increase consumption with core consumers, and increased distribution of our other product offerings. Managing our DSD network requires relationship building and communication as to plans, and alignment of goals and interests, and we are not always a top priority for our DSD network. We also continue to expand our business in e-commerce, including our DTC business, and look to adapt our approaches as consumer and retail behavior changes to ensure we remain competitive and visible regardless of channel.

Previous wording

We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions in which we operate. We recognize deferred tax assets and liabilities based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. We regularly assess the need to record a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Current wording

We are subject to federal and state income taxes in the U.S. and taxes in foreign jurisdictions in which we operate. We recognize deferred tax assets and liabilities based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. We regularly assess the need to record a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Previous wording

•Americas—The Americas segment is comprised of our operations in the Americas region, primarily in the United States and Canada.

Current wording

•Americas—The Americas segment is comprised of our operations in the Americas region, primarily in the U.S. and Canada.

Previous wording

•Other—This product category consists of all other products, which includes Runa(until we ceased selling it in December 2023), Ever & Everand PWR LIFT product offerings, Vita Coco product extensions beyond coconut water, coconut milk products, and other revenue transactions (e.g., bulk product sales). For these products, control is transferred upon customer receipt, at which point the Company recognizes the transaction price for the product as revenue.

Current wording

•Other—This product category consists of all other products, which included Runa(until we ceased selling it in December 2023), and includes Ever & Everand PWR LIFT product offerings, Vita Coco product extensions beyond coconut water, coconut milk products, and other revenue transactions (e.g., bulk product sales). For these products, control is transferred upon customer receipt, at which point the Company recognizes the transaction price for the product as revenue.

Previous wording

Americas net sales increased by $56.6 million, or 15.2%, to $430.2 million for the year ended December 31, 2023, from $373.6 million for the year ended December 31, 2022, primarily driven by CE volume growth of 13.8% with additional benefit from branded pricing, partially offset by private label price/mix.

Current wording

Americas net sales increased by $12.1 million, or 2.8%, to $442.3 million for the year ended December 31, 2024, from $430.2 million for the year ended December 31, 2023, primarily driven by CE volume growth of 2.7% with additional benefit from branded pricing. These increases were partially offset by a decline in private label volume due to the transition out of private label oil at a key customer, and supply constraints impacting private label coconut water.

Previous wording

Vita Coco Coconut Water net sales increased by $41.3 million, or 15.0%, to $317.2 million for the year ended December 31, 2023, from $276 million for the year ended December 31, 2022. The increase was primarily driven by a combination of increased CE volume growth and benefits from pricing actions.

Current wording

Vita Coco Coconut Water net sales increased by $26.1 million, or 8.2%, to $343.3 million for the year ended December 31, 2024, from $317.2 million for the year ended December 31, 2023. The increase was primarily driven by a combination of increased CE volume growth and benefits from pricing actions.

Previous wording

International net sales increased by $9.2 million, or 17.0%, to $63.4 million for the year ended December 31, 2023 from $54.2 million for the year ended December 31, 2022. The increase was driven by CE volume growth of 11.7%, with notable growth in the Europe, the Middle East and Africa ("EMEA") region, in addition to benefits from net pricing actions.

Current wording

International net sales increased by $10.3 million, or 16.3%, to $73.7 million for the year ended December 31, 2024 from $63.4 million for the year ended December 31, 2023. The increased sales were driven by CE volume growth of 12.8%, with notable growth in the Europe, the Middle East and Africa ("EMEA") region, in addition to benefits from net pricing actions.

Previous wording

Vita Coco Coconut Water net sales increased by $3.3 million, or 8.4%, to $41.8 million for the year ended December 31, 2023, from $38.6 million for the year ended December 31, 2022. The increase was driven by higher CE volume, primarily in the European region, which was partially offset by volume decreases in Asia, in addition to benefits from net pricing actions..

Current wording

Vita Coco Coconut Water net sales increased by $8.5 million, or 20.3%, to $50.3 million for the year ended December 31, 2024, from $41.8 million for the year ended December 31, 2023. The increased sales was driven by higher CE volume, primarily in the European region, and benefits from net pricing actions. These increases were partially offset by volume decreases in the Asia Pacific region ("APAC").

Previous wording

Private Label net sales increased by $5.9 million, or 45.6%, to $18.7 million for the year ended December 31, 2023, as compared to $12.9 million for the year ended December 31, 2022, which was driven by CE volume growth in both EMEA and the Asia Pacific regions.

Current wording

Private Label net sales increased by $0.6 million, or 3.3%, to $19.3 million for the year ended December 31, 2024, as compared to $18.7 million for the year ended December 31, 2023, which was driven by CE volume growth in EMEA, which was partially offset by CE volume decline in shipments from APAC.

Previous wording

Net Sales for Other products increased by $0.1 million, or 3.1%, to $2.8 million for the year ended December 31, 2023, from $2.7 million for the year ended December 31, 2022, driven primarily by CE volume growth in the EMEA region.

Current wording

Net Sales for Other products increased by $1.2 million, or 42.6%, to $4.0 million for the year ended December 31, 2024, from $2.8 million for the year ended December 31, 2023, driven primarily by CE volume growth in both EMEA and APAC regions.

Previous wording

On a consolidated basis, cost of goods sold decreased $11.5 million, or 3.6%, to $312.9 million for the year ended December 31, 2023, from $324.4 million for the year ended December 31, 2022. On a consolidated and segment basis, the decrease was primarily driven by significantly lower transportation costs, relating to ocean freight and domestic logistics, which were partly offset by higher CE volume.

Current wording

On a consolidated basis, cost of goods sold increased $4.3 million, or 1.4%, to $317.2 million for the year ended December 31, 2024, from $312.9 million for the year ended December 31, 2023. On a consolidated and segment basis, the increase was primarily driven by elevated transportation costs relating to ocean freight, which was partly offset by lower finished goods costs, partially driven by private label product mix, and domestic logistics.

Previous wording

On a consolidated basis, gross profit increased by $77.4 million, or 74.9%, to $180.7 million for the year ended December 31, 2023, from $103.4 million for the year ended December 31, 2022. This was a result of decreased transportation cost, strong CE volume growth and benefits from branded pricing actions, which was partially offset by price/mix effects within private label products. As a result, gross margin increased approximately 12.4% percentage points to 36.6% for the year ended December 31, 2023, as compared to 24.2% for the year ended December 31, 2022.

Current wording

On a consolidated basis, gross profit increased by $18.1 million, or 10.0%, to $198.8 million for the year ended December 31, 2024, from $180.7 million for the year ended December 31, 2023. This was a result of CE volume growth, Vita Coco Coconut Water net pricing improvement and lower domestic transportation costs, partially offset by elevated transportation costs relating to ocean freight. As a result, gross margin increased approximately 1.9% percentage points to 38.5% for the year ended December 31, 2024, as compared to 36.6% for the year ended December 31, 2023.

Previous wording

During the year ended December 31, 2023, we recorded an unrealized loss of $0.9 million relating to outstanding derivative instruments for forward foreign currency exchange contracts, with the largest loss for the year ended December 31, 2023 related to the contracts hedging the British pound and the Brazilian real. During the year ended December 31, 2022, we recorded an unrealized gain of $6.6 million relating to outstanding derivative instruments for forward foreign currency exchange contracts. All forward foreign currency exchange contracts were entered to hedge some of our exposures to the British pound, Canadian dollar, Brazilian real, Malaysian ringgit, European Union euro, and Thai baht.

Current wording

During the year ended December 31, 2024, we recorded an unrealized loss of $8.2 million for the mark-to-market changes in the fair value on the outstanding derivative instruments for forward foreign currency exchange contracts, with the largest loss for the year ended December 31, 2024 related to the contracts hedging the Brazilian real, offset by gains in British Pound, Euro, and Canadian dollar. During the year ended December 31, 2023, we recorded an unrealized loss of $0.9 million relating to outstanding derivative instruments for forward foreign currency exchange contracts. All forward foreign currency exchange contracts were entered to hedge some of our exposures to the British pound, Canadian dollar, Brazilian real, Malaysian ringgit, Euro, and Thai baht.

Previous wording

Foreign currency loss was $0.3 million for the year ended December 31, 2023, as compared to a $1.4 million gain for the year ended December 31, 2022. The change in both years was a result of movements in various foreign currency exchange rates related to transactions denominated in currencies other than the functional currency.

Current wording

Foreign currency loss was $1.6 million for the year ended December 31, 2024, as compared to a $0.3 million loss for the year ended December 31, 2023. The change in both years was a result of movements in various foreign currency exchange rates related to transactions denominated in currencies other than the functional currency.

Previous wording

Income tax expense was $11.3 million for the year ended December 31, 2023, as compared to $3.0 million for the year ended December 31, 2022. The effective combined federal, state and foreign tax rate decreased to 19.5% from 27.9% for the years ended December 31, 2023, and 2022, respectively.

Current wording

Income tax expense was $14.8 million for the year ended December 31, 2024, as compared to $11.3 million for the year ended December 31, 2023. The effective combined federal, state and foreign tax rate increased to 21.0% from 19.5% for the years ended December 31, 2024 and 2023, respectively.

Previous wording

The effective tax rate for the current period is lower than the U.S. statutory rate of 21% primarily as a result of lower statutory tax rates in countries outside the U.S. that the Company operates in and the corresponding credits available from those taxing jurisdictions to offset U.S. income tax. The effective tax rate for the same period in the prior year is higher than the U.S. statutory rate of 21% primarily as a result of state income taxes for the U.S. operations of the Company and other nondeductible expenses for tax purposes, and is partially offset by lower statutory tax rates in countries outside the U.S. that the Company operates in. The change in effective tax rates between the periods is primarily driven by the jurisdictional mix of the Company’s pre-tax profits and the relative impact of other nondeductible expense in relation to the pre-tax profits.

Current wording

The effective tax rate for the current period is in line with the U.S. statutory rate of 21%, due to offsetting items having minimal net impact on the rate. Primarily, the benefit of lower statutory tax rates in foreign jurisdictions is offset by state income taxes. The effective tax rate for the same period in the prior year is lower than the U.S. statutory rate of 21% primarily driven by lower tax rates in foreign jurisdictions and the associated credits available to offset U.S. income tax. The change in effective tax rates between the periods is primarily attributable to state income taxes.

Previous wording

These non-GAAP measures are key metrics used by management and our board of directors, to assess our financial performance. We present these non-GAAP measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance and because we believe it is useful for investors to see the measures that management uses to evaluate the Company.

Current wording

These non-GAAP measures are key metrics used by management and our Board, to assess our financial performance. We present these non-GAAP measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance and because we believe it is useful for investors to see the measures that management uses to evaluate the Company.

Previous wording

Since our inception, we have financed our operations primarily through cash generated from our business operations and proceeds on borrowings through our credit facilities and term loans. We had $132.5 million and $19.6 million of cash and cash equivalents as of December 31, 2023 and 2022, respectively.

Current wording

Since our inception, we have financed our operations primarily through cash generated from our business operations and proceeds on borrowings through our credit facilities and term loans. We had $164.7 million and $132.5 million of cash and cash equivalents as of December 31, 2024 and 2023, respectively.

Previous wording

Our future capital requirements will depend on many factors, including our revenue growth rate, our working capital needs primarily for inventory build, our global footprint, the expansion of our marketing activities, the timing and extent of spending to support product development efforts, the introduction of new and enhanced products and the continued market consumption of our products, as well as any shareholder distribution either through equity buybacks or dividends. Our asset-lite operating model has historically provided us with a low cost nimble, and scalable supply chain, which allows us to adapt to changes in the market or consumer preferences while also efficiently introducing new products across our platform. We may seek additional equity or debt financing in the future in order to acquire or invest in complementary businesses, products and/or new IT infrastructures. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued product innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.

Current wording

Our future capital requirements will depend on many factors, including our revenue growth rate, our working capital needs primarily for inventory build, our global footprint, the expansion of our marketing activities, the timing and extent of spending to support product development efforts, the introduction of new and enhanced products and the continued market consumption of our products, as well as any shareholder distribution either through equity buybacks or dividends. Our asset-light operating model has historically provided us with a low cost nimble, and scalable supply chain, which allows us to adapt to changes in the market or consumer preferences while also efficiently introducing new products across our platform. We may seek additional equity or debt financing in the future in order to acquire or invest in complementary businesses, products and/or new IT infrastructures. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued product innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.

Previous wording

During the year ended December 31, 2023 as compared to the year ended December 31, 2022, cash used in investing activities decreased $0.4 million, driven by less expenditures for property and equipment.

Current wording

During the year ended December 31, 2024 as compared to the year ended December 31, 2023, cash used in investing activities increased $0.4 million due to equipment purchases and technology related capital expenditures.

Previous wording

During the year ended December 31, 2023 compared to the year ended December 31, 2022, net cash provided by financing activities was $3.3 million higher, primarily driven by increased proceeds from the exercise of stock options.

Current wording

During the year ended December 31, 2024 compared to the year ended December 31, 2023, net cash used by financing activities increased $14.6 million, primarily driven by share repurchases that occurred in 2024 and lower proceeds from stock award exercises. See Note 14, Stockholders' Equity, for further discussion on share repurchases.

Previous wording

In May 2020, the Company entered into the five-year credit facility (the "2020 Credit Facility") with Wells Fargo Bank, National Association consisting of a revolving line of credit, which currently provides for committed borrowings of $60 million. The maturity date on the 2020 Credit Facility is May 12, 2026.

Current wording

In May 2020, the Company entered into the 2020 Credit Facility with Wells Fargo Bank, National Association consisting of a revolving line of credit, which currently provides for committed borrowings of $60 million. On February 14, 2024, the 2020 Credit Facility was amended and extended for five years, with an amended maturity date of February 13, 2030.

Previous wording

Starting in December 2022, borrowings on the 2020 Credit Facility bear interest at rates based on either: 1) a fluctuating rate per annum determined to be the sum of Daily Simple Secured Overnight Financing Rate ("SOFR") plus a spread defined in the credit agreement (the "Spread"); or 2) a fixed rate per annum determined to be the sum of the Term SOFR plus the Spread. The Spread ranges from 1.00% to 1.75%, which is based on the Company’s leverage ratio (as defined in the credit agreement) for the immediately preceding fiscal quarter as defined in the credit agreement. In addition, the Company is currently subject to an unused commitment fee ranging from 0.10% and 0.20% on the unused amount of the line of credit, with the rate being based on the Company’s leverage ratio (as defined in the credit agreement).

Current wording

Starting in December 2022, borrowings on the 2020 Credit Facility bear interest at rates based on either: 1) a fluctuating rate per annum determined to be the sum of Daily Simple Secured Overnight Financing Rate ("SOFR") plus a spread defined in the credit agreement (the "Spread"); or 2) a fixed rate per annum determined to be the sum of the Term SOFR plus the Spread. The Spread ranges from 1.00% to 1.75%, which is based on the Company’s leverage ratio (as defined in the credit agreement) for the immediately preceding fiscal quarter as defined in the credit agreement. In addition, the Company was subject to an unused commitment fee ranging from 0.10% and 0.20% on the unused amount of the line of credit in the year ended December 31, 2024, with the rate based on the Company’s leverage ratio (as defined in the credit agreement). Beginning on February 14, 2025, the unused commitment fees will range from 0.125% to 0.225%.

Previous wording

Fargo, the federal funds effective rate plus 1.5% and one-month LIBOR plus 1.50%), as selected periodically by the Company. The LIBOR-based loans bore interest at LIBOR plus the Spread. The unused commitment fee prior to the December 2022 amendment was the same.

Current wording

The borrowings made prior to December 2022 bore interest at rates based on either: 1) London Interbank Offered Rate ("LIBOR"); or 2) a specified base rate (determined by reference to the greatest of the prime rate published by Wells Fargo, the federal funds effective rate plus 1.5% and one-month LIBOR plus 1.50%), as selected periodically by the Company. The LIBOR-based loans bore interest at LIBOR plus the Spread. The unused commitment fee prior to the December 2022 amendment was the same.

Previous wording

The outstanding balance on the Revolving Facility was zero as of December 31, 2023 and December 31, 2022, respectively. As of December 31, 2023, we were compliant with all financial covenants.

Current wording

There were no amounts drawn on the Revolving Facility as of December 31, 2024 and December 31, 2023, respectively. As of December 31, 2024, we were compliant with all financial covenants.

Previous wording

We lease certain assets under noncancelable operating leases, which expire through 2025. The leases relate primarily to office space in addition to machinery and equipment. Future minimum commitments under these leases are $1.7 million as of December 31, 2023.

Current wording

We lease certain assets under noncancelable operating leases, which expire through 2025. The leases relate primarily to office space in addition to machinery and equipment. Future minimum commitments under these leases are $0.4 million as of December 31, 2024.

Previous wording

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"). ASC 606 defines a five-step model that requires entities exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying the performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Revenue is recognized when control of the promised good is transferred to the customer in an amount that reflects the consideration to which the Company is expected to be entitled to receive in exchange for those products. Each contract includes a single performance obligation to transfer control of the product to the customer. Our revenue is recognized net of allowances for returns, discounts, credits and any taxes collected from consumers.

Current wording

The Company recognizes revenue in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"). ASC 606 defines a five-step model that requires entities exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying the performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Revenue is recognized when control of the promised good is transferred to the customer in an amount that reflects the consideration to which the Company is expected to be entitled to receive in exchange for those products. Each contract includes a single performance obligation to transfer control of the product to the customer. Our revenue is recognized net of allowances for returns, discounts, credits and any taxes collected from consumers.

Previous wording

The Company accounts for income taxes under Accounting Standards Codification 740, Income Taxes("ASC 740"), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the consolidated financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax assets and liabilities computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. Interest and penalties related to unrecognized tax positions are included in income tax expense in the consolidated statement of operations and comprehensive income and accrued expenses in the consolidated balance sheets. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Current wording

The Company accounts for income taxes under ASC Topic 740, Income Taxes("ASC 740"), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the consolidated financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax assets and liabilities computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. Interest and penalties related to unrecognized tax positions are included in income tax expense in the consolidated statement of operations and comprehensive income and accrued expenses in the consolidated balance sheets. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Previous wording

Goodwill represents the excess of the purchase price paid in excess of the fair value of net tangible and intangible assets acquired in a business combination and is measured in accordance with the provisions of ASC 350, Intangibles—Goodwill and Other. Goodwill is not amortized; instead goodwill is tested for impairment on an annual basis on December 31, or more frequently if the Company believes indicators of impairment exist.

Current wording

Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired in a business combination and is measured in accordance with the provisions of ASC Topic 350, Intangibles—Goodwill and Other(ASC 350"). Goodwill is not amortized; instead goodwill is tested for impairment on an annual basis on December 31, or more frequently if the Company believes indicators of impairment exist.

Previous wording

The Company has determined that there are three reporting units for purposes of testing goodwill for impairment: (i) the Americas reporting unit, (ii) the Europe reporting unit, and (iii) the Asia reporting unit. The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. In performing the qualitative assessment, the Company reviews factors both specific to the reporting units and to the Company as a whole, such as financial performance, macroeconomic conditions, industry and market considerations, and the fair value of each reporting unit at the last valuation date. If the Company elects this option and believes, as a result of the qualitative assessment, that it is more likely than not that the carrying value of each of the reporting units exceeds their fair value, the quantitative impairment test is required; otherwise, no further testing is required.

Current wording

The Company has determined that there are three reporting units for purposes of testing goodwill for impairment. The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. In performing the qualitative assessment, the Company reviews factors both specific to the reporting units and to the Company as a whole, such as financial performance, macroeconomic conditions, industry and market considerations, and the fair value of each reporting unit at the last valuation date. If the Company elects this option and believes, as a result of the qualitative assessment, that it is more likely than not that the carrying value of each of the reporting units exceeds their fair value, the quantitative impairment test is required; otherwise, no further testing is required.

Previous wording

Emerging growth company status ceases on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (ii) the last day of our fiscal year following the fifth anniversary of the date of the closing of this offering, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. Based on the closing share price and the market value of the Company's Common Stock, par value $0.01 per share ("Common Stock"), held by non-affiliates as of June 30, 2023, the Company was deemed a large accelerated public company filer as of December 31, 2023. As a result, beginning with this Annual Report on Form 10-K for the year ending December 31, 2023, the Company will not be able to rely on the extended transition period noted above and will be required to adopt all new accounting pronouncements within the same time periods as public companies.

Current wording

The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. Following the IPO, as an emerging growth company, we elected to apply the extended transition period. Based on the closing share price and the market value of our common stock, par value $0.01 per share, held by non-affiliates as of June 30, 2023, the Company was deemed a large accelerated public company filer as of December 31, 2023. As a result, beginning with the Annual Report on Form 10-K for the year ended December 31, 2023, the Company was not able to rely on the extended transition period noted above and was required to adopt all new accounting pronouncements within the same time periods as public companies.