Crocs, Inc. (NASDAQ:CROX) Q2 2023 Earnings Conference Call July 27, 2023 8:30 AM ET Company Participants Cori Lin - Vice President, Corporate Finance Andrew Rees - Chief Executive Officer Anne Mehlman - Executive Vice President & Chief Financial Officer Conference Call Participants Jonathan Komp - Baird Abbie Zvejnieks - Piper Sandler Jay Sole - UBS Jeff Lick - B. Riley Financial Jim Duffy - Steffel Rick Patel - Raymond James Operator Good day, and welcome to the Crocs' Second Quarter 2023 Earnings Conferen ...

Q2 2023 Investor Presentation These statements include, but are not limited to, statements regarding potential impacts to our business related to our supply chain challenges, cost inflation, our financial condition, brand and liquidity outlook, and expectations regarding our future revenue, margins, non-GAAP adjustments, tax rate, earnings per share, debt ratios and capital expenditures, the acquisition of HEYDUDE and benefits thereof, Crocs' strategy, plans, objectives, expectations (financial or otherwise ...

Table of Contents | --- | --- | --- | --- | --- | --- | --- | --- | --- | |--------------------------------------------------------------------------------------------------|-------|-------------------------------|-------|-------|------------------------------------------------|--------|---------------------------------------------------|----------------------| | Cash provided by operating activities \nCash used in investing activities | $ | 2023 \n330,613 \n(51,645) | $ | (in | 2022 \n thousands) \n84,744 ...

Crocs, Inc. (NASDAQ:CROX) Q1 2023 Results Conference Call April 27, 2023 8:30 AM ET Company Participants Cori Lin - Vice President, Corporate Finance Andrew Rees - Chief Executive Officer Anne Mehlman - Executive Vice President & Chief Financial Officer Conference Call Participants Abbie Zvejnieks - Piper Sandler Jonathan Komp - Baird Tom Nikic - Wedbush Securities Jeff Lick - B. Riley Financial Jay Sole - UBS Laura Champine - LOOP Jim Duffy - Stifel Mitch Kummetz - Seaport Aubrey Tianello - BNP Paribas Hal ...

[PART I — Financial Information](index=5&type=section&id=PART%20I%20%E2%80%94%20Financial%20Information) [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Q1 2023, including income, balance sheets, and cash flows, with accompanying notes [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Revenues increased 33.9% to **$884.2 million** in Q1 2023, with net income rising to **$149.5 million** and diluted EPS reaching **$2.39** Condensed Consolidated Statements of Income (Q1 2023 vs Q1 2022) | Financial Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | **Revenues** | $884,166 | $660,148 | | Gross profit | $476,370 | $324,924 | | Income from operations | $234,928 | $118,677 | | Income before income taxes | $191,766 | $99,060 | | **Net income** | $149,543 | $72,760 | | **Diluted EPS** | $2.39 | $1.19 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$4.60 billion** as of March 31, 2023, while total liabilities decreased to **$3.63 billion**, and stockholders' equity rose to **$968.5 million** Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total current assets | $1,114,662 | $1,025,975 | | **Total assets** | $4,595,635 | $4,501,797 | | Total current liabilities | $634,366 | $641,274 | | Long-term borrowings | $2,250,288 | $2,298,027 | | **Total liabilities** | $3,627,135 | $3,683,866 | | **Total stockholders' equity** | $968,500 | $817,931 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow improved to a **$9.9 million** inflow in Q1 2023 from a **$68.8 million** outflow, while investing and financing activities reflect reduced acquisition-related spending Cash Flow Summary (Q1 2023 vs Q1 2022) | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Cash provided by (used in) operating activities | $9,931 | $(68,765) | | Cash used in investing activities | $(27,581) | $(2,071,466) | | Cash provided by (used in) financing activities | $(52,306) | $2,099,484 | | Net change in cash | $(65,956) | $(41,557) | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover accounting policies, the **HEYDUDE acquisition**, segment reporting, and the company's **$2.33 billion** long-term debt structure - The company has four reportable operating segments: Crocs Brand (North America, Asia Pacific, EMEALA) and the HEYDUDE Brand[36](index=36&type=chunk)[122](index=122&type=chunk) - The acquisition of HEYDUDE was completed on February 17, 2022, for an aggregate price of **$2.3 billion**, consisting of **$2.05 billion** in cash and **2.85 million** shares of common stock[23](index=23&type=chunk)[105](index=105&type=chunk) - As of March 31, 2023, total long-term borrowings had a face value of **$2.325 billion**, including a **$1.425 billion** Term Loan B Facility and **$700 million** in Senior Notes[82](index=82&type=chunk) - The company had remaining authorization to repurchase approximately **$1.05 billion** of its common stock as of March 31, 2023[67](index=67&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial results, highlighting **33.9% revenue growth** to **$884.2 million**, improved margins, and brand performance, alongside liquidity and capital resources - Key trends include the integration of HEYDUDE, with plans for a new distribution center and ERP system, and caution regarding consumer confidence in Western markets due to macroeconomic pressures[150](index=150&type=chunk) Q1 2023 vs Q1 2022 Key Metrics | Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $884.2M | $660.1M | 33.9% | | Gross Margin | 53.9% | 49.2% | +470 bp | | Operating Margin | 26.6% | 18.0% | +860 bp | | Diluted EPS | $2.39 | $1.19 | 100.8% | - Revenue growth of **33.9%** was driven by a **37.8%** increase in unit sales volume, partially offset by a **2.3%** decrease from unfavorable currency exchange rates and a **1.6%** decrease from lower average selling prices[135](index=135&type=chunk)[156](index=156&type=chunk) - The company paid down **$41.4 million** of net borrowings during the quarter, reducing total borrowings to **$2.28 billion**[150](index=150&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Consolidated revenues rose **33.9%** to **$884.2 million**, driven by strong growth in both Crocs and HEYDUDE brands, leading to improved gross margin and operating income Revenues by Brand and Channel (Q1 2023 vs Q1 2022) | Brand / Channel | Q1 2023 (in thousands) | Q1 2022 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | **Crocs Brand** | **$648,778** | **$545,225** | **19.0%** | | - Wholesale | $410,563 | $344,258 | 19.3% | | - DTC | $238,215 | $200,967 | 18.5% | | **HEYDUDE Brand** | **$235,388** | **$114,923** | **104.8%** | | - Wholesale | $167,863 | $86,919 | 93.1% | | - DTC | $67,525 | $28,004 | 141.1% | | **Total Revenues** | **$884,166** | **$660,148** | **33.9%** | - Gross margin increased to **53.9%** from **49.2%** in Q1 2022, partly due to higher air freight in the prior year and a **420 basis point** benefit from adjustments to the fair value of HEYDUDE inventory costs upon acquisition in 2022[153](index=153&type=chunk)[157](index=157&type=chunk)[181](index=181&type=chunk) - SG&A as a percentage of revenues decreased to **27.3%** from **31.2%** in Q1 2022, mainly because prior year costs associated with the HEYDUDE acquisition did not recur[153](index=153&type=chunk) [Reportable Operating Segments](index=30&type=section&id=Reportable%20Operating%20Segments) Crocs Brand revenues grew across all regions, notably **Asia Pacific** at **46.1%**, while HEYDUDE Brand revenue surged **104.8%**, contributing to significant operating income increases for both brands Segment Revenues and Operating Income (Q1 2023 vs Q1 2022) | Segment | Revenue Q1 2023 (in thousands) | Revenue Q1 2022 (in thousands) | Operating Income Q1 2023 (in thousands) | Operating Income Q1 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Crocs - North America | $351,308 | $319,450 | $127,783 | $129,611 | | Crocs - Asia Pacific | $140,002 | $95,847 | $56,605 | $30,106 | | Crocs - EMEALA | $157,467 | $129,921 | $65,776 | $34,927 | | **Total Crocs Brand** | **$648,778** | **$545,225** | **$218,007** | **$163,935** | | **HEYDUDE Brand** | **$235,388** | **$114,923** | **$76,620** | **$15,658** | - Asia Pacific revenue growth was driven by China (due to relief of COVID-19 restrictions), Australia, South Korea, and Southeast Asia distributors[167](index=167&type=chunk) - HEYDUDE's operating income increase of **389.3%** was partly due to prior year adjustments of **$27.9 million** to the fair value of inventory costs upon acquisition[220](index=220&type=chunk) [Financial Condition, Capital Resources, and Liquidity](index=34&type=section&id=Financial%20Condition,%20Capital%20Resources,%20and%20Liquidity) The company maintains a strong liquidity position with **$125.7 million** in cash and **$550.7 million** in available borrowings, supported by improved operating cash flow and compliance with debt covenants Liquidity Position as of March 31, 2023 | Component | Amount (in thousands) | | :--- | :--- | | Cash and cash equivalents | $125,687 | | Available borrowings | $550,719 | - Cash provided by operating activities increased by **$78.7 million** year-over-year, driven by higher net income and favorable changes in working capital[238](index=238&type=chunk) - Financing activities used **$52.3 million** in cash, a stark contrast to the **$2.1 billion** provided in Q1 2022, which was used to fund the HEYDUDE acquisition[33](index=33&type=chunk)[213](index=213&type=chunk) - The company is in compliance with all financial covenants for its debt facilities, which include a maximum leverage ratio and a minimum interest coverage ratio[59](index=59&type=chunk)[230](index=230&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rate fluctuations on variable-rate debt and foreign currency volatility, with mitigation strategies in place - The company is exposed to interest rate risk on its variable-rate Term Loan B Facility and Revolving Facility; a hypothetical **1%** rate increase would have raised Q1 2023 interest expense by **$4.2 million**[216](index=216&type=chunk)[244](index=244&type=chunk) - The company faces foreign currency exchange risk; a hypothetical **1%** appreciation of the U.S. Dollar would have reduced Q1 2023 revenues by **$3.3 million** and income before taxes by **$1.3 million**[245](index=245&type=chunk) - To manage currency risk, the company uses foreign currency forward contracts, with a notional value of approximately **$144.3 million** as of March 31, 2023[262](index=262&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with ongoing integration of HEYDUDE into internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of March 31, 2023[248](index=248&type=chunk) - The company is in the process of integrating HEYDUDE into its overall internal control over financial reporting and will complete the evaluation for the year ending December 31, 2023[249](index=249&type=chunk) [PART II — Other Information](index=42&type=section&id=PART%20II%20%E2%80%94%20Other%20Information) [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to ordinary course litigation but does not anticipate any pending legal proceedings to have a material adverse impact - A discussion of legal matters is provided in Note 12 — Commitments and Contingencies[268](index=268&type=chunk) - The company believes no pending legal proceedings would reasonably have a material adverse impact on its business, financial results, and cash flows[98](index=98&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes to the risk factors from the Annual Report on Form 10-K for the year ended December 31, 2022[269](index=269&type=chunk) [Item 6. Exhibits](index=43&type=section&id=ITEM%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate documents, CEO/CFO certifications, and XBRL data files - The report includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act[251](index=251&type=chunk)[271](index=271&type=chunk) - Interactive Data Files (XBRL) are included as exhibits[251](index=251&type=chunk)

Crocs, Inc. (NASDAQ:CROX) Q4 2022 Earnings Conference Call February 16, 2023 8:30 AM ET Company Participants Cori Lin - Vice President, Corporate Finance Andrew Rees - Chief Executive Officer Anne Mehlman - Executive Vice President & Chief Financial Officer Conference Call Participants Jonathan Komp - Baird Tom Nikic - Wedbush Securities Abbie Zvejnieks - Piper Sandler Laura Champine - Loop Sam Poser - Williams Trading Jim Duffy - Stifel Mitch Kummetz - Seaport Research Mauricio Serna - UBS Aubrey Tianello ...

Financial Performance - Crocs Inc's 2022 revenue reached a record $3.6 billion [1], representing a 58% increase compared to the previous year [48] - Q4 2022 revenues were $9452 million [3], a 65% increase [3] - The company achieved a double-digit operating margin target in 2019 and expanded the adjusted margin to 28% in 2022 [1] - Crocs brand revenue grew by 19% in Q4 [11] - Adjusted gross margin for the Crocs brand expanded by 510 basis points due to a shift to molded product and Jibbitz [1] Brand Growth and Strategy - Relevance for the Crocs brand has increased by 34%, and consideration increased by 69% [1] - Crocs brand marketing spend increased from approximately $70 million to $190 million [1] - Digital penetration reached 45% [14] - The company repurchased approximately $17 billion of shares since 2014 at an average price of $3790 per share [1] HEYDUDE Brand Acquisition and Performance - Crocs acquired the casual footwear brand HEYDUDE [1] - HEYDUDE brand revenue grew 70% to $986 million [79] - HEYDUDE brand's adjusted gross margin was 472% in Q4 2022 [122]

Performance-condition RSUs are typically granted on an annual basis and consist of a performance-based and service-based component. The performance targets and vesting conditions for performance-condition RSUs are based on achievement of multiple weighted performance goals. The number of performance-condition RSUs ultimately awarded may be between 0% and 200%, based on performance. These RSUs vest in three equal annual installments beginning one year after the grant date, pending certification of performanc ...

~70% PF ~27% * FY 2022E reflects expected estimated revenues and guidance for non-GAAP operating margin. Full 2022 financial results to be announced in February 2023. See reconciliation to GAAP equivalents in Appendix. ** Pro forma includes HEYDUDE for the period prior to acquisition close (assuming the acquisition had closed on the first day of such trailing twelve month period). CASUALIZATION PERSONALIZATION Brand * FY 2022E reflects expected estimated revenues and mix. All figures are approximate. Full 2 ...

Financial Data and Key Metrics - Consolidated revenues for Q3 2022 were $985 million, representing 63% growth on a constant currency basis [10] - Crocs brand revenues grew 20% on a constant currency basis, with DTC comparable sales up 18% [10] - HEYDUDE brand revenues were $269 million, representing 87% growth compared to the prior year [10] - Adjusted operating margins were 28%, and adjusted diluted EPS increased 20% to $2.97 per share [10] - Net leverage improved to 2.4x, with $155 million of debt repaid during the quarter [38] Business Line Performance - Crocs brand sold 30.3 million pairs of shoes in Q3, a 19.2% increase over Q3 2021 [28] - Crocs brand average selling price (ASP) was $23.33, flat on a constant currency basis but down 4.5% on a reported basis due to unfavorable FX [28] - HEYDUDE brand is expected to exceed $1 billion in revenues in 2023, a year earlier than previously anticipated [18] - Clogs continued strong double-digit growth, while sandals grew nearly 20% in Q3 [16] - Jibbitz grew double digits year-over-year, driven by consumer engagement [16] Market Performance - North America Crocs brand revenues increased 1.8% to $445 million, with DTC comparable sales up 13% [29] - International markets drove strong growth, with Asia revenues up 82.3% to $138 million and EMEALA revenues up 45.6% to $132 million [30][31] - China saw over 30% revenue growth despite COVID lockdowns [31] - HEYDUDE brand saw increased mindshare in the Northeast and South regions of the US [19] Strategy and Industry Competition - The company is focused on driving market share gains and executing long-term growth strategies for sustainable profitable growth [9] - Marketing activations and product innovations, such as partnerships with Salehe Bembury and Christian Cowan, have elevated brand relevance [12][13] - Digital growth remains a key initiative, with digital penetration increasing to 37.4% and 22% constant currency growth in digital sales [17] - HEYDUDE's rebranding and influencer strategy are expected to drive further growth [20] Management Commentary on Operating Environment - Macro pressures include widespread inflation, elevated interest rates, a strong US dollar, China's zero-COVID strategy, and the war in Ukraine [23] - High levels of promotions in response to elevated inventory levels are pressuring margins, particularly in the US [24] - Despite these challenges, the company raised its 2022 guidance and remains confident in achieving long-term revenue targets [24] Other Important Information - The company signed a lease for a larger facility in Las Vegas to support HEYDUDE's growth, expected to be operational in Q4 2023 [34] - Inventory balance at the end of Q3 was $514 million, up $301 million year-over-year, including $190 million from HEYDUDE [39] - Full-year 2022 revenue guidance for Crocs brand was raised to $2.605 billion to $2.63 billion, with HEYDUDE expected to generate $850 million to $890 million [40][41] Q&A Session Summary Question: Inventory and Gross Margin Outlook - Crocs brand inventory was down slightly from Q2, reflecting revenue growth and higher costs [47] - Gross margins are expected to remain under pressure due to promotional environments, with transitory costs likely to dissipate in 2023 [47] Question: 2023 Outlook and Innovation - The company is bullish on 2023, with a strong pipeline of product and marketing innovation for both Crocs and HEYDUDE brands [49] - Sandals are expected to see strong growth, particularly in markets like India, Southeast Asia, and the Middle East [57] Question: SG&A Flexibility and Wholesale Strategy - SG&A was leveraged by 420 basis points in Q3, driven by shared services and investments in marketing and talent [52] - The company is disciplined in managing wholesale partner inventories to maintain brand health [53] Question: HEYDUDE's International Expansion - HEYDUDE will begin international expansion in 2023, starting with the UK and Germany [68] - The company is optimistic about HEYDUDE's long-term growth potential but is taking a disciplined approach to international markets [68] Question: HEYDUDE's Customer Overlap with Crocs - There is customer overlap between Crocs and HEYDUDE, but consumers purchase the brands for different wearing occasions [73] - HEYDUDE is taking share from discrete brands and lower-end athletic footwear [73] Question: Average Selling Prices (ASP) and Product Mix - ASPs were down in Q3 due to currency impacts and promotions in North America, offset by price increases in international markets [74] - New product introductions, such as the Echo Clog, are expected to balance out ASP pressures in 2023 [75] Question: HEYDUDE's Performance by Gender and Kids - HEYDUDE's men's business has shown the strongest performance, with opportunities to enhance the women's product range [82] - Kids' distribution is expanding, with key retailers adding HEYDUDE to their portfolios [82]