Steven Madden, Ltd. (NASDAQ:SHOO) Q3 2021 Earnings Conference Call November 3, 2021 8:30 AM ET Company Participants Danielle McCoy - Director of Corporate Development & Investor Relations Edward Rosenfeld - Chairman and Chief Executive Officer Zine Mazouzi - Chief Financial Officer Conference Call Participants Camilo Lyon - BTIG Erinn Murphy - Piper Sandler Kelly Crago - Citigroup Tom Nikic - Wedbush Securities Janine Stichter - Jefferies Marni Shapiro - Retail Tracker Jay Sole - UBS Laura Champine - Loop C ...

PART I – FINANCIAL INFORMATION [ITEM 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents unaudited condensed consolidated financial statements and notes, detailing financial position, performance, and cash flows [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Key Balance Sheet Data (in thousands) | Metric | June 30, 2021 | December 31, 2020 | June 30, 2020 | | :-------------------------------- | :------------ | :---------------- | :------------ | | **ASSETS** | | | | | Cash and cash equivalents | $262,144 | $247,864 | $318,101 | | Total current assets | $743,780 | $698,241 | $635,921 | | Total Assets | $1,173,143 | $1,137,761 | $1,132,392 | | **LIABILITIES** | | | | | Total current liabilities | $279,158 | $235,916 | $237,892 | | Total Liabilities | $390,621 | $347,392 | $365,272 | | **STOCKHOLDERS' EQUITY** | | | | | Total stockholders' equity | $782,522 | $790,369 | $767,120 | - **Total assets increased by $35,382 thousand** from December 31, 2020, to June 30, 2021, reaching **$1,173,143 thousand**[8](index=8&type=chunk) - **Total liabilities increased by $43,229 thousand** from December 31, 2020, to June 30, 2021, reaching **$390,621 thousand**[8](index=8&type=chunk) [Condensed Consolidated Statements of Income/(Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%2F(Loss)) Key Income Statement Data (in thousands, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $397,894 | $142,812 | $758,919 | $501,980 | | Gross profit | $170,055 | $55,888 | $309,159 | $189,352 | | Income/(loss) from operations | $47,718 | $(23,702) | $75,762 | $(49,950) | | Net income/(loss) attributable to Steven Madden, Ltd. | $36,852 | $(16,586) | $58,049 | $(34,037) | | Diluted net income/(loss) per share | $0.45 | $(0.21) | $0.71 | $(0.43) | | Cash dividends declared per common share | $0.15 | $— | $0.30 | $0.15 | - **Total revenue for the three months ended June 30, 2021, increased by 178.6% to $397,894 thousand** compared to the same period last year, and **for the six months, it increased by 51.2% to $758,919 thousand**[9](index=9&type=chunk) - The company reported a **net income of $36,852 thousand** for the three months ended June 30, 2021, a significant improvement from a **net loss of $(16,586) thousand** in the prior-year period[9](index=9&type=chunk) [Condensed Consolidated Statements of Comprehensive Income/(Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%2F(Loss)) Comprehensive Income/(Loss) (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income/(loss) | $37,341 | $(17,144) | $59,672 | $(34,945) | | Total other comprehensive income/(loss) | $3,870 | $5,213 | $4,400 | $(9,250) | | Comprehensive income/(loss) | $41,211 | $(11,931) | $63,863 | $(44,195) | | Comprehensive income/(loss) attributable to Steven Madden, Ltd. | $40,300 | $(11,191) | $62,132 | $(43,447) | - **Comprehensive income attributable to Steven Madden, Ltd. for the three months ended June 30, 2021, was $40,300 thousand**, a substantial increase from a **loss of $(11,191) thousand** in the prior-year period[10](index=10&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Changes in Stockholders' Equity (in thousands) | Metric | Balance at December 31, 2020 | Balance at June 30, 2021 | | :------------------------------------ | :--------------------------- | :----------------------- | | Total Stockholders' Equity | $790,369 | $782,522 | | Share repurchases and net settlement of awards | $(42,794) | $(37,236) | | Dividends on common stock | $(24,772) | $(12,347) | | Net income | $58,049 | $36,852 | - **Total stockholders' equity decreased slightly from $790,369 thousand at December 31, 2020, to $782,522 thousand** at June 30, 2021, primarily due to share repurchases and dividends, partially offset by net income[12](index=12&type=chunk) - The company **repurchased 1,030 thousand shares for $42,794 thousand** during the six months ended June 30, 2021, and **paid $24,772 thousand in cash dividends**[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary (in thousands) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $91,923 | $57,867 | | Net cash provided by/(used in) investing activities | $5,104 | $(4,482) | | Net cash (used in)/provided by financing activities | $(82,729) | $1,844 | | Net increase in cash and cash equivalents | $14,280 | $54,000 | | Cash and cash equivalents – end of period | $262,144 | $318,101 | - **Net cash provided by operating activities increased to $91,923 thousand** for the six months ended June 30, 2021, from $57,867 thousand in the prior-year period[15](index=15&type=chunk) - **Net cash used in financing activities was $(82,729) thousand** for the six months ended June 30, 2021, primarily due to share repurchases and cash dividends[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements – Unaudited](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%E2%80%93%20Unaudited) [Note A – Basis of Reporting](index=9&type=section&id=Note%20A%20%E2%80%93%20Basis%20of%20Reporting) Unaudited condensed consolidated financial statements are prepared under GAAP and SEC regulations, with prior year reclassifications for consistent presentation - Financial statements are prepared in accordance with GAAP for interim information and SEC rules, including normal recurring adjustments[17](index=17&type=chunk) - Certain reclassifications were made to prior years' presentation to conform to the 2021 presentation, primarily related to segment reporting of corporate expenses and assets[17](index=17&type=chunk)[20](index=20&type=chunk) [Note B - COVID-19 and Restructuring Charges](index=9&type=section&id=Note%20B%20-%20COVID-19%20and%20Restructuring%20Charges) COVID-19 impacted 2020 operations with store closures and impairments; 2021 saw business improvements, reinstated dividends, and severance charges - COVID-19 led to temporary store closures, furloughs, salary reductions, and charges for trademark adjustments, asset impairments, and restructuring in 2020[18](index=18&type=chunk) - In 2021, the company experienced business improvements in retail and wholesale, reinstating quarterly cash dividends and stock repurchases[18](index=18&type=chunk) - The company recorded **pre-tax charges of $433 thousand and $1,239 thousand** for additional severance in Q2 2021 and H1 2021, respectively, related to its restructuring plan[19](index=19&type=chunk) [Note C – Reclassification](index=9&type=section&id=Note%20C%20%E2%80%93%20Reclassification) Prior years' financial amounts were reclassified to align with 2021 presentation, mainly affecting segment reporting of corporate expenses and assets - Reclassifications were made to prior years' amounts to conform to the 2021 presentation, mainly for segment reporting of corporate expenses and assets[20](index=20&type=chunk) [Note D – Acquisitions](index=10&type=section&id=Note%20D%20%E2%80%93%20Acquisitions) In Q2 2021, the company acquired remaining non-controlling interests in European and South African joint ventures - **Acquired remaining 49.9% non-controlling interest in European joint venture for $16,626 thousand** on April 14, 2021[21](index=21&type=chunk) - **Acquired remaining 49.9% non-controlling interest in South African joint venture for $2,501 thousand** on June 28, 2021[22](index=22&type=chunk) [Note E – Use of Estimates](index=10&type=section&id=Note%20E%20%E2%80%93%20Use%20of%20Estimates) Financial statements require significant management estimates for revenue, bad debts, inventory, intangible assets, impairment, litigation, and contingent liabilities - Significant estimates include variable consideration in revenue, allowances for bad debts, inventory valuation, intangible asset valuation, impairment of long-lived assets, litigation reserves, and contingent payment liabilities[24](index=24&type=chunk) - The company estimates variable consideration for future customer chargebacks, markdown allowances, discounts, and returns by reviewing major customers' performance indicators[24](index=24&type=chunk) [Note F– Factoring Agreement](index=10&type=section&id=Note%20F%E2%80%93%20Factoring%20Agreement) The company entered a factoring agreement with Rosenthal & Rosenthal, Inc. for receivables collection, with Rosenthal assuming credit risk - Entered into an Amended and Restated Deferred Purchase Factoring Agreement with Rosenthal & Rosenthal, Inc. on July 22, 2020[25](index=25&type=chunk) - Rosenthal serves as the collection agent for certain receivables, receiving a base commission of **0.20%** of the gross invoice amount and assuming credit risk for credit-approved receivables[25](index=25&type=chunk) [Note G – Short-Term Investments](index=10&type=section&id=Note%20G%20%E2%80%93%20Short-Term%20Investments) Short-term investments, primarily certificates of deposit, totaled $40,513 thousand as of June 30, 2021 Short-Term Investments (in thousands) | Date | Amount | | :---------------- | :------- | | June 30, 2021 | $40,513 | | December 31, 2020 | $39,302 | - Short-term investments consist of certificates of deposit with maturities of one year or less[26](index=26&type=chunk) [Note H – Fair Value Measurement](index=11&type=section&id=Note%20H%20%E2%80%93%20Fair%20Value%20Measurement) Fair value measurements use a three-level hierarchy, with Level 3 contingent consideration primarily from B.B. Dakota and GREATS Brand acquisitions Fair Value Measurements (in thousands) as of June 30, 2021 | Category | Fair value | Level 1 | Level 2 | Level 3 | | :---------------------- | :--------- | :------ | :------ | :------ | | **Assets:** | | | | | | Forward contracts | $140 | $— | $140 | $— | | **Liabilities:** | | | | | | Contingent consideration | $8,041 | $— | $— | $8,041 | | Forward contracts | $325 | $— | $325 | $— | - **Level 3 contingent consideration of $8,041 thousand** at June 30, 2021, primarily relates to earn-out provisions from the B.B. Dakota, Inc. and GREATS Brand, Inc. acquisitions, estimated using option pricing or risk-neutral simulation methods[28](index=28&type=chunk)[29](index=29&type=chunk) - Adjustments to contingent consideration valuation resulted in an **expense of $7,720 thousand for B.B. Dakota and $114 thousand for GREATS Brand** in 2021[28](index=28&type=chunk) [Note I – Leases](index=13&type=section&id=Note%20I%20%E2%80%93%20Leases) The company leases properties under operating leases, with liabilities discounted using an incremental borrowing rate and variable payments expensed as incurred Lease Position (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Operating lease right-of-use asset | $97,222 | $101,379 | | Operating leases - current portion | $33,561 | $34,257 | | Operating leases - long-term portion | $92,179 | $98,592 | | Total operating lease liabilities | $125,740 | $132,849 | | Weighted-average remaining lease term | 4.8 years | 5.0 years | | Weighted-average discount rate | 4.2 % | 4.3 % | Total Lease Cost (in thousands) | Metric | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | | :---------------- | :------------------------------- | :----------------------------- | | Operating lease cost | $9,074 | $19,266 | | Variable lease cost | $5,621 | $12,975 | | Total lease cost | $14,615 | $32,080 | - The company made **payments of $2,912 thousand and $9,505 thousand for COVID-19 lease amendments** during the three and six months ended June 30, 2021, respectively, included in variable lease costs[35](index=35&type=chunk)[37](index=37&type=chunk) [Note J – Impairment of Other Long-Lived Assets](index=15&type=section&id=Note%20J%20%E2%80%93%20Impairment%20of%20Other%20Long-Lived%20Assets) Long-lived assets are evaluated for impairment; charges were recorded in 2021 for fixed assets and lease right-of-use assets in specific segments - **Impairment charges of $477 thousand and $1,089 thousand were recorded** for fixed assets and lease right-of-use assets for the three and six months ended June 30, 2021, respectively[40](index=40&type=chunk) - In the prior year, impairment charges were **significantly higher at $1,178 thousand and $29,999 thousand** for the three and six months ended June 30, 2020, due to COVID-19 impacts[40](index=40&type=chunk) [Note K – Share Repurchase Program](index=15&type=section&id=Note%20K%20%E2%80%93%20Share%20Repurchase%20Program) The Board authorized a $200,000 thousand share repurchase program; 736,076 shares were repurchased for $30,678 thousand in H1 2021 - The Share Repurchase Program, **expanded to $200,000 thousand** on April 24, 2019, has no fixed expiration date[41](index=41&type=chunk) Share Repurchase Activity (Six Months Ended June 30, 2021) | Metric | Value | | :------------------------------------ | :------------ | | Shares repurchased | 736,076 | | Aggregate purchase price | $30,678 | | Weighted average price per share | $41.68 | | Amount remaining for future repurchases | $80,912 | - An **additional 294,205 shares were withheld for tax-withholding requirements and option costs, totaling approximately $12,115 thousand**[42](index=42&type=chunk) [Note L – Net Income/(Loss) Per Share of Common Stock](index=16&type=section&id=Note%20L%20%E2%80%93%20Net%20Income%2F(Loss)%20Per%20Share%20of%20Common%20Stock) Basic and diluted EPS are calculated based on weighted average common shares, with potential dilution from options and restricted stock - Basic net income/(loss) per share is based on weighted average common stock outstanding, excluding unvested restricted common stock[43](index=43&type=chunk) - Diluted net income per share includes potential dilution from in-the-money options and vesting restricted stock awards using the treasury method[43](index=43&type=chunk) - **Approximately 13,000 and 2,000 options, and 0 and 8,000 restricted shares**, were excluded from diluted EPS for the three and six months ended June 30, 2021, respectively, as they were anti-dilutive[43](index=43&type=chunk) [Note M – Income Taxes](index=16&type=section&id=Note%20M%20%E2%80%93%20Income%20Taxes) Income tax provision is based on the estimated annual effective tax rate, which decreased in 2021 due to jurisdictional mix and lower GILTI Income Tax Provision and Effective Tax Rates | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income/(loss) before provision (benefit) for income taxes | $46,941 | $(23,345) | $74,948 | $(48,547) | | Income tax expense/(benefit) | $9,600 | $(6,201) | $15,276 | $(13,602) | | Effective tax rate | 20.5% | 26.6% | 20.4% | 28.0% | - The **decrease in effective tax rates in 2021 is primarily due to the expected jurisdictional mix of profit and losses and lower GILTI**[44](index=44&type=chunk) - The company received or expects to receive corporate income tax benefits from the CARES Act, including net operating loss carryback, employee retention credit, and payroll tax deferral[46](index=46&type=chunk) [Note N – Equity-Based Compensation](index=17&type=section&id=Note%20N%20%E2%80%93%20Equity-Based%20Compensation) Total equity-based compensation for H1 2021 was $11,019 thousand, with 7,985,790 shares available for grant under the 2019 Plan Equity-Based Compensation (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Restricted stock | $4,436 | $4,627 | $8,945 | $9,491 | | Stock options | $1,044 | $894 | $2,074 | $1,716 | | Total | $5,480 | $5,521 | $11,019 | $11,207 | - As of June 30, 2021, **7,985,790 shares of common stock were available for grant** under the 2019 Plan[47](index=47&type=chunk) - **Unrecognized compensation cost related to restricted stock awards was $51,970 thousand**, expected to be recognized over a weighted average period of **4.0 years**[52](index=52&type=chunk) [Note O – Goodwill and Intangible Assets](index=19&type=section&id=Note%20O%20%E2%80%93%20Goodwill%20and%20Intangible%20Assets) Goodwill totaled $168,426 thousand; identifiable intangible assets had a net carrying amount of $114,526 thousand, including a trademark sale gain Goodwill by Reporting Unit (in thousands) as of June 30, 2021 | Reporting Unit | Net Carrying Amount | | :-------------------------- | :------------------ | | Wholesale Footwear | $91,212 | | Wholesale Accessories/Apparel | $62,688 | | Retail | $14,526 | | Total Goodwill | $168,426 | Identifiable Intangible Assets (in thousands) as of June 30, 2021 | Asset Type | Net Carrying Amount | | :---------------------- | :------------------ | | Trade names | $128 | | Customer relationships | $14,996 | | Re-acquired right | $28,164 | | Trademarks | $71,238 | | Total Intangibles | $114,526 | - The company **sold an internally developed trademark for $8,000 thousand** during the quarter ended June 30, 2021, with the gain recorded in operating expenses[55](index=55&type=chunk) [Note P – Derivative Instruments](index=20&type=section&id=Note%20P%20%E2%80%93%20Derivative%20Instruments) Forward foreign exchange contracts are used as cash flow hedges to manage currency risk on inventory purchases, with hedging activities deemed effective - The company uses forward foreign exchange contracts to manage foreign currency risk on forecasted inventory purchases, designating them as cash flow hedging instruments[57](index=57&type=chunk) - As of June 30, 2021, the **net notional amount of the hedging portfolio was $26,288 thousand, with a fair value of $140 thousand in assets and $325 thousand in liabilities**[57](index=57&type=chunk) - Hedging activities were considered effective for the three and six months ended June 30, 2021, with no ineffectiveness recognized in the Consolidated Statements of Income[57](index=57&type=chunk) [Note Q – Commitments, Contingencies and Other](index=20&type=section&id=Note%20Q%20%E2%80%93%20Commitments,%20Contingencies%20and%20Other) The company has future minimum royalty and advertising payments and is involved in lawsuits, but management expects no material financial impact - **Future minimum royalty and advertising payments totaled $17,813 thousand** as of June 30, 2021, based on license agreements[58](index=58&type=chunk) - Management believes liabilities from legal proceedings will not have a material effect on the company's financial position or results of operations[59](index=59&type=chunk) [Note R – Operating Segment Information](index=21&type=section&id=Note%20R%20%E2%80%93%20Operating%20Segment%20Information) The company operates five reportable segments: Wholesale Footwear, Wholesale Accessories/Apparel, Retail, First Cost, and Licensing, generating revenue domestically and internationally - The company operates five reportable segments: Wholesale Footwear, Wholesale Accessories/Apparel, Retail, First Cost, and Licensing[60](index=60&type=chunk) Total Revenue by Segment (in thousands) | Segment | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Wholesale Footwear | $198,113 | $77,966 | $414,891 | $313,035 | | Wholesale Accessories/Apparel | $64,011 | $22,018 | $138,633 | $89,690 | | Retail | $132,673 | $41,379 | $200,174 | $94,322 | | First Cost | $334 | $252 | $917 | $1,502 | | Licensing | $2,763 | $1,197 | $4,304 | $3,431 | | Total Revenue | $397,894 | $142,812 | $758,919 | $501,980 | Total Revenue by Geographic Area (in thousands) | Geographic Area | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Domestic | $353,300 | $126,131 | $668,946 | $444,568 | | International | $44,594 | $16,681 | $89,973 | $57,412 | | Total | $397,894 | $142,812 | $758,919 | $501,980 | [Note S – Recent Accounting Pronouncements](index=23&type=section&id=Note%20S%20%E2%80%93%20Recent%20Accounting%20Pronouncements) The company is evaluating ASU 2020-04 regarding LIBOR transition and expects no material impact on its financial statements - The company is evaluating ASU 2020-04, which provides practical expedients for contract modifications and hedging relationships related to the LIBOR transition[62](index=62&type=chunk) - The company does not expect the adoption of ASU 2020-04 to have a material impact on its condensed consolidated financial statements[62](index=62&type=chunk) [Note T – Credit Agreement](index=23&type=section&id=Note%20T%20%E2%80%93%20Credit%20Agreement) A $150,000 thousand secured revolving credit agreement was entered in 2020, with no outstanding borrowings as of June 30, 2021 - Entered into a **$150,000 thousand secured revolving credit agreement** on July 22, 2020, maturing July 22, 2025[63](index=63&type=chunk) - Borrowings bear variable interest rates based on LIBOR or the base rate, plus a specified margin[65](index=65&type=chunk) - As of June 30, 2021, the company had no cash borrowings or letters of credit outstanding under the Credit Facility[70](index=70&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides an overview of the business, executive summary, detailed analysis of operations, liquidity, capital resources, and critical accounting policies [Overview](index=25&type=section&id=Overview) Steven Madden, Ltd. designs, sources, markets, and sells fashion-forward branded and private label footwear, handbags, apparel, and accessories globally - Steven Madden, Ltd. designs, sources, markets, and sells branded and private label footwear, handbags, apparel, and accessories[75](index=75&type=chunk) - Products are marketed through department stores, specialty stores, luxury retailers, mass merchants, online retailers, company-owned retail stores, and e-commerce websites across various international markets[75](index=75&type=chunk) - The company is recognized for design creativity, quality products, accessible price points, and efficient delivery[75](index=75&type=chunk) [Executive Summary](index=26&type=section&id=Executive%20Summary) Revenue and earnings improved significantly in 2021 after a COVID-19 decline, with strong liquidity and no debt as of June 30, 2021 - **Total revenue for Q2 2021 increased 178.6% to $397,894 thousand**, and **net income attributable to Steven Madden, Ltd. was $36,852 thousand**, a significant turnaround from a **net loss of $(16,586) thousand** in Q2 2020[77](index=77&type=chunk) - **Diluted net income per share was $0.45** in Q2 2021, compared to a **loss of $(0.21) per share** in Q2 2020[77](index=77&type=chunk) - **As of June 30, 2021, the company had $302,657 thousand in cash, cash equivalents, and short-term investments, no debt, and working capital of $464,622 thousand**[78](index=78&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) The company saw significant revenue and profit growth across segments in H1 2021, recovering from COVID-19, with improved gross margins and leveraged operating expenses [Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020](index=28&type=section&id=Three%20Months%20Ended%20June%2030,%202021%20Compared%20to%20Three%20Months%20Ended%20June%2030,%202020) Q2 2021 consolidated total revenue surged by 178.6%, with gross profit increasing to 42.7% and operating expenses decreasing as a percentage of revenue Consolidated Financial Performance (Three Months Ended June 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :--------- | | Total revenue | $397,894 | $142,812 | 178.6% | | Gross profit | $170,055 (42.7%) | $55,888 (39.1%) | 204.3% | | Operating expenses | $121,860 (30.6%) | $78,412 (54.9%) | 55.4% | | Income/(loss) from operations | $47,718 (12.0%) | $(23,702) (-16.6%) | N/A | | Net income/(loss) attributable to Steven Madden, Ltd. | $36,852 (9.3%) | $(16,586) (-11.6%) | N/A | - **Gross profit as a percentage of total revenue increased to 42.7% in Q2 2021 from 39.1% in Q2 2020**, driven by a shift to retail and lower promotional activity, partially offset by inbound freight costs and GSP non-renewal[82](index=82&type=chunk) - **Operating expenses as a percentage of total revenue decreased to 30.6% in Q2 2021 from 54.9% in Q2 2020**, benefiting from higher revenues, expense control, and **an $8,000 thousand gain on trademark sale**[82](index=82&type=chunk) [Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020](index=31&type=section&id=Six%20Months%20Ended%20June%2030,%202021%20Compared%20to%20Six%20Months%20Ended%20June%2030,%202020) H1 2021 consolidated total revenue increased by 51.2%, with gross profit improving to 40.7% and operating expenses decreasing as a percentage of revenue Consolidated Financial Performance (Six Months Ended June 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :--------- | | Total revenue | $758,919 | $501,980 | 51.2% | | Gross profit | $309,159 (40.7%) | $189,352 (37.7%) | 63.3% | | Operating expenses | $232,308 (30.6%) | $199,785 (39.8%) | 16.3% | | Income/(loss) from operations | $75,762 (10.0%) | $(49,950) (-10.0%) | N/A | | Net income/(loss) attributable to Steven Madden, Ltd. | $58,049 (7.6%) | $(34,037) (-6.8%) | N/A | - **Gross profit as a percentage of total revenue increased to 40.7% in H1 2021 from 37.7% in H1 2020**, driven by a higher penetration of retail, e-commerce strength, and the absence of prior-year COVID-19 related inventory reserves[91](index=91&type=chunk) - **Operating expenses as a percentage of total revenue decreased to 30.6% in H1 2021 from 39.8% in H1 2020**, due to greater leverage on higher revenue, a gain on trademark sale, and expense control initiatives[91](index=91&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2021, the company had $302,657 thousand in cash and investments, no debt, and sufficient liquidity for the next twelve months Liquidity Position (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :------------------------------------ | :------------ | :---------------- | | Cash, cash equivalents and short-term investments | $302,657 | $287,166 | | Working capital | $464,622 | N/A | | Debt | $— | N/A | - **Cash provided by operations was $91,923 thousand** for the six months ended June 30, 2021, an improvement from $57,867 thousand in the prior-year period, driven by increased net income and favorable changes in accounts payable[101](index=101&type=chunk) - **Net cash used in financing activities was $82,729 thousand** for the six months ended June 30, 2021, primarily due to $42,794 thousand in share repurchases and $24,772 thousand in cash dividends[103](index=103&type=chunk) Contractual Obligations (in thousands) as of June 30, 2021 | Contractual Obligations | Total | Remainder of 2021 | 2022-2023 | 2024-2025 | 2026 and after | | :------------------------------------ | :---- | :---------------- | :-------- | :-------- | :------------- | | Operating lease obligations | $138,838 | $20,459 | $59,089 | $35,739 | $23,551 | | Purchase obligations | $42,810 | $42,810 | $— | $— | $— | | Future minimum royalty and advertising payments | $17,813 | $4,125 | $13,688 | $— | $— | | Transition tax | $14,847 | $1,563 | $4,493 | $8,791 | $— | | Total | $214,308 | $68,957 | $77,270 | $44,530 | $23,551 | [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from variable interest rates and foreign currency fluctuations, using forward contracts to mitigate currency risk - The company is exposed to market risk from variable interest rates on its financing arrangements, primarily based on the prime rate and LIBOR[113](index=113&type=chunk) - Foreign currency risk arises from international operations and inventory purchases, which are primarily denominated in U.S. dollars, but may be impacted by exchange rate fluctuations[115](index=115&type=chunk) - **A hypothetical 10% increase or decrease in the U.S. dollar against foreign currencies would result in an approximate $3,042 thousand net increase or decrease** in the fair value of the derivatives portfolio as of June 30, 2021[116](index=116&type=chunk) [ITEM 4. Controls and Procedures](index=35&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2021[118](index=118&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[119](index=119&type=chunk) - The COVID-19 pandemic has not had a material impact on the company's internal controls over financial reporting[119](index=119&type=chunk) PART II – OTHER INFORMATION [ITEM 1. Legal Proceedings](index=36&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in lawsuits, but management believes any liabilities will not materially impact financial position or results of operations - The company is a defendant in certain lawsuits in the normal course of business[120](index=120&type=chunk) - Management believes that any liabilities from these legal matters will not materially impact the company's financial position, results of operations, or cash flows[120](index=120&type=chunk) [ITEM 1A. Risk Factors](index=36&type=section&id=ITEM%201A.%20Risk%20Factors) This section updates risk factors from the 10-K, specifically regarding liquidity maintenance during unforeseen events like the COVID-19 pandemic - Readers are directed to the risk factors discussed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020[121](index=121&type=chunk) - The risk factor regarding the company's ability to maintain adequate liquidity during unforeseen events like COVID-19 is restated, highlighting potential business disruptions and temporary store closures[122](index=122&type=chunk)[123](index=123&type=chunk) - All stores are currently open, but there's no assurance they will remain open if COVID-19 cases surge or new restrictive measures are implemented[123](index=123&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2021, the company repurchased 876,241 shares for approximately $37,236 thousand, with no unregistered sales of common stock Common Stock Repurchases (Three Months Ended June 30, 2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Dollar Amount of Shares that May Yet Be Purchased Under the Plans or Programs | | :------------------- | :------------------------------- | :--------------------------- | :-------------------------------------------------------------------------------- | | 4/1/2021 - 4/30/2021 | 13,628 | $37.66 | $109,554 | | 5/1/2021 - 5/31/2021 | 358,137 | $41.21 | $95,058 | | 6/1/2021 - 6/30/2021 | 504,476 | $43.54 | $80,912 | | Total | 876,241 | $42.50 | N/A | - No unregistered sales of common stock occurred during the three months ended June 30, 2021[124](index=124&type=chunk) - Shares withheld for tax-withholding requirements and option costs during Q2 2021 **amounted to approximately $8,498 thousand**[125](index=125&type=chunk) [ITEM 6. Exhibits](index=38&type=section&id=ITEM%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Interactive Data Files for financial statements - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) and 18 U.S.C. Section 1350[127](index=127&type=chunk) - Interactive Data Files (iXBRL) for the condensed consolidated financial statements are included as Exhibit 101 and 104[127](index=127&type=chunk) [Signatures](index=39&type=section&id=Signatures) The Form 10-Q was signed on August 3, 2021, by the Chairman and CEO, and the Chief Financial Officer of Steven Madden, Ltd - The report was signed on August 3, 2021[129](index=129&type=chunk) - Signatories include Edward R. Rosenfeld, Chairman and Chief Executive Officer, and Zine Mazouzi, Chief Financial Officer[129](index=129&type=chunk)

Steve Madden, Ltd. (NASDAQ:SHOO) Q2 2021 Earnings Conference Call July 28, 2021 8:30 AM ET Company Participants Danielle McCoy - IR Ed Rosenfeld - CEO Zine Mazouzi - CFO Conference Call Participants Paul Lejuez - Citi Camilo Lyon - BTIG Susan Anderson - B. Riley Jay Sole - UBS Janine Stichter - Jefferies Erinn Murphy - Piper Sandler Sam Poser - Williams Trading Roni Shapiro - Retail Tracker Dana Telsey - Telsey Advisory Group Operator Good day, and thank you for standing by. Welcome to the quarter two 2021 ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for Q1 2021 show a return to profitability compared to a net loss in Q1 2020 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of March 31, 2021, shows total assets of **$1.17 billion** and stockholders' equity of **$800.8 million** Key Balance Sheet Items (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $233,202 | $247,864 | | Inventories | $106,561 | $101,420 | | Total current assets | $734,531 | $698,241 | | Total Assets | $1,168,943 | $1,137,761 | | Total current liabilities | $256,493 | $235,916 | | Total Liabilities | $368,175 | $347,392 | | Total stockholders' equity | $800,768 | $790,369 | [Condensed Consolidated Statements of Income/(Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%2F(Loss)) Q1 2021 saw a significant turnaround with **$21.2 million** net income, up from a **$17.5 million** net loss in Q1 2020 Q1 2021 vs Q1 2020 Income Statement (in thousands, except per share data) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total revenue | $361,025 | $359,168 | | Gross profit | $139,104 | $133,464 | | Income/(loss) from operations | $28,044 | $(26,248) | | Net income/(loss) attributable to Steven Madden, Ltd. | $21,197 | $(17,451) | | Diluted net income/(loss) per share | $0.26 | $(0.22) | - The company recorded **no impairment of intangibles** in Q1 2021, compared to a **$9.5 million charge** in Q1 2020. Impairment of store fixed assets and lease right-of-use assets was also significantly lower at **$612 thousand** compared to **$28.8 million** in the prior year[10](index=10&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities improved to **$5.0 million** in Q1 2021 from **$39.6 million** used in Q1 2020 Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by/(used in) operating activities | $5,042 | $(39,609) | | Net cash (used in) investing activities | $(1,616) | $(227) | | Net cash (used in) financing activities | $(17,792) | $(11,624) | | Net (decrease) in cash and cash equivalents | $(14,662) | $(52,963) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20-%20Unaudited) Notes detail accounting policies, COVID-19 impact, segment performance with strong retail growth, and a post-quarter European JV acquisition - In response to COVID-19, the company took measures including temporary furloughs, salary reductions, well as suspension of share repurchases and dividends. The quarterly cash dividend and stock repurchase plan were **reinstated** during the first quarter of 2021[16](index=16&type=chunk) Segment Revenue and Operating Income (in thousands) | Segment | Revenue Q1 2021 | Revenue Q1 2020 | Operating Income/(Loss) Q1 2021 | Operating Income/(Loss) Q1 2020 | | :--- | :--- | :--- | :--- | :--- | | Wholesale Footwear | $216,779 | $235,069 | $44,376 | $41,053 | | Wholesale Accessories/Apparel | $74,621 | $67,672 | $7,515 | $(6,479) | | Retail | $67,501 | $52,943 | $(4,707) | $(43,002) | - On April 14, 2021, the company acquired the remaining 49.9% interest in its European joint venture for **$16.5 million**[75](index=75&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=23&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A highlights Q1 2021 revenue growth to **$361.0 million**, **$21.2 million** net income, and strong liquidity with no debt - Despite the continued impact of the pandemic and supply chain disruption, the business saw **improvements** in the retail segment and in sell-through performance at wholesale partners in Q1 2021[81](index=81&type=chunk) Q1 2021 Financial Highlights (in thousands) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total Revenue | $361,025 | $359,168 | | Gross Profit | $139,104 | $133,464 | | Gross Margin | 38.5% | 37.2% | | Operating Income/(Loss) | $28,044 | $(26,248) | | Net Income/(Loss) | $21,197 | $(17,451) | [Results of Operations by Segment](index=28&type=section&id=Results%20of%20Operations%20by%20Segment) Segment performance varied, with Retail revenue up **27.5%** and Wholesale Accessories/Apparel up **10.3%**, offsetting Wholesale Footwear decline - **Wholesale Footwear:** Revenue decreased **7.8%** to **$216.8 million**, but operating income increased to **$44.4 million** due to expense control initiatives[90](index=90&type=chunk) - **Wholesale Accessories/Apparel:** Revenue increased **10.3%** to **$74.6 million**. The segment swung to an operating income of **$7.5 million** from a loss of **$6.5 million** in the prior year[91](index=91&type=chunk) - **Retail:** Revenue increased **27.5%** to **$67.5 million**, driven by e-commerce. The operating loss narrowed significantly to **$(4.7) million** from **$(43.0) million** in Q1 2020, which included large impairment charges[92](index=92&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity in Q1 2021 with **$273.0 million** in cash and no debt, supported by a new **$150 million** credit facility - As of March 31, 2021, the company had **$273.0 million** in cash, cash equivalents, and short-term investments, and **no debt**[96](index=96&type=chunk)[97](index=97&type=chunk) - Cash provided by operations was **$5.0 million** for Q1 2021, a significant improvement from **$39.6 million** of cash used in Q1 2020[99](index=99&type=chunk) - The Board of Directors approved a quarterly cash dividend of **$0.15 per share**, payable in June 2021[106](index=106&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency fluctuations and interest rates, managing them with forward contracts and maintaining no outstanding debt - The company uses forward foreign exchange contracts to mitigate the impact of exchange rate fluctuations on forecasted inventory purchases. As of March 31, 2021, the notional amount of these contracts was **$37.0 million**[59](index=59&type=chunk)[114](index=114&type=chunk) - A sensitivity analysis showed that a **10%** increase or decrease of the U.S. dollar against foreign currencies would result in a net change of approximately **$3.7 million** in the fair value of the derivatives portfolio[114](index=114&type=chunk) - The company is also exposed to translation risk from its foreign operations in Canada, Mexico, Europe, South Africa, China, Taiwan, and Israel, as their financial results are translated into U.S. dollars[115](index=115&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were **effective** as of March 31, 2021, with **no material changes** to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the fiscal quarter[118](index=118&type=chunk) - **No material changes** to the company's internal control over financial reporting occurred during the quarter[119](index=119&type=chunk) [PART II – OTHER INFORMATION](index=33&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=33&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management **expects no material impact** on financial position or results - Management does **not expect ongoing legal proceedings to have a material effect** on the company's financial position or results of operations[61](index=61&type=chunk)[121](index=121&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **154,040** common shares in Q1 2021, with **$109.7 million** remaining for future repurchases Share Repurchases in Q1 2021 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2021 | 13,507 | $35.24 | | Feb 2021 | 8,173 | $33.60 | | Mar 2021 | 132,360 | $36.31 | | **Total Q1** | **154,040** | **$36.07** | - As of March 31, 2021, approximately **$109.7 million** remained available for future repurchases under the company's Share Repurchase Program[42](index=42&type=chunk)[123](index=123&type=chunk) [Item 6. Exhibits](index=35&type=section&id=ITEM%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and iXBRL formatted financial statements - Exhibits filed include certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[125](index=125&type=chunk)

Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2021 was $361 million, up 1% from Q1 2020, with diluted EPS of $0.33, a 108% increase from the prior year [12][29] - Operating income for the quarter totaled $35.6 million, or 9.9% of revenue, compared to $14.2 million, or 4% of revenue in the prior year [28] - Consolidated gross margin increased by 130 basis points to 38.5% compared to 37.2% in the prior year [27] Business Line Data and Key Metrics Changes - Wholesale revenue declined 4% to $291.4 million, with wholesale footwear revenue down 8% to $216.8 million due to COVID-19 and supply chain disruptions [25][13] - Retail segment revenue increased 27% to $67.5 million, driven by a significant improvement in e-commerce, which grew 89% compared to Q1 2020 [18][20] - Wholesale accessories and apparel revenue increased 10% to $74.6 million, driven by strong gains in handbags [16] Market Data and Key Metrics Changes - Internationally, Europe showed strong revenue gains driven by digital channels, while Canada faced challenges due to COVID-19 lockdowns [15] - E-commerce represented 54% of total retail segment sales, with Steve Madden's e-commerce business growing 112% [26][20] Company Strategy and Development Direction - The company is focused on capturing growth in the European market through the acquisition of a 49.9% share in its European joint venture, expecting approximately $55 million in revenue [22][23] - Management emphasized the importance of digital channels and strong product assortments to drive future growth [23][106] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the near-term outlook for the wholesale channel due to ongoing supply chain disruptions and conservative ordering from wholesale customers [17][31] - The company anticipates continued challenges from COVID-19 but remains confident in its long-term growth potential based on brand strength and market positioning [23][32] Other Important Information - The company repurchased approximately 154,000 shares for $5.6 million during the quarter, with $135 million remaining on the share repurchase authorization [30] - A quarterly cash dividend of $0.15 per share was approved, payable on June 25, 2021 [31] Q&A Session Summary Question: Can you provide more details on the supply chain impact? - Management noted that supply chain disruptions had a significant impact in Q1, estimating a $15 million impact, with expectations of a similar or greater impact in Q2 [35][38] Question: How are retailers planning for the second half? - Retailers are re-evaluating their fall plans due to improved performance, but no firm updates have been received [47] Question: What is the outlook for gross margins? - Management expects significant headwinds from increased freight costs and the non-renewal of GSP, estimating a 210 basis point pressure on gross margins in Q2 [40][41] Question: How is the European joint venture performing? - The European joint venture has shown strong growth, with management confident in its potential as a significant growth driver [59] Question: What trends are being observed in the dress shoe category? - Management reported strong performance in dress shoes, capturing a disproportionate share of consumer interest [66] Question: What is the outlook for the accessories business? - The accessories business is performing well, but management cautioned that timing shifts may affect performance in Q2 [96] Question: How is the digital marketing strategy evolving? - The company is seeing strong returns on digital marketing investments, with a focus on enhancing product pages and improving conversion rates [106][120]

PART I [Item 1. Business](index=4&type=section&id=ITEM%201%20BUSINESS) The company designs, sources, and markets fashion-forward footwear, accessories, and apparel through a multi-channel global distribution network - The company's business is organized into five distinct segments: Wholesale Footwear, Wholesale Accessories/Apparel, Retail, First Cost, and Licensing[22](index=22&type=chunk) - Products are sourced from independent manufacturers, primarily in **China (78% of 2020 purchases)**, with other locations including Cambodia, Mexico, Brazil, India, and Vietnam[53](index=53&type=chunk)[102](index=102&type=chunk) - **Walmart Inc. was a significant customer**, representing approximately **13.9% of total revenue** for the year ended December 31, 2020[57](index=57&type=chunk) - As of December 31, 2020, the company operated **218 retail stores**, including 143 full-price stores, 66 outlet stores, and seven e-commerce websites[47](index=47&type=chunk) - The Board of Directors reinstated a quarterly cash dividend of **$0.15 per share** in February 2021, following a temporary suspension due to the COVID-19 pandemic[21](index=21&type=chunk)[135](index=135&type=chunk) [Product Distribution Segments](index=5&type=section&id=Product%20Distribution%20Segments) The company's operations are divided into five segments, each featuring a portfolio of owned and licensed brands Key Brands by Segment | Segment | Key Brands | | :--- | :--- | | **Wholesale Footwear** | Steve Madden®, Madden Girl®, Dolce Vita®, Blondo®, GREATS®, Superga® (license), Anne Klein® (license) | | **Wholesale Accessories/Apparel** | Steve Madden®, Betsey Johnson®, Big Buddha®, BB Dakota®, Anne Klein® (license) | | **Retail** | Steve Madden, Steven, Superga stores and e-commerce sites for major brands | | **First Cost** | Serves as a buying agent for private label footwear | | **Licensing** | Steve Madden®, Betsey Johnson®, Dolce Vita® trademarks for various products like apparel, jewelry, luggage | [Product Sourcing and Distribution](index=9&type=section&id=Product%20Sourcing%20and%20Distribution) The company sources products from independent manufacturers, primarily in Asia, and distributes them through third-party centers in the U.S - The company relies on independent manufacturers and does not have long-term manufacturing contracts, believing sufficient alternative sources exist[53](index=53&type=chunk) - U.S. distribution is handled mainly from **six third-party distribution centers** located in California, Texas, and New Jersey[56](index=56&type=chunk) [Human Capital Resources](index=13&type=section&id=Human%20Capital%20Resources) The company employed approximately 2,800 people globally as of early 2021 and implemented various diversity and COVID-19 response initiatives - As of February 1, 2021, the company employed approximately **2,800 people**, with 2,100 full-time and 700 part-time[76](index=76&type=chunk) - In 2020, the company established a **Diversity and Inclusion Council**, formed employee resource groups (Black Sole, SM Pride), and partnered with Historically Black Colleges and Universities to expand recruiting[80](index=80&type=chunk)[84](index=84&type=chunk) - The company's COVID-19 response included temporarily closing all stores, enabling remote work for corporate positions, and implementing enhanced safety protocols[82](index=82&type=chunk) [Item 1A. Risk Factors](index=15&type=section&id=ITEM%201A%20RISK%20FACTORS) The company faces significant risks from the COVID-19 pandemic, changing fashion trends, supply chain dependencies, and cybersecurity threats - The **COVID-19 pandemic** poses a significant risk, potentially causing store closures and a material reduction in revenue for an indeterminable period[86](index=86&type=chunk)[87](index=87&type=chunk) - The business is highly dependent on its ability to anticipate and respond to **rapid changes in fashion trends** and consumer preferences[88](index=88&type=chunk)[89](index=89&type=chunk) - The company relies on independent foreign manufacturers, with **78% of total purchases in 2020 coming from China**, creating exposure to geopolitical risks, trade policies, and tariffs[102](index=102&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - The loss of founder and Creative and Design Chief, **Steven Madden**, or other members of the executive team could have a material adverse effect on the business[92](index=92&type=chunk) - The company faces risks from **information technology disruptions and data security breaches**, which could lead to loss of confidential information, operational disruption, and legal liability[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) [Item 2. Properties](index=24&type=section&id=ITEM%202%20PROPERTIES) The company leases most of its properties, including its headquarters, retail stores, and showrooms, with lease expirations staggered over the next decade - The company leases the majority of its facilities, including executive offices in Long Island City, NY (111,000 sq ft) and offices/sample production in Dongguan, China (154,900 sq ft)[127](index=127&type=chunk) Retail Store Lease Expiration Schedule | Year | Number of Stores | | :--- | :--- | | 2021 | 31 | | 2022 | 56 | | 2023 | 36 | | 2024 | 21 | | 2025 | 26 | | Thereafter | 45 | [Item 3. Legal Proceedings](index=25&type=section&id=ITEM%203%20LEGAL%20PROCEEDINGS) The company is involved in various legal cases from the ordinary course of business which are not expected to have a material financial impact - The company has various pending legal matters but believes they will not have a material impact on its financial condition or results[129](index=129&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=25&type=section&id=ITEM%205%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY,%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's stock (SHOO) experienced significant volatility in 2020, and both dividend and share repurchase programs were temporarily suspended - The company's common stock (SHOO) experienced significant volatility in 2020, with a high of **$43.47** and a low of **$16.38**[133](index=133&type=chunk) - The quarterly dividend and share repurchase program were **temporarily suspended in March 2020** due to the COVID-19 pandemic and reinstated in February 2021[135](index=135&type=chunk)[136](index=136&type=chunk) 2020 Share Repurchase Summary | Metric | Value | | :--- | :--- | | Shares Repurchased | 769,526 | | Weighted Average Price | $32.97 | | Aggregate Purchase Price | ~$25.4 million | | Remaining Authorization (as of 12/31/20) | ~$111.6 million | [Item 6. Selected Financial Data](index=28&type=section&id=ITEM%206%20SELECTED%20FINANCIAL%20DATA) Financial performance declined significantly in 2020 due to the pandemic, resulting in a net loss and decreased revenue and total assets Selected Financial Data (in thousands, except per share data) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Total revenue | $1,201,814 | $1,787,157 | $1,677,734 | | Gross profit | $464,541 | $686,017 | $640,163 | | (Loss)/income from operations | $(31,605) | $176,814 | $173,382 | | Net (loss)/income attributable to Steven Madden, Ltd. | $(18,397) | $141,311 | $129,136 | | Diluted net (loss)/income per share | $(0.23) | $1.69 | $1.50 | | Total assets (at year end) | $1,137,761 | $1,278,647 | $1,072,570 | | Stockholders' equity (at year end) | $790,369 | $841,224 | $814,682 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=ITEM%207%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) The COVID-19 pandemic caused a 32.8% revenue decline to $1.2 billion and a net loss of $18.4 million in 2020 - Total revenue for 2020 **decreased by 32.8% to $1.20 billion** from $1.79 billion in 2019, with decreases in all segments due to the COVID-19 pandemic[152](index=152&type=chunk)[159](index=159&type=chunk) - The company reported a **net loss of $18.4 million**, or ($0.23) per diluted share, in 2020, compared to net income of $141.3 million, or $1.69 per diluted share, in 2019[153](index=153&type=chunk) - In response to the pandemic, the company took measures to preserve liquidity, including **temporary salary reductions, suspension of dividends and share repurchases**, and scaling back on capital expenditures and inventory[150](index=150&type=chunk)[175](index=175&type=chunk) - As of December 31, 2020, the company had **$287.2 million in cash**, cash equivalents, and short-term investments, with **no debt**[155](index=155&type=chunk)[176](index=176&type=chunk)[178](index=178&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) All segments saw revenue declines in 2020 due to COVID-19, and the company recorded significant impairment charges Segment Revenue Performance (2020 vs. 2019) | Segment | 2020 Revenue ($M) | 2019 Revenue ($M) | % Change | | :--- | :--- | :--- | :--- | | Wholesale Footwear | $713.7 | $1,112.1 | (35.8)% | | Wholesale Accessories/Apparel | $235.9 | $334.9 | (29.6)% | | Retail | $239.4 | $321.2 | (25.5)% | | First Cost | $3.9 | $7.4 | (47.6)% | | Licensing | $9.0 | $11.6 | (22.6)% | - In 2020, the company recorded significant impairment charges, including **$44.3 million for intangibles** and **$36.9 million for lease right-of-use assets** and store fixed assets[159](index=159&type=chunk) - Retail segment gross margin as a percentage of revenue **increased from 60.8% in 2019 to 64.4% in 2020**, primarily due to a sales shift to the higher-margin e-commerce business[163](index=163&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position, ending 2020 with $287.2 million in cash and securing a new credit facility - On July 22, 2020, the company entered into a new **$150 million, five-year, asset-based revolving credit facility**, replacing its previous credit line[178](index=178&type=chunk) - **Cash provided by operations was $44.2 million** in 2020, a significant decrease from $233.8 million in 2019, primarily due to reduced income and unfavorable changes in working capital[180](index=180&type=chunk) - Net cash used in financing activities was **$57.1 million** in 2020, mainly for share repurchases ($46.6 million) and dividend payments ($12.5 million)[183](index=183&type=chunk) [Critical Accounting Policies and the Use of Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20the%20Use%20of%20Estimates) Key accounting policies requiring significant management estimates include allowances for bad debts, inventory valuation, and impairment testing for goodwill - Key accounting estimates include allowances for bad debts, customer returns and chargebacks, inventory valuation, and valuation of intangible assets and goodwill[193](index=193&type=chunk) - Goodwill and indefinite-lived intangible assets are **tested for impairment at least annually**, or more frequently if impairment indicators are present[197](index=197&type=chunk)[199](index=199&type=chunk) - Long-lived assets, such as those in retail stores, are reviewed for impairment when events suggest their carrying value may not be recoverable[200](index=200&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=ITEM%207A%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks from foreign currency exchange rate fluctuations, which it manages using forward exchange contracts - The company faces market risk from foreign currency exchange rates, as inventory purchases are primarily from foreign jurisdictions[205](index=205&type=chunk) - To mitigate currency risk, the company uses forward foreign exchange contracts; a 10% change in the U.S. dollar would result in a net change of approximately **$4.1 million** in the fair value of its derivatives[206](index=206&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=43&type=section&id=ITEM%208%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section incorporates the company's consolidated financial statements and reports from its independent registered public accounting firms [Reports of Independent Registered Public Accounting Firms](index=51&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firms) Ernst & Young LLP issued an unqualified opinion for 2020, identifying impairment of long-lived assets and markdown allowances as critical audit matters - Ernst & Young LLP provided an **unqualified audit opinion** for the 2020 financial statements and internal controls[244](index=244&type=chunk)[245](index=245&type=chunk) - Critical audit matters for 2020 included the **impairment assessment of long-lived assets** at retail stores and the **estimation of markdown allowances**, both involving complex judgments[248](index=248&type=chunk)[250](index=250&type=chunk)[252](index=252&type=chunk) - EisnerAmper LLP provided an unqualified audit opinion for the 2019 and 2018 financial statements[263](index=263&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=43&type=section&id=ITEM%209%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company changed its independent accounting firm in March 2020 and reported no disagreements with its former accountant - On March 6, 2020, the company changed its independent registered public accounting firm from **EisnerAmper LLP to Ernst & Young LLP**[210](index=210&type=chunk) - There were **no disagreements** with the former accountant, EisnerAmper LLP, on any accounting or auditing matters[211](index=211&type=chunk) [Item 9A. Controls and Procedures](index=43&type=section&id=ITEM%209A%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls, procedures, and internal control over financial reporting were effective as of year-end 2020 - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2020[212](index=212&type=chunk) - Management's assessment concluded that internal control over financial reporting was **effective** as of December 31, 2020, a conclusion supported by an unqualified opinion from the independent auditor, Ernst & Young LLP[217](index=217&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=44&type=section&id=ITEM%2010%20DIRECTORS,%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Required information for this item is incorporated by reference from the company's 2021 definitive proxy statement - The information for this item is incorporated by reference from the Registrant's Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders[221](index=221&type=chunk) [Item 11. Executive Compensation](index=44&type=section&id=ITEM%2011%20EXECUTIVE%20COMPENSATION) Required information for this item is incorporated by reference from the company's 2021 definitive proxy statement - The information for this item is incorporated by reference from the Registrant's Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders[222](index=222&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=44&type=section&id=ITEM%2012%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Required information for this item is incorporated by reference from the company's 2021 definitive proxy statement - The information for this item is incorporated by reference from the Registrant's Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders[223](index=223&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=44&type=section&id=ITEM%2013%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS,%20AND%20DIRECTOR%20INDEPENDENCE) Required information for this item is incorporated by reference from the company's 2021 definitive proxy statement - The information for this item is incorporated by reference from the Registrant's Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders[224](index=224&type=chunk) [Item 14. Principal Accountant Fees and Services](index=44&type=section&id=ITEM%2014%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Required information for this item is incorporated by reference from the company's 2021 definitive proxy statement - The information for this item is incorporated by reference from the Registrant's Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders[225](index=225&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=44&type=section&id=ITEM%2015%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the exhibits filed as part of the Form 10-K, including various agreements and certifications - This section contains the index of all exhibits filed with the Form 10-K, including credit agreements, employment agreements, and certifications by the CEO and CFO[227](index=227&type=chunk)[229](index=229&type=chunk)

Steven Madden Ltd (NASDAQ:SHOO) Q4 2020 Earnings Conference Call February 25, 2021 8:30 AM ET Company Participants Danielle McCoy - Director, Corporate Development & IR Edward Rosenfeld - Chairman & CEO Zine Mazouzi - CFO Conference Call Participants Erinn Murphy - Piper Sandler & Co. Camilo Lyon - BTIG Janine Stichter - Jefferies Laura Champine - Loop Capital Markets Samuel Poser - Williams Trading Tom Nikic - Wells Fargo Securities Susan Anderson - B. Riley Securities Kelly Crago - Citigroup Mauricio Sern ...

Steven Madden, Ltd. (NASDAQ:SHOO) Q3 2020 Earnings Conference Call October 27, 2020 8:30 AM ET Company Participants Danielle McCoy - IR Ed Rosenfeld - Chairman & CEO Conference Call Participants Paul Lejuez - Citi Camilo Lyon - BTIG Janine Stichter - Jefferies Matthew Degulis - KeyBanc Capital Will Gaertner - Susquehanna Jay Sole - UBS Laura Champine - Loop Capital Dana Telsey - Telsey Advisory Susan Anderson - B. Riley Securities Tom Nikic - Wells Fargo Chris Svezia - Wedbush Erinn Murphy - Piper Sandler O ...

Steven Madden, Ltd. (NASDAQ:SHOO) Q2 2020 Earnings Conference Call July 29, 2020 8:30 AM ET Company Participants Danielle McCoy - Investor Relations Ed Rosenfeld - Chief Executive Officer Conference Call Participants Paul Lejuez - Citi Jay Sole - UBS Matthew Degulis - KeyBanc Capital Markets Erinn Murphy - Piper Sandler Sam Poser - Susquehanna Camilo Lyon - BTIG Laura Champine - Loop Capital Susan Anderson - B. Riley FBR Janine Stichter - Jefferies Steve Marotta - CL King & Associates Tom Nikic - Wells Farg ...

Steven Madden, Ltd. (NASDAQ:SHOO) Q1 2020 Results Conference Call May 29, 2020 8:30 AM ET Company Participants Danielle McCoy - Director of Corporate Development and Investor Relations Ed Rosenfeld - Chairman and CEO Conference Call Participants Camilo Lyon - BTIG Matthew Degulis - KeyBanc Capital Markets Erin Murphy - Piper Sandler Sam Poser - Susquehanna Susan Anderson - B. Riley FBR Tom Nikic - Wells Fargo Laura Champine - Loop Capital Ross Licero - Telsey Advisory Group Chris Svezia - Wedbush Securities ...