UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to _____________________ Commission File Number 0-23702 STEVEN MADDEN, LTD. (Exact name of registrant as specified in its charter) incorporation or ...

Steven Madden, Ltd. (NASDAQ:SHOO) Q1 2022 Earnings Conference Call April 27, 2022 8:30 AM ET Company Participants Danielle McCoy - Director of Corporate Development and IR Ed Rosenfeld - Chairman and Chief Executive Officer Zine Mazouzi - Chief Financial Officer Conference Call Participants Brendon Shea - Citi Jay Sole - UBS Tom Nikic - Wedbush Laura Champine - Loop Capital Camilo Lyon - BTIG Marni Shapiro - The Retail Tracker Sam Poser - Williams Trading Dana Telsey - Telsey Advisory Group Susan Anderson - ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 0-23702 STEVEN MADDEN, LTD. (Exact name of registrant as specified in its charter) Delaware 13-3588231 (State or other ...

Steven Madden, Ltd. (NASDAQ:SHOO) Q4 2021 Earnings Conference Call February 24, 2022 8:30 AM ET Company Participants Danielle McCoy - Director of Corporate Development and Investor Relations Edward Rosenfeld - Chief Executive Officer Zine Mazouzi - Chief Financial Officer Conference Call Participants Camilo Lyon - BTIG, LLC Kelly Crago - Citigroup Inc. Susan Anderson - B. Riley FBR, Inc. Erinn Murphy - Piper Sandler Laura Champine - Loop Capital Markets Tom Nikic - Wedbush Securities Inc. Sam Poser - Willia ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part covers the company's unaudited financial statements, management's discussion and analysis, market risk disclosures, and internal controls [ITEM 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, statements of changes in stockholders' equity, and cash flow statements, along with detailed notes explaining the basis of reporting, significant accounting policies, and specific financial events [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates **Total Assets (in thousands):** | Date | Amount | | :--- | :--- | | Sep 30, 2021 | $1,300,060 | | Dec 31, 2020 | $1,137,761 | | Sep 30, 2020 | $1,104,410 | **Total Liabilities (in thousands):** | Date | Amount | | :--- | :--- | | Sep 30, 2021 | $492,880 | | Dec 31, 2020 | $347,392 | | Sep 30, 2020 | $336,670 | **Total Stockholders' Equity (in thousands):** | Date | Amount | | :--- | :--- | | Sep 30, 2021 | $807,180 | | Dec 31, 2020 | $790,369 | | Sep 30, 2020 | $767,740 | [Condensed Consolidated Statements of Income/(Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%2F(Loss)) This section provides a summary of the company's revenues, expenses, and net income or loss over specific reporting periods **Three Months Ended September 30 (in thousands, except per share data):** | Metric | 2021 | 2020 | Change (YoY) | | :--- | :--- | :--- | :--- | | Total revenue | $528,742 | $346,867 | +52.4% | | Gross profit | $219,998 | $139,877 | +57.3% | | Income/(loss) from operations | $88,418 | $(2,998) | Turnaround to profit | | Net income/(loss) attributable to Steven Madden, Ltd. | $66,643 | $(6,951) | Turnaround to profit | | Diluted net income/(loss) per share | $0.82 | $(0.09) | Turnaround to profit | **Nine Months Ended September 30 (in thousands, except per share data):** | Metric | 2021 | 2020 | Change (YoY) | | :--- | :--- | :--- | :--- | | Total revenue | $1,287,661 | $848,847 | +51.7% | | Gross profit | $529,157 | $329,229 | +60.7% | | Income/(loss) from operations | $164,180 | $(52,948) | Turnaround to profit | | Net income/(loss) attributable to Steven Madden, Ltd. | $124,692 | $(40,988) | Turnaround to profit | | Diluted net income/(loss) per share | $1.53 | $(0.52) | Turnaround to profit | [Condensed Consolidated Statements of Comprehensive Income/(Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%2F(Loss)) This section details the company's net income or loss and other comprehensive income or loss components for the reporting periods - For the three months ended September 30, 2021, the company reported net income of **$66,665K** and a total other comprehensive loss of **$(3,984)K**, resulting in comprehensive income attributable to Steven Madden, Ltd. of **$62,518K**[12](index=12&type=chunk) - For the nine months ended September 30, 2021, the company reported net income of **$126,337K** and total other comprehensive income of **$207K**, resulting in comprehensive income attributable to Steven Madden, Ltd. of **$124,650K**[12](index=12&type=chunk) - In contrast, for the three months ended September 30, 2020, the company reported a net loss of **$(7,146)K** and total other comprehensive income of **$2,152K**, leading to a comprehensive loss attributable to Steven Madden, Ltd. of **$(4,578)K**[12](index=12&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section outlines the changes in the company's equity, including share repurchases, dividends, and net income, over a specific period **Changes in Stockholders' Equity (Nine Months Ended Sep 30, 2021, in thousands):** | Item | Amount | | :--- | :--- | | Balance at January 1, 2021 | $790,369 | | Share repurchases and net settlement of awards | $(74,685) | | Stock-based compensation | $16,696 | | Dividends on common stock | $(36,990) | | Net income | $126,337 | | Balance at September 30, 2021 | $807,180 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the reporting periods **Cash Flows (Nine Months Ended September 30, in thousands):** | Activity | 2021 | 2020 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $96,184 | $607 | +$95,577 | | Net cash provided by investing activities | $2,408 | $524 | +$1,884 | | Net cash used in financing activities | $(126,429) | $(40,936) | $(85,493) | | Net decrease in cash and cash equivalents | $(28,341) | $(40,281) | +$11,940 | | Cash and cash equivalents – end of period | $219,523 | $223,820 | $(4,297) | [Notes to Condensed Consolidated Financial Statements – Unaudited](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%E2%80%93%20Unaudited) This section provides detailed explanations and additional information supporting the unaudited condensed consolidated financial statements [Note A – Basis of Reporting](index=9&type=section&id=Note%20A%20%E2%80%93%20Basis%20of%20Reporting) This note describes the accounting principles and rules used for preparing the interim financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC rules, including normal recurring adjustments[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) This note details the company's responses to the COVID-19 pandemic and associated restructuring charges - In March 2020, the Company temporarily closed brick-and-mortar stores and corporate offices and furloughed a significant number of employees due to the COVID-19 pandemic[21](index=21&type=chunk) - Precautionary measures included temporarily suspending share repurchases and quarterly cash dividends (reinstated in Q1 2021), and salary reductions for executives and employees (reinstated by August/October 2020)[21](index=21&type=chunk) - The Company recorded a pre-tax charge of **$1,239K** for additional severance related to its restructuring plan during the nine months ended September 30, 2021[22](index=22&type=chunk) [Note C – Reclassification](index=10&type=section&id=Note%20C%20%E2%80%93%20Reclassification) This note explains adjustments made to prior year financial amounts for consistent presentation - Certain prior year amounts were reclassified to conform to the 2021 presentation, primarily regarding the breakout of impairment of fixed assets and lease right-of-use assets from operating expenses and segment reporting of corporate expenses and assets[23](index=23&type=chunk) [Note D – Acquisitions](index=10&type=section&id=Note%20D%20%E2%80%93%20Acquisitions) This note provides details on the company's recent acquisitions of non-controlling interests in joint ventures - On April 14, 2021, the Company acquired the remaining **49.9%** non-controlling interest in its European joint venture for **$16,626K**[24](index=24&type=chunk) - On June 28, 2021, the Company completed the acquisition of the remaining **49.9%** non-controlling interest in its South African joint venture for **$2,501K**[25](index=25&type=chunk) [Note E – Use of Estimates](index=10&type=section&id=Note%20E%20%E2%80%93%20Use%20of%20Estimates) This note highlights management's reliance on estimates and assumptions in preparing the financial statements - The preparation of financial statements requires management to make estimates and assumptions, including variable consideration in revenue, bad debt allowances, inventory valuation, intangible asset valuation, impairment of long-lived assets, litigation reserves, and contingent payment liabilities[26](index=26&type=chunk)[27](index=27&type=chunk) [Note F– Factoring Agreement](index=10&type=section&id=Note%20F%E2%80%93%20Factoring%20Agreement) This note describes the company's factoring agreement for managing certain receivables and credit risk - On July 22, 2020, the Company entered into an Amended and Restated Deferred Purchase Factoring Agreement with Rosenthal & Rosenthal, Inc., where Rosenthal serves as the collection agent for certain receivables and assumes credit risk for credit-approved receivables[28](index=28&type=chunk) [Note G – Short-Term Investments](index=11&type=section&id=Note%20G%20%E2%80%93%20Short-Term%20Investments) This note details the composition and amounts of the company's short-term investments **Short-Term Investments (in thousands):** | Date | Amount | | :--- | :--- | | Sep 30, 2021 | $40,390 | | Dec 31, 2020 | $39,302 | - Short-term investments consist of certificates of deposit with maturities of one year or less[29](index=29&type=chunk) [Note H – Fair Value Measurement](index=11&type=section&id=Note%20H%20%E2%80%93%20Fair%20Value%20Measurement) This note explains the valuation methods and changes in fair value for certain financial instruments, particularly contingent consideration - The Company's Level 3 liabilities for contingent consideration increased from **$207K** at January 1, 2021, to **$8,041K** at September 30, 2021, primarily due to adjustments related to the acquisitions of B.B. Dakota, Inc. and GREATS Brand, Inc[31](index=31&type=chunk) - Fair value of contingent payments for B.B. Dakota, Inc. was estimated using the Black-Scholes-Merton option pricing method with a **11.0%** discount rate[31](index=31&type=chunk) - Fair value of contingent payments for GREATS Brand, Inc. was estimated using a risk neutral simulation method with a **10.0%** discount rate[32](index=32&type=chunk) [Note I – Leases](index=13&type=section&id=Note%20I%20%E2%80%93%20Leases) This note provides information on the company's lease-related assets, liabilities, and associated costs **Lease-Related Assets and Liabilities (in thousands):** | Item | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Operating lease right-of-use asset | $90,832 | $101,379 | | Total operating lease liabilities | $117,421 | $132,849 | | Weighted-average remaining lease term | 4.7 years | 5.0 years | | Weighted-average discount rate | 4.2% | 4.3% | **Total Lease Cost (in thousands):** | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $10,975 | $16,996 | | Nine Months Ended Sep 30 | $42,961 | $37,129 | - The Company incurred **$9,505K** in expenses related to COVID-19 lease amendments during the nine months ended September 30, 2021, included in variable lease cost[40](index=40&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) This note details the impairment charges recorded for the company's fixed assets and right-of-use assets **Total Impairment Charges for Fixed Assets and Right-of-Use Assets (in thousands):** | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $0 | $6,897 | | Nine Months Ended Sep 30 | $1,089 | $36,896 | - Impairment losses are recorded when the carrying amount of a long-lived asset group exceeds its fair value, estimated using an income approach based on management's forecast of future cash flows[43](index=43&type=chunk) [Note K – Share Repurchase Program](index=15&type=section&id=Note%20K%20%E2%80%93%20Share%20Repurchase%20Program) This note outlines the company's share repurchase activities and remaining authorization - During the nine months ended September 30, 2021, the Company repurchased **1,497,609** shares of common stock for approximately **$62,081K** at a weighted average price of **$41.45** per share[44](index=44&type=chunk) - As of September 30, 2021, approximately **$49,509K** remained available for future repurchases under the Share Repurchase Program[44](index=44&type=chunk) - On November 2, 2021, the Board of Directors approved an increase of approximately **$200,000K** to the share repurchase authorization, bringing the total authorization to **$250,000K**[44](index=44&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) This note explains the calculation of basic and diluted earnings per share - Basic net income/(loss) per share is based on the weighted average number of common shares outstanding, excluding unvested restricted common stock[46](index=46&type=chunk) - Diluted net income per share reflects potential dilution from stock options and restricted stock awards, to the extent dilutive[46](index=46&type=chunk) - Contingently issuable performance awards (**17,000** shares in 2021, **300,000** in 2020) were excluded from diluted EPS calculation as performance conditions were not met[46](index=46&type=chunk) [Note M – Income Taxes](index=16&type=section&id=Note%20M%20%E2%80%93%20Income%20Taxes) This note discusses the company's effective tax rates and significant factors influencing them **Effective Tax Rates:** | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | 24.4% | (145.6%) | | Nine Months Ended Sep 30 | 22.6% | 18.2% | - The difference in effective tax rates is primarily due to the expected jurisdictional mix of profit and losses and a decrease in Global Intangible Low Taxed Income (GILTI) in 2021[47](index=47&type=chunk) - The Company expects to receive corporate income tax benefits from the CARES Act, including net operating loss carryback, employee retention credit, and employer payroll tax deferral[50](index=50&type=chunk) [Note N – Equity-Based Compensation](index=17&type=section&id=Note%20N%20%E2%80%93%20Equity-Based%20Compensation) This note provides details on the company's equity-based compensation plans and expenses **Total Equity-Based Compensation (in thousands):** | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $5,677 | $5,732 | | Nine Months Ended Sep 30 | $16,696 | $16,939 | - As of September 30, 2021, **7,730,522** shares of common stock were available for grant under the 2019 Plan[51](index=51&type=chunk) - Steve Madden was granted an option to purchase **225,000** shares on August 2, 2021, vesting in four equal installments by June 30, 2022[53](index=53&type=chunk) [Note O – Goodwill and Intangible Assets](index=19&type=section&id=Note%20O%20%E2%80%93%20Goodwill%20and%20Intangible%20Assets) This note presents the carrying amounts of goodwill and intangible assets and any impairment assessments **Goodwill Net Carrying Amount (in thousands):** | Reporting Unit | Sep 30, 2021 | | :--- | :--- | | Wholesale Footwear | $90,906 | | Wholesale Accessories/Apparel | $62,688 | | Retail | $14,363 | | **Total** | **$167,957** | - No impairment charges were recorded for goodwill and intangibles in 2021, following a qualitative assessment as of July 1, 2021, which concluded fair values exceeded carrying values[58](index=58&type=chunk) - The Company sold an internally developed trademark for **$8,000K** during the nine months ended September 30, 2021, with the gain recorded in operating expenses[60](index=60&type=chunk) [Note P – Derivative Instruments](index=20&type=section&id=Note%20P%20%E2%80%93%20Derivative%20Instruments) This note describes the company's use of derivative instruments for hedging foreign currency risk - The Company uses forward foreign exchange contracts as cash flow hedging instruments to manage the risk of exchange rate fluctuations on forecasted inventory purchases[62](index=62&type=chunk) - As of September 30, 2021, the net forward contracts hedging portfolio had a notional amount of **$26,648K**[62](index=62&type=chunk) [Note Q – Commitments, Contingencies and Other](index=20&type=section&id=Note%20Q%20%E2%80%93%20Commitments,%20Contingencies%20and%20Other) This note outlines the company's future financial commitments and potential liabilities from legal proceedings - As of September 30, 2021, the Company had future minimum royalty and advertising payments totaling **$16,000K**[63](index=63&type=chunk) - Management believes that liabilities from legal proceedings will not have a material effect on the Company's financial position or results of operations[64](index=64&type=chunk) [Note R – Operating Segment Information](index=21&type=section&id=Note%20R%20%E2%80%93%20Operating%20Segment%20Information) This note provides financial data broken down by the company's various operating segments - The Company operates five reportable segments: Wholesale Footwear, Wholesale Accessories/Apparel, Retail, First Cost, and Licensing[65](index=65&type=chunk) - Corporate expenses are unallocated and include costs related to corporate executives, finance, social responsibility, legal, human resources, information technology, and other shared costs[66](index=66&type=chunk) **Nine Months Ended September 30, 2021 Segment Revenue (in thousands):** | Segment | Revenue | % of Total Revenue | | :--- | :--- | :--- | | Wholesale Footwear | $719,094 | 55.8% | | Wholesale Accessories/Apparel | $236,444 | 18.4% | | Retail | $323,227 | 25.1% | | First Cost | $1,909 | 0.1% | | Licensing | $6,987 | 0.5% | | **Total** | **$1,287,661** | **100.0%** | [Note S – Recent Accounting Pronouncements](index=23&type=section&id=Note%20S%20%E2%80%93%20Recent%20Accounting%20Pronouncements) This note discusses the company's evaluation of recently issued accounting standards - The Company is evaluating ASU 2020-04, "Reference Rate Reform," which provides practical expedients for contract modifications and hedging relationships related to the transition from LIBOR, but does not expect a material impact on its financial statements[69](index=69&type=chunk) [Note T – Credit Agreement](index=23&type=section&id=Note%20T%20%E2%80%93%20Credit%20Agreement) This note details the company's revolving credit agreement and its current utilization - On July 22, 2020, the Company entered into a **$150,000K** secured revolving credit agreement, maturing on July 22, 2025[70](index=70&type=chunk) - As of September 30, 2021, the Company had no cash borrowings and **$1,400K** in letters of credit outstanding under the Credit Facility[78](index=78&type=chunk) - The Credit Agreement contains various restrictions and covenants, including minimum availability requirements, but no other financial maintenance covenants[74](index=74&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) This section provides management's perspective on the company's financial condition and results of operations, highlighting the significant recovery from the COVID-19 pandemic in 2021, with detailed analysis of revenue, gross profit, operating expenses, and net income across consolidated and segment-specific performance, alongside discussions on liquidity, capital resources, and contractual obligations [Overview](index=26&type=section&id=Overview) This section provides a general description of Steven Madden, Ltd.'s business operations and product distribution channels - Steven Madden, Ltd. designs, sources, markets, and sells fashion-forward branded and private label footwear, handbags, apparel, and accessories[85](index=85&type=chunk) - Products are distributed through various channels including department stores, specialty stores, luxury retailers, mass merchants, online retailers, company-owned retail stores, and e-commerce websites across North America, Europe, South Africa, and Asia[85](index=85&type=chunk) [Executive Summary](index=26&type=section&id=Executive%20Summary) This section summarizes the company's key financial performance and liquidity position for the reporting period - The Company experienced significant improvements in its retail segment and wholesale businesses in 2021, recovering from the unprecedented decline in revenue and earnings in 2020 due to the COVID-19 pandemic[86](index=86&type=chunk) **Key Financial Highlights (Three Months Ended Sep 30, 2021 vs. 2020):** | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Total revenue | $528,742 | $346,867 | +52.4% | | Net income attributable to Steven Madden, Ltd. | $66,643 | $(6,951) | Turnaround to profit | | Diluted EPS | $0.82 | $(0.09) | Turnaround to profit | - As of September 30, 2021, the Company had **$259,913K** in cash, cash equivalents, and short-term investments, no debt, and working capital of **$492,527K**[88](index=88&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenue, gross profit, and operating income, across different periods and segments [Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020](index=28&type=section&id=Three%20Months%20Ended%20September%2030,%202021%20Compared%20to%20Three%20Months%20Ended%20September%2030,%202020) The company demonstrated a strong recovery in the third quarter of 2021, with significant revenue growth and a return to profitability across most segments compared to the pandemic-impacted prior year [Consolidated](index=28&type=section&id=Consolidated_3M) This subsection provides a consolidated view of the company's financial performance for the three months ended September 30 - Total revenue increased **52.4%** to **$528,742K**, driven by increases in Retail, Wholesale Footwear, and Wholesale Accessories/Apparel segments[91](index=91&type=chunk) - Gross profit margin improved to **41.6%** from **40.3%**, primarily due to a shift towards the higher-margin retail segment, partially offset by inbound freight costs and the non-renewal of GSP[91](index=91&type=chunk) - Income from operations was **$88,418K**, a significant turnaround from a loss of **$(2,998)K** in the prior-year period[91](index=91&type=chunk) [Wholesale Footwear Segment](index=28&type=section&id=Wholesale%20Footwear%20Segment_3M) This subsection details the financial performance of the Wholesale Footwear segment for the three months ended September 30 - Revenue increased **42.6%** to **$304,203K**, accounting for **57.5%** of total revenue[92](index=92&type=chunk) - Gross profit margin improved to **35.5%** from **34.3%**[92](index=92&type=chunk) - Income from operations increased to **$70,515K** from **$31,707K** in the prior year[92](index=92&type=chunk) [Wholesale Accessories/Apparel Segment](index=28&type=section&id=Wholesale%20Accessories%2FApparel%20Segment_3M) This subsection details the financial performance of the Wholesale Accessories/Apparel segment for the three months ended September 30 - Revenue increased **38.7%** to **$97,811K**, representing **18.5%** of total revenue[93](index=93&type=chunk) - Gross profit margin decreased to **27.8%** from **35.5%**, primarily due to the non-renewal of the GSP impacting imports from Cambodia in the handbag business[93](index=93&type=chunk) - Income from operations was **$13,310K**, a turnaround from a loss of **$(4,658)K** in the prior year[93](index=93&type=chunk) [Retail Segment](index=29&type=section&id=Retail%20Segment_3M) This subsection details the financial performance of the Retail segment for the three months ended September 30 - Revenue surged **108.6%** to **$123,054K**, driven by strong performance in e-commerce and brick-and-mortar stores[94](index=94&type=chunk) - Gross profit margin improved to **65.9%** from **63.8%**, primarily due to lower promotional activity[94](index=94&type=chunk) - Income from operations was **$22,539K**, a significant turnaround from a loss of **$(17,292)K** in the prior year[94](index=94&type=chunk) - The Company ended the quarter with **216** retail stores, compared to **220** stores as of September 30, 2020[94](index=94&type=chunk) [First Cost Segment](index=29&type=section&id=First%20Cost%20Segment_3M) This subsection details the financial performance of the First Cost segment for the three months ended September 30 - Commission income decreased to **$991K** from **$1,479K**[95](index=95&type=chunk) - Income from operations was **$695K**, down from **$882K** in the prior year[95](index=95&type=chunk) [Licensing Segment](index=29&type=section&id=Licensing%20Segment_3M) This subsection details the financial performance of the Licensing segment for the three months ended September 30 - Royalty income slightly increased to **$2,683K** from **$2,558K**[96](index=96&type=chunk) - Income from operations was **$1,991K**, up from **$1,948K** in the prior year[96](index=96&type=chunk) [Corporate](index=29&type=section&id=Corporate_3M) This subsection details the corporate operating expenses for the three months ended September 30 - Corporate operating expenses increased **32.4%** to **$20,632K**, primarily due to the impact of the COVID-19 pandemic in the prior year[97](index=97&type=chunk) [Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020](index=31&type=section&id=Nine%20Months%20Ended%20September%2030,%202021%20Compared%20to%20Nine%20Months%20Ended%20September%2030,%202020) For the first nine months of 2021, the company achieved substantial revenue growth and a strong return to profitability, driven by recovery across all segments, effective expense control, and a gain from trademark sale, significantly reversing the losses incurred during the peak of the pandemic in 2020 [Consolidated](index=31&type=section&id=Consolidated_9M) This subsection provides a consolidated view of the company's financial performance for the nine months ended September 30 - Total revenue increased **51.7%** to **$1,287,661K**, with growth across Retail, Wholesale Footwear, and Wholesale Accessories/Apparel segments[100](index=100&type=chunk) - Gross profit margin improved to **41.1%** from **38.8%**, driven by a shift to the higher-margin retail segment, partially offset by inbound freight costs and GSP non-renewal[100](index=100&type=chunk) - Income from operations was **$164,180K**, a significant turnaround from a loss of **$(52,948)K** in the prior-year period, benefiting from higher revenue, an **$8,000K** gain on trademark sale, and expense control initiatives[100](index=100&type=chunk) [Wholesale Footwear Segment](index=31&type=section&id=Wholesale%20Footwear%20Segment_9M) This subsection details the financial performance of the Wholesale Footwear segment for the nine months ended September 30 - Revenue increased **36.6%** to **$719,094K**, representing **55.8%** of total revenue[101](index=101&type=chunk) - Gross profit margin improved to **34.4%** from **33.2%**[101](index=101&type=chunk) - Income from operations increased to **$159,049K** from **$71,534K** in the prior year[101](index=101&type=chunk) [Wholesale Accessories/Apparel Segment](index=31&type=section&id=Wholesale%20Accessories%2FApparel%20Segment_9M) This subsection details the financial performance of the Wholesale Accessories/Apparel segment for the nine months ended September 30 - Revenue increased **47.6%** to **$236,444K**, accounting for **18.4%** of total revenue[102](index=102&type=chunk) - Gross profit margin decreased to **26.4%** from **30.2%**, primarily due to the non-renewal of the GSP impacting imports from Cambodia[102](index=102&type=chunk) - Income from operations was **$15,468K**, a turnaround from a loss of **$(12,465)K** in the prior year[102](index=102&type=chunk) [Retail Segment](index=32&type=section&id=Retail%20Segment_9M) This subsection details the financial performance of the Retail segment for the nine months ended September 30 - Revenue increased **110.8%** to **$323,227K**, driven by continued strength in e-commerce and recovery in brick-and-mortar stores[103](index=103&type=chunk) - Gross profit margin improved to **65.2%** from **63.4%**, primarily due to lower promotional activity[103](index=103&type=chunk) - Income from operations was **$43,632K**, a significant turnaround from a loss of **$(66,944)K** in the prior year[103](index=103&type=chunk) [First Cost Segment](index=32&type=section&id=First%20Cost%20Segment_9M) This subsection details the financial performance of the First Cost segment for the nine months ended September 30 - Commission income decreased to **$1,909K** from **$2,981K**[104](index=104&type=chunk) - Income from operations increased to **$1,577K** from **$1,251K** in the prior year, despite lower revenue, due to decreased operating expenses[104](index=104&type=chunk) [Licensing Segment](index=32&type=section&id=Licensing%20Segment_9M) This subsection details the financial performance of the Licensing segment for the nine months ended September 30 - Royalty income increased to **$6,987K** from **$5,989K**[105](index=105&type=chunk) - Income from operations increased to **$5,826K** from **$3,416K** in the prior year, also benefiting from decreased operating expenses[105](index=105&type=chunk) [Corporate](index=32&type=section&id=Corporate_9M) This subsection details the corporate operating expenses for the nine months ended September 30 - Corporate operating expenses increased **23.4%** to **$61,372K**, primarily due to the impact of the COVID-19 pandemic in the prior year[106](index=106&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flow, capital structure, and ability to meet its financial obligations - As of September 30, 2021, the Company had **$259,913K** in cash, cash equivalents, and short-term investments, with no cash borrowings and **$1,400K** in letters of credit outstanding under its **$150,000K** revolving credit facility[108](index=108&type=chunk)[109](index=109&type=chunk) - Working capital was **$492,527K** as of September 30, 2021[109](index=109&type=chunk) - The Company believes its current financial position and available liquidity will meet all financial commitments and operating needs for at least the next twelve months[110](index=110&type=chunk) [Operating Activities](index=33&type=section&id=Operating%20Activities) This subsection details the cash generated or used by the company's primary business operations - Cash provided by operations was **$96,184K** for the nine months ended September 30, 2021, a significant increase from **$607K** in the prior year, driven by higher net income and favorable changes in accounts payable and accrued expenses[111](index=111&type=chunk) [Investing Activities](index=33&type=section&id=Investing%20Activities) This subsection details the cash flows related to the acquisition and disposal of long-term assets and investments - Net cash provided by investing activities was **$2,408K**, including **$8,000K** from the sale of a trademark and **$4,599K** in capital expenditures[112](index=112&type=chunk) [Financing Activities](index=33&type=section&id=Financing%20Activities) This subsection details the cash flows related to debt, equity, and dividend transactions - Net cash used in financing activities was **$126,429K**, primarily due to **$74,685K** in share repurchases, **$36,990K** in cash dividends, and **$19,127K** for the acquisition of incremental ownership of joint ventures[113](index=113&type=chunk) [Contractual Obligations](index=33&type=section&id=Contractual%20Obligations) This subsection outlines the company's future financial commitments under various agreements **Contractual Obligations as of September 30, 2021 (in thousands):** | Obligation | Total | Remainder of 2021 | 2022-2023 | 2024-2025 | 2026 and after | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease obligations | $129,469 | $9,997 | $59,984 | $36,039 | $23,449 | | Purchase obligations | $128,646 | $128,646 | — | — | — | | Future minimum royalty and advertising payments | $16,000 | $2,312 | $13,688 | — | — | | Transition tax | $14,847 | $1,563 | $4,493 | $8,791 | — | | **Total** | **$288,962** | **$142,518** | **$78,165** | **$44,830** | **$23,449** | - The majority of products are produced by independent manufacturers overseas, primarily in China, with growing percentages in Cambodia, Mexico, Brazil, and some European nations[115](index=115&type=chunk) [Dividends](index=34&type=section&id=Dividends) This subsection provides information on the company's dividend policy and recent declarations - The Board of Directors approved a quarterly cash dividend of **$0.15** per share, payable on December 27, 2021, to stockholders of record as of December 17, 2021[118](index=118&type=chunk) - Future dividend payments are subject to Board discretion and contingent upon future earnings, financial condition, capital requirements, and general business conditions[119](index=119&type=chunk) [Inflation](index=34&type=section&id=Inflation) This subsection discusses the impact of inflation on the company's sales and profitability - Management does not believe inflation and price changes significantly affected sales or profitability for the three months ended September 30, 2021[120](index=120&type=chunk) - Historically, the Company has mitigated product cost increases by raising prices, renegotiating costs, changing suppliers, and improving operating efficiencies[120](index=120&type=chunk) [Off-Balance Sheet Arrangements](index=34&type=section&id=Off-Balance%20Sheet%20Arrangements) This subsection confirms the absence of any off-balance sheet financial arrangements - The Company has no off-balance sheet arrangements[121](index=121&type=chunk) [Critical Accounting Policies and the Use of Estimates](index=34&type=section&id=Critical%20Accounting%20Policies%20and%20the%20Use%20of%20Estimates) This subsection refers to the company's key accounting policies and the significant judgments involved - There have been no material changes to the Company's critical accounting policies and use of estimates from those reported in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020[122](index=122&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to market risks, primarily from variable interest rates on financing and foreign currency exchange rate fluctuations, and describes the strategies employed to manage these risks, including the use of forward foreign exchange contracts - The Company is exposed to market risk from variable interest rates on its financing arrangements, primarily based on the prime rate and LIBOR[123](index=123&type=chunk) - Foreign currency exchange risk, particularly from inventory purchases in foreign jurisdictions, is managed by denominating purchases in U.S. dollars and using forward foreign exchange contracts for terms up to two years[126](index=126&type=chunk) - A hypothetical **10%** increase or decrease in the U.S. dollar against foreign currencies would result in a net change of approximately **$2,267K** in the fair value of the derivatives portfolio as of September 30, 2021[127](index=127&type=chunk) - The Company also faces translation risk from its foreign operations in Canada, Mexico, Europe, South Africa, China, Taiwan, and Israel, where local currencies are functional[128](index=128&type=chunk) [ITEM 4. Controls and Procedures](index=36&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, assessed the effectiveness of the company's disclosure controls and procedures, concluding they were effective as of September 30, 2021. No material changes to internal control over financial reporting were identified, and the COVID-19 pandemic did not materially impact these controls [Disclosure Controls and Procedures](index=36&type=section&id=Disclosure%20Controls%20and%20Procedures) The Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of disclosure controls and procedures as of September 30, 2021, concluding they were effective - The Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of disclosure controls and procedures as of September 30, 2021, concluding they were effective[129](index=129&type=chunk) [Changes in Internal Control Over Financial Reporting](index=36&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2021, and the COVID-19 pandemic did not materially impact these controls - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2021[130](index=130&type=chunk) - The COVID-19 pandemic has not had a material impact on the Company's internal controls over financial reporting[130](index=130&type=chunk) [PART II – OTHER INFORMATION](index=37&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part includes legal proceedings, risk factors, equity security sales, and required exhibits and signatures [ITEM 1. Legal Proceedings](index=37&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings, but management anticipates that any resulting liabilities will not materially affect its financial position, results of operations, or cash flows - The Company is a defendant in certain lawsuits in the normal course of business[132](index=132&type=chunk) - Management believes that any liabilities resulting from these matters should not have a material impact on the Company's financial position, results of operations, or cash flows[132](index=132&type=chunk) [ITEM 1A. Risk Factors](index=37&type=section&id=ITEM%201A.%20Risk%20Factors) This section directs readers to previously disclosed risk factors in the company's annual and prior quarterly reports, while specifically restating the risk associated with disruptions in product delivery systems and the challenges of effective inventory management, exacerbated by recent supply chain issues - The risk factor regarding disruptions to product delivery systems and failure to effectively manage inventory is restated, emphasizing its potential material adverse effect on business, financial condition, results of operations, and liquidity[134](index=134&type=chunk) - In the three months ended September 30, 2021, the supply chain was disrupted by increased consumer demand, pandemic-related outbreaks in Asia, domestic port and warehouse delays, container shortages, and global inflation, leading to higher freight costs[135](index=135&type=chunk) - Reliance on ocean freight transportation exposes the Company to risks such as port congestion, severe weather, natural disasters, and terrorism, which can cause delivery delays, increase costs, and disrupt business[134](index=134&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchase activities during the third quarter of 2021 under its Share Repurchase Program, including the number of shares bought back and the average price paid **Common Stock Repurchases (Three Months Ended September 30, 2021, in thousands, except per share data):** | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | 7/1/2021 - 7/31/2021 | 251,740 | $42.16 | | 8/1/2021 - 8/31/2021 | 323,968 | $41.62 | | 9/1/2021 - 9/30/2021 | 197,355 | $39.49 | | **Total** | **773,063** | **$41.25** | - As of September 30, 2021, approximately **$49,509K** remained available for future repurchases under the Share Repurchase Program[138](index=138&type=chunk) [ITEM 6. Exhibits](index=39&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits accompanying the Form 10-Q, including required certifications from the CEO and CFO, and the financial statements formatted in iXBRL - The report includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[140](index=140&type=chunk) - The Condensed Consolidated Financial Statements and Notes are provided in iXBRL (Inline Extensible Business Reporting Language) format[140](index=140&type=chunk) [Signatures](index=40&type=section&id=Signatures) This section contains the official signatures of the company's Chairman and Chief Executive Officer, Edward R. Rosenfeld, and Chief Financial Officer, Zine Mazouzi, certifying the Form 10-Q report - The report was duly signed on November 4, 2021, by Edward R. Rosenfeld, Chairman and Chief Executive Officer, and Zine Mazouzi, Chief Financial Officer[142](index=142&type=chunk)[143](index=143&type=chunk)

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]