CROX - Earnings call transcript Q1 2022

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Operator

Good morning and welcome to the Crocs, Inc.

First Quarter 2022 Earnings Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. is event this note being recorded. Please like Lin, Vice now to turn Corinne to over conference President the I'd of Finance. Corporate ahead. go Please

Corinne Lin

Good as the thereof, XXXX and you the are accordingly regarding thank financials of latest quarterly to, include, not to achievements Crocs' morning, call We involve our morning, These site to described Factors us Form like future of a are forward-looking subject our our may acquisition caution annual by intentions; implied expressed the We unknown to our may to everyone, required statements to for copy be be federal plans, shareholder the actual in filings future limited update XX-K and to today risks achievements and documents of metrics and on of filed the those some subsequent relating of these we at reflect for to impacts amounts events, is objectives, portfolio, results and risk that Crocs Form this anticipated non-GAAP all announced statements on that other crocs.com. press or non-GAAP Crocs we release performances more law. statements. factors, or actual in on call. with for or refer as product applicable forward-looking the with our the counterparts earnings to other SEC. to or future results uncertainties impact potential; joining would quarter results, morning. except by the Earlier information subject section measures. press this Safe any from first Certain the annual Crocs Web statements to and and and cause the statements expectations, this provided the our release are you These report call. information potential of materially to to and Harbor the ability pandemic. this which we differ is different growth not these adjusted our issued XX-K from forward-looking could financial related otherwise but well to described statements results, GAAP forward-looking or on regarding business known remind that report strategy, contained earlier financial uncertainties found COVID-XX of is and provisions performance as Risk create is laws. SEC as the materially on benefits these HEYDUDE value risks, deliver and their and the Please obligated results, securities A Accordingly, refer factors. statements you reconciliation

Executive President Rees, are Anne Vice Executive Chief the Chief Officer; Mehlman, us Financial Andrew call and Joining today Officer. on and

Following call this questions. the your their turn remarks, prepared we call At for to time, will over open Andrew. the I'll

Andrew Rees

adjusted operating very performed adjusted on had a everyone. quarter, Thank We're Crocs generated number of pleased basis, across XX% grew sales Revenues XX% strong EPS. despite you, to regions we margins headwinds. the diluted strongly exceptional we constant of all and our the brand company were at good and and extremely that results, announce first morning, overall Corinne, $X.XX Within today by an currency channels. of very

in for growth strong Anne assimilating Crocs DTC a including that it Overall, constant both HEYDUDE on revenue HEYDUDE, are currency On clear we basis, the constant shortly, the we're growth, six during of XX%. quarter robust from XXXX. confident and a number grew million exceptional revenue consolidated financial our first footwear but $X.XX EPS a Adjusted Piper XX%. Stock diluted brand brand. Spring brands a growth exceptional basis. basis, XX% the weeks pro and was HEYDUDE XX% HEYDUDE currency XX%. with here forma are million, Taking Sandler's demand company a HEYDUDE and rapidly February While we've top On digital and Crocs it's growth few including ranked runway. footwear is in on of operating detail the Teens and into Crocs HEYDUDE, at highlights Both review more only our $XXX up last results will margins quarter, very Crocs XX owned in of XX% brand while spring; brand, from consolidated integration basis, up is best-in-class QX a was XX. as number number X track. an at per exceeded revenues of were preferred expectations survey The X $XXX share. and preferred is with X and since the proceeding the Adjusted including at on was for

to ESG we our zero Finally, our net released a become XXXX reiterating bold XXXX. report, commitment by company

We brand. with Moving strong for XX%. with brand QX quarter, of to currency growth experienced our begin let's Crocs constant highlights a the the

Our demand strong continued consumers the for evidences brand. growth have DTC the

indicator footwear Another to teens. Crocs Spring in that become brand Piper survey two amongst up Sandler the number jumped the spots is demand of Teen it X preferred

icon Ambassador, In our Crocs to Salehe China, ingenuity. continue and Bembury. with Questlove the luxury and relevance introduced partnership Balenciaga Justin sandal and China's Clog her as house renowned created leveraging wore entertainment wore when waves with brand made fashion activations. from Bieber Grammys creativity newest consideration footwear Nana and designer we a drive Crocs Pollex through We fashion Crocs in the many at We hard collaboration

to continue innovative many marketing digital run We campaigns.

ranked the Latino, popular campaign. The series. liked post the to the popular our Karol visits drive also the SLAM stars became XK site the looks. helped most a social how amongst Crocs highlighting in second G their basketball Crocs sandal Crocs with To custom in video basketball million develop to five global X.X magazine Web during additional For themed history. we game consideration success the Viva we most We Crocs with into Spotify content Karol off a curated NBA athletes, up announcement G Instagram four teamed collaboration, in incorporate drive which top with series playlists court experienced playlists brands and

candy to Day James collaboration were clog create Late unique site, between visitors Crocs and guest topic The novelty Valentine's host XXX,XXX with to Our Show sweetheart our of classic Minaj. Late drove fur a conversation and the the Corden Sweethearts on Nicki

features Our both launch higher new comfort growth we and Cozzzy DTC newly in on digital first LiteRide From breathability two-strap launch as XXX app. channel we franchise. a the finally, to well franchise perspective, a promising lined as start a sandal from company-owned and and mix year. in price levels And debuted a revenues distributors, very in our and Crocs promotional mortar, point original and that strong grew on compared stores, a revenues enhanced by LiteRide benefited XX% achieved higher pricing, basis revenues, constant a revenues XX% which XXXX. e-commerce wholesale retail and on includes brick Crocs as DTC currency product favorable basis. constant includes had currency grew from retail as brand Wholesale, which lower last to over

digital strong basis. quarter XX% growth a business experienced Our of on another constant currency

out HEYDUDE, quarter both about pro contributing forma opportunities The pro to survey, revenues a building February us. the Sandler closed the wholesale future is for momentum quarter. XXX second strong forma exceptional XX, HEYDUDE we're brand XXXX HEYDUDE. incredible, focused our the or excited are the Spring the in even for platform Demand for top basis. and the more the growth, fueling million ranked ninth and Turning in on Piper consecutive XX% South. expectations, on of remains for first brand ahead was to million exceeded in growth we the drive XXX and acquisition Midwest cracking survey on HEYDUDE. and particularly Underlying XX To the brand digital,

By the into love plus $X later in From and potential integration we the talent, growing this consumers everything to You days look markets. marketing work that progressing early and to will highly international year. across plan. successful it's begin some but this investing this it an to and see forward of brand standpoint, taking high in marketplace U.S. billion a digital, is brand

leadership call, of forward shared success mentioned we high this highly fourth on legal exceeding profitable brand. supply expectations. positions. integration conference service the continued As already of with finance, chain, including look the results our integrating functions We're and growth, the track quarter we've HR, many to key hired We during and

notable Crocs by Goals. report, is the company. ESG and sustainable report more time, reflecting becoming we and to and Sustainable commitment that guided will Development brands brand UN Another equitable capture this published to our both important achievement the SASB be to progress Over and evolve continue

an invite to a carbon, we've how demonstrates our own values brand reinforces ESG; to comfortable of commerce our [ph] comfort company XXXX. pillar shoes, transparency and without the and that actionable our their to in energy. sustainable is three everyone efforts, to comfort proud our As report applied to renewable approach comfort all into for this a for And by become excited our We're bold especially zero people. net the about report commitment around innovation sustainability communities be

future. me let to Now turn the

fourth As more supply ongoing in become confidence interest China. zero uncertain. of war rising these has complicated the rates impact caused we and disruptions shutdowns call, The the remains inflation, macro factors COVID policy the high by on the our backdrop remains in in discussed environment The challenging. Ukraine all only quarter chain of with consumer and

Anne long-term forward Crocs tremendous have to strength both We to and brands. growth to on the and brands, the potential clear underlying confident extremely are XXXX vision results detail. for $X we With and both the financial evidence about revenue that, confidence However, HEYDUDE brand look ability of execute continuing our in $X now by and HEYDUDE brand revenues more billion to and by billion of Crocs the the review to to XXXX. in our grow will

Anne Mehlman

and first begin good quarter our I'll a with results. of short Andrew, you, Thank everyone. recap morning,

mentioned amounts to press a reconciliation to the release. GAAP of equivalent refer our For please their non-GAAP amounts,

release, earnings And the revenue brand led adjusted adjusted share. regions We of all seen and consistent As exceeded expectations. headwinds, and revenues another an very best-in-class Gross we freight growth adjusted despite and quarter operating remained across excellent you've press within HEYDUDE and SG&A to delivered and channels. first from already margins strong leverage our strong margins had per quarter. Crocs

the acquisition HEYDUDE is Middle previous reportable the Pacific, from now Africa has operating segments East, America. for HEYDUDE America and that Latin moved America, newly the a to segment EMEALA brand the now Crocs are added America the and brand. segment, Europe, Asia formed we've closed, With North segment our Latin

First following comprised and unfavorable or were quarter growth revenues growth close HEYDUDE the the $XXX of on quarter brand year, $XXX from losing currency a Crocs achieved inter-quarter. and the million, of rate XX.X% XX. growth half over the million from latter Crocs of acquisition $XXX despite from in consolidated XX.X% million Russia the revenues XX.X% brand last February movements

average brand we was selling price the brand, slightly X.X% of first Jibbitz penetration. quarter XX.X% sold promotions last and by of for The million Crocs by the and which increase discounting pairs declined year-over-year XX.X driven Crocs QX over a during price reduced During $XX.XX, incremental year. shoes, increases,

and or constant XX.X% growth Crocs in year, highlights the QX Asia on top greater an clearly by Let's region, driven brand DTC discounting less review Crocs strength of driven North by with XX.X% by volume. XXX.X% of XX.X% revenues increased in a strong the year, on revenues America. to to wholesale brand a basis beginning last America and million Crocs increased prior where $XXX generated brand signaled prices revenues currency growth million sell-throughs. higher North pricing, and higher of The exceptional few $XX

China last slightly constant EMEALA, and growth posted and offset and by India double channels $XXX Korea, brand EMEA offset on DTC constraints. growth India, last revenue digit conservative year. revenue Russia with were styles, to grew operations. traffic million, Double as and headwinds. core South consumer revenues Japan strong Singapore, digit by posted basis American combined driven growth currency versus led regions, as a growth, and growth This was on we COVID was strong in by lockdowns Japanese XX.X% a a increases constant DTC higher paused Latin double our from even for by remain digit new inventory revenue Korea basis Australia. currency accelerating year. Digital period Crocs e-commerce strong, XX% of South and excellent in the momentum softness all

grew versus Turning into XX% million since HEYDUDE. exceeded will contributing On regards XXXX next $XXX provide to February report quarter adjusted the a margin, last beginning only brand our pro the gross it million. XX.X% a and we XX. for of visibility consolidated gross Revenues on XX.X%. With we'll forma QX revenues expectations, for basis to to $XXX year. margins first Consolidated remainder year's basis, were margin

declined freight even Adjusted fewer points last adjusted power which XX almost margin level of connection with and prices the $XX gross entirely margin. margins XXX year addition inventory of gross unfavorable Importantly, only Adjusted these reserve the purchasing HEYDUDE as of HEYDUDE at offset in and due a the Crocs was gross promotions than basis gross up points quarter, significant and for headwinds. pause million consolidated higher the inventory lower brand due carried $X incremental XX.X%, XX during of write acquisition with operations. a basis the margin Russia basis to lower million excludes to points the a

XXXX, During the first million versus was basis of SG&A primarily talent. first points prior adjusted XX.X% rate consolidated quarter revenues improved additional in achieved versus quarter. year, an investing of SG&A while in in last $XX to XX.X% and XX The decrease marketing year's

and noted marketing significant million million to the talent. Russia non-recurring support acquisition. SG&A the of growth is expenses HEYDUDE the of to quarter particularly bad expenses included debt HEYDUDE, related our in the have for where Non-recurring required in business, $X Crocs long-term operations. invest infrastructure, we first investment included to $XX related pause to continue of will We

Our XX.X% of first Adjusted HEYDUDE margin adjusted declined income from as SG&A quarter leverage addition operating the XX.X% year gross freight the offset including of $XXX brand. incremental last to $XXX million million year, last only XX.X% partially margin from $XX consolidated HEYDUDE. attributable million increased to of headwinds the and operating

For first XX.X% non-GAAP was XX.X% the our tax rate last versus year. quarter,

non-GAAP to $X.XX earnings year. increased Our from $X.XX diluted share first quarter per XX.X% last

million $XXX of first position our and million capacity we Our borrowing equivalents revolver. upsized $XXX liquidity quarter cash on strong and ended remains cash as of with the

after and Our borrowings loan at were a fee end $X on issuing billion the million of billion net a revolver. $X.X $XXX term QX borrowing

This HEYDUDE. $XX acquisition to up million Our of includes step another inventory balance at addition inventory March the XX, of HEYDUDE of and $XX related million. of XXXX $XXX inventory was million the

of In-stock in-transit products as partially a We times. we continue as to increases result particularly significant inventory on levels elevated a airfreight. improved, result in-transit experience U.S., investments core are in making the have of in the

to Turning will QX. All otherwise current share XXXX our unless be the basis, to and I future, reported like would for outlook on a stated. numbers

year-over-year We approximately XXXX, consolidated guidance growth billion, over year we revenue XX%. expect our raising are Crocs representing growth approximately billion brand $X.X XX%. XX% full of from $X.X For revenue still of to to

now $XXX million for $XXX million million outstanding million an for quarter year revenues full Following expect implying be raising basis, HEYDUDE expectations first the HEYDUDE, to reported to are we a between pro on and $XXX $XXX forma on our to a basis.

to We XX% are also raising our adjusted operating approximately margin be range to XX%.

growth we and $XX.XX. result approximately $XX.XX be diluted a anticipated our XXXX, expectations to share raising As between outstanding per best-in-class margins are of non-GAAP for to earnings

$XXX we QX XX% revenues and to XX% growth expect $XXX representing million to For be prior between XXXX, consolidated year. from million,

approximately current constant Crocs is growth XX% in expect XX% XX% grow revenues We brand at to to to rates. currency, XX% which currency

guidance. brand Excluding currency XX% Russia, above growth the year is full approximately Crocs would which XX%, of to pause and be

approximately growth, be significant expect Even airfreight to in with be we XX%. and support investment expected operating million SG&A to approximately to HEYDUDE revenues margin expect to $XXX million. adjusted We $XXX

brand HEYDUDE growth I'll fundamentals And and to Given our time, environment, over the of be spite call projections global below operating In the to to cash midyear Crocs Xx year, brand incredibly At we this by is the allow growth which now for us the thoughts. Andrew final our to strong. shares would leverage strong in so. are revenue profitability. summary, repurchase year, and for to accretive should back flow the we and his do choose challenging next already expect turn

Andrew Rees

Anne. you, Thank

momentum of QX brands. our our performance we indicated, both great in As have

questions. brand call We this to unlock out for value potential create. exceeded we're focused targets has and continues long significant already the open range the grow the achieving please and channels. full Operator, and brand. brand the all young brands laid regions shareholder The to of expectations, exciting excited Crocs this both for HEYDUDE in Our on we've remain will

Operator

you. Thank

will session. Instructions]. We the [Operator now begin question-and-answer

from ahead. Please first Baird. go from Our question comes Komp Jonathan

Jonathan Komp

Yes, you. Good morning. Thank hi.

for guidance, First it business you then ask, embedded looks to the acceleration. the comment when along second half and your that like think QX maybe bit the second really and will supporting look of factors half little the more the brand, at question top with to outlook, you just and a growth? what's of the the in in line Crocs want Can acceleration especially you I performance contribute in an

Anne Mehlman

Yes. Hi, the for Jon. Thank you question.

So is brand in the which just full XX% margins which the plus to we're Crocs HEYDUDE guidance, our best-in-class for guidance, reiterate very year confident and the revision upward brand, carries of operating the combination. in our both

our XXX Crocs innovation is continued full brand brand to the XX% to to turning pipeline, currency at the pre-books for brand on the back see above XX% constant XXX really to of which reported XX% we're overall And would Russia, be the obviously the a and then strong Our translates guide seeing Crocs XX% XX% Then add for just globally. it that basis. pause specifically, both plus. guide and you brand resonance revenue HEYDUDE we in on if performance growth, to XX% QX to XX% for based is year brands, XX%

to billion. a look little sort you of which HEYDUDE that to billion execute, of obviously, And and long QX. extra X continuing is color brand the then on And our on brand let term, Crocs we gives I'll color. to So X Andrew the the forward add

Andrew Rees

Jonathan. think it couple can I a at at Look, come Yes. different ways, you of

at trajectory Anne So businesses, our look our the that. in DTC pre-books, can can think at we reference look we I and

look other the we strength brand. the just the is think underlying thing of I at

perform metrics, brand, brand both the the resonance of strong would despite introductions look we I really well. And less Crocs markets. international in metrics, in in ideal that our brand first brand a if external NPI quarter. our here at at As the clearly States United to continues key There's would kind look very say we see we of some consider for trajectory. what we And and than is, the the

we closures flow late certainly last have As stronger at look That's year impacted we'll of three, two NPI. that. a much factory quarter quarter -- the certainly and

the and So we're the consumer by in and how wholesale into with HEYDUDE and brand, And that's kind enthusiasm accounts of a quarter. half perspective, it next having advocacy, our the have which impressed current pretty consumer the year. we're conversations then the we're optimistic the of the about And results the year, the back takeaway, of rest for them truly they're on about the the seeing buying for in they're the translating obviously, brand year. from

I we strength see think both We So very -- underlying see in we're fortunate. brands. great

Jonathan Komp

can than up That's I XX part less you've the the follow great. business, company HEYDUDE if on for it as And had of days.

the outlook for this year. pretty raised significantly You've

you And XXXX. surprised you least Thank at highlighted achieve just can the the far? level much How that have could more, you elaborate guidance? for then to on you. what billion you've So $X you Are much so where know scenarios I picture, broader there upside the maybe sooner? maybe supply visibility by

Andrew Rees

Yes.

I on that about the last bit Jonathan. call, think little we talked a

customers. HEYDUDE both we but into they book, diligence the right. to the we on, revenue the strong is in from visibility see great which our could do knew As DTC, brought Amazon, which very We had and had company a we questions. is XP. strong principally and trajectory book had wholesale We digital we dot-com a supply, order had some We it

changed. thing the biggest probably that's So I think that's

team. very the look at then have I And confidence much in reported last working obviously the to our several weeks, customers. the quarter supply we we that first the of period inbound since logistics six we HEYDUDE As the weeks and with think more well both and getting in

stage a really for arriving more wouldn't for are to potential And which don't we've say reason on really I got ideal, ultimate we're time. is I HEYDUDE. not say this guidance confidence things very about supply, around the the the brand. more any principal raising for So lot at But 'XX this -- want

building around billion enormous think that the sight $X I originally. doing a is optimistic. work about really out We're this into young we think brand integrating potential. the company, We the But do a have a clear we the brand to of very got to line lot lot We've we're of great platform. with that brand of around work talked today.

Jonathan Komp

really helpful. you. That's Thank

Operator

comes question from Susan from The go ahead. next Riley. Please Anderson B.

Alec Legg

taking Hi. Susan. our Good Legg morning. Alec on for questions. for Thanks

the to go the the HEYDUDE product made or back in seen production mentioned Thanks. believe either any chain, with I shipping on the China. supply was the of challenges point you primarily Have Just centers? and you shutdowns there,

Andrew Rees

Yes, predominantly HEYDUDE China. right. is made you're in

within that we're the some But of We things supply factory in revised the relative and couple expecting production closures the have and incorporated of last over our in material HEYDUDE. grand overall months not that scheme seen base to our guidance. is

shipping within and obviously logistics question, robust Crocs. think more operation, one I manage the logistics HEYDUDE step been have into really nice you referenced help so to the of of a that and logistics. also We and integrating able benefits that's in far we're

So I'd say all incorporated guidance. in factors date of those our are to

Anne Mehlman

but even though into our impact impact have QX. that's Crocs just well, Yes. perspective, Crocs as for that would related do our that business we shipped shutdowns the Shanghai add that China QX a on business e-commerce our from chain impacted business out And has supply the based guidance it's incorporated not Shanghai. an of to I on an for

Alec Legg

HEYDUDE. year Okay, last it and record up perfect. delta that was XX% just margin between year, what's expectation plus? I on I was year, plus. then the follow XX% record it believe And that of long-term a to guess

Anne Mehlman

Yes.

quickly, a brand infrastructure an So from very HEYDUDE job very, scaled growing obviously they in had think a of it perspective. young wonderful I back infrastructure. did They SG&A and was underinvested and

XX%. little We later today. performance approximately So bit margins I their filed believe year, EBITDA last were a

laid in needed we brand bought able when that invest last talked to for XX that the be see infrastructure. you'll We really we to the months. out the So about

they haven't is our the so spent in in at all. difference marketing, much marketing there SG&A, And investment in because in order,

the infrastructure brand stable to people to forward. invest intend So going build in and marketing, in a we

Alec Legg

quarter. And best Nice for of luck job Thank year. of rest on the the you.

Anne Mehlman

Alec. Thanks,

Operator

Instructions]. [Operator

Champine from comes question Please go Loop. next ahead. Our Laura from

Laura Champine

Thanks on efforts drive your your question. have you for as through spring? promotional taking is the to my been? environment on assessment we year-on-year And comment how what higher successful Can move pricing

Andrew Rees

you, Thank Laura.

clearly see QX I can very that our think in you results.

in you first pricing, reduced results, at look So from basis Jibbitz promotions, from the over if and quarter underlying from also the increases the QX margin sales gross points. was enhanced XXX

significant So I very would margin say from factors. increases those underlying

If major additional some flowed you remember, markets price April. last wholesale year. DTC our the took international in we in to increases later earlier year in customers in They this some year. We pricing took select

the our in less last competition, I we to aggregate to also cadence So are what and were and advance And anticipate promotional year If we I those increases, would be the this they've extremely time monitor look in think to environment promotions say doing relative well. us price at last changes competitive of was cost it's year. we closely, with positioned we that relative and promotional inflationary than competition. generally

really we the So good I are place about we feel there. think that

events the at of brand an Day see some do we current key in enhanced we And positioned the Easter really we're prices. good participate promotional of way You activity or like about it's of can feel July. to is in cadence rate Xth the and feel Memorial the seeing the or around But sale important market.

Anne Mehlman

our that add just would I were up XX%. ASPs Yes.

but Andrew also well. were on So as as our the in up ASPs the mentioned margins, XX% quarter

Laura Champine

to QX let slowing improvements way increasing the is it of QX. that ship, in promotions you saw brand, the like in think deceleration at you or supply to it the QX because that, guide from ship line that look top I Is you Crocs Got units a QX? to what wanted are chain for are it. If seems

Anne Mehlman

Yes.

that that XX% I way the actually we is in last -- we about grew are QX, year QX So talk would year-over-year.

So rate highest an year. it's had last growth it's we extremely -- actually the

growth would And neutralize So high if that say the and I Russia QX. to currency year still guide for our quarter. and then is full growth you impact, above equivalent it is a

think see anticipate QX. that we about really we -- don't good doesn't felt So it I slowing.

Laura Champine

Thank you. Understood.

Anne Mehlman

you. Thank

Andrew Rees

you. Thank

Operator

closing like question-and-answer [Operator no There This to Instructions]. questions for session. conference our in to the the any are more I'd queue. Rees over back turn Andrew concludes remarks.

Andrew Rees

Look, great for and thank very joining. who company, in much joined today for day. a everybody you I'd and their thank continued say you the like just interest Have to us

Operator

The conference attending today's presentation. Thank has now concluded. for you

may disconnect. now You

Crocs (CROX) 5 May 222022 Q1 Earnings call transcript