Crocs, Inc. Reports Record Quarterly Revenues of Over $1 Billion, Up 11%

Second Quarter Operating Margin of 30%

Raises Full Year Outlook for Revenues, Operating Margin, and Earnings Per Share

BROOMFIELD, Colo., July 27, 2023 /PRNewswire/ -- Crocs, Inc. (NASDAQ: CROX), a world leader in innovative casual footwear for women, men, and children, today announced its second quarter 2023 financial results.

"We achieved record quarterly revenues of over $1 billion, representing growth of 12% on a constant currency basis to prior year. Both the Crocs and HEYDUDE brands continue to gain share and bring in new consumers with our comfortable offerings, as evidenced by DTC growth of 26% in the second quarter," said Andrew Rees, Chief Executive Officer. "We continue to invest behind our strategic priorities that are driving profitable growth."

Amounts referred to as "Adjusted" or "Non-GAAP" are Non-GAAP measures and include adjustments that are described under the heading "Reconciliation of GAAP Measures to Non-GAAP Measures." A reconciliation of these amounts to their GAAP counterparts are contained in the schedules below.

Second Quarter 2023 Highlights

• Consolidated revenues of $1,072.4 million increased 11.2%, or 12.0% on a constant currency basis, as compared to 2022.
• Crocs Brand revenues of $833.0 million increased 13.8%, or 14.9% on a constant currency basis, as compared to 2022.
• Crocs Brand growth was fueled by Asia revenue growth of 33.2%, or 39.0% on a constant currency basis, and North America direct-to-consumer ("DTC") comparable sales growth of 12.9%, as compared to 2022.
• HEYDUDE Brand DTC revenues grew 29.7% and digital revenues increased 36.7% as compared to 2022.
• Operating margin was 29.7% and adjusted operating margin was 30.3%.
• Diluted earnings per share increased 31.4% to $3.39 as compared to the same period last year. Adjusted diluted earnings per share rose 10.8% to $3.59.
• We paid down $299.1 million of debt in the first half of 2023 and reduced gross leverage to 1.8x.

Second Quarter 2023 Operating Results

• Revenues were $1,072.4 million, an increase of 11.2% from the same period last year, or 12.0% on a constant currency basis. DTC revenues, which includes retail and e-commerce, grew 26.0%, or 27.2% on a constant currency basis. Wholesale revenues grew 0.2% compared to 2022, or 0.8% on a constant currency basis.
• Gross margin was 57.9% compared to 51.6% in the prior year. Adjusted gross margin improved 290 basis points to 58.1% compared to 55.2% in the same period last year.
• Selling, general, and administrative expenses ("SG&A") of $302.8 million increased from $249.8 million in the same period last year, and SG&A as a percent of revenues rose to 28.2% from 25.9% in prior year. Adjusted SG&A rose to 27.8% of revenues versus 25.1% for the same period last year.
• Income from operations increased 28.4% to $318.5 million and operating margin improved to 29.7%, compared to 25.7% for the same period last year, due to higher gross margin and significantly less HEYDUDE acquisition expenses. Adjusted income from operations rose 11.7% to $324.6 million and adjusted operating margin improved 20 basis points to 30.3%.
• Diluted earnings per share increased 31.4% to $3.39, as compared to $2.58 for the same period last year. Adjusted diluted earnings per share increased 10.8% to $3.59 compared to 2022.

Second Quarter 2023 Brand Summary

• Crocs Brand: Revenues increased 13.8%, or 14.9% on a constant currency basis, to $833.0 million. DTC comparable sales increased 19.5%. Wholesale revenues increased 3.8%, or 4.6% on a constant currency basis.
  • North America revenues of $474.6 million increased 12.2%, or 12.5% on a constant currency basis.
  • Asia Pacific revenues of $198.3 million increased 33.2%, or 39.0% on a constant currency basis.
  • Europe, Middle East, Africa, and Latin America ("EMEALA") revenues of $160.1 million declined 0.2%, or 1.4% on a constant currency basis.
• HEYDUDE Brand: Revenues during the second quarter increased 3.0% to $239.4 million. DTC revenues increased 29.7% to $90.6 million. Wholesale revenues declined 8.4% to $148.8 million following pipeline fill in the same period last year.

Balance Sheet and Cash Flow

• Cash and cash equivalents were $166.2 million as of June 30, 2023, compared to $191.6 million as of December 31, 2022.
• Inventories decreased to $436.3 million as of June 30, 2023, compared to $471.6 million as of December 31, 2022 and $501.5 million as of June 30, 2022.
• Capital expenditures during the six months ended June 30, 2023 were $51.6 million, compared to $56.7 million for the same period last year, reflecting continued investments in our distribution centers and expansion of our corporate facilities to support growth.
• Borrowings were $2,027.5 million as of June 30, 2023 compared to $2,322.4 million as of December 31, 2022, as we repaid $299.1 million of debt. Our liquidity position remains strong with $166.2 million in cash and cash equivalents and $563.7 million in available borrowing capacity as of June 30, 2023.

Share Repurchase Activity

As announced in June, we expected to resume our share repurchase program beginning in the third quarter. In July 2023, we repurchased 0.4 million shares of our common stock for $50.0 million. Following these repurchases, $1.0 billion of share repurchase authorization remained available for future repurchases. We will continue to methodically balance debt repayment and share repurchases as we approach our long-term net leverage target of 1.0x to 1.5x.

Financial Outlook

Third Quarter 2023

With respect to the third quarter of 2023, we expect:

• Revenues to grow approximately 3% to 5% compared to third quarter 2022, resulting in revenues of approximately $1,013 million to $1,034 million at currency rates as of the latest reported period.
• Adjusted operating margin of approximately 27.0%.
• Adjusted diluted earnings per share of $3.07 to $3.15.

Full Year 2023

With respect to 2023, we expect:

• Consolidated revenue growth to now be 12.5% to 14.5% compared to 2022, resulting in revenues of approximately $4,000 million to $4,065 million at currency rates as of the end of the last reported period.
  • Revenues for the Crocs Brand to now grow 12% to 13% on a reported basis.
  • Revenues for the HEYDUDE Brand to now grow 14% to 18% on a reported basis, which is approximately 3.5% to 7.5% including the period prior to the HEYDUDE acquisition.
• Adjusted operating margin to now be approximately 27.5%.
• Non-GAAP adjustments of approximately $35 million primarily related to investments in our distribution centers to support growth and to be fairly balanced across cost of sales and SG&A.
• Combined GAAP tax rate to be approximately 23% and non-GAAP effective tax rate of approximately 20%.
• Adjusted diluted earnings per share to now be between $11.83 and $12.22. Adjusted diluted earnings per share guidance does not assume any impact from potential future share repurchases.
• Capital expenditures to be approximately $165 to $180 million, primarily related to the expansion of our distribution capabilities including our new HEYDUDE distribution center in Las Vegas opening later this year, implementation of new technology systems for HEYDUDE, and expansion of our corporate facilities to support growth.

Conference Call Information

A conference call to discuss second quarter 2023 results is scheduled for today, Thursday, July 27, 2023, at 8:30 am ET. To receive conference call details, please register at the Investor Relations section of the Crocs website, investors.crocs.com. The webcast will also be available live and on replay through July 27, 2024 at this site.

About Crocs, Inc.

Crocs, Inc. (Nasdaq: CROX) is a world leader in innovative casual footwear for women, men, and children, combining comfort and style with a value that consumers know and love. The Company's brands include Crocs and HEYDUDE and its products are sold in more than 85 countries through wholesale and direct-to-consumer channels. For more information on Crocs, Inc. please visit investors.crocs.com. To learn more about our brands, please visit www.crocs.com or www.heydude.com.

Forward Looking Statements

This press release includes estimates, projections, and statements relating to our business plans, commitments, objectives, and expected operating results that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

These statements include, but are not limited to, statements regarding potential impacts to our business related to our supply chain challenges, cost inflation, our financial condition, brand and liquidity outlook, and expectations regarding our future revenue, margins, non-GAAP adjustments, tax rate, earnings per share, debt ratios and capital expenditures, the acquisition of HEYDUDE and benefits thereof, Crocs' strategy, plans, objectives, expectations (financial or otherwise) and intentions, future financial results and growth potential, statements regarding second quarter and full year 2023 financial outlook and future profitability, cash flows, and brand strength, anticipated product portfolio and our ability to deliver sustained, highly profitable growth and create significant shareholder value. These statements involve known and unknown risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to be materially different from any future results, performances, or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the following: our expectations regarding supply chain disruptions; the COVID-19 pandemic and related government, private sector, and individual consumer responsive actions; cost inflation; current global financial conditions, including economic impacts resulting from the COVID-19 pandemic; the effect of competition in our industry; our ability to effectively manage our future growth or declines in revenues; changing consumer preferences; our ability to maintain and expand revenues and gross margin; our ability to accurately forecast consumer demand for our products; our ability to successfully implement our strategic plans; our ability to develop and sell new products; our ability to obtain and protect intellectual property rights; the effect of potential adverse currency exchange rate fluctuations and other international operating risks; and other factors described in our most recent Annual Report on Form 10-K under the heading "Risk Factors" and our subsequent filings with the Securities and Exchange Commission. Readers are encouraged to review that section and all other disclosures appearing in our filings with the Securities and Exchange Commission.

All information in this document speaks only as of July 27, 2023. We do not undertake any obligation to update publicly any forward-looking statements, whether as a result of the receipt of new information, future events, or otherwise, except as required by applicable law.

Category:Investors

CROCS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

In addition to financial measures presented on the basis of accounting principles generally accepted in the United States of America ("GAAP"), we present "Non-GAAP cost of sales," "Non-GAAP gross profit," "Non-GAAP gross margin," "Non-GAAP gross margin by brand," "Non-GAAP selling, general, and administrative expenses," "Non-GAAP selling, general and administrative expenses as a percent of revenues," "Non-GAAP income from operations," "Non-GAAP operating margin," "Non-GAAP income tax expense (benefit)," "Non-GAAP effective tax rate," "Non-GAAP net income," and "Non-GAAP basic and diluted net income per common share," which are non-GAAP financial measures. We also present future period guidance for "Non-