CROX - Crocs, Inc.

Operator: Good morning, and welcome to the Crocs, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Senior Vice President of Investor Relations and Strategy. Please go ahead. Erinn Murphy: Good morning, and thank you for joining us to discuss Crocs Inc. third quarter results. With me today are Andrew Rees, Chief Executive Officer; and Patraic Reagan, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask that you limit to one per caller. Before we begin, I would like to remind you that some of the information provided on this call is forward-looking and accordingly, is subject to the safe harbor provisions of the federal securities laws. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially. Please refer to our most recent annual report on Form 10-K, quarterly report on Form 10-Q and other reports filed with the SEC for more information on these risks and uncertainties. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I'll turn the call over to Andrew Rees, Crocs, Inc. Chief Executive Officer. Andrew Rees: Thank you, Erinn, and good morning, everyone. Thank you for joining us today. Before we discuss the quarter, I would like to start by welcoming our Chief Financial Officer, Patraic Reagan, to his first Crocs Inc. earnings call. Our third quarter performance was driven by managing both of our brands in a disciplined fashion, streamlining our cost structure and controlling our inventory in the marketplace. We delivered very strong profitability and cash flow, which enabled us to repurchase 2.4 million of our outstanding shares and pay down $63 million of debt. These are fundamental levers of our value creation model. While our results came in ahead of our expectations, I acknowledge that this performance is not up to the standards that we expect for ourselves. We are working to regain momentum in the marketplace, and our teams have already begun executing against our strategies. With this in mind, I would like to begin the call today by elaborating on the progress we have made on our strategic pillars for both Crocs and HEYDUDE and the speed at which we are driving further simplicity and cost reductions across our enterprise. Patraic will then provide a more detailed overview of our financial results and outlook. Starting with the Crocs Brand. As we communicated last quarter, we elected to take 2 strategic actions to protect the long-term brand health. First, we pulled back on the breadth and depth of promotional activity across our digital channels in North America. This promotional pullback has had the greatest impact on our Classic Clog business as we work harder to protect our icon. Second, we continue to reduce receipts into the wholesale channel to better match supply to demand and ultimately drive a demand-led model. While these actions are impacting near-term sales, we expect them to enable a foundation for future growth. Further, we have seen a net positive benefit to our gross profit dollars in North America as a result of our pullback on promotions. Our return to growth in North America will be based on greater product innovation, diversification within clogs, growth within sandals and new categories. We are carefully managing our Classic Clog franchise with the desired outcome of creating clearer segmentation while leaning into innovation within new clog and sandal introductions. While improving the trajectory of North America is a top priority, we are making good progress against our 5 strategic pillars for the Crocs Brand. First, we will continue to drive brand relevance through clog iterations and innovation. During the quarter, we introduced the crafted clog starting at $60. This new franchise incorporates a non-molded comfortable upper with a Jibbitable back strap as we put personalization in the forefront of our design. We featured Lola Tung, the actress of hit show, The Summer I Turned Pretty, to bring this to market. Following our initial sell-up on TikTok Shop, we have seen strong consumer response in all channels. We're also focused on scaling existing clog franchises, including Croc Brand and Echo. Within the Echo franchise, we launched the Echo RO during the quarter and saw immediate success. Looking to 2026, we will expand our crafted franchise with new materializations, launch a new and improved Croc Brand, which is already an established fan favorite in our portfolio and introduce Echo 2.0 clog. We expect product diversification within our clog pillar to enable greater channel segmentation and drive long-term growth in our clog franchise. Second, we're focused on diversifying outside of clogs through new category expansion. Our sandals pillar outperformed the broader portfolio and took market share in this quarter with strong full price performance across our style franchise, including Brooklyn, Getaway and Miami. Retailers have continued to chase these key styles beyond the back-to-school season. As we look into 2026, these franchises paired with the reintroduction of an updated personalizable 2-strap sandal underscores our opportunity to gain further market share in this category. We are also excited with the response we have received around our new cozy franchise, the Unfurgettable, which we launched in partnership with actress Millie Bobby Brown. This style has already seen a very positive response on TikTok, resonating particularly well with the Gen Z female consumer. The Unfurgettable, along with broader newness in our cozy assortment has catalyzed our line business so far this season. Third, we will fuel consumer engagement with disruptive digital and social marketing. During the quarter, we launched a multiyear agreement with the NFL, which featured our classic and classic line clogs as well as Jibbitz. This release exceeded our expectations with particularly strong sell-through across the board, leading to multiple restocks. Other highlights in the quarter included a disruptive launch with Krispy Kreme and our newest release on Roblox. In the quarter, we launched a Pan-Asian Monsoon campaign, "Your Crocs, Your Splash." This campaign positions a Classic Clog as the footwear of choice for the rainy season and stars 2 prominent actors from South Korea and India. The campaign video generated approximately 575 million views across Instagram and YouTube. These partnerships are prime examples of how our brand excites, inspires and connects with a wide range of consumers across the globe. Fourth, we'll continue to create compelling consumer experiences across distribution. Year-to-date, we've accelerated our first-mover advantage in social commerce. We remain the #1 footwear brand on TikTok Shop in the U.S. and the growing adoption of this platform is gaining momentum with younger consumers. This month, we created further disruption in the market by live streaming both of our brands on TikTok Shop and our own dot-com throughout the month of October. Through this initiative, we have seen an uptick in our followers and influx of new consumers. In fact, Crocs was the first fashion brand to live stream 24/7 for an entire month across TikTok and dot-com. We're continuing to expand this partnership and have launched TikTok Shop in the U.K., Germany and Brazil. Fifth, we see significant opportunity to capture greater share across our international markets, many of which are still in their infancy of growth. In the third quarter, we saw broad-based strength across our Tier 1 international markets. China delivered revenue growth across all channels and was up mid-20% to prior year, outperforming the overall market handily. During the quarter, we launched a unique POP MART, China's SKULLPANDA collaboration, which included a Douyin live stream on POP MART'S page and was a smash hit in China. In addition to China, we saw strong growth in Japan and across all of our key markets in Western Europe. In summary, our priorities are clear: driving product innovation in clogs and sandals, staying agile and consumer-focused while sharpening segmentation and accelerating international growth where penetration opportunities remain. Turning now to HEYDUDE. We delivered third quarter results that came in ahead of expectations. We are encouraged by the progress we're making in stabilizing the brand in North America to return to profitable growth. Let me share more about the actions we have taken and what gives me confidence in our ability to reestablish brand growth. First, we're focused on building a community. Our recently refreshed consumer insights work underscores that we have a passionate group of brand fans, ones that identify as laid-back and no-fuss, but clearly seek the comfortable and lightweight products we have to offer. We launched our HEYDUDE Country campaign in June, which plays to our brand's affinities, including music, travel and pre and post sport and is centered around this laid-back, no-fuss consumer. Relatedly, we are encouraged to see the brands return to the top 10 preferred footwear brands among males in the Piper Sandler Taking Stock With Teens survey this fall. Second, our product direction is clear. We're building the core and thoughtfully adding more. Within our Wally and Wendy franchise, we launched the Stretch Sox and its performance has already surpassed legacy socks on a like-for-like basis. In 2026, we will launch Stretch Jersey, a sweatshirt for your feet, and retailer response to this product has been very strong as it appeals to both her and him. Outside of the core, we are seeing continued traction of our Paul franchise, which plays into the dress casual sneaker space, and we're solidly building on our slipper success again this holiday. Earlier this month, we launched our third collaboration with Jelly Roll, featuring the fan favorite Bradley Boot in 2 colorways. The initial launch on TikTok Shop drove the largest single day for HEYDUDE on the platform to date. We see this collab as serving to halo, our broader boot offering as we move into holiday. Third, we're focused on continuing to clean up channel inventory in the North America marketplace. During the third quarter, we accelerated returns and markdown allowances to our retailers to improve inventory health while elevating our brand presentation at wholesale. The nature of these cleanup actions has had an impact on revenue in the third quarter through vendor returns, and we're planning for continued markdown support in the fourth quarter. These actions have been effective in cleaning up the channel and establishing a foundation for future growth. On an enterprise basis, we're working to quickly rightsize our cost base. As we shared on our last call, we've already taken action on $50 million of gross cost savings this year and have since identified another $100 million of gross cost savings across the business to simplify the organization. While Patraic will go into more detail shortly, we expect these cost savings to generate greater flexibility across the P&L, enabling future investment to drive growth for our brands. At this time, I will turn the call over to Patraic to provide more detail around our third quarter financial performance and our fourth quarter outlook. Patraic Reagan: Thank you, Andrew, and good morning, everyone. Before I review the quarter, I'd like to say how grateful and excited I am to have the opportunity to serve as Chief Financial Officer of Crocs, Inc. This is a company I've long admired professionally and as a consumer, one whose profitable growth has been built on an enduring cultural icon. For Crocs and HEYDUDE, I see strong potential both domestically and globally, and I look forward to working with our talented teams across the world to further drive the company's strategic and financial goals. Now let's get into our results. Our third quarter revenue of approximately $1 billion were down 7% to prior year. Crocs Brand revenue of $836 million was down 3% to prior year, with wholesale down 8% and DTC up 1%. North American revenues were down 9% to last year as we continue to intentionally pull back on discounting within our digital channels during the quarter. This was partially offset by strong digital marketplace performance. These actions, in part resulted in DTC down 8%, while wholesale was down 11%. International revenue was up 4% to prior year, driven by direct-to-consumer, which was up 23%. DTC performance continues to reflect broad-based strength across both digital and retail. International wholesale was down 7% based on timing shifts we communicated last quarter. Within our Tier 1 international markets, we saw broad-based strength led by China and Japan, while Western Europe also drove strong results across the U.K., Germany and France. Now turning to HEYDUDE brand. Revenue of $160 million was down 22% to prior year, but ahead of our expectations. DTC was better than planned, down 1% to prior year. This was driven by the addition of new retail stores and strong digital marketplace performance, most notably on TikTok Shop, offset by the planned reduction in performance marketing spend as we work to enhance profitability, albeit with negative revenue impacts. Wholesale was down 39%, reflecting the previously communicated wholesale cleanup actions we took in the quarter. As a result of these actions, we started to see an improvement in wholesale sellouts, which are now in line with our inventory levels. This is an important data point as we position HEYDUDE for a return to growth. Moving back to Crocs Inc. Enterprise adjusted gross margin of 58.5% was down 110 basis points to prior year, including a 230 basis point headwind from tariffs. The tariff impact in the quarter was 60 basis points higher than we previously anticipated based on higher receipts and country mix. Excluding tariffs, our adjusted gross margin would have been up, reflecting lower negotiated product costs, higher ASPs for both brands and brand mix. Crocs brand adjusted gross margin of 61.8% was down 70 basis points to prior year, driven by tariff headwinds. HEYDUDE brand adjusted gross margin of 42.3% was down 560 basis points to prior year, driven by tariff headwinds and fixed cost to leverage, which was partially offset by higher ASPs. Importantly, the third quarter represents the ninth consecutive quarter of ASP increases for HEYDUDE. Adjusted SG&A rate was 37.7%, up 350 basis points compared to prior year. Adjusted SG&A dollars increased 3% to prior year, a notable improvement from the 15% SG&A increase in the first half of the year. This was driven by investments in talent, DTC and marketing, significantly offset by cost savings under the $50 million initiative that we announced earlier this year. Taken together, adjusted operating margin of 20.8% came in ahead of our guidance of 18% to 19%, but was down 460 basis points compared to prior year. Adjusted diluted earnings per share of $2.92 was down 19% to last year, and our non-GAAP effective tax rate was 16.9%. Moving on to inventory. At the end of Q3, our inventory balance was $397 million, up 8% to prior year, including the impact of higher tariffs and product mix. Importantly, inventory units were down low single digits to prior year. Our enterprise inventory turns were above our goal of 4x on an annualized basis as we proactively managed our inventory receipts. Our liquidity position remains strong, comprised of $154 million of cash and cash equivalents and nearly $850 million of borrowing capacity on our revolver. Our strong profitability and free cash flow enables us to return value to shareholders through buybacks and debt paydown. During the quarter, we repurchased 2.4 million shares of our common stock for a total of $203 million at an average cost of approximately $83 per share. This represented approximately 4% of our float. Year-to-date, we have repurchased 4.3 million shares of our common stock for a total of approximately $400 million. We ended the quarter with $927 million remaining on our buyback authorization. Total borrowings at quarter end of $1.3 billion included the paydown of $63 million of debt during the third quarter. Our net leverage ended the quarter at the lower end of our targeted range of 1 to 1.5x. Now turning to our fourth quarter outlook. For Q4, we expect revenues to be down approximately 8% in currency rates as of October 27. Within this, we expect the Crocs brand to be down approximately 3% with acceleration in our international business from a mid-single digit in Q3 to a low double-digit rate in Q4. North America revenue is expected to be down low double digits to prior year, reflecting a wider range of outcomes, including our view of a choiceful consumer, a highly competitive holiday season and lower inventory receipts in the wholesale channel. For HEYDUDE, we expect revenue to be down in the mid-20s range, including the impact of reducing performance marketing spend in the DTC channel and the investments we are making in wholesale marketplace cleanup. We expect adjusted operating margin to be approximately 15.5%. This excludes approximately $10 million related to cost reduction initiatives we referenced earlier. Our adjusted operating margin embeds gross margins down approximately 300 basis points, driven almost entirely by tariff headwinds. In addition, our adjusted SG&A dollars are expected to be below that of prior year as we continue to see the positive impact of our cost savings. Adjusted diluted earnings per share is expected to be in the range of $1.82 to $1.92. For the year, our capital expenditures are expected to be in the range of $70 million to $75 million. While it is too early to provide 2026 guidance, I do want to provide more context on how we are thinking about further cost savings. As Andrew mentioned, we are already benefiting from the previously actioned $50 million of gross cost savings in 2025. In addition, we have identified $100 million of incremental gross cost savings that we expect to benefit 2026. These savings include simplifying our organizational structure, deliberately reducing spend in noncritical areas and further optimizing our supply chain. It is too premature to share how much of these savings we will choose to flow to the bottom line. However, we are committed to managing our adjusted SG&A base to ensure we drive operating leverage in 2026 while creating greater flexibility across the P&L. To conclude, we have already taken several strategic and tactical actions to improve the momentum of our brands. We have also taken steps to provide flexibility in our cost structure, and we are intently focused on driving consistent profitable growth in the future. At this time, we will now turn the call back over to the operator to begin the question-and-answer portion of our call. Operator: [Operator Instructions] The first question comes from Jonathan Komp with Baird. Jonathan Komp: I want to ask first about the incremental cost savings initiatives. It looks like you're obviously preserving margin here, but are there structural deficiencies in the organization you're also trying to address when you look at the structure of the organization? And as you think about 2026 and the comment around driving operating leverage, could you achieve leverage in a scenario where revenue still is down in the first half and maybe not significantly growing for the year? Andrew Rees: Thank you, Jonathan. I'll address it to start, and Patraic will pick up anything that I missed. So what I would say in terms of the cost savings, there's several buckets we're looking at. I think number one is we've got a significant benefit from some efficiencies we've been able to drive in supply chain. We've invested quite a bit in our supply chain over the last several years, and we're now reaping some of the rewards of those efficiencies. And we've also integrated both our HEYDUDE and our crocs supply chains more fully. So that's given us some really nice benefits. Number two, we have looked at some structural key components. We've been quite thoughtful about this, where we've been able to reorganize kind of how we go to market and how we run some key parts of our business. We think that is going to give us more speed and more efficacy as well as generating a lower cost. And then we've also just been, I would say, rigorous around looking at where we're spending on vendors, outside services, et cetera, and consolidating that. And I think there's probably a small component in there is trying to use AI and some of the technological advances that we're seeing across the globe to make us more efficient and effective. In terms of the last part of your question, we will reinvest some of those savings in key areas around product innovation, around some things that we think will drive the top line. And we do believe that on an annual basis, we can absolutely provide -- we can achieve operating leverage in 2026. If revenues are down a little bit in a quarter that may be higher. But for the year, we're quite confident we can get operating leverage. Patraic Reagan: Yes. Jon, just a couple of things to add from a perspective -- from my perspective. What I would say is that our language in the prepared remarks were really intentional. So what we're trying to do is drive flexibility as we turn into 2026. And I think what's been great to see in terms of the response of the organization is that we've really been able to turn very quickly efficiently into identifying some of the areas that we're going to provide that flexibility in. And just to reiterate what Andrew said towards the end is we're clear that we need to protect product innovation and brand, brand marketing, right? It does us no good to just cut costs through the P&L at the expense of what is the core of our business. So what we'll do as we go through this is continuing to look at all areas of the organization, but product and innovation and communication to our consumers through brand is an area that we're going to ring fence. Jonathan Komp: That's really helpful. If I could sneak in one more. Can I just ask, Andrew, is portfolio management the consideration in your capital allocation strategy? And I ask in the context of coming up on the 4-year anniversary of owning HEYDUDE and still seeing significant challenges here? Andrew Rees: Yes. Thank you, Jon. No, I would say at this point, look, we believe HEYDUDE is a strong brand. It's a strong scale brand within -- particularly within the U.S. casual footwear space. We absolutely acknowledge the challenges that we have had in running and operating this brand over the last several years. But I think I feel like we're doing the right work. We've made the right decisions, and we are confident in its future trajectory. We're definitely focused on returning it to profitability, cleaning up the marketplace, making the right strategic decisions relative to promotion discount and also the amount we're investing in digital marketing. We have retooled the management team, and I'm very confident in the strength of our management team and its ability to drive the future. And so I think we're not contemplating any portfolio changes at this time. And I would say we're confident in returning HEYDUDE to the right level of profitability and also growth in the future. Operator: The next question is from Chris Nardone from Bank of America. Christopher Nardone: So just on Crocs North America, can you help identify some of the actions you're taking to help drive some improved results in this portion of the business? And in particular, it would be really great if you can elaborate on both your pipeline of new product and also how you think about the ramifications of potentially losing some of your core customers given your pullback on promotions? Andrew Rees: Yes. Thank you, Chris. So look, I would say returning the North American -- Crocs North American business to growth is a top priority for our overall company. As a reminder, some of the lack of growth or the decline in sales are based on some strategic decisions we made. One is reducing digital discounting. I think we elaborated on this in prepared remarks, but also reducing wholesale sell-in. So -- and in that, we're making sure that we're appropriately positioned to grow in the future and not eroding our brand and particularly not eroding our core iconic franchise. We do think, and that is embedded in our guidance. We do think the North American consumer is bifurcated. There is a portion of our North American consumers that are highly affluent. They're buying crocs, they're buying other high-end brands, and they are in great financial shape. But there is a large portion of consumers who are nervous. They are in less good financial shape and they're being super cautious about their spending and certainly spending closer to need. Given all of that and that -- the impact of that, I think we believe we're seeing in our business. I think others have talked about that, and that is embedded in our future expectations. But what are we doing, which I think is the core of your question? Number one, focusing on clog innovation and brand relevance. We're introduced -- we have introduced and are introducing a number of key product categories or key product franchises crafted, Echo and reintroducing Croc Brand to diversify our clog platform and allow greater segmentation across our wholesale partners, and we're quite excited about the impact that this will have. We're also continuing our diversification into new silhouettes and new categories. We had a strong sandal season in 2025, and we're -- we have a very strong pipeline of products going into '26 and are confident about continued sandal growth, continued growth in personalization. And we're in the heart of slipper season right now. And as you can see, we have a tremendous lineup of slippers and line product actually on both of our brands. And then continuing our, I would say, disruptive social and digital engagement. We're a leading brand on TikTok for Crocs, the leading brand on TikTok for Crocs, but also a close second for HEYDUDE. And you probably have seen during October, we launched a live streaming initiative where we live streamed both of our brands 24/7 for the entire month and gained -- and achieved all of our objectives from that perspective and learned a tremendous amount about how the consumer is migrating from traditional shopping to social shopping. So I think we have a well-rounded and robust strategy to return Crocs to growth in North America and are very confident in our ability to do that in short order. Operator: The next question is from Tom Nikic with Needham. Tom Nikic: I want to ask about the marketplace cleanup for HEYDUDE. I know there was quite a bit of action that happened in Q3. Should we assume that there's kind of more marketplace cleanup that has to happen in Q4? And would you think that by year-end this year, you'd be relatively clean and that we wouldn't see as much in 2026? Andrew Rees: Yes. Good. I'm glad you asked about this, Tom. So this is important. In Q3, we invested actually a considerable amount of money in terms of the marketplace cleanup. That was primarily return. So we took back aged and slow selling product from some of our large wholesale partners, and it was a substantial amount. We felt this was important to reset how the brand looks at wholesale. There is more in Q4, which is already embedded in the guidance that we provided. And that is primarily discount, that is discount support where we're looking to complete some of the cleanup activity. The majority of it will be done during 2025. I think there's some ongoing inventory health management that will happen in '26, but it will be far less impactful than we have seen in the last 2 quarters. And in fact, we've been doing this for some period of time. What I would say is as we look at the impacts of these investments we've made, I think we're quietly encouraged that sell-through is improving based on a reduction of aged inventory in the marketplace, a stronger presentation of HEYDUDE and a stronger presentation of new and current product. We particularly called out Stretch Sox. This was a franchise that we introduced earlier this year. And as the year has gone on, as our partners are more fully set on Stretch Sox and the socks product that was the precursor has sold down and has illuminated, we're really, really happy with the sell-throughs of that franchise, and it's really core and backbone franchise for the brand. Patraic Reagan: Yes. And Tom, just maybe 2 quick things that I would add is that, as you can see from prepared remarks, we highlighted that the sell-in and inventory levels are in much better line for HEYDUDE. So that's a very encouraging sign. And then secondly, we called out that for the ninth consecutive quarter, ASPs have increased with the HEYDUDE brand, which is also a key metric to watch as we continue to pivot the brand to return to growth. Tom Nikic: Very helpful. And Patraic, welcome aboard and looking forward to working with you. Operator: The next question is from Adrienne Yih with Barclays. Adrienne Yih-Tennant: Andrew, I wanted to ask about sort of some of the choicefulness that you might be seeing in the fourth quarter. We've heard from other discretionary companies generally that there's been a little bit of a weakness in the 25- to 35-year-old cohort. Back-to-school generally has been very strong and then a little bit of an exit kind of weakness coming out of the quarter. So if you can talk to that. And then Patraic, welcome aboard. A quick question on the end of quarter inventory. The spread looks like it's about 10% between dollars and units. So that seems like it's reflective of maybe the April tariff. How should we think about end of quarter inventory entering the new year. Did that then express kind of the August tariff? And how should we think about early spring, the pass-through on the gross margin? Andrew Rees: Okay. There's a lot there, Adrienne. So let me take -- let's take it in the order you asked it. I'll do the consumer and then Patraic can give you some color on inventory. I think -- look, I think you're going to hear from us essentially what you've been hearing from a lot of other people that the consumer is clearly being more cautious about spending and it's particularly -- I wouldn't categorize it by age group so much, I'd probably identify it more by socioeconomic strata. We definitely see it in our mid- to lower channels. There is less traffic to stores, right? So they're not even going to the store, right? They don't have the same level of disposable income or flexible income. So they're being more choiceful about what they're buying. They're making fewer trips to the store. And they're also shopping closer to need, right? So we expect -- we're anticipating to see that in the fourth quarter, where typically, even a constrained consumer does release the purse strings a little bit as they celebrate the holidays, whichever holidays they do celebrate, but they will shop a little closer to need. So those are the things that we're seeing. So I think it's the lower-end consumer is being more choiceful. They're being more cautious about what they spend on and they're shopping closer to need. That's how I would categorize it and think about it. Patraic Reagan: Yes. And Adrienne, thank you for asking the question about inventory. First of all, I'd start off by saying that how we manage inventory here, matching demand to supply is really a strength of the organization. And frankly, it's a competitive advantage in terms of the speed in which we can evaluate and react to consumer demand in both good times and bad. You're right, as you call out, the spread, that's directionally correct. And what you can think about is that optically, with inventory up roughly about 8% as we closed the Q3, that was almost entirely on a dollar basis driven by the impact of tariffs. What you really see is in terms of our diligence of managing inventory is on the unit side where we're actually down low single digits. So we feel really good about where we are from an inventory position as we ended Q3. We'll continue to exercise that muscle. Honestly, as we are in Q4, we're aggressively managing inventory. Like I said, it is a core competency of what we do. So we feel like as we turn into Q4, we'll continue to manage inventory from a unit standpoint similar to what we saw in Q3. And then in 2026, too early to comment really on '26, but I think you can take our history as an indicator in terms of how tightly we will continue to manage inventory and at the same time, making sure that we're serving our consumers across the globe. Operator: The next question is from Peter McGoldrick with Stifel. Peter McGoldrick: Welcome, Patraic. I'm interested in the market share in the under $100 assortment. I was curious if you could talk more about the current positioning of both of your brands and then any competitive dynamics that may be playing out as the consumer feels prices going directionally higher across the marketplace. Andrew Rees: Yes. I mean I can talk about that directionally. We don't -- we can't give you precise numbers around kind of market share. I think the strength of both of our brands is that they are extremely democratic in nature, right? They service a very broad range of consumers. Both brands attract consumers for whom this is a very -- a great value. Our brands are a great value. They also attract consumers that are -- that see these brands as aspirational. So we service a very broad consumer base. The -- I would say the vast majority of our products are under $100, right? So obviously, you're well aware that the Classic Clog essentially MSRP $50 and the majority of our HEYDUDE product is between $60 and $70. So from a price point perspective, we give the consumer excellent value. I think what you're kind of alluding to a little bit, we have seen competitive brands that sell at higher price points being pretty quick to elevate price points further and capture greater price or elevate pricing pretty quickly to compensate for tariff impact that they're seeing. We see less of that, I would say a lot less of that at the price points that we compete at. So I think the less than $100 arena remains relatively competitive. And I think the other thing that you might be alluding to is in terms of competition at these price points, we do see the athletic brands, particularly the big ones, leaning back into these price points and increasing distribution at the -- let's say, the sort of good to bad tiers of the market. Operator: The next question is from Rick Patel with Raymond James. Rakesh Patel: Congrats on the new role, Patraic. We have questions on the North America wholesale channel. First, any color on the spring wholesale order book and how that's shaping up? And second, can you point to any product or innovation wins that would give you particular confidence in being able to reinvigorate the wholesale channel as you look out to 2026? Andrew Rees: Are you looking for both brands, Rick? Or are you primarily focused on Crocs? Rakesh Patel: Primarily on the Crocs Brand. Andrew Rees: Yes. So we don't provide details on order book, as you know. But a little color we can help you with. As we look at the North American Crocs wholesale order book, there's 2 things going on. One is, number one, our retailers are planning cautiously, right? They're not expecting -- they're not seeing traffic growth and they're not expecting significant growth in the short term. And I actually don't believe they're going to plan significant growth into the early part of 2026. So they're fighting cautiously. As we talked about last time and as I just articulated a little bit to Peter's question, we do see athletic gaining some share in the good to better portions of the market. So there's some open-to-buy going to athletic. So there's pressure. We're also managing that carefully. So we would expect, I would say, continued declines in our wholesale sell-in for Crocs in North America. That is embedded in our guidance that we provided in Q4. So that's kind of the framework. And then the last part of your question was what are we doing and what product innovation that we think is going to counteract that. I would say, number one, we have a really strong lineup from our clog perspective in 2026. We just introduced Crafted, which is a clog with a materialized upper. It's a soft materialized upper. The current iterations that you can see in the marketplace have canvas uppers. There are some -- and there is also some leather uppers coming. In fact, it's a vegan leather suede coming to the market right about now. We think that franchise has a lot of legs because it makes the clog, the Classic Clog, which has a molded footbed, more approachable and more accessible to a broad group of people. Right now, Unfurgettable, which is our fuss -- our highly exaggerated fuss product and the other Lined products that we have in the marketplace, we believe are performing well -- are performing well, and we're excited about that. Next year, we're going to be introducing or reintroducing to the market Croc Brand. This is a fan favorite. I think if you look on Amazon, there's something like 200,000 4- and 5-star reviews for the Croc Brand. So we've been -- we've downplayed Croc Brand for some time deliberately to focus on classic. We're reintroducing Croc Brand. So we think that has a multiyear trajectory. And then lastly, we're bringing new Echo 2.0 to the market later next year. And I think the other piece that is important, and I mentioned already is building on sandals. Sandals were a really strong driver of growth in '25, and we have additional products and enhancements to key franchises as we think about sandals later into '26. Patraic Reagan: Yes. And Rick, just one final comment for me as we close this one out is we talked quite a bit about the wholesale channel, Andrew alluded to that and went into some great detail. I would say that we are seeing DTC accelerate as we go from Q3 to Q4. So we take that as a great sign in terms of how our products and our innovation pipeline are resonating with our consumers. So I don't want to drive past what's happening in the DTC channels. Rakesh Patel: And to clarify, you're seeing North America DTC accelerate? Patraic Reagan: That's right, yes. Operator: The next question is from Jay Sole with UBS. Jay Sole: Andrew, I want to ask about some of the actions you took on Crocs Brand in Q3, specifically with pulling back on promotions. Did you do that across the entire quarter? Or was there a moment during the quarter where you went back to promotions, whether it's peak back-to-school season just compete? And then maybe, Patraic, just on the Q3 gross margin, was there a tariff impact on the gross margin in Q3? If so, what was it? And then I think to the 300 basis points you talked about for Q4, is there any mitigation that's a part of that? Or basically, how much of the gross tariff costs are you absorbing? Andrew Rees: Yes. I'll be quick and then Patraic can get into your tariff question. So from a North American digital promotional pullback, that was across the entire quarter, right? And it didn't go to 0, obviously, but we did both have many more days that were nonpromotional and also the depth of the promotions that we run were typically substantially less than we had run previously. So it was across the entire quarter. Patraic Reagan: Yes. And then to answer the question on tariffs. So first of all, I think it's been really impressive to see all the actions that are taking place across Crocs as it relates to mitigating tariffs. And so the organization has been on the front foot in terms of identifying where we're able to mitigate where we can the impact of tariffs. Specific to Q3, roughly, we had about 230 basis points of tariff headwinds in the quarter. Obviously, we had several mitigating actions, whether it relates to negotiating with our vendors with our input costs, et cetera, in our supply chain. So we're able to mitigate a good portion of that. And as we go into Q3 -- or I'm sorry, as we go into Q4, the headwinds that you see there are almost entirely due to tariffs. And the mitigating actions will still be present, but in a slightly muted way, especially as we look at Q4 and the nature of -- kind of promotional nature of the quarter, and we alluded to that a bit in the prepared remarks is we're talking about anticipating a highly competitive selling season in Q4. Operator: The next question is from Brooke Roach with Goldman Sachs. Brooke Roach: I was hoping to follow up on Jay's question about tariff mitigation and just get your latest thoughts on pricing as you look to offset some of these tariffs, particularly given the stronger AUR results you've recently materialized. What are your plans for pricing as you move into next year? And then as a follow-up, Patraic, can you provide a little bit of color on how you see that tariff headwind directionally shaping into the first half of next year versus the 300 bps of gross margin pressure that you're forecasting for the fourth quarter? Andrew Rees: Yes. Thanks, Brooke. So pricing, so from a conceptual perspective, we don't price the cost, we price to market, right? So I think we've talked about this a lot over the years, right? What we think about from a pricing perspective, we look at both the strength of our brand, the trajectory of the brand and the competitive dynamics for products in the marketplaces in which we compete. And we do this around the world based on the local market. So what we have seen most recently, so in the back half of '25, we have actually taken select price increases on key products in some markets around the world. And we do have a number of those incrementally planned in the early part of 2026. At this point, though, we are not planning to initiate price increases, for example, on our core Classic Clog here in North America. We think that is well priced and that portion of the market is still -- is more price sensitive and more competitive. So I think we've got a great pricing framework. We're very precise and dynamic around this and -- but that's kind of where we sit at this point. Patraic Reagan: Yes. And Brooke, just building on Andrew's comments. So the nature of pricing here at Crocs is very dynamic and quite a bit of muscle built in that space. So we feel really good about how we're kind of pricing from a value standpoint to our consumers' price to value standpoint. As we turn into 2026, obviously, we're not providing any sort of guidance at this point in time. That will come in the next call. But directionally, what I can say is the large impact in tariffs for us and really any other consumer brand or footwear brand that's operating in the countries we operate in is most felt in the second half of this year. And so what you can directionally think about is that we'll continue to feel some of that pressure as we get into the first half of 2026. Operator: The next question is from Aubrey Tianello with BNP Paribas. Aubrey Tianello: I wanted to ask on stores and if you can give us an update on the store growth strategy for both brands, but especially Crocs, where there's been a pickup in store openings over the course of this year. How should we be thinking about store growth going forward? Andrew Rees: Yes. That's a great question, Aubrey. Glad you asked it. So starting with Crocs, there has been a bit of a pickup in store openings. A lot of that is driven out of our European store base, right? So we've very successfully opened a number of stores in Europe. Those are almost all outlet stores in the U.K. and France principally. And I would have to say they are performing incredibly. So we're super happy about that. Also some store openings in Asia and a small number here in North America. So as you probably know, our store base is incredibly profitable, very high sales per square foot, high margins and a very good strong flow-through. The other thing I would also highlight for those of you in New York is we did open our SoHo store earlier this year. It's performing very, very well indeed, super happy with it. And it's also, I would say, the pinnacle presentation of the brand. And you may have seen on social media that we were live streaming from that store during October. Terence Reilley, our Chief Brand Officer, did an amazing job live streaming from the store and also featuring some celebrities, including Jaxson Dart. So it's been a great investment for us. From a HEYDUDE perspective, we have also continued to open stores here in North America, again, outlet stores. I would say the one thing that we have done this year is shifted where we've opened the stores suddenly, and they're a little bit more in what we call HEYDUDE Country, the HEYDUDE Heartland. And again, those stores continue to meet our expectations. Patraic Reagan: Yes. And Aubrey, the only thing I would add and just kind of emphasize in terms of Andrew's comments are the profitability of the Crocs stores, both domestically and internationally, it's super impressive. And you can kind of see that in the cascade of the financials and something we haven't talked about as much on the Q&A portion of the call is generating the free cash flow that is just inherent into the -- in what is the strength of our financial model. And so our stores are an important part of that, and they throw off and they generate a lot of cash, which allows us then to both invest back into the business and return capital back to our shareholders. Operator: The next question is from Anna Andreeva with Piper Sandler. Anna Andreeva: Welcome to Patraic. We had a question on $100 million of savings. Just any color on how we should think about the cadence of those as we go through '26. Is the expectation that these are scaling as we go through the year or more equally divided? And what's the amount of savings we should expect for the fourth quarter? And then just as a follow-up, Patraic, you mentioned North America DTC accelerated quarter-to-date at Crocs, which is pretty impressive considering fewer promos. And I know Crocs [indiscernible] is a big deal for the business. Anything you did differently this year? Is this driven more by TikTok? Just any color you could provide on that? And what's implied in the guide for North America DTC at Crocs for 4Q? Patraic Reagan: Yes. So Anna, let me hit the cost savings first, and then we'll get into the second part of the question. So first of all, the $100 million number, that's a gross number, right? And so what we mean by gross is we have identified $100 million of savings across the entirety of our cost base, whether that's in cost of goods, SG&A, et cetera. And we are -- we've done that, number one, to make sure that we're operating as efficiently as we can, of course. But then secondly, to provide us with the flexibility to make choices as we get into 2026. And those choices could be flowing those savings to the bottom line. Those choices could be investing in areas that we see in terms of outsized growth that we're able to chase into. And so I'm not going to get into a cadence of kind of quarterly at this point. It's too early in that. We'll provide a little bit more detail on that when we get into 2026 during the Q4 call. And I think the second part of the question, Andrew is going to hit on. Andrew Rees: Yes. So just a point of clarification. We did not say that DTC accelerated during Q3, right? So we actually don't comment on trajectory within the quarter. But what we did say is we believe that DTC in North America will be stronger in Q4 than it was in Q3. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Andrew Rees, Chief Executive Officer, for any closing remarks. Andrew Rees: I just want to say thank you, everybody, for joining us today and your continued interest in Crocs Inc., and we look forward to continuing to speak to you in the future. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good morning, and welcome to the Crocs Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Senior Vice President of Investor Relations and Corporate Strategy. Please go ahead. Erinn Elisabeth Murphy: Good morning, and thank you for joining us to discuss Crocs, Inc. second quarter results. With me today are Andrew Rees, Chief Executive Officer; and Susan Healy, Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask you to limit to one per caller. Before we begin, I would like to remind you that some of the information provided on this call is forward-looking and accordingly, is subject to the safe harbor provisions of the federal securities laws. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially. Please refer to our most recent annual report on Form 10-K, quarterly report on Form 10-Q and other reports filed with the SEC for more information on these risks and uncertainties. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis, unless otherwise stated. At this time, I'll turn the call over to Andrew Rees, Crocs, Inc. Chief Executive Officer. Andrew Rees: Thank you, Erinn, and good morning, everyone. Thank you for joining us today. Our teams delivered a solid second quarter, fueled by top line growth and our highest ever quarterly gross profit, which drove strong free cash flow in the midst of what continues to be a volatile marketplace. I will start by highlighting the key metrics of the quarter and then discuss the strategic rationale behind the decisions we have made to drive profitability and support long-term brand health. And finally, we'll touch on deeper insights on our individual brands. At an enterprise level, second quarter revenues of $1.1 billion grew 3% to prior year. Crocs Brand revenues of $960 million grew 4% to prior year, led by 16% international growth. HEYDUDE revenues of $190 million, down 4% to prior year and an improvement from the first quarter. Enterprise adjusted gross margins of 61.7% gained 30 basis points to our prior year. Adjusted operating margin of approximately 27% supported adjusted diluted earnings per share of $4.23, a gain of 5% to prior year. Our strong margin profile fueled free cash flow of $269 million, enabling us to repurchase 1.3 million shares and repay $105 million of debt. Our net leverage ended the quarter at the lower end of our target range of 1x to 1.5x. To remind everyone, over the last decade, we have deployed $2.4 billion to buy back approximately 30% of our total shares outstanding. This, along with continued deleverage of our balance sheet, has been a consistent driver of EPS growth and shareholder returns. Turning now to the current operating environment. We see the U.S. consumer behaving cautiously around discretionary spending. They are faced with current and implied future price increases, which we think has the potential to be a further drag on an already choiceful consumer. Against this backdrop, our retail partners are acting more carefully and reducing their open-to-buy dollars in future seasons. As we have consistently said, we are not trying to manage our business quarter-to-quarter. We had a solid first half of the year with our brands fueling strong gross profit and cash flow. The current environment in the second half is concerning, and we see that clearly reflected in retail order books. We strongly believe this is a time to make bold decisions for the future to sustain and advance our durable cash flow model. As a result, we have chosen to amplify certain measures in the second half of the year to protect brand health and profitability. For the Crocs Brand, in addition to adjusting our forward receipts, we pulled back on promotional activity across the direct channels starting in May. While this has and will continue to impact our top line, we see this as an opportunity to drive margin dollars over time, support continued cash flow generation and tighten brand control. For the HEYDUDE Brand, we've accelerated our actions in the channel to support a clean and refreshed marketplace. This has resulted in us choosing to take back additional aged inventory and ensure more of our partners are reset with our current product lines. This will create further headwinds to sales volume over the next several quarters. From an expense perspective, we've already actioned $50 million of cost savings and are identifying further cost savings opportunities. As it relates to inventory, we've opted to plan our business conservatively. Proactively pulling back on receipts across both brands for the second half, primarily in the U.S. Without losing sight of the bigger picture, I want to remind everyone that over the last 3 years, we have made significant progress in diversifying our business, which will serve as a strong foundation to enable long-term sustainable growth. One, we've moved from 1 brand to a 2-brand enterprise, fortifying our leadership within the casual footwear segment. Two, we've diversified our clog offering and have 6 major franchises that make up the majority of our clogs business. In addition, we've developed strong sandals and personalization pillars that offer unique wearing occasions and enable self-expression. Three, we've accelerated our international growth business, which has grown from 38% of Crocs Brand sales in 2022 to 52% in the second quarter. Collectively, this diversification should fuel durable long-term growth for years to come. Now turning to performance by brand. For the Crocs Brand, all of our key product pillars, clogs, sandals and Jibbitz Charms grew in the second quarter. Clog iterations and emerging franchises drove growth within the clog category, including Echo, Bae, and InMotion. These results exemplify that when we deliver new innovation with clear storytelling through our marketing channels, the consumer responds with strong engagement. In Asia, clog personalization and hype continues to resonate well. Outside of clogs, sandals continue to yield strong results, providing new first versatile wearing occasions for our consumer. During the quarter, we saw notable strength across our style franchises, which included the Brooklyn, Getaway and Miami. As we moved into the summer season, the Miami went viral on TikTok, and we were chasing demand. Our consumer is responding well to neutrals and new materialization, including glitter and patent finishes. As we look forward, the success of these 3 franchises is translating into shelf space gains and we're adding new collections such as a Soho sandal next spring. Within personalization, our Jibbitz Charms growth continues to be driven by distribution expansion in our international markets, improved in-store presentation, and success around elevated charms. We remain laser-focused on our digitally led social-first marketing playbook as this is a key ingredient in sustaining brand heat. In addition to bringing back franchise favorites like Cars, Pokémon and Minecraft partnerships were also standouts in the quarter. We furthered our connection to sport, growing our NIL athlete roster with first-round NFL Draft Picks, Jaxson Dart and Ashton Jeanty, who notably wore our Swarovski crystal-studded Crocs clogs on the red carpet. We continue to lean into social commerce as consumers more frequently start and end their shopping journeys on social platforms. During the quarter, Crocs remained the #1 footwear brand on TikTok Shop in the U.S. and we recently launched on this platform in the U.K., where results have been strong out of the gate. Our plan is to continue to expand social commerce and live streaming platforms globally, and we expect this to drive new growth opportunities. Turning to performance by region. Our growth in the quarter was led by our international business, which registered revenue growth of 16%, led by the direct-to-consumer channel. Our international business represented more than half of our Crocs Brand revenue mix this quarter. In China, we reported another quarter of strong revenue growth in excess of 30%. During the quarter, Crocs Brand outperformed during mid-season festival, placing Crocs among the leading women's footwear brands on both Tmall and Douyin. We're deepening our connections with consumers through our roster of locally relevant celebrities and KOLs, including brand ambassador and actress, Bai Lu and actor TJC. India saw a double-digit revenue growth in the quarter, with outsized consumer demand across our classic clog and sandal franchises. We welcomed Rashmika Mandanna as our first brand ambassador in India, and inaugural Instagram post garnered over 400 million views. Japan grew nicely during the quarter, and Western Europe continued to perform strongly, led by France and Germany. Our North American business was down 6% to prior year as we pulled back on discounting on our DTC channels, most notably on clogs. We continue to see sandals as a growth vehicle increasing double digits in the quarter as we further diversify our business. Last week, we held the grand opening of our newest retail concept in SoHo, New York. This store houses our largest personalization experience to date, with expanded and upgraded Jibbitz Charms opportunities. In addition to our mainline product, consumers can find New York exclusive products as well, as a dedicated assortment of elevated EXP product line with dynamic digital storytelling. Turning to the HEYDUDE Brand. We've been focused on 3 core pillars of our strategy. One, igniting the HEYDUDE community. Two, driving the core and adding more. And three, prioritizing brand health as we stabilize the North America market. First, we've continued to ignite the HEYDUDE community. Over the past 12 months, we've been focused on speaking to a new female consumer while not losing sight of our core consumer. The cumulative impact of our marketing efforts over this period have resulted in an increase in HEYDUDE awareness to 35% in North America. In addition to an uptick in awareness, we've also seen improvement in consideration and purchase intent. With these advancements, HEYDUDE is now poised to further engage our core consumer. In June, we launched our latest campaign HEYDUDE Country. This campaign is rooted in authenticity and plays into several of our brand affinities, including music, pre- and post-sport and travel. We're excited about the future of this campaign and its broad appeal to our existing core consumer as well as new HEYDUDE fans, both him and her. Second, we're building the core and adding more. During the quarter, we iterated our icons, the Wally and the Wendy for color, materialization and partnerships. In June, we leveraged our icon to release the HEYDUDE x Pabst Blue Ribbon collection which sold out on our own dot-com. We also partnered with Margaritaville to release a collaboration featuring our HEY2O collection, which speaks to the core HEYDUDE consumer. Lastly, we launched the Paul Pro, an elevated iteration of our best-selling for Paul silhouette at an $80 price point. Against our third strategic pillar, we continue to prioritize brand health as we stabilize the North American market while laying the groundwork for future international growth. We were pleased by continued growth of our direct-to-consumer channel, up 7% in the quarter. This was supported by our new store openings and strong performance on TikTok. While we are pleased with the strategic progress we have made against our 3 pillars, we have identified further opportunities to more rapidly reset our North America business. We have focused our efforts against 2 primary actions. One, we pulled back on bottom of the funnel performance marketing investment to enable a more profitable digital business. And two, we've initiated incremental returns and marked our allowances to our retailers to improve the health of our inventory in the marketplace. This will simultaneously elevate our brand presentation at wholesale. While these measures will have a meaningful impact to the second half performance across both channels, we feel that they will stabilize the business more quickly. In closing, we believe the HEYDUDE Brand potential and its community are much greater than the size of the business today, and we're confident that the critical steps we are taking will fuel the potential in the future. I will now turn the call over to Susan to provide more detail around our second quarter financial performance and third quarter outlook. Susan L. Healy: Thank you, Andrew, and good morning, everyone. Our second quarter enterprise revenues of $1.1 billion were up 3% to prior year. Crocs Brand revenue of $960 million was up 4% to prior year. Growth was led by wholesale up 6%, while DTC was up 3%. North America revenues were down 6% to last year as we pulled back on discounting during the quarter. These actions, in part, drove DTC down 8%, while wholesale was down 4%. International revenue was up 16%, aided in part by timing shifts out of Q3 and into Q2 in select markets. China and India led the growth, while Japan and Western Europe also contributed strongly to these results. HEYDUDE Brand revenue of $190 million was down 4% to prior year, an improvement from the prior quarter. DTC was up 7%, driven by the contribution of new retail stores and our strong performance on TikTok Shop. Wholesale was down 13% in the quarter. Enterprise adjusted gross margins of 61.7% were up 30 basis points to prior year. Crocs Brand adjusted gross margin of 64.1% was approximately flat to prior year. HEYDUDE Brand adjusted gross margin of 50.2% was up 110 basis points to prior year, primarily due to distribution and logistics efficiencies. Adjusted SG&A dollars for the quarter increased 12% versus prior year. Adjusted SG&A rate was 34.7%, up 270 basis points compared to prior year, driven by incremental investments in talent, DTC and marketing. This excludes the noncash impairment charge of $737 million on HEYDUDE's intangible assets. This impairment comes as a result of a longer-than-expected time line to stabilize the HEYDUDE Brand and return it to growth, due in part to a weaker U.S. consumer and the disproportionate impact of tariffs on HEYDUDE product. Adjusted operating margin of 26.9% was down 240 basis points compared to prior year. Adjusted diluted earnings per share of $4.23 was up 5% to last year. Our non-GAAP effective tax rate was 17.7%, which reflects the tax impact of intra-entity transactions and excludes the impact of the HEYDUDE impairment. Our inventory balance as of June 30 was $405 million, up 7% to prior year, in part due to the elevated cost of inventory from tariffs. Enterprise inventory turns remained above our goal of 4x on an annualized basis. Our liquidity position remains strong, comprised of $201 million of cash and cash equivalents and $784 million of borrowing capacity on our revolver. During the quarter, we repurchased approximately 1.3 million shares of our common stock for a total of $133 million at an average cost of approximately $102 per share. In the first half of the year, we repurchased 1.9 million shares or 3% of our outstanding shares. We had $1.1 billion remaining on our buyback authorization as of the end of Q2. We ended the quarter with total borrowings of $1.4 billion and net leverage at the lower end of our target range of 1x to 1.5x. Before I discuss our outlook, I want to briefly touch on tariffs. Last week, the U.S. extended the pause period on a series of incremental tariffs on countries in which we source our products. While we can't predict future tariff changes, we are planning our business at the current rates. The impact from these incremental rates equates to approximately $40 million in the second half of 2025 and approximately $90 million on an annual basis, based on our current sourcing mix. Now moving to our outlook. It continues to be difficult to fully project the financial implications of changing global trade policies as well as to predict how consumer sentiment and purchasing patterns will evolve. Therefore, we are not reinstating full year guidance at this time. However, we would like to provide some visibility for the third quarter. For Q3 we expect consolidated revenues to be in the range of down 9% to 11% at currency rates as of August 4. This revenue range is based on the visibility we have to orders from our wholesale partners, a reduction of discounts in our Crocs DTC channels, the pullback of performance marketing for HEYDUDE, the incremental cleanup actions we have elected to take for HEYDUDE as well as the potential range of outcomes against a weakening U.S. consumer backdrop. Within this range, we expect the Crocs Brand to be down mid-single digits, led by declines in North America, offset in part by growth in international. This includes our expectation that the second half wholesale environment will be challenging for both brands based on the visibility we have in our current order books. Adjusted operating margin is expected to be in a range of 18% to 19%, including an anticipated approximate 170-basis point impact from tariffs and deleverage on expenses tied to our reduced revenue outlook. We plan to continue to buy back stock and pay down debt while remaining within our target net leverage range of 1x to 1.5x. Based on the current environment, we are rapidly actioning additional cost-saving measures across the enterprise in Q3. I will now turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Susan. While the current environment has created uncertainty for the industry and for our consumers, I'm confident that the increasingly diversified sources of growth we are developing and the strategic actions we are taking, will position our brands for consistent and profitable long-term growth. At this time, we'll open the call for questions. Operator: [Operator Instructions] And our first question today will come from Jonathan Komp with Baird. Jonathan Robert Komp: Robert W. Baird & Co. Incorporated, Research Division I want to start just by asking about Crocs North America and the outlook for Q3. I'm hoping you might be able to better isolate some of the unique factors impacting Q3 versus what might be lasting? And then as you look forward, especially into 2026, I know you've made some changes at the organization at the Chief Brand Officer level, Chief Strategy position. So just as you look forward beyond the next couple of quarters, could you give us more sense of the pipeline and the strategy in terms of reinvigorating the excitement for the brand? Andrew Rees: Great. Thank you, John. I think as you look to the back half of the year for the Crocs Brand in North America, there's a number of things affecting the business. Some choices that we have made, which we think will be productive in the long term and also some market-related factors. Our consumer is an incredibly broad-based consumer. If you look at our demographics and who we sell to from the Crocs Brand, it's essentially the general population. So as you look at the general population, there is a portion of that consumer base which we think is ample evidence that they are super cautious. They're they are not purchasing, they're not even going to the stores, and we see traffic down. So we're certainly affected by that, and we see that flowing through into our back half in terms of really our wholesale business and a little bit of our outlet business where we see that lower end consumer. So we see our order books down and we see a trajectory for our wholesale business. That is unintended and not necessarily out of our control, but that is what it is. I think the second piece is our decision to pull back on discounting on the Crocs Brand in North America, in particular, and that is a fact that is an intentional decision we make. That's a revenue headwind, but a gross margin and ultimately an EBIT potential. We think that's important to do that because as we looked at the trajectory and the discounting over time, we saw it increasing, and we think that is detrimental to the long-term health of the brand. So that's really, I think when you kind of look at the North American market. What I would say is, we've got consumer innovation coming into the market. We've seen a strong trajectory in the past in the summer season from our sandal business. We think that grows next year. We see new product innovation on clogs and sandal coming -- on clogs coming in the fourth quarter. We have, I think, significant product innovation on sandal in the first half of next year. And we're continuing to accentuate and grow our personalization business, both in Jibbitz and expanding that beyond Jibbitz into a broader personalization offer. I would also add that in Q2, we saw a strong international growth for the Crocs Brand and obviously, growth overall. And I think we've talked about repeatedly that we see international as a continued important growth driver for the brand. I think the other thing you referenced was some personnel changes to strengthen our management team. I think we feel really good about those. Terrence is getting settled as the Chief Brand Officer of both brands, I think, and driving the level of energy and creativity, which we're excited to see come to market. And we've strengthened our sort of growth and transformation with the addition of a Strategy and Growth Officer. So we feel great about the team. I think it's going to be a difficult period to navigate in the next half year for the Crocs Brand in North America, but we think we're doing the right things for the long-term potential of the brand. Jonathan Robert Komp: Robert W. Baird & Co. Incorporated, Research Division Okay. Great. I appreciate all that color. Just two follow-ups, if I could. Do you think in some of your core family channels, are you losing share in the order book at all as larger competitors come back with emphasis on the channel? And then just any more detail on protecting the profitability. I don't know if you were surprised by the magnitude of the revenue slowdown just given the size of the deleverage that you're implying for Q3, looks hard to see where you're seeing progress on protecting profitability just based on the Q3 outlook alone. Andrew Rees: Got it. Yes, that makes sense. So yes, I think if you look at the -- I think what you're referencing, we do see an athletic trend in the marketplace. I think everybody is well aware of that, talked about that. There is, I think, a clear athletic trend the consumers migrating back towards athletic. We know that is a cyclical trend. And as we look at some key athletic events coming up, we do think that will persist for a while. You've got the World Cup next year. You have the L.A. Olympics in a couple of years. And I think the athletic brands are building innovation into that, which they typically do. So that's a little bit of a headwind. I think we can fight that headwind in the long term. And we also know that our brand is well positioned against pre- and post-sport. So I think athletic headwind is providing some pressure on open-to-buy, combined with the consumer uncertainty of that very broad consumer base. In terms of protecting profitability, yes, I think there's a couple of things. If you look at Q3, 170 basis points of the deleverage are tariffs, and obviously, that will continue into '26 and beyond. I think in our prepared remarks, Susan gave you some good color on what that looks like. And in terms of -- I think I'm anticipating that Q3 is a bit of a low spot in our EBIT potential. We've taken out $50 million of cost savings already. Some of those are spread between gross margin and SG&A. And we will look -- and we are currently engaged in an extensive process to drive incremental cost savings or incremental SG&A reductions throughout the remainder of the year. Operator: And our next question will come from Chris Nardone with Bank of America. Christopher Michael Nardone: BofA Securities, Research Division So first, are you seeing anything in your Crocs international business that is implying a material step change for your back half outlook relative to the mid-teens growth in the most recent quarter? And then on your global Crocs direct business, is the slowdown that you're embedding in your 3Q guidance, is that matching what you're seeing? Or are you baking in a scenario where sales continue to sequentially get worse throughout the rest of the quarter? Andrew Rees: Okay. Let me answer the international piece. I'm going to come back to you on the DTC piece. I didn't quite understand what you're asking there. So from an international perspective, there are always a kind of few puts and takes between quarters, particularly around your distributor business, and you're probably well aware our distributor business is substantial. And so -- but in the long run, a mid- teens growth trajectory for our international business, we feel very good about that. I think we highlighted in the prepared remarks, strong growth in China, really successful mid-season festival; strong growth in India, another large -- a very large potential market; good performance in Western Europe; and actually return to growth in Japan, which we're also excited about. So I think our international business remains really important to us. It could be a driver of growth. I would also highlight in Q2, it was the majority of our Crocs business, right? We passed the 50% mark in terms of the international business being bigger than our domestic business. I think puts and takes between quarters will be kind of around that longer-term trajectory. The second piece, I'm not 100% clear what you were asking there. Christopher Michael Nardone: BofA Securities, Research Division Yes. So I'm just trying to get a sense of -- I know you're not guiding 3Q by channel, by region per se, but we're a little over a month into the quarter. It sounds like the outlook is getting a little bit worse. Are you baking in things sequentially getting worse as we move through the quarter? Or are you kind of calling the 3Q guidance based on the trends you're seeing as of today, the first couple of weeks of the quarter? Andrew Rees: Yes. We're not baking in it getting sequentially worse as it goes through the quarter. From now, we do think the back half is worse than the first half, right, based on the things I talked about earlier. So -- but do I -- do we see it sequentially declining from sort of our July trajectory as we go through the year? We were not anticipating that. I think there is an element of cautiousness and we recognize the consumer is pretty unpredictable, particularly here in the North America. We do see sort of fairly significant fluctuations week-to-week. So I think we've got some cautiousness embedded in it, but we haven't embedded a downward trajectory month over month from now. Christopher Michael Nardone: BofA Securities, Research Division Got it. That's very clear. And then just to sneak one more in just on margins. I just wanted to get a sense of how you're thinking about taking price for both plans -- for both brands and what's included in your margin guidance in terms of mitigation strategies around tariffs. It sounds like you're pulling back on promos and DTC, which is leading to lower volumes. So I'm just wondering if that's making you rethink whether you think you can take price across both brands. Andrew Rees: Yes. I mean this is -- so I think we can, over the medium term, mitigate the impact of tariffs. That will come from cost savings in our supply chain, both negotiations with factories, which I don't think is a huge amount, but there's some there, but also just efficiency drive within our supply chain. It will come from some price, and it will come also from some reduction in SG&A through, again, looking much harder and driving to efficiency. In terms of your specific question around price, we have selective actions planned, some in the back end of this year for HEYDUDE. We are getting some net price, as you pointed out, through reduction in discounting. And we have -- we will be announcing some price increases on Crocs, both in select styles and also in some of our international markets where we think we have opportunities. So we're going to, I think, be very strategic about where we get price. We don't think this is a market that we can be taking all of our prices up by a certain amount to simply mitigate the tariffs. I don't think that's realistic given where our brands sell and the very broad base of our consumer base. Operator: And our next question will come from Adrienne Yih with Barclays. Adrienne Eugenia Yih-Tennant: Barclays Bank PLC, Research Division Andrew, I guess my question is, given the down 9% to 11%, how much of that is due to kind of the wholesale pullback? Is that a reaction to the front order book? Or is that more of a proactive management, given kind of everything that you know about what's happening and potentially with the consumer kind of demand environment? And how do you think about philosophically balancing that with the risk of losing shelf space in the marketplace? Andrew Rees: Right. So I would say the guide embeds the order book for both brands, right? So we've been -- it's not -- we're not anticipating an erosion of order book. It embeds the order book where it sits today. And I would say it also embeds conservative assumptions around returns or cancellations, right? So we're definitely, I think, being very cautious about how we're anticipating the market flowing out over the next 6 months and how the consumer is going to react. In terms of shelf space, I think in response to Jon's question, I think in some channels of wholesale distribution, we are losing shelf space relative to other brands, relative to the athletic brands. And I think we are working to make sure that we drive incremental shelf space with sandals. We certainly picked up shelf space in the summer with sandals. We think we will pick up more shelf space in sandals next year. But a significant part of our clogs business is done through our DTC channels, right? It's done through our retail stores and our digital channels. And obviously, I think we're maintaining market share through those channels. Adrienne Eugenia Yih-Tennant: Barclays Bank PLC, Research Division Okay. Great. And then my just clarifying question. You said that within that guidance of down 9% to 11% at Crocs, if I heard correctly, it would be down mid-single digits. So HEYDUDE will then kind of go -- kind of the trajectory of HEYDUDE will worsen pretty significantly. Is that -- are you seeing more of this wholesale kind of pullback and more of the actions, the reset actions at the wholesale brand? Andrew Rees: Yes. I think the principal driver of that leg down for HEYDUDE is the actions that we decided to take, right? The first is the reset of some inventory in the wholesale, and that's pretty significant, and that will be done essentially in Q3. So that's a meaningful amount. And the second is the reduction of marketing, so performance marketing on our digital channels where we've seen that creep up over a number of quarters, and we've got to a point where the marginal profitability was really not there. So we took an opportunity to -- we took a tough decision to reset that. So it's principally due to those two things. I wouldn't say the wholesale trajectory and order book trajectory is dramatically worse than Crocs, is a little bit below, but those are the two biggest things. Adrienne Eugenia Yih-Tennant: Barclays Bank PLC, Research Division Okay. And then two clarifying questions for Susan. When you say the current tariff environment, you mean the August 1, right? They put all that whole litany of kind of new numbers for all the different separate countries. Is that kind of the new $90 million annual growth unmitigated? And then secondarily, the inventory up 7%. How much of that is now due to the cost of tariffs? Susan L. Healy: Yes. So on the first part of your question, yes, that is an up-to-date number. I think, as of hot off the presses. So that includes everything that we heard as of August, plus I think there was a -- there's a 50% tariff on India that we have incorporated in that number. India is a meaningful but not the largest country from which we source exports to the U.S. And then your second part of your question was about inventory. Yes, up 7%. We don't break that out, but a meaningful portion of that is the cost of the tariffs, and we capitalize that in our inventory and recognize that as we sell the product. Operator: And our next question will come from Anna Andreeva with Piper Sandler. Anna A. Andreeva: Piper Sandler & Co., Research Division Just a follow-up on the pullback in promotional activity of Crocs in North America. Did you quantify that impact in the second quarter or how we should think about that for 3Q? And we still see Crocs around promotions around big events, whether it was Memorial Day or July 4 weekend. So just trying to understand how we should think about the magnitude of that pullback manifesting. And then secondly to Andrew, on the shelf space losses to athletics, just trying to understand athletic space has been strong for some time now. Why do you think your losses are accelerating now? Andrew Rees: Got it. So we haven't quantified in dollars, the amount of the pullback relative to the reduction in discounts. But what I could say is if you look at Q2, which is down essentially almost 6%, right, for North America for Crocs. If we had, I think, not made that decision, it would have been down slightly. So it was a pretty meaningful impact. And yes, I think to your question, will we still run, I would say, competitive discounts and promotional events around key events? Absolutely, we will. But we are being careful about the depth and the breadth of those events and also making sure that we are not running significant events between those time periods. So it is a very meaningful change in terms of dollars that we are foregoing in North America for future health of the brand. And the second point, I -- I'm not sure I agree with you, right, in terms of the athletic trend. I think there are some high-end athletic brands that have been performing very strongly in North America for some time, but they are selling at high prices and are principally selling to an elevated consumer. I think the broader athletic trend that hits the broad consumer base that we service, has accelerated. And that is, I think, principally due to some of the big players re-embracing a broader distribution strategy. Anna A. Andreeva: Piper Sandler & Co., Research Division Okay. Okay. No, that's fair enough. And just as a quick follow-up to Susan. Could you guys quantify the timing shift in international? You said it benefits 2Q and current 3Q, I believe. Susan L. Healy: Yes. We didn't actually quantify the shift. It's a part of the difference in the growth rate between international and international between Q2 and Q3, but we still would have been -- it still would have been positive. As Andrew said, we have these shifts based on our distributor business from quarter-to-quarter on a regular basis, both this year and last year. Operator: And our next question will come from Jay Sole with UBS. Jay Daniel Sole: UBS Investment Bank, Research Division Andrew, can you just elaborate a little bit on what you're seeing in China? I think you talked about China was up over 30% versus last year. Talk about what's driving the strength and maybe the outlook that you have for China in the third quarter and beyond. Andrew Rees: Yes. So I think what's driving our business in China is, I think, strong consumer engagement, right? So the overall China business and you look at it across many different brands is not strong from a consumer perspective. Consumer purchasing is certainly not -- it is not strong in the Chinese market. We are bucking that trend because we're driving, I think, brand heat for the Crocs Brand in China. That brand heat has been driven by a set of socially -- social-first digital marketing tactics using key Chinese celebrities. And we have a very large digital business in China, which has performed particularly well during mid-season festival, and we're very familiar with how to operate during these festival time periods and maximize the business. We have also extended significantly our mono-brand stores through our distribution partners in China with significant store openings both last year and this year. And I think our personalization aspect to our brand, the use of Jibbitz and the ability to personalize the shoes have also been particularly effective in engaging that consumer. And I think that's also effective in engaging sort of the broader Asian consumer. We see our personalization business strong in Southeast Asia, in Korea and in Japan as well. Operator: And our next question will come from Rick Patel with Raymond James. Rakesh Babarbhai Patel: Raymond James & Associates, Inc., Research Division Can you unpack the disparity in performance between HEYDUDE in direct-to-consumer versus wholesale? Direct-to-consumer has performed well now for 3 quarters in a row. So I guess what would you attribute the softer performance to at wholesale? And as we think about the wholesale channel, in particular, how long do you envision it will take to rightsize inventories so that sell-in and sell- through are in better alignment? Andrew Rees: Yes. Great question, Rick. So look, direct-to-consumer has performed well, but there are new points of distribution there, right? So that's for -- I would say, for 2 principal reasons. We continue to open outlet stores for the HEYDUDE brand which we're very pleased with both the performance of those stores and also the role they play in terms of extending the HEYDUDE brand to new consumers, right? So the HEYDUDE brand, while the awareness has improved, it has improved to 35%. That is a relatively low number compared to the 60% plus awareness, HEYDUDE awareness for the Crocs Brand. So we've made progress on awareness, but it's still low. And so there's new points of distribution from an outlet store perspective embedded within that DTC growth. There is also a TikTok Shop. So you are aware that with both of our brands, we've been at the forefront of selling on TikTok Shop. Crocs is the #1 footwear brand on TikTok Shop. And I think HEYDUDE is at #3. So that is -- #2, sorry, I've been told. I know it's 2 or 3. And that is an outsized performance relative to the size of the HEYDUDE brand in the U.S. marketplace. So it's -- I would say it's new points of distribution is a big driver there. Operator: And our next question will come from Aubrey Tianello with BNP Paribas. Aubrey Leland Tianello: BNP Paribas Exane, Research Division I wanted to ask on HEYDUDE. I think it's been a few quarters now since you changed the approach to marketing going more top of funnel. How are you feeling about the benefits you're seeing from that? And then how are you thinking about investment in the brand going forward? And then any update on new leadership for HEYDUDE? Andrew Rees: Yes. So I'll do your last question first. So the current leadership for HEYDUDE is myself. So I'm really enjoying being able to dig into the brand and work with the team. While we have not yet appointed a brand President for HEYDUDE, I would say that we have appointed some key team members, and I'm really excited about the strength of our leadership team for the HEYDUDE Brand. I think they are doing a really great job and really grappling with some difficult situations, but doing it in a extremely proactive and productive way for the future. In terms of shifting the marketing, we have seen, I think, positive signs from that. We have been -- we continue to invest in marketing. We have been experimenting with some different messages and different approaches. We have seen an increase of HEYDUDE Brand awareness, as I mentioned in the prior question, to 35%, which we think is a very productive trend. I would say our latest campaign around HEYDUDE Country has been really well received by the industry as we talk to our wholesale partners. And I think we are seeing some clear evidence it's resonating with consumers. We have also spent a good amount of time as we've talked about in the past, speaking to her and bringing a younger female consumer to the brand. I think that has been productive. I would say that as we look forward, we are shifting more of our dollars and focus back to our core consumer and ensuring that we really resonate and capture and get the most productive purchasing from our core consumer. So I think we're doing all of the right things. We plan to continue to invest in the HEYDUDE Brand, and we see a trajectory that we think we will be pleased with and ultimately, shareholders will be pleased with over time. Aubrey Leland Tianello: BNP Paribas Exane, Research Division Thanks. And if I could just sneak in a follow-up on capital allocation. In the first half, you're ahead of where you were last year in terms of share repurchases. Does that continue into the back half? Or is that different now with the new revenue trajectory? Susan L. Healy: Yes. So let me try to address that. Consistent with our past practice, we really don't commit ahead of time to our capital allocation, how we're going to allocate our free cash flow. But as you can see from what we did in the first half of the year, we really believe our stock is an excellent value and consistent with our 1x to 1.5x target range, we're going to continue to allocate free cash flow to buy back stock and pay down debt as we see the opportunities. Operator: And our next question will come from Brooke Roach with Goldman Sachs. Brooke Siler Roach: Goldman Sachs Group, Inc., Research Division Susan, I was hoping you could elaborate on the cost savings actions that you've taken, that you're planning on taking. What additional areas of opportunity have you identified outside of the SG&A savings in the $50 million that was previously discussed? And can you provide any color on the magnitude or timing of these savings for the second half and into '26? Susan L. Healy: Sure, Brooke. So when we talk about the $50 million of cost savings, these are things that we've already identified and taken action on for the year. We realized $15 million of that in Q2, and that was really balanced across SG&A and gross margin. And you can think about the remaining $35 million as being kind of evenly spread across Q3 and Q4 with a similar weighting on SG&A and gross margin. As we look to the further opportunities that Andrew mentioned, we're particularly focused on SG&A and steps that we can take to further simplify the business. We spoke a little bit about the marketing spend for HEYDUDE and being able to pull back on performance marketing, where we don't feel there's an adequate return. We're looking at our entire expense base with that lens to make sure that where we're investing the dollars are the ones where we're seeing the return for the long term. Operator: And our next question will come from Ashley Owens with KeyBanc Capital Markets. Ashley Anne Owens: KeyBanc Capital Markets Inc., Research Division Maybe just to start on HEYDUDE, the further pressure on the wholesale channel, is the assumption that this will come as incremental margin headwinds on the brand through the balance of the year? And additionally, I know you mentioned pulling back on some of the inventory received domestically for the back half. So can you help us understand how this shapes the product cadence? You've been strong in newness in collaboration for several years now. But should we expect a pullback in some of these efforts in SKU count until conditions normalize? Or how are you thinking about balancing tighter buys with the need to maintain freshness? Andrew Rees: Yes, yes. Good. Thank you, Ashley. Those things are clearly connected. So yes, from a HEYDUDE perspective, there will be incremental pressure on margins in the back half based on the actions we're taking, right? So the cleanup -- the continued cleanup of wholesale inventory is costly, right? And that is a significant investment that we are making. In terms of inventory receipts, we're planning our receipts cautiously in terms of where we've -- we're purchasing and/or bringing in units that we think satisfies what we anticipate will be the future demand. We're not planning -- I think one of the comments we've heard from wholesale partners is, look, we're going to plan our inventories down. And if things perform, we will chase. We're not planning significant receipts for chase because that would be inventory risk that we think is not merited at this point. In terms of SKU count and new product introductions, we think the wholesale returns and cleanup that we'll do will significantly refresh and reset the floors to current new inventory. And where we've done that, we've seen some nice improvements. So it's about making sure that we do have newness and we do have new inventory and new styles within -- at the point of sale for our consumers. And I would say we're seeing some really nice trajectory in HEYDUDE against Stretch Sox, which has been completely refreshed. So we started that refresh at the beginning of this year. As we look at wholesale and DTC inventory, that's been a significant effort, and we're very pleased with the performance of Stretch Sox going forward. The Paul franchise has been a franchise that's performed well. We recently added the Paul Pro, which is an elevated version of the Paul with additional cushioning and a better footbed. That's performing well. HEY2O performed well through the summer, which is our drain shoe for fishing or for those who are in and around the water. And I would say also our work business for HEYDUDE, particularly the Comp Toe, is also performing well. So the newness is performing and the reason we're prepared to make what is a significant investment to refresh is we want more newness in front of more people. Operator: Our next question will come from Sam Poser with Williams Trading. Samuel Marc Poser: Williams Trading, LLC, Research Division So Andrew, in the prepared remarks, you talked about -- I just want to clarify, you talked about the weakness -- the uncertainty and the potential weakness of your broad-based consumer, which I assume you're speaking both to Crocs and to HEYDUDE? Andrew Rees: Yes. Yes, I think -- what is different about us is the -- we sell at very democratic price points on both brands, right? And the democratic price point means that we appeal to a particularly broad consumer base. There are other brands that are absolutely performing much better in this marketplace because they are focused on exclusively on a high-end consumer. The low-end consumer is a consumer that we believe is most sensitive to increases, is most nervous and in some cases, is not leaving the house. Samuel Marc Poser: Williams Trading, LLC, Research Division Well, let me ask you this, though. You did also talk about how well you've been doing with sandals. Is this -- and you're sort of implying it and what you're working on with HEYDUDE, is this an issue basically of you, for the sake of argument, don't have the right product for the broad base of consumer. It isn't innovative enough. They just aren't going to it. And you talked about athletic getting better, so there may be more innovation there, and that may take some from you. So how much of this is sort of macro consumer versus we need to make better stuff for our customers, for our customers seeking on this. Andrew Rees: Yes. I think we believe we are making very good stuff for our consumers, right? So as we look at where our brands are positioned, particularly on HEYDUDE, I just talked about it, the refreshing the product line and refreshing the product that we're putting in front of consumers is proving to be very positive, right? So I think the incremental improvements that we're making are strong. In terms of the -- sorry, in terms of the Crocs business, we also see a strong trajectory on new product introductions, right? A lot of the growth we saw in sandals in the very successful sandal season and the increase in market share in sandals was based on new styles that we think are meeting consumers' needs. And we're very confident that sandal business will grow nicely into next year as we kind of think about next season. So I think the macro is a very important factor for our business. We're definitely seeing that for our brands. And then I think we're making some tough decisions in the back half of this year, which I know given your kind of long-term understanding, I think you recognize are impactful to the business but also costly. Samuel Marc Poser: Williams Trading, LLC, Research Division And then I guess the question is what -- last thing, what percent of your business -- of your Crocs business was sandals this year? What was the penetration versus last year? Andrew Rees: Yes. We typically break that out at the end of the year. I would say it grew in penetration, I can tell you that. I think kind of once a year, we're trying to give you visibility to that. But it was -- we said it was 13% last year in terms of penetration. It was up double digits in the first half of the year. So it will be -- it will grow. Operator: And ladies and gentlemen, this will conclude our question-and-answer session. I'd like to turn the conference back over to Andrew Rees for any closing remarks. Andrew Rees: Thank you, everybody, for joining us today and your continued interest and support of our company. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines at this time.

Operator: Good day, and welcome to the Crocs Inc. First Quarter 2025 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Senior Vice President of Investor Relations and Corporate Strategy for Crocs. Please go ahead. Erinn Murphy: Good morning and thank you for joining us to discuss Crocs, Inc. first quarter results. With me today are Andrew Rees, Chief Executive Officer; and Susan Healy, Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask that you limit to one per caller. Before we begin, I would like to remind you that some of the information provided on this call is forward-looking, and accordingly, is subject to the safe harbor provisions of the federal securities laws. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially. Please refer to our most annual report on Form 10-K quarterly report on Form 10-Q and other reports filed with the SEC for more information on these risks and uncertainties. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I will turn the call over to Andrew Rees, Crocs, Inc.'s Chief Executive Officer. Andrew Rees: Thank you, Erinn and good morning everyone. Thank you for joining us today. We are incredibly pleased with the performance we delivered during the first quarter despite what has been an increasingly volatile macroeconomic backdrop since the start of the year. At the enterprise level, revenues of $937 million grew 1% to prior year and came in ahead of our guidance, which called for a revenue decline of approximately 1.5% on a constant currency basis. Importantly, both of our brands contributed to this outperformance. Croc’s brand revenues of $762 million grew 4% to prior year, led by double-digit growth in International and the North American business performed ahead of plan. HEYDUDE revenues of $176 million, down 10% prior year, including direct to consumer growth of 8%, an acceleration from the fourth quarter. Enterprise adjusted gross margins of 57.8% gained 180 basis points to prior year. Adjusted operating margins of 23.8% came in more than 200 basis points above our guidance while we continue to make strategic investments to extend our competitive advantages in the future. All in, we delivered $3 in adjusted diluted earnings per share, nearly 20% above the high end of our guidance range. During the quarter, we repurchased 607,000 shares, while at the same time we remain well within our net leverage range of between 1 and 1.5 times at quarter end. Before I share more insights from the quarter, I want to take a moment to discuss the dynamic landscape we're operating in, the actions we have taken to best position ourselves to win despite evolving global trade policies and our resulting decisions to withdraw guidance. Since joining Crocs over 10 years ago, I have witnessed some extraordinary times. From charting our turnaround to the emergence of the Crocs brand as an icon of popular culture, to the global COVID-19 pandemic where retailers shut their doors for months, to the acquisition of HEYDUDE and to today where many companies are grappling with and trying to understand our new global trade environment. Business and consumer uncertainty is extremely high. However, we're being prudent in the face of this uncertainty and are focused on what we can control, leaning into our clear competitive advantages and applying an agile mindset to how we adapt. Since we last reported mid-February, the U.S. has implemented a series of incremental tariffs on countries where we source our product. In addition, the daily uncertainty as to the level of these tariffs makes it incredibly hard to plan and predict both short and long-term impacts to our business. As we sit here today, we have a well-diversified sourcing mix. To provide some context, our anticipated sourcing mix into the U.S. in 2025 stands at approximately 47% from Vietnam, 17% from Indonesia, 13% each for China and India, and 5% each for Mexico and Cambodia. We are mindful that we are in the midst of a 90-day pause from certain reciprocal tariffs, which could further escalate and impact on our sourcing in the countries previously mentioned. One of the primary reasons we've suspended guidance for 2025 is our ability to predict the financial impact of future tariffs. To provide you with a framework if we assume 10% incremental tariff on all sourcing destinations into the U.S. this would translate to a cost of approximately $45 million on an annualized cash basis. If the incremental 145% tariff on China remains in place, along with the 10% on all other sourcing destinations, this would imply a cost of approximately $130 million on an analyzed cash basis based on our current sourcing mix. Given the broad range of outcomes that we are facing as a company and as an industry, we're focused on what we can control and on driving long term value for our brands. In light of the current macroeconomic environment, we have taken swift action to proactively reduce our cost base. Since we last reported, we have identified approximately $50 million of additional savings to be realized in 2025 and we are continuing to evaluate potential actions for future savings as well as closely managing our inventory levels. While we are encouraged by the performance of our overall business in April, it is challenging to predict how consumers may respond to prolonged uncertainty. It is possible that in the future we could see softer demand for footwear and other consumer goods, particularly given the potential for increased costs and higher prices across the industry that could further burden an already choiceful consumer. Despite withdrawing our guidance, one thing is certain. We believe our industry leading gross margins, low unit cost, well-diversified supply chain, global business model and strong free cash flow position us well to take market share. We are and expect to continue to be very profitable while generating significant free cash flow. We're committed to being transparent with all of our stakeholders as we navigate this current environment. Now turning to the performance by brand starting with Crocs. First, we're continuing to drive global brand relevance through our icon and icon iterations. In addition to introducing new Clog franchises. During the quarter, Clog growth was led by our Classic Clog in addition to growth within established franchises such as Echo as well as new franchises such as InMotion. Hype resonated well with notable success in Asia led by the Classic platform BAE and Crush. In China, the BAE, a hype variation of our Clog was relaunched in partnership with Global Brand Ambassador and Chinese celebrity TJC. This campaign delivered very strong engagement across our key social and digital channels and an influx of traffic to our stores. Second, we are making clear progress towards introducing product for new wearing occasions outside of Clogs. Sandals gained notable share of our business in the quarter, led by Style Sandals and outperformed the overall Clogs brand. The strength was broad based across our style sandal franchises including Getaway, our number one franchise, Brooklyn and Miami. Year-to-date we are seeing very strong sell throughs across these core style franchises and our strategic accounts are chasing receipts. Into 2025, we tightened our sandal assortment which has resulted in higher productivity per franchise. As a reminder, we see sandals as an avenue for attracting new consumers to our brand. Over the last 12 months, 54% of consumers who purchased sandals on our own.com channels were new to brand. This performance has translated into incremental shelf space with our retail customers. We are building on these franchises into the summer and through fresh new colors and styles. Third, we remain laser focused on our digitally led social first marketing playbook as this is a key ingredient to sustaining brand heat. During the quarter, we announced some exciting influences including our spring break activation with Alex Cooper, top tier Podcast Host and Style Maven. This campaign featured our key influencers sporting neon classics all over Miami, driving more than 2.5 million social impressions over the weekend. While we introduced a number of partnerships during the quarter, perhaps the most anticipated drop was our limited release collaboration with Tokyo based streetwear brand BAPE. This release amassed a substantial wait list ahead of the launch. This release drove an exceptional level of traffic to our websites and app while garnering nearly 70% new customer acquisition. Turning to social commerce, we are continuing to lead into this phenomenon as consumers are more frequently starting and completing their shopping journeys on social platforms. TikTok shops scaled nicely in the quarter and we see it as a halo to our other channels. During the quarter, Crocs brand remained the number one footwear brand on TikTok shop. And finally, our fourth strategic pillar is to gain market share around the world. In Q1, we achieved 12% revenue growth in international with balanced growth across wholesale and direct to consumer channels. China accelerated in the quarter growing more than 30% as compared to the prior year. The growth in China was well balanced across channels including the addition of 40 new partner doors. In April, we secured our second ever Super Brand Day on Tmall. During the multi day event, nine of the top ten footwear styles on the platform were Crocs brand. Our successful activation was complemented by a celebrity and influencer led live stream. In the quarter, we also saw robust growth in Western Europe led by France and Germany. Our North American business came in ahead of expectations and was down 3% to prior year. Turning to the HEYDUDE brand. We continue to make progress on stabilizing the brand in North America and I am very pleased with how the team has executed to deliver a better than expected first quarter. First, starting with the HEYDUDE community, we're building a passionate fan base. In February, HEYDUDE had its first ever TikTok Shop Super Brand Day, during which HEYDUDE ranked as the number one footwear brand across the platform with particular success in our Austin Lift and HEY-2-0 Styles. With an emphasis on her [ph] in March, we activated our Sydney Sweeney Times Austin Lift Fashion Crisis Hotline campaign under the Beauty is Comfort tagline. The campaign content reached a staggering 8 million consumers, surpassing all internal benchmarks. We also were front and center at the Houston Rodeo talking to the core HEYDUDE consumer and were recognized as the number one brand dubbed the Grand Champion of the Rodeo for best brand experience. Second, we are building the core and adding more. We iterate on our icons, the Wendy and the Wally through color materialization and partnerships. The three major platforms include Stretch Sox, Stretch Canvas and Funk Mono. During the quarter, we successfully transitioned out of our legacy Wally Soxs program and the retailer reception of our updated Wally Stretch Sox has been strong. In addition, we released two iterations of our Jelly Roll Times HEYDUDE Wally. The second Jelly Roll launch started as an early access exclusive release on TikTok Shop where it sold out completely within the day. When we launched the Collab on our own DTC the next day, we saw very high levels of traffic, well above expectations. We also leveraged Travis Hunter, Heisman Trophy winner and number two 2025 NFL draft pick to launch an improved HEY-2-0 to update an already successful franchise. And finally against our third strategic pillar, we continue to prioritize brand health as we stabilize the North America market while laying the groundwork for future international growth. We are pleased by the acceleration of our direct to consumer channel, up 8% in the quarter. This was supported by a significant improvement versus prior year in our own.com growing traction of the TikTok shop and new retail expansion. During the quarter we opened two premium outlet stores and converted to temporary stores, helping to drive brand awareness and connect consumers with a full expression of our brand. We plan to open approximately 10 stores during the year. ASP for the HEYDUDE brand were up low single digits to last year, our seventh consecutive quarter of positive ASP growth. We also saw full price sales in our own.com improve nicely in the quarter fueled by product newness including the Austin Lift and the Paul. I will now turn the call over to Susan to provide more detail around our financial performance and how we are approaching the remainder of the year. Susan Healy: Thank you Andrew and good morning everyone. We delivered strong first quarter results that bested our guidance expectations across all core metrics. First quarter enterprise revenues of $937 million were up 1% to prior year and ahead of our guidance of down 1.5%. Overall, first quarter trends were more volatile than we have seen in recent quarters. Trends were strongest in March and our business continued to perform well in April. Crocs brand revenue of $762 million was up 4% a prior year. Growth was led by wholesale up 5% while DTC was up 3%. North America was down 3% to last year ahead of expectations with DTC and wholesale declines of 2% and 5% respectively. International revenue was up 12%. China led the growth with revenue up more than 30% in the quarter along with Western Europe with notable outperformance in France and Germany. HEYDUDE brand revenue of $176 million was down 10% the prior year and ahead of our guidance which called for a revenue decline of 14% to 16%. DTC was up 8%, accelerating from the fourth quarter. Upside to our guidance was driven by better than anticipated digital Trends. Wholesale was down 17% in the quarter, including the impact of resetting our Wally Stretch Sox’s program which is performing well. Enterprise adjusted gross margin of 57.8% was up 180 basis points to prior year. Crocs brand adjusted gross margin of 60.7% was up 260 basis points to prior year tied to lower product costs and favorable customer mix. HEYDUDE brand adjusted gross margin of 46.6% was down 120 basis points to prior year driven by deleverage against our supply chain costs. Adjusted SG&A dollars for the quarter increased 18% versus prior year. Adjusted SG&A rate was 34% up 520 basis points compared to prior year driven by incremental investment in talent, marketing and DTC to support long-term market share gains. Adjusted operating margin of 23.8% was 230 basis points ahead of our guidance of 21.5% and down 330 basis points compared to prior year. Adjusted diluted earnings per share was roughly flat to last year at $3, significantly above our expectations. Our non-GAAP effective tax rate was 17.2% which reflects the tax impact of intra entity transactions. Our inventory balance is healthy and current at $391 million as of March 31 and flat versus prior year. Enterprise inventory turns remained above our goal of four times on an annualized basis. Our liquidity position is strong comprised of $166 million of cash and cash equivalents and $679 million of borrowing capacity on our revolver. During the quarter, we repurchased approximately 607,000 shares of our common stock for a total of $61 million at an average cost of $100 per share. At the end of Q1, we had just under $1.3 billion remaining on our buyback authorization. We ended the quarter with total borrowings of $1.5 billion and remained within our net leverage target range of 1 to 1.5 times. As Andrew mentioned, we are withdrawing our full year outlook. The primary reason for withdrawing guidance is that at this point it is extremely difficult to quantify and project the financial outcome of tariffs and the related potential for softer consumer demand across the industry. To illustrate the potential tariff impact, if a 10% incremental tariff on all sourcing destinations into the U.S. were in place, this would cost us approximately $45 million on an annualized cash basis. If the incremental 145% tariff on China were to remain in place along with the 10% on all other sourcing destinations, this would imply a cost of approximately $130 million on an annualized cash basis based on our current sourcing mix. As you would expect, we are pursuing three primary levers to mitigate any potential impact of tariffs in the short and longer term. One, adjusting our sourcing mix into the U.S.; two, further reducing costs and three evaluating potential price increases. While we have withdrawn our guidance, we do want to share some context for the near term. First, while much of the second quarter is ahead of us, we are pleased with how both of our brands performed in April. Second, we would expect tariffs to have a more adverse impact on HEYDUDE's gross margin rate as compared to the Crocs brand given relatively higher China sourcing exposure for HEYDUDE. We expect gross margin pressure from tariffs to start in Q2 and expect the largest impact to begin in the second half. Third, since we last reported, we have identified an incremental $50 million of cost savings in 2025 and we are continuing to evaluate potential actions for further savings. Fourth, we are carefully managing our forward unit inventory levels but are mindful that incremental tariffs will add higher average unit costs. Finally, our capital allocation plans remain unchanged. We plan to pay down debt and opportunistically buy back stock while remaining within our 1 times to 1.5 times net leverage target range. I will now turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Susan. While the geopolitical climate has become more volatile since the start of the year, I am confident that we will chart a winning course led by our talented team, the democratic appeal of our brands and the value and comfort proposition consumers clearly value. As we have demonstrated in the past, we have a proven track record of coming out of periods of uncertainty stronger than we entered them. And I'm confident that the current reality presents a very strong opportunity to further our competitive advantages and gain market share. At this time, we'll open the call for questions. Operator: [Operator Instructions] And the first question comes from Anna Andreeva with Piper Sandler. Please go ahead. Anna Andreeva: Great. Thank you so much. Good morning and congrats. Nice results. We had a two-part question. First on gross margins, really strong at the Crocs brand and I think you mentioned product costs and favorable customer mix. Can you comment on sustainability of those? Sounds like the costing benefit gain may be accelerated sequentially, so that's the first one. And secondly, you mentioned pricing as a potential lever. Can you just provide more color on that? Do you see that opportunity more at Crocs versus HEYDUDE and would this be a global versus a U.S. increase? And thanks so much. Andrew Rees: Great. Thanks Anna. So on gross margins, yes, I think we had really pleased with the results in Q1 and look, one of the strengths of this company is our incredible gross margins, which allows us to be very strategic where we invest in terms of sustainability, we do believe they're sustainable. The gross margin uplift or the strength of the gross margins really came from I think three things. One was good negotiating with our vendors so we were able to continue to get some efficiencies in terms of sourcing. Over the last several years we've made very substantial investments in our distribution and logistics infrastructure here in the U.S. in the Netherlands and In other parts of the world, I think that's really paying off with efficiencies. And then we also had, really good customer mix and channel mix. So I think we're pretty confident in the sustainability of that. Ex-tariffs, obviously I'm sure we're going to talk plenty about that on this call and appreciate you not leading with that. So second part of your question around pricing. Yes, absolutely that's a lever to mitigate sort of incremental costs. And we expect spec depending on the level of incremental costs that may come from tariffs and other factors. We do expect the industry to go up in terms of price. I would say at this point we're being super strategic around that. We have probably initiated a very small number of very targeted price increases to, to really kind of mitigate some selective issues. And we're really in a little bit of a wait and see mode, but doing a substantial amount of preparatory work to understand where and how we should manage price in the future. But I think it's a lever that we expect the industry to use and we will use as well. Anna Andreeva: Thank you so much and good luck navigating the environment. Andrew Rees: Thank you. Operator: And your next question comes from Jonathan Kompf with Baird. Please go ahead. Jonathan Komp: Yes, good morning. I guess I'll combine two questions. First, just obviously a difficult environment to decide what to communicate externally, but any thoughts on not guiding Q2 revenue or just any more specifics on a short term basis or sort of commenting on comfort levels with the prior revenue outlook, assuming a stable environment. Just any more color there on the approach? And then secondly just on the mitigation strategies you mentioned, hoping to maybe clarify, are you thinking of scenarios to offset that full 130 million you outlined, including the higher China rate, or just how you're thinking about the different scenarios and how you're planning your business to offset different potential levels of exposure? Andrew Rees: Thank you. Yes, okay, thanks, John. So with regard to Q2, look, I think we said a couple of times in our prepared remarks, April is behind us now. And like April was strong. We were very satisfied with April. I think, the trajectory was consistent with March. And I would say the U.S. Consumer in particular seems to be holding up well. And then we're seeing sort of continued trajectory in our international business. So the thing that I just think we're super wary and cautious of is, we can't predict what's happening sort of day to day in this sort of global trade environment. And we're really sort of being prudent and protecting ourselves from an unexpected shock that we have no idea that's coming. So I think it's just being prudent and sensible. But as I would reiterate as we sit today, we feel good. From a mitigation perspective, so we try to give you some bookends in terms of what tariffs might mean to us. Right. So that was really kind of the intent. So if you had the 10% across the globe of everything coming in, so just an elevated tariff level in general that was 45 million [ph], the 130 I think is a pretty extreme case. That would assume that two things happened. One is that the 1 45% incremental tariffs on China stayed in place and we continue to import goods from China at the rate, which our current plan suggests, right. So I would say right now with that 145% in place, we are bringing a minimal fractional portion of goods in from China. They're more very selective on the Croc side and it's almost non-existent on the HEYDUDE side. So if that remain in place, we would very unlikely incur that 130 million because we just simply wouldn't bring the goods in. We'd cancel off some orders and I would say we are rapidly shifting sourcing to other countries. I think we've got a very well diversified sourcing base, so it stands us in good stead. I think the thing that the whole industry is worried about, if a reciprocal tariff remains in place relative to Vietnam, that's a huge amount of production for us and everybody else, that would be incredibly hard to mitigate. Jonathan Komp: Yes, that's very helpful. Thanks, Andrew. Operator: And your next question is from Peter McGoldrick with Stifel. Please go ahead. Peter McGoldrick: Thanks for taking our question. I wanted to ask about your level of marketing spend. This is an area you stepped up in previous years to drive significant gross profit growth. How should we think of your approach to spending in marketing in 2025 against the uncertain backdrop? Andrew Rees: Yes. So I think when we, when we finished Q4 in mid-February and announced that those results, or we announced those results in mid-February, obviously finished Q4 in the end of December. We did talk about we were planning a slightly more elevated level of marketing in 2025 to support both Crocs and HEYDUDE. And our intent at this point, net of the $50 million of SG&A reductions that we have already enacted and completed is to maintain that level of marketing. We think it's incredibly important, even in times that can be uncertain, to continue to communicate very proactively, engage and connect with our consumers and give them reasons to buy our brands. As we think about our brands, they are both at approachable price points. And even in more uncertain times when the consumer is constrained, we're still, we still have two brands that I think are very accessible to a very broad range of consumers. So we would maintain that level of investment. And the profile of that investment is pretty consistent with what you've seen in the past. Using key celebrities, using ambassadors, creating engagement around events. We talked about some of the events that we ran in Q1 with HEYDUDE. And we've had a very successful Q1 in China where we've used high profile celebrities and invested heavily in marketing. Peter McGoldrick: Thank you for that. And then diving deeper on the HEYDUDE refresh positioning with expanded product assortment and new marketing initiatives. Can you just discuss the strategy to balance that new direction while maintaining the brand identity and appeal with the core customer group? Andrew Rees: Absolutely. So look, I think, overall we're super happy with the last two quarters for HEYDUDE. The brand has performed ahead of expectations for both of those quarters and so we are very happy with that. And really that is as a result of exactly what you just said. Right. So maintaining a strong commitment to our core consumer with the Wally and the Wendy and updating and introducing new styles for that core consumer. So we talked in prepared remarks around how we have repositioned the Wally, particularly around a Stretch Soxs platform. So it took a myriad of disparate styles with different style names and numbers and colors, etcetera and householded them under a coherent program. So it makes it much easier for the consumer to shop. We have also updated the product with additional details and key features and we also reset the marketplace, pulling back a lot of the old products, resetting our core wholesale partners, so that was a pretty big investment on our partners. I think we and they are really pleased with that so far. At the same time as investing in communication with a younger female consumer, using Sydney Sweeney as our key ambassador there, launching some new product, the Austin Lift on TikTok, TikTok shop. And both of those activities are performing very well. So I think that's really the core explanator for the really pleasing results in Q4 of last year and Q1 of this year and we expect that to continue. Peter McGoldrick: Thank you. Operator: Next question comes from Laura Champine with Loop Capital. Please go ahead. Laura Champine: Thanks for taking my question. This is a quarter where it's tough to know what's best to ask. But let's start with kind of the framework that you've given us for cost impact, for tariff and I get it that the 130 million is not really reasonable is not going to happen. But we also are hearing of significant cost increases coming out of Southeast Asia as those factories get a lot busier. So what is a more reasonable expectation of a cost increase? I'm guessing it's somewhere between the 45 million and the 130, but is there anything you can do to help us kind of frame it up, ballpark it? Andrew Rees: I would say, Laura, if we could, we would. Right. We're not, this is not an effort to be obtuse. It's just simply impossible. So what I would say is in terms of cost of goods increases without tariffs coming out of Southeast Asia, we're not seeing that at all. We have a base of five or six key manufacturing partners, each of which operate multiple large facilities for us in multiple countries and have done so for 20 years. So we are not seeing any cost increases coming out of those partners. In fact, I think in response to an earlier question, we saw some cost decreases from some of those partners going into Q1. So that's not a factor that we're seeing or concerned about. I could imagine that people who have been heavily in China and trying to transfer that, transfer that volume to new manufacturing partners in Southeast Asia are seeing a pretty high price already, pretty high cost. But that doesn't apply to us at this stage. In terms of being able to predict the cost, what you're really talking about is predict the tariff load that we're going to pay on the goods that we bring in from different areas. I have no way of providing you a number there. I would if I could. Laura Champine: Understood just as a follow on kind of what's your latest thinking about elasticity of demand? Like you mentioned price increases. If you could help us ballpark that, it would be great, but what's your latest thinking strategically on elasticity of demand as sort of industry wide price increases go through? Andrew Rees: Yes, this category is not in elastics as a double negative, but so there is elasticity, right. So if prices go up, we would expect volumes to go down and would therefore plan accordingly. What I would say is I would rather increase prices, protect margin and have adequate room in the P&L to invest in marketing and consumer communication to drive consumers to our brand than take margin reductions and have no latitude to communicate effectively with consumers. So I think the -- and so a higher price, higher margin, and maybe a slightly lesser volume is a much stronger place to be. Laura Champine: Understood. Thank you. Andrew Rees: Thank you. Operator: And your next question comes from Aubrey Tianello with BNP Paribas. Please go ahead. Aubrey Tianello: Hey, good morning. Thanks for taking the question and really appreciate the framework and all the help on tariffs. I wanted to go back to the comment on not bringing goods in. If the 145% tariff remained in place that you look to shift production, what would be the timeframe to relocate production out of China and which parts of the business are still sourced from China? Is it kids? Anything specific? Andrew Rees: Yes, it's not anything specific. So I think we gave you the percentage mix in China that is more HEYDUDE than it is Crocs. In fact, a lot more HEYDUDE than it is Crocs. And in terms of shifting the remaining piece of Crocs, I think that could happen quickly. That could happen. If we got an indication that the 145 is going to stay in place for a long time or a large elevated tariff on China is going to stay in place for a long time, we would shift that within six months. There are capabilities that we get in China that we don't get elsewhere, right. And those will take a little bit longer because they've been manufacturing footwear for a lot longer than some of the other places we're talking about. The HEYDUDE piece is also doable within a relatively short time frame. I would say within 12 months we could shift all of that volume. We might be able to do a little bit quicker. I'm being relatively cautious there, but I wouldn't say it's impacting any particular product. I'm aware that a couple of brands have called out that they're heavily in China for kids, which makes sense because it's still a lower cost environment. So your lowest margin product, you put in the cheapest sourcing place. That is not the case for us. We are confident we will have ample kids supply for our consumers. Aubrey Tianello: Great, thank you. Operator: And your next question comes from Rick Patel with Raymond James. Please go ahead. Rick Patel: Thank you. Good morning. Can you double click on the drivers for -- I'm sorry for Crocs international growth, Maybe update us on how big the largest regions are today and what you see as the most compelling growth drivers as we think about organic growth versus new distribution. Andrew Rees: Right. Okay. So I think the macro comment or the macro driver is, is brand penetration. As we look at the Crocs market share in many of our international markets, it is a third of the market share we would see in many of our stronger markets. U.S. U.K. for example, will be two where we have high market share and Australia. So it's really, it's penetrating the market to the degree which we have penetrated the market elsewhere, that's the macro driver. In terms of the, how we're doing that. It's product, it's marketing, it's incremental distribution, it's heavily digitally led, it's leveraging social selling and social commerce. So the playbook that, we've operated elsewhere applies most places. In terms of the larger focus areas. China's really important. We've been talking about that for some time and continue to see real success in China clearly gaining market share in a market, which is relatively difficult and we ascribe that to approachable price point, very strong marketing and digital first activation. We are increasingly focused on India where you have a rapidly growing middle class and a very large population. We saw some constraints in India, which we've talked about historically around their import restrictions that they've applied. We have solved all of those. We now have adequate production for both Crocs and HEYDUDE in India to satisfy all of the demand we have in India. But plus export, it's become a more significant manufacturing hub and export market for us as well and then we're really pleased with the traction that we're seeing in Western Europe. I think we have highlighted historically the U.K. has performed very well, but we're seeing really nice traction in traction in France and Germany. And that's again really about penetrating the market. Those are a little bit more wholesale markets. So that's about penetrating new customers, getting new presentation in front of the consumers, supported by localized marketing. Hopefully, that gives you a good... Rick Patel: Andrew, thank you. And just to follow up on that, like is as we think about the importance of marketing investment and the company's strategy to continue leaning in like how much of that marketing investment is distorted towards white space opportunities for Crocs like in international markets as opposed to trying to turn around. HEYDUDE. Andrew Rees: It's both, I would say. So the overall HEYDUDE marketing budget is a little bit above that of Crocs, but not massively as a percentage of sales I'm talking about. So obviously dollars is a lot less but in terms of percentage of sales. And then I would say for Crocs, we very strategically allocate it to the markets that we where we see the greatest opportunity. So we've had a sustained level of spending in China that's definitely paying off. We are ramping up our spending in India and we have a strong level of activity in Western Europe. Rick Patel: Very helpful. Thanks so much. Operator: And your next question comes from Adrienne Yih with Barclays. Please go ahead. Michael Vu: Good morning. This is Michael Vu on for Adrienne Yee. And thank you for taking our question related to the wholesale versus DTC channels. Can you share any details on the relationship or in better words, how it would work for distribution in the wholesale channel? If you increase prices in DTC, what happens for wholesalers for those who have already placed their orders? And is there any negotiating room with the wholesalers on increasing prices of orders on the ones that they've already placed? Thank you. Andrew Rees: Okay, that's a complicated question. So obviously in DTC we have latitude to change prices whenever we wish. I would say that's not likely unless we're kind of testing price elasticity. We probably want to keep pricing in the market or a given market, whether that be the U.S. or the U.K. or China, pretty consistent across channels. In terms of changing the price of goods that have already been ordered from a wholesale partner. I think that's what you're really getting at with your question. Look, we have done that in the past when it was an emergency situation or it's a situation we thought that was warranted. I don't think in this case we're likely to take that approach. I think we have a little time here to see how things settle out. So I think that's extremely like it's doable. But it's very unlikely we would do that. And so we would be looking for a more coordinated change in pricing across multiple channels at a designated point in time in the future. Michael Vu: Sounds great. Thank you very much. Operator: And your next question comes from Ashley Owens with KeyBanc Capital Markets. Please go ahead. Ashley Owens: Great. Good morning. So maybe just a follow up on the wholesale channel in general. We're hearing from others that some of the suppliers are planning the balance of the year more prudently than initial expectations have suggested. Is this something you're currently seeing with the order books or any color you could provide on how that's shaking out or shifting in real time would be helpful. Thank you. Andrew Rees: Yes. I'm probably going to really reiterate what you -- so what I would say is major retailers, our wholesale partners, particularly here in the U.S. are planning their futures conservatively. Right. And I think they probably say the same thing that we're saying is, April looks pretty good, but I don't know what's going to happen in the future. And if you're a major retailer, the most important thing for you to manage and control is your inventory levels. So they are planning future inventory levels conservatively. And we are seeing that, we expected to see that and are seeing that and frankly support that. Generally the worst thing for a brand is to force a whole bunch of inventory into the channel that's not going to sell. And then as the consumer rebounds at some point in the future, the channel is less selling aged and out of date inventory, so we're totally in sync with that and would rather have that dynamic than a different dynamic. Ashley Owens: Okay, great. Thank you. Operator: And your next question comes from Tom Nikic with Needham. Please go ahead. Tom Nikic: Hey everyone, thanks for taking my question. My question is about capital allocation. This may be maybe a Susan question, but it sounds like the current environment wouldn't change your plans for investment in the business. But does it change the way you think about capital allocation? Would you stockpile more cash? Would you prioritize debt pay down versus buyback or vice versa? Just curious if your thought process has changed at all there. Susan Healy: Yes, great question, Tom. When we look at our cash flow for the year, first of all, we do model various different scenarios. And as we've evaluated a range of potential scenarios, one thing stands true. We would continue to generate a significant amount of free cash flow. And so given that we're still committed to our one to one and a half times leverage range, but within that, we have the opportunity to do both. So both opportunistic share repurchases like we did in Q1, as well as paying down debt. Tom Nikic: All right, thanks very much and best of luck the rest of the year. Susan Healy: Thank you. Andrew Rees: Thanks, Tom. Operator: And your next question comes from Sam Poser with Williams Trading. Please go ahead. Sam Poser: Thank you very much for taking my questions. I've got one that I'll break into three parts or three. Could you break out with HEYDUDE, in your direct business, like sort of the idea of how much comes from stores versus your own dot com versus social. Can you give us some idea of that, of that breakout? Andrew Rees: Yes we're not providing that breakout, Sam. So but just to give you some qualitative comments if that's helpful. And I'll start with the last piece, the social. Right. So look, social selling is something, which we have embraced, right. So we've been doing it for several years in China and it's been incredibly successful. TikTok Shop launched their. Well, TikTok launched their shop in the fall of last year. We put both of our brands on that shop relatively quickly and we're seeing tremendous success. We are seeing success both in terms of the amount of selling that we do, but we are also seeing a very clear halo from that selling on those styles both to our other digital channels and also into store. So we think it's a combination of selling and marketing, if you like, a sort of perfect storm. In terms of the other components for HEYDUDE so that's our direct digital business. So that's heydude.com and also Amazon where we are a 3P partner with Amazon for HEYDUDE. So we have complete control over both of those channels, we feel good about the performance of those channels. We feel good about our ability to showcase our brand and also introduce new products and storyteller on that product. Well, and then the last piece is the retail business, which is our outlet stores that we opened last year. Those are performing well. It gives us multiple vehicles, as you well understand from an outlet business, we can showcase the breadth of our product. We can also have a vehicle to clean up excess inventory and importantly, in some of the markets where the brand is less well known, it's an introduction for the consumer to the brand. So all qualitative, but I hope that helps you understand how we think about those components of our DTC business. Sam Poser: Yes. So thank you. Then secondly, you talked about April maintaining the momentum in April, maintained with, as some retailers call it, Marple [ph], March and April together because of the shift of Easter. How can you. Can you give us a little more color on that trend line between March and April in the big picture? And then I'll just ask the other one. Now, it sounds to me like you are planning the pairs, like you're being more conservative with the pairs you're going to put in the marketplace towards the back half of the year and willing still plan to gain share, but willing to give up some unit sales in place of brand. Is that a given, given the uncertainty of the marketplace? Andrew Rees: Yes, that's a fair question. That's a fair summary, Sam. Right. Yes, we would prefer to. So, for example, right. If 145% tariff remains in place in China, we will cancel off goods that we were planning to bring in from China for HEYDUDE Versus bring them in at essentially zero profit, which will take payers down in the marketplace. In addition, if a given retail partner wants to manage down their order book, collectively or specifically, we are working with them to do that versus trying to force them to take orders which they don't need. And so what was the March and April piece? Susan Healy: Andrew Rees: Trend line? YeS. I mean, I think we have said a few times that, the trend is good. Right. We feel good about March and April, but we, like anybody else, don't really have a crystal ball as to how long that continues. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Chief Executive Officer Andrew Reese for any closing remarks. Andrew Rees: So just to close out, appreciate everybody's interest in our company and we look forward to speaking to you again at the end of the next quarter. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good morning, and welcome to the Crocs Fourth Quarter 2024 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Senior Vice President of Investor Relations and Corporate Strategy. Please go ahead. Erinn Murphy: Good morning, and thank you for joining us to discuss Crocs, Inc. fourth quarter and full year results. With me today are Andrew Rees, Chief Executive Officer; and Susan Healy, Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask that you limit to one per caller. Before we begin, I would like to remind you that some of the information provided on this call is forward-looking, and accordingly, is subject to the safe harbor provisions of the federal securities laws. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially. Please refer to our annual report on Form 10-K and other reports filed with the SEC for more information on these risks and uncertainties. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I'll turn the call over to Andrew Rees, Crocs, Inc.'s Chief Executive Officer. Andrew Rees: Thank you, Erinn, and good morning, everyone. Thank you for joining us today. 2024 was another record year for our company fueled by our employees, our brand strategies and our deepening connections with our consumers. For the full year of 2024, we delivered revenue growth of 4% to prior year, achieving $4.1 billion in total revenues. This performance was supported by adjusted gross margins of 58.8%, a 230 basis point gain over the prior year. With our adjusted operating margins of 25.6% and strong deployment of our free cash flow, we delivered adjusted diluted EPS of $13.17, 9% above the prior year. By brand, Crocs Brand revenues of $3.3 billion grew 10%, with international up 19% and North America up 3%. 2024 marked the seventh consecutive year of Crocs Brand revenue growth in North America. HEYDUDE revenues of $824 million with direct-to-consumer channel inflecting back to growth for the fourth quarter. Our strong cash flow generation of $923 million allowed us to pay down $323 million in debt and buyback approximately 4.3 million shares for $551 million. Susan will provide more detail on our fourth quarter, full year results and guidance for 2025, but first, I would like to walk through our individual brand strategies and notable highlights for 2024. Our Crocs Brand is governed by four strategic pillars: one, drive brand relevance through icon iterations; two, gain market share outside of clogs through new wearing occasions; three, fuel disruptive and authentic social and digital marketing; and four, gain share in markets around the world. First, we are driving relevance globally as the clog authority. In 2024, our Classic Clog was named one of the Greatest Shoes of All Time by Footwear News, a testament to the iconic nature of our hero style. In January, our original Classic Clog went on display at the Museum of Modern Arts in New York City. This is part of a broader exhibit showcasing iconic products that have made an impact on consumer and culture. Overall, for the year, clogs grew 10%, led by the Classic Clog with outsized growth internationally. We continue to deliver icon iterations and introduce new clog franchises. Today, we have six major franchises within clogs. Overall, clogs made up 75% of our sales mix during the year. Our Echo Clog is now a top three franchise and continues to usher in a younger male consumer. During the holiday season, our Classic Clog was a standout with strength in both adults and kids. The Classic Platform clog and other height iterations drove robust results in several of our markets across Asia. We have a strong pipeline planned for 2025. Our InMotion Clog combines two of our most innovative technologies, LiteRide and our Free Feel technology, delivering incredible value and lightweight comfort for just $60. Based on the success of our DTC test last fall, we're scaling the InMotion Clog globally and in select wholesale distribution in North America. Importantly, we partnered with NFL player George Kittle and his wife Claire as spokespersons for this launch as we lean into the pre- and post-sport comfort. In addition, we are further scaling the Echo franchise through a new-to-market mule, the Echo Wave. This is currently selling in our own channels and planned for select athletic specialty retailers this spring. Second, we're continuing to fortify our product pillars outside of the clog through new wearing occasions. During the holiday quarter, the Cozzzy Slipper was a standout performer and we could not keep the product in stock as demand surpassed supply. Sandals remain an important focus for our brand to drive strategic diversification and new wearing occasions. During 2024, our sellouts were up mid-teens to prior year in North America market. This was particularly impressive against the domestic sandal market that we estimate was down. We introduced the Getaway, a brand new multi-silhouette franchise, which exceeded expectations. Our new style sandal franchise, Miami, also performed well. We brought new materialization to our beloved Brooklyn franchise, including the Brooklyn Woven, the Brooklyn Heel, and of course, our personalizable Brooklyn 4U. Overall, sandals grew 3% to prior year and growth was strong in most of our international Tier 1 markets with the exception of India, which continue to face supply challenges. On balance, sandals represents 13% of our sales mix. In 2025, we are leaning into Getaway, Brooklyn and Miami franchises with fresh new colors and styles. The retailers' response has been exceptionally strong, particularly here in North America. Our personalization engine Jibbitz grew 6%, led by our international markets with strong product wins in elevated and licensed product. Our Jibbitz consumer remains one of our most valuable, as we see them continuing to purchase with higher frequency. Our strategic priorities within Jibbitz are centered around driving higher penetration in digital and wholesale channels, enhancing speed to market, and continually introducing fresh new product. In 2025, we're bringing newness across colors and textures to market and innovating within back straps. We recently shipped approximately 600 new Jibbitz fixtures into North American wholesale to bring our personalization value proposition to a broader consumer base. We're committed to remaining a leader in this space. Third, we remain laser-focused on our digitally-led social-first marketing playbook. 2024 included some of our biggest consumer moments on record. We launched the Tmall Global Brand Day, established ourselves as a leading footwear brand on TikTok Shop, along with HEYDUDE, executed the best-ever Croctober and created unique consumer moments during the year through our partnerships. In the fourth quarter, [Louie] (ph) and Mickey & Friends drove particular excitement amongst our youngest fan base. And finally, against our fourth pillar, we're focused on gaining market share around the world. In North America, we grew 3% to prior year, our seventh consecutive year of growth. International grew 19% on top of 23% last year. In China, we grew 64% to prior year with the fourth quarter accelerating from the third quarter. This included the Double 11 Shopping Festival, which bested our expectations. China now represents our second largest market after the US, making up 6% of revenues. Our 2024 growth in China was balanced, reflecting positive comp store sales, digital growth and new store growth. We saw robust growth in Western Europe, led by strong double-digit growth in France and Germany, while solidifying market share gains in South Korea despite a challenging backdrop. We ended the year with approximately 2,200 Crocs mono-brand doors, including approximately 1,800 partner doors and 390 owned and operated stores. In 2025, we plan to continue expanding our footprint internationally and see the greatest new door opportunities across growth markets, including China, India, Southeast Asia and the Middle East. In addition, owned and operated store growth will be focused on premium outlet doors in China, Western Europe, North America and Japan. As we think about our growth opportunities beyond 2025, we believe we can continue to fuel growth in North America through iterating on our icon and expanding wearing occasions. With that said, we see the majority of our dollar growth coming from international, where we're in the earlier phase of establishing clog relevance and see ample opportunity for market share gains. Our average market share in major countries, including China, India, Japan, Germany and France, represents approximately one-quarter of the market share we've achieved in our more established markets, the US, UK, and South Korea. All-in, we have confidence in low double-digit growth of our international business on a constant currency basis over the medium-term. Turning now to the HEYDUDE Brand. We are pleased with the progress we've made in 2024 as we prioritize brand health, elevated pricing as a result of pulling back on discounting and drove better segmentation with our wholesale partners. We ended the year on a high note with the fourth quarter revenue accelerating sequentially from the third quarter and flat to prior year. This was led by strong improvements in our digital trends as new products were supported by fresh and compelling marketing content. Overall, our direct-to-consumer channel was up 7% to prior year, marking the first positive inflection in five quarters. Zooming out, our three strategic pillars for HEYDUDE are focused on: one, creating the HEYDUDE Brand community through connecting with youth female culture, while maintaining a strong connection with the male fan base; two, build the core, our Wendy and Wally, and add more; three, stabilize and accelerate North America while laying the groundwork for future international growth. Starting with building a HEYDUDE community, we are assembling a strong roster of high-profile influencers, including style icon and actress Sydney Sweeney, award-winning music artist Jelly Roll, and our recently announced partnership with Heisman Trophy winner Travis Hunter. In looking at our social channels, we expanded our community, bringing our total following to 2.4 million consumers across leading platforms. During the holiday season, we saw exceptional HEYDUDE Brand engagement on TikTok. In December, the HEYDUDE Brand was ranked the #3 footwear brand across all brands on the TikTok Shop. While it's still early days, our strategy to capitalize on the younger female consumer to unlock broader brand awareness and relevance is starting to build. During the fourth quarter, we saw 160% growth in new customers in the female 18 to 24 year old demographic, fueled in part by the product successes in the Wendy Slipper and the Austin Lift. Turning to our second pillar, build the core and add more, we focus on our core Wendy and Wally assortment on three major platforms: Stretch Sox, Stretch Canvas and Funk Mono. We iterate on these icons through color and materialization and partnerships. One example was the launch of our Wendy and Wally Slipper during the holiday season. We introduced it as a DTC exclusive, bolstered by a strong social and digital marketing campaign featuring Sydney Sweeney. Within two days, we sold out completely. The slipper outperformance was noticed by our wholesale partners and we launched in select accounts. As we mentioned on our Q3 call, we're investing behind the Austin Lift and the Paul franchises based on the success we saw in 2024. In the fourth quarter, Austin Lift and Paul emerged as top franchises online. In the next few weeks, you will see exciting new marketing around the Austin Lift as we build upon of our early success on this franchise. Finally, we're continuing to prioritize brand health as we stabilize the North American market, while laying the groundwork for future international growth. In the fourth quarter, we saw improved full price selling with ASP growth of 7%, marking the sixth consecutive quarter of ASP growth. During 2024, we opened 38 premium outlet stores, which is helping to drive brand awareness and connect consumers with the full expression of our brand. Based on the performance of these stores, we're planning to open an additional 10 stores in 2025. We have confidence in the long-term potential of HEYDUDE. The continued green shoots we're seeing give us positive reinforcement of the opportunities for durable future growth. I will now turn the call over to Susan to provide more details around our financial performance and our outlook. Susan Healy: Thank you, Andrew, and good morning, everyone. We delivered strong 2024 results, capped off by a better-than-expected fourth quarter, which saw an acceleration in revenue growth from the third quarter despite an incremental $11 million currency headwind versus our plan. Starting with the fourth quarter, enterprise revenues of $990 million were up 4% to prior year. Crocs Brand revenues of $762 million were up 5% to prior year. Growth was led by DTC, which was up 6%, while wholesale was up 4%. North America was flat to last year, slightly ahead of our expectations, supported by 2% growth in our direct-to-consumer channel, offset by wholesale declines. During the holiday season, we saw strength during Black Friday, particularly on digital, as well as in the week leading up to Christmas as the consumer reverted to more normal holiday shopping patterns. International revenue was up 14%. China led the growth with revenue up 25% in the quarter, accelerating from the prior quarter. HEYDUDE Brand revenues of $228 million were flat to prior year, led by DTC, up 7%. Upside to our guidance was driven by improved digital trends. Wholesale was down 8% in the quarter and also better than our plan. Enterprise adjusted gross margins of 57.9% were up 220 basis points to prior year. Crocs Brand adjusted gross margin of 60.9% was up 140 basis points to prior year, tied to product mix and lower fulfillment costs. HEYDUDE Brand adjusted gross margin of 47.7% was up 220 basis points to prior year, driven by fulfillment efficiencies and higher ASPs, partially offset by product costs. This performance was significantly better than our expectations. Adjusted SG&A dollars for the quarter increased 23% versus prior year. Adjusted SG&A rate was 37.7%, up 610 basis points compared to prior year, driven by continued investment in DTC, talent and marketing to support long-term market share gains. Adjusted operating margin of 20.2% was down 390 basis points compared to prior year and above our expectations. Adjusted diluted earnings per share decreased 2% to $2.52 and our non-GAAP effective tax rate was 16.1%, which excludes the current period tax impact of intra-entity transactions. During the quarter, we repurchased approximately 2 million shares for a total of $225 million and also repaid $75 million of debt. Now, turning to the full year. We delivered enterprise revenue growth of 4% to prior year, achieving $4.1 billion in total revenues. Crocs Brand revenues were $3.3 billion, growing 10% to prior year, with DTC growing 11% and wholesale growing 9%. The growth was volume-driven, with units increasing 6% versus last year to a total of 127 million pairs of shoes sold, while brand ASPs increased 2% to $25.52. ASPs were driven by favorable pricing, channel mix and product mix. North America revenues grew 3% versus the prior year to $1.8 billion. Growth was led by DTC, up 6%, while wholesale was down 1%. Underlying North American brick-and-mortar growth was up high-single-digits. International revenues grew 19% versus prior year to $1.4 billion, led by 25% DTC growth and 17% wholesale growth. China grew 64% on top of last year's triple-digit growth rate, while Western Europe grew 18%, led by France and Germany. In aggregate, our international Tier 1 markets grew 20% during 2024. Turning to HEYDUDE, revenues were $824 million, down 13% from prior year. Wholesale revenues were down 20% and DTC revenues were down 4%. For the year, ASPs were up 6% to $30.54, while unit volume was 27 million or down 18% to prior year. Enterprise adjusted gross margin for the year was 58.8%, up 230 basis points from last year. Crocs Brand adjusted gross margin was 61.6% or 140 basis points higher than prior year. The primary drivers of margin expansion were lower freight and fulfillment costs and favorable product mix. HEYDUDE Brand adjusted gross margin was 48.1% or 190 basis points higher than prior year. The primary drivers of margin expansion were higher ASP, favorable channel mix and lower freight costs. Adjusted SG&A dollars for the year increased 20% versus prior year. Adjusted SG&A rate was 33.2%, up 450 basis points compared to prior year. Adjusted operating margin of 25.6% was down 210 basis points from 27.7% in the prior year, driven by planned investments in SG&A. Adjusted diluted earnings per share increased 9% to $13.17. Our non-GAAP effective tax rate was 16%. Our inventory balance as of December 31st was $356 million, a decline of 7% versus prior year. Enterprise inventory turns were above our goal of 4 times on an annualized basis. Our liquidity position remains strong, comprised of $180 million of cash and cash equivalents and $809 million of borrowing capacity on our recently upsized $1 billion revolver. We generated $923 million of free cash flow in 2024, enabling us to repurchase stock and pay down debt. During the year, we repurchased approximately 4.3 million shares for a total of $551 million. Earlier this month, the Board of Directors approved an upsized share repurchase authorization of an additional $1 billion, bringing our current authorization to approximately $1.3 billion. We also repaid $323 million of debt during the year, reducing borrowings to approximately $1.3 billion. We ended the year at the low end of our net leverage target range of 1 time to 1.5 times. Before turning to guidance, I would like to address the topic of tariffs. Our guidance embeds an additional 10% tariff on goods imported from China into the US beginning February 4, as well as the anticipated additional 25% tariff on goods importing from Mexico beginning in March, and assumes these will stay in place for the remainder of the year. We do not have any production in Canada. In 2025, we expect the share of enterprise imports into the US from China to be approximately 15%, with Crocs at 10% and HEYDUDE at 27%. Our exposure to Mexico is expected to be under 4% and for the Crocs Brand only. For the enterprise, we estimate an approximate $11 million headwind to gross profit from these additional tariffs or roughly 25 basis points to our margin rate. For the full year 2025, we expect enterprise revenue growth to be up approximately 2% to 2.5% on a reported basis, assuming currency rates as of February 10. This includes an anticipated $60 million currency headwind to the prior year. On a constant currency basis, we expect enterprise revenue growth to be up approximately 3.5% to 4%. For the Crocs Brand, we expect revenue growth of approximately 4.5%, led by international growth. In North America, we expect growth for the full year to be slightly up, and for International, we expect growth to be up approximately 10%. For HEYDUDE, we expect revenue to be down approximately 7% to 9% for the year. We expect direct-to-consumer growth in 2025 to come from improving digital trends and our new retail store contribution. Our outlook does not contemplate wholesale growth, as we expect the wholesale channel to take longer to turn than our direct-to-consumer channel. We expect enterprise adjusted gross margin for the year to be down slightly, impacted in part by foreign currency and tariffs. We expect mid-teens adjusted SG&A growth in the first half of the year versus prior year and low-single-digit adjusted SG&A growth in the back half. Included in this is an uptick in our enterprise marketing spend from 9% to 10% as a percent of revenue. Taken together, we expect our adjusted operating margin to be approximately 24% for the full year. This includes an anticipated negative impact from both foreign currency and tariffs of approximately 60 basis points. Beyond 2025, we are committed to maintaining an adjusted operating margin at or above 24%, assuming a normalized currency and tariff environment. We expect adjusted diluted earnings per share in the range of $12.70 to $13.15. Consistent with our previous guidance policy, this range reflects future debt repayment, but does not assume any impact from future share repurchases. We are committed to our 1 time to 1.5 times net leverage range while redeploying excess cash flow towards share buybacks opportunistically. We expect our underlying non-GAAP effective tax rate, which approximates cash taxes paid, to be 18%, and the GAAP effective tax rate to be approximately 21.5%. Our 2025 anticipated tax rate is lower than our previously communicated 20% long-term tax rate due to forecasted business mix for the year. We expect 2025 capital expenditures to be in the range of $80 million to $100 million. Turning to guidance for the first quarter. We expect enterprise revenues to be down approximately 3.5% at currency rates as of February 10. This includes an anticipated $19 million currency headwind. On a constant currency basis, we expect enterprise revenue growth to be down approximately 1.5%. We expect the Crocs Brand to be flat to down approximately 1%, led by mid-single-digit international growth. We expect North America to be down mid-single-digits, including the negative impact of the Easter shift. We expect HEYDUDE revenue to be down approximately 14% to 16%, tied to wholesale declines, offset in part by growth in DTC. Adjusted gross margins are expected to be up slightly for the enterprise. Adjusted operating margin is expected to be approximately 21.5%. This includes an anticipated negative impact from foreign currency and tariffs of 80 basis points. Adjusted diluted earnings per share is expected to be in the range of $2.38 to $2.52. In closing, we are making near-term decisions that we believe are in the best long-term interest of the company and our shareholders, and we will continue to focus on what the company does best: delivering growth with industry-leading margins that generate significant cash flow. I will now turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Susan. Our company initiatives remain consistent, and we're focused on three primary levers to fuel durable long-term growth: ignite our icons across both brands to drive awareness and global relevance for new and existing consumers; two, drive market share gains across our Tier 1 markets through strategic investment behind DTC, talent and marketing; and three, attract new consumers to our brand through methodically diversifying our product range and usage occasions. While the geopolitical climate has become more volatile since the onset of the year, we continue to execute our brand strategies, invest in our people, and maintain a nimble mindset. At this time, we'll open the call for questions. Operator: We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Jonathan Komp from Baird. Please go ahead. Jonathan Komp: Hi, good morning. If I could ask about the Crocs Brand in North America, I know you mentioned down mid-single-digits in the first quarter and up slightly for the year. Could you just talk a little bit more about what you're seeing, maybe the health of the brand and the drivers of that inflection after the first quarter? And then, just one follow-up, Susan, on the SG&A outlook. I know you mentioned second half growth, I think you said low-single-digits. Could you just talk about the step-down in the growth rate of the G&A spend and how we should think about that going forward? Thank you. Andrew Rees: Great. Thanks, Jon. So, let me take the Crocs Brand. Susan can give you some incremental insight into the SG&A growth. So, as we think about the Crocs Brand in North America, I think it's also important to kind of step back. Crocs Brand has grown for seven consecutive years in North America and the business is triple what it used to be prior to that timeframe. I would say we're pretty -- we're very confident in the products that we have coming to market in North America, as we look at both our clog innovation, as we look both at our sandals. We had a nice sandal year last year in North America with strong sellouts, and we're optimistic based on the feedback that we've gotten from retailers with our product portfolio for 2025. I think it's important also to think about the consumer environment. And when we think about the consumer environment, there's a healthy dose of uncertainty. So, we are taking a prudent approach in terms of how we think about the growth of the brand. And I would say, as we think about the sort of multiyear trajectory, we're very confident in our product pipeline, our marketing engine to continue to drive growth in North America. Susan Healy: And Jonathan, regarding your second question on SG&A, so just as a reminder, our SG&A dollars are going into the key areas that we think will fuel future growth, which are DTC investments, including marketplaces and new retail stores, along with talent and marketing. To your question about the first and second half, as you know, 2024 was an investment year for us and the cadence of those investments more back-half weighted. So, as we begin to lap those second half investments in 2024, that's why we say mid-single -- low-single-digits increase in SG&A for the second half of 2025, as we complete our two-year investment cycle. Andrew Rees: Yeah. Maybe I'll just take this opportunity to sort of talk about kind of the overall arc of SG&A, because I expect there will be a series of questions coming up on this call. I think -- and if you think about the growth in our SG&A and the sort of multi-year trajectory of our business, over the past five years, the Crocs, Inc. company has gone from one brand to two brands, it's gone from $1 billion in revenue to in excess of $4 billion of revenue. And that very rapid growth, particularly in the early part of that five-year period resulted in extraordinary SG&A leverage and very, very high levels of profitability. In the last two years, we've been focused on making key investments in what we believe are critical capabilities, infrastructure talent, and also elevating our marketing investment to drive kind of future sustainable growth. So, this has resulted in SG&A deleverage in '24, further deleverage that we're telling you about in '25, but we're committed to maintaining that 24% operating margin level for the future. And I think if you kind of step back and look at our peers and look at the industry which we compete, 24% operating margin is an extraordinary level of profitability. And I would also say we've been extremely proactive in taking that high level of profitability, resulting in high levels of cash flow and returning that proactively to shareholders. So, hopefully, that kind of gives everybody the context and the perspective that we have on the business and how we think that reward shareholders in the long run. Jonathan Komp: That's really helpful. Thank you. Andrew Rees: Thanks, Jon. Operator: The next question comes from Chris Nardone from Bank of America. Please go ahead. Chris Nardone: Great. Thanks, guys. Good morning. Just a follow-up on Crocs North America. Can you maybe discuss how wholesale sell-through is trending relative to your expectations, and just the confidence you have in your order books for the year, and if there's an improvement in wholesale embedded in your guidance? Thank you. Andrew Rees: Yeah. I mean, I think we -- from a wholesale perspective and North America perspective, I would kind of go back to some of the things that I said to Jon, which was, number one, look, we have, I think, a very strong pipeline of products across three major product categories, both clogs, sandals and Jibbitz. We ended the 2024 year, I think, with a very successful wholesale season. We have clean inventories in the market. We're confident in our marketing engine that will drive continued consumer takeaway from wholesale. I think we're strategically well-positioned with our wholesale customers. We don't really talk about sell-throughs on an in-quarter basis. We never have. As we think about our order books and so our wholesale customers' reaction to the product we're bringing to market into '25, we're very happy with the order books that we see at this stage, which run essentially all the way through to -- into third quarter. Susan Healy: And when you think about the first quarter, it's helpful to be mindful of a couple of factors. So, Q1 is our toughest comparison in North America tied to the timing of wholesale as Easter shifts into the second quarter of this year. This is going to drive Crocs Brand North America sales growth down in Q1 and up in Q2. And then, we also see about a 100-basis-point headwind to DTC growth in Q1 from lapping the leap year. Chris Nardone: Okay. And then just a quick follow-up. You bought back a lot of stock last quarter. Just want to gauge your appetite to continue leaning into share repurchases given where the stock is trading. Are there still more opportunities to pay down debt and potentially move below your current leverage target? Susan Healy: Yeah. So, let me address that then, Chris, is, we plan -- we're committed to our long-term leverage target of 1 time to 1.5 times; that's unchanged. But as you can see in Q4, we plan to do both. We did about 75% share repurchase and 25% debt repay down. And that mix is obviously influenced by the opportunity we see in our stock. And we do have a $1.3 billion repurchase authorization. You can see our Board upsized that by $1 billion earlier this month. So, we are committed to do both. We are committed to that leverage target, but you can look at our Q4 balance and take confidence in how we see great opportunities in our stock as an investment. Chris Nardone: Thank you. Operator: The next question comes from Adrienne Yih from Barclays. Please go ahead. Hi, Adrienne, is your line on mute? Adrienne Yih: Yes, it is. Sorry about that. Gosh, you would think after all these years. I apologize. I was saying, nice to see the progress at the end of the year. Andrew, my question for you on kind of if we look out two to three years, how should we be thinking about the opportunities for Crocs in North America? What drives further growth there? And I know in past calls, we've talked about sort of more of that international growth is going to spur the Crocs Brand. And then, for HEYDUDE, where -- kind of given the success on the DTC in the fourth quarter, but then going back to negative sales growth in the fiscal year, how comfortable are you with the turn and the investments that you are making into that to support the brand growth? Thank you. Andrew Rees: Great. Thank you, Adrienne. So, a lot there. So, let me start with international versus North American growth for the Crocs Brand. So, I think super clear, and it's embedded in your question, that we think the easiest growth for the Crocs Brand is internationally, right? And that is really based on our degree of penetration and market share in some of these major markets. As we look at our international markets, and I think we put a nice page in our latest investor deck, we can see more developed international markets like the UK or South Korea, and also if you compare it to the US compared to less developed international markets, and in the less developed markets like China, France, Japan, even Germany, we have about a-quarter of the market share that we have in the developed markets. That is based on the degree of marketing effort, et cetera, that we put in those markets over time. We've got to make choices over time. And we think that there is a long and relatively straightforward runway in those markets. So, that's where the majority of growth will come in the short-term and the easiest growth, we believe. In North America, we're well-penetrated from a clog perspective. We do have a growing and emerging sandal business, and over time, we do believe we can drive innovation into incremental product categories that will yield growth in North America. But to yield substantive growth in North America, we really have to do penetrate new wearing occasions. And we've got a nice pipeline of innovation there. But as yet, I would say it's not fully proven. So, I think for us to talk about acceleration in North America, we have to prove that first. And I can assure you, we're doing that work, and hopefully, we'll have some great results to showcase in that arena in the coming future. So, hopefully, that kind of gives you the balance of Crocs. But -- and having said that, that's still a very healthy brand that yields a coherent growth and high levels of profitability go forward. From a HEYDUDE perspective, I think you're curious about the future guide and our performance in Q4 relative to Q1 guide, right? Adrienne Yih: Yes. Andrew Rees: So, the piece that I think it would be helpful to, look, we're really pleased with the performance of the brand in Q4. It was led by product, it was led by marketing, and particularly DTC, and our ability to drive consumer takeaway in our DTC channel. That being said, we know we want to provide, I think, really very prudent guidance for this year so that we can perform well against it. So, I think, hopefully, we're doing that. I would say, as we kind of look at the trajectory of the brand, we've done this before at Crocs. We've really turned around that brand, and from a brand that was going nowhere years ago to a brand that's incredibly successful today. We know the playbook. We're seeing a lot of the green shoots, so we're very confident with what we're seeing and where we're going. And I would say, lastly, from a HEYDUDE perspective, look, we think this is a great brand. We think it's well positioned against the consumer. It hasn't met our short-term expectations, but we remain extremely confident in its long-term potential, its ability to further penetrate the US market and leverage internationally. Adrienne Yih: Fantastic color. Thank you very much, and best of luck. Andrew Rees: Thank you. Operator: The next question comes from Jim Duffy from Stifel. Please go ahead. Jim Duffy: Thanks. Good morning. A quick mention of appreciation for the very clear disclosures on tariff assumptions. Thanks for that. Andrew, starting on the HEYDUDE Brand, can you speak to the state of engagement with wholesale partners? Is the distribution footprint now stable? How do you see changes to shelf space? What's the willingness of wholesale partners to engage with new product offerings where you're seeing success in DTC? Thanks. Andrew Rees: Yeah. Great. So, yeah, I would say, we don't anticipate significant changes in our distribution strategy from this point forward. There are incremental customers we'd like to attract. There is shelf space we'd like to increase. But in terms of who we are engaged, I think we're engaged with a lot of the right people and [indiscernible] add to that in the future. In terms of the degree of enthusiasm and conversation and connectivity with some of those key partners, I would say they are very much engaged with HEYDUDE. For some of them, HEYDUDE a top five brand, right? So, it's a brand that they are supportive of, they wish to succeed. But I would also say -- and I would say they are seeing the benefits of the work that we've done associated with product and marketing, particularly some of the ambassadors and celebrities that we're using to draw interest to the brand. They can see the connectivity of the brand with the consumer on TikTok and some of the social sites. But I would also say there is work to be done, and that work is called out in our guidance. We do not see -- contemplated in our guidance today is not wholesale growth in North America. There is still work to be done relative to cleaning up inventories in the channel. In fact, we'll be taking some returns in the first quarter of aged inventory and replacing it with new and current inventory. So that's a proactive step that we're taking that is also embedded in our guidance. So, there's still work to be done. But I would say our partners are shoulder to shoulder doing that work with us. Jim Duffy: Great. Thanks for that. And, Susan, just a quick one on the outlook. Can you comment on working capital considerations in '25? We're very focused on free cash flow. Any reason to think free cash flow couldn't again exceed $800 million? Susan Healy: Yeah. So Jim, we don't -- as you know, we don't specifically guide free cash flow. I mean, we're really pleased with the free cash flow generation ability of both our brands and our ability to convert that into share repurchases and debt paydown for our investors. When it comes to your models, I know -- I think we gave you all the components you need to derive that. So, we get happy to take any questions offline. Jim Duffy: You mentioned the inventory turns kind of exceeded your goal of 4 times in 2025. Do you expect -- or excuse me, '24. Do you expect reinvestment in inventory in '25? Susan Healy: We're really pleased where we ended up on both brands and our strategies will be consistent with the growth we've planned for the brand. As Andrew said, we've got some strategies around HEYDUDE. But overall, we're very pleased with how clean we ended up the quarter in both brands. Jim Duffy: Okay. Thanks. Operator: The next question comes from Bob Drbul from Guggenheim. Please go ahead. Bob Drbul: Hi, excuse me, good morning. Just two questions for me. The first one just on the commitment to 24% operating margins, when you think about sort of the increase in marketing spend and sort of flexibility around the SG&A line or marketing spend within that, can you just talk about how you're approaching it in that 24% commitment? And then, the second question I have is just on HEYDUDE. Will Travis Hunter be wearing those shoes at the draft? Is that part of the deal? Andrew Rees: So, let me do the second piece first. I'm not going to make any predictions about what he's going to be wearing at the draft. You may have noticed he was wearing HEYDUDE at his Heisman Trophy ceremony. And I would say, look, our engagement with Travis Hunter is like our engagement with the other music leaders and actors or actresses that we've engaged with. It's first based on a genuine connection with the brand. He was an individual that loved the brand, wore the brand, and obviously, he's been playing most recently here in Boulder, Colorado. So, we're very familiar with him. So, when we look for celebrities and ambassadors that we're going to engage with, that authenticity is super important, and he absolutely has that. We hope he goes very high in the draft and goes to a large media market because that would be helpful. So, going back to your other question, so 24% commitment, we have lots of flexibility within this business. We have been very proactive in terms of making investments. I know that was not always popular. And just I want to highlight where those investments have gone and how that relates to the future. The first is into DTC, right? So, we've opened more stores. Those stores are extraordinarily profitable, and we will continue to kind of lean into some store openings. Most of the stores we open are premium outlets, which as everybody, I think, understands its extraordinary profitable. We're also shifting our digital business to be marketplace and some of those marketplaces have a higher run rate of SG&A associated with them, but that is where the consumer is going. I think a great example of that is TikTok Shop. We saw great results for both brands on TikTok Shop in the fourth quarter. We think that will be a growing channel for us as -- and it's sort of a parallel to what we see in Asia, and particularly China, where consumer spending is shifting from digital marketplaces to social marketplaces. And that does carry some higher SG&A. So, we've kind of thought that through and projected that forward. We have also increased our marketing spend from what was probably several years ago, you still run about 7%, 7.5% of sales. We're planning it, in 2025, at 10% of sales. So, we've been proactive in terms of both investing at a higher level in HEYDUDE given where the brand is and the future potential we see in that brand, but also investing at a higher level in Crocs because we have more scale Tier 1 markets around the world that require more marketing support, and we think have actually also more opportunities for growth. And then, other aspects of that investment is also talent capabilities, et cetera, and you can imagine what that is across. Now, having said that, some of that is also flexible, right, as we can make different decisions over time based on the opportunities that we see in front of us. So, I think we feel pretty comfortable with the 24% floor at this point. And we just wanted to provide that clarity for you all. Bob Drbul: Thank you. Operator: The next question comes from Anna Andreeva from Piper Sandler. Please go ahead. Anna Andreeva: Great. Thanks so much. Good morning, and congrats on a nice end to the year. We had a question on gross margins. You mentioned up slightly in the first quarter, then down slightly for the year, which makes sense just given the tariffs and the FX, but you saw some positives with product costing and also other efficiencies. So, can you talk about sustainability of those? And what did you see in terms of promotional [counter] (ph) at both brands during the fourth quarter? And what are you expecting with promo activities as the year unfolds? And then, we had a quick follow-up as well. Susan Healy: Right. So, when we talk about gross margin, in particular, and I think you asked about the shaping across the year, from an enterprise basis, just at a high level, we're expecting gross margins to be down slightly for the year, but that embeds 60 basis points impact of foreign exchange and tariffs. So, therefore, gross margin would actually be up slightly without that impact. And as we're thinking about the full year, Q1 would be up, and we expect Q2 to be down the most on a year-on-year basis, in part based on the heavier impact of FX and tariffs. Andrew Rees: Yeah. From a promo perspective -- sorry, you want to follow-up on that, and then I'll pick up the promos for you. Anna Andreeva: No. Please go ahead. Thank you. Andrew Rees: Okay. So, from a promo perspective, I think there's probably a couple of big things going on here. Number one is, we believe the consumers kind of, and as Susan referenced in her prepared remarks, returning to kind of more normalized shopping patterns. And by that, we mean shopping patterns relative to sort of pre-pandemic. And in terms of the promo environment in Q4, look, we had great gross margin and gross margin improvement in Q4. So that was very encouraging. I would say the promo environment was dynamic as we think about it around the world. It was a little bit greater in some places and a little bit less in other places. So, pretty dynamic. It generally came out where we expected. I think the one thing we did see is we did see the consumer migrating incrementally to lower price and more promo products. So, they definitely were feeling a little pressure. And as we kind of think about 2025, we think we're -- we planned it prudently relative to we think -- what we think the arc of the consumer is. Anna Andreeva: Okay. That's super helpful. I appreciate it. And just as a follow-up, can you guys provide a little bit more color on what's the expectation for the HEYDUDE recovery in the back half, just given the sharp decline expected for the first quarter? You mentioned the new stores are highly profitable, and you're getting a new consumer through that. But anything else you can share on the performance of the new stores? And are you planning to open any additional doors in '25? And thanks again. Andrew Rees: Okay. Thank you, Anna. So, I don't think there's a lot more that we're going to say around the pace of recovery, the timing of recovery. I would think what we'd say is, we're on track with where we believe we would be at this time, right? And the ways we can monitor that and see that is growing HEYDUDE community, strong engagement with the core customer, incrementally attracting our, I would say, new customers, specifically in the sort of younger female arena from a demographic perspective. We see traction on DTC. We plan a positive -- we have embedded in our guidance is positive DTC growth in 2025 based on digital growth, but also based on those stores. We do plan on opening about 10 more new premium outlet stores in 2025 to add to the 38 that we opened in '24. We are not embedding wholesale growth, as we said, within that trajectory. And I think we've also -- I would highlight, I think we've guided really prudently, which I think you probably would expect us to do. And we're confident in our trajectory today, and we're super confident in the long-term trajectory. Anna Andreeva: All right. That's super helpful. Thank you so much, guys. Andrew Rees: Thank you. Operator: The next question comes from Laura Champine from Loop Capital. Please go ahead. Laura Champine: Thanks for taking my question. When I think about the 24% long-term operating income guide, what's your pricing philosophy there? And how much would you use pricing to offset cost increases? Andrew Rees: Yeah. That's a really great question, actually, Laura. So, as we think about -- how we think about pricing for both of our brands from a philosophical perspective is we want to price to the market and a market is a country, right? So, we have to think very long and hard about how each individual item is priced in each bucket. And that is dictated by comparative prices, so competition, what other people will think it's -- charging for a product that would be competing for the wearing occasion we're competing for, but also the strength and the trajectory of our brand, right? So, pricing has driven some really nice -- I would say, actually incredible gross margin improvement on Crocs over the last several years. And -- but at this point, we don't -- we're not planning significant price increases in the short term, but we don't necessarily know what's going to happen in the longer term. So, we do look at pricing very closely. We think it's a very, very important lever, and we think we're well priced today. So, we're not planning a lot of price growth in the short-term, but we continue to remain, I would say, very nimble relative to what that might entail. Laura Champine: Got it. And then, looking at HEYDUDE's ASP, up 7%, I think, in the quarter, what is that on top of year-on-year? Andrew Rees: I don't have that number to hand. But what I can say is the drivers of the ASP increase has principally been reduction in discounting. So, as we look at, particularly our DTC channels, I think we've had six quarters now of sustained ASP increases. And the driver of that has principally been reducing discounting versus absolute price increases. Laura Champine: Got it. Thank you. Operator: The next question comes from Tom Nikic from Needham. Please go ahead. Tom Nikic: Hey, good morning, everyone. Thanks for taking my question. I wanted to follow up on HEYDUDE, specifically on the product development side... Andrew Rees: Hey, Tom, we're having a real hard time hearing you. Can you get closer to the mic? Tom Nikic: Hey, sorry about that. I want to follow up on HEYDUDE and specifically on the product development side. I know that there's a big opportunity to sort of diversify the brand and extend beyond the core Wally and Wendy, like how far along do you feel like you are in that process? I don't know if you want to use the innings metaphor or whatever, but just -- if you give us thoughts on the product development and product expansion journey that you're on, that would be great. Thanks. Andrew Rees: Yes. So, I think what I'd say to start with is, look, the most important element of the product strategy for HEYDUDE is the core at this point, right? The Wally and the Wendy is a very large part of the business. We also think it's the future -- the short-term future driver of growth. And we drive growth off the Wally and Wendy. We've re-platformed the Wally and the Wendy on to kind of three major platforms, Stretch Sox, Stretch Canvas and Funk Mono, which I think gives the consumer a lot more understanding of where the products that they love are and what other versions are available, so it's much easier to navigate the product architecture. That is kind of -- that transition is in place kind of as we speak. We add opportunities -- future opportunities for the consumer to engage in those platforms through color, through materialization and through collaborations, and also unique and limited supply product. In terms of extending beyond that, we are in the very early innings. We do have some great examples. If you look at the Austin Lift, which is a shoe that we will lean into here in the first quarter. It performed extremely well in the -- through '24 and particularly in the fourth quarter. We're leaning into it more in the first quarter with a really exciting program coming out featuring Sydney Sweeney. So, we're excited about that. So, that is a part of the more. We have a boot business on the Bradley, which actually performed extremely well in the fourth quarter, too. The Paul is a dress shoe for men. It's really a derivative of the Wally, but it has some slightly different comfort characteristics and some elevated materials in the upper, that's also performing well. So, I think those are all kind of good examples of extending the Wally and Wendy, but back to your kind of core question, we're in the very early innings, probably the first innings, but the strength of those extensions will be based on the strength of the core. So, that's where we're focused today. Tom Nikic: Understood. Thanks very much, and best of luck this year. Operator: This concludes our question... Andrew Rees: Okay. I think we're out of time at this point. So, I just wanted to -- I know we didn't get to a few people that we haven't gotten to that question, we apologize for that, and we'll pick them up in after calls. But I did want to thank everybody for their attention and their support of our brands and our company. So, we appreciate it. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good day and welcome to the Crocs Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Senior Vice President of Investor Relations and Corporate Strategy. Please go ahead. Erinn Murphy: Good morning and thank you for joining us to discuss Crocs, Inc.’s third quarter results. With me today are Andrew Rees, Chief Executive Officer; and Susan Healy, Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask that you limit to one per caller. Before I begin, I would like to remind you that some of the information provided on this call is forward-looking and accordingly, is subject to the safe harbor provisions of the federal securities laws. These statements include, but are not limited to, statements regarding our strategy, plans, objectives, expectations and intentions, including our financial outlook. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially. Please refer to our quarterly reports on Form 10-Q and other reports filed with the SEC for more information on these risks and uncertainties. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I’ll turn the call over to Andrew Rees, Crocs, Inc.’s Chief Executive Officer. Andrew Rees: Thank you, Erinn and good morning everyone. Thank you for joining us today. We reported third quarter results that exceeded our guidance in terms of sales and profitability on an enterprise basis. Consolidated enterprise revenues of $1.1 billion grew 2% to prior year, led by 5% growth in DTC. By brand, Crocs brand grew 8%, with international up 17% and North America up 2%. HEYDUDE revenues contracted 17%, slightly below our expectations. Adjusted diluted EPS of $3.60 a share increased 11%. Today, I will be covering the following topics. I will first share deeper insights into our third quarter results, along with what we are seeing from a broader consumer perspective. I will then elaborate on HEYDUDE’s strategic priorities and what gives me confidence around the brand’s longer term growth prospects, touching on some of the early wins we are seeing in the business today. Finally, Susan will review our financial performance, our updated 2024 outlook and our preliminary thoughts on 2025. Now, turning to third quarter insights, starting with the Crocs brand. The investments we are making in product and marketing enable us to win with consumers around the world. All three of our product pillars, clogs, sandals and personalization, grew during the third quarter, led by our icon, the Classic Clog. In August, Footwear News named our Classic Clog, one of the greatest shoes of all time. Embracing the personalization platform that our clog provides, we launched our Live Life Fully Loaded campaign during the back-to-school season. This campaign created high consumer engagement in our stores and online, both for our Classic Clog as well as our Jibbitz business, as consumers were able to fuel their love for self expression. We are continuing to drive on our clog by introducing new silhouettes and building durable franchises. The Echo franchise, which has developed a breadth of products across clogs, sandals, boots and sneakers, continues to bring in new, largely male explorer consumer to our brand. As we look into spring, we are excited to bring the Echo Wave, Molded Mule and the Echo Search to market. Both new innovations are priced under $100. Another example of how we have iterated on the clog is our in-motion franchise. We have seen successful results in our test of this franchise on our DTC channels, ahead of a scaled rollout in 2025. This new innovation features our proprietary light ride foam footbed, along with our Free Feel technology. By applying the learnings from a quick-to-market DTC cosy slipper launch last year, we are able to scale the offering this fall across expanded colorways and with our wholesale partners at an incredible value of $49.99. Sell-out has been strong out of the gates and we are chasing replenishment. In addition to our mainline product, we bought many exciting partnerships to life during the quarter. These included a Bath & Body Works collection, featuring our Classic Clog and a cosy sandal prehibited, with 4 mystery scent Jibbitz charms. We also introduced Batman and Squishmallow, and of course, our Crocs Times McDonald’s Happy Meal. As a natural extension of our first collaboration with McDonald’s, we designed and introduced the McDonald’s Times Crocs Happy Meal, with a curated assortment of 17 limited-edition Classic Clog key chains and a sticker pack for personalization. We launched the Happy Meals first in China and saw fantastic results. Within the first 48 hours, over 400,000 Crocs Happy Meals were sold, generating over 10 billion brand impressions. Since then, we have launched our Happy Meal in over 40 countries, driving significant brand momentum and heat. Last week, we celebrated the 7th Annual Crocs Day on October 23, our very owned fan-inspired holiday within the month of Croctober. With a much-awaited debut, we celebrated the release of Pet Crocs, available alongside matching classic line clogs, allowing dogs and dog parents to coordinate their looks in lockstep. Our Pet Crocs, designed in partnership with BARK, were available globally on our own dot-com and in select retail stores. The release was a huge success. Fan-inspired festivities did not stop there. This year, we released a Crocs costume, which is in the form of a life-sized iconic Classic Clog fully loaded with Jibbitz charms. And just like your favorite pair of Crocs clogs, this costume is available in both left and right versions, making it a perfect pairing opportunity with friends. In September, we achieved another step forward towards our circularity goals, with the launch of a limited edition Keep It Going Classic Clog. The new clogs featured 25% post-consumer recycled content from the shoes collected through our all Crocs new live consumer take-back program, with the remaining construction of the shoe containing up to 25% bio-based Croslite material. Now for a review of the Crocs brand business by geography. The North American market performed well with revenue growth of 2% versus prior year, led by DTC. In North America, the consumer has reverted to pre-pandemic shopping patterns dropping closer to need and concentrating spend around key shopping events and holidays. We saw a solid back-to-school season, but since Labor Day, we have seen the consumer pull back. We anticipate the consumer environment being relatively muted in the U.S. until Black Friday/Cyber Monday holiday period. Our overall international revenues grew 17% versus prior year, supported by notable growth in Australia, China, France and Germany. Our China business grew over 20%, on top of more than 90% growth last year in the third quarter, with approximately two-thirds of the growth driven by mono-brand partner stores. As we shared during our second quarter call, the industry was more promotional during the mid-season festival. It is clear that the Chinese consumer is being far more conservative in their purchase behavior, and we have seen an even more pronounced pullback within key Tier 1 cities like Shanghai and Beijing. In light of the broader macro environment in China, we are taking a more cautious view for the rest of the year. Despite this backdrop, our brand continues to gain share in China, which we believe is a direct result of our accessible, authentic and personalizable brand positioning, serving as a meaningful competitive advantage. Turning to HEYDUDE, our third quarter results came in slightly below our guidance, with revenues declining 17%. Before I provide further detail on the quarter, I want to start by sharing the progress we have made towards building HEYDUDE into a consistent and profitable growth brand. In September of last year, we made a pivot to prioritize brand health, clean up channel inventory, while right-sizing our account base and began building a fleet of premium outlet stores to showcase the best expression of our brand. Since then, we have elevated ASPs, shutted more than 50% of our accounts improved inventory turns to 4x a year and opened 29 premium outlet stores. In addition, we invested in talent across the brand, while accelerating our market investment as we work towards driving higher awareness and relevance to generate brand heat. We strongly believe these are the right decisions to build a solid foundation for profitable growth at HEYDUDE. While we recognize HEYDUDE’s performance this year has not yet reflected these investments and actions, let me share a little bit more about what has given me confidence. As we spoke about last quarter, we sharpened our strategy to focus on three strategic imperatives: driving used female culture and creating a HEYDUDE brand community, building the core of Wally and Wendy and adding more, then stabilize and accelerate North America. Against these imperatives, we have seen the following green shoots. First, we believe the female youth culture is a key driver of influence, brand connectivity and a catalyst to build community. In August, we were thrilled to announce Sydney Sweeney as our global brand ambassador and our Director of Dudes. This partnership has generated the best performing content HEYDUDE had seen to-date and we have plans to ignite further content with Sydney Sweeney. During the quarter, we launched TikTok Shop and we have an excellent response, bringing a new, younger consumer. In fact, on select launch days, our brand emerged as the number one global key account on TikTok Shop. Baidu’s number of TikTok followers surpassed Instagram in the quarter, further underscoring our opportunity to reach the younger audience. We were also named the official comfort shoe of Barstool Sports in time for our refreshed collegiate collection. Second, we are focused on our icons, the Wendy and Wally. Our three core offerings include stretched stocks, stretched canvas, funk mama. During the quarter, we iterated on these core offerings through our collaboration engine, successfully introducing Beetlejuice and SpongeBob to name a few. In October, we announced a long-term partnership with Country Music singer, Jelly Roll. Our initial collab with this famed artist featured our Wally was sold out in minutes. Since the launch, we’ve seen the product show up in the secondary platforms for up to $6,000. As we discussed on our Q2 call, the company [ph] has the new product innovation that is an extension of our Wendy and Wally DNA with added cushioning and height. In the third quarter, we began scaling this across select global accounts. As we look beyond our core, we are seeing very healthy demand signs in our women’s Austin Lift and our men’s pole silhouette, with plans to scale them in 2025. Third, we are hyper-focused on stabilizing the North American market to drive a sustainable foundation from which to grow. We’ve streamlined our account base and are focused on building relationships across our strategic retailers, similar to that of Crocs. We have worked to improve our inventory position in channel and improve ASPs across the build. In the third quarter, our digital ASPs were up 10% to last year and we saw improving weeks of supply across our key strategic accounts. Our premium outlet stores are performing in line with our expectations. While we are encouraged by these early positive indicators, HEYDUDE’s recent performance and the current operating environment are signaling it will take longer than we had initially planned for the business to turn the corner. We continue to have confidence about the long-term potential of the brand and the green shoots we are seeing give us positive reinforcement around our opportunity. I am incredibly proud of the HEYDUDE team and the urgency with which they have executed against our sharpened strategy. I will now turn the call over to Susan to walk through our financials for the quarter. Susan Healy: Thank you, Andrew and good morning everyone. Our third quarter results exceeded the high end of our enterprise guidance on the top and bottom line, supported by a combination of better underlying operating performance, a lower than expected tax rate and lower share count. For the Crocs Brand, revenues were $858 million, growing 8% to prior year and channel growth was balanced, with DTC and wholesale, each growing 8%. The growth was volume-driven, with units increasing 11% versus last year to a total of 32.1 million pairs of shoes sold, while brand ASPs decreased 3% to $26.48. ASPs were below last year tied largely to product mix and slight price erosion. North America revenues grew 2% versus the prior year to $491 million. Growth was led by DTC, which was up 4%, while wholesale was down 2%. Underlying North American brick-and-mortar growth was up mid-single digits. International revenues of $367 million grew 17% versus prior year, led by DTC growth of 18% and wholesale growth of 15%. In China, we saw growth in excess of 20% on top of last year’s 90% plus growth rate, while our direct European markets continued to show healthy growth in the quarter, led by Germany and France. Turning to HEYDUDE, revenues were $204 million, down 17% from last year. Wholesale revenues were down 23% and DTC revenues were down 9%. While we did plan for wholesale declines in the third quarter, our guidance anticipated stabilization of DTC. To support the strategies Andrew outlined earlier, we changed our investment strategy around performance marketing, shifting investments towards brand marketing, which impacted our digital performance negatively. We believe we are making the right decisions for the long-term health of the brand, highlighted by the continued strengthening of our ASPs, up 4% to $30.94 in the quarter. Concurrently, volumes were lower with 7 million pairs of shoes sold, 21% below last year. Consolidated adjusted gross margin for the third quarter was 59.6%, up 220 basis points from last year. Crocs Brand adjusted gross margin was 62.5% or 40 basis points higher than prior year. The primary drivers of margin expansion were favorable product costs and select international price increases, offset in part by channel mix. HEYDUDE brand adjusted gross margin was 47.9% or 510 basis points higher than prior year, driven primarily by freight, favorable channel mix and pricing. Overall, adjusted gross margin was below expectations as the channel mix benefit was not as favorable as expected, given softer-than-anticipated digital trends in the quarter. Our third quarter adjusted SG&A dollars increased 19% to prior year. Our adjusted SG&A rate was 34.2%, up 510 basis points compared to prior year, driven by continued investment in talent, marketing, digital and retail to support long-term market share gains. Our third quarter adjusted operating margin was 25.4%, down 290 basis points from 28.3% in the prior year, driven by planned investments and SG&A. Third quarter adjusted diluted earnings per share increased 11% to $3.60. Our non-GAAP effective tax rate was 12.6%. Our lower-than-expected tax rate was largely tied to cash tax savings from the refinancing of our intercompany debt that occurred in the quarter. Our inventory balance as of June 30 was $367 million, a decline of 6% since this time last year. Both of our brands achieved inventory turns above our goal of 4x on an annualized basis. Our liquidity position remains strong, comprised of $186 million of cash and cash equivalents and $559 million of borrowing capacity on our revolver. During the quarter, we repaid approximately $110 million debt, reducing borrowings to approximately $1.4 million. Year-to-date, we have repaid $248 million of debt, and we ended the quarter at the lower end of our long-term net leverage target range of 1 to 1.5x. Enabled by our best-in-class free cash flow generation, we also completed $151 million of share buybacks during the quarter, repurchasing 1.1 million shares, at an average price of approximately $135 per share. Year-to-date, we have completed $326 million of share buybacks, reproducing 2.3 million shares. We currently have $549 million remaining on our share repurchase authorization. Now turning to 2024 guidance. Based on our third quarter results and the visibility we have heading into the fourth quarter, we are adjusting our full year outlook. Our full year enterprise revenue growth is now approximately 3% versus 3% to 5% prior, assuming currency rates as of September 30. For the Crocs Brand, we are narrowing our revenue range from 7% to 9% growth to approximately 8%. For HEYDUDE, we are lowering our revenue range from down 8% to 10% to down approximately 14.5% based on lower than previously assumed sellouts in both wholesale and digital. We are maintaining our guidance for consolidated adjusted operating margins of more than 25% for the year, powered by our strong adjusted gross margins, which we continue to plan up to prior year across the enterprise. Resulting in part from our lower-than-expected annual tax rate and incremental share repurchase in the quarter, we are raising our 2024 adjusted diluted earnings per share from $12.45 to $12.90 to the high end of our prior range at $12.82 to $12.90. Consistent with our previous guidance policy, this range reflects future debt repayment, but does not assume any impact from future share repurchases. We are now expecting an underlying non-GAAP effective tax rate, which approximates cash taxes paid to be approximately 16% and the GAAP effective tax rate to be approximately 21%. We are lowering our annual capital expenditures guidance from $100 million to $110 million to $90 million to $100 million, tied to the cash timing of select operational projects. Turning to our guidance for Q4. We expect consolidated revenues to be in the range of flat to up slightly at currency rates as of September 30th. We expect the Crocs Brand to grow approximately 2%, like double-digit international growth. Our fourth quarter international growth rate is below our year-to-date growth rate based on, one, a more cautious consumer in China; and two, ongoing regulatory pressure in India, which is impacting our ability to meet demand. Turning to North America. We expect a slightly negative fourth quarter, which includes our expectations of a more choiceful consumer as well as the timing of wholesale shipments between quarters. For the second half, North America is expected to be flat to prior year, in line with our previous expectations. We expect Q4 DTC to remain positive. For HEYDUDE, we expect revenue to be down between 4% and 6% in the quarter, below the former implied range of up low to mid-teens. The largest driver of our lower revenue outlook is tied to lower-than-expected sellouts on both digital and wholesale. Our assumptions around our non-comp drivers, including our retail stores and our international distributor sell-ins, are in line with our former forecast. Adjusted gross margins are expected to be up for the enterprise, with Crocs Brand up slightly and HEYDUDE slightly down versus prior year. We expect adjusted SG&A spend to be in the high-teen range in Q4 and adjusted operating margin to be approximately 19.5%. Adjusted diluted earnings per share is expected to be between $2.20 to $2.28. While we are not guiding to 2025 yet, I want to provide some preliminary shaping for your models based on the visibility we have thus far. For Crocs, we expect revenue growth in 2025 to be led by international. As a reminder, we will be negatively impacted by the timing of Easter moving back into Q2. This will have an outsized impact in our North America region in the first quarter, in addition to lapping leap year. For HEYDUDE, next year is about brand stabilization. As Andrew shared, we are seeing green shoots around the brand receptivity from a broadening group of consumers, but note that financial results will lag the marketing momentum we are currently seeing. With the visibility we have into 2025, we expect the first quarter to be sequentially down from the fourth quarter size of wholesale. In 2025, we plan to continue to invest behind talent, marketing, digital and retail in order to create sustainable long-term growth, which will put incremental pressure on our EBIT margin rate versus 2024. In closing, we are making near-term decisions that we believe are in the best long-term interest of the company and our shareholders, and we will continue to focus on what our company does best, delivering growth with industry-leading margins that generate significant free cash flow. I will now turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Susan. Our company’s initiatives remain consistent, and we’ll focus on three primary levers to fuel durable long-term growth: one, ignite our items across both brands to drive awareness and global relevance for new and existing consumers; two, drive market share gains across our Tier-1 markets through strategic investment behind talent, marketing, digital and retail; and three, attract new consumers to our brands through methodically diversifying our product range and usage occasions. At this time, we’ll open the call for questions. Operator: [Operator Instructions] The first question today comes from Jonathan Komp with Baird. Please go ahead. Jonathan Komp: Yes. Hi, good morning. Thank you. I’ll stick with one topic here. I want to ask about Crocs North America. Could you just give a little more detail? Susan, I know you mentioned a shift in Q4 on wholesale, but expectations for DTC to remain positive. Could you just remind us of some of the moving parts for DTC? And what’s driving the forecast? And then maybe a bigger picture question. As we look forward into 2025, what role will North America play in the total Crocs outlook for 2025? And what are some of the drivers that you see, Andrew? Andrew Rees: Great. So let’s do it in that order, Jonathan. Susan will kind of give you the mechanics around the remainder of this year, and I’ll take a picture. Susan Healy: Great. Thanks, Jon. When we think about North America, we are unchanged in our expectation that North America will be flat for the second half, and we were really pleased with the underline performance in the third quarter of the Crocs brand in North America, but for the full back half, our expectations are unchanged. So by channel, fourth quarter DTC is expected to be positive, offset by wholesale, which is planned down as retailers took product earlier in Q3 than we planned. And overall, we’re mindful of current consumer shopping patterns as well as macro headwinds in the fourth quarter, and we’re taking a prudent approach. Andrew Rees: Yes. So if we step back to the big picture, so North America this year, based on all the guidance we provided for the fourth quarter, will grow about 2.5% for the year. And so what role does this play within our overall business? So the North American business, as we look at it, is a well-managed, stable business. It’s highly profitable. It’s cash generative. And it really is, obviously, a large business, the absolute size of it. So it generates the income, the cash flow that we can use to fund, one, is the international growth for Crocs, but also some of the investments we’re making in HEYDUDE. It’s balanced across channels. So we have a wholesale business. We have a retail business. We have a digital business. We’ve made some strategic shifts over the past year within digital, going more to 3P on our Amazon platform. We think that’s been highly productive, and we think that will be attractive in the future. So – and we kind of think about the business as really being very well positioned to continue the role that it’s playing today. We’re confident that over the short to longer term, we’ll be able to grow the business modestly, and it plays an important role in our overall portfolio. Jonathan Komp: Great. That’s helpful. Thank you. Andrew Rees: Thank you. Operator: The next question comes from Jim Duffy with Stifel. Please go ahead. Jim Duffy: Thank you. Good morning. Multipart question on HEYDUDE. First, you mentioned streamlining the account base for HEYDUDE. Can you elaborate on those distribution actions? And then I’m hoping you can speak to HEYDUDE brand operating profitability and your willingness to continue to invest against profitability to strive for brand inflection? Andrew Rees: Okay, great. So from an account base perspective, we really talked about this almost a year ago now, where we cut off some of the smaller customers to really focus back on the large national strategic accounts, or alliance partners as we call, where we want to make sure that we have adequate segmentation and differentiation and we can grow with a broad base of accounts. We do keep a lot of what we can kind of smaller, more strategic, well-positioned or regional customers we think are important in terms of reaching select consumers and also giving a broader consumer base and some attractive points of distribution. So that has happened probably just a year ago at this point. So we feel really good with where we are from an account-based perspective. In terms of profitability, there is a couple of key drivers there as we think about the future. One is gross margin. You’ve seen us start to elevate gross margins from a low in ‘23 to some substantial improvements in ‘24. Based on some of the infrastructure investments we’ve made, based on some pricing decisions we’ve made that have impacted gross margin in the past, we think long-term gross margin is around 50%. We’re not going to get there in the next couple of quarters, but that’s in the midterm. We think that’s a very strong place for a brand to be. And then obviously, we’re investing substantially in SG&A. So we’re investing at an elevated rate in terms of marketing. You saw a lot of the activities. We talked about them on our prepared remarks. I think you’ve seen them in the – on social media and in the press, especially in this quarter. We’re investing in marketing to engage younger consumer, to pivot to a more female-orientated consumer and also to create broader awareness for the brand. We are also making SG&A investments to fuel growth, both in our outlet stores that we’ve opened this year in North America and also preparing for our international growth. So I think what this tells you is that we’re supremely confident in the long-term growth potential of HEYDUDE. We’re prepared to make these investments. We’re confident they will pay off. And frankly, the broader financial profile of the Crocs, Inc. business allows us to do this, and we think they are prudent investments that will pay off for shareholders in the medium to long term. Jim Duffy: Okay. Just to follow up on that, Andrew. In the context of valuing Crocs, Inc., many people are looking at the contribution of the Crocs brand profitability and trying to isolate that for valuation purposes. And so additional perspective on the HEYDUDE brand profitability would, I think, help people get to that assessment of the size of the different profit pools? Andrew Rees: Yes. I mean I guess I would encourage our investors to look at the totality, right? So our total company is highly profitable, highly cash generative. And as you kind of think about investing in the company, I would encourage people to look at the totality and look at the future potential of those cash flow streams and the optionality that provides us to continue to deleverage and reduce risk within the company, but also return cash to shareholders in a sustainable basis. I think that’s a pretty good investment profile. Jim Duffy: And then with the outlook for HEYDUDE, have you at all tempered the SG&A investment plans? Andrew Rees: I would say no. We haven’t. We – I’ll go back to what I said sort of in my first answer. We’re extremely confident around the mid- to long-term potential of the HEYDUDE brand. And as we analyze each of the investments we’re making, we feel that they will provide a very strong return. Operator: The next question comes from Adrienne Yih with Barclays. Please go ahead. Adrienne Yih : Yes, great. Thank you very much. Andrew, you had talked about sort of the back-to-school season being kind of back to the highs are high and the lows are kind of, I guess, a toppy background. I’m wondering if you can sort of talk about how you operate in that environment? How you think the retail channel partners are kind of managing through that? And if you think that we’re pulling up some sales for holiday? And then my last question is how long does it take for the sell-through to work through itself? Do you think that you’re having – well, you have the spring order book some futures? Can you give us some color on that? Thank you very much. Andrew Rees: Yes. Yes, I suspect you’ve heard others talk about this, and you’re probably, as our retail partners report in a week or so a month or so, you’ll hear a lot more about this. But look, I do think the consumers return to a more traditional shopping pattern. We will kind of say it’s kind of pre-pandemic. They’re going to shop when they need it. They’re going to shop at key events, whether they be holidays or promotional. And in some cases, they need a little extra incentive to transact. So I think that’s what we were familiar with before we got into the sort of lack of supply-oversupply components of the pandemic. I think they’re back there – they’ve been getting back there over the last year or so. We are anticipating that into the fourth quarter. And I think our retail partners, certainly in this country, are pretty adept. I mean they’re highly sophisticated. They’re seeing this happen. They have probably more data than we do to really understand this. So I think they’re pretty intact there and they’re transitioning pretty quickly, and I think they’ll do a good job. And in terms of order books, pretty prudent. We try to make sure our order books are very much lined up with expected sell-out. We think the timing that sellout was a little bit shifted, but we try to calculate the aggregate sellout. We don’t want excess inventories in the market. And I think we’re on top of that for Crocs. As we’ve talked about from a HEYDUDE perspective, we have had excess inventories in the market, and we’ve been aggressively trying to work those down this year, and we’ve made good progress, but frankly, not quite all the progress we want to make. Adrienne Yih : Great. Thank you very much and best of luck. Andrew Rees: Thank you. Operator: The next question comes from Chris Nardone with Bank of America. Please go ahead. Chris Nardone: Thank you, guys. Good morning. Can you just elaborate a little bit more on your confidence in growing your Crocs North America direct-to-consumer business in the fourth quarter, maybe based on what you’re seeing quarter-to-date? Then switching your Amazon business to a 3P model, I think you fully lapped that now. Can you just elaborate on the rationale around doing that? And just how you view your Amazon business relative to like your crocs.com business? Thank you. Andrew Rees: Yes. I would say that’s a hard question to answer, Chris. So look, I think all the plans that we put in place for our Crocs North America DTC business, we feel great about it, right? We feel great about the product line. We feel great about our holiday planning. We feel great about our back-end logistics, et cetera, but growing that business and comping is based on all those things going well. And – so no product line up on marketing. So we feel really good about it. I would say that’s a combination of obviously our stores, which are predominantly premium outlet stores, a combination of our dot-com business and also our marketplace business. And so we feel really good about it. And fingers crossed, everything will play out how we think it’s going to play out, but there’s, obviously, some uncertainty there. And I would also say we kind of try to plan it prudently as well. We’ve got backup plans for if things don’t go 100% to our expectations. Big picture on Amazon, I would say, look, Amazon, a super important customer. We’re a broad democratic brand. We want to reach our consumers where they are. They’re clearly on Amazon. They start a lot of their shopping on Amazon, their initial searches on Amazon when they’re looking for a pair of Crocs, but also many other things. And from participating on that very important marketplace, both here in North America and other parts around the world, we think this is an opportunity for us to have more emphasis on our brand, a little bit better control of the products that we bring to market, et cetera. And so we are liking the transition we think is productive, and I think the consumer is enjoying it, too. Chris Nardone: Thanks, Andrew. And just one quick follow-up on the operating margin outlook. I think you mentioned it should be a little bit lower next year. Just wanted to hear your rationale about balancing investment spend to grow both of these brands for the long term, but also trying to maintain an operating margin around the mid-20% range, close to your longer-term 26% plus target? Susan Healy: Yes. So I can take that one. This is – we’re really planning on continuing to invest. We see revenue generating opportunities for both brands. We look, as Andrew said, very disciplined about what we see the return on investment. And when we see these opportunities we’re investing, 2024 has been an investment year. We’re very early in the planning process for next year, but we’re going to continue to invest behind talent, marketing, digital and retail. And as we said, that’s going to put incremental pressure on our EBIT margin rate versus 2024. And we’ll give you more guidance about 2025 on our fourth quarter call. Andrew Rees: Yes. And I would say, big picture, Chris, look, I would say mid-20s. I think we’ll be above 25% according to our guidance for this year. We’ve been significantly above that in recent years. These are extraordinary levels of profitability. If you look at our competitive base, there are very few players that come close. Nobody is above. So, we have got to balance maintaining high levels of profitability and cash flow generation, which obviously underpin our overall valuation. We are actually investing in attractive mid to long-term growth opportunities, and we will toggle backwards and forwards between those. Chris Nardone: Thank you. Good luck. Operator: The next question comes from Bob Drbul with Guggenheim Securities. Please go ahead. Bob Drbul: Hi. Good morning. Two questions actually. The first one is, can you talk about the change in the investment marketing strategy for HEYDUDE in the quarter, and what KPIs you are seeing? And the second question is, can you just clarify for Crocs for North America, do you expect growth in North America market for 2025? Andrew Rees: Okay. Two different questions, so the first one actually is a super important question, Bob. Glad you asked it. So, one of the key decisions that we made in the third quarter is we pulled back on performance marketing for the HEYDUDE brand. As we have looked at the sort of multiyear trajectory, our level of performance marketing had been creeping up. I would say the marginal ROIs were still positive, but they were not where we wanted them to be. And we wanted to push more of a marketing investment into the brand and into the long-term future of the brand. So, we made a pretty distinct pullback in performance marketing. So, that’s ad dollars, Google Search, or all of those kind of things that you can spend money on a short-term basis. You can measure the returns, but if your marginal return dips to a level that you don’t really feel comfortable with, so we pulled back on that. And then we used that money to fund Sydney Sweeeny, Jelly Roll, Barstool Sports, some of the TikTok activations that we have been doing, starting up the TikTok Shop. And we think that will be much more attractive from a brand return and investment perspective over the long-term. That has had a short-term impact, and it’s probably the biggest explanator [ph] for our miss in Q3 from a HEYDUDE revenue perspective, and also the biggest explanator for the reduction in Q4 guide for HEYDUDE. That’s the biggest dollar change, and we think it’s the right thing to do in the long-term. And then your question on Crocs, I think it was a clarification on North American – yes, we think we will grow modestly slightly for North America Crocs in 2025. That is our current plan. But I would say the real value creator and the value driver for Crocs is international growth. You have seen that come through for the last 2 years, and we are very confident that will continue into 2025. Bob Drbul: Thank you. Operator: The next question comes from Rick Patel with Raymond James. Please go ahead. Rick, your line is now open. You may ask your question. Rick Patel: Hi. Sorry about that. Thank you. Good morning. I was hoping you can expand upon what you just ended with in terms of Crocs’ international growth potential in 2025. So, given the slowdown that you are seeing in China that you expect to continue, how should we think about the building blocks of growth next year? In which market you have the most confidence and to do the heavy lifting? Andrew Rees: Yes. So, thank you Rick. So, what I would say is we have definitely seen a slowdown in China, but I would point out, we are still growing in China, and we still intend to grow in China next year, right. So, it’s not the 80%, 90% growth that we saw in ‘23. We grew 20%-plus growth in Q2 – sorry, Q3 that we just reported, but we do intend to continue to grow in China, really underpinned by a lot of the mono-brands store openings that we have done in China. So, we have grown our digital business successfully. We have opened some select retail stores. We operate ourselves, and we also work with a range of brand partners who opened mono-brand stores. I think we have opened – by the end of the year, we will have close to 400 mono-brand stores, and we have opened in excess of 150 stores year-to-date. Obviously, as those have grown open through the year, that will provide growth for next year as well as we think our positioning in the marketplace are accessible price points, personalization, comfort, etcetera, is going to be a competitive positioning. So, we will grow in China. In addition to China, I think we are confident around India. We have I think a very attractive business model in India that has been impeded recently with the BIS. Everybody knows what that is. That’s the Indian Government has been imposing some restrictions associated with we need to make your products in India. We will have production up and running for both Crocs and HEYDUDE in India next year. It started this year, but it will reach – its reach enough supply to fund market next year. So, we are confident about India. We have talked quite a bit about how our key direct markets in Western Europe continued to be successful. Germany and France, we anticipate that continuing. So, those are some of the key drivers. We have had great success in Australia for the last couple of years. We see that as probably a little bit more stable for the next couple of years, but that’s obviously attractive business as is South Korea. I would say, to be frank, Japan remains a work in progress. We are focused on kind of resetting the business and focusing on the Classic Clog and personalization in that market, with evidence that is starting to get traction. But that obviously is a very big market with big long-term potential. So, I think there are plenty of growth engines to support our international aspirations from a Crocs perspective. Rick Patel: Thank you very much. Andrew Rees: Thank you. Operator: The next question comes from Sam Poser with Williams Trading. Please go ahead. Sam Poser: Good morning. Thank you for taking my questions. So, can we talk about HEYDUDE? And I mean, Andrew, you reiterate your confidence in it. I guess my question is, what – how did this all evolve? And what happened different than what you thought was going to happen that was under your control that you have to fix? And how long – and what are – what specifically other than switching marketing and cleaning up are you doing to sort of start driving sales again? It looks to me like you have some good stuff going on as far as partners and so on, but the consumer is not responding. And that’s not let’s take macro out of the picture, let’s say, what’s under your control? Andrew Rees: Okay. So, let me start with the last part of your question, and then we can go back to the first part, and you can kind of just clarify. So, the last part, I think is, you are kind of getting at what are we doing, why do we think that will help the situation, if you like. So, the things that we are doing are multipronged, right. So, one is marketing, which you highlighted. So, I think a pretty significant pivot in the marketing agenda, to engage a broader set of consumers, drive brand awareness, drive brand relevance pivot towards a younger female culture – female consumer, which drives culture in this country, certainly. And we think culture in this country drives culture and resonance in other countries around the world. That’s very, very important. And I think you talked about that or you mentioned that. Second is, I would say, wholesale management, so that is reducing in-market inventories, working proactively with all of our alliance partners to make sure they have the right product at the right time they have adequate differentiation. And I think we are making some good strides there, but there is still work to be done. So, I think there is more work to be done, but we are doing the right things, and they will pay off in the longer term. Number three is building, I would say, complementary channels of distribution, premium outlet stores. We have opened a chain of premium stores I think about 29 year-to-date to the end of September. We will open another 11 in the fourth quarter. They are performing well. That is a very attractive investment from our perspective. And it allows the consumers that are in those centers to see the breadth of the brand. We see a much better balance in those environments between Wally and Wendy, between male and female. We also have a kids business in those environments. So, we think that’s a very valuable consumer exposure mechanism. Third thing is laying the groundwork for international growth. We opened up four direct markets, two in the quarter, so as you might remember, we are now present in the UK, in Germany, India and Australia as direct markets. They are all small. And when I say present in direct market, that means we have wholesale distribution, we have a digital presence, we don’t have any retail presence in those markets just too small at this stage. But I would say what we are seeing, while the numbers are small and we expected them to be small, is a relatively positive reception from those consumers, and that’s a pretty diverse set of consumers from the UK to Germany, to India to Australia. In addition, the international business in Spain and Italy continues to perform well through a distributor, and we have a range of incremental distributors that we will ship in Q4 and Q1. Essentially, they are opening orders, so they will be starting up the business. So, I would say it’s the marketing, but it’s building all the platforms that will enable future growth in the future – well, growth in the future. Alright. And now let’s come back to what we are getting at the beginning of your question. Sam Poser: Well, I mean I wrote about this a long time ago. At the end of fiscal ‘20 – end of calendar ‘22, and the beginning of ‘23, you shifted a ton of product into marketplace. So, I guess the question is this, how overstated were the sales last year? And what’s the right starting point to think about? And how much of just filling shelf space, doing the things you did back then sort of caused what happened now? And should you have taken sort of a more measured growth approach and maybe you would be ahead of where you are today? And what decisions were made that your – what decisions were made that caused this? And then I know you are confident, but just lowered numbers and I don’t know what next – we will see what happens next year, but I just want to get a little more meat on the bone as to what happened that was in your control versus… Andrew Rees: Yes. I think you kind of said some of it. We definitely grew too fast, right. So, out of the gate when we bought the brand, nobody knew how high was up. We didn’t know how high was up and our customers didn’t either, right. So, they were constantly out of stocking, they wanted more product, we shipped some product. And I think if you think about this sort of ‘22 into ‘23 timeframe, in retrospect, we absolutely shipped too much products. So, if you are kind of asking what decisions we made that were wrong, that was wrong, that was wrong, right. And then the other thing I think that we did not do well is the initial marketing activities were ineffective. We spent money, but they were ineffective. They were not sufficiently effective. They weren’t focused at the right consumer, and they weren’t creating the kind of resonance and impact that we wanted. I think the third thing is the process of integrating the brand and putting in place all of the infrastructure, whether that would be DCs, whether that would be systems and capabilities because it came with very little of that. We knew that, but that took us time. It probably took us a little bit longer than we had hoped, and that delayed some of the, I would say, offensive investments that we are now making around stores and international. So, that’s taken longer than we thought. Now, that being said, we bought a business that was approximately $600 million in revenue, and it is now high-$800 million, almost $900 million – sorry, sorry, $800-ish million in revenue, so it’s substantially bigger. It is less profitable on an EBIT percentage perspective because we have invested for what we think is the longer term growth potential, but it has been profitable all along. It’s been accretive along and has generated cash, and we paid down the debt associated with the investment or paid down a lot of the debt associated with the investment. So, it has not gone if that’s what you are kind of trying to get at as we would have hoped and expected, but that doesn’t change our confidence around the future, the team that we have in place, the strategies and activities that we have deployed and our willingness to support those – that team, those strategies and activities. So, I just want to make sure we are super clear about that. That is what we are going to do, and we are very confident that we will be a positive outcome for investors. Operator: The next question comes from Jay Sole with UBS. Please go ahead. Jay Sole: Great. Thank you so much. Andrew, if we could just talk about the Crocs brand sort of big picture, obviously talking about a little bit of growth in North America next year. But beyond that, what’s the plan to drive growth? I mean do you see an opportunity to raise brand awareness? Are there new wholesale doors you get into? I mean can you open it more maybe of your own stores and your direct-to-consumer channel, new categories you can get into or market share gains in existing categories? Just tell us how growth should trend big picture. And why maybe we will see growth accelerate beyond sort of in North America beyond whatever rate you expect to get in 2025? Andrew Rees: Yes. That’s a great question, Jay. I would say, look, in the very short-term, sort of the 1-year to 2-year timeframe, the primary growth driver for Crocs will be the international business, right,. I just want to make sure I reiterate that. And that’s a big and attractive business, right. So – and the underlying strategic issue there is that our penetration in those large international markets is a fraction of what it is here in the U.S., that’s not your question. Your question is what drives growth in North America. I don’t think there is a huge amount of distribution growth. I think we are, the places we want to be, there are other places we could go. There are mass retailers that were not represented in. I just don’t think that’s the right place for our brand as we want to continue to maintain a democratic, but elevated positioning for our brand. So, I don’t think we are going to go there. We do think there is continued digital growth and development as the consumer goes more and more digital. We do think there is growth in personalization. We think there is growth in sandals. We had a nice sandal growth here in North America in ‘24. We think that continues into ‘25 and has long-range potential. And we do think there is an opportunity for us to play in a broader set of, I would say, silhouette wearing occasions. You have seen us experiment there. We will continue to experiment there, but I wouldn’t say we are today, have a slam-dunk winner in that arena, but we think we can get there over time. So, for the sort of 12-month to 24-month timeframe, we are really thinking about North America is that cash cow funding that international growth, while we can continue to experiment and engage our consumers in incremental growth opportunities from the silhouette and product perspective. Jay Sole: Got it. That’s very helpful. Andrew, thank you. Andrew Rees: Thank you. Operator: The next question comes from Anna Andreeva with Piper Sandler. Please go ahead. Anna Andreeva: Great. Thanks for my question. Good morning. We wanted to follow-up just on the overall profitability of the business given investments at HEYDUDE. Can you guys talk about what guardrails do you have in place at the consolidated level to offset some of these investments? Andrew, I think you mentioned 25% is the right level for the business. Are there additional opportunities at the Crocs side of things, either with pricing or maybe OpEx management as we think about next year? Thanks so much. Susan Healy: Thanks for the question, Anna. This is Susan. One thing I think it’s really important to emphasize here is how disciplined we are about our investments. We have mentioned increasing our SG&A, which we continue to plan to do into next year. But there is a lot – you mentioned guardrails and KPIs, there is a lot of scrutiny around making sure we are making the right investments. And as Andrew indicated, and talking about HEYDUDE, when we find that we need to pivot, we do that pretty readily and pretty nimbly as we did with the marketing investment on HEYDUDE pivoting from performance to brand when we saw a better opportunity there. So, we are super disciplined about it. But when we said we are including 2024 as an investment year, and 2025 continued to be an investment year, that will be – create incremental EBIT margin pressure. So, the 25% guidance that Andrew reiterated was for this year. And next year, we would expect to be below that. Anna Andreeva: Okay. Appreciate it. Best of luck. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Andrew Rees, Chief Executive Officer, for any closing remarks. Andrew Rees: I just want to conclude by thanking everybody for their continued interest in our company. We appreciate you spending time with us today. Thank you. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

Operator: Good day, and welcome to the Crocs' Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] And please note this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Senior Vice President of Investor Relations and Corporate Strategy of Crocs. Please go ahead. Erinn Murphy: Good morning and thank you for joining us to discuss Crocs, Inc. second quarter results. With me today are Andrew Rees, Chief Executive Officer; and Susan Healy, Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask that you limit to one per caller. Before we begin, I would like to remind you that some of the information provided on this call is forward-looking, and accordingly is subject to the Safe Harbor provisions of the federal securities laws. These statements include, but are not limited to statements regarding our strategy, plans, objectives, expectations, and intentions, including our financial outlook. These statements involve known and unknown risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to differ materially. Please refer to our quarterly report on Form 10-Q and other reports filed with the SEC for more information on these risks and uncertainties. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I'll turn the call over to Andrew Rees, Crocs, Inc. Chief Executive Officer. Andrew Rees: Thank you, Erinn, and good morning everyone. Thank you for joining us today. Before we discuss the quarter, I'd like to start by welcoming Susan Healy to her first Crocs, Inc. earnings call. We reported second quarter revenue of more than $1.1 billion which represents the highest quarterly achievement in the company's history, and exceeded our guidance. Coupled with robust adjusted gross margin expansion of 330 basis points, adjusted earnings per share grew by 12% to $4.01 even as we accelerated strategic investments. This performance resulted in record free cash flow for Crocs, Inc., which we utilized to pay down $200 million in debt and repurchase $175 million of our common stock. Our enterprise initiatives remain consistent, and we've focused on three primary levers to fuel durable, long-term growth. One, ignite icons across both of our brands to drive awareness and global relevance for new and existing consumers. Two, drive market share gains across our Tier 1 markets through strategic investment behind talent, marketing, digital, and retail. And three, attract new consumers to our brands through methodically diversifying our product range and usage occasions. Starting with the Crocs Brand, the investments we are making in product and marketing are enabling us to win with consumers around the world. During the quarter, we saw further growth in global brand awareness and desirability. We have continued to evolve our partnership model with the clear intent to drive engagement, build consumer love, and ultimately fuel brand heat. During the second quarter, we celebrated SpongeBob's 25th anniversary by creating a SpongeBob and Patrick clog, with the official announcement unveiled on the Las Vegas Sphere. Along with this, we released a number of partnerships that range from Pringles, to Naruto, to Treasure, a K-pop band, and Minions. We continue to push into sneaker and lifestyle opportunities as exemplified through our Salehe Juniper sneaker release which sold out within minutes, at $140, and was seen on secondary shopping platforms for multiples of the original price; a testament to the strong consumer response. Looking at product overall, growth in the second quarter was once again led by our icon, the Classic Clog. As we prioritize durable growth, we have built several successful franchises that aim at expanding into new usage occasions to drive new and repeat purchases. The sandal category strengthened in the quarter as the consumer reacted favorably to the newness that we have brought to the market this year. In particular, our Style sandals are performing well across both new franchises like the Getaway and Miami, as well as established franchises, like the Brooklyn. We introduced a Jibbitable version of the Classic Brooklyn, as well as a woven style leveraging our molded DNA. The growth of our Jibbitz business during the quarter was led by strong double-digit growth in Asia, which was also our highest penetration by geography. Our Jibbitz consumer continues to be one of our most valuable consumers, and we see them purchasing with higher frequency and average order value. Our strategic priorities within Jibbitz are centered around driving higher penetration in digital and wholesale channels, enhancing speed to market, and continually introducing product freshness. Moving to a review of our business by geography, we saw broad-based strength led by our Tier 1 markets. The North America market performed ahead of our expectations and gained market share with revenue growth of 3% versus the prior year. Strength was driven by better advanced demand from our retail partners and solid DTC channel growth. For the first-half, our North American revenues grew 6% against a broader market that was essentially flat. International revenue grew 22% versus prior year, supported by exceptional growth in China and Australia. China grew over 70% on top of triple-digit growth last year. While there is evidence in the market that the Chinese consumer is becoming more cautious, we see our accessible, authentic and personalizable brand position as a clear competitive advantage. Coming off the strength of our Super Brand Day in the first quarter, we emerged as the number one women's footwear brand on Tmall in the days that followed. This momentum drove outside strength in the Midsummer Festival, but Crocs led the conversation and took notable share on Tmall and Douyin despite more promotional period for the industry at large. For the first time ever, Crocs emerged as a top 10 overall fashion brand on Tmall during the festival and was one of only two footwear brands mentioned in the top 10 fashion rankings. Our direct markets within Europe registered double-digit growth in the quarter, led by the U.K. and Germany. And we continue to see ample opportunity for growth in the future. Turning to the HEYDUDE brand, we remain focused on solidifying the business in North America and establishing the Wendy and Wally as iconic franchises for the consumer. We've made progress in improving the health of our underlying business in North America, exemplified by pricing on digital up versus prior year, solid recovery in gross margins, and our inventories turning in excess of 4 turns. That said, our wholesale business for HEYDUDE remains challenging and we expect that to continue through the second-half of the year. As we shared in the first quarter earnings call, sell in and sell out are down versus last year, and we're focused on energizing the brand through improved marketing effectiveness and new product introductions. During the quarter, we brought new HEYDUDE partnerships to the market, including Corona, a four piece collection with the iconic beverage band featuring our Wally, Wendy and Hudson Styles. Our Lee partnership, Denim and Dudes, marked the first HEYDUDE collaboration with international reach. From a product perspective, we're bringing more focus around our core across the Wendy and Wally and we're leaning into three primary offerings, Stretch Subs, Stretch Canvas, and Funk Mono. While leading from the core is our focus, we'll make calculated bets with key sneaker and boot styles that the brand is also known for. As we look into 2025, we see an opportunity to optimize our SKU count, while still improving our channel segmentation and bringing new innovations to market. For example, we introduced the COMPF this quarter, leveraging our Wendy and Wally D&A and added cushion and height reselling for $85. We initially tested this product in DTC and will bring it to wholesale in time for back-to-school. From a distribution perspective, we opened 13 new HEYDUDE outlet locations in the quarter, bringing our total year-to-date openings to 19. We are pleased with our new stores and see growing consumer engagement and shopping across genders and ages as consumers can experience the full breadth of the line. During the quarter, we also introduced Haymakers, our personalization proposition within our direct channels. These stations are creating buzz in our stores as consumer explore self-expression with the brand. For the year we plan to open approximately 30 outlet stores. On the wholesale side, we'll continue to optimize our account base and focus on improving customer segmentation. Internationally, we're making progress in our direct markets in Europe as we build the brand in the U.K. and Germany. We're also introducing the HEYDUDE brand in Australia this quarter and have plans to expand into select distributor markets in 2025. We're working on elevating our reach and effectiveness of our marketing to drive bigger brand moments geared at accelerating awareness and creating community. We plan to introduce the brand in a methodical and consistent way and get more shoes on feet. In addition to igniting our icons and focusing on the core, we're bringing her to the center of the conversation. We believe female youth culture is one driver of influence and brand connectivity and plan to accelerate our influence opportunity as we move into the fall. We plan to significantly accelerate our marketing investment and effectiveness in the second-half of this year to drive more brand heat for HEYDUDE. Before turning the call over to Susan to review our financial results, I want to call out the publication of our 2023 Crocs Inc. Comfort report released in June. This annual report highlights our commitment to and progress on our purpose to create a more comfortable world for all through action orientated ambitions of inclusivity, climate stability, circularity and community. I would encourage you to check out the report for more information against these initiatives. I will now turn the call over to Susan to walk through our financials for the quarter. Susan Healy: Thank you, Andrew, and good morning, everyone. Before I review the quarter, I'd like to say what an honor it is to have the opportunity to serve as the CFO of Crocs, Inc. This is a company with strong financial performance brought to life by its culture, brands, people, and purpose. I look forward to working with Andrew and our talented management team to further advance the company's strategic and financial goals, as well as to get to know many of you in the investment community in the weeks ahead. Now, for a review of our second quarter financial performance, we generated over $1.1 billion in consolidated revenues in the quarter, growing 5% over last year, led by the Crocs brand. Adjusted gross margin improved 330 basis points from prior year to 61.4%, and adjusted operating margin was 29.3%, resulting in adjusted earnings per share of $4.01. Our second quarter results exceeded the high end of our guidance for the enterprise. For the Crocs brand, revenues were $914 million, growing 11% a prior year, driven by DTC growth of 14% and wholesale growth of 9%. The growth came from a mix of volume and ASP, with units increasing 6% versus last year to a total of 35 million pairs of shoes sold, and brand ASP increasing 4% to $25.96. As Andrew noted, North America revenues came in ahead of our expectations, growing 3% versus the prior year to $489 million. Growth was led by DTC, which was up 7%, while wholesale was down 4%. Underlying North American brick and mortar growth was up mid-single digits. International revenue of $425 million was up 22% from prior year, led by DTC growth of 28% and wholesale growth of 18%. China led the way, growing over 70% on top of triple digit revenue growth last year. And we also saw exceptional growth in Australia. In addition, our direct European markets grew by strong double digits. Turning to HEYDUDE, revenues were $198 million, down 17.5% from last year and within our guidance range. Consistent with our strategy to strengthen the HEYDUDE brand for the long term, brand ASPs were up 7% to $30.76, while volumes were lower. We sold 6 million pairs of shoes, 23% below last year. Wholesale revenues were down 24% from last year, since which time we have strategically reduced our account base and right-sized channel inventories. The DTC channel was down 8%, supported by retail contribution, offset by digital contraction as a result of prioritizing brand health through higher ASPs. Consolidated adjusted gross margin for the second quarter was 61.4%, up 330 basis points from last year. Crocs brand adjusted gross margin was 64.1%, or 210 basis points higher than the prior year. The primary drivers of margin expansion were favorable product costs, lower freight costs, and higher international pricing. HEYDUDE Brand gross margin was 49.1% and 200 basis points higher than prior year, driven by lower freight costs, channel mix, and higher ASPs, partially offset by investments in infrastructure. Our second quarter adjusted SG&A dollars increased 19% the prior year. Our SG&A rate was 32%, up 420 basis points compared to prior year, driven by continued investment in talent, marketing, and DTC to support long-term market share gains. Our second quarter adjusted operating margin declined 100 basis points to 29.3% compared to 30.3% for the same period last year, but was favorable to our expectations on higher gross margin and revenue. Second quarter adjusted diluted earnings per share increased 12% to $4.01. Our non-GAAP effective tax rate was 17.8%. Our inventory balance as of June 30th, was $377 million, a decline of 14% versus this time last year. Both of our brands achieved inventory turns above our goal of 4 times on an annualized basis. Our liquidity position remains strong, comprised of $168 million of cash and cash equivalents, and $559 million of borrowing capacity on our revolver. During the quarter, we repaid approximately $200 million of debt, reducing borrowings to approximately $1.5 billion. We ended the quarter within our long-term net leverage target range of 1 to 1.5 times. We completed a $175 million of share buybacks during the quarter. Repurchasing 1.2 million shares at an average price of $149.53 per share, we currently have $700 million remaining on our share repurchase authorization. In the second-half of 2024, we plan to continue to buy back stock and pay down debt, enabled by our best-in-class free cash flow generation. Now, turning to 2024 guidance, we are reaffirming our full-year top line guidance range and raising our operating margin and EPS expectation to reflect to be in Q2, partially offset by continuing investment in talented marketing in the back-half of the year. We are maintaining our full-year revenue outlook of 3% to 5% growth despite $11 million of incremental FX headwind, underscoring the underlying strength of our business. Our guidance assumes currency rate as of June 30th. For the Crocs brand, we continue to expect revenue growth between 7% and 9% led by international. For HEYDUDE, we continue to expect revenues to contract between 8% to 10%, and expect wholesale to be negative for the year and DTC trends to be better than wholesale as we communicated last quarter. We are raising our guidance for consolidated adjusted operating margin from approximately 25% to more than 25% for the year. We are maintaining our guidance for enterprise gross margin as well as Crocs and HEYDUDE brand gross margins to be up for the year versus 2023. We remain focused on investing behind brand accretive and strategic SG&A initiative, which we believe will drive second-half SG&A dollar growth to be above the first-half. We are raising our 2024 adjusted diluted earnings per share guidance from a range of $12.25 to $12.73 to a range of $12.45 to $12.90. Our updated full-year range balances the strength we saw on 2Q along with appropriate caution around consumer spending trend and the geopolitical landscape as well as the timing of our SG&A investments. Consistent with our previous guidance policy, this range reflects future debt repayment, but does not assume any impact from future share repurchases. We are maintaining our expectations underlying non-GAAP effective tax rate, which approximates cash taxes paid to be approximately 18% and the GAAP effective tax rate to be 21.5%. Our annual capital expenditures are now planned between $100 million to $110 million, down from a $120 million to $130 million tied to the cash timing of select operational projects. Turning to our guidance for Q3, we expect consolidated revenues to be in the range of down 1.5% to up a 0.5% at currency rate as of June 30th, with the Crocs brand growing 3% to 5% led almost entirely by international growth. We expect HEYDUDE revenue to be down between 14% to 16% in the quarter, showing modest sequential improvement versus Q2. Embedded in our HEYDUDE guidance is the impact of lapping significant discounting on our marketplace for most of Q3 last year as well as timing of wholesale orders. We expect SG&A spend to be up on the low-to-mid 20% range in Q3, with talent and marketing investments elevated versus the year-to-date trend. We expect adjusted operating margin to be approximately 24.5%, and adjusted diluted earnings per share to be between $2.95 and $3.10. As we look to the fourth quarter for the HEYDUDE Brand, we expect revenue growth to be supported by, one, easing comparisons; two, the timing of wholesale shipments; three, the contribution from new retail stores; four, sell-in to new international distributors; and five, lapping last year's pricing reset on digital late in Q3. In summary, we had a record second quarter. We have clear plans to invest further in our business to fuel long-term profitable growth, and I am confident in our ability to achieve our 2024 objectives. I will now turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Susan. We were pleased by the results our teams have delivered through the first-half, including our ability to pay down debt and return significant capital to shareholders. We believe the strategic investments that we are making in talent and marketing will set our brands up for durable, long-term share gains. At this time, we'll open the call for questions. Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jonathan Komp of Baird. Please go ahead. Jonathan Komp: Yes, hi. Thank you. Good morning. I want to ask about the second-half revenue outlook. Could you maybe talk, Andrew, about your assumptions and what you're seeing in terms of the core North America Crocs sell-throughs and how you're expecting that to trend? And then, Susan, just to follow-up on the fourth quarter HEYDUDE outlook, I know you highlighted, I think, it was four or five reasons for the inflection in year-over-year performance. Could you maybe just talk about the underlying assumptions in terms of the sell-through rates or the consumer end demand that's needed to hit the guidance in Q4 for HEYDUDE? Thank you. Andrew Rees: Yes, thank you, Jonathan. So, look, before I start, obviously, we're really thrilled we had an exceptional Q2. And we're thrilled to announce those results today. In terms of the back-half for Crocs, we're obviously not adjusting our overall expectations for the Crocs Brand. But -- and we had an exceptional first-half with the Crocs Brand. As we look at the back-half, in North America, I think we're very satisfied with the share gains that we've achieved in the first-half. We've grown about 6% on -- through the first-half, that's against a market that is approximately flat; so substantial share gain. In the back-half, we are more cautious, right? I think we definitely see the U.S. consumer behaving cautiously. We think our brand is well positioned relative to a cautious consumer environment. We excel at exceptional value, we give the consumer exceptional value. But we are planning to back-half for North America, from a Crocs revenue perspective, approximately flat. And I'll let Susan talk about HEYDUDE, and I'll maybe add something at the end. Susan Healy: Yes. Hello, Jonathan. So, when you think about HEYDUDE in the back-half of the year, you've got to really think about Q3 and Q4 in tandem. So, we expect Q3 wholesale to be down to last year and below Q2 versus last year. And we anticipate Q4 sell-in to be up. Part of what's driving that is the fact that, last year, we had some orders that we shipped in Q3. And we deliberately did that to get them ahead of our planned ERP implementation just to avoid any potential disruption. And so, when you look at Q4 then, on is you're going to see more normalized wholesale flow between Q3 and Q4. And there's also some other sort of non-comp compares, things like our rollout of retails stores, which are ramping up this year, our sell-in to new and international distributors, and then you're also lapping last year's pricing reset in digital which took place late in Q3. Jonathan Komp: Got it. Thank you. Operator: The next question comes from Adrienne Yih of Barclays. Please go ahead. Adrienne Yih: Yes. Thank you very much, and congrats on a nice quarter. I guess my question is on the SG&A, the talent and brand-accretive marketing. Can you give us examples of what has worked thus far in the year-to-date tie-in, where you're placing those incremental investments in the third quarter, and when you do see the type of payback, the return on that ad spend and the talent investment? Thank you very much. Andrew Rees: Yes. Yes, Adrienne, I would say these are long-term investments we're making. Our company, as it stands today, is exceptionally profitable. Our four-year guide for EBIT is now 25.5%, this is an exceptional number. And we've grown extremely rapidly over the last several years, both organically and across then also through the acquisition of HEYDUDE. At this time, we're making a series of investments in talent to enable us to grow in the future. Some examples around that would be enhancing our international teams for Crocs, where we're growing very rapidly in Asia and also in Europe, and investing in our marketing functions for both Crocs and HEYDUDE in terms of talent. We've historically made some meaningful investments in terms of distribution infrastructure, and we're actually seeing some nice benefits from efficiency of our distribution infrastructure. And I think really the big one is really marketing, right? We see a consumer that's obviously, I think, somewhat cautious here in the United States. We're a little concerned about the cautiousness of the consumer in China as well. And we believe it's extremely important in these environments to engage the consumer. So, we're upping our marketing investments against Crocs, but we're also meaningfully upping our marketing investment against HEYDUDE where we've obviously got new talent in place in terms of HEYDUDE leadership. And I think we've got some really great ideas and a strong point of view about how we can bring that brand to life. Operator: Our next question comes from Jim Duffy of Stifel. Please go ahead. Jim Duffy: Thank you. Hi, Andrew. Welcome, Susan. Susan, looking forward to working with you. With respect to the guide for the remainder of the year, the fiscal third quarter guide, I think more cautious than most had expected. Can you, Andrew, speak to what you saw across July and key considerations in your outlook for the back to school seasons? Then also perhaps speak to tactical strategies, product flow, and considerations as it relates to holiday? Andrew Rees: Yes. Thanks, Jim. In terms of inter-quarter, we don't really give any perspective on that, we never have. But what I would say, the consumer is behaving cautiously. We anticipated that, we expected that as we thought about this year. And that is definitely true. So, I think it's definitely prudent to plan the rest of our year that way. And we've done that from a Crocs perspective. And then, obviously, there's a lot going on with the HEYDUDE guide between Q3 and Q4. I think Susan thoroughly elucidated what that looks like. So, it's not really inter-quarter trends that we're calling out because I'd note that we really haven't changed that full-year perspective. We expected this, and have planned accordingly. Operator: Our next question comes from Rick Patel of Raymond James. Please go ahead. Rick Patel: Thank you. Good morning and great to have you on the call, Susan. For the Crocs Brand, can you talk about how the D2C strategy on Amazon may be affecting how results are being reported as we think about wholesale versus direct-to-consumer? And just given the lumpiness of the results implied for the third quarter, can you provide additional color on what you might be seeing in terms of changes in the trend line for the wholesale channel versus three months ago? Andrew Rees: Yes. So, I think maybe I'll hit on the second bit first, right? So -- and I think there's a couple of times. But what I would say, and I'm not sure we -- in terms of lumpiness, what are you referring to, Rick? Rick Patel: I'm just talking about the sequential slowing that's embedded in the third quarter guidance? Andrew Rees: Yes. So, I think that's pretty simple, right? So, as we think about the first-half for the Crocs Brand in North America, we had 6% growth, right, against a market that was approximately flat, so significant market share gains. In the back-half, we're guiding the Crocs Brand to be approximately flat, right? So, that's -- I don't think that's lumpiness, but that's a distinct change in first-half to second-half, and that is due to anticipated consumer softness. So, I think that's the piece. And I think that's only prudent, right? We want to plan our business that way to ensure that we keep inventories clean and fresh in the channel. We want to make sure that we don't get over inventory and then not pouring our cash into inventory versus returning it to shareholders. So, that's I think just prudent planning. And then, your first part of the question was the Amazon trajectory. Look, I think Amazon continues to be a really important global partner. Our perspective associated with we want to be on the marketplaces where the customer shops, that is Amazon in the U.S. and in fact, in many parts around the world. And we are shifting sometimes how we manage the marketplace in terms of 1P versus 3P. I don't think that change in terms of where it shows up in our P&L will be phasing out as we go through the back-half of this year. Operator: The next question comes from Chris Nardone of Bank of America. Please go ahead. Chris Nardone: Thanks guys. Good morning. So, regarding your Crocs brand international business, can you discuss where you're seeing some of the momentum and what countries are driving the biggest impact to your back-half growth expectations? Then quickly on HEYDUDE International, if you could also remind us what percentage of your business this year will come from outside of the U.S. And then, Andrew, what gives you confidence that you can avoid some of the gray market issues that impacted the brand previously with this newer international rollout? Thank you. Andrew Rees: All right. So, three questions there, right? So international for Crocs, right, so, obviously, that is a key driver of our growth, has been for the past couple of years at this point, and that's really the fundamental thing that we're doing there is penetrating underpenetrated markets, like in China, for example, like in Australia, for example, and also in parts of Western Europe. So, the fundamental driver is that we've got markets around the world that are large and substantive where the brand is under penetrated and we're now able to invest talent, invest marketing and drive that penetration. The key markets that have been driving growth are China, is our number one and probably our greatest long-term potential. And we've made substantial investments to enable that growth. Australia has been also a very strong driver of growth. We called that out a couple of times. I think in the prepared remarks, we referenced China is up 70% during the quarter two, which is on triple-digit growth last year. We continue to expect strong growth in China, but we are also calling out the fact that the Chinese consumer is clearly more conservative than they have been in the past. We think our brand is well-positioned against that. In terms of other important markets, I would say some of our key Western European direct markets, the U.K., Germany, et cetera have also performed well yielding strong double-digit growth. And if you look longer term, we're also super excited about our potential in India, which we think is a rapidly emerging market. We've made -- we're making also very coherent investments in that marketplace. All right. So, the other parts of your question are HEYDUDE International. We don't break out the percentage that is HEYDUDE International in terms of percent of the business. But, I think and I've talked about it before, what I would say is our model internationally is essentially going to be mirror Crocs. So, we're going to be direct where Crocs is direct and we're going to use distributors where distributors where Crocs use distributors. In terms of where we put, I would say, planted flags for HEYDUDE, right? And bear in mind, from a HEYDUDE perspective, we're starting off with brand awareness that is essentially zero in these international countries. We've planted flags in the U.K. We've planted flags in Germany. We're planting a new flag in Australia. We think that's going to be a nice market for HEYDUDE. So, those are direct markets and that means that we're opening e-commerce, we're selling wholesale, and we're participating in the market directly leveraging our Crocs team. The second thing we've done is we've initiated new distribution agreements with a range of distributors and Susan called out part of our Q4 benefit is we'll be doing some initial shipments to a range of new international distributors, which will get up and running in 2025. Hopefully, that gives you everything you need, Chris. Operator: The next question comes from Tom Nikic of Wedbush. Please go ahead. Tom Nikic: Hey, good morning, everyone. Thanks for taking my question, and Susan, welcome aboard and looking forward to working with you. I want to ask of, on the HEYDUDE side, I know, obviously, it's got a new brand President, Terence, who obviously is very familiar with the enterprise overall. Can you just talk a little bit about, what, I guess what Terence, brings to the table for the HEYDUDE Brand, like how he can help rejuvenate and reinvigorate the brand and essentially like what part he'll play in getting HEYDUDE back to a growth trajectory. Thank you. Andrew Rees: Great, thank you, Tom. Yes, look, we're thrilled to have Terence back. I would say it's only been 90 days at this point, so, but we're thrilled to have him back. We all loved working with him when he was here initially and we're all very, impressed by the trajectory he was able to drive at Stanley where he was for a period of time while he was not with us. So, we're thrilled to have him back. I would also emphasize, he's leading what we believe is a strong management team within our HEYDUDE business. So, we think we've got all of the pieces in place. And in terms of, I think, what he's able to do, he's driving really, I think, three or four key things. One is definitely sharpening the brand's focus on their icon, the Wendy and the Wally. So, driving investment focus, energy, and innovation into the Wendy and the Wally, he is focusing our attention on North America, which is obviously the biggest market. But if we can leverage brand heat in North America around the world, it also gives us opportunities internationally. And he's really shifting the marketing energy and the focus to the female consumer. If we can drive, we believe the younger female consumer drives youth culture. If we can engage and energize a female, younger female consumer, we know that's going to spread passion for the brand to a much broader range of consumers and drive the brand overall. And I would say lastly, we're also arming him with significant firepower, right, embedded in our guidance in the back office, an increase in our marketing investments that's substantial. So, we will support Terence and the innovation he's able to bring to the HEYDUDE Brand and really be able to drive that in the future. Operator: The next question comes from Sam Poser of Williams Trading. Please go ahead. Sam Poser: Good morning. Thank you for taking my questions. I've got -- I have three that I'm going to merge into one since I asked one. Number one, Walmart, how long have you been selling to walmart.com or what's going on there? Number two, can you just talk about, promotional activities you saw in the quarter and then promotional activity you're anticipating in the back-half of the year for both brands? And then lastly, how much is lapping Barbie affecting the domestic guidance in North American guidance for the Crocs brand for the back-half of the year? Andrew Rees: Got it. Okay, three questions, Sam, right? Number one, we have been present on walmart.com for several years now. And the, our philosophy is unchanged on this, which is we believe our brand, particularly the Crocs brand which is a highly democratic brand, should be represented where the consumer is shopping. Walmart.com is the second largest marketplace in the U.S. market relative to Amazon as Flipkart is in India. So, we think those are important platforms for the brand to be represented on. But obviously the product needs to be appropriately segmented relative to the consumer that's shopping on those marketplaces. So, hopefully that kind of answers that question. In terms of promotional activity, what are you getting at there, Sam? What are you trying to elucidate? Sam Poser: Well, I'm just asking, really it's more about the U.S. guidance. But I mean, are you seeing, you talk about a weaker consumer. So, I'm wondering if you need to get, if you're anticipating needing to get more promotional or, I'm just, how you're looking at the marketplace and then how do you look towards Crocs and HEYDUDE responding to that? Andrew Rees: Yes, I think, so what I would say is look, the market is more promotional than it was sort of last year, I would say, and certainly more promotional than it was coming out of the pandemic. I would say it's kind of returning from my perspective to what it was pre-pandemic, which is key promotional periods are super important. And the marketplace gets pretty down and dirty during those key promotional periods. As we've talked about with an accessible brand, we believe you have to participate in those promotional periods to get your fair share of consumer spending. And we've been doing that and we'll continue to do that. I'm not sure at this point we're anticipating an increasing trajectory of promotions in the back-half. That is not the reason for the difference in terms of anticipated growth rate for the first-half to back-half. So, I think we kind of see it as status quo and we see our strategy as status quo, hope that helps. In terms of your specific question about Barbie, look, it was a nice performing product and we really enjoyed the advent of pink being a really great color last year. And we have a lot of color in our brands, it was great. But the specific Barbie collab and comping that or not comping that is not driving any impact in our business. Operator: The next question comes from Laura Champine of Loop. Please go ahead. Laura Champine: Thanks for taking my question. It's really about the long-term prospects for HEYDUDE with kind of a short-term kicker of when do you think your new leadership there should be able to make a material impact in the growth trajectory of HEYDUDE, but also how has your experience with HEYDUDE over the last nine months, call it, influenced your thoughts on the long-term growth potential of the brand? Andrew Rees: Yes, great question, Laura. So, what I would say is we are extremely bullish against long-term perspective or projections for HEYDUDE and as bullish as we were when we bought the brand. We, obviously over the last several months it has not performed as we had hoped it would, particularly here in the U.S. marketplace. And I think we've talked at some length about some of the things that I think we did wrong associated with that. That does not change our long-term perspective on the brand. We think the value proposition that the brand brings to the table, lightweight, comfortable, easy on and off product, that is extremely compelling from a -- to the consumer that we can make in many different colors, fabrications, flavors, et cetera, with a really effective consumer engagement strategy and marketing strategy, we think has a lot of potential against today's consumers. And really everything we continue to kind of learn about the brand and the innovation we can bring in certain areas of the product line is reinforcing that. So, I would also note, despite the brand not meeting our current ambitions, it's making an extremely solid contribution to our overall financial picture in terms of revenues, margin and profitability. So, but not reaching our ambition for the brand. And I think we're very confident in the team we have in place, the strategy we have in place that we will be able to reach a full ambition for the brand. And so, I think we're -- in a nutshell, we're as confident and as enthusiastic about the brand as we were when we bought it. Operator: The next question comes from Ashley Owens of KeyBanc Capital Markets. Please go ahead. Ashley Owens: Hi, thanks for taking the question. I just want to touch on gross margins a bit. We've seen some pretty solid expansion in both brands for the first-half of the year. Just how should we be thinking about modeling that for the balance if we're still seeing similar levels of expansion in the back-half as we did in the first-half? Just any puts and takes you could provide color on would be helpful. Thanks. Andrew Rees: Yes, Susan will answer this. Susan Healy: Great. Hello, Ashley. So, at the enterprise level, we expect gross margins to be up for the year end for the second-half, but not at the same rate as the first-half, basically due to the harder compares. So, if we kind of look at it brand by brand, for Crocs, we expect it to be up slightly year over year as we start to anniversary some bigger freight gains from last year. And on the HEYDUDE side, we're expecting Q3 margin to fully recover when we compare it to two years ago. Operator: The next question comes from Mitch Kummetz of Seaport. Please go ahead. Mitch Kummetz: Yes, thanks for taking my question. Andrew, how is the spring '25 order book coming together and do you expect HEYDUDE North America spring orders to be up or down? And then just as a follow-up to Jonathan's question earlier, Susan, you mentioned the wholesale order shift. Can you quantify that perhaps? Thank you. Andrew Rees: Yes, thanks, Mitch. I think, look, we don't comment consistently on future order books, but I would say, look we're satisfied with, obviously, as you're well aware, we're outselling spring '25 currently. I would say retailers, as you would expect, are buying somewhat cautiously given the current trajectory of the business and what they see for the remainder of the year. That's really a domestic comment. As we look at our Crocs order book domestically and globally and the strength of our spring '25 line, we're happy with where it's at and we'll obviously get into spring '25 and we'll tell you more about that in the future. From a HEYDUDE perspective, we're excited about the line that we're bringing to the table in spring '25 and we're getting a lot of positive feedback against some of the innovation that's embedded within our product strategy and we plan to support that with really compelling marketing and drive consumer engagement. Susan Healy: And on the specifics about the orders that we shipped earlier last year in Q3, we don't break that out specifically, but that is definitely embedded in our guidance of being down 14% to 16%. And when you think about the impact that has on the year-over-year compares for Q4, that's part of what's providing that lift that the implied guidance gives you for the full-year. Operator: Our next question comes from Jay Sole of UBS. Please, go ahead. Jay Sole: Great, thank you. Andrew, I'm just wondering if you can elaborate a little bit on the China business. You made a few comments, but China for Crocs brand being up 70% on top of triple digit growth last year, could you talk about your progress in that market, where you're pleased, maybe where there's more opportunity and what kind of growth do you expect going forward? Thank you. Andrew Rees: Yes, I think we talked a lot about it over the last 18 months. We're really excited by the trajectory that we're seeing in China. At the heart of it is we've driven brand relevance. We've made the Crocs brand and particularly the clog and personalization of the clog relevant to the Chinese consumer. We've done that mostly through, I would say, digital and social marketing. And we've really established a very strong platform in the Chinese market. That's driven strong growth across our channels, right? That's driven strong growth, very strong growth and triple digit growth last year, and 70% in Q2, as you highlighted in your question, across channels. So, that's been both digital. So, it's Tmall, Douyin, and all the other digital platforms. It's what we book as wholesale, which is to franchise partners that then sell through monobranded stores. So, those monobranded stores are seeing comp store gains. Those franchise partners are also opening more stores. So, that's been driving the wholesale growth. And we've had some modest incremental growth in our retail fleets, where we're focusing on both what we call energy stores in the major metropolitan areas, China, sorry, Shanghai and Beijing and a couple of other tier one cities, and also tier one outlets, which we think are also important in the Chinese market. So, growth across all channels. As we look forward, while we're not quantifying future growth expectations. Our anticipation is we will see sustained growth over multiple years in the Chinese market. We're still very much underpenetrated relative to the size of the market. And we think that growth will come across all channels, but I think the largest component of the growth will come from our wholesale sales as our partners open more stores and we drive more store penetration across the Chinese market. Our anticipation is we'll penetrate sort of tier one, tier two cities in the next two to three years. We're not anticipating a lot of business below two tier cities. We want to really keep the quality of our business high and focused on the higher demographic portion of the market. Operator: Our next question comes from Jim Duffy of Stifel. Please go ahead. Jim Duffy: Well, thanks for taking the follow-up. Two quick ones, if I may. With sandals and the more sneaker-like product, what are the important read-throughs on D2C adoption and how's that translating to wholesale engagement? And then secondly, on capital allocation, cash flow has always been one of the hallmarks of the model, net leverage now within your targeted range. Is there any shift in priority between reducing leverage and increasing the share buyback? Thanks. Andrew Rees: Okay, all right. So, I'm going to hit sandals, and then, Susan can hit capital allocation. So, from a sandal perspective, we have been happy with our sandal performance during Q2. So, I think some strengthening relative to the Q1. That's driven by that kind of fashion-oriented sandal. So, we made introductions of a couple of new collections that have been performing well. The Getaway, which is a comfort fashion sandal, and the Miami, which is more of a fashion sandal, those have been performing well. And, we have been kind of chasing some inventory. We have also driven some innovation into the Brooklyn, which has been a longstanding franchise as the wedge or elevated fashion sandal. We have introduced a couple of new models in that that have been performing well. Including a personalized sandal where the consumer can add charms to the sandal to really dress it up. So, we think that that's been performing well in our penetrated markets or our key Tier 1 markets. And, we are confident that sandals continue to drive a long-term growth trajectory for the brand. The sneaker-oriented product is really all about testing and experimentation. We did introduce the Juniper with Salehe Bembury during the quarter. We highlighted that in our prepared remarks. It's small -- very, very small. But it's really the sort of pinnacle offering. And, we continue to experiment and test the whole range of kind of sneaker-oriented silhouettes. That's a longer-term strategy. But, it's important that we continue to innovate in that arena. Let me hand it over to Susan for capital allocation. Susan Healy: Gosh. So, Jim, you asked about debt pay down and share buyback. And the short answer is we like both. And, we are planning to do both in the back-half of the year. We are fortunate to have a business with very strong cash flow. And, we are also within our net leverage target range of 1 to 1.5 times. So, that gives us the flexibility to deploy capital both ways. And in answer to your question, no change at this point to that target. We really like where we are from a cash flow and liquidity standpoint. Operator: Our next question is a follow-up from Baird. Please go ahead. Jonathan Komp: Hi, thank you. Just one more follow-up, but I wanted to ask a bigger picture question around the philosophy for the SG&A investments. And, obviously, this year is a year in which you are planning to grow revenue 3% to 5%. And yet, you are spending almost 20% higher SG&A for the year. So, could you just maybe remind us your overall philosophy? And as we lookout, is there hope that these investments drive faster revenue growth, and any color there in terms of the overall strategy? Thanks. Andrew Rees: Great question, Jon. So, obviously, we are starting off -- I would say we are starting off from a base of extremely high profitability, right? So, even this year with that distorted investment profile that you just highlighted in your question, we'll achieve kind of 25.5% in terms of EBITD margin, extraordinary level relative to our peers in the industry which we are in, and obviously, that's due to the very high gross margins we experienced on our Crocs brand and also the efficiency of our business model. In terms of philosophy going forward, I think there will be periods of time when we choose to invest in SG&A. Both variable and SG&A because of our marketing is variable and can be turned on and off at any point in time. And where we will make investments in talent and people and infrastructure and capabilities that we think would be important for the future. The intent of those investments is to support and -- sorry, support and guarantee -- you know guarantees don't work. But, assure long-term growth. So, we are trying to build in a company and a brand that has long-term growth potential and can continue to grow for many years to come. So, I would say there will be periods of time when we distort an SG&A. There were periods of time when we leverage SG&A. And, that's kind of how we think about it from a long-term philosophy perspective. Jonathan Komp: Okay. Operator: That concludes our question-and-answer session. A - Andrew Rees: Look, I just want to say thank you. Operator: I would like to turn the conference back over. Andrew Rees: Okay, sorry, jumped the gun a little bit there. Thanks everybody for thoughtful questions. And, thank you everybody for joining us today and their interest in our company. So, I really appreciate it. Operator: The conference has now concluded. Thank you for attending today's presentation.

Operator: Good day, and welcome to the Crocs Inc. First Quarter Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Vice President of Investor Relations and Strategy. Please go ahead. Erinn Murphy: Good morning, and thank you for joining us to discuss Crocs, Inc. first quarter results. With me today are Andrew Rees, Chief Executive Officer; and Anne' Mehlman, Executive Vice President, Croc's Brand President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask that you limit to 1 per caller. Before we begin, I would like to remind you that some of the information on this call is forward-looking and accordingly, is subject to the safe harbor provisions of the federal securities laws. These statements include, but are not limited to, statements regarding our strategy, plans, objectives, expectations and intentions, including our financial outlook. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially. Please refer to our quarterly report on Form 10-Q and other reports filed with the SEC for more information on these risks and uncertainties. Certain financial metrics, as we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I'll turn the call over to Andrew Rees, Crocs, Inc. Chief Executive Officer. Andrew Rees: Thank you, Erinn, and good morning, everyone. Thank you for joining us today. We reported very strong first quarter results, which well exceeded our guidance on both the top and bottom line. Revenue grew by 7% to prior year for the enterprise, led by outsized Crocs brand growth of 16% and HEYDUDE brand also performed ahead of guidance. Adjusted gross margins of 56% improved 180 basis points versus prior year, and we grew our adjusted earnings per share by 16% and to $3.02. Our growth strategy remains consistent, and we are focused on 3 primary initiatives from an enterprise perspective to fuel durable and consistent growth. One, ignite our icons across both brands to drive awareness and global relevance for new and existing consumers; two, drive market share gains across our Tier 1 markets through strategic investment behind talent, marketing, digital and retail; and three, attract new consumers to our brands through methodically diversifying our product range and usage occasions. Before I discuss more detail on the quarter, I want to start by saying how pleased I am to announce the hiring of Susan Healy as Executive Vice President and Chief Financial Officer. Susan is a seasoned financial professional and a Wall Street veteran with broad exposure to the consumer sector, including Ulta Beauty, where we served as the SVP of Finance for 5 years. Most recently, Susan served as a public company CFO for IAA, a global marketplace for automotive buyers and sellers. We have a deep finance bench, and I'm excited about Susan's leadership and expertise. I look forward to working with her and for the investment community to get to know her in coming months. Starting with the Crocs brand, our socially led digital-first marketing playbook continues to win with consumers across the world. And the first quarter was no exception. In the U.S., we ranked in the top 10 footwear brand in the Piper Sandler taking stock with Team Spring Survey, taking the #7 spot and maintaining our mind share year-over-year. This marks over 4 years of being a top 10 brand for the U.S. teen consumer. The democratic nature of our brand allows us to create a broad array of consumer moments that drive brand affinity and engagement through our partnership model. During the quarter, our successful range from Toy Story and Hello Kitty to Clog, a Chinese streetwear brand. Our Toy Story Collection was one of the most successful licensing partnerships to date with global offering available across select wholesale partners and our own DTC. In addition, we launched our second collaboration with Simone Rocha, a luxury brand. Our 7-Style collection was priced between $175 and $225. It launched in 20 markets and sold out globally almost immediately. As we think about product, we continue to prioritize our 3 pillars: clogs, sandals and personalization. Growth in our first quarter was led by our classic clogs and we are seeing both new and existing consumers come to the brand through our icons. Our Kids business was another highlight with double-digit growth in the quarter. We continue to create multi-product franchises that broaden usage occasions for the consumer. Building on the success of our Echo Franchise, we launched the Echo Storm, a fully-molded sneaker. This launch in our DTC channel as well as Foot Locker and JD Sports during the quarter and performed well. In fact, 59% of our Echo Storm purchases and our own dot-com with new consumers. Just in time for NBA All Star weekend, we further expanded visibility of our Echo Franchise through the Crocs NBA slide and players like Nikola Jokic to Steph Curry were spotted wearing them. During the first quarter, we rolled out 2 new sandal franchises, the 2.0 Version of our Classic Slide and Two Trap and the Getaway. The Getaway leverages our newest proprietary material known as free-fill technology. Within this franchise, we have seen positive momentum with the strappy and the flip styles and have found that these resonate with a broad consumer segment. For the year, we continue to expect sandals to grow in excess of our overall growth and increase in penetration. Our personalization vehicle Jibbitz grew double digits in the quarter, led by growth in Asia. We continue to see ample white space for personalization and our strategy is focused around 3 pillars: number one, driving higher penetration within digital and wholesale. Two, continuing to create product freshness through our elevated Jibbitz, including Metallic, texture and [ shimmering ] and free speed to market. Moving on to distribution strategy. We are pleased by the broad-based strength across geography and particularly in several of our Tier 1 markets. The North American market was well ahead of expectations and took meaningful market share during the quarter. North America revenues grew 9% versus the prior year, supported by underlying strength in wholesale sellout and better-than-expected trends in our DTC channels. International grew 24% versus prior year. And once again, we saw triple-digit growth in China and Australia. Our direct markets in Western Europe grew double digits, led by growth in the U.K., France and Germany. We continue to have significant opportunity in China, and we remain bullish on our long-term growth prospects. During the quarter, we won our First-ever Super Brand Day on Tmall and announced our 2 new brand ambassador for 2024, [ Liu Yuxin ] and [indiscernible]. Liu Yuxin announcement came ahead of International Women's Day and featured a classic Geo Clog. This campaign drove substantial reach and continue to create buzz with the domain community. [indiscernible] played into our Clog relevance with a robust campaign on Super brand A, generating 1 million views during a 1-hour live stream and drove Crocs to the #1 spot within the women's footwear category on Tmall. Our corporate responsibility efforts continue to progress. We are expanding our Old Crocs New Life consumer Takeback program to all Crocs stores in the U.S. This fall, we're furthering our circularity commitment by repurposing materials from well-loved Crocs in the form of a new limited edition Classic Clog. As it relates to the HEYDUDE brand, our focus for 2024 is on solidifying the business and establishing the Wally and Wendy as iconic franchises for the consumer. We have worked to maintain price integrity on digital, improved channel inventories and create more segmentation across wholesale partners. Our overall first quarter performance largely played out as we expected. We strengthened March, driving slight upside to our guided revenue range. That said, performance around Easter and into April has fallen short of expectations with sellout rates softening in wholesale. Based on the visibility, we have quarter-to-date and given the choppy retail environment, we're taking a more prudent approach around trends for the balance of the year. As we have discussed, our focus is on making sure we end the year with sell-in and sellout trends converging, and we have better segmented inventory in the channel. Before I discuss a few Q1 highlights, I'd like to touch on our recent leadership announcement. Several weeks ago, we announced a new brand President for HEYDUDE, who we see as a strong leader for the next phase of growth for the brand. We are thrilled to be welcoming back Terence Reilly to our Crocs Inc. family. Terence started last week and brings with him a best-in-class reputation from brands, including Stanley and Crocs. In addition to providing global leadership perspectives, he has a proven-track record of creating and executing ground building playbooks by leveraging iconic products, driving brand relevance and ultimately building communities. Now turning to Q1 highlights. HEYDUDE was the #8 preferred footwear brand in the Piper Sandler, Taking Stock with Teen Survey this spring, consistent with this rank last year. From a product perspective, we continue to establish our Wendy and Wally icons through color, graphic, height, which proved successful during the quarter. In Q1, we expanded our collegiate program to 5 additional schools just in time for March Madness. We also launched the Big Lebowski, an online exclusive, the unique collaboration so in process sellout with 80% of consumers need to brand. Our sneaker franchise gained a new addition with the Hudson for Him and Hudson Lift for Her. We chose to introduce the new silhouettes in our own DTC channels and with an exclusive wholesale partner. We saw the Hudson Lift quickly become a hit for our younger female consumers who continue to choose height while maintaining a brand promise of lightweight comfort. From a distribution perspective, we opened 6 new outlet locations with the HEYDUDE brand. Overall performance is in line with our expectations, and we plan to open it approximately at 30 outlets this year. On the wholesale side, we're pleased with the work we have done to clean up our account base. Our go-forward focus is around improved customer segmentation. Finally, we have introduced a brand to the U.K. and Germany, supported by dedicated digital sites as well as placement with key wholesale partners in both markets during Q1. These launches were supported by key influencer and media events. While we're starting to see the awareness of the brand internationally, our priority in 2024 is around improving the long-term health of the North American market, as we build our core offering and drive heat for the brand. We have laid plans to continue to invest behind marketing, talent, digital and retail to further support our market share opportunity. While our near-term plans for HEYDUDE are taking longer to play out, our record Q1's performance led by Crocs, showcases, the diversification of our portfolio and enabled us to raise our earnings per share outlook for the year. We will continue to make [ offensive ] investments fueled by strong gross margins to set ourselves up for long-term growth and durable market share gains. I will now turn the call over to Anne to walk through our financials for the quarter. Anne Mehlman: Thank you, Andrew, and good morning, everyone. I am extremely pleased with our first quarter results, which exceeded the high-end guidance across all metrics. We generated $939 million in consolidated revenues growing almost 7% over last year, led by the Crocs brand. For the quarter, adjusted gross margin gained 180 basis points to 56% and adjusted operating margin was 27.1%. Adjusted earnings per share of $3.02 came in well ahead of our guidance of $2.15 to $2.25. For the Crocs brand, revenues were $744 million, growing 16% relative to prior year, driven by DTC growth of 19% and a wholesale growth of 14%. Brand ASPs were up 11% to $23.36. The brand sold 32 million pairs of shoes, an increase of 3% versus last year. By geography, North America revenues were ahead of our expectations and gained market share, growing 9% versus the prior year to $383 million. Growth was led by DTC at 13% and wholesale was up 5%, driven by strong double-digit growth in brick-and-mortar. During the quarter, our North American wholesale partners opted to take product earlier than we had previously anticipated based on the strong solid performance of the Crocs brand. International revenues of about $361 million were up 24% from 2023, led by DTC growth of 37% and wholesale growth of 20%. As Andrew noted, Australia and China grew triple digits again this quarter. We saw strong double-digit growth in our direct markets in Western Europe with growth led by the U.K., France and Germany. Turning to HEYDUDE. Revenues were $195 million, ahead of our guidance but down 17% from last year. The brand sold 7 million pairs of shoes, a decrease of 21% from last year, as we last pipeline fill and focused on improving our full price selling. HEYDUDE average selling price was $27.68, up 5% from last year. Relative to Q4, our Q1 marketplace ASPs were up 10%, a continued tailwind from reduced price matching online. Wholesale revenues were down 20% from last year as we focused on continued inventory management in the channel. The DTC channel was down 11% as a result of prioritizing brand health through higher ASPs. Consolidated adjusted gross margin for the first quarter was 56%, up 180 basis points from last year. Crocs brand adjusted gross margin was 58.1% or 180 basis points higher than prior year. During the quarter, the primary drivers of margin expansion were lower inbound freight and favorable product costs coupled with select price increases internationally and lower discounting. HEYDUDE brand adjusted gross margin came in at 47.8%, in line with our expectations but 180 basis points below prior year, driven by investment in distribution and logistics partially offset by reduced rates. Our first quarter adjusted SG&A dollars increased 16% to prior year. Our SG&A rate was 28.8% and up 250 basis points compared to prior year, driven by continued investment in talent, marketing and DTC to support long-term market share gains. Our first quarter adjusted operating margin declined 80 basis points to 27.1% compared to 27.9% for the same period last year, but was favorable to our expectations on higher gross margins and favorable revenue, leveraging our cost base. First quarter adjusted diluted earnings per share increased 16% to $3.02 and our non-GAAP tax rate was 17.2%. We ended the quarter with clean inventory on our balance sheet and in our channel. Our inventory balance on March 31, 2024, was $392 million, a decline of 18% against this time last year. We are pleased that both brands achieved inventory turns at our goal of 4x. Our liquidity position remains strong, comprised of $159 million of cash and cash equivalents and $484 million of borrowing capacity on our revolver. As a reminder, Q1 is a high net working capital quarter, and we typically limit buyback and debt paydown activity. As a result, we ended the quarter with total borrowings of $1.7 billion and remain with our net leverage target of 1 to 1.5x. In 2024, we intend to buy back stock and pay down debt, enabled by our best-in-class cash flow generation. Now turning to guidance. For Q2, we expect consolidated revenues to be up 1% to 3% at currency rates as of March 31, with the Crocs brand growing 7% to 9%, but almost entirely by international growth. As I mentioned earlier, several of our North American wholesale partners opted to take product earlier in Q1. We expect HEYDUDE revenue to be down between 19% to 17%, extrapolating the trends we are seeing quarter-to-date. We expect adjusted operating margin to be approximately 26.5% and adjusted diluted earnings per share of $3.40 to $3.55. For the full year 2024, we are raising our underlying earnings per share outlook supported by the strength in Q1. We are maintaining our revenue outlook of growth between 3% and 5%, assuming quarter-end currency rates. For the Crocs brand, we now expect revenues to grow between 7% and 9% from our prior expectation of 4% to 6% and with growth continuing to be led by international. For HEYDUDE, we expect revenues to contract down 10% to down 8%, below our former expectation of flat to slightly up. We expect HEYDUDE sales trends to improve each quarter and expect the sell-in and sell-through dynamic to normalize into Q4. As we discussed in our Q4 call, we expect wholesale to be negative for the year and DTC trends to be better than wholesale. As it relates to retail, we plan to open approximately 30 stores in 2024, 6 of which were opened during Q1. We expect gross margin to be up for 2024 versus 2023 at the enterprise level. Based on the strength in Q1, we now expect Crocs brand gross margin to be up for the year and continue to expect HEYDUDE gross margin to be up for the year. We plan to invest into brand accretive and strategic SG&A initiatives, resulting in consolidated adjusted operating margins for the year of approximately 25%. For full year 2024, we still expect our underlying non-GAAP tax rate, which approximates cash taxes paid to be approximately 18% and GAAP tax rate to be 21.5%. We are raising our non-GAAP diluted earnings per share to a range of $12.25 to $12.73 in 2024 from $12.05 to $12.50 previously. This range incorporates future debt repayment, but does not assume any impact from future share repurchases. Our annual capital expenditure guidance of $120 million to $130 million remains unchanged, and we continue to expect exceptional cash flow generation. At this time, I'll turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. We are pleased with our strong first quarter results and believe that our brands and strategies can and will continue to win. With the investments we have made in talent and marketing, I'm confident in driving long-term market share gains. At this time, we'll open the call for questions. Operator: [Operator Instructions] The first question comes from Jonathan Komp with Baird. Jonathan Komp: I'll just ask maybe a 2-part question. Andrew, if you could talk a little bit more about HEYDUDE, if you've been able to isolate some of the recent softness, maybe what's related to the environment or background versus anything new brand specific? And how should we think about D2C trending within the new guidance for HEYDUDE here? And then just separately, Crocs North America, could you comment on what you're seeing in the D2C performance and how you're feeling about the pipeline looking forward there? Andrew Rees: Great. Thank you, Jonathan. So yes, I think what I'd say on HEYDUDE is we had really -- we had a good Q1. We came in slightly ahead of our expectations and the guidance we provided. It was solid. But what we've seen from Easter into April is really a softening of our wholesale sellout, which has made us nervous. I think part of that is maybe lack of promotion. We tried to be less promotional during the Easter period than we were the prior Easter. Easter early is also always tough, so I think we might have made some missteps relative to what we were going to do relative to the market. But we can see continued softness, and we are concerned about the robustness of the consumer market. So as we've talked about our goal for 2024 for HEYDUDE wholesale is to get sell-in and sell-out and balance to get our inventories down in the channel and make sure that we're driving a really healthy business for our wholesale partners. So I think at this point, it's prudent to take down our expectations and manage the business accordingly. I'll let Anne hit on the DTC trends. Anne Mehlman: Yes. And Jonathan, just to answer your specific question around retail contribution for HEYDUDE. So as we think about just the HEYDUDE guidance, just to give you a little bit more flavor there, so the building blocks for the year, right, we're opening approximately 30 stores, and we expect that revenue contribution to build throughout the year. And then obviously, that's supported by a strong pipeline of new products and new product introduction. But at the highest level, we still expect wholesale to be down for the year but -- and DTC to perform better than wholesale. And then when you kind of think through that and Q4 will be the strongest in terms of revenue growth because of that retail contribution. We will also easier [ lack ] wholesale comparisons, and then we will realize some selling ahead of select international markets. So just as you're thinking through your HEYDUDE kind of revenue trend for the year. And then on the Crocs side for DTC, we saw 13% growth from a DTC perspective in Q1, which in North America, which was definitely better than our expectations. That was really supported by really good product and continued pipeline of that. I feel great about the pipeline for product kind of coming out of Q1. We do expect Q2 to be more muted for North America growth as Q1 was supported by the Easter shift Andrew talked about as well as leap year, so we had an extra day there. Jonathan Komp: Great. And best of luck Anne in the new role. Anne Mehlman: Thanks Jon. Operator: The next question comes from Adrienne Yih with Barclays. Adrienne Yih-Tennant: Congratulations on a nice start to the year. I guess my first question is on the forward order book. You talked about seeing sort of earlier deliveries or earlier shipments, that's typically a channel that's improving on visibility. And I get that it shifts from one place to the other. But generally speaking, is the quality of the conversation and everything that you're hearing about fall and beyond sort of starting to get more optimistic? And then my second follow-up is, I can't believe I'm asking this, -- but your inventory is down 18%, very, very clean. What would need to happen sort of as you're looking at the channel and I know there's a lot of consumer uncertainty for you to start kind of working that down 18% back to maybe a more normalized level? Or is it at a normalized level? Andrew Rees: Great. Adrienne, so what do I say for -- I think you're trying to get at, what is the reason for the pull forward and how are our customers or how our big retailers are feeling about the back end of the year. I think really, I probably answer that in 2 pieces. I think the reason for the pull forward was they were seeing strong sell-through on the Crocs product. They're not seeing strong sell-through on all of their brands. So they wanted more product earlier. I think they have probably underestimated kind of the Easter shift, and we're trying to pull stuff in earlier. So I think it's a closer in assessment of the market than then kind of saying that we're off to the braces, and this is going to be a strong market for the rest of the year. I think it's really a sort of quarter-to-quarter adjustment. What I would say is from a -- we feel great about our order books, our order books are definitely solid for both brands, and they support the underlying guidance that we provided. But I would not say that channel is super buoyant about the back end of the year yet. I think we're looking for more definitive signals. Anne Mehlman: Yes. And then the inventory question and welcome, by the way. But the inventory question is really related to -- so the 18% down. We feel really good about inventory. We think that's the right level because we're at kind of 4x turns for both brands, which is where we target inventory turns. For the rest of the year, I don't expect it to be down 18%. Q1 last year, we were still cleaning up some of our inventories on the HEYDUDE side. And then even on the Crocs side, we were still kind of just starting to see transit times return to normal. So I actually expect that to be much flatter year-over-year. in Q2 and then moving throughout the year. So the best way to kind of look at it for us is to model about 4x turns. Operator: Next question comes from Jim Duffy with Stifel. Jim Duffy: I have a question on Crocs and then one on HEYDUDE margins. Starting on the Crocs brand, can you speak to the regions responsible for the more optimistic view on brand revenue and the factors behind the changes in Crocs margin assumptions? Anne Mehlman: Jim, so on the Crocs revenue assumptions, obviously, as we move through, we had a better Q1 than anticipated really on the North America side. And then as we get into Q2, we definitely have pretty good visibility into order books, and we can also see DTC trends. So I would say -- I think the other thing is we're really seeing our international markets do very well, as we talked about China, Australia, but also some strength in Europe, so that gives us confidence, and that's really what led to the revenue raise. On the gross margin side, we saw a couple of things. One, we saw some better full price selling in which supports that overall gross margin. We also have seen a little bit of input cost pressure relief on the Crocs side. And so we've seen our costs as we negotiate those kind of in the first quarter come down. And so we've taken those assumptions for the remainder of the year as we kind of look through that. So those are really supporting the higher gross margin assumptions on the Crocs side. Jim Duffy: Got it. And can you speak to the HEYDUDE margin revenue for 2024. Does the lower revenue come with incremental margin pressure? Or is there some place where you have savings as an offset? And then, Anne, the GAAP charges for the HEYDUDE ERP implementation is new. Can you talk about that effort, the timing, the rationale and so forth? Anne Mehlman: Sure. Andrew Rees: Yes. So from a margin -- we're not anticipating incremental margin pressure from the lower revenue, some of the revenue reduction for HEYDUDE. I think we -- the margin is sort of playing out our pricing, promotional strategy, our channel mix is playing out pretty much where we thought it would be. And obviously, the reduction is really coming from wholesale revenues and so as our DTC revenues are obviously higher margin than wholesale revenues, we don't see a margin reduction. We think our margin guide is good for HEYDUDE, and I'll let Anne talk about the ERP. Anne Mehlman: Yes. And one thing supporting those gross margins that kind of I'll talk about that relates to the ERP is actually, we've implemented that -- or we've taken live the new HEYDUDE Las Vegas warehouse, which is shipping our distribution center. And so that, obviously, throughout the year, will support us being more efficient on the HEYDUDE side for storage and things like that. From that is also related to -- we implemented that new DC, and we also implemented technology for HEYDUDE. And so we took an impairment on the other piece related to that technology implementation. As we are now live on technology for HEYDUDE. So really excited about that. Operator: The next question comes from Chris Nardone with Bank of America. Christopher Nardone: For HEYDUDE, do you mind just clarifying if your 2Q guidance reflects the trend you're seeing quarter-to-date? Or if there's an improvement embedded in the guidance? Then as a follow-up longer term, I recognize Terence just took over the President's role last week. But do you envision major strategic shifts in how you'll run the brand? And if so, can you elaborate on maybe some of his early plans? Anne Mehlman: Yes. So let me talk through HEYDUDE guidance and then I'll -- Andrew will talk through the other piece. So on HEYDUDE guidance, it reflects the current trends that we are seeing. So we are not anticipating an improvement for Q2 at this time. Andrew Rees: Great. Thank you, Anne. So Terence has obviously been on board essentially 1.5 weeks at this point. So I think it's not fair to him to have articulated a new strategy. But I would say we do not anticipate dramatic strategy shifts. I think as we've been working together on kind of the key pillars within this strategy, we're very much aligned that it's going to be really about the Wally and Wendy our iconic franchise. We think that franchise is incredibly relevant to a broad base of consumers. And really, what we need to do is a better job around engaging the consumer and making the HEYDUDE brand and that franchise, those iconic franchises more relevant for more consumers. And I think that's the same strategy we put in place for Crocs a number of years ago where we wanted to make the classic relevant for more consumers around the world, which is what we've done. So we don't see a major strategy shift from a product perspective, from a marketing perspective or from a distribution channel perspective. Christopher Nardone: Okay. Got it. And then just as a quick follow-up. Can you just talk about your confidence in the gray market issues on Amazon abating by midyear, which was your prior message? Any change to that? Andrew Rees: So we're still seeing a headwind from gray market for HEYDUDE on Amazon. We anticipate that will continue through the first half of the year and that headwind is embedded in the guidance that we provided. Operator: The next question comes from Laura Champine with Loop Capital. Laura Champine: I'd like to drill down into what's happening with the HEYDUDE Direct business. I mean I think you mentioned a shift to more full price selling. I'm wondering what happened with units in that business? And I'm also wondering how long you would expect that business to be pressured by a shift in your ASP goals? Andrew Rees: Yes. So you're essentially right, Laura. So as we've raised prices in our HEYDUDE Direct business, which is mostly on Amazon, where we're a 3P seller for HEYDUDE. We have seen a drop in units. We expected that. And I think net-net, that's been productive for the brand and productive for our margin ends, but we have seen a drop in unit sales. I would say, as we're introducing new products and our marketing is kicking in for HEYDUDE, there's some evidence that, that will mitigate over time. Laura Champine: Got it. And is over time -- I mean, is an improvement in the direct business implied in your full year guidance for HEYDUDE or not? Anne Mehlman: So I would say what we have said is that our full year guidance that our direct business, which includes our Marketplace business, our own dot-com as well as our retail business will outperform our wholesale business this year. And so that's included in our full year guidance. Operator: Next question comes from Rick Patel with Raymond James. Rakesh Patel: Guidance for operating margins was maintained at 25% for the year despite plans for the first half to shake out a little bit ahead of that. Can you just provide color on what you think could weigh on margins as we think about the back half in terms of perhaps the timing of investments or SG&A deleverage just given your updated sales guidance for the next few quarters? Anne Mehlman: Yes. I think I'm really pleased with our operating margins. Obviously, they well outperformed in Q1. So we're maintaining approximately 25%, but obviously, that implies a little bit higher approximately 25% if you look at our EPS guidance. I feel very good about the factors there, which are really supported by high gross margins allows us to invest in our business. We're anticipating quite a bit of investment. So I feel very confident in that approximately 25% operating margin. Rakesh Patel: And can you also talk about what's implied in guidance for the Crocs brand as we think about ASPs versus units going forward? I'm just curious how we should extrapolate the very strong performance in 1Q. Anne Mehlman: Yes. I think from a Crocs brand perspective, obviously, we don't guide based on that. We saw nice unit and ASP growth in Q1. We don't have any more planned price increases currently for this year. We had a little bit of international price increases flowing through in Q1 and which will flow through to Q2 that should actually abate a little bit in Q3 and Q4. So I think I feel confident in the guidance that we provided. That's kind of all the color where we need to give at this point. Operator: And the next question comes from Jim Chartier with Monness, Crespi, Hardt. James Chartier: I was wondering if you could talk about HEYDUDE performance on your own e-commerce site versus the marketplace business, if there's any meaningful difference between the two? And if so, what drove the divergence? Andrew Rees: Yes. We don't obviously give -- we obviously don't break that out. But just a little bit of color, we're happy to provide. Because we're able to introduce a lot of new products more quickly and our own dot-com we give you some limited drops on our own dot-com. I think we had corona running last week, which was a collaboration that we did for HEYDUDE. We did the Lebowski earlier, and we've also had some new product introductions and testing that we do pull forward styles that we think is going to be exciting to the continue and contest in that environment for releasing them more broadly. Yes, our own dot-com has been performing better than the marketplace, and we anticipate that trend will continue. James Chartier: Great. And then -- and I think you mentioned for fourth quarter could benefit for HEYDUDE from sell-in ahead of some international markets. Are those just the U.K. and Germany? Or are there additional markets that you're planning for next year? Anne Mehlman: Yes, that's a great question. So we do have some select distributors that we sell to and that we will be selling to. So the U.K. and Germany are direct -- more direct markets for us. So it's really -- that's really a comment around the distributor revenue for HEYDUDE. Operator: And the next question comes from Mitchel Kummetz with Seaport Research. Mitchel Kummetz: On HEYDUDE, the change in the outlook there, is it fair to say that you've taken expectations down for both DTC and wholesale, but more so on the wholesale side? Anne Mehlman: Yes. Mitch, yes, I think wholesale definitely, that's been kind of the biggest gap with where we've seen our expectations originally versus the performance in March and April. I will say for Q3, we also -- HEYDUDE overall revenue is planned to be down year-over-year, which is a big change driven largely by negative wholesale. We do expect it to be sequentially better than Q2, but we do expect that kind of negative wholesale in Q3. So I think that's a fair assumption. Mitchel Kummetz: That's helpful. And then as far as the back half goes for HEYDUDE, I think the revised guide does assume kind of flattish sales, which would be a pretty big step up from the first half. Does that reflect better sellout rates in wholesale? Or is that primarily just DTC kicking in with the outlet stores, maybe some sell-in the fourth quarter for spring? Can you maybe just kind of walk through that, the assumptions around that? Anne Mehlman: Yes, absolutely. I think there's kind of 3 things really driving that. We [ lack ] easier wholesale comparisons in the back half from a sell-in perspective. The contribution from retail really builds and then the third piece, as I just mentioned to Jim, starting to realize sell in ahead of select international market launches. Those are international distributors that take place in Q4. So those are the 3 big pieces that really drive that change. If you look at it, I need to say this, but if you look at it on a 2-year basis, just because we had a little bit of lumpiness the year before, you can see that it's a little bit smoother than what it looks like on a year-over-year basis. Operator: The next question comes from Sam Poser with Williams Trading. Samuel Poser: Andrew, I've got a question. You said in regard to the change in the guidance on HEYDUDE that you were concerned about the robustness of the consumer. Can you discuss that on how that relates to both HEYDUDE and to Crocs? Andrew Rees: Yes. Yes. I mean if we look at -- so what I'm referring to there is if you look at kind of industry data, so the market data for the footwear market, it is clearly down I would say, mid- to high double -- single digits in the first quarter of the year, and we see that continuing week-on-week, right? So there are some brands that are doing better than the market. Crocs is one of them. There are others that are also well, well-known that it's doing substantially better than market. At this point, HEYDUDE is not doing better than the market, right? So they are definitely on different trajectories relative to the underlying market. I think the underlying market is a reflection of the consumer is spending less money on footwear. Samuel Poser: But they're spending more money on the stuff they really like. So wouldn't -- I mean I guess the question is, what do you guys need to do to, I guess, what was different than what you anticipated with the HEYDUDE brand? And then what do you -- rather than have it be just the market as you've done lots of good collabs and things like that, that have performed well, both with Crocs and with HEYDUDE, what do you guys have to do that can overcome that because you're overcoming that weak consumer with the Crocs brand, but you're not overcoming the weak consumer with the HEYDUDE brand? Andrew Rees: Exactly. So product and marketing, right? So we are optimistic about our pipeline of new product introductions for HEYDUDE, but some of them are unproven at this stage. And most of the new products is really Wally and Wendy, but we are new derivatives of. But I think in the Crocs, there will be improved marketing. And so driving brand relevance making the HEYDUDE brand relevant to more consumers. Operator: The next question comes from Tom Nikic with Wedbush. Tom Nikic: I wanted to ask about the outlet flows that you're opening. How are those stores being sorted, but is it mostly clearance and liquidation product? Is it specially made for the channel? Is the product being sold there? Any different than what you're selling in the wholesale channel? Just I just kind of love to hear what -- how you're thinking about merchandising... Andrew Rees: Yes. Great. Good question, Tom. So as we talked about, we've got 11 outlet stores opened at this point or through the end of March 6 that we opened in the first quarter 5 that we opened last year. The stores, the format is pretty consistent with kind of a lot of other footwear brands, I would say. The front of the store is essentially full-size runs. So the consumer actually can drive consumer satisfaction, they can definitely find a product that they want and in their size. Those full size ones will be a combination of newer products, sometimes even current product and also some slightly older products that we happen to have in the quality assortment of. And then in the back of the store is a essentially clearance product. And so it provides 2 vehicles for us. It provides one vehicle to educate the consumer about the HEYDUDE brand, allow them to find a product that they can buy and take away and enjoy and hopefully become a HEYDUDE brand fan. And then the back of the story allows us to liquidate old product at much higher prices that we'll be able to liquidate elsewhere and give the consumer incredible value in the back of the store. So I would say we're really happy with the way the store is working, and we've opened in a combination of markets. We've opened the markets that I would describe as sort of HEYDUDE heartland. We've also opened in markets that are a little bit more nascent for HEYDUDE. So we're using the stores to introduce new customers to the brand. And we're kind of happy that both are working. Operator: And the next question comes from Jay Sole with UBS. Jay Sole: Great. Andrew, I'm hoping -- can you elaborate a little bit on the performance of Crocs in China because triple digit growth is really strong. If I'm correct, I believe it's kind of low seasonality quarter, in China. So was there anything maybe related to timing or something that could have boosted that number? And then how are you thinking about spring? Do you think you can maintain really strong growth through the peak spring and summer seasons. And if you can tell us about that, that would be super helpful. Andrew Rees: Yes, that's a great question. Yes, the first quarter is not our sort this quarter in China, you're exactly right. It's a sort of counter seasonal quarter. It does build through the quarter. I think the one thing that is different this year, that we did call out in our prepared remarks is we did win a Super Brand Day on Tmall. For those of you not familiar, that's a process you go through to bid on that and to get selected. We were selected because of our brand heat, we were able to showcase the brand and really -- so that was a noncomp event and a substantial noncomp event in Q1, which is very productive. We do believe we'll be able to maintain a very, very strong growth rate in China through Q2 and the remainder of the year. That is driven by a growing digital presence and a growing consumer following, but also incremental store openings. We will plan to open a significant number of franchise partner stores with our partners this year. So we'll have incremental wholesale distribution in the China market, which will drive, I think, a very strong business for us. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Andrew Rees for any closing remarks. Andrew Rees: Thank you very much, everybody, for joining us and your interest in our brand. I just want to highlight that this is Anne's last earnings call. She may be happy about that, may not be happy about that, but Anne with the announcement and the joining of Susan Healy, who will join us on June 3, will be moving over to her full-time role as Crocs brand President. So I want to thank Anne for all her incredible contributions over the last 6 years. So thank you, Anne. Anne Mehlman: Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good morning and welcome to the Crocs Fourth Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Senior Vice President of Investor Relations and Corporate Strategy. Please go ahead. Erinn Murphy: Good morning, everyone, and thank you for joining us to discuss Crocs Inc. fourth quarter and full year results. With me today are Andrew Rees, Chief Executive Officer; and Anne Mehlman, Executive Vice President, incoming Crocs Brand President and current Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask you to limit to one per caller. Before we begin, I would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the Safe Harbor provisions of the Federal Securities Laws. These statements include, but are not limited to, statements regarding our strategies, plans, objectives, expectations and intentions including our financial outlook. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially. Please refer to our annual report on Form 10-K and other reports filed with the SEC for more information on these risks and uncertainties. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I will turn the call over to Andrew Rees, Crocs Inc. Chief Executive Officer. Andrew Rees: Thank you, Erinn, and good morning, everyone. Thank you for joining us today. 2023 was a record year for the Crocs Enterprise and we're starting off 2024 from a position of strength. Our teams are focused on continuing to drive market share gains and sustainable profitable growth. We ended the year strong delivering better than expected fourth quarter. Let me start by sharing a few highlights from the full year of 2023. Total revenues grew 12% year-on -year to almost $4 billion dollars, driven by 19% direct-to-consumer growth at the enterprise level. Crocs brand revenues surpassed the $3 billion mark, increasing 14% versus last year. HEYDUDE Brand revenues were approximately $950 million and delivered over $200 million in operating income. We expanded our gross margins and once again delivered industry-leading margins with adjusted operating margins of almost 28% exceeding our guidance. We grew our adjusted diluted earnings per share by 10% versus last year to $12.03. Our strong cash flow generation allowed us to repay $666 million of debt as we resumed our share repurchase program during the year. Finally, we're pleased to see the Crocs Inc. achieved the number 20 spot on Fortune's 2023 top 100 fastest growing companies. Before I provide strategic updates by brand, I want to speak to the recently announced executive transitions. Michelle Poole, Crocs’ Brand President will be retiring from the company following a distinguished 32-year career in the footwear industry, the last decade of which she had a tremendous impact on Crocs. Michelle Poole maiden her role through early May and transitioned to a special advisor through early 2025. In keeping with our succession planning. I'm pleased to promote our current CFO Anne Mehlman to Crocs Brand President. Many of you have the opportunity to work closely with Anne and know she brings a strategic and consumer-focused commercial lens to her leadership. I have strong confidence in her commercial acumen, deep knowledge of the Crocs business and global mindset. Anne will remain CFO until a replacement is named an active search for her successor is already underway. Moving on to our performance against our key strategic pillars, starting with the Crocs brand. We continue to invest in our Crocs brand to our socially led usually first marketing playbook and product innovation naming a few of our accomplishments this year. Our marketing wins range from creating height to mainstream moments including the MSCHF Yellow Boot, Aespa K-pop brand that featured a stump line clog and we ended the year unveiling Armada clog the perfect friend to Lightning McQueen. Complex, a leading culture publications set it back Crocs can't stop going viral in 2023. We celebrated our most successful Crocs over year fueled by the span inspired Crocs Cowboy Boot that sold out in 24 hours. We were awarded Collection of the Year by Footwear News Salehe Bembury Times Crocs Pollex Clog for partnership. Moving on to products, innovation and ongoing diversification remain important areas of focus. While we've had great success creating consumer moments through partnerships and collaborations, our core franchisees are our fundamental growth engines and all three of our product pillars Clogs, Sandals and personalization grew double-digits in 2023. Clogs grew 12% supported by solid growth in both our core Classic, as well as new Clog franchises filled by height and product innovation. Sandals surpassed the $400 million mark growing 29% versus last year and now makes up 13% of our Crocs sales mix. We gained market share across our four Sandal segments that we prioritize everyday Style, Sport Street and Adventure. Beyond the revenue milestone the sandals category brings diversification not only to our overall product mix but to our customer mix. In 2023, 61% of consumers that purchase Sandals on own ecom channels were new to the brand. These consumers shop more frequently carried a higher average order value and purchase multiple Silhouettes. Our Sandal consumers skew more female versus our other buyers. Our Jibbitz business grew 17% to over a quarter billion dollars making up approximately 9% of our total mix. We continue to view personalization as a mega consumer trend and see opportunity to further grow our Jibbitz penetration in 2024, notably through improved wholesale execution, deeper international penetration and increased speed to market. We're elevating our franchise management capabilities and have built several sustainable multi-product platforms including the Echo, Brooklyn and Crush to name a few. Each of these franchises caters to unique customer groups and diversified wearing occasions. The echo franchise which was developed a breadth of products across Clogs, Sandals, Boots and now Sneakers has bringing a largely male explorer consumer. In fact 71% of consumers who shopped our Echo franchise on our owned ecom channel in 2023 were new consumers. We're becoming faster and more agile and we see opportunities to further capitalize on these attributes in 2024. In the fourth quarter, we tested slippers in four color ways and we're able to get these to market 60% faster than our normal product cycle. This test sold out in two and a half weeks and we're building this into a full line for 2024. We're expanding our speed to market capabilities across other areas of our product portfolio, including emerging new franchise such as a Getaway assortment. As we think about distribution, I'm pleased by the broad-based growth of the Crocs brand for the year. The 2023 North America grew 8% and international grew 23%. In fact fourth quarter represented our 12th consecutive quarter of strong double-digit growth outside of North America. Globally, South Korea and the UK grew double-digits Australia and China each grew triple-digits. While we reported a record revenue in China, it still only represent 4% of revenues underscoring the untapped potential we have in the region. We continue to see our organic foundation in China grow as evidenced by our hashtag known as Dong Men or Clogs followers. We now have 70 million Dong Men hashtags on red highlighting the consumer engagement and excitement for the brand. Three weeks ago, I had the opportunity to visit several of our Tier-1 countries in Asia alongside our broader leadership team. It is evident that the brand’s trajectory is taking hold across the region. The Asian consumer is embracing personalization at a rate higher than other parts of the world. Another anecdote that gives me confidence broadly in our international growth agenda is that South Korea, a most established market in the region carries a highest market share of any discrete market globally and is one of the best representations of our core strategies across Clogs, Sandals and Personalization. This strong market position highlights the potential upside of opportunity across our other international markets. The Crocs brand has entered 2024 with momentum. From a product perspective we expected to deliver more height for her, street for him and drive personalization at scale. We expect Sandals to continue to gain as a percentage of sales, driven by newness as we relaunched the classic Sandal 2.0 and scale, our recently introduced Getaway Sandal franchise. From a sustainability perspective, I'm incredibly pleased to announce that we achieved our 2023 goal to reach 20% buyer base Crocs life material across our portfolio. A significant milestone on our journey to 50% buyer base this Crocs life by 2030. We also saw promising results in our Pilot Shoe recycling program that we launched in late October and we now plan to expand this initiative to All-Stars. We will share more on these and many other initiatives in our mid-year comfort report. Turning to HEYDUDE, we generated almost $950 million of revenue and over $200 million in operating income in 2023. This year I did share our learnings, but I'm very confident that the HEYDUDE brand benefits from the lightweight, comfortable, easy on and off and value remain top of mind with consumers. While our brand awareness significantly improved year-over-year reaching 32% in the second half, it is still low by Eddie Global Brand standing, but our brand love and affinity are high. As we talked about in our third quarter call, we made a number of strategic pivots in September, which impacted our sell-in within the wholesale channel, curtailed smaller, non-strategic accounts and focused our efforts around improving full price sell-through on digital. We're pleased with the initial impact of our decisions as evidenced by improved gross margins and healthy channel inventories and expect sell-in and sell-through to normalize as we move throughout the second half of 2024 and prioritize returning to a full market position. In the fourth quarter and on a full year basis, we gained market share among our key strategic accounts underscoring our confidence in the brand’s underlying demand with consumers. In 2023, The Hated Brand gained approximately 200 basis points of US market share versus 2022 in the casual fashion category, according to Cicada’s Retail Tracking Service. During the first quarter, the HEYDUDE brand had some big moments with Dude Perfect as a face of a happy holiday programming. Leveraging our consumer insights we know that 50% of our buyers give HEYDUDES as gifts and we saw evidence of this during the fourth quarter. Looking forward, we plan to create consumer moments through scaling our collaborations and partnerships. We recently collaborated with actor Chase Stokes from the popular Outer Banks Netflix show to launch the Wally MID. Later in Q1, we will be expanding our Collegiate program to more schools during March Madness to deepen consumer engagement. From a product perspective, during the fourth quarter, our icons the Wally&Wendy were top sellers. Our Bradley boot rounded out by top three selling styles overall with exceptional sell-through as consumers responded to its compelling price point, lightweight and attractive styling despite a soft overall industry boot season. Once Again our seasonal Ugly Sweater Christmas Styles were standouts. As we move into 2024, we will focus on continuing to invest in core and expect the Wally&Wendy franchises to remain the lion's share of our offerings, driven by newness in color, graphic and heights. We will capitalize on our successful sneaker franchises including the Karina and the Sirocco and build on our fashion boot offering in the fall. We're taking a focused approach to how we allocate inventory by account and expect to see more evidence of account and channel segmentation as we move throughout the year. From a distribution perspective, we're in the early days of implementing our outlet retail strategy for the HEYDUDE brand leveraging Crocs’ successful retail playbook. On the HEYDUDE side, we opened five outlet locations in the second half and have been pleased with the results thus far. We plan to open up 30 outlet stores in 2024 spread throughout the year. For context retail is roughly one-third of our North American business for the Crocs brand and it’s highly profitable. Turning to wholesale, while our spring order books are down versus last year as we discussed on our November call, we expect sell-in and sell-through to normalize as we move throughout the back half of the year. As it relates to international we remain in test mode in a few direct markets in Europe, as well as in several distributor markets leveraging the success of the Crocs brand playbook. This will lay the groundwork to expand into new international markets in the next two to three years. Well coming into the year from a position of strength. While there are question marks around the global macro backdrop and the broader consumer health, I'm confident in our brands, our people, and our purpose and are looking forward to another year of outside share gains, industry-leading profitability and top tier cash flow generation. Anne will now review our financial results in more detail. Anne Mehlman: Thank you, Andrew, and good morning, everyone. I'm very pleased by our fourth quarter results, which exceeded the high end of our guidance across all metrics. We generated $960 million in consolidated revenues, growing 1.5% over last year led by the Crocs brands. We delivered top-tier profitability with adjusted gross margin up 240 basis points to 55.7% adjusted operating margin of 24.1% and adjusted earnings per share of $2.58 ahead of our guidance of $2.05 to $2.35. Our strong profitability and focus on net working capital enabled us to repay $277 million of debt in the fourth quarter. We also repurchased $25 million of stock in the fourth quarter at an average cost of $86.34 per share. As discussed earlier in January, at the ICR Conference, we made a change to our segment reporting that will now be reflected in our 10-K. Our reportable operating segments will now be the Crocs brand and the HEYDUDE brand. We plan to continue sharing our progress against our strategic growth pillars, key country call outs and channel dynamics. Turning to the Crocs brand in the fourth quarter. Revenues were $732 million, growing 10% relative to prior year, driven by strong DTC growth of 12% and wholesale growth of 7%. Brand ASPs were up 12% to $26.76, led by both channel and product mix, higher international pricing and lower discounting. The brand sold 27 million pairs of shoes, a decrease of 1% to Q4 last year or up 5% excluding the impact of the termination of our African distributor. For the year, the brand sold 120 million units of 3.5% versus last year, an ASP growth of 10%. Now, let's review the Crocs brand highlights by country and channel. In the quarter, North America revenues are $471 million were up 3% from 2022, a strong DTC growth of 7% was partially offset by a 5% decline in wholesale. The decline in wholesale revenues reflect a full quarter of impacts for e-tail distribution change, partially offset by double-digit growth in our brick and mortar wholesale. Crocs brand in the fourth quarter was led by international with revenues up 25% driven by DTC which grew 37% in the quarter against 2022. In fact, all six of our Tier 1 markets grew in the fourth quarter, China, India, Japan, South Korea, the US and Western Europe. As Andrew noted, two of our countries group grew triple-digits for the year, Australia and China. China was a record Revenue year ending the year at $120 million. In Western Europe, we saw strong double-digit growth in the UK and France, while Germany ended the year flattish despite a tough macro backdrop. Turning to HEYDUDE. Revenues were $228 million, down 19% from last year, but ahead of our guidance. During Q4, the brand sold 7.4 million pairs of shoes, a decrease of 18% from last year as we lacked pipeline sell and as we took decisive actions to reduce channel inventories, HEYDUDE average selling price during Q4 was roughly flat to last year at $30.65. Relative to Q3, our e-commerce ASPs were up 15% as we pulled back on price matching online. We continue to make progress against great disk cleanup and expect to be in a substantially better position exiting the first half of 2024. Wholesale revenues were down 28% from Q4 last year as we left 2022 pipeline fill. Right sized our non-strategic wholesale accounts and faced a more challenging wholesale environment. The DTC channel contracted 9% as we forfeited sales for better pricing and margin. Consolidated adjusted gross margin for the fourth quarter was 55.7%, up 240 basis points from last year as freight was a key tailwind for both brands. Crocs brand adjusted gross margin was 59.5% or 340 basis points higher than prior year. The increase in adjusted gross margin is attributable to approximately 240 basis points of freight tailwinds, increases in international pricing and favorable promotions and customer mix, partially offset by negative currency impacts of 100 basis points. HEYDUDE brand adjusted gross margin for the quarter with 45.5% and came in better than expected. The margin decrease of 170 basis points from Q4 2022 was driven by excess distribution costs and product mix. This was partially offset by reduced freight and storage costs. Our Q4 adjusted SG&A at 31.6% of revenues deleverage by 430 basis points, compared to prior year. For full year 2023, adjusted SG&A deleveraged 200 basis points to 28.7%. The significant increase in adjusted SG&A rate for the quarter and the full year is attributable to continued marketing investment, talent and infrastructure to support future growth and durable market share gains. Taking these drivers together, our fourth quarter adjusted operating margin declined 190 basis points to 24.1%, compared to 26% for the same period last year. In Q4, the company recorded a one-time GAA tax benefit of approximately $112 million, primarily related to the closing of our HEYDUDE activity in Hong Kong and the related transfer of our intellectual property. Fourth quarter adjusted diluted earnings per share decreased 2.6% to $2.58, when reflecting our non-GAAP tax rate of 19.6%. For the full year, our adjusted diluted earnings per share increased 10% to $12.03. We ended the year with clean inventory on our balance sheet and in the channel. Our inventory balance on December 31st 2023 was $385 million, a decline a 18% against this time last year. The Crocs brand inventory balance was $281 million, down 7% from last year and were roughly flat to Q3 2023. HEYDUDE inventory was down 38% from last year to $104 million and down 6% versus Q3. We ended 2023 with a strong liquidity position, comprised of $149 million of cash and cash equivalents and $570 million of borrowing capacity on our revolver. Through strong cash flow generation and diligent management of net working capital, we have reduced total borrowings to $1.7 billion and our net leverage stood approximately 1.3 times. Since acquiring HEYDUDE in February 2022, we have repaid $1.2 billion in debt and resumed our share repurchase activity in the second half of 2023. On a full year basis, we repurchased $175 million of stock at an average price of $104 per share. Our strong liquidity position, investing cash flow generation will enable us to continue to pay down debt and buyback stock in 2024. In February, we successfully refinanced our Term Loan B and achieved a 75 basis point reduction in borrowing rate from silver plus 3% to silver plus 2.25% with no change to our leverage covenants or maturity dates. Nowm turning to the future, I would like to share our current outlook for Q1 and then full year 2024. For Q1, we expect consolidated revenues to be down 1.5% to up 0.5% at year end currency rates with the Crocs brand growing between 6% to 8%. We expect HEYDUDE revenue to be down 20% to 23% as we lap pipeline sales from last year and given our aforementioned spring order book trends. We expect adjusted operating margins to be approximately 22% and adjusted diluted earnings per share of $2.15 to $2.25. For the full year 2024, we are reiterating our revenue outlook of 3%, to 5% growth assuming year end currency rates. For Crocs brand revenues, we expect to grow 4% to 6% with growth led by international. For HEYDUDE brand revenues, we continue expect growth to be flat to slightly up. In terms of shaping, we expect HEYDUDE sales trends to improve throughout the year. We expect gross margin improvement over 2023 at the enterprise level, we expect stable Crocs brand gross margin and expect HEYDUDE gross margin to be up for the year, as we start to realize the benefit of our newly opened Las Vegas DC and our planned ERP implementation. We expect to reinvest these dollars into brand accretive, and strategic SG&A investments resulting in consolidated adjusted operating margins for the year of approximately 25%. Following our tax structure changes, for full year 2024, we expect our underlying non-GAAP tax rate, which approximates cash taxes paid to be approximately 18% and GAAP tax rate 21.5%. We anticipate non-gaap diluted earnings per share to be approximately $12.05 to $12.50 in 2024. This range incorporates a recent tax changes in Term Loan B refinancing, but does not assume any impact from potential future share repurchases. We also expect to incur $10 million of one-time charges, primarily in the first quarter related to the completion of our distribution and logistics project for HEYDUDE. To support growth for both brands we expect to invest approximately $120 million to $130 million in capital expenditures in 2024 and continue to expect best-in-class cash flow generation. At this time, I'll turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. Crocs Inc. had a record breaking year in 2023. As we move into 2024, we are on the offense. I'm proactively making the decisions to invest incrementally in our business to set us up with continued durable market share gains, while delivering top-tier total shareholder returns. At this time, we'll open the call for questions. Operator: [Operator Instructions] And our first question will come from Tom Nickik of Wedbush Securities. Please go ahead. Tom Nickik: Hey everybody. Thanks for taking my question. I want to ask about HEYDUDE, I know you gave some of the reasons why we should expect better performance from HEYDUDE over the course of the year, but it seems like you're kind of digging yourself into a pretty big hole in Q1 and you kind of need a pretty significant amount of reacceleration in the remainder of the year. I guess kind that the confidence in that reacceleration stems from order books or like feedback you gotten from wholesale partners and I guess just on the wholesale front, I think obviously last year was a much choppier year than you would expected for the HEYDUDE brand and I guess like, whatever the wholesale partner seen lately that's gotten a more comfortable to help drive that reacceleration and hold it in HEYDUDE brand that that you are expecting. Andrew Rees : Yeah. Thanks Tom. Yeah, I think I'll hit the start of this and Anne can pick it up at the end with a few set of points around how we think of the year will play out for HEYDUDE. So, I think the first thing you've got to do is you've got to separate sell-in from sellout, right? So, yes, I absolutely - you can see that the HEYDUDE brand has been choppy from us from a sell-in perspective and didn't play out as we thought it would during the full year. And you heard us say on our Q3’s call talk about how we're going to pivot or how we pivoted some of our kind of strategic actions. But if you kind of step all the way back to sellout and the consumer takeaway that we see for the brand, because that is what our wholesale partners experience right? So I think we can see a few things that are very, very clear. The underlying sell-out for the HEYDUDE brand has been strong, right? It is a top performing brand for many of our wholesale partners and it ranks highly in that brand stack. The HEYDUDE brand during 2023 gained market share in the fashion - the fashion casual category actually substantial market share we believe based on the [Indiscernible] data of about 200 basis points. So it was one of the larger market share gainer and that that's in terms of consumer takeaway. And then we can also see that underlying PTC business and that we've changed some pricing strategies and dynamics and I think easy business which is causing us to give up some revenue, but also to drive higher margin. So, in essence, what we see is we kind of read through to the consumer that we are selling more pairs to more consumers and gain market share. And so that's kind of the important rate. Now we acknowledged that in the back half of ‘22 early part of ‘23 we put too many pairs into the market and so we sold more in than we should have done. We also have gone through the process of cleaning up our account base, because I think we had too many accounts with too much inventory kind of competing against each other. And so I think we got real clarity on who our strategic partners are and I would say as we talk to those strategic partners and frankly you've heard from a number of them those that are the public they are really bullish on the brand. So that's kind of what we see from a consumer lens. I think the second piece I'd say that drives trajectory for the business is before I hand it over to Anne is that outlet business, right? So we opened up those five outlet stores in the back end of last year. We are very pleased with the performance of those stores and a local mall this year. And as you go through the year, the cumulative revenues and profit that you get from this stores is substantial and will continue to build that business in the future. And the sort of benchmark we gave you to kind of get head around it was the retail business for Crocs North America is about a third of the total business. So it's very substantial and we think that exists for HEYDUDE too. Anne Mehlman : Yeah, and Tom, just to give you a little context on the shape and a little bit more detail, so, embedded in our full year guidance of flat to slightly up for HEYDUDE, we are assuming that wholesale right now is down for the year in our guidance. Although we do assume it improves every quarter throughout just as we look at the trajectory. In Q1, we would expect a similar channel dynamic to what we saw in Q4. And then, we really start to see the benefits of retail contribution start to impact that in Q2 and beyond. So I would say ‘24 really about from a wholesale perspective focusing on sellout as Andrew mentioned, making sure we have the right inventory in the market and letting that really be a pull market and wholesale revenue will be what it is and that's incorporated into our guidance. Tom Nickik: And then a quick follow up on HEYDUDE. Just where – sorry if you mentioned during the prepared remarks and if I missed it, but where are we at in terms of cleaning up the gray market and all that? Andrew Rees : Yeah, I think we're making great progress. Yeah, we see, substantial dips in the gray market from sort of earlier in ‘2'3. We're not done yet. We think it will take through the first half of ‘24 to complete that. But certainly solid progress. Tom Nickik: Okay. Thanks very much, best of luck this year. Andrew Rees : Thank you. Operator: The next question comes from Jonathan Komp of Baird. Please go ahead. Jonathan Komp: Yeah, good morning. Thank you. I want to ask about Crocs North America. Could you just share your current thoughts on the health of the business? Any thoughts on the trajectory in 2024 here and maybe include with that Jibbitz in your view there? I know you mentioned penetration increases for the year. And then just one separate question more for Anne. As we think about the margin guidance for the year, it looks like you're implying pretty significant SG&A deleveraged for the Crocs brand. I wanted to see if you can give any more color there if that's the case and further give detail on what's driving that? Thank you. Andrew Rees : Yes, Jon. So I think the Crocs brand continues to be very well positioned in North America. Obviously, it's our largest business and it is a scale business. We have substantial market share and we are well penetrated from a wholesale perspective from a retail perspective and from a digital perspective. But we do see we said we were very happy with the performance of the Crocs brand in the market in ‘23. We see, we are very positive I would say indications of continue to support from our wholesale partners. We have a strong pipeline of product innovation that will bring to market. We have a strong pipeline of licensed products collaborations that will bring to market during the year. In fact I have spent most of yesterday afternoon reviewing new products. So super excited about that. So I think the brand is well positioned. I think it also does I know as you rightly call out, we do think we have incremental penetration opportunities for Jibbitz. We see the consumer dynamic with personalization been incredibly positive as you saw in ‘23 it grew above the overall growth of the business and gained penetration. We think we see opportunities in the wholesale market where, look at it is a different more difficult product to display and sell in the wholesale market, but we have sort of creative solutions that we will be testing and rolling out. We also bring in the timelines in for Jibbitz dramatically. So that we can respond to I would say kind of social friends much more quickly. So we're super excited about using personalization to create ongoing consumer engagement. Anne Mehlman : Yeah, and just as a reminder, that North America in 2023 grew 8.3% on a constant currency basis and 3% in Q4. So pretty good results out of the North America scale Crocs business. I think from an SG&A perspective as we talked about it at ICR, we are going to invest some of our margin improvements in SG&A this year. We think it's really important and that goes for both brands. Just to give you context, we do expect higher SG&A dollar growth in the first half versus the second half because we're still in anniversaring during some larger investments on both brands that we meet in 2023. So SG&A growth is up mid-20% in both Q1 and Q2. So it’s something that to keep in mind and why we're not going to guide specifically from both brand perspective on investments - the investments that we're making across the board are really on the marketing side, talent in both brands. On Crocs, it's really focused on our international markets, which we expect to drive the growth this year. And then on HEYDUDE, some of that is related to our outlet store investment and that's the biggest pieces and in some technology associated with both brands. Jonathan Komp: Okay. Thanks, again. Anne Mehlman : Thanks, John. Operator: Next question comes from Rick Patel of Raymond James. Please go ahead. Rick Patel: Good morning, everyone. Congrats to Anne on the new role and all the best in the show on your new chapter. Just wanted to ask a question about the long-term potential for growth. So, with total revenues being guided up 3% to 5% percent here. How should we think about the potential to hit $5 billion of revenue by 2026? Just hoping you could add some color on the building blocks there. Andrew Rees : Thanks, Rick and I assume you are referring to the $5 billion for Crocs that we guided some years ago. Rick Patel: Correct. Andrew Rees : Yeah. Okay. So, yes. As I think, sort of number of years ago we guided we thought there's a – the Crocs would be a $5 billion brand and I think at that point we set out we thought I could happen by 2026. I think where we are today is, we absolutely still firmly believe the Crocs is a scale business, the Crocs brand and can easily be $5 billion and we look at the pillars that we used to drive that growth, which is Asia, digital, Clogs, Sandals and personalization and we see really kind of solid progress against all of those pillars, as I probably say more than solid progress we've seen sort of incredible progress over the last several years against those pillars. I think quite a few things have changed since we provided that guidance in around global supply chain. We had to pull back out of Russia because of all the issues that you're well aware of and frankly currency as well cost us about $200 million dollars in top line. So I don't think that it's realistic to achieve the $5 billion by 2026. But - and so we're really focused on driving continued growth in a profitable and sustainable way. And probably take a little bit longer. But I think it still drives incredible shareholder returns and value creation for shareholders and in terms of operating margins, this will be the first year. I think with deviating from the – or projecting to deviate from the 26%. We still think the operating margins for our company are in the mid 20s. But will not be every single year above the 26% mark. We think it's very prudent to invest incremental dollars from time-to-time to create the capabilities that allow us to grow in the future. Hopefully it gives you a perspective in a long term. Rick Patel: Very helpful. Thank you. Operator: The next question comes from Abbie Zvejnieks of Piper Sandler. Please go ahead. Abbie Zvejnieks : Great. Thanks for taking my question. Just on the Crocs brand, is there any color you can give on quarter-to-date trends and the Crocs brand being guided to 6% to 8% percent versus 4% to 6% for the year. What are you seeing that gives you confidence in that number? And does that assume just a continuation of trends that you're seeing so far? Is there any Improvement contemplated in getting to that 6% to 8% for the quarter? Andrew Rees : Yeah, I think I'll obviously we get a of a bit of brand color and Anne can give you some of the more specifics. I would say, it's a continuation of the trends from last year, basically. We see - we don't give a lot of in-quarter color. But if you think about some of the big drivers that have really be propelling the brand. And so Asia and international growth has been super important. We see Clog growth, Sandal growth and Jibbitz growth from a product perspective important and as you know, we have visibility to bookings. So we feel real confident around our wholesale bookings and we see we see solid sell-out for the brand. So I think it’s continuation mostly. Anne Mehlman : Yeah,a nd just January, we don't really comment on trends inter quarter, but January is a very small piece of our overall quarter when you that is pretty a material for us as a business. Abbie Zvejnieks : Got it. That's helpful. And just one follow-up more of a housekeeping question. Since you changed the reporting segments, is there any way you can tell us kind of what 4Q would have looked like under the old reporting segments? Thank you. Anne Mehlman : Yeah, so, as we didn't change our reporting segments to our new reporting segments are HEYDUDE Brand and Crocs brand as we think that reflects how we should look at the business. So as reported, North America grew 3%, in Q4, international grew 25% led by Asia Pac, which was up 36% and Amelia was up 16%. For the year operating profit dollars across all regions increased double-digits verses prior year, and the strongest growth came from Asia Amelia. So this will be the last time what we will give the information as our segments have now changed but that gives you some full-year picture. Abbie Zvejnieks : Perfect. Thank you. Anne Mehlman : Thank you, Abby. Operator: The next question comes from Jim Duffy of the Stifel. Please go ahead. Jim Duffy: Thank you. Good morning. Appreciate you taking my question. Hope you guys are doing well. Two questions. First, can you speak to the outlook for international markets, specifically, which are the markets you are excited about for ’24, certainly Chinese on that list. Are there are others that you would highlight? And likewise in the international landscape of the market do you expect to be more challenging? Andrew Rees : Yes, absolutely, Jim. So I think, let me start with this sort of highlights. China is probably top of the list as you rightly pointed out. We've had kind of a multi-year investment effort and focus on China. I am really thrilled with that study to pay off in 2023 with triple-digit growth essentially doubling the business during that year from a top-line perspective. Obviously, it improves dramatically from a bottom-line perspective, as well. But we're just getting started in China, right? So 4% of our overall revenues, if you look at sort of other global brands that benchmark of sort of Greater China substantially higher than that maybe four to five times higher than that. So, I would say second, we're seeing great trajectory in parts of Western Europe, particularly the UK we're probably on a two to three-year very strong growth trajectory in that market. And it's also an important market for influence across the European marketplace. We're seeing strong trajectory in France also I would say thirdly North Korea - sorry South Korea has been a very steady growth driver for us. And I think I mentioned in my prepared remarks it’s actually only isolated our countries around the world is our highest market share performance even above the United States, but we see the future opportunities continued growth opportunities in South Korea. Australia has performed very strongly. We've seen a real turnaround in the business there. And so those are probably the highlights. I think the more challenging markets, Japan remains a slightly more challenging market. I think we're shifting focus that market because it is a large market and we do anticipate growth in the future, but we've got some work to do. And I think you know, we're very, very optimistic about India in the long range and we're putting substantial investments into that market a little bit like we did it around China. But there are a number of short-term issues around sourcing that are creating some I think some headwinds in there very short term. But I think in the long term India will be a big success. Jim Duffy: Very helpful. Thank you, Andrew. Anne soon you'll be above the fray on questions like this, but I do have a question on the tax rate outlook. It came in a little bit lower than I expected. Is that reflective of geographic mix of the profit tools? I guess that what I went after here, is that a sustained – we view that as structurally sustainable tax rate or there a one kind of dynamic related to that? Anne Mehlman : Yeah, thanks Jim. Yes. I'm very excited to turn trekking over to tax trekking back over somebody else. But I think our tax rate as with any Q4 we moved our HEYDUDE IT from Hong Kong where we don't have operations to Singapore and Netherlands and that created that one-time benefit of $112 million that we backed out for the purposes of adjusted EPS. You could have a better idea of our true underlying tax rate for the current year. That does have underlying benefits for this year. So that's how we get to the 18% So it reflects some geographical mix, but also just a restructure in our in our tax structure. Right now, we're saying we think 18% is right for this year. I would still use 20% long-term until we have a better picture going forward. Jim Duffy: Helpful. Thank you. Anne Mehlman : Thank you. Operator: The next question comes from Chris Nardone of Bank of America. Please go ahead. Chris Nardone: Great. Thank you. Good morning. Can you talk about the underlying assumptions in your outlook for the relatively stable gross margins for your core Crocs business this year? I'm just trying to understand what would be holding that back from expanding on the mid-single digit growth and if margins do come in better, are you expecting to spend against that strength or you allow some level of flow through to the bottom-line this year? Anne Mehlman : Yeah, I think that's a great question. So obviously we're really pleased with our Crocs gross margins. For the year, they expanded nicely after what was a tougher 2022 on some we had some significant freight tailwinds. We think that's pretty normalized at this point. So we think that just given all the puts and takes so, you've got currency, you've got freight, you’ve got mix from a channel perspective, pricing and product mix. We think that that about where we were last year is a fairly good place to be. So on revenue growth that's not necessarily where we tend to see margin expansion on revenue growth as your operating margin because you leverage your SG&A. This year, we've made the conscious decision to take those dollars and really invest as - about that we're investing in India and some of our other international markets as well as talent and really focused on that long-term sustainable growth. If we can - if we exceed what we said if we have good Investments we will make the call whether we should continue to invest for the long-term or let that flow through an compound operating margin perspective. Chris Nardone: Got it. That's very helpful. And then just as a quick follow-up, can you provide an assessment of how the Red Sea disruption is impacting your business today? I am just trying to gauge what you are underwriting for freight rates this year and your initial for your margin outlook? Anne Mehlman : Yeah, so right now from a Red Sea perspective, we're really seeing it impact from are mostly our EMEA business at this point we're seeing a couple weeks delay. Overall from a shipping time perspective we haven't seen a material change to our freight rates at this point. And so I would say, we don't know what's going to happen this year. Obviously, we don't know how this is going to play out. But at this point, it's not it's not been a material impact to our business. Operator: The next question comes from Jeff Lick of B. Riley Financial. Please go ahead. Jeff Lick: Thanks for taking my question and Anne, I would extend my congratulations, a incredibly well-deserved promotion and increase in role. Andrew, I was wondering if you take a step back and look at 2019 as a starting point where in North America was $640 million in with the Crocs brand and international was $590 million. Obviously there's way more people internationally than in the U.S. And I think there's an argument to be made that the Crocs brand might even resonate a little bit better with certain countries and populations than the U.S. So, I'm just wondering if all the things that you had done leading up to the pandemic, customization, social influencing, speed to market with distribution, obviously, you did that in the U.S. first if you use the U.S. as a kind of a leading indicator, I'm wondering kind of where you're at like what you're seeing internationally and do would you disagree that international should be at least as big if not bigger than the U.S. And then I guess, the critics might say we’ll see the U.S. is going to come back that obviously hasn't happened. I was wondering maybe you could speak to what people are missing as to if anything in the US has accelerated just the dynamics between the US and international was what you could give us there? Andrew Rees : Okay? Yeah, I think like I ought to see Japanese great way of thinking about it, right? So, just to sort of paint the picture for everybody, what we saw the Crocs brand really started inflect in the U.S. marketplace sort of late ‘18 into ‘19 and then grew dramatically through the pandemic. I think, a lot of people outside of the company kind of put that down to well, that was the pandemic and people were happy to wear Crocs at home, but they're not happy to wear Crocs when they are back out in the real world, right? So, I think at this point, hopefully, that has proven to be incorrect in that, people are happy and excited to wear Crocs out in the real world. And I think what's happening there is we're engaging the consumer, we’re excited in the consumer with innovative new products with a high comfort product, with a high value product, with a product that can be personalized in many different ways and it's pretty exciting and the customers engaged in it. So that's grown that business dramatically. We've seen that trajectory repeated in a number of our international markets. And so we look at markets like the UK. We are still probably in our third year of very accelerated growth. So we're seeing that trajectory play out. And so, and then as I highlighted an earlier question and in our prepared remarks, we actually have the highest market share in the Korea marketplace as of today. So even above the U.S. So that's to your point around there might be some places in the world where the Crocs brand actually resonates even better than in the U.S. Easy on and off and that’s kind of key component that where culturally there are many markets where people take their shoes off when they go into a building or go into somebody's home. So I think that's a viable thesis. We're not guiding the international businesses to be clear and then bigger than the U.S. business. I mean, I think when we did our $5 billion plan, we were pretty clear that a lot of our growth will come out of Asia and that international will be super important. And you've seen that in the last six quarters, the international business growing very strongly. So we can cut. Jeff Lick: Okay. Thank you. Operator: The next question comes from Sam Poser of Williams Trading. Please go ahead. Sam poser : Good morning. Thank you for taking my questions. I have two for Anne want can you talk about evolving demand planning, especially with the HEYDUDE brand in order to get to the pull model that that you're working towards and how that is working within the Crocs brand and how you in your new role intend to make that work further work? And then, for Andrew, Andrew you talked about it in the prepared remarks about promoting Anne to this position. Could you just expand on why she is, you went through a long process here wasn't quick from what I gathered, but can you sort of go into sort of some more nuanced discussion of why she ended up being the best person for the job and in your view? Thanks. Andrew Rees : You mean other than she's awesome? Sam poser : I think yes. Other than she is awesome. Andrew Rees : I’ll let her answer the first question. Anne Mehlman : Andrew is thinking of a good answer for you Sam now and just can’t getting at. So, yes, on the demand planning front, for both HEYDUDE and from a Crocs perspective, we have key account planning really very thoughtfully at our big accounts and we plan strategically what sell out is and we are not obviously trying to sell-in. We, as we talked about on HEYDUDE a couple of key differences we are making and remember, when we bought HEYDUDE we didn’t really have the infrastructure in place. So we were mutual and tools and that we're implementing. We worked really hard to do that last year. So we're also looking at making sure that the - as Andrew mentioned that we have the right products in the right accounts and that we’re thoughtful about seating product in the right place and also, depths and where we put things. So we're really focused on as you mentioned letting it be a pull model and if we are a little bit short on some things and it sells out fast enough, right? And that's more demand for next year. So that's kind of how we're thinking about it. That's how we think about it existing on the Crocs side. Andrew Rees : Great. So your second question, so look at me my flippant answer is important right? Like we have great confidence in on both the knowledge of the business, the commercial acumen, her understanding of kind of the consumer trends, beyond her abilities as a CFO. So, that's important. I would say this transition is part of the succession planning that we've been doing for some time. We do it for all of us senior leaders. We do that in conjunction with the Board as you'd expect. And we have a very thorough process around this. So, it's definitely something we take very seriously and we think this is, listen this, Michelle is retiring and we wish her well. I mean she's done an amazing job and as I also said in my prepared remarks, she has been doing this in the footwear industry for a long time and have some other things that she would like to like spend a bit more time doing. So, I think it's a very natural transition and very well planned. Sam poser : Thanks. And then I just have a real quick follow-up for Anne, it was just somebody else's question about, comfort that the Hated business would grow in the back half of the year. How much of the sort of the way this looks like it's going to flow is retailers and you overreacted, put too much product into the marketplace at the beginning of last year given sort of the way things were in the middle of this year when they were writing spring retailers over probably over reacted and may not have written enough. And now they're sort of seeing what's going on and then that started to normalize as the orders move throughout the year. Am I thinking about that correctly? Andrew Rees : I think mostly Sam. Yeah, that's mostly a very thoughtful understanding of the marketplace. Sam poser : Thanks very much. Good luck. Andrew Rees : Thanks, Sam. Anne Mehlman : Thanks, Sam. Operator: The next question comes from Aubrey Tianello of BNP Paribas. Please go ahead. Aubrey Tianello: Hey, good morning. Thanks for taking the question. I wanted to follow up on Crocs North America. You mentioned changing the distribution model with Amazon. Could you maybe give a little more detail on what's changing? How those changes was with the P&L? And also what the timeframes for that? Anne Mehlman : Yeah, yeah great question. So as we talked after our third call, I think taking a step back really at the highest level globally, we are trying to have more brand control in global marketplaces where our brand is sold. So we talk about marketplaces that's on a digital front and those maybe Amazon or others. And so the best way to do that is for us to sell directly to the consumer on those marketplaces. So it's direct-to-consumer sales versus a wholesale sales. So the dynamics is how it flows through the P&L. It's a higher gross margin, higher Sg&A, higher revenue, but it's really not - that's not the focus point. The focus is just controlling our brand and how consumers should - how it shows up to the consumer and making sure that we provide a consistent and best experience for our consumer. I would say, this distribution model performs - has been performing in line with our expectations these changes. And so, we will expect to continue down this path this year. Operator: This concludes our question and answer session. I would like to turn the conference back over to Andrew Rees for any closing remarks. Andrew Rees: Thank you. I just wanted to express our sincere appreciation for everybody's joining us today and their interest in our company. So, thank you so much and have a great day. Operator: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.

Operator: Welcome to the Crocs, Incorporated Third Quarter 2023 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Senior Vice President of Investor Relations and Corporate Strategy. Please go ahead. Erinn Murphy: Good morning, everyone, and thank you for joining us today for the Crocs Inc. Third Quarter 2023 Earnings Call. Earlier this morning, we announced our latest quarterly results, and a copy of the press release and our slide presentation may be found on our Web site at crocs.com. We would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the Safe Harbor provisions of the Federal Securities Laws. These statements include, but are not limited to, statements regarding our supply chain challenges, cost inflation, the acquisition of HEYDUDE and the benefits [thereof] (ph), Crocs' strategy, plans, objectives, expectations, financial or otherwise, and intentions, future financial results and growth potential, anticipated product portfolio, and our ability to create and deliver 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. Crocs is not obligated to update these forward-looking statements to reflect the impact of future events, except as required by applicable law. We caution you that all forward-looking statements are subject to risks and uncertainties described in the Risk Factors section of our annual report on Form 10-K and our subsequent filings with the SEC. Accordingly, actual results could differ materially from those described on this call. Please refer to Crocs' Annual Report on Form 10-K as well as other documents filed with the SEC for more information regarding these risk factors. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, Chief Executive Officer; and Anne Mehlman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I will turn the call over to Andrew. Andrew Rees: Thank you, Erinn, and good morning, everyone. Let me start by welcoming Erinn Murphy, our new SVP of Investor Relations and Corporate Strategy, and by thanking Cori Lin as she transitions to a new role within Crocs and for her dedication to leading Investor Relations over the past three years. We delivered strong third quarter results, with quarterly revenues over $1 billion, exceeding the high end of guidance, led by double-digit growth in the Crocs brand, partially offset by high single-digit decline in the HEYDUDE brand. I'm pleased by our team's agility as we continue to operate in an increasingly challenging macro environment. We drove strong 18% direct-to-consumer revenue growth at the enterprise level, and once again delivered industry-leading margins with 28% adjusted operating margins. Anne will review our financial results in more detail shortly, but here are a few highlights from the third quarter. Revenues of over $1 billion grew 6% on a constant currency basis. Adjusted diluted EPS increased 9% to $3.25 per share. Inventory on an enterprise basis was down 24% year-over-year. By brand, Crocs' brand revenues grew 11% constant currency fueled by Asia revenues increasing 29%, North America revenues up 8%, and global DTC comparable sales up 15% with strong full-price selling. HEYDUDE brand revenues were $247 million, with DTC growth of 15% offset by declines in wholesale. During the quarter, we took decisive action around HEYDUDE to maintain price integrity and elevate our marketplace management strategy to ensure long-term brand health. I will elaborate on our strategy in a moment. I want to start my comments today with our views on the macroeconomic backdrop and the health of the consumer. We are operating with greater uncertainty than we started the year, with persistent inflation, higher interest rates, the resumption of student loan payments in the United States, and escalating geopolitical tensions across the globe. Despite this, our consumer has been relatively resilient, and continues to show up during key shopping events, such as back-to-school, which was strong for both brands. In September, trends softened across the footwear industry, and we are seeing consumers pull back in-between peak shopping events. Against this backdrop, we're focused on making the right decisions for the health of our brands, keeping a tight control of inventory, and investing behind initiatives to support profitable long-term growth. We believe we are well-positioned in the current economic backdrop, and see our value-orientated price points as a durable competitive advantage. Moving into our brand highlights, let's begin with the Crocs brand. We continue to see broad-based consumer love for the Crocs brand. In Piper Sandler's fall 2023 Taking Stock With Teens survey, Crocs was the number six favorite footwear brand among U.S. teens, registering a new record-high mind share, with balanced contribution across all genders. With respect to product innovation, our strategy to diversify our clog offering, grow sandals, and leverage personalization is working. We demonstrated double-digit growth in clogs with outsized momentum with our height-orientated offerings, including the Crush and Mega Crush styles. As we look at our broader assortment, I want to call out the Echo franchise, which has developed into a sizable business across clogs and sandals. We September, we introduced the Echo boot, which is off to a good start. Turning to sandals, in Q3, sandals' revenues grew 6% on top of nearly 20% growth in 2022, and the 35% growth on a trailing 12-month basis. We had a solid back-to-school season for sandals in all three regions, with EMEALA as a standout region in the quarter. In fact, we were the number one sandal and flip-flop brand on Amazon U.K. during the month of August, growing 37% over last year. Globally, the Classic and Brooklyn remain our leading sandal franchises, followed by the Crush. This quarter, we proactively destocked our Classic sandals as we prepare to re-launch a new version of this franchise in 2024. In Q4, we'll also test the Getaway, our newest sandal innovation. The Getaway is built around our newest proprietary material innovation, known as Free Feel Technology, and will initially come to market with four styles. For 2023, we expect our sandal business to be approximately $400 million. From a marketing perspective, Q3 had some of our biggest wins to date. In July, our Barbie collaboration, which featured clogs, sandals, and Jibbitz sold out quickly ahead of the blockbuster movie launch, and we restocked the collection twice during the quarter. It was our number one licensed property in the quarter. In August, we dropped our fourth Lightning McQueen adult clog, with a very strong unveil on TikTok, garnering approximately 38 million views, our best-performing TikTok ever. Finally, in September, we launched Shrek globally online and with select retail partners. This launch gathered over 300 million global media impressions, and helped land Crocs as the number three on Hypebeast rankings. These partnerships, among several others, brought new consumers to our brand and to our social channels. In fact, we crossed the two million follower mark on Instagram in September, and recently crossed the two million follower mark on TikTok. In October, we celebrated our biggest Croctober yet, with a fan-inspired Crocs Classic cowboy boot generating significant buzz, garnering 6.2 billion global media impressions through the month-long celebration, with the boot almost completely selling out globally in a few days. At $120 per pair, this was our highest price point Croctober shoe to date, and gives us confidence in the permission our band has with consumers. Asia is another important long-term growth driver for the Crocs brand, as the brand is currently under-penetrated relative to the U.S. In Q3, Asia revenues grew by 29% in constant currency. Growth was again broad-based, with strong brand momentum across the region. We've continued to invest in talent in the region. During Q3, we welcomed Carol Chen, our new SVP and General Manager of APAC, who joined us following a 22-year career at Nike. Drilling down into China, we had another exceptional quarter of growth while Q3 revenues increased over 90% in constant currency ahead of our expectations. Crocs rising popularity in China has created a passionate following with a hashtag known as Dòng mén or crocs followers. We now have close to 60 million Dòng mén hashtags on Red, up from approximately 40 million at the end of Q2. In the quarter, we had a particularly successful Big Brand Day campaign, which leveraged the introduction of the Siren silhouette, a Tmall first launch. Revenue during this campaign bested our internal targets handily, driven by a traffic and record-high average order value which underscored our strategy to drive quality business through new product introductions. Finally on the sustainability front, Crocs is taking steps to further its circularity ambitions. With the recent launch of our new Retail Takeback Program piloting this week in 45 of our U.S. retail stores, we are inviting consumers to give all Crocs new life by dropping Crocs in any condition in collection bins at participating stores. Through this effort, Crocs is working to keep shoes on feet for those who need them and keep shoes out of landfills. Turning to HEYDUDE, I remain confident in the brand health metrics that underscore how beloved this brand is with consumers. This fall, HEYDUDE was the number 7 favorite footwear brand in The Piper Sandler Taking Stock With Teens survey, taking the highest share we've seen to-date. In under-penetrated markets like the northeast, mind share almost tripled among the teen demographic. Despite a tough footwear backdrop, we are pleased with the performance of our strategic accounts during the back-to-school season. Strategic wholesale now represents 50% of our brand sales mix, up from 39% last year. In Q3, sellout from our strategic accounts was up 28% year-over-year offset by the rationalization of non-strategic accounts. From a product perspective, we are focused on new style introductions that create heat and drive new consumers to our brand while working down our carryover inventory. During the back-to-school season, top-selling styles included core icons like the Wally Sox Micro in black alongside our updated icons like the Wendy Funk Mono in electric Pink. We also saw continuous strength in our Sirocco Sneaker which rounded out our top-selling styles. In the third quarter, we dropped our second Montreal collaboration with sell-through rates of greater than 60%, attracting an influx of younger consumers to our buyer file. In September, there was tremendous excitement around our first ever collegiate collection which featured 12 schools alongside several NIL athletes who will act as brand ambassadors. We had strong consumer feedback as several schools sold out of the collection in the first five days. In August, we entered long-term partnership with Dude Perfect, a content group that is known for its humor and iconic trick shots. Dude Perfect has amassed a powerful social community with approximately 90 million followers across YouTube, TikTok, and Instagram, and believes in coming together in good times, a brand ethos consistent with HEYDUDE. Leveraging our consumer insights that over 50% of our buyers give HEYDUDEs as gifts, Dude Perfect will be the face of a happy holidudes holiday programming. As I reflect on where we are as a brand, I remain as confident in the long-term opportunities as I was when we acquired HEYDUDE. We believe that the brand's versatility, the products easy on- and off-nature, iconic silhouettes, and the permissions into new categories and regions remain unparalleled. That said, I acknowledge that there has been several growing pains this past year. Some of our own doing and others tied to the macro backdrop. I want to take the time to share our learnings and our recent actions designed to bring the brand to a healthy pool market. In 2022, we accelerated growth within our strategic accounts. And, we did it fast. The intent of this decision was to build brand awareness and secure a shelf space with our most important retail partners. We have delivered on both of these goals. As evidenced in our recent brand health tracker aided awareness of HEYDUDE brand in North America is now at 32% in Q3, up from 18% in Q1. That said, we recognize the need to be better around driving effective segmentation alongside new product introductions to sustain this broader customer base. There was also more carryover inventory in our legacy customers than we had expected, which further diluted our offerings. Year-to-date, we have made considerable progress in cleaning up our inventory and are pleased that our HEYDUDE inventory ended down 41% from Q3 last year. We have also made several key hires over the past 12 months to fortify our efforts in North American marketplace management including hiring a GM of North America, VP of global category and general management, and other talents in product design, wholesale sales, and consumer insights. We're already seeing the benefits of the augmented team and believe this collective impact will build as we move throughout 2024. As we have talked about on our previous calls, we are anniversarying last year's pipeline fill, which impacted Q3 by approximately $60 million. And we expect it be approximately $50 million headwind in Q4, unchanged from our former outlook. What has changed since we last updated you in July, retailers are more cautious around our HEYDUDE brand and out ones demand was lighter than we previously expected. For the industry, post back-to-school wholesale market has been soft as consumers have pulled back and footfall has been down double digits. Our HEYDUDE brand, which has limited history with retailers, has seen a more restricted open to buy as we look into the spring season. In sharp contrast, our spring order books for Crocs brands are strong for the first-half of 2024, reflecting the ongoing momentum we see in the Crocs brand. Taking the environment aside, we made an important pivot to our digital pricing strategy in September. Specifically, we made a decision to stop price matching with the gray market goods that are selling on Amazon, forfeiting near-term sales to prioritize long-term market health. We know it's the right decision for the brand going forward. Already, we are seeing immediate positive impacts with ASP up over $10 on Amazon and the pivot has been acknowledged by a wholesale partners. While this will hinder sales growth in Q4, and possibly into the first-half of next year, we believe this will set us up for a much cleaner marketplace as we move throughout 2024 as well as protect the brand. Unauthorized inventory levels have improved versus where they were in June and based on our current visibility, we expect Gray market goods to be in a substantially better position in the first-half of 2024. While we are not guiding to 2024, we would expect HEYDUDE wholesale revenues in North America to remain negative through Q2 by in part to macro and impart you to a decision to pull macro promotional activity prioritizing brand health a marketplace management. Beyond this year, I would like to provide some of the building blocks and how I thinking about HEYDUDE's growth agenda. First, we're adopting an omnichannel approach to drive engagement and meet consumers where they shop. In addition to strengthening our digital capabilities and staying disciplined with strategic wholesale partners, we'll explore brand of creative opportunities. To that end, were in the early days of developing an outlet retail strategy for the HEYDUDE brand, leveraging Crocs successful retail playbook. We've opened our first outlet locations and expect to have five locations by the end of the year. Second, we're remaining a laser focus on winning with a US strategic wholesale partners to improve segmentation and differentiation. In 2024, we'll focus on strengthening a family channel partners further tapping into the Sporting Goods channel where we have ample whitespace and elevating our approach with multi-specialty. We also expect to start 2024 with a much cleaner account base having shot at over 50% was 600 accounts during the year. We have also pullback on digital rights for accounts that fall outside of our strategic accounts. Third, International, we have set up a few test markets in Europe, and laying the groundwork to expand in new international markets in the next two to three years. Well, we use an approach that is consistent with our Crocs playbook, go direct to markets where we a direct for Crocs and utilize distribution partners in markets where we are indirectly as Crocs. In summary, our Crocs brand has never been stronger and we remain steadfast on executing a global long-term strategy. With HEYDUDE, we focus on protecting profitability and elevating market place management even if that comes at the expense of near-term revenues, in an effort to support consistent profitable growth on the long term. I will now turn the call over to Anne for review our third quarter financial results in more details. Anne Mehlman: Thank you, Andrew, and good morning, everyone. I will begin with a short recap of our third quarter results. All revenue growth rates will be sighted on cons and currency basis and less otherwise stated. For reconciliation of the Non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to this morning's press release. We had a strong third quarter with over a billion dollars in consolidated revenue representing approximately 6% growth year over year. We delivered another quarter of industry leading margins with adjusted gross margin a 57.4%, adjusted operating margin 28.3%, an adjusted diluted EPS growth of 9%. Our portfolio is diversified from a brand channel and geography perspective. On a trailing 12 months basis and in Q3 Crocs brand revenues were 75% of total revenues and HEYDUDE brand revenues were 25%. Channel mix was well-balanced with wholesale revenues representing 53% of TTM revenue and DTC at 40%. Finally, approximately 33% of total TTM revenues and 40% of Crocs brand TTM revenues were from international market. During the third quarter, Crocs brand revenues were $799 million growing 11% relative to prior year and driven by strong DTC growth with 18.4%. The brand sold 29 million pairs of shoes, a decrease of 4% from last year. The unit declined came almost entirely from our EMEALA region tied to the corrective actions we took last quarter to curtail a significant African distributor that we believe was diverting goods to the US Gray market. The Crocs brand average selling price during Q3 was $27.25 which was up 15% on a constant currency basis driven by product mix, fewer DTC promotion, international price increases, and channel mix. Within the Crocs brands, Crocs grew double digits and continued to generate demand with newer products such as Echo, Mega Crush and Height in Asia. Kids is also developing into a solid category for the brand and took significant share during the back-to-school season, representing approximately 20% of footwear revenues. Sandals increased 6% in Q3. As Andrew mentioned, sandal growth was lighter in Q3 as we destocked the classic franchise ahead of relaunching an updated line in 2024. Finally, Jibbitz continues to create excitement and engagement with consumers around the world, growing 15 percent from last year, with growth across all three regions, but particularly strong in Asia. Now, let's discuss a few Crocs brand highlights by region. In North America, third quarter revenues increased 8% to $481 million. We gained significant market share in a declining U.S. footwear market. North America DTC comparable sales were up 10.2%. Wholesale revenues decreased 1% as double-digit brick-and-mortar wholesale growth was offset by declines to Amazon as we evolve our distribution model on Amazon. This shift negatively impacted unit growth and positively impacted ASP growth in our North America region. As we look into 2024, we are pleased with the strength of our spring order book for North America wholesale. Crocs brand Q3 revenues in Asia grew 29% to $175 million, and growth was broad-based across countries and channels. Australia led the growth with revenues increasing triple digits, and China grew over 90% versus last year. South Korea and Southeast Asia each saw strong double-digit growth rates in the quarter. Crocs brand revenues for Amelia were $143 million, up 3% from the third quarter of 2022. This quarter, we saw robust double-digit growth in the U.K. and France. This strength was somewhat offset by Germany, which weakened during the quarter against a tough economic backdrop. As previously mentioned, we terminated a relationship with a significant distributor servicing Africa in Q2. In Q3, we saw an $8 million revenue headwind from this corrective action, and we expect to see a $13 million headwind in Q4, bringing the year to a cumulative $29 million revenue headwind. Turning to HEYDUDE, Q3 revenues were $247 million, a decrease of 9% from last year. During Q3, the brand sold 8.3 million pairs of shoes, a decrease of 11% over last year. HEYDUDE average selling price during Q3 was $29.68, a 3% higher than prior year. Its channel mix into DTC and product mix in wholesale was partially offset by double-digit pricing declines on e-commerce. As a reminder, our average selling price is a basic average and not adjusted for channel dynamics. Wholesale revenues were down 20% from Q3 last year, as we continue to let pipeline fill, and as lower consumer footfall led to retailers seeking a more conservative approach to at-once orders. The DTC channel, which is predominantly e-commerce, led the growth with revenues increasing 15% from last year. Consolidated adjusted growth margins for the third quarter were 57.4%, increasing 230 basis points from last year, driven by favorability in ocean freight rates and the absence of air freight, as well as lower promotional activity in the Crocs Brand. These were both partially offset by higher overhead and fulfillment costs associated with our HEYDUDE distribution network inefficiency. Turning to the brands, adjusted gross margin for the Crocs Brand was 62.1%, or 460 basis points higher than prior year. Key drivers of this improvement include 340 basis points from lower freight, fewer year-over-year promotions, partially offset by product mix. HEYDUDE adjusted gross margins were 42.8%, down 600 basis points from prior year. Approximately 500 basis points of margin headwind came from higher levels of discounting in our digital channels. Distribution and logistics inefficiencies also remain headwinds. Offsetting these headwinds, we saw lower inbound freight in the quarter. During the third quarter, consolidated adjusted SG&A represented 29.1% of revenues, which is 190 basis points higher than last year, as we invested more in talent and marketing for both brands to support our growth trajectory, and we annualized additional investment for HEYDUDE. Our third quarter consolidated adjusted operating income was $296 million, an increase to prior year by 8%, and consolidated adjusted operating margins increased 40 basis points, remaining best in class at 28.3%. Our third quarter non-GAAP diluted earnings per share increased 9% to $3.25. Our continued strong free cash flow generation enabled us to repay approximately $90 million of debt in Q3, reducing borrowings to approximately $2 billion. At the end of Q3, our gross leverage was approximately 1.7 times, as we ended the third quarter with $127 million of cash and cash equivalents. During Q3, we resumed our share purchase activity and completed $150 million of share buybacks, repurchasing 1.4 million shares at an average price of $107.85. We currently have $900 million remaining on our share repurchase authorization. We will continue to balance debt repayment and share repurchases and remains committed to our long-term net leverage target of 1 to 1.5 times. Our inventory balance at September 30, 2023, was $390 million, a decline of 24% to last year. Crocs Brand inventory was $279 million, down 14% to prior year, and HEYDUDE inventory was $111 million, a decrease of 41% to prior year. Inventory turns continue to improve, and we are very pleased with the health of our inventory. As we look forward, I would like to share our current outlook for the fourth quarter and full fiscal 2023. All numbers will be on a reported basis, unless otherwise stated. While we are very pleased by our consolidated results in the first nine months of the year and the standout performance of our Crocs Brand, we recognize our HEYDUDE performance has fallen short of expectations. As Andrew mentioned, we took actions during Q3 to prioritize longer-term marketplace health. As such, we are reducing our expectations for Q4 in the full-year. For fiscal 2023, we now expect consolidated Crocs Inc. revenue growth to be 10% to 11% compared to 2022, down from the prior range of 12.5% to 14.5% growth and resulting in full-year revenues of approximately $3.905 to $3.940 billion. From a brand perspective, our expectations for the Crocs Brand remain unchanged at 12% to 13% revenue growth, despite a tougher FX headwind than we previously projected. For HEYDUDE, we are lowering our full-year revenue outlook to up approximately 4% to 6% on a reported basis, down from our prior range of 14% to 18% growth. This translates to a contraction of 4% to 6% on the 2022 pro forma revenues of $986 million. As always, we are focused on best-in-class profitability. We continue to expect our consolidated growth margins to be greater than 55.5% led by the Crocs brand. Given the confidence we have in our brand's long term, we are making a conscious effort to continue to invest across the enterprise, and we now expect full-year adjusted operating margins of approximately 27%. Our adjusted diluted earnings per share outlook moves to $11.55 to $11.85, down from our prior guidance range of $11.83 to $12.22. For Q4, we expect consolidated revenues to be between $903 million and $938 million, implying a contraction of 1% to 4% from last year. Within the brands, we expect Crocs to grow 4% to 7%, and HEYDUDE to be down 20% to 25%. We expect Q4 adjusted operating margin to be approximately 21% and adjusted diluted earnings per share of $2.05 to $2.35. At this time, I'll turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. As we look forward, our focus remains squarely on sustaining brand health, investing behind market share gains, and supporting durable revenue and profit growth. I remain confident in our brands, our leadership, and a significant opportunity ahead of us to take share in the casual footwear market. At this time, we'll open the call for questions. Operator: We will now begin the question and answer session. [Operator Instructions] Our first question comes from Jonathan Komp from Baird. Please go ahead. Jonathan Komp: Hi, thank you. Good morning. I want to ask first on HEYDUDE. Maybe, Anne, if you could clarify the fourth quarter outlook, just broad expectations for the two channels. And for your strategic accounts and wholesale, are you losing shelf space or what should we make of the reported revenue trend there? And then maybe, Andrew, more broadly for 2024, I want to get your thoughts, I know when you bought the brand you talked about revenue north of $1 billion for 2024. Is that still a realistic possibility or has been pushed out a while? And when you think about the factors to drive sell-throughs, how do you rank orders or the biggest opportunities in the next year? Andrew Rees: Yes, okay, let me talk about Q4 shelf space. Anne will then give you some updates on the channel expectations for HEYDUDE, and then I'll come back and talk about '24. So, from a Q4 perspective, we don't believe we're losing shelf space. In fact, we're not losing shelf space in our strategic accounts. We have ample evidence for that. We're taking down our sell-in expectations to allow us to lower in-channel inventories. We're doing that in a number of ways; one, proactive cancellation of prior orders so that there's less inventory flowing into the channel. We're also supporting our wholesale partners with some inventory cleanup that includes, so both returns and also some markdown funding so they can clean their inventories in the fourth quarter of this year. The strategic accounts in the Q3 were up 28% in terms of their sellout. And we think they will continue to grow in terms of sellout and the brand will gain share in the fourth quarter. Anne Mehlman: And then, Jon, for your question on clarifying HEYDUDE growth, so our full-year HEYDUDE guidance on a reported basis is 4% to 6%, on a pro forma basis it's to shrink 4% to 6%. So, that implies that our Q4 growth for HEYDUDE, our Q4 would be negative 20 to negative 25. It's the revenue guide. And then when you think about channels, that's, as we talked about, it's still -- that implies negative wholesale. And then we expect DTC to be slightly better than that. Andrew Rees: And then from a '24 perspective, last part of your question, Jon, yes, I think we're very confident the brand will be north of $1 billion in 2024. We do anticipate that wholesale sales, which is obviously predominantly North America, will be down in the first part of the year. But we're confident that DTC will be up and, overall, would drive growth for the full-year. Jonathan Komp: Okay. And is it possible, Andrew, just your thinking today, I know it's early, but in terms of the biggest contributors to the sell-through, whether it's some of the distribution capacity, new products, new geographies, how are you thinking about the biggest drivers as they line up sitting here today? Andrew Rees: Yes, so I think there's a few things going on. One is, I think, account rationalization. So, as we think off sellout, sellout at our strategic accounts has been strong, as we highlighted the 28% growth in Q3, and I think we published the growth rates that we've seen in prior quarters. So, the strategic accounts, HEYDUDE is performing well with those accounts. We have rationalized a significant number of non-strategic accounts or legacy accounts about 50%, we closed over 600 doors by the time we get to the end of the year. We've also rationalized the digital selling for the non-strategic accounts. There was a very long list of accounts that historically had the rights to sell digitally. They have all been revoked apart from our core strategic accounts. So, we're doing the hard work to get a significant reset for the brand in the North America marketplace with our wholesale partners. We do anticipate our wholesale partners to plan their overall business pretty conservatively in this consumer environment, both through the fourth quarter of this year and in the first part of next year. And I think we also are very focused on driving improved product differentiation and segmentation across our wholesale partners, with both new product introductions. I think we feel very confident about the pipeline of new products that we have. And you've seen us start to ramp up the licensing and collaboration engine that we use on Crocs in HEYDUDE, you've seen a couple of those, we talked about it in our prepared remarks, and that will accelerate through the back-half of this year into next year. Jonathan Komp: Okay, that's very helpful. And then just one, and if I could on the fourth quarter operating margin target, could you just tell me there, are you embedding any change in promotional activity for the Crocs brand in the gross margin there? And G&A, are you changing the expectations at all for the slightly more challenging top line environment here? Thanks again. Anne Mehlman: Yes, so a couple of things. I would say we're really pleased, overall, with our Crocs gross margins. And we reaffirmed our gross margin guidance for the year. So, we actually think, from a promotional standpoint, year-over-year promotions, we're planning flat to last year. We'll participate in normal promotional periods, but we don't see or anticipate any big change. And then from an SG&A standpoint, we do think it's really important to invest for the future and not try to manage one quarter from a profitability standpoint. So, we do expect to continue invest SG&A, and that's how you get to the overall profitability guidance. Operator: Our next question comes from Jim Duffy from Stifel. Please go ahead. Jim Duffy: Well, thank you. Good morning. Wanted to ask a few questions on HEYDUDE, I guess, Andrew, I'll ask you the Monday morning quarterback, the HEYDUDE business, some, you've built a lot of awareness to the brand, generated a lot of cash, successfully paid down a lot of debt from the HEYDUDE deal. If you had to do it over again, what would you have done differently, and maybe would that give us some context for the extent of the marketplace challenge and maybe size to the spring order declines to give us context for that impact? Thanks. Andrew Rees: Yes, I think that's a question, it's well-framed, Jim. As we look at the brand, we've grown it over 60% from a top line perspective since we've owned it. We've generated over, approximately, $472 million of EBIT since we've owned, it's had strong cash flow, and it's been accretive from day one. So, I think while there are some short-term challenges, it's been a great addition to our portfolio. In terms of the challenges, I think we've really focused on three key areas. One is getting stronger control of in-market inventory. And I think the rationale here, so the Monday morning quarterback perspective, we sold in a lot of inventory in 2022 into the market. We wanted to penetrate the broad-based national accounts very quickly. And so we wanted to penetrate the broad-based national accounts for two reasons. We wanted to capture the shelf space. We also wanted to leverage the presence of the product on the shelf in the regions where the brand had not historically been distributed to raise brand awareness. I think that's worked extremely well. We've definitely captured shelf space, and we've raised brand awareness. We talked in our prepared remarks as how we believe the awareness of the brand is now 32% on a national basis, up from 18% earlier in the year. But I think the level of inventory was too high. So, really what we're doing is proactively lowering in-channel inventories and working with our strategic accounts to clean up that inventory and putting them in a strong sell-through and in a more profitable position. That's painful in terms of sell-in, which is what you see showing up in our Q4 guidance and what you see in our anticipated Spring '24 order book. The second thing is improving segmentation and differentiation such that all of our key customers that may trade, in some cases, in the same mall or in the same center, can continue to grow their businesses collectively. So, as we get a stronger innovation and stronger product pipeline, we believe we can effectively do that. And the third thing is taking control of pricing, particularly in the digital realm. We've talked about when we closed a lot of our international distributors, some of that excess inventory, and I think we didn't have full visibility to the amount of inventory that those distributors were holding. That has started to show up on Amazon, in the grey market. We've seen a lot of price pressure from that. Historically, we had a strategy where we thought we could compete from a price perspective and make sure we captured our fair share that was dragging down overall pricing in the market. So we've pivoted from that perspective, that's given up quite a bit of revenue expectation in the short term, but it's raised our ASPs, raised our profitability. It's obviously much more supportive of our wholesale customers. And we're hoping that Gray market inventory sells out quickly, and we can reset the digital market. So those are probably the three big buckets from a Monday morning quarterback perspective, and we're very confident that those will put us in a great position to continue to accelerate this brand in the long term. Jim Duffy: Thank you for that. And question just on the HEYDUDE profits pool outlook into fiscal '24, do you still see HEYDUDE gross margin of 50% is achievable in fiscal '24? It looks like the inventories are tight and perhaps maybe even there's less clearance than this year, do you think that the HEYDUDE profit pool be in decline in fiscal '24? Anne Mehlman: Yes, so first, I want to comment that, I think, inventories for both brands are in really good shape. So I would say that we're very pleased there. And as you mentioned, HEYDUDE inventory was down about 40% of the quarter. We're not ready to guide for next year at this point, but we do expect that HEYDUDE growth margins will improve next year as we have what's ASP pressure from the Gray market as well as we've talked about will have better distribution of logistics as we open up our distribution center in Q1 of next year. Operator: Our next question comes from Abbie Zvejnieks from Piper Sandler. Please go ahead. Abbie Zvejnieks: Great. Thanks so much for taking my question. Just on the gross margin, I know you maintain the 55.5% or greater than 55.5% that could still imply some like year over year pressure on the gross margin line item. And since you're not planning for a different promotional strategy at Crocs, can you just help us unpack what would lead the pressure on gross margin on the year over year business? Anne Mehlman: Yes, so from a pressure on gross margin, I'm not completely sure that I understand the question, Abbie. I think for the overall 55.5 guide that would imply that gross margin for the fourth quarter will be up versus last year for overall consolidated by, I think, a couple 100 basis points. So maybe you can give me what you're thinking through. Abbie Zvejnieks : Yes, I guess just like what's driving that pressure year over year? Anne Mehlman: Yes, so we expect gross margins to increase for the year and we expect gross margin to be up for the fourth quarter specifically focused on the Crocs side. Again, that would be helps overall, we've had freight tailwinds all year and more full price selling on the Crocs side, which will be slightly offset year over year from the HEYDUDE side as those gross margins will decline in Q4 as we've seen all year, as we have a subpar distribution and logistics strategy, given where we are and so we can get into next year. But overall we do expect gross margins to be up year over year in Q4. Abbie Zvejnieks: Okay. Got it, that's helpful. And then just on the HEYDUDE DTC expectations for... And they said it's better than wholesale, but can you just give any color on what you're seeing? I know maybe the pricing controls are impacting that, which is any color like order to date would be helpful. Andrew Rees: Yes, I mean, I can give a little color. I don't think we're going to give any more specific metrics. From a DTC perspective, we have raised prices, particularly on the Amazon components, which shows up in DTC because it's a 3P model if you remember correct. So we no longer competing with the Gray market, so APS are up. Even in these last few weeks, we can see ASPs up on average $10 a pair, which is obviously very significant. That is given up some market share, the Gray market is taking a little bit greater share in the market. But we think Net-Net with some newness and excitement that will eject into the market that we overall can grow at DTC business. We also highlighted in our prepared remarks, we will have opened by the end of the quarter five outlet stores, those are proper outlet stores. You may remember we had a number of clearance stores in, I would say, lower quality centers around the country where we were looking to liquidate some of the aged inventory that we bought at the acquisition. We have opened five proper outlet stores that showcase full-price goods at the front of the store, do have some liquidation capability, and also I think, showcase the brand and all of the various components of the brand. So those will also be in the DTC number for the quarter, and that will be obviously, a non-comp component. Operator: Our next question comes from Tom Nickik from Wedbush Securities. Please go ahead. Tom Nickik: Hey, thanks for taking my question. I know you've got a lot going on at HEYDUDE domestically, but in the past, you've kind of talked about expanding internationally, given how underpenetrated the brand is there. Do your plans to expand internationally get put on hold now, or do you kind of pump the brakes a little bit, given the challenges that you're seeing in the domestic market? Andrew Rees: Yes, good question, Tom. In essence, no. We think the brand has significant global relevance. We've talked about in the past we've reshaped the international business. When we bought the brand, their distribution strategy was distributor-orientated, so they had a portfolio of about 35 distributors across the world, most of which were doing a poor job. We've terminated most of those distributors. There are two that continue to do a good job. I think we've highlighted this in the past, the distributor in Italy and the distributor in Spain. Those are both really nice businesses. They do well. They do a great job distributing the brand in the marketplace. And if I think about what is really a U.S.-centric brand, if they can succeed in those markets, those are some of the tougher markets in my view, for a U.S.-centric brand to perform. I think it gives you evidence that the brand can perform well poorly -- sorry, perform well across a broad range of international markets. We are putting some time and effort into, I would say, experiments as we try and understand which are the right markets to penetrate internationally. We know brand awareness is very, very low, but we are putting time, effort, and some resources against that. It will take kind of two to three years, but it does start next year. Tom Nickik: All right. Thanks, Andrew, best of luck this holiday season. Andrew Rees: Thank you. Operator: The next question comes from Sam Poser from Williams Trading. Please go ahead. Samuel Poser: Thank you all for taking my questions. I want to follow up on Monday morning quarterbacking here a little bit, Andrew. Could you make the argument that you focus much more on supply than on demand as you are selling goods in, and you are shifting to more of a demand-based way you are looking at the HEYDUDE business now? Andrew Rees: Yes. I would not say it quite like that, but I think, in essence, you end up in the same place, Sam. Yes, we are certainly cutting supply into the wholesale arena to ensure that supply is pegged at or below demand. That is a demand-based environment. I think, as we sold in historically, we did not know where demand was going to be, but I do think we now have a lot more know where demand was going to be, but I do think we now have a much stronger lens on that. Yes, that is a reasonable way of saying it. Samuel Poser: If you had to do it all over again, would you have grown the business as quickly as you did last year? Andrew Rees: I probably would have done, but probably would have hoped that we could have had, I would say, stronger segmentation between the accounts such that we could give everybody the opportunities to succeed, and they were not competing against each other. I do think it was important to grab shelf space, which we were able to do very effectively. Obviously, it is not great if you are a public company to have one year of great growth and the next year of flat to contracting growth, but net-net, I think we have put ourselves in a good position from a brand and consumer perspective. I probably would do it, but probably do it in a better way and maybe slightly moderated. Samuel Poser: Is the Las Vegas Distribution Center up and running now? Anne Mehlman: Yes, this is Anne. We are mostly through construction, and it will be up and running in Q1. Samuel Poser: Thanks. And then you talked about the sell-through rates or the sell-through of 28% in your strategic wholesale accounts. But what were the -- how much of that was at the -- how much of that was on sale? I mean, did the ASPs go down to drive that given the gray market and the amount of inventory in the marketplace? Andrew Rees: The ASPs in the strategic wholesale accounts were actually up over the prior year. They were strong. So that wasn't a sell. That wasn't a promotional. Obviously, there are promotions during back-to-school, but that wasn't more promotional than the year before. The compression on ASPs was really on Digital, on Amazon, and on our own dot-com. So hopefully that answers your question. Operator: The next question comes from Rick Patel from Raymond James. Please go ahead. Rick Patel: Thank you. Good morning. I'm looking for additional color on the distribution of HEYDUDE. So can you paint a picture for what HEYDUDE distribution looked like earlier this year, perhaps in terms of number of doors, and where you expect it to shrink to as the brand right sizing goes on? And then as you think about 2024 and leaning into some of the growth areas and higher quality points of the business, where do you see this distribution evolving to? Andrew Rees: Yes. I think I'd probably go back further than the beginning of this year. What I'd say is when we bought the brand, the brand had about 1,300 points of distribution that was regional and very much orientated towards small mom-and-pop accounts, right?. So of that 1,300 doors, we've closed over 600 accounts, so that's probably more doors than that. But we've closed over 600 accounts, many of them with single doors, but some might have had one or two. And we've really extended the brand into large national chains. And as we kind of think about the HEYDUDE brand, we see the HEYDUDE brand essentially being sold almost everywhere that the Crocs Brand is sold. So I think about the primary chain, we're talking about family footwear, we're talking about sporting goods, we're talking about mall-based specialty, and then I want to say also some sort of super regional chains. So I think we're mostly in the customers that we want to be in. In a lot of those customers, were all doors, and there are a few of those customers we are partial doors, so we've got expansion opportunity. So it's been a pretty dramatic reshaping above the overall customer portfolio, and I think the future growth comes from a number of things. What comes from some customers extending to a broader proportion of their doors, it comes from a greater share of shelves in some doors, it also comes from accelerating sell-through with that demand perspective that Sam highlighted. So hopefully that answers your question, Rick. Rick Patel: That's very helpful. Thank you. Can you also talk about what your fourth quarter operating margin expectations are by brand? And then what should we extrapolate from fourth quarter operating margins overall as we think about what the potential could be in 2024? Anne Mehlman: Yes, so we don't guide fourth quarter operating margins by brand. Obviously, I think it'll be -- we've had strong operating margins in both of our brands. Our overall operating margin guide of 27% remains in its best-in-class. I wouldn't extrapolate Q4 to other quarters. As you said, we're going to invest in SG&A, so that we can continue to support from a marketing perspective and a consumer perspective the long-term growth potential of both of our brands and not manage for a quarter. But I think 27% operating margin overall, I feel really good about that overall. Operator: Our next question comes from Laura Champine from Loop. Please go ahead. Laura Champine: Thanks for taking my question. I first wanted to ask more about this guide for Q4 for HEYDUDE, just because it's such a significant downgrade from what we previously expected. If you bucket the change, how much of it is due to decisions that Crocs made to control distribution, and how much of it is something that happened to you, meaning wholesale customers ordering less and this sort of glut of inventory in the resale channel? Andrew Rees: It's a little bit of both, right? I think what I'd say, as we work with our wholesale customers, I think they're pretty cautious about the way the consumer is reacting right now, particularly post-back-to-school. We talked about that in preparatory marketing. I think that extends well into next year. So, I think they're being cautious. They're looking to buy less inventory and put themselves in a stronger position. It is also proactive cancellations and returns that we're taking to, to clean up inventories for key customers to put them in a much stronger inventory position and a higher profit perspective. And it is also a lower digital selling expectation based on not competing with some of the competitive sources on a price perspective. So we're seeing higher margins, higher ASPs, but less revenues. So it's really a combination of all those factors. Laura Champine: If retailers who are fairly new to the brand are cancelling orders and repositioning for lower inventories this Q4, what gives you the confidence that this brand can grow in 2024? Andrew Rees: The sellout that we're seeing, so the consumer takeaway, right, so as we look at our data from our major retail customers both in Q3, which you kind of can see 28% increase in sell-out, and we look at the week-to-week data that we get right now, we are selling more units to the consumer than we sold last year. So the consumer is taking away more goods. The sell-in, which is our revenue, we're right-sizing inventory, but the consumer takeaway continues to grow. Laura Champine: Got it. And then as we try to shape the year, do you think that Q1 looks like Q4? Meaning, for HEYDUDE, do you think that there'll still be some trend off with revenues down in this 20% range? Or should we see sort of immediate improvement because this is a Q4 issue? Anne Mehlman: Laura, I don't think we're ready to guide specifically for next year yet. We'll guide during our normal time periods. But we did say that we believe wholesale will be negative in the first-half of next year. But we haven't kind of given shape to that as we work through kind of our spring order books and our expectations. Operator: Our next question comes from Jeff Lick from B. Riley Financial. Please go ahead. Jeff Lick: Good morning. Thanks for taking my question. Andrew, I was wondering if you could maybe just opine. It strikes me that HEYDUDE -- the similarities between HEYDUDE and Crocs, there's an awful lot of them. And when you joined Crocs back in the early to mid-2000s, it just seems like there's quite a lot of parallels here to where HEYDUDE is now and where Crocs was then. And I was just wondering if you could kind of talk through your thought process and how you might use that as a blueprint. And then lastly, has the thought that, "Hey, maybe we should just focus on maximizing profitability as opposed to revenue," has that kind of entered into the equation now? Andrew Rees: So, I would agree and disagree, Jeff. I think that there is a very, very important parallel between the two brands and the work that we did to improve dramatically the performance of Crocs. There are a couple of parallels, right? One was managing the in-market inventories much more closely, which I think we've clearly articulated here that we're really trying to get on top of for HEYDUDE. I think the second is driving brand heat or demand, I think as Sam would say, for the brands through marketing, through limited supply, through licenses, collaborations, and really kind of, I would say, event-driven opportunities to drive the consumers to the brand. And we can accelerate and do more of that for HEYDUDE, which is definitely a parallel to Crocs. I would say way back when in the consumer's mind, Crocs was incredibly cold, right? So I think we just kind of used the Piper Sandler in-survey as a proxy, right? I think back then Crocs was number 38 on that list, right? So Crocs is now number six. HEYDUDE's not number 38. HEYDUDE's number seven, right? So it is a brand that resonates very strongly with a broad base of consumers. So I think that's a huge difference in terms of kind of what we're looking at here. Anne Mehlman: And then in terms of maximizing for profitability, Jeff, we're maximizing for the long-term health of the brand, certainly prioritizing profitability from a gross margin standpoint, but not maximizing for profitability overall. We think it's really important for us to invest. We made a conscious decision to continue to invest in Q4. We certainly could maximize for short-term profitability, but we don't actually think that gets us the best long-term outcome. Operator: Due to time constraints, this concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. Andrew Rees: Yes. I just want to thank everybody for joining us this morning, and their continued interest in our company. And we wish everybody a happy holiday season when it comes around. Operator: Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good day, and welcome to the Crocs' Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Cori Lin. Please go ahead, Cori. Cori Lin: Good morning, everyone, and thank you for joining us today for the Crocs Inc. Second Quarter 2023 Earnings Call. Earlier this morning, we announced our latest quarterly results and a copy of the press release may be found on our website at crocs.com. We would like to remind you that, some of the information provided on this call is forward-looking and accordingly is subject to the Safe Harbor provisions of the Federal Securities Laws. These statements include, but are not limited to, statements regarding our supply chain challenges, cost inflation, the acquisition of HEYDUDE and the benefits thereof, Crocs' strategy, plans, objectives, expectations, financial or otherwise and intentions, future financial results and growth potential, anticipated product portfolio, our ability to create and deliver shareholder value and statements regarding potential impacts to our business related to the COVID-19 pandemic. 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. Crocs' is not obligated to update these forward-looking statements to reflect the impact of future events, except as required by applicable law. We caution you that, all forward-looking statements are subject to risks and uncertainties described in the Risk Factors section of our annual report on Form 10-K and our subsequent filings with the SEC. Accordingly, actual results could differ materially from those described on this call. Please refer to the Crocs Annual Report on Form 10-K as well as other documents filed with the SEC for more information relating to these risk factors. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, Chief Executive Officer; and Anne Mehlman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I'll turn the call over to Andrew. Andrew Rees: Thank you, Cori, and good morning, everyone. I'm incredibly pleased with our second court results. We delivered record quarterly revenues of over $1 billion. The growth in ages brands continue to perform extremely strongly as evidenced by 26% direct to consumer revenue growth. We gained appreciable market share and once again delivered industry-leading profitability with 30% operating margins. Andrew will review our financial results in more detail solely, but here are a few highlights from the second quarter. Revenues were $1 billion per 12% on a constant currency basis. Crocs revenues grew 15% constant currency, fuelled by Asia [ph] increasing 39%. And global DTC comparable sales rising 20%. The Crocs brand continues to gain market share in North America with revenues up 13% driven by sandals and new product introductions. HEYDUDE brand revenues were $239 million with exceptional DTC growth of 30% and digital growth of 37% constant currency. Adjusting diluted earnings per share increased 11% to $3.59 per share. Gross leverage ended at 1.8 and net leverage was 1.7 times a quarter end, allowing us to repurchase $50 million of shares in July. Finally, Crocs, Inc. was named to the Time 100 Most Influential Companies for 2023. In summary, we had an excellent quarter, and our teams globally remained focused on driving brand health, market share gains, and profitable growth in the back half of the year. I would now like to provide updates for each of our brands. The Crocs' brand delivered strong revenue growth since 2018, as we built both cloth and brand relevance across the globe. This past quarter, our product of marketing efforts continues to deliver newness and excitement to the color brand brands, while simultaneously reaching new consumers who may not have considered our brand in the past. With respect to product innovation, we're diversifying our cloud offering and growing sandals. We've seen significant success in the number of hate-oriented new clogged productions, including the crush, mega-crush and more recently, the Siren. In addition, our recent launch of Dylan, a more elevated and fashion forward-cloth, is very encouraging. The echo continues to outperform our initial expectations, and personalization continues to draw global relevance for the classic. Turning to Sandals. As we have shared, this category is an important growth initiative Crox allowing us to expand into the adjacent $30 billion global sample category, where we believe our molded technologies, accessible price points, strong go-to-market, will allow us to compete effectively in a relatively fragmented market. The Crocs and Hayes brands continued to perform extremely strongly, as evidenced by 26% direct to consumer revenue growth. We gained appreciable market share and once again delivered industryleading profitability with 30% operating margins. Anne will review our financial results in more detail shortly, but here are a few highlights from the second quarter. Revenues of over a billion dollars grew 12% on a constant currency basis, crocs brand revenues grew 15%, constant currency fueled by Asia revenues increasing 39% and global DTC comparable sales rising 20%. The Crocs brand continues to gain market share in North America with revenues up 13%. Driven by sandals and new product introductions. Hey, Jude. Brand revenues were 239,000,000 with exceptional DTC growth of 30% and digital growth of 37%. Constant currency adjusted diluted earnings per share increased 11% to $3.59 per share. Gross leverage ended at 1.8 and net leverage was 1.7 times at quarter end, allowing us to repurchase $50 million of shares in July. Finally, Crops Inc. Was named to the time 100 most influential companies for 2023. In summary, we had an excellent quarter. And our teams globally remain focused on driving brand health, market share gains and profitable growth in the back half of the year. I would now like to provide updates for each of our brands. The Cross brand has delivered strong revenue growth since 2018 as we built both Clog and brand relevance across the globe this past quarter, our product and marketing efforts it's continued to deliver newness and excitement to the current brand brands while simultaneously reaching new consumers who may not have considered our brand in the past. With respect to product innovation, we are diversifying our Clog offering and growing sandals. We've seen significant success with a number of height orientated new Clog introductions, including the Crush, Mega Crush, and more recently, the Siren. In addition, our recent launch of Dylan, a more elevated and fashion forward club, is very encouraging. The Echo continues to outperform our initial expectations and personalization continues to drive global relevance for the Classic. Turning to sandals. As we have shared, this category is an important growth initiative for Crocs, allowing us to expand into the adjacent $30 billion global Sandal category, where we believe our molded technologies, accessible price points, strong go to market will allow us to compete effectively in a relatively fragmented market. We're excited by our incredible Sandal performance, where revenues grew 34% compared to Q2 last year and 40% growth on a trailing 12 month basis. Growth was robust in all regions, driven by our diversified sample offerings, new product introductions and robust marketing calendar. The Classic and Brooklyn continue to be our leading sandal franchises. In addition, the more recent Mellow and Crush introductions have been extremely successful and are also top selling styles. We will continue to drive sample awareness and customer acquisition with activations, such as the new Pollock slide with Salehi Bembrick. Overall, we're pleased with the sandal trajectory and very confident that sandal revenues will grow to in excess of $400 million this year. From a collaboration perspective, we announced plans for a two year partnership with Salehi Bembrick, who will serve as Creative Director of the Crocs Times Pollex Pod to introduce innovative new styles. This quarter, we introduced the Pollex slide, which sold out instantly and provided a halo for our sandalwood offerings globally. More recently, we partnered with rapper Lil Nas X to showcase our height collection, such as Siren and Crush. During Paris Fashion Week, we took over the famed Mercy pop up space. Other marketing highlights from the quarter include our Mellow slide with Taco Bell, a clog collaboration with Parisian running brand Satisfy, and a slide and close partnership with Korean food brand Otoji. Finally, this month, our Barbie collection, featuring Clogs sandals and Jivets quickly sold out ahead of the blockbuster movie launch last weekend. Asia is another important long term growth driver for the Crocs brand, as the brand is currently underpenetrated relative to here in the US. In Q2 Asia revenues grew by 39% in constant currency, growth was again broad based, with strong brand momentum throughout the region, including China, Australia, South Korea and Southeast Asia. We're particularly encouraged by another exceptional quarter of growth in China, with Q2 revenues increased over 100% ahead of our expectations and one more sign of the potential within this market. The leadership team and I had the opportunity to visit China in June for the first time in three years and was wonderful to see how much the brand had grown. We met with our partners suppliers and visited many stores. We have been deploying the same playbook we have used globally, including influencers, collaborations and personalization. We partnered with local celebrities, including [indiscernible] Zhou Yutong to style collaborations and products in their own authentic way. Brock's Creations by four emerging Chinese designers from Fashion Incubator. Labelhood were featured at Shanghai Fashion Week and Jibbitz, our vehicle for self-expression continues to surprise and delight consumers and create great excitement in our stores. Croc's rising popularity in China has created a passionate following with a hashtag known as Dongman or Clark's followers. [indiscernible], a leading Chinese social app, topics related to Crocs have accumulated over 310 million views. During the popular midseason festival in June, Crocs sales ranked second on Tmall within casual footwear brands in Douyin Chinese TikTok, we ranked first in sales during mid-season festival. In summary, we're incredibly excited by the Crocs brand momentum in China and are even more confident about the potential for the Crocs brand in the second largest footwear market in the world. Now to Heidu [ph]. We're incredibly pleased with exceptional DTC growth of 30% and constant currency digital growth of 37%. Our product of marketing innovation is driving new customer acquisition and is growing awareness on the coasts. Our ecommerce data demonstrates that Q2 revenues on both the East and West Coast increased 45% compared to last year. New product introductions, which range from new colors to new silhouettes, are driving excitement. Our Americana styles were top sellers ahead of Memorial Day and 4 July holidays amongst men, women and kids. As a demonstration of our test and learn approach, this year our Americana collection featured over 20 patterns and colors, building on the early success we saw last year. The new Wally and Wendy Funk and Wash Canvas styles have performed strongly in both DTC and wholesale, and our efforts to expand the brand beyond the iconic Wally and Wendy within sneakers are off to a great start. The Karina for women and the newly introduced Shirako sold out quickly, and we're in the process of getting them back in stock. On the marketing front, we focused on enhancing brand awareness. We launched our first ever HEYDUDE collaboration this quarter with outdoor lifestyle brand Mossy Oak, and we saw great sell through. We've also started to seed our back to campus collection on social channels and look forward to launching our collection featuring colleges from the South Eastern Conference or SEC in September. Finally, with respect to wholesale revenues, as we discussed in June, a large part of last year's revenue related to pipeline fill for some of our new strategic alliance partners. We estimate pipeline fill of $70 million for the second quarter of last year and $220 million for fiscal '22. This pipeline fill was very conscious decision in our part to secure self-space, knowing there will be competition in the marketplace. Aggregate consumer takeaway for the brand across all channels, we estimate to be up approximately 27% during Q2 of 2023, based on over 80% increase in our strategic alliance accounts, shrinkage in our non-strategic wholesale accounts and 30% DTC growth. Retail Traction Service data from Sukana, formerly MPD, indicates that HEYDUDE rose from the number 15 in Fashion Footwear brand in Q2 of last year to number eight in Q2 of this year based on US sales. As we look towards the remainder of the year for HEYDUDE, we are lowering our outlook for revenues. Wholesale growth is expected to be low. As we outlined in June, there is $220 million of non-comparable sales last year due to the rapid expansion to major US strategic customers and the discontinuation of relationships with some smaller customers. Since then, while our wholesale partners are very pleased with the performance of HEYDUDE and a number have called us out in their recent earnings, many are cautious in terms of future bookings based on their overall market outlook and lack of historical data on HEYDUDE's performance. Finally, as we previously shared, we anticipate constrained distribution capabilities, particularly related to at once in the back half of the year due to ERP and warehouse transitions. Even with this lowered near term revenue outlook, the HEYDUDE brand is acquiring new customers and is gaining penetration in strategic accounts and on the coasts. We remain incredibly optimistic about the long term potential of the brand on a global basis. Finally, turning to digital for both brands, we saw exceptional 21% constant currency growth, driven by new product introductions that are resonating well with consumers globally. For the Crocs brand, the app is rapidly scaling and gaining consumer traction, reaching penetration over 20% in South Korea. In the US, we continue to be excited by our launch of customization and on our site now offering an online configurator for organizations to design custom Clogs and jibbitz. Our global CRM database is also accelerating in key markets with the expansion of programs like SMS and the app. As we mentioned last quarter to gain better control of our brand and realize higher ASP, we anticipate transitioning some of our Croc's Etail business that sits in our wholesale equipment to a direct digital sale both on Crocs.com as well as marketplaces, where we will sell directly to the consumer. This will result in lower wholesale sales and higher DTC sales. For HEYDUDE, we're investing in digital capabilities such as enhanced site experience payment offerings to improve the customer journey. We're also scaling our digital marketing investments to acquire and retain new customers. These efforts, coupled with new product introductions, have led to strong growth rates across all our digital channels, including being a top performing brand during Amazon's recent Prime Day. Overall, our digital first approach is working and is driving strong growth globally. In summary, we have tremendous confidence in and clear evidence as to the underlying strength and growth potential of both the Crocs and HEYDUDE brands. Sell through from both our brands continues to be robust, and we believe we're benefiting from our democratic price point and gaining share in a difficult market. I will now turn the call over to Anne who will review our second quarter financial results in more detail. Anne Mehlman: Thank you, Andrew, and good morning, everyone. I'll begin with a short recap of our second quarter results. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. For a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to this morning's press release. We had an excellent second quarter with over $1 billion in consolidated revenues, representing 12% year on year growth. We delivered another quarter of industry-leading profitability with adjusted gross margin of 58.1%, adjusted operating margin of 30.3% and adjusted diluted EPS growth of 10.8%. Our portfolio is diversified from a brand channel and geography perspective. On a trailing twelve month basis ending Q2, HEYDUDE brand revenues were 26% of total revenues. Channel mix was well balanced with wholesale revenues representing 54% of trailing 12 month revenues and DTC at 46%. Finally, approximately 31% of total TTM revenues and 40% of Crocs brand TTM revenue were from international markets. During the second quarter, Crocs brand revenues were $833 million, growing 14.9% to prior year and driven by strong DTC growth of 26.8%. The brand sold 33 million pairs of shoes, an increase of 1.8%. The Crocs brand average selling price during Q2 was $25, which was up 12.8% on a constant currency basis, driven by price increases and fewer DTC promotions internationally. Within the Crocs brand quad screwed double digits and continued to generate demand with newer products such as Echo Crush and Dylan. Sandals, an important growth pillar for the future increased 34% in Q2, with growth in all regions to represent 16% of Crocs brand sales. Finally, Jibbitz continues to create excitement and engagement with consumers around the world, growing 13% from last year with strong growth internationally. Now, let's discuss a few cross brain highlights by region. In North America, second quarter revenues increased 12.5% to $475,000,000 and first half revenues increased 11.5%. We gained significant market share in a declining US footwear market. The North America DTC channel for the Crocs brand, an indicator of underlying consumer demand, was a key growth driver with DTC comparable sales up 12.9%. Wholesale revenues were also robust, increasing 5.5%, despite a more challenging wholesale environment. Asia Pacific delivered significant growth as we execute on our long term growth plan to ignite the brand in the region. Croc's brand Q2 revenues in Asia grew 39% to $198 million, and growth was broad based across countries and channels. China and Australia led the growth, with revenues increasing over triple digits, while South Korea and Southeast Asia also had strong double digit growth. Crocs brand revenues for Amelia were $160 million, a decline of 1.4% from the second quarter of 2022. As a reminder, Q2 last year benefited from a $40 million revenue shift out of Q1 following the Vietnam shutdowns. This quarter, strong growth in direct markets including the UK and France, as well as outstanding DTC comp growth of 38.6%, was offset by a decline in distributors. In connection with the newly implemented Marketplace Management Program in the quarter, we terminated our relationship with a significant distributor servicing Africa. This was not anticipated going into the quarter, and we terminated the relationship after finding evidence of product diversion to the Gray market outside of their approved territories. This impacted revenue by $8 million in Q2 and will impact second half revenues by $21 million. We expect Emilia revenue growth to reaccelerate in the back half of this year. Turning to HEYDUDE, Q2 revenues were $239.4 million, an increase of 2.9% from last year. During Q2, the brand sold $8.3 million pairs of shoes, an increase of 3.6% over last year. HEYDUDE average selling price during Q2 was $28.88, or 0.6% lower than prior year due to price pressure from gray market selling on Amazon. The DTC channel, which is predominantly ecommerce, led the growth with revenues increasing 29.7% from last year. Digital sales increased 36.6% and digital penetration increased 1,000 basis points to 41.8%. As Andrew explained earlier, underlying consumer demand for the HEYDUDE brand is incredibly healthy. Consolidated adjusted gross margins for the second quarter were 58.1%, increasing 290 basis points from last year, driven by favorability in ocean freight rates and the absence of air freight that was partially offset by higher overhead and fulfilment costs associated with our HEYDUDE distribution network. Inefficiency currency negatively impacted consolidated gross margins by approximately 50 basis points. Turning to the brands, adjusted gross margin for the cross brand was 62%, or 410 basis points higher than prior year. Reduced air freight of approximately 380 basis points combined with lower inbound freight rates, higher prices internationally and channel mix were partially offset by product mix. Currency negatively impacted margins by 80 basis points. HEYDUDE adjusted gross margins were 47.1% flat with prior year. We continue to see a reduction in inbound freight rates. However, this has been offset by additional inventory, storage and network costs related to the transition of our subscaled distribution network combined with gray market pressures on ASP and our channels. During the second quarter, consolidated adjusted SG&A represented 27.8% of revenues, which is 270 basis points higher than last year as we invested more in marketing and talent for both brands to support our growth trajectory and annualized additional investments for HEYDUDE. Our second quarter consolidated adjusted operating income was $325 million and increased to prior year by 11.7%, and consolidated adjusted operating margins remained best in class and increased 20 basis points to 30.3%. Our second quarter non-GAAP diluted earnings per share increased 10.8% to $3.59. Our continued strong free cash flow generation enabled us to repay approximately $300 million of debt in the first half, reducing borrowing to $2 billion. At the end of Q2 adjusted gross leverage was 1.8 times achieving our mid-year leverage goal and net leverage was approximately 1.7 times as we ended the second quarter with $166 million of cash and cash equivalents. Our exceptional free cash flow generation has enabled us to quickly deleverage and resume our share repurchase program. In July, we completed $50 million of share buybacks. We're purchasing 425,000 shares at an average price of $117.72. We currently have a $1 billion remaining on our share repurchase authorization, and we will continue to methodically balance debt repayment and share repurchase as we approach our long term net leverage target of one to one and a half times. Our inventory balance at June 30, 2023 was $436 million, a decline of 13% to Q2 last year. Cross brand inventory was $307 million, down 8.4% to prior year, and HEYDUDE inventory was $130 million, a decrease of 22.3% to prior year. Inventory turns continue to improve and we are very pleased with the health of our inventory. As we look forward, I would like to share our current outlook for the third quarter and the balance of 2023. All numbers will be on a reported basis unless otherwise stated. Having completed an exceptional first half and with improved visibility and confidence around the second half, particularly for the Crocs brand, we are raising our full year 2023 outlook for revenue and profitability. We now expect revenue growth of 12.5% to 14.5% on a reported basis compared to 2022, up from prior guidance of 11% to 14% growth and resulting in full year revenues of approximately $4 billion. On a consult validated basis as always, we are focused on best in class profitability and are raising our adjusted operating margin to be approximately 27.5% for the full year. We are confident in our ability to deliver higher operating margins as gross margins have outperformed and we have been able to closely manage SG&A while investing for future growth. We are also raising our adjusted diluted earnings per share outlook to be between approximately $11.83 to $12.22 up from the prior guidance of $11.17 to $11.73. From a brand perspective, we are raising our expectations for the Crocs brand and now expect to grow 12% to 13% on a reported basis, up from 7% to 9% previously with Asia expected to deliver the highest growth and DTC outperformance expected to continue. For HEYDUDE, as Andrew mentioned, we are lowering our full year growth outlook to be between 14% and 18% revenue growth on a reported basis. This translates to approximately 3.5% to 7.5% growth on a 2022 pro forma revenues of $986 million. While we continue to anticipate strong growth in wholesale sellout for the HEYDUDE brand, our wholesale partners are manage their inventory very closely for the remainder of the year, and we have a constrained warehouse that limits our at once capabilities. On a two year basis, HEYDUDE growth is very healthy at approximately 80%, and we remain excited about the long term growth potential of this young brand. For Q3 we expect consolidated revenues to grow approximately 3% to 5% as to lap significant pipeline for HEYDUDE. We expect Q3 adjusted operating margin to be approximately 27% and adjusted diluted earnings per share of $3.07 to $3.15. In summary, we are incredibly pleased that we are able to raise expectations for revenues, operating margin, and EPS. At this time, I'll turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. As we look forward, we're incredibly confident in the strength of the Crocs and HEYDUDE brands and our ability to drive market share gains and sustainable, profitable growth. Our focus remains squarely on sustaining brand health and creating long term shareholder value. Operator, please open the call for questions. Operator: [Operator instructions] Our first question comes from Jonathan Komp from Baird. Please go ahead. Jonathan Komp: Hi. Good morning. Thanks, everyone. I want to start just by asking a little more detail about your outlook for HEYDUDE. Could you give a little more color what you're expecting for the third quarter, embedding in your total revenue guidance and just how to think about the channel expectations in third quarter for HEYDUDE. And then maybe a bigger picture question, I know when you bought the brand, you pointed to at least $1 billion of revenue by 2024. You're delivering that this year, but how should we think about the growth drivers as we get beyond 2023? Andrew Rees: Great. Thank you, Jonathan. So maybe I'll do the last part of your question first and kind of set the stage for HEYDUDE. Then we can come back to Q3. So as we look at the period since we've owned HEYDUDE, look, we've rapidly expanded distribution, to what I would say is essentially the same or very similar distribution to Crocs. A large part of that expansion was last year, and I'll come back to that. At the same time, we've introduced new innovative silhouettes that we think are doing well. We know we're doing well, and we see we do radically strengthen the team. As we look at Q2 sell-out for the brand up 27% as we look across all channels and consumer satisfaction is incredibly high. MPs for the brand is 71, which is about 50% higher than, frankly, most brands in the casual footwear space. As we look at the back half of the year, we are reducing our expectations for the brand, principally related to wholesale. And there's a few things going on there. Number one, as I talked about in prepared remarks, we've got $220,000,000 of sell in that we did last year. That is pretty hard to come. Second, we are seeing our wholesale partners be pretty cautious in the back half of the year. I think they're being cautious for kind of three reasons. One is they're just cautious about overall traffic trends and the trajectory of the consumer. They've got some overstock in some other brands, principally some of the big athletic brands that they've got to work through and they don't have good history on HEYDUDE in the back half of the year. So we're seeing very cautious bookings. When we combine that with some constraints that we have around our at once business, we transitioning towards the end of the year our warehouse and our ERP system. So we're being realistic about our at ones capabilities. And then lastly, we've seen some gray market on the Amazon platform, which we think is principally coming from the distributors. That we closed last year. We are seeing a slight mitigation of that. But we're also working hard to clean up the Amazon presentation. So I think hopefully that gives you a strong picture of what's happening with HEYDUDE. We're incredibly confident with the brand, incredibly confident of the long term growth trajectory. We're not ready to guide next year's growth. I think that was embedded in your question. But we feel well positioned for the long term growth of the HEYDUDE, brand both here in the US and internationally. and I'll let Anne add some commentary around Q3. Anne Mehlman: Thanks, Andrew. Hi, John. I think the biggest thing for Q3 is just to remember we're still dealing with, as Andrew mentioned, the non comp business of HEYDUDE, or the pipeline fill. So for Q3 we do expect HEYDUDE to be down. And that's primarily that's really related to the wholesale part of the business, as Andrew just mentioned. And you can see from our presentation, we had about $60 million of pipeline fill last year. And then we expect direct to consumer to be up and then Crocs, obviously, to continue to grow. And that provides the color around the overall Q3 Three guidance for revenue growth. Jonathan Komp: Okay, that's very helpful. Then if I could just ask separately about Crocs, given some of the sales that looks like you're going to miss in the second half, maybe close to $30 million from the distributor you mentioned, but you're still raising guidance for the year. Could you just highlight maybe where you're seeing upside for Crocs and maybe tie in with that? Any updated thoughts on the gross margin for the year for Crocs, since it looks like it was quite strong in the quarter? Andrew Rees: Thank you. Yeah. Thank John. Look, our cross business is very strong, and we're seeing the brand perform strongly in, frankly, many regions. I'd probably call out a couple. DTC is very strong, particularly here within North America, but also in Asia, our US wholesale business is probably a little bit stronger than we thought it was going to be. So we feel really good about that. China, I think we gave you a lot of color around China in our prepared remarks, is performing very well, and broader Asia is also performing well. So I think what we're seeing is continued strength in crops, really driven by the same things that we've kind of talked about out a few times. But it's really product innovation, its marketing innovation. We see it across clogs as well as sandals as well as Jibbitz. So we feel very confident in the overall crops trajectory. And we'll let Anne pick up on your first margin point. Yeah, I would also just add that Amelia DTC is actually incredibly strong as well. So even though the distributor part is impacting that, we saw very strong growth in Amelia DTC of I think around 40%. But overall, from a gross margin perspective, so crops gross margins are also flowing through stronger. Some of that is just stronger channel as DTC outperforms. The second piece is we've taken quite a bit of price in our international markets, which are really supporting margins. And then we've seen promotional levels kind of level out in North America. And then obviously, we've been able to recoup the air freight last year, as well as just lower freight rates. So I would say overall, we expect margins to be higher than the kind of original guide we thought they were going to be like a little bit higher than 58, and now we're thinking they're probably going to be north of that. So overall, our gross margin expectations for the year are higher than the kind of 55.5 we talked about last time, and that supports the operating margin raise. All right, thank you very much. Operator: Thank you. The next question comes from Abbie Zvejnieks with Piper Sandler. Please go ahead. Abbie Zvejnieks: Hi. Yeah, thanks for taking my question. So just first, can you just comment on any differences, I guess, that you're seeing from your wholesale partner behavior between Crocs and HEYDUDE in the US. Specifically, is there any difference between sellout between the brands, or is this really that non comp dynamic and then just not having that historical data on what happens in the second half for HEYDUDE? Andrew Rees: Yeah, I think that is obviously a question that we've definitely been kind of asking ourselves and looking closely at Abby. And I would say a lot of it is really the newness of the brand. We feel Crocs is clearly performing well and I would say crocs at us. Wholesale, it's the newness, it's both clothes, it's both sandals, and it's performing well. I would say the HEYDUDE sellout is also very strong. I think we gave you some visibility to that. In the strategic partners, it's up dramatically, I think close to 8% and sellout in aggregate across all channels, our estimate is up 27%. So consumer takeaway is strong. It's definitely performing at wholesale. We think the principal issue is they have years and years in history on Crocs and how it performs in the back half of the year. The history is very light. And to some of the wholesale partners, nonexistent for the back half of the year. And we're seeing cautious bookings. And as I highlighted in my earlier answer, it's hard for us to react to that without once given our kind of warehouse situation. So that's really our diagnosis. Abbie Zvejnieks: Got it. That makes sense. And then just on the inventory, management was really strong during the quarter. So you talked about hey due gross margin was flat year over year, but some pressure from those storage costs. As you've cleared through inventory, when do you think you could start to see maybe some benefit to the HEYDUDE, gross margin? Andrew Rees: Thanks. Yeah, we're very pleased with overall inventory, obviously down for both brands and really coming in line with our longer term target for turn targets for both brands to be about four times. I think from a gross margin perspective, overall, there's kind of two pieces pressuring HEYDUDE gross margin. One piece, as you mentioned, is the additional kind of storage and subpar logistics situation for that brand, which we expect to obviously cure next year with the opening up of our new Las Vegas distribution center. And the second piece is we are seeing quite a lot of gray market activity on Amazon Pressure, our HEYDUDE ASPs. And that's really related to some of the terminations that we did when we went through and terminated some of the Legacy International distributors and also some of the Legacy US partners. So we expect to work through that and that to improve throughout the year. So I expect next year our gross margins should be back in line kind of with where we originally thought, which is more on the lines of around 50% in the shorter term. Abbie Zvejnieks: Got it. Thank you. The next question comes from Tom Nickik from Wedbush securities. Please go ahead. Hey, yeah, thanks for taking my question. So I guess when we think about HEYDUDE, obviously, I believe you said down in Q three, and that would imply that there's a pretty significant step up in the fourth quarter based on the slide deck. There's also a pretty significant amount of new door contribution last year. I'm not sure if that's channel sell or sell through. Channel fail that had happened earlier in the year or whatever. But I guess how do we get comfortable with kind of the reacceleration that's embedded in HEYDUDE for the fourth quarter? Andrew Rees: Yeah, I think there's a few things. One is in the fourth quarter. We anticipate that the DTC balance of the business is bigger, right. It typically is with the with the holiday period. So we think DTC is the bigger and as you can see, we've gotten nice trajectory on our DTC business. And we also looked at our wholesale business. And yes, there is still a component of sort of pipeline fill that's harder to comp in the fourth quarter, but I think the balance of the business we will see a rebound in. Q4. Abbie Zvejnieks: All right? And then I just want to follow up on Inventories. So I think inventory was down 13% year over year, if I'm not mistaken. Should we think about inventories being down year over year in the back half as well? Yeah, I don't think we don't typically guide inventory. I would say that we expect by the end of the year to look at to be closer to our four term target? Anne Mehlman: So I think it depends a lot on obviously from a revenue perspective, and we will both, for both brands tend to bring in inventories ahead of a very high selling season for wholesale in Q1. So some of that depends on our Q1 order book, obviously, but we think that our inventories will be back in line probably around four turns by Q4? Abbie Zvejnieks: Understood. Thanks, Anne. Thanks, Andrew. Best of luck in the back half. Thanks for the talk. Operator: The next question comes from Jay Sole from UBS. Please. Go ahead. Jay Sole: Great. Thank you so much. In the slide deck you gave us that nice data point that sandals continue to expect it to be 400 million for the Crocs brand. You also mentioned some new styles from HEYDUDE. I think you pointed out in the slide deck the Funk, the Shiraco, what percentage of HEYDUDE revenue is the wall in the Wendy right now? And maybe where was it a year ago and where do you see it going from here? Andrew Rees: Thank you. Yeah, we've not been providing that, Jay. But I can qualitatively tell you that a very large portion of the Heydoo business is Wally and Wendy. That's the iconic silhouette. And while we're highlighting new styles, which we think is important to continue to diversify and build out the brand and take the brand into kind of other silhouettes and other wearing occasions, a ton of our effort from a product innovation and newness perspective is going into the Wally and Wendy. I think we were highlighted. A great example is the patriotic pack, right? So last year essentially when we bought the brand, they had a stars and stripes shoe that did really well. Going into Memorial Day and 4 July, we saw great traction with that. So we expanded that to I think we said 20 plus style colors across men's, women's and kids. And that did amazing. So a very large portion of business is Wally and Wendy and our innovation is going into Wally and Wendy plus also the additional silhouettes and I would call know Soroco in particular, which is kind of a running orientated silhouette, casual running. It's performing very well in our DCC business and in our key wholesale accounts. Jay Sole: Okay. Got. And if I can maybe ask one more give us an update on the cash use plans for Q Three and Q Four. Obviously paid down a lot of debt in the quarter, bought back some stock, do you expect those trends to continue at a similar rate or different rate? That would be helpful. Thank you. Andrew Rees: Yeah, I think. Thanks, Jay. We're incredibly pleased with our historical debt pay down and what we anticipate to pay down. So we've obviously done a lot of work on derisking the balance sheet and paid down $850 million of debt since we purchased HEYDUDE, we do expect to continue to generate incredible free cash flow. So that free cash flow. Given these dynamics, after we will funding our business, obviously will continue to deploy capital. So we'll prioritize paying down debt to get to a target net leverage longer term ratio of one to one and a half, as we stated. And we will look to Opportunistically also buy back shares. So we will balance both in the back half of the year. And is that included in the EPS guidance? No, the EPS guidance includes debt pay down and excludes any Opportunistic share buybacks. Jay Sole: Got it. Okay. Thank you so much. Operator: Our next question comes from Samuel Poser from Williams Trading. Please go ahead. Sam Poser: Good morning, everybody. Thanks for taking my questions. All right. At the fanny show, we were told that when showing a lot of new product, that to help balance, you run a map program, but you have map holidays. My question to you is, what are you doing with core product in both Crocs and HEYDUDE. To create more relative scarcity so you don't need the map holidays so you can drive more of a full price business because I think everybody out, they're seeing a good amount of promotion. And then I want to follow up on how you're controlling Amazon and how long that's going to take to get that all cleaned up. Andrew Rees: Okay. All right, so I think let me do the first part first, Sam. So what I'd say is. For Crocs on HEYDUDE, we operate Map, as you well know. We try and make sure our key styles are mapped and so they are not promoted on an ongoing basis. And then we give the retailers, I think, five holidays a year throughout the year, which is frankly pretty typical. I would say most brands follow that cadence and give them an opportunity to drive some promotion. Those are all at key promotional periods when the consumer is expecting promotion. And we think that is a very sensible strategy to maintain majority full price sell through. Plus also give our wholesale partners an opportunity to drive a little extra business at key times and compete with other brands. I would highlight particularly for Crocs, where that's been in place for some period of time that is driving a very high overall achieved gross margin rate and a great deal of profitability for the then you want to ask your question associated with Amazon cleanup. Yeah, but I understand but people, if you have a brand that appears as strong as both your brands are and you have a strong Map policy, wouldn't the consumer start waiting for the sale periods over time versus just control it? So I understand promoting stuff you need to clear, but if you have core colors that you're going to yeah, I don't understand it. Yeah, I would say Sam, there's not a lot of evidence for that. Right. We see our core products, core colors. Core products sell week in, week out. Right. So there's really not a lot of evidence that they're waiting for the map periods. And I would say the map breaks on the cores are pretty light. And I would say, look, we're doing a ton of other things with scarcity, right? So we do multiple co labs a week to drive scarcity and drive consumer interest in the brand and a reason to buy. We have huge amounts of kind of seasonal product that's in and out. And if you think about the core classic Clog, a whole range of seasonal colors that don't get replenished and so the consumer knows if they don't buy them, they're not available later. So I think the balance of marketing activity, consumer activation, is kind of working really well, to be honest, in terms of driving the overall trajectory of the brand as well as the sales and gross margin achievement, and then apply that to HEYDUDE, including the Amazon question. Yeah. And we're transitioning to a similar strategy for HEYDUDE. Right? So we've rapidly expanded the distribution of the brand, essentially to the same partners that have Crocs. We're following kind of a similar pricing approach, but I would say we are seeing quite a lot of pressure in terms of Amazon gray market, and we're working really hard to close that down. I think we highlighted that we think a lot of that product is coming from the distributors that we closed internationally. So the amount of product that they have available is finite and will run out and we believe is running out. And so it's a disruption, temporary disruption, to. To the business, but I think we're very clear about what it is and how we deal with it. Operator: The next question comes from Jeff Lick from B. Riley. Please go ahead. Jeff Lick: Good morning, guys. Congrats on a great second quarter. Andrew Anne, I was wondering, your Q2 presentation that you put out on June 7, the implication is you take the HEYDUDE guidance from mid 20's down to the 14 to 18. The implication is things were probably on track at that point, given how you go about your IR efforts and your communications. I'm just wondering if you could walk us through some color as to what happened from June 7 onto today in terms of how did you get the feedback, any color, on how things deteriorated a little bit and changed? Andrew Rees: Yeah, look, I think the biggest thing, Jeff, is what I highlighted to earlier question right. Which was, as we look at know, there's really two big pieces. One is wholesale. The other is, sort know, our efforts to clean up the grain market. The biggest probably is the wholesale. And as we look at our bookings for the fourth quarter, they were more conservative we thought they were going to be. That's really the biggest change. And the reasons that we've been told and the reasons that we understand for that is, number one, the wholesale channel majority of the wholesale channel has been pretty cautious about the back half of the ship. They have some inventory overhang from some other brands that they need to work through so they're open to buy dollars. They're a little bit more constrained than they'd like to be. Now, you could argue that. They should invest in the performing brands and then deal with the overstock brands separately. We certainly have made that argument and we'll continue to make that argument. And they don't have strong history on. So, unlike Crocs, where they have years and years of history and can see exactly how it performs in the back half of the year, they don't have the same history and confidence in HEYDUDE. And they're pushing bit of the responsibility back on us in terms of at once, but we don't have the ability to deal with that to the degree they'd like us to. So we just felt at this point it was prudent to lower expectations for the back half of the year. So that's really what changed. As we look beyond the back half of this year, we see lots of growth opportunities for the brand, both from a territory perspective, from a customer perspective, and also from a silhouette and new product introduction perspective. Jeff Lick: Just a quick follow up on the direct to consumer HEYDUDE at 29.7, I'm curious, is that relative to the 40.6 in Q1 on a two year, are those comparable? It seems like that probably decelerated a little bit and then I was wondering, as you guys measure the grade market impact, how much of an impact in terms of percentage points might that have on that DTC revenue percentage? Anne Mehlman: Yeah. So Jeff, the 40% was just the only that was just March. If you remember, that was Direct to Consumer call for March because we didn't own the business before that. The 29.7% is total growth for Direct to Consumer, which is Ecommerce, and we have a small amount of retail clearance, retail type of clearance stores. So that's the 29.7% growth. So you're comparing kind of three months to one month when we kind of own the business. So I'm not sure it's a totally fair comparison, but we feel pretty good about a 30% direct to consumer growth. I'm not sure if we can actually. Or we're ready to kind of talk about how much the gray market has hurt from a growth perspective. But I would say, actually, on both brands, it's not insignificant. It's actually pressured ASPs and also, obviously, we lose the buy box and being able to sell directly to the consumer. So we've been very aggressive in Attacking that. We talked about. We've launched a market cleanup kind of program and obviously canceled a pretty significant distributor. And we will continue to be very focused on making sure that our product ends up where it should be. Operator: Thank you, Jeff. The next question comes from Jim Duffy from Steffel. Please go ahead. Jim Duffy: Thank you. Good morning. First, Andrew. Andrew, I'm hoping you can speak to development of the China marketplace and opportunity for that to build, maybe to start, just can you size the baseline? A lot of moving parts with COVID Give us a sense for the size of that business now, and then maybe speak to the current channel mix. And then with that background, if you could speak to the different avenues for growth, will digital be the Principal channel, or do You Plan to open more stores in China as well? Andrew Rees: Yeah, let me talk about the strategy, about what we're going to do in China. I'll have Anne come in at the end and talk to about the size of the base and give you some perspective there. Right, so from a strategy perspective, the way to think about it and we've talked about this historically through the cleanup. So the way to think about it in China today, we have a large digital business. We've definitely invested very heavily in digital. It's probably our most important Channel within China. And then, secondly, we have a small footprint of Company owned stores. Those company owned stores are in the major cities and in The BesTmalls, which Are Sort of quite expensive for your distributors or your distribution partners in country to invest in. They're super important because they showcase all of our latest products. They drive authenticity with the consumer. And then we have outlet stores that we also own directly ourselves, important because they are highly profitable. And also they allow you to keep your inventories clean. And then the third component of the strategy is the franchise chives, or partner owned mono branded stores. So as we look at growth, we think growth will principally come from two things. We think our digital business will continue to grow, and that's diversified across the platform. So that's Tmall, that's JD, but also increasingly Chinese TikTok, where we do a lot of social selling in. So the growth will come from digital and will also come from partner operated stores. And so, as we look at the partner portfolio, they will continue to grow their store footprint, probably quite aggressively. The stores that they're operating for, crops are performing extremely well. They're making a lot of money from those, and they're really commercial animals. If they're making money and they can see an opportunity to open up stores, they will. And obviously, we'll encourage that. So really, the partner operated stores and the digital will drive the business in the future. Anne Mehlman: Yeah. So I think historically, from a size perspective, we said China was about 5% of the Croc's revenue base. And obviously, our longer term growth for that is we expect it to grow up to be about 10%, which would be a 500 million dollar kind of base. And roughly, if you do the math, it's historically when we said it would have been more like a $60 million business. So we obviously are growing it very quickly. So it's outgrowing. So it is taking share and really on track with that long term trajectory. So we're pretty pleased overall with how China is growing and that it's on track of. Jim Duffy: And Anne, is that a margin accretive business? Anne Mehlman: So we're investing quite heavily in it right now. Right. So we're investing outsized marketing into that business. But long term, obviously, you leverage that and the gross margins in that business are incredibly strong. Jim Duffy: Great then last question for me, Anne, is just on the HEYDUDE S A. I'm curious if you've at all adjusted it for for the tempered revenue view. Anne Mehlman: I'm sorry, can you say that again? What was the last part of your question? Jim Duffy: It's the HEYDUDE SG&A. I'm curious if you've adjusted your planned SG&A investment in the HEYDUDE brand for the tempered revenue view? Anne Mehlman: Oh, understand. No, actually we continue to accelerate investment into HEYDUDE in line with our original plans because again, this is not a consumer takeaway issue. And so we feel very strongly that we need to invest in our brands and luckily we can still generate 27.5% operating margins. The benefit of having a portfolio and also the benefit of having one brand spin off so much profitability. So we will continue to invest in HEYDUDE SG&A throughout the year at the same pace. Operator: Thank you. The next question comes from Laura Champine from LOOP. Please go ahead. Laura Champine: Thanks for taking my question. So I hear that the shift from expecting HEYDUDE to grow in the mid twenty s to more like high teens this year is because of wholesale customer orders coming in conservatively. This that impact your own internal thoughts about the growth rate for HEYDUDE for next year and beyond? Andrew Rees: Laura, I think, you know, connected to Anne's answer to Jim's question immediately prior. No, we see. HEYDUDE on essentially the same trajectory as we saw it on when we bought the Company. And since we've owned it, we still have very high expectations for the long term growth of the brand. And we continue to make, I would say, the SG&A investments, the talent investments and the marketing investments that we had anticipated making even before taking down this adjusted this adjustment to our growth rate. And we will continue to do that. We're very confident in the long term potential of the brand. And we're managing this brand for its ultimate potential, not its kind of one quarter or one half year performance. Laura Champine: Understood. And then just a follow up on the sort of Wild Wild West environment on Amazon and the gray goods sold there. Has there been a change in your own policy for wholesale customers, for, HEYDUDE to resell on Amazon? And if so, how much is that impacting that guide for this year? Andrew Rees: Yeah, there has been a change and we will make further changes. So what we did last year so that doesn't impact our guide for this year. Just to be clear, what we did last year is we did terminate some customers that were operating, I would say one or two stores, but buying goods principally to sell on Amazon. So we terminated several customers that were doing that. That was done last year. That's not this year. We also very clear in our terms of sale to all of our partners that they're not allowed to sell on Amazon. That doesn't mean that some do, because they do. But that is our policy. We will further, as we go through the back end of this year, constrict our wholesale customers rights to sell on their own coms as well. Right. So this is essentially moving HEYDUDE to the same policy we have for Crocs, which is our large wholesale customers. So think Famous Footwear or Foot Locker, they absolutely have the rights to sell on their own, but the mom-and-pop retailers will not have the rights to sell on any web presence that they have. So we're in the process of the sort of continued reining in of digital cell. Just to emphasize, we're getting into the same place that Crocs is. We're not restricting further than that. Laura Champine: Makes sense. Can you be specific on how much that has impacted the Guide for 2023? Andrew Rees: Look, it's probably had some impact. We can't break that out and be specific about that, but it probably is a factor. Operator: The next question comes from Rick Patel from Raymond James. Rick Patel: Please go ahead. Good morning, everyone. Thank you for taking the question. Can you talk about the drivers of the Crocs brand in North America going forward? I'm just curious how we should think about the contribution of pricing versus volume in the back half and also if there's anything to call out in terms of the wholesale business, in light of the trends that you're seeing at HEYDUDE? Andrew Rees: Yeah. I mean, the drivers of Crocs. I think your question is kind of a multi period question. So we see new product introductions, we see strong marketing support. We see collaborations continuing to drive very high interest in the Crocs brand and in fact, growing interest in the Crocs brand. We will capture that interest through continuing to diversify Clogs and continue to grow our Clog business. As well as the rapid acceleration of sandal and penetration of sandal categories and also continued innovation within Jibbets. So we really see those core businesses towards the back end of this year and we'll also continue to experiment with, I would say, kind of new and innovative silhouettes that we think the Crocs brand can be particularly relevant. So you'll continue to see us us push the envelope in terms of experimentation. I think that's super important. And so I'm pretty confident, as evidenced by our DTC growth and our strong wholesale performance, that will continue to drive kind of multi year trajectory for the Crocs brand in North America. Rick Patel: Can you also update us on where you are with addressing HEYDUDE's ERP and capacity constraint issues? And I believe you touched on working through that next year. But I'm just curious if it's going to be a first half versus second half event, and when that does happen, what kind of change we can expect from HEYDUDE from a go to market strategy perspective, in terms of potential to add new wholesale partners or accelerate international efforts? Andrew Rees: Yeah. We plan to transition to our new ERP and our warehouse, essentially at the end of the year. So that will be the transition period and that will release a couple of important constraints. One is we're incurring a lot of extra costs to move goods around, double handle goods, and have goods stored in subscale places. So reduce that will alleviate some expense and also some flexibility and ability to react to the business. It will also give us the opportunity to have a much larger at once business in the following year. And it will also allow us a little bit more flexibility with some of our major wholesale partners with whom today we're really trying to do a lot of direct shipments, which can be efficient and cost effective, but are also not very flexible. So it'll give us a lot more flexibility, it'll give us lower costs, flexibility, and the opportunity for a larger at once business Operator: Thanks very much, you. This concludes our question-and-answer session. I would like to turn the conference back over to Andrew Reese for any closing remarks. Andrew Rees: So, just to close, I think I'd like to just thank everybody for their continued interest in the business. Obviously, we had a phenomenal second quarter, and I think what you're also seeing is the real cash generated power of our portfolio and the ability to pay down debt very rapidly and give us a lot of balance sheet flexibility. So thank you for your interest and we'll talk to you again next quarter. Operator: Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good day, and welcome to the Crocs, Inc. First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Cori Lin, VP of Corporate Finance. Please go ahead, Cori. Cori Lin: Good morning, everyone, and thank you for joining us today for the Crocs Inc First Quarter 2023 Earnings Call. Earlier this morning, we announced our latest quarterly results and a copy of the press release may be found on our website at crocs.com. We would like to remind you that, some of the information provided on this call is forward-looking and accordingly is subject to the Safe Harbor provisions of the Federal Securities Laws. These statements include, but are not limited to, statements regarding our supply chain challenges, cost inflation, the acquisition of HEYDUDE and the benefits thereof, Crocs' strategy, plans, objectives, expectations, financial or otherwise and intentions, future financial results and growth potential, anticipated product portfolio, our ability to create and deliver shareholder value and statements regarding potential impacts to our business related to the COVID-19 pandemic. 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. Crocs' is not obligated to update these forward-looking statements to reflect the impact of future events, except as required by applicable law. We caution you that, all forward-looking statements are subject to risks and uncertainties described in the Risk Factors section of our annual report on Form 10-K and our subsequent filings with the SEC. Accordingly, actual results could differ materially from those described on this call. Please refer to the Crocs Annual Report on Form 10-K as well as other documents filed with the SEC for more information relating to these risk factors. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, Chief Executive Officer; and Anne Mehlman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I'll turn the call over to Andrew. Andrew Rees: Thank you, Cori, and good morning, everyone. I'm incredibly pleased with the strength of our brands, our first quarter results, and our outlook for 2023. The Crocs and HEYDUDE brands continued to be in high demand, which led to strong double-digit revenue growth. Our teams globally are focused on driving brand health, market share gains, and sustainable profitable growth. Looking at the first quarter of 2023, Anne will review our financial results in more detail shortly, but here are a few highlights. Revenues of $884 million grew 36% on a constant currency basis and grew in all brands, regions and channels. Crocs brand revenues grew 22% constant currency with growth in all regions, and DTC comparable sales grew 19%, Crocs brand North America revenues grew 10% with DTC comparable growth of 12% and wholesale growth of 5%. HEYDUDE brand revenues were $235 million, up 15% on a pro forma basis. Adjusted gross margins of 54% and adjusted operating margins of 28% were exceptional. Adjusted diluted EPS increased 27% to $2.61 per share. For the third year in a row, Crocs was named as one of the Top 10 most innovative brands by Fast Company. And earlier this week, we published our second annual ESG report, and the first report inclusive of the HEYDUDE brand. In summary, 2023 is off to a great start, and I would like to provide updates on the underlying health of our brands, long-term growth drivers for the Crocs brand and HEYDUDE expansion. Both of our brands are incredibly healthy as evidenced by our results and recent external studies. The Crocs brand ranked the number two casual footwear brand amongst women and number three among men in a recent L.E.K. study of footwear and apparel brand heat. The Crocs brand ranked as a number six favorite footwear brand among teens in Piper Sandler's Spring 2023 Taking Stock with Teen Survey. The brand strengthened the most amongst male teens increasing mind share significantly compared to prior year. The HEYDUDE brand is gaining momentum in the United States, ranking the number one casual footwear brand amongst women and men in the L.E.K. study. In the Piper Sandler survey, the HEYDUDE brand took the number eight spot up from the number nine spot last spring. With regards to product innovation, we recently focused on diversifying the clogged silhouette. The Echo franchise, which we launched last year, focused on a more male centric buy, but also inclusive of her has been an early global success. We are driving strong awareness with our typical marketing playbook. We have also innovated with height across many of our styles, such as a Mega Crush and the Classic platform flip and slide. Styles with height resonate particularly well in Asia and helping fuel our success in that region. Turning to sandals. This category is an important growth initiative for Crocs, allowing us to expand into the adjacent $30 billion global sandal category. We believe our molded technologies, accessible price points, strong go-to-market will allow us to compete effectively in a relatively fragmented market. We are excited by our incredible Q1 sandals performance where revenues grew 65% compared to last year. Growth was robust in all regions and was highest in EMEALA, where sandal penetration was also the greatest. Our sandal portfolio well diversified this year, particularly as compared to last year alike newness following the Vietnam factory closures in 2021. In our Classic franchise, the two straps on the slide continued to be top selling styles in addition to the newer introduction of the Classic Cozy. New introductions in the Brooklyn franchise including the Buckle and The Flip, as well as the new Mega Crush and Crush sandals, the all terrain sandal and the Echo Slide are also performing above expectations. We are also testing dozens of new styles this year and we will leverage our test of learn and speed capabilities to expand their opportunities in the future. To drive sandal awareness and acquisition, with a robust marketing calendar this year. During Q1, activations focused on the Classic sandal and the new opening price point/franchise. Recently, the Brooklyn sandal was featured on the Today Show in the best selling fashion finds for Spring Summer segment. Overall, we are pleased with the sandal trajectory. Over the past three quarters with the average growth of over 45% and we are confident the sandal revenues will grow to approximately $400 million this year. Asia is another important long term growth driver for the Cross brand, as the brand is currently under penetrated relative to the penetration here in the United States. In Q1, Asia revenues grew by 55% constant currency and growth was broad-based. We are particularly encouraged by the green shoots we are seeing in China, where we continue to invest in marketing, newness and digital during the pandemic. Q1 revenues grew over 110% constant currency in China. The Crush Clog was the only footwear brand to win the 2022 best new products launch award by Tmall. The Crocs brand had the best Q1 growth on Tmall in China, amongst leading footwear and apparel brands. Outside of China, we're pleased with the brand momentum throughout the region, including India, South Korea, and Australia. Turning to digital, another key Crocs brand growth driver. As the digital marketplace matures and our capabilities grow, we anticipate transitioning some of our retailers business that sits in our wholesale segment, to a direct digital sale, both across.com and our major marketplaces where we will sell directly to the consumer. Global retailers are also clearly attempting to manage their inventories more closely. The combination of these factors we believe will long term be very accretive for both brands as we have more brand control, higher ASP realization, and higher gross margins. Now to HEYDUDE, we're incredibly pleased with the first year of the acquisition. The financial contribution of HEYDUDE exceeded our expectations with brand revenues of nearly $1 billion, EPS accretion and significant debt pay down in the first year. The foundation is strong as we enter our second year with the brand. With respect to our go-to-market strategy, we've successfully penetrated Crocs’ strategic accounts, which currently represent approximately 50% of HEYDUDE's wholesale business. We quickly achieved top five casual brand status in North America family footwear accounts such as Rack Room and Famous Footwear. To focus our efforts, we will continue to prioritize these strategic accounts that can elevate the brand's position. We recently took steps to rationalize non-strategic accounts that we're not adequately supporting the brand. From a product perspective, we introduced several new styles as we test and learn what resonates with the consumer. As we seek to expand the brand beyond the iconic Wally and Wendy, several recent introductions have been in the casual sneaker category. The Karin for Women and the newly introduced Sirocco are top selling styles on heydude.com, and we have early signs of success for the Cody, Conway and Sunapee. The initial expansion into international is also on track. From a strategy perspective, we plan to go market in the same way as Crocs. Meaning, if we are directing a country with Crocs, we'll be direct with HEYDUDE. This year, we plan to test and learn in EMEALA with a few direct markets, UK, Germany, and the Netherlands, and a few distributor markets. Our efforts began earlier this month when we shipped our first HEYDUDE e-commerce orders out of our Netherlands distribution center and launched on Amazon. We'll continue to provide updates on our progress. Finally, with respect to the integration this year, we have two significant initiatives underway, namely implementing ERP and building a new distribution center in Las Vegas. We anticipate these to be complete towards the end of the year. Both are significant investments required to support the growth of a billion dollar plus brand. We're excited about the progress we have made and the bright future for the HEYDUDE brand. In summary, we have tremendous confidence in and clear evidence as to the underlying strength and growth potential of both the Crocs and HEYDUDE brands. We remain cautious relative to the consumer confidence in western markets and anticipate declining traffic patterns through the year. However our sell through for both of our brands continues to be robust and we believe we are benefiting from our democratic price points. Amidst the more challenging economic landscape, we believe we are well positioned to gain share. I will now turn the call over to Anne, who will review our first quarter financial results in more detail. Anne Mehlman: Thank you, Andrew, and good morning, everyone. I will begin with a short recap of our first quarter results. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. For a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to this morning's press release. As Andrew outlined, we had an exceptional first quarter with $884 million in consolidated revenues, representing 36.2% growth. We delivered another quarter of top tier profitability with adjusted gross margin of 54.2%, adjusted operating margin of 27.9% and adjusted diluted EPS growth of 27.3%. I will now detail our revenue highlights beginning with the Crocs brand. During the first quarter, we sold 30.7 million pairs of shoes, an increase of 19.7% over last year. The Crocs brand average selling price during Q1 was $21, which was up 2.1% on a constant currency basis, driven by fewer discounts in Asia and improved pricing in EMEALA. ASP declined 0.5% on a reported basis due to unfavorable effects. The addition of HEYDUDE has diversified our product portfolio. For Q1 Clog’s penetration was just over half of our total revenues. The casual silhouettes of HEYDUDE constituted 27% of total revenues and Crocs brand sandals were approximately 12% of total revenues. From a Crocs brand perspective, Clog continued to exhibit double digit growth this quarter. As Andrew mentioned, sandals an important growth pillar for the future increased 65% in Q1 with growth in all regions. Finally, Jibbitz continues to create excitement and engagement with consumers globally, growing strong double digits from last year. Now, let's review a few Crocs brand highlights by regions. In North America, the Crocs brand remains very healthy. First quarter revenues increased 10.3% to $351 million. The North America DTC channel for the Crocs brand, an indicator of underlying consumer demand was the key growth driver with DTC comparable sales of 12% on top of 18% comparable sales growth in the first quarter of 2022. Wholesale revenues increased 6%. The wholesale revenue increase is also evidence that sell-in and sell-out are beginning to normalize, as we had anticipated to occur during the first half. International was again the largest growth driver for the Crocs brand in Q1. As we execute on our long-term growth plan to ignite the brand in Asia and EMEALA. International represented 46% of Crocs brand revenues in the quarter. Crocs brand revenues in Asia grew 54.8% to $140 million during the first quarter. Growth was broad-based across countries and channels. China and Australia led the growth with revenues growing in excess of 110%, while Southeast Asia markets and South Korea also had exceptional growth. Crocs brand revenues for EMEALA were $157 million, growing 25.1% with broad-based growth. Momentum has been building in several important markets with Q1 revenues increasing strong double digits driven by the UK, France, and Germany admits a very uncertain consumer backdrop. Turning to HEYDUDE, revenues were $235 million, increasing 106% compared to the partial period in Q1 2022 and 15% on a pro forma basis. The DTC channel, which is predominantly e-commerce, led the growth with revenues increasing 141.1% versus last year. Digital penetration increased 420 basis points to 30.1%. As Andrew noted, the consumer love for the HEYDUDE brand is exceptional and we remain confident about realizing the full potential the Crocs playbook will have on the brand. Consolidated adjusted gross margins for the first quarter were 54.2%, increasing 30 basis points from last year. Favorability and freight rates were partly offset by higher product costs, higher end of season clearance, and the addition of the HEYDUDE brand, currency negatively impacted consolidated gross margins by approximately 85 basis points. End of season clearance was more normalized this year, as last year inventory was extremely lean following the Vietnam shutdown. Before I provide gross margin detail by brand, we will now disclose distribution and logistics costs that are reported within our cost of goods sold. This is to provide greater transparency enabled better comparison of our gross margins to many peers who report these costs in SG&A. For the first quarter, distribution and logistics costs totaled $105.1 million or 12% of total revenues. Excluding these costs, our gross margins are exceptional and are one of the structural advantages of our business model that contribute to our industry leading operating margins. Turning to the brands. Adjusted gross margin for the Cross brand was 56.3% or 140 basis points higher than prior year. The significant improvement in freight of nearly 600 basis points included reduced airfreight of approximately 450 basis points was partly offset by the impact of higher end of season clearance of approximately 140 basis points, and inflationary cost pressures of approximately 70 basis points, currency negatively impacted margins by 115 basis points. HEYDUDE adjusted gross margins were 49.6% as we start to a reduction in inbound freight rates. As we noted at year end, we expect HEYDUDE gross margins to sequentially improve over the course of the year, as the effective cost from legacy freight contract that take time to roll through the P&L and higher inventory storage costs in the short-term subside. During the first quarter of 2023, we leveraged consolidated adjusted SG&A 100 basis points, improving to 26.3% of revenues versus 27.3% last year. This improvement was achieved while still investing in talent and marketing for both brands. Our first quarter adjusted operating income increased 40.8% to $247 million from last year. Consolidated adjusted operating margin increased 130 basis points to 27.9%. Our first quarter non-GAAP diluted earnings per share increased 27.3% to $2.61. Our liquidity position remains strong, as we ended the first quarter with $126 million with cash and cash equivalents and ample capacity on our revolving credit facility. We repaid $41 million of debt in the quarter, reducing borrowings to $2.28 billion. At the end of Q1, adjusted gross leverage was approximately 2.1x and net leverage was approximately 2x. We are confident in our ability to achieve gross leverage under 2x by the middle of this year. Our inventory balance at March 31, 2023 was $476 million, an increase of 16.8% versus Q1 last year. Crocs brand inventory was $318 million up 10.3% and HEYDUDE inventory was $158 million up 32.6%. Our higher inventory balance reflects higher revenue growth and higher costs within inventory. As we look forward, I would like to share our current outlook for the second quarter and the balance of 2023. All numbers will be on a reported basis unless otherwise stated. For Q2, we expect consolidated revenues to grow approximately 6% to 9% at current currency rates as we lap a high Q2 wholesale growth rate 2022, related to the Vietnam shutdowns in the prior year. We expect Q2 adjusted operating margin to be approximately 26% and adjusted diluted earnings per share of $2.83 to $2.98. With our Q1 performance, we are raising our full year 2023 revenue outlook and expect growth of 11% to 14% on a reported basis, compared to 2022, resulting in full year revenues of approximately $3.95 billion to $4.05 billion at current currency rates. Revenue for the Crocs brand, we now expect to grow 7% to 9% on a reported basis. We expect the highest growth internationally driven by robust consumer demand. For HEYDUDE, we are maintaining our full year outlook of mid 20% revenue growth on a reported basis. As always, we are focused on best-in-class profitability and now see our adjusted operating margin to be between 26% to 27% for the full year. We are raising our adjusted diluted earnings per share outlook to be between approximately $11.17 to $11.73. In summary, 2023 is off to an excellent start and we look forward to another record setting year. At this time, I'll turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. As we look forward, we're incredibly confident in the strengths of the Crocs and HEYDUDE brands, and our ability to drive market share gains and sustainable profitable growth. Our focus remains squarely on navigating current uncertainties and creating long-term shareholder value. Operator, please open the call for questions. Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Abbie Zvejnieks from Piper Sandler. Abbie, please go ahead. Abbie Zvejnieks: So just on that 2Q guide, can you just talk about what trends you're seeing maybe quarter to date especially in wholesale? I know you noted that more difficult compare and I guess why you expect a deceleration in Crocs brand revenue and then give it a little bit more color on that? Operating margin year over year decline of about 400 basis points in 2Q and like which buckets we should expect to see that deleverage? Anne Mehlman: So, your first question on Q2. So, as we guided, we expect consolidated revenues to grow 6% to 9% current currency rates, and that's as we lack a high Q2 wholesale growth rate in 2022 really related to the Vietnam shutdown. So, if you remember back to last year we had a pretty big Q2 because things we had very low inventories in Q1. That's really the shift there. Overall, we don't talk a lot about what we're seeing end quarter, but I will say we're pretty pleased with what we're seeing at a sell-through from both brands in our wholesale channel at this point in time. And then from a Q2 operating margin perspective, if you also remember back to last year, we had just purchased the HEYDUDE brand and had a lot of time to put investment behind that. So the first piece is SG&A is ramping up quite a bit from last year because we didn't have the SG&A that we have now to support HEYDUDE. And the second piece is that Q2 is a big marketing quarter for us, and so you will see marketing ramps. So, I do expect SG&A to deleverage year over year from a Q2 perspective. Abbie Zvejnieks: And maybe one more just on the capital allocation strategy, once you hit that two times growth leverage target. I mean, what is your priority on debt pay down versus buybacks, I guess given the share price? Anne Mehlman: Yes. So, we remitted to hitting below two times gross leverage in Q2, which then gives us flexibility, as you mentioned, to either to both pay down debt and restart share purchases. And we generate a lot of free cash flow and we're committed to doing both. Obviously, debt pay down is very important. Our long term leverage guide is to be below 1x to 1.5x gross. And so and with interest rates the way they are, it makes a lot of sense to continue to pay down debt, but we'll also prioritize buying back shares to make sense from an overall return perspective. Operator: Thank you. And our next question comes from Jonathan Komp from Baird. Jonathan, please go ahead. Jonathan Komp: Maybe just a little bit of a follow-up first if I could. Anne, can I follow up and ask about what you're expecting for Crocs D2C performance, largely because there's been a lot of volatile U.S. focused indicators the last couple of months, so any additional color there would be helpful on the D2C trends you're expecting? And then, Andrew, maybe just a broader question on the core clogs business and largely North America focused, are you seeing any signs that the core clogs business should give back some of the volume gains you've had the last few years as you focus more on sandals and other categories? Andrew Rees: Yes. Let me -- maybe just, I'll hit both of those for you Jonathan. So, if you think about DTC, obviously DTC performance was very strong in both brands in Q1. That was probably a little bit better than we expected. And I would say, look, we're seeing great traffic trends, we're seeing great traffic trends to Crocs stores, Crocs website, and HEYDUDE digital presence. So I think that gives us tremendous confidence, that our brands are in demand and consumers are seeking them out in a single branded environment. We think those compares probably get harder as the year goes on. We do anticipate consumer softening as the year goes on. I think, we saw a little bit of softening as quarter one went along. So, we're not necessarily baking the same performance we had in Q1 into the rest of our year. I think that's only prudent. And then, from a clog's growth perspective, I would say that's been somewhat of a highlight, right? So, the way to think about it is we continue to see classic growth around the world as we continue to get classic penetration in many of our international markets. And we're also putting a lot of time and effort into diversifying the clog portfolio. I'd call out in particular the Echo I think many of you have seen that in U.S. retail -- U.S. wholesale accounts. It's performing particularly well here in the U.S. and in fact globally. And then we've also -- I would also call out some of our height clogs, right? The crush and the mega crush performing particularly well in Asia where HEYDUDE is super important. So clogs continue to be a -- I say a long-term growth story for us, but there is definitely driving more diversification into that core product offering. Jonathan Komp: Great. And then just one follow-up on Q2 modeling, if I could. Anne should we expect the SG&A growth to be similar or maybe at a faster rate than Q2, any further color there? And then, given that mix and continued improvements in freight should we expect that similarly positive gross margin performance in Q2? Anne Mehlman: Yes. So I'll start with gross margin. So yes, we expect that gross margin will be up year-over-year in Q2on an adjusted basis. So I think, as we talked about -- we expect to see HEYDUDE improve throughout the year, as we see some of that higher freight rates roll off in inventory. We are comping pretty big air freight spend last year that we don't have this year. So those are all tailwinds from a gross margin perspective. And I think actually from Q1 perspective, gross margin performed a little bit better than what we expected, some of that was DT CC mix, but also some pullback in discounting and better pricing in our overseas markets. And then from an SG&A standpoint, we do expect, as I mentioned before, SG&A to ramp into Q2. I think Q2 tends to be one of our higher SG&A spend quarter, just given the marketing that we put behind the brand in Q2 into our summer months. Operator: Our next question comes from Tom Nikic from Wedbush Securities. Tom, please go ahead. Tom Nikic: I wanted to follow up on HEYDUDE. I know obviously you had exceptional growth in 2022. 15% pro forma in Q1 seems a bit more modest, than what you had been growing in recent quarters, particularly with the distribution gains and getting into new stores and stuff like that, I guess we kind of would have expected stronger growth. Was there anything -- was it kind of parsing out some of the legacy doors that's kind of holding back HEYDUDE growth or anything like that? Just kind of trying to understand the puts and takes at HEYDUDE. Andrew Rees: Yes. Great question Tom. So I would say, look, there is a lot going around HEYDUDE. So let me try and kind of add a little bit more color to that. Firstly, I'd say, we are super confident in our kind of mid-20s growth rate that we have guided for the brand for the full year. And I would say, as we look at the brand trajectory during the quarter, we are also very pleased with that increasing consumer awareness, both through our broader distribution, but also our marketing efforts. We continue to see tremendous customer loyalty from existing customers. I think a statistic we have talked about in the past is the average customer has four pairs in their closets and we clearly see when we attract new customers, they buy incremental pairs relatively quickly. So, we see great improvement awareness for the brand. We see consumer affinity and we're pleased with our sell-throughs both on our DTC environment and also in the wholesale environment. As we had talked about in the past, we are constrained, right? So we are strained with our distribution center and all of our kind of logistics capabilities through this year. So we did anticipate a slowing of the growth at mid-20s guide for the full year and obviously a little bit slower in Q1. We are definitely constrained. We are making significant investments to relieve those constraints, but they won't come online until the back end of the year and probably won't have an effect until next year. The other thing that's also important to bear in mind, as you look to future quarters is, we had significant pipeline fill. So we opened a lot of big national accounts last year in Q2 and Q3. So when you open a big national account and your pipeline fill 400, 500, 600 doors, that's a significant amount of volume that you don't anniversary the following year. So you've also got to take that into consideration in Q2 and Q3. And the last thing I'd say, as you did reference it in your question, the closure of the smaller customers, right? So, we're rationalizing our customer base the original owners of HEYDUDE and the agents they use for distribution opened a lot of very small accounts. And we've rationalized a significant number of them. I think you've seen some of that in the press and that's not a significant drag on the revenue this quarter or for the rest of the year. It's a very small amount of money, but it does mean that we focus all of our time attention on our big leadership accounts, which we think will do a much better job supporting and elevating the brand. So, hopefully that gives you some real color about what's going on with HEYDUDE. Operator: Thank you. Our next question comes from Jeff Lick from B. Riley Financial. Jeff, please go ahead. Jeff Lick: Congrats on the quarter. I just was hoping you could give a little more color on China and India, how it unfolded relative to what your expectations were? And then just a little micro question on HEYDUDE, I was just wondering what your data shows in terms of the indexing and different geographies of the country. Obviously, the brand's always been a little hotter in the middle of the country, and I'm just kind of wondering where, what inning do you think it is on the coasts? Andrew Rees: Okay, Yes. Thanks Jeff. I appreciate it. So, let me start with China and India. I think we prepared remarks. We called out China had over 110% growth in the quarter. Additionally, we called out that the brand. We got an award from Tmall, which we're really pleased to get with the launch of our crush product. There was an award associated with one of the most effective awards, sorry, launches of a new product integrated marketing program that we put together and we saw exceptional growth on Tmall. And the key part of your question is it a little bit better or worse than we thought, but it's better than we thought, right? So, we've been investing and in China through the pandemic, we've invested in marketing. We've strengthened our team. We really kind of kept our foot on the gas even when the business performance was not what we expected. And as the country is opening up, the consumer is back out shopping, we're seeing very strong performance really across all our channels, on our own digital channels, on Tmall in the stores that we own and also in our partner operated kind of mono branded franchise stores. So, definitely doing better than we thought and we're really excited because obviously it's a big market and we think that has a lot of future potential. India also continues to be strong and so, that's a good market, a very good market for us. We continued a very strong trajectory in that marketplace. So, we're pleased with that. And as we think about Asia broadly, we're also seeing strong performance in -- continued strong performance in South Korea and Australia. Turning to HEYDUDE in the U.S. the pattern that we see, look, this data is not easy to come by. So, I'm going to be sort of qualitative in nature. We definitely see much stronger brand awareness and brand residents in the sort of the heartland of the brand, which is sort of all down through the Midwest, down through Texas into down into -- down into to Florida. That's the heartland of the brand that has the highest awareness that has the highest kind of consumer resonance. As we've expanded distribution to the coast, we're definitely seeing pretty significant improvements in brand awareness purchasing and brand relevance on the coasts. But it's off a very low base, right? So, the brand awareness on the coast was single digits, mid single digits. It's now a lot better than that, but it's still very low. So, we think we're doing the right things, we think we're on the right path, but that still represents a significant future opportunity. Operator: We now have a question from Jay Sole from UBS. Jay, please go ahead. Jay Sole: I might just ask about the HEYDUDE margins. In Q1, you pointed out that the adjusted gross margin was about 49.6 and the operating margin was 32.6. As you work on the ERP implementation in the new distribution center and presumably the DTC percentage of the business increases, how would you expect those numbers to trend going forward? Anne Mehlman: Yes, so I think, one thing on the distribution center, our distribution center is more of a support from a wholesale side. So we do have some actual a little bit easier time servicing some of our DTC business. It's still hard because things still have to move through that, but we do use some outside three PL support for DTC. So, I actually expect DTC to continue to outperform for HEYDUDE as well. That's on thee-com side is performing really well and we are opening up a little a few retail stores from an allied perspective for HEYDUDE, this year that will look similar to Crocs. So, we're, Jay pretty excited and pleased from the DTC side for HEYDUDE and Crocs as well. Jay Sole: Got it. Okay. And if I can ask just one more just to follow up on China a little bit. Obviously huge growth in China this quarter, but can maybe, can you tell us what the China growth was last quarter? Obviously store closures probably impacted that, but or maybe just somehow dimensionalize what the dollar sales were in China this quarter, and sort of what you're really expecting for the year from China. Andrew Rees: Yes. I mean, I can give you for the year, Jay, I don't really have the quarters, right here in front of me, but I think China for the year grew around 30% last year. That was much more back half weighted because and the way to think about the sort of the impact of the lockdowns in China, they were most severe in Q2, right? So, there were constraints in Q1 but the depth of the lockdowns were in Q2. So China grew up 30% last year round numbers and then obviously this is significant growth on top of that, but the growth was muted in Q1. Anne Mehlman: Yes. If you look at ‘23 versus ‘21like on a two-year basis, we're still upwards of 85% growth from a -- in a reported, and in a constant it's like 95% growth. So even on a two-year basis, the growth in China is very, very strong kind of taking out some of the noise of the lockdowns. Andrew Rees: Yes, and we don't break out dollars associated with China. And we're giving you kind of really high growth rates, but I would say the dollars are still way below what we think our potential is. So, we think we've got a long way to go at China. Operator: Our next question comes from Laura Champine from LOOP. Laura, please go ahead. Laura Champine: My understanding is that Q2 operating margins are usually better than Q1. When's the last time they were worse? And maybe tell us what's special about, it sounds like it's SG&A expense that's going to push EBIT margin lower sequentially. Can you be more specific about what's driving that? Anne Mehlman: Yes, so it’s Anne. So I think normally our gross margins are lower in Q1, because of the mix of wholesale in Q1, which is a heavy wholesale quarter, which will hold true this year as well. Q2 will have higher gross margins, really from SG&A perspective. And what's really driving from a Q2 perspective is just again the investment in HEYDUDE. So Q1, we are still ramping into Q2 from an investment standpoint from a HEYDUDE standpoint as we are adding. So that will be an add to that on the SG&A side for HEYDUDE, but also adding -- we always increase marketing for both brands into Q2, as that's a really important season from a revenue growth perspective and it's a higher DTC quarter. So, there is more SG&A associated with it. But overall, feel very comfortable with our 26% operating margin still best-in-class, and then raising the year to 26% to 27%. Operator: Our next question comes from Jim Duffy from Stifel. Jim, please go ahead. Jim Duffy: Thank you. Good morning. First question is on the guide. You've given us a full year guide by brand. How do you expect the growth splits by brand in the second quarter? Anne Mehlman: Yes. I think we expect both brands to grow in the second quarter. It's hard to give a guide by quarter things are still lumpy from a quarter perspectives by brand. We feel confident in the overall revenue growth and I think we will see growth from both brands in Q2. Jim Duffy: Okay. And then can you give us an update on the state of HEYDUDE inventory? Have you cleared through that legacy product that you were referencing in the second half of last year? How do you feel about the current inventory positions for the HEYDUDE brand? Andrew Rees: Yes. I think we feel good, Jim, about our inventory. And really it's important to kind of focus on two components. One is our in market inventories. I think we are well-positioned in market with good inventories in many of our leading strategic wholesale customers. And our inventory is turning -- is performing well. In terms of the inventory that we hold, I would say, we are in good shape relative to our future growth. So our quantum of inventory we think puts us in good shape relative to future growth and any legacy inventory we are working through pretty quickly. So we feel good about where we are and we think we are on a track record -- on a track trajectory here to get that dealt with pretty quickly this year. Jim Duffy: Great. Thank you. And then I have a few more, I'll have for the follow-up session, but one last one. Andrew mentioned a little bit of softening as Q1 progressed. You've seen some glimpses of spring weather. Has that brought any lift to the business in recent weeks? Andrew Rees: Yes. I mean, we don't really come in kind of in season. I would say, look, I think it's been widely reported. March was kind of tough from a weather perspective and that it did impact some of our kind of large national wholesale customers. And so that was clearly an issue I think in Q1. And look, the tax season was not great either, right? So that's the tax refund season when obviously a lot of refunds come out and people typically kind of spend that. So that wasn't as strong as it's been in prior well. So that's kind of what I was referencing too. I think we have gone through a couple of weeks now with an Easter shift. So I don't think it's crystal clear, what's going on through April. But I think we are pretty confident in the traffic that we are seeing to our mono-branded environment. So we clearly can tell that our brands are very strong. Operator: We have a question from Mitch Kummetz from Seaport. Mitch, please go ahead. Mitch Kummetz: Andrew, you mentioned that sandals were up 65% in the quarter. Could you maybe speak to the sell in versus sell through how much of this was shipping in your spring order book versus good performance once that product hit retail or in your own direct channel? Andrew Rees: Yes, so, in a nutshell, what I'd say is both Mitch, but let me kind of break that out a bit. Yes, you're absolutely right. Q1 is a big selling quarter, especially for sandals both here in the U.S. and kind of on a global basis, right? So, a large amount of that high growth that 65% is wholesale sell in. I would also say that sell-through we've been very pleased with sell through both on our DTC environments and also the sell through. We can monitor with our wholesale customers. We believe all of the newness that we're bringing to our sandal category is really driving and the marketing we're doing to support it is really driving strong growth in the category. I would also point out that if we looked at the last three quarters, so once we got past the void of newness that we had in quarters one and two of last year, the last three quarters, I think 45% is our three quarter channel growth number. So that is in essence both sell-in and sell--through. So it's really both this is an important growth driver for the Crocs brand and I think we're seeing some real success in this category. Mitch Kummetz: And then, I guess secondly on the HEYDUDE business. You mentioned momentum and some newer franchise and newer styles. I was hoping you might be able to tell us like what percent of the business is the Wally and the Wendy, and beyond those, like what would be the next bigger styles and how important are those to the business right now? Andrew Rees: Yes, look, we don't break out the Wally Wendy penetration, but it's large, right? You can see that just going to any of our wholesale customers, you look at our website, the brand is anchored around those core silhouettes, those core silhouettes, Wally and Wendy, really typify what the consumer is looking for in the brand. They typify -- they're easy on and off, they're lightweight, they're comfortable, and they come in a wide variety of materials, styles, and colors. So give the customer a tremendous diversity and choice, I would say, and they are a large part of the business and will continue to be a large part of the business, us introducing new styles in new areas is by no means trying to back away from the Wally and Wendy. That's super important. But the introductions we've made in -- what I would call kind of this casual sneaker arena have been really successful. They're still small to date but sell-through is a high and they're performing very well. We think that's important for the brand because that's a very large category if we look at sort of casual sneakers as a very large addressable market. Operator: Our next question is coming from Aubrey Tianello from BNP Paribas. Aubrey, please go ahead. Aubrey Tianello: Just one for me. On the gross margin, curious if anything has changed with respect to the full year outlook. I think, you mentioned last call, we should be thinking about 58% for the Crocs brand and then about 55% to 55.5% on a consolidated basis. Is that still the right way to think about it? Anne Mehlman: Yes, good morning, great question. I think actually it's going to be on the higher end of that. So I would say consolidated, adjusted gross margins, I would expect to be more in the approximately 55.5% that's really supported. We saw better gross margins in Q1 and rolling that through the year really supports that 26% to 27% adjusted operating margin. Justas we saw better freight costs from a HEYDUDE perspective in Q1 as well as better DTC performance and pricing overseas on the Croc side. Operator: We have a question from Hale Holden from Barclays. Hale, please go ahead. Hale Holden: The new HEYDUDE silhouettes are pretty exciting. And I was wondering if you could talk about consumer interest in them, because I seem like there are slightly higher price points than the Wally and Wendy and your ability to get incremental shell space at your wholesale partners forum. Andrew Rees: Yes, so I think, we -- but it's not happened yet. So the short answer is yes, we will get an incremental shell space based on them. But it's not significant yet, right? So, with these new introductions, the way we kind of approach this is we really want to launch them on our own channels. So, really the strongest presentation around Karin, the Cody, the Conway, and the Sunapee, which some of the new silhouettes is on DTC, where they've been performing very well. There are select kind of leading wholesale accounts that have those. I would say the bulk of the deliveries for those to wholesale will be later in the summer to back-to-school. I would also say look into the future. We had a very strong boot season in the HEYDUDE brand last year. We make a lightweight, I would say, democratically priced, very comfortable boot. It performed very well. That was mainly legacy product and we've done significant updates and improvements for that. And we're very optimistic about our boot season for the back end of this year too. Operator: And this concludes our question-and-answer session. I would like to turn the conference back over to Andrew Rees for any closing remarks. Andrew Rees: Yes, thank you. I just want to thank everybody for listening in this morning and their interest in our company. We appreciate the questions. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good day, and welcome to the Crocs, Inc. Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Cori Lin, Vice President, Corporate Finance. Please go ahead. Cori Lin: Good morning, everyone, and thank you for joining us today for the Crocs Fourth Quarter and Full Year 2022 Earnings Call. Earlier this morning, we announced our latest quarterly and annual results and a copy of the press release may be found on our website at crocs.com. We would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the Safe Harbor provisions of the Federal Securities Laws. These statements include, but are not limited to, statements regarding the acquisition of HEYDUDE and the benefits thereof, Crocs' strategy, plans, objectives, expectations, financial or otherwise and intentions, future financial results and growth potential, anticipated product portfolio, our ability to create and deliver shareholder value and statements regarding potential impacts to our business related to the COVID-19 pandemic. 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. Crocs' is not obligated to update these forward-looking statements to reflect the impact of future events, except as required by applicable law. We caution you that all forward-looking statements are subject to risks and uncertainties described in the Risk Factors section of our annual report on Form 10-K and our subsequent filings with the SEC. Accordingly, actual results could differ materially from those described on this call. Please refer to the Crocs Annual Report on Form 10-K as well as other documents filed with the SEC for more information relating to these risk factors. Adjusted gross profit, adjusted gross margin, adjusted selling, general and administrative expenses, adjusted income from operations and operating margin, adjusted income tax benefit and effective tax rate, adjusted basic and diluted earnings per common share are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, Chief Executive Officer; and Anne Mehlman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I'll turn the call over to Andrew. Andrew Rees: Thank you, Cori, and good morning, everyone. As you saw in our press release issued this morning, we delivered extraordinary 2022 results, including record $3.5 billion in sales and industry-leading adjusted operating margins of 27.7%. These results underscore the high consumer demand globally for the Crocs brand, the growing momentum of the HEYDUDE brand and our ability to consistently deliver strong profitability while investing for the future. Looking forward to 2023, we expect another year of robust revenue growth, top-tier margins and significant cash flow generation. Now let me share a few highlights from the full year of 2022. Total revenues grew 54% as we added a second fast-growing brand, HEYDUDE. Crocs brand revenues were $2.7 billion, increasing 19% on a constant currency basis. Crocs brand International growth was exceptional at 47% constant currency for 2022 and accelerating to 75% constant currency growth for Q4 in both Asia and EMEALA. HEYDUDE brand revenues exceeded initial expectations and reached nearly $1 billion on a pro forma basis and delivered over $275 million in adjusted operating income. Consolidated digital revenues grew 58% to represent 37.8% of 2022 revenues. Exceptional adjusted gross margins of 54% even with significant freight and inflationary pressures. Adjusted income from operations increased 42% to nearly $1 billion and adjusted operating margins of nearly 28%. Adjusted diluted earnings per share increased 31% to $10.92 and strong cash flow allowed us to reduce gross leverage from 3.1 times upon the acquisition of HEYDUDE to 2.25 times at year end. As we transition to 2023, I want to give you additional insights into three of our long-term growth drivers for the Crocs brand, sandals, international and innovation in both product and marketing as well as provide an update on HEYDUDE. Sandals, an important growth initiative for Crocs, allowing us to extend into the adjacent $30 billion global sandal category, where we believe our molded technologies, accessible price points, strong go-to-market will allow us to compete effectively in a relatively fragmented market. The category also provides an additional entry point to the Crocs brand for consumers who may not choose to engage with the clog. We know our sandals resonate with consumers since sandal consideration is now on par with that of clogs. And we already have a sizable $310 million sandal business. Within sandals, we refined our focus on four subcategories; Everyday, Style, Street/Sport and Adventure. The Everyday category offers broad-reaching classics for everyone and includes our personalizable slides, two straps and flips. Our Style category is female-centric, trend-driven and includes styles such as the Brooklyn, Crush and Mega Crush. Our Street/Sport category is rooted in street style with a focus on him, but inclusive of her and includes our new Echo and Mellow franchises. Finally, our Adventure category has functional design for the whole family and includes our All Terrain and Swiftwater franchises. 2022 for the Crocs brand sandals was a year of two halves. In the first half, sandal revenues declined due to the lack of newness following the Vietnam factory shutdowns in 2021. In the second half of 2022, Sandals grew by 31% and as we introduced a strong cadence of newness such as the Crush, Mellow and Echo supported by effective sandal-specific marketing. We're incredibly confident in sandal growth in 2023, given planned newness and a significant increase in marketing allocated to sandals and the strong Crocs brand trajectory in important sandal markets such as India and Southeast Asia. With respect to newness in our Style category, we're planning additional height and new uppers in our popular Brooklyn franchise. In our Street/Sport category, we continue to use innovative technology in our Mellow franchise, and we'll launch a new flip during the year. With the new product introductions, marketing investments and regional brand momentum, we expect sandals to be our fastest-growing product category in 2023, reaching approximately $400 million in sales. Moving to another important growth driver for the Crocs brand, our international markets, we have now seen eight consecutive quarters of strong double-digit growth outside of North America. We anticipate even greater growth as a Crocs brand has approximately one-third of penetration internationally than it has here in the US. The drivers of this growth are in essence, the same drivers of growth that we saw in the US. First, focusing on our iconic clog and driving relevance with innovation and collaborations; second, leveraging Jibbitz for personalization and consumer engagement; third, expanding our addressable market with sandals; and finally, always on social and digital marketing to continuously engage our existing and new consumers. Our unique playbook for Crocs has been successful in the US and across all of our key focus markets. In EMEALA, Western Europe grew revenues by 38% constant currency with the United Kingdom up 105% constant currency. In Asia, South Korea grew over 30% constant currency despite having an already high level of penetration. India grew 91% constant currency. Additionally, we see our global brand building activities having a halo in many of our distributor markets, resulting in triple-digit revenue growth in Latin America, the Middle East and Southeast Asia. China has been a unique case. As you know, we completed the repositioning of our China business in 2021. Since then, China has been constrained by COVID lockdowns, yet we still invested in our team and in marketing to build brand relevance. We have seen green shoots in the second half of 2022. Revenues grew 35% constant currency. As China reopens and the consumer returns to more normalized shopping, we're excited about the prospect of building significant Crocs brand presence in 2023 and beyond. While still a smaller base than we would like, we expect China to grow approximately 30% in 2023. Products and marketing innovations is another important driver of the Crocs brand. Our marketing calendar is extremely robust. As we look to put more Crocs and more consumers. In 2023, we expect to have record new product introductions, some of which I mentioned when discussing sandals. Product newness will be critical to our always-on brand drumbeat as well as a strong pipeline of more than 60 global brand partnerships across a healthy mix of celebrities, mega brands and licenses of which 25% will be regionally led. We will invest in a record amount of marketing dollars over $200 million to drive the Crocs brand relevance amplifying our products and engaging new and existing consumers. This will be achieved by maintaining our digitally led and social first approach to engage consumers through digital first drops, social innovation and brand ambassadors. Turning now to HEYDUDE. Today represents our first full year of ownership, and we've accomplished a lot. The integration is on track, although there is still much work to be done. We've developed a clear plan for the brand and the future is bright. With respect to recent accomplishments, there are many. We have updated the brand identity and clarified its purpose and meaning. We've expanded the line with several new icons to be trialed in 2023, staff the entire leadership team and hired over 150 roles, stabilize and expanded the manufacturing footprint, developed a business systems road map, expanded distribution capabilities to handle the immediate throughput needs, turned over many international distributors and spent nearly $60 million of marketing in the second half alone, which on an annualized basis was almost 4x the amount spent in 2021. We've also seen great initial results exceeding our expectations. Brand revenues in 2022 grew 70% on a pro forma basis, driven by wholesale partner expansion in the United States. DTC revenues were approximately 36% of sales. Gross margins have been lower than anticipated due to channel mix, unfavorable pre-acquisition freight contracts and higher inventory handling costs as we work to expand the HEYDUDE distribution center to support the $1 billion and growing brand. Even with this, HEYDUDE generated over $275 million in adjusted operating income, a $0.31 adjusted operating margin. While we have more to do, we are incredibly excited about our results thus far the potential for the HEYDUDE brand and the value this acquisition will generate for shareholders. The addition of HEYDUDE has brought other benefits as well. It enables us to access a larger addressable market, which is now approximately $160 billion on a global basis versus $40 billion prior to the acquisition. We are now far more diversified from a product perspective with casual HEYDUDE silhouettes representing 27% of 2022 revenues on a pro forma basis, COGS representing 57% of consolidated revenues. Finally, we substantially leveraged our shared services across the two brands, further supporting our industry-leading operating margins. Before I turn the call over to Anne, I'm incredibly proud that our five-year annualized TSR of 54% would have placed Crocs, Inc. as the number two best-performing company in the S&P 500. This exceptional performance is a testament to our strategy, our execution and our talented team. I want to express my gratitude to the entire Crocs, Inc. organization for their hard work and commitment to delivering best-in-class growth and profitability. 2022 was a transformational year as we integrated HEYDUDE, but the Crocs and HEYDUDE brands enter 2023 with incredible strength and momentum. I'm confident in our brands, our team and our demonstrated ability to deliver sustainable growth, profitability and shareholder value. With that, Anne will now review our financial results in more detail. Anne Mehlman: Thank you, Andrew, and good morning, everyone. I'll begin with the recap of our fourth quarter results. All revenue growth rates will be cited on a constant currency basis, unless otherwise stated. For a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to our press release. Our fourth quarter results were outstanding with $945 million in consolidated revenues, a 64.8% increase to prior year, aided by the addition of HEYDUDE. We continue to deliver top-tier profitability with adjusted gross margin of 53.3%, adjusted operating margin of 26% and adjusted earnings per share of $2.65, up 23% to fourth quarter of last year. Strong profitability and tight working capital management enabled us to repay $300 million on our term loan B facility in the quarter. I will now detail our revenue highlights by brand, beginning with the Crocs brand. During the quarter, we sold 27 million pairs of shoes, an increase of 20.8% over last year. Our average selling price in Q4 was $23.95, a 6.8% decline on a reported basis and a 3.6% decline on a constant currency basis. As a slight decline in North America associated with higher DTC promotions, offset constant currency ASP increases internationally. Importantly, while the North American markets became more promotional in the second half of the year and helped right-size channel inventories to a healthy level, the Crocs brand was still less promotional in the fourth quarter and for the full year than pre-pandemic. From a product perspective, for the fourth quarter, results continue to be driven by our key product pillars: Clogs, Sandals and Jibbitz. Sales of clogs increased 9% to become 79% of Crocs brand revenues with growth of our profitable classic clog franchise outpacing that of other clogs. Sandals grew 53% in the quarter to represent 10% of brand revenues. Jibbitz continued to drive consumer engagement and grew 13% to become 8% of brand revenues. For the full year, clogs were 77% of brand revenues, sandals were 12% and Jibbitz grew 27% to become 8% of brand revenues. Now let's review Crocs brand highlights by region for the quarter. North America revenues of $457 million were relatively flat from 2021 as strong DTC growth of 18%, an indicator of underlying consumer demand was largely offset by a 25% decline in wholesale. DTC comparable sales for North America increased 13%, on top of 53% DTC comparable sales growth in the fourth quarter of 2021. Digital led the growth driven by brand strength and newness. Wholesale declined as we continue to proactively manage market health with our partners in the fourth quarter. Brick-and-mortar channel inventory in North America is very healthy with on-hand inventory levels down double-digits versus prior year. Similar to the third quarter, Crocs brand growth was led by international with both Asia and EMEALA revenues up 75% in the quarter. Asia Q4 revenues were $91 million, up 74.8% from last year. As Andrew mentioned, we saw broad-based growth across all channels in all of our key focus markets. South Korea and India continued to outperform and grew strong double-digits during the quarter and the year. China faced periodic COVID lockdowns however, grew 38% for the quarter, following 34% growth in Q3. EMEALA revenues increased an exceptional 75.6% over Q4 2021 despite our exit of direct Russia operations. Momentum has been building over the last two years and resulted in broad-based growth in our direct and distributor markets. Overall, we are extremely pleased with the underlying strength of the Crocs brand internationally. Turning to HEYDUDE. Revenues were $279 million, growing 36.6% from Q4 of 2021. Digital sales were particularly strong during holiday and constituted 51.6% of brand sales in the quarter. We remain confident in the potential of the brand and look forward to sharing our growth strategies and plans in the future. From a channel perspective, digital remains our top priority for both brands as it enables us to meet our consumers in their preferred channel. During Q4 2022, our consolidated digital business, which combines e-commerce and e-tail, grew 80% on top of 41% growth in Q4 of 2021. Digital penetration for the quarter was 45.1%, up from 40.3% last year and 34.2% in 2019. Our digital growth benefited from product newness, refined user experience and additional marketing activities that drove strong traffic. Consolidated adjusted gross margin for the quarter was 53.3%, down approximately 1,000 basis points from last year. About half of the compression to consolidated adjusted gross margin is related to the addition of the HEYDUDE brand. Crocs brand adjusted gross margin was 56.1% or 760 basis points lower than prior year, which was in a typical year as we took price ahead of inflation and had an overall lack of promotions in the industry. The decline in adjusted gross margin is attributable to approximately 340 basis points of promotions, 180 basis points of inflationary costs and 180 basis points of higher freight and inventory handling costs. Currency negatively impacted gross margins by 70 basis points. HEYDUDE brand gross margin for the quarter was 46.4%, as positive channel mix was offset by the continued effect of legacy freight contract costs. Higher inventory storage costs as we work to expand distribution center capabilities to support the larger business and holiday promotional activity. Our Q4 adjusted SG&A at 27.3% of revenues improved by 780 basis points compared to prior year. This excludes $18 million of costs in Q4, primarily related to the shutdown of our Russia direct operations and the HEYDUDE acquisition and integration. For full year 2022, adjusted SG&A leveraged 490 basis points to 26.7%. The significant decrease in adjusted SG&A rate for the quarter and the full year is due to leverage of shared services across both brands given as we invested over $215 million this year in additional marketing, talent and infrastructure to support future growth. Our fourth quarter adjusted operating margin declined 260 basis points to 26% compared to 28.6% for the same period last year as gross margin pressures offset SG&A leverage. Fourth quarter adjusted diluted earnings per share increased 23.3% to $2.65. For the full year 2022, let me recap a few highlights. Total revenues grew 54% to $3.55 billion with Crocs brand revenues increasing 19% on a constant currency basis on top of 65% growth in 2021 and HEYDUDE brand revenues reaching nearly $1 billion on a pro forma basis. Crocs Brand International growth was exceptional at 47% constant currency. Adjusted income from operations increased 42% to $986 million and adjusted operating margin of 27.7% remains industry-leading. Full year adjusted diluted earnings per share increased 31% to $10.92. We concluded 2022 with a strong liquidity position comprised of $192 million of cash and cash equivalents and $749 million of borrowing capacity on our revolver. Through strong cash flow generation and tight working capital management, we pre-paid $300 million on the Term Loan B during Q4, reducing total borrowings to $2.3 billion and gross leverage of 2.25x and net leverage to approximately 2.1x. We remain focused on deleveraging to under 2x gross leverage by the middle of 2023. Our inventory balance at December 31, 2022, was $472 million inclusive of $169 million of HEYDUDE inventory. The Crocs brand inventory balance was $303 million, a 42% increase over prior year and continues to decline sequentially, down 7% versus the third quarter. Our higher inventory reflects revenue growth, higher costs and inventory and a very low level of inventory last year due to limited availability with the factory closures. While HEYDUDE inventory is slightly elevated from pre-acquisition purchases, Crocs brand inventory is very healthy. Our entire team is extremely focused on inventory health, especially as we grow. In 2022, capital expenditures were $104 million. A little over half of this investment was in our distribution centers as we expand and automate our facilities. The balance of the investment was in our information technology, retail fleet and corporate offices, all of these investments support future growth. And as I mentioned, we will continue to invest in the business to fuel and sustain growth. Now turning to the future. I would like to share our current outlook for Q1 and then full year 2023. For Q1, we expect consolidated revenues to grow approximately 27% to 30% at current currency rates, with the Crocs brand growing double-digits. We expect adjusted operating margin to be between 24% and 25% and adjusted diluted earnings per share of $2.06 to $2.19. For the full year 2023, our guidance contemplates some conservatism as we are cautious about the impact of macroeconomic events, particularly on the US and European consumer as the year progresses. Even with this, we continue to expect revenue growth of 10% to 13%, assuming current currency rates. For Crocs brand revenues, we expect to grow 6% to 8% and 9% to 11% in constant currency with growth in all regions and all channels. For HEYDUDE brand revenues, we expect growth to be in the mid-20s on a reported basis. We expect consolidated adjusted operating profit margins of approximately 26%. This includes an anticipated benefit to Crocs brand gross margin associated with lower inbound freight rates and the clawback of air freight, slightly offset by channel mix and the growth in sandals. For the full year 2023, we expect our underlying non-GAAP tax rate, which approximates cash tax paid to be approximately 20%. Our GAAP tax rate will be approximately 24%. We anticipate non-GAAP earnings per share to be approximately $11 to $11.31 in 2023, which does not assume any impact from potential future share repurchases. It also incorporates increased interest expense on our floating rate debt associated with the current rate environment. To support growth for both brands, we expect to invest approximately $165 million to $180 million in capital expenditures. Investments include expansion of our distribution capabilities, including our new HEYDUDE DC in Las Vegas, implementation of new technology systems for HEYDUDE and expansion of our corporate facilities to support our growth. In 2023, we estimate approximately $30 million of one-time charges primarily related to the aforementioned capital investments and are fairly balanced across COGS and SG&A. We expect the combined brands to generate significant cash flow, allowing us to achieve two times or less gross leverage by the middle of this year. Our capital allocation priorities are first to invest in the business and second, to balance deleveraging with the ultimate goal of reaching one to 1.5 times net leverage and resuming our historically successful share repurchase program. In summary, throughout 2022, we delivered strong revenue growth, profitability and cash flow. With the underlying strength of the core Crocs business and the addition of HEYDUDE, we are confident we have positioned ourselves for sustained profitable growth, strong cash flow generation and significant value creation for our shareholders. At this time, I'll turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. Crocs, Inc. had an exceptional year in 2022. The Crocs brand is resonating strongly with consumers throughout the world, and we're confident in continued growth led by sandals and International. The HEYDUDE acquisition is exceeding expectations. Integration is going well, and we have a clear plan for growth. I could not be more excited for the future and the tremendous value creation opportunity for shareholders. Operator, please open the call for questions. Operator: Thank you. And we will now begin the question-and-answer session. [Operator Instructions] And our first question today will come from Jonathan Komp of Baird. Please go ahead. Jonathan Komp: Yeah. Hi. Thank you. Good morning. Anne, can I ask a follow-up on the first quarter guidance? I believe you said, the Crocs brand should grow double-digits. Could you give a little more color on how that might look geographically? And then a bigger picture question for 2023 for the Crocs brand, are you expecting North America to grow for the full year? And could you comment on some of the drivers across some of the product initiatives and the channel performance you're expecting? Anne Mehlman: Sure. Jonathan, good morning. So let me start with full year and then I'll talk about Q1. So for full year, as shared, we expect the Crocs brand to go 6% to 8%, which is about 9% to 11% given constant currency and growth is really going to be powered by international, but the US will grow. I think we're currently cautious about the consumer in the US, especially in the back half, but we're still anticipating growth over last year driven and that growth is really going to be driven by sandals and newness. And we do expect North America to have good growth in Q1 as well. And then from just an overall channel perspective, we still expect DTC to lead the growth in our North America region for this year is that we continue to focus, especially on our e-comm side. Andrew Rees: Yes. And just about maybe a tad or color to that, John. I think one of the reasons that DTC is leading the growth. That's where we have the newness, the fastest, right? We were able to bring a lot of new sandals and new styles to our DTC environments in Q4, and they are showing up faster as you'd expect in our DTC environments, both e-comm and in store in Q1, we're extremely pleased at this point with the performance we're seeing, and we're excited as those new products supported by in our social digital marketing flows to wholesale. Jonathan Komp: That's great. And then one follow-up just on the outlook for the Crocs brand gross margin. It looks like you quantified a little over 400 basis points from airfreight investment and then higher freight and inventory handling in 2022. So as we think about some of those costs coming back into the business as a benefit, would you expect Crocs brand gross margin to be back to the 58% level, or could you maybe just give some color on the puts and takes you see there? Thank you. Anne Mehlman: Yes. Let me -- yes, that's a great question. So let me just take a minute to recap. So 2022, obviously, we're anniversarying a high point from 2021. So our Crocs brand adjusted gross margin finished at 56.7%, which is about a 500 basis point decline to 2021. And as you mentioned, we had about 220 basis points of air freight that will come back and then about 190 basis points of higher freight inventory handling costs that we talked about coming back over the year. And then the rest was really related to inflationary costs. We had promotions were about 90 basis points and then currency. For 2023, we do believe that Crocs brand will be largely in line with our long-term expectations of about 58% gross margin. And then HEYDUDE is expected to increase year-over-year, but will ramp slower throughout the year because we need to continue to work through the subscale D&L network. So our overall consolidated adjusted gross margins for this year, we're projecting to be about 55% to 55.5% including obviously the impact of HEYDUDE. And we will continue just one side note, we will continue to provide gross margin color by brand for the remainder of the year. Jonathan Komp: That’s all really helpful. Thank you. Anne Mehlman: Thank you. Andrew Rees: Thank you. Operator: Our next question today will come from Tom Nikic of Wedbush Securities. Please go ahead. Tom Nikic: Hey, Andrew, hey, Anne. Thanks for taking my question. I want to ask -- so I believe you said North America wholesale was down 25% in Q4 and I think on the Q3 call, you kind of gave us like the wholesale sell-through. It's going to give us a better indication of the demand for the brand in the wholesale channel. How did the sell-throughs look in North America wholesale for Q4? Andrew Rees: Yeah. I would say, Tom, we were very happy with the performance of North American wholesale in Q4. We ended the year with inventories in channel down double digits, and that was one of our kind of primary goals was to make sure that we took -- it was obviously going to be a promotional quarter. We anticipated that. And we took advantage of that promotional quarter to make sure we're clearing out of end-of-season goods and also enabling our wholesale partners to effectively compete in what would be a promotional pump period. So we're very happy with the performance of the wholesale business. It was important to keep our inventories in line. And as we kind of look at our in-channel inventories, we think we're very well positioned for 2023. Tom Nikic: Okay. I could also ask on the inventory growth for the core Crocs brand. I realize it's kind of coming down sequentially. But -- optically, it still is a pretty big number, plus I believe it's low-40s. How should we kind of think about that working its way down over the course of 2023 and do you see any risk that you're potentially over-inventoried with core Crocs brand? Andrew Rees: Yeah. I would say, Tom, I think there's a couple of ways -- a couple of things to think about. One is, yes, it's a 40% growth over the same period last year. But if you remember that same period last year was an exceptional low because it was immediately after the Vietnam factory closures, right? So on a normalized basis, we actually think the Crocs inventory is very well positioned relative to our future growth plans. So on a normalized basis, it puts us at approximately four turn, which is where we'd like to be from an inventory to sales ratio. We think that's kind of one of the best in the industry, that's best-in-class in terms of working capital management and it allows us to have healthy core inventories and fill out once demand, it allows us to bring in new products at the rate we want to but not have excess inventories on that. So -- we think it's about where we want it to be, given what we expect for future growth. Tom Nikic: Understood. Thanks, Andrew. And if I could just sneak one more in for you. The $30 million of onetime charges that you're expecting for 2023. Can you give us a little bit more color as to what that comes from? I guess, the description in the press release was kind of investments for growth which normally are kind of included in the adjusted numbers, but I'm just kind of curious like what those one-time targets. Anne Mehlman: Sure. There's kind of three buckets. The majority of those are things that were just consistent in how we talk about it. So, it's distribution center overlap where we might be transitioning distribution center. So it's kind of overlap on as we're bringing up the HEYDUDE distribution center costs where we're playing duplicate rent and things like that. Also same with -- we're making some changes as we talked about, some investments in some corporate headquarters to expand and so we're paying some duplicate rent there. So those are the majority of the charges. And then the other one is we're implementing a new ERP system for HEYDUDE. And those costs, we typically call out as a one-time as we don't typically implement ERP systems. Tom Nikic: That’s helpful. Thanks Andrew. Thanks Anne. And best of luck in 2023. Andrew Rees: Thank you. Anne Mehlman: Thank you very much. Operator: Our next question today will come from Abbie Zvejnieks from Piper Sandler. Please go ahead. Abbie Zvejnieks: Hi, guys and thanks very much for taking my question. So how should we think about the cadence of gross margin in terms of tailwinds from lopping air freight versus the promotions and the greater mix of HEYDUDE revenue? And then just on the HEYDUDE inventory composition, I think you said it's a bit elevated. Can you just talk about the reasons for this? Is this due to changes in wholesale partner behavior or more so on logistics? Just any color there would be helpful. Thanks. Anne Mehlman: Yes. Thank you, Abbie. Let me start with gross margin then I'll let Andrew talk about the HEYDUDE inventory. So from a gross margin perspective, from a Crocs brand, I expect it to be a pretty normal cadence throughout the year, so a return to seasonal patterns. Q1 tends to be low just given the wholesale channel mix in the quarter. So I would just model that out as kind of normal kind of seasonal patterns given the guidance. I think from a HEYDUDE perspective, we do expect, as I mentioned earlier, to be lower in the first half as we're still rolling through some of those higher freight and storage costs. And then as we get into rolling off those costs as well as into a better sized distribution center, we expect that to increase into the back half of the year. And that plays into our overall gross margin that we talked about from 55% to 55.5%. Andrew Rees: Yes. And I think on the second part of your question, Abbie, around HEYDUDE inventories, yes, we feel that the HEYDUDE inventories are heavier than we'd want to be on a go-forward basis. And I'd say it was principally related to a number of factors. One is inbound receipts that were ordered pre our acquisition that were probably not the right composition that we would have liked in terms of -- there was probably heavier on things that haven't sold us quickly. So, we're going to have to work our way through those. There was also just the process of getting the whole planning function up and running effectively so that we can match demand with supply effectively, and we've been pretty good at that historically. On the Crocs brand, we have not been as good at that on HEYDUDE over the last year, but I think we're confident we'll get there. I think we have plenty of opportunities to sell this inventory over the coming year. We're not panicked about it, but it's a little bit heavier than we'd like at this point. Abbie Zvejnieks: Perfect. Anne Mehlman: I think it's on our owned inventory, just if I can voice over. One, just a quick note is that as our own inventory, we're actually very satisfied with inventory that we have in channel from the HEYDUDE perspective. Andrew Rees: Yes. Abbie Zvejnieks: Got it. And then another on promotions, should we think about this as like more of a normalized level, especially as you guys are bringing in more newness and more like fashion risk, or how are you thinking about the go-forward promotional environment? Anne Mehlman: Yes. So from a promotional standpoint, I mean, I think Q4 played out exactly as we anticipated from promotions on the Crocs side, especially. I think for this year, we expect it to be normalized promotion environment. Again, I don't think it has to do with more of our product mix. I think it has more of a just a return to the norm of a promotional environment against a very low promotional environment in 2021. As we said in our prepared remarks, we're still actually less promotional than we were pre-pandemic. So I do expect promotions to maintain and pretty much be in line from this point going forward. Abbie Zvejnieks: Got it. Thank you so much. Anne Mehlman: Thank you. Andrew Rees: Thank you. Operator: Our next question today will come from Laura Champine of Loop. Please go ahead. Laura Champine: Thanks for taking my question and congratulations on the international growth in Q4. If growth continues to be, sort of, mixed towards international, how is that likely to impact gross margins if the mix continues to shift in that direction in 2023? Anne Mehlman: Yes, hello. It does depend a little bit on where that growth occurs. So if it occurs in our direct-to-consumer channels like anywhere else in the world, then that's obviously helpful from a gross margin standpoint. Obviously, we've had really strong distributor growth, which is a headwind to gross margin, but carries no SG&A. So the higher the distributor growth have outperformed, it will impact gross margins a little bit, but again, be accretive overall because there's no SG&A associated with it. And that would be embedded, obviously, we've embedded good international growth into our guidance. So that would be embedded in our current margin guidance from a Crocs perspective. Laura Champine: And are you incorporating, sort of, a stable mix of distributor versus DTC, or do you think the outsized growth in distributors continues through this year? Anne Mehlman: No, it's a pretty stable mix. Actually, I think last year, we had really strong distributor growth as we saw tourism return to a lot of markets, and we saw some restock. I think this year it's actually a much more balanced mix between DTC and distributor. Laura Champine: Got it. Thank you. Anne Mehlman: Yes. Operator: Our next question today will come from Sam Poser of Williams Trading. Please go ahead. Sam Poser: Thank you for taking my question. I have a small handful. Number one, you mentioned that you're going to increase the marketing, I would assume for both brands pretty aggressively. What, kind of, ROI are you assuming on those increased investments? Andrew Rees: So yes, I think I would say we're going to increase our dollar spend, Sam, but we're investing at about the same rate that we have invested historically. So if you remember, we've run the Crocs brand at between kind of 7% and 8% of sales in terms of marketing. That includes both our brand marketing and a lot of our digital marketing and our social marketing and we're maintaining that rate. But obviously, as the brand has grown over the last several years, that dollar amount is a lot more significant. And that's one of the important factors around scale in this business. If you have scale and you invest as a percentage of sales, you can reach a lot more consumers. From a HEYDUDE perspective, it will be an increase over last year because we underinvested in the first half of the year as we were digesting the brand. We did invest at rate -- at about a similar rate in the back half of the year for the HEYDUDE brand. So it will be an increase in the first half and then similar in the back half. But of course, we're also getting growth there as well. So the dollar amount will be larger. Sam Poser: Well, let me follow up on that. The -- when you went into 2022 and you said we're going to invest x, was the return on your investment higher than what you anticipated? Andrew Rees: The return on investment was consistent with our expectations. Sam Poser: All right. Thank you. Then what -- and what is the expectation for 1Q North American wholesale? Is it going to look like Q4 -- just look to Q4 more similar and then DTC similar as well? Is that sort of how to think about it -- in North America, given it appears retailers hesitancy to step up at the moment? Andrew Rees: Yeah. I mean, Sam, I'll take that. We don't guide by channel, by region, we never have. But what I would say is I think the way to think about it, I think what you're trying to get at is how healthy is the wholesale channel? And do we expect sell-in to kind of normalize with sell-through, right? And as we kind of think about the first half of 2023, we're pretty confident that sell-in will normalize, we'll sell-through because we've got our kind of in-channel inventories down double-digits at year-end. We're very confident that we're kind of well positioned within channel inventories. The only challenges that we could expect are some of our partners are still heavy -- some are not, but the heavy with other brands and trying to manage constrained DCs and open-to-buy constraints, so we are focused -- we are dealing with that, and that's a little bit of an unknown. We are starting to deliver substantial newness to our North American wholesale. I think we're confident in that at this point, but some of that is a bit unknown. So -- but I think in the first half of 2023, we'll definitely see a normalization of North American wholesale, sell-in and sell-out. Sam Poser: And then Anne, can you tell me the -- what is your assumed like sort of net gross interest expense -- the interest expense you're expecting for the full year? Anne Mehlman: Yeah. So from an interest rate perspective, so our guidance obviously assumes higher interest rate expense than last year driven by the full year of debt related to HEYDUDE in the rate environment. So as a reminder, we locked in $700 million of fixed rate debt at an average rate of 4.2%. And then the balance of our debt is the $1.7 billion Term Loan B that's floating rate, which is silver plus 350. So on average, it's like 7.7%, if you want to model the interest rate. And then obviously, we paid down $550 million of debt in 2022, and we anticipate really strong cash flow this year and significant down against this year, which will offset some, but interest will be higher this year than it was last year. Sam Poser: All right. Thanks very much. Continued success. Andrew Rees: Thanks, Sam. Operator: And our next question is from Jim Duffy of Stifel. Please go ahead. Jim, your line is now live. You maybe muted. Jim Duffy: Sorry about that. Yeah. I was on mute. Anne Mehlman: Good morning, Jim. Jim Duffy: Good morning, Anne, good morning, Andrew. I have a couple of questions around margins for the brands and the regions. First, on HEYDUDE, you've had some unforeseen challenges. The HEYDUDE margins, however, still running at 31%, which is above your original objective of 26%, 27%. I guess I'm curious, does that make you rethink the margin opportunity for the HEYDUDE brand? Anne Mehlman: Yeah. Hey, Jim, thank you so much. I do believe that the HEYDUDE margins we're very pleased with, overall, the operating margins. One thing when we originally guided, HEYDUDE to operating margins, we hadn't pulled out the shared service cost from both brands. So now we've pulled that out. And so both brands are running higher operating margins. And then we have obviously pulled out the shared service cost to get to our overall operating margin guide of 26%. So obviously, last year, we ran higher. We delivered 27.7%, but our long-term guide is around 26% as we continue to invest in both brands to support the growth. Jim Duffy: Helpful. Thank you. Anne and I know you don't want to get into regional margin guidance. But for the Crocs brand, can you speak to the mixed direction in the regional profit pools? Will you see a meaningful shift towards international, or does planned investments and growth for international -- you'll keep the margin mix of the regions -- or excuse me, the profit mix of the region is relatively consistent? Anne Mehlman: Yes. So, a couple of things there. Obviously, from an operating margin perspective, all of our regions are very profitable. As we continue to scale international markets, we will continue to see that profitability expand. In Asia, we've been investing significantly in China to support that growth. And so, as those Asian markets scale, then obviously, it drives leverage and continues to expand our profit margins. So, I don't expect a significant operating margin change based on our international mix. Jim Duffy: Okay. Thank you very much. Anne Mehlman: Thank you. Operator: Our next question is from Mitch Kummetz of Seaport Research. Please go ahead. Mitch Kummetz: Yes. Thanks for taking my questions. First question on HEYDUDE. So you gave the guide in reported. I think by my math, the pro forma works out to be kind of mid-teens growth year-over-year. I'm curious to know, if you expect that to be kind of a straight line cadence over the quarters? I know that the growth has been moderating a little bit, I think, as you're lapping larger numbers. And I would think that as you go through the year, you continue to kind of lap larger numbers. So I'm wondering if we should be thinking of that sort of mid-teens on a straight-line basis pro forma or do you expect that to kind of moderate as the year goes by? Anne Mehlman: Yes. Good morning, Mitch. I think obviously, Q1 is highest growth just as we didn't own them for a full year. So as you mentioned. On a reported basis, we haven't guided by quarter, I think we see good growth throughout the year. As Andrew also mentioned, we're cautious in the back half of the year, just given cautious on the Crocs brand but also just cautious overall, on the consumer. So we've incorporated that into our guidance for the back half of the year. Mitch Kummetz: Okay. And then on the Crocs business, maybe just a couple of questions. You mentioned Clogs growth in the quarter, and I think it was said that the classic kind of outperformed the clog category overall. I'm curious to know how lined clogs performed in the quarter. I believe that was a pretty healthy business for you guys last year in Q4. And I'm curious how that lapped this year? And then, I guess, secondly, on sandals, Andrew, you referenced kind of four kind of big sandal segments there. I'm kind of curious if how that kind of performed by segment in the back half and then sort of the outlook for 2023? I assume that the kind of the everyday piece is the biggest of those segments. And I'm wondering if you're seeing kind of outsized growth there versus the others, and if that would be expected to continue in 2023? Andrew Rees: Okay. Good. Mitch, a lot of questions there. So, Classic has performed extremely well in Q4. It performed extremely well all year long, right? And as kind of we mentioned in our prepared remarks, as we look to gain share in a lot of international markets, it's important that we really cement and land the classic, and we've been doing an exceptional job of that. So that's been driving strong classic growth. Classic also continue to do -- online Classic continues to do extremely well in the US. From a Lined perspective, line – I say the Lined business in the US peaked last year. So that was probably a high watermark of consumer takeaway of Lined that moderated a little bit this year. And we expect that to moderate in the future, right? We think we're going to reset the Lined business at a little bit of a lower level. It's a very important component for our fourth quarter business. We think we've got some really strong innovation coming into that area. I would say international for Lined is a completely different story. So on an international basis, Lined still has a lot of incremental penetration opportunities in those markets that kind of demand a winter Lined products. So I think Northern Europe think northern parts of Asia, right? So a bit of a different story in line in different parts of the world. And from a sandals perspective, yes, we talked about H2 for sandals, 30% plus growth and you're right that if you think about Q4 growth in sandals, it was 50-plus percent. So 50-plus percent growth rate for Q4 in sandals, really driven by a lot of those new styles that we've brought to market, as well as strong sell-in of sandals to our distributor markets and some of those distributor markets are sandal heavy if you think about Southeast Asia. Mitch Kummetz: Okay. That’s helpful. Thanks and good luck. Andrew Rees: Thank you. Anne Mehlman: Yes. Operator: Our next question is from Jay Sole of UBS. Please go ahead. Mauricio Serna: Hi. Good morning. This is Mauricio Serna on behalf of Jay Sole. Thanks for taking our questions. Congratulations on the results. Maybe I wanted to ask a little bit more -- if you could provide more details on the European business, how is that performing and what are your expectations for this year in that particular business when we look at it from a wholesale and DTC perspective? Also, as we think about the gross margin outlook for 2023, when do you think we lap a return to more normalized promotional levels? And lastly, on the -- the health of the balance sheet, it seems that you're on track to getting to your target leverage ratio. Should we expect the company to resume buyback activity as soon as second half of 2023 and at a similar rate as what you were doing prior to the HEYDUDE acquisition? Thanks. Andrew Rees: So Mauricio, I'll give you a little color on EU and then Anne will talk about gross margin and balance sheet. So look, the EMEALA business - our EMEALA segments, which obviously Europe, Middle East, Africa and LatAm performed extremely well in the fourth quarter. 75% growth is obviously exceptional. If we kind of isolate down to Europe, we're seeing very strong trajectory for the Crocs brand in the European market. I think in our prepared remarks, we called out as an example of that, 105% growth in the UK, which is obviously an important market in Europe. So we're seeing very strong trajectory for the brand that's showing up both in our DTC business, which in Europe is primarily digital and it's also showing up in our wholesale business. As we look to 2023, I don't think we're going to lap 75% growth, but we still see very strong trends in our European business. So we're very confident. And that's really about the brand trajectory. The brand is getting traction. And we are not seeing a significant pullback from the consumer for our brand. I'm not saying that's not true across broader product categories, but they still have -- they're still buying Crocs. Anne Mehlman: Yeah. And then I think your second question relies on gross margin outlook. And so as I mentioned, I think from a margin perspective, Q4 played out exactly as we anticipated with margins as well as the promotional environment. I think our seasonal promotions and liquidation of each inventory was very successful. And that continues. Q1, January tends to be you're cycling through the liquidation period and then you get to more normalized throughout the quarters. I think from a return of the promotional environment, we're still less promotional than we were pre-pandemic. And so we feel like we're at a pretty normalized level this year. I don't see anything that's out of the ordinary. And then your second question on capital allocation. We're -- we paid down $550 million of debt in 2022, which we're really pleased with. And our priority during 2023 is to continue to pay down debt to get to that 2x gross leverage and then continue past that. Then we have some options of how we want to allocate. So at current interest rates, we would equally pay down debt, that will be a priority as we target to get 1x to 1.5x net leverage, and then we will also look at resuming our share repurchases at that point. Mauricio Serna: Okay. Thank you so much. Anne Mehlman: Thank you. Operator: [Operator Instructions] Our next question is from Aubrey Tianello with BNP Paribas. Please go ahead. Aubrey Tianello: Good morning. Thanks so much for taking my question. I wanted to start out with the SG&A outlook for 2023. Just given you're being a little more cautious with your view on the revenue guide for this year, a little lower than the long-term algo. Can you just -- any more detail on where you're able to pull back on SG&A to preserve the 26% EBIT margin? Anne Mehlman: Yeah, sure. So in 2023, we plan to invest principally in marketing and talent. And that -- as Andrew mentioned earlier on the call, we -- for marketing, we invest as a percentage of sales of 7% to 8%. So obviously, if revenue was to significantly decline with us an area we look at pulling back on, although it's usually we try not to because we want to really preserve the brand. So I don't think it's necessary for us to pull back from an SG&A standpoint to hit the 26%. Obviously, we're investing more year-over-year because this year, in 2022, we were over the 26%. But if business doesn't turn out as expected, we can pull SG&A levers and pretty quickly deleverage given the flexibility of our cost structure. Aubrey Tianello: Yeah. Andrew Rees: Yeah. Yeah. I think really, I emphasize, are our perspective is the opposite of your question, which is with growth in the business and expansion in gross margins, we're actually able to continue to invest to drive future growth from an SG&A point of view. Aubrey Tianello: Got it. Yeah. Got it. And then maybe just one on HEYDUDE. Just given the amount of growth in the last couple of years has been so impressive. Can you help us understand how much more room there is domestically for the brand in terms of wholesale door penetration how far along you are with that process and how much opportunity is left in the US? Andrew Rees: Yes. Great question. So, we've made really good progress in our first year of ownership in sort of wholesale door penetration in the US, right? So, we're really pleased with the progress we've made and as you kind of implied in your question that has fueled our growth. As we look at 2023, we do feel like there is incremental door penetration and there's still long-term door penetration available in the US. There are still a number of key and significant customers that we have not yet penetrated that we're obviously working on. And I think in addition to that, there's a lot of share by door opportunity, right? So as we continue to bring new styles to market, as we continue to drive greater brand awareness for the HEYDUDE brand consistently across the US. If you remember when we purchased the brand, it was -- its awareness was regional, I would describe it as. So, as we invest in marketing drive awareness, we will see both door penetration. We'll share expansion of share by door, and we will see, we believe, an increase in rates of sell-through. So that will be somewhat constrained in 2023, because we're dealing with a constrained distribution network where our D&L capabilities are not consistent with our growth potential. But over the long run, we see lots of runway for North American growth in HEYDUDE. Aubrey Tianello: Great. And then maybe if I could just follow-up quickly on that. Any update on the time frame for expanding internationally with HEYDUDE? And is any of that reflected in the guide for the year? Andrew Rees: Yes. I think actually, one point I just want to go back in my last answer and add to it. I think PD released some information just recently and indicated that HEYDUDE was I think, one of, if not the fastest-growing brand in the US in Q4, so in dollar terms. So, that's obviously exceptional. From an international perspective, yes, we're super clear, right? So, our game plan for 2023 is to continue to test the brand internationally. That will involve direct distribution with some select wholesale customers and a digital presence in the UK and Germany that will come up later sort of in the second to third quarter. It will also involve distribution with some key wholesale partners in the sort of Middle East -- sorry, in the Southern Europe and the Middle East. So we've been -- that's our plan for HEYDUDE International. We think it's critically important that we get really strong feedback from these important markets. We've done a lot of research associated with kind of brand receptivity but that's our plan. It's relatively modest in terms of dollars in 2023. It's all about testing and positioning for the future. Aubrey Tianello: Thank you so much. Andrew Rees: Thank you. Andrew Rees: Thank you. Operator: At this time, we will conclude our question-and-answer session. I'd like to turn the conference back over to Andrew Rees for any closing remarks. Andrew Rees: Thank you very much, everybody. Appreciate everybody's interest and great questions this morning. And as you can tell from our prepared remarks and also the answers to our questions, we're incredibly confident in terms of how our brand is positioned or brands are positioned for another exciting year in 2023. Thank you. Operator: The conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.

Operator: Hello, and welcome to the Crocs, Inc. Third 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. [Operator Instructions]. Please note, today's event is being recorded. I now would like to turn the conference over to your host today, Ms. Cori Lin. Ms. Lin, please go ahead. Cori Lin: Good morning everyone and thank you for joining us today for the Crocs third quarter 2022 earnings call. Earlier this morning, we announced our latest quarterly results and a copy of the press release may be found on our Web site at Crocs.com. We would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the Safe Harbor provisions of the Federal Securities Laws. These statements include, but are not limited to, statements regarding our supply chain challenges, cost inflation, the acquisition of HEYDUDE and the benefits thereof, Crocs' strategy, plans, objectives, expectations, financial or otherwise and intentions, future financial results and growth potential, anticipated product portfolio, our ability to create and deliver shareholder value and statements regarding potential impacts to our business related to the COVID-19 pandemic. 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. Crocs is not obligated to update these forward-looking statements to reflect the impact of future events, except as required by applicable law. We caution you that all forward-looking statements are subject to risks and uncertainties described in the Risk Factors section of our annual report on Form 10-K and our subsequent filings with the SEC. Accordingly, actual results could differ materially from those described on this call. Please refer to the Crocs annual report on Form 10-K as well as other documents filed with the SEC for more information relating to these risk factors. Certain financial metrics that we refer to as adjusted or “non-GAAP” are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, Chief Executive Officer; and Anne Mehlman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I'll turn the call over to Andrew. Andrew Rees: Thank you, Cori, and good morning, everyone. I'm credibly pleased with the strength of our brands and the third quarter results we released this morning. Consumer demand for both the Crocs and HEYDUDE brands is exceptional, and led to strong double digit revenue growth. As we continue to navigate a dynamic macro environment, our teams remain focused on driving market share gains and executing our long-term growth strategies for sustainable profitable growth. Looking at the third quarter of 2022, Anne will review our financial results in more detail shortly, but here are a few highlights. Consolidated revenues of 985 million grew 63% on a constant currency basis. Crocs brand revenues grew 20% constant currency with growth in all regions and DTC comparable sales grew 18%. HEYDUDE brand revenues were 269 million, representing revenue growth of 87% versus prior year. Adjusted operating margins of 28% were best-in-class. Adjusted diluted EPS increased 20% to $2.97 per share, significant deleveraging within the quarter with net leverage of 2.4x. Moving to our brand highlights for the quarter, let's begin with the Crocs brand. In Piper Sandler's Fall 2022 Taking Stock with Teens survey, the Crocs brand increased to the number five favorite footwear brand among teens, up from number six in Fall of 2021. The brand also continued to strengthen with men's and kids, ranking as the number five and number four brands, respectively, within the NPD Retail Tracking Service for fashion footwear in terms of dollar value of sales for September in the United States. These results were achieved as we continue to raise the bar in marketing activations and product innovations. Our partnership with Salehe Bembury continues to be very successful, as we released three new colors this quarter, all of which sold out instantly in the U.S. In EMEA, our partnership with high fashion designer Christian Cowan featured custom Jibbitz charms that can be converted into wearable accessories, such as a necklace and a hairclip, elevating our customization to new heights. In China, we teamed up with prominent fashion ambassadors, Fan Chengcheng and Nana to launch our global Crush collection. As a fan-centric brand, we continue to demonstrate our versatility partnering with convenience store 7-Eleven and relaunching our adult Lightning McQueen Clog for the fourth time at fans request. Marketing activations with product innovations is one of our core competencies, and how we continue to build brand relevance. New product introductions include adding height for her [ph] in the Crush collection that is now global, a new molded silhouette for him with the Echo Clog. Early access events on the Crocs app for the Echo Clog generated significant app downloads, strong DTC sellouts, as well as much excitement with our specialty footwear retailers. In the sandal arena, we elevated comfort with the Miller Slide that targets the recovery segment combining the comfort of LiteRide foam with modern silhouette. Our rapid pace of both product and marketing innovation hit an all-time record in September, and we plan to sustain a high level of innovation and new product introduction through the holiday season and into 2023. From a cross brand perspective, Clogs continued to exhibit strong double digit growth this quarter. Sandals, an important growth pillar for the future, increased nearly 20% in Q3. We're confident that sandals will deliver strong back half growth, as we experienced exceptional growth internationally and see high sandal penetration in markets such as India, Southeast Asia and the Middle East. Finally, Jibbitz continues to create excitement and engagement with consumers globally, growing double digits from last year. We continue to drive digital growth, one of our most important initiatives. We saw strong 22% constant currency growth and digital penetration increased to 37.4% with growth across all regions, driven by increases in new customers combined with repeat purchasing from existing customers. We launched more robust technical capabilities to enable enhanced personalization and we expanded new marketplaces, including selling [indiscernible] in China. Turning to HEYDUDE, the brand is one of the fastest growing casual footwear brands in the U.S. market today. And we now expect revenues to exceed $1 billion in 2023, a full year earlier than previously committed. In Piper Sandler's Fall Taking Stock with Teens survey, HEYDUDE ascended to the number seven favorite footwear brand among teens, up from number eight in the Fall of 2021 and number nine in the Spring of 2022. We're also seeing early evidence of success with our marketing campaigns, as the Piper study noted increased HEYDUDE mindshare in the Northeast and the South regions of the United States. We're excited about the rebrand that went live in July. And we've seen consideration increase by 5 percentage points in our recent brand study. The brand was recently featured in The Wall Street Journal article entitled, The Beer Koozie-Like Shoe That Is Selling Out Across America. We're excited to have acquired the rights to HEYDUDE.com this past quarter, which should make it even easier for our fans to purchase directly from our Web site. HEYDUDE also began its influencer strategy with a portfolio of partners. Going forward, we'll continue to implement a successful marketing playbook for the HEYDUDE brand. From a product perspective, the HEYDUDE brand is continuing to expand wearing cases, as we enter colder seasons with products such as the Britt, Denny and the Scott boots. Additionally, the introduction of the Axel is testing the relevance of the HEYDUDE brand in the sneaker category. Our iconic clog silhouettes to Wally and Wendy continue to grow and be in demand, as we introduce new colors, prints and elevated products to include [indiscernible]. With the addition of HEYDUDE, we have diversified our product portfolio. For Q3, clog penetration was just over half of our total revenues. The casual silhouettes of HEYDUDE diversified our overall revenue base to constitute 27% total revenues and sandals were approximately 9% of enterprise revenues. In summary, we have tremendous confidence and clear evidence as to the underlying strength and growth potential for both Crocs and the HEYDUDE brands. Before turning the call over to Anne, I want to provide an update on what we're seeing in the macro environment. Pressures remain from widespread inflation, elevated interest rates and the strong U.S. dollar, China's zero COVID strategy and the war in Ukraine. During the pandemic, inventories were operating at historically lean levels caused by supply chain delays and Vietnam factory closures. In recent months, we've seen high levels of promotions in response to elevated inventory levels, particularly in the United States. The combination of these factors are pressuring margins and making near-term performance more difficult to predict. However, even facing an uncertain macro environment, we're raising our guidance for 2022 and remain confident in continuing to gain significant market share and achieving our long-term revenue targets for both brands while generating best-in-class profitability. I will now turn the call over to Anne who will review our third quarter financial results in more detail. Anne Mehlman: Thank you, Andrew, and good morning, everyone. I will begin with a short recap of our third quarter results. All revenue growth rates will be cited on a constant currency basis, unless otherwise stated. For a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to this morning's press release. As Andrew outlined, we had an exceptional third quarter with $985 million in consolidated revenues, representing 63% growth. In spite of several headwinds to margins, we delivered another quarter of industry leading adjusted operating margins of 27.9% and adjusted EPS growth of 20.2%. I will now detail our revenue highlights by brand, beginning with the Crocs brand. During the third quarter, we sold 30.3 million pairs of shoes, an increase of 19.2% over Q3 of 2021. The Crocs brand average selling price during Q3 was $23.33, which is flat on a constant currency basis and declined 4.5% on a reported basis due primarily to unfavorable FX. Let's now review a few Crocs brand highlights by region. In North America, the Crocs brand remains strong and gained share. Third quarter revenues increased 1.8% to $445 million. The North America DTC channel for the Crocs brand, an indicator of underlying consumer demand, was the key growth driver with DTC comparable sales up 13% on top of 70% comparable sales growth in 2021. Wholesale selling was down 15%. However, wholesale sell-out was at high single digits as we continue to partner with major wholesale accounts to carefully manage market level inventories. International was the largest growth driver for the Crocs brand in Q3, as we execute on our long-term growth plan to ignite the brand in Asia and EMEALA. International net represents nearly 40% of Crocs brand revenues. Crocs brand revenues in Asia grew 82.3% to $138 million during the quarter. The strong growth was broad based across India, Southeast Asia, Japan and South Korea. Additionally, the green shoots in China continued despite headwinds from the continued COVID lockdowns with revenues increasing more than 30% compared to last year. Crocs brand revenues for EMEALA were $132 million growing 45.6% with distributors, brick and mortar wholesale partners and e-commerce driving the growth. Momentum continued from Q2 with strong growth in our top direct markets, the UK and Germany. Turning to HEYDUDE. Revenues continue to exceed expectations contributing $269 million for our portfolio and growing 87% from Q3 2021 revenues. The momentum of the HEYDUDE brand has been exceptional, and we remain confident about realizing the full potential the Crocs playbook will have on the brand. As a reminder, we will continue providing gross margin visibility by brand for the remainder of 2022. Beginning in 2023, gross margin will be reported on a consolidated basis only. Consolidated adjusted gross margins for the quarter were down 910 basis points from last year to 55.1%. Approximately half of the compression is related to the addition of the HEYDUDE brand. Adjusted gross margin for the Crocs brand was 57.5% or 670 basis points lower to prior year, driven by the impact of inflationary cost pressures of approximately 200 basis points and 270 basis points of higher freight and inventory handling costs, of which we estimate 150 basis points to be transitory. Currency negatively impacted margins by 115 basis points. In addition, we also saw a more normalized promotional environment in our North America business, although that was mostly offset by higher ASPs in Asia and EMEALA. HEYDUDE adjusted gross margins were 48.8%. This gross margin represents the continued effect of cost from legacy freight contracts that take time to roll through the P&L and higher inventory storage costs in the short term, as we work to expand DC capabilities to support a larger business. To that end, we have signed a lease to open a significantly larger new facility in Las Vegas, which we anticipate will come on stream in Q4 of 2023 to efficiently support our growth aspirations. During the third quarter of 2022, we leveraged consolidated adjusted SG&A 420 basis points improving to 27.2% of revenues versus 31.4% last year. This improvement was achieved while still investing in marketing and talent related to HEYDUDE as well as marketing in the Crocs brand. Nonrecurring SG&A expenses for the third quarter were $9 million, primarily related to HEYDUDE integration costs of approximately $7 million. To support the long-term growth of our portfolio, we will continue to invest in key areas like marketing and talent while maintaining our efficient SG&A structure. Our flexible SG&A base, coupled with our ability to leverage shared services across the portfolio, allows us to remain fluid in a dynamic operating environment. Our third quarter adjusted operating income increased 33.8% to $274 million from last year, including $79 million attributable to HEYDUDE. Consolidated adjusted operating margin declined 490 basis points to 27.9% from 32.8% last year. Our third quarter non-GAAP diluted earnings per share increased $0.50 or 20.2% to $2.97. Our liquidity position remains strong as we ended the third quarter with $143 million of cash and cash equivalents. Through strong cash flow generation, we repaid a total of $155 million of debt in the quarter, fully repaying the balance due on our revolver and making our first prepayment on the term loan B, reducing borrowings to $2.62 billion and net leverage to approximately 2.4x at the end of Q3. Through EBITDA growth and debt repayment, we remain focused on deleveraging to under 2x by the middle of 2023. Our inventory balance at September 30, 2022 was $514 million, an increase of $301 million versus last year, inclusive of HEYDUDE. The addition of HEYDUDE added $190 million of inventory with approximately half of the inventory in transit. The Crocs brand had $324 million in inventory, an increase of 52.6% over prior year. Our higher inventory reflects revenue growth, higher cost and inventory and a very low level of inventory last year due to limited availability with the factory closures and elongated transit times related to the pandemic. Looking to close out the year, I would like to share our current outlook for 2022. All numbers will be on a reported basis, unless otherwise stated. After outperforming in Q3, we are raising our full year 2022 revenue guidance for the Crocs brand to be between $2.605 billion and $2.63 billion, representing constant currency growth of approximately 17%. We continue to expect the strongest growth to occur in Asia and EMEALA as the regions continue to experience high growth and consumer demand. With respect to HEYDUDE, we are maintaining our full year guide and are confident in our revenue expectations of between $850 million to $890 million on a reported basis, implying $940 million to $980 million on a pro forma basis. This translates to consolidated revenues growing 49% to 52% to approximately $3.455 billion to $3.52 billion. As always, we are focused on best-in-class profitability and therefore are raising our adjusted operating margins to be approximately 27% for the full year. We are raising the bottom end of our adjusted diluted earnings per share outlook to be between approximately $9.95 to $10.30. This includes the impact of higher interest rates and lower tax rate with our full year non-GAAP tax rate now expected to be 21%. After repaying $350 million of debt year-to-date, we remain committed to using excess cash flow to repay debt. Through consistent debt repayment and EBITDA growth, we will achieve 2x gross leverage by mid 2023. In summary, we delivered a strong Q3 and look forward to finishing out another record setting year. At this time, I'll turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. As we close out the year and look forward, we remain incredibly confident in the strength of the Crocs and HEYDUDE brands and our management team that continues to drive strong growth, profitability and cash flow. Our focus remains squarely on navigating current uncertainties and creating tremendous long-term shareholder value. Operator, please open the call for questions. Operator: Yes, thank you. At this time, we will begin the question-and-answer session. [Operator Instructions]. And the first question comes from Jonathan Komp with Baird. Jonathan Komp: Yes. Hi. Good morning. Thank you. I want to ask about inventory. Sorry if I missed this. But it looked like the Crocs total inventory might have been down sequentially. So I wanted to just clarify that, both on hand in terms of the inventory Crocs as well as do you have a sense where your wholesale partners sit today? And then related to that gross margin, Anne, I'm wondering if kind of in the 55% range is a safe assumption for fourth quarter? And if you could talk about that promotional level you're embedding in the outlook here. Andrew Rees: Why don't, Jon, I kind of tackle the wholesale partners, and then Anne will give you the details on our inventory and talk about gross margin. So from a wholesale partner perspective, it's actually something we've been super focused on. We want to maintain healthy inventories in the channel, believe that gives us greatest control over our brand. You probably saw in North America in our prepared remarks, North America was down from a wholesale perspective, but sell-out was up over the same period last year. Therefore, we destocked in the wholesale environment. And we continue to work closely with our major U.S. wholesale partners and our global distributors to manage their inventory levels very closely. We think that's super important to maintaining brand health. Now let me pass it up to Anne. Anne Mehlman: Yes. Thank you. Good morning, Jon. Our consolidated inventory balance was 514, and that included -- that was up about $300 million from last year. That's inclusive of HEYDUDE. HEYDUDE was about $190 million of inventory. So if you take that out, we're pretty close to flat sequentially, not quite from a Crocs standpoint. The Crocs brand inventory -- Yes, sorry, actually we're down a little bit from Q2. The Crocs brand had $324 million in inventory. And really inventory reflects the revenue growth that we've had over last year, higher costs in inventory and then obviously we had a very low level of inventory last year due to the pandemic. And then from a gross margin standpoint, we are still maintaining our best-in-class gross margins. Last year was obviously a high watermark for gross margins. We are starting to see freight rates come down. And we're building out infrastructure for both brands. So we called out -- we think 150 basis points of transitory costs will start to dissipate, but that's probably not going to happen until next year. And then we guided our long-term operating margins. Long term will be greater than 26%. This year, we guided 27%. But we didn't give a guide for gross margins in Q4. We do anticipate the promotional environment that we saw in Q3 to continue into Q4 and be relatively promotional, and especially compared to last year where there was a lot less promotions in the market. Jonathan Komp: Okay, that's really helpful. And then one follow up, just broader question, as you look forward to 2023 amid the current macro uncertainty. Any feedback that you're getting in terms of things that might influence your outlook for the Crocs brand, thinking through North America, the potential to hold gains that you've had, as well as the international performance to continue some of the recent strength? Just any color or feedback directionally understanding you're not guiding at this point? Andrew Rees: Yes. I think what we'd say a couple of things is pace of innovation is super important, right? We've seen us be able to accelerate on the Crocs side, accelerate both product innovation and marketing innovation through the quarter. We think that's had a very positive effect. We showed a lot of new product to our major wholesale customers for next year. And we have, I would say, a very strong pipeline of innovation on the Crocs side and the HEYDUDE side. So we think that's really important in this environment. We think both of our brands are in really good health. They're well positioned, given the macroeconomic environment, selling at very approachable price points. And the benefits of the strong growth we've seen on Crocs for the last several years is we've acquired a lot of new customers. And we are -- as we look at our analytics, we're able to retain those customers, continue to communicate with them, continue to sell to them. So we're bullish and very positive about the prospects for next year. Jonathan Komp: That's great. Thanks and best of luck. Operator: Thank you. And the next question comes from Abbie Zvejnieks with Piper Sandler. Abbie Zvejnieks: Hi, guys. Thanks for taking my question. Congrats on the quarter. The EBIT margin control this quarter like despite all of the industry headwinds, like FX and promotion, it's really impressive. So can you just talk about the flexibility you have on SG&A that allows you to manage to this level of profitability? And then on the North America wholesale, how much of the reduced selling was intentional versus any changes in demand from your wholesale partners? Thanks. Anne Mehlman: So I'll talk to SG&A and then I'll let Andrew talk to wholesale. So yes, we're really pleased with the EBIT contribution. We continue to generate best-in-class operating margins. From an SG&A standpoint, we did leverage SG&A in the quarter. We're really able to, especially with the addition of the HEYDUDE brand, able to leverage our overall shared service and enterprise costs. But we also continue to invest dollars in marketing talent and digital. I think that's really important. So we'll continue to strategically support the growth of both brands while maintaining that efficient SG&A rate and investing in marketing so that we can continue to connect with our consumers. Andrew Rees: Yes, and I think one other thing I'd add to that is the benefit of both brands gives us leverage over shared services, which is particularly important. So from a wholesale perspective, I think the better word is probably discipline versus intentional, Abbie. As we approach our kind of wholesale partner management, we try and be really disciplined in terms of what inventory that they hold and making sure that they're seeing strong sell-throughs. As I mentioned, U.S. wholesale sell-out was up high single digits. So that's over the same period last year. So we had actually strong consumer demand and strong sell-out. But I think what we're seeing is our wholesale customers are being really prudent in terms of how they manage their business in terms of managing their overall inventory levels. And we're not going to play the game of forcing inventory into them and getting them overstocked. We believe we have greatest control over our brand by managing our inventory ourselves. Abbie Zvejnieks: Great. That makes sense. Thank you. Operator: Thank you. And the next question comes from Tom Nikic with Wedbush Securities. Tom Nikic: Hi. Good morning, everyone. Thanks for taking my question. In regards to the North America inventory destocking in the wholesale channel, do you have any thoughts as to how long that's going to take? I'm assuming that there's kind of more of that coming in Q4, which is why the Crocs brand is expected to have a little bit slower growth in Q4 versus the rest of the year. But do you think it will persist into 2023 as well? Andrew Rees: Yes. Tom, I'd probably say pretty similar to what I said in response to Abbie's question. We're going to continue to be super disciplined. And will that likely result in more sell out from wholesale than sell-in in Q4? Probably. That's the way we're looking at it. In terms of next year, I'm not sure. I think the inventory glut in the industry, the heavy inventories that a lot of our wholesale customers see from a range of brands, I think most people have been pretty clear that they're going to be aggressive in the holiday season. And we've factored that promotional environment into our guidance. So I think people will deal with a lot of it this year. So I think we'll have to take next year as it comes. But I think what's important for us is to focus on what we can control. And we know we can control pace of innovation, we can control innovative and pace of marketing, and driving sell out for the brand. And if we continue to drive sell-out for the brand, we know our brand is incredibly profitable for our wholesale partners. And we're very convinced that they will continue to purchase. Tom Nikic: Understood. And if I could just follow up on the sandal business, I know you had a tough sandal business in the first half of the year. And it sounds like there was a pretty good inflection in the third quarter. Should we assume that maybe when we get to kind of spring/summer 2023, you've got a little bit more innovation in the pipeline relative to what you had in 1H '22? And thus, we should see kind of a better sandal business year-over-year in 2023? Andrew Rees: Yes, you should. In short, Tom, the answer to that is yes. We've seen the sandal business inflect, as you pointed out, 20% growth in Q3. That has been largely driven by innovation, introducing new products. We also commented, we're also seeing very strong growth in parts of the world that have very strong sandal penetration. So I would call out India, Southeast Asia and parts of the Middle East. They have much higher sandal penetration and we're seeing strong growth. So part of the weakness we saw earlier was we weren't seeing strong growth in those areas. And as we look to next year, I would say we've gotten very good feedback on the innovation that we're bringing to market. And we anticipate some of those regional impacts continuing to support strong sandal growth. Tom Nikic: Sounds good. Thanks, Andrew and team, and best of luck for the holiday season. Andrew Rees: Thank you. Operator: Thank you. And the next question comes from Sam Poser with Williams Trading. Sam Poser: Good morning. Thanks for taking my questions. I've got a handful here. I just want to follow up on next spring. The destocking -- would it be okay to say that you pushed a little more than you would have -- the hindsight being 2020, you may be pushed more good into the first half of the year than you wanted to and now you've become more disciplined since then. And then when we look at next spring, I would assume that generally there's going to be a lot more newness and innovation than there was this past spring. So it's not really apples-to-apples from a product perspective. Is that an accurate assessment at all? Andrew Rees: I think the second part of what you said, Sam, is an accurate assessment, a lot of innovation coming. We've shown our customers a lot of new products and across the spectrum, within clogs, within sandals, within personalization. So I think they're pretty excited about that. So the fact that it will not be comparable to last spring from an innovation cadence perspective, I think that's completely accurate, yes. In terms of kind of commented on sell-in and sell-out kind of through the year, I think we're focused on looking forward and making sure that our inventories are right-sized and that we're managing the brand effectively, both in this country but also across the globe. Sam Poser: Okay, cool. I've got a few more. Are you working on any personalization with HEYDUDE down the road, because one of the great things about Crocs is the personalization with the Jibbitz? I don't expect Jibbitz on HEYDUDE, but are you working -- is there personalization coming to that brand in any sense? Andrew Rees: Yes. So I think it shows up differently from HEYDUDE, Sam, but in a way, yes. So I think personalization behavior is more around kind of SMUs and getting short run special product either for wholesale customers or for particular consumer segments that we want to target through our direct to consumer. So we will definitely make product and market it to discrete segments. There's not a sensible vehicle to sort of put a divot on. We do think there's opportunities with laces and things like that, but that's a little bit down the road. And then I think the other way that we can create kind of short-term demand for specific styles within HEYDUDE is collaborations, right? And we will have a cadence of collaborations and an opportunity to use the HEYDUDE brand in that fashion over time. That will take a little time to work out. But we think there's lots of opportunity to do that. So the broad spectrum of our kind of marketing playbook and the way we can engage with consumers, we think is extremely applicable and you're probably already seeing us starting to utilize that to promote the HEYDUDE brand. Sam Poser: I got two more. The growth of either brand, vis-à-vis store expansion versus breadth and depth of product within existing distribution, can you give us some color? I know the regional differences in this, but could you give us some color on that? I'll just give you my last two. One, I heard there's new HEYDUDE stores opened down South somewhere and I wonder what your plans are there? And then, Anne, I want you to answer Jon's question. Is 55% a good number to use for Q4 gross margin? Andrew Rees: All right. So there's a lot there. I think that was three actually, Sam. So let me just try. So I think the core question you're asking is about sort of growth in wholesale distribution, doors versus penetration. For Crocs, what I would say is, look, we continue to look for sensible incremental doors, but we're in a lot of places, and that applies to the U.S. and a lot of our international market. But if there is a new incremental channel we think makes sense and allows us to reach our consumer groups, we will absolutely take it on. So the majority of Crocs growth is going to be more driven by share a shelf, so more shelf space and faster sell through. For HEYDUDE, in the last six months since we've owned it, we've actually expanded distribution quite a lot already. But there is clearly more to come in '23 and beyond, and there is international on top of that plus is also share a shelf. Like the places where we've expanded distribution, we really have minimal shelf presence and we envisage a lot greater shelf presence for the brand in the future. So it's both. The HEYDUDE store that we opened, yes, we opened two small clearance stores. And they are simply a vehicle to help release some of the aged inventory in the warehouses we've taken over the brand that's clearly from aged inventory and we're looking to try and clear that out in a sensible fashion. Very much aware that the liquidation channels for the footwear industry are essentially full at this stage. So they're clearance stores, they're not a precursor to a store strategy for HEYDUDE at this stage, that is still in the works. And then over to Anne for gross margin. Anne Mehlman: All right. Thanks, Sam, and good morning. With gross margins for Q4, we're not trying to be coy about not guiding. We're trying to make sure that we have room in order to perform and do what we need to do for the holiday season. We've talked a lot about we will participate and keep our share of wallet. We think that's really important, especially when the consumer is shopping during holiday. But we do feel like we're confident and being able to hit our guidance for the year, and we feel like we've actually increased our operating margin guide to approximately 27% for the year, which implies operating margins for Q4 of approximately 21% to 23%. So within there, you can get a range of gross margin guides. And that leaves us enough flexibility to participate in whatever promotion or environment that we think is appropriate. Sam Poser: Just one last one for you, Anne, on a follow up to that. In 2019, you had about a 400 basis point gap between the Q3 gross margins and the Q4 gross margins being lower. If we look back at these historical differences between the quarters, is that accurate or things just changed so much it's very hard to tell given that in the last two years that's been much tighter than that? Anne Mehlman: Yes, I think it's a really hard read to make. Sam, to your point, I think 2019 was a really long time ago. And the brand is in a much different place, including our product line and the mix of products that we sell. I don't think that's necessarily a key indicator of performance and how we should look at seasonality going forward. Sam Poser: All right. Thanks very much and continued success. Anne Mehlman: Thanks, Sam. Andrew Rees: Thank you, Sam. Operator: Thank you. The next question comes from Laura Champine with Loop Capital Markets. Laura Champine: Hi. Thanks for taking my question. I was really impressed with the growth in APAC and EMEA during the quarter. I'm hoping you can talk a little bit more to the drivers of that. And also when we can expect international growth to become a meaningful part of the HEYDUDE story? Andrew Rees: Thank you, Laura. Yes, we were really thrilled about the international growth as well. Obviously, as you know from a long range plan perspective, particularly APAC growth is a very important driver of that long range plan. So the drivers were pretty broad based that really start with brand. We saw continued strengthening of the brand and brand perception in all of those major markets. Our own internal brand studies show really good trajectory. And if you kind of look externally, if you follow kind of Google Trends and that kind of stuff by market, you can see that from an external perspective. So the brand is in really great shape and continuing to strengthen. And then I think very specifically, if you remember through the pandemic, we really kept our distributors very lean on inventory. And they're starting to build their inventories again, seeing strong growth and anticipating strong growth. So distributors were important. But we also saw strong growth from major wholesale partners and strong digital growth. So it's really very broad based both across Asia and across EMEA. I think we also called out in our prepared remarks, despite COVID lockdowns and a very difficult environment to operate in China, we continue to see green shoots in the China market, and in fact have 30% plus growth in Q3 in that market of a small base. And then from a HEYDUDE perspective in terms of international, we're going to sort of put our toe in the water next year with international. We think it's an important part of the long-term growth trajectory for HEYDUDE. But we're going to start with some presence in Europe. We're going to focus on really two major countries, the UK and Germany. Those will be direct markets where we'll go direct to two major brick and mortar wholesalers. And we will also start a number of major distributors out of our kind of European headquarters. So that's really our toe in the water for international. We've been preparing the groundwork doing some research, et cetera. We're very optimistic about that. But we want to make sure that we set the brand up for success. And we do that in a very disciplined and sequential fashion. Laura Champine: Got it. Given that a somewhat significant portion of the growth of the Crocs brand specifically came from distributors, and my understanding is that's much lower margin business, how much did the channel shift negatively impact your gross margin in Q3? Anne Mehlman: Yes, that's a great question, Laura. We did see strong distributor growth. But we also saw strong direct market growth. And our direct to consumer growth was very, very strong. So actually, the mix shift was pretty flat overall, just because direct to consumer was so strong in the quarter. Laura Champine: Awesome. Thank you. Anne Mehlman: Thank you. Operator: Thank you. And the next question comes from Jim Duffy with Stifel. Jim Duffy: Thank you. Good morning. Thanks for taking my questions. A quick question on the HEYDUDE guide, then a couple of questions on average selling prices. With respect to HEYDUDE, results very strong in the third quarter, clearly good momentum. I was surprised you didn't increase the guide for the HEYDUDE brand. Is that your typical conservatism, other product inventory flow challenges, or is it seasonality that we're seeing in the implied fourth quarter guide? Andrew Rees: Yes, I think a couple of things I'd say about that, Jim. I think one of the things we did call out as we look into next year, when we initially bought the brand, we wanted to make sure that everybody understood. This was a scale business. And we said, look, the brand we think could be more than $1 billion by 2024, when in fact it's sort of pretty obvious that we will achieve that next year. So we'll achieve that kind of $1 billion mark by 2023. And I think if you look across sort of footwear brands, historically, it'd be one of the faster brands in terms of time from kind of zero to $1 billion. So it's obviously a very high growth brand. As we look specifically at the fourth quarter, look, we've never owned this business through the fourth quarter before. We can look at the historical performance, but a lot is different from how it was back then. So we believe it's just sensible to be prudent, I would say, versus conservative. And we'll see how the brand performs through the fourth quarter. We don't have great intelligence. And obviously, it's a bit of a different consumer shopping environment. So I think we're just being prudent in terms of how we manage it. And I think the third thing that I call out is we are a little bit infrastructure constrained from a HEYDUDE perspective. Their warehouse and facilities that we bought or took over in the Las Vegas area are very small. We've done our best to expand them in the short term. But there will be restricted in terms of how much we can grow the business based on that infrastructure. But we have signed a lease for a substantively bigger facility, which will also be in the Las Vegas area, and that will open likely in the fourth quarter of next year. So we've also just got to make sure we kind of manage the business within the constraints that we have. Jim Duffy: Thank you. And then, Andy, I get a lot of questions around customer overlap between Crocs and HEYDUDE from your DTC data files. Can you share what you see in terms of Crocs and HEYDUDE brand customer overlap? Andrew Rees: Yes. I think I talked a little bit about this maybe last quarter. As we look at -- if you look at the HEYDUDE consumer, they clearly have Crocs in their closet, right? So there is definitely a customer overlap. But they are buying the shoes for a different purpose, right? They see the wearing occasions as distinct. So we don't today see a lot of tradeoff between the brands and consumer purchasing. But the customers do own -- the HEYDUDE customers do own Crocs. They have a higher share of their closet than the average consumer. As we look at where we think HEYDUDE is taking share from, because obviously it's taking a lot of share in the marketplace, there are discrete brands that we can see that are clearly losing share. And then we also think that there is a little bit kind of in lower end athletic when you look at the $60 price point for sort of an athletic shoe, which is really just a casual shoe from the consumers' perspective, we think we're taking share of that. So yes, there is overlap but the consumer is purchasing for different wearing occasions. Jim Duffy: Okay. And then last one, if I may, thinking about average selling prices. First, can you give us a simplified or tidy way to think about the timing and amount of price increases in international markets? And then related to average selling prices, maybe speak to key product drivers looking into spring 2023 and the expected product mix influence to ASP? Anne Mehlman: Yes. Hi, Jim. So within the quarter, our ASPs were down and that was basically currency, right, with the majority of that decrease. We also talked about in prepared remarks that North America promotions were up, forcing down ASPs a little bit in the U.S., and that was offset by overseas markets. And that was price increases that we've taken previously as well as just continue to pull back in discounts, especially in Asia, as we see the brand really gained traction there similar to what we saw in North America a few years ago. I think those dynamics are -- we don't have any large price increases that we've announced from a Crocs standpoint. So I would say, right now we look at pricing market, we try to understand where the consumer is going. But overall, we feel like we offer a really compelling value both domestically and internationally at the price points we're at. And then from a mix perspective, I'll let Andrew talk about that and what he anticipates for next year. Andrew Rees: Yes. I think there's probably puts and takes hopefully netting to essentially flat, right? So we are introducing a range of products that are at a higher price point. We've got a number of clogs that are higher price point. We recently introduced the Echo, which is performing extremely well in specialty channels and also on our DTC channels. And that's at a higher price point. But also as we increase sandal penetration, that's at a slightly lower price point. So I think there's puts and takes and we feel like that kind of puts us in a good position. Jim Duffy: Thank you. Operator: Thank you. And the next question comes from Mitch Kummetz with Seaport. Mitch Kummetz: Hi. Thanks for taking my questions. On the margins, Anne, I know you don't really want to commit to your gross margin for Q4. But I guess what jumps out at me is the 21% to 23% op margin, that's down quite a bit from what it's been trending through the first part of the year, also on a year-over-year basis is expected to be down a lot more. So if gross margin -- let me ask it this way. Is there anything on the SG&A side that we should be thinking about less leverage, more spending that would create such a big difference in the op margin? Anne Mehlman: Yes, I think it is better to look at full year and long term. Our full year rate is far and away best-in-class adjusted 27. We're really pleased with that. And our long-term rate is still 26 plus. So I wouldn't get too wrapped up in one quarter's dynamic. And I think we're really confident that we're going to continue to take share in Q4 and deliver those 26% plus long-term operating margins. Mitch Kummetz: Okay. And then just a couple of quick questions on HEYDUDE. I'd back into 233 million, 273 million for the fourth quarter, and I appreciate that this is your first Q4 owning the business. But I am curious. I know that Q3 was up 87%. That implied range for Q4. Do you know how much that is up year-over-year versus pro forma Q4 last year? Anne Mehlman: Yes, it definitely decelerates. I want to say offhand, it's between 20% and 30% around those ranges from a pro forma perspective. But I will just point out, as Andrew mentioned, especially with holiday, that's a very big direct to consumer, right, where we sell directly to the consumer. And as we mentioned, we have logistics constraints with our DC. So we announced that we're opening up a new distribution center in Las Vegas, but that won't be ready until Q3 next year. So we are fighting kind of through logistics as well for Q4. Mitch Kummetz: Okay. And then lastly on HEYDUDE, Andrew, could you talk a bit about the difference in performance men's versus women's? I don't know if you're seeing much difference in how that's doing? And also kids, I talked to some retailers that seemed to be adding kids later in the year that didn't already have it. So could you talk a little bit how that's developing? Andrew Rees: I couldn't get the last part of your question, Mitch. You said, you talked to some retailers -- Mitch Kummetz: That seemed to be adding kids in the back half of this year or for holiday that didn't seem to have it before. So it feels to me like maybe that's a newer business on HEYDUDE. Could you talk a little bit about that development? Andrew Rees: Yes. So look, we're learning a tremendous amount about this brand as we go along, right? We are seeing probably greatest strength on the men's side of the business through the summer. We've seen good performance on the women's side of the business. But we've also seen a couple of soft spots [indiscernible] very clearly what they were caused by and we think it's essentially around product and some of the textiles and some of the product that go to market. We think the brand has tremendous resonance with women, but we need to kind of enhance the product range there a little bit. Our vision is that the HEYDUDE brand will continue to be men's, women's and kids brand. And we will be merchandizing and generating product to achieve that. But definitely I think historically, we've seen men's business perform a little bit better than women's. Kids has always been a good part of the business. But yes, we are expanding distribution to some key retailers and adding kids to the portfolio. So you've seen that and will continue to see that. Mitch Kummetz: Great. All right. Thanks. Good luck. Andrew Rees: Thank you. Operator: Thank you. And this concludes the question-and-answer session. Now I'd like to turn the floor to management for any closing comments. Andrew Rees: I'd just like to thank everybody for joining us on the call today and their continued interest in our two incredible brands. So thank you. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may not disconnect your lines.

Operator: Welcome to the Crocs Incorporated Second 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. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Corinne Lin, Vice President of Corporate Finance. Please go ahead. Corinne Lin: Good morning, everyone and thank you for joining us today for the Crocs second quarter 2022 earnings call. Earlier this morning, we announced our latest quarterly results and a copy of the press release may be found on our website at Crocs.com. We would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the Safe Harbor provisions of the Federal Securities Laws. These statements include, but are not limited to, statements regarding the acquisition of HEYDUDE and the benefits thereof, Crocs’ strategy, plans, objectives, expectations, financials or otherwise and intentions; future financial results and growth potential; anticipated product portfolio, our ability to create and deliver shareholder value and statements regarding potential impacts to our business related to the COVID-19 pandemic. 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. Crocs is not obligated to update these Forward-Looking Statements to reflect the impact of future events, except as required by applicable law. We caution you that all Forward-Looking Statements are subject to risks and uncertainties described in the Risk Factors section of our annual report on Form 10-K and our subsequent filings with the SEC. Accordingly, actual results could differ materially from those described on this call. Please refer to Crocs annual report on Form 10-K as well as other documents filed with the SEC for more information relating to these risk factors. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, Chief Executive Officer; and Anne Mehlman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I will turn the call over to Andrew. Andrew Rees: Thank you, Cori and good morning, everyone. I’m pleased with our very strong second quarter results and the strength of our brands as we continue to navigate a dynamic consumer environment. Both of our brands are incredibly well positioned relative to the core consumer needs of comfort and value. We are very confident that we will continue to gain significant market share, resulting in industry leading growth, profitability, and cash flow. I want to also thank all of our teams across the world for all of their hard work as they respond to the many opportunities in front of us. Looking at the second quarter of 2022, Anne will review our financial results in more detail shortly. But here are a few highlights. Consolidated revenues of 965 million, growing 56% on a constant currency basis. The Crocs Brand had another great quarter growing 19% constant currency, negatively impacted by Russia and the China COVID lockdown, which offset approximately three percentage points of growth. HEYDUDE exceeded expectations generating revenues of 232 million an impressive growth almost doubling compared to last year. In July, we launched a new brand campaign for HEYDUDE, that we think is compelling and introduced as an updated brand identity. Adjusted operating margin on a consolidated basis remains best in class at 30%, despite currency, inflation and supply headwinds. Adjusted diluted earnings per share increased $1.01 to $3.24. Finally, we are very proud that Crocs’ recently earned a number three spot on [Forbes] (Ph) list of America’s best employers for women. We are particularly pleased with our Q2 results in the context of the overall market. While market data is not as complete and timely as we would like, based on a variety of sources, we believe that the footwear market in the U.S. track in the first half of 2022, and may have done a little better globally, but we believe it was a best class. In the context of a flat to down market during the first half constant currency revenues for the Crocs Brand grew by 20%, and consolidated revenues grew by 52% driven by the acquisition of HEYDUDE. As you can see, both Crocs Inc and the Crocs Brand are gaining significant market share. There are many macroeconomic and external headwinds, including currency, inflation, rising interest rates, weakening consumer sentiment in the U.S. and Europe, the war in Ukraine and China’s COVID strategy making this future very difficult to predict. That said, we believe great brands need to continue to invest in innovation and engage their consumers, and great companies must plan prudently and become more agile. In the light of the current environment, we are very focused on managing the business prudently in order to maintain high levels of profitability and strong cash flow. During our call today, we will outline how Crocs Inc will continue to gain market share both as a result of the growth momentum of HEYDUDE and the growing consumer demand globally for the Crocs Brand. HEYDUDE is one of the hottest brands in the U.S. footwear market today, because of the consumer love of the brand and its products. We are investing rapidly in the capabilities that will allow us to sustain the growth potential of the brand, while we are not yet ready to outline the longer term potential, we believe it is significant and we will easily achieve a short term goal of a billion dollars in sales. Our strategy utilizes the proven playbook of investing in great product and digital and social marketing combined with a disciplined go-to-market and distribution strategy. This will result in robust U.S. growth from expanding wholesale distribution, as well as strong digital growth. We are currently planning international growth beginning in 2023, and while small, initially we are confident in the growth potential given initial tests and the versatility of the Wally and Wendy [Indiscernible]. The integration of HEYDUDE is going well, including staffing many critical positions, as well as completing our brand work to help solidify the brand DNA and the consumer passion for the brand. We have recently unveiled and updated brand identity and positioning and will invest significantly in digital marketing through the back half of the year. The growth of the HEYDUDE brand will continue to be very profitable. Thanks to the simplicity of the product, the ability to drive supply chain efficiencies and the SG&A leverage we gain from shared services across both brands. Turning to the Crocs Brand. We will continue to gain market share because of our comfort positioning, molded DNA, strong marketing and product innovation pipeline. We have developed deep connections with our consumers and they love our brand as evidenced by our own brand metrics and which continue to be very strong, as well as leading industry studies. When we combine the brand awareness and relevance with our very democratic price point, we believe that the brand is very well positioned to thrive when the consumer is looking for comfort and value. In addition, Crocs has significant penetration opportunities in key international markets, hence I will focus on Asia. Our proven playbook is driving growth in South Korea, India, and Southeast Asia. And we are very encouraged by the green shoots we seeing in China. We will continue to create brand pull with our powerful social and digital marketing and a pipeline of new products. We had numerous successful collaborations and licenses, raging from a second drop of Salehe Bembury to Cinnamon Toast Crunch Cereal, to MCM in China and Lazy Oaf in Europe. One of our latest marketing innovations was our first ever virtual store experience in the Metaverse, combining commerce and gamification with a Suki collaboration. From a product perspective, we expanded our sandal portfolio with a longer awaited Crush Sandal, debuted in the U.S. and top Asian markets. The Crush was recently featured in Vogue in an article Eentitled these Ugly-Chic Sandals have gotten the most compliments this summer. Innovations such as the Crush Sandal and dedicated marketing campaigns, such as summer of Crocs that featured five new sandal introductions are just two of the examples of how we are driving growth in the $30 billion sandal market. We were disappointed with our year-to-date sandal revenue decline of 13% constant currency. As we over edited the line to maximize throughput at the factories. And we had delays in newness and which was also compounded by a poor sandal season in the U.S. Year-to-date, we do however see strong double-digit growth in our Icon Sandal franchise, and we expect sandals to improve in the back half with more newness and additional marketing. As a digital first company, we also continue to engage our consumers in their preferred channel. In Q2, Crocs Brand digital sales grew by 21% constant currency with balanced growth from new and repeat customers. All of these factors give us confidence in our ability for the Crocs Brand to continue to gain market share. In terms of managing the company prudently, we must remain agile to be responsive in a shifting consumer landscape. Let me outline some of those key steps. With uncertainty around the future macroeconomic environment and consumer behavior, we are planning for lower growth in the Crocs Brand in the short-term. Our assumption is a consumer confidence in the U.S. and key European markets will continue to soften as the year progresses, as higher interest rates and high food and energy inflation slow consumption. For 2022, we expect Crocs Brand revenues to grow approximately 14% to 17% constant currency or 10% to 13%, including the negative impact of currency of approximately 400 basis points. This will allow us to prudently plan and manage our inventory and investments. Following strong HEYDUDE performance in H1, we now expect 2022 revenues of between $850 million and $890 million, which is nearly a billion dollars on a pro forma basis. We will continue to leverage SG&A and keep inventories lean. This will enable us to maintain strong marketing investment and constant consumer engagement, and will position us to continue our track record of delivering industry leading profitability and cash flow generation. In summary, while we understand that consumer environment is very uncertain right now, Crocs owns two incredible brands that are perfectly positioned for this time, and we are managing the company to take significant market share. And we will now review our second quarter financial results in more detail. Anne Mehlman: Thank you, Andrew and good morning, everyone. I will begin with the short recap of our second quarter results. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. For a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts please refer to our press release. As you have already heard, both brands performed well during the second quarter, amid many headwinds, we delivered strong revenue growth of 19.4% within the Crocs Brand taking our first half revenue growth to 20.3%. HEYDUDE revenues continue to exceed our expectations and almost doubled from last year. Gross margins remain strong, particularly for the Crocs Brand despite freight and FX headwinds. While consolidated SG&A leverage led to another quarter of industry leading adjusted operating margins of 30.1% and strong adjusted EPS growth. Second quarter consolidated revenues were $965 million representing 55.6% growth over last year. The Crocs Brand had a record breaking quarter with revenues at an all time high of $732 million up 19.4% on top of 88.4% growth last year. The Crocs Brand growth rate was negatively impacted by currency of 510 basis points in the quarter. HEYDUDE revenues of $232 million also a record were up 96%. During the second quarter, the Crocs Brand sold 32.4 million pairs of shoes, an increase of 11.4% over Q2 2021. The Crocs Brand average selling price during Q2 was $22.39, a year-over-year increase of 2.5% driven primarily by higher pricing and product mix offset in part by channel mix and currency. Let’s review a few Crocs Brand highlights by region. In North America, second quarter revenues increased 7.8% to $423 million on top of over 132.3% growth last year. This growth was driven by digital channels, including our own eCommerce, where we saw strong growth in traffic, evidencing strong consumer demand for the Crocs Brand in North America. For the first half North America revenues grew 12.5%, admits an approximately 3% decline in the U.S. wholesale footwear market according to NTD. The Crocs Brand in Asia generated second quarter revenues of $149 million or 27.6% growth. Strength in the region was led by India and Southeast Asia distributors with revenues more than doubling versus last year. In Southeast Asia, distributor partners benefited from COVID reopening and the partial return of tourism to the region. This momentum was partially offset by softness in China due to COVID lockdowns. H1 results for Asia have been consistently strong for two-years in a row posting 25.5% growth this year on top of 24.3% growth last year. Crocs Brand revenues for EMEALA grew 48.4% to $160 million, growth was particularly strong in the UK, Germany and with our distributor partners. Similar to Asia distributors are seeing strong demand and sell through. Looking at the first half EMEALA grew 38% on top of 60% for the first half of last year. Turning to HEYDUDE, revenues exceeded expectations contributing $232 million and growing 96% from pro forma 2021 revenues. We are excited to see the success of the brand during our first full quarter of ownership and expect the new branding and implementation of the Crocs playbook to fuel future growth. As a reminder, we will continue providing growth margin visibility by brand for the remainder of 2022. Beginning in 2023, gross margin will be reported on a consolidated basis only. Consolidated adjusted gross margins for the second quarter were down 660 basis points from last year to 55.2% due to increased air freight and logistics costs, the addition of HEYDUDE, channel mix and currency. Adjusted gross margin, excludes a $34 million inventory write up in connection with the HEYDUDE acquisition. At a brand level adjusted gross margin for the Crocs Brand was 57.9% down 390 basis points driven primarily by freight headwinds of 445 basis points, including a 340 basis point impact of incremental air freight and 105 basis points of currency, somewhat offset by increased prices and product mix. HEYDUDE, adjusted gross margin was 47.1%. HEYDUDE, experienced higher inbound freight rates versus prior year and we have moved quickly to leverage Crocs inbound rate contracts, which we expect to result in gross margin improvement in the back half of the year. During the second quarter of 2022, we were able to leverage consolidated adjusted SG&A 610 basis points improving to 25.1% of revenues versus 31.2% last year. Non-recurring SG&A expenses for second quarter were $8 million including 6 million of HEYDUDE integration costs. The 610 basis points of leverage was achieved while investing in additional $42 million versus prior year, primarily in marketing and talent. To support the long-term growth of both brands, we plan to continue leveraging SG&A, while maintaining investment in the right areas to stay connected to our consumers. Our flexible SG&A base, coupled with our ability to leverage shared services of supply chain, IT, finance, HR and legal across the brands allows us to remain agile. Our second quarter consolidated adjusted operating income of $291 million increased $94 million or 47.9% from last year, including $76 million attributable to HEYDUDE. Adjusted operating margin declined slightly to 30.1% from 30.7% last year, as gross margin headwinds were nearly offset by SG&A leverage. Adjusted operating margins would have been favorable to prior year, excluding currency. Our second quarter non-GAAP diluted earnings per share increase 45.3% to $3.24. Our liquidity position remains strong, as we ended the second quarter with $187 million of cash and cash equivalence and $470 million of borrowing capacity on a revolving credit facility. Given strong cash flow generation in the second quarter, we repaid $110 million of debt during the quarter, reducing borrowing to $2.77 billion and net leverage to 2.6 times at the end of Q2. Our inventory balance at June 30, 2022 was $502 million, including $167 million for HEYDUDE. Similar to the industry, our in transit levels remain elevated as a result of longer transit times. While inventories were up $125 million in the Crocs Brand bear-in-mind, that last year at this time, inventories were exceptionally lean. We also see elevated inventories in the U.S. due to the flowing of our U.S. growth rate, relative to what we anticipated. Having traditionally targeted over a four times inventory turn, we are slightly below that today. However, excluding in transit inventory turns exceeded six times for both brands. Turning to the future. I would like to share our current outlook for 2022 and the third quarter. All numbers will be on a reported basis unless otherwise stated. Since our prior guidance, we have seen a strengthening U.S. dollar, ongoing shutdowns in China, and we are also anticipating a continued weakening in consumer confidence. As such, we are planning our own DTC more cautiously and are helping manage our inventory in our wholesale partners more tightly. Given those dynamics for 2022, we are lowering the Crocs Brand revenue guidance to be approximately $2.6 billion representing year-over-year growth of between 14% and 17% on a constant currency basis and 10% and 13% on a reported basis. We expect to grow in all regions with the strongest growth to occur in Amelia and Asia, as the regions continue to experience high consumer demand and COVID reopening. With respect to HEYDUDE, we continue to gain visibility and confidence in our supply chain. Thus, we are raising our expectations for the full-year and now expect HEYDUDE revenues to be between $850 million and $890 million on a reported basis, implying $940 million to $980 million on a pro forma basis. This translates to consolidated revenues growing 47% to 52% to approximately $3.4 billion to $3.5 billion. We continue to expect that we will have best-in-class adjusted operating margins of approximately 26% to 27% for the full-year, implying adjusted operating income of approximately $880 million to $945 million. The net effect of the revenue revisions is that expected adjusted diluted earnings per share will be between approximately $9.50 to $10.30. For the third quarter of 2022, we expect consolidated revenues to be between $915 million and $955 million, representing 46% to 53% growth from prior year. We expect Crocs Brand revenues to grow approximately 15% to 18% on a constant currency basis or 9% to 12%, including the negative impact of currency of 600 basis points. We expect HEYDUDE revenues to be approximately $235 million to $255 million. We expect adjusted operating margin to be between approximately 25% and 26%. As we manage through the shifting operating environment, our commitment to quickly pay down our debt remains unchanged, and we expect to be below two times growth leverage in the next 12-months, enabling us to repurchase shares should we choose to do so. In summary, as we navigate the mini headwinds, we plan to actively take market share, drive highly profitable growth and reduce leverage. At this time, I will turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. Through the remainder of 2022, the strength of our brands continues to position us perfectly to take significant market share during these uncertain times. Our thoughtful management will drive strong profitability and cash flow and create tremendous shareholder value over the long-term. Operator, please open the call for questions. Operator: Thank you. [Operator Instructions] Our first question comes from Tom Nikic from Wedbush Securities. Please go ahead. Tom Nikic: Hey good morning. Thanks for taking my question. I just wanted drill down a little bit on the slowdown that you are expecting for Crocs Brand. I mean, sounds like a pretty significant step down in Q4 kind of backing into something more like a mid-single digit growth to high single digit and constant FX. I just want to make sure I kind understand what is happening here. Like, is it a combination of DTC and wholesale? Where you are assuming more conservative assumptions? Is it something that you have been heard from the wholesale partners, I just kind of want to make sure I understand what exactly is happening in the North American market? Andrew Rees: Yes. Let me kind of give the sort of high-level Tom, and then I will hand it over to Anne more specifics. I think the backdrop, as we talked about a little bit in our prepared remarks is we are just anticipating that the consumer continues to soften through the remainder of the year. As we look at the consumer over the past several months, we have definitely seen very concrete signs of this in softening. I think, we are very optimistic about back-to-school and feel good about that. But we anticipate as the drag of high interest rates, high inflation and uncertainty continues to impact the consumer that will soften as the years are gone. So we are trying to be more prudent and build that into our expectations, by building that into our expectations, we can manage our inventory, we can manage our costs appropriately so that we kind of orientate towards our number one priority of maintaining very high levels of profitability and strong cash flow. And Anne can give you kind of a little bit more cover on that as well. Anne Mehlman: Yes. I think, that is exactly right. When we were thinking about the full-year, we have obviously absorbed several headwinds, so about a $100 million of currency pressure, which is about 440 basis points. The shutdowns in China and Russia for the full-year accounts for about 180 basis points. So we tried to incorporate all of that into our full-year from a Crocs perspective, as well as just readjusting where we think the consumer could go for Q4. We wanted to make sure that we planned prudently, so that we could also plan our inventory and cost structure around that. Andrew Rees: Yes. And maybe I will come back on the flip side we see very strong growth internationally. We don’t see some of those same pressures in some of our international markets. And so we are excited about continued growth internationally. And then obviously, we have only owned HEYDUDE for a relatively short period of time now, but that continues to perform extremely well above our expectations. And as we look forward, we - as we talked about, we are getting a little bit more confidence in security or supply that. So we think there is more upside deck too. Tom Nikic: If I could just quick follow-up, you made a couple of references to managing cost structure and despite a more conservative top-line, you maintain the margin rate outlook for the year. Can you just kind of talk a little bit about how you are able to kind of maintain the margin rate for the year despite some of these kind of mounting top-line? Anne Mehlman: Yes, I think, we have a pretty flexible cost structure and we have adjusted investments to be in line with where we think the top-line is growing, and we are obviously still growing our business strong double-digits. So, it is easy to kind of pull back a little bit and still invest in marketing, which we are still planning on doing at the same rate as we were previously, which is for the Crocs Brand approximately 8% to the year. So that allows us to kind of take advantage of that. Also gross margins underlying for the Crocs Brand remain strong as well. We have air freight tapering off in the back half of the year. We do have some cost pressures coming in from a gross margin perspective, but we do lose the air freight headwind in the back half of the year, as we spent $75 million of that air freight investment program that is concluding in Q3 and we don’t have - I think we only have about $15 million left. Andrew Rees: And just as a point of strategy, we believe that we maintain - we create the most future shareholder value by maintaining profitability. So we are not anxious to sacrifice profitability to drive less profitable growth. Tom Nikic: Understood. Thanks very much and best of luck for the remainder of the year. Operator: The next question comes from Jonathan Komp from Baird. Please go ahead. Jonathan Komp: Yes, hi thank you. Maybe just a follow-up, as we think about the Crocs progression throughout the year, could you maybe share a little more specifically on how you are planning especially North America for the fourth quarter? And then as you think of the Crocs Brand holding on to the gains from the last couple of years, especially in the Americas, is your confidence in that outlook changed at all? I know you are still projecting a $5 billion long-term target. So I just want hear how you are thinking about - any differently about the Crocs Brand. Andrew Rees: Yes. Great question John. So look, the Crocs Brand is absolutely holding onto the gains that it achieved over the last couple of years. In the first half of the year, the Crocs Brand grew about 20% globally. It grew in the U.S. marketplace, and the market was flat to down. So, we are gaining share, we are continuing to gain share. And I think the guidance that we are providing we anticipate will also be strong share gain for the Crocs Brand. So I think, we have definitely holding onto the gains that we have been successful in acquiring for the last couple of years. As we look at the Crocs Brand, I would say all of the brand metrics remain extremely strong. So our own internal brand studies give us great confidence that the brand continues to strengthen over what it has been. You can see that in organic search. And we also hear that from our wholesale partners, as we discuss the brand and we discuss future strategies and how we are going to continue to gain share shelf in our major wholesale partners, both here in the U.S. and in key international markets. DTC, if we look at DTC in the first half, particularly in Americas, I know people are focused on the Americas that grew 10% on a constant currency basis. So again, significantly better than the market and growing over last year, which was an absolute record for the Crocs Brand. I would say we continue to see very strong demand for the core cloud that is driving a big part of our revenue growth and that is particularly here in the U.S. and also internationally. So I think, everything that we are seeing really supports long-term thesis, and even given I think what is a softer consumer environment today and we are anticipating over the near-term. We still have great confidence in our ability to hit the $5 billion Crocs Brand growth target that we put out there by 2026. Anne Mehlman: If I could just add to the full-year, we did guide that all of the regions would grow. So all of our Crocs regions will grow for the full-year. Jonathan Komp: Okay. And just to clarify and that is full-year, not specifically to the fourth quarter which -. Anne Mehlman: Yes. We didn’t guide fourth quarter specifically. Jonathan Komp: Okay. Thank you. And then maybe, Andrew. One follow-up on HEYDUDE, you obviously, the message has changed pretty dramatically, even though you have only had it for one full quarter here with respect to the longer term outlook. So I want to maybe just ask more specifically what you are seeing early on for that brand to give you much more confidence in the potential and some of the early relationships you have engaged from wholesale partners, what are they seeing and what type of feedback are you getting? Thanks. Andrew Rees: Yes. So I think maybe kind of - I will try and start at the top. So as we did our consumer research in due diligence, and as we look, as we speak more-and-more to the consumer over the last several months, once we have owned the brand, we see like a tremendous brand love from the consumers. The consumers absolutely love the brand. They are passionate about it. They talk to everybody about it. The viral component of the brand communication is extraordinary. And we think that is due to what is a relatively unique product. It is lightweight, it is comfortable, it is easy on and off. It comes in hundreds, if not thousands of different materials and flavors, so they can buy multiple pairs. So there is a tremendous brand and consumer connectivity. That has not been created by brilliant marketing in the past. It is just the product and then finding and loving the product. And so as we look at our plans, I think we were cautious initially, because we were taking over a founder led very entrepreneurial company. It wasn’t really clear to us the degree to which we could get supply in the near-term. I would say that has achieved. There is gone a lot better than we thought. And so we have been able to shore up their supply, manage the supply, and really satisfy a lot of short-term demand. So that was kind of our cautiousness in the short-term. As we look to the longer term and specifically receptivity from sort of major wholesale partners, we are seeing I would say exuberant enthusiasm from wholesale partners that have taken on the brand. We have shipped a substantive amount of product to a number of key partners so that they could be in business for back to school. And I think the comments that we are hearing are things along the line, it is the standout brought back to school. It’s really performing above almost any other brand we have in our portfolio. So we are seeing very, very strong performance from that, which obviously then gives us confidence to plan, share a shelf in those partners and to plan our growth for the future. We are not yet ready to talk about what we think that looks like, it is very early days. But I think, you can be confident that we will follow - the playbook that we followed Crocs. We will build a strong and thoughtful domestic business here in the U.S. And we think we are pretty confident. The brand has a lot of likes internationally as well. So, we are pretty excited. Jonathan Komp: Great. Thanks again. Operator: The next question comes from Abbie Zvejnieks from Piper Sandler. Please go ahead. Abbie Zvejnieks: Thank you for taking the question just on inventory. Can you talk about the composition of the inventory and then how we should kind think about the promotional cadence and the back half and how if that will have an impact on margin at all. And then are there any differences in product availability between Crocs and HEYDUDE? Thank you. Anne Mehlman: I will talk about the first part and then I will let Andrew talk about product availability. So, inventories were up in the Crocs Brand, but bear in mind that, last year at this time, our inventories were exceptionally lean, especially in the Americas where we see most of the increases today. So if you exclude the HEYDUDE inventory, Crocs inventory was up about $125 million, about 60%, about 30% of the increase is due to in transit. And then we have about another 30% due to inflation sitting in inventory resulting from that is from thus far the higher freight costs, the fob and duties that are all sitting in that inventory. So while it is a little bit heavy, we do think that we will get back to four terms and we are working really hard to do that, including in transit. If you exclude in transit now, we are still turning above six times. And then the remainder of the inventory of increases really related to HEYDUDE and that turns very quickly and that is very efficient, as that mostly wholesale, a lot of it is pickup and then related to our comp business for HEYDUDE. Andrew Rees: Yes. So, Anne also embedded in question I think was sort of future promotional environment and availability differences between HEYDUDE and Crocs. So let me kind of hit on those. So, look, I think, we have already seen the retail environment, particularly here in the U.S. become more promotional, certainly more promotional than it was last year. I would still love to get back to sort of pre pandemic levels. And as we said on our last call, we think it is important as a democratic brand and both of our brands that democratic, we reach a very broad base of consumers. We, we need to participate in those events and you saw that at 4th of July, et cetera. And as we look through the back half of the year, we will continue that strategy of participating in those key events. In terms of inventory availability, I think we have pretty strong availability on the Crocs side associated with our core products. And as you look across wholesale, e-com, E-tail and our own source, which we are very much in stock and trading strongly on our core product. We are still lacking a little newness, particularly I would say within sandals. So we have a strong pipeline of newness through the back half of this year, as we catch up from the factory closures back end of last year. And I would say, as we look to 2023, we have a record cadence of newness for the Crocs Brand in particular. So we think that is particularly important. On the HEYDUDE side, the key issue for inventory availability is flow through. So we are getting strong shipments from our factories in Asia. And we are investing in our distribution capabilities to provide stronger flow through to our customers here in the U.S. and abroad. Abbie Zvejnieks: Thank you. It is super helpful. Andrew Rees: Thank you. Operator: The next question comes from Sam Poser from Williams Trading. Please go ahead. Sam Poser: Good morning. Thanks for taking my questions. I got a whole pile, so I will start with gross margin. What is the - can you give some color on the gross margin for HEYDUDE in the quarter? And can you tell us sort of what the gross margin expectation is for the balance of the year, or year gross margin expectation are we looking down 600 basis points or somewhere in that world? Anne Mehlman: Yes. So let me start with the adjusted gross margins for the quarter were impacted by the addition of HEYDUDE, which accounted for about 250 basis points of decline for the quarter. So from that they were impacted kind of - HEYDUDE was impacted by two pieces, impacted by heavy wholesale demand in Q2 shifting the channel mix from DTC to wholesale, as well as very high freight rates. So the inventory we were bringing in was the old shipping contracts for HEYDUDE, which was at very high spot rates. We have now shifted them to our Crocs freight rates and that will significantly improve in the back half and into next year as we start landing inventory at our freight rate. So that that is kind of HEYDUDE do piece. We do believe those were an anomaly and that build strength in the back half. And then the remainder from a Crocs standpoint, the underlying margin, if you exclude freight was actually up. So the freight and FX were the biggest pressures on the Croc side. And if you exclude those pieces we were up, and again that includes the air freight associated with the air freight investment we made related to Vietnam. As you remember, that was $75 million. I think, we said 15 to 18, less to spend in Q3. So that implies that back half margins will be higher than first half margins, from a gross margin standpoint. And that would all be incorporated into our 26% to 27% operating margin guide for the full-year. Sam Poser: So could you give us a gross margin percent for the full-year? Anne Mehlman: I think we are just not going to guide that piece because we are already giving operating margin percent and EPS guidance. Sam Poser: Okay. Alright, so secondly, Andrew, you hinted at the fact that the - about newness. And the question is did you have newness issue in clogs as well? Did like the delay of the crush clogs and those platform clogs when the bay went away, did you need more newness there and how quickly is that being corrected if that is a issue? Andrew Rees: Yes. So Sam, good question. So yes, newness has definitely been a problem during the first half of this year. Having said, we did achieve 20% growth in Crocs during the first half of this year. But the cadence of our brand is such that we need to bring more news to the table. I would say it was most poignant in sandals and that was particularly around the fashion sandals. So we lean heavily on our icon sandals, classic slide, the classic flip which were frankly easier to produce. And those have done really well. They are up strong, double digits over prior trading, but we missed the fashion sandals. But yes, we also lack some newness in the cloud arena. I would say the crush, which you highlighted in your question introduced I would say tentatively here in the U.S. over the last couple of months, we don’t have huge amounts of supply. You can see that this crush family is already sold out on e-com, and we are currently introducing into the major Adrian markets is doing extremely well. So that formula of height is working very well. And as we look at the clogs newness, we have new clogs in the back half of this year, and we have a number of significant new clog programs early next. Sam Poser: Okay. And then does that mean the - so in your guidance and this is for both of you, and then I have one other one does. Is the guidance given sort of the macro impact and the improvement of newness coming, is this a discretion is the better part of valor guidance given the macro or, I mean, how much of this is the macro versus supply - timing of product and so and so forth? Andrew Rees: Look, we just think Sam, I think we are very clear in our prepared remarks. We just, we - I would say primarily it is the macro. We believe the consumer environment particularly in the U.S. will soften sequentially as we go through the year. And I think there is lots of evidence and lots of accomplished economists talking about that. And so we think it is prudent to plan for that. If we plan in that way, we can maintain our profitability and our cash flow, which is our primary requirement. We are very confident in the Crocs Brand where the Crocs Brand sits, the fact that we will continue to gain share in that environment. Sam Poser: Thank you. And then lastly, you said that you felt good about - you felt positive about back-to-school. Can you tell us or give us some indication as to what you are seeing for back to school, so far to give you that confidence and any color would be awesome. Andrew Rees: Yes. I’m not going to provide specific metrics, but I think what I would say is, as we look across all of our channels, as we look across e-com, E-tail, our own stores and our wholesale customers, uh, we feel like the consumer is out shopping for back-to-school. And we have also seen that in prior sessions. So the consumer generally prioritizes their children, strongly during a constrained environment. And back-to-school we feel like is off to a good start. Sam Poser: Thanks very much and good luck. Andrew Rees: Thank you. Operator: The next question comes from Jay Sole from UBS. Please go ahead. Jay Sole: Great, thank you so much. Andrew I’m just wondering, you can elaborate a little bit further on your comments about HEYDUDE. Given the brand is turning toward a billion dollars, faster than probably the market expected. And that is sort of like the high bar that you originally said you made the deal. Any thought about bigger picture what this brand could achieve in terms of growth - revenue growth at the same time if you talk about the North America business a little bit, obviously there is a lot of new doors that seems like the brand has entered whether it is like the famous footwear - a family channel type of doors, but how much more new door opportunity is there for HEYDUDE at this point in North America, relative to the number doors you turned right now? Andrew Rees: Yes. So let me take the second bit first. So what I would say is we have tentatively shipped new doors. So, yes, you can see HEYDUDE in places. You haven’t seen it before, whether it be a - as you said, famous footwear rack room shoes, academy, et cetera, some sporting goods, et cetera. We have shipped them what we have available and that is by no means what we consider to be a full assortment or by no means penetrating all of their doors. So, I would say, the door expansion opportunity is very substantive for HEYDUDE, not only the door expansion, but the assortment in those doors and the ability to turn quickly. So I think there is lots of runway there. We are taking orders for spring 2023, and hopefully, we will be able to create much more compelling assortments for our major wholesale customers early in 2023, it is really a little bit hand to mouth today. But I would say, as I said earlier, where we are present the results are very good. They are pleasing to us. And I think the wholesale customers are very pleased. In terms of the longer term, it’s just early days, Jay. As you said, we have achieved or very close to achieving kind of the billion dollars number that we put out there. And really the reason put out there, we just wanted people to understand this is a scale business. This is not a sport business. And we just wanted people to understand that quickly, because clearly when we bought the business, we heard from the analyst and investment community, they didn’t understand what the brand was. And we wanted to understand that this is a scale brand. So clearly, we are just getting started. So I think the scale is much bigger than where it is today. But I think it will be kind well into the next year before - leverage apparently. We have got a lot of planning to do, got a lot of work to do before. We are ready to talk about that. Jay Sole: Got it. And maybe I can ask one more just on the Crocs Brand. In retrospect now, given that you are lapping a quarter, you lapped a quarter in Q2 with fiscal stimulus, it probably drove a lot of growth in your DTC business, how did you see the effect of that on the business in 2021, and then what was the impact here in 2022in Q2 in DTC and sort of, how do you see the business trending in a normalized growth rate? Like what is the outlook for DTC growth for Crocs Brand North America? Anne Mehlman: Yes, I think, let me start on this one, Jay. I think, we actually saw a lot of the stimulus more heavily waited to Q1, into Q1 beginning of Q2. I would say from a stimulus perspective. I think we started to move through that pretty quickly, and I’m really happy with our 10% - over 10% direct-to-consumer performance in Q2 in North America. I will also say we had really good retention rates. Our retention rate was up on our us e-com so also speaks to the strengths of North America and also that wasn’t just stimulus spending coming in from customers, because they came back. So that I would say all leads to the fact that we have a really strong sustainable, direct-to-consumer business in North America. And I don’t think that is just stimulus driven, as I said, I think we lack most of that in Q1. Andrew Rees: Yes. The only things that add two things, Jay, is one we comp up, we talked about comping up in the first half for our North American and DTC business by 10%. So record performance in 2021, driven by stimulus. We grew on that in 2022. So we didn’t shrink we grew. The second thing, I would say one of the bigger impacts that we are seeing is actually return of seasonality. And by this, I mean, I think in 2021, the constraints, the availability constraints were so high, consumers bought when available. And I think we are seeing in 2022 and anticipating in the future. We are going back to more kind of seasonal components. So they will buy a key events where there be promotional events or holidays or travel or vacation. So we are seeing some shifts in the patents of the business, and we are also planning for those to continue to revert to pre pandemic patents. Jay Sole: Got it. Okay, super helpful. Thank you so much. Operator: The next question comes from Jim Chartier from Monness Crespi Hardt. Please go ahead. James Chartier: Good morning. Andrew, kind of reiterated your expectation for your 2026 outlook for Crocs, a big part of that is the sandals business. Wonder if you could talk about what - kind of reinforces your confidence, and that large sandal opportunity, what are you seeing the performance today and then you mentioned a lot of innovation for next year. What is the wholesale reception to that innovation for next year and wholesalers investing behind sandal category for you for next year? Andrew Rees: Thank you Jim. So couple things. One is I would just start the question -. Look, we were disappointed in sound performance during the first half of the year. We have definitely studied it. We feel like we understand what happened and really lack of newness and lack of supply. And some of our key style, channels really hurt us. As we look at the back half of the year, we do see newness accelerating. We do see that accelerating into 2023. We have got very strong plans and so that gives us confidence around reversing that trend of the decline that we saw in the first half. As we look forward, longer-term and kind of more strategically, we also feel like we are seeing what we anticipated in this category, which is when times get tough, other brands are retrenching. So we do see other brands pulling back on their sample programs, pretty substantially, and some shifts in what the consumer is looking for within sandals. And I think this was part of the thesis that we laid out. It is a big category, it is an unimportant category to some of the major players and when times are tough, they are going to de-emphasize it and we feel like we are seeing that. So we feel like there is a newness opportunity, there is a competitive opportunity. And I think the other thing is it wasn’t a strong sandal season in the U.S. this year. Spring was a little slow and coming, and so we kind of saw some overall softness in the category. So we still feel very strongly about our opportunities within the sandal arena. James Chartier: Great. Thank you. Operator: The next question comes from Laura Champine from Loop Capital. Please go ahead. Laura Champine: Thanks for taking my question. It is on the Crocs Brand. I mean, I understand that you are taking guidance for back half growth just on macro. How does that impact your promotional marketing strategy in the back half given that you also have, I think some products introductions you are excited about as well? Andrew Rees: Yes, that is super important. So, we are taking our guidance down to reflect, I think the macroeconomic environment and our desire to position ourselves strongly. We are protecting all of our marketing activity. So you will see Crocs Brand marketing activity accelerate in the back half. We have a record makeup in terms of collaboration schedule. We are protecting all of our dollars and cents that we plan to spend on marketing, both in the U.S. market, but also importantly in our major international markets, including China. So we will continue to spend to support the introduction of all of those new products and to engage our consumers very proactively. Laura Champine: Got it. Thank you. Operator: The next question comes from Jim Duffy from Stifel. Please go ahead. Jim Duffy: Hi good morning. Andrew thanks for mentioning the Crocs North America direct-to-consumer growth 10% currency. Was that a second quarter number or is that for the first half of the year? Anne Mehlman: First half. Jim Duffy: And I’m curious on the digital performance, can you give us the North America direct-to-consumer number for the second quarter? The digital channel has been challenging for many in North America, if you could comment on the Crocs Brand digital performance in the second quarter as well, that would be helpful? Andrew Rees: Yes. I don’t, I think we are not going to be disclosing those specific numbers, Jim, but I can tell you it grew and we are very happy with the performance. Anne Mehlman: Yes. Our overall digital growth for the second quarter for the Crocs Brand was up 21% in constant currency. And for Q2, for the Crocs Brand, we are up 7.5% from a DTC comp perspective. So and that obviously, the biggest kind of piece of that is the U.S. so you have to grow. Jim Duffy: Okay. And then, I’m curious within the digital channel, what you are seeing between new and existing customers, have you seen any fall off in recruitment of new customers or any fall off in contribution from existing customers? And this question is mostly geared toward North America, if you are willing to share. Anne Mehlman: Yes. So from a North America standpoint, we saw actually retention up plus 30% and we also saw acquisition up. So double-digit. So I wouldn’t say that we have seen a follow-up either and prepared remarks. We actually see really nice growth our e-com growth growing because of both of those things. Jim Duffy: Next question, the board does a very nice job of aligning incentives with strategic objectives. We won’t get a view on this until the proxy, but can you give us an idea of some of the key metrics for management compensation in 2022, where the board has you focus? Andrew Rees: Yes. I would say, look, you will see it later, Jim, but our program for incentives and management compensation is very consistent to what it has been in the past. So it is focused on profitability. It’s focused on growth. It is focused very strongly on cash flow, which I think is super important. And it does call out kind of specific growth strategies, whether they be-it digital, whether they be sandal whether they be Asia. But it is very consistent with it is in the past. And we think it works extremely well. It guess the whole the whole team here at Crocs focused on the most important aspects to drive shareholder value. Jim Duffy: Okay. And then last one for me, I just wanted to ask on HEYDUDE, risk been in his chair for a couple of quarters now, can you give us just an update on the vision for positioning of HEYDUDE, both from a branding standpoint and from a merchandising standpoint? Andrew Rees: Yes. So, you have started to see a little bit of that. So in July, we launched a new brand identity, which is starting to get out there. We think that is been - we actually can see that is been extremely well received by the core consumer. And I think it is more consistent with where we want to take the brand. We are also doing some brand advertising for the first time in the brand’s history. And that is actually, early days, but also performing extremely well, we are very happy with that. And, I think, Rick and his team, which we are building out rapidly have started to develop product architecture that will probably be back half of 2023 before you start to see some significant evolution in product architecture. And we will continue to develop consumer messaging and brand advertising that will start to play out earlier in 2023. So we are really happy with how that is going, and I think it will be very, very strong. Jim Duffy: Thank you. Operator: The next questions from Mitch Kummetz from Seaport. Please go ahead. Mitch Kummetz: Thanks for taking question. I guess, I just have a few hopefully as - quickly. I know a year-ago with HEYDUDE there are lot of retailers that relied on product. So do you sense as to how much of the year-over-year growth you are seeing there is kind of filing that pipeline? Is there catching up with where they want to be? And do you have any metrics on kind of wholesale sell through support what kind of what is happening at retail with those partners and I got couple of others. Andrew Rees: Yes, I think the best way of getting at the core your question is wholesale sell through. We get that from obviously our major partners, we don’t get it from all the smaller partners. But I think the retailers that do stock, HEYDUDE, would say sell through is exceptional. Mitch Kummetz: Okay. And then, Andrew you reference Spring 2023, a couple times, I think in some remarks, do you have any sense as to kind of what the order spring order book is looking like for the Crocs Brand in the U.S.? I’m wondering if it is going to be up or down. And then lastly, on margins. and you talked about kind of the HEYDUDE pressure on gross margins, but I’m guessing that likely helped from an SG&A leverage standpoint. So is there any way you can kind of break out the operating margins by each brand? And that is it. Thanks. Andrew Rees: Thanks Micth. So, I will let Anne talk about operating margins for each brand, but from an order book perspective, look, it is early days on that yet, but we also don’t disclose order book ahead of time. We stopped doing that quite a long time ago. So but we are selling in spring summer 2023, both here in the U.S. and globally. And we are pretty excited about a lot of the newness that we have to offer our customers. Anne Mehlman: Yes. And then from an operating emergency standpoint on each brand, remember, these are unadjusted for HEYDUDE. So that includes a 35 - this is going to include a $35 million, inventory write up in Q2 related to the acquisition. So HEYDUDE operating margins were 17.9% that is GAAP, Crocs was 35.7%, and then our consolidated obviously and that is a GAAP margin. Mitch Kummetz: Okay. Thank you. Operator: This concludes our question and answer session. I would like to turn the conference back to management for any closing remarks. Andrew Rees: Really appreciate everybody joining us today. And thank you for your continued interest in Crocs. Operator: The conference has now concluded. Thank you for today’s presentation. You may now disconnect.

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. Please note this event is being recorded. I'd now like to turn the conference over to Corinne Lin, Vice President of Corporate Finance. Please go ahead. Corinne Lin: Good morning, everyone, and thank you for joining us today for the Crocs first quarter 2022 earnings call. Earlier this morning, we announced our latest quarterly results, and a copy of the press release may be found on our Web site at crocs.com. We would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the Safe Harbor provisions of the federal securities laws. These statements include, but are not limited to, statements regarding the acquisition of HEYDUDE and the benefits thereof, Crocs' strategy, plans, objectives, expectations, financials or otherwise and intentions; future financial results and growth potential; anticipated product portfolio, our ability to create and deliver shareholder value and statements regarding potential impacts to our business related to the COVID-19 pandemic. 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. Crocs is not obligated to update these forward-looking statements to reflect the impact of future events, except as required by applicable law. We caution you that all forward-looking statements are subject to risks and uncertainties described in the Risk Factors section of our annual report on Form 10-K and our subsequent filings with the SEC. Accordingly, actual results could differ materially from those described on this call. Please refer to Crocs annual report on Form 10-K as well as other documents filed with the SEC for more information relating to these risk factors. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, Chief Executive Officer; and Anne Mehlman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I'll turn the call over to Andrew. Andrew Rees: Thank you, Corinne, and good morning, everyone. We're very pleased today to announce that we had an exceptional first quarter, despite the number of headwinds. Revenues grew by 47% on a constant currency basis, adjusted operating margins were extremely strong at 27% of sales and we generated $2.05 of adjusted diluted EPS. Within our overall company results, the Crocs brand performed very strongly across all regions and channels. While we've only owned HEYDUDE for six weeks during the quarter, we are rapidly assimilating it into the company and it's very clear that demand for the brand is exceptional and we're confident in a robust growth runway. Anne will review our financial results in more detail shortly, but here are a few highlights from the first quarter of 2022. Overall, consolidated revenue growth, including both Crocs and HEYDUDE, was 47% on a constant currency basis. On a constant currency basis, Crocs brand grew 22% including strong DTC growth of 20% and digital growth of 23%. HEYDUDE revenue exceeded our expectations at $150 million since February 17. On a pro forma basis, Q1 revenues were $205 million, up 81%. The HEYDUDE integration is proceeding while and is on track. Adjusted operating margins on a consolidated basis, including Crocs and HEYDUDE, was best-in-class at 27%. Adjusted diluted EPS was an exceptional $2.05 per share. Both brands ranked in the top 10 of Piper Sandler's Spring Taking Stock with Teens survey with Crocs at number 6 preferred footwear brand, up from number 8 last spring; and HEYDUDE as the number 9 preferred footwear brand. Finally, we released our 2021 ESG report, reiterating our bold commitment to become a net zero company by 2030. Moving to our brand highlights for the quarter, let's begin with the Crocs brand. We experienced a strong Q1 with constant currency growth of 22%. Our strong DTC growth evidences the continued demand consumers have for the brand. Another indicator of Crocs demand is that it jumped up two spots in the Piper Sandler Spring Teen survey to become the number 6 preferred footwear brand amongst teens. We continue to drive Crocs brand relevance and consideration through many activations. We made waves at the Grammys when Justin Bieber wore a hard Crocs sandal created in collaboration with luxury fashion house Balenciaga and Questlove wore the Pollex Clog from our partnership with renowned footwear designer Salehe Bembury. In China, we introduced fashion and entertainment icon Nana as China's newest Crocs Ambassador, leveraging her creativity and ingenuity. We continue to run many innovative digital marketing campaigns. For our Karol G collaboration, we curated a custom playlists with Spotify and the popular playlists Viva Latino, which helped drive 1.4 million visits to the Crocs Web site during the campaign. The Karol G Instagram announcement also became the second most liked post in Crocs social history. To drive sandal consideration amongst athletes, we teamed up with SLAM magazine to develop a content series highlighting how four global basketball stars incorporate Crocs into their off court looks. We experienced additional basketball themed success with Crocs ranked in the top five most popular brands in the NBA 2K video game series. Our Valentine's Day collaboration with Sweethearts candy to create the classic sweetheart fur clog drove 200,000 unique visitors to our site, and the novelty Crocs were a topic of conversation on The Late Late Show between host James Corden and guest Nicki Minaj. Our new Cozzzy two-strap lined sandal debuted in a digital first launch on the Crocs app. And finally, we had a very promising start to our newly launch LiteRide 360 franchise that features enhanced breathability and comfort as well as a higher price point in original LiteRide franchise. From a channel perspective, we achieved strong growth in both DTC and wholesale as revenues benefited from higher pricing, favorable product mix and lower promotional levels as compared to last year. Crocs brand DTC revenues, which includes revenues from e-commerce and company-owned retail stores, grew by 20% on a constant currency basis over 2021. Wholesale, which includes brick and mortar, retail and distributors, grew revenues 23% on a constant currency basis. Our digital business experienced another strong quarter of 23% growth on a constant currency basis. Turning to HEYDUDE, we closed the acquisition on February 17, and are even more excited about the opportunities ahead of us. HEYDUDE brand revenues exceeded our expectations, contributing 150 million to the first quarter or 205 million on a pro forma basis. Demand was incredible, both in wholesale and digital, fueling 81% pro forma growth for the quarter. Underlying momentum is exceptional for HEYDUDE. The brand ranked ninth in the Piper Sandler Spring 2022 survey, cracking the top 10 for the second consecutive survey and remains particularly strong in the Midwest and South. To drive future growth, we're focused on building out the brand platform for HEYDUDE. You will begin to see some of this work in the marketplace later this year. By investing in talent, marketing and digital, we look forward to taking this highly successful brand that consumers love and growing it into a $1 billion plus brand across the U.S. and high potential international markets. From an integration standpoint, it's early days but everything is progressing to plan. As we mentioned during our fourth quarter conference call, we've hired many of the key leadership positions. We're integrating the shared service functions including HR, finance, legal and supply chain, with the integration on track and results already exceeding expectations. We look forward to continued success of this high growth, highly profitable brand. Another notable achievement is that we published the Crocs brand ESG report, reflecting important progress and our commitment to becoming more sustainable and equitable company. Over time, this report will evolve to capture both brands and continue to be guided by the SASB and UN Sustainable Development Goals. As a brand that is proud to invite everyone to be comfortable in their own shoes, the report demonstrates how we've applied our commerce to our [ph] values into an actionable three pillar approach to ESG; comfort without carbon, comfort for our communities and comfort for all people. We're excited about the transparency of our sustainability efforts, especially around sustainable innovation and renewable energy. And this report reinforces our bold commitment to become a net zero company by 2030. Now let me turn to the future. As we discussed in our fourth quarter call, the macro environment remains challenging. The backdrop of high inflation, rising interest rates and supply chain disruptions has only become more complicated with the war in Ukraine and the ongoing shutdowns caused by the zero COVID policy in China. The impact of all these factors on consumer confidence remains uncertain. However, we have tremendous confidence and clear evidence to the underlying strength and growth potential of both the Crocs and HEYDUDE brands. We look forward to continuing to execute on the long-term vision for both brands, and are extremely confident about our ability to grow the Crocs brand to $5 billion in revenues by 2026 and the HEYDUDE brand to $1 billion of revenue by 2024. With that, Anne will now review our financial results in more detail. Anne Mehlman: Thank you, Andrew, and good morning, everyone. I'll begin with a short recap of our first quarter results. For a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to our press release. As you've already seen from our press release, we had an excellent first quarter. We delivered strong and consistent revenue growth within the Crocs brand across all regions and channels. And HEYDUDE revenues exceeded expectations. Gross margins remained very strong despite freight headwinds, and leverage and adjusted SG&A led to another quarter of best-in-class adjusted operating margins and adjusted earnings per share. With the HEYDUDE acquisition now closed, our reportable operating segments for the Crocs brand are North America, Asia Pacific, Europe, Middle East, Africa and Latin America. Latin America has moved from the previous America segment to the newly formed EMEALA segment, and we've added a segment that is now the HEYDUDE brand. First quarter consolidated revenues were $660 million, a growth rate of 43.5% over last year, comprised of $545 million from the Crocs brand or 18.5% growth and $115 million from the HEYDUDE brand following the acquisition close on February 17. Crocs achieved 18.5% growth despite losing revenues from Russia in the latter half of the quarter and unfavorable currency movements inter-quarter. During the first quarter for the Crocs brand, we sold 25.6 million pairs of shoes, which slightly declined by 1.1% over last year. The Crocs brand average selling price during Q1 was $21.10, a year-over-year increase of 19.6% driven by price increases, reduced promotions and discounting and incremental Jibbitz penetration. Let's review a few Crocs brand highlights by region, beginning with North America where Q1 revenues increased 19.5% to $319 million to prior year, driven by higher prices and strong sell-throughs. DTC revenues increased 18.5% on top of an exceptional 131.3% growth last year, and clearly signaled the strength of the Crocs brand in North America. The Crocs brand in Asia generated revenues of $96 million or 22.1% growth on a constant currency basis driven by higher pricing, less discounting and greater wholesale volume. South Korea, India and Singapore, all posted strong double digit revenue growth versus last year. This momentum was slightly offset by softness in China and Japan as COVID lockdowns and a conservative Japanese consumer remain headwinds. DTC revenue growth of 26% on a constant currency basis was strong, with growth accelerating from the period last year. Digital channels posted excellent double digit growth, led by India, South Korea and Australia. Crocs brand revenues for EMEALA, our new combined EMEA and Latin American regions, grew 26.8% on a constant currency basis to $130 million, even as we paused Russia operations. Double digit DTC revenue increases were driven by higher e-commerce traffic and strong growth in core styles, offset by inventory constraints. Turning to HEYDUDE. Revenues exceeded our expectations, contributing $115 million since February 17. On a pro forma basis, Q1 revenues grew 81% to $205 million. With regards to margin, we will provide visibility into brand gross margin for the remainder of 2022 and we'll report it on a consolidated basis only beginning next year. Consolidated adjusted gross margins for the first quarter were 53.9% versus last year's 55.2%. Importantly, adjusted gross margin for the Crocs brand was 54.9%, only 30 basis points lower than last year even with 650 basis points of incremental freight and 50 basis points of unfavorable purchasing power as higher prices and fewer promotions almost entirely offset these significant headwinds. Adjusted gross margins at the consolidated level declined due to the addition of HEYDUDE during the quarter, which carried a lower gross margin. Adjusted gross margin excludes a $28 million inventory write up in connection with the HEYDUDE acquisition and a $2 million inventory reserve due to the pause of Russia operations. During the first quarter of 2022, consolidated SG&A improved 60 basis points to 27.3% of revenues versus 27.9% in last year's first quarter. The decrease in adjusted SG&A rate was achieved while investing an additional $52 million versus prior year, primarily in marketing and talent. We will continue to invest to support the long-term growth of our business, particularly in HEYDUDE, where we have noted significant investment is required in infrastructure, marketing and talent. Non-recurring SG&A expenses for the first quarter included $21 million related to the HEYDUDE acquisition. Crocs non-recurring expenses included $5 million of bad debt related to the pause of Russia operations. Our first quarter consolidated adjusted operating income of $175 million increased 39.6% from $126 million last year, including $16 million attributable to HEYDUDE. Adjusted operating margin declined to 26.6% from 27.3% last year as SG&A leverage only partially offset the gross margin headwinds of incremental freight and the addition of the HEYDUDE brand. For the first quarter, our non-GAAP tax rate was 19.8% versus 19.5% last year. Our first quarter non-GAAP diluted earnings per share increased 37.6% to $2.05 from $1.49 last year. Our liquidity position remains strong as we ended the first quarter with $172 million of cash and cash equivalents and $365 million of borrowing capacity on our upsized revolver. Our net borrowings at the end of Q1 were $2.9 billion after issuing a $2 billion term loan fee and borrowing $235 million on a revolver. Our inventory balance at March 31, 2022 was $408 million. This includes the addition of $92 million of HEYDUDE inventory and another $28 million of inventory step up related to the acquisition of HEYDUDE. We continue to experience significant in-transit inventory increases as a result of elevated in-transit times. In-stock levels on core products have improved, particularly in the U.S., partially as a result of the investments we are making in airfreight. Turning to the future, I would like to share our current outlook for 2022 and Q2. All numbers will be on a reported basis, unless otherwise stated. For full year 2022, we are raising our consolidated revenue guidance to approximately $3.5 billion from approximately $3.4 billion, representing year-over-year growth of 52% to 55%. We still expect Crocs brand revenue growth of over 20%. Following an outstanding first quarter for HEYDUDE, we are raising our expectations for the full year and now expect HEYDUDE revenues to be between $750 million to $800 million on a reported basis, implying $840 million to $890 million on a pro forma basis. We are also raising our adjusted operating margin range to be approximately 26% to 27%. As a result of outstanding anticipated growth and best-in-class margins for 2022, we are raising our non-GAAP diluted earnings per share expectations to be approximately between $10.05 to $10.65. For Q2 2022, we expect consolidated revenues to be between $918 million and $957 million, representing 43% to 49% growth from prior year. We expect Crocs brand revenues to grow approximately 17% to 20% growth in constant currency, which is 12% to 15% at current currency rates. Excluding currency and the pause of Russia, Crocs brand growth would be approximately 20% to 23%, which is above full year guidance. We expect HEYDUDE revenues to be approximately $200 million to $220 million. Even with significant investment expected in airfreight and SG&A to support growth, we expect adjusted operating margin to be approximately 26%. Given our strong revenue and cash flow projections for the year, we now expect to be below 2x growth leverage by midyear next year, which would allow us to repurchase shares should we choose to do so. In summary, in spite of the challenging global operating environment, the Crocs brand and our fundamentals are incredibly strong. And the HEYDUDE brand is already accretive to growth and profitability. At this time, I'll turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. As our Q1 performance indicated, we have great momentum in both of our brands. Our Crocs brand continues to grow in all regions and channels. The HEYDUDE brand has already exceeded expectations, and we're excited to unlock the full potential of this exciting young brand. We remain focused on achieving the long range targets we've laid out for both brands and the significant shareholder value this will create. Operator, please open the call for questions. Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Jonathan Komp from Baird. Please go ahead. Jonathan Komp: Yes, hi. Good morning. Thank you. First question I want to ask, when you look at the performance of the business along with the Q2 guidance, and then it really looks like an embedded second half acceleration. Can you maybe just comment a little bit more of what's supporting your outlook, especially in the second half and for the Crocs brand, and in the factors that you think will contribute to the acceleration in top line growth? Anne Mehlman: Yes. Hi, Jon. Thank you for the question. So just to reiterate our guidance, we're very confident in our full year guidance, which is both the 20% plus in Crocs brand and the upward revision of the HEYDUDE brand, which carries best-in-class operating margins for the combination. Our full year 20% guide for the Crocs brand and 840 to 890 for the HEYDUDE brand is based on really the continued strong pre-books that we see for both brands, innovation pipeline, brand resonance and just performance we're seeing overall globally. Then turning to Q2 specifically, our Crocs brand revenue guide of 17% to 20% constant currency translates to 12% to 15% on a reported basis. And then if you add back the pause in Russia, it would be at 20% to 23% growth, which is obviously above the 20% plus. So that sort of gives you the color on Q2. And we look forward to continuing to execute, obviously, on our long term, which is the Crocs brand of 5 billion and the HEYDUDE brand to 1 billion. And then I'll let Andrew add a little extra color. Andrew Rees: Yes. Look, I think you can come at it at a couple of different ways, Jonathan. So we can look at our pre-books, we can look at the trajectory in our DTC businesses, and I think Anne reference that. I think the other thing is we just look at the underlying strength of the brand. As we look at our brand metrics, if we look at some of the external brand metrics, the Crocs brand continues to perform very well. There's clearly resonance for the brand, both here in the United States and in our key international markets. And we really see a strong trajectory. And I would say that is, despite what we would kind of consider less than ideal NPI introductions in the first quarter. As we look at quarter two and quarter three, we'll have a much stronger flow of NPI. That's certainly -- the factory closures late last year certainly impacted that. So we're pretty optimistic about the rest of the year. And then from a HEYDUDE perspective, we're truly impressed by the consumer advocacy, the consumer takeaway, and the enthusiasm which our wholesale accounts have for the brand, and the kind of results they're seeing on it in the current quarter. And obviously, that's translating in how they're buying into the brand for the back half of the year, and the conversations we're having with them about next year. So I think we see -- we're very fortunate. We see great underlying strength in both brands. Jonathan Komp: That's great. And if I can follow up on the HEYDUDE business, you've had it as part of the company for less than 90 days. You've raised the outlook pretty significantly for this year. So can you maybe just elaborate more, what surprised you so far? How much visibility you have on supply for the upside to the guidance? And then maybe the broader picture, I know you've highlighted at least $1 billion by 2024. Are there scenarios where you could achieve that level much sooner? Thank you. Andrew Rees: Yes. I think we talked a little bit about that on the last call, Jonathan. As we do diligence to the company and we brought it on, we knew they had a very strong revenue book, right. We could see the trajectory in DTC, which the HEYDUDE is principally digital both dot-com and Amazon, which is 3P. We had a great order book from our wholesale customers. We had strong visibility into supply, but we had some questions. So I think that's probably the biggest thing that's changed. As we look at the last several weeks, obviously the six weeks we reported in the first quarter and the period since then working very well with the HEYDUDE team. And I think we have much more confidence in both inbound supply and logistics of getting that to our customers. So not ideal, I wouldn't say things are arriving on time. But we've got a lot more confidence around supply, which is really the principal reason for raising the '22 guidance for HEYDUDE. And we're very -- I don't really want to say any more at this stage about the ultimate potential for this brand. I think we have clear line of sight to the $1 billion that we talked about originally. We've got a lot of work to do around integrating the brand into the company, building out the brand platform. We're doing a lot of really great work around that today. But we're very optimistic. We think this is a young brand with enormous potential. Jonathan Komp: That's really helpful. Thank you. Operator: The next question comes from Susan Anderson from B. Riley. Please go ahead. Alec Legg: Hi. Good morning. Alec Legg on for Susan. Thanks for taking our questions. Just to go back on HEYDUDE and the supply chain, I believe the product you mentioned was primarily made in China. Have you seen any challenges with the shutdowns there, either the point of production or the shipping centers? Thanks. Andrew Rees: Yes, you're right. HEYDUDE is predominantly made in China. We have seen some factory closures over the last couple of months within HEYDUDE. But in the grand scheme of things relative to our overall supply base and the production that we're expecting not material and that is incorporated in our revised guidance. I think you also referenced shipping and logistics within that question, and that's been one of the nice benefits of integrating HEYDUDE into Crocs. We obviously have a far more robust logistics operation, so we're able to step in and really help manage the logistics. So I'd say all of those factors to date are incorporated in our guidance. Anne Mehlman: Yes. I would just add that even though it's not an impact from a supply chain perspective, we do have an impact on the Crocs business based on the Shanghai shutdowns related to our e-commerce business that shipped out of Shanghai. And that's incorporated into our Q2 guidance as well, but that has impacted our China business for Crocs for Q2. Alec Legg: Okay, perfect. And then just to follow up on HEYDUDE. I believe last year, it was a record margin year, it was 40% plus. I guess what's the delta between that record year and that long-term expectation of 26% plus? Anne Mehlman: Yes. So I think HEYDUDE obviously was a young brand and underinvested from an SG&A infrastructure perspective. They did a wonderful job of growing very, very quickly, and they had scaled it back in infrastructure. So I believe last year, their EBITDA margins were approximately 38%. We filed performance a little bit later today. So you'll be able to see that laid out for the last 12 months. We talked about when we bought the brand that we really needed to invest in the infrastructure. And so the difference there is our investment in SG&A, in order, in marketing, because they haven't spent much in marketing at all. So we intend to invest in marketing, in people and the infrastructure to build a stable brand going forward. Alec Legg: Thank you. Nice job on the quarter. And best of luck for the rest of year. Anne Mehlman: Thanks, Alec. Operator: [Operator Instructions]. Our next question comes from Laura Champine from Loop. Please go ahead. Laura Champine: Thanks for taking my question. Can you comment on how successful your efforts to drive pricing higher have been? And what your assessment is on the promotional environment year-on-year as we move through spring? Andrew Rees: Thank you, Laura. I think you can see that very clearly in our Q1 results. So if you look at the Q1 results, the underlying gross margin increases in the first quarter from pricing, from reduced promotions, and also from enhanced Jibbitz sales was over 600 basis points. So I would say very significant underlying margin increases from those factors. If you remember, last year we took price increases in DTC in April. They flowed to our major wholesale customers later in the year. We took some additional pricing in some select international markets earlier this year. So I would say those price changes were in advance of what we anticipate to be inflationary cost increases, and they've positioned us extremely well. If we look at the promotional environment and we monitor closely, the promotions that we are doing relative to last year and relative to competition, our promotional cadence in aggregate was less than this time last year. And I think it's also generally competitive with competition. So I think we feel really good about the place that we are there. You can see an enhanced cadence of some promotional activity in the market. And we do feel like it's important to participate in key events around Easter or Memorial Day or 4th of July. But we feel really good about the way the brand is positioned and the rate of sale we're seeing at the current prices. Anne Mehlman: Yes. I would just add that our ASPs were up 20%. So as Andrew mentioned on the margins, but our ASPs were also up 20% in the quarter as well. Laura Champine: Got it. If I look at the Q2 guide for the Crocs brand, it seems like a top line deceleration from Q1. Is the way to think of that, that units are slowing because Q1 you saw improvements in supply chain to let you ship what you wanted to ship, or is it that promotions are increasing in Q2? Anne Mehlman: Yes. So the way that I would talk about Q2 is that we are -- actually last year in Q2, we grew 93% year-over-year. So it's actually an extremely -- it's the highest growth rate we had last year. So it is a high growth quarter. And then if you neutralize for currency and the Russia impact, I would say that growth is still above our full year guide and equivalent to Q1. So we felt really good about Q2. I don't think that we see -- it doesn't anticipate slowing. Laura Champine: Understood. Thank you. Anne Mehlman: Thank you. Andrew Rees: Thank you. Operator: [Operator Instructions]. There are no more questions in the queue. This concludes our question-and-answer session. I'd like to turn the conference back over to Andrew Rees for any closing remarks. Andrew Rees: Look, I'd just like to say thank you very much for everybody who joined us today and their continued interest in the company, and thank you for joining. Have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Thank you for standing by and good morning, and my name is Savannah, and I will be your conference call operator. At this time, I would like to welcome you to the Crocs Fourth Quarter 2021 Earnings Call. [Operator Instructions] And after the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn it over to today's speakers. Please go ahead. Marisa Jacobs: Good morning, and welcome to the Crocs, Inc. Fourth Quarter 2021 Earnings Call. Good morning, everyone, and thank you for joining us today for the Crocs Fourth quarter and Full Year 2021 Earnings Call. Earlier this morning, we announced our latest quarterly and annual results, and a copy of the press release may be found on our website at crocs.com. We would like to remind you that some of the information provided on this call is forward-looking and accordingly, is subject to the safe harbor provisions of the federal securities laws. These statements include, but are not limited to, statements regarding the anticipated consummation of the acquisition of Jude and the timing and benefits thereof, Crocs' strategy, plans, objectives, expectations, financial or otherwise and intentions; future financial results and growth potential; anticipated product portfolio, our ability to create and deliver shareholder value and statements regarding potential impacts to our business related to the COVID-19 pandemic. 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. Crocs is not obligated to update these forward-looking statements to reflect the impact of future events, except as required by applicable law. We caution you that all forward-looking statements are subject to risks and uncertainties described in the Risk Factors section of our annual report on Form 10-K and our subsequent filings with the SEC. Accordingly, actual results could differ materially from those described on this call. Please refer to the Crocs annual report on Form 10-K as well as other documents filed with the SEC for more information relating to these risk factors. Adjusted gross profit, adjusted gross margin, adjusted selling, general and administrative expenses, adjusted income from operations and operating margin, adjusted income tax or benefit and effective tax rate, adjusted basic and diluted earnings per common share are non-GAAP measures. A reconciliation of these amounts for GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, Chief Executive Officer; and Anne Mehlman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I'll turn the call over to Andrew. Andrew Rees: Thank you, Guy. And let me start by apologizing for the technical difficulties we're having today, but let me proceed with my prepared remarks. As you saw in our press release issued this morning, I'm incredibly proud of the $2.3 billion in sales and industry-leading adjusted operating margins of 30% we generated in 2021. These results underscore the underlying strength of the Crocs brand and even more remarkable, considering the challenging environment we continue to navigate. Looking forward to 2022, we expect robust revenue growth for the Crocs and HEYDUDE brands and another highly profitable year. Anne will review our Q4 financial results in more detail shortly, but here are a few highlights from the full year of 2021. The Crocs brand grew 67%, experiencing broad-based growth across all major markets, channels and product categories. Digital revenues grew 48% over 2020 and 122% over 2019. Our best-in-class adjusted operating margins expanded to 30% from 19% in 2020. Adjusted diluted earnings per share more than doubled to $8.32. We returned $1 billion to shareholders through share repurchases, and we capped this extraordinary year by announcing the acquisition of a second high-growth, highly profitable brand, HEYDUDE. These exceptional results demonstrate the strengths of the cross brand and its resonance with consumers globally. It was a great year for the Classic Clog and Classic Line Clog taking the #1 and #2 spots for U.S. holiday sales according to NPD and also being named Shoe of the Year by Footwear News. We continue to fuel brand heat throughout the year with a pipeline of innovative collaborations, including a high heel Croc Madam with leading fashion house, Balenciaga, and a nature inspired clock with SalehiBembri. We entered the Metaverse with our first NFT, partnering with Parisian Label, Egan Lab. In addition to global collaboration launches with Justin Bieber, Pleasures, Palace and more, we saw great momentum with regional collaborations such as influencers Never family in China, iconic footwear retailer Atmos Ping in Japan, and DJ Latam Cushman in Europe. We also expanded our partnerships in the Jives franchise, including bringing the mythical world of DumasDragoNS and the vibrant characters of Lisa-Frankto life. In summary, the Crocs brand remains strong, and I'm confident in our ability to deliver strong growth in 2022 and beyond. From a channel perspective, digital remains a top priority as it enables us to meet the consumers where they are. During 2021, our digital business, which combines e-commerce and e-tail, grew 48% on top of 50% growth in 2020. Digital penetration increased on a 2-year basis to 37% from 31% in 2019. This year, we invested in our digital capabilities, included in the Crocs mobile app, global social platforms such as Studon and digital talent across the globe. We're confident these investments and our continued focus will drive digital growth globally over the long term. We achieved strong growth in both our direct-to-consumer and wholesale channels with DTC revenues up 64% and wholesale revenues up 69% globally. Global DTC sales were driven by higher traffic and strong average transaction value. Wholesale growth was balanced with high double-digit growth in all subchannels, including brick-and-mortar, e-tail and distributors. From a product perspective, we sold over 100 million of footwear globally in 2021, and our results continue to be driven by our key product pillars: clogs, sandals and jibes. Sales of clogs were particularly strong, increasing to 80% of total footwear revenues versus 72% in 2020. Sales of the classic clog franchise increased triple digits,driven by graphics as well as line, height and adventure iterations. Sandals grew nearly 30%, driven by strong performance in our personalizable classic slide and classic sandal, particularly in the Americas. We also saw strong growth across other core items like our Crocband and Katy Flips, as well as our Brooklyn style franchise Hard by Lightwave technology. EBIT had another outstanding year, up almost 150%. This important category continue to have broad appeal with global penetration reaching 7% versus 5% last year. Our product strategy continues to resonate with consumers globally, giving us confidence in our $5 billion revenue target for the Crocs brand we outlined at our Investor Day in September. Turning to ESG. We made progress in our commitment to net 0 emissions for the Crocs brand by 2030. We've taken a major step forward by becoming a 100% vegan brand, and we kicked off our employed sustainability initiative by blending bio-based compounds into our shoes that we manufacture containing Crocs. We continue to give back to our communities, including donating 150,000 pairs of shoes across multiple organizations. And together with the generosity of our consumers, raising funds for Feeding America to provide 25 million meals to those in need. I'm proud of the passion of our team and the progress we're making in terms of making a positive impact on our planet and our communities. To cap off an extraordinary 2021, in late December, we announced the HEYDUDE acquisition and adding a second high-growth, highly profitable brand to our portfolio. We expect to close the transaction in the coming days and are delighted to soon welcome Alessandro and his talented team to Crocs. We'll feel privileged to have Alessandro staying on for 18 months to help ensure a smooth and successful transition. Our preliminary integration work is progressing well, and we're well advanced in terms of building our new leadership team. with the majority of critical positions already felt. We have a plan to amplify the HEYDUDE brand through innovative marketing and leveraging crop strong wholesale relationships to extend distribution. We're excited about the potential of HEYDUDE and incredibly confident in our ability to build a $1 billion brand by 2024. Looking forward, the Crocs and HEYDUDE brands enter 2022 with incredible strength and momentum. However, I'll be remiss if I did not mention the many unknowns in the world today, ranging from challenging supply chain, lingering COVID shutdowns to rising inflation and potential impacts on consumer spending. We're not immune to these many macro headwinds. However, I'm confident in our brand, our team and our demonstrated ability to navigate uncertain times. With respect to the supply chain and the pandemic, we've been managing disruptions for more than 2 years and have demonstrated incredible agility to satisfy consumers' needs globally. As we have shared, the factory shutdowns in Vietnam last year, combined with the continued extended trend at times, have lingering impacts on supply and new product introductions for the first half of 2022. As Anne will outline in our guidance, the greatest impact from these disruptions will come in the current quarter, resulting in over $40 million of orders slipping from Q2 into Q3, with the largest impact being in EMEA. However, we're looking forward to a robust revenue growth in Crocs and HEYDUDE brands for the full year of 2022. The combined business has incredible potential, and we anticipate the powerful combination will be highly profitable, cash generative and create significant long-term shareholder value. Before I turn the call over to Anne, I want to express my gratitude to the entire Crocs organization for their hard work and commitment to delivering best-in-class growth and profitability. I also want to reiterate a warm welcome to all the HEYDUDE employees around the world, who will soon be joining the Crocs family. 2021 was an incredible year for the organization, and I'm proud of how we executed as a team and the value that we've created for shareholders. With that, Anne will now review our financial results in more detail. Anne Mehlman: Thank you, Andrew, and good morning, everyone. I'll begin with a recap of our fourth quarter results. For a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to our press release. Our fourth quarter results were outstanding, with all regions recording double-digit revenue growth, led by the Americas. Profitability continues to be best-in-class as we expand gross margins and leverage SG&A to increase adjusted operating margins to 28.6% compared to 21.1% in the fourth quarter last year. Fourth quarter revenues came in at $586.86 million compared to $411.5 million last year, a 43.5% increase on a constant currency basis. On a 2-year stack, revenues grew 123.1%. During the quarter, we sold 22.6 million pairs of shoes, an increase of 19.7% over last year. Our average selling price rose 18.9% to $25.71, attributable to price increases taken during the year, coupled with fewer promotions and discounts. For the full year 2021, we sold 103 million pairs of shoes, up 49% over 2020. Our average selling price for 2021 rose nearly 12% to $22.27, also driven by price increases and fewer promotions and discounts. As evidenced by our ability to take price and still deliver significant volume increases, the Crocs brand is strong as ever. Now let's review our results by region. Growth was led by the Americas, which experienced another strong quarter with revenues of $469 million, up 51.2% from 2020. This growth was led by digital of 55.2% from 2020 to 244.5% on a 2-year basis. DTC and wholesale increased 49.3% and 52.6%, respectively, from prior year. Our broad-based performance in the Americas is the direct result of meeting the consumer where they shop and driving relevance through innovative marketing. EMEA revenues increased 22.5% over Q4 2020 to $60.5 million. EMEA outperformed expectations in the quarter as we were able to secure more inventory than initially planned. Growth was fairly balanced by channel, with DTC revenues increasing 18.5% and Wholesale revenues increasing 24.6% in the quarter compared with 2020. GTC benefited from strong growth in both e-commerce and retail, while wholesale benefited from exceptional performance in brick-and-mortar. We are extremely pleased with our EMEA performance, which is benefiting from improved brand relevance and consideration. In Asia, Q4 revenues were $57.1 million, up 10.3% from last year. This growth was driven equally by DTC and wholesale. South Korea and India continue to outperform and both grew nicely during the quarter and the year. China has faced periodic COVID lockdowns that impacted Q4 results. However, China grew double digits for the year, and we remain confident in our long-term plan. Our fourth quarter adjusted gross margin was 63.7%, up 770 basis points from last year's 56%. The gross margin improved in all regions and all channels driven by increased prices, fewer promotions and discounts and favorable product mix. Full year 2021 adjusted gross margins of 61.6% rose 700 basis points from last year, also driven by increased prices, reduced promotional activity and product mix. Our Q4 adjusted SG&A was approximately flat to last year at 35.1% of revenues. This excludes $6.4 million in onetime costs related to the HEYDUDE acquisition. For full year 2021, adjusted SG&A leveraged 400 basis points to 31.6% of revenues from 35.6% of revenue. The significant decrease in adjusted SG&A is a result of strong sales growth and operating leverage even as we invested in additional brand marketing and talent to support future growth. Our fourth quarter adjusted operating margin expanded 750 basis points to 28.6% compared to 21.1% for the same period last year, led by gross margin expansion, offset slightly by SG&A. Adjusted income from operations for the full year increased 164.8% to $695.3 million, and adjusted operating margin rose 1,120 basis points to 30.1% compared to 18.9% last year. Fourth quarter non-GAAP diluted earnings per share more than doubled to $2.15 compared to $1.06 for the same period a year ago. Full year adjusted diluted earnings per share also more than doubled to $8.32. We've included 2021 with a strong liquidity position comprised of $213.2 million of cash and cash equivalents and $414.7 million of borrowing capacity on our revolver. In addition, we had $785 million of long-term borrowings and ended the year under 1x leverage on a net basis. Given our strong cash flow generation for the full year 2021, we returned $1 billion to shareholders, repurchasing approximately 7.8 million shares at an average price of $128.52 per share. Inventory at December 31, 2021, increased 21.9% to $213.5 million from $175.1 million in Q4 2020 with the majority of the increase driven by in-transit inventory due to extended transit times. We anticipate extended transit times to sustain throughout the year and to drive increases in inventory in certain periods. We felt good about our [indiscernible] positions during the holiday season, which supported strong sell-through in our ability to take market share. As Andrew mentioned, in addition to expanded transit times, we expect other logistics challenges to persist throughout 2022. Now turning to the future, I would like to share our current outlook for Q1 and then full year 2022. For Q1, we expect consolidated revenues including the HEYDUDE brand to be approximately $605 million to $630 million. Excluding HEYDUDE, we expect Crocs brand revenues of $520 million to $535 million, which implies organic growth of approximately 13% to 16%. The consolidated revenue guidance assumes the HEYDUDE acquisition closes in the coming days. We expect non-GAAP operating margin to be approximately 22%, which includes approximately $30 million of incremental air freight costs within gross margin. For full year 2022, we continue to expect revenue growth for the Crocs brand, excluding HEYDUDE, to exceed 20%, generating revenues of over $2.75 billion for the year. In addition to the Crocs brand revenues, we still anticipate full year 2022 revenues for HEYDUDE to be approximately $700 million to $750 million on a pro forma basis and $620 million to $670 million on a reported basis. On a combined basis, we expect 2022 revenues of more than $3.45 billion on a pro forma basis and approximately $3.4 billion on a reported basis. We expect adjusted operating profit margins for the combined business of approximately 26%. This includes the incremental air freight, but excludes estimated due acquisition and integration costs that I will outline shortly. For the full year 2022, we expect our underlying non-GAAP tax rate, which approximates cash tax to be paid to be approximately 22%. Our GAAP tax rate will be approximately 25%. To provide greater clarity around our earnings potential and mid to acquisition, we are providing full year earnings per share guidance. We anticipate non-GAAP earnings per share to be approximately $9.70 to $10.25 in 2022. To support growth for both brands, we expect to invest approximately $170 million to $200 million in capital expenditures, primarily to continue to expand and automate our distribution capabilities. As Andrew mentioned, we are very excited about the addition of the HEYDUDE brand and expect to close in the coming days. To fund the acquisition, we will issue 2.85 million shares to one of the sellers, and we have secured a $2 billion term loan fee, which we will provide additional details for upon close. We also expect to borrow $50 million under our existing senior revolving credit facility, as well as exercise the accordion provision on the revolving credit agreement to increase the borrowing capacity by $100 million. We estimate approximately $60 million onetime charges in SG&A in 2022 mostly related to the HEYDUDE acquisition and a $75 million noncash impact in gross margin, mostly related to the write-up of HEYDUDE inventory to fair market value. We expect approximately $30 million of SG&A onetime costs to be incurred in the first quarter and that leverage will peak during Q1. As previously shared, we are committed to deleveraging and expect a combined brand to generate significant cash flow, allowing us to quickly achieve 2x gross leverage by the end of 2023. With this focus on deleveraging, we have suspended our share repurchase program until gross leverage is under 2x. Regarding future disclosures, the Crocs brand will continue to be broken out into the Americas, Asia and EMEA regions, and we will report the HEYDUDE brand as a separate segment. For both brands, we will report wholesale and DTC revenues as well as digital penetration. Beginning in Q1 2022, we will move Latin America from the Americas to the EMEA region for the Crocs brand to better align and manage our distributor businesses. In summary, throughout 2021, we delivered strong revenue growth, profitability and cash flow. With the underlying strength of the Crocs core business and the addition of HEYDUDE, we are confident we have positioned ourselves for sustained profitable growth and strong cash flow generation. At this time, I'll turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. Crocs brand had a tremendous year in 2021. We're confident in the trajectory of the Crocs brand and excited by the pending acquisition of HEYDUDE. By leveraging the proven Crocs playbook to enhance HEYDUDE's growth trajectory, we see a tangible pathway to a highly profitable combined company and tremendous value creation for shareholders. Operator, let's open the call for questions. Operator: [Operator Instructions]. Thank you, Andrew. I think the first question is coming from the line of Erinn Murphy from Piper Sandler. Erinn Murphy: You hear me okay? Andrew Rees: We can. I apologize for our technical difficulties. Thank you, Erinn. Erinn Murphy: No worries. Okay. So I've got a couple maybe starting on the supply chain. Could you talk a little bit more about the impact that you're seeing now into the first and it sounds like into the second quarter. Is that factories that are still ramping on production? Is it the container shortages that we're seeing globally? And then how has the response been to retailers? Are they actually having to cancel orders? And then I guess relatedly, Anne, can you just go through the shift again Q1 to Q2, Q2 to Q3? I just want to make sure we have that all buttoned up. Andrew Rees: Yes. Let me kind of give you the qualitative, Erinn, and then Anne can pick up some of the details. So factories are back up and running. They have been for some time. And actually, we're relatively pleased with their ramp-up post Chinese New Year. They've come back up to speed quickly. The delays that we're seeing from Q1 into Q2 are really transportation-related, and I would say it's a combination of delays in loading, delays in transit and delays unloading. So that was a longer delay than we expected. So I would say that most -- it's impacting us most in EMEA. And as we look at our overall business, I think we're confident in the amount of supply that we have and the ability to grow our supply base to meet our overall annual guidance. And it's really the transportation delays that continue to move around. Anne Mehlman: Yes. And then as far as revenue impact, as we said in prepared remarks, approximately $40 million of revenue associated with our EMEA business, that's wholesale or distributor revenue that would have -- we would have fulfilled in Q1 that's impacted by these supply delays. We haven't totally given the shift amongst the quarters for the rest of the year because there's still a lot of uncertainty just related with transit time. So we reaffirm that we're going to grow over 20% for the full year. Andrew Rees: Yes. I just realized the one other piece that you asked in there, Erinn, was expectations around cancellations. I would say, I think the majority of retail partners have been incredibly understanding. I think they're seeing this from lots of people right now, and we would not anticipate cancellations at this time. Erinn Murphy: Okay. And then the second part or my second question is around HEYDUDE. If I just look at the guidance, just for the stub period for that 1 month that you'll likely be recognizing revenue, it looks like it's $90 million. Can you just help us think through the seasonality because if we just flatline that on a monthly basis, it implies HEYDUDE revenue is closer to $900 million for the year, not the $700 million to $750 million on a pro forma. So just maybe help us think through the stub period and how we should extrapolate that for the full year seasonality. Anne Mehlman: Sure. So I think you have to keep the $90 million divided by 1.5 months because we're assuming that it will close in the coming days. So if you do that math, then you get to about $720 million at the midpoint of guidance, if you just annualize it for the remaining 10 months. So I think you just got to make sure that you're accounting for those extra weeks in February. Erinn Murphy: Okay. Okay. Fair enough. And then maybe just if I can add one more on price increases given the inflationary backdrop. We've been seeing some price increases that you took in Europe last month. And I'm just curious kind of what's contemplated in the guidance this year on a global basis for price increases. Anne Mehlman: Yes. So I appreciate the question. Our early action in 2021 of taking price obviously allowed us to more than offset the impact of inflation for 2021. I think that puts us in a really good position for 2022. As you mentioned, we did take price increases in EMEA, and we actually took some in Asia as well. So both of those will flow through in 2022 and are contemplated in guidance. as well as the U.S. wholesale prices increases that we took that flow through in the back half of last year, that will still flow through the first half of this year. . Operator: The second question comes from the line of Jonathan Komp at Baird. . Marisa Jacobs: Operator, if you could please unmute the line that's now first in queue. Andrew Rees: Jonathan, we're not -- just in case you're already talking, we're not hearing you. Anne Mehlman: Susanna, if you could unmute the first line, we believe that's Jonathan Komp even though it's listed separately in the system. Okay. I'm sorry. We'll go to the line of Laura Champine from Loop Capital. Laura Champine: So my question is about the implied acceleration in organic growth for Crocs brand from mid-teens in Q1 to end the year over 20%. Is the thought process behind that, that the slower growth in Q1 is just due to the supply chain issue that you called out? Or is there more going on there? Anne Mehlman: Laura, it's Yes, absolutely. I think the growth in Q1, as we called out at ICR in January, is related to the impact of the Vietnam shutdowns last year on the first half. So it's all related to timing. We're not seeing any changes in underlying consumer demand for the brand. Laura Champine: Got it. Quick follow-on. How is pricing holding up relative to your initial expectations coming into this year? And if there's anything you can do to quantify that kind of pricing that you expect to take year-on-year, that would be super helpful. Andrew Rees: Yes. I think we feel great about the price impacts -- the price increases that we took last year as well as those that we've taken this year. And as Anne mentioned to a prior question in both Europe and Asia, we're having absolutely expected impact in terms of those price increases are certainly holding up. And we feel very confident about our future pricing trajectory. We are seeing competitors take price and anticipating more of that through the year. I think we were a little bit early in some of the actions that we took last year. We'll monitor that closely. It's very important to us that we continue to provide incredible value to consumers, but also at the same time, capture the value that's required in terms of the value of the Crocs brand. Operator: We're going to try Jonathan Komp again, please, from Baird. Jonathan Komp: Okay. Can you hear me now? Andrew Rees: Yes. Jonathan Komp: Perfect. I wanted to ask first just on Crocs when you think about the growth outlook maybe relative to the long-term growth drivers, digital sandals outside of North America growth. How should we think about those playing out in '22 and maybe even color here Q1 versus the balance of the year, how do you see those impacting the Crocs brand? Andrew Rees: Yes. I think as we kind of think about the playbook that we've outlined, digital, international, sandals, et cetera, I think it continues to work extremely well. We're getting very strong sell-through and continued growth on the clog, which is really fueling a lot of the international growth and the digital growth. Sandals had a good year last year, and we are expecting sandals to be disproportionately impacted in terms of supply during the first half of this year. But that's really a supply-related issue. When I look at our innovation, our product development and the consumer reception to our sandals, particularly the personalizable sandals we talked about, both the classic slide and the Classic II scrap. We're getting very strong reception for consumers. So I'd say the only element that I would call out would be sandals, and that's really supply related to the stage. We feel great about the kind of strategic playbook and its ability to drive the growth that we've anticipated. Anne Mehlman: Yes. And I think just one other kind of comment around the international geographic impact and what it's going to do this year. So as we have out in our prepared remarks, we're really excited about the growth we're seeing out of EMEA. Really strong growth trajectory there. Unfortunately, they're disproportionately impacted in related to supply, and that will impact growth rates there for Q1, but we still expect to have strong international growth this year out of EMEA as well. It will just unfortunately be more outside of Q1. Jonathan Komp: Okay. That's very helpful. And then maybe switching to operating margin. You outperformed in Q4 in '21, reaching 30%. Could you maybe just share more detail on the thought in the guidance down to 26% adjusted operating margin. I know a portion of that is the air freight. But the balance of that, if you could maybe just touch on what you're embedding both for the underlying Crocs brand? And then how quickly you'll be able to ramp and what you're assuming for HEYDUDE within that. Anne Mehlman: Yes. This is a great question. So we're really pleased with, obviously, our best-in-class operating margins of almost 30% on an adjusted basis last year, which were supported by, as we talked about, price increases that we took, leveraging SG&A and really good growth. So I think for this year, there's still a lot of unknowns. What we're comfortable with is the 26% and then the air freight of the $75 million over 200 basis points of impact on those margins. We're also said that the combined HEYDUDE and Crocs would be 26% operating margin. We obviously haven't closed the transaction yet for HEYDUDE. But as we do and as we move through that, and we'll provide some more clarity on our first quarter call. Operator: The next question will come from Sam Poser from Williams Trading. Samuel Poser: I've got a -- I've just got a few. One, what is the share count that you're assuming for next year? And then I'll get another thing. Anne Mehlman: The share count that we're assuming for next year, for 2022? Samuel Poser: This year. Anne Mehlman: I think you would be safe to say that right around the diluted share count of approximately 62.4 million shares. Samuel Poser: That will be a little lower in the first quarter,I assume. Anne Mehlman: Yes, because the -- we haven't issued the HEYDUDE shares yet. So we will issue those shares in connection with the acquisition when it closes. Samuel Poser: Okay. And then can you walk through -- you said that in the press release, it said that it'd be about $75 million of airfreight in the first half. Q1 is going to have $30 million. That means that Q2 is more impacted than Q1. I mean, that's a easy math, but you didn't talk about Q2 in that regard. Anne Mehlman: It's more impacted from a cost standpoint. I would just say some of that is just continuing to pull things that had delays from Q1 that flow. So yes. And as we talked about, we see extended transit times throughout the year, but the first half is obviously most impacted. Samuel Poser: Okay. And then lastly, when you started to look under the 1/3 of HEYDUDE, we haven't gotten it yet. But I was just wondering what are -- can you give us some details on what you're seeing from sort of the structure, the infrastructure, what you're going to need to do versus what you first expected when you -- a couple of months or 1.5 months ago when you announced the deal or 2 months ago when you announced the deal? Andrew Rees: Yes. Let me take that, Sam. So what I'd say is that the more we know, the more excited we are, right? So in terms of -- we're looking at the brand, its trajectory, its connectivity with consumers and its relationships with its key partners and wholesale customers. I think the brand is in a great place. And there is clearly far more demand and then the ability to meet that demand in the short term. So feel really great about the brand. In terms of the infrastructure, I would say we've moved incredibly quickly. We have put our team in place. As we've said on the call, we just pay closing the next in the coming days. I would say our team is in place, both people that we've recruited from that type company, but also some strategic reallocations from the Crocs brand. We always knew that there was a substantial amount of infrastructure to put in place. We knew that as we due diligence, that is absolutely true. But we always say we have the resources and are very well positioned to put that infrastructure in place quickly. Samuel Poser: And just one last thing. And if we think about this, the gross -- the actual gross reported gross margin -- your expected gross margin to be down significantly in the first half of the year and the gross margin in the second quarter is likely to be worse or more than it is? Anne Mehlman: I would just say there's -- yes, Sam, good question. I would not necessarily assume that. I would just look at -- I mean, there are some seasonal things that impact our gross margins as far as how much wholesale revenue makes up Q1 versus Q2. So when we're not guiding Q2 gross margins, I wouldn't say that our Q2 margins are going to be below Q1. Operator: The next question comes from the line of Jay Sole from UBS. Jay Sole: Great. Just about the plan to pay down debt. Is there flexibility in that? I mean, if you decide that you think the stock price represents better value than paying down debt. Could you change your mind and reinstate the authorization and buy back some stock? Anne Mehlman: Yes. So just to clarify, we still have our authorization. So that's still outstanding. We have some covenants associated with our debt that we need to be 2x leverage to be able to buy back. But we think we can pay down debt very quickly. The combined entity generates a lot of cash, and we're very committed to paying down that debt. And we've had a very successful buyback program and very aggressively bought back stock last year, and we do think our stock represents a tremendous value at this stock price. So we will continue to work to pay down debt so we can look at repurchasing Jay Sole: Okay. And then maybe can you talk about Jibbitz a little bit? I mean can you talk about the Jibbitz growth in the past year and the fourth quarter? And do you expect Jibbitz to grow faster than the overall company average in '22? Andrew Rees: Yes. So Jibbitz grew for the full year, 150% or over 150% to 7% of overall sales last year, which obviously is outstanding. And I know you're all aware, that's obviously incredibly high-margin category. But probably more important than the margin and even the sales dollars is the consumer engagement that it creates. You see that we use Jibbitz both in our retail stores to create consumer engagement, but also on almost all of our collaborations. So as we look at this year, yes, it will certainly grow faster than the overall growth rate that we put out there for the Crocs brands. It will continue to be a high-growth category. Jay Sole: Got it. And how should we think about the SKU count for Jibbitz? I mean, is it -- are you expanding it? Like what do you need to do to sort of continue to expand and amplify that business? Andrew Rees: Yes. The Jibbitz SKU count, I would say, has expanded dramatically. But it comes and goes, right? There are a set of core Jibbitz that continue to exist, numbers, letters, emojis and things that the consumer is looking for on an ongoing basis. Many of the SKUs are seasonal or short term in nature. They're available for a short period of time. They sell through and then they're gone. So that's how we'll kind of continue to manage the Jibbitz business. . You probably also noticed that we're shifting a lot of our kind of offerings to pack offerings. It makes it far more efficient to sell and ship through e-commerce and it also helps our wholesale partners. So we'll continue to do a single digits, but we'll also do a lot more packs. Operator: The next question comes from the line of Susan Anderson from B. Riley. Susan Anderson: Nice job on the quarter. I'm just curious maybe if you could talk about investments that you guys expect to make this year and how you're thinking about SG&A margin in 2022? Anne Mehlman: Yes. Susan, I think what we are going to invest around is really along our cost perspective on our key initiatives we've laid out that are driving growth, which is really around digital China marketing, and then we will ignite all of that with continued innovation around products. And then I will also say we will invest in talent to support all of those initiatives. So that's on the SG&A side from the cost perspective. From the HEYDUDE perspective, the SG&A there is really to put into the infrastructure to allow sustainable growth in the years to come. They've had an incredible growth trajectory. And as we've talked about, they've supported that with very, very low SG&A. So we have some investments we're looking at, and as Andrew talked about in his prepared remarks, very excited that we've already been able to hire some team members of that leadership team. So those are really the key investments. And then just one other point on the HEYDUDE side is a lot of benefit that will sit in marketing this year as they haven't invested a ton in brand marketing and are almost noting into this point. So we will invest there. And we haven't completely given all the rates, but as we closely do and go into Q1 [indiscernible] [Technical Difficulty] seeing strong demand there as you roll those out. And then I'm just curious, are these meaningful to sales yet at all? Or is it really still just about the marketing? Andrew Rees: Yes. I would say the reaction to the collabs that you just announced, plus others that are coming. I would say the calendar is really full for the coming quarters. Carol G did extremely well. Kluis, which was done in partnership with Zappos, has done extremely well. So they both, I would say, outperformed our expectations and 100% sold through in terms of sales success. I would say the quantities around some of these collabs are getting a little bit bigger, but it's really a balancing act between the brand heat, the buzz that we create and revenue. So it's -- I think we feel really good about what we are. Operator: The next question comes from the line of Jim Duffy at Stifel. James Duffy: Absolutely normal 2021. And I wanted to start with a question on the 1Q and fiscal '22 Crocs revenue guidance. Can you speak to assumptions for growth in pairs and ASPs embedded in that guidance? Anne Mehlman: Yes. We haven't provided that at this point in time. Obviously, we have some price increases that we just talked about, and we still expect unit growth. But we haven't given the split at this point in time, Jim. James Duffy: Okay. I'm taking ASP, an 18 percentage point contribution to growth in the fourth quarter. In the first quarter, are you expecting a similar amount? Or is that -- what is it -- just trying to figure out are you actually expecting tariffs growth? And then maybe related to this, does the ASP include attach of Jibbitz? Or is it a pure footwear ASP read? Anne Mehlman: Yes. So the way that we calculate ASP, as we take our total revenue and we divide it by our footwear payers. So we think as driven in addition to our shoes, so we include that in our AFP so that Jibbitz will -- if growth of Jibbitz will impact that ASP growth is the right way to think about it. And then I would just say, contextually for Q4, we had a couple of things happening in Q4 that supported our ASP growth. The first piece was obviously the price increases we took in the U.S. that on our core project in the tertiary products around that. And the second piece is really the pro pull out of promotions and discounts. We've continued to see that. We had it in the U.S., but also Asia and EMEA in Q4. And that tends to be a generally more promotional period with the holiday. And again, we saw a very large pullback of promotion and discounts in Q4 that's unique to Q4, where Q1 tends to be a little bit more of a wholesale quarter. So that wouldn't have as big of an impact in Q1 as it was in Q4. James Duffy: Got it. Okay. I know you don't typically guide by channel or region, but can you maybe provide some view as to the composition of growth do you see versus wholesale expected for the year? And I'm curious for '22 and the Crocs brand. Do you foresee stronger contribution to growth in international markets? Or will growth really continue to be led by North America? Anne Mehlman: I think we see strong growth in all of our markets this year. Again, we were especially excited about EMEAs kind of order booking where that was coming up. I also would say we've seen some really good growth out of a lot of our markets in Asia. So we expect growth in all of our markets and also all of our selling channels. Andrew Rees: Yes. And if you look at the 2021, Jim, you can see really balanced growth across all the channels. So I think the brand is resonating with consumers around the world and the consumers are then able to access the brand through multiple channels. So we feel like the distribution strategy is working well, and we expect to see balanced growth across talents. James Duffy: Great. Then last one for me. You mentioned investment in automation at DCs in the prepared remarks, that sounds interesting. Can you maybe elaborate on that some speak about expected Crocs benefits and when those light manifests in the P&L? Andrew Rees: Yes. We've been investing in automation. I think we talked about this for several quarters. In fact, it's probably a couple of years now. We've invested in automation in multiple DCs. I think the piece in the prepared remarks is particularly around an upgrade of our automation in our Ohio DC also in new automation for our European DC. So it primarily helps your digital business. It's picked a person capability that gives you the greatest benefit on your digital business. Obviously, as you know, digital is a priority for us. So leveraging technology to do that more efficiently and effectively is obviously a sensible thing to do. So we're pleased about that. And we'll certainly be building the cost-saving benefits into our future guidance. Anne Mehlman: Yes, you see, Jim, that's also allowed us to support the big growth that we've been producing over the last couple of years in digital because it allows us to get more throughput, which is obviously a huge benefit as well. Operator: The next question comes from the line of Jim Chartier from Monness Crespi. James Chartier: You mentioned in one of the slides you're seeing increased signs of accelerating demand in Asia and brent. Just curious what signs are those? You mentioned Korea, India kind of standouts there. Why are those geographies taking off? And then what's kind of the expectation for China this year? Andrew Rees: Yes. I think we can measure and see the growth acceleration in some of our, I would say, European and Asian markets through a couple of different dimensions. One is the brand tracking that we do. So we measure brand consideration, brand relevance, et cetera. We see that increasing rapidly in select markets, and we've been able to correlate that to growth in the business historically. So we can see that in the markets that you mentioned, and we can also see that in some key European markets. I would also say, in addition to that, we have very strong order books in those markets. So we have strong order books from wholesale and e-tail customers. So we feel really good about that for the rest of the year. And I will sort of say that's very much the case in EMEA as well. From a China perspective, the China plan and the turnaround that we talked about extensively over the last 2 years, I think, is on track and where we expect it to be. But we do see COVID lockouts, right? So as they get COVID cases in China, I'm sure you're all aware of this, they have a tendency to lock down the city, close all stores and quarantine the population at home. So when that happens, obviously, in that city, it kind of business goes to 0 for a short period of time has been a reopens. So we've seen that through Q4. And frankly, in our expectations assume that will continue through this year. So it's just an interruption to the business that we have to manage. Having said that, we grew China double digits last year and we expect to do the same again this year. James Chartier: Great. And then in terms of the U.S., we've seen tremendous growth in the classic clog for 3 years. Where do you see additional opportunity for that product in the U.S. Andrew Rees: So I would say we've seen tremendous growth in the classic clog globally, not just the U.S., right? It's been definitely strong in the U.S., but we've seen that growth globally. And we continue to see the classic franchise grow, and we've added sandals, but we've also added different versions of the cloud, particularly maybe outdoor orientated, I call attention to. So we continue to see the classic cloud growing with color, with graphics, with height, with new iterations and also, obviously, with collaboration. So I think there's a lot of growth runway in the classic clog. Operator: The next question comes from Steve Marotta from CL King. Steven Marotta: Anne, if you said this explicitly, please forgive me, I missed it. But implicit in your comments, it seems that the price actions that have already been taken, are they expected to fully offset all of the cost increases with the exception of the incremental air freight? So if you -- again, as you look out to 2022 and you see from a raw material standpoint and labor standpoint and other costs with the exception, again, of the incremental air freight, do you see that the price actions that have already been taken offsetting those costs? Anne Mehlman: Yes. We certainly saw that last year, and we more than offset inflation last year. While it's hard to predict sort of the inflationary environment at this point, we do believe that we largely be able to offset inflationary costs through the price actions that we've taken from a Crocs perspective to what we know at this point. Steven Marotta: And would you make those comments inclusive for HEYDUDE as well? Anne Mehlman: We haven't closed on HEYDUDE yet from a transaction perspective. So I think we will obviously take a look at HEYDUDE pricing and as well as kind of underlying inflationary pressures there after we close, and we will come back and talk about that with a little more granularity on our Q1 call. Operator: The next question comes from the line of Mitch Kummetz from Seaport. Mitch Kummetz: I've got a few. Just first one is housekeeping. So when I look at the HEYDUDE projection for this year for like Qs 2 through 4, it looks like it's up $535 million to $575 million, and that would kind of roughly work out to be $180 million, $190 million a quarter. Is that how you see the business playing out? Or is it going to be more lumpy than that because of supply chain or maybe because the business builds over the course of the year? How should we be modeling that HEYDUDE contribution beyond Q1? Anne Mehlman: Right. So what we've said is -- so I'm just trying to follow your numbers because I believe you get on a reported basis this year is going to be 620 to 670. So that's on a reported on a pro forma basis, we said between 700 and 750. Again, I think with HEYDUDE, right? Mitch Kummetz: I took the 620 to 670, and I carved out the Q1, which left me 535 to 575 for the balance of the year. And I'm trying to understand how that balance flows on a quarterly basis, if it's pretty straight line or... Anne Mehlman: Yes. I think, Mitch, at this point in time, we haven't commented on that yet again because we haven't closed the transaction yet, which we will. So as soon as we close the transaction, we'll try to give a little bit more color on how that plays out. I would say just taking a step back, though, at a macro level, when we think about seasonality for due, I would say, it's a little early to tell just because their growth is so strong and continues to grow. It's hard to undersea long-term underlying seasonality into the business. Mitch Kummetz: Okay. And then as far as ASPs go, for several quarters now, you've benefited not only from pricing but also fewer promotions it looks like for '22, pricing is going to continue to be a benefit for you. I'm curious how you're thinking about promotions. Are you assuming a more conservative posture there? Or do you think kind of promotions are sort of net neutral when you sort of look at it on a year-over-year basis? Andrew Rees: Yes. I would say it's our intent to try and maintain a very low promotional cadence like we have established over the last months. Obviously, you do have to look at the competitive environment when we take that into consideration. I think that's our plan. There will still be promotions around some key consumer events, but they'll be very modest in nature. We think that's the right way to proceed. I think that's probably what most brands are thinking. So that's our assumption. Mitch Kummetz: Okay. And then lastly on HEYDUDE, and I recognize that you haven't closed the transaction yet. But can you say kind of what percent of the business are the Wendy and Wale silhouettes. Is that the majority of the business? And I'm also curious as to kind of when you look back over like particularly the holiday season, what was really working for the brand in addition to maybe those 2 kind of key silhouettes? Andrew Rees: Yes. The Wendy and the Wally are very important silhouettes to the brand. They are a big part of the business, and that is one of the things that attracted us to the brand. We believe brands that have iconic silhouettes that resonate extremely strongly with the consumer, like Crocs, are very valuable brands. They have pricing power. They have tremendous traction with the consumer. So '21 is super important. I would say in addition to Wendy and Wally, the HEYDUDE brand has done some nice work with expanding into derivatives, expanding into fleece line, expanding into boots, and those performed very well during the holiday season. So it gives us a lot of evidence and ammunition for our product strategy in the future. And I would say we're working very productively on that right now. Operator: And the final question will come from the line of Sam Poser. Samuel Poser: I just want a quick follow-up to my earlier question. Historically, your gross margin in -- over the last few years, your gross margin in Q2 has been 650, 700 basis points higher than Q1. Is there anything that would change that this year sort of for the core Crocs business. From what I understand, HEYDUDE runs a higher gross margin, so that should actually be added to . Anne Mehlman: Yes. We haven't published HEYDUDE gross margins yet. But for Q2, I would say just for the core Crocs brand, we've a little bit of a shift from revenue, right, from like an EMEA perspective is the wholesale order book shifts around. The reason why your Q2 margins are so much higher because Q1 is such a heavy wholesale quarter. So that is sort of a channel mix issue. So -- but I still expect structurally that those, as we talked about before, that those structurally, Q2 will still be higher than Q1, and that dynamic still exists this year as well. Samuel Poser: And the shift. You said initially, the shift from EMEA is from Q1 to Q2 or from Q1 to Q2 and then Q2 to Q3 of that wholesale business? Andrew Rees: The only information we provided is from Q1 to Q2. Samuel Poser: Okay. And can you give us some indication of what -- well, we have it from last year. All right. Operator: This now concludes our Q&A session. Anne Mehlman: Thank you. Operator: Thank you for joining today.

Operator: Ladies and gentlemen, thank you for standing by and welcome to Crocs, Inc. Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Cori Lin. Corinne Lin: Good morning, everyone, and thank you for joining us today for the Crocs third quarter 2021 earnings call. Earlier this morning, we announced our latest quarterly results and a copy of the press release may be found on our website at crocs.com. We would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the Safe Harbor provisions of the federal securities laws. These statements include, but are not limited to statements regarding potential impacts to our business related to the COVID-19 pandemic. Crocs is not obligated to update these forward-looking statements to reflect the impact of future events. We caution you that all forward-looking statements are subject to risks and uncertainties described in the Risk Factors section of our Annual Report on Form 10-K. Accordingly, actual results could differ materially from those described on this call. Please refer to Crocs' Annual Report on Form 10-K, as well as other documents filed with the SEC for more information relating to these risk factors. Adjusted gross margin, income from operations, operating margin and earnings per diluted common share are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, Chief Executive Officer; and Anne Mehlman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I will turn the call over to Andrew. Andrew Rees: Thank you, Corinne and good morning, everyone. As you saw from our release this morning, we achieved exceptional top-line growth and industry-leading profitability during Q3 of 2021. Our extraordinary performance in spite of the ongoing COVID-19 pandemic, and widespread in supply chain disruptions demonstrates the strength of the Crocs brand and product offering globally and reinforces the confidence we have in achieving our short and long-term goals. Our team’s ability to navigate these disruptions for the last two plus years has been and continues to be a key ingredient across the success. Anne will review our financial results in more detail shortly, but here are few highlights from the third quarter of 2021. We experienced broadbased growth with total revenues up 73% versus prior year to $626 million and doubling from 2019. DTC grew 60% versus prior year and 90% versus 2019 to represent 51% of revenues. Digital sales grew 69% achieving double-digit growth in all regions and representing 37% of total revenues. Adjusted operating income more than doubled in the quarter to $205 million versus $75 million in 2020 with adjusted operating margins expanding to an impressive 33%. Finally, we committed to becoming a net zero company by 2030 and began production of bio-based products that go on sale in 2022. Let’s now turn our attention to the topic that I know is top of mind for many of you. The recent factory closures in Vietnam due to COVID-19 and broader global supply chain challenges facing all industries. We first want to recognize our factory partners for their extraordinary efforts in a difficult time and for protecting the health of their employees. We appreciate their ongoing partnerships. Regarding the impact of the Crocs business, during the third quarter, some of our factories in Vietnam were closed for several weeks and they began reopening earlier this month. As of today, most of our factories in Vietnam are operational although they are in various stages of restarting. We expect the situation to remain fluid as the vaccination rates increase in the country. We are pursuing all of the actions you might expect to mitigate the impact of this temporary disruption. First we are shifting production capacity to other countries including China, Indonesia and Bosnia where possible. We also have a unique advantage and that we can ramp factory production quickly due to the limited inputs and simple configuration of our products. Secondly, by prioritizing top selling products and narrowing SKU counts, while still preserving newness we are able to improve factory throughput. Thirdly, we are aggressively leveraging airfreight to bring in units for 2022 spring summer selling season. In the United States, we are planning to reduce our dependency on West Coast ports by adding East Coast trans shipment capabilities to reach our major U.S. customers. In addition to maximizing the supply, we are strategically allocating units. We will prioritize our most important channels, e-commerce, e-tail and our major wholesale customers. As we all know, this situation is very fluid. But I have full confidence in the supply chain team and our factory partners to manage through this temporary disruption. Also I want to emphasize that these disruptions will not distract from our long-term strategy that we believe will propel the Crocs brand to $5 billion plus over the next five years. Now let’s turn back to the third quarter operating highlights. From a channel perspective, global DTC revenues, which include revenues from e-commerce and company-owned retail stores grew by 60%. Wholesale, which includes brick and mortar, e-tail and distributors grew revenues 88% and 111% compared to 2019. Digital sales grew 69% and an impressive 129% versus 2019. All channels benefited from strong traffic, higher pricing and fewer promotions. Execution against our product growth strategy is going well. Clog sales were outstanding, increasing 91% from a strong 2020 to represent 82% of footwear revenues versus 72% last year. We continue to innovate and are excited about our first-line product, which is on trend for holiday. Recent Clog collaborations with Balenciaga, Hidden Valley Ranch and Sankuanz in China amongst others continue to excite fans and elevate the Crocs brand. We continue to raise awareness for sandals including the new collaborations such as the one with Benefit Cosmetics that featured both the Clog and the two-strap sandal. Sandals grew by 15% in the quarter and 31% year-to-date as we concluded the sandal season in many parts of the world. Sandals represented 30% of footwear sales for the quarter versus 19% last year due to the strength of Clog growth. Jibbitz sales once again more than doubled for the quarter versus 2020. We continued to create excitement through a fresh assortment including recent Jibbitz partnerships for social media personality Bretman Rock and legendary rock brand Grateful Dead. Consumer demand for our products is high and we remain confident in our growth trajectory. We are raising the low end of our full year revenue guidance and now expect 2021 revenues to increase by between 62% and 65%. We are also raising our 2021 adjusted operating margin guidance from approximately 25% to approximately 28% as we benefit from favorable gross margins, SG&A leverage and the underlying strength of our brand. I am pleased to share that our brand is extraordinarily healthy. And this is a testament to our product and marketing teams around the world to continue to innovate and raise the bar. In our 2021 Brand Strength Survey, which measures participants’ views about the Crocs brand globally, results were up double-digits for each of our key metrics, brand desirability, brand relevance and brand consideration. We’ve now averaged double-digit growth across these metrics for five consecutive years. Another indicator of brand strength is the Piper Sandler Fall 2021Taking Stock With Teens survey. While the Crocs brand advanced into all teen preferred footwear rankings to the number 6 spot, up from number 9 last year and number 34 just five years ago. Supported by the health of our brand, wholesale bookings for the first half of 2022 have been exceptionally strong. However, given the supply constraints we have just discussed, we have limitations around how much demand we can fulfill for the first half of the year. Despite this temporary supply chain disruption, we are confident that we will be able to exceed 20% revenue growth for 2022. Before I turn the call over Anne, I want to thank the entire Crocs organization. We are incredibly proud of the health of the Crocs brand and business. Our results and the confidence we have in our long-term vision are due to a dedicated and talented colleagues, who bring the Crocs brand to life every day. I want to thank them for everything that they do. With that, Anne will now review our financial results in more detail. Anne Mehlman: Thank you, Andrew, and good morning, everyone. I’ll begin with a short recap of our third quarter results. For reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to our press release. As you’ve already seen, we had an outstanding third quarter. We delivered broad based revenue growth across all regions, channels and product pillars. Gross margin expansion and SG&A leverage led to another quarter of best-in-class profitability and increased earnings per share. Third quarter revenues increased to $625.9 million, up 72.2% on a constant currency basis, compared to the third quarter of 2020 and up 100.1% compared to the third quarter of 2019. During the third quarter, we sold 25.4 million pairs of shoes, which represents a increase of 50.6% over last year and 60% versus the third quarter of 2019. The average selling price during Q3 was $24.42, a year-over-year increase of approximately 14.9% driven by price increases, promotional strategy and product mix. Now, let’s shift our view by results by region beginning with the Americas, where Q3 revenues are $453.9 million, increased 94.8% against the prior year. DTC revenue growth in the region was up 78.3%, driven by higher traffic conversions and average transaction value. Thirdquarter digital penetration increased to 32.8% from 30.8% last year and rose significantly from 26.9% in 2019. Wholesale growth was 117.6% versus prior year and almost triple versus 2019 as we continue to see strong sell through with our best partners. In Asia, Q3 revenues were $83.6 million representing an increase of 21.2% on a constant currency basis from last year. India, posted triple-digit revenue growth versus last year, while China and South Korea both grew revenue double-digits, offset by distributor sales in Southeast Asia and a conservative Japanese consumer. Digital revenues grew 11.3% versus prior year and 30.5% versus 2019. Digital penetration was 38.1% in the third quarter compared to 42.3% last year and 32.9% in 2019. EMEA revenues of $86.3 million increased 42.8% on a constant currency basis with growing brand heat, offsetting global logistics disruptions. DTC revenues increased 22.1% with strength driven by higher traffic. Wholesale revenues grew 56.9% fueled by strength in all sub-segments, e-tail, distributors, and brick and mortar. Digital growth was a standout growing 37% versus prior year and 85.9% compared to 2019. Digital penetration represents 56.9% of EMEA revenue this quarter versus 59.8% last year and 49.6% in Q3 2019. Adjusted gross margins for the third quarter were 64.2% an improvement of 680 basis points from last year’s 57.4%. This improvement was driven primarily by price increases in fewer promotions and discounts, offsetting higher freight cost associated with global logistics disruptions. Currency favorably impacted margins by approximately 65 basis points. During the third quarter, our adjusted SG&A improved 520 basis points to 31.4% of revenue versus 36.6% in last year's third quarter. The decrease in adjusted SG&A rate was achieved while investing approximately $60 million versus prior year, primarily in marketing and talent to support our strategic initiatives, digital, sandals, China and innovation. We will continue to make investments to support the long-term trajectory of our business. Our third quarter adjusted operating income more than doubled to $205.1 million versus $75.4 million last year with robust operating profit growth in all regions. Adjusted operating margin rose from 20.8% last year to 32.8% this year benefiting from gross margin expansion and SG&A leverage on strong sales growth. Third quarter non-GAAP diluted earnings per share increased to $2.47 from $0.94 in the same period last year. Our liquidity position and balance sheet continue to remain strong. We ended the third quarter with $436.6 million of cash and cash equivalents and $686 million in borrowings with an additional $500 million of borrowing capacity on our revolver. In August, we once again opportunistically took advantage of historically low interest rates issuing $350 million and 4.125% senior unsecured notes due 2031 with share repurchase as the primary use of proceeds. Throughout the quarter, we repurchased approximately 1.1 million shares of our common stock in the open market for $150 million at an average price of $142.17. As previously announced, we will repurchase an additional $500 million of shares by the end of 2021 via an accelerated share repurchase for a total of $1 billion of share repurchases in 2021. Our shares outstanding as of October 14, 2021 were $58.8 million including the partial impact of the ASR. Our inventory balance at September 30, 2021 was $212.5 million, up from $174.1 million in the third quarter of last year. Inventory was lean throughout Q3 and we ended the quarter with higher in transit inventory due to the global logistics challenges. Turning to the future, I would like to share our current outlook for the balance of 2021. As Andrew outlined earlier, the global supply chain remains volatile. For 2021, we are raising the low end of our revenue guidance expecting revenues to grow approximately 62% to 65%. This implies a two year growth rate of approximately 82% to 86% and a three year compound annual growth rate of approximately 35% to 36%. We anticipate strong growth for fiscal 2021 in all regions and channels. However, fourth quarter revenues in EMEA will be disproportionately impacted by the Vietnam supply disruption as much of the region’s inventory is sort there due to favorable duties. Today, our 2021 operating margins have benefited from our high gross margins and ability to leverage SG&A. As a result, we are raising our full year 2021 adjusted operating margin guidance by 300 basis points to be approximately 28%, which represents significant expansion from 18.9% in 2020. This margin guidance is below our 2021 year-to-date margin due to higher global logistics cost and continued investment in SG&A in the fourth quarter to support our future growth. Looking to 2022 as Andrew mentioned, we expect revenue growth in excess of 20% for the full year. We plan to invest approximately $75 million in airfreight ahead of our 2022 spring summer selling season. Despite elevated supply chain costs and significant investment to fuel our growth, we expect operating margins in 2022 to be comparable to full year 2021 guidance excluding the incremental airfreight. We will resume our normal cadence of providing more detailed fiscal year guidance on our fourth quarter earnings call. In summary, we continued to deliver outstanding revenue growth and profitability, while managing through supply disruptions, opportunistically strengthening our balance sheet and investing in our future growth. At this time, I’ll turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. With three quarters of the year behind us, we’ve achieved tremendous success fueled by the strength of the Crocs brand and our superior execution. We are navigating the ongoing global supply chain disruption and have utmost confidence in our ability to deliver upon our short and long-term goals. There is no better team to navigate through this temporary disruption and lead Crocs to the next stage of our growth. Operator please open the call for questions. Operator: [Operator Instructions] Your first question comes from the line of Erinn Murphy with Piper Sandler. Erinn Murphy : Great. Thank you. Good morning. Good to hear about the progress Andrew, in Vietnam and just some of the mitigating factors you are taking on the supply chain. I guess first, could you just remind us, how big is Vietnam for you today? And where do you see your manufacturing mix evolving over the next 12 months? And then, secondly, maybe kind of honing a little bit more on the fourth quarter, how easy is it to get your product to market now? It sounds like Europe is going to be a little bit more challenged. And then, is there products that you are seeing stuck out on the West Coast ports right now? Are you needing to accelerating airfreight specifically for holiday? Thanks. Andrew Rees: Okay. Thank you very much. Lot of questions there. So perfect. So, Vietnam, yes, Vietnam is a significantly portion of our manufacturing base. It’s actually about – it was initially planned to be at 70% of our manufacturing base for 2021. It will be a little less than that as we do the diversification we’ve talked about. We’ve nine factories that are spread between southern, mid and northern Vietnam. As we articulated in the prepared remarks, the factories are now largely open and in various stages of reopening. One thing that we learnt from COVID I think is really important to people to understand, our shoes are really simple and so ramping up factories could be very, very quick. If you think about the classic Clog, it has three components, two of which are made onsite. So you don’t have a lot of external logistics to be able to get started. And so we think we are confident in terms of ramping manufacturing. We will continue to diversify our manufacturing base. I think Indonesia was our most immediate target. We have two factories in Indonesia that will be online by the end of the year and they will ramp very quickly next year. We have a major facility planned in India in a year or so. So, we will continue diversification and during the shuffling of the supply we will obviously move some manufacturing back to China in the short-term. So, our team is really good at this. We have great relationships with our factory partners. So we feel really confident where we are. Obviously, the closure of the factories was disruptive, but I would also emphasize it’s a temporary disruption. In terms of flow of goods for Q4, was the second part of your question. Erinn Murphy : Yes. Andrew Rees: It’s difficult, right. So, yes, we definitely have product partnerships outside of Long Beach. We have already diversified our inbound ports. So we’d already pushed products to the northern parts on the west coast to east coast ports et cetera. So we had already done a good amount of that. And we think we have kind of reasonable line of sight to everything that’s going on and I would say we’ve incorporated all of that into our guidance. You highlighted Europe. Europe is definitely more impacted, because you may be aware that Vietnam is duty free into Europe. So a lot of the production for Europe is coming out of Vietnam. So that’s a little bit more impacted. We think that’s a temporary impact. Our trajectories, our bookings in EMEA are being extremely strong, but will be impacted in Q4. And I think the last part of your question was about airfreight. So, we don’t anticipate using significant airfreight in Q4. Most of the products that we will sell in Q4 is already here or inbound. So there will be a little bit but not significant. Erinn Murphy : That is so helpful. Thank you, Andrew. And if I can just add one for Anne, on your outlook for next year, could you just maybe help us with the shaping of first half versus second half, just kind of marrying the comments of supply chain with the strong wholesale spring summer 2022 order book? Thank you. Anne Mehlman : Sure. Hi, Erinn. So, our revenue for 2022 as we said, it’s going to be over 20%. So, we are excited to be able to kind of provide that visibility a little bit earlier. I will say that there is a lot of variability right now in transit times per what Andrew just talked about with supply disruption as well as extended freight times. So that makes quarter-to-quarter timing pretty difficult to anticipate this far out. Clearly, the front half is impacted by supply constraints. But I will say our current plan is not significantly back half weighted and then while we think it will be more covered on our full year Q4 call. Erinn Murphy : Excellent. Congratulations. Andrew Rees: Thanks, Erinn. Anne Mehlman : Thanks, Erinn. Operator: Your next question comes from the line of Jonathan Komp with Baird. Jonathan Komp : Yes. Hi. Can you hear me? Sorry about that. Andrew Rees: Yes. We got you, Jonathan. Jonathan Komp : Okay. Great. I wanted to ask about the ASP, the pricing component accelerated again in the fourth quarter. Could you maybe just touch on, from a product perspective, what’s driving that? I noticed line Clogs maybe had a higher pricing increase, and a lot of the new product looks at like a premium price point. So, you could maybe comment on the ASP drivers and then as we think into 2022 given the inflationary environment, how should we think about ASP given the unique input exposure you have? Anne Mehlman : Yes. There is a couple of impacts on ASP. So, it’s a very good question. So, the biggest impact continue to be on ASP and kind of have been all year. We did take price increases as you mentioned to price increases on our line Clog as well as our traffic in the U.S. and other places. So that is an impact. So the mix shift at Clogs that we talked about in prepared remarks, as well as that pricing help supported – help support ASP and then also the pullback in promotions and discounts that we’ve seen broadly. Those are the biggest drivers from an ASP perspective, I would say, on the slightly negative side is a little bit of mix impact which has been offset. Going into next year, from an inflationary perspective, we do anticipate some inflation, certainly we’ve seen that we’ve been pretty proactive about taking price ahead of what we kind of anticipated from an inflationary environment. We do have some price increases that we took this year that will flow through into next year and we are proactively looking at other measures and think that we can do to kind of offset any inflationary pressures. Jonathan Komp : Okay. That’s really helpful. And maybe, as a follow-up, just at a high level, thinking about gross margin next year. You highlighted the freight – the airfreight, I think you said mostly you are ahead of spring summer. So maybe that’s mostly in the first quarter but if you could give any more color to the timing of the airfreight charges? And then, from an underlying gross margin perspective should we expect a significant waiting when we think about the full year 2022 performance? Thanks. Anne Mehlman : Yes. So, from a airfreight perspective, I would say that’s really front half. I don’t really want to break down by quarter, but if you think it’s both Q1 and Q2, so, again, we will try to give you more visibility as we get a little closer. And then, from an overall kind of margin profile, we didn’t guide that specifically. As we just mentioned, we are seeing some inflation. This year it’s been primarily around freight and wages and what we see happening is that freight and wages in our distribution centers, that will continue through next year as well as some of the resin impact we expect to come on. However, that’s incorporated in our overall 28% operating margin guidance excluding the airfreight. So, as we just mentioned, we also have some price increases falling through and we are looking at other things. So, we will try to give you again more color for next year on our normal cadence on our Q4 call. Jonathan Komp : Okay. That’s very helpful. Thanks again. Andrew Rees: Thank you, Jonathan. Operator: Your next question comes from the line of Laura Champine with Loop Capital. Laura Champine : Thanks for taking my question. It’s sort of a follow-on on the last one. Anne, can you comment more specifically about the cost increase of using the new more sustainable resin in your product? And talk about whether you would have a concurrent price increase for the products or what your philosophy is around that? And then secondly, on the new formulation, does that changed the wear profile of the product at all? Andrew Rees: Okay. Thank you, Laura. So let me take those kind of reversed order. So, the new formulation really uses the new ingredient, right. So, it’s the same ingredient, but the ingredient is derived from a different source, well, sustainable source. So, the wear profile, the look and feel and the comfort of the product is completely unchanged. Right, so the consumer would not notice the two products side-by-side, would not notice difference between these two products side-by-side. So I think that what it absolutely kind of fantastic part about how we are approaching this. In terms of the cost increase, yes, I think we articulated when we made this announcement that the bio-based resin is more costly than the resin that we use today. But we are blending it in. Right, so, there is a blend of the bio-based resin in essentially every product that we make. And so the cost increase for next year will be - the cost impact for next year frankly is minimum. As we look forward into the future, it will have more impact. But we are confident we can offset that through efficiency gains and/or potential price increases in the future. So, but we do not intend to upcharge the consumer for the bio-based products. And we will not be increasing prices to the consumer based on the increase in the bio-based resin purely. We will be looking at sort of the overall health of the brand. That makes sense? Laura Champine : Yes. Thank you. Anne Mehlman : Thanks, Laura. Operator: Your next question comes from the line of Sam Poser with Williams Trading. Sam Poser : Good morning. Thank you for taking my questions. I’ve got a few. Well I just read them off. One, what - you talked about the additional $75 million in airfreight for next year. What is sort of the normal – could you give us some idea about the normal airfreight is and some more information there? Number two, what percent within Vietnam, how exposed of those nine factories, how many are in the south? And what kind of production comes out of the south? And then, I noticed in your stores, what is the change in the regular full price selling in your outlets this year versus past years? And how much, it appeared to me that you are seeing a lot more full price selling in the outlets that I anticipated. And wondered how that’s impacting margins and how do you see that going forward? Certainly I have a ton more, but I’ll just leave it there. Anne Mehlman : Sure. So, I’ll start answering your first one. So, our normal airfreight is certainly less than $10 million. We don’t tend to spend a lot of airfreight. We actually spend a little bit more this year than we did last. And that’s – it will be between $8 million to $10 million. So it’s kind of in the normal runrate for this year. Andrew Rees: Great. And so, Vietnam, look, the majority of the factories are in the south, some as you expect with the concentration of production facilities down there. We are obviously not going to kind of break out the size of each facility, but I would say the majority have been in the south. The north and the mid factories have continued to operate through this whole period. Although we did see some disruption based on COVID cases and labor availability. I think the only other piece of color I would say is, as the factories in the south the reopening, we are seeing the labor coming back pretty effectively. So we are pretty confident about getting those facilities back online quickly. And then you asked about full price selling in our stores. Absolutely, as you kind of looked at the selling season, especially through the summer, which obviously is a peak period for us particularly in the outlets with all of the tourist traffic. Yes, we were a lot more full priced than we were last year. So, we did see a nice margin uptick in the stores. You could see that’s reflected in our overall margins have been extremely strong and I think I’ve articulated very clearly that that was due to reduced promotional activity or one of the key components which reduced promotional activity and in-store has been an important component of that. Sam Poser : And you anticipate that the outlet stores will continue to run at a more regular price rate, which should be really, really good on your leveraging your rents and everything else compared to your full price stores? Andrew Rees: I would say, yes. Look, I think we are heading into Q4, which is a more promotional period. There are some key periods in Q4, Black Friday, Cyber Monday, et cetera when we feel like some promotional activity is required by the consumer and it would be probably it’s full hard not to participate in that to some degree. But I think the depths and breadths will be less for sure and we are not planning to return to a higher promotional cadence anytime soon. We see demand for the brand far ahead of our ability to supply at the stage. Sam Poser : And then one last thing, when will your factories in south Vietnam do you think be at full capacity? And where are they today? If you can give us some kind of color there? Andrew Rees: Yes. That’s too hard to say, Sam. I mean, I think, we are certainly going to see – we are anticipating that we see some on again off again type of situation. We are not anticipating that they ramp up. Our baseline projection is do not anticipate they ramp up to full production in a number of weeks and then stay there for the rest of its eternity. We think this is going to be volatile. We’ve incorporated that into our expectations and into our guidance. Sam Poser : Thanks very much. Continued success. Andrew Rees: Thank you. Anne Mehlman : Thanks, Sam. Operator: Your next question comes from the line of Susan Anderson with B. Riley. Susan Anderson: I guess, I want to ask about the boots for the fall if there is any early reads on the boot offering that you have out there, particularly the personalizable ones? Andrew Rees: Yes. I would say, boots is a very, very minor part of our strategy and product offering. As we look at the full, we are actually primarily focused on line classic or lined product. That’s where we really can deliver I think very strongly on kind of consumer expectations as with the volume of our businesses. I would say, lines have been performing extremely well. We are very satisfied with the performance of our boots but it’s really a very minor part of what we do. Susan Anderson: Great. And then, I am curious about just the Jibbitz growth in the quarter. I am not sure if you mentioned that and then also how much more space did you gained for Jibbitz if that outlet had closures for the quarter. Andrew Rees: Yes. I think what we said is the Jibbitz doubled again in the quarter. I think, if you remember back at our Investor Day presentation, we said it was 6% of our overall business. In terms of wholesale presentation, we continue to gain wholesale presentation for Jibbitz, I would say across the globe in this country in Western Europe and also in Asia. So that is an important part of our growth in Jibbitz. I would also say that our online sales of Jibbitz have shifted more from kind of singles to packs, which has also allowed us to accelerate growth in terms of digital sales of Jibbitz too. Susan Anderson: Great. And then, lastly, maybe if you could just talk about what you are expecting in terms of mix of wholesale to DTC? It seems like wholesale is like reaccelerating now, I guess, DTC is still growing, but do you expect that to shift back a little bit more to wholesale next year? Anne Mehlman : Yes. Thank you for the question. I think, when we think about next year, as I mentioned, there is still a lot of unknown with just kind of the variability of transit times and all the things that we are laying out. As we talked about in the prepared remarks, we are seeing really strong wholesale bookings, as well as we are really confident in the consumer demand for a product. But I don’t think we are ready to kind of give that break out. Yes, it’s still pretty early. So we are happy to provide more color commentary to get a little closer to the year next year. Susan Anderson: Great. Okay. Thanks so much. Good luck with this holiday. Anne Mehlman : Thank you. Andrew Rees: Thank you. Operator: Your next question comes from the line of Steve Marotta with CL King. Steve Marotta: Good morning, Andrew, Anne and Cori. Anne, I have a few questions for you. Could you please disassemble what the in transit inventory is in the third quarter of this year versus last year? And the follow-up is, can you talk about price increases in the first half of 2022 on a like-for-like basis versus pricing in the first half of 2021. Thank you. Anne Mehlman : Sure. So, yes, in the quarter, we grew roughly at 73%, inventory grew 22% and all the growth was in transit. So, and that’s really just a reflection of the extended transit times that we’ve experienced. I think we managed it really well trying to keep our inventory really in stock especially in our strategic channel including our own e-commerce channel. And then, switching over from a price increase first half 2022 versus first half 2021, so we did take the biggest kind of flow through that we talked about is the price increase we took for wholesale that has a flow through to first half of 2022 yet we’ll be flowing through. And then we also have some price increases we took internationally. That will flow through in the first half of 2022. Steve Marotta: Okay. I’ll take the balance offline. Thank you. Andrew Rees: Thank you. Operator: Your next question comes from the line of Jim Chartier with Monness Crespi. Jim Chartier: Good morning. Thanks for taking my question. For next year, how should we think about growth by product category in the region? Should we still expect Clogs in the Americas to grow faster than the overall? Or should we start to see the shift towards sandals and – next year? Andrew Rees: Yes. Thanks, Jim. As we look at next year, we still expect Clog growth to be very strong. So we are still seeing tremendous growth in bookings in our Clog business. I would say, we are anticipating that the Americas will be strong, but we also think the international business will accelerate. And then, we think sandal growth will be – will improve hopefully but it’s – that’s kind of a smaller piece of the business. So, if we think about our five year plan in terms of growing our sandal business, we definitely think we are on track for our long-term trajectory. I am confident about the growth of that category. Jim Chartier: Great. And then, just on the store openings this year in Asia, where have those stores been open? Have you started to open up any new stores in China? Thanks. Anne Mehlman : Yes. That’s a great question. The vast majority of the store openings in Asia have actually been in China. So it’s split between some outlets that we took back in Beijing and then simple price stores within eastern China. Jim Chartier: Great. Thank you. Operator: Your next question comes from the line of Jim Duffy with Stifel. James Duffy: Thanks and good morning. I have a couple questions. I want to start just on customer activity in the D2C data file. Can you shape the composition of sales to existing customers versus customers that are new to the data file? And maybe speak about growth of that data file? Andrew Rees: Yes. I mean, we don’t break that out in a lot of detail, Jim. It’s just not how we go to market. But what I can tell you, obviously we do analyze that information. What I can tell you is that, the growth we are seeing in DTC is frankly from both. It’s from new customers and also increased and repeat purchasing from existing customers. As we look at the – and obviously with the acquisition of those new customers our underlying data file is growing extremely well. I would also add that some of our call out of activity and some of the marketing activity we do allows us to capture consumers very effectively in terms of when they are in a queue looking for a call out while they enter an auction as you might have seen, we’ve moved some of our call outs to an auction type of process. That also is very effective in terms of increasing our consumer data file. So, we feel very confident and optimistic about the consumer activity that we see both online and in-store. James Duffy: Thanks for that. And then, Andrew, I wanted to ask about wholesale orders, clearly retailers very anxious to get more products for spring. I am curious the measures you have in place will help you guard against the risk of over inventory in the channel, well those be stage deliveries, you are mounting inventories in the channel. I recognize the orders are strong, but just talk about your thought process for managing through that as the year unfolds. Andrew Rees: Yes. I mean, I think, we talked about this a few times. I think we’ve really stepped up our brand health and inventory management activities. We looked very closely with all of our major wholesale partners around what they are ordering, how much they are ordering, when they are ordering it. We monitor sell-throughs extremely close as you would expect us to do. And some of our key products frankly are really on allocation across those partners. So, we make sure we have the right product in the right place. So, I’d say, we are very much on top of that. And do all of the things that you kind of frankly expect us to do to make sure that I think that the biggest problem or the biggest thing that any brand has to be aware of in making sure that their inventory is fresh, inventory is turning in all the channels and if you just look at our overall inventory efficiency and our turn rates I think they are best-in-class. Anne Mehlman : Yes. And, James, just one thing to add there as we touched in our prepared remarks we do see a really strong wholesale order book for next year. We are not going to be able to fulfill all the demand that’s in our wholesale order book just given Vietnam production in the first half and the impact. Even though we are airfreighting and we are projecting really strong growth for next year. We will still be constrained from a wholesale demand perspective. James Duffy: Helpful. Thanks, Anne. And then, I wanted to ask you if you could provide a little more color on the components of gross margin improvement. You got 65 basis points from currency. How would you split the rest of the contributors to that gross margin improvement? And I am particularly curious about the benefit to gross margin from Jibbitz mix. Any color you can provide there will be helpful. Thanks. Anne Mehlman : Yes. The biggest overall benefit to gross margins are really have to deal with the pullback in promotions, as well as price increases. So, that’s kind of the largest share. I would combine those two in a bucket. Jibbitz mix is also a piece of it, but price increases and promotional strategy are the largest followed by product mix and Jibbitz share. James Duffy: Great. Thank you. I’ll leave it at that. Andrew Rees: Yes. Thanks. Operator: Your next question comes from the line of Jay Sole with UBS. Jay Sole : Great. Thank you so much and thanks for taking my question. Andrew, I just want to maybe take a step back as questions about pricing and channels and just if you think about 20%, exceeding 20% growth next year on top of this year where growth is going to be in the mid-60s at least, how do you think about what’s – what gives you confidence to give an outlook for next year at this point here in October, versus normally in February when you do it, obviously the wholesale order book sounds really robust. But can you maybe just talk about what strategies you are using to continue to drive growth on top of big growth and maybe which consumer groups are really you are targeting to increase for sales and just continue to increase brand relevance? Thank you. Andrew Rees: Yes. Yes. Excellent question. So, if we step way back, I think what we are seeing is, very strong brand trajectory, right. We talked about that a little bit in prepared remarks. We monitor brand relevance, consideration et cetera and we’ve seen double-digit increases in that sort of five years in a row, right. So, as we look at our brand relevance and our brand trajectory, and that’s frankly not just in the U.S. we are looking that in all of our key countries. We are looking at in Europe. We’re looking at in China, Korea, Japan, et cetera. So, we will see continued acceleration of brand relevance, which allows us I think a great deal of confidence that we can continue to scale the brand in many parts of the world, right. If you look at our recent success, in our recent trajectory, it’s been heavily driven by the United States. We’ve seen extraordinary growth here in the United States really for three years in a row now despite the pandemic. As we look to the future and as we talked about in our Investor Day, we really see that growth accelerating outside of the United States. So in our EMEA business, we are seeing very strong traction this year. We anticipate that continuing with a temporary disruption in Q4 of this year. And then, we also see Asia is our biggest long-term potential with giant markets available to us in, firstly China, but also Japan and Southeast Asia which is essentially been closed down during this time period. So, it’s brand trajectory. It’s growth opportunity around the world. It’s kind of the two key factors. And that’s what really underpins our $5 billion in the next five years in terms of our overall growth. Then I’d layer on top of that, bookings. As we look at wholesale bookings as we book into the first half of next year, we are clearly seeing demand way beyond what we are able to supply given some of the supply disruptions and just all of the overall scaling about supply chain. So, we think we can solve that over time. But we can’t solve that in a short term. So, I knew that’s what gives us the confidence to be able to give you the kind of 20% plus revenue growth into next year. The rate limiting factor for next year is really supply. And then I think to one of the earlier questions we do remain very vigilant and monitor closely the sell-through of that product. The last thing that we want to do is, is create some negative momentum for the brand by over-inventorying any of our particular channels. Jay Sole : Got it. That’s very helpful. Thank you, Andrew. Operator: Your next question comes from the line of Jonathan Komp with Baird. Jonathan Komp : Thanks. Two quick follow-ups if there is time. One, tacking out of the prior question and thinking back to the Investor Day and hitting the $5 billion of revenue, your current ASP, I mean that would require close to $200 million pairs a year. So, just any broader context as we think about that five year projection. How you get comfortable with those types of volumes? Andrew Rees: Yes. I mean, look, it does imply, I think we talked about that explicitly, I think at Investor Day. We do see some ASP growth over that timeframe, but still the biggest driver of the growth will be pairs. And what I would say is that you just look at other brand, then you look at the availability of production, it requires forethought and planning and it requires anticipation. But there is absolutely available capacity to be able to produce those kind of pairs. And partners that are willing and able to and frankly make good money out of producing those pairs. So they are anxious to support us and put – and stand out new facilities. So we don’t really have any huge concern about that. It’s definitely something that we feel very confident we can deliver against. Jonathan Komp : Okay. And then, Anne, maybe one follow-up, I know at Investor Day, you talked about roughly a flat gross margin over time looking against the 2021 level. It looks like gross margin obviously is trending higher closer to 60% or a little above for 2021 here. So, is that sort of the new bar you think is sustainable going forward? Or do you think over that five year horizon, you will get back some gross margin or how should we think about that? Anne Mehlman : Yes. I think where we specifically talked about to you for – our Investor Day is that we are comfortable with the 26% adjusted operating margins over the long term and 26% we are – and I think still that’s best-in-class. I think as far as the pieces, what we’ll try to do is, update you guys more full year on each of the initiatives and how that’s playing in. So, I would say, that 26% operating margin guidance over the long-term still stands. Obviously, next year we guided higher excluding the airfreight of 28%. Jonathan Komp : Okay. Fair enough. Thanks again. Anne Mehlman : Thank you. Andrew Rees: Thank you. Operator: And at this time, there are no further questions. I would now turn the call back over to management for any closing remarks. Andrew Rees: I just want to conclude by thanking everybody for their ongoing interest in our company and thank you very much. Operator: Thank you. That does concludes today’s conference call. We thank you for participating. You may now disconnect.

Operator: Good day and thank you for standing by. Welcome to the Crocs, Inc. Second Quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Cori Lin, please go ahead. Corinne Lin: Good morning everyone and thank you for joining us today for the Crocs second quarter 2021 earnings call. Earlier this morning, we announced our latest quarterly results and a copy of the press release found on our website at crocs.com. We would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the Safe Harbor provisions of the federal securities laws. These statements include, but are not limited to statements regarding potential impacts to our business related to the COVID-19 pandemic. Crocs is not obligated to update these forward-looking statements to reflect the impact of future events. We caution you that all forward-looking statements are subject to risks and uncertainties described in the Risk Factors section of our Annual Report on Form 10-K. Accordingly, actual results could differ materially from those described on this call. Please refer to Crocs' Annual Report on Form 10-K as well as other documents filed with the SEC for more information relating to these risk factors. Adjusted gross margin, income from operations, operating margin and earnings per diluted common share are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us today on the call are Andrew Rees, Chief Executive Officer and Anne Mehlman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I will turn the call over to Andrew. Andrew Rees: Thank you Corinne and good morning everyone. Our Q2 results were exceptional, as we continue to see strong demand for the Crocs brand globally. Our confidence in the strength of our brand is also reflected in our raised 2021 guidance. Looking beyond this year, we're announcing that the Crocs brand will have net zero emissions by 2030. We will raise our already low emission footprint per shoe and enable us to provide comfort without carbon to our fans worldwide. I'm excited for our future and I'm confident we can deliver sustained highly profitable growth while having a positive impact on our planet and our communities. Turning to the highlights from the second quarter of 2021. Revenues nearly doubled versus prior year to $641 million and increased 79% from 2019. Revenue growth was strong across all regions with the Americas up 136% and on a constant currency basis EMEA up 53% and Asia up 27%. [indiscernible] was one of our long term growth pillars grew by 57% in the second quarter and 38% for the first half. Digital sales grew by 25% versus prior year and an impressive 99% versus 2019 to represent 36% of revenues. ETC grew 79% versus prior year and 86% versus 2019 to represent 52% of revenues. Adjusted operating income more than doubled to $196 million and adjusted operating margins expanded to a record of 31%. Adjusted diluted earnings per share increased by $1.22 to $2.23. Underlying these incredible results is the iconic brand we have built. To continue to feel brand relevance and consideration globally we leveraged digital and social marketing, influencer campaigns and collaborations. We were the first footwear brand to market an augmented reality experience on TikTok with a #GetCrocd challenge featuring trial sandals and clogs for [Jibbit]. Globally this drove over 8 billion views and over 1 million uses of the hashtag. We also generated buzz when Balenciaga the spring 2022 runway featured our second collaboration together comprises of a knee-high rain boot, and a croc Malone saleto. Global collaboration highlights include London based gateway brand [indiscernible] in Russia rave music brand Little Big. In Japan highly influential retail Beams, and in South Korea, world famous Ramyun brand nongshim. Finally, in the U.S., we reintroduced our free path for healthcare initiative during National Nurses Week, where we gave away 50,000 pair of Crocs work shoes to frontline caregivers. We're proud of the brand we have built, and especially pleased with the initiatives, such as free pair for healthcare that enable the Crocs brand and business to have a positive impact in our communities. This week, we announced our next step and having a positive impact on our planet; our commitment to becoming a net zero emissions by 2030. Our inherently simple approach to design the materials we use and how our shoes are manufactured means that classic clog already has a low carbon footprint of only 3.94 kilograms of carbon per pair. We're taking it a step further with a plan to achieve net zero emissions through sustainable ingredients, and packaging as well as a responsible resource use. We anticipate our consumers will be as excited as we are about our commitment to having a positive impact on our planet. In addition to reducing our environmental footprint, our comfort journey will increasingly include uplifting our communities, and creating a welcoming environment for everyone rooted in a culture of transparency and accountability. This week, we launched the new brand purpose section of our Crocs.com site, and a new ESG section of our investor site to share our progress. I encourage you to review the content that we will discuss in greater detail at our upcoming investor day. Now let's turn to second quarter operating highlights. We're very excited by the growth we're seeing in all key product pillars, clogs, sandals and Jibbitz. Clog sales were outstanding, increasing 101% year-over-year to represent 74% of total footwear revenues versus 68% last year. We continue to innovate and encouraged by the initial results of our new platform and seasonal colors and prints. Sandal sales were a standout increasing 57% for Q2 and 38% for the first half driven by our classic fly and classic sandal, the both feature personalization as well as and Tulum franchises. In addition to this strong growth we're very pleased in a global brand study. Sample consideration is now in line with that of clogs. Given the strength of clogs, sandals represented 20% of footwear sales for the quarter versus 23% last year. And as we have shared while we expect clog growth to outpace sandals this year we anticipate that over the longer term sandals will grow faster than clogs. Jibbitz sales will once again exceptional more than tripling for the quarter versus last year. The global personalization mega trend continues and Crocs fans enjoys experience of shopping for charm in our retail and wholesale stores. From a channel perspective, global DTC revenues, which include revenues from e-commerce and company on retail stores grew by 79%. Retail had extraordinary performance with traffic and conversion of significantly for more normalized second quarter of 2019. E-commerce performed well and this was the 17th consecutive quarter a double digit e-commerce growth. Digital sales grew 25% on top of an elevated 2020 compare to represent 36% of our second quarter sales compared to 56% last year and 33% in 2019. Digital remains a top priority and we continue to invest in our customer experience globally to retain our competitive advantage relative to other footwear brands. Our wholesale channel which includes brick and mortar, e-tail and distributors grew revenues by 112% versus prior year and 71% compared to 2019. Our focus on strategically important accounts comprised of leading e-tailers, sporting goods, family footwear, and specialty footwear retailers led to a strong growth in all sub channels globally. Our top 20 brick and mortar accounts and distributors were standouts as they rebounded from the depths of the pandemic. Finally, profitability was exceptional, as we achieve record quarterly adjusted operating margins and record quarterly adjusted EPS. While we remain incredibly optimistic about our business and has substantially raised full year 2021 guidance as we emerge from the pandemic, global logistics remain challenging and volatile. In addition, we're increasingly seeing COVID spikes in some of our primary manufacturing countries and are concerned about the short term impact of potential factory closures on supply. We have attempted to incorporate both the additional expense and the potential supply disruption into our guidance to annual review. Before I turn the call over to Anne I want to thank the entire Crocs organization. These results are a reflection of the hard work and dedication to the Crocs brand. I am excited for our future. I look forward to achieving our commitment of net zero by 2030 creating a more comfortable world for us all. With that Anne will now review our financial results in more detail. Anne Mehlman: Thank you, Andrew. And good morning everyone. We'll begin with a short recap of our second quarter results. For reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to our press release. Our second quarter results are exceptional. We delivered record quarterly revenues on broad based growth across all regions, channel and product colors. Profitability with best in class as we expanded gross margins, leveraged SG&A and increased earnings per share. Second quarter revenues came in at $640.8 million, compared to $331.5 million in the second quarter of 2020 and 93.3% increase or 88.4% on a constant currency basis. Growth was 78.5% versus the second quarter of 2019. Year-to-date revenues exceeded $1.1 billion, an increase of 68.1% versus the first half of 2019. We sold 29.1 million pairs of shoes, an increase of 78.8% over last year and 52.7% versus the second quarter of 2019. Our average selling price during Q2 increased 8% to $21.84 with the increase attributable to less promotional activity and higher pricing as well as favorable product mix including increased sales of terms per shoe. The Q1 price realignments we took on certain products in select markets globally have been successfully adopted as evidenced by our growth have not hindered demand. Now, let's review our results by region. As Andrew mentioned earlier, the Americans had another great quarter with revenues of $405.7 million up 136.4%. DTC growth of 128.1% was outstanding driven by retail. Higher traffic combined with [indiscernible] significant store closures last year contributed to triple digit growth in company and retail stores to more than doubled versus 2019. Digital penetration was 30.9% in the second quarter, compared to 30.7% in 2019. Wholesale growth was at 149.3% versus prior year and 140% versus 2019. In Asia, Q2 revenues were $126.8 million up 35.5% or 27.1% on a constant currency basis from last year. DTC increased 10.8% while wholesale grew 76.5%. Digital revenues grew 17.1% versus prior year and 40% versus 2019. Digital penetration also increased from 31% in 2019 to 40.5% this year. South Korea continues to exhibit strength, while several other countries in the region remain impacted by the pandemic. EMEA revenues increased 63.1% or 52.6% on a constant currency basis to $108.3 million with growing brand heat, offsetting any global logistics disruptions. DTC revenues increased 29.2% with e-commerce strength driven by higher traffic and a return to growth in retail and stores reopened. Wholesale revenues grew 82.6% fueled by broadbased strength in etail, distributors, and brick and mortar. Our EMEA business overall continues to benefit from our focus on digital commerce, which represented 52.5% of EMEA revenue this quarter versus 40.3% in Q2, 2019. Second quarter adjusted gross margins were 61.8% up 660 basis points from last year to 55.2%. The majority of the improvement was driven by price increases coupled with fewer promotions and discounts, offsetting pressures from elevated free rates. Currency favorably impacted margins by approximately 90 basis points. Our adjusted SG&A improved to 31.2% of revenue versus 33% in last year's second quarter. The decrease in adjusted SG&A rate is a result of strong sales growth and operating leverage. We invested approximately $60 million versus the first quarter to support our strategic initiatives, digital, sandals, China and marketing. We will continue to make investments this year to support the long term trajectory of our business. Our second quarter adjusted operating income more than doubled to $196.4 million versus $73.8 million last year with robust operating profit growth in all regions. Adjusted operating margin rose from 22.3% last year to 30.7% this year, benefiting from gross margin expansion and SG&A leverage on strong sales growth. For Q2, our underlying non-GAAP effective tax rate was 24.7% excluding a onetime benefit of $175.4 million. The income tax benefit and decrease in our GAAP effective tax rates were driven primarily by the realization of deferred tax assets which were previously subject to evaluation allowance. Second quarter non-GAAP adjusted diluted earnings per share increased to $2.23 compared to $1.01 a year ago. Our liquidity position and balance sheet remained strong. We finished the quarter with $197.9 million in cash and cash equivalents and $386.4 million in borrowings and have ample liquidity with $454.7 million of borrowing capacity on a revolver. In Q2, we executed a $300 million ASR which resulted in the repurchase of $2.9 million shares at an average price of $103.79 per share. We expect to generate significant operating cash flow and to maintain a strong balance sheet. We will continue to prioritize investment in the business to support our future growth. We will also continue to be opportunistic with respect to our capital structure and our capital return. Inventory at June 30, 2021 was $209.1 million up from $146.8 million in the second quarter last year. Inventory was lean throughout Q2 and we ended the quarter prior in transit inventory due to the continuation of global logistics challenges. Turning to the future, I would like to share our current outlook for the third quarter and full year 2021. As Andrew mentioned, global logistics remain volatile. Due to the lack of visibility, we have provided guidance with potential supply chain disruptions and additional expense in mind. For Q3, we expect revenue to grow approximately 60% to 70% and adjusted operating margin to expand to be between 24% and 26%. Strong growth is expected in all regions in all channels as brand momentum continues. Given our extraordinary first half performance and confidence in the momentum of the Crocs brand we are raising full year 2021 guidance. We now expect 2021 revenue to grow between 60% and 65% and the midpoint growth in the second half is anticipated to be 49% versus 2020 and 100% versus 2019. In addition, we expect adjusted operating margins to be approximately 25% for the full year 2021. Well we expected leverage SG&A long term, we plan to invest in the back half of this year to support future growth. We now expect our underlying non-GAAP tax rate to be approximately 23%, which is higher than previous guidance due to greater than expected profit in our U.S. business. We look forward to sharing our long term growth algorithm at our upcoming investor day on September 14. In summary, we've delivered outstanding revenues and profitability that exceeded expectations while strengthening our balance sheet and investing in our future growth. At this time, I'll turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. Before we open the line for Q&A, I want to acknowledge that Dorian Wright is retiring from a board of directors after a decade of service. I want to express my gratitude for all of Dorian's many contributions and wish her all the best in the future. I also want to thank our talent team around the world without which these results would not be possible. The Crocs brand remains incredibly strong, as evidenced by our second quarter results, and our increased guidance for 2021. We're incredibly excited for the future which now includes achieving net zero emissions by 2030 and having a positive impact on our planet. Operator, please open the call for questions. Operator: [Operator Instructions] Your first question is from Jonathan Komp with R.W. Baird. Your line is open. Jonathan Komp: Yes thank you very much. I wanted to start off when you think about the second half guidance, given the raise to the full year revenue. And I think you highlighted there's an embedded acceleration to 100% growth at the midpoint versus 2019 for the second half. Could you just maybe share more detail on what you're seeing maybe across channels and geographies to support your confidence in that two year acceleration from here yet? Andrew Rees: Hey thanks John. I'll give you a bit of color and then pass it over to Anne to give you kind of most specifics. Yes, we remain incredibly confident in the trajectory of the brand. Obviously, we've had a very strong first pass, very strong Q2 and as we look across all of our channels we really see strength in all the channels. Maybe I'll start with retail, where we had really exceptional growth. So our stores have reopened this year. We've seen significant increases in traffic. We've seen significant increases in conversion and our retail stores, both here in the U.S. and also particularly in Korea performed really well. Digital is performing well. I think we highlighted the 99% comp over the 2019 numbers, and digital as both our own e-com buzz an additional retail. And then from a wholesale perspective, again, our wholesale channels performing well, I think we call that in particular. Our brick and mortar are leading 20 brick and mortar accounts and our distributors. So distributors, we kept fairly lean on inventory last year through the pandemic. We didn't want them backing up on aged inventory. So as they're emerging, they are replenishing. And I noticed a very bullish about the future of the brands. So I think we're confident on all dimensions. Anne Mehlman: Yes, I think that's exactly right. And I think to add a little color by region as well. We saw Europe, EMEA growth is almost 53% constant currency in the quarter. So really good to see some international growth coming on strong, and we expect those trends to continue. Asia also returned to growth on a two year basis, which is great to see. So we expect all of our regions to contribute to those growth factors in Q3, and Q4. And then obviously we have some visibility on our order book that supports all of this growth that we're guiding. Jonathan Komp: Okay, that’s encouraging and very helpful. May be secondly then when you think about the supply chain ability to keep up with that growth, could you just share more given your outside exposure to Vietnam from a sourcing perspective. Can you just share more the current state of the environment there and the key factors on them, you mentioned having embedded some impact in the second half so maybe you can give little more color what’s embedded in the expectations? Andrew Rees: I think it’s great question. Sorry one about key concerns. So as you look at global supply and logistics. Look, it's been extremely challenging for the last 12 months, we’ve been living with that for the last 12 months and performed as we have performed in the last 12 months given that and so what different today and let me break those two pieces apart one is global logistics, which is containers, freight time, etc. And just to kind of give you a perspective, I would say kind of transit times from Asia to most of our leading markets are approximately double what they were historically. So but that's been the case for some time and we're expecting to live with that. We've also seen elevated freight costs some in the first half of the year, and we're expecting to see more in the back half of the year. And we've embedded that expense into our projections. I think what's different now is the COVID spikes that we're seeing in our Southeast Asia and particularly Vietnam. And our expectation is that we will see some temporary factory closures in the next quarter as Vietnam battles COVID. They unfortunately, don't have access to or the ability to administer the amount of vaccine that we have in this country. So really, they're left with lockdowns and being congested just about how people interact. And so we do expect temporary factory closures which will obviously impact supply. So but with that, we've embedded that in our guidance in terms of really trying to make sure that we're confident in the amount of inventory that A, we have on hand and B, what we have in transit and we feel really comfortable with where we are given those uncertainties. Jonathan Komp: Okay, thank you very much. Operator: Your next question is from Erinn Murphy with Piper Sandler. Your line is open. Erinn Murphy: Great, thanks. Good morning, and really great quarter. I guess just Andrew, for you on that last point on Vietnam. Can you just remind us how big Vietnam is as a percent of your overall sourcing and just how quickly you can move into other regions if some of these rolling lockdowns continue and then I guess, bigger picture on A-PAC could you share a little bit more about what you saw in China in the quarter? How did you how did the consumers respond to [indiscernible] and any other kind of key initiatives as you kind of refocus that region for growth? Andrew Rees: All right. I will let Anne talk about Vietnam and factory base to start with, and let me pick up China. Anne Mehlman: Hi Erinn. So as you know we manufacture a significant portion of our products in Vietnam. We don't release the overall percentage, but it is the most significant manufacturing geography for us. And then as well as supplemented by China, Indonesia and a couple other places around the world, but Vietnam is a significant. And that's effective. Andrew Rees: Yes and I think the ability to move out of China yes, we have absolutely some ability. We have some capacity – spare capacity in, sorry, an ability to move out of Vietnam. We do have some spare capacity, other places, but it's not enough to make a wholesale change. Then in terms of China trading. Look, I think we were really let me kind of go back up to Asia first and then come down to China. We were really pleased with our Asia performance during the quarter. Obviously, we grew nicely even on a constant currency basis with some currency that helped the headline number, our constant currency basis. We grew nicely at 27% And that was despite some significant COVID impacts around Asia. When you think about India, when you think about state of emergency in Japan, and also the lack of travel in Southeast Asia and the current space that you're seeing. In terms of China, I think we've talked extensively about the repositioning plan that we have in place, I would say we think it was a really good quarter in China. We executed really well against all of the dimensions of that repositioning plan, including elevating and enhancing our marketing, trading on mid-season festival. So we feel really good about the performance in China and we, I think are set up well and very confident about accelerated growth in ‘22. Erinn Murphy: Great, that's great to hear. And then maybe if you could speak a little bit more about the goal you established last night to get to net zero by 2030. I guess our question is, what percent reduction are you committing to versus just using offset to net out the rest? So just curious on some of the kind of commitments internally to get there and I'm assuming I mean, this is well ahead of most footwear companies that we've benchmark. So just really, I mean, fantastic job to put this up already. Andrew Rees: Great, thank you Erinn. We appreciate that. So what I would say, look, we've been working on this for some time. And we've been working on this from a number of dimensions. One is sourcing and working with, I would say, a major chemical company as a partner to identify the potential for sustainable ingredients that go into our product. So deriving our cross like [indiscernible] from instead sustainable ingredients. And we identified a solution to that that we feel very comfortable with. And we'll be focused on scaling that solution over the coming years which is really one of the key factors in terms of lowering overall footprint. But we're also looking at it from lots of different angles. From a packaging perspective, I think one thing that we've done for years is really not ship our product in packaging. We don't use shoe boxes. So 85% of our product shipped without a shoe box, but we think we can do even better there. But also looking at sustainable energy that we would use in our facilities, including some of our factories, as well as reuse. So as we look at the whole carbon footprint, and all of the key components that go into that obviously, we start from a great place with a very low carbon footprint on our classic clog at 3.94 kilograms of carbon. We will be posting that on our website here very shortly. And we will also be measuring the footprint of all of our other products over time and releasing that information. So we want to be really transparent about this. In terms of the future goals, yes, part of it is offsets. But we will be making a substantial reduction in our actual carbon footprint in of itself. We're not ready to disclose that at this stage. But we'll talk much more about that in our September Investor day. So we do have some significant internal goals around that. Erinn Murphy: Great. And then just last one Anne for you just the CapEx guidance for the year moved from 130 million to 80 to 100 million. What was the difference in the change? Was there anything in terms of supply chain investments that you pushed out? Or was it another investment? Thanks so much. Anne Mehlman: Yes, no, we're very committed itself to the investments we're making around our supply chain is really just timing of costs in this year. So it really has nothing to do with that. It's just really more around timing. Erinn Murphy: Super. Continued success. Thanks so much. Anne Mehlman: Thanks Erinn. Operator: Your next question is from Mitchel Kummetz with Pivotal Research Group. Your line is open. Mitchel Kummetz: Hi, yes. Thanks for taking my questions and congrats on the quarter. Andrew, if I heard you correctly, you made a comment that sandal consideration is now comparable to clogs. Help me understand how meaningful that is. And maybe what you can do is, is there any way you can provide context around that in terms of like, what that consideration was a year ago or two years ago versus clogs just so we understand what it means to be comparable? And then also, I don't think you're saying that next year, you're going to sell as many sandals as clogs. But what could that mean, going forward in terms of the growth of the sandal business for consideration to now be at the level that it is? Andrew Rees: Right, thanks. I'm glad you picked up on that. Yes. So we think actually, it's very important. So what we mean by that is when we measure brand consideration with our consumers we run a obviously consumer brands study every quarter to try and assess where our consumers are. One of our key questions is consideration for the clogs, consideration for sandals, etc. I would say historically the sandal consideration number has been a fraction of the clog consideration number that's what we're known for, that's what most consumers would consider purchasing a Crocs item they would first consider a clog. So we think it's very meaningful that the sandal consideration has risen over time. It's risen because of the marketing we've done behind it. It's risen because of the some of the new products that were brought into market particularly those that are personalizable. And so I think it's very meaningful. In terms of what does it mean in the future for revenues? No, we're not saying that sandal sales will be equivalent to clogs sales in the future. But I think it gives us a lot of confidence in that sample trajectory that we've been talking about we started to see we saw again here in Q2, but it gives us a lot of confidence in that growth strategy that we've talked about. Mitchel Kummetz: Got it. Okay. And then Anne just a quick one for you as I kind of worked my model, given the quarter and the guide, I kind of back into Q4 operating margin of like 16% to 17%. Hopefully my math is correct. That's down from Q4 last year, obviously down from kind of the run rate that you're on. I'm just kind of curious why is that not higher? Is that based on some of the investments that you're making on the SG&A side? Does that reflect some of the supply chain issues that you're kind of anticipating going forward? Can you maybe address that? Anne Mehlman: Yes, so we didn't guide specifically for Q4. So just reiterating that we said approximately [indiscernible] of the year, I think the biggest thing in the back half are really around we're going to continue to invest in SG&A particularly in marketing and marketing expense, was this quarter about 26 million. We will continue as we talked about our last call, we'll continue to invest in marketing and our marketing expenditures for the year will be just a little over 7% of revenue. So that will accelerate, continue to accelerate through the back half and we will continue to invest for the future to support our future growth. And then from a margin standpoint we will have some margin pressure although for the back half margins will be up. Gross margins will be up over last year. We will have some pressure just based on what we talked about with logistics and freight, and kind of the overall logistics environment. So those two factors are combining to put to our guide of approximately 25% for the year. Mitchel Kummetz: All right. Thanks and good luck. Operator: Your next question is from Sam Poser with Williams Trading. Your line is open. Sam Poser: Thanks, everybody. So I've got a couple I want to follow up on Mitchel's question. Can you hear me? Andrew Rees: Yes. Hi Sam. Sam Poser: Okay. Hi. I just want to follow up on this question regarding the fourth quarter and just by asking with the incremental marketing spend that you're pushing in, how much incremental marketing as a percent or however you want to talk about it was there in Q2 and how much of those incremental sales can you attributed to it? And how much incremental marketing is built into the balance of the year and what kind of sales width are you attributing to that within the guide? Anne Mehlman: Okay, let me try to parse that. So from a marketing perspective, here today, and we are marketing about $28 million. 26 million of that was in Q2. So obviously, the majority of that incremental spend year to date was in Q2, and we'll see much of the same type of spend and in order to get to that approximately, you can do the math, a little over 7%, in the back half of the year, about some of that is performance marketing as you mentioned, which is variable, which supports e-com which is a little bit more transactional. And the rest of that is brands. So it's hard to say, to equate how much of the increased revenue is actually related to that marketing. But what we do know is that our marketing is incredibly effective. And we look at things like brands surveys, see those trending in the right way, see no consideration. And we know that in order to support our growth long term, we need to continue to spend into that. So I think it's really less about what the incremental that is contributing to that year, and more about what the incremental is going to contribute to our future. Sam Poser: Okay, I'm going to come back to it, I'm not arguing that you shouldn't be spending the money. What I'm saying is how much of the near term, my question is, is I believe that because even the brand marketing and the other is driving help to drive a lot of your strong results this quarter that my question is, is, and I would assume, based on the marketing, your marketing percent of sales, given the results were less than what you anticipated they would have been in Q2. Is that a fair statement based on the guidance you gave in the money you spent? Anne Mehlman: Was our marketing percentage less than what we planned for 2Q? I'm sorry? I don't understand, can you – Andrew Rees: Yes. You're saying that look, if we had sales acceleration above what we expected did the marketing come in low? No, I think I would say no to that. Because a lot of our marketing is very variable. And we planned on a very short term, short period of time. Even some of our brand marketing, we can lean into events or lead back from events, especially around social media. So we were very, we calibrate that very closely. So I wouldn't say it was dramatic, it was less than in Q2 than we expected. And look, I think our strategy is really clear where we have a great marketing strategy. We have, I think, really effective team. We're doing some incredible work. So we're going to continue to spend to ignite consumer interest in the brand that's clearly working. And as onset we don't look at what is the incremental in the year. We think about it from a multiyear trajectory. Anne Mehlman: Yes. And a piece of that, too, is that if you look at our results, our 10-Q will be out a little bit later. But are you looking at results basically I mean you can see that we actually took some of the increases that we were having in the U.S. and investing that overseas, particularly in our Asian market. So we can do that within the quarter. Sam Poser: All right. And then how much of your inventory, the current inventory on your books is in transit right now. Anne Mehlman: We don't break out the in transit verse is the what's on hand, but it's significant. And it's up significantly year-over-year. Much of the increase of our current inventory is actually sitting in transit. And that's been pretty consistent all year as we've just been working through logistics and as Andrew talks about really or longer freight cycle time. Sam Poser: And how much of your product that is made for the -- how much of the product that you need for the full year is already produced. So by that I'm asking how much of the production needed, I guess for the next six, eight months is made? And how much of that is what percent is impacted by the issues in Vietnam? Anne Mehlman: Yes. It’s a good point Sam, the majority of our product for Q3 is obviously, Q3 is you have a product and so there is some for Q4, but obviously, it increases as you go out and increase your time span. Sam Poser: Alright. Thank you very much and continued success. Anne Mehlman: Thank you. Operator: Your next question is from Susan Anderson with B. Riley. Your line is open. Susan Anderson: Hi, good morning, let me add my congrats on an amazing quarter. I was wondering if you can maybe talk around about your thoughts on promotions and as we look forward and impacting gross margin levels, and curious if you think there is still room to pull back on promotions and also how you're thinking about price increases? Are there more planned for the back half or 2022? Thanks. Andrew Rees: Yes, so I think, look, we've been very proactive in terms of pulling back on promotions through the year. Is there further room I would say, some but not significant and I would say those are particularly in maybe some of the Asian markets. We got a little bit of opportunity to continue to pull back as the brand heat starts to accelerate in those markets. But I don't think that's significant go forward. We've done a lot. If you look at our U.S. website, I mean, it's essentially been non-promotional all year long, etc. So, I think, as you look at our stores also, essentially non-promotional. If you talk about price increases, yes there are some price increases that we're planning in ‘22. Those have already been communicated. I would say they are stronger outside of the U.S. particularly in Asia as we look to, to manage price value in given market. As we said we always look at the price of the product relative to competition, relative to the brand in that particular market. So there are some price increases that will flow through in ‘22. But I would say they are also dramatically less significant than the moves that were made this year. Susan Anderson: Okay, great. And then maybe if you could talk about your thoughts on that -- are there any early reads that you could talk about? Or how you expect it to play out this year? And then I'm curious for this fall, if there's any new products that you're expanding on, such as maybe your boot offering similar to what you've done in sandals? Speaker: Yes, I think we're very optimistic about back to school. I would say, early reads are strong, as we look at obviously, there's some parts of the country that go back a lot earlier than others. As we look at the performance in those markets we were seeing trajectories that we really like. So we're very optimistic about back to school, obviously was very strong last year, coming out of the lock downs of the pandemic. We feel very confident in our ability to anniversary and grow from that basis. I would also point out as you look at our seasonality the growth in back to school and the strength of fourth quarter, a lot of our seasonality that was historically in the business is really smoothed out. And so we can be incredibly profitable each quarter of the year. In terms of new products in the back end of the year, I would say particularly exciting is as far as our online products. It's been growing, being building now for about three/four years. But we don't feel like in any of the prior years, we've really tapped the full potential of that. So we think for us both in the clog but also as in the new exciting size product that will come out more broadly, will be important in the back half. Susan Anderson: Great, thanks so much. Good luck the rest of the year. Andrew Rees: Thank you. Operator: Your next question is from Jay Sole with UBS. Your line is open. Jay Sole: Great, thanks so much. Andrew can you talk about the allocation model that the company's implemented over the last quarter to? And just talk to us what the benefits have been to the brand and to the operations overall? Andrew Rees: Yes, I think so. Let me start off with saying I think the benefits are significant and really important. And the allocation model is one part of a sort of multi pronged approach to really manage our brand at wholesale. Obviously price promotion in our DTC channels, we can control explicitly wholesale. We really have to look at things like [match] pricing, which we instituted on some of our key lines earlier this year, and also allocation that we provide to our key wholesalers. What we're trying to do with there is, is really is manage the amount of inventory that's in the marketplace on our most important key styles and also provide differentiation between our wholesale partners so that they're not competing head to head. So which will allow them to trade more for price and our brand show up how we want to show for consumers. So I don't think it's anything new. As you kind of think about the industry, I would say it has been a important shift for Crocs as we've adopted, what I might consider kind of best in class brand management practices. I would say, I think they've been incredibly well received across the industry. I'm sure there are the occasional wholesale partner that would like more products, and in fact, there are probably quite a few that would like more products. But this is an important part of marketing the brand. Jay Sole: Understood. Maybe just a follow up on that in the context of 136% growth in the Americas this quarter obviously is a phenomenal result. Can you give us a sense of how you're able to drive that kind of growth and move to an allocation model like what would sales growth have been had you supplied inventory maybe the way you had a year ago or two years ago? Andrew Rees: Yes. I don't think we know the answer to that question. Because, as you point out, 136% sales growth is phenomenal. Right? So in short, what allowed that to happen is really consumer demand, consumer takeaway is either level or ahead of that, frankly, right? We're not stopping the channel. We're keeping the channel pretty much where we would like it and in a very healthy place. So it's really consumer demand and consumer takeaway. And that's as a result of product innovation and all the marketing that we do. So in terms of what it could have been I don't think that we don't know and I'm probably not that relevant, because I think we're really comfortable where we are. Anne Mehlman: Yes, I think it really is important for profitability as well. If you look at our 8% [indiscernible] growth in the quarter, it's hard to see how much of that is directly related, but support our wholesalers out the door. And obviously, our [indiscernible] as well. Jay Sole: Got it. Maybe one more, if I can. I think Andrew mentioned some price increases are coming next year. Given the map pricing, given some of the price increases that have happened how high can prices go and how do you think about the brand, the brand positioning relative to price in terms of like where the ultimate opportunity lies? Andrew Rees: Yes. I think that's a good question. And just to reiterate, the price increases, I reference everything outside of the United States. So one thing that we're very conscious of, is the consumer value that the brand provides. This is a very democratic brand. We serve a lot of consumers, both from highly affluent and much less affluent. And we never want to be in a place where we're turning consumers away because our product is too expensive in their mind and not providing the value that we think it provides. So we're very careful about pricing so that we don't push too far. I think we've got that balance, I think about right at this point. We're giving the consumers incredible value, as well as obviously attracting the value that we think the brand deserves and the marketing and product innovation deserves and obviously providing a great return to shareholders. So yes that's something we're very conscious of. It's very, very important to the brand in it and its future trajectory, and the price increase they talked about the next year are mostly outside the United States. Jay Sole: Got it. That's super helpful. Thank you so much. Operator: Our next question is from [indiscernible] your line is open. Unidentified Analyst: Good morning, Andrew, Anne and Corinne. Can you talk a little bit about how much channel mix was a factor in the second quarter gross margin delta and how much that will be a factor in what is the gross margin guidance is for the year? Anne Mehlman: Yes. So [indiscernible] from a year-over-year perspective wasn't incredibly, it was actually helped a little bit margin because retail was so strong. And so from a gross margin standpoint retail is very is high. From an operating margin as you know, we're rather agnostic. As we think about from a quarter-over-quarter perspective Q1 is our tends to be our highest wholesale percentage quarter. So it's certainly from a quarter-over-quarter perspective, you could see gross margins accelerate Q2 to Q1 because of that channel mix. And then for the year, I wouldn't say that it's the biggest impact. The biggest impact sitting around our margin are really pricing pullback with discounts and promotions, as well as product mix rate increase in our Jibbitz business as well as clogs are very favorable. And then we have a little bit of currency in there. And then those are somewhat offset by increased free pressures, as we talked about, but still supporting overall higher margins for the year. Unidentified Analyst: Very helpful. Thank you. Operator: Your next question is from Laura Champine with Loop Capital. Your line is open. Laura Champine: Thanks for taking my question. I know you've answered a lot of questions on pricing so far, but I may have missed it, did you give the growth mix units versus price in the quarter couple other ones on pricing? As you look to raise prices next year in other regions are they just coming up closer to Americas’ pricing? Or will there still be a significant differential? And then third on pricing, how much of a price increase do you need to take to hit your environmental goals with what I presume is a higher cost more environmentally sound material? Anne Mehlman: Great. Well, let me answer your first question and then I'll turn it over to Andrew about price increases. So from overall perspective, our units were up, our pair sold were up 78.8%. And our ASP was up about 8%. And then as far as the overall pricing and outside of the U.S. from prices outside of the U.S. they don't necessarily depends on the product or necessarily, depending on currencies tend to be higher than in the U.S., which is why we have an opportunity in some of our markets to align pricing. Andrew Rees: Yes. I would say if you look at pricing outside the U.S. Look, it's really dependent on I would say the market, the competition and the brand in that market. So there are international markets where we're actually at a premium to the U.S. And there are others where we're like, discount. So I would say broadly, yes, it's more coming in line with where we are positioned relative to competition, relative to consumer demand. So I think that in terms of the genesis of your question that's what we're trying to do. So that's the driver in terms of the incremental costs associated with some of our ESG efforts. Yes, I think we've we feel like we'll talk a little bit more about that in our Investor Day in September. But we've incorporated that into our long term business planning and I think it's best if we kind of cover that in that context. Laura Champine: Got it. I guess, a follow on a obviously your Asia-Pacific growth is accelerating. But I am curious when I look at your pricing, whether that is slowing your growth down in China or do you think that it's still just about finding the right partners in that market? Andrew Rees: I would say very clearly we do not believe pricing is low enough that in China. We think we're priced appropriately in China and we look at the kind of the repositioning plan it’s about the partners, it's about our marketing investment. It's about our e-com business. So no, we don't think it's about pricing. We think it's a lot of different dimensions that as I mentioned to Erinn’s question earlier we are really confident about the trajectory of that and how we're positioned this for next year. Laura Champine: Great. Great quarter, guys. Thank you. Andrew Rees: Thank you. Operator: Your next question is from James Duffy with Stifel. Your line is open. James Duffy: Thanks. Good morning, terrific execution. And congratulations to the team. I want to ask about infrastructure. You've been very thoughtful about investing in infrastructure. But the volumes have just been huge. I'm curious once the product is in the U.S. or other regions are there bottleneck points or throughput challenges to delivering on demand and can you speak areas of investment to support additional growth into 2022? Andrew Rees: Yes. Really thoughtful question James. So we don't have any current bottlenecks in our infrastructure. I would say there are many bottlenecks in the global logistics chain whether it be long beach, whether it be rail out of long beach, whether it be availability of trucking, the list goes on, right? But so we look at our ability to process goods, whether it's through a warehouse or through our Crocs dock facilities, we can process very high volume of goods and have certainly had no concerns for ‘21 into ‘22. You might note that we're significantly expanding our U.S. DC. Again, that will be open later next year. And we are also, we have moved to a new DC, in the Netherlands and that will be going up to full operation again by the end of the year. So it's impartial operation across the two facilities today but working really well. In terms of longer term investment, absolutely we will continue to grow the business at these rates or rather rates we anticipate to continue to grow the business. We will continue to make investments in our infrastructure in the U.S., in EMEA and some of our key Asian countries as well. Anne Mehlman: And one just note over on the cost side, we've actually seen quite a lot of efficiencies from our U.S. distribution network this year. And that is showing up in our margins that we call that out as supporting our overall growth margin level. James Duffy: Great. The other investments have proved very prescient. Andrew, can you talk about the total business with Asia distributors kind of the glide path to recovery in that business what you're seeing there? Andrew Rees: I think that a big unknown, I would say and we're not, that's not happening this year period. Right. So not, not in our prospects or in our guidance. Those Asian distributors, as you rightly point out they can be significant. There's large populations in those countries that we serve. And it's highly dependent on tourist travel and that's just not going to happen. I guess if you asked me when I think it's late next year before people start traveling to those countries and that's kind of how we're thinking about it. James Duffy: Okay, great. I look forward to connecting with you guys at the investor day. Andrew Rees: Thank you. Operator: We have a follow up question from Erinn Murphy with Piper Sandler. Your line is open. Erinn Murphy: Great, thanks. Just one follow up for me on the buyback. I think you fully exhausted your existing authorization this quarter. Any thoughts on upping that in the near future? Anne Mehlman: I think we have is almost 700 million left on our existing buyback obviously. Erinn Murphy: Okay. Got it. Maybe I'm mistaken. Thank you so much. Anne Mehlman: Thank you. Operator: We also have a follow up question from Sam Poser with Williams Trading. Your line is open. Sam Poser: Hi, I have three quick ones just about looking forward with the gross margin you talked about mix from a product perspective but you expect the channel and geographic mix to continue to help you. Secondly, if you could give us some color on upcoming collaborations. And third, if you can discuss how inventory at retail, both in your own stores and your partnership in your wholesale partner stores is looking right now relative to demand you're seeing, currently seeing. Andrew Rees: All right Sam let's hit those in reverse order. So retail inventory at retail I think look, the way we think about Q2 is I think we were not in optimal retail inventory position in our own retail or even our wholesale partners. So it's better than it was at the end of Q1, but it's certainly not optimal. So when I say optimal, I'm looking at kind of out of stocks and weaker supply. So when we've got an opportunity for the future. What's the second one? The [clogs] we have a very strong pipeline of [clogs]. We talked a little bit more in our prepared remarks about all the different things are going on. I know you've tracked those closely. But I would say we have a very full pipeline through the end of the year and increasingly out of a very full pipeline for next year. Andrew Rees: Yes and then on gross margins Sam we do expect channel mix Andrew mentioned a little bit earlier, it will help. But the biggest drivers of growth margin for the year are really related to the pricing actions that we've taken, the continued pullback and promotional strategy and then a little bit of currency, we expect currency to be about 70 basis points roughly for the year as current currency rates. And all of those combined and then as I mentioned as well we have some efficiencies in our DCs and then some of those are offset slightly by increased freight rates. So margins will, gross margins will be up for the year. But those are the major drivers in Jibbitzs. Sam Poser: Thanks very much. Andrew Rees: I think that's all of our questions and we're out of time. So really appreciate everybody's continued interest in the company. And thank you very much for attending this morning. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

Operator: Thank you for standing by, and welcome to the Crocs, Incorporated First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Corinne Lin. Thank you. Please go ahead. Corinne Lin: Good morning, everyone, and thank you for joining us today for the Crocs’ first quarter 2021 earnings call. Earlier this morning, we announced our latest quarterly results, and a copy of the press release may be found on our website at crocs.com. We would like to remind you that some of the information provided on this call is forward-looking and accordingly, is subject to the safe harbor provisions of the Federal Securities Laws. These statements include, but are not limited to, statements regarding potential impacts to our business related to the COVID-19 pandemic. Crocs is not obligated to update these forward-looking statements to reflect the impact of future events. We caution you that all Forward-Looking Statements are subject to risks and uncertainties described in the Risk Factors section of our annual report on Form 10-K. Accordingly, actual results could differ materially from those described on this call. Please refer to Crocs’ annual report on Form 10-K as well as other documents filed with the SEC for more information relating to these risk factors. Adjusted gross margin, income from operations, operating margin and earnings per diluted common share are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, Chief Executive Officer; and Anne Mehlman, Executive Vice President and Chief Financial Officer. Following the prepared remarks, we will open the call for your questions. At this time, I will turn the call over to Andrew. Andrew Rees: Thank you, Corinne, and good morning, everyone. We are thrilled with our Q1 results. The strength of the Crocs brand is exceptional, experiencing growth across all regions and all channels. In Q1, our global brand momentum continued to strengthen, and we benefited from economy starting to emerge from the pandemic and government stimulus in select important markets. I'm proud of our performance, and I'm incredibly confident in our ability to deliver sustained highly profitable growth. Highlights from the first quarter of 2021 include for the third consecutive quarter, we achieved record revenues, with first quarter revenues of 460 million up 64% versus prior year. Our Americas business had another tremendous quarter, with revenues increasing 87% and DTC revenues growing 131%. Our EMEA business has increasing momentum with 49% revenue growth, and Asia showed strong double-digit growth of 26% in the quarter. Digital grew 75% to represent 32% of total revenues. Adjusted operating income was 126 million, increasing by approximately 100 million, and adjusted operating margins expanded to 27%. Adjusted diluted earnings per share grew from $0.22 to a quarterly record of $1.49. On top of these outstanding financial results, the Crocs brand ranked the highest it has ever been in Piper Sandler Spring Taking Stock with Teens survey. The strength of our brand remains unabated. We continue to drive brand relevance and consideration through a multifaceted marketing approach that leverages digital and social marketing, celebrity and influencer campaigns and collaborations. We kicked off 2021 with an award-winning collaboration with French EDM artist, Vladimir Cushman that featured his signature, Skull Mask. To celebrate St. Patrick's Day, we posted a rainbow of Crocs and a pot of Jibbitz across social media and released Lucky Charms Jibbitz that quickly sold out. In March, we launched a second global collaboration with Justin Bieber and his Drew House brand that confirmed Crocs with socks are indeed better together. And to continue accelerating across brand in China, Justin Bieber sent fans on a mission to locate arcade games in nine cities, giving them a chance to win free Crocs, Drew House plush toys and socks. We are incredibly proud that our Crocs brand and business has a positive impact on our communities. Most recently, we were pleased to partner with the United Nations Foundation as it launched its 2021 #EqualEverywhere campaign to promote gender equality around the world. From a Free Pet Health Care program that allowed us to provide comfort to those on the front lines to partnerships with Feeding America, the NAACP, UNICEF and Glad that let the world know, we are all in this together. We have accelerated our mission of everyone comfortable in their own shoes by remaining focused on doing the right thing. In addition for doing the right thing for our communities, we strive to do the right thing for our employees. We recently raised entry-level wages to an average of $15 per hour for our frontline employees in our U.S. distribution center and U.S. retail stores in recognition of their contribution to the success of the Crocs brand. We were honored last week to be named to Forbes' Best Employers for Diversity for 2021. We were also recently named to Fast Company's annual list of the World's Most Innovative Companies for 2021 that recognized organizations that not only found a way to be resilient in 2020, but also turn those challenges into impactful initiatives. Our ability to make a difference also resonates with our consumers, including teams who are socially and environmentally conscious. I'm confident that the strength of the Crocs brand and our mission of everyone comfortable on their own shoes will continue to drive accelerated growth this year and beyond. Now let's turn to first quarter operating highlights. From a product perspective, we experienced strong growth in our key product pillars: Crocs, sandals and Jibbitz. Sales of clogs were exceptional this quarter, increasing 87% year-over-year, representing 76% of total footwear revenues versus 65% last year. We continue to experience success with seasonal offerings and trend-right drops such as out-of-this-world and marble prints. At the same time, sandal revenues increased 17% to represent 17% of footwear sales versus 24% last year. We are very encouraged by our initial results of our sandals that feature personalization, including our Classics Y and the newly-introduced Classic 2-strapped sandal, while we expect clog growth to outpace sandals this year over the longer term sandal will grow faster than clogs. Jibbitz sales continues to be outstanding, more than doubling for the quarter versus last year as global personalization mega-trend continues. From a channel perspective, global DTC revenues, which include revenues from e-commerce and company-owned retail stores, grew 93%. Both e-commerce and retail had extraordinary performance, and this was our 16th consecutive quarter of double-digit e-commerce growth. Digital, which combines e-commerce that has reported in DTC and e-tail that is reported in wholesale, grew 75% to represent 32% of our first quarter sales compared to 30% last year. Digital remains our top priority, and our digital presence remains a competitive advantage relative to other footwear brands. Our wholesale channel, which includes brick-and-mortar, e-tail and distributors, grew 50% versus prior year, fueled by growth in all segments. E-tail and out top 20 brick-and-mortar accounts experienced exceptional sell through. Distributers had the highest growth as they replenished inventories in preparation for a strong 2021. With our continued momentum, we remain focused on positioning our brand for long-term sustainable growth. After careful consideration, we recently decided to prioritize wholesale partners who are aligned with our brand strategy and desired positioning in the market place. As such, we began to culminating select North American relationships, a strategy many major brands have also used to maintain strong marketplace health. Looking forward, we will remain focused on our strategically important accounts comprised of leading e-tailers, sporting goods and family footwear and specialty footwear retailers. Our record revenues in the first quarter were achieved despite challenging global logistics that impacted many industries around the world. We are not immune to these challenges, with blockage of the Swiss Canal and significant bottlenecks in West Coast ports leading to delays. Global Logistics are expected to remain congested, and we are being proactive as possible. Our new EMEA DC in the Netherlands has opened, and the transition is running smoothly. The expansion of our U.S. DC is also proceeding as planned. These investments will support our competitive advantage in digital and our future growth. Finally, profitability was exceptional as we achieved record quarterly adjusted operating margins and record quarterly adjusted EPS. We are incredibly optimistic about the balance of 2021 and have substantially raised guidance for the year. Before I turn the call over to Anne, I want to express my gratitude to the entire Crocs organization for their dedication to our brand and to our communities. I'm proud of how they have executed as a team and the results that we have delivered for our employees, our customers and our shareholders. With that, Anne will now review our financial results in more detail. Anne Mehlman: Thank you, Andrew, and good morning, everyone. I will begin with a short recap of our first quarter results. For a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to our press release. Our first quarter results were extraordinary, fueled by all regions and channels, we delivered record quarterly revenues. Profitability was outstanding as we expanded gross margins, leveraged SG&A and increased earnings per share. First quarter revenues came in at $460.1 million compared to $281.2 million in the first quarter of 2020, a 63. 6% increase or 60.5% on a constant currency basis. We sold 25.9 million pairs of shoes, an increase of 51.5% over last year's first quarter. Our average selling price during Q1 increased almost 8% to $17.64, with the increase attributable to increases in DTC revenue as well as fewer promotions and discounts. As we have shared previously, we look at our brand positioning market-by-market and in Q1, realigned pricing on certain products in select markets globally. Now let's review our results by region. As Andrew mentioned earlier, the Americas had another exceptional quarter, with revenues at 276.4 million, up 87. 1%. DTC growth of 131.3% was phenomenal. Strong traffic conversion and ATV as well as store closures last year contributed to triple-digit growth in both company-owned retail stores and e-commerce. Wholesale growth was 59. 4% as high sell-through more than offset challenging logistics. In Asia, Q1 revenues were $82.6 million, up 26.2% or 20.1% on a constant currency basis from last year's first quarter. DTC increased 20.6%, while wholesale grew 28. 6%. Digital revenues grew 60.1% and penetration increased significantly from 24.4% to 30.9%. We saw balanced growth across most of our key countries. India revenues were standout, increasing triple-digits Distributors also returned to growth, albeit at a slower rate. EMEA revenues increased 48.8% or 41% on a constant currency basis to $101.1 million, with growing brand heat offsetting any global logistics disruptions. DTC revenues increased 29.2%, with e-commerce strengths driven by higher traffic and ASPs, partially offset by retail declines due to COVID-19 closures. Wholesale revenues grew 52.7%, fueled by strength in e-tail and distributors. Our EMEA business overall continues to benefit from our focus on digital commerce, which represented 41.8% of EMEA revenue this quarter versus 38.2% last year. Our first quarter adjusted gross margins were 55.2%, up 720 basis points from last year's 48%. Currency favorably impacted margins by approximately 100 basis points, while the majority of the improvement was driven by fewer promotions and discounts, channel mix and supply chain efficiencies. Our adjusted SG& A improved to 27.9% of revenues versus 38.7% in last year's first quarter. The decrease in adjusted SG&A rate is a result of strong sales growth and operating leverage. We realized significant leverage even as we continue to invest to support our strategic initiatives. Our first quarter adjusted operating income increased nearly fivefold to $125.7 million versus $26.4 million last year, with robust operating profit growth in all regions. Adjusted operating margin rose from 9.4% to 27.3%, benefiting from gross margin expansion and SG&A leverage on strong sales growth. For Q1, we recorded $24.2 million of income tax expense, with an effective tax rate of 19.7% versus 40.9% last year. First quarter non-GAAP adjusted diluted earnings per share increased to $1.49 compared to $0.22 a year ago. Our liquidity position and balance sheet remains strong. We completed the quarter with $255.9 million of cash and cash and equivalents. In addition to $499.7 million of borrowing capacity on our revolver in March to opportunistically take advantage of historically low interest rates, we issued $350 million in 4.25% senior unsecured notes due 2029 and used a portion of proceeds to repay the balance on our senior revolving credit facility. During Q1 and excluding the impact of the final ASR share delivery that we entered into in Q4, we repurchased 600,000 shares for $50 million at an average price of $76.95 per share. This month, the Board approved an increase to our repurchase authorization, such that $1 billion remains available today for future repurchases. Inventory at March 31, 2021, was $196.5 million, up from $195.8 million in the first quarter last year. Inventory was lean throughout Q1, and we ended the quarter with higher in-transit inventory due to global logistics challenges. Turning to the future, I would like to share our current outlook for the second quarter and full-year 2021. For Q2, we expect revenue to grow approximately 60% to 70% and adjusted operating margin to improve to between approximately 21% and 23%. Strong growth is expected in all regions as brand momentum continues and we anniversary some COVID-related closures that were most prevalent in the second quarter of 2020. Barring a reversal in the pandemic recovery trend, we expect 2021 revenue to grow between 40% and 50%. As revenue grows, we expect to be able to leverage SG&A, leading to adjusted operating profit margins of approximately 22% to 24% for 2021. We now expect our underlying non-GAAP tax rate to be approximately 20%, which is higher than previous guidance due to greater-than-expected profit in our U.S. business. Our GAAP tax rate will also be approximately 20%, which is lower than previous guidance due to the release of additional valuation allowances following greater-than-expected profit in our international businesses. In summary, we delivered outstanding revenues and profitability that exceeded expectations while strengthening our balance sheet and investing in our future growth. At this time, I will turn the call back over to Andrew for his final thoughts. Andrew Rees: Thank you, Anne. Consumer demand for the Crocs band remains exceptional as you can see from our first quarter results and our increased guidance for 2021. We have a tremendous momentum in our business, and we are excited about the long-term future of our brand. Operator, please open the call for questions. Operator: [Operator Instructions] Your first question comes from the line of Erinn Murphy from Piper Sandler. Erinn Murphy: Great, thanks good morning and really incredible job to the whole team there. I guess my first question is on what you are seeing currently at wholesale between sell-in and sell-through and I was pretty surprised by how lean inventory was, but you still have incredible Q2 guidance. So could you just talk a little bit about kind of the balance between the two right now? And then maybe, Andrew, can you share a bit more about kind of the timing and maybe of the strategic pullback at wholesale, what type of account should we expect that you are kind of pulling back from? And how is that kind of contemplated in the full-year guidance? Andrew Rees: Great, a lot of questions there, Erinn. No, a pleasure, pleasure. So from a wholesale perspective, look, we are seeing very, very strong sell-out, right. So we continue to see strong sellout, we have seen that strong both quarter. Frankly, it was also strong last quarter. In terms of sell-in, that is also strong. As you can see in our kind of revenue growth from a wholesale perspective, 50% growth is very, very strong, particularly strong in North America. That is affected by shipping delays. There are a great deal of logistics issues around the world, as I'm sure you are well aware of, but net-net, we are still able to achieve that growth, and we are able to keep our wholesale partners. Certainly, in stock, probably not in stock to the degree they would like to be, quite frankly. From a timing of an overall inventory balances, yes, the inventory balance is relatively flat from last year, but don't forget that was an elevated position. So if you compare it to end of Q1 2019, I think that will be about a 50% growth in inventory, right? So as you look at inventory relative to future guidance, we still believe we are in good position to meet the guidance that we have provided. In terms of the actions and the work that we have done with wholesale partners, that is really in the broader context of our marketplace management. So if you think about earlier this year, we instituted MAP pricing on select styles here in the U.S., and we are really focused on making sure that we have a healthier long-term marketplace, particularly for our core classic product which is obviously the backbone of our brand. And so we made the decision to pull back from certain wholesale partners. I would say these are generally partners who didn't feel like they were consistent with our future strategy. And I think it is really in the context of our broader marketplace management strategy that we are working through and with that, all put us in a great place for the future. Anne Mehlman: And just to clarify, the 50% inventory for - is Q2 balance versus Q2 2019. Erinn Murphy: Got it. No, I appreciate that. And then just my second kind of question is around pricing increases. We picked up at the end of March; you were taking pricing here in North America in the core classic. It feels like the messaging was a little bit different, Andrew. I think earlier around ICR, it seemed like you guys were kind of tapped out at where pricing could be here in North America, so I guess we are a little surprised to see that. So curious what you are seeing kind of post the pricing actions and then what percent of your higher guidance today contemplates this pricing increase? Thank you. Andrew Rees: Yes. So let me let Anne address what percent of - the proportion of our guidance that is impacted by the pricing increase. But before we do that, yes, in terms of the pricing impact, yes, it takes some pricing increases this quarter, classic and I would say derivative and related products. We have a lot of products that ladder together, so we moved actually quite a few products. That was really based on what the impact the market-by-market around the world. It was here in the U.S. that were also highlighted within other markets around the world as well. The impact of those price changes will take anywhere between six to nine-months to flow through to our overall financials. As we look at pricing, we are really looking to make sure that we: a, number one, given incredible value to our consumers, that is the first thing that we are focused on; the second thing that we are looking at is appropriately matching supply and demand, and we really felt they can have an opportunity to take some pricing action. We think that pricing action has been well received. We monitor that closely in our DTC channel. We also monitor closely with our wholesale partners, so we feel like it has been well received. But we will continue to monitor as time goes on. Anne Mehlman: Yes. And then just on the guidance piece. So I think, obviously, the increase in guidance does reflect the pricing increases that we took, but it also just reflects the increasing brand momentum because our branch continues to accelerate. I think we have really seen the over-performance in Q1. We expect a strong Q2. And then we have more visibility into the back half, and so that really is the reason for the increase in guidance. I think that we have gained more confidence now that markets are reopening globally. And the health of the U.S. consumer is obviously continuing to improve, which seems to have been supported by governments -. So I think it is a mix of those pieces. In addition to that, we also have evidence that the brand trajectory and EMEA was up almost 50% in the quarter is following what we have seen in the U.S. So it is a mix of price, but it is also volume. So it is a mix of both of those from a guidance increase perspective on the revenue side. Erinn Murphy: Thank you both and I will hop in. thanks so much. Andrew Rees: Thanks Erinn. Anne Mehlman: Thanks Erinn. Operator: Your next question comes from the line of Jay Sole from UBS. Your line is open. Please ask your question. Jay Sole: Great, thank you so much. I want to ask about sandals. I think I heard you mention that sandals grew 17% in the quarter. Can you talk about if - how you view that result, were you pleased with that? And what signs did you see that give you confidence that you see long-term growth potential in sandals to help you capture bigger market share in that $30 billion global category? Andrew Rees: Yes. We saw a lot of signs, Jay, that were very encouraging. So I think we were very pleased with the 17% growth. It is obviously behind our clog growth. And as we said earlier in the year, we do expect sandals to grow less quickly than clog this year. But over the long-term, we expect sandals to be a higher-growth category than our underlying clog business. The signs that we saw that were particularly encouraging, I would say, number one, personalization, so the Jibbit-able or the personalizable sandals that we released last year and this year continue to do extremely well. So classic slide we released last year that is really strengthening this year. The 2-strap classic and that we released this year has had a very strong kind of initial introduction. So personalization of sandals is definitely working really well with our - for consumer, and so we are very pleased by that. In addition to that, I would say the reintroduction of some major franchises that we launched last year into the sort of the core of the pandemics so Brooklyn to Luke and Monterrey, as we have reintroduced them this year a few new colors, but frankly, a lot of the same products are also doing really well. So if you look at the combination of personalization, you look at our other core platforms, we feel really optimistic about sandals. And as we look to the future, you mentioned in your question [indiscernible] global addressable market - so I’m confident about the future it this category. Jay Sole: Great, Andrew. That was real helpful. If I could ask you 1 more. The brand relevance just to continue to increase. Can you just talk about what some of the key drivers were some of the key actions that you took in the quarter that continues to drive the incredible momentum behind the brand right now? Andrew Rees: Yes. I think in a nutshell, I would say it is probably three things: it is product, marketing and marketplace management, right. So number one, I think we continue to deliver to the market, fresh and innovative product, right and first and innovative for us can be as simple as the right color and the right graphic. So we have some of our new colors in classic definitely trend right, definitely in sync with whether the consumer is performing well. Graphic is performing well, so that is an innovative product and as we already talked a little bit about, sandals. I would say marketing, the integrated marketing program, our use of celebrities, our use of collaborations, our use of social media, amplifying that around the world, both here in this country. But also, frankly, in China and all parts of the world has been really important and then increasingly, our marketplace management efforts here in the United States and in our key overseas markets, where we are being very thoughtful about where our product shows up, how it is priced, what supply we put into the market so that we maintain a really profitable business for us, but frankly, also a very profitable business for our wholesale and distributor partners as well. Jay Sole: Got it. Thank you so much. Andrew Rees: Thanks Jay. Anne Mehlman: Thanks Jay. Operator: Your next question comes from the line of Jonathan Ops from the Crocs. Your line is open. Please ask your question. Jonathan Komp: It is Jon Komp from Baird. Just if I could start 1 follow-up on the pricing question, I know you mentioned labor and some wage increases. There has been maybe some questions about resin input costs, too. So is there any sort of inflationary offset for the pricing you have taken? And any thoughts on updated targets for gross margin for the year? Anne Mehlman: Yes. So good question. We are seeing a little bit of inflation, as we talked about. I think the biggest pressure right now is really on grade, both on the inbound and outbound side. We also anticipate some labor cost pressures. So in key manufacturing origins, we haven't seen that yet, but we do anticipate that coming. And also in our DCs, as Andrew tapped in his prepared remarks, we did actually raise some salaries and wages there. So our input costs are a small percentage of our overall product costs, but we are seeing higher commodity costs due to supply and demand imbalances. That is also a little bit of an offset. And I will say, we have incorporated all of that into the guidance perspective. And our gross margins, we do expect to be up year-over-year, and you can see that kind of coming through as you sign in Q1, so we do expect to have good gross margins for the year. Jonathan Komp: And just 1 more clarification, I don't know if Asia Pacific was mentioned for pricing at all, if that market recovers, would that be something you might look at beyond 2021 or any thoughts there on the geographic reach of the actions you have taken so far? Andrew Rees: Yes. So we have taken some pricing trends in Asia already, Jon, in some of our core markets, so some of that was done this year already. But I do think in the future, there is potential for price as the brand continues to strengthen in key Asian markets. Jonathan Komp: Okay. Excellent and then just one broader question for me. I know, at some point, we will be having a broader discussion during an Investor Day, but when you think of this year's performance and the new guidance to get back to low to mid-20% adjusted operating margin, how should we think about the broader context of this performance and is there anything that you see this year setting sort of a high or unattainable bar going forward or do you think there is good opportunity to maintain and grow margin looking ahead? Anne Mehlman: Yes. So obviously, we haven't given long-term guidance. I think we are incredibly optimistic about what we are seeing in the brand. As we have kind of talked about the pieces, we think gross margins are largely sustainable; we have done a lot of work around that. And then from an SG&A perspective, we have always said we have less been able to leverage the increase in volume because our business model is created that way. So we think those pieces won't change, but we will obviously look forward to putting out some longer-term guidance at the back half of this year during an Investor Day. Jonathan Komp: Understood, I just look forward to that. Thank you. Anne Mehlman: Thanks, Jon. Operator: Your next question comes from the line of Sam Poser from Williams Trading. Your line is open. Please ask your question. Sam Poser: Parts of pretty much everything has been answered, but I will try to - number one, the closures, you mentioned that those retailers that you have decided to shut down do not fit your long-term plans or the way the brand was being presented. Can you tell us what that expectation is and what that is that you want from these partners? Do they all have to be large retailers now or is it digital, is it brand presentation, digital abilities and so on and so forth within those retailers that you decided to close? Andrew Rees: Yes. I mean, I think - so I think the way I would probably answer that, Sam, is I say, look, there are certain categories of resellers that we have real stronger ability. We have been really clear about that over some feedback yet. So I really clarify a period of time. So e-tail, sporting goods, family footwear and large specialty chains, we are fundamentally partnered by retailers are going to win in the long-term, and those are formats that we think make sense to consumer over the long-term. In addition to that, we are looking to make sure that we are well in place in strategically important more retailers whether they are Tier zero influential accounts or regional accounts that have strong penetration in the local markets. We are less interested in undifferentiated small players that don't have particularly good service levels or in-store standards and potentially are taking advantage of some, I would say, digital distribution that we don't think is accretive to the brand. So it is really kind of putting resources, putting our time and energy behind just the retailers which we think are going to be strategically important in the future. Sam Poser: Thanks. And then given the port - the supply chain delays and so on, is any and you mentioned some of the cost increase would go to help your - some of those logistics. Does some of this price increase will go to possibly air trading goods to play catch-up so you can service some of these businesses better as you await product to come in that is on the water right now? Anne Mehlman: Yes. Yes, that is absolutely right. I mean I think we are very, I would say, focused on not using airfreight ever possible, obviously, especially given air freight costs are even more elevated than what we have seen in the past. But we will selectively airfreight goods in order to get them in quicker, particularly where we are really lean. So we have been doing that that is incorporated in our guidance. We still expect gross margin. So yes, part of the price increases will offset some of the airfreights that we will need to use. Sam Poser: And then lastly, China, you talked about you expected China to come - really turn the corner for next year. Is there anything happening there, any changes there, any improvements you are seeing there that are better than expected that might make some of that happen this year? Andrew Rees: I would say from a China perspective, Sam, we are definitely on track. Look, we feel really good about the plan we put in place. We are tracking into that plan, all the KPIs by channel and make a lot of sense and we are right where we should be. So I would say is broadly on track. I would say a few things we were really pleased with the Justin Bieber launch in China that went exceptionally well. He resonated, and the activations that we did resonated probably had one of the fastest sellouts and we looked at our sell-out time across the globe. We are certainly getting some traction in social media in China with some of the things that we are doing and trying to be innovative. I would say our partner transitions are going well. The new concept stores that we both in are clearly resonating, and personalization is at the forefront of those stores. So I think we are definitely on track. I wouldn't say that we are going to see faster acceleration this year. Sam Poser: Thank you very much and continued success. Andrew Rees: Thank you, Sam. Anne Mehlman: Thank you, Sam. Operator: Your next question comes from the line of Susan Anderson from B. Riley. Your line is open. Please ask your question. Susan Anderson: Hi good morning, nice job on the quarter. I'm curious in Europe if you have seen the retail part of things or the wholesale stores to sequentially improve into April as it sounds like things are starting to open up there and then also if you could talk about maybe which markets are still shut down for you in Europe? Anne Mehlman: Sure. Yes. We don't comment on inter-month movements and kind of during the quarter. But I will say from a Europe perspective, one of the best things about our EMEA business is actually very high from a digital penetration standpoint. So even though most of our stores in Western Europe were shut down in Q1, we still saw a really strong trajectory both on our retail platform and on our own e-commerce, so driving that 50% growth as well as distributors in Europe as we have seen pretty market improvement in some of our distributor markets in India. And so obviously, we are seeing things kind of vary from an opening up perspective there, but again, we don't have that many retail stores in Europe, so the underlying trajectory that is driving EMEA is really the digital side of things. Susan Anderson: Great that is helpful. And then if I could just add a follow-up on the collaboration front. I'm curious if there is any, I guess, quantitative details around new customers coming in as you do these collaborations and I guess, just drawing buzz to the brand and driving excitement with existing customers and then also on the sandal front, I'm curious if there is any plan to do any collaborations with the sandals to kind of drive excitement around those products? Andrew Rees: Yes. Let me start with the last piece because that is easy. It is yes, absolutely. We will see a number of collaborations in 2021 that are focused on sandals. So yes, I think that is definitely coming and I think really important. And I would also say some of our super high profile collaborators will be on the sandal for the rest of the year. In terms of new customers and us, et cetera, from the collaborations, it is really a combination, and I would say each one is unique, right and actually design that way, right. Some are designed to have an opportunity to attract new customers, acquire new customers, and the mechanism of releasing these collaborations does allow you to capture the customer iteration for those new customers and be able to market them in the future. And some of them are designed to be more, I would say, maybe controversial is not the right word, but more kind of interesting and buzz-worthy. So it is really a tapestry that we try to put together, and so it really works from both perspectives. I think one other thing that you would note in 2021, we will do more international collaborations. We have already released a number internationally, and we will do far more internationally, both in Europe and in Asia this year. And I think you may have noticed on Sunday night that Quest Love was also wearing one of our shoes on the Red Carpet at Oscars. Susan Anderson: Yes. Great. That is very helpful. Good luck the rest of the year. Anne Mehlman: Thank you. Operator: Your next question comes from the line of Mitch Kummetz from Pivotal Research Group. Your line is open. Please ask your question. Mitchel Kummetz: Hi thanks for taking my questions. Anne, you mentioned that part of the uptick in guidance is just a better outlook for the back half. And just I want to kind of run some numbers back of the envelope, it looks like for the back half, you are looking for about 30%-ish sales growth, which is not as strong as the first half, but on a two-year basis, it looks like it is 70% plus which is actually stronger than the first half. And so I'm hoping you could just tell us what gives you the confidence in that is because the brand is becoming more of a back-to-school brand because expect big things for lining clogs in the fourth quarter? And if is there anything on the visibility side that you can sort of support that what you are seeing in the fall order book? Just anything there would be helpful. Anne Mehlman: Yes. I mean, again, I think, Mitch, we are really seeing that growth momentum continuing to accelerate both in the U.S. and overseas which is really exciting for us. I think our distributor business and the Asia, while still down for material reasons is starting to increase again, our EMEA distributor business is positive. So we are seeing all those really good signs. Obviously, we had huge direct-to-consumer outperformance in Q1 which is our smallest direct-to-consumer quarter, so that really gives us confidence. And I think we do have more back half visibility as well as just seeing how the U.S. consumer is responding to stimulus and other things and what they are reopening. I think all of those things lead us to believe that, that trajectory only continues to accelerate. So we -this as the confidence to raise our guidance. We are really pleased with that. Andrew Rees: Yes. From a product perspective next week, no, we are definitely optimistic about lifecycle because it is an important paper brand. And so that does help support our business in the back half. Anne Mehlman: And then finally, the pricing increases will actually flow through the revenue as well as margins. So those were also incorporated into the updated guide. Mitchel Kummetz: Okay. And then is there any way to isolate the impact of stimulus on the quarter and when you think about - it was something that occurred really, I guess, a little bit in January, but then more so in March, and that is continued into April. Do you think stimulus should be equally beneficial in the second quarter is the first quarter? Or is it weighted more towards one or the other, do you think? Anne Mehlman: I'm not sure about we did more towards the first and the second quarter, but we definitely saw an impact. I mean I think it was pretty clear and from what I've been reading, it looks like others have as well. So certainly, the consumer seems quite buoyant right now in the U.S., and we definitely saw an impact from stimulus. Mitchel Kummetz: Okay. And then lastly, Andrew, on sandals, you mentioned, it sounds like the slide, the personalization side of sandals is really what drove the quarter. But then you also mentioned the reintroduction of some franchises like Tulum and Brooklyn also did well. I'm curious if you can maybe speak to the trajectory of the sell-through that you are seeing there. I would guess that January and February probably weren't great months for those kinds of franchises. I wouldn't think that maybe the sell-in on the order book was that great there, but now we are getting into the warmer months, and things like bellbottom denims trending again, that is good for wedges. Anything that you are seeing there kind of on the trajectory side that would speak to your confidence in those more fashion franchises as we get further into the sandal season. Andrew Rees: Alright. So there is quite a lot there. So what I would say probably is, look, sandal delivery and the quantum of sandal sales absolutely increases if you go from the back end of the first quarter into the second quarter, right. That is just kind of the natural seasonal cycle. So we are certainly seeing more deliveries, and we are certainly seeing the business accelerate. I would say the personalize that was, frankly, did well out of the gate - and I think one thing that we are seeing in some components of the sandal business, particularly slide and potentially the 2-strap, it is pretty seasonal. That consumer that is wearing it is wearing it with and without sock depending on the season. So we are seeing that be more seasonal in the future, and we think in the future, we think the sandal overall sales of business probably is a little less seasonal than it is. I would say, and 1 thing in addition I would say is, in the quarter, I think the new introductions like personalized and the reintroduction of clogs drop, they were both components in terms of the driver of the business. It wasn't just strong based on the personalized sandals, both did well. Mitchel Kummetz: Okay. Alright, thanks good luck. Anne Mehlman: Thank you. Operator: Your next question comes from the line of Laura Champine from Loop. Your line is open. Please ask your question. Laura Champine: Thanks for taking my question, it is really about operating expense leverage and especially, how are you planning your sales and marketing expense this year to support that very strong growth that you expect? Anne Mehlman: Yes. It is a great question. So we are obviously pleased to leverage SG&A, and we talked about that on the last call that we would leverage SG&A. Q1 was probably a little bit lower from an SG&A standpoint just because our marketing usually kicks off - our marketing campaigns really start off in Q2, so we do expect that to increase as well as we have increased some wages for our frontline employees, and we will continue to invest in our key initiatives, right, that we have laid out, so that is sandals, that is China, that is digital and then relative product and marketing. And we will see those costs start to layer in throughout the year because the big focus is obviously investing to support our growth for next year as well. Laura Champine: Got it. So is it possible to give sort of a range of sales and marketing expense increase year-on-year or to talk about how it layers in seasonally? Anne Mehlman: I definitely think it all, again, increase in Q2, so if you kind of - last year was a weird year, so I kind of throw that one out and go back and look at 2019 and kind of think about how SG&A kind of walks from a quarterly spread, and I think that will help, because we definitely expect it to increase quarter-over-quarter, and we do expect to invest in marketing. So we will continue to see that increase, and we can go back and look at our historical marketing costs to have been right around just under 7% of SG&A for revenue, sorry, yes. Laura Champine: Got it. Thank you. Operator: Your next question comes from the line of Shin Anand from Stifel. Your line is open. Please ask your question. James Duffy: It is Jim Duffy from Stifel. Great execution, no doubt a lot of hard work behind this. I want to take a step back with this in mind, I'm hoping you guys can talk more about the infrastructure to support the growth. You have outlined sightlines to a $2 billion business this year. That is a big jump in just two-years from about 740 million. Can you talk about scaling manufacturing capacity to support this, have you taken on any new partners and I know you have the new distribution centers, are there any gaps in the infrastructure that are of particular focus as you look to support that higher revenue run rate? And then I'm curious, as you exit the year, are you still playing catch-up on infrastructure and you feel the infrastructure is in place to support further growth? Andrew Rees: Yes. Good question. Thanks, Jim. So we have really been investing in our infrastructure now for about 2/3 years, right. So substantive investments last year, we are making substantive investments this year. Those capital investments for us are really going into our DC. So as a reminder, we opened new DC in Dayton, Ohio. Two-years ago, we expanded that last year. We will further expand that next year, right. We have opened new DC in the Netherlands that is now open. We are transitioning our operations from old one to a new one through the remainder of the year, and that is a substantial increase in terms of capacity. So we also transitioned last year to a new DC which is a [3PL] (Ph) in Japan, et cetera. So for us, we are making, I would say, some pretty significant investments, expanding capacity and also expanding efficiency and effectiveness with the use of automation. So I think we feel good about that. But frankly, as we continue to grow in these rates, we will continue to need to make those kind of investments. But we have, I think, a good plan for that. From a sourcing and manufacturing perspective, we have some phenomenal partners. We have major partner groups in Asia that have very significant resources. They have opened new facilities, they have expanded existing facilities, and we will continue to do that in the future. And we are in conversations also with a couple of significant new partners as well. So we feel really confident in the partner base that we have and our ability to work with new partners in potentially new regions for manufacturing. So we feel like we are in a good place. As you know, we do try to run our inventory fleet, right. We think managing working capital, getting high working capital efficiency and keeping inventories lean such that the marketplace is not - goods is actually a really important component brand management. Anne Mehlman: And if I could just add on the SG&A side, Jim, I think when you think about how we are supporting the growth, we are definitely adding in one of the investments. We will be adding headcount across our key areas and our key initiatives in order to support this growth, and that will obviously is included in our guidance for our operating margins this year. James Duffy: Great. Very helpful answer. Building on that, any challenges with staffing to support any of this additional capacity or are you finding ready availability of labor? Andrew Rees: I would say no, not really. Look, we are hiring quite a few positions because obviously, you need to add positions to - and I would say that is across a broad spectrum of functions. But what we are finding is our brand not only is in demand from the consumer perspective, it is very apparel feeling to in place there. They are excited by the trajectory of the business. They are excited by a lot of the things that we are doing from a management perspective. And I think generally, they are getting great feedback from our employees since it is a great place to work. So we are attracting a lot of really phenomenal employment. Anne Mehlman: Yes. And we have been recognized. I think Andrew said in his prepared remarks, by Forbes for inclusivity as an employer. And then I think we are also recognized as one of the best midsized employers. So that is that is branding perspective. James Duffy: Outstanding. Keep up the good work, guys. Andrew Rees: Thank you. Anne Mehlman: Thank you. Operator: Your next question comes from the line of Sam Poser from Williams Trading. Your line is open. Please ask your question. Sam Poser: Just a quick two follow-ups. Number one, how much bigger on a percent basis do you expect the marketing spend to be in Q2 and Q3, I guess, versus Q1 and versus 2019 as a percentage? Anne Mehlman: So I would take the way to think about marketing is take it as a percentage of our revenue. So if you take our revenue guidance and use our marketing percentage historically, it is going to be about right. We might expand that a little bit, things are going well, but that is kind of how I would think about that, Sam. Sam Poser: Can you just remind us what that is? Anne Mehlman: Yes, it is almost 7%. So if we run around 6.8% of revenue from a marketing standpoint. Sam Poser: Thanks. And then lastly, the gold shoe we saw the other night was that something you guys made or something stylists did? And will we see that as part of the line? Andrew Rees: Unclear whether it would be part of the line. It is something that we made in collaboration with the stylists. Sam Poser: Okay. Thanks very much - continued success. Andrew Rees: Thank you very much. Operator: There are no further questions at this time. You may continue. Andrew Rees: Thank you very much. I just want to thank everybody for joining us all today and their continued interest in Crocs. So thank you very much. Have a great day. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.