Crocs, Inc. Reports Record Third Quarter Revenues

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Revenues

$

625,919

$

361,736

$

1,726,790

$

974,445

Cost of sales

154,967

678,594

453,581

Gross profit

399,796

206,769

1,048,196

520,864

Selling, general and administrative
expenses

196,728

134,683

525,120

371,371

Income from operations

203,068

72,086

523,076

149,493

Foreign currency gains (losses), net

537

(516)

(84)

(1,434)

Interest income

615

43

713

189

Interest expense

(6,486)

(1,502)

(12,830)

(5,593)

Other income (expense), net

2

15

901

Income before income taxes

197,736

70,084

510,890

143,556

Income tax expense (benefit)

44,247

8,195

(59,951)

14,025

Net income

$

153,489

$

61,889

$

570,841

$

129,531

Net income per common share:

Basic

$

2.47

$

0.92

$

8.96

$

1.92

Diluted

$

2.42

$

0.91

$

8.79

$

1.89

Weighted average common shares
outstanding:

Basic

62,033

67,473

63,695

67,606

Diluted

63,324

68,385

64,937

68,608

CROCS, INC. AND SUBSIDIARIES

EARNINGS PER SHARE

(UNAUDITED)

(in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Numerator:

Net income

$

153,489

$

61,889

$

570,841

$

129,531

Denominator:

Weighted average common
shares outstanding - basic

62,033

67,473

63,695

67,606

Plus: Dilutive effect of stock
options and unvested restricted
stock units

1,291

912

1,242

1,002

Weighted average common
shares outstanding - diluted

63,324

68,385

64,937

68,608

Net income per common share:

Basic

$

2.47

$

0.92

$

8.96

$

1.92

Diluted

$

2.42

$

0.91

$

8.79

$

1.89

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and par value amounts)

September 30,
2021

December 31,
2020

ASSETS

Current assets:

Cash and cash equivalents

$

436,601

$

135,802

Restricted cash - current

1,412

1,542

Accounts receivable, net of allowances of $21,137 and $21,093, respectively

229,298

149,847

Inventories

212,496

175,121

Income taxes receivable

1,255

1,857

Other receivables

16,990

10,816

Prepaid expenses and other assets

22,000

17,856

Total current assets

920,052

492,841

Property and equipment, net of accumulated depreciation and amortization of $88,595 and
$86,305, respectively

91,318

57,467

Intangible assets, net of accumulated amortization of $108,014 and $95,426, respectively

31,634

37,636

Goodwill

1,630

1,719

Deferred tax assets, net

517,929

350,784

Restricted cash

3,731

1,929

Right-of-use assets

170,957

167,421

Other assets

7,814

8,926

Total assets

$

1,745,065

$

1,118,723

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

133,446

$

112,778

Accrued expenses and other liabilities

149,206

126,704

Income taxes payable

22,315

5,038

Current operating lease liabilities

45,248

47,064

Total current liabilities

350,215

291,584

Long-term income taxes payable

193,990

205,974

Long-term borrowings

685,955

180,000

Long-term operating lease liabilities

157,874

146,401

Other liabilities

4,200

4,131

Total liabilities

1,392,234

828,090

Commitments and contingencies

Stockholders' equity:

Preferred stock, par value $0.001 per share, 5.0 million shares authorized including
1.0 million authorized as Series A Convertible Preferred Stock, none outstanding

—

—

Common stock, par value $0.001 per share, 250.0 million shares authorized, 105.9 million
and 105.0 million issued, 61.5 million and 65.9 million outstanding, respectively

106

105

Treasury stock, at cost, 44.4 million and 39.1 million shares, respectively

(1,236,003)

(688,849)

Additional paid-in capital

540,948

482,385

Retained earnings

1,124,187

553,346

Accumulated other comprehensive loss

(76,407)

(56,354)

Total stockholders' equity

352,831

290,633

Total liabilities and stockholders' equity

$

1,745,065

$

1,118,723

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

Nine Months Ended September 30,

2021

2020

Cash flows from operating activities:

Net income

$

570,841

$

129,531

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

23,832

20,251

Operating lease cost

44,067

45,818

Inventory donations

1,153

8,873

Provision for (recovery of) doubtful accounts, net

(2,441)

5,720

Share-based compensation

29,939

10,809

Deferred income taxes

(176,873)

—

Other non-cash items

(1,384)

3,632

Changes in operating assets and liabilities:

Accounts receivable

(80,981)

(38,937)

Inventories

(41,193)

(14,873)

Prepaid expenses and other assets

(5,069)

7,706

Accounts payable, accrued expenses and other liabilities

30,997

25,243

Right-of-use assets and operating lease liabilities

(37,723)

(45,133)

Cash provided by operating activities

355,165

158,640

Cash flows from investing activities:

Purchases of property, equipment, and software

(35,758)

(33,193)

Proceeds from disposal of property and equipment

6

434

Other

(15)

(168)

Cash used in investing activities

(35,767)

(32,927)

Cash flows from financing activities:

Proceeds from notes issuance

700,000

—

Proceeds from bank borrowings

170,000

150,000

Repayments of bank borrowings

(350,000)

(220,000)

Deferred debt issuance costs

(14,491)

(520)

Repurchases of common stock

(500,000)

(39,159)

Repurchases of common stock for tax withholding

(18,766)

(2,616)

Other

237

1,344

Cash used in financing activities

(13,020)

(110,951)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

(3,907)

130

Net change in cash, cash equivalents, and restricted cash

302,471

14,892

Cash, cash equivalents, and restricted cash—beginning of period

139,273

112,045

Cash, cash equivalents, and restricted cash—end of period

$

441,744

$

126,937

CROCS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(UNAUDITED)

Non-GAAP cost of sales, gross profit, and gross margin reconciliation:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

(in thousands)

GAAP revenues

$

625,919

$

361,736

$

1,726,790

$

974,445

GAAP cost of sales

$

226,123

$

154,967

$

678,594

$

453,581

New distribution centers ⁽¹⁾

(2,031)

(897)

(4,131)

(2,636)

COVID-19 inventory write-off ⁽²⁾

—

—

—

(2,396)

Other

—

(119)

—

(119)

Total adjustments

(2,031)

(1,016)

(4,131)

(5,151)

Non-GAAP cost of sales

$

224,092

$

153,951

$

674,463

$

448,430

GAAP gross profit

$

399,796

$

206,769

$

1,048,196

$

520,864

GAAP gross margin

63.9

%

57.2

%

60.7%

53.5

%

Non-GAAP gross profit

$

401,827

$

207,785

$

1,052,327

$

526,015

Non-GAAP gross margin

64.2

%

57.4

%

60.9%

54.0

%

^{(1)  Represents expenses, including expansion costs, related to our distribution centers in Dayton, Ohio and Dordrecht, the Netherlands.}

^{(2)  Represents an inventory write-off in our Asia Pacific segment associated with the impact of COVID-19.}

Non-GAAP selling, general and administrative expenses and selling, general and administrative expenses as a percent of revenues reconciliation:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

(in thousands)

GAAP revenues

$

625,919

$

361,736

$

1,726,790

$

974,445

GAAP selling, general and
administrative expenses

$

196,728

$

134,683

$

525,120

$

371,371

Donations of inventory

—

(50)

—

(9,970)

COVID-19 severance costs

—

—

—

(2,403)

COVID-19 impact of bad debt
expense ⁽¹⁾

—

48

—

(4,433)

Other COVID-19 costs ⁽²⁾

—

(183)

—

(827)

Duplicate headquarters rent ⁽³⁾

—

(426)

—

(1,120)

Other

—

(1,652)

—

(2,133)

Total adjustments

—

(2,263)

—

(20,886)

Non-GAAP selling, general
and administrative expenses ⁽⁴⁾

$

196,728

$

132,420

$

525,120

$

350,485

GAAP selling, general and administrative expenses as a percent of revenues

31.4

%

37.2

%

30.4

%

38.1

%

Non-GAAP selling, general and administrative expenses as a percent of revenues

31.4

%

36.6

%

30.4

%

36.0

%

^{(1)  Represents bad debt expense associated with the impact of COVID-19 on wholesale partners in our Asia Pacific and Americas segments.}

^{(2)  Represents costs incurred in response to COVID-19, including hazard pay, cleaning costs, and legal costs.}

^{(3)  Represents duplicate rent costs associated with our move to our new headquarters in Broomfield, Colorado.}

^{(4)  Non-GAAP selling, general and administrative expenses are presented gross of tax.}

Non-GAAP income from operations and operating margin reconciliation:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

(in thousands)

GAAP revenues

$

625,919

$

361,736

$

1,726,790

$

974,445

GAAP income from operations

$

203,068

$

72,086

$

523,076

$

149,493

Non-GAAP cost of sales
adjustments ⁽¹⁾

2,031

1,016

4,131

5,151

Non-GAAP selling, general and
administrative expenses
adjustments ⁽²⁾

—

2,263

—

20,886

Non-GAAP income from
operations

$

205,099

$

75,365

$

527,207

$

175,530

GAAP operating margin

32.4

%

19.9

%

30.3

%

15.3

%

Non-GAAP operating margin

32.8

%

20.8

%

30.5

%

18.0

%

^{(1)  See 'Non-GAAP cost of sales, gross profit, and gross margin reconciliation' above for more details.}

^{(2)  See 'Non-GAAP selling, general and administrative expenses and selling, general and administrative expenses as a percent of revenues reconciliation' above for more details.}

Non-GAAP income tax expense (benefit) and effective tax rate reconciliation:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

(in thousands)

GAAP income from operations

$

203,068

$

72,086

$

523,076

$

149,493

GAAP income before income
taxes

197,736

70,084

510,890

143,556

Non-GAAP income from
operations ⁽¹⁾

$

205,099

$

75,365

$

527,207

$

175,530

GAAP non-operating income (expenses):

Foreign currency gains
(losses), net

537

(516)

(84)

(1,434)

Interest income

615

43

713

189

Interest expense

(6,486)

(1,502)

(12,830)

(5,593)

Other income (expense), net

2

(27)

15

901

Non-GAAP income before
income taxes

$

199,767

$

73,363

$

515,021

$

169,593

GAAP income tax expense

$

44,247

$

8,195

$

(59,951)

$

14,025

Tax effect of non-GAAP
operating adjustments

508

(649)

1,038

(6,109)

Impact of 2020 intra-entity IP
transfer ⁽²⁾

(1,556)

—

173,503

—

Non-GAAP income tax
expense

$

43,199

$

7,546

$

114,590

$

7,916

GAAP effective income tax rate

22.4

%

11.7

%

(11.7)

%

9.8

%

Non-GAAP effective income tax rate

21.6

%

10.3

%

22.2

%

4.7

%

^{(1)  See 'Non-GAAP income from operations and operating margin reconciliation' above for more details.}

^{(2)  In the fourth quarter of 2020, we made changes to our international legal structure, including an intra-entity transfer of certain intellectual property rights, primarily to align with current and future international operations. The transfer resulted in a step-up in the tax basis of intellectual property rights and a correlated increase in foreign deferred tax assets based on the fair value of the transferred intellectual property rights. This adjustment represents the current period impact of this transfer, including the release of the valuation allowance as a result of a tax law change.}

Non-GAAP earnings per share reconciliation:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

(in thousands, except per share data)

Numerator:

GAAP net income

$

153,489

$

61,889

$

570,841

$

129,531

Non-GAAP cost of sales
adjustments ⁽¹⁾

2,031

1,016

4,131

5,151

Non-GAAP selling, general and
administrative expenses
adjustments ⁽²⁾

—

2,263

—

20,886

Non-GAAP other income
adjustment ⁽³⁾

—

—

—

(919)

Tax effect of non-GAAP
adjustments

1,048

(649)

(174,541)

(6,109)

Non-GAAP net income

$

156,568

$

64,519

$

400,431

$

148,540

Denominator:

GAAP weighted average common
shares outstanding - basic

62,033

67,473

63,695

67,606

Plus: GAAP dilutive effect of
stock options and unvested
restricted stock units

1,291

912

1,242

1,002

GAAP weighted average
common shares outstanding -
diluted

63,324

68,385

64,937

68,608

GAAP net income per common
share:

Basic

$

2.47

$

0.92

$

8.96

$

1.92

Diluted

$

2.42

$

0.91

$

8.79

$

1.89

Non-GAAP net income per
common share:

Basic

$

2.52

$

0.96

$

6.29

$

2.20

Diluted

$

2.47

$

0.94

$

6.17

$

2.17

^{(1)  See 'Non-GAAP cost of sales, gross profit, and gross margin reconciliation' above for more information.}

^{(2)  See 'Non-GAAP selling, general and administrative expenses and selling, general and administrative expenses as a percent of revenues reconciliation' above for more information.}

^{(3)  Represents a prior year fair value adjustment associated with our donations of inventory.}

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL GUIDANCE

Full Year 2021:

Approximately:

Non-GAAP operating margin reconciliation:

GAAP operating margin

27%

Non-GAAP adjustments associated with distribution center investments

1%

Non-GAAP operating margin

28%

Non-GAAP effective tax rate reconciliation:

GAAP effective tax rate

Non-GAAP adjustments associated with the 2020 intra-entity IP transfer

26%

Non-GAAP effective tax rate

23%

Full Year 2022:

Approximately:

Non-GAAP operating margin reconciliation:

GAAP operating margin

25%

Non-GAAP adjustments associated with air freight

3%

Non-GAAP operating margin

28%

CROCS, INC. AND SUBSIDIARIES

REVENUES BY SEGMENT

(UNAUDITED)

Three Months Ended
September 30,

Nine Months Ended
September 30,

% Change

Constant Currency % Change ⁽¹⁾

Favorable (Unfavorable)

2021

2020

2021

2020

Q3 2021-2020

YTD 2021-2020

Q3 2021-2020

YTD 2021-2020

(in thousands)

Americas:

Wholesale

$

213,321

$

98,025

$

526,164

$

256,258

117.6

%

105.3

%

117.4

%

105.4

%

Direct-to-consumer ⁽²⁾

242,587

136,022

611,833

297,097

78.3

%

105.9

%

78.0

%

105.3

%

Total Americas

455,908

234,047

1,137,997

553,355

94.8

%

105.7

%

94.5

%

105.5

%

Asia Pacific:

Wholesale

37,207

28,842

158,098

109,705

29.0

%

44.1

%

28.6

%

38.8

%

Direct-to-consumer

46,438

38,862

134,973

117,031

19.5

%

15.3

%

15.8

%

8.8

%

Total Asia Pacific

83,645

67,704

293,071

226,736

23.5

%

29.3

%

21.2

%

23.4

%

EMEA:

Wholesale

59,058

37,630

222,643

136,507

56.9

%

63.1

%

55.5

%

55.4

%

Direct-to-consumer

27,283

22,341

73,006

57,741

22.1

%

26.4

%

21.3

%

22.1

%

Total EMEA

86,341

59,971

295,649

194,248

44.0

%

52.2

%

42.8

%

45.5

%

  Total segment revenues

625,894

361,722

1,726,717

974,339

73.0

%

77.2

%

72.2

%

74.3

%

Unallocated corporate and other

25

14

73

106

78.6

%

(31.1)

%

71.5

%

(31.1)

%

Total consolidated revenues

$

625,919

$

361,736

$

1,726,790

$

974,445

73.0

%

77.2

%

72.2

%

74.3

%

Total wholesale

$

309,611

$

164,511

$

906,978

$

502,576

88.2

%

80.5

%

87.7

%

77.3

%

Total direct-to-consumer

316,308

197,225

819,812

471,869

60.4

%

73.7

%

59.3

%

71.2

%

Total consolidated revenues

$

625,919

$

361,736

$

1,726,790

$

974,445

73.0

%

77.2

%

72.2

%

74.3

%

^{(1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See 'Reconciliation of GAAP Measures to Non-GAAP Measures' above for more information.}

^{(2)  Direct-to-consumer revenues consist of sales generated through our company-operated retail stores (previously our "Retail" channel) and company-operated e-commerce websites and third-party e-commerce marketplaces (previously our "E-commerce" channel).}

CROCS, INC. AND SUBSIDIARIES

RETAIL STORE COUNTS

(UNAUDITED)

June 30,
2021

Opened

Closed

September 30,
2021

Company-operated retail locations:

Americas

164

—

—

164

Asia Pacific

142

12

—

154

EMEA

46

—

—

46

Total

352

12

—

364

December 31,
2020

Opened

Closed

September 30,
2021

Company-operated retail locations:

Americas

165

—

1

164

Asia Pacific

137

19

2

154

EMEA

49

—

3

46

Total

351

19

6

364

CROCS, INC. AND SUBSIDIARIES

DIGITAL SALES PERCENTAGE

(UNAUDITED)  

Digital sales, which includes sales through our company-owned websites, third party marketplaces, and e-tailers, as a percent of total revenues, by operating segment were:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Digital sales as a percent of total
revenues:

  Americas

32.8

%

30.8

%

31.2

%

38.9

%

  Asia Pacific

38.1

%

42.3

%

37.1

%

39.0

%

  EMEA

56.9

%

59.8

%

50.1

%

53.5

%

  Global

36.8

%

37.7

%

35.5

%

41.8

%

The 2020 digital sales percentages were impacted to some extent by the COVID-19 pandemic, which increased digital penetration when brick-and-mortar stores
were closed during such time-frame. Nonetheless, we expect digital sales to continue to increase going forward.

Investor Contact:

Cori Lin, Crocs, Inc.

(303) 848-5053

[email protected] 

PR Contact:

Melissa Layton, Crocs, Inc.

(303) 848-7885

[email protected]