Q4 2019 Earnings Call

February 27, 2020

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Operator: Thank you, good morning, everyone, and thank you for joining us today for the Crocs Q4 2019 Earnings Call. Earlier this morning, we announced our latest quarterly results, and a copy of the press release can 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 future revenues, gross margin, SG&A as a percentage of revenue, operating margins, CapEx, and our product pipeline. 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.

Brendon Frey: Thank you, good morning, everyone, and thank you for joining us today for the Crocs Q4 2019 Earnings Call. Earlier this morning, we announced our latest quarterly results, and a copy of the press release can 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 future revenues, gross margin, SG&A as a percentage of revenue, operating margins, CapEx, and our product pipeline. 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.

Thank you good morning, everyone and thank you for joining us today for their crops fourth quarter 2019 earnings call.

Earlier this morning, we announced our latest quarterly results in a copy of the press release can be found on our website.

Alex Dot com.

We would like to remind you that some of the information provided on this call is forward looking and accordingly subject to the safe Harbor provisions of the federal Securities laws.

These statements include but are not limited to statements regarding future revenues gross margin, that's DNA as a percentage revenue operating margin capex and our product pipeline.

Rocks 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 factor section of our annual report on form 10-K.

Operator: 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, net income, 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, President and 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.

Brendon Frey: 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, net income, 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, President and 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.

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 FCC for more information relating to these risk factors.

Adjusted gross margin income from operations operating margin net income in earnings per diluted common share. Our non-GAAP measures. A reconciliation of these amounts to their gap counterparts is contained in the press release, we issued earlier this morning.

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

Following their prepared remarks, we will open the call for your question.

This time I'll turn the call over to Andrew.

Thank you Brenda and good morning, everyone. This morning, we reported revenues of 263 million, which was slightly ahead of the upwardly revised guidance. We provided in early January.

Andrew Rees: Thank you, Brandon. Good morning, everyone. This morning, we reported revenues of $263 million, which was slightly ahead of the upwardly revised guidance we provided in early January. This result marks an all-time Q4 record high for the company and represents an increase of 22% over the same period last year. Our strong top-line growth allowed us to drive significant SG&A leverage, which, along with 310 basis points of adjusted gross margin expansion, helped fuel adjusted earnings per share of $0.12 versus an adjusted loss of $0.10 per share a year ago. These achievements underscore the work we have done expanding the year-round desirability, relevance, and consideration of our brand and product offering. Our Q4 performance represents a strong finish to our record revenue year.

This result marks an all time fourth quarter record high for the company and represents an increase of 22% over the same period last year.

Oh strong topline growth allowed us to drive significant as she and I elaborate.

Which along with 310 basis points of adjusted gross margin expansion.

Helped fuel adjusted earnings per share of 12 cents versus an adjusted loss of 10 cents per share a year ago.

These achievements underscore the work we have done expanding the around desirability relevant on consideration about Brian I'm product offering.

Oh fourth quarter performance represents a strong finish to a record revenue yes.

Andrew Rees: Anne will review our financial results in more detail shortly, but here are just a few of the many highlights from 2019. Overall, global revenues grew 13% to a record of $1.2 billion for the full year. Excluding store closings and currency, underlying growth was 17%. Adjusted operating margin of 11.6% was approximately 390 basis points over 2018, and adjusted EPS increased 87% to $1.61. We invested $15 million back into the business by our additional marketing programs. We returned cash to shareholders by buying back more than 6 million shares, and we relocated our US distribution center to a new automated facility in Ohio. Importantly, momentum we generated in 2019 has carried into the new year, and we anticipate continuing to drive meaningful growth in 2020.

I will review our financial results in more detail shortly but here are just a few of the money highlights from 2019.

Overall global revenues grew 13% to a record a 1.2 billion for the full year.

Excluding store closings in currency underlying growth was 17%.

Adjusted operating margin of 11.6% was approximately 390 basis points over 2018 on adjusted EPS increased 87% to $1.61 cents.

We invested $15 million back into the business buyer additional marketing programs, we returned cash to shareholders by buying back more than 6 million Chaz.

We relocated a U.S. distribution center to a new automated facility in Ohio.

Importantly momentum we generated and 29 team has carried into the new yeah, we anticipate continuing to drive meaningful growth in 2020.

Andrew Rees: To better understand where the business is headed, it's helpful to understand the key drivers of our recent performance, since the same underlying strategies will propel us forward in the future. Starting with building brand heat, it was an incredibly busy and exciting year. Throughout 2019, we executed numerous programs and campaigns that further strengthened consumer affinity for the Crocs brand around the world. This was the third year of our successful Come As You Are campaign, we once again invested in a strong lineup of brand ambassadors, including Zooey Deschanel, Kim Se-jeong, and Suzu Hirose. Late last year, we announced the addition of award-winning actor, activist, and entrepreneur Priyanka Chopra Jonas to our team for 2020. Priyanka will be featured in many of our marketing assets for 2020, both in the US and in our international markets.

To better understand why the businesses had it it's helpful to understand the key drivers of our recent performance since the same underlying strategies will propel us forward in the future.

Starting with building brand heat it was an incredibly busy an exciting yeah throughout 2019, we executed numerous programs and campaigns to further strengthen consumer affinity for the crocs brand around the well.

This was the third year about successful come as you all campaign.

We once again invested in the strong line up of brand ambassadors, including so it doesn't know Kim syndrome, and Suzuka Russell and.

Late last year, We announced the addition award winning actor activists an entrepreneur Perenco Choper Jonas to our team for 2020.

We aren't there will be featured in many of our marketing assets for 2020, both in the U.S. and in our international markets.

Andrew Rees: More recently, we unveiled our newest brand ambassador, Yang Mi, an actress and singer and one of the top celebrities in China, with over 100 million followers across her social media platform. We're very excited to have Yang Mi on board, as her reach and appeal is a key component of our growth strategy in this large and important market. We launched over 20 collaborations in 2019, each of which had an impact on enhancing brand relevance. These included partnerships with Post Malone, Luke Combs, Takashi Murakami, and Vera Bradley in the US, PSY in Korea, Vivienne Tam in China, and Beams in Japan. We'll reprise several of these collaborations in 2020, along with many partnerships that we're really excited about.

More recently, we unveiled our newest brand ambassador.

Yeah, I'm on an actress and Cigna and one of the top celebrities in China with over 100 million followers across the social media platform.

We're very excited to have you are my on board as a reach an appeal is a key component of our growth strategy in this large unimportant market.

We launched over 20 collaborations in 29 team each of which had an impact on enhancing brand relevance.

He is included partnerships with post Malone, Luke Combs, Takashima economy, and Vera Bradley in the U.S.

Hi, and Korea, maybe sometime in China and beams in Japan.

Will reprice several of these collaborations in 2020, along with many partnerships that we're really excited about.

Another important part about 2019 marketing strategy in the U.S. was the introduction of across profile it ticked up a.

Andrew Rees: Another important part of our 2019 marketing strategy in the US was the introduction of a Crocs profile on TikTok, a video-sharing app popular with teens and young adults. The initial reception has been fantastic, evidenced by the fact that our hashtag Thousand Dollar Crocs Challenge has received 2.8 billion views to date. The effect of our marketing efforts is clearly evident and measurable. In Piper Jaffray's most recent study, in just one year, Crocs moved from the number 13 most preferred footwear brand by teens to number 7. In our own annual brand strength survey, we saw double-digit increases in both desirability and relevance. According to Google, we had 2 of the top 10 most searched shoes in 2019, including the coveted number 1 spot with our Luke Combs collaboration.

A video sharing out popular with teenagers and young adults. The initial reception has been fantastic evidenced by the fact that I have sex thousand dollar crops Challenge has received 2.8 billion views today.

The effective on marketing efforts is clearly evident I'm measurable.

In Piper Jaffrey. His most recent study in just one year crocs moves to the number 13, most preferred footwear brand by teens to number seven.

In our own annual brand strength survey, we saw double digit increases in both desirability and relevance and according to Google We had two of the top 10, most shoes in 29 team, including the coveted number one spot with Hulu come collaboration.

Report up perspective, our results continue to be driven by I'll focus on all four key growth pillars, prioritizing clogs sandals visible come for technology and personalization.

Andrew Rees: From a product perspective, our results continue to be driven by our focus on our four key growth pillars: prioritizing clogs, sandals, Visible Comfort technology, and personalization. Following strong spring, summer, and back-to-school seasons for clogs, we fueled demand during the holidays by refreshing our core assortment with on-trend colors, prints, and expanded our offering of line clogs for cold weather wearing occasions. The response from the consumers was incredibly strong. Q4 clog revenues increased approximately 36% and represented 69% of our footwear sales, up from 62% during last year's Q4, providing further proof that our clog silhouette is a year-round style. At the same time, our sandal business enjoyed a successful holiday, and we continue to build awareness of our presence in this category and inspire our female consumers with the breadth of our offering.

Following strong spring summer I'm back to school seasons for clogs.

We feel demand during the holidays by refreshing of course Altman with on trend colors prints and expanded our offering of line clogs for cold weather wearing occasions.

The response from can see him as was incredibly strong.

You fall club revenues increased approximately 36% and represented 69%, although footwear sales up from 62% during last year's fourth quarter, providing further proof that our clog silhouette is a year round style.

At the same time on sandal business enjoyed a successful holiday and we continue to build awareness about presence in this category and inspire all female consumers with the breadth of our offering.

Andrew Rees: Sales grew 7% over last year's Q4 and grew 10% for 2019, the third consecutive year of double-digit growth for this category. We have exciting plans to build on this momentum in 2020, including seeing more of our celebrities in our new sandals, as well as featuring more sandals in our collaborations. We're also expanding the third component of our product strategy, Visible Comfort technology, with the recent introduction of kids sizes into our LiteRide collection. Since launching LiteRide in early 2018, it has quickly become one of our top five franchises. Visible Comfort technology is now a core part of Crocs' DNA, and we believe it provides us with the compelling growth opportunities well into the future.

Sales grew 7% over last year's fourth quarter and grew 10%. The 2019, the third consecutive year double digit growth for this category.

We have exciting plans to build on this momentum in 2020, including see more about celebrities and our new sandals as well as featuring more sandals and collaborations.

We're also expanded the third component about product strategy visible come to technology with the recent introduction of kids sizes into a light right collection.

Since launching light right in early 2018, it has quickly become one of a top five franchises.

Visible come for technology is now Copart Crooks DNA, we believe it provides us with the compelling growth opportunities well into the future.

With respect to what you bits charms business.

Andrew Rees: With respect to our Jibbitz Charms business, we saw accelerated momentum as the year progressed, culminating in a rollout to select wholesale accounts during the Q4. We've made great progress in broadening the appeal of our unique charms by evolving the assortment and regularly refreshing the offering with on-trend, relevant, and localized designs. Personalization is a global mega trend, and we are seeing growing numbers of consumers worldwide customize their Crocs footwear. We anticipate that our Jibbitz business will continue to gain momentum in 2020 and beyond, driven by all channels. Let me now turn briefly to the Q4 performance of our sales channels. Our DTC comp, which combines our retail and e-commerce results, increased 22% for the Q4 on top of 16% gain a year ago. E-commerce sales were up 34% on top of 19% growth last year.

We saw accelerated momentum as the year progress.

Culminating in a roll out to select wholesale accounts during the fourth quarter.

We've made great progress and broaden the appeal of our unique chums by evolving assortment and regularly refreshing the offering with on trend relevant and localized designs.

Personalization as a global macro trends, we're seeing growing numbers of consumers worldwide customize the crux footwear.

We anticipate that I, just business will continue to gain momentum in twentytwenty and beyond driven by all channels.

Let me now turn briefly to the fourth quarter performance, although sales channels.

DTC comp, which combines our retail and E. Commerce results increased 22% for the fourth quarter on top of 16% gain a year ago.

E Commerce sales were up 34% on top of 19% growth last year.

Andrew Rees: This represents our 11th consecutive quarter of strong double-digit e-commerce growth. The increasing brand heat continues to drive more traffic to our own sites, plus we are seeing good traction on global marketplaces. Retail comps rose 16%, our 10th consecutive quarter of positive comps. On a two-year stack, retail comps were up 29%. Q4 wholesale revenues increased 22%, following last year's 10% growth, led by strong sell-through and replenishment orders from many of our leading wholesale partners around the globe. As we think about Q4 from a geographic perspective, Q4 revenues grew double digits in each of our 3 regions, with the strongest growth coming from the Americas, led by the US.

This represents our 11th consecutive quarter strong double digit E commerce growth.

The increasing brand he continues to drive more traffic to our own sites plus we're seeing good traction on global marketplaces.

Retail comps rose, 16%, a 10th consecutive quarter of positive comps.

On a two year stack retail comps were up 29%.

Fourth quarter wholesale revenues increased 22% following last years, 10% growth.

Led by strong sell through and replenishment orders for many of our leading wholesale partners around the globe.

As you think about Q4 from a geographic perspective Q4 revenues grew double digits in each about three regions with the strongest growth coming from the Americas led by the U.S.

Oh performance in a whole market is the direct result of our commitment to execute the playbook, we outlined a couple of years ago.

Andrew Rees: Our performance in our home market is the direct result of our commitment to execute the playbook we outlined a couple of years ago, one that centers on strengthening our relationship and driving relevance with the consumer through great product and marketing. We're confident that the work we've done further igniting brand heat and emphasizing our core clogs and sandals, along with our burgeoning Jibbitz business, has Crocs well-positioned to drive sustainable growth in the US. We believe the same is true for EMEA and Asia, where we are in various stages of implementing the same strategies and playbook we've developed domestically. EMEA showed great progress in Q4, growing 17% in constant currency year-over-year. Asia represents our largest long-term growth opportunity, where clog relevance, particularly in China, lags our other key countries.

One that census, and strengthening our relationship and driving relevance with the consumer through great product and marketing.

We're confident that the work we've done further igniting brand heat and emphasizing our coal clogs and sandals, along with a burgeoning Jim it's business as crocs, well positioned to drive sustainable growth in the U.S.

We believe the same is true for EMEA and Asia, well, we're in various stages of implementing the same strategies on playbook, who develop domestically.

EMEA show Great progress in Q4 growing 17% in constant currency year over year.

Asia represents our largest long term growth opportunity what club relevance, particularly in China.

Other key countries.

Andrew Rees: With a much stronger foundation in place in China, we're starting to ramp up our efforts to accelerate growth. In the near term, however, our priority is to ensure that our employees in China, along with our partners and suppliers, safely navigate the health risks associated with the coronavirus. Our thoughts are with everyone affected. Many of our approximately 350 partner stores are closed temporarily. For those that remain open, they are operating on reduced schedules and experience lower than usual traffic. Despite this difficult situation, we continue to be very optimistic about our long-term growth prospects in China. Finally, I'm pleased to announce that we recently appointed Elaine Boltz to the newly created position of Executive Vice President, Chief Operations and Transformation Officer.

With a much stronger foundation in place in China, we're starting to ramp up our efforts to accelerate growth in the near term. However, our priority is to ensure that our employees in China, along with our partners on supplies.

Hopefully navigate the health risks associated with the Corona virus.

Our thoughts with everyone affected.

Many of our approximately 350 part of stores close temporarily for those that remain open they are operating reduce schedules an experience lower than usual traffic.

Despite this difficult situation, we continue to be very optimistic about a long term growth prospects in China.

Finally.

I'm pleased to announce that we recently appointed lame balls to the newly created position of executive Vice President Chief operations and transformation officer.

Andrew Rees: Elaine brings nearly 3 decades of leadership, operations, direct-to-consumer, and marketing experience to Crocs, having served in senior leadership positions at the TJX Companies, Chico's, and Ann Taylor during her career. In her new role, Elaine will have responsibility for our operations functions globally, including information technology, supply chain, and enterprise-wide business transformation. I'm confident she'll play a key role in enhancing execution of our long-term strategies. Before I turn the call over to Anne, I want to express my gratitude to the entire Crocs organization for delivering such a strong year of growth and profitability. This wouldn't have been possible without the hard work and commitment we have seen demonstrated by our global teams on a daily basis.

Helane brings nearly three decades of leadership operations direct to consumer marketing experience. The crux, having served in senior leadership positions at the TJX companies Chicos and until I loved your in her career.

In a new role Alain will have responsibility for our operations functions globally, including information technology supply chain and enterprise business enterprise wide business transformation.

I'm confident you play a key role enhancing execution of a long term strategies.

Before I turn the call over time I want to express my gratitude to the entire crocs organization for delivering such a strong year of growth and profitability.

We've come a long way over the past few years and this wouldn't be impossible without the hard work and commitment we have seen demonstrated by a global teams on a daily basis.

Normally at this time of year, we would set new year's greetings to all our associates customers family and friends in China is a concerning time, so many and we'd like to wish them and all of their families. Good health over the coming weeks and months.

Andrew Rees: Normally, at this time of year, we would send New Year's greetings to all our associates, customers, family, and friends in China. These are concerning times for many, and we would like to wish them and all of their families good health over the coming weeks and months. We look forward to healthier times ahead for everyone. With that said, Anne will now review our financial results in more detail and outline our guidance.

We look forward to healthy at times ahead for everyone.

With that said and we will now review our financial results in more detail an outline of guidance.

Anne Mehlman: Thank you, Andrew. Good morning, everyone. I'll begin with a short recap of our Q4 and full year 2019 results. 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, we had a record-setting Q4, exceeding our revenue guidance and achieving a dramatic improvement in our bottom line. Q4 revenues came in at $263 million, compared to $216 million in Q4 2018, a 21.8% increase, or 22.7% on a constant currency basis. Currency negatively impacted our revenues by approximately $2 million. Store closures reduced revenues by approximately $2 million, absent which our sales would have been up 23.7%.

Thank you Andrew and good morning, everyone.

Beginning with the short recap of our fourth quarter and full year 2019 result for a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts. Please refer to our press release.

You've already heard we had a record setting fourth quarter exceeding our revenue guidance and achieving a dramatic improvement in our bottom line.

Fourth quarter revenues came in at 263 million compared to 216 million in the fourth quarter 2018 at 21.8% increase or 22.7% on a constant currency basis.

Currency negatively impacted revenue by approximately $2 million. In addition store closures reduced revenues by approximately $2 million absent, which our sales would've been up 23.7%.

Anne Mehlman: This is our 11th consecutive quarter of organic sales growth and the sixth consecutive quarter of double-digit organic sales growth. We sold 13.7 million pairs of shoes, an increase of 18% over last year's Q4. Our average selling price for footwear during Q4 increased 3% to $18.44, with the increase attributable to less discounting and higher prices on certain product, which more than offset the impact of changes in our channel mix and the negative impact of currency. For 2019 in total, we sold 67.1 million pairs of shoes, 12% more than 2018, at an average selling price of $17.81, up 1% from prior year, or 3% in constant currency.

As our 11th consecutive quarter organic sales growth and the sixth consecutive quarter of double digit organic sales growth.

We sold 13.7 million pairs of shoes, an increase of 18% over last year's fourth quarter.

Our average selling price for footwear during Q4 increased 3% to $18.44, but the increase attributable to less discounting and higher prices on certain product, which more than offset the impact of changes in our channel mix and the negative impact of currency.

For 2018 in total we sold 67.1 million pairs of shoes, 12% more than 2018 at an average selling price $17, an 81 cents up 1% from prior year or 3% in constant currency. The Americas had another phenomenal quarter with revenues up 28.

Anne Mehlman: The Americas had another phenomenal quarter, with revenues up 28% to $155.8 million and minimal impact from currency. Growth was robust across every channel. In addition, we completed the relocation of our Americas distribution center from California to Ohio during Q4. While there were some challenges getting product out in a timely manner, which required some additional spending to remedy, we are very excited about the great benefits we expect to receive from our new distribution center investment, including higher throughput, greater efficiency, and an improved customer experience. In 2021, we intend to relocate our distribution center in the Netherlands, supporting our EMEA region, to a larger facility and are evaluating similar investments this year and beyond, designed to support our anticipated growth. In Asia, Q4 revenues were $64.4 million, up 15% from last year's Q4.

$255.8 million and minimal impact from currency growth was robust across every channel. In addition, we completed the relocation of our Americas distribution Center from California to Ohio. During Q4, well there was some challenges getting product out in a timely manner, which required some additional spend.

Going to remedy we're very excited about the great benefits, we expect to receive from our new distribution center investments, including higher corporate greater efficiency and an improved customer experience.

2021, we intend to relocate our distribution center in the Netherlands, supporting our EMEA region to a larger facility and are evaluating similar investments this year and beyond designed to support our anticipated growth.

In Asia Q4 revenues were $64.4 million, a 15% from last year's fourth quarter on a constant currency basis revenues rose 15.4%.

Anne Mehlman: On a constant currency basis, revenues rose 15.4%. DTC comparable sales were up 5.7%, driven by growth in our own crocs.com and our expanding marketplace presence, somewhat offset by lower retail comp. EMEA revenues rose 15% over last year's Q4 to $43 million. On a constant currency basis, revenues grew 17.2%. Our business is benefiting from growing brand heat and our continued focus on digital commerce. Our Q4 adjusted gross margin was 49.3%, well above last year's 46.2%, driven by favorable product mix, lower levels of promotions and discounts, and higher volumes, helping to leverage our fixed costs. This was partially offset by higher distribution center costs in the US related to the startup of our new US DC.

DTC comparable sales were 5.7% driven by growth in our own dot com and our expanding market place president.

Offset by lower retail comp.

EMEA revenues rose, 15% over last year's fourth quarter to $43 million.

On a constant currency basis revenues grew 17.2% our business is benefiting from growing brand heat and our continued focus on digital commerce.

Our fourth quarter adjusted gross margin was 49.3% well above last year's 46.2% driven by favorable product mix lower levels of promotions and discounts and higher volumes, hoping to leverage our fixed cost. This was partially offset by higher distribution center costs in the U.S. related to.

The startup of our new you FTC compared with our guidance adjusted gross margin was lower by 70 basis points due to the cost of scaling activities at our new Ohio distribution Center.

Anne Mehlman: Compared with our guidance, adjusted gross margin was lower by 70 basis points due to the cost of scaling activities at our new Ohio distribution center. Our adjusted SG&A improved by 620 basis points to 44.4% of revenue versus 50.6% in last year's Q4, and compared to our guidance of approximately 47% of revenue. The upside to our guidance was driven by our ability to leverage higher revenues in the quarter. Non-recurring charges were $1.2 million in Q4, compared to $4.6 million in last year's Q4. The work done over the past two years to reduce costs is now enabling us to drive significant leverage from revenue growth, even as we continue to invest more in marketing.

Our adjusted EPS DNA improved by 620 basis points to 44.4% of revenue versus 50.6% in last year's fourth quarter and compared to our guidance of approximately 47% of revenue.

Thank you our guidance was driven by our ability to leverage higher revenues in the quarter.

Nonrecurring charges were $1.2 million in Q4 compared to $4.6 million in last year's fourth quarter work done over the past two years to reduce cost is now enabling us to drive significant leverage from revenue growth, even as we continue to invest more in marketing.

Anne Mehlman: Our operating margin improved dramatically to 3.2% or 4.9% on an adjusted basis. For Q4, we recorded a tax benefit versus a tax expense last year. Higher than anticipated US profits enabled us to use various tax benefits accumulated during prior years. Q4 diluted adjusted earnings per share, excluding the tax benefit and non-GAAP adjustments, were $0.12, compared to a non-GAAP loss per diluted share of $0.10 a year ago. During Q4, we repurchased approximately 400,000 shares of our common stock on the open market for $13.7 million, at an average share price of $34.73. For the full year, we repurchased 6.1 million shares of our common stock for $147.2 million, at an average cost of $24.20 per share.

Our operating margin improved dramatically to 3.2% or 4.9% on an adjusted basis.

For Q4, we recorded a tax benefit versus the tax expense last year higher than anticipated U.S. profit enabled us to use various tax benefits accumulated during prior years.

Fourth quarter diluted adjusted earnings per share excluding the tax benefit in non-GAAP adjustments were 12 cents compared to a non-GAAP loss per diluted share of 10 cents a year ago.

During Q4, we repurchased approximately 400000 shares of our common stock on the open market for $13.7 million at an average share price at $34.73.

For the full year, we repurchased 6.1 million shares of our common stock for $147.2 million at an average cost of $24.20 per share $508.6 million remains available under our plan for future share repurchases.

Anne Mehlman: $508.6 million remains available under our plan for future share repurchases. Our balance sheet continues to be very strong. We ended the year with $108.3 million in cash and $205 million in outstanding borrowings. Inventory at 31 December 2019 was $172 million, up 38.2% compared to $124.5 million last year. The increase was driven in part by early receipts ahead of Chinese New Year. For the year, our inventory turns were 4.3 times. As pleased as I am with our strong Q4 performance, I am equally excited by our full year results. We grew revenue by 13%, or 17%, excluding approximately $28 million of currency impact and about $17 million of store closures.

Our balance sheet continues to be very strong we ended the year with $108.3 million in cash and $205 million an outstanding borrowings.

Been Tory at December 31st 2019 was $172 million.

38.2% compared to $124.5 million last year.

The increase was driven impart by early receipt the head of Chinese new year for the year, our inventory turns were 4.3 times.

As pleased as I am with our strong Q4 performance I'm equally excited by our full year result.

We grew revenue by 13% or 17%.

Excluding approximately $20 million of currency impact and about $17 million of store closures. In addition, we have leveraged adjusted SGN aided by approximately 430 basis points, even as we increased our marketing spend by $14.5 million.

Anne Mehlman: In addition, we have leveraged adjusted SG&A by approximately 430 basis points, even as we increased our marketing spend by $14.5 million. For the year, adjusted operating margins were 11.6%, up 390 basis points. On a GAAP basis, operating margins were 10.5%. With this result, we achieved our goal outlined two years ago of double-digit operating margins. Adjusted EPS for the full year was $1.61 versus $0.86 last year. Excluding the Q4 tax benefit, our underlying effective tax rate for the year was 13.5%. We plan to host an Investor Day during the second half of 2020, where we will lay out longer-term financial targets for the company.

For the year adjusted operating margins were 11.6% at 390 basis points on a GAAP basis operating margins were 10.5% with this result, we achieved our goal outlined two years ago, a double digit operating margin.

Adjusted EPS for the full year was $1.61 versus 86 cents last year, excluding the Q4 tax benefit our underlying effective tax rate for the year with 13.5%.

We plan to host an investor day during the second half of 2020, where we will lay out longer term financial targets for the company.

As we turn to guidance I want to remind you that our guidance is based on current currency rate and on the best information, we have given the limited visibility with respect to the crowd of virus and that.

Anne Mehlman: We turn to guidance, I want to remind you that our guidance is based on current currency rates and on the best information we have, given the limited visibility with respect to the coronavirus impact. Andrew touched on earlier, our thoughts and our focus on the well-being of our colleagues and partners in China as they deal with this very difficult situation. With a number of partner stores currently closed and other measures in place to try to prevent further spreading of the coronavirus, we've shipped very little product in China so far this quarter. A result, we've lowered our Q1 2020 revenue projection for our Asia region by $20 million to $30 million.

Andrew touched on earlier, our thoughts and our focus on the wellbeing of our colleagues and partners in China. They deal with is very difficult situation with a number of partner stores currently closed and other measures in place to try to prevent further spreading of the current of Iris, we've shipped very little product in China. So far this quarter.

As a result, we've lowered our Q1 2020 revenue projection for Asia region by 20 million to $30 million.

Anne Mehlman: This includes the impact on our China business, as well as the impact on other key markets in Asia, as we are seeing declines in retail traffic in Singapore, South Korea, Japan, and our Southeast Asia distributor markets. It also reflects our best estimates for supply delays out of our Asia factories in Q1. For Q1 2020, we expect revenues to be between $305 million and $325 million, compared to $295.9 million in last year's Q1, including a negative currency impact of $3 million. We expect operating margins to be between 9% and 12%, including approximately $3 million of one-time expenses for store closures and other provisions in Asia. For 2020, we now expect our revenues to grow 8% to 12% over 2019.

This includes the impact on our China business as well as the impact on other key markets in Asia. As we are seeing decline in retail traffic in Singapore, South Korea, Japan, and our southeast Asia distributor market.

It also reflects our best estimates for supply lays out of our Asia factories in Q1.

For the first quarter 2020, we expect revenues to be between 305 million and 325 million compared to $295.9 million in last year's first quarter, including a negative currency impact of $3 million.

We expect operating margin to be between 9% and 12%, including approximately $3 million of onetime expenses per store closures and other provision in Asia for.

For 2020, we now expect our revenues to grow 8% to 12% over 2019. This includes a negative currency impact of approximately $10 million as well as an estimated impact a $40 million to $60 million related to the crowd of era.

Anne Mehlman: This includes a negative currency impact of approximately $10 million, as well as an estimated impact of $40 to 60 million related to the coronavirus. To be clear, the impact from the coronavirus assumed in our guidance is related to store closures and overall consumer demand in Asia region, and doesn't contemplate a further disruption to our supply chain, nor continued softness in the region during the back half of the year. Our operating margin is expected to increase to approximately 11% to 13%, including estimated transition costs of about $3 million for the new DC in the Netherlands and approximately $5 million related to one-time charges for store closures and other provisions in Asia. Interest expense for 2020 is expected to be approximately $9 million.

Clear the impact from the current of Iris assumed in our guidance is related to store closures and overall consumer demand in Asia region in doesn't contemplate a further disruption to our supply chain nor continued softness in the region during the back half of the year.

Our operating margin is expect to increased to approximately 11% to 13%, including estimated transition costs of about $3 million for the new DC in the Netherlands, and approximately $5 million related to onetime charges for store closures and other provisions in Asia.

Interest expense for 2020 is expected to be approximately $9 million.

Anne Mehlman: In terms of income taxes, excluding the utilization of any discrete tax benefits, we expect a tax rate of approximately 17% in 2020. With respect to CapEx, we expect to invest between $50 to 60 million in 2020, which includes expenditures related to our new distribution facility in the Netherlands, scheduled to open in 2021, as well as some investments that shifted from last year into this year. In summary, although we are experiencing near-term challenges with the disruption in our Asia business, the Crocs brand and our fundamentals are strong, and we believe this disruption to be temporary. I remain very excited about our plans for 2020, as we continue to drive top and bottom-line growth while making important investments to fuel the business over the long term. At this time, I'll turn the call back over to Andrew for his final thoughts.

In terms of income taxes, excluding the utilization of any discrete tax benefits, we expect attach rate of approximately 17% in 2020.

With respect to Capex, we expect to invest between $50 million to $60 million in 2020, which includes expenditures related to our new distribution facility in the Netherlands scheduled to open in 2021 as well as some investments that shifted from last year into this year.

In summary, although we are experiencing near term challenges, but the disruption in our Asia business. The crocs brand and our fundamentals are strong and we believe this disruption to be temporary I remain very excited about our plans for 2020 as we continue to drive top and Bottomline growth, while making important investments to feel the business over the long term.

At this time I'll turn the call back over to Andrew for his final thought.

Andrew Rees: Thank you, Anne. As our 2019 performance indicates, we have great momentum in our business, and our brand heat has never been stronger. While we decreased our 2020 guidance as a result of challenges created by the coronavirus, our positive outlook for Crocs remains unchanged. We are confident there is a long runway of growth ahead of us and numerous opportunities to drive increased shareholder value for years to come. Operator, please open the call for questions.

Thank you on as a 29 team performance indicates we have great momentum in our business and our brand he has never been stronger.

Well, we decreased our 2020 guidance as a result of challenges created by the krona virus.

Ill positive outlook for Crocs remains unchanged. We are confident there was a long runway of growth ahead of us a numerous opportunities to drive increased shareholder value for years to call. Operator, Please open the call for questions.

At this time I'd like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad and we'll pause for just a moment, while we compile the Q and a roster.

Operator: At this time, I'd like to remind everyone, in order to ask a question, please press star, followed by the number one on your telephone keypad. We'll pause for just a moment while we compile the Q&A roster. Our first question comes from the line of Erinn Murphy with Piper Sandler. Go ahead, please. Your line is open.

And our first question comes from the line of Erinn Murphy with Piper Sandler Go ahead. Please your line is open.

Great. Thanks, Good morning, I guess my question, maybe just starting with the Corona virus and what you've embedded in your guidance of 40 million for the full year. It sounds like you're already assuming kind of the broader impact you're seeing an outside of the Asian market, that's going to China, but what's your assumption on how long. This pressure continues and then maybe if we can just under.

Erinn Murphy: Great. Thanks. Good morning. I guess my question may be just starting with the coronavirus and what you've embedded in your guidance of the, the $40 to $60 million for the full year. It sounds like you're already assuming kind of the broader impact you're seeing in outside of the Asian market outside of China. What's your assumption on how long this pressure continues? Then maybe if we can just understand a bit more on the supply chain side, can you talk about kind of what's being produced in China? If there's specific packaging or other input costs or inputs that go into maybe production lines elsewhere in Asia, and if you've seen any disruption on the supply side at this point.

And if it more on the supply chain side.

Can you talk about what's being produced in China for specific packaging or other input costs are inputs that go into maybe production lines elsewhere in Asia and as you've seen any disruption on the supply side at this point.

Yes, thanks, Aaron so.

Andrew Rees: Yeah. Thanks, Erinn. I, you know, firstly, I think, you know, I, I would like to say that, you know, our first focus is around, you know, health and well-being of our employees, our partners, and our suppliers, you know, throughout the Asia region. That's kind of how we've approached this. As we look at the business impacts, I think they're on 3 levels. Firstly, we've got direct impact in China, which I think is pretty clear to everybody. Stores are still substantially closed. Our e-commerce was not operating through most of February because our distribution partner was closed at the request of the local government. They are now operating, but obviously, your business is at a reduced level.

Firstly, I think I would like to say that flows focuses around the health and wellbeing of our employees our partners I know supplies throughout the Asia region. So that's kind of how we've approached this as we look at the business impacts I think there on three levels. Firstly, we got direct impact in China, which I think is pretty.

Clear to everybody so stores is still substantially closed.

Our our ecommerce was not operating through most of February because our distribution partner was closed at the request of the local government. They are now operating but obviously you businesses at a reduced level.

Andrew Rees: Almost as important as that is the impact in rest of Asia. If you look at the 130 million-plus Chinese tourists that travel globally, eight of their top destinations are in Asia, and we're seeing significant drops in traffic in Japan, in Korea, and in Singapore. As we look at our distributor businesses in Thailand and other parts of Southeast Asia, we're seeing big drops in traffic there. Then on top of that, you've got the supply disruption. There's really three levels of impact that we're managing and monitoring. Part of your question was, you know, how long have we assumed that this goes on? Our assumption is essentially, and what we've built into the guidance that we have provided at this stage, is, is that this goes on through Q1 and Q2.

Almost as important as that is the impact in rest of Asia. So if you look at the 130 million plus Chinese tourists to travel globally.

Eight of that top destinations are in Asia, and we're seeing significant drops in traffic in Japan, and Korea in Singapore, and as we look at our distributor businesses in Thailand, and other parts of Southeast Asia was a big drops in traffic that.

And then on top of that you've got the supply disruption. So there's really three levels of impact that where we're managing on monitoring.

Part of your question was how long have we assumed this goes on our assumption is essentially what we've built into the guidance that we have provided at this stage is that this goes on through first and second quarter. So we've got impacted first quarter on second quarter, and we recover in the back half.

Andrew Rees: We've got impact in Q1 and Q2, and we recover in the back half. In terms of the supply disruptions, again, the way to think about it is we're a little over 10% of our finished good production comes out of China. A little over 70% of our finished good production comes out of Vietnam, so that kind of gives you kind of where we're orientated. But as you rightly pointed out, Vietnam is, is not free from impacts, right? We do get components that go into the product that we make in Vietnam, out of China. Some of that is dual sourced, so we can switch to a Vietnam-only source, and some of it's sole sourced out of China, so we'll have to look for different sources around that.

In terms of the supply disruptions I kind of the way to think about it is were little over 10% above finished good production comes out of China, a little over 70% of finished good production comes out of Vietnam. So that kind of gives you kind of where we'll orientated.

As you rightly pointed out Vietnam is not free from impacts right. So we do get components that go into the product that we make in Vietnam out of China. Some of that is jewel sourced. So we can switch to a.

Vietnam only source and some of it comes and some of it sole sourced out of China. So we'll have to look for different sources around that.

Andrew Rees: You also see other impacts in terms of just the productivity of your Vietnam facilities, because many of these manufacturing groups are Chinese or Taiwanese owned. Yeah, we are seeing supply disruption. I think, if you kind of look at February, for example, coming back from Chinese New Year, look, a lot of facilities came back very, very slowly, or came back at far less productivity than they would have done. That is getting better, but there's definitely disruption going forward. I don't know if there's anything else you'd add, Erinn.

And you also see other impacts in terms of just the productivity of you Vietnam facilities, because many days manufacturing groups Chinese or Taiwanese owned.

So we are seeing supply disruption I think if you kind of look at February for example, coming back from Chinese new year.

A lot of facilities came back very very slowly on all came back that far less port productivity didn't they would have done that is getting better, but there's definitely disruption going forward I know, there's anything else you data, yes, I would you see that all of our factories have restarted in China, just very level varying levels of productivity.

Anne Mehlman: Yeah, I would just say that all of our factories have restarted, in China, just at very level, varying levels of productivity.

Erinn Murphy: Okay, that's helpful. In terms of the disruption, just so I make sure I understand how you're, you know, kind of framing the guidance, you're not assuming any further disruptions from here on the supply chain side, and really the impact is on kind of the, the cooler demand across APAC in the first half? Am I understanding that right? You have included supply chain?

Okay. That's helpful. But then in terms of that disruption does that make sure I understand how you're kind of framing the guidance you're not assuming any further disruption from here on the supply chain side and really the impact is on kind of that cooler demand across APAC in the first half am I understanding that right are you have included supply chain.

Andrew Rees: No, we've-

Anne Mehlman: Correct.

Andrew Rees: Yeah, yeah. Yep, yep, correct.

Yes, yes, yes correct.

Okay got it and then just.

Erinn Murphy: Okay, got it. Then maybe just-

Andrew Rees: Just to put a final point on that, if we see.

Andrew Rees: Just to put a final point on that, if we see significant delays going into Q3 and Q4 deliveries, that would be a, you know, a larger impact than we've outlined.

Just to put a finer point on that if we see significant delays going into Q3 in Q4 deliveries that would be.

Erinn Murphy: Yeah

Andrew Rees: ... significant delays going into Q3 and Q4 deliveries, that would be a, you know, a larger impact than we've outlined.

A larger impact and we've outlined.

Erinn Murphy: Got it. Then in terms of, like, inventory on hand, particularly into the North American market, how comfortable are you as you look out through the first half, just given that this is the region where you've been seeing the most significant piece of your growth?

Got it and then in terms of like inventory on hand, particularly into the North American market how comfortable are you.

Do you look out there the first half just given that this is the region, where you've been being the most significant piece of your growth.

Yeah, I would see from the U.S. perspective, a couple of things right our inventories up.

Anne Mehlman: Yeah, I, I would say from the US perspective, a couple things, right? Our inventory is up, you know, approximately 37% year over year, and most of that is in our US market because we did bring about 50% of that is because we brought it in ahead of Chinese New Year, which proved prudent just because the Chinese New Year and the timing of that. The rest of it is because we were obviously light on supply last year, and going into, you know, US growth, we wanted to make sure we had enough inventory. We're less impacted at this point, in the US right now because of our inventory.

You know approximately 37% year over year and most of that in our U.S. market. Because we did bring about 50% of that is because we brought it in ahead of Chinese new year, which proved prudent just because the Chinese new year in the tightening of that and then the rest of it because we were obviously late last year and going into.

You have growth we wanted to make sure we had enough inventory. So were left I would say were less impacted at this point.

In the U.S. right now because of our inventory.

Got it Okay and then just last question for me just on the collaboration pipeline can you talk a little bit more about.

Erinn Murphy: Got it. Okay. Then just last question for me. Just on the collaboration pipeline, can you talk a little bit more about, you know, how we should be thinking about the phasing of that here in 2020? Then what is the international opportunity on the collabs that you guys have been introducing to the market? Thank you very much.

How we should be thinking about the phasing of that you're in 2020, and then what is the international opportunity on the collapse you guys have.

Okay. Thank you very much.

Andrew Rees: Yeah. Thanks, Erinn. collabs, you've probably seen, we've started to ramp up the way to think about phasing is they are sort of now through summer, and then we have another pulse in late Q3, Q4. That's basically how we phase it. Through the summer and then leading up to holiday are our two periods that we focus on for collabs. I think we've seen that those work most effectively in the past. In terms of kicking off 20 collabs, you saw we did KFC a couple of weeks ago, which I'd have to say, that was not really oriented around selling a lot of pairs.

Yes, Thanks, Sara So co lobs, you've probably seen we've started to ramp up the way to think about phasing is they are sort of now through summer and then we have a now.

A pulse in Q in late Q3, Q4, that's basically how we size it so through the summer and then leading up to holiday.

Our two periods that we focus on for call Labs, I think we've seen it does work most effectively in the Pos in terms of kicking off a 2020 call labs you. So we did KFC a couple of weeks ago, which I'd have to say.

That was not really oriented around selling a lot of past opposed that we sell will actually be in March we delayed that because we wanted to have access to the Chinese market for that because obviously KFC is very important in that marketplace, but I would say the media attention. The PR an earned media we got from that was probably one of the best we've ever done.

Andrew Rees: The pairs that we sell will actually be in March. We delayed that because we wanted to have access to the Chinese market for that, because obviously KFC is very important in that marketplace. I would say the media attention, the PR, and the earned media we got from that was probably one of the best we've ever done, to be quite honest. It was really impactful. You also saw us tease one this week, which, if you haven't figured it out, that will be coming out at the weekend. Then, from an international perspective, absolutely. I would say, today, we probably have, on the schedule, more than double what we did last year from an international perspective.

To be quite honestly. It was that was really impactful you also saw those teams one this week, which if you haven't figured it out that will be coming out at the weekend.

And then from an international perspective, absolutely I would say.

Today, we probably have on the schedule more than double what we did last year from an international perspective, and that probably one of the key focuses is getting more intellectual cola hubs, which would be China Asia and on Europe.

Andrew Rees: That's probably one of the key focuses, is getting more international collabs, which would be China, Asia, and Europe.

Got it thank you guys and others.

Erinn Murphy: Got it. Thank you, guys, and all the best.

Thank you.

Andrew Rees: Thank you.

Anne Mehlman: Thank you.

Our next question comes from the line of Jonathan call from Baird Go ahead. Please.

Operator: Our next question comes from the line of Jonathan Komp from Baird. Go ahead, please. Your line is open.

Your line is open.

Yeah, Hi, great. Thank you just.

Jonathan Komp: Yeah. Hi, great. Thank you. Just maybe first following up on the coronavirus impact and the guidance, could you just remind us the size of China today? Is it still kind of 7% or 8% of sales? When you look at the trend in the rest of your Asia business, pretty clear that China saw a sharp falloff. Can you maybe just talk about kind of the direction or the recent trend you're seeing? Is it, is it intensifying in terms of the traffic declines, or how do you think about kind of the rest of the Asia business?

First following up on the virus impact and the guidance.

Could you just to remind us that size of China today is it still kind of.

Seven or 8% of sales and then when you look at the trend than the rest of your Asia business.

Pretty fair that China sharp fall off can you, maybe just talk about kind of the direct sharing a recent trend you're seeing and that is an intensified in terms of that traffic declines or how do you think about.

The rest of the Asian business.

Sure so.

Anne Mehlman: Sure. We don't normally disclose China because it's not a disclosable segment, but for purposes of this, it was about 5% of revenue in 2018, is the right way to think about it. Obviously, you know, we're seeing the impact in China. Then I would say from our direct markets, the biggest impact markets that we're seeing are really Singapore, Korea, and Japan. That's really on mostly the retail side and pretty large dropoffs of traffic. Then as far as, you know, the Southeast Asia markets, we know that, you know, Thailand, as Andrew mentioned, is very exposed to from a tourism perspective. We are also hearing, you know, from our distributor partners that certain of our markets in Southeast Asia are experiencing large drops in traffic.

We don't normally disclose China, because it's not a disposable segment, but for purposes of this it was about 5% revenue in 2018 is the right way to think about it.

And so obviously you know we're seeing the impact in China, and then I would say from our direct market. The biggest impact market that we're seeing are really Singapore Korea and Japan.

And that's really on mostly to retail side and pretty large drop off of traffic.

And.

And then as far as.

The southeast Asian market, we know that Thailand, as Andrew mentioned, it very exposed to permit tourism perspective.

So we are also hearing from our distributor partners that certain of our market in southeast Asia.

Experiencing large Scott and traffic.

Okay, that's really helpful and then.

Jonathan Komp: Okay, that's really helpful. Then more broadly, on the earnings guidance, just 2 questions there. I think first, you know, excluding kind of the, the coronavirus impact looks like, you know, very strong growth still. I wanted to, to ask maybe, you know, what's driving, especially kind of gross margin, what you're seeing for the year? Then, just also when you look at the range, you know, pretty wide range, obviously from the implied high end versus the low end. What's... like, what are the major moving parts or assumptions that you're embedding in the range?

More broadly on the earnings guidance.

Two questions there I think first.

Good day, and kind of a new corrado virus impact looks like very strong broke still so I wanted to.

Ask maybe what's driving this especially kind of gross margin, what you're seeing for the year and that.

Just also when you look at the range pretty wide range, obviously isn't that implied high end versus the low end. So what's going on the major moving parts or assumptions that you are embedded in the range.

Yes, so John let me give you kind of sort of whats the sort of flavor as to what's driving it and what we're assuming and then I'll dig into some of the components that you are looking alluding to there in terms of.

Andrew Rees: Yeah. Jonathan, let me give you kind of sort of what's the, the sort of flavor as to what's driving it and what we're assuming, and then Anne will dig into some of the components that you are alluding to there in terms of margin and SG&A. If you think about yes, we've still got underlying growth. Despite the coronavirus impact that we've called out, you know, our full year guidance still directs you towards strong growth. That growth coming from the Americas and EMEA. If you kind of look back at Q4, you really start to... you know, I would say, I would say, in 2019 for the full year, and certainly the latter period of the year, you start to see growth accelerating in EMEA.

Margin SGN I. So if you think about yes, we've still got underlying growth. So despite the the corona virus impact that we've called out.

Full year guidance still direct you towards.

Strong growth, but growth coming from the Americas, EMEA and if you kind of look back at Q4, you really start.

I would say it was a.

Declining 19 for the full year and certainly the lot a period of the you start to see growth accelerating in EMEA. So we think Americas in EMEA strong drivers of our growth. The causation that that growth is kind of kind of what we've been talking about so product marketing connecting with our consumer driving brand relevance and awareness.

Andrew Rees: We think Americas and EMEA are strong drivers of our growth. The causation of that growth is kind of, kind of what we've been talking about. Product marketing, connecting with our consumer, driving brand relevance and awareness, I think that's working extremely well, and we're seeing really clear evidence that that's spreading. We feel good about that. You know, obviously, without these impacts, we think that we would have started to see that in Asia, and we'll start to see that in the future in Asia. We think we've got a clear game plan to drive growth.

I think thats working extremely well and we're seeing really clear evidence of that spreading.

So we feel good about that.

Obviously without these impacts we think that we would have started to see that in Asia, and we'll start to see that in the future in Asia, but we I think we've got a clear game plan to drive growth.

Anne Mehlman: Yeah, just to reiterate what Andrew said, you know, the underlying business is strong, and we wouldn't be updating guidance if it wasn't for the coronavirus. Taking that into account, when you think about gross margins, directionally for the year, we do expect adjusted gross margins to be up as we continue to have stronger product margins and tailwinds from higher prices and mix. Then, as discussed in our prepared remarks, we have $3 million of charges associated with our new Netherlands DC that we expect to open in 2021, but we had $12 million in charges last year associated with our US DC. Then we expect continued improvement throughout the year in our US DC, and that ramping up.

Yes, just to reiterate what Andrew said you know the underlying business is strong and we wouldn't be updating guidance. If it wasn't further krona virus.

Taking that into account when you think about gross margin directionally for the year. We do expect adjusted gross margin to be up as we continue to have stronger product margins in tailwinds from higher prices in Mek and then as discussed in our prepared remarks, we have $3 million of charges associated with our new Netherlands DC.

That we expect to open in 2021, but we had 12 million in charges last year associated with our USBC.

And then we expect continued improvement throughout the year.

And our USSTC in that ramping up we don't expect the full impact this year from the 100 basis points, but we will get that on an ongoing basis on an annualized basis as soon as well.

Anne Mehlman: We don't expect the full impact this year from the 100 basis points, but we will get that on an ongoing basis, on an annualized basis, as soon as we're at, full productivity level.

Productivity level.

Okay.

Jonathan Komp: Okay. Any chance of quantifying just kind of how much you think gross margin will be up, or any more detail there? Thanks for taking the question.

Chance to quantify and just kind of how much your gross margin will be up.

Or any more detail there.

Thanks for taking my question.

Anne Mehlman: I think the way that I would think about that is that it's embedded in our overall EBIT margin guidance of 11% to 13%. I would say, you know, gross margin is going to be up. SG&A, when we planned SG&A, we planned investment in marketing China and capabilities in certain functions, obviously planning, you know, a pretty big growth year. We also plan to invest an incremental $20 million in marketing. Even though we have the impact of coronavirus on 2020, we really don't want to jeopardize our long-term growth and still expect to invest. We only expect, you know, modest leverage in SG&A. With those pieces, you can get to.

The way, but I would think about that is that it's embedded in our overall EBIT margin guidance.

11% to 13%. So I would tell you know gross margins going to be up ash DNA. When we planned SGN a we planned.

Investment in marketing, China and capabilities in certain functions, obviously planning a pretty big growth here and we also plan to invest an incremental $20 million marketing. So even though we have the impact of current a virus on 2020.

We really don't want to jeopardize our long term growth and still expect to invest so we only expect modest leverage and asked yet so with those pieces you can get to the overall.

Andrew Rees: Yep.

Anne Mehlman: the overall guidance.

Okay understood. Thank you.

Jonathan Komp: Okay, understood. Thank you.

Andrew Rees: Thanks, Jonathan.

Thanks, Jonathan.

Our next question comes from the lineup Mitch numerous with pivotal research go ahead. Please your line is open.

Operator: Our next question comes from the line of Mitch Kummetz with Pivotal Research Group. Go ahead, please. Your line is open.

Mitch Kummetz: Yeah, thanks for taking my questions. Just maybe a couple on coronavirus, and then I got another one. Just to be clear, your, your, your $40 to 60 million, that's just Asia. You're not assuming anything for Europe, even though, you know, Italy is a problem now?

Yeah. Thanks for taking my questions I'm, just maybe a couple on current of Iris on that I got another one so just to be clear your 40 to 60 million. That's just Asia, you're not assuming anything for Europe, even though.

It always has a problem now.

Yes, I mean, that's broadly true I think the thing that we're conscious solve is potential supply disruption in the future, but we don't see that in the first half significantly and is on alluded to earlier I think we have some inventory buffer in the U.S. So that's that's really predominantly Asia and then.

Andrew Rees: Yeah, I mean, that's, that's broadly true. I think the thing that we're conscious of is, you know, potential supply disruption in the future, but we don't see that in the first half significantly. As Anne alluded to earlier, I think we have some, you know, inventory buffer in the US. That's, that's really predominantly Asia.

Mitch Kummetz: On the EBIT margin guidance for both Q1 and the full year, actually, maybe just the full year, the 11% to 13%. In the press release, you kind of talk about provisions in Asia for the year, is it like, you know, 50 basis points, 100 basis points, you know, that you factored in for coronavirus?

On the.

On the on the EBIT margin guidance for both Q1 and the full year actually maybe just the full year.

Moving to 13% in the press release, you kind of talked about provisions in Asia.

Yeah. Thanks for the years 50 basis points 100 basis points.

Factored in for the Tomorrow.

Very good love the line went dead in the Middle of your second question, Oh, sorry, Yeah, I think I've got a deadline.

Andrew Rees: Nick, the line went dead in the middle of your second question.

Mitch Kummetz: Oh, sorry. Yeah, I think I've got a bad line. How much are you factoring, factoring into EBIT margin on coronavirus?

How much are you factoring it for factoring into EBIT margin on krona virus.

The flow through of our revenue plus I would say the onetime charges that we outlined.

Anne Mehlman: The flow-through of our revenue plus, I would say the one-time charges that we outlined of approximately $5 million. That's really related to, you know, some things around stores, that we may want to take some store closures early just based on traffic levels.

Approximately $5 million and that's really related to.

Some things around stores that we may want to taking store closures early just based on traffic level.

Mitch Kummetz: Okay. Then just last question. As you think about this explorer consumer that I think is driving a lot of your incremental revenue growth, have you started to see much demand outside of classic clogs yet? I know that, you know, like, the Brooklyn Wedge Collection is new. I think you're gonna be focusing more on, I think you said it on the, in the, on the call, some of the celebrities and, and, and, collabs outside of just, just clogs. Are you starting to see demand pick up in other areas outside of clogs, particularly with that consumer?

Okay, and then just last question.

Think about this explore consumer that I think it's driving a lot of your incremental revenue growth have you started to see much demand outside of classic clogs, yet I know that like the Brooklyn Watch collection as new I think you're going to be focusing more on I think you said it on the on the call some of the celebrities and and colao outside of just just Claude.

Are you starting to see demand pick up in other areas outside of clause, particularly without consumer.

I would say I was at the majority of the interest from that consumer is probably still on the call called at this stage I think it's really early in 2020 product introduction plans.

Andrew Rees: I would say, I would say the majority of the interest from that consumer is probably still on the core clog at this stage. I think it's really early in our 2020 product introduction plans. As you rightly point out, we have focused a set of products and a set of marketing strategies on engaging that consumer in a wider set of product strategies. I think it's really too early to say. I would say, our sandals that we have planned for this year, I think we are really optimistic about. Obviously very, very early, but where we see performance of some of those sandals on some of our DTC channels, I think we're, we're, you know, we're feeling good about where we are.

And as you rightly pointed out we have focused a set of products and as head of marketing strategies on drugs on engaging that consumer in a wider set of product starting I think it's really too early to say I would say.

Sandals that we have planned for this year I think we are really optimistic about.

And obviously very very early but where we see.

Performance of some of those sandals on some of our DTC channels I think we're out where we're feeling good about while we are.

Mitch Kummetz: Got it. All right. Thanks.

Got it alright. Thanks.

[noise]. Our next question comes from the line of Jim Churchey with Moness Crespi.

Operator: Our next question comes from the line of Jim Chartier with Monness Crespi. Go ahead, please. Your line is open.

Go ahead. Please your line is open.

More interest taking my questions.

Operator: Morning. Thanks for taking my questions. Andrew, earlier, I think you said that you expect recovery in the second half of 2020. Is that just the coronavirus impact goes away, or do you expect some of the demand that's impacted related to the coronavirus to shift into Q3 or Q4?

Jim Chartier: Morning. Thanks for taking my questions. Andrew, earlier, I think you said that you expect recovery in the second half of 2020. Is that just the coronavirus impact goes away, or do you expect some of the demand that's impacted related to the coronavirus to shift into Q3 or Q4?

Andrew.

Earlier, I think you said that you expect recovery in the second half of 20.

Is that just the current of our son Packers away or do you expect some of it the band.

That's impacted related to the Corona virus to shift into the third or fourth quarter.

I think it's mostly that we expect the the lack of commercial activity commerce activity shopping a big malls to subside in Q3 in Q4 people be back out in the malls I think I think most of the demand in the Asian countries is low.

Andrew Rees: I think it's, it's mostly that we expect the, you know, the lack of commercial activity, commerce activity, shopping, and being in malls to subside in Q3 and Q4. People will be back out in the malls. I, I, I think, I think most of the demand in the Asian countries is lost. I don't think it just pushes out. There's no reason to believe that they would, you know, they would buy more in the back half of the year because they didn't buy in the first half of the year.

Yes, I don't think it just pushes out there's no reason to believe that they would.

They will buy more in the back half deal because they did buy in the first off idea.

Operator: Okay. Anne, on the non-recurring store closing costs, you quantified $3 million in Q1, but you didn't quantify it for the year. Is there additional costs beyond Q1 related to those store closings?

Jim Chartier: Okay. Anne, on the non-recurring store closing costs, you quantified $3 million in Q1, but you didn't quantify it for the year. Is there additional costs beyond Q1 related to those store closings?

Okay and.

And on the nonrecurring store closing costs.

Quantify rebuilding the first quarter, but you didnt quantify.

Sure.

Is there additional costs beyond first quarter related to throw store closings.

Yes, what we talked about related to Asia, mostly charges related to Asia onetime charges for the year is 5 million.

Anne Mehlman: Yeah. What we talked about related to Asia, mostly charges related to Asia, one-time charges for the year is $5 million, $3 million being in Q1.

3 million being in Q1.

Operator: Okay. Then just by my math, you know, the $40 to $60 million impact is, you know, 3% to 5%. When you add that to your sales guidance for the year, you know, it comes out to 13% to 15%, which is 1% above your previous guidance. Is there an implicit raise to the underlying business, or is that math off?

Jim Chartier: Okay. Then just by my math, you know, the $40 to $60 million impact is, you know, 3% to 5%. When you add that to your sales guidance for the year, you know, it comes out to 13% to 15%, which is 1% above your previous guidance. Is there an implicit raise to the underlying business, or is that math off?

Okay.

And they're just by buying back.

The 40 to 60 million dollar impact is 3% to 5% or would you add that to your sales guidance for the year.

Comes out there.

<unk> percent, which is 1% above your previous guidance is is there an a plus the race can be underlying business or is that.

Yeah.

Yeah I think.

Anne Mehlman: Yeah, I think, you know, it's within, you know, very close to our original range. You know, obviously, we continue to see strength in our underlying business, as we talked about. We feel really good about the underlying business, you know, excluding kind of the extraordinary events with the coronavirus.

It within very close to our original range. Obviously, we continue to strengthen our underlying business as we talked about.

And we feel really good about underlying business.

Putting kind of the extraordinary events with the current a virus.

Operator: Okay, that's all I had. Thanks, and best of luck.

Jim Chartier: Okay, that's all I had. Thanks, and best of luck.

Okay. That's all I have backs at best.

Andrew Rees: Yeah.

Yes. Thanks.

Anne Mehlman: Thanks, Jim.

Operator: Thanks.

Andrew Rees: Thanks.

And again as a reminder, if you'd like to ask a question. Please please press star one on your telephone keypad.

Operator: Again, as a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Sam Poser with Susquehanna. Go ahead, please. Your line is open.

Our next question comes from the line of Sam Poser with Susquehanna.

I have please your line is open.

Sam Poser: Thank you for taking my question. Most of the stuff that I wanted to know, to know about has been asked. I guess the question is, in Q4, how did APAC do relative to your internal expectation, from a, we'll say, sales and margin perspective?

Thank you for taking my question most of the stuff that I wanted to know.

But.

I guess the question is in the fourth quarter.

Did was Asia Pac.

How did asiapac do relative to your internal expectation.

From a.

Sales of margin perspective.

Yes.

Anne Mehlman: Yeah. You know, our Asia growth in Q4 was 15%. We were pleased with that growth. You know, some of it, we're starting to see the pickup in wholesale. We had extremely strong e-commerce growth, which was in line with our strategy of opening marketplaces and really focusing on digital. We were pleased with our Asia growth in Q4.

Our Asia growth in the fourth quarter with 15%.

So we were pleased with that growth.

Some of that we're starting to see the pickup in wholesale and then we had extremely strong ecommerce growth, which was in line with our strategy of opening marketplaces and really focusing on digital.

So we were pleased with our Asia growth in the fourth quarter, yes, consistent with our plants.

Andrew Rees: Yeah, consistent with our plans, Sam.

Sam Poser: If we think ahead a year, I mean, once the dust settles, and you're not gonna make, may not make up the sales this year, but you should make, you know, you should run a very healthy increase at the end, at the beginning of next year, theoretically, as if the brand momentum continues as you have planned. Is that a fair statement?

So.

So if we think I had a year.

I mean.

Once the dust settles and you're not going to make may not make up the sales this year, but.

You should make.

Sure.

Run a very healthy increases at the beginning of next year theoretically.

As if the brand momentum continues as you have plant.

Got a fair statement.

Yes, I'm not going to comment and sort of on long range growth expectations. I think we've highlighted we will definitely do that in the later this year when we plan to hold in Investor Conference.

Andrew Rees: Yeah, I mean, I'm not gonna comment sort of on long range growth expectations. I think we've highlighted we will definitely do that later this year when we plan to hold an investor conference. But I, yeah, I think as we've talked about, you know, repeatedly, you know, we definitely see Asia as our largest long-term growth opportunity, based on the size of the markets that we are participating in, the direct markets that where we participate, and also the indirect markets, the distributors that we have in those marketplaces. It was important to us that we were able to achieve the growth that we did in Q4.

But yeah I think as we've talked about you know repeatedly we definitely see Asia as our largest long term growth opportunity.

Based on the size of the markets that we are participating in.

The direct markets, where we participate and also the indirect markets to distributors that we have in those marketplaces. So.

It was important to us that we were able to.

Achieved the growth that we did in Q4 and in the future once the dust settles from a grown a virus. We will be we are focused and we will continue to be very focused on driving growth in Asia.

Andrew Rees: In the future, once the dust settles from coronavirus, we are focused and will continue to be very focused on driving growth in Asia.

Sam Poser: Just, just another, just to follow up on that, other brands have talked about how their business was, let's say, for the first three weeks of January. Can you give us some idea of the trend prior to the advent of the coronavirus?

And then.

Just a follow up on that.

But other brands have talked about how business how their business was let's say.

For the first three weeks of January can you give us some idea of the trend.

Two.

The.

Advent of.

Yes.

Yes, so we don't think.

Anne Mehlman: Yeah. thanks, Sam. We don't talk about trends within the quarter. you know, just going back to Q4, because I think that's relevant, you know, with our 15% sales increase, you know, we saw really strong growth within our Southeast Asia distributor markets, in India especially, and in e-com. you know, I think that's, you know, the best way to think about it.

I think Dan we don't talk about trends within the quarter.

But.

Just going back to Q4, I think thats relevant with our 15% sales increase we saw a really strong growth.

Within our southeast Asia distributor markets in India, especially in an E com.

And I think that the best way to think about it.

Okay, and then just a follow up questions.

Sam Poser: Okay. Then, just to follow up on somebody else's questions. I mean, are you seeing or do you foresee any impact of the coronavirus in, let's say, Europe or Australia or the Americas? Is there any impact in markets other than in Asia, baked into the sales reduction that you provided?

Are you force.

Are you seeing or do you foresee.

And the impact of the Corona virus.

Let's say Europe, Australia.

Eric.

And there is any is there any impact.

And in markets other than in Asia.

Two.

Reduction that you provide.

Yes. So look is a very fluid situation Sam is youre youre aware off from what you probably look Australia, absolutely I mean, it's fairly we're already seeing that it's a strong tourist destination out of China, and so you can see that impact already.

Andrew Rees: Yeah. Look, it's a very fluid situation, Sam Poser, as you're, you know, you're aware of. From what you've highlighted, look, Australia, absolutely. I mean, you know, Australia, we're already seeing that. It's a strong tourist destination out of China, and so you can see that impact already. I don't know about Europe, to be quite honest. Obviously, the explosion in cases of in Northern Italy and potential for that to spread in Europe is something that's very recent. It's really this week, and it's very hard to contemplate what that would have, and really any impact in Europe is not built into our expectations.

I don't know about Europe to be quite honest on obviously the.

The explosion in cases of in northern Italy, and potential that spread in Europe is.

Something that's very recent it's early this week and it's very hard to contemplate what that would happen and really any impact in Europe is not built into our expectations, yeah, and if I could just elaborate just to clarify one thing Australia actually considered part of our Asia region. Yes. So that would be included in our guidance, it's actually pretty small for us, but that Australia is included.

Anne Mehlman: Yeah, if I could just elaborate, just, to clarify one thing. Australia is actually considered part of our Asia region.

Andrew Rees: Yeah.

Anne Mehlman: That would be included in our guidance. It's actually pretty small for us, but that Australia is included in our Asia region, in our guidance, whereas Europe is not.

In our Asia region in your guidance, whereas Europe is not.

Sam Poser: Lastly, I promise you, Can you talk about, like, sort of the evolution of the management of the brand, and the, you know, and what's really sort of besides the product and the, maybe it's the manner by which you're marketing them, the, the, the way you're segmenting the product and so on, in the Americas, how that's working and how and where that is, all other things being equal, in Europe and Asia?

And then.

I promise you.

Can you talk about like sort of the evolution of the management of the brand.

<unk>.

And what's really short.

The product.

Maybe it's the manner by what's your marketing them.

Segmenting the product and so on.

In the Americas, how that's working and how.

Where that is all things being equal.

Yeah.

And in Europe and Asia.

Yes, thats it Thats a very good question, Sam So I would say as we're going to look at our marketplace is obviously the America. The U.S. market is by far the most sophisticated.

Andrew Rees: Yeah, that's a very good question, Sam. I would say, as we kind of look at our marketplaces, obviously, the US market is by far the most sophisticated. I think what you're alluding to is we've definitely instituted and are focused on a marketplace management strategy, which allows us to manage which products go to which channels, how much they are allocated, if you like, and make sure that we have the right product in the right places for the right consumers. Clearly, there's different consumers going to different channels, we are working actively on that. We're pleased with where we are on that, and I would say the vast majority of our retail partners are also pleased with that, to see us very proactively managing the marketplace.

And I think what Youre alluding to is we've definitely.

Instituted focused on a marketplace management strategy, which allows us to manage which put us go to which channels how much. They are allocated if you like and make sure that we have the right product in the right places for the right consumers.

Clearly there's different consumer is going to different channels and we are working actively on that we're pleased with where we are on that and I would say the vast majority of our retail partners are also pleased with that to see us very proactively managing the marketplace.

Andrew Rees: That need is also, that is also a need in Europe, and we're transposing some of those marketplace management techniques to Europe. It's less relevant in other markets which are far less sophisticated. It is a key element of our ongoing strategy, and we think it's an important element because it will drive longevity and sustain our growth over time.

That need is is also.

That is also need in Europe on where transposing some of those marketplace management techniques to Europe, it's less relevant in other markets. What's your thought a sophisticated.

But it is a key element of our ongoing strategy and we think it's an important element because it drives.

We'll see it will drive longevity and sustain our growth strategy growth over time.

Thank you and.

Sam Poser: Thank you, and, and, good luck with all this.

Good luck.

Thank you.

Andrew Rees: Thank you, Sam.

Our next question comes from line of Jim Duffy with Stifel. Go ahead. Please your line is open.

Operator: Our next question comes from the line of Jim Duffy with Stifel. Go ahead, please. Your line is open.

Thank you good morning.

Jim Duffy: Thank you. Good morning. First, congratulations to the team on the terrific year in 2019.

First congratulations to the team on the terrific year in 2019.

Anne Mehlman: Thanks.

Andrew Rees: Thank you.

Jim Duffy: I wanted to ask, with respect to the 2020 guidance, can you guys speak to the wholesale growth rates and D2C comps assumed in the guide? I'm specifically curious what's assumed for North American D2C comps.

And I wanted to ask.

With respect to the 2020 guidance can you guys speak to the wholesale growth rates and D to C comps assumed in the guide and then specifically curious what's assumed for North American DTC comps.

Yes, we don't break out the key says I would tell you that encompass in our overall guidance, but we from the American standpoint, we expect DTC comps to be positive and we expect good wholesale growth as well.

Anne Mehlman: Yeah, we don't break out the pieces. I would say that it's encompassed in our overall guidance, but, you know, from the Americas standpoint, we expect D2C comps to be positive, and we expect good wholesale growth as well.

Okay, and one of the reasons I asked I'm curious you expectations for mix in the the influence there on ASP would you expect this piece to increase on a year to year basis.

Jim Duffy: Okay. One of the reasons I ask, I'm curious, you know, expectations for mix and the influence there on ASP. Would you expect ASPs to increase on a year-to-year basis?

Yeah, I would say all things being equal and ex currency, because obviously that the fluid situation I would say yes.

Anne Mehlman: Yeah, I would say all things being equal and ex currency, because obviously that's a fluid situation, I would say yes.

Okay, and then I wanted to ask some about.

Jim Duffy: Okay. Then, I wanted to ask some about inventories and the complexities of inventory management, given the virus disruptions. What are some of the considerations and the differences as it relates to inventory management in Asia that you're seeing between distributor markets and direct markets? Had you yet sold into the distributors when the virus came about, for direct markets, you know, what are the considerations for channel inventories? Can you guys speak through that a little bit, please?

Inventories in the complexities of inventory management.

Given the virus disruptions what are some of the considerations and the differences as it relates inventory management in Asia that you're seeing between distributor markets in direct markets had you yet sold into the distributors when the virus.

How about for direct markets.

What are the considerations for channel inventories can you guys speak to that a little bit. Please.

Yeah I think this is one of the areas that internally, where we're incredibly focused on because it's going to be extremely fluid I mean, I think the broad dynamics.

Andrew Rees: Yeah. I think this is, you know, one of the areas that internally, we're incredibly focused on, 'cause it's gonna be extremely fluid. I mean, I think the broad dynamics are that, you know, factories came back slower than, than, you know, we would have expected out of Chinese New Year because of the coronavirus. You've got some delays coming out of those factories. You've also got reduction in demand, particularly in some of the Asian markets. You've got, you know, future supply that's not gonna be consumed. I would say we're very focused on kind of rescheduling supply that's coming out of the factories that are producing, and also redirecting supply that was intended for, you know, for China and some of those other markets.

The factories came back slower than.

We would have expected out of Chinese new year because of the.

Because of the krona virus, so you've got some delays coming out of those factories you both scope reduction in demand.

Similarly in some of the Asian market, So you've got future supply, that's not going to be consumed.

So I would say, we're very focused on kind of rescheduling supply that's coming out of the factories that are producing.

And.

And also redirecting supply that was intended for for China and some of those are the markets.

Andrew Rees: As Anne alluded to earlier, I think, it's fortuitous that we, you know, we brought in a good amount of inventory into our North America marketplace ahead of an early Chinese New Year, 'cause that puts us in a better position there. This is gonna be a very fluid situation, and we're gonna be working very closely with our distributors and our wholesale accounts to manage this over the coming months.

As I alluded to earlier I think it's what you are those that we improve that we we brought in a good amount of inventory into a North America marketplace. A ahead of an early Chinese new year because of puts us in a better position.

This is going to be a very fluid situation I'm going to be working very closely with distributors on our wholesale accounts too.

To manage this over the coming months.

Andrew with respect to those distributors had you yet sold into them for the spring summer season or is that something that happens generally after the Chinese new year, I would say different in different parts of the world, but but in Asia.

Jim Duffy: Okay, Andrew, with respect to those distributors, had you yet sold into them for the spring, summer season, or is that something that happens generally after the Chinese New Year?

Andrew Rees: No, I would say different in different parts of the world. In Asia, they've taken, you know, I think Anne mentioned it, they've taken quite a lot of supply in Q4 and very early Q1. In Latin America and EMEA, it's flowing as we speak. It's different for different parts of the world.

They've taken I think on mentioned it they taken quite a lot of supply in Q4 very early Q1.

In in Latin America, and Amir, it's it's flowing as we speak.

But.

So it's different but different parts of the world.

Okay, and then last one for me I'm curious.

Jim Duffy: Okay. Last one for me. I'm curious how you're phasing marketing investments in Asia. You'd made some investments in ambassadors for Asia. Can you talk about how you're leveraging those relationships and, you know, have you delayed any programs or anything like that? You mentioned the KFC launch was delayed. Just how are you thinking about marketing investments in Asia? Are you able to delay that till later in the year when it may be more impactful?

Oh, you're.

[laughter] phasing marketing investments in Asia, you'd made two investments in ambassadors for Asia.

Can you talk about how you're leveraging those relationships and you have you delayed any programs or.

Anything like that you mentioned the KFC launch was delayed just how are you thinking about marketing investments in Asia are you able to delay that till later in the year when it may be more impactful.

Yeah, So I mean I think the.

Andrew Rees: Yeah. I mean, I think that, you know, obviously, China was a really big focus for us. It was, I think, a very big coup for the brand to be able to land Yang Mi as our brand ambassador. As we revealed her and launched that, really pre-coronavirus, it had a great impact. We saw tremendous social media engagement, and we saw a nice impact from that. Obviously, with stores being closed, we have pulled back on some of that activity, and we'll push it into later in the year.

Obviously, China was a really big focus for us. It was I think very big coup for the brand to be able to to land a young may as a as our brand ambassador and as we revealed her and on launch that.

Really pre Corona virus.

It had a great impacts we saw a tremendous social media engagement we saw.

A nice impact from that.

So, but obviously with stores being closed we have a pull back on some of that activity and will and we'll push it into later India.

Thank you.

Jim Duffy: Thank you.

Thank you. Thank you.

Operator: Thank you.

Anne Mehlman: Thank you.

Andrew Rees: Thank you.

And there are no further questions at this time I'd like to turn the call back over to our presenters.

Operator: There are no further questions at this time. I'd like to turn the call back over to our presenters.

Thank you very much appreciate everybodys interest in the company of the difficult a interesting time and difficult time for all of those impacted by the krona virus, but as a company will vary but very much focused on the well being of our employees and managing the situation go forward. So we appreciate everybody is ongoing interest in the company.

Andrew Rees: Thank you very much. Appreciate everybody's interest in the company. Obviously, a difficult, interesting time and difficult time for all of those impacted by the coronavirus. As a company, we're very, we're very much focused on the well-being of our employees and managing this situation go forward. We appreciate everybody's ongoing interest in the company.

And this does conclude todays conference call you may now disconnect.

Operator: This does conclude today's conference call. You may now disconnect.

[music].

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