Q4 2021 Crocs Inc Earnings Call

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Speaker 1: Thank you for standing by and good morning and my name is Savannah and I will be your conference call operator. At this time, I would like to welcome you to the Crocs fourth quarter 2021 call. All lines have been placed on mute to prevent any background noise. And after the speaker's remarks, there will be a question and answer session. And if you would like to ask a question during this time, please press the one. I'll now turn it over to the speakers. Please go ahead.

Thank you for standing by.

Dan and I will be your conference call operator at this time I would like to walk through the Crocs fourth quarter 2021.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

Couple of questions.

I will now turn it over to Jim.

Please go ahead.

Yes.

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Thank you Byron.

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Speaker 2: Please wait. The conference will begin shortly.

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Speaker 3: Good morning and welcome and welcome to the Crocs Inc. fourth quarter 2021 earnings call.

Good morning, and welcome and welcome to the Crocs, Inc. Fourth quarter 2021 earnings call.

Speaker 3: Good morning everyone and thank you for joining us today for the Crocs fourth quarter and full year 2021 earnings call. Earlier this morning we announced our latest quarterly and annual results and a copy of the press release may be found on our website at crocs.com.

Everyone and thank you for joining us today for the Crocs fourth quarter and full year 2021 earnings call earlier. This morning, we announced our latest quarterly and annual results and a copy of the press release may be found on our website at crocs Dot Com, we would like to remind you that some of the information provided on this call is forward looking and accordingly are subject to the safe Harbor provisions of the fed.

Speaker 3: We would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the safe harbor provisions of the federal securities laws. These statements include but are not limited to statements regarding the anticipated consummation of the acquisition of Hey Dude and the timing and benefits thereof, Cox's strategy, plans, objectives, expectations, financial or otherwise, and intentions.

All Securities laws. These statements include but are not limited to statements regarding the anticipated consummation of the acquisition of Hey, Dude and the timing benefits thereof clock. This strategy plans objectives expectations financial otherwise and intentions future financial results and growth potential anticipated product portfolio, our ability to create.

Speaker 3: future financial results and growth potential, anticipated product portfolio, our ability to create and deliver shareholder value, and statements regarding potential impacts to our business related to the COVID-19 pandemic. These statements involve known and unknown risks, uncertainties, and other factors which may cause our actual results, performance, or achievements to be materially different from any future results, performances, or achievements expressed or implied by the forward-looking statement.

And deliver shareholder value and statements regarding potential impacts to our business related to the COVID-19 pandemic. These statements involve known and unknown risks uncertainties and other factors, which may cause our actual results performance or achievements to be materially different from any future results performances or achievements expressed or implied by the forward looking statements crocs is not obligated to update.

Speaker 3: Crocs is not obligated to update these forward-looking statements to reflect the impact of future events except as required by applicable law.

These forward looking statements to reflect the impact of future events, except as required by applicable law.

Speaker 3: We caution you that all forward-looking statements are subject to risks and uncertainties described in the risk factors section of our annual report on Form 10-K and our subsequent filings with the SEC.

We caution you that all forward looking statements are subject to risks and uncertainties described in the risk factors section of our annual report on Form 10-K , and our subsequent filings with the SEC.

Speaker 3: Accordingly, actual results could differ materially from those described on this call. Please refer to the CRAC's annual report on Form 10-K , as well as other documents filed with the SEC for more information relating to these risk factors. Adjusted gross profit, adjusted gross margin, adjusted selling, general, and administrative expenses, adjusted income from operations and operating margin, adjusted income tax for benefit, and effective tax rates.

Accordingly actual results could differ materially from those described on this call. Please refer to the Crocs annual report on Form 10-K as long as other documents filed with the SEC for more information relating to these risk factors.

Adjusted gross profit adjusted gross margin adjusted selling general and administrative expenses adjusted income from operations and operating margin adjusted income tax benefit and an effective tax rate.

Speaker 3: Adjusted basic and diluted earnings per common share are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning.

Adjusted basic and diluted earnings per common share are non-GAAP measures. A reconciliation of these amounts for GAAP counterparts is contained in the press release, we issued earlier this morning.

Speaker 3: Joining us on the call today are Andrew Rees, Chief Executive Officer, and Anne Melnytt, 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.

Joining us on the call today are Andrew Rees, Chief Executive Officer, and knowledge 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.

Speaker 4: Thank you, Corey. And let me start by apologizing for the technical difficulties we're having today. Let me proceed with my prepared remarks.

Thank you Cai, let me start by apologizing for the technical difficulties, we're having today, but as we proceed with my prepared remarks.

Speaker 4: As you saw in our press release issued this morning, I'm incredibly proud of the $2.3 billion in sales and industry-leading adjusted operating margins of 30% we generated in 2021. These results underscore the underlying strength of the Crocs brand and even more remarkable considering the challenging environment we continue to navigate. www.hrs.nlm.ac.uk

You saw in our press release issued this morning, I'm incredibly proud of the $2 $3 billion in sales and industry, leading adjusted operating margins of 30% we generated in 2021.

These results underscore the underlying strength of the crocs brand and even more remarkable considering the challenging environment, we continue to navigate.

Speaker 4: Looking forward to 2022, we expect robust revenue growth for the Crocs and Hey Dews brands and another highly profitable year.

Looking forward to 2022, we expect robust revenue growth for the crux, and Hey, Dude brands and another highly profitable yet.

Speaker 4: And we'll review our Q4 financial results in more detail shortly. But here are a few highlights from the full year of 2021.

And we'll review our Q4 financial results in more detail shortly but here are a few highlights from the full year of 2021.

Speaker 4: The cross-brand grew 67%, experiencing broad-based growth across all major markets, channels, and part of category.

The cross brand grew 67% experiencing broad based growth across all major markets channels and product categories did.

Speaker 4: Digital revenues grew 48% over 2020 and 122% over 2019.

Digital revenues grew 48% over 2020 and 122% over 2019.

Speaker 4: Our best-in-class adjusted operating margins expanded to 30% from 19% in 2020.

Our best in class adjusted operating margins expanded to 30% from 19% in 2020.

Speaker 4: Adjusted diluted earnings per share more than doubled to $8.32.

Adjusted diluted earnings per share more than doubled to $8 32.

Speaker 4: We returned a billion dollars to shareholders through share repurchases, and we capped this extraordinary year by announcing the acquisition of a second high-growth, highly profitable brand Heydoo.

We returned $1 billion to shareholders through share repurchases and we kept this extraordinary year by announcing the acquisition of a second high growth highly profitable, Brian Hey, Jay.

Speaker 4: These exceptional results demonstrate the strength of the Crocs brand and its resonance with consumers globally.

These exceptional results demonstrate the strength of the crocs brand and its resonance with consumers globally.

Speaker 4: It was a great year for the Classic Clog and Classic Line Clog, taking the number one and number two spots for US holiday sales according to NPD, and also being named shoe of the year by Footwear News.

It was a great year for the classic Clog and classic line clock, taking the number one and number two spots for U S holiday sales. According to NPD and also being named shoe of the year by footwear news.

Speaker 4: We continue to fuel brand heat throughout the year with a pipeline of innovative collaborations, including a high-heeled Croc Madame with leading fashion house Balenciaga, and a nature inspired clock with Soleihi Bembry.

We continue to fuel brand here throughout the year with a pipeline of innovative collaborations, including our high heel cross Madame with leading fashion House Balenciaga and in nature in spite clock with select Bembry.

Speaker 4: We entered the metaverse with our first NFT, partnering with Parisian label Egon Lab.

We entered the metaverse without first N F T partnering with to reason label Egon lap.

Speaker 4: In addition to global collaboration launches with Justin Bieber, Pleasures, Palace and more, we saw great momentum with regional collaborations such as Influencers, Never Family in China, iconic footwear retailer Atmos Pink in Japan and DJ Vladimir Kuzma in Europe .

In addition to global collaboration launches with Justin Bieber Pleasures Palace and mall, we saw great momentum with regional collaborations such as influences never family in China iconic footwear retailer at Mustang in Japan, and D. J <unk> buy in Europe .

Speaker 4: We also expanded our partnerships in the Gibbets franchise, including bringing the mythical world of Dungeons and Dragons and the vibrant characters of Lisa Frank's life.

We also expanded our partnerships and the <unk> franchise, including bringing the mythical water Dungeons and Dragons and the vibrant characters of Liza Frank to life.

Speaker 4: In summary, the Crocs brand remains strong and I'm confident in our ability to deliver strong growth in 2022 and beyond.

In summary, the cross brand remains strong and I'm confident in our ability to deliver strong growth in 2022 and beyond.

Speaker 4: From a channel perspective, digital remains our top priority, as it enables us to meet the consumers where they are.

From a channel perspective digital remains a top priority as it enables us to meet the consumers where they are.

Speaker 4: During 2021, our digital business, which combines e-commerce and e-tail, grew 48% on top of 50% growth in 2020. Digital penetration increased on e-commerce and e-tail.

During 2021, our digital business, which combined e-commerce and E tail grew 48% on top of 50% growth in 2020.

Digital penetration increased on a two year basis to.

Speaker 4: to 37% from 31% in 2019.

To 37% from 31% in 2019.

Speaker 4: This year we invest in our digital capabilities, including the Crocs mobile app, global social platforms such as Do You Own and digital talent across the globe.

This year, we invested in our digital capabilities, including the Crocs mobile App global social platforms, such as <unk>.

And digital talent across the globe.

Speaker 4: We're confident these investments and our continued focus will drive digital growth globally over the long term.

We're confident these investments and our continued focus will drive digital growth globally over the long term.

Speaker 4: We achieved strong growth in both our direct-to-consumer and wholesale channels, with DTC revenues up 64% and wholesale revenues up 69% globally.

We achieved strong growth in both our direct to consumer and wholesale channels with DTC revenues up 64% of wholesale revenues up 69% globally.

Speaker 4: Global DTC sales were driven by higher traffic and strong average transaction value.

Global DTC sales were driven by higher traffic and strong average transaction value.

Speaker 4: Wholesale growth was balanced with high double digit growth in all subchannels including brick and mortar, detail and distributed.

Wholesale growth was balanced with high double digit growth in all sub channels, including brick and mortar E tail and distributors.

Speaker 4: From a product perspective, we sold over 100 million pairs of footwear globally in 2021.

From a product perspective, we sold over 100 million pets that globally in 2021.

Speaker 4: and the results continue to be driven by our key product pillars, clogs, sandals and gibbons.

And our results continues to be driven by our key product pellets.

Fox Saddles adjuvant.

Speaker 4: Sales of clogs were particularly strong, increasing to 80% of total footwear revenues versus 72% in 2020.

Sales of clogs were particularly strong increasing to 80% of total footwear revenues versus 72% in 2020.

Speaker 4: Sales of the classic clog franchise increase triple digits, driven by graphics as well as line, height and adventure iterations.

Sales of the classic clog franchise increased triple digits, driven by graphics as well as line height and adventure iterations.

Speaker 4: Sandals grew nearly 30%, driven by strong performance in our personalizable classic slide and classic sandal, particularly in America.

Sandoz grew nearly 30% driven by strong performance in our personal lines book Classic Slide and classic sandal, particularly in Americas.

Speaker 4: We also saw strong growth across other core items like our Croc Band and Katie Flips, as well as our Brooklyn-style franchise powered by Light Right Technology.

We also saw strong growth across other core items like our cross band and Katie Philips as well as our Brooklyn style franchise powered by like by technology.

Speaker 4: Gibbetts had another outstanding year, up almost 150%.

Jim It's had another outstanding year of almost 150%. This important category continued to have broad appeal with global penetration, reaching 7% versus 5% last year.

Speaker 4: This important category continues to have broad appeal with global penetration reaching 7% versus 5% last year.

Speaker 4: Our product strategy continues to resonate with consumers globally, giving us confidence in our $5 billion revenue target for the cross-brand we outlined at our investor day in September .

Our product strategy continues to resonate with consumers globally, giving us confidence in our $5 billion revenue target for the cross brand, we outlined at our Investor Day in September .

Speaker 4: Turning to ESG, we made progress in our commitment to net zero emissions for the Crocs brand by 2030.

Turning to ESG, we made progress in our commitment to net zero emissions for the Crocs brand by 2030.

Speaker 4: We've taken a major step forward by becoming a 100% vegan brand, and we kicked off our important sustainability initiative by blending bio-based compound into our shoes that we manufacture containing cross-lays.

We've taken a major step forward by becoming a 100% vegan brand and we kicked off our important sustainability initiatives by blending bio based compound into our shoes that we manufacture containing crossly.

Speaker 4: We continue to give back to our communities, including donating 150,000 pairs of shoes across multiple organizations.

We continue to give back to our communities, including donating 150000 pairs of shoes across multiple organizations.

Speaker 4: and together with the generosity of our consumers, raising funds for Feeding America, provide 25 million meals to those in need. I'm proud of the passion of our team and the progress we're making.

And together with the generosity of our consumers raising funds for feeding America to provide 20 million 25 million meals to those in need.

I'm proud of the passion of our team and.

And the progress we're making.

Speaker 4: in terms of making a positive impact on our planet and our communities.

In terms of making a positive impact on our planet and our communities.

Speaker 4: To cap off an extraordinary 2021, in late December , we announced the Haydood acquisition, adding a second high growth, highly profitable brand to our portfolio.

To cap off an extraordinary 2021 in late December we announced the <unk> acquisition.

Adding a second high growth highly profitable brand to our portfolio.

Speaker 4: We expect to close the transaction in the coming days and are delighted to soon welcome Alessandro and his talented team to Crux.

We expect to close the transaction in the coming days and are delighted to soon welcome Alessandro and his talented team to crops.

Speaker 4: We'll feel privileged if Alessandro staying on for 18 months to help ensure a smooth and successful transition.

Well, so privileged to have Alessandro staying almost 18 months to help ensure a smooth and successful transition.

Speaker 4: Our preliminary integration work is progressing well, and we're well advanced in terms of building our HEDU leadership team, with the majority of critical positions already filled.

Our preliminary integration work is progressing well and we're well advanced in terms of building our Haydu leadership team with the majority of critical positions already filled.

Speaker 4: We have a plan to amplify the Haydoo brand through innovative marketing and leveraging Crock's strong wholesale relationships to extend distribution.

We have a plan to amplify the haydu brand through innovative marketing and leveraging cross strong wholesale relationships to extend distribution.

Speaker 4: We're excited about the potential of Hey Dude and incredibly confident in our ability to build a billion dollar brand by 2024.

We're excited about the potential of hey, Dude and incredibly confident in our ability to build a billion dollar brand by 2024.

Speaker 4: Looking forward, the Crocs and Hey Dude brands enter 2022 with incredible strength and momentum.

Looking forward, the crux and hatred brands enter 2022 with incredible strength and momentum.

Speaker 4: However, I'll be remiss if I did not mention the many unknowns in the world today, ranging from challenging supply chain, lingering COVID shutdowns, to rising inflation and potential impact on consumer spending.

However, I'd be remiss, if I did not mention the many unknowns in the world today, ranging from challenging supply chain lingering COVID-19 shutdowns to rising inflation and potential impact on consumer spending we're.

Speaker 4: We're not immune to these many macro headwinds. However, I'm confident in our brand, our team, and our demonstrated ability to navigate uncertain times.

We're not immune to these many macro headwinds however, I'm confident in our brand our team and our demonstrated ability to navigate uncertain times.

Speaker 4: With respect to the supply chain and the pandemic, we've been managing disruptions for more than two years and have demonstrated incredible agility to satisfy consumers' needs globally.

With respect to the supply chain and the pandemic, we'd be managing disruptions for more than two years and have demonstrated incredible agility to satisfy consumers' needs globally.

Speaker 4: As we have shared, the factory shutdowns in Vietnam last year, combined with the continued extended trend at times, have lingering impacts on supply and new product introductions for the first half of 2022.

As we have shared the factory shutdowns in Vietnam last year combined with the continued extended transit times have lingering impacts from supply of new product introductions for the first half of 2022.

Speaker 4: As Anne will outline in our guidance, the greatest impact from these disruptions will come in the current quarter.

As Andrew outlined in our guidance the greatest impact from these disruptions will come in the current quarter.

Speaker 4: resulting in over 40 million dollars of orders slipping from Q2 into Q3 with the largest impact being in EMEA.

Resulting in over $40 million of orders slipping from Q2 into Q3 with the largest impact being in EMEA.

Speaker 4: However, we're looking forward to a robust revenue growth in Crocs and Hey Dude brands for the full year of 2022.

Okay.

However, we're looking forward to a robust revenue growth in crops and hatred brands for the full year of 2022.

Speaker 4: The combined business has incredible potential and we anticipate the powerful combination will be highly profitable, cash generative and create significant long term shareholder value.

The combined business has incredible potential and we anticipate the powerful combination will be highly profitable cash generative and create significant long term shareholder value.

Speaker 4: Before I turn the call over to Anne, I want to express my gratitude to the entire Crocs organization for their hard work and commitment to delivering best in class growth and profitability.

Before I turn the call over to Ann I want to express my gratitude to the entire Crocs organization for the hard work and commitment to delivering best in class growth and profitability.

Speaker 4: I also want to reiterate a warm welcome to all the hatred employers around the world who will soon be joining the Crocs family.

I also want to reiterate a warm welcome to all the hatred employees around the world who will soon be joining the <unk> family.

Speaker 4: 2021 was an incredible year for the organization, and I'm proud of how we executed as a team and the value that we've created for shareholders. With that, Anne will now review our webinar.

2021 was an incredible year for the organization and I'm proud of how we execute it as a team and the value that we've created for shareholders.

With that and we will now review our financial results in more detail.

Speaker 3: Thank you Andrew and good morning everyone. I'll begin with a recap of our fourth quarter results. For a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to our press.

Thank you Andrew and good morning, everyone I'll begin with a recap of our fourth quarter results for a reconciliation of the non-GAAP amounts mentioned theyre equivalent GAAP amounts please refer to our press release.

Speaker 3: Our fourth quarter results were outstanding, with all regions recording double-digit revenue growth led by the Americas.

Our first quarter results were outstanding with all regions recording double digit revenue growth led by the Americas profitability continue to be best in class as we expand gross margins and leverage SG&A to increase adjusted operating margins to 28, 6% compared to 21, 1% in the fourth quarter last year.

Speaker 3: Profitability continued to be best in class as we expand gross margins and leveraged SG&A to increase adjusted operating margins to 28.6% compared to 21.1% in the fourth quarter last year.

Speaker 3: Fourth quarter revenues came in at $586.86 million.

Fourth quarter revenues came in at $586 $86 million.

Speaker 3: compared to $411.5 million last year, a 43.5% increase on a constant currency basis.

Compared to $411 $5 million last year, a 43, 5% increase on a constant currency basis on a two year stack revenues grew 123, 1%.

Speaker 3: On a two-year stack, revenues grew 123.1%.

Speaker 3: During the quarter, we sold 22.6 million pairs of shoes, an increase of 19.7% over last year. Our average selling price rose 18.9% to $25.71, attributable to price increases taken during the year, coupled with fewer promotions and discounts.

During the quarter, we sold $22 6 million pairs of shoes, an increase of 19, 7% over last year, our average selling price rose 18, 9% to $25.71 attributable to price increases taken during the year, coupled with fewer promotions and discounts.

Speaker 3: For the full year 2021, we sold 103 million pairs of shoes, up 49% over 2020. Our average selling price for 2021 rose nearly 12% to $22.27.

For the full year 2021, we sold 103 million pairs of shoes up 49% over 2020, our average selling price for 2021 rose nearly 12% to $22 in 2007, and also driven by price increases and fewer promotions and discounts as evidenced by our ability to take price and still.

Speaker 3: Also driven by price increases and fewer promotions and discounts. As evidenced by our ability to take price and still deliver significant volume increases, the Cross brand is strong as ever. Now, let's review our results by region. Growth was led by the Americas, which experienced another strong quarter with revenues of $469 million, up 51.2% from 2020.

Our significant volume increases the cross brand as strong as ever now let's review our results by region growth was led by the Americas, which experienced another strong quarter with revenues of $469 million up 51, 2% from 2020. This.

Speaker 3: This growth was led by digital of 55.2% from 2020 and 244.5% on a two year basis.

This growth was led by digital up 55, 2% from 2020 and 244, 5% on a two year basis.

Speaker 3: DTC and wholesale increased 49.3% and 52.6% respectively from prior years.

Did you see in wholesale increased 49, 3% and 52, 6% respectively from prior year.

Speaker 3: Our broad-based performance in the Americas is the direct result of meeting the consumer where they shop and driving relevance through innovative marketing.

<unk> performance in the Americas is the direct result of meeting the consumer where they shop and driving relevance through innovative marketing.

Speaker 3: EMEA revenues increased 22.5% over Q4 2020 to $60.5 million. EMEA outperformed expectations in the quarter as we were able to secure more inventory than initially planned. Growth was fairly balanced by channel with DTC revenues increasing 18.5% and wholesale revenues increasing 24.6% in the quarter compared to 2020.

EMEA revenues increased 22, 5% over Q4, 2000 $20 million to $65 million.

EMEA outperformed expectations in the quarter as we were able to secure more inventory than initially planned growth was fairly balanced by channel with DTC revenues, increasing 18, 5% and wholesale revenues, increasing 24, 6% in the quarter compared to 2020.

Speaker 3: ETC benefited from strong growth in both e-commerce and retail, while wholesale benefited from exceptional performance in brick and mortar. We are extremely pleased with our EMEA performance, which is benefiting from improved brand relevance and consideration.

PTC benefited from strong growth in both e-commerce and retail wholesale benefited from exceptional performance in brick and mortar. We are extremely pleased with our EMEA performance, which is benefiting from improved brand relevance and consideration.

Speaker 3: In Asia, Q4 revenues were $57.1 million, up 10.3% from last year. This growth was driven equally by DGC and wholesale. South Korea and India continue to outperform and both grew nicely during the quarter and the year. China has faced periodic COVID lockdowns that impacted Q4 results. However, China grew double digits for the year and we remain confident in our long-term plan.

In Asia Q4 revenues were $57 1 million.

Up 10, 3% from last year.

Growth was driven equally by DTC and wholesale South Korea, India continue to outperform in both grew nicely during the quarter and the year, China is face periodic COVID-19 Lockdown impacted Q4 results. However, China grew double digits for the year and we remain confident in our long term plan.

Speaker 3: Our fourth quarter adjusted gross margin was 63.7%, up 770 basis points from last year's 56%. Gross margin improved in all regions and all channels driven by increased prices, fewer promotions and discounts, and favorable product mix.

Our fourth quarter adjusted gross margin was 63, 7% up 770 basis points from last year's 56%.

Gross margin improved in all regions and all channels driven by increased prices fewer promotions and discounts and favorable product mix.

Speaker 3: Full year 2021 adjusted gross margins of 61.6% rose 700 basis points from last year, also driven by increased prices, reduced promotional activity, and product mix.

Full year 2021, adjusted gross margins of 61, 6% Rose 700 basis points from last year also driven by increased prices reduced promotional activity and product mix.

Speaker 3: Our Q4 adjusted SG&A was approximately flat to last year at 35.1% of revenue.

Q4, adjusted SG&A was approximately flat to last year at 35, 1% of revenues.

Speaker 3: This excludes $6.4 million in one-time costs related to the Haydood acquisition.

This excluded $6 4 million in onetime costs related to the Hey, Dude acquisition.

Speaker 3: For full year 2021, adjusted SG&A leveraged 400 basis points to 31.6% of revenues from 35.6% of revenues. The significant decrease in adjusted SG&A is a result of strong sales growth and operating leverage even as we invest in an additional brand marketing and talent to support future growth.

For full year 2021, adjusted SG&A leveraged 400 basis points to 31, 6% of revenues from 35, 6% of revenues the significant decrease in adjusted SG&A as a result of strong sales growth and operating leverage even as we invested in additional brand marketing and talent to support future growth.

Speaker 3: Our fourth quarter adjusted operating margin expanded 750 basis points to 28.6% compared to 21.1% for the same period last year, led by gross margin expansion offset slightly by SG&A.

Yes.

Our fourth quarter adjusted operating margin expanded 750 basis points to 28, 6% compared to 21, 1% for the same period last year led by gross margin expansion offset slightly by SG&A.

Speaker 3: Adjusted income from operations for the full year increased 164.8% to $695.3 million. An adjusted operating margin rose 1,120 basis points to 30.1% compared to 18.9% last year.

Adjusted income from operations for the full year increased to 164, 8% to $695 3 million and adjusted operating margin Rose 1120 basis points to 31% compared to 18, 9% last year.

Speaker 3: Fourth quarter non-GAAP diluted earnings per share more than doubled to $2.15 compared to $1.06 for the same period a year ago. Full year adjusted diluted earnings per share also more than doubled to $8.32.

Fourth quarter non-GAAP diluted earnings per share more than doubled to $2.15 compared to $8 six for the same period a year ago full.

Full year adjusted diluted earnings per share also more than doubled to $8 and 32 seconds.

Speaker 3: We concluded 2021 with a strong liquidity position comprised of $213.2 million of cash and cash equivalents and $414.7 million of borrowing capacity on a revolver. In addition, we had $785 million of long-term borrowing and ended the year under one time leverage on a net basis.

We concluded 2021 with a strong liquidity position comprised of $213 $2 million of cash and cash equivalents and $414 $7 million of borrowing capacity on our revolver. In addition, we had $785 million of long term borrowing and ended the year under one times Levered on a net.

Basis.

Speaker 3: Given our strong cash flow generation for the full year 2021, we returned a billion dollars to shareholders, repurchasing approximately 7.8 million shares at an average price of $128.52 per share.

Given our strong cash flow generation for the full year 2021, we returned $1 billion to shareholders repurchasing approximately seven 8 million shares at an average price of $128 52 per share.

Speaker 3: Inventory at December 31, 2021 increased 21.9% to $213.5 million from $175.1 million in Q4 2020, with the majority of the increase driven by in-transit inventory due to extended transit time.

Inventory at December 31, 2021 increased 21, 9% to $213 5 million.

From $175 1 million in Q4 2020 with the majority of the increase driven by in transit inventory due to extended transit times.

Speaker 3: We anticipate extended transit times to sustain throughout the year and to drive increases in inventory in certain periods.

We anticipate extended transit times to sustain throughout the year and to drive increases in inventory in certain periods. We felt good about our on hand conditions during the holiday season, which supported strong sell through in our ability to take market share as Andrew mentioned in addition to extended transit times, we expect other logistics challenges to protect throughout 2022.

Speaker 3: We felt good about our on-hand positions during the holiday season, which supported strong sell-through and our ability to take market share. As Andrew mentioned, in addition to expanded transit times, we expect other logistics challenges to persist throughout 2022.

Speaker 3: Now, turning to the future, I would like to share our current outlook for Q1 and then full year 2022. For Q1, we expect consolidated revenues, including the Hey Jude brand, to be approximately $605 million to $630 million.

Now turning to the future I would like to share our current outlook for Q1, and then full year 2022.

For Q1, we expect consolidated revenues, including the Hadrian brands to be approximately 605 million to $630 million, Excluding hey, Dude, We expect cross brand revenues of $520 to $535 million.

Speaker 3: Excluding Haydew, we expect cross-brand revenues of $520 to $535 million, which implies organic growth of approximately 13 to 16 percent. The consolidated revenue guidance assumes the Haydew acquisition closes in the coming days. We expect non-GAAP operating margin to be approximately 22 percent, which includes approximately $30 million of incremental error-free costs within gross margin.

Which implies organic growth of approximately 13% to 16% of.

Our consolidated revenue guidance assumes the <unk> acquisition closes in the coming days, we expect non-GAAP operating margin to be approximately 22%, which include approximately $30 million of incremental airfreight costs within gross margin.

Speaker 3: For full year 2022, we continue to expect revenue growth for the cross-brand, excluding Hey Dude, to exceed 20%, generating revenues of over $2.75 billion for the year. In addition to the cross-brand revenues, we still anticipate full year 2022 revenues for Hey Dude to be approximately $700 to $750 million on a pro forma basis and $620 to $670 million on a reported basis.

For full year 2022, we continue to expect revenue growth for the cross brand, excluding hey, dude to exceed 20% generating revenues of over $2 $75 billion for the year. In addition to the cross brand revenues, we still anticipate full year 2022 revenues for <unk> to be approximately 700 to 750 million.

On a pro forma basis, and $620 million to $670 million on a reported basis on a combined basis, we expect 2022 revenues of more than 345 billion.

Speaker 3: On a combined basis, we expect 2022 revenues of more than $3.45 billion on a pro forma basis and approximately $3.4 billion on a reported basis.

On a pro forma basis, and approximately $3 4 billion on a reported basis.

Speaker 3: We expect adjusted operating profit margins for the combined business of approximately 26%. This includes the incremental air freight, but excludes estimated Hey Dude acquisition and integration costs that I will outline shortly.

We expect adjusted operating profit margins for the combined business of approximately 26%. This includes the incremental air freight, but excludes estimated hey, Dude acquisition and integration costs that I will outline shortly.

Speaker 3: For the full year 2022, we expect our underlying non-GAAP tax rate, which approximates cash tax to be paid, to be approximately 22%. Our GAAP tax rate will be approximately 25%.

For the full year 2022, we expect our underlying non-GAAP tax rate, which approximates cash tax to be paid to be approximately 22%, our GAAP tax rate will be approximately 25% to.

Speaker 3: To provide greater clarity around our earnings potential in mid to acquisition, we are providing full year earnings per share guidance. We anticipate non-GAAP earnings per share to be approximately $9.70 to $10.25 in 2022.

To provide greater clarity around our earnings potential mid to acquisition, we are providing full year earnings per share guidance, we anticipate non-GAAP earnings per share to be approximately $9 70 to $10 and 25% in 2022.

Speaker 3: To support growth for both brands, we expect to invest approximately $170 to $200 million in capital expenditures primarily to continue to expand and automate our distribution capability.

To support growth for both brands, we expect to invest approximately $170 million to $200 million in capital expenditures, primarily to continue to expand and automate our distribution capabilities.

Speaker 3: As Andrew mentioned, we are very excited about the addition of the Hey Dude brand and expect to close in the coming days. To fund the acquisition, we will issue 2.85 million shares to one of the sellers and we have secured a $2 billion term loan fee which we will provide additional details for upon close. We also expect to borrow $50 million under our existing Senior Revolving Credit Facility as well as exercise the accordion provision on the Revolving Credit Agreement to increase the borrowing capacity by $100 million.

As Andrew mentioned, we are very excited about the addition of the Hadrian brands and expect to close in the coming days.

On the acquisition, we will issue $2 eight 5 million shares one of the sellers and we have secured a $2 billion term loan b, which we will provide additional details for upon close we also expect to borrow $50 million under our existing senior revolving credit facility as well as exercised the accordion provision on a revolving credit agreement.

To increase the borrowing capacity by $100 million.

Speaker 3: We estimate approximately $60 million of one-time charges in SG&A in 2022, mostly related to the Haydew acquisition, and a $75 million non-cash impact gross margin, mostly related to the write-up of Haydewed inventory to fair market value.

We estimate approximately $60 million, one time charges in SG&A in 2022, mostly related to the hatred acquisition and a $75 million noncash impact in gross margin mostly related to the write up of Hey, Dude inventory to fair market value.

Speaker 3: We expect approximately $30 million of SG&A one-time cost to be incurred in the first quarter and that leverage will peak during Q1. As previously shared, we are committed to deleveraging and expect the combined brands to generate significant cash flow, allowing us to quickly achieve two times or less leverage by the end of 2023. With this focus on deleveraging, we have suspended our share repurchase program until gross leverage is under two times. For more information, visit www.fema.gov

We expect approximately $30 million of SG&A onetime costs to be incurred in the first quarter and that leverage will peak. During Q1 as previously shared we are committed to deleveraging and expect the combined brand to generate significant cash flow, allowing us to quickly achieve two times or less leverage by the end of 2023.

With this focus on deleveraging, we have suspended our share repurchase program until gross leverage is under two times.

Speaker 3: Regarding future disclosures, the Crocs brand will continue to be broken out into the Americas, Asia and EMEA regions and we will report the Hey Dude brand as a separate segment. For both brands, we will report wholesale and DTC revenues as well as digital penetration.

Regarding future disclosures the crocs brand will continue to be broken out into the Americas Asia and EMEA regions and we will report the <unk> brand as a separate segment for both brands, We will report wholesale and DTC revenues as well as digital penetration beginning in Q1 2022, we will move Latin America from the <unk>.

Speaker 3: Beginning in Q1 2022, we will move Latin America from the Americas to the EMEA region for the cross-brand to better align and manage our distributor business.

Americas to the EMEA region for the cross brand to better align and manage our distributor businesses in summary throughout 2021, we delivered strong revenue growth profit profitability and cash flow with the underlying strength of the crocs core business and the addition of Hey, Dude, we're confident we have positioned ourselves for sustained profitable.

Speaker 3: In summary, throughout 2021, we delivered strong revenue growth, profitability, and cash flow. With the underlying strengths of the Crocs core business and the addition of Hey Dude, we are confident we have positioned ourselves for sustained profitable growth and strong cash flow generation. At this time, I'll turn the call back over to Andrew for his final thoughts.

Growth and strong cash flow generation at this time I'll turn the call back over to Andrew for his final thoughts.

Speaker 4: Thank you, Anne. Crocs brand had a tremendous year in 2021. We're confident in the trajectory of the Crocs brand and excited by the pending acquisition of Hey Dude.

Thank you Ed Crooks, Brian had a tremendous year in 2021, we're confident in the trajectory of the Crocs brand and excited by the pending acquisition of hatred by.

Speaker 4: By leveraging the Proven Crocs playbook to enhance Haydew's growth trajectory, we see a tangible pathway to a highly profitable combined company and tremendous value creation for shareholders.

By leveraging the proven cross playbook to enhanced paid to its growth trajectory, we see a tangible pathway to a highly profitable combined company and tremendous value creation for shareholders.

Operator, let's open the call to questions.

Okay.

Speaker 3: Thank you, Andrew. I think the first question is coming from the line of Aaron Murphy from Piper Sandler.

Yeah.

Thank you Andrew I think the first question is coming from the line of Erinn Murphy from Piper Sandler.

Hear me Okay.

Speaker 4: We can apologize everybody for our...

We can I apologize if I'm right or are we.

Speaker 4: severe technical difficulties. Thank you, Erin. No worries. OK, so I've got a couple maybe starting on the supply chain. Could you talk a little bit more about the impact that you're seeing now into the first and it sounds like into the second quarter? Is that factories that are still ramping on production? Is it the container shortages that we're seeing globally? And then how is the response been to retailers? Are they actually having to cancel orders?

We had technical difficulties. Thank you Eric.

No worries, okay. So I've got a couple maybe starting on the supply chain could you talk a little bit more about you know the impact that you're seeing now into the first and it sounds like into the second quarter is that factories that are still ramping on production is it the container shortages that we're seeing globally and then how is the response been to retailers are they actually having to.

Cancel orders and then I guess Relatedly and can you just go through the ship again Q1 to Q2 Q2 to Q3 I just want to make sure we have that all buttoned up.

Speaker 5: And then I guess relatedly, Anne, can you just go through the shifts again, Q1 to Q2, Q2 to Q3? I just want to make sure we have that all buttoned up.

Speaker 4: Yeah, let me kind of give you the qualitative there and then Anne can pick up some of the details. So, factories are back up and running, they have been for some time, and actually we're relatively pleased with their ramp up post Chinese New Year. They've come back up to speed quickly. The delays that we're seeing from Q1 into Q2 are really transportation related, and I would say it's a combination of delays in loading, delays in transit, and delays in unloading. So that was a longer delay than we expected.

Yes, let me kind of give you the qualitative there and then and can pick up some of the detail so far.

Factories are back up and running they have been for some time and actually we're relatively pleased with that ramp up post Chinese new year, they've come back up to speed quickly the delays that we're seeing.

<unk> Q1 into Q2 are really transportation related and I would say, it's a combination of delays and loading delays and transit delays on loading.

So that was a longer delay than we expected.

Speaker 4: So, I would say that most.

So I would say that most.

Speaker 4: It's impacting us most in EMEA and as we look at our overall business, I think we're confident in the amount of supply that we have and the ability to grow our supply base to meet our overall annual guidance and it's really the transportation delays that continue to move around.

It's impacting us most in EMEA.

And.

As we look at our overall business I think we're confident in the amount of supply that we have and the ability to grow our supply base to meet our overall annual.

Guidance and it's really the transportation delays that continue to move around.

Speaker 3: Yeah, and then as far as revenue impact, as we said in prepared remarks, there's approximately $40 million of revenue associated with our EMEA business that's wholesale or distributor revenue. That would have, we would have fulfilled in Q1 that's impacted by these supply delays we haven't.

Yeah, and then as far as revenue impact as we said in prepared remarks is approximately $40 million of.

Revenue associated with our EMEA business.

Wholesale or distributor revenue.

That would have.

Would have fulfilled in Q1, that's impacted by these supply delays we haven't.

Speaker 3: We haven't totally given the shift amongst the quarters for the rest of the year because there's still a lot of uncertainty. You've just related with transit times, but we reaffirmed that we're going to grow over 20% for the full year. Yeah, I just realized that one other piece that you asked in there, Erin, was expectations around cancellations. I would say I think the majority of retail partners are being incredibly understanding. I think they're seeing this from lots of people right now and we would not anticipate cancellations at this time.

We haven't totally given the shift amongst the quarters for the rest of the year because theres still a lot of uncertainty just related with transit times.

We reaffirmed that we're going to grow over 20% for the full year and I just realized the one other piece that you asked in there Eric.

Expectations around cancellations I would say I think the majority of retail partners are being incredibly understanding asics that saying this from lots of people right now and we would not anticipate cancellations at this time.

Speaker 5: Okay, thank you for that. And then the second part, or my second question is around Hey Dude. If I just look at the guidance, just for the stub period, so that one month that you'll likely be recognizing revenue, it looks like it's 90 million.

Okay. Thank you for that and then the second part of my second question is around Hey, Dude, if I could.

I get the guidance I'm just for the stub period, so that one month that you'll likely be recognizing revenue. It looks like it's $90 million can you just help us think through the seasonality because if we just flatline that on a monthly basis and imply hey, Dude revenue was closer to 900 million for the year not the 700 to 750 on a pro forma so just maybe help us think through.

Speaker 5: Can you just help us think through the seasonality? Because if we just flatline that on a monthly basis, it implies, hey dude, revenue is closer to 900 million for the year, not to 700 to 750 on a pro forma. So just maybe help us think through that, the sub-period and how we should extrapolate that for the full year seasonality.

That the stub period, and how we should extrapolate that for the full year seasonality. Thank you.

Speaker 3: Sure, so I think you have to take the 90 million divided by one and a half months because we're assuming that it'll close in the coming days. So if you do that math, then you get to about 720 million at the midpoint of guidance if you just annualize it for the remaining 10 months. So I think you just got to make sure that you're accounting for those extra weeks in February .

Sure. So we think you have to take the 90 million divided by one five months, because we're assuming that it will close in the coming days. So if you do that math.

Then you get to about $720 million at the midpoint of guidance. If you just annualize it for that for the remaining tenor so I think.

I think you've just got to make sure that you are accounting for those those extra weeks in February .

Speaker 5: Okay, fair enough. And then maybe just if I can add one more on price increases, given the inflationary backdrop. We've been seeing some price increases that you took in Europe last month. And I'm just curious kind of what's contemplated in the guidance this year on a global basis for price increases. Thanks so much.

Okay. Okay fair enough and then maybe just if I can add one more on price increases given the inflationary backdrop, we've been seeing some price increases that you took in Europe last month and I'm, just curious kind of what's contemplated in our guidance if you're on a global basis for price increases. Thanks, so much.

Speaker 3: Yeah, so appreciate the question. Our early action in 2021 of taking price obviously allowed us to more than offset the impact of inflation for 2021. I think that puts us in a really good position for 2022.

Yeah. So appreciate the question our early action in 2021 of taking price, obviously allowed us to more than offset the impact of inflation for 2021, I think that puts us in a really good position for 2022.

Speaker 3: As you mentioned, we did take price increases in EMEA and we actually took some in Asia as well.

You mentioned, we did take price increases in EMEA, and we actually took some into Asia as well.

Speaker 3: So both of those will flow through in 2022 and are contemplated in guidance as well as

So both of those will flow through in 2022 are in conflict and are contemplated in guidance as well as the U S. Wholesale prices increases that we took that flowed through in the back half of last year that will still flow through the first half of this year.

Speaker 3: the US wholesale prices increases that we took that flowed through in the back half of last year that will still flow through the first half of this year.

Great I'll, let someone else hop and thank you all.

Speaker 6: Thanks, Erin. Great. The second question comes from the line of Jonathan Comte at Baird.

Thanks, Sharon Thanks, Sarah.

The second question comes from the line of Jonathan Komp at Baird.

Okay.

Yeah.

Yeah.

Speaker 5: Operator, if you could please unmute the line that's now first in queue.

Operator, if you could please on mute the line that's now.

First in queue.

Okay.

Jonathan we're not just in case, you're already talking we're not hearing you.

Speaker 5: Susanna, if you could unmute the first line, we believe that's Jonathan Komp, even though it's listed separately.

Susanna if you get on line on mute. The first line, we believe that Jonathan Komp, even though it's listed separately.

In the system.

Sure.

Speaker 5: Okay, I'm sorry, we'll go to the line of Laura Champagne from Loop Capital.

Okay I'm sorry, it will go to the line of Laura Champine from loop capital.

Speaker 7: Good morning. Thank you. So my question is about the implied acceleration in organic growth for Crocs brand from mid-teens in Q1 to end the year over 20%. Is the thought process behind that, that the slower growth in Q1 is just due to the supply chain issue that you called out, or is there more going on?

Good morning, Thank you.

So my question is about the implied acceleration in organic growth for Crocs brand from mid teens in Q1 to end the year over 20% is the thought process behind that is the that the slower growth. In Q1 is just due to the supply chain issue that you called out.

Or is there more going on there.

Speaker 3: Yeah, hi Laura, it's Anne. Yes, absolutely. I think the growth in Q1 as we called out at ICR in January is related to the impact of the Vietnam shutdowns last year on the first half. So it's all related to timing. We're not seeing any changes in underlying consumer demand for the brand.

Yeah, Hi, Laura Yes, absolutely I think the growth in Q1 as we called out at ICR in January is related to the impact of the Vietnam shutdowns last year on the first half. So it's all related to timing, we're not seeing any changes in underlying consumer demand for the.

Brand.

Speaker 7: Got it. Quick follow on. How is pricing holding up relative to your initial expectations coming into this year? And if there's anything you can do to quantify that kind of pricing that you expect to take year on year, that would be super helpful.

Got it quick follow on how is pricing holding up relative to your initial expectations coming into this year and if theres anything you can do to quantify that kind of pricing that you expect to take year on year that would be super helpful.

Speaker 4: Yeah, I think we feel great about the price impacts, the price increases that we took last year, as well as those that we've taken this year, and as Anne mentioned, to a prior question in both Europe and Asia.

Yes, I think.

We feel great about the.

Price impacts the price increases that we took last year as well as those that we've taken this year and as I mentioned to a prior question.

In both Europe and in Asia.

Speaker 4: we're having absolutely expected impact in terms of those price increases are certainly holding up and

We're having absolutely unexpected impact in terms of those price increases are certainly holding up and.

Speaker 4: We feel very confident about our future pricing trajectory. We are seeing competitors take price and anticipating more of that through the year. I think we were a little bit early in some of the actions that we took last year. We will monitor that closely. It's very important to us that we continue to provide incredible value to consumers, but also at the same time capture the value that's required in terms of the value of the Crocs brand. so these are the results that I've had in terms of your preferences again let's try this again all right

We feel very confident about our future pricing trajectory.

We are seeing competitors take price and anticipating more of that through the year. I think we were a little bit early and some of the actions that we took last year, we will monitor that closely.

It's very important to us that we continue to provide incredible value to consumers, but also at the same time capture the value that's required in terms of the value of the crocs brand.

Okay.

Okay. Thank you.

Sure.

Speaker 5: Thanks. We're going to try Jonathan Komp again, please, from Baird. Okay, thank you.

So we're gonna try Jonathan Komp again, please from Baird.

Okay. Thank you can you hear me now.

Yes.

Oh perfect. Thank you.

Speaker 8: Wanted to ask first just on Crocs, when you think about the growth outlook, maybe relative to the long term growth drivers, digital sandals outside of North America growth.

Wanted to ask first just on Crocs and when you think about the growth outlook, maybe relative to the long term growth drivers digital sandals outside of North America growth.

Speaker 8: How should we think about those playing out in 22 and maybe even color? Key one here versus the balance of the year, how do you see those impacting the Crocs brand?

How should we think about those playing out in 'twenty, two and maybe even color.

Q1 here versus the balance of the year, how do you see those impacting the crocs brand.

Yeah.

Speaker 9: Yeah, I think as we kind of think about the playbook that we've outlined, digital, international, sandals, etc., I think it continues to work extremely well. We're getting very strong sell through and continued growth on the clog, which is really fueling a lot of the international growth and the digital growth.

Yeah, I think as.

We kind of think about the playbook that we've outlined digital international sandals et cetera, I think it continues to work extremely well, we're getting very strong sell through and continued growth on the clock, which is really fueling a lot of the international growth in the digital growth.

Speaker 4: Sandals had a good year last year. We are expecting sandals to be disproportionately impacted in terms of supply during the first half of this year. But that's really a supply related issue. When I look at our innovation, our product development, the consumer reception to our sandals, particularly the personable sandals we talked about, both the classic slide and the classic two strap, getting very strong reception.

Have a good year last year, we are expecting samples to be disproportionately impacted in terms of supply during the first half of this year.

That's really a supply related issue when I look at our innovation, our product development and the consumer reception to our sandals, particularly the personalized will sandals, we talked about both the classic slide on the classic two strep, we are getting very strong reception from consumers consumer so I'd say, the only element that I would call out.

Speaker 4: consumers. So I'd say the only element that I would call out would be sandals, and that's really supply related to the stage. We feel great about the kind of strategic playbook and its ability to drive the growth that we've anticipated. And I think just one other kind of comment around the international geographic impact.

We'll be saddled and Thats really supply related to the stage, we feel great about the kind of strategic playbook and its ability to drive the growth that we've anticipated and I think just one other kind of comment around the international geographic impact.

Speaker 3: and what that's going to do this year. So as we talked about in our prepared remarks, we're really excited about the growth we're seeing out of EMEA. Really strong growth trajectory there. Unfortunately, they're disproportionately impacted in Q1 related to supply and that will impact growth rates there for Q1, but we still expect to have strong international growth this year out of EMEA as well. It'll just unfortunately be more outside.

And what that's going to do this yourself as we talked about in our prepared remarks were really excited about the growth we're seeing out of EMEA up really strong growth trajectory. There. Unfortunately, there are disproportionately impacted in Q1 related to supply and that will impact growth rates. There for Q1, but we still expect to have strong international growth. This year out of EMEA as well it'll just.

Unfortunately be more outside of Q1.

Speaker 8: Okay, that's very helpful. And then maybe switching to operating margin, you outperformed in Q4 in 21, reaching 30%. Could you maybe just share more detail on the thought?

Yeah.

Okay. That's that's very helpful. And then maybe switching to operating margin you outperformed in Q4, and 20 wide, reaching 30% could you could you maybe just share more detail on the thought.

Speaker 8: You know, in the guidance down to 26% adjusted operating margin, I know, you know, a portion of that is the.

And the guidance down to 26% adjusted operating margin I know a portion of that is the.

Speaker 8: the air freight, but the balance of that, if you could maybe just touch on what you're embedding, both for the underlying Crocs brand and then

The airfreight, but the balance of that if you could maybe just touch on what Youre embedding both for the underlying Crocs brand and then how quickly you'll be able to ramp and what youre, assuming for hey, dude within that thank you.

Speaker 8: how quickly you'll be able to ramp and what you're assuming for hey dude within that. Thank you.

Speaker 3: Yeah, that's a great question. So we're really pleased with obviously our best in class operating margins of 30% on an adjusted basis last year, which were supported by, as we talked about, price increases that we took leveraging SG&A and really good growth. So I think for this year, there's still a lot of unknowns. What we're comfortable with is the 26% and then the air freight of the 75 million is over 200 basis points.

Yeah. So that's a great question. So we're really pleased with obviously, our best in class operating margins.

30% on an adjusted basis last year.

Which were supported by as we talked about price increases that we took leveraging SG&A.

Really good growth. So I think for this year, there's still a lot of unknown, what we're comfortable with the 26% and then the airfreight up to $75 million.

Over 200 basis points of impact on those margins were also.

Speaker 3: of impact on those margins. We're also, you know, said that the combined...

Said that the combined hey, Dude and crops would be 26% operating margin. We obviously haven't closed the transaction yet for Hey Dude.

Speaker 3: Hey Dude and Crocs would be 26% operating margin. We obviously haven't closed the transaction yet for Hey Dude. But as we do and as we move through that, then we'll provide some more clarity on our first quarter call.

As we do and as we move through that then we'll provide some more clarity on our first quarter call.

Okay understood. Thanks again.

Well thank you.

Speaker 5: The next question will come from Sam Poser from Williams Trading.

The next question will come from Sam Poser from Williams trading.

Speaker 10: Good morning. Thank you for taking my question. I've got a few. One, what is the share count that you're assuming for next year?

Good morning, Thank you for taking my question.

I've got a I've just got a few one what is the share count that you are assuming for next year.

And then I will get it.

Okay.

Speaker 3: the share count that we're assuming for next year for 2022?

The share count that we're assuming for next year.

For 2022.

Mhm.

Speaker 3: for this year. I think you would be safe to say that right around a diluted share count of approximately 62.4 million shares. Thanks.

So this year.

I think you would be safe to say that right around the diluted share count of approximately $62 4 million shares.

Yeah.

And then our one.

Pierre <unk>.

Speaker 11: That would be a little lower in the first quarter.

Yes.

It's a little lower a little lower in the first quarter I assume.

Speaker 3: Yes, because we haven't issued the Hey Dude shares yet. So we will issue those shares in connection with the acquisition when it closes.

Yes, because the we haven't issued the hey, Dude shared yet so we will issue those shares in connection with the acquisition when it closes.

Okay.

And then.

Speaker 10: Can you walk through, you said that in the press release it said that there'd be about $75 million of air freight in the first half.

Can you walk through you said that in the press release, it said that it would be about $75 million of air freight in the first half.

Q1 is going to have 30 million.

Speaker 10: That means that Q2 is more impacted than Q1. I mean, that's just easy math, but I didn't talk about Q2 in that regard.

That means that Q2 was more impacted in Q1, I mean, that's just easy math, but you didn't talk about Q2 in that regard.

Speaker 6: It's more impacted from a cost standpoint. I would just say some of that is just.

Its more impacted from a cost standpoint, I would just say some of that is just.

Speaker 6: you know, continuing to pull things in because we had delays from P1 that flow. So, yes, and as we talked about, we see extended transit times throughout the year, but, you know, the first half is obviously most impacted.

Continuing to pull things that we had delays from Q1 that flow. So, yes, and as we talked about we see extended transit times throughout the year, but.

The first half was obviously most impacted.

Speaker 10: Okay, and then lastly, when you started to look under the hood of.

Okay, and then last.

Lastly, when you're starting to look under the Hood of.

Speaker 10: of, hey, dude, you haven't gotten it yet. But I was just wondering, you know, what are you know, can you give us some details on what you're seeing from sort of the structure, the infrastructure, you know, what you're going to need to do versus what you first expected when you you know, a couple months, or one and a half ago when you announced the deal two months ago when you announced the deal.

Oh, Hey, Dude, we haven't gotten there yet but I was just wondering what are you know can you give us some details on what you're seeing from sort of the structure of the infrastructure.

What youre going to need to do versus what you expected when you.

A couple of months.

And a half ago, when you announced the deal two months ago, when you announced the deal.

Yeah, let.

Speaker 4: Let me take that down. So yeah, what I'd say is the more we know the more excited we are right so

Let me take that Sam So what I'd say is the more we know the more excited we are right. So.

Speaker 4: In terms of we're looking at the brand, its trajectory, its connectivity with consumers and its relationships with its key partners and wholesale customers, I think the brand is in a great place and there is clearly...

In terms of we're looking at the brand is trajectory.

Connectivity with consumers and its relationships with its.

Key partners and wholesale customers.

Brands and a great place and there is clearly.

Speaker 4: far more demand and any ability to meet that demand in the short term. So we feel really great about the brand. In terms of the infrastructure, I would say we've moved incredibly quickly. We've put our team in place. As we've said on the call, we anticipate closing in the next...

Far more demand and then the ability to meet that demand in the short term. So we feel really great about the brand in terms of the infrastructure I would say we've moved incredibly quickly we've put a team in place.

As we've said on the call we anticipate closing in the next in.

Speaker 4: in the coming days. I would say our team is in place, both people that we've recruited from outside the company, but also some strategic reallocations from the Crux brand. We always knew that there was a substantial amount of infrastructure to put in place. We knew that as we did diligence, that is absolutely true, but we, I would say we have the resources and are very well positioned to put that infrastructure in place quickly. Thank you.

In the coming days I would say our team is in place both of the people that we've recruited from outside the company, but also some strict strategic reallocations from the cross brand.

We always knew that there was a substantial amount of infrastructure to put in place.

We knew that as we did diligence that is absolutely true but.

We I would say we have the resources and are very well positioned to put that infrastructure in place quickly.

Okay.

Thank you and just one last thing and.

Speaker 10: If we think about this, the actual gross reported gross margin in your extended gross margin to be down significantly in the first half of the year, and the gross margin in the second quarter is likely to be worse than it is in Q1.

If we think about this the gross what the actual growth reported gross margin.

<unk> had a gross margin would be down significantly in the first half of the gear and the gross margin in the second quarter is likely to be worse or worse than it is in Q1.

Speaker 3: I would just say there's, yeah, Sam, a good question. I would not necessarily assume that. I would just look at, I mean, there are some seasonal things that impact our gross margins as far as how much wholesale revenue makes up Q1 versus Q2. So why we're not guiding Q2 gross margins, I wouldn't say that our Q2 margins are going to be below Q1.

I would just say there is.

Yeah sure good question.

We're not necessarily assume that I would just look at I mean, there are some seasonal things that impact our gross margins as far as how much wholesale revenue makes up Q1 versus Q2. So while we're not guiding Q2 gross margins I wouldn't say that our Q2 margins are going to be below Q1.

Okay. Thanks, very much continued success.

Thank you Sam.

Speaker 5: Great. The next question comes to the line of J. Sol from UBS.

Great. The next question comes from the line of Jay sole from UBS.

Speaker 8: Great. Thank you so much for taking the question. Just about the plan to pay down debt, is there flexibility in that? I mean, if you decide that you think the stock price represents better value than paying down debt, could you change your mind and reinstate the authorization and buy back some stock?

Great. Thank you so much for taking the question.

Just about the plan to pay down debt is there flexibility in that I mean, if you decided that you think the stock price.

Represents better value than paying down debt could you could you change your mind and reinstate the authorization and buy back some stock.

Speaker 3: Yeah, so just to clarify, we still have our authorization. So that's still outstanding. We have some covenants associated with our debt, you know, that we need to be two times leverage to be able to buy back. But we think we can.

Yeah. So just to clarify we still have our authorization so that's that.

<unk>.

We have some covenants associated with our debt that.

That we need to be two times leverage.

To be able to buyback, but we think we can we can pay down debt very quickly the combined entity generates a lot of cash and we're very committed to paying down that debt.

Speaker 6: We can pay down debt very quickly, the combined entity generates a lot of cash, and we're very committed to paying down that debt, and we've had a very successful buyback program and very aggressively bought back stock.

And we've had a very successful buyback program and very aggressively bought back stock last year, and we do think our stock represents a tremendous value.

Speaker 6: last year and we do think our stock represents a tremendous value at this stock price so we will continue to work to pay down debt so we can look at repurpose.

Stock price. So we will continue to work to pay down debt. So we can look at repurchasing.

Speaker 8: Okay, and then maybe keep talking about jibbits a little bit. I mean, can you talk about the jibbits growth, you know, in the past year in the fourth quarter, and you expect jibbit to grow faster than the than the overall company average in 20.

Okay and then maybe can you talk about you have it's a little bit I mean, he's talking about the javits growth you know in the past year in the fourth quarter and do you expect shipments to grow faster than the than the overall company average.

You too.

Speaker 4: Yeah, so Gibbous grew for the full year 150% or over 150% to 7% of overall sales last year, which obviously is outstanding and I know you're all aware that's obviously incredibly high margin category.

Yes, So <unk> group for the full year of 150% of our over 150% to 7% of overall sales last year, which obviously is outstanding.

I know Youre all aware, that's obviously incredibly high margin category.

Speaker 4: But probably more important than the margin and even the sales dollars is the consumer engagement that it creates. You see that we use Gibbets both in our retail stores to create consumer engagement, but also on almost all of our collaborations. So as we look at this year, yeah, it will certainly grow faster than the overall growth rate that we put out there for the Crocs brand. It will continue to be a high growth category.

But probably more important in the margin.

And even the sales dollars is the is the consumer engagement that it creates.

<unk> that we use both in our retail stores to great consumer engagement, but also on almost all of our collaborations. So as we look at this year, yes, it will certainly grow faster than the overall growth rates that we've.

So we put out therefore, the crocs brand it will continue to be a high growth category.

Speaker 8: Got it. And Andrew, how do you actually think about the skew count for jibbits? I mean, is it, you know, are you expanding it? Like what do you need to do to sort of continue to expand and amplify that?

Got it and then I'll just ask.

Do you think about the SKU count for Jim. It's I mean is it you know.

Are you expanding it like what what do you need to do to sort of continue to expand and amplify that business.

Speaker 4: Yeah, the gibbet skew count I would say has expanded dramatically, but it comes and goes. There are a set of core gibbets that continue to exist.

Yes.

<unk> SKU count I would say is expanding.

<unk> dramatically, but it comes and goes right. There are a set of core Jim. It's the continued to exist numbers letters emoji.

Speaker 4: numbers, letters, you know, emojis and things that the consumer is looking for on an ongoing basis. Many of the SKUs are seasonal or short-term in nature. They're available for a short period of time. They sell through and then they're gone. So that's how we'll kind of continue to manage the jibber to business. You probably also noticed that we're shifting a lot of our kind of offerings to pack offerings. It makes it far more efficient.

And things that the consumer is looking for an ongoing basis. Many of the skus are seasonal or short term in nature that are available for short period of time, they sell through and then that gone. So that's how we will kind of continue to manage the <unk> business. You probably also noticed that we're shifting a lot of our kind of our.

Offerings to pack offerings, it makes it far more efficient.

Speaker 4: to sell and ship through e-commerce and it also helps our wholesale partners. So we'll continue to do single jibbitz, but we'll also do a lot more packs.

To sell and ship through E Commerce and it also helps our wholesale partners. So we'll continue to do a single <unk>, but will also do a lot more opex.

Got it okay. Thank you so much.

Okay.

Speaker 5: The next question comes from the line of Susan Anderson from B Riley.

The next question comes from the line of.

Susan Anderson from B Riley.

Speaker 12: Hi, good morning. Nice job on the quarter. I'm just curious maybe if you could talk about investments that you guys expect to make this year and how you're thinking about SG&A margin in 2022.

Hi, good morning, nice job on the quarter.

I'm just curious maybe if you could talk about investments that you guys expect to make this year and how youre thinking about SG&A margin in 2022.

Speaker 6: Hi Susan, I think what we're going to invest around is really along our cross perspective on our key initiatives we've laid out that are driving growth, which is really around digital.

Yes, Hi, Susan I think what we're going to invest around is really along our cost perspective on our key initiatives. We've laid out that are driving growth, which is really around digital.

Speaker 6: China, marketing, and then we will ignite all of that.

China marketing and then we will ignite all of that.

Speaker 6: with continued innovation around products. And then I will also say,

With continued innovation around product and then I will also say, we will invest in talent to support all of those initiatives. So that's on the SG&A side from the crops perspective from the Hey, Dude protective the SG&A there is really to put into the infrastructure to allow sustainable growth in the years to come they've had.

Speaker 6: we will invest in talent to support all of those initiatives. So that's on the SG&A side from the crops perspective. From the Hey Dude perspective, the SG&A there is really to put into the infrastructure to allow sustainable growth.

Speaker 6: in the years to come. They've had an incredible growth trajectory. And as we've talked about, they've supported that with very, very low SGNA. So we have some investments we're looking at. And as Andrew talks about in his prepared remarks.

An incredible growth trajectory and as we've talked about they've supported that with very very low SG&A. So we have some investments we're looking at and as Andrew talked about in his prepared remarks, very excited that we've already been able to hire some key members of that leadership team.

Speaker 6: very excited that we've already been able to hire some key members of that leadership team.

Speaker 6: So those are really the key investments. And then just one other point on the Hey Dude side is a lot of that investment will sit in marketing this year as they haven't invested a ton in brain marketing or almost nothing into this point. So we will invest there. And we haven't completely given out all the rates, but as we close Hey Dude and go into Q1, we'll talk about where we see SG&A from a rate perspective at that point in time.

Those are really the key investment and then just one other point on the <unk> side, a lot of that investment will sit in marketing this year as they haven't invested a ton in brand marketing you're almost nothing at this point. So we will invest there and we haven't completely given all the rates, but as we closed hey, Dude and go into Q1, we'll talk about.

Where we see SG&A from a rate perspective at that point in time.

Speaker 12: Great. And then maybe if you could talk about the recent collabs that you've done, such as, I guess, the most recent Clueless and then Carol T. Are you still seeing strong demand there as you roll those out? And then I'm just curious, are these meaningful to sales yet at all, or is it really still just about the marketing?

Great and then maybe if you could talk about the recent collabs that you've gotten such as I guess, the most recent <unk> and <unk> are you still seeing strong demand there as you roll those out and then I'm. Just curious are these meaningful the sales yet at all or is it really still just about the marketing.

Speaker 4: Yeah, I would say the reaction to the collabs that you just announced plus others that are coming. I would say the calendar's really full for the coming quarters. Yeah, Carol G did extremely well, Clueless, which was done in partnership with Zappos, has done extremely well. So they both, I would say, outperformed our expectations and 100% sold through in terms of sales success. I would say the quantities around some of these collabs are getting a little bit bigger. But it's really a balancing act between the brand heat, the buzz that we create, and revenue. So I think we feel really good about where we are.

Yes, I would say the reaction to the callouts that you just announced plus others that are coming I would say the calendar is really full for becoming the coming quarters.

<unk> did extremely well clueless, which was done in partnership with Zappos has done extremely well so they both I would say outperformed our expectations.

100% sell through in terms of in terms of sales success I would say the quantities around some of these clubs are getting a little bit bigger, but its really a balancing act between.

The brand heat the buzz that we create and on revenue. So I think we feel really good about what we are.

Speaker 12: Great, that sounds good. Thanks so much. Good luck this year.

Great that sounds good. Thanks, so much good luck this year.

Okay.

Speaker 5: The next questions comes from the line of Jim Duffy at Stacey.

The next question comes from the line of Jim Duffy at Stifel.

Speaker 13: Thank you. Good morning. Yeah, absolutely. Hello 2021.

Thank you good morning, Yeah, absolutely although 2021.

Speaker 10: And I want to start with a question on the one Q and fiscal 22 Crocs revenue guidance. Can you speak to assumptions for growth and pairs and embedded in that guidance?

Dan I wanted to start with a question on the <unk> in fiscal 'twenty. Two crocs revenue guidance can you speak to assumptions for growth in Paris in Asps is embedded in that guidance.

Speaker 6: Yeah, we haven't provided that at this point in time. Obviously, we have some price increases that we just talked about, and we still expect unit growth. But we haven't given the split at this point in time, Jim.

Yes, we haven't provided that at this point in time, obviously, we have some price.

<unk> that we just talked about and we still expect unit growth, but we haven't given the split at this point in time.

Speaker 13: OK, I'm thinking ASP and 18 percentage point contribution to growth in the fourth quarter. In the first quarter, are you expecting a similar amount? Or is that mid? What is it? Just trying to figure out, are you actually expecting Paris growth? And then maybe related to this, does the ASP include a patch of jibbitz? Or is it a pure footwear ASP read?

Okay, I'll take an ASP 18 percentage point contribution to growth in the fourth quarter in the first quarter are you expecting a similar amount or is that.

What is it.

Trying to figure out are you actually expecting periscope and then maybe related to this does the ASP include attach of <unk> or is it a pure footwear asps.

Speaker 3: Yeah, so the way that we calculate ASP is we take our total revenue and we divide it by our pairs, our footwear pairs, so we include, we think of gibbets as like an addition to our shoes, so we include that in our ASP.

Yeah, So the way that we calculate ASP E S.

We take our total revenue and we divide it by our peers our footwear pairs. So we think as a given as an addition to our shoe. So we include that in our ESP, so that Jim as well if growth of Gibbus will impact that ASP growth is the right way to think about it.

Speaker 6: so that growth of gibbets will impact.

Speaker 6: that ASP growth is the right way to think about it. And then I would just say contextually from Q4, we had a couple things happening in Q4 that supported our ASP growth.

And then I would just say contextually from Q4, we had a couple of things happening in Q4 that supported our ESP growth. The first piece was obviously the price increases we took in the U S.

Speaker 6: The first piece was obviously the price increases we took in the U.S.

Speaker 11: you know, that on, you know, our core classic and then the tertiary products around that. And the second piece is really the pullback of promotions and discounts. We've continued to see that. We had it in the U.S., but also Asia and EMEA in Q4. And that tends to be a generally, you know, more promotional period with the holiday. And, again, we saw, you know, a very large pullback of promotion and discounts in Q4 that's unique to Q4, where Q1 tends to be a little bit more of a wholesale quarter.

Our core classic and then the tertiary products around that and the second piece is really the pull back on promotions and discounts. We've continued to see that we had it in the U S. But also Asia and EMEA in Q4 and that tends to be a generally more promotional period with the holiday and again, we saw it.

A very large pullback of promotion and discount in Q4, that's unique to Q4 for Q1 tends to be a little bit more of a wholesale quarter. So that wouldn't have as big of an impact in Q1.

Speaker 11: So that wouldn't have as big of an impact in Q1.

In Q4.

Speaker 10: Got it. Okay, now I know you don't typically guide by channel or region, but can you maybe provide some view as to the composition of growth of P2C versus wholesale expected for the year? And I'm curious for 22 and the Cox brand, do you foresee stronger contribution to growth in international markets or will growth really continue to be led by North America?

Got it okay.

We don't typically guide by channel or region, but can you maybe provide some view as to the composition of growth.

Do you see versus wholesale expected through the year and I'm curious for 'twenty, two and the Crocs brand do you foresee a stronger contribution to growth from international markets or will growth really continued to be led by North America.

Speaker 3: I think we see strong growth in all of our markets this year. Again, we were especially excited about Amiya's order book and where that was coming up. I also would say we've seen some really good growth out of a lot of our markets in Asia. So we expect growth in all of our markets and also all of our selling channels.

I think we see strong growth in all of our markets. This year again, where we were especially excited about them yet.

Border bucket, where that was coming up and I also would tell you. We've seen some really good growth out of a lot of our markets in Asia. So we expect growth in all of our markets and also all of our selling channels and if you look at the 2021 Jim.

Speaker 4: Yeah, and if you look at the 2021 gym, you can see really balanced growth across all of the channels. So I think the brand is resonating with consumers around the world, and the consumers are then able to access the brand through multiple channels. So we feel like the distribution strategy is working well, and we expect to see balanced growth across channels.

You can see really balanced growth across all of the channels. So I think the brand is resonating with consumers around the world and the consumers are unable to access the brand through multiple channels. So we feel like the distribution strategy is working well and we expect to see balanced growth across channels.

Speaker 13: Great. Then last one for me. You mentioned investment and automation in the DCs and the prepared remarks. That sounds interesting. Can you maybe elaborate on that some? Speak about expected cost benefits and when those might manifest in the P&L.

Great.

Last one for me you.

You mentioned investment in automation in the Dcs in the prepared remarks, it sounds interesting can.

Can you.

Maybe elaborate on that some speak about expected cost benefits.

And when those might manifest in the P&L.

Speaker 4: Yeah, we've been investing in automation. I think we talked about this for several quarters, in fact, probably a couple of years now. We've invested in automation in multiple DCs. I think the piece in the prepared remarks is particularly around an upgrade of our automation in our Ohio DC and also new automation for our

Yes, we've been investing in automation I think we talked about this for several quarters in fact, probably a couple of years now we've invested in automation.

Multiple dcs.

In the prepared remarks is particularly around an upgrade of our automation in our Ohio, DC and also new automation for our.

Speaker 4: for our European DC. So this primarily helps your digital business. It's picked a person capability that gives you the greatest benefit on your digital business. Obviously, as you know, digital is a priority for us. So leveraging technology to do that more efficiently and effectively is obviously a sensible thing to do. So we're pleased about that. And we'll certainly be building the cost-saving benefits into our future guidance.

For.

European DC.

<unk>.

Primarily helps your digital business.

Pick the person capabilities. It gives you the greatest benefit on new digital business. Obviously as you know digital is a priority for us so leveraging technology to do that more efficiently and effectively is obviously a sensible thing to do so we're pleased about that and we'll certainly be.

Building.

The cost saving benefits into our into our future guidance, Yes, I would just say Jim. That's also allowed us to support the big growth that we've been producing over the last couple of years in digital because it allows us to get more throughput.

Speaker 3: Yeah, I would just say Jim, that's also allowed us to support the big growth that we've been producing over the last couple years in digital because it allows us to get more throughput, which is obviously a huge benefit as well.

Sure.

<unk> is obviously a huge benefit as well.

Great. Thank you so much.

Thank you.

Speaker 5: The next question comes from the line of Jim Chartier from Monash Krusty.

The next question comes from the line of Jim Chartier from <unk> Crespi.

Good morning, Thanks for taking my question.

Speaker 13: You mentioned in one of the slides your increased...

You mentioned one of the slides you're see increased.

Speaker 13: signs of accelerating demand in Asia? And Brent, are you just curious, you know, what signs are those? You know, you mentioned Korea and India as kind of standouts there. You know, why are those geographies taking off? And then, you know, what's kind of the expectation for China this year?

Signs of accelerating demand in Asia, and Brian can you just curious you know what.

What signs are those you mentioned Korea, and India is kind of standouts there why are those geographies taking off.

Then what's kind of the expectation for China This year.

Yes, I think we can measure and see the.

Speaker 4: We can measure and see the...

Speaker 4: growth acceleration in some of our, I would say, European and Asian markets.

The growth acceleration in some of our I would say European and Asian markets through a couple of different dimensions. One is the brand tracking that we do so we measure Brian consideration brand relevance et cetera, we see that increasing rapidly in select markets and we've been able to <unk>.

Speaker 4: through a couple of different dimensions. One is the brand tracking that we do. So we measure brand consideration, brand relevance, et cetera. We see that increasing rapidly in select markets. And we've been able to correlate that to growth in the business historically. So we can see that in the markets that you mentioned, and we can also see that in some key European markets. I would also say, in addition to that, we have very strong order books in those markets. So, um,

Light that too.

Growth in the business historically.

So we can see that in the markets that you mentioned and we can also see that in some key European markets. I would also say in addition to that we have very strong order books in those market. So.

Speaker 4: We have strong order books from wholesale and retail customers, so we feel really good about that for the rest of the year and I will say that's very much the case in Amir as well. From a China perspective, it is not to say it's not to say it's very much aerb Middle School, it's something

We have a strong order books from wholesale and E tail customers. So we feel.

Really good about that for the rest of the year and I also say that's very much the case in <unk> as well from.

From a China perspective.

Speaker 4: the China plan and the turnaround that we talked about extensively over the last...

The China plant and the turnaround that we talked about extensively over the last.

Speaker 4: two years, I think is on track and where we expect it to be. But we do see COVID lockdowns, right? So as they get COVID cases in China, I'm sure you're all aware of this. They have a tendency to lock down the city, close all stores and quarantine the population at home. So when that happens, obviously in that city, your kind of business goes to zero for a short period of time, then it reopens.

Two years I think is on track and where we expect it to be but we do see COVID-19 lockdowns right. So.

As they get Covid cases in China, I'm sure you're all aware of this.

You tend to have a tendency to lock down the city close those stores and quarantine the population at home.

So when that happens obviously in that city, you kind of business goes to zero for a short period of time, then it reopens. So we've seen that through Q4 and frankly in our expectations. We assume that will continue through this year. So it's just a.

Speaker 4: So we've seen that through Q4 and frankly in our expectations we assume that will continue through this year. So it's just an interruption to the business that we have to manage. Having said that we grew China double digits last year and we expect to do the same again.

Interruption to the business that we have to manage having said that we grew China double digits last year and we expect to do the same again this year.

Speaker 13: And then in terms of US, we've seen tremendous growth in the classic product for three years. Where do you see additional opportunity for that product in the US?

Alright, and then in terms of the U S. You have seen tremendous growth in the classic clog for three years.

Where do you see additional opportunity for that product in the U S.

Speaker 4: So I would say we've seen tremendous growth in the classic clog globally, not just the US, right? It's been definitely strong in the US, but we've seen that growth globally. And we continue to see the classic franchise growing. We've added sandals, but we've also added different versions of the clog, particularly maybe outdoor orientated, I call attention to. So we continue to see the classic clog growing with color, with graphics, with height.

So I would say we've seen tremendous growth in the classic clog globally, not just in the U S rights being definitely strong in the U S, but we've seen that growth growth globally.

And we continue to see the classic franchise growing we've added channels, but we've also added different versions of the club, particularly maybe outdoor oriented I call attention to.

So we continue to see the classic clog growing with color with graphics with height width with new iterations and also obviously with collaborations. So I think this a lot of growth runway in the classic clog.

Speaker 4: with new iterations and also obviously with collaborations. So I think there's a lot of growth runway in the Classic Club.

Alright, thank you.

Yes.

Speaker 5: The next question comes from Steve Marotta from CL King.

Okay. The next question comes from Steve Marotta from CL King.

Speaker 14: Good morning Andrew, Anne, and Corey. Thank you for taking my question. Anne, if you said this explicitly, please forgive me, I missed it. But implicit in your comments, it seems that the price actions that have already been taken, are they expected to fully offset all of the costing increases with the exception of the incremental air freight?

Good morning, Andrew and Corey. Thank you for taking my question and if you said this explicitly please forgive me I missed it but implicit in your comments.

It seems that the price actions that have already been taken or are they expected to fully offset all of the cost increases with the exception of the incremental airfreight. So again as.

Speaker 14: Again, as you look out to 2022 and you see from a raw material standpoint and labor standpoint and other costs with the exception, again, of the incremental air freight, do you see that the price actions that have already been taken off.

As you look out to 2022, and you see from a raw material standpoint, and a labor standpoint, and other costs with the exception again of the incremental air freight do you see that the price actions that have already been taken offsetting those costs. Thanks.

Speaker 3: Yes, we certainly saw that last year and we more than offset inflation last year and while it's hard to predict sort of the inflationary environment at this point, we do believe that we should largely be able to offset inflationary costs through the price actions that we've taken from a Crocs perspective to what we know at this point. When would you make those?

Yes, we certainly saw.

Saw that last year and.

We more than offset inflation last year, and while it's hard to predict sort of the inflationary environment. At this point, we do believe that we should largely be able to offset it.

Placement costs through the price actions that we've taken from a cost perspective.

So what we know at this point.

And would you make those comments inclusive for who do it as well.

Speaker 6: We haven't closed on HeyDude yet from a transaction perspective, so I think we will obviously take a look at HeyDude pricing and as well as kind of underlying inflationary pressures there after we close and we will come back and talk about that with a little more granularity on our Q1 call.

We haven't closed on Hadrian, yet from a transaction perspective. So I think we will obviously take a look at hey, dude pricing and as well as kind of underlying inflationary pressures. There. After we close and we will come back and talk about that with a little more granularity on our Q1 call.

Helpful. Thank you very much.

Thank you.

Speaker 5: The next question comes from the line of Mitch Cunnith from Seaport.

The next question comes from the line of Mitch <unk> from Seaport.

Speaker 13: Yes, thanks for taking my questions. Um, I've got a few first ones housekeeping. So when I look at the dude projection for this year for like, huge two through four.

Yes, thanks for taking my questions I've got a few the first one housekeeping so when I look at Hey, Dude projection for this year for Qs two through four it looks like it's about $5 35 to 575 million and that would kind of roughly worked out to be 180 $890 billion a quarter is that how.

Speaker 13: It looks like it's about 535 to 575 million, and that would kind of roughly work out to be 180, 190 million a quarter. Is that how you see the business playing out, or is it gonna be more lumpy than that because of supply chain, or maybe because the business builds over the course of the year? How should we be modeling that hated contribution beyond Q1?

You see the business playing out or is it going to be more lumpy than that because of the supply chain or maybe because the business builds over the course of the year, how should we be modeling that you do contribution beyond Q1.

Speaker 3: Right, so what we said is, so I'm just trying to follow your numbers because I believe our need-to-use guidance on a reported basis this year is going to be 620 to 670.

Right. So what we've said is I'm just trying to follow your numbers because I believe our <unk> guidance on a reported basis. This year. It can be 626 70.

Speaker 6: So that's on a reported. On a performant basis, we said between 700 and 750. Again, I think what he do there. Right.

So that that's on a reported on a pro forma basis, we think between 700 750 again right when they do.

Right.

Speaker 13: Yeah, I took the six twenty to six seventy and I carved out the Q1, which left me five thirty five to five seventy five for the balance of the year. And I'm trying to understand how that that balance flows on a quarterly basis. If it's pretty straight line.

Sure.

Yeah, I took the 620 to 670 <unk> carved out the Q1, which left me $5 35 to 575 for the balance of the year and I'm trying to understand how that that balance flows on a quarterly basis, if it's pretty straight line.

Speaker 3: Yeah, I think Mitch at this point in time, we haven't commented on that yet again because we haven't closed the transaction yet, which we will. So as soon as we close the transaction, we'll try to give a little bit more color on how that plays out. I would say just taking a step back though on a macro level, when we think about seasonality for Hey Dude, I would say, you know, it's a little early to tell just because their growth is so strong and continues to grow. It's hard to understand what long term underlying seasonality is.

Yeah, I think Richard at this point in time, we haven't commented on that yet again, because we havent closed the transaction, yet, which we will so as soon as we close the transaction, we will try to get a little bit more color on how that plays out I would say just taking a step back though at a macro level. When we think about seasonality for <unk> I would say you know it's a it's a little early to tell just because their growth.

It's so strong and continues to grow it's hard to understand what long term underlying seasonality into the business.

Speaker 13: Okay. And then as far as ASPs go, for several quarters now, you've benefited not only from pricing but also fewer promotions. It looks like for 22, pricing is going to continue to be a benefit for you. I'm curious how you're thinking about promotions. Are you assuming a more conservative posture there, or do you think kind of promotions are sort of net neutral when you sort of look at it over your base?

Okay, and then as far as Asp's go for several quarters now.

Benefited not only from pricing, but also fewer promotions.

It looks like for 'twenty, two pricing is going to continue to be a benefit for you I'm curious how you're thinking about promotions are you assuming a more conservative posture, there or do you think kind of promotions are sort of net neutral when you sort of look at it on a year over year basis.

Speaker 4: Yeah, I would say it's our intent to try and maintain a very low promotional cadence like we have established over the last 12 months. Obviously, you do have to look at the competitive environment when we take that into consideration. I think that's our plan. There will still be promotions around some key consumer events, but they'll be very modest in nature. We think that's the right way to proceed. I think that's probably what most brands are thinking, so that's our assumption.

Yeah, I would say, it's our intent to try and maintain a very low promotional cadence like we have established over the last two.

<unk> months, obviously, you do have to look at the competitive environment. When we take that into consideration I think that's that's our plan.

It will still be promotions around some key consumer events, but there'll be very modest in nature.

That's the right way to proceed I think thats, probably what most brands are thinking so that's our assumption.

Speaker 13: Okay. And then lastly, on Hey Dude, and I recognize that you haven't closed the transaction yet, but can you say, you know, kind of what percent of the business are the Wendy and Wally silhouettes? Is that the majority of the business? And I'm also curious as to kind of when you look back over, like, particularly the holiday season, you know, what was really working for the brand in addition to maybe those two kind of key silhouettes?

Okay, and then lastly on the Hey, Dude and I recognize that you havent closed the transaction yet but.

Can you say you know kind of what percent of the business are the windy and Wally silhouettes is that the majority of the business and I'm also curious as to kind of when you look back over like particularly the holiday season, what was really working for the brand.

In addition to maybe those two kind of key silhouettes.

Speaker 4: Yeah, the Wendy and the Wally are a very important silhouettes to the brand. They are a big part of the business and that is one of the things that attracted us.

Yeah.

Yes, Wendy on the walls are.

Very important silhouettes to the brands. They are a big part of the business that is one of the things that attracted us to the brand. We believe brands to have iconic silhouettes that resonate extremely strongly with the consumer like crocs.

Speaker 4: to the brand. We believe brands that have iconic silhouettes that resonate extremely strongly with a consumer like Crocs.

Speaker 4: are very valuable brands. They have pricing power, they have tremendous traction with the consumer. So Wendy and Wally are super important. I would say in addition to Wendy and Wally.

A very valuable brands they have pricing power. They have they have tremendous traction with with the consumer so plenty of volume Super important I would say in addition to when do you Wally.

Speaker 4: The Hey Dude brand has done some nice work with expanding into derivatives, expanding into fleece line, expanding into boots, and those performed very well during the holiday season so it gives us a lot of evidence and ammunition.

The <unk> brand has done some nice work with expanding into derivatives expanding into.

Police lines expanding into boots, and those performed very well during the holiday season. So it gives us a lot of evidence and ammunition for our product strategy in the future and I would say, we're working very proactively on that right now.

Speaker 4: for our product strategy in the future. And I would say we're working very proactively on that right now. Got it.

Got it okay, thanks, and good luck.

Speaker 5: Great. Thank you. And the final question will come from the line of Sam Poser.

Great. Thank you and our final question will come from the line of Sam Poser.

Speaker 10: I just want a quick follow up to my earlier question.

I just want a quick follow up to my earlier question.

Speaker 10: historically your gross margin in your last few years, your gross margin in Q2 has been

Historically your gross margin in the last few years your gross margin in Q2 has been.

Speaker 10: six, five, 700 basis points higher than Q1. Is there anything that would change that this year sort of to the core?

Six five to 700 basis points higher than Q1.

There anything that would change that this year sort of the core.

Core crops business.

Speaker 10: I, from what I understand, Hey dude runs a higher gross margin. So that should actually be added.

From what I understand Hey, Dude runs a higher gross margin so that should actually be added.

Yeah.

Speaker 3: Yeah, we haven't published to do gross margins yet. But for Q2, I would say just for the core crops brand, you know, we go a little bit of shift from revenue, right? From like an EMEA perspective is the wholesale order book shifts around the reason why your Q2 margins are so much higher because Q1 is such a heavy wholesale quarter. So that's sort of a channel mix issue. So, but I still expect structurally that those, as we talked about,

Yes, we havent published <unk> gross margins yet.

For Q2, I would say just for the core Crocs brand.

The little bit of shift from revenue right from like in EMEA perspective, it's the wholesale order book shifts around the reason why your Q2 margins are somewhat higher Q1 is such a heavy wholesale corner.

So that's a sort of a channel mix issue, so I still expect structurally that those.

Speaker 6: you know, before, that those structurally Q2 will still be higher than Q1 and that dynamic still exists this year as well.

As we talked about before that does structurally Q2 will still be higher than Q1 and that dynamic still exist this year as well.

Speaker 10: And the shift, you said initially, the shift from the EMEA is

And the shift you said initially the shift from the.

EMEA is.

Speaker 10: from Q1 to Q2 or from Uclue 1 to Q2 and then Q2 to Q3 of that also.

From Q1 to Q2 or from Youku into Q2, and then Q2 to Q3 of that wholesale business.

Speaker 9: The only information we provided is from Q1 to Q2.

The only put the information we provided is from Q1 to Q2.

Speaker 10: Okay. And can you give us some indication of, well, we have it from last year, so. All right. Thank you. Thank you. Appreciate it. This now concludes our...

Okay.

And can you give us some indication of what.

While we have it from last year, so alright.

Thank you.

Thanks. Thank you appreciate this now concludes our Q&A session.

Yeah.

Thank you.

Thank you for joining today.

Okay.

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