Q4 2023 Crocs Inc Earnings Call

Good morning, and welcome to the Crocs fourth quarter 2023 earnings Conference call.

Operator: Good morning, and welcome to the Crocs fourth quarter 2023 earnings conference call. Our participants will be in listen-only mode.

All participants will be in listen only mode.

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After todays presentation, there will be an opportunity to ask questions.

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Operator: To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Erin Murphy, Senior Vice President of Investor Relations and Corporate Strategy. Please go ahead.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

I would now like to turn the conference over to Erin Murphy Senior Vice President of Investor Relations and corporate strategy. Please go ahead.

Erin Murphy: Good morning, and thank you for joining us to discuss Crocs, Inc. Fourth quarter and full year results with me today are Andrew Rees, Chief Executive Officer, and Anne Mehlman Executive Vice President incoming Cross brand President and current Chief Financial Officer. Following their prepared remarks, we will open the call for your questions.

Erin Murphy: Good morning, and thank you for joining us to discuss Crocs Inc.'s fourth quarter and full year results. With me today are Andrew Rees, Chief Executive Officer, and Anne Mehlman, Executive Vice President, incoming Crocs brand president, and current Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask you to limit to one per caller.

Erin Murphy: But we ask you to limit to one per caller.

Erin Murphy: Before we begin I would like to remind you that some of the information provided on this call is forward looking and accordingly is subject to the safe Harbor provision of the federal Securities laws.

Erin Murphy: Before we begin, I would like to remind you that some of the information provided in this call is forward-looking and, accordingly, is subject to the safe harbor provisions of the Federal Securities Law. These statements include, but are not limited to, statements regarding our strategy, plans, objectives, expectations, and intentions, including our financial outlook. These statements involve known and unknown risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to differ materially. Please refer to our annual report on Form 10-K and other reports filed with the SEC for more information on these risks and uncertainties. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures.

Erin Murphy: These statements include but are not limited to statements regarding our strategy plans objectives expectations and intentions, including our financial outlook.

Erin Murphy: These statements involve known and unknown risks uncertainties and other factors, which may cause our actual results performance or achievements to differ materially. Please refer to our annual report on Form 10-K, and other reports filed with the FCC for more information on these risks and uncertainties.

Erin Murphy: Certain financial metrics that we referred to as adjusted or non-GAAP. Our non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release, we issued earlier. This morning, all revenue growth rates will be decided on a constant currency basis, unless otherwise stated at this time I'll turn the call over to Andrew.

Andrew Rees: A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I'll turn the call over to Andrew Rees, Crocs Inc.'s Chief Executive Officer. Thank you, Aaron.

Andrew Rees: We crossed Inc, Chief Executive Officer.

Andrew Rees: Thank you Erin and good morning, everyone. Thank you for joining us today.

Andrew Rees: And good morning, everyone. Thank you for joining us today. 2023 was a record year for the Crocs enterprise, and we're starting off 2024 from a position of strength. Our teams are focused on continuing to drive market share gains and sustainable profitable growth. We ended the year strong, delivering a better than expected fourth quarter. Let me start by sharing a few highlights from the full year of 2023.

Andrew Rees: 2023 was a record year for the Crocs enterprise and we're starting off 2020 full from a position of strength.

Andrew Rees: Our teams are focused on continuing to drive market share gains and sustainable profitable growth.

Andrew Rees: We ended the year strong delivering better than expected fourth quarter.

Andrew Rees: Let me start by sharing a few highlights from the full year of 2023.

Andrew Rees: Total revenues grew 12% year-on-year to almost $4 billion, driven by 19% direct consumer growth at the enterprise level. Crocs brand revenues surpassed the $3 billion mark, increasing 14% versus last year. Haydut Grand revenues were approximately $950 million and delivered over $200 million in operating income.

Andrew Rees: Total revenues grew 12% year on year to almost $4 billion, driven by 19% direct to consumer growth at the enterprise level.

Andrew Rees: Crocs brand revenues surpassed the $3 billion, mark increasing 14% versus last year.

Andrew Rees: Hey, Dude barring revenues were approximately $950 million and delivered over $200 million in operating income.

Andrew Rees: We expanded our gross margins and once again delivered industry, leading margins with adjusted operating margins of almost 28% exceeding our guidance.

Andrew Rees: We expanded our gross margins and once again delivered industry-leading margins with adjusted operating margins of almost 28%, exceeding our guidance. We grew our adjusted diluted earnings per share by 10% versus last year to reach $12.03. Our strong cash flow generation allowed us to repay $666 million of debt, and we resumed our share repurchase program during the year.

Andrew Rees: We grew our adjusted diluted earnings per share by 10% versus last year to $12.03.

Andrew Rees: Strong cash flow generation allowed us to repay $666 million of debt and we resumed our share repurchase program during the year.

Andrew Rees: Finally, we're pleased to see Crocs Inc. achieve the number 20 spot on Fortune's 2023 Top 100 Fastest Growing Companies. Before I provide strategic updates by brand, I want to speak to the recently announced executive transition. Michelle Poole, Crocs brand president, will be retiring from the company following a distinguished 32-year career in the footwear industry, the last decade of which had a tremendous impact on Crocs. Poole will remain in her role through early May and transition to a special advisor through early 2025.

Andrew Rees: Finally, we're pleased to see the Crocs, Inc. Achieved the number 20 spot. Unfortunately, 2023 top 100 fastest growing companies.

Before I provide strategic updates by Brian I want to speak to the recently announced executive transitions.

Andrew Rees: Michelle Poole Crocs brand presidents will be retiring from the company following a distinguished 32 year career in the footwear industry.

Andrew Rees: Last decade of what she had a tremendous impact on crops.

Andrew Rees: Michel who made in her role through Ellie Mae and transition to a special adviser through early 2025.

Andrew Rees: In keeping with our succession planning, I'm pleased to promote our current CFO, Anne Mehlman, to Crocs brand president. Many of you have had the opportunity to work closely with Anne and know she brings a strategic and consumer-focused commercial lens to her leadership. I have strong confidence in our commercial acumen, deep knowledge of the Crocs business, and global mindset. Anne will remain CFO until a replacement is named, and an active search for her successor is already underway.

Andrew Rees: In keeping with our succession planning I am pleased to promote our current CFO Anne Mehlman to cross brand President.

Andrew Rees: Many of you had the opportunity to work closely with them and know she brings as strategic and consumer focused commercial lens to our leadership.

Andrew Rees: I have strong confidence in our commercial acumen deep knowledge of the crops business and global mindset.

Andrew Rees: We will remain CFO until a replacement is named an active sexual her successor is already underway.

Andrew Rees: Moving on to our performance against our key strategic pillars, starting with the cross brand.

Andrew Rees: Moving on to our performance against our key strategic pillars, starting with the Crocs brand. We continue to invest in our Crocs brand through our socially-led, digitally-first marketing playbook and product innovation, naming a few of our accomplishments this year. Our marketing wins range from creating hype to mainstream moments, including the mystery of the yellow boot, Asper, a K-pop brand that featured our stomp-lined clog, and we ended the year unveiling our made a clog, the perfect friend to Lightning McQueen. Complex, a leading culture publication, said it best.

Andrew Rees: We continue to invest in our cross brand through our socially led digitally first marketing playbook and product innovation.

Andrew Rees: Naming a few of our accomplishments this year.

Andrew Rees: Our marketing wages range from creating height to mainstream moments, including the mischief yellow boot asked though a K pop brand featured a stump line clogs and.

Andrew Rees: And we ended the year unveiling I've made a clog the perfect friends of Lightning Mcqueen.

Andrew Rees: Complex, a leading culture publications set at bass.

Andrew Rees: Crocs cannot stop going viral in 2020. We celebrated our most successful Croctober yet, fueled by the span-inspired Crocs Cowboy boot that sold out in 24 hours. We were awarded Collection of the Year by Footwear News for the Salehi Bambri Times Crofts Polex Clogfoot button. Moving on to products, innovation and ongoing diversification remain important areas of focus. While we've had great success creating consumer moments through partnerships and collaborations, our core franchises are our fundamental growth engines, and all three of our product pillars, clogs, sandals, and personalization, grew double digits in 2023. Clogs grew 12%, supported by solid growth in both our core classics as well as new clog franchises fueled by height and product innovation.

Andrew Rees: Crocs cannot stop going viral and 2023.

Andrew Rees: We celebrated our most successful croc Tobey yeah fueled by the span inspired crocs cowboy boots sold out in 24 hours.

Andrew Rees: We were awarded a collection of the year, but what are news, but this way he bembry times crops Polacks clock partnership.

Andrew Rees: Moving on to product innovation and ongoing diversification remain important areas of focus.

Andrew Rees: Well, we've had great success, creating consumer moments through partnerships and collaborations.

Andrew Rees: Cool franchises are a fundamental growth engines and all three of our product pillars clogs sandals I'm personally ization grew double digits in 2023.

Andrew Rees: Bogs grew 12% supported by solid growth in both our core classic as well as new clock franchisees fueled by site and product innovation.

Andrew Rees: Sandals surpassed the $400 million mark, growing 29% versus last year, and now make up 13% of our Crocs sales. We gained market share across our four saddle segments that we prioritized: every day, style, sport, street, and adventure.

Andrew Rees: Downloads surpassed $400 million, Mark growing 29% versus last year, and now makes up 13% of our cross sales mix.

Andrew Rees: We gained market share across our foresaddle segments that we prioritized everyday style sports Street and adventure.

Andrew Rees: Beyond the revenue milestone, the Sandals category brings diversification not only to our overall product mix but to our customer mix. In 2023, 61% of consumers that purchased sandals on owned e-com channels were new to the brand. These consumers shopped more frequently, carried a higher average order value, and purchased multiple silhouettes. Our female consumers skew more female versus our other buyers. Our Jibbitz business grew 17% to over a quarter billion dollars, making up approximately 9% of our total mix. We continue to view personalization as a mega-consumer trend and see opportunity to further grow our gibbets penetration in 2024, notably through improved wholesale execution, deeper international penetration, and increased speed to market. We're elevating our franchise management capabilities and have built several sustainable multi-product platforms, including the Echo, Brooklyn, and Crush, to name a few. Each of these franchises caters to unique customer groups and diverse wearing occasions. The Echo franchise, which has developed a breadth of products across clogs, sandals, boots, and now sneakers, is bringing in a largely male explorer consumer.

Andrew Rees: On the revenue milestone the sandals category brings diversification not only to our overall product mix, but to our customer mix.

Andrew Rees: In 2023, 61% of consumers that purchase sandals on own E. Com channels. When you did the brand. These consumers shop more frequently carried a higher average order value I'm purchase multiple silhouettes.

Andrew Rees: Donald consumers skew more female versus our other buys.

Andrew Rees: Our <unk> business grew 17% to over a quarter billion, making up approximately 9% of our total mix.

Andrew Rees: We continue to view personalization is a mega consumer trend and see opportunity to further grow our Jupiter penetration in 2020 full.

Andrew Rees: Notably through improved wholesale execution deeper international penetration and increase speed to market.

We're elevating our franchise management capabilities and have built several sustainable multi product platforms, including the echo Brooklyn, I'm crushed to name a few.

Each of these franchises cadence to unique customer groups and diversified wearing occasions.

Andrew Rees: The <unk> franchise, which was developed a breath of products across clogs sandals boots, and now sneakers is bringing in a largely male explorer consumer.

Andrew Rees: In fact, 71% of consumers, who shopped, our echo franchise on our own E Comm channel in 2023, when new consumers.

Andrew Rees: In fact, 71% of consumers who shopped our Echo franchise on our own e-com channel in 2023 were new consumers. We're becoming faster and more agile, and we see opportunities to further capitalize on these attributes in 2024. In the fourth quarter, we tested slippers in four colorways, and we were able to get these to market 60% faster than our normal product cycle. This test sold out in two and a half weeks, and we're building this into our full line for 2024.

Andrew Rees: We're becoming faster and more agile and we see opportunities to further capitalize on these attributes in 2024.

Andrew Rees: In the fourth quarter, we tested slippers and full color wise, and we're able to get these to market, 60% faster than a normal product cycle.

Andrew Rees: This test sold out in two and a half weeks and we're building this into a full line to 2024.

Andrew Rees: We're expanding our speed to market capabilities across other areas of our product portfolio, including emerging new franchises, such as a getaway assortment. As we think about distribution, I'm pleased by the broad-based growth of the Crocs brand this year. For 2023, North America grew 8%, and international grew 23%. In fact, the fourth quarter represented our twelfth consecutive quarter of strong double-digit growth outside of North America. Globally, South Korea and the UK grew double digits, and Australia and China each grew triple digits.

Andrew Rees: We're expanding our speed to market capabilities across other areas of our product portfolio, including emerging new franchise, such as the getaway assortment.

Andrew Rees: As you think about distribution I am pleased by the broad based growth of the cross brand for the year.

Andrew Rees: For 2023, North America grew 8% and international grew 23%.

Andrew Rees: In fact fourth quarter represented the 12th consecutive quarter of strong double digit growth outside of North America.

Andrew Rees: Globally, South Korea, and the U K grew double digits in Australia, and China each grew triple digits.

Andrew Rees: While we reported record revenue in China, it still only represents 4% of revenues, underscoring the untapped potential we have in the region. We continue to see our organic fanbase in China grow as evidenced by our hashtag, known as Dongmen, or Crocs followers. We now have 70 million Dongmen hashtags on red, highlighting consumer engagement and excitement for the brand.

Andrew Rees: While we reported a record revenue in China, it's still only represent 4% of revenues underscoring the untapped potential we have in the region.

Andrew Rees: We continue to see our organic fan base in China grow as evidenced by our hashtag known as doorman all clogs followers.

Andrew Rees: We now have 70 million dogma, and hashtags on red highlighting the consumer engagement and excitement for the brand.

Andrew Rees: Three weeks ago, I had the opportunity to visit several of our tier one countries in Asia alongside our broader leadership team.

Andrew Rees: Three weeks ago, I had the opportunity to visit several of our tier one countries in Asia, alongside a broader leadership team. It is evident that the brand's trajectory is taking hold across the region. The Asian consumer is embracing personalization at a rate higher than other parts of the world.

It is evident the brand's trajectory is taking hold across the region.

Andrew Rees: The agent consumerism embracing personalization at a rate higher than other parts of the world.

Andrew Rees: Another anecdote that gives me confidence broadly in our international growth agenda is that South Korea, the most established market in the region, carries the highest market share of any discrete market globally. It is one of the best representations of our core strategies across clogs, sandals, and personalization. The strong market position highlights the potential upside of opportunity across our other international markets. The Crocs brand has entered 2024 with momentum. From a product perspective, we expect to deliver more height for her, street for him, and drive personalization at scale. We expect sandals to continue to gain as a percentage of sales driven by newness as we relaunch the Classic Sandal 2.0 and scale our recently introduced Getaway Sandal franchise. From a sustainability perspective, I'm incredibly pleased to announce that we achieved our 2023 goal to reach 20% fire-based cross-site material across our portfolio, a significant milestone on our journey to 50% biobased cross-site by 2030. We also saw promising results in our Pilot Shoe Recycling Program that we launched in late October, and we now plan to expand this initiative to all stores.

Andrew Rees: Another anecdote it gives me confidence broadly in our international growth agenda is at South Korea, our most established market in the region carries our highest market share of any discrete market globally and as one of the best representation of our core strategies across clogs sandals and personalization.

The strong market position highlights the potential upside of opportunity across our other international markets.

Andrew Rees: The crops, Brian has entered 2024 with momentum from a product perspective, we expect to deliver more hyper huh streetfighting and drive personalization at scale.

Andrew Rees: We expect <unk> to continue to gain as a percentage of sales driven by newness as we relaunch the classic saddled to point out and scale. Our recently introduced getaway sandal franchise.

Andrew Rees: From a sustainability perspective, I'm incredibly pleased to announce that we achieved our 2023 golf.

Andrew Rees: To reach 20% Biobased crosslight material across our portfolio.

Andrew Rees: A significant milestone on our journey to 50% Biobased Crosslight by 2030.

Andrew Rees: We also saw promising results in our pilot shoe recycling program that we launched in late October and we now plan to expand this initiative to all stores.

Andrew Rees: We will share more on these and many other initiatives in our midyear comfort report.

Andrew Rees: We will share more on these and many other initiatives in our Mid-Year Comfort Report. According to Hey Dude, we generated almost $950 million of revenue and over $200 million in operating income in 2023. This year had its share of learnings, but I'm very confident that the Hey Dude brand benefits from them, from the lightweight, comfortable, easy on and off, and value, remain top of mind with consumers.

Andrew Rees: Turning to Hey, do we generated almost $950 million of revenue and over $200 million in operating income in 2023.

Andrew Rees: This year had its share of learnings, but I'm very confident that the hatred Brian benefits.

Andrew Rees: From the lightweight comfortable easy I don't know and value remain top of mind with consumers.

Andrew Rees: While our brand awareness significantly improved year over year, reaching.

Andrew Rees: While our brand awareness significantly improved year over year, reaching 32% in the second half, it is still low by any global brand standard, but brand love and affinity are high. As we talked about in our third-quarter call, we made a number of strategic pivots in September, which impacted our sell-in within the wholesale channel, curtailed smaller non-strategic accounts, and focused our efforts around improving full-price sell-through on digital. We're pleased with the initial impact of our decisions as evidenced by improved gross margins and healthy channel inventory and expect sell-in and sell-through to normalize as we move throughout the second half of 2024 and prioritize returning to a pull market position. In the fourth quarter, and on a four-year basis, we gained market share among our key strategic accounts, underscoring our confidence in the brand's underlying demand with consumers. In 2023, the Hey Dude brand gained approximately 200 basis points of US market share versus 2022 in the casual fashion category, according to Sakana's Retail Tracking during the first quarter. The Hey Jude brand had some big moments, with Duke Perfect as the face of Happy Holidudes holiday programming.

Andrew Rees: Reaching 32% in the second half it is still low by any global brand standards.

Andrew Rees: But Brian Love and affinity are high.

Andrew Rees: As we talked about in our third quarter call. We then made a number of strategic pivots in September which impacted our sell in within the wholesale channel curtail smaller non strategic accounts and focus our efforts around improving full price sell through on digital with.

Pleased with the initial impact about decisions as evidenced by improved gross margins and healthy channel inventories unexpected.

Andrew Rees: I expect sell in and sell through to normalize as we move throughout the second half of 2024.

Andrew Rees: Prioritize returning to a full market position.

Andrew Rees: In the fourth quarter and on a full year basis, we gained market share among our key strategic accounts under.

Andrew Rees: Underscoring our confidence in the brand's underlying demand with consumers.

Andrew Rees: In 2023, the hatred Brad gained approximately 200 basis points of U S market share versus 2022, and the casual fashion category. According to <unk> retail tracking service.

Andrew Rees: During the first quarter.

Andrew Rees: The hatred, Brian Hudson Big moments with Duke Class Act as the face of a happy Hologic holiday programming.

Andrew Rees: Leveraging our consumer insights, we know that 50% about buyers give hey, dude, that's gifts and we saw evidence of this during the fourth quarter.

Andrew Rees: Leveraging our consumer insights, we know that 50% of our buyers give heydos as gifts, and we saw evidence of this during the fourth quarter. Looking forward, we plan to create consumer moments through scaling our collaborations and partnerships. We recently collaborated with actor Chase Stokes from the popular Outer Banks Netflix show to launch the Wally Mitch.

Andrew Rees: Looking forward, we plan to create consumer moments through scaling our collaborations and partnerships.

Andrew Rees: We recently collaborated with Axa Chase Stokes from the popular out of banks Netflix show to launch the Wally met.

Andrew Rees: Later in Q1 will be expanding our collegiate program to more schools during March madness to deepen consumer engagement.

Andrew Rees: Later in Q1, we'll be expanding our collegiate program to more schools during March Madness to deepen consumer engagement. From a product perspective, during the fourth quarter, our icons, the Wally and Wendy, were top sellers. Our Bradley boot rounded up our top three selling styles overall with exceptional sell-through as consumers responded to its compelling price point, light weight, and attractive styling. Once again, our seasonal ugly sweater Christmas styles will stand out.

Andrew Rees: From a product perspective during the fourth quarter, our icons the wall and Wendy with top sellers are broadly boot rounded out the top three selling styles overall was exceptional sell through as consumers responded to its compelling price point life's white unattractive styling.

Andrew Rees: Despite a soft overall industry boot season.

Andrew Rees: Once again, a seasonal ugly sweater Christmas styles were standouts.

Andrew Rees: As we move into 2024 will focus on continuing to invest in call unexpected Wally and win new franchises to remain the lion's share of our offerings.

Andrew Rees: As we move into 2024, we'll focus on continuing to invest in CORE and expect the Wally and Wendy franchises to remain the lion's share of our offerings, driven by newness in color, graphic, and height. We will capitalize on our successful sneaker franchises, including the Corina and the Scirocco, and build on our fashion boot offering in the fall. We're taking a focused approach to how we allocate inventory by account and expect to see more evidence of account and channel segmentation as we move throughout the year. From a distribution perspective,

Andrew Rees: Driven by newness and color graphic and hyped.

We will capitalize on our successful sneaker franchises, including the Korean and the Sirocco and build on our fashion boot offering in the fall.

Andrew Rees: We're taking a focused approach to how we allocate inventory by account and expect to see more evidence of accounts and channel segmentation as we move throughout the year.

Andrew Rees: From a distribution perspective.

Andrew Rees: We're in the early days of implementing our outlet retail strategy for the Hey Dude brand, leveraging Crocs' successful retail playbook. On the Hey Dude side, we opened five retail outlets in the second half and have been pleased with the results thus far. We plan to open up 30 outlet stores in 2024, spread throughout the year. For context, retail is roughly one third of our North American business for the Crocs brand, and it's highly profitable. Turning to wholesale, while our spring order books are down versus last year, as we discussed on the November call, we expect sell-in and sell-through to normalize as we move throughout the back half of the year. As it relates to international, we remain in test mode in a few direct markets in Europe, as well as in several distributor markets, leveraging the success of the Crocs brand playbook. This will lay the groundwork to expand its new international markets in the next two to three years. We're coming into the year from a position of strength.

Andrew Rees: We're in the early days of implementing our outlet retail strategy for the Hey, Dude brand <unk>.

Andrew Rees: Leveraging cross successful retail playbook.

Andrew Rees: On the hated side, we opened five outlet locations in the second half and have been pleased with the results thus far.

Andrew Rees: We plan to open up 30 outlet stores in 2024 spread throughout the year.

Andrew Rees: For context retail is roughly one third of our North American business for the Crocs brand and is highly profitable.

Andrew Rees: Turning to wholesale while our spring order books are down versus last year as we discussed on our November call, we expect sell in and sell through to normalize as we move throughout the back half of the year.

Andrew Rees: As it relates to international we remain in test mode, and a few direct markets in Europe.

Andrew Rees: As well as in several distributor markets leveraging the success of the Crocs brand playbook. This will lay the groundwork to expand into new international markets in the next two to three years.

Andrew Rees: We're coming into the year from a position of strength.

Andrew Rees: While there are question marks around the global macro backdrop and broader consumer health, I'm confident in our brands, our people, and our purpose, and we are looking forward to another year of outsized share gains, industry-leading profitability, and top-tier cash flow generation. And we'll now review our financial results in more detail. Thank you, Andrew. And good morning, everyone.

Andrew Rees: While there are question marks around the global macro backdrop, and the broader consumer health I am confident in our brands our people and our purpose.

Andrew Rees: And are looking forward to another year of outsized share games industry, leading profitability and top tier cash flow generation.

Speaker Change: And we will now review our financial results in more detail.

Thank you Andrea and good morning, everyone I'm very pleased by our fourth quarter results, which exceeded the high end of our guidance across all metrics, we generated $960 million and consolidated revenues growing one 5% over last year led by the cross brand, we delivered top tier profitability with adjusted gross margin up 200.

Anne Mehlman: I'm very pleased by our fourth quarter results, which exceeded the high end of our guidance across all metrics. We generated $960 million in consolidated revenue, growing 1.5% over last year, led by the Crocs brand. We delivered top-tier profitability with adjusted gross margin up 240 basis points to 55.7%, adjusted operating margin of 24.1%, and adjusted earnings per share of $2.58, ahead of our guidance of $2.05 to $2.35. Our strong profitability and focus on networking capital enabled us to repay $277 million of debt in the fourth quarter. We also repurchased $25 million of stock in the fourth quarter at an average cost of $86.34 per share.

Speaker Change: Third and 40 basis points to 55, 7%.

Speaker Change: <unk> operating margin of 24, 1% and adjusted earnings per share $2.58 ahead of our guidance of $2 five to $2.35, our strong profitability and focus on networking capital enabled us to repay $277 million of debt in the fourth quarter. We also reap.

Speaker Change: Purchased $25 million of stock in the fourth quarter at an average cost of $86 34 per share.

Anne Mehlman: As discussed earlier in January at the ICR conference, we made a change to our segment reporting that will now be reflected in our 10K. Our reportable operating segments will now be the Crocs brand and the Hey Dude brand. We plan to continue sharing our progress against our strategic growth pillars, key country call-outs, and channel dynamics. Turning to the Crocs brand in the fourth quarter.

Speaker Change: As discussed earlier in January at the ICR Conference, we made a change to our segment reporting that will now be reflected in our 10-K.

Speaker Change: Our reportable operating segments will now be the craft brand and the <unk> brand. We plan to continue sharing our progress against our strategic growth pillars key country call outs and channel dynamics.

Speaker Change: Turning to the Crocs brand in the fourth quarter.

Anne Mehlman: Revenues were $732 million, growing 10% relative to the prior year, driven by strong DTC growth of 12% and wholesale growth of 70%. Brand ASPs were up 12% to $26.76, led by both channel and product mix, higher international pricing, and lower distance. The brand sold 27 million pairs of shoes, a decrease of 1% to Q4 last year, or up 5%, excluding the impact of the termination of our African distributor. For the year, the brand sold 120 million units, a 3.5% versus last year, and ASP growth was 10%. Now, let's review the Crocs brand highlights by country and channel.

Speaker Change: Revenues were $732 million growing 10% relative to prior year, driven by strong DTC growth of 12% and wholesale growth of 7% brand asps were up 12% to $26.76.

Speaker Change: Led by both channel and product mix higher international pricing and lower discounting.

Speaker Change: Brand sold 27 million pairs of shoes, a decrease of 1% in Q4 of last year or up 5%, excluding the impact of the termination of our African distributor.

Speaker Change: For the year, the brand sold $120 million or three 5% versus last year and E. S P growth with 10%.

Speaker Change: Now, let's review the cross brand highlights by country and channel.

Anne Mehlman: In the quarter, North America revenues of $471 million were up 3% from 2022; strong DTC growth of 7% was partially offset by a 5% decline in wholesale. The decline in wholesale revenues reflects a full quarter of impact from our e-tail distribution model change, partially offset by double-digit growth in our brick-and-mortar hold. Crocs brand in the fourth quarter was led by International, with revenues up 25% driven by DTC, which grew 37% in the quarter against 2022. In fact, all six of our Tier 1 markets grew in the fourth quarter—China, India, Japan, South Korea, the U.S., and Western Europe. As Andrew noted, two of our countries grew triple digits for the year; Australia and China. China had a record revenue year, ending the year at $120 million.

Speaker Change: In the quarter North America revenue $471 million were up 3% from 2022.

Speaker Change: Strong DTC growth of 7% was partially offset by a 5% decline in wholesale.

Speaker Change: It's kind of in wholesale revenues reflect a full quarter of impact from our E Mail distribution model change, partially offset by double digit growth in our brick and mortar wholesale.

Speaker Change: Craft brand in the fourth quarter was led by international with revenues up 25% driven by DTC, which grew 37% in the quarter against 2022 in fact, all six of our tier one markets grew in the fourth quarter, China, India, Japan, South Korea, the U S and west.

Speaker Change: Or in Europe.

Speaker Change: Andrew noted two of our countries grew triple digits for the year, Australia and China.

Speaker Change: China was a record revenue year, ending the year at $120 million in Western Europe, we saw strong double digit growth in the UK and France, well, Germany ended the year flattish despite the tough macro backdrop.

Anne Mehlman: In Western Europe, we saw strong double-digit growth in the U.K. and France, while Germany ended the year flattish, despite a tough macro-backlash. Turning to Hey Dude, revenues were $228 million, down 19% from last year but ahead of our guidance. During Q4, the brand sold 7.4 million pairs of shoes, a decrease of 18% from last year as we lapped pipeline fill and as we took decisive actions to reduce channel inventories. The Hey Dude average selling price during Q4 was roughly flat to last year at $30.65. Relative to Q3, our e-commerce ASPs were up 15% as we pulled back on price matching online. We continue to make progress against the great goods cleanup and expect to be in a substantially better position exiting the first half of 2024. Wholesale revenues were down 28% from Q4 last year as we left 2022 pipeline fill, right-sized or non-strategic wholesale accounts and faced a more challenging wholesale environment. The DTC's channel contracted 9% as we forfeited sales for better pricing and margins.

Speaker Change: Turning to <unk> revenues were $228 million down 19% from last year, but ahead of our guidance. During Q4, the brand sold $7 4 million pairs of shoes, a decrease of 18% from last year as we lap pipeline fill and as we took decisive actions to reduce channel inventories.

Speaker Change: Hey, Dude average selling price during Q4 was roughly flat to last year at $30.65.

Speaker Change: Relative to Q3, our ecommerce asps were up 15% as we pulled back on price matching online we continue to make progress against great goods cleanup unexpectedly in a substantially better position exiting the first half of 2024.

Speaker Change: Wholesale revenues were down 28% from Q4 last year as we lapped 2022 pipelines, though right sized or nonstrategic wholesale accounts and faced a more challenging wholesale environment. The DTC channel contracted 9% as we forfeited sales for better pricing and margin consolidated adjusted gross.

Anne Mehlman: Consolidated adjusted gross margin for the fourth quarter was 55.7%, up 240 basis points from last year, as freight was a key tailwind for both brands. Crocs brand adjusted gross margin was 59.5%, or 340 basis points higher than last year. The increase in adjusted gross margin is attributable to approximately 240 basis points of freight tailwinds, increases in international pricing and favorable promotions, and customer mix partially offset by a negative currency impact of 100 basis points. Pay viewed brand adjusted growth margin for the quarter was 45.5% and came in better than expected. The margin decrease of 170 basis points from Q4 2022 was driven by excess distribution costs and product.

Speaker Change: For the fourth quarter with 55, 7% up 240 basis points from last year.

Speaker Change: It was a key tailwind for both brands.

Speaker Change: Cross brand adjusted gross margin was 59, 5% or 340 basis points higher than prior year.

Speaker Change: The increase in adjusted gross margin is attributable to approximately 240 basis points of freight tailwind increases in international pricing and favorable promotion.

Speaker Change: Customer mix, partially offset by negative currency impact of 100 basis points.

Speaker Change: Hey, Dude brand adjusted gross margin for the quarter was 45, 5% and came in better than expected.

Speaker Change: Arjun decrease of 170 basis points from Q4 2022, Mr. Vin by excess distribution costs and product mix. This was partially offset by reduced freight and storage costs.

Anne Mehlman: This is partially offset by reduced freight and storage costs, which were Q4 adjusted SG&A at 31.6% of revenues, deleveraged by 430 basis points compared to the prior year. For full year 2023, adjusted STNA de-leveraged by 200 basis points to 28.7%. The significant increase in adjusted SG&A rates for the quarter and the full year is attributable to continued marketing investment, talent, and infrastructure to support future growth and durable market share gains. Taking these drivers together, our fourth quarter adjusted operating margin declined 190 basis points to 24.1% compared to 26% for the same period last year. In Q4, the company recorded a one-time GAAP tax benefit of approximately $112 million, primarily related to the closing of our Hey Dude activity in Hong Kong and the related transfer of our intellectual property. For the fourth quarter, Adjusted Diluted Earnings Per Share decreased 2.6% to $2.58 when reflecting our non-GAAP tax rate of 19.6%.

Speaker Change: Our Q4 adjusted SG&A at 31, 6% of revenues Deleveraged by 430 basis points compared to prior year.

Speaker Change: For full year 2023, adjusted SG&A, Deleveraged 200 basis points to 28, 7% the.

Speaker Change: The significant increase in adjusted SG&A rate for the quarter and the full year is attributable to continued marketing investment talent and infrastructure to support future growth and durable market share gains.

Speaker Change: Taking these drivers together our fourth quarter adjusted operating margin declined 190 basis points to 24, 1% compared to 26% for the same period last year.

Speaker Change: In Q4, the company reported a one time GAAP tax benefit of approximately $112 million primarily related to the closing of our heated activity in Hong Kong and the related transfer of our intellectual property.

Speaker Change: Fourth quarter adjusted diluted earnings per share decreased two 6% to $2.58 when reflecting our non-GAAP tax rate of 19, 6% for the full year, our adjusted diluted earnings per share increased 10% to $12.03.

Anne Mehlman: For the full year, our Adjusted Diluted Earnings Per Share increased 10% to $12.03. We ended the year with clean inventory on our balance sheet and in the channel. Our inventory balance on December 31, 2023 was $385 million, a decline of 18% against this time last year. The Crocs brand inventory balance was $281 million, down 70% from last year and roughly flat to Q3 2023. Paydude's inventory was down 38% from last year to $104 million, and down 6% versus 2.3%.

We ended the year with clean inventory on our balance sheet and in the channel.

Speaker Change: Our inventory balance on December 31, 2023, with $385 million a decline of 18% against this time last year.

Speaker Change: The cross brand inventory balance was $281 million down 7% from last year and roughly flat to Q3 2023.

Speaker Change: <unk> inventory was down 38% from last year to $104 million and down 6% versus Q3.

Speaker Change: We ended 2023 with a strong liquidity position comprised of $149 million of cash and cash equivalents and $570 million borrowing capacity on our revolver through.

Anne Mehlman: We ended 2023 with a strong liquidity position comprised of $149 million of cash and cash equivalents and $570 million of borrowing capacity on a revolver. Through strong cash flow generation and diligent management of networking capital, we have reduced total borrowings to $1.7 billion and our net leverage to approximately 1.3 times. Since acquiring Hey Dude in February 2022, we have repaid $1.2 billion in debt and resumed our share repurchase activity in the second half of 2023. On a full-year basis, we repurchased $175 million of stock at an average price of $104 per share.

Speaker Change: Through strong cash flow generation intelligent management of networking capital, we have reduced total borrowings to $1 7 billion and our net leverage to approximately one three times.

Speaker Change: Since acquiring hey, Dude in February 2022, we have repaid $1 $2 billion in debt and resumed our share repurchase activity in the second half of 2023.

Speaker Change: On a full year basis, we repurchased $175 million of stock at an average price of $104 per share our strong liquidity position and best in cash flow generation will enable us to continue to pay down debt and buy back stock in 2024 and.

Anne Mehlman: Our strong liquidity position and best-in-cash-flow generation will enable us to continue to pay down debt and buy back stock in 2024. In February, we successfully refinanced our Term Loan B and achieved a 75 basis point reduction in the borrowing rate from SOFR plus 3% to SOFR plus 2.25%, with no change to our leverage covenants or maturity date. Now, turning to the future, I would like to share our current outlook for Q1 and then full year 2024. For Q1, we expect consolidated revenues to be down 1.5% to up 0.5% at year-end currency rates, with the Crocs brand growing between 6% to 8%. We expect due revenue to be down 20% to 23% as we lapped pipeline fill from last year and given our aforementioned spring order book trend. We expect adjusted operating margin to be approximately 22% and adjusted diluted earnings per share of $2.15 to $2.25.

Speaker Change: In February we successfully refinanced our term loan B and achieved a 75 basis point reduction in borrowing rate from sofa, plus 3% just over plus 2.25% with no change to our leverage covenants or maturity date.

Speaker Change: Now turning to the future I would like to share our current outlook for Q1, and then full year 2024.

Speaker Change: For Q1, we expect consolidated revenue to be down one 5% to up one 5% at year end currency rates with the cross brand growing between 6% to 8%, we expect <unk> revenue to be down 20% to 23% as we lapped pipeline fell from last year and given our aforementioned spring order book trends.

Speaker Change: We expect adjusted operating margin to be approximately 22% and adjusted diluted earnings per share of $2.15 to $2 25.

Speaker Change: For the full year 2024, we are reiterating our revenue outlook of 3% to 5% growth assuming you're in currency rate for.

Anne Mehlman: For the full year 2024, we are reiterating our revenue outlook of 3% to 5% growth, assuming year-end currency rates. For Crocs brand revenue, we expect to grow 4% to 6% with growth led by international. For Hay-Doo Brand revenues, we continue to expect growth to be flat to slightly up.

Speaker Change: Our cross brand revenues, we expect to grow 4% to 6% with growth led by international for Haydu brand revenues, we continue expect growth to be flat to slightly up.

Speaker Change: Terms of shaping we expect hey, dude sales trends to improve throughout the year.

Anne Mehlman: In terms of shaping, we expect Hey Dude sales trends to improve throughout the year. We also expect gross margin improvement over 2023 at the enterprise level. We expect stable Crocs brand gross margins and expect Hey Dude! gross margin to be up for the year as we start to realize the benefit of our newly opened Las Vegas, D.C., and our planned ERP implementation. We expect to reinvest these dollars into brand accretive and strategic SG&A investments resulting in consolidated, adjusted operating margins for the year of approximately 25%. Following our tax structure changes for full year 2024, we expect our underlying non-GAAP tax rate, which approximates cash taxes paid, to be approximately 18% and a GAAP tax rate of 21.5%.

Speaker Change: We expect gross margin improvement over 2023 at the enterprise level, we expect stable craft brand gross margin and expect <unk> gross margin to be up for the year as we start to realize the benefit of our newly opened Las Vegas D C and our planned ERP implementation, we expect to reinvest these dollars into brand accretive strategic S.

Speaker Change: G&A investments, resulting in consolidated adjusted operating margins for the year of approximately 25%.

Speaker Change: Following our tax structure changes for full year 2024, we expect our underlying non-GAAP tax rate, which approximates cash taxes paid to be approximately 18% and GAAP tax rate of 21, 5%.

Speaker Change: We anticipate non-GAAP diluted earnings per share to be approximately $12 five to $12 50 in 2024.

Speaker Change: This range incorporates our recent tax changes and term loan b refinancing, but does not assume any impact from potential future share repurchases. We also expect to incur $10 million of one time charges, primarily in the first quarter related to the completion of our distribution and logistics projects for Hey, Dude.

Andrew Rees: We anticipate non-GAAP diluted earnings per share to be approximately $12.05 to $12.50 in 2024. This range incorporates recent tax changes in Term Loan B refinancing but does not assume any impact from potential future share purchases. We also expect to incur $10 million of one-time charges primarily in the first quarter related to the completion of our distribution and logistics projects for Hey Dude. Additionally, to support growth for both brands, we expect to invest approximately $120 to $130 million in capital expenditures in 2024 and continue to expect best-in-class cash flow generation. At this time, I'll turn the call back over to Andrew for his final thoughts. Thank you, Anne.

Speaker Change: To support growth for both brands, we expect to invest approximately $120 million to $130 million and capital expenditures in 2024 and continue to expect best in class cash flow generation.

Speaker Change: At this time I'll turn the call back over to Andrew for his final thoughts.

Andrew Rees: Thank you Anne.

Andrew Rees: Crocs, Inc. At a record breaking year in 2023 as we move into 2024, we are on the offense and proactively making the decision to invest incrementally in our business to set ourselves up for continued durable market share gains while delivering top tier total shareholder returns.

Speaker Change: At this time, we'll open the call for questions.

Operator: Crocs Inc. had a record-breaking year in 2023. As we move into 2024, we're on the offense and proactively making the decision to invest incrementally in our business to set ourselves up for continued durable market share gains while delivering top-tier total shareholder returns. At this time, we'll open the call for questions. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: To withdraw your question. Please press Star then two.

Speaker Change: We ask that you please limit yourself to one question.

Speaker Change: At this time, we will pause momentarily to assemble the roster.

And our first question will come from Tom <unk> of Wedbush Securities. Please go ahead.

Operator: To withdraw your question, please press star then 2. We ask that you please limit yourself to one question. At this time, we will pause momentarily to assemble the roster, and our first question will come from Tom Nickick of Redbush Securities. Please go ahead.

Tom: Hey, everybody. Thanks for taking my question.

Tom: I wanted to ask about Hey, Dude.

Tom: Yes.

Tom: Why.

Tom: We should expect better performance.

Tom Nickick: Hey everybody, thanks for taking my question. I wanted to ask you something about Hey Dude, I know you gave some of the... Seems like you're kind of digging yourself into a pretty big hole in Q1, so a pretty significant amount of re-acceleration for the remainder of the year. You know, I guess. The confidence in that re-acceleration stemmed from... order books or you know, like feedback you've gotten from wholesale partners and I guess, on the wholesale front, you know, I think obviously last year was a much choppier year than you had expected for the Hey Dude brand. And I guess like, you know, one of the wholesale partners seen lately that's gotten them more comfortable to help drive that re-acceleration and hold it in the heated bracket.

Tom: Over the course of the year, but.

Tom: It seems like you're kind of digging yourself into a pretty big hole in Q1.

Tom: Need.

Tom: Pretty significant amount of reacceleration, the remainder of the year I guess kind of.

Yes.

Tom: The confidence in that Reacceleration stemmed from.

Tom: Order books or feedback.

Tom: Feedback you've gotten from wholesale partners.

Tom: Yes.

Tom: On the wholesale front I think obviously last year wasn't much happier than you had expected for the <unk> brand.

Tom: And I guess like you know whatever the wholesale partners seed.

Tom: Lately, that's gotten them more comfortable.

Tom: Sure.

Tom: Helped drive that Reacceleration in the.

Tom: <unk> brand.

Tom: Correct.

Speaker Change: Yeah. Thanks, Tom Yeah, I think I think I'll I'll.

Tom Nickick: Yeah, thanks, Tom. Yeah, I think I'll hit the start of this and Anne can pick it up at the end with a few sort of points around how we think the year will play out for Hey Dude. So I think the first thing you've got to do is you've got to separate sell-in from sell-out, right? So, absolutely, you can see that the Hey Dude band has been choppy from us from a sell-in perspective and didn't play out as we thought it would during the full year.

Speaker Change: I'll hit the start of this and I can pick it up at the end with a few sort of points around how we think could play out behavior. So.

Speaker Change: I think the first thing you got to do is you've got a separate.

Speaker Change: Sell in from sellout right. So yes, I absolutely you can see that the hey, dude bandwidth being choppy from us.

Speaker Change: From a sell in perspective, and I didn't play out as we thought it would during the full year and you heard us on our Q3 call talk about how we're going to pivot to how we pivoted some of kind of strategic options, but if you kind of step all the way back to sell out and they consume.

Andrew Rees: And you heard on our Q3 call talk about how we're going to pivot or how we shifted some of our strategic actions. But if you kind of step all the way back to sell-out and the consumer takeaway that we see for the brand, because that is what our wholesale partners experience, right? So I think we can see a few things that are very, very clear. The underlying demand for the Hey Dude brand has been strong, right? It is a top performing brand for many of our wholesale partners, and it ranks highly in their brand stack. The Hey Dude brand gained market share in the fashion casual category during 2023, actually substantial market share, we believe based on this Econadata, about 200 basis points.

Speaker Change: Take away that we see for the brand because that is what our wholesale partners experts right. So.

Speaker Change: I think we can say a few things that are very very clear.

Speaker Change: The underlying sell out for the Haydu brand has been strong right. It is a top performing brand for many of our wholesale partners ranked highly in the brown sack.

Speaker Change: The hatred brand during 2023 gained market share in the fashion the.

Speaker Change: The fashion casual category actually substantial market share we believe based on the second of data about 200 basis points. So it was one of the larger market share gain and that's in terms of consumer takeaway.

Andrew Rees: So it was one of the larger market share gainers, and that's in terms of consumer takeaway. And then we can also see that in our underlying DTC business. Now we've changed some pricing strategies and dynamics in our DTC business, which is causing us to give up some revenue, but also to drive higher margins. So, in essence, what we see is we kind of read through to the consumer that we are selling more pairs to more consumers and gaining market share. And so that's kind of an important read. Now, we acknowledged that in the back half of 22, early part of 23, we put too many pairs into the market.

Speaker Change: And then we can also see that.

Speaker Change: Underlying DTC business now we've changed some pricing strategies and dynamics and I think Tc business.

Speaker Change: Causing us to give up some revenue, but also to drive higher margin so in essence.

Speaker Change: What we see as we kind of read through to the consumer.

Speaker Change: We are selling more pads to more consumers and gaining market share.

Speaker Change: And so that's kind of important right now.

Speaker Change: We acknowledged that in the back half of 'twenty two early part of 'twenty three we put too many pets into the market. So we sold more in than we should've done. We also have gone through the process of cleaning up our account base because I think we had too many counts.

Andrew Rees: So we sold more than we should have done. We also have gone through the process of cleaning up our account base because I think we had too many accounts with too much inventory kind of competing against each other. So I think we've got real clarity on who our strategic partners are, and I would say, as we talk to those strategic partners, and frankly, you've heard from a number of them, those that are public, they're really bullish on the brand. So that's kind of what we see from a consumer lens.

Speaker Change: With too much inventory kind of competing against each other.

Speaker Change: I think we've got real clarity on who our strategic partners.

Speaker Change: And I would say as we talk to those strategic partners.

Speaker Change: Frankly, you've heard from a number of them those that are public that really bullish on the brand.

Speaker Change: So that's kind of what we see from a consumer lens I think the second piece I would say that drives trajectory for the business is before I hand, it over to Ann is that outlet business right. So we opened up those five outlet stores.

Andrew Rees: I think the second piece I'd say that drives the trajectory for the business is, before I hand it over to Ann, is that outlet business, right? So we opened up those five outlet stores in the back end of last year. We're very pleased with the performance of those stores, and we'll open more this year.

Ann: And the back end of last year, we're very pleased with the performance of those stores and the local more of the ship and as you go through the year, the cumulative revenues and profit.

Andrew Rees: And as you go through the year, the cumulative revenues and profit that you get from those stores are substantial, and we'll continue to build that business in the future. And the sort of benchmark we gave you to kind of get your head around it was that the retail business for Crocs North America is about a third of the total business. So it's very substantial, and we think that exists for HeyDo too.

Ann: You get from those stores is substantial and we will continue to build that business in the future and the.

Ann: Sort of benchmark, we gave you just kind of get.

Ann: Head around it was.

Ann: The retail business for Crocs, North America, it's about a third of the total business. So it is very substantial and we think that exist for 82.

Anne Mehlman: Yeah, and Tom, just to give you a little context on the shape and in a little bit more detail, so embedded in our full year guidance of flat to slightly up for Hey Dude, we are assuming that wholesale right now is down to the year in our guidance, although we do assume it improves every quarter throughout just as we look at the trajectory. In Q1, we would expect a similar channel dynamic to what we saw in Q4, and then we really start to see the benefits of retail contribution start to impact us in Q2 and beyond. So, I would say 24 is really about, from a wholesale perspective, focusing on sellout, as Andrew mentioned, making sure we have the right inventory in the market, and letting that really be a pull market and wholesale revenue will be what it is, and that's incorporated into our guidance, quick follow up on on Hey, dude, just where I'm sorry if you mentioned, If I had missed it, but where are we at in terms of cleaning up the gray market?

Speaker Change: Yeah, and Tom just to give you a little context on shape and a little bit more detail. So embedded in our full year guidance of flat to slightly up for Hey, Dude. We are assuming that wholesale right now is down for the year and our guidance although.

Speaker Change: Although we do assume it improves every quarter drop just as we look at the trajectory.

Speaker Change: In Q1, we would expect a similar channel dynamics to what we saw in Q4, and then we really start to see the benefit of retail contribution to start to impact us in Q2 and beyond so I would say 24, its really about from a wholesale perspective, focusing on sell out as Andrew mentioned, making sure we have the right inventory in the market and letting that.

Speaker Change: Really be pulp market and and wholesale revenue will be what it is and that's incorporated into our guidance.

Speaker Change: And a quick follow up on.

Speaker Change: Just we're sorry, if you mentioned this during the prepared remarks.

Speaker Change: If I missed it but where are we at in terms of cleaning up the gray market and.

Speaker Change: All of that.

Speaker Change: Yeah, I think we're making great progress, we see substantial dips in the gray market from sort of earlier than in 'twenty. Three we're not done yet we think it will take through.

Andrew Rees: Yeah, I think we're making great progress. Yeah, we see substantial dips in the gray market from sort of earlier in 23. We're not done yet. We think it will take, you know, through the first half of 24 to complete that. But certainly, solid progress. Thanks very much and best of luck.

Speaker Change: Through the first half of 'twenty four to complete that but certainly.

Speaker Change: Solid progress.

Speaker Change: Alright, thanks, very much and best of luck this year.

Jonathan Robert Komp: Thank you. The next question comes from Jonathan Komp of Baird. Please go ahead.

Speaker Change: Thank you Tim.

Speaker Change: The next question comes from Jonathan Komp of Baird. Please go ahead.

Jonathan Robert Komp: Yeah, good morning, thank you. I want to ask about Crocs North America. Could you just share your current thoughts on the health of the business? Any thoughts on the trajectory in 2024 here and maybe include that Jibbitz in your view there? I know you mentioned penetration increases for the year. And then just one separate question more for Anne.

Jonathan Robert Komp: Yeah. Good morning. Thank you I wanted to ask about Crocs North America could you just share your current thoughts on the health of the business any thoughts on the trajectory in 2024 here and maybe include without Gib its and in your view there I know you mentioned penetration increases for the year and then just.

Speaker Change: One separate question more for and as we think about the margin guidance for the year it looks like you're implying.

Andrew Rees: As we think about the margin guidance for the year, it looks like you're implying pretty significant SG&AB leverage for the Crocs brand. I want to just see if you can give any more color there, if that's the case, and further give detail on what's driving that.

Speaker Change: Pretty significant SG&A deleverage for the Crocs brand I wanted to see if you can give any more color. There. If that's the case and further give detail on what's driving that thank you.

Andrew Rees: Thank you. Yes, so I think the Crocs brand continues to be very well positioned in North America. Obviously, it's our largest business, and it is a scale business. We have, you know, substantial market share. We're well penetrated from a wholesale perspective, from a retail perspective, and from a digital perspective.

Speaker Change: Yes.

Speaker Change: So I think the crocs brand continues to be very well positioned in North America, obviously, its our largest business I know, there's a scale business, we have substantial market share and we're well penetrated.

Speaker Change: From a wholesale perspective from a retail perspective and from a digital perspective.

Andrew Rees: But we do see, we were very happy with the performance of the Crocs brand in the market in 23. We see, you know, we have very positive, I would say, indications of continued support from our wholesale partners. We have a strong pipeline of product innovation that we'll bring to market. We also have a strong pipeline of licensed products and collaborations that we'll bring to market during the year. In fact, I spent most of yesterday afternoon reviewing new products. I'm so super excited about that.

Speaker Change: But we do see.

Speaker Change: We were very happy with the performance of the cross brand in the market.

Speaker Change: 'twenty three.

Speaker Change: We see you know we are very positive I would say indications of continued support from our wholesale partners. We have a strong pipeline of product innovation that we'll bring to market. We have a strong pipeline of licensed product collaborations that will bring to market.

Speaker Change: During the year. If that's that was spent most of yesterday afternoon, reviewing new products. So super excited about that so I think the brand is well positioned.

Anne Mehlman: So, I think the brand is well positioned. I think it also does, and you rightly point out, we do think we have an incremental penetration opportunity for Jivits. We see the consumer dynamic with personalization being incredibly positive. As you saw in 23, it grew above the overall growth of the business and gained penetration. We think we see opportunities in the wholesale market where, you know, look, it is a more difficult product to display and sell in the wholesale market, but we have some creative solutions that we'll be testing and rolling out. We also are dramatically reducing the timelines for Jivits dramatically so that we can respond to, I would say, social trends much more quickly. So, we're super excited about using personalization to create ongoing consumer engagement.

Speaker Change: I think it also doesn't yet as you rightly called out we do think we have incremental.

Speaker Change: Penetration opportunity for Jabil.

Speaker Change: We see the consumer dynamic with personalization bidding credibly positive as you saw in 'twenty three it grew above the overall growth of the business and gained penetration.

Speaker Change: We see opportunities in the wholesale market, where you go look at it it is a difficult more difficult product to display and sell it and also market, but we have some creative solutions that we will be testing and rolling out.

Speaker Change: We also are bringing the timelines and prohibits dramatically. So that we can respond to I would say kind of social trends are much more quickly. So we're super excited about using personalization to create ongoing consumer engagement.

Speaker Change: Yeah, and just as a reminder, that North America in 2020 through grew.

Anne Mehlman: Yeah, and just as a reminder that North America in 2020 grew, you know, 8.3% on a constant currency basis and 3% in Q4. So pretty good results out of the North America scale Crocs business. I think from an SG&A perspective, as we talked about at ICR, we are going to invest some of our margin improvements in SG&A this year. We think it's really important, and that goes for both brands.

Speaker Change: Eight 3% on a constant currency basis, and 3% in Q4, so pretty good results out of the North America scale Cross business I think from an SG&A perspective, as we talked about at ICR.

Speaker Change: We are going to invest some of our margin improvement and SG&A. This year, we think it's really important and that goes for both brands.

Anne Mehlman: Just to give you context, we do expect higher SG&A dollar growth in the first half versus the second half because we're still anniversarying some larger investments in both brands that we made in 2023. So SG&A growth is up, you know, mid-20% in both Q1 and Q2, so just something to keep in mind. And while we're not going to guide, you know, specifically from a both-brand perspective on investments, the investments that we're making across the board are really on the marketing side.

Speaker Change: Just to give you context, we do expect higher SG&A dollar growth in the first half versus the second half because we're still anniversarying some larger investment on both brands that we made in 2023.

Speaker Change: So SG&A growth was up mid 20% in both Q1 and Q2, so just something to keep in mind and I mean, we're not going to guide.

Speaker Change: Specifically from a both brand perspective on.

Speaker Change: And then the investments that we're making across the board are really on the marketing side, Kelly and golf brand on crop, it's really focused on our international markets, which we expect to drive the growth. This year and then on Hey Dude.

Anne Mehlman: Talent in both brands. Crocs is really focused on our international markets, which we expect to drive growth this year. And then on Hey Dude, some of that is related to our outlet store investment. And that's the biggest piece. And then some technology associated with both brands. Okay, thanks again.

Speaker Change: That is related to our outlet store investment now.

Speaker Change: The biggest pieces and then some technology.

Speaker Change: As you did with both brands.

Speaker Change: Okay. Thanks again.

Rick Patel: Thanks, John. The next question comes from Rick Patel of Raymond James. Please go ahead. Good morning, everyone.

Speaker Change: Thanks, John.

Speaker Change: Yeah.

Speaker Change: Next question comes from Rick Patel of Raymond James. Please go ahead.

Rick Patel: Good morning, everyone. Congrats Dan on the new role and all the best and Michelle.

Andrew Rees: Congratulations to Anne on her new role and all the best to Michelle on your new chapter. Just wanted to ask a question about the long-term potential for growth. So with total revenues being guided up 3 to 5 percent here, how should we think about the potential to hit $5 billion in revenue by 2026? Just hoping you could add some color on the building blocks there.

Rick Patel: On your new chapter.

Rick Patel: Wanted to ask a question about the long term potential for growth so with total revenues being guided up 3% to 5% here how should we think about the potential to hit $5 billion of revenue by 2026, just hoping you could add some color on the building blocks there.

Speaker Change: Thanks Brooks.

Rick Patel: Thanks, Rick. And I assume you're referring to the five billion for Crocs that we guided some years ago. Right. Yeah, okay.

Speaker Change: And I assume youre, referring to the $5 billion for crocs that we guided.

Speaker Change: Some years ago.

Correct.

Brooks: Yeah, Okay. So, yes I think.

Andrew Rees: So, yeah, because, you know, a number of years ago, we guided, we thought that Crocs could be a $5 billion brand. And I think at that point, we said, we thought that could happen by 2026. I think where we are today is, you know, we absolutely still firmly believe that Crocs is a scale business, the Crocs brand, and can easily be $5 billion. And we look at the pillars that we're using to drive that growth, which are Asia, digital, cog, sandals, and personalization. And we see really kind of solid progress against all of those pillars. In fact, I would say more than solid progress; we've seen sort of incredible progress over the last several years against those pillars.

Brooks: So a number of years ago, we guided we thought the crops can be a $5 billion brand and I think at that point, we said, we thought that could happen by 2026.

Brooks: I think where we are today is we absolutely still firmly believe the crocs is a scale business. The crocs brand and can easily be $5 billion and we look at the the pillars that we're using to drive that growth, which is Asia digital Cogs sandals, and personalization and we see really kind of solid progress against all of those pill.

Brooks: I think what I've said more than solid progress we've seen in sort of incredible progress over the last several years against those pellets.

Andrew Rees: I think quite a few things have changed since we provided that guidance around the global supply chain. We had to pull back out of Russia because of all the issues that you're well aware of. And frankly, currency as well cost us about $200 million in top line. So I don't think that it's realistic to achieve $5 billion by 2026. But we're really focused on driving continued growth in a profitable and sustainable way. And probably take a little bit longer.

Brooks: I'd say quite a few things have changed since we provided that guidance in around our global supply chain.

Brooks: We had to pull back out of Russia because of all the issues.

Brooks: Well aware of and frankly currency as well cost is about $200 million in topline.

Brooks: I don't think that it's realistic to achieve the $5 billion by 2026.

Brooks: And so we're really focused on driving continued growth in a profitable and sustainable way and probably take a little bit longer, but I think it's still drives incredible shareholder returns and value creation for shareholders and in terms of in terms of operating margins. This will be the first.

Andrew Rees: But I think it still drives incredible shareholder returns and value creation for shareholders. And in terms of operating margins, this will be the first year I think we're deviating from, or we're projecting to deviate from, the 26%. We still think the operating margins for our company are in the mid 20s, but it will not be every single year above the 26% mark.

Brooks: I think with deviating from the old projected to deviate from the 26%.

Brooks: We still think the operating margins for our company are in the mid twenties.

Brooks: But we will not be every single year above the 26% Mark.

Abby Zugenics: We think it's very prudent to invest incremental dollars from time to time to create the capabilities that allow us to grow in the future. Hopefully, it gives you a perspective on the long term. Very helpful. Thank you. The next question comes from Abby Zugenics of Piper-Sandler. Please go ahead. Great, thanks for taking my question. Just on the Crocs brand, is there any color you can give on quarter-to-date trends

Brooks: It is very prudent.

Brooks: To invest incremental dollars from time to time.

Brooks: To create the capabilities allow us to grow in the future.

Brooks: So hopefully that gives you a perspective on the long term.

Speaker Change: Very helpful. Thank you.

Brooks: Yeah.

Abbvie: The next question comes from Abbvie is the <unk> of Piper Sandler. Please go ahead.

Abbvie: Great. Thanks for taking my question I'm just on the Crocs brand are there is there any color you can give on quarter to date trends and you know the crocs thing being guided to 6% to 8% versus you know 4% to 6% for the year. What are you seeing that gives you confidence in that number and it does that assume just a continuation of trends that you're seeing so far.

Andrew Rees: And, you know, the Crocs brand being guided to six to eight percent versus, you know, four to six percent for the year. What are you seeing that gives you confidence in that number? And, you know, does that assume just a continuation of the trends that you're seeing so far? Is there any improvement, you know, contemplated in getting to that six to eight percent for the quarter? Yeah, I think I'll let you get a bit of the brand color and give you some of the more specifics.

Abbvie: Is there any improvement.

Speaker Change: Yeah contemplated in getting to that 6% to 8% for the quarter.

Speaker Change: Yeah, I think I'll, let me, obviously be kind of a bit of a.

Speaker Change: Brian color and can give you some of the more specifics.

Andrew Rees: I would say it's a continuation of the trends from last year, basically. We see, you know; we don't give a lot of in-quarter color. But if you think about some of the big drivers that have really been propelling the brand, so Asia and international growth have been super important. We see clog growth, sour growth, and gibbets growth from a product perspective as important. And as you know, we have visibility into bookings, so we feel real confident around our wholesale bookings. And we see, you know, we see solid sellout for the brand. So I'd say it's mostly a continuation.

Speaker Change: I would say, it's a continuation of the trends from last year basically.

Speaker Change: We see.

Speaker Change: Don't give a lot of ins in quarter color.

Speaker Change: But if you think about some of the big drivers that have really been propelling the brand So Asia and our international growth has been super important.

Speaker Change: We see cloud growth solid growth and <unk> growth from a product perspective important and.

Speaker Change: And as you and as you know we have visibility to bookings so we feel real confident around our wholesale bookings.

Speaker Change: And we see.

We see solid sellout for the brands, so I'd say continuation mostly.

Anne Mehlman: Yeah, and just, you know, January. We don't really comment on trends in our quarter, but you know, January is a very small piece of our overall quarter. When you think about it, that's pretty immaterial for us as a business.

Speaker Change: Yeah, and just January we don't really comment on trends in our corner, but January is a very small piece of our overall quarter.

Speaker Change: When you think that it's pretty immaterial for us as a business.

Abby Zugenics: That's helpful. And just one follow-up, more of a housekeeping question. You know, since you've changed the reporting segments, is there any way you can tell us, kind of, what 4Q would have looked like under the old reporting segments? Thank you. Yeah, so we did change our reporting segments, so our new reporting segments are the HeiJu brand and Crocs brand, as we think that reflects how we should look at the business. As reported, North America grew 3% in Q4. International grew 25%, led by Asia-Pac, which was up 36%, and Amelia was up 16%.

Speaker Change: Got it that's helpful and just one follow up more of a housekeeping question. You know since you changed the reporting segments is there any way you can tell US you know kind of what for Q would have looked like under the old reporting segments. Thank you.

Speaker Change: Yeah. So we didn't change our reporting segments. So our new reporting segments are he do brand and cross brand as we think that reflects how we should look at the business and so as reported North America grew 3% in Q4 International grew 25% led by Asia Pac.

Speaker Change: Which was up 36% and Emilia was up 16%.

Anne Mehlman: For the year, operating profit dollars across all regions increased double digits versus the prior year, and the strongest growth came from Asia and Amelia. So this will be the last time that we'll give you the information as our segments have now changed, but that gives you a full year picture. Perfect. Thank you. Thank you, Abby.

For the year operating profit dollars across all regions increased double digits versus prior year and the strongest growth came from Asia and Amelia said this will be the last time, but we'll get the information as our statements about change, but that gives you some full year picture.

Speaker Change: Perfect. Thank you.

Amelia: Thank you Eddie.

Amelia: The next question comes from Jim Duffy of Stifel. Please go ahead.

Jim Duffy: The next question comes from Jim Duffy of CIFRL; please go ahead. Thank you. Good morning.

Jim Duffy: Thank you good morning, I. Appreciate you taking my question Hope you guys are doing well.

Jim Duffy: Appreciate you taking my question. Hope you guys are doing well. Two questions. First, can you speak to the outlets for international markets? Specifically, which are the markets you're excited about for 24? Certainly, China's on that list.

Jim Duffy: Two questions first can you speak to the outlook for international markets, specifically, which are the markets Youre excited about for 'twenty. Four certainly China is on that list are there others that you would highlight and likewise in the international landscape or the market do you expect to be more challenging.

Speaker Change: Yes absolute.

Andrew Rees: Are there others that you would highlight? And likewise, on the international landscape, are the markets you expect to be more challenging? Yes, absolutely, Jim. So I think, you know, let me start with the sort of highlights. China's probably top of the list, as you rightly pointed out.

Speaker Change: Absolutely Jim.

Speaker Change: So I think let me start with the sort of highlights China's probably top of the list as you rightly pointed out we've always kind of a multi year investment effort.

Speaker Change: And focus on China, I'm really thrilled that that's starting to pay off in.

Speaker Change: 2023.

Andrew Rees: We've had kind of a multi-year investment effort and focus on China. I'm really thrilled that that started to pay off in 2023 with triple-digit growth, so essentially doubling the business during that year from a top line perspective. Obviously, it improves dramatically from a bottom line perspective as well. But we're just getting started in China, right?

Speaker Change: The triple digit growth essentially doubling the business during that year from a top line perspective, obviously, it improves dramatically from a bottom line perspective as well.

Speaker Change: But we're just getting started in China right. So four.

Speaker Change: 4% of our overall revenues if you look at sort of.

Speaker Change: Although global brands, a benchmark of sort of greater China substantially higher than that maybe four to five times higher than that.

Andrew Rees: So 4% of our overall revenues. If you look at sort of other global brands, their benchmark for sort of greater China is substantially higher than that, maybe four to five times higher than that. So, secondly, we're seeing great trajectory in parts of Western Europe, particularly the UK. We're probably on a two to three-year, very strong growth trajectory in that market, and it's also an important market for influence across the European marketplace. We're seeing a strong trajectory in France also. Thirdly, South Korea has been a very steady growth driver for us, and I think I mentioned in my prepared remarks that, actually, when we isolate our countries around the world, it's our highest market share performance, even above the United States, but we've seen future opportunities, continued growth opportunities in South Korea. Australia has performed very strongly.

Speaker Change: So I would say second.

Speaker Change: Seeing great trajectory in parts of Western Europe, particularly the U K, we're probably on a two to three year very strong growth trajectory in that market.

Speaker Change: And it's also an important market for influenza Cros.

Speaker Change: The European.

Speaker Change: Marketplace, we're seeing a strong trajectory in in France and also.

Speaker Change: I would say thirdly.

Speaker Change: North Korea, sorry, South Korea has been a very steady growth driver for us.

Speaker Change: I mentioned in my prepared marks is actually when we isolate out countries around the world, It's our highest market share performance.

Speaker Change: Even above the United States, but we see future opportunities continued growth opportunities.

Speaker Change: In South Korea.

Speaker Change: Australia has performed very strongly.

Speaker Change: <unk> seen a real turnaround in the business there.

Andrew Rees: We've seen a real turnaround in the business there, and so those are probably the highlights. I think of the more challenging markets; Japan remains a slightly more challenging market. I think we're shifting our focus to that market because it is a large market, and we do anticipate growth in the future, but we've got some work to do. I think we're very, very optimistic about India in the long term, and we're putting substantial investments into that market, a little bit like we did around China, but there are a number of short-term issues around sourcing that are creating some headwinds in the very short term, but I think in the long term, India will be a big success.

Speaker Change: And so those are probably the highlights I think the the more challenging markets, Japan remains a slightly more challenging market I think where we are.

Speaker Change: We're shifting focused up market because it is a large market.

Speaker Change: And we do anticipate growth in the future, but we've got some work to do and I think.

Speaker Change: Very very optimistic about India in the long range, and we're putting substantial investments into that market a little bit like you did around China, but there are a number of kind of short term issues around sourcing that are creating some some I think some headwinds in the very short term, but I think in the long term and there will be a big success.

Andrew Rees: Very helpful. Thank you, Andrew. And soon you'll be above the fray on questions like this. But I do have a question on the tax rate outlook. It came in a little bit lower than I expected.

Speaker Change: Very helpful. Thank you Andrew.

Speaker Change: And soon you'll be above the fray on questions like this but I do have a question on the tax rate outlook.

Speaker Change: Yeah.

Andrew Rees: It came in a little bit lower than I expected is that reflective of geographic mix of the profit pools.

Anne Mehlman: Is that reflective of the geographic mix of the profit pools? I guess that what I'm after here is, do you view that as a structurally sustainable tax rate, or is there a one-time dynamic related to that? Yeah, thanks, Jim. Yes, I'm very excited to turn tracking back over to somebody else. But I think our tax rate, so at the end of Q4, we moved our HeyDude IP from Hong Kong, where we don't have operations, to Singapore and the Netherlands. And that created that one-time benefit of $112 million that we backed out for the purposes of adjusted EPS, so you could have a better idea of our true underlying tax rate for the current year. That does have underlying benefits for this year. So that's how we get to the 18%.

Speaker Change: Yes, I guess.

Speaker Change: What I'm after here is that a sustained.

Structurally sustainable tax rate or is there a one time dynamic related to that.

Speaker Change: Yeah.

Speaker Change: Thanks, Jim Yes, I'm I'm very excited to turn tracking over to tax tracking back to everybody else, but I.

Speaker Change: I think our tax rate and so at the end of Q4, we moved our he viewed it from Hong Kong, where we don't have operations to Singapore and Netherlands.

Speaker Change: That created that one time benefit of $112 million that we backed out for the purposes of adjusted EPS. So you can have a better idea of our true underlying tax rate for the current year that does have underlying benefits for this year. So that's how we get to the 18%. So it reflects some geographical mix, but also just the restructure in our in our tax structure.

Anne Mehlman: So it reflects some geographical mix but also just the restructuring in our tax structure. Right now, we're saying we think 18% is right for this year. I would still use 20% long-term until we have a better picture going forward. Thank you. Thank you. The next question comes from Chris Nardone of Bank of America. Please go ahead. Great, thank you. Good morning.

Speaker Change: Now, we're saying we think 18% is right for this year I would still use 20%.

Speaker Change: Long term until we have a better picture going forward.

Speaker Change: Okay.

Speaker Change: Helpful. Thank you.

Speaker Change: Yeah.

Speaker Change: The next question comes from Chris <unk> of Bank of America. Please go ahead.

Chris: Great. Thank you good morning.

Chris Nardone: Can you talk about the underlying assumptions in your outlook for relatively stable gross margins for your core Crocs business this year? I'm just trying to understand what would be holding that back from expanding on the mid single-digit growth. And if margins do come in better, are you expecting to spend against that strength, or will you allow some level of flow through to the bottom line this year? Yeah, thanks. That's a great question.

Chris: Can you talk about the underlying assumptions in your outlook for the relatively stable gross margins for your core crocs business. This year I'm, just trying to understand what would be holding that back from expanding on the mid single digit growth and if margins do come in better or are you expecting to spend against that strength or where you allow some level of flow through to the bottom.

Chris: <unk> this year.

Speaker Change: Yeah. Thanks, that's a great question. So obviously, we were really pleased with our crosscurrents margins.

Anne Mehlman: So obviously, we're really pleased with our crossroads margins. You know, for the year, they expanded nicely after what was a tougher 2022 on some, you know, we had some significant freight tailwinds. We think that's pretty normalized at this point.

Speaker Change: For the year, they see and Ed.

Speaker Change: Isaly after what was a tougher 2021.

Speaker Change: We had some significant freight tailwind, we think that's pretty normalized.

Speaker Change: At this point so we think that just given all the puts and takes there you know you've got currency you've got freight you've got next from a channel perspective pricing and product mix, we think that you know.

Anne Mehlman: So we think that, given all of the puts and takes, so you know, you've got currency, you've got freight, you've got mix from a channel perspective, pricing, and product mix, we think that about where we were last year is a fairly good place to be. So on revenue growth, that's not necessarily where we tend to see margin expansion on revenue growth is your operating margin because you leverage your SG&A. This year, we've made the conscious decision to take those dollars and really invest, as Andrew talked about; we're investing in India and some of our other international markets, as well as talent, and really focused on that long-term sustainable growth. You know, if we can, if we exceed what we said, if we have, you know, good investments, we will make the call whether we should, you know, continue to invest for the long term or let that flow through to the operating margin. I got it.

Speaker Change: That about where we were last year as a fairly good place to be so on revenue growth, that's not necessarily where we tend to see margin expansion on revenue growth as your operating margin because you leverage your SG&A. This year, we've made the conscious decision to take take those dollars and really invest as Andrew talked about we're investing in it.

Speaker Change: India and some of our other international markets as well as talent and really focused on that long term sustainable growth.

Speaker Change: If we exceed what we said if we have you know good investments, we will make the call whether we should continue to invest for the long time, alright, let that flow through to.

Speaker Change: Operating margin perspective.

Speaker Change: Got it that's very helpful. And then just as a quick follow up can you provide an assessment of how the Red Sea disruption is impacting your business today and just trying to gauge what you're underwriting for freight rates. This year and your initial full year margin outlook.

Anne Mehlman: That's very helpful. And then, just as a quick follow-up, can you provide an assessment of how the Red Sea disruption is impacting your business today? And just trying to gauge what you're underwriting for freight rates this year in your initial full-year margin outlook? Yeah, so right now from a Red Sea perspective, we're really seeing an impact, you know, from our, mostly our Mia business at this point; we're seeing a couple weeks delay. Overall, from a shipping time perspective, we haven't seen a material change in our freight rates at this point.

Speaker Change: Yeah, So right now from a rent perspective, we're really seeing an impact from.

Speaker Change: Mostly our EMEA business at this point, we're seeing a couple of weeks delay.

Speaker Change: Overall from a shipping time perspective, we haven't seen a material change to our freight rates at this point and so I would say.

I don't know what's going to happen. This year, obviously, we don't know how this is going to play out but at this point, it's not it's.

Anne Mehlman: So I would say, you know, I don't know what's going to happen this year. Obviously, we don't know how this is going to play out. But at this point, it's not, it hasn't had a material impact.

It's not been a material impact to our defense.

Speaker Change: The next question comes from Jeff Flick of B Riley financial Please go ahead.

Jeff Flick: Thanks for taking my question and I would extend my congratulations incredibly well deserved promotion and increase in rural.

Jeff Lick: The next question comes from Jeff Lick of B. Reilly Financial. Please go ahead. Thanks for taking my question. And Anne, I'd extend my congratulations on your incredibly well-deserved promotion and increase in role. Andrew, I was wondering if you could take a step back and look at 2019 as a starting point where North America was 640 million for the Crocs brand and international was 590.

Jeff Flick: Andrew I was wondering if you take a step back and look at 2019 as a starting point, where in North America was $640 million at the Crocs brand and international was $5 90.

Jeff Flick: Obviously, there's way more people internationally then.

Speaker Change: In the U S and I think theres, an argument to be made that the crocs brand might even resonate a little better with certain countries in populations in the U S. So I'm just wondering if all the things that you had done leading up to the pandemic customization social influencing the speed to market with distribution.

Andrew Rees: You know, obviously, there are way more people internationally than in the U.S., and I think there's an argument to be made that the Crocs brand might even resonate a little better with certain countries and populations than in the U.S. So I'm just wondering if, you know, all the things that you had done leading up to the pandemic, you know, customization, social influencing, you know, speed to market with distribution, obviously, you did that in the U.S. first. If you use the U.S. as a kind of a leading indicator, I'm wondering kind of where you are, like what you're seeing internationally, and do you disagree that international growth should be at least as big if not bigger than the U.S., and then I guess you know the critics might say, well, the U.S. is going to come back. That obviously hasn't happened.

Speaker Change: Obviously, you did that in the U S first.

Speaker Change: If you use the U S as a kind of a leading indicator.

I'm wondering kind of where where you're at like what you're seeing internationally and do would you disagree that.

Speaker Change: International should be at least as big if not bigger than the U S. And then I guess.

Speaker Change: The critics might say well Gee the U S is going to come back.

Speaker Change: It obviously hasn't happened I was wondering if you could speak to like what people are missing yes.

Speaker Change: If anything the U S has accelerated just the dynamics between the U S and international what's your what you could give us there.

Andrew Rees: I was wondering if you could speak to what people are missing as to, you know, if anything, the U.S. has accelerated, you know, just the dynamics between the U.S. and international, what you could give us there. Okay, yeah, I think, like, honestly, Jeff, I think it's a great way of thinking about it, right? So, you know, just to sort of paint the picture for everybody, you know, what we saw, the Crocs brand really started to take off in the US marketplace, sort of late 18 into 19, and then grew dramatically through the pandemic. I think, you know, a lot of people outside of the company kind of put that down to, well, that was the pandemic, and people were happy to wear Crocs at home, but they're not happy to wear Crocs when they're back out in the real world, right?

Speaker Change: Okay, Yeah, I think I'm.

Speaker Change: Okay.

Speaker Change: Honestly, Jeff and he is a great way of thinking about it right. So you know just sort of paint the picture for everybody. What we saw the crocs brand really starting to inflect in the U S market place sort of late 18 into 19, and then that grew dramatically through the pandemic I think you know a lot of people.

Speaker Change: Outside of the company how to put that down to well that was the pandemic people will happy to whack crocs at home, but they're not happy to work cross when that back out in the real world right. So.

Speaker Change: I think at this point hopefully.

Speaker Change: That has proven to be incorrect in that people are happy and excited to wet crops out in the real world and I think what's happening. There is we're engaging into consumer we're excited in the consumer with innovative new products with a high comfort product with a high value product.

Andrew Rees: So, I think at this point, hopefully, that has proven to be incorrect, in that, you know, people are happy and excited to wear Crocs out in the real world. And I think what's happening there is we're engaging the consumer, we're exciting the consumer with innovative new products, with a high comfort product, with a high value product, with a product that can be personalized in many different ways. And it's pretty exciting, and the customer is engaged in it. So, that's grown that business dramatically. We've seen that trajectory repeated in a number of our international markets. And so, if we look at, you know, markets like the UK, we're probably in our third year of very accelerated growth.

Speaker Change: With a product that can be personalized and many different ways.

Speaker Change: And it's pretty exciting and the customers engaged in it so thats grown that business dramatically.

Speaker Change: We've seen that trajectory repeated in a number of our international markets.

Speaker Change: So we look at.

Speaker Change: Markets like the U K.

Speaker Change: Our third year of <unk>.

Speaker Change: Very accelerated growth so we're seeing that trajectory play out.

Speaker Change: So.

Speaker Change: And then as I highlighted in the earlier question and in our prepared remarks.

Andrew Rees: So, we're seeing that trajectory play out. And then, as I highlighted in an earlier question and in our prepared remarks, we actually have the highest market share in the Korean marketplace as of today. So, even above the US. So, that's to your point around. There might be some places in the world where the Crocs brand actually resonates even better than in the US. Easy on and off being a kind of key component there, where culturally there are many markets where people take their shoes off when they go into a building or go into somebody's home.

Speaker Change: We actually have the highest market share in the in the career marketplace as of today.

Speaker Change: So even above the U S. So that's to your point around there might be some places in the world, where the cross brand actually resonates even better than in the U S easy on and off in a kind of key component that were culturally there are many buckets, where people take their shoes off when they go into a building will go into somebody's home. So.

Speaker Change: I think that's a viable thesis.

Guiding the international business just to be clear then to be bigger than the U S business I mean, I think when we did a $5 billion plan, we were pretty clear.

Andrew Rees: So, I think that's a viable thesis. We're not guiding the international business, just to be clear, to be bigger than the U.S. business. I mean, I think when we did our $5 billion plan, we were pretty clear that a lot of our growth would come out of Asia and that international would be super important. And you've seen that in the last six quarters, the international business has grown very strongly.

Speaker Change: A lot of our growth will come out of Asia, and the international will be super important and you've seen that in the last.

Speaker Change: Six quarters in the international business is growing very strongly so.

Speaker Change: We.

Speaker Change: We can cut.

Speaker Change: Okay.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Speaker Change: The next question comes from Sam Poser of Williams trading. Please go ahead.

Andrew Rees: So we concur. Okay, thank you. The next question comes from Sam Poser of Williams Trading. Please go ahead. Good morning. Thank you for taking my questions. I have two for Anne.

Sam Poser: Morning. Thank you for taking my questions I have two for and I want can you talk about the evolving demand planning, especially.

Sam Poser: I want you to talk about the evolving demand planning, especially with the Hey Dude brand, in order to get to the pull model that you're working towards and how that is working within the Crocs brand and how you and your new role intend to make that work further. And then, Andrew, you talked about it in the prepared remarks about promoting Anne to this position. Could you, you know, could you just expand on, you know, why she is. You went through a long process here. It wasn't quick, from what I gathered.

Sam Poser: With the Hey, Dude brand in order to get to the pull model that that youre working towards and how that is working within the crocs brand and how you in your new role.

Sam Poser: Tend to make that were further work and then.

Sam Poser: Four.

Sam Poser: Andrew Andrew you talked about it in the prepared remarks about promoting and to this position.

Speaker Change: Could you could you just expand on why she is.

Andrew Rees: Went through a long process here it wasn't quick from what I gathered but can you sort of go into sort of some more nuanced.

Sam Poser: But can you sort of go into sort of some more nuance? A discussion of why she ended up being the best person for the job, in your view. Thanks. Do you mean other than she's awesome?

Andrew Rees: Discussion of why she.

Andrew Rees: Ended up being the best person for the job and in your view.

Speaker Change: You mean other than she is awesome.

Andrew Rees: Thank you, Andrew. All right. I'll let Anne answer the first question. Andrew's thinking of a good answer for you, Sam, no, I'm kidding.

Speaker Change: [laughter].

Speaker Change: [laughter].

Speaker Change: Thank you Andrew Alright.

Speaker Change: I'll, let I'll, let I'll answer the first question Andrew thinking of you have a good answer for you Sam I'm, just kind of getting up so yeah. So on the demand planning price.

Anne Mehlman: So yeah, so on the demand planning front, so for both HeyDude and for McCracken's perspective, you know, we have key account planning, we look very thoughtfully at our big accounts, and we plan strategically for what sellout is, and then that obviously drives sell-in. As we talked about on HeyDude, a couple of the key differences we were making, and remember when we bought HeyDude, you know, we didn't really have the infrastructure in place. So these are new tools and skills that we're implementing. We worked really hard to do that last year.

Speaker Change: Okay.

Speaker Change: And from a cost perspective.

Speaker Change: We have key account planning, we looked very thoughtfully at our big accounts and we plan strategically.

Speaker Change: You know what sell out is and then that obviously drive sell in and we as we talked about and he did a couple of the key differences, we are making and remember when we bought <unk>. We didn't really have the infrastructure in place. So these are new tools and Gil that we're implementing we worked really hard to do that last year.

Speaker Change: So we're also looking at making sure that that as Andrew mentioned that we have the right product in the right accounts and.

Andrew Rees: So we're also looking at making sure that, as Andrew mentioned, we have the right product in the right account and that we're thoughtful about, you know, feeding product in the right place and also, you know, depth and where we put things. So we're really focused on, as you mentioned, letting it be a pull model, and, you know, if we are a little bit short on some things, and it sells out fast, then that's great, and that's, you know, more demand for next year. So that's kind of how we're thinking about it; that's how we think about it existing on the Crock side. Great So your second question, look, I mean, my flippant answer is important, right? Like, we have great confidence in Anne, both her knowledge of the business, her commercial acumen, her understanding of some of the consumer trends, you know, beyond her abilities as a CFO. So that's why it's important. I would say, you know, this transition is part of the succession plan planning that we've been doing for some time. We do it for all of our senior leaders.

Speaker Change: And that we're thoughtful about seating.

Speaker Change: Seating product in the right place and also you know gaps and where we put things. So we're really focused on as you mentioned letting.

Speaker Change: Be a pull model and if we are a little bit short on some things and it fills out. That's then that's great and that's you know more demand for next year. So that's kind of how we're thinking about it that's how we think about it existing on the crop side.

Speaker Change: Right. So your second question. So look I mean, my flippant answer is important right like we have great confidence in.

Speaker Change: And on both our knowledge of the business and commercial acumen.

Speaker Change: Our understanding of kind of the consumer trends beyond Uh huh.

Speaker Change: Abilities and the CFO so.

Speaker Change: That's important I would say this transition as part of the succession plan planning that we've been doing.

Speaker Change: For some time, we do it for all of our senior leaders, we do that in conjunction with the board as you would expect.

Speaker Change: You know we have a very thorough process around this so.

Andrew Rees: We do that in conjunction with the board, as you'd expect. And, you know, we have a very thorough process around this. So it's definitely something we take very seriously. And we think this is, you know, this. Michelle is retiring, and we wish her well. I mean, she's done an amazing job.

Speaker Change: It's definitely something we take very seriously and we think this is a you know listen this michelle.

Speaker Change: Is retiring and we wish I wish them well I mean, she has done an amazing job.

Speaker Change: And as I also said in my prepared remarks, she has been doing this in the footwear industry for a long time and it has some other things that she would like to like to spend a bit more time doing so I think it's a very natural transition and a very well planned.

Andrew Rees: And as I also said in my prepared remarks, you know, she's been doing this in the footwear industry for a long time and has some other things that she would like to spend a bit more time doing. So I think it's a very natural transition and very well planned. Thanks.

Speaker Change: Thanks, So as I have a quick follow up for Ann.

Speaker Change:

Speaker Change: It was to somebody else's question about comfort that the <unk> business would grow in the back half of the year how much of the.

Ann: The sort of the way this looks like it's going to flow is retailers and you overreacted put too much product into the marketplace at the beginning of last year, given sort of the way.

Sam Poser: It was to somebody else's question about, you know, comfort that the hey dude business would grow in the back half of the year. How much of the, the sort of way this looks like it's going to flow is retailers and you overreacted, put too much product into the marketplace at the beginning of last year, given sort of the way things were in the middle of this year when they were writing spring, retailers probably overreacted and may not have written enough, and now they're sort of seeing what's going on. And then that's starting to normalize as the orders move throughout the year. Am I thinking about that correctly? I think, mostly Sam.

Ann: Things were in the middle of this year when they were writing spring retailers over probably overreacted and may not have written enough and now they are sort of seeing what's going on and that's starting to normalize as the orders move throughout the year am I thinking about that correctly.

Speaker Change: I think mostly south yes, that's mostly.

Speaker Change: Very thoughtful.

Speaker Change: Understanding of the market place.

Speaker Change: Thanks, very much good luck.

Anne Mehlman: Yeah, that's mostly a very thoughtful understanding of the marketplace. Thanks very much. Good luck.

Speaker Change: Tim.

The next question comes from Abra P&L of BNP Paribas. Please go ahead.

Samuel Marc Poser: Hey, good morning, Thanks for taking the question.

Samuel Marc Poser: I wanted to follow up on crops in North America, you mentioned changing the distribution model with Amazon.

Aubrey Tionnello: Thank you. The next question comes from Aubrey Tionnello of BNP Paribas. Please go ahead. Hey, good morning.

Abra: Can you maybe give a little more detail on what's changing how those changes flow through the P&L and also what the timeframe is for that.

Aubrey Tionnello: Thanks for taking the question. I wanted to follow up on Crocs North America. You mentioned changing the distribution model with Amazon. Could you maybe give a little more detail on what's changing, how those changes flow to the P&L, and also what the timeframe is for that? Yeah, yeah, great question.

Speaker Change: Yeah, Yeah, Great question, so as we talked about in our third call I think taking a step back really at the highest level globally. We are trying to have more brand control and global marketplaces, where our brand is also we talked about marketplaces. That's on a digital front and those may be Amazon or others.

Anne Mehlman: So as we talked about in our third call, I think, you know, taking a step back really at the highest level globally, we are trying to have more brand control and global marketplaces where our brand is sold. So we talked about marketplaces that are on a digital front and those, you know, maybe Amazon or others. And so the best way to do that is for us to sell directly to the consumer on those marketplaces. So it's a direct sale versus a wholesale sale. So, you know, the dynamics of how it flows through the P&L, you know, it's a higher gross margin, higher SG&A, higher revenue, but it's really not, that's not the focus point.

Speaker Change: And so the best way to do that is for us to sell directly to the consumer on those marketplaces.

Speaker Change: So it is a direct to consumer sale versus a wholesale sale. So you know.

Speaker Change: The dynamics of how it flows through the P&L, it's a higher gross margin higher SG&A higher revenue, but it's really not that's not the focus point. The focus is just controlling our brand and how consumers how it shows up to the consumer and making sure that we provide a consistent and best experience for our consumer I would say you know this distribution model.

Speaker Change: It's been performing in line with our expectations. These changes.

Speaker Change: So we will expect to continue.

Anne Mehlman: The focus is just controlling our brand and how consumers perceive it, how it shows up to the consumer, and making sure that we provide a consistent and best experience for our consumer. I would say, you know, this distribution model has been performing in line with our expectations and these changes. And so, you know, we will expect to continue down the path that. This concludes our question and answer session. I would like to turn the conference back over to Andrew Rees for any closing remarks. Thank you. I just wanted to express our, you know, sincere appreciation for everybody joining us today and their interest in our company. So thank you so much and have a great day. The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect. BF-WATCH TV 2021, The Ultimate Parody Site!

Speaker Change: In the past this year.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Andrew Rees for any closing remarks.

Thank you I just wanted to express our sincere appreciation for everybody.

Andrew Rees: Joining us today and their interest in our company. So thank you so much and have a great day.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].