Q1 2025 Crocs Inc Earnings Call

May 8, 2025

Susan Rees, Susan Healy, Erinn Murphy

Speaker Change: Good day and welcome to the Crocs Inc. 1st quarter, 2025, Ernie's conference call.

All participants will be in listen only mode.

Speaker Change: Should you need assistance, please signalling conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star than one on your telephone keypad. So with joy to answer your question, please press star than two.

Please note this event is being recorded.

Erinn Murphy: I would now like to turn the conference over to Erinn Murphy.

Senior Vice President, Investor Relations, and Strategy for Crocs

Please go ahead.

Speaker Change: Good morning, and thank you for joining us to discuss Crocs Inc. First Quarter results. With me today are Andrew Rees, Chief Executive Officer, and Susan Healy, Chief Financial Officer. Follow their prepare remarks, we will open the call for your questions, which we ask you to limit to one per caller.

Speaker Change: Before we begin, I would like to remind you that some of the information provided on this call is forward looking, and accordingly is subject to the safe harbor provisions of the Federal Security's laws.

Speaker Change: These statements involve known in unknown risks, uncertainties, and other factors which may cause our actual results, performance or achievements to differ materially.

Speaker Change: Please refer to our most recent annual report on Form 10K, quarterly report on Form 10Q, and other reports filed with the SEC for more information on these risks and uncertainties.

Speaker Change: Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures . A reconciliation of these amounts to their gap counterparts is contained in the press release we issued earlier this morning.

Speaker Change: All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I will turn the call over to Andrew Rees, Crocs Inc. Chief Executive Officer.

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

Andrew Rees: We're incredibly pleased with the performance we delivered during the first quarter, despite what has been an increasingly volatile macroeconomic backdrop since the start of the year.

Andrew Rees: At the enterprise level, revenues of 937 million grew 1% to prior year, and came in ahead of our guidance, which called for a revenue decline of approximately 1.5% on a constant

Importantly, both of our brands contributed to this out performance.

Andrew Rees: Crocs brand revenues of $762 million grew 4% to prior year, led by double digit growth in international and the North American business performed a head of plan.

Andrew Rees: Pagered revenues of 176 million down 10% prior, including direct to consumer growth of 8% an acceleration from the fourth quarter.

Andrew Rees: Enterprise-adjusted gross margins of 57.8% gain 180 basis points to prior year

Andrew Rees: Adjusted operating margins of 23.8% came in more than 200 basis points above our guidance.

Andrew Rees: While we continue to make strategic investments to extend our competitive advantages in the future.

Andrew Rees: All-in, we deliver $3 in adjusted diluted earnings push-ass, nearly 20% above the high end of our guidance range.

Andrew Rees: During the quarter, we repurchased 607,000 shares, while at the same time, we remained well within our net leverage range of between one and one and a half times at quarter-ent.

Andrew Rees: Before I share more insights from the quarter, I want to take a moment to discuss the dynamic landscape we're operating in. The actions we have taken to best position ourselves to win, despite evolving global trade policies and our resulting decisions to withdraw guidance.

Since joining Crocs over ten years ago, [inaudible]

I have witnessed some extraordinary times.

Andrew Rees: From charting our turnaround to the emergence of the Crocs brand as an icon of popular culture to the global COVID-19 pandemic where retailers shut at their doors for months.

Andrew Rees: To the acquisition of Hey Dude, and to today, when many companies are grappling with and trying to understand our new global trade environment.

Business and Consumer Uncertainty is extremely high.

Andrew Rees: However, we're being prudent in the face of this uncertainty and are focused on what we can control.

Andrew Rees: Leaning into a clear competitive advantages and applying an agile mindset to how we adapt.

Andrew Rees: Since we last reported mid-February, the US has implemented a series of incremental tariffs on countries where we source our product

Andrew Rees: In addition, the daily uncertainty as to the level of these tariffs makes it incredibly hard to plan and predict both short and long-term impacts to our business.

Andrew Rees: As we sit here today, we have a world diversified sourcing mix [inaudible]

Andrew Rees: To provide some context, our anticipated sourcing mix into the US in 2025.

Andrew Rees: Stands at approximately 47% from Vietnam, 17% from Indonesia, 13% each for China and India, and 5% each for Mexico and Cambodia.

Andrew Rees: We are mindful that we're in the midst of a 90-day pause from certain reciprocal tariffs which could further escalate and the impact on our sourcing in the country's previously mentioned.

Andrew Rees: One of the primary reasons we've suspended guidance for 2025 is our ability to predict the financial impact of future tariffs.

Andrew Rees: To provide you with a framework, if we assume 10% incremental tariff on all sourcing destinations into the U.S., this would translate to a cost of approximately $45 million on an annualized cash basis.

Andrew Rees: If the incremental 145% tariff on China remains in place, along with the 10% on all other

Andrew Rees: This would imply a cost of approximately $130 million on an analyzed cash basis based on a current sourcing mix.

Andrew Rees: Given the broad range of outcomes that we're facing as a company and as an industry, we're focused on what we can control and on driving long-term value for our brands.

Andrew Rees: In light of the current macro-economic environment, we have taken swift action to proactively reduce our cost space [inaudible]

Andrew Rees: Since we last reported, we've identified approximately $50 million of additional savings to be realized in 2025.

Andrew Rees: And we are continuing to evaluate potential actions for future savings as well as closely managing our inventory levels.

Speaker Change: Thank you for watching. Please subscribe to my channel. I hope to see you again soon. Until then, take care.

Susan Rees, Susan Healy, Erinn Murphy

Speaker Change: While we are encouraged by the performance of our overall business in April , it is challenging to predict how consumers may respond to prolonged uncertainty.

Speaker Change: It is possible that in the future we could see softer demand for footwear and other consumer goods, particularly given the potential for increased costs and higher prices across the industry that could further burden an already choiceful consumer

Susan Rees, Susan Healy, Erinn Murphy

Speaker Change: Despite withdrawing our guidance, one thing is certain. We believe our industry leading gross margins, low unit cost.

Speaker Change: Well-diversified supply chain, global business model, and strong free cash flow, position as well to take market share.

Speaker Change: We are and expect to continue to be very profitable while generating significant free cash flow. We're committed to being transparent with all of us fake holders as we navigate this current environment.

Now turn into the performance by brand, starting with Crocs

Speaker Change: First, we're continuing to drive global brand relevance to our icon and icon iterations in addition to introducing new club franchises.

Speaker Change: During the quarter, clock growth was led by our classic clock, in addition to growth within established franchises such as Echo, as well as new franchises, such as Emotion.

Operator: Good day and welcome to the Crocs, Inc. Q1 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. 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 Erinn Murphy, Senior Vice President, Investor Relations and Strategy for Crocs. Please go ahead.

Speaker Change: Hype Resonated Well with Notable Success in Asia, led by the classic platform, Bay and Crush.

Speaker Change: In China, the Bay, a hype variation of our club, was relaunched in partnership with Global Brand Ambassador and Chinese celebrity, T.J.C.

Speaker Change: This campaign delivered very strong engagement across our key social and digital channels and an influx of traffic to our stores.

Susan Rees, Susan Healy, Erinn Murphy

Andrew Rees: Second, we are making clear progress towards introducing product for new wearing occasions outside of clocks.

Erinn Murphy: Good morning, and thank you for joining us to discuss Crocs, Inc. Q1 results. With me today are Andrew Rees, Chief Executive Officer, and Susan Healy, Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask you to limit to one per caller. Before we begin, I would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the safe harbor provisions of the federal securities laws. These statements involve known and unknown risks, uncertainties, and other factors which may cause our actual results, performance, or achievements to differ materially. Please refer to our most recent annual report on Form 10-K, quarterly report on Form 10-Q, and other reports filed with the SEC for more information on these risks and uncertainties.

Andrew Rees: Sandals gained notable share of our business in the quarter, led by style sandals and outperformed the overall Crocs brand.

Andrew Rees: The strength was broad-based across our style saddle franchises, including Getaway, our number one franchise

Brooklyn, Miami Miami.

Andrew Rees: Year to date, we are seeing very strong self-rules across these core style franchises and our strategic accounts are chasing receipts

Andrew Rees: Into 2025 we tightened our sandal assortment which has resulted in higher productivity per franchise.

Andrew Rees: As a reminder, we see sandals as an avenue for attracting new consumers to our brand.

Andrew Rees: Over the last 12 months, 54% of consumers who purchase sandals on our own.com channels were

Andrew Rees: This performance has translated into incremental shelf space with our retail customers.

Erinn Murphy: Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I will turn the call over to Andrew Rees, Crocs, Inc.'s Chief Executive Officer.

Andrew Rees: We're building on these franchises into the summer through fresh new colors and styles.

Andrew Rees: Third, we remain laser focused on a digitally-led social first marketing playbook, as this is a key ingredient to sustaining brand heat.

Andrew Rees: During the quarter, we announced some exciting influences, including our spring break activation with Alex Cooper, Top tier podcast host and Style Maven

Andrew Rees: Thank you, Erinn, and good morning, everyone. Thank you for joining us today. We're incredibly pleased with the performance we delivered during the first quarter despite what has been an increasingly volatile macroeconomic backdrop since the start of the year. At the enterprise level, revenues of $937 million grew 1% to prior year and came in ahead of our guidance, which called for a revenue decline of approximately 1.5% on a constant currency basis. Importantly, both of our brands contributed to this outperformance. Crocs brand revenues of $762 million grew 4% to prior year, led by double-digit growth in international, and the North American business performed ahead of plan. HEYDUDE revenues of $176 million down 10% to prior year, including direct-to-consumer growth of 8%, an acceleration from the fourth quarter. Enterprise-adjusted gross margins of 57.8% gained 180 basis points to prior year.

Andrew Rees: This campaign featured our key influences sporting neon classics all over Miami driving more than 2.5 million social impressions over the weekend

while we introduce a number of partnerships during the quarter.

Andrew Rees: Perhaps the most anticipated rub was a limited release collaboration with Tokyo-based Street

Andrew Rees: This released a master's substantial wait list ahead of the launch. This released drove an exceptional level of traffic to a website and app while garnering nearly 70% new customer acquisition.

Andrew Rees: Turning to social commerce, we are continuing to lead into this phenomenon as consumers are more frequently starting and completing their shopping journeys on social platforms.

Andrew Rees: TikTok shop scaled nicely in the quarter, and we see it as a halo to our other channels.

Andrew Rees: During the quarter, Crocs brand remained the number one footwear brand on TikTok shop.

Andrew Rees: And finally, our fourth strategic pillar is the game market share around the world.

Andrew Rees: Enterprise-adjusted gross margins of 57.8% gained 180 basis points to prior year. Adjusted operating margins of 23.8% came in more than 200 basis points above our guidance, while we continue to make strategic investments to extend our competitive advantages in the future. All in, we delivered $3 in adjusted diluted earnings per share, nearly 20% above the high end of our guidance range. During the quarter, we repurchased 607,000 shares, while at the same time, we remained well within our net leverage range of between 1 and 1.5 times at quarter end. Before I share more insights from the quarter, I want to take a moment to discuss the dynamic landscape we're operating in, the actions we have taken to best position ourselves to win despite evolving global trade policies, and our resulting decisions to withdraw guidance.

Andrew Rees: In Q1, we achieved 12% revenue growth in international, with balanced growth across wholesale and direct to consumer channels.

Andrew Rees: Adjusted operating margins of 23.8% came in more than 200 basis points above our guidance, while we continue to make strategic investments to extend our competitive advantages in the future. All in, we delivered $3 in adjusted diluted earnings per share, nearly 20% above the high end of our guidance range. During the quarter, we repurchased 607,000 shares, while at the same time, we remained well within our net leverage range of between 1 and 1.5 times at quarter end. Before I share more insights from the quarter, I want to take a moment to discuss the dynamic landscape we're operating in, the actions we have taken to best position ourselves to win despite evolving global trade policies, and our resulting decisions to withdraw guidance.

Andrew Rees: China accelerated in the quarter, growing more than 30% as compared to the prior year.

Andrew Rees: The growth in China was well-balanced across channels, including the addition of 40 new

Andrew Rees: In April , we secured our second ever Superbrand Day on T-Mole. During the multi-day event, nine of the top ten footwork styles on the platform were Crocs Brand.

Andrew Rees: Our successful activation was complemented by a celebrity and influence the lead livestream.

Andrew Rees: In the quarter, we also saw robust growth in Western Europe , led by France and Germany.

Andrew Rees: I'm North American business, came in ahead of expectations and was down 3% to pray in.

Andrew Rees: Turning to the Hey Dude brand, we continue to make progress on stabilizing the brand in North America and I'm very pleased with how the team has executed to deliver a better than expected first quarter.

Andrew Rees: Since joining Crocs over 10 years ago, I have witnessed some extraordinary times, from charting our turnaround to the emergence of the Crocs brand as an icon of popular culture, to the global COVID-19 pandemic where retailers shuttered their doors for months, to the acquisition of HEYDUDE, and to today where many companies are grappling with and trying to understand our new global trade environment. Business and consumer uncertainty is extremely high. However, we're being prudent in the face of this uncertainty and are focused on what we can control, leaning into our clear competitive advantages and applying an agile mindset to how we adapt. Since we last reported, mid-February, the US has implemented a series of incremental tariffs on countries where we source our product.

Thank you.

Andrew Rees: First, starting with the Hadoo community, we're building a passionate fan base.

Andrew Rees: In February , Haydude has its first ever TikTok shop Superbrand Day during which Haydude ranked as a number one footwear brand across the platform with particular success in our Austin lift and H2O styles.

Andrew Rees: With an emphasis on her, in March, we activated out Sydney, Swini, times off to the left, fashion crisis hotline campaign, under the beauty of comfort tagline.

Andrew Rees: The campaign content reached a staggering 8 million consumers surpassing all internal benchmarks.

Andrew Rees: We also were front and center at the Houston rodeo, talking to the core hairdo consumer, and were recognized as the number one brand, dubbed the Grand Champion of the rodeo for best brand experience.

Andrew Rees: In addition, the daily uncertainty as to the level of these tariffs makes it incredibly hard to plan and predict both short- and long-term impacts to our business. As we sit here today, we have a well-diversified sourcing mix. To provide some context, our anticipated sourcing mix into the US in 2025 stands at approximately 47% from Vietnam, 17% from Indonesia, 13% each for China and India, and 5% each for Mexico and Cambodia. We are mindful that we're in the midst of a 90-day pause from certain reciprocal tariffs which could further escalate and impact on our sourcing in the countries previously mentioned. One of the primary reasons we've suspended guidance for 2025 is our ability to predict the financial impact of future tariffs.

Go to Beadaholique.com for all of your beading supply needs!

Susan Rees, Susan Healy, Erinn Murphy

Second, we're building the core and adding more [inaudible]

Andrew Rees: We iterate on our icons, the Wendee and the Wally through colour, materialisation and partnerships.

Andrew Rees: The three major platforms include Stretch Sucks, Stretch Canvas, and Funk Mono.

Andrew Rees: During the quarter, we successfully transitioned out of our Legacy Wally Socks program, and the Retail Reception of our updated Wally Stretch Socks has been strong.

Andrew Rees: In addition, we released two iterations of our Jelly Roll times A-Dude Wally. The second Jelly Roll launch started as an early access exclusive release on TikTok Shop, where it sold out completely within the day.

Andrew Rees: When we launched the CoLab on our own DTC the next day, we saw very high levels of traffic, well above expectations.

Speaker Change: We also leverage Travis Hunter, Heisman Trophy winner, and number two, 2025, NFL Draft Pick to launch an improved H2O to update an already successful franchise.

Andrew Rees: To provide you with a framework, if we assume 10% incremental tariff on all sourcing destinations into the US, this would translate to a cost of approximately $45 million on an annualized cash basis. If the incremental 145% tariff on China remains in place, along with the 10% on all other sourcing destinations, this would imply a cost of approximately $130 million on an annualized cash basis based on our current sourcing mix. Given the broad range of outcomes that we're facing as a company and as an industry, we're focused on what we can control and on driving long-term value for our brands. In light of the current macroeconomic environment, we have taken swift action to proactively reduce our cost base.

Speaker Change: And finally, against our third strategic pillar, we continue to prioritize brand health as we stabilize the North America market while laying the groundwork for future international growth.

Speaker Change: We're pleased by the acceleration of our Director Consumer Channel, up 8% in the quarter.

Speaker Change: This was supported by a significant improvement versus prior year in our own calm, growing traction of the TikTok shop and new retail expansion.

Speaker Change: During the quarter, we opened two premium hour stores and converted two temporary stores, helping to drive round awareness and connect consumers with a full expression of our brand.

We print it open approximately 10 stores during the year.

Andrew Rees: Since we last reported, we've identified approximately $50 million of additional savings to be realized in 2025, and we are continuing to evaluate potential actions for future savings as well as closely managing our inventory levels. While we are encouraged by the performance of our overall business in April, it is challenging to predict how consumers may respond to prolonged uncertainty. It is possible that in the future, we could see softer demand for footwear and other consumer goods, particularly given the potential for increased costs and higher prices across the industry that could further burden an already choiceful consumer. Despite withdrawing our guidance, one thing is certain: we believe our industry-leading gross margins, low unit cost, well-diversified supply chain, global business model, and strong free cash flow position us well to take market share.

Speaker Change: ASP for the hatred brand were up low single digits to last year on 7th consecutive quarter of positive ASP growth.

Speaker Change: We also saw full-price sales in our own.com improved nicely in the quarter fueled by product units including the Austin list and the poll.

Speaker Change: I will now turn the call over to Susan to provide more detail around my financial performance and how we are approaching the remainder of the year.

Susan Healy: Thank you, Andrew, and good morning, everyone. We delivered strong first quarter results that bested our guidance expectations across all core metrics.

Susan Healy: First quarter enterprise revenues of $937 million were up 1% to prior year and a head of our guidance of down 1.5%.

Susan Healy: Overall, first quarter trends were more volatile than we have seen in recent quarters. Trends were strongest in March and our business continued to perform well in April .

Susan Healy: Crocs brand revenue of $762 million was up 4% to prior year.

Andrew Rees: We are and expect to continue to be very profitable while generating significant free cash flow. We're committed to being transparent with all of our stakeholders as we navigate this current environment. Now turning to the performance by brand, starting with Crocs. First, we're continuing to drive global brand relevance through our icon and icon iterations, in addition to introducing new clog franchises. During the quarter, clog growth was led by our Classic Clog, in addition to growth within established franchises such as Echo, as well as new franchises such as In Motion. Height resonated well with notable success in Asia, led by the Classic Platform, Bay, and Crush. In China, the Bay, a height variation of our clog, was relaunched in partnership with global brand ambassador and Chinese celebrity TJC.

Susan Healy: Growth was led by wholesale up 5 percent, while DTC was up 3 percent

Susan Healy: North America was down 3% last year ahead of expectations, with DTC and wholesale declines of 2% and 5% respectively.

Susan Healy: China led the growth with revenue up more than 30% in the quarter, along with Western Europe , with notable outperformance in France and Germany

Susan Healy: Paydude brand revenue of $176 million was down 10% a prior year and ahead of our guidance which called for a revenue decline of 14 to 16%

DTC was up 8%, accelerating from the fourth quarter. [inaudible]

Upside to our guidance was driven by better than anticipated digital trends.

Andrew Rees: This campaign delivered very strong engagement across our key social and digital channels and an influx of traffic to our stores. Second, we are making clear progress towards introducing product for new wearing occasions outside of Crocs. Sandals gained notable share of our business in the quarter, led by Style Sandals, and outperformed the overall Crocs brand. The strength was broad-based across our Style Sandal franchises, including Getaway, our number one franchise, Brooklyn, and Miami. Year to date, we are seeing very strong sell-throughs across these core style franchises, and our strategic accounts are chasing receipts. Into 2025, we tightened our sandal assortment, which has resulted in higher productivity per franchise. As a reminder, we see sandals as an avenue for attracting new consumers to our brand. Over the last 12 months, 54% of consumers who purchase sandals on our own dot-com channels were new to brand.

Susan Healy: Full Sail was down 17% in the quarter, including the impact of resetting our Wally Stretch Sox program, which is performing well.

Susan Healy: Enterprise adjusted gross margin of 57.8% was up 180 basis points to prior year.

Susan Healy: Crocs brand-adjusted gross margin of 60.7% was up 260 basis points to prior year, title lower product costs and favorable customer mix.

Andrew Rees: Year to date, we are seeing very strong sell-throughs across these core style franchises, and our strategic accounts are chasing receipts. Into 2025, we tightened our sandal assortment, which has resulted in higher productivity per franchise. As a reminder, we see sandals as an avenue for attracting new consumers to our brand. Over the last 12 months, 54% of consumers who purchase sandals on our own dot-com channels were new to brand. This performance has translated into incremental shelf space with our retail customers. We're building on these franchises into the summer and through fresh new colors and styles.

Susan Healy: Pated Brand Adjusted Gross Margin of 46.6% was down 120 basis points to prior year, driven by few leverage against our supply chain costs.

Susan Healy: Adjusted SG&A dollars for the quarter increased 18% versus prior year

Susan Healy: Ajusted S-GNA rate was 34 percent, up 520 basis points compared to prior year, driven by incremental investment in talent, marketing, and DTC to support long-term market share gains.

Andrew Rees: This performance has translated into incremental shelf space with our retail customers. We're building on these franchises into the summer and through fresh new colors and styles. Third, we remain laser-focused on our digitally-led social-first marketing playbook, as this is a key ingredient to sustaining brand heat. During the quarter, we announced some exciting influences, including our spring break activation with Alex Cooper, top-tier podcast host and style maven. This campaign featured our key influencers sporting neon classics all over Miami, driving more than 2.5 million social impressions over the weekend. While we introduced a number of partnerships during the quarter, perhaps the most anticipated drop was our limited-release collaboration with Tokyo-based streetwear brand BAPE. This release amassed a substantial waitlist ahead of the launch. This release drove an exceptional level of traffic to our websites and app while garnering nearly 70% new customer acquisition.

Susan Healy: Adjusted operating margin of 23.8% was 230 basis points ahead of our guidance of 21.5% and down 330 basis points compared to prior year.

Andrew Rees: Third, we remain laser-focused on our digitally-led social-first marketing playbook, as this is a key ingredient to sustaining brand heat. During the quarter, we announced some exciting influences, including our spring break activation with Alex Cooper, top-tier podcast host and style maven. This campaign featured our key influencers sporting neon classics all over Miami, driving more than 2.5 million social impressions over the weekend. While we introduced a number of partnerships during the quarter, perhaps the most anticipated drop was our limited-release collaboration with Tokyo-based streetwear brand BAPE. This release amassed a substantial waitlist ahead of the launch. This release drove an exceptional level of traffic to our websites and app while garnering nearly 70% new customer acquisition.

Susan Healy: Adjusted diluted earnings per share was roughly flat to last year at $3, significantly above

Susan Healy: Our non-GAAP effective tax rate was 17.2%, which reflects the tax impact of intra-entity transactions.

Susan Rees, Susan Healy, Erinn Murphy

Susan Healy: Our inventory balance is healthy and current at $391 million as of March 31st and flat versus prior year

Thank you.

Susan Healy: Enterprise inventory turns remain above our goal of four times on an annualized basis.

Susan Healy: Our liquidity position is strong, comprised of $166 million of cash and cash equivalents and $679 million of borrowing capacity on our revolver.

Andrew Rees: Turning to social commerce, we are continuing to lead into this phenomenon as consumers are more frequently starting and completing their shopping journeys on social platforms. TikTok Shop scaled nicely in the quarter, and we see it as a halo to our other channels. During the quarter, Crocs brand remained the number one footwear brand on TikTok Shop. And finally, our fourth strategic pillar is to gain market share around the world. In Q1, we achieved 12% revenue growth in international with balanced growth across wholesale and direct-to-consumer channels. China accelerated in the quarter, growing more than 30% as compared to the prior year. The growth in China was well-balanced across channels, including the addition of 40 new partner doors. In April, we secured our second-ever Super Brand Day on Tmall. During the multi-day event, 9 of the top 10 footwear styles on the platform were Crocs brand.

Susan Healy: During the quarter, we repurchased approximately 607,000 shares of our common stock for a total of $61 million at an average cost of $100 per share.

Susan Healy: At the end of Q1, we had just under $1.3 billion remaining on our buyback authorization.

Susan Healy: We ended the quarter with total borrowings of $1.5 billion and remained within our net leverage target range of 1 to 1.5 times.

As Andrew mentioned, we are withdrawing our full-year outlook.

Andrew Rees: The growth in China was well-balanced across channels, including the addition of 40 new partner doors. In April, we secured our second-ever Super Brand Day on Tmall. During the multi-day event, 9 of the top 10 footwear styles on the platform were Crocs brand. Our successful activation was complemented by a celebrity and influencer-led live stream. In the quarter, we also saw robust growth in Western Europe, led by France and Germany.

Susan Healy: The primary reason for withdrawing guidance is that, at this point, it is extremely difficult to quantify and project the financial outcome of tariffs and the related potential for softer consumer demand across the industry.

Andrew Rees: Our successful activation was complemented by a celebrity and influencer-led live stream. In the quarter, we also saw robust growth in Western Europe, led by France and Germany. Our North American business came in ahead of expectations and was down 3% to prior year. Turning to the HEYDUDE brand, we continue to make progress on stabilizing the brand in North America, and I'm very pleased with how the team has executed to deliver a better-than-expected first quarter. First, starting with the HEYDUDE community, we're building a passionate fanbase. In February, HEYDUDE had its first-ever TikTok Shop Super Brand Day, during which HEYDUDE ranked as the number one footwear brand across the platform with particular success in our Austin Lift and H2O styles. With an emphasis on Her, in March, we activated our Sydney Sweeney Times Office in the Lift Fashion Crisis Hotline campaign under the Beauty is Comfort tagline.

Andrew Rees: Our North American business came in ahead of expectations and was down 3% to prior year. Turning to the HEYDUDE brand, we continue to make progress on stabilizing the brand in North America, and I'm very pleased with how the team has executed to deliver a better-than-expected first quarter. First, starting with the HEYDUDE community, we're building a passionate fanbase. In February, HEYDUDE had its first-ever TikTok Shop Super Brand Day, during which HEYDUDE ranked as the number one footwear brand across the platform with particular success in our Austin Lift and H2O styles. With an emphasis on Her, in March, we activated our Sydney Sweeney Times Office in the Lift Fashion Crisis Hotline campaign under the Beauty is Comfort tagline.

Susan Healy: If the incremental 145% tariff on China to remain in place, along with the 10% on all other sourcing destinations, this would imply a cost of approximately $130 million on an annualized cash basis based on our current sourcing mix.

Susan Healy: As you would expect, we are pursuing three primary lovers to mitigate any potential impact of tariffs in the short and longer term.

One, adjusting our sourcing mix into the US F

Two, further reducing costs, and three, evaluating potential price increases.

Susan Rees, Susan Healy, Erinn Murphy

Susan Healy: While we have withdrawn our guidance, we do want to share some context for the near term.

Andrew Rees: The campaign content reached a staggering 8 million consumers, surpassing all internal benchmarks. We also were front and center at the Houston Rodeo, talking to the core HEYDUDE consumer, and were recognized as the number one brand, dubbed the Grand Champion of the Rodeo for Best Brand Experience. Second, we are building the core and adding more. We iterate on our icons, the Wendy and the Wally, through color, materialization, and partnerships. The three major platforms include Stretch Socks, Stretch Canvas, and Funk Mono. During the quarter, we successfully transitioned out of our legacy Wally Socks program, and the retailer reception of our updated Wally Stretch Socks has been strong. In addition, we released two iterations of our Jelly Roll times HEYDUDE Wally. The second Jelly Roll launch started as an early access exclusive release on TikTok Shop, where it sold out completely within the day.

Susan Healy: First, while much of the second quarter is ahead of us, we are pleased with how both of our brands

Susan Healy: Second, we would expect tariffs to have a more adverse impact on Hadood's gross margin rate as compared to the Crocs brand, given relatively higher China sourcing exposure for Hadood.

Susan Healy: We expect gross margin pressure from tariffs to start in Q2 and expect the largest impact to begin in the second half.

Susan Healy: Third, since we last reported, we have identified an incremental $50 million of cost savings in 2025 and we are continuing to evaluate potential actions for further savings.

Andrew Rees: In addition, we released two iterations of our Jelly Roll times HEYDUDE Wally. The second Jelly Roll launch started as an early access exclusive release on TikTok Shop, where it sold out completely within the day. When we launched the collab on our own DTC the next day, we saw very high levels of traffic, well above expectations. We also leveraged Travis Hunter, Heisman Trophy winner, and number 2 2025 NFL draft pick to launch an improved H2O to update an already successful franchise.

Susan Healy: Fourth, we are carefully managing our forward unit inventory levels, but are mindful that incremental tariffs will add higher average unit costs.

Susan Healy: Finally, our capital allocation plans remain unchanged. We plan to pay down debt and opportunity in a strictly by-backed stock while remaining within our one-to-one-and-a-half times net-leveraged target range.

Andrew Rees: When we launched the collab on our own DTC the next day, we saw very high levels of traffic, well above expectations. We also leveraged Travis Hunter, Heisman Trophy winner, and number 2 2025 NFL draft pick to launch an improved H2O to update an already successful franchise. And finally, against our third strategic pillar, we continue to prioritize brand health as we stabilize the North American market while laying the groundwork for future international growth. We're pleased by the acceleration of our direct-to-consumer channel of 8% in the quarter. This was supported by a significant improvement versus prior year in our own dot-com, growing traction of the TikTok Shop, and new retail expansion. During the quarter, we opened 2 premium outlet stores and converted 2 temporary stores, helping to drive brand awareness and connect consumers with the full expression of our brand.

Andrew Rees: I will now turn the call back over to Andrew for his final thoughts.

Andrew Rees: Thank you, Susan. While the geopolitical climate has become more volatile since the start of the year, I'm confident that we will chart a winning course.

Andrew Rees: And finally, against our third strategic pillar, we continue to prioritize brand health as we stabilize the North American market while laying the groundwork for future international growth. We're pleased by the acceleration of our direct-to-consumer channel of 8% in the quarter. This was supported by a significant improvement versus prior year in our own dot-com, growing traction of the TikTok Shop, and new retail expansion. During the quarter, we opened 2 premium outlet stores and converted 2 temporary stores, helping to drive brand awareness and connect consumers with the full expression of our brand.

Speaker Change: Led by our talented team, the Democratic Appeal of Our Brands

and the value on comfort proposition to consumers clearly value.

Speaker Change: As we have demonstrated in the past, we have a proven track record of coming out of periods of uncertainty stronger than we ended them, and I'm confident that the current reality presents a very strong opportunity to further our competitive advantages and game market

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

Susan Rees, Susan Healy, Erinn Murphy

Andrew Rees: We plan to open approximately 10 stores during the year. ASP for the HEYDUDE brand were up low single digits to last year, our seventh consecutive quarter of positive ASP growth. We also saw full-price sales in our own dot-com improve nicely in the quarter, fueled by product newness, including the Austin Lift and the Paul. I will now turn the call over to Susan to provide more detail around our financial performance and how we are approaching the remainder of the year.

We will now begin the question and answer session.

Speaker Change: To ask a question, you may press star then 100 telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to ask your question, please press star then two. We ask that you limit yourselves to one question. Thank you very much.

Susan Rees, Susan Healy, Erinn Murphy

Speaker Change: And the first question, because of Anna Andreeva with Piper Sandler, please go ahead.

Operator: Thank you, Andrew, and good morning, everyone. We delivered strong Q1 results that bested our guidance expectations across all core metrics. Q1 enterprise revenues of $937 million were up 1% to prior year and ahead of our guidance of down 1.5%. Overall, Q1 trends were more volatile than we have seen in recent quarters. Trends were strongest in March, and our business continued to perform well in April. Crocs brand revenue of $762 million was up 4% to prior year. Growth was led by wholesale up 5%, while DTC was up 3%. North America was down 3% to last year, ahead of expectations, with DTC and wholesale declines of 2% and 5%, respectively. International revenue was up 12%. China led the growth, with revenue up more than 30% in the quarter, along with Western Europe, with notable outperformance in France and Germany.

Susan Healy: Thank you, Andrew, and good morning, everyone. We delivered strong Q1 results that bested our guidance expectations across all core metrics. Q1 enterprise revenues of $937 million were up 1% to prior year and ahead of our guidance of down 1.5%. Overall, Q1 trends were more volatile than we have seen in recent quarters. Trends were strongest in March, and our business continued to perform well in April. Crocs brand revenue of $762 million was up 4% to prior year. Growth was led by wholesale up 5%, while DTC was up 3%. North America was down 3% to last year, ahead of expectations, with DTC and wholesale declines of 2% and 5%, respectively.

Anna Andreeva: Great, thank you so much, good morning, and congrats, nice results [inaudible]

Anna Andreeva: We had a two-part question. First, on gross margins, really strong at the Crocs brand, and I think you mentioned product costs and favorable customer mix. Can you comment on sustainability of those? Sounds like the costing benefit gain maybe accelerated sequentially, so that's the first one. And secondly, you mentioned pricing as a potential lever. Can you just provide more color on that? Do you see that opportunity more at Crocs versus, hey, dude, and with

with this be a global versus a US increase. [inaudible]

And thanks so much

Anna Andreeva: Great, thanks Anna. So on Gross Margin, yeah, I think we had, you know, really pleased with the results in Q1. And look, you know, one of the strengths of this company is our incredible Gross Margin, which allows us to be very strategic where we invest.

Susan Healy: International revenue was up 12%. China led the growth, with revenue up more than 30% in the quarter, along with Western Europe, with notable outperformance in France and Germany. HEYDUDE brand revenue of $176 million was down 10% to prior year and ahead of our guidance, which called for a revenue decline of 14% to 16%. DTC was up 8%, accelerating from the fourth quarter. Upside to our guidance was driven by better-than-anticipated digital trends. Wholesale was down 17% in the quarter, including the impact of resetting our Wally Stretch Socks program, which is performing well. Enterprise adjusted gross margin of 57.8% was up 180 basis points to prior year.

Anna Andreeva: In terms of sustainability, we do believe they're sustainable. The gross margin up less or the strength of the gross margins really came from I think three things one was

Anna Andreeva: Good negotiating with our vendors. So we were able to continue to get some efficiencies in terms of sourcing. Over the last several years we've made very substantial investments in our distribution and logistics infrastructure here in the US, in the Netherlands and in other parts of the world and I think that's really paying off.

Operator: HEYDUDE brand revenue of $176 million was down 10% to prior year and ahead of our guidance, which called for a revenue decline of 14% to 16%. DTC was up 8%, accelerating from the fourth quarter. Upside to our guidance was driven by better-than-anticipated digital trends. Wholesale was down 17% in the quarter, including the impact of resetting our Wally Stretch Socks program, which is performing well. Enterprise adjusted gross margin of 57.8% was up 180 basis points to prior year. Crocs brand adjusted gross margin of 60.7% was up 260 basis points to prior year, tied to lower product costs and favorable customer mix. HEYDUDE brand adjusted gross margin of 46.6% was down 120 basis points to prior year, driven by deleverage against our supply chain costs. Adjusted SG&A dollars for the quarter increased 18% versus prior year.

Anna Andreeva: with Efficiencies, and then we also had really good customer mix and channel mix.

Anna Andreeva: So, I think we're pretty confident in the sustainability of that.

Anna Andreeva: You know, ex tariffs obviously, but I'm sure we're going to talk plenty about that on this call and appreciate you not leading with that. So, you know, second party, a question around pricing. Yeah, absolutely. That's a lever to mitigate sort of incremental costs.

And we expect…

Susan Healy: Crocs brand adjusted gross margin of 60.7% was up 260 basis points to prior year, tied to lower product costs and favorable customer mix. HEYDUDE brand adjusted gross margin of 46.6% was down 120 basis points to prior year, driven by deleverage against our supply chain costs. Adjusted SG&A dollars for the quarter increased 18% versus prior year. Adjusted SG&A rate was 34%, up 520 basis points compared to prior year, driven by incremental investment in talent, marketing, and DTC to support long-term market share gains.

Anna Andreeva: Spectre, depending on the level of incremental costs that may come from tariffs and other factors.

Anna Andreeva: We do expect the industry to go up in terms of price [inaudible]

Anna Andreeva: I would say at this point we've been super strategic around that.

Anna Andreeva: We have probably initiated a very small number of very targeted price increases.

to really kind of mitigate some selective issues.

Anna Andreeva: and we're really in a little bit of a weight and sea mode, but doing a substantial amount of preparatory work to understand where and how we should manage price in the future. But I think it's a lever that we expect the industry to use and we will use as well.

Operator: Adjusted SG&A rate was 34%, up 520 basis points compared to prior year, driven by incremental investment in talent, marketing, and DTC to support long-term market share gains. Adjusted operating margin of 23.8% was 230 basis points ahead of our guidance of 21.5% and down 330 basis points compared to prior year. Adjusted diluted earnings per share was roughly flat to last year at $3, significantly above our expectations. Our non-GAAP effective tax rate was 17.2%, which reflects the tax impact of intra-entity transactions. Our inventory balance is healthy and current at $391 million as of 31 March 2024 and flat versus prior year. Enterprise inventory turns remained above our goal of 4 times on an annualized basis. Our liquidity position is strong, comprised of $166 million of cash and cash equivalents and $679 million of borrowing capacity on our revolver.

Anna Andreeva: Thank you so much and good luck navigating the environment. Thank you Thank you so much.

Susan Rees, Susan Healy, Erinn Murphy

Speaker Change: Andrew, next question comes from Jonathan Komp, with Baird, please go ahead

Susan Healy: Adjusted operating margin of 23.8% was 230 basis points ahead of our guidance of 21.5% and down 330 basis points compared to prior year. Adjusted diluted earnings per share was roughly flat to last year at $3, significantly above our expectations. Our non-GAAP effective tax rate was 17.2%, which reflects the tax impact of intra-entity transactions. Our inventory balance is healthy and current at $391 million as of 31 March 2024 and flat versus prior year. Enterprise inventory turns remained above our goal of 4 times on an annualized basis. Our liquidity position is strong, comprised of $166 million of cash and cash equivalents and $679 million of borrowing capacity on our revolver.

Jonathan Kopp: Yeah, good morning. I guess I'll combine two questions. First, just...

Speaker Change: Obviously, a difficult environment to decide, you know, what to communicate externally, but any thoughts on that?

Speaker Change: Guiding Q2 Revenue, or just any more specifics on a short-term basis.

Speaker Change: Or sort of commenting on comfort levels of the prior revenue outlook, assuming a stable environment just any more color there on the approach. And then secondly, just on the mitigation strategies you mentioned.

Speaker Change: Hoping to maybe clarify, are you thinking of scenarios to offset that full 130 million, you outlined including the higher China rate, or just how you're thinking about the different scenarios and how you're planning your business to offset different potential levels of exposure?

Thank you.

A couple of times in our prepared remarks.

Speaker Change: You know, April is behind us now, and April was strong. We were very satisfied with April . I think the trajectory was consistent with March.

Operator: During the quarter, we repurchased approximately 607,000 shares of our common stock for a total of $61 million at an average cost of $100 per share. At the end of Q1, we had just under $1.3 billion remaining on our buyback authorization. We ended the quarter with total borrowings of $1.5 billion and remained within our net leverage target range of 1 to 1.5 times. As Andrew mentioned, we are withdrawing our full-year outlook. The primary reason for withdrawing guidance is that, at this point, it is extremely difficult to quantify and project the financial outcome of tariffs and the related potential for softer consumer demand across the industry. To illustrate the potential tariff impact, if a 10% incremental tariff on all sourcing destinations into the US were in place, this would cost us approximately $45 million on an annualized cash basis.

Susan Healy: During the quarter, we repurchased approximately 607,000 shares of our common stock for a total of $61 million at an average cost of $100 per share. At the end of Q1, we had just under $1.3 billion remaining on our buyback authorization. We ended the quarter with total borrowings of $1.5 billion and remained within our net leverage target range of 1 to 1.5 times. As Andrew mentioned, we are withdrawing our full-year outlook. The primary reason for withdrawing guidance is that, at this point, it is extremely difficult to quantify and project the financial outcome of tariffs and the related potential for softer consumer demand across the industry.

Speaker Change: is, you know, we can't predict what's happening sort of day-to-day in this sort of global, you know, trade environment and we really sort of being prudent and protecting ourselves.

Speaker Change: from an unexpected shock that we have no idea that's coming. So I think it's just being prudent and sensible.

Speaker Change: But as I would reiterate, you know, as we said today, we feel good.

from a mitigation perspective, so we try to give you

Susan Healy: To illustrate the potential tariff impact, if a 10% incremental tariff on all sourcing destinations into the US were in place, this would cost us approximately $45 million on an annualized cash basis. If the incremental 145% tariff on China were to remain in place, along with the 10% on all other sourcing destinations, this would imply a cost of approximately $130 million on an annualized cash basis based on our current sourcing mix. As you would expect, we are pursuing 3 primary levers to mitigate any potential impact of tariffs in the short and longer term.

Speaker Change: Some bookends in terms of what tariffs might mean to us, right? So that was really kind of the intent. So if you had the 10% across the globe with everything coming in, so just an elevated tariffs level in general, that was a 45 million, the 130, I think it's a pretty extreme a case that would assume that two things happened.

Operator: If the incremental 145% tariff on China were to remain in place, along with the 10% on all other sourcing destinations, this would imply a cost of approximately $130 million on an annualized cash basis based on our current sourcing mix. As you would expect, we are pursuing 3 primary levers to mitigate any potential impact of tariffs in the short and longer term. 1, adjusting our sourcing mix into the US. 2, further reducing costs. And 3, evaluating potential price increases. While we have withdrawn our guidance, we do want to share some context for the near term. First, while much of Q2 is ahead of us, we are pleased with how both of our brands performed in April.

Speaker Change: One is that the 145% incremental tariffs on China stayed in place.

Speaker Change: and we continue to import goods from China at the rate which our current plans suggest. Right? So I would say right now with that 145% in place, we are bringing a minimal by fractional portion of goods in from China. They're more very selective on the crock side and it's almost non-existent on the Haiti side. So if that remain in place, we were very unlikely incur that 130 million, but that's not the case.

Susan Healy: 1, adjusting our sourcing mix into the US. 2, further reducing costs. And 3, evaluating potential price increases. While we have withdrawn our guidance, we do want to share some context for the near term. First, while much of Q2 is ahead of us, we are pleased with how both of our brands performed in April. Second, we would expect tariffs to have a more adverse impact on HEYDUDE's gross margin rate as compared to the Crocs brand, given relatively higher China sourcing exposure for HEYDUDE.

Speaker Change: We just simply wouldn't bring the goods in. We'd cancel off some orders and I would say we are rapidly...

shifting sourcing to other countries.

Speaker Change: I think we've got a very well diversified sourcing base, so it stands as in good stead. I think the thing that the whole industry is worried about, if a reciprocal tariff remains in place relative to Vietnam, that's a huge amount of production for us and everybody else, that would be incredibly hard to mitigate.

Operator: Second, we would expect tariffs to have a more adverse impact on HEYDUDE's gross margin rate as compared to the Crocs brand, given relatively higher China sourcing exposure for HEYDUDE. We expect gross margin pressure from tariffs to start in Q2 and expect the largest impact to begin in the second half. Third, since we last reported, we have identified an incremental $50 million of cost savings in 2025, and we are continuing to evaluate potential actions for further savings. Fourth, we are carefully managing our forward unit inventory levels, but are mindful that incremental tariffs will add higher average unit costs. Finally, our capital allocation plans remain unchanged. We plan to pay down debt and opportunistically buyback stock while remaining within our 1 to 1.5x net leverage target range. I will now turn the call back over to Andrew for his final thoughts.

Susan Rees, Susan Healy, Erinn Murphy

Susan Healy: We expect gross margin pressure from tariffs to start in Q2 and expect the largest impact to begin in the second half. Third, since we last reported, we have identified an incremental $50 million of cost savings in 2025, and we are continuing to evaluate potential actions for further savings. Fourth, we are carefully managing our forward unit inventory levels, but are mindful that incremental tariffs will add higher average unit costs. Finally, our capital allocation plans remain unchanged. We plan to pay down debt and opportunistically buyback stock while remaining within our 1 to 1.5x net leverage target range. I will now turn the call back over to Andrew for his final thoughts.

Yeah, that's very helpful. Thanks, Andrew.

Thank you.

Susan Rees, Susan Healy, Erinn Murphy

Speaker Change: And your next question is from Peter McColdrick with Steeple. Please go ahead.

Peter Mcgoldrick: Thanks for taking our question. I wanted to ask about your level of marketing spend. Is an area you stepped up in previous years to drive significant growth profit growth? How should we think of your approach to spending in marketing in 2025 against the uncertain backdrop? Thank you very much.

Yes, so um...

Peter Mcgoldrick: I think when we finish Q4 and Mitch Bebrein announced that those results, or we announced those results in Mitch Bebrein, obviously finished Q4 in the end of December , we just talk about we were planning a slightly more elevated level of marketing in 25.

Peter Mcgoldrick: to support both Crocs and Haydude. And our intent at this point, net of the $50 million of SGNA reductions that we have already enacted and completed, is to maintain that level of marketing.

Erinn Murphy: Thank you, Susan. While the geopolitical climate has become more volatile since the start of the year, I'm confident that we will chart a winning course, led by our talented team, the democratic appeal of our brands, and the value on comfort proposition consumers clearly value. As we have demonstrated in the past, we have a proven track record of coming out of periods of uncertainty stronger than we entered them, and I'm confident that the current reality presents a very strong opportunity to further our competitive advantages and gain market share. At this time, we'll open the call for questions.

Andrew Rees: Thank you, Susan. While the geopolitical climate has become more volatile since the start of the year, I'm confident that we will chart a winning course, led by our talented team, the democratic appeal of our brands, and the value on comfort proposition consumers clearly value. As we have demonstrated in the past, we have a proven track record of coming out of periods of uncertainty stronger than we entered them, and I'm confident that the current reality presents a very strong opportunity to further our competitive advantages and gain market share. At this time, we'll open the call for questions.

We think it's incredibly important in even-

Peter Mcgoldrick: In times that can be uncertain to continue to communicate very proactively, engage and connect with our consumers and give them reasons to buy our brands.

as we think about our brands. [inaudible]

They are both at approachable price points [inaudible]

Peter Mcgoldrick: And even in more uncertain times when the consumer is constrained, we still have two brands that I think are very accessible to a very broad range of consumers. So we would maintain that level of investment. And the profile of that investment is pretty consistent what you've seen in the past. Thank you very much.

Andrew Rees: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. We ask that you limit yourselves to one question. At this time, we'll pause momentarily to assemble our roster. The first question comes from Anna Andreeva with Piper Sandler. Please go ahead.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. We ask that you limit yourselves to one question. At this time, we'll pause momentarily to assemble our roster. The first question comes from Anna Andreeva with Piper Sandler. Please go ahead.

Peter Mcgoldrick: using key celebrities, using ambassadors, creating engagement around events. We talked about some of the events that we ran in Q1 with HeyDude, and we've had a very successful Q1 in China where we've used high-profile celebrities and invested heavily in marketing.

Susan Rees, Susan Healy, Erinn Murphy

Speaker Change: Thank you for that. And then diving deeper on the hatred to refresh positioning with expanded product assortment and new marketing initiatives. Can you discuss the strategy to balance that new direction while maintaining the brand identity and appeal with the core customer group?

Anna Andreeva: Great. Thank you so much. Good morning and congrats. Nice results. We had a two-part question. First, on gross margins, really strong at the Crocs brand, and I think you mentioned product costs and favorable customer mix. Can you comment on sustainability of those? It sounds like the costing benefit gain may be accelerated sequentially, so that's the first one. And secondly, you mentioned pricing as a potential lever. Can you just provide more color on that? Do you see that opportunity more at Crocs versus HEYDUDE, and would this be a global versus a US increase? And thanks so much.

Susan Rees, Susan Healy, Erinn Murphy

Speaker Change: Absolutely. So look, I think, you know, overall we're super happy with the last two quarters for what I do, the brand is performed.

Head of Expectations for both of those quarters.

Speaker Change: And so we're very happy with that. And really that is as a result of exactly what you just said, right? So maintaining...

A strong commitment to our core consumer.

Speaker Change: with the Wally and the Wendy, and updating and introducing new styles for that core consumer. So we talked and prepared remarks around.

Erinn Murphy: Great. Thanks, Anna. So on gross margins, yeah, I think we're really pleased with the results in Q1. And look, one of the strengths of this company is our incredible gross margins, which allows us to be very strategic where we invest. In terms of sustainability, we do believe they're sustainable. The gross margin uplift or the strength of the gross margins really came from, I think, three things. One was good negotiating with our vendors, so we were able to continue to get some efficiencies in terms of sourcing. Over the last several years, we've made very substantial investments in our distribution and logistics infrastructure here in the US, in the Netherlands, and in other parts of the world, and I think that's really paying off with efficiencies. And then we also had a really good customer mix and channel mix.

Andrew Rees: Great. Thanks, Anna. So on gross margins, yeah, I think we're really pleased with the results in Q1. And look, one of the strengths of this company is our incredible gross margins, which allows us to be very strategic where we invest. In terms of sustainability, we do believe they're sustainable. The gross margin uplift or the strength of the gross margins really came from, I think, three things. One was good negotiating with our vendors, so we were able to continue to get some efficiencies in terms of sourcing.

how we have repositioned the Wally particularly around me.

Speaker Change: Stretch Sox Platform. So it took a myriad of disparate styles with different style names and numbers and colors, etc., and householded number under a coherent program so it makes it much easier for the consumer to shop. We've also updated the product with additional details and key features, and we also reset the marketplace.

Andrew Rees: Over the last several years, we've made very substantial investments in our distribution and logistics infrastructure here in the US, in the Netherlands, and in other parts of the world, and I think that's really paying off with efficiencies. And then we also had a really good customer mix and channel mix. So I think we're pretty confident in the sustainability of that. Ex-tariffs, obviously. I'm sure we're going to talk plenty about that on this call and appreciate you not leading with that.

Speaker Change: Pulling back a lot of the old products, resetting our core wholesale partners, so that was a pretty big investment on our partners I think we are really pleased with that so far.

Speaker Change: at the same time as investing in communication with a younger female consumer using Sydney Swedeners, our key ambassador there, launching some new product, the Austin Lyft

Erinn Murphy: So I think we're pretty confident in the sustainability of that. Ex-tariffs, obviously. I'm sure we're going to talk plenty about that on this call and appreciate you not leading with that. Second part of your question around pricing, yeah, absolutely. That's a lever to mitigate sort of incremental costs. We expect, depending on the level of incremental costs that may come from tariffs and other factors, the industry to go up in terms of price. I would say at this point, we've been super strategic around that. We have probably initiated a very small number of very targeted price increases to really kind of mitigate some selective issues. We're really in a little bit of a wait-and-see mode but doing a substantial amount of preparatory work to understand where and how we should manage price in the future.

Speaker Change: on TikTok Shop, and both of those activities are performing very well. So I think that's really the core explanator for the really pleasing results in Q4 of last year and Q1 of this year. And we expect that to continue.

Andrew Rees: Second part of your question around pricing, yeah, absolutely. That's a lever to mitigate sort of incremental costs. We expect, depending on the level of incremental costs that may come from tariffs and other factors, the industry to go up in terms of price. I would say at this point, we've been super strategic around that. We have probably initiated a very small number of very targeted price increases to really kind of mitigate some selective issues. We're really in a little bit of a wait-and-see mode but doing a substantial amount of preparatory work to understand where and how we should manage price in the future. But I think it's a lever that we expect the industry to use, and we will use as well.

Thank you

Susan Rees, Susan Healy, Erinn Murphy

Speaker Change: Next question, customer Laura Champine, with Loop Capital, please go ahead

Laura Champagne: Thanks for taking my question. This is a quarter where it's tough to know what's best to ask, but let's start with kind of the framework that you've given us for

Cost Impact for Tariff, and I get it that...

Erinn Murphy: But I think it's a lever that we expect the industry to use, and we will use as well.

Anna Andreeva: Okay. Well, thank you so much, and good luck navigating the environment.

Erinn Murphy: Thank you.

Andrew Rees: Thank you.

Andrew Rees: Andrew, next question comes from Jonathan Komp with Baird. Please go ahead.

Operator: Andrew, next question comes from Jonathan Komp with Baird. Please go ahead.

Laura Champagne: 330, but hey, is there anything you can do to help us kind of frame it up, ballpark it?

Jonathan Komp: Yeah. Good morning. I guess I'll combine two questions. First, just obviously a difficult environment to decide what to communicate externally, but any thoughts on not guiding Q2 revenue or just any more specifics on a short-term basis or sort of commenting on comfort levels with the prior revenue outlook, assuming a stable environment, just any more color there on the approach? And then secondly, just on the mitigation strategies you mentioned, hoping to maybe clarify, are you thinking of scenarios to offset that full $130 million you outlined, including the higher China rate, or just how you're thinking about the different scenarios and how you're planning your business to offset different potential levels of exposure? Thank you.

I would say, Laura, if we could, we would.

Laura Champagne: Right? This is not an effort to be obtuse. It's just simply impossible. So what I would say is...

Laura Champagne: In terms of cost of goods increases without tariffs coming out of Southeast Asia, we're not seeing that at all You know, we have ...

Laura Champagne: A base of five or six key manufacturing partners, each of which operate multiple large facilities for us in multiple countries and have done so for 20 years. So we are not seeing any cost increases coming out of those partners. In fact, I think...

Laura Champagne: In response to an earlier question, we saw some cost decreases from some of those partners going into Q1. So that's not a factor that we're seeing all concerned about.

Erinn Murphy: Yeah. Okay. Thanks, John. So with regard to Q2, look, I think we said a couple of times in our preparatory remarks that April is behind us now. And April was strong. We were very satisfied with April. I think the trajectory was consistent with March. And I would say the US consumer, in particular, seems to be holding up well. And then we're seeing sort of continued trajectory in our international business. So the thing that I just think we're super wary and cautious of is we can't predict what's happening sort of day-to-day in this sort of global trade environment, and we're really sort of being prudent and protecting ourselves from an unexpected shock that we have no idea that's coming. So I think it's just being prudent and sensible. But as I would reiterate, as we sit today, we feel good.

Andrew Rees: Yeah. Okay. Thanks, John. So with regard to Q2, look, I think we said a couple of times in our preparatory remarks that April is behind us now. And April was strong. We were very satisfied with April. I think the trajectory was consistent with March. And I would say the US consumer, in particular, seems to be holding up well. And then we're seeing sort of continued trajectory in our international business.

Laura Champagne: The people who have been heavily in China and trying to transfer that volume to new manufacturing plants in Southeast Asia are seeing a pretty high price, a pretty high cost, but that doesn't play to us at this stage.

Laura Champagne: In terms of being able to predict the cost of what you're really talking about is predict the tariff load that we're going to pay on the goods that we bring in from different areas.

Andrew Rees: So the thing that I just think we're super wary and cautious of is we can't predict what's happening sort of day-to-day in this sort of global trade environment, and we're really sort of being prudent and protecting ourselves from an unexpected shock that we have no idea that's coming. So I think it's just being prudent and sensible. But as I would reiterate, as we sit today, we feel good. From a mitigation perspective, so we try to give you some bookends in terms of what tariffs might mean to us, right? So that was really kind of the intent.

Laura Champagne: I have no way of providing you a number that I, what if I could?

Speaker Change: I understand just as a follow on kind of what's your latest thinking about elasticity of demand? Like you mentioned price increases if you could help us ballpark that it would be great, but but what's your latest thinking strategically on elasticity of demand is sort of industry-wide price increases go.

Thank you for tuning in.

Yeah.

Speaker Change: This category is not inelastic as a double negative, but so there is elasticity, right? So if prices go up we would expect volumes to go down. [inaudible]

Erinn Murphy: From a mitigation perspective, so we try to give you some bookends in terms of what tariffs might mean to us, right? So that was really kind of the intent. So if you had the 10% across the globe of everything coming in, so just an elevated tariff level in general, that was the $45 million. The $130 million, I think, is a pretty extreme case. That would assume that two things happened. One is that the 145% incremental tariffs on China stayed in place, and we continued to import goods from China at the rate which our current plan suggests, right? But I would say right now, with that 145% in place, we are bringing a minimal, in fact, fractional portion of goods in from China there. They're more very selective on the Crocs side, and it's almost nonexistent on the HEYDUDE side.

and would therefore plan accordingly. What I would say is

Andrew Rees: So if you had the 10% across the globe of everything coming in, so just an elevated tariff level in general, that was the $45 million. The $130 million, I think, is a pretty extreme case. That would assume that two things happened. One is that the 145% incremental tariffs on China stayed in place, and we continued to import goods from China at the rate which our current plan suggests, right? But I would say right now, with that 145% in place, we are bringing a minimal, in fact, fractional portion of goods in from China there. They're more very selective on the Crocs side, and it's almost nonexistent on the HEYDUDE side.

Speaker Change: I would rather increase prices, protect margin or have adequate room in the P&L to invest in marketing and consumer communication to drive consumers to our brand than take margin reductions and have no latitude to communicate effectively with consumers.

Speaker Change: So I think the, and so a higher price, higher margin, maybe a slight less volume is a much stronger place to be.

Understood. Thank you.

Thank you.

Susan Rees, Susan Healy, Erinn Murphy

Speaker Change: And your next question comes from Aubrey, T&LO with B&P Parabus. Please go ahead.

Erinn Murphy: So if that remained in place, we would very unlikely incur that $130 million because we just simply wouldn't bring the goods in. We'd cancel off some orders. And I would say we are rapidly shifting sourcing to other countries. I think we've got a very well-diversified sourcing base, so it stands us in good stead. I think the thing that the whole industry is worried about, if a reciprocal tariff remains in place relative to Vietnam, that's a huge amount of production for us and everybody else. That would be incredibly hard to mitigate.

Andrew Rees: So if that remained in place, we would very unlikely incur that $130 million because we just simply wouldn't bring the goods in. We'd cancel off some orders. And I would say we are rapidly shifting sourcing to other countries. I think we've got a very well-diversified sourcing base, so it stands us in good stead. I think the thing that the whole industry is worried about, if a reciprocal tariff remains in place relative to Vietnam, that's a huge amount of production for us and everybody else. That would be incredibly hard to mitigate.

Aubrey Tianello: Hey, good morning. Thanks for taking the question and really appreciated the framework and all the help on tariffs.

Speaker Change: I wanted to go back to the comment on not bringing goods in if the 145% tarot remain in place that you look to shift production.

Speaker Change: What would be the timeframe to relocate production out of China, and which parts of the business are still sourced from China? Is it kids, anything specific?

Susan Rees, Susan Healy, Erinn Murphy

Speaker Change: Yeah, it's not anything specific. So, I think, you know, we gave you the percentage mix in China. That is more Hey Dude than it is Crocs. That's a lot more Hey Dude than it is Crocs. And in terms of shifting the remaining piece of Crocs.

Jonathan Komp: Yeah. That's very helpful. Thanks, Andrew.

Andrew Rees: Andrew, next question is from Peter McGoldrick with Stifel. Please go ahead.

Operator: Andrew, next question is from Peter McGoldrick with Stifel. Please go ahead.

Speaker Change: I think that could happen quickly. That could happen, you know, if we got an indication...

Speaker Change: So the 145th is going to stay in place for a long time or a large elevated tariff on China is going to stay in place for a long time. We would shift that within six months.

Jim Duffy: Hey, thanks for taking our question. I wanted to ask about your level of marketing spend. This is an area you stepped up in previous years to drive significant gross profit growth. How should we think of your approach to spending in marketing in 2025 against the uncertain backdrop?

Peter McGoldrick: Hey, thanks for taking our question. I wanted to ask about your level of marketing spend. This is an area you stepped up in previous years to drive significant gross profit growth. How should we think of your approach to spending in marketing in 2025 against the uncertain backdrop?

Speaker Change: There are capabilities that we get in China that we don't get elsewhere, right? And those, we'll take a little bit longer, because they've been manufacturing for a lot longer than some of the other places we're talking about. The Haydude piece is...

Erinn Murphy: Yeah. So I think when we finish Q4 in mid-February and announce those results, or we announce those results in mid-February, obviously finish Q4 in the end of December, we did talk about we were planning a slightly more elevated level of marketing in 2025 to support both Crocs and HEYDUDE. And our intent at this point, net of the $50 million of SG&A reductions that we have already enacted and completed, is to maintain that level of marketing. We think it's incredibly important in times that can be uncertain to continue to communicate very proactively, engage, and connect with our consumers, and give them reasons to buy our brands. As we think about our brands, they are both at approachable price points.

Andrew Rees: Yeah. So I think when we finish Q4 in mid-February and announce those results, or we announce those results in mid-February, obviously finish Q4 in the end of December, we did talk about we were planning a slightly more elevated level of marketing in 2025 to support both Crocs and HEYDUDE. And our intent at this point, net of the $50 million of SG&A reductions that we have already enacted and completed, is to maintain that level of marketing. We think it's incredibly important in times that can be uncertain to continue to communicate very proactively, engage, and connect with our consumers, and give them reasons to buy our brands. As we think about our brands, they are both at approachable price points.

Speaker Change: It is also doable within a relatively short time room, I would say within 12 months.

Speaker Change: We could shift all that volume. We might be able to do a little bit quicker on being relatively cautious there, but I wouldn't say it's impacting any particular product I'm aware that a couple of brands have called out that they're heavily in China for kids

Speaker Change: which makes sense because there's still a lower cost environment so your lowest margin product you put in the cheapest sourcing place that is not the case for us. We're confident we'll have ample kids supply for our consumers.

Great. Thank you.

Susan Rees, Susan Healy, Erinn Murphy

Speaker Change: In your next question, come from Rick Patel with Raymond James, please go ahead

Rick Patel: Thank you. Good morning. Can we double click on the drivers for the Crocs International Growth? Maybe update us on how big the largest regions are today, and what you see is the most compelling growth drivers as we think about organic growth versus new distribution.

Erinn Murphy: And even in more uncertain times when the consumer is constrained, we still have two brands that I think are very accessible to a very broad range of consumers. So we would maintain that level of investment, and the profile of that investment is pretty consistent with what you've seen in the past, using key celebrities, using ambassadors, creating engagement around events. We talked about some of the events that we ran in Q1 with HEYDUDE, and we've had a very successful Q1 in China where we've used high-profile celebrities and invested heavily in marketing.

Andrew Rees: And even in more uncertain times when the consumer is constrained, we still have two brands that I think are very accessible to a very broad range of consumers. So we would maintain that level of investment, and the profile of that investment is pretty consistent with what you've seen in the past, using key celebrities, using ambassadors, creating engagement around events. We talked about some of the events that we ran in Q1 with HEYDUDE, and we've had a very successful Q1 in China where we've used high-profile celebrities and invested heavily in marketing.

Right, okay, so I think the-

The macro comments, or the macro driver, is brand penetration.

Rick Patel: You know, as we look at the Crocs market share in many of our international markets...

Rick Patel: It is a third of the market share we would see in many of our stronger markets, US, UK, for example, we too, where we have high market share on Australia. So it's really penetrating the market to the degree which we have penetrated the market elsewhere.

Jim Duffy: Thank you for that. And then diving deeper on the HEYDUDE refresh positioning with expanded product assortment and new marketing initiatives, could you discuss the strategy to balance that new direction while maintaining the brand identity and appeal with the core customer group?

Peter McGoldrick: Thank you for that. And then diving deeper on the HEYDUDE refresh positioning with expanded product assortment and new marketing initiatives, could you discuss the strategy to balance that new direction while maintaining the brand identity and appeal with the core customer group?

Rick Patel: That's the macro driver. In terms of the, you know, how we're doing that, it's product, it's marketing, it's incremental distribution, it's heavily digitally led, it's leveraging social selling and social commerce. So the playbook that, you know, we've operated elsewhere, applies most places. [inaudible]

Erinn Murphy: Absolutely. So look, I think overall, we're super happy with the last two quarters for HEYDUDE. The brand has performed ahead of expectations for both of those quarters, and so we're very happy with that. And really, that is as a result of exactly what you just said, right? So maintaining a strong commitment to our core consumer with the Wally and the Wendy and updating and introducing new styles for that core consumer. So we talked in preparatory remarks around how we have repositioned the Wally, particularly around a Stretch Socks platform. So it took a myriad of disparate styles with different style names, numbers, and colors, etc., and householded them under a coherent program, so it makes it much easier for the consumer to shop. We've also updated the product with additional details and key features.

Andrew Rees: Absolutely. So look, I think overall, we're super happy with the last two quarters for HEYDUDE. The brand has performed ahead of expectations for both of those quarters, and so we're very happy with that. And really, that is as a result of exactly what you just said, right? So maintaining a strong commitment to our core consumer with the Wally and the Wendy and updating and introducing new styles for that core consumer. So we talked in preparatory remarks around how we have repositioned the Wally, particularly around a Stretch Socks platform. So it took a myriad of disparate styles with different style names, numbers, and colors, etc., and householded them under a coherent program, so it makes it much easier for the consumer to shop. We've also updated the product with additional details and key features.

Um...

Rick Patel: In terms of the larger focus areas, China is really important. We've been talking about that for some time and continue to see real success in China clearly gaining market share in a market which is...

relatively difficult.

Rick Patel: and we have scrived that to approachable price point, very strong marketing and digital first activation. We are increasingly focused on India, we have a rapidly growing middle class.

Rick Patel: and a very large population. We saw some constraints in India, which we've talked about historically around their

Rick Patel: Import restrictions that they've applied. We have solved all of those. We are now have adequate.

Erinn Murphy: And we also reset the marketplace, pulling back a lot of the old products, resetting our core wholesale partners. So that was a pretty big investment on our partners' end. I think we and they are really pleased with that so far. At the same time, as investing in communication with a younger female consumer, using Sydney Sweeney as our key ambassador there, launching some new product, the Austin Lift, on TikTok Shop. And both of those activities are performing very well. So I think that's really the core explanation for the really pleasing results in Q4 of last year, and Q1 of this year. And we expect that to continue.

Andrew Rees: And we also reset the marketplace, pulling back a lot of the old products, resetting our core wholesale partners. So that was a pretty big investment on our partners' end. I think we and they are really pleased with that so far. At the same time, as investing in communication with a younger female consumer, using Sydney Sweeney as our key ambassador there, launching some new product, the Austin Lift, on TikTok Shop. And both of those activities are performing very well. So I think that's really the core explanation for the really pleasing results in Q4 of last year, and Q1 of this year. And we expect that to continue.

Rick Patel: All of the demand we have in India plus export is become a more significant manufacturing hub and export market for us as well and then we're really pleased with the traction that we're seeing in Western Europe .

Rick Patel: I think we've highlighted historically the UK has performed very well but we're seeing really nice traction in France and Germany and that's again really about penetrating the market. Those are a little bit more wholesale markets so that's about penetrating new customers, getting new presentation in front of the consumers supported by localized marketing.

Hopefully that gives you a good...

Speaker Change: Yes, I'm going to introduce to you and just a follow up on that is always we think about the importance of marketing investment and you know the company strategy the continued leading end like how much of that marketing investment is distorted towards white space opportunities for Crocs like in international markets as opposed to trying to turn around a dude. [inaudible]

Jim Duffy: Thank you.

Peter McGoldrick: Thank you.

Andrew Rees: Next question, customer Laura Champagne with Loop Capital. Please go ahead.

Operator: Next question, customer Laura Champagne with Loop Capital. Please go ahead.

Laura Champine: Thanks for taking my question. This is a quarter where it's tough to know what's best to ask, but let's start with kind of the framework that you've given us for cost impact for tariffs. I get it that the $130 million is not really reasonable, is not going to happen. We also are hearing of significant cost increases coming out of Southeast Asia as those factories get a lot busier. What is a more reasonable expectation of a cost increase? I'm guessing it's somewhere between the $45 million and the $130 million, but is there anything you can do to help us kind of frame it up ballpark?

Speaker Change: It's both, I would say. So the overall hatred marketing budget is a little bit above that of Crocs, but not massively. I have a percentage of sales I'm talking about. So obviously, dollars is a lot less, but in terms of percentage of sales. And then I would say for Crocs.

Speaker Change: We very strategically allocate it to the markets where we see the greatest opportunity, so we've had a sustained level of spending in China that's definitely paying off. We're ramping up our spending in India and we have a strong level of activity in Western Europe .

Erinn Murphy: I would say, Laura, if we could, we would, right? This is not an effort to be obtuse. It's just simply impossible. So what I would say is in terms of cost of goods increases without tariffs coming out of Southeast Asia, we're not seeing that at all. We have a base of five or six key manufacturing partners, each of which operate multiple large facilities for us in multiple countries and have done so for 20 years. So we are not seeing any cost increases coming out of those partners. In fact, I think in response to an earlier question, we saw some cost decreases from some of those partners going into Q1. So that's not a factor that we're seeing or concerned about.

Andrew Rees: I would say, Laura, if we could, we would, right? This is not an effort to be obtuse. It's just simply impossible. So what I would say is in terms of cost of goods increases without tariffs coming out of Southeast Asia, we're not seeing that at all. We have a base of five or six key manufacturing partners, each of which operate multiple large facilities for us in multiple countries and have done so for 20 years. So we are not seeing any cost increases coming out of those partners. In fact, I think in response to an earlier question, we saw some cost decreases from some of those partners going into Q1. So that's not a factor that we're seeing or concerned about.

Very helpful. Thanks so much.

Andreeva, James Duffy,

And your next question comes from Adrienne Yih

with Barclays, please go ahead.

Speaker Change: Good morning, this is Michael Vuon for Adrienne Yih, and thank you for taking our question.

Speaker Change: So related to the wholesale-versed DTC channels, can you share any details on the relationship or in better words how it would work for distribution in the wholesale channel if you increase prices in DTC, what happens at the four wholesalers for those who have already placed their orders and is there any negotiating room with the wholesalers on increasing prices of orders on the ones that they've already placed? Thank you.

Speaker Change: Okay, that's a complicated question. So obviously in DTC we have a lot of change prices whenever we wish. I would say...

Erinn Murphy: I could imagine that people who have been heavily in China and trying to transfer that volume to new manufacturing partners in Southeast Asia are seeing a pretty high price or pretty high cost, but that doesn't apply to us at this stage. In terms of being able to predict the costs, what you're really talking about is predict the tariff load that we're going to pay on the goods that we bring in from different areas. I have no way of providing you a number there. I would if I could.

Andrew Rees: I could imagine that people who have been heavily in China and trying to transfer that volume to new manufacturing partners in Southeast Asia are seeing a pretty high price or pretty high cost, but that doesn't apply to us at this stage. In terms of being able to predict the costs, what you're really talking about is predict the tariff load that we're going to pay on the goods that we bring in from different areas. I have no way of providing you a number there. I would if I could.

Speaker Change: That's not likely unless we're kind of testing price elasticity. We probably want to keep pricing in the market or a given market, whether that be, you know, the US or the UK or China pretty consistent across channels.

Changing...

Speaker Change: The price of goods that have already been ordered from a wholesale partner. I think that's what you're really getting at with your question. Look, we have done that in the past.

Laura Champine: Understood. Just as a follow-on, kind of what's your latest thinking about elasticity of demand? You mentioned price increases. If you could help us ballpark that, it would be great. But what's your latest thinking strategically on elasticity of demand as sort of industry-wide price increases go through?

Speaker Change: when it was an emergency situation, or as a situation we thought that was warranted. I don't think in this case we're likely to take that approach. I think we have a little time here to see how things settle out. So I think that's extremely like it's doable, but it's very unlikely we would do that. [inaudible]

Erinn Murphy: Yeah. This category is not inelastic. That's a double negative. So there is elasticity, right? So if prices go up, we would expect volumes to go down and would therefore plan accordingly. What I would say is I would rather increase prices, protect margin, and have adequate room in the P&L to invest in marketing and consumer communication to drive consumers to our brand than take margin reductions and have no latitude to communicate effectively with consumers. So I think and so a higher price, higher margin, and maybe a slightly lesser volume is a much stronger place to be.

Andrew Rees: Yeah. This category is not inelastic. That's a double negative. So there is elasticity, right? So if prices go up, we would expect volumes to go down and would therefore plan accordingly. What I would say is I would rather increase prices, protect margin, and have adequate room in the P&L to invest in marketing and consumer communication to drive consumers to our brand than take margin reductions and have no latitude to communicate effectively with consumers. So I think and so a higher price, higher margin, and maybe a slightly lesser volume is a much stronger place to be.

Speaker Change: And so we will be looking for a more coordinated change in pricing across multiple channels at a designated point in time in the future.

Ashley Owens: And your next question comes from Ashley Owens with Keybanc capital markets. Please go ahead.

Ashley Owens: Hi, Good morning, So maybe just a follow up on the wholesale channel in general and what we're hearing from others that some of the suppliers you're planning the balance of the air more prudently than initial expectations had suggested that's something you're currently seeing with the order books or any color you could provide on how that's shaking out or shifting in real time would be helpful.

Ashley Owens: Thank you.

Ashley Owens: Yes, and probably going to really reiterate what you've already.

Laura Champine: Understood. Thank you.

Ashley Owens: So what I would say is major retailers our wholesale partners.

Erinn Murphy: Thank you.

Andrew Rees: Thank you.

Andrew Rees: Andrew, next question comes from Aubrey Tianello with BNP Paribas. Please go ahead.

Operator: Andrew, next question comes from Aubrey Tianello with BNP Paribas. Please go ahead.

Ashley Owens: Particularly here in the U S P.

Ashley Owens: Planning their futures conservatively right.

[Analyst] (BNP Paribas Exane): Hey, good morning. Thanks for taking the question. Really appreciate the framework and all the help on tariffs. I wanted to go back to the comment on not bringing goods in if the 145% tariff remained in place, that you look to shift production. What would be the timeframe to relocate production out of China, and which parts of the business are still sourced from China? Is it kids, anything specific?

Aubrey Tianello: Hey, good morning. Thanks for taking the question. Really appreciate the framework and all the help on tariffs. I wanted to go back to the comment on not bringing goods in if the 145% tariff remained in place, that you look to shift production. What would be the timeframe to relocate production out of China, and which parts of the business are still sourced from China? Is it kids, anything specific?

Speaker Change: Think they'd probably say the same thing that we're saying is <unk>.

Ashley Owens: April looks pretty good but.

Ashley Owens: But I don't know, what's going to happen in the future and if you're a major retailer.

Ashley Owens: Most important thing for you to manage and control is your inventory levels. So they are planning future inventory levels conservatively.

Ashley Owens: And we are saying that we expected to see that and are seeing that and frankly support that right.

Erinn Murphy: Yeah. It's not anything specific. So I think we gave you the percentage mix in China. That is more HEYDUDE than it is Crocs. In fact, it's a lot more HEYDUDE than it is Crocs. And in terms of shifting the remaining piece of Crocs, I think that could happen quickly. That could happen if we got an indication that the 145 is going to stay in place for a long time or a large elevated tariff on China is going to stay in place for a long time. We would shift that within six months. There are capabilities that we get in China that we don't get elsewhere, right? And those will take a little bit longer because they've been manufacturing footwear for a lot longer than some of the other places we're talking about. The HEYDUDE piece is also doable within a relatively short timeframe.

Andrew Rees: Yeah. It's not anything specific. So I think we gave you the percentage mix in China. That is more HEYDUDE than it is Crocs. In fact, it's a lot more HEYDUDE than it is Crocs. And in terms of shifting the remaining piece of Crocs, I think that could happen quickly. That could happen if we got an indication that the 145 is going to stay in place for a long time or a large elevated tariff on China is going to stay in place for a long time. We would shift that within six months. There are capabilities that we get in China that we don't get elsewhere, right? And those will take a little bit longer because they've been manufacturing footwear for a lot longer than some of the other places we're talking about.

Ashley Owens: Generally the worst thing for a brand is to force a whole bunch of inventory into the channel that's not going to sell.

Ashley Owens: And then as the consumer rebounds at some point in the future the channels less selling aged and out of date inventory. So.

Ashley Owens: We're totally in sync with that and would rather have that dynamic than a different dynamic.

Ashley Owens: Okay, great. Thank you.

Speaker Change: And your next question comes from Tom <unk> with Needham. Please go ahead.

Speaker Change: Hey, everyone.

Speaker Change: Taking my question.

Speaker Change: My question is about our capital allocation may be.

Speaker Change: Maybe Susan question, but.

Speaker Change: It sounds like the.

Andrew Rees: The HEYDUDE piece is also doable within a relatively short timeframe. I would say within 12 months, we could shift all of that volume. We might be able to do it a little bit quicker on being relatively cautious there. But I wouldn't say it's impacting any particular product. I'm aware that a couple of brands have called out that they're heavily in China for kids, which makes sense because it's still a lower-cost environment. So your lowest-margin product, you put in the cheapest source in place. That is not the case for us. We're confident we'll have ample kids supply for our consumers.

Speaker Change: The current environment, what would change your plans for investment in the business, but then.

Erinn Murphy: I would say within 12 months, we could shift all of that volume. We might be able to do it a little bit quicker on being relatively cautious there. But I wouldn't say it's impacting any particular product. I'm aware that a couple of brands have called out that they're heavily in China for kids, which makes sense because it's still a lower-cost environment. So your lowest-margin product, you put in the cheapest source in place. That is not the case for us. We're confident we'll have ample kids supply for our consumers.

Speaker Change: Does it change the way you think about <unk>.

Speaker Change: Capital allocation would you.

Speaker Change: Stockpile more cash would you prioritize debt paydown versus buyback or vice versa. Just just curious if.

Speaker Change: Your thought process has changed at all there.

Speaker Change: Yeah, Great question Tom.

Speaker Change: When we look at our cash flow for the year first of all we do model various different scenarios.

Speaker Change: And as we've evaluated a range of potential scenarios. One thing stands true we would continue to generate a significant amount of free cash flow.

[Analyst] (BNP Paribas Exane): Great. Thank you.

Aubrey Tianello: Great. Thank you.

Andrew Rees: Andrew, next question comes from Rick Patel with Raymond James. Please go ahead.

Operator: Andrew, next question comes from Rick Patel with Raymond James. Please go ahead.

Speaker Change: And so given that we're still committed to our one to one five times leverage range, but within that we have the opportunity to do both so both opportunistic share repurchases like we did in Q1 as well as paying down debt.

Rick Patel: Thank you. Good morning. Can you double-click on the drivers for Crocs international growth? Maybe update us on how big the largest regions are today and what you see as the most compelling growth drivers as we think about organic growth versus new distribution.

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

Speaker Change: Thank you thanks, Tom.

Erinn Murphy: Right. Okay. So I think the macro comment or the macro driver is brand penetration. As we look at the Crocs market share in many of our international markets, it is 1/3 of the market share we would see in many of our stronger markets, US, UK, for example, to where we have high market share, and Australia. So it's penetrating the market to the degree which we have penetrated the market elsewhere. That's the macro driver. In terms of how we're doing that, it's product, it's marketing, it's incremental distribution. It's heavily digitally led. It's leveraging social selling and social commerce. So the playbook that we've operated elsewhere applies most places. In terms of the larger focus areas, China's really important.

Andrew Rees: Right. Okay. So I think the macro comment or the macro driver is brand penetration. As we look at the Crocs market share in many of our international markets, it is 1/3 of the market share we would see in many of our stronger markets, US, UK, for example, to where we have high market share, and Australia. So it's penetrating the market to the degree which we have penetrated the market elsewhere. That's the macro driver. In terms of how we're doing that, it's product, it's marketing, it's incremental distribution. It's heavily digitally led. It's leveraging social selling and social commerce. So the playbook that we've operated elsewhere applies most places. In terms of the larger focus areas, China's really important.

Sam Poser: And your next question comes from Sam Poser with Williams trading. Please go ahead.

Sam Poser: Thank you very much for taking my questions I've got.

Sam Poser: One that I'll break into three parts or three.

Sam Poser: Oh breakout.

Sam Poser: Take out with Hey, Dude in the in your direct business like sort of the idea of how much come from stores versus your.

Sam Poser: Your own dot com versus social can you give us some idea of that of that breakout.

Sam Poser: Yeah, Yeah, we are.

Sam Poser: Not providing that breakout.

Sam Poser: So.

Sam Poser: But just to give you some qualitative comments if that's helpful.

Sam Poser: And I'll start with the last piece the social right, so look social selling.

Sam Poser: Is something which we have embraced right. So.

Sam Poser: We've been doing it.

Sam Poser: For several years and in China, and it's been incredibly successful tick tock launch there.

Erinn Murphy: We've been talking about that for some time and continue to see real success in China, clearly gaining market share in a market which is relatively difficult. We ascribe that to approachable price point, very strong marketing, and digital-first activation. We are increasingly focused on India, where you have a rapidly growing middle class and a very large population. We saw some constraints in India, which we've talked about historically around their import restrictions that they've applied. We have solved all of those. We now have adequate production for both Crocs and HEYDUDE in India to satisfy all of the demand we have in India, but plus export. It's become a more significant manufacturing hub and export market for us as well. We're really pleased with the traction that we're seeing in Western Europe.

Andrew Rees: We've been talking about that for some time and continue to see real success in China, clearly gaining market share in a market which is relatively difficult. We ascribe that to approachable price point, very strong marketing, and digital-first activation. We are increasingly focused on India, where you have a rapidly growing middle class and a very large population. We saw some constraints in India, which we've talked about historically around their import restrictions that they've applied. We have solved all of those. We now have adequate production for both Crocs and HEYDUDE in India to satisfy all of the demand we have in India, but plus export. It's become a more significant manufacturing hub and export market for us as well. We're really pleased with the traction that we're seeing in Western Europe.

Sam Poser: It will tick tock launch that shop in the fall of last year, we put both of our brands on that shelf relatively quickly and we've seen tremendous success. We are seeing success. Both in terms of the amount of selling that we do.

Sam Poser: But we're also seeing a very clear halo from that for selling on those styles both to our other digital channels and also into store.

Sam Poser: So we think it's combination of selling our marketing if you like a bit of a perfect storm in terms of the other components, but hey, dude. So that's.

Sam Poser: Our direct digital business. So that's haydu dot com and also Amazon, where we are a three P partner with Amazon for Hey, Dude. So we have complete control over both of those channels.

Sam Poser: We feel good about the performance of those channels, we feel good about our ability to showcase our brand and also introduce new products and storyteller around that product as well and then the last piece is the retail business, which is our outlet stores that we opened last year.

Erinn Murphy: I think we've highlighted historically, the UK has performed very well, but we're seeing really nice traction in France and Germany. And that's, again, really about penetrating the markets. Those are a little bit more wholesale markets, so that's about penetrating new customers, getting new presentation in front of the consumers supported by localized marketing. Hopefully, that gives you a good.

Andrew Rees: I think we've highlighted historically, the UK has performed very well, but we're seeing really nice traction in France and Germany. And that's, again, really about penetrating the markets. Those are a little bit more wholesale markets, so that's about penetrating new customers, getting new presentation in front of the consumers supported by localized marketing. Hopefully, that gives you a good. Yep. Go ahead, Rick.

Sam Poser: Those are performing well.

Sam Poser: It gives us multiple vehicles as you well understand from an outlet business. We can showcase the breadth of our product. We can also have a vehicle to clean up excess inventory.

Rick Patel: Yep. Go ahead, Rick. Thank you, Andrew. Thank you. And just to follow up on that, as we think about the importance of marketing investment and the company strategy, the continued leaning in, how much of that marketing investment is distorted towards white-space opportunities for Crocs in international markets as opposed to trying to turn around HEYDUDE?

Rick Patel: Thank you, Andrew. Thank you. And just to follow up on that, as we think about the importance of marketing investment and the company strategy, the continued leaning in, how much of that marketing investment is distorted towards white-space opportunities for Crocs in international markets as opposed to trying to turn around HEYDUDE?

Sam Poser: And importantly in some of the markets, where the brand is less well known it's an introduction for the consumer to the brand. So all qualitative but I hope that helps you understand how we think about those components of our DTC business.

Speaker Change: Yes. Thank you that's it.

Sam Poser: And then secondly, you talked about April maintaining the momentum in April maintained.

Erinn Murphy: It's both, I would say. So the overall HEYDUDE marketing budget is a little bit above that of Crocs but not massively. As a percentage of sales, I'm talking about. So obviously, in dollars, it's a lot less, but in terms of percentage of sales. And then I would say for Crocs, we very strategically allocate it to the markets where we see the greatest opportunity. So we've had a sustained level of spending in China. That's definitely paying off. We're ramping up our spending in India, and we have a strong level of activity in Western Europe.

Andrew Rees: It's both, I would say. So the overall HEYDUDE marketing budget is a little bit above that of Crocs but not massively. As a percentage of sales, I'm talking about. So obviously, in dollars, it's a lot less, but in terms of percentage of sales. And then I would say for Crocs, we very strategically allocate it to the markets where we see the greatest opportunity. So we've had a sustained level of spending in China. That's definitely paying off. We're ramping up our spending in India, and we have a strong level of activity in Western Europe.

Sam Poser: With.

Sam Poser: Some retailers call it Marpol March and April together because of the shift of Easter.

Sam Poser:

Sam Poser: Can you can you give us a little more color on that trend line between.

Sam Poser: March and April.

Sam Poser: Picture and then I'll just ask the other one now.

Sam Poser: It sounds to me like you're planning the pairs like you're being more <unk>.

Sam Poser: Conservative with the pairs, you're going to put in the marketplace towards the back half of the year and willing.

Sam Poser: Still plan to gain share, but willing to give up some unit sales in place of brand is that is that a given given the uncertainty.

Rick Patel: Very helpful. Thanks so much.

Andrew Rees: Andrew, next question comes from Adrian Yee with Barclays. Please go ahead.

Operator: Andrew, next question comes from Adrian Yee with Barclays. Please go ahead.

Sam Poser: Marketplace.

Adrienne Yih: Good morning. This is Michael Vuon for Adrian Yee, and thank you for taking our question. Related to the wholesale versus DTC channels, can you share any details on the relationship or, in better words, how it would work for distribution in the wholesale channel if you increase prices in DTC? What happens for wholesalers, for those who have already placed their orders? And is there any negotiating room with the wholesalers on increasing prices of orders on the ones that they've already placed? Thank you.

Michael Cowan: Good morning. This is Michael Vuon for Adrian Yee, and thank you for taking our question. Related to the wholesale versus DTC channels, can you share any details on the relationship or, in better words, how it would work for distribution in the wholesale channel if you increase prices in DTC? What happens for wholesalers, for those who have already placed their orders? And is there any negotiating room with the wholesalers on increasing prices of orders on the ones that they've already placed? Thank you.

Sam Poser: It's a fair question.

Sam Poser: Fair summary sounds right, yes, we would prefer to so for example, right if the 145.

Speaker Change: Sorry, the 145% tariff remains in place in China, we will cancel last goods.

Sam Poser: We were planning to bring in from China for Hey, Dude.

Speaker Change: Verse is bring them in at essentially zero profit.

Speaker Change: Which will take passed out in the marketplace. In addition.

Erinn Murphy: Okay. That's a complicated question. So obviously, in DTC, we have latitude to change prices whenever we wish. I would say that's not likely unless we're kind of testing price elasticity. We'd probably want to keep pricing in the market or a given market, whether that be the US, the UK, or China, pretty consistent across channels. In terms of changing the price of goods that have already been ordered from a wholesale partner, I think that's what you're really getting at with your question. Look, we have done that in the past when it was an emergency situation or as a situation we thought that was warranted. I don't think in this case, we're likely to take that approach. I think we have a little time here to see how things settle out. So I think that's extremely it's doable, but it's very unlikely we would do that.

Andrew Rees: Okay. That's a complicated question. So obviously, in DTC, we have latitude to change prices whenever we wish. I would say that's not likely unless we're kind of testing price elasticity. We'd probably want to keep pricing in the market or a given market, whether that be the US, the UK, or China, pretty consistent across channels. In terms of changing the price of goods that have already been ordered from a wholesale partner, I think that's what you're really getting at with your question. Look, we have done that in the past when it was an emergency situation or as a situation we thought that was warranted.

Speaker Change: If a given retail partner wants to manage down their order book.

Speaker Change: Collectively or specifically, we are working with them to do that versus trying to force them to take orders, which they don't need it.

Speaker Change: And sorry, what was the March and April pace.

Speaker Change: Yeah, Yeah, I mean, I think we've said a few times that the trend is is good right. We feel good about March and April and.

Speaker Change: But.

Speaker Change: We like anybody else don't really have a.

Speaker Change: A crystal ball as to how long that continues.

Andrew Rees: I don't think in this case, we're likely to take that approach. I think we have a little time here to see how things settle out. So I think that's extremely it's doable, but it's very unlikely we would do that. And so we would be looking for a more coordinated change in pricing across multiple channels at a designated point in time in the future.

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

Speaker Change: So just to close out I appreciate everybody's.

Erinn Murphy: And so we would be looking for a more coordinated change in pricing across multiple channels at a designated point in time in the future.

Speaker Change: Interest in our company and.

Speaker Change: We look forward to.

Speaker Change: To speaking to you again at the end of the next quarter. Thank you.

Adrienne Yih: Sounds great. Thank you very much.

Michael Cowan: Sounds great. Thank you very much.

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

Andrew Rees: Andrew, next question comes from Ashley Owens with KeyBanc Capital Markets. Please go ahead.

Operator: Andrew, next question comes from Ashley Owens with KeyBanc Capital Markets. Please go ahead.

Ashley Owens: Great. Good morning. So maybe just to follow up on the wholesale channel in general, we're hearing from others that some of the suppliers are planning the balance of the year more prudently than initial expectations had suggested. Is this something you're currently seeing with the order books or any color you could provide on how that's shaking out or shifting in real time would be helpful? Thank you.

Speaker Change: [music].

Erinn Murphy: Yes. I'm probably going to reiterate what you already have actually. So what I would say is major retailers, our wholesale partners, particularly here in the US, are planning their futures conservatively, right? And I think they'd probably say the same thing that we're saying is, "April looks pretty good, but I don't know what's going to happen in the future." And if you're a major retailer, the most important thing for you to manage and control is your inventory levels. So they are planning future inventory levels conservatively. And we are seeing that, right? We expected to see that and are seeing that and frankly, support that, right? Generally, the worst thing for a brand is to force a whole bunch of inventory into the channel that's not going to sell.

Andrew Rees: Yes. I'm probably going to reiterate what you already have actually. So what I would say is major retailers, our wholesale partners, particularly here in the US, are planning their futures conservatively, right? And I think they'd probably say the same thing that we're saying is, "April looks pretty good, but I don't know what's going to happen in the future." And if you're a major retailer, the most important thing for you to manage and control is your inventory levels. So they are planning future inventory levels conservatively. And we are seeing that, right? We expected to see that and are seeing that and frankly, support that, right? Generally, the worst thing for a brand is to force a whole bunch of inventory into the channel that's not going to sell.

Erinn Murphy: And then as the consumer rebounds at some point in the future, the channel's less selling, aged, and out-of-date inventory. So we're totally in sync with that and would rather have that dynamic than a different dynamic.

Andrew Rees: And then as the consumer rebounds at some point in the future, the channel's less selling, aged, and out-of-date inventory. So we're totally in sync with that and would rather have that dynamic than a different dynamic.

Ashley Owens: Okay. Great. Thank you.

Andrew Rees: Andrew, next question comes from Tom Nikic with Needham. Please go ahead.

Operator: Andrew, next question comes from Tom Nikic with Needham. Please go ahead.

Tom Nikic: Hey, everyone. Thanks for taking my question. My question's about capital allocation. This may be a Susan question, but it sounds like the current environment wouldn't change your plans for investment in the business. But does it change the way you think about capital allocation? Would you stockpile more cash? Would you prioritize debt paydown versus buyback or vice versa? Just curious if your thought process has changed at all there.

Susan Healy: Yeah. Great question, Tom. When we look at our cash flow for the year, first of all, we do model various different scenarios. As we've evaluated a range of potential scenarios, one thing stands true. We would continue to generate a significant amount of free cash flow. So given that, we're still committed to our 1 to 1.5 times leverage range. But within that, we have the opportunity to do both. So both opportunistic share repurchases like we did in Q1 as well as paying down debt.

Tom Nikic: All right. Thanks very much, and best of luck the rest of the year.

Susan Healy: Thank you.

Rick Patel: Thanks, Tom.

Andrew Rees: Thanks, Tom.

Andrew Rees: Andrew, next question comes from Sam Poser with Williams Trading. Please go ahead.

Operator: Andrew, next question comes from Sam Poser with Williams Trading. Please go ahead.

Sam Poser: Thank you very much for taking my questions. I've got one that I'll break into three parts or three. Could you break out HEYDUDE in your direct business, sort of the idea of how much comes from stores versus your own.com versus social? Can you give us some idea of that breakout?

Erinn Murphy: Yeah. Yeah. We're not providing that breakout, Sam. But just to give you some qualitative comments, if that's helpful. And I'll start with the last piece, the social, right? So look, social selling is something which we have embraced, right? So we've been doing it for several years in China, and it's been incredibly successful. TikTok launched their shop in the fall of last year. We put both of our brands on that shop relatively quickly, and we're seeing tremendous success. We're seeing success both in terms of the amount of selling that we do, but we're also seeing a very clear halo from that selling on those styles both to our other digital channels and also into store. So we think it's a combination of selling and marketing, if you like, a sort of perfect storm.

Andrew Rees: Yeah. Yeah. We're not providing that breakout, Sam. But just to give you some qualitative comments, if that's helpful. And I'll start with the last piece, the social, right? So look, social selling is something which we have embraced, right? So we've been doing it for several years in China, and it's been incredibly successful. TikTok launched their shop in the fall of last year. We put both of our brands on that shop relatively quickly, and we're seeing tremendous success. We're seeing success both in terms of the amount of selling that we do, but we're also seeing a very clear halo from that selling on those styles both to our other digital channels and also into store. So we think it's a combination of selling and marketing, if you like, a sort of perfect storm.

Erinn Murphy: In terms of the other components for HEYDUDE, so that's our direct digital business. So that's heydude.com and also Amazon where we are a 3P partner with Amazon for HEYDUDE. So we have complete control over both of those channels. We feel good about the performance of those channels. We feel good about our ability to showcase our brand and also introduce new products and storytell around that product well. And then the last piece is the retail business, which is our outlet stores that we opened last year. Those are performing well. It gives us multiple vehicles. As you well understand, from an outlet business, we can showcase the breadth of our product. We can also have a vehicle to clean up excess inventory. And importantly, in some of the markets where the brand is less well known, it's an introduction for the consumer to the brand.

Andrew Rees: In terms of the other components for HEYDUDE, so that's our direct digital business. So that's heydude.com and also Amazon where we are a 3P partner with Amazon for HEYDUDE. So we have complete control over both of those channels. We feel good about the performance of those channels. We feel good about our ability to showcase our brand and also introduce new products and storytell around that product well. And then the last piece is the retail business, which is our outlet stores that we opened last year. Those are performing well. It gives us multiple vehicles. As you well understand, from an outlet business, we can showcase the breadth of our product.

Andrew Rees: We can also have a vehicle to clean up excess inventory. And importantly, in some of the markets where the brand is less well known, it's an introduction for the consumer to the brand. So all qualitative, but I hope that helps you understand how we think about those components of our DTC business.

Erinn Murphy: So all qualitative, but I hope that helps you understand how we think about those components of our DTC business.

Sam Poser: Yeah. So thank you, Rick. Then secondly, you talked about April maintaining the momentum in April maintained. As some retailers call it, "Marpril." March and April together because of the shift of Easter. Can you give us a little more color on that trend line between March and April in the big picture? And then I'll just ask the other one now. It sounds to me like you're planning the pairs. You're being more conservative with the pairs you're going to put in the marketplace towards the back half of the year and still planning to gain share but willing to give up some unit sales in place of brand. Is that a given, given the uncertainty of the marketplace?

Erinn Murphy: Yeah. Yeah. That's a fair question. That's a fair summary, Sam, right? Yes. We would prefer to, so for example, right, if $145, sorry, the 145% tariff remains in place in China, we will cancel off goods that we were planning to bring in from China for HEYDUDE versus bring them in at essentially zero profit, which will take pairs down in the marketplace. In addition, if a given retail partner wants to manage down their order book collectively or specifically, we are working with them to do that versus trying to force them to take orders which they don't need. And sorry, what was the March and April piece?

Andrew Rees: Yeah. Yeah. That's a fair question. That's a fair summary, Sam, right? Yes. We would prefer to, so for example, right, if $145, sorry, the 145% tariff remains in place in China, we will cancel off goods that we were planning to bring in from China for HEYDUDE versus bring them in at essentially zero profit, which will take pairs down in the marketplace. In addition, if a given retail partner wants to manage down their order book collectively or specifically, we are working with them to do that versus trying to force them to take orders which they don't need. And sorry, what was the March and April piece?

Ashley Owens: Trend line.

Susan Healy: Trend line.

Erinn Murphy: Yeah. Yeah. I mean, I think we've said a few times that the trend is good, right? We feel good about March and April. But we, like anybody else, don't really have a crystal ball as to how long that continues.

Andrew Rees: Yeah. Yeah. I mean, I think we've said a few times that the trend is good, right? We feel good about March and April. But we, like anybody else, don't really have a crystal ball as to how long that continues.

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

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Chief Executive Officer Andrew Rees for any closing remarks.

Erinn Murphy: So just to close out, appreciate everybody's interest in our company, and we look forward to speaking to you again at the end of the next quarter. Thank you.

Andrew Rees: So just to close out, appreciate everybody's interest in our company, and we look forward to speaking to you again at the end of the next quarter. Thank you.

Andrew Rees: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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