Crocs, Inc.

Thank you for standing by and welcome to the Crocs Incorporated first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Ms. Corinne Lin. Thank you. Please go ahead.

Good morning, everyone, and thank you for joining us today for the Crocs first quarter 2021 earnings call. Earlier this morning, we announced our latest quarterly results and a copy of the press release movie found on our website at crocs.com. We would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the safe harbor provisions of the federal securities laws. These statements include but are not limited to statements regarding potential impacts to our business related to the COVID-19 pandemic. Crocs is not obligated to update these forward-looking statements to reflect the impact of future events. We caution you that all forward-looking statements are subject to risks and uncertainties described in the risk factors section of our annual report on Form 10-K. Accordingly, actual results could differ materially from those described on this call. Please refer to Crocs' annual report on Form 10-K as well as other documents filed with the SEC for more information relating to these risk factors. Adjusted gross margin, income from operations, operating margin, and earnings per diluted common share are non-GAAP measures. Reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Reese, Chief Executive Officer, and Ann Millman, Executive Vice President and Chief Financial Officer. Following the prepared remarks, we will open the call for your questions. At this time, I'll turn the call over to Andrew.

Thank you, Kari, and good morning, everyone. We are thrilled with our Q1 results. The strength of the Crocs brand is exceptional, experiencing growth across all regions and all channels. In Q1, our global brand momentum continued to strengthen and we benefited from economies starting to emerge from the pandemic and government stimulus in select important markets. I'm proud of our performance and I'm incredibly confident in our ability to deliver sustained, highly profitable growth. Highlights from the first quarter of 2021 include for the third consecutive quarter, we achieved record revenues with first quarter revenues of $460 million, up 64% versus prior year. Our Americas business had another tremendous quarter with revenues increasing 87% and DTC revenues growing 131%. Our EMEA business has increasing momentum with 49% revenue growth, and Asia showed strong double-digit growth of 26% in the quarter. Digital grew 75% to represent 32% of total revenues. Adjusted operating income was $126 million, increasing by approximately $100 million, and adjusted operating margins expanded to 27%. Adjusted diluted earnings per share grew from $0.22 to a quarterly record of $1.49. On top of these outstanding financial results, the Crocs brand ranked the highest it has ever been in Piper Sandler's spring Taking Stock with Teens survey. The strength of our brand remains unabated. We continue to drive brand relevance and consideration through our multifaceted marketing approach that leverages digital and social marketing, celebrity and influencer campaigns, and collaborations. We kicked off 2021 with an award-winning collaboration with French EDM artist Vladimir Kuchma that featured his signature skull mask. To celebrate St. Patrick's Day, we posted a rainbow of Crocs and a pot of gibbets across social media and released Lucky Charms gibbets that quickly sold out. In March, we launched a second global collaboration with Justin Bieber, and his Drew House brand that confirmed Crocs with socks are indeed better together. And to continue accelerating the Crocs brand in China, Justin Bieber sent fans on a mission to locate arcade games in nine cities, giving them a chance to win free Crocs, Drew House plush toys, and socks. We are incredibly proud that the Crocs brand and business has a positive impact on our communities. Most recently, we were pleased to partner with the United Nations Foundation as it launched its 2021 hashtag equal everywhere campaign to promote gender equality around the world. From a free pair for healthcare program that allowed us to provide comfort to those on the front lines, to partnerships with Feeding America, the NAACP, UNICEF, and GLAAD, that let the world know we're all in this together. We have accelerated our mission of everyone comfortable in their own shoes by remaining focused on doing the right thing. In addition for doing the right thing for our communities, we strive to do the right thing for our employees. We recently raised entry-level wages to an average of $15 per hour for our frontline employees in our U.S. distribution center and U.S. retail stores in recognition of their contribution to the success of the Crocs brand. We were honored last week to be named to Forbes Best Employers for Diversity for 2021. We were also recently named to Fast Company's annual list of the world's most innovative companies for 2021 that recognized organizations that not only found a way to be resilient in 2020, but also turned those challenges into impactful initiatives. Our ability to make a difference also resonates with our consumers, including teens, who are socially and environmentally conscious. I'm confident that the strength of the Crocs brand and our mission of everyone comfortable in their own shoes will continue to drive accelerated growth this year and beyond. Now let's turn to first quarter operating highlights. From a product perspective, we experienced strong growth in our key product pillars, clogs, sandals, and gibbets. Sales of the clogs were exceptional this quarter, increasing 87% year-over-year, representing 76% of total footwear revenues versus 65% last year. We continue to experience success with seasonal offerings and trend-right drops, such as Out of This World and Marble Prince. At the same time, sandal revenues increased 17% to represent 17% of footwear sales versus 24% last year. We are very encouraged by our initial results of our sandals that feature personalization, including our classic fly and the newly introduced classic two-strap sandal. While we expect clog growth to outpace sandals this year, over the longer term, sandals will grow faster than clogs. Jibbitz sales continue to be outstanding, more than doubling for the quarter versus last year, as global personalization megacurrent continues. From a channel perspective, global DTC revenues, which include revenues from e-commerce and company-owned retail stores, grew 93%. Both e-commerce and retail had extraordinary performance and this was our 16th consecutive quarter of double-digit e-commerce growth. Digital, which combines e-commerce that is reported in DTC and e-tail that is reported in wholesale grew 75% to represent 32% of our first quarter sales compared to 30% last year. Digital remains our top priority and our digital presence remains a competitive advantage relative to other footwear brands. Our wholesale channel, which includes brick and mortar, e-tail and distributors grew 50% versus prior year, fueled by growth in all segments. eTail and our top 20 brick and mortar accounts experienced exceptional sell-through. Distributors had the highest growth as they replenished inventories in preparation for a strong 2021. With our continued momentum, we remain focused on positioning a brand for long-term sustainable growth. After careful consideration, we recently decided to prioritize wholesale partners who are aligned with our brand strategy and desired positioning in the marketplace. As such, we began terminating select North American wholesale relationships, a strategy many major brands have also used to maintain strong marketplace health. Looking forward, we'll remain focused on our strategically important accounts, comprised of leading e-tellers, sporting goods, and family footwear and specialty footwear retailers. Our record revenues in the first quarter were achieved despite challenging global logistics that impacted many industries around the world. We're not immune to these challenges, with blockage of the Suez Canal and significant bottlenecks in West Coast ports leading to delays. Global logistics are expected to remain congested and we're being proactive as possible. Our new EMEA DC in the Netherlands has opened and the transition is running smoothly. The expansion of our USDC is also proceeding as planned. These investments will support our competitive advantage in digital and our future growth. Finally, profitability was exceptional as we achieved record quarterly adjusted operating margins and record quarterly adjusted EPS. We're incredibly optimistic about the balance of 2021 and have substantially raised guidance for the year. Before I turn the call over to Anne, I want to express my gratitude to the entire Crocs organization for their dedication to our brand and to our communities. I'm proud of how they've executed as a team and the results that we have delivered for our employees, our customers, and our shareholders. With that, Anne will now review our financial results in more detail.