Crocs, Inc.

and thank you for standing by. Welcome to the Crocs, Inc. Second 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, 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 speaker today, Corinne Lin. Please go ahead.

Corinne Lin Good morning, everyone, and thank you for joining us today for the Crocs second quarter 2021 earnings call. Earlier this morning, we announced our latest quarterly results and a copy of the press release may be found on our website at crocs.com. We would like to remind you that some of the information provided on this call is forward looking and accordingly is subject to the safe harbor provisions of the federal securities law. 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 factor section of our annual report on Form 10-K. Accordingly, actual results could differ material from those described on this call. Please refer to Kroc's annual report on Form 10-K as well as other documents filed with the SEC for more information relating to these risk factors. Adjusted gross margin, income from operations, operating margin, and earnings per diluted common share are non-GAAP measures. A reconciliation of these amounts through GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, Chief Executive Officer, and Ann Melman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I'll turn the call over to Andrew.

Thank you, Kari, and good morning, everyone. Our Q2 results are exceptional as we continue to see strong demand for the Crocs brand globally. Our confidence in the strength of our brand is also reflected in our raised 2021 guidance. Looking beyond this year, we're announcing that the Crocs brand will have net zero emissions by 2030. We will raise our already low emission footprint per shoe and enable us to provide comfort without carbon to our fans worldwide. I'm excited for our future and I'm confident we can deliver sustained, highly profitable growth while having a positive impact on our planet and our communities. Turning to the highlights from the second quarter of 2021. Revenues nearly doubled versus prior year to 641 million and increased 79% from 2019. Revenue growth was strong across all regions, with the Americas up 136% and on a constant currency basis, EMEA up 53% and Asia up 27%. Sandals, one of our long-term growth pillars, grew by 57% in the second quarter and 38% for the first half. Digital sales grew by 25% versus prior year and an impressive 99% versus 2019 to represent 36% of revenues. PTC grew 79% versus prior year and 86% versus 2019 to represent 52% of revenues. Adjusted operating income more than doubled to $196 million and adjusted operating margins expanded to a record of 31%. Adjusted diluted earnings per share increased by $1.22 to $2.23. Underlying these incredible results is the iconic brand we have built. To continue to fuel brand relevance and consideration globally, we leverage digital and social marketing, influencer campaigns, and collaborations. We were the first footwear brand to market an augmented reality experience on TikTok with our hashtag Get Cropped Challenge, featuring try-on sandals and clogs with jibbits. Globally, this drove over 8 billion views and over 1 million uses of the hashtag. We also generated buzz when Balenciaga's Spring 2022 runway featured our second collaboration together, comprised of a knee-high rain boot and a cropped Madame Stiletto. Global collaboration highlights include London-based skatewear brand Palace, in Russia, rave music brand Little Big, In Japan, highly influential retailer Beams, and in South Korea, world-famous ramen brand Nongshim. Finally, in the U.S., we reintroduced our Free Pair for Healthcare initiative during National Nurses Week, where we gave away 50,000 pair of Crocs at Work shoes to frontline caregivers. We're proud of the brand we have built and especially pleased with the initiatives such as Free Pair for Healthcare that enable the Crocs brand and business to have a positive impact on our communities. This week we announced our next step in having a positive impact on our planet, our commitment to becoming a net zero emissions by 2030. Our inherently simple approach to design, the materials we use, and how our shoes are manufactured means that our classic clog already has a low carbon footprint of only 3.94 kilograms of carbon per pair. We're taking it a step further with our plan to achieve net zero emissions through sustainable ingredients and packaging, as well as a responsible resource use. We anticipate our consumers will be as excited as we are about our commitment to having a positive impact on our planet. In addition to reducing our environmental footprint, our comfort journey will increasingly include uplifting our communities and creating a welcoming environment for everyone rooted in a culture of transparency and accountability. This week we launched a new brand purpose section of our crocs.com site and a new ESG section of our investor site to share our progress. I encourage you to review the content that we will discuss in greater detail at our upcoming investor day. Now let's turn to second quarter operating highlights. We're very excited by the growth we've seen in all key product pillars, plugs, sandals, and gibbets. Plug sales were outstanding, increasing 101% year over year to represent 74% of total footwear revenues versus 68% last year. We continue to innovate and are encouraged by the initial results of our new platform and seasonal colors and prints. Sandal sales were a standout, increasing 57% for Q2 and 38% for the first half, driven by our classic slide and classic sandal that both feature personalization, as well as Brooklyn and Tulum franchises. In addition to this strong growth, we're very pleased that in our global brand study, sandal consideration is now in line with that of Klug's. Given the strength of Klug's, sandals represented 20% of Fort Worth sales for the quarter, versus 23% last year. And as we have shared, while we expect clog growth to outpace sandals this year, we anticipate that over the longer term, sandals will grow faster than clogs. Jibbitz sales were once again exceptional, more than tripling for the quarter versus last year. The global personalization megatrend continues, and Crocs fans enjoy the experience of shopping for charms in our retail and wholesale stores. From a channel perspective, global DTC revenues, which include revenues from e-commerce and company-owned retail stores, grew by 79%. Retail had extraordinary performance, with traffic and conversion up significantly from more normalized second quarter of 2019. E-commerce performed well, and this was the 17th consecutive quarter of double-digit e-commerce growth. Digital sales grew 25% on top of an elevated 2020 compare to represent 36% of our second quarter sales compared to 56% last year and 33% in 2019. Digital remains our top priority and we continue to invest in our customer experience globally to retain our competitive advantage relative to other full web brands. A wholesale channel which includes brick and mortar, e-tail and distributors grew revenues by 112% versus prior year and 71% compared to 2019. Our focus on strategically important accounts comprised of leading e-tailers, sporting goods, family footwear and specialty footwear retailers led to a strong growth in all sub-channels globally. Our top 20 brick and mortar accounts and distributors were standouts as they rebounded from the depths of the pandemic. Finally, profitability was exceptional as we achieved record quarterly adjusted operating margins and record quarterly adjusted EPS. While we remain incredibly optimistic about our business and have substantially raised four-year 2021 guidance, as we emerge from the pandemic, global logistics remain challenging and volatile. In addition, we're increasingly seeing COVID spikes in some of our primary manufacturing countries and are concerned about the short-term impact of potential factory closures on supply. We have attempted to incorporate both the additional expense and the potential supply disruption into our guidance that Anne will review. Before I turn the call over to Anne, I want to thank the entire Crocs organization. These results are a reflection of their hard work and dedication to the Crocs brand. I'm excited for our future and look forward to achieving our commitment of net zero by 2030, creating a more comfortable world for us all. With that, I will now review our financial results in more detail.