Crocs, Inc.

Good morning and welcome to the Crocs Incorporated first quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Corey Lynn, Vice President of Corporate Finance. Please go ahead.

Good morning, everyone, and thank you for joining us today for the Crocs first quarter 2022 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 laws. These statements include, but are not limited to, statements regarding the acquisition of Heydude and the benefits thereof, CROC strategy, plans, objectives, expectations, financials, or otherwise, and intentions. future financial results and growth potential, anticipated product portfolio, our ability to create and deliver shareholder value, and statements regarding potential impacts to our business related to the COVID-19 pandemic. These statements involve known and unknown risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to be materially different from any future results, performances, or achievements expressed or implied by the forward-looking statements. PROC is not obligated to update these forward-looking statements to reflect the impact of future events, except as required by applicable law. We caution you that all forward-looking statements are subject to risks and uncertainties described in the risk factors section of our annual report on Form 10-K and our subsequent filings with the SEC. Accordingly, actual results could differ materially from those described on this call. Please refer to CROC's annual report on Form 10-K, as well as other documents filed with the SEC, for more information relating to these risk factors. 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. Joining us on the call today are Andrew Reese, 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. we're very pleased today to announce that we had an exceptional first quarter, despite a number of headwinds. Revenues grew by 47% on a constant currency basis, adjusted operating margins were extremely strong at 27% of sales, and we generated $2.05 of adjusted diluted EPS. Within our overall company results, the Crocs brand performed very strongly across all regions and channels. While we have only owned Hey Dude for six weeks during the quarter, We are rapidly assimilating it into the company and it's very clear that demand for the brand is exceptional and we're confident in a robust growth runway. Anne will review our financial results in more detail shortly, but here are a few highlights from the first quarter of 2022. Overall consolidated revenue growth, including both Crocs and Hey Dude, was 47% on a constant currency basis. On a constant currency basis, Crocs brand grew 22% including strong DTC growth of 20% and digital growth of 23%. Hey Dude revenue exceeded our expectations at $115 million since February 17th. On a pro forma basis, Q1 revenues were $205 million, up 81%. The Hey Dude integration is proceeding well and is on track. Adjusted operating margins on a consolidated basis, including Crocs and Hey Dude, was best in class at 27%. Adjusted diluted EPS was an exceptional $2.05 per share. Both brands ranked in the top ten of Piper Sandler's spring Taking Stock with Teens survey, with Crocs at number six preferred footwear brand, up from number eight last spring, and Hey Dude as the number nine preferred footwear brand. Finally, we released our 2021 ESG report, reiterating our bold commitment to become a net zero company by 2030. Moving to our brand highlights for the quarter, let's begin with a cross-brand. We experienced a strong Q1 with constant currency growth of 22%. Our strong DTC growth evidences the continued demand consumers have for the brand. Another indicator of Crocs' demand is that it jumped up two spots in the Piper Sandler Spring Teen Survey to become the number six preferred footwear brand amongst teens. We continue to drive Crocs' brand relevance and consideration through many activations. We made waves at the Grammys when Justin Bieber wore a hard Crocs sandal created in collaboration with luxury fashion house Balenciaga. and Questlove wore the Polex clog from our partnership with renowned footwear designer, Salehi Bembry. In China, we introduced fashion and entertainment icon, Nana, as China's newest Crocs ambassador, leveraging her creativity and ingenuity. We continue to run many innovative digital marketing campaigns. For our Carol G collaboration, we curated a custom playlist with Spotify and a popular playlist, Viva Latina, which helped drive 1.4 million visits to the Crocs website during the campaign. The Karol G Instagram announcement also became the second most liked post in Crocs social history. To drive sound consideration amongst athletes, we teamed up with Slam Magazine to develop a content series highlighting how four global basketball stars incorporate Crocs into their off-court looks. We experienced additional basketball-themed success with Crocs ranked in the top five most popular brands in the NBA 2K video game series. Our Valentine's Day collaboration with Sweetheart's Candy to create the classic Sweetheart fur clog drove 200,000 unique visitors to our site. And the novelty Crocs were a topic of conversation on the Late Late Show between host James Gordon and guest Nicki Minaj. Our new cozy two-strap line sandal debuted in a digital first launch on the Crocs app. And finally, we had a very promising start to our newly launched LightRide 360 franchise that features enhanced breathability and comfort, as well as a higher price point than our original LightRide franchise. From a channel perspective, we achieved strong growth in both DTC and wholesale as revenues benefited from higher pricing, favorable product mix, on lower promotional levels as compared to last year. Brock's brand DTC Revenues, which includes revenues from e-commerce and company-owned retail stores, grew by 20% on a constant currency basis over 2021. Wholesale, which includes brick and mortar, retail, and distributors, grew revenues 23% on a constant currency basis. Our digital business experienced another strong quarter of 23% growth on a constant currency basis. Turning to Hey Dude, We closed the acquisition on February 17th and are even more excited about the opportunities ahead of us. HeyDude brand revenues exceeded our expectations, contributing $115 million to the first quarter or $205 million on a pro forma basis. Demand was incredible, both in wholesale and digital, fueling 81% pro forma growth for the quarter. Underlying momentum is exceptional for HeyDude. The brand ranked ninth in the Piper Sandler Spring 2022 survey, cracking the top ten for the second consecutive survey, and remains particularly strong in the Midwest and South. To drive future growth, we're focused on building out the brand platform for HeyDo. You will begin to see some of this work in the marketplace later this year. By investing in talent, marketing, and digital, we look forward to taking this highly successful brand that consumers love and growing into a billion-dollar-plus brand across the U.S. and high-potential international markets. From an integration standpoint, it's early days, but everything is progressing to plan. As we mentioned during our fourth quarter conference call, we've hired many of the key leadership positions. We're integrating the shared service functions, including HR, finance, legal, and supply chain, With the integration on track and results already exceeding expectations, we look forward to continued success of this high-growth, highly profitable brand. Another notable achievement is that we published the Crocs brand ESG report, reflecting important progress and our commitment to becoming a more sustainable and equitable company. Over time, this report will evolve to capture both brands and continue to be guided by the SASB and UN Sustainable Development Goals. As a brand that is proud to invite everyone to be comfortable in their own shoes, the report demonstrates how we've applied our come-as-you-are values into an actionable three-pillar approach to ESG. Comfort without carbon, comfort for our communities, and comfort for all people. We're excited about the transparency of our sustainability efforts, especially around sustainable innovation and renewable energy, and this report reinforces our bold commitment to become a net-zero company by 2030. Now let me turn to the future. As we discussed on our fourth quarter call, the macro environment remains challenging. The backdrop of high inflation, rising interest rates, and supply chain disruptions has only become more complicated with the war in Ukraine and the ongoing shutdowns caused by the zero COVID policy in China. The impact of all these factors on consumer confidence remains uncertain. However, we have tremendous confidence and clear evidence to the underlying strength and growth potential of both the Crocs and Hey Dude brands. We look forward to continuing to execute on the long-term vision for both brands and are extremely confident about our ability to grow the Crocs brand to $5 billion in revenues by 2026 and the Hey Dude brand to a billion dollars of revenue by 2024. With that, Anne will now review our financial results in more detail.