Crocs, Inc.

And welcome to the Crocs, Inc. First Quarter 2023 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 a touchtone phone. 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 Cori Lynn, VP of Corporate Finance. Please go ahead, Cori.

Good morning, everyone, and thank you for joining us today for the Crocs, Inc. First Quarter 2023 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 our supply chain challenges, cost inflation, the acquisition of hatred and the benefits thereof, crock strategy, plans, objectives, expectations, financial 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, performances, or achievements to be materially different from any future results, performances, or achievements expressed or implied by the forward-looking statements. CRUX 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 the Crocs annual report on form 10 K as well as other documents filed with the sec for more information relating to these risks factors, certain financial metrics that we refer to as adjusted or non gap or non gap measures. Reconciliation of these amounts to their gap 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. I'm incredibly pleased with the strength of our brands, our first quarter results, and our outlook for 2023. The Crocs and HeyDude brands continue to be in high demand, which led to strong double-digit revenue growth. Our teams globally are focused on driving brand health, market share gains, and sustainable, profitable growth. Looking at the first quarter of 2023, Anne will review our financial results in more detail shortly, but here are a few highlights. Revenues of $884 million grew 36% on a constant currency basis and grew in all brands, regions, and channels. Crocs brand revenues grew 22% constant currency, with growth in all regions, and DTC comparable sales grew 19%. Kroc's brand North America revenues grew 10% with DTC comparable growth of 12% and wholesale growth of 5%. Hey dude brand revenues were 235 million, up 15% on a pro forma basis. Adjusted growth margins of 54% and adjusted operating margins of 28% were exceptional. Adjusted diluted EPS increased 27% to $2.61 per share. For the third year in a row, Crocs was named as one of the top 10 most innovative brands by Fast Company. And earlier this week, we published our second annual ESG report and the first report inclusive of the Hey Dude brand. In summary, 2023 is off to a great start, and I would like to provide updates on the underlying health of our brands, long-term growth drivers for the Crocs brand, and Hey Dude expansion. Both of our brands are incredibly healthy as evidenced by our results and recent external studies. The Crocs brand ranked the number two casual footwear brand amongst women and number three amongst men in a recent L.E.K. study of footwear and apparel brand heat. The Crocs brand ranked as the number six favorite footwear brand among teens in Piper Sandler's Spring 2023 Taking Stock with Teens survey. The brand strengthened the most amongst male teens, increasing mine shares significantly compared to prior year. The Hey Dude brand is gaining momentum in the United States, ranking the number one casual footwear brand amongst women and men in the LEK study. In the Piper Sandler survey, the Hey Dude brand took the number eight spot up from the number nine spot last spring. With regards to product innovation, we recently focused on diversifying the clog silhouette, The Echo franchise, which we launched last year, focused on a more male-centric street vibe, but also inclusive of her, has been an early global success. We are driving strong awareness with our typical marketing playbook. We've also innovated with Hype across many of our styles, such as the Mega Crush and the classic platform flip and slide. Styles with Hype resonate particularly well in Asia and are helping fuel our success in that region. Turning to Sandals. This category is an important growth initiative for Crocs, allowing us to expand into the adjacent $30 billion global sandal category, where we believe our molded technologies, accessible price points, strong go-to-market will allow us to compete effectively in a relatively fragmented market. We're excited by our incredible Q1 sandal performance, where revenues grew 65% compared to last year. Growth was robust in all regions and was highest in Amelia, where saddle penetration was also the greatest. Our saddle portfolio is well diversified this year, particularly as compared to last year, but like newness following the Vietnam factory closures in 2021. In our classic franchise, the two-strap and the slide continue to be top-selling styles, in addition to the newer introduction of the classic cozy. New introductions in the Brooklyn franchise, including the buckle and the flip, as well as the new Mega Crush and Crush sandals, the All-Terrain Sandal and the Echo Slide are also performing above expectations. We're also testing dozens of new styles this year, and we'll leverage our test of learn and speed capabilities to expand their opportunities in the future. To drive saddle awareness and acquisition, we have a robust marketing calendar this year. During Q1, activations focused on the Classic Sandal and the new opening price point Splash franchise. Recently, the Brooklyn sandal was featured on the Today Show in the best-selling fashion finds for spring-summer segment. Overall, we're pleased with the sandal trajectory. Over the past three quarters, with the average growth of over 45%, and we're confident the sandal revenues will grow to approximately $400 million a share. Asia is another important long-term growth driver for the Crofts brand, as the brand is currently underpenetrated relative to the penetration here in the United States. In Q1, Asia revenues grew by 55% constant currency and growth was broad-based. We're particularly encouraged by the green shoots we're seeing in China, where we continue to invest in marketing, newness, and digital during the pandemic. Q1 revenues grew over 110% constant currency in China. The Crush Plug was the only footwear brand to win the 2022 Best New Products Launch Award by Tmall. The Crux brand had the best Q1 growth on Timor in China amongst leading footwear and apparel brands. Outside of China, we're pleased with the brand momentum throughout the region, including India, South Korea, and Australia. Turning to digital, another key Crocs brand growth driver. As the digital marketplace matures and our capabilities grow, we anticipate transitioning some of our e-tail business that sits in our wholesale segment to a direct digital sale, both across .com and on major marketplaces, where we will sell directly to the consumer. Global e-tailers are also clearly attempting to manage their inventories more closely. The combination of these factors, we believe, will long-term be very accretive for both brands, as we have more brand control, higher ASP realization, and higher gross margins. Now to HeyDoug. We're incredibly pleased with the first year of the acquisition. The financial contribution of Hey Dude exceeded our expectations, with brand revenues of nearly $1 billion, EPS accretion, and significant debt pay down in the first year. The foundation is strong as we enter our second year with the brand. With respect to our go-to-market strategy, we've successfully penetrated Kroc's strategic accounts, which currently represent approximately 50% of Hey Dude's wholesale business. We quickly achieved top five casual brand status in North America family footwear accounts, such as Rack Room and Famous Footwear. To focus our efforts, we will continue to prioritize these strategic accounts that can elevate the brand's position. We recently took steps to rationalize non-strategic accounts that were not adequately supporting the brand. From a product perspective, we introduced several new styles as we test and learn what resonates with the consumer. As we seek to expand the brand beyond the iconic Wally and Wendy, several recent introductions have been in the casual sneaker category. The Carina for Women and the newly introduced Sirocco are top-selling styles on HeyDude.com, and we have early signs of success for the Cody, Conway, and Centipede. The initial expansion into international is also on track. From a strategy perspective, we plan to go market in the same way as Crocs, meaning If we are direct in a country with Crocs, we will be direct with HeyDude. This year, we plan to test and learn in Emilia with a few direct markets, UK, Germany, and the Netherlands, and a few distributed markets. Our efforts began earlier this month when we shipped our first HeyDude e-commerce orders out of our Netherlands distribution center and launched on Amazon. We will continue to provide updates on our progress. Finally, with respect to the integration this year, we have two significant initiatives underway. namely implementing ERP and building a new distribution center in Las Vegas. We anticipate these to be complete towards the end of the year. Both are significant investments required to support the growth of a billion-dollar-plus brand. We're excited about the progress we have made and the bright future for the Hey Dude brand. In summary, we have tremendous confidence in and clear evidence as to the underlying strength and growth potential of both the Crocs and Hey Dude brands. We remain cautious relative to the consumer confidence in Western markets and anticipate declining traffic patterns through the year. However, sell-through for both of our brands continues to be robust, and we believe we are benefiting from our democratic price points. Amidst the more challenging economic landscape, we believe we are well-positioned to gain share. I will now turn the call over to Anne, who will review our first quarter financial results in more detail.