Crocs, Inc.

Good day and welcome to the Crocs second quarter 2024 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 touch tone phone. To withdraw your question, please press star two. Please limit yourself to one question. And please note, this event is being recorded. I would now like to turn the conference over to Erin Murphy, Senior Vice President of Investor Relations and Corporate Strategy of Crocs. Please go ahead.

Good morning, and thank you for joining us to discuss Crocs, Inc. second quarter results. With me today are Andrew Reese, Chief Executive Officer, and Susan Healy, Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. which we ask that you 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 include, but are not limited to, statements regarding our strategy, plans, objectives, expectations and intentions, including our financial outlook. 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 quarterly report on Form 10-Q and other reports filed with the SEC for more information on these risks and uncertainties. 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'll turn the call over to Andrew Reese, Crocs, Inc. Chief Executive Officer.

Thank you, Erin, and good morning, everyone. Thank you for joining us today. Before we discuss the quarter, I'd like to start by welcoming Susan Healy to her first Crocs, Inc. earnings call. We reported second quarter revenue of more than 1.1 billion, which represents the highest quarterly achievement in the company's history and exceeded our guidance. Coupled with robust adjusted gross margin expansion of 330 basis points, adjusted earnings per share grew by 12% to $4.01, even as we accelerated strategic investments. This performance resulted in record free cash flow for Crocs Inc, which we utilized to pay down $200 million in debt and repurchase $175 million of our common stock. Our enterprise initiatives remain consistent, and we focused on three primary levers to fuel durable long-term growth. One, ignite icons across both of our brands to drive awareness and global relevance for new and existing consumers. Two, drive market share gains across our tier one markets through strategic investment behind talent, marketing, digital, and retail. And three, attract new consumers to our brands through methodically diversifying our product range and usage occasions. Starting with the Crocs brand, the investments we are making in product and marketing are enabling us to win with consumers around the world. During the quarter, we saw further growth in global brand awareness and desirability. We have continued to evolve our partnership model with a clear intent to drive engagement, build consumer love, and ultimately fuel brand heat. During the second quarter, we celebrated SpongeBob's 25th anniversary by creating a SpongeBob and Patrick plug with the official announcement unveiled on the Las Vegas sphere. Along with this, we released a number of partnerships that range from Pringles to Naruto to Treasures, a K-pop brand, and Minions. We continue to push into sneaker and lifestyle opportunities, as exemplified through a Salehi Juniper sneaker release, which sold out within minutes at $140 and was seen on secondary shopping platforms for multiples of the original price. a testament to the strong consumer response. Looking at product overall, growth in the second quarter was once again led by our icon, the classic plug. As we prioritize durable growth, we have built several successful franchises that aim at expanding into new usage occasions to drive new and repeat purchases. The Sandal category strengthened in the quarter as the consumer reacted favorably to the newness that we have brought to the market this year. In particular, our style samples are performing well across both new franchises like the Getaway and Miami, as well as established franchises like the Brooklyn. We introduced a gibbetable version of the classic Brooklyn, as well as a woven style leveraging our molded DNA. The growth of our gibbets business during the quarter was led by strong double-digit growth in Asia, which was also our highest penetration by geography. Our gibbets consumer continues to be one of our most valuable consumers, and we see them purchasing with high frequency and average order value. Our strategic priorities within gibbets are centered around driving higher penetration in digital and wholesale channels, enhancing speed of market, and continually introducing product freshness. Moving to a review of our business by geography, we saw broad-based strength led by our Tier 1 markets. The North America market performed ahead of our expectations and gained market share with revenue growth of 3% versus the prior year. Strength was driven by better at-once demand from our retail partners and solid DTC channel growth. For the first half, our North American revenues grew 6% against a broader market that was essentially flat. International revenue grew 22% versus prior year, supported by exceptional growth in China and Australia. China grew over 70% on top of triple-digit growth last year. While there is evidence in the market that the Chinese consumer is becoming more cautious, We see our accessible, authentic, and personalizable brand position as a clear competitive advantage. Coming off the strength of our Super Brand Day in the first quarter, we emerged as the number one women's footwear brand on Tmall in the days that followed. This momentum drove outside strength in the Midsummer Festival, where Crocs led the conversation and took notable share on Tmall and Doyon, despite more promotional period for the industry at large. For the first time ever, Crocs emerged as a top 10 overall fashion brand on T-Mold during the festival and was one of only two footwear brands mentioned in the top 10 fashion rankings. Our direct markets within Europe registered double-digit growth in the quarter, led by the UK and Germany, and we continue to see ample opportunity for growth in the future. Turning to the Hey Dude brand, we remain focused on solidifying the business in North America and establishing the Wendy and Wally as iconic franchises for the consumer. We've made progress in improving the health of our underlying business in North America, exemplified by pricing on digital up versus prior year, solid recovery in gross margins, and our inventories turning in excess of four turns. That said, our wholesale business with Hey Dude remains challenging, and we expect that to continue through the second half of the year. As we shared in the first quarter earnings call, sell-in and sell-out are down versus last year, and we'll focus on energizing the brand through improved marketing effectiveness and new product introductions. During the quarter, we brought new Hey Dude partnerships to the market, including Corona, a four-piece collection with the iconic beverage brand featuring O'Wally, Wendy, and Hudson styles. A lead partnership, Denim and Dude's, marked the first Hey Dude collaboration with international reach. From a product perspective, we're bringing more focus around our core, across to Wendy and Wally, and we're leaning into three primary offerings, Stretch Socks, Stretch Canvas, and Funk Mono. While leading from the core is our focus, we'll make calculated bets with key sneaker and boot styles that the brand is also known for. As we look into 2025, we see an opportunity to optimize our SKU count while still improving our channel segmentation and bringing new innovations to market. For example, we introduced the Comf this quarter, leveraging our Wendy and Wally DNA and added cushion and height, retailing for $85. We initially tested this product in DTC and will bring it to wholesale in time for back to school. From a distribution perspective, we opened 13 new Hey Dude outlet locations in the quarter, bringing our total year-to-date openings to 19. We are pleased with our new stores and see growing consumer engagement and shopping across genders and ages, as consumers can experience the full breadth of the line. During the quarter, we also introduced Haymakers, our personalization proposition within our direct channels. These stations are creating buzz in our stores as consumers explore self-expression with the brand. For the year, we plan to open approximately 30 outlet stores. On the wholesale side, we'll continue to optimize our account base and focus on improving customer segmentation. Internationally, we're making progress in our direct markets in Europe as we build the brand in the UK and Germany. We're also introducing the Hey Dude brand in Australia this quarter. and have plans to expand into select distributor markets in 2025. We're working on elevating our reach and effectiveness of our marketing to drive bigger brand moments, geared at accelerating awareness and creating community. We plan to introduce the brand in a methodical and consistent way and get more shoes on feet. In addition to igniting our icons and focusing on the core, we're bringing her to the center of the conversation. We believe female youth culture is one driver of influence and brand connectivity and plan to accelerate our influence opportunity as we move into the fall. We plan to significantly accelerate our marketing investment and effectiveness in the second half of this year to drive more brand heat for Hey Dude. Before turning the call over to Susan to review our financial results, I want to call out the publication of our 2023 Crocs Inc. Comfort Report released in June. This annual report highlights our commitment to and progress on our purpose to create a more comfortable world for all through action-orientated ambitions of inclusivity, climate stability, circularity, and community. I would encourage you to check out the report for more information against these initiatives. I will now turn the call over to Susan to walk through our financials for the quarter.