Crocs, Inc.

Good day and welcome to the Crocs Inc. Fourth Quarter and Full Year 2025 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 your telephone keypad. 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 Erin Murphy, Senior Vice President, Investor Relations and Strategic Finance for Crocs, Inc. Please go ahead.

Good morning, and thank you for joining us to discuss Crocs, Inc. fourth quarter and full year 2025 results. With me today are Andrew Reese, Chief Executive Officer, and Patrick Reagan, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask that you limit yourself 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 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 annual report on Form 10-K 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. 2025 ended on a strong note as we reported a better-than-expected holiday season fueled by new products and authentic consumer connections. Our powerful value creation model drove strong free cash flow, which we returned to shareholders in the form of repurchases and debt pay down. We continue to invest thoughtfully and strategically behind our brands in support of building an even stronger foundation to fuel long-term profitable growth. For the full year of 2025, we delivered revenue of over $4 billion with approximately $3.3 billion from the Crocs brand and $715 million from HeyDude. Crocs Brand grew for the eighth consecutive year. International revenues, which comprise almost half of our Crocs Brand sales, grew double digits. Direct-to-consumer was over half of our enterprise revenue and grew faster than our wholesale business. Strong free cash flow generation of $659 million enabled us to pay down $128 million in debt and buy back approximately 6.5 million shares for $577 million, representing approximately 10% of our shares outstanding. Before going further into 2025's highlights, I would like to start by taking a moment to reflect on a milestone we recently achieved. Earlier this week, on February 8th, we surpassed the 20-year mark as a public company. Since our IPO, we've established ourselves as a world leader in innovative casual footwear for all. In addition to creating one of the greatest and most recognizable icons of our time, the classic clog, we have built a powerful and defensible business model that is increasingly diversified across brands, products, channels, and geographies with distribution in over 85 countries. We have emerged as a disruptor in social and digital marketing and commerce while building strong communities of loyal brand fans. In the last 20 years, we have relentlessly served our consumers, selling approximately 1.5 billion pairs of shoes while delivering 14% sales growth on a compound annual growth basis. Our high margins and cash flow generation give us great flexibility to continue to invest in and grow our business while returning a considerable amount of cash to shareholders. Since our IPO, Crocs shares have generated a total shareholder return in excess of 700%, almost two times that of the S&P 500 over the same period. While I'm exceptionally proud of these accomplishments and the way we consistently show up for our consumers, I'm even more energized for what I believe lies ahead for our company. We will continue to build on our promise of creating a more comfortable world for all through driving innovative casual footwear and personalization at scale across our two uniquely positioned consumer beloved brands. Our diversified revenue streams today are powerful, and we have already built multi-billion dollar plus revenue pillars. In fact, our digital, international, and non-clog product categories each represent a revenue stream in excess of $1.5 billion, which we see as compelling drivers for future growth. We will attack the next 20 years with ambition, decisiveness, and agility, and stay on the offense by leveraging our product innovation engine, our social disruptive marketing, and multichannel distribution. Now, turning to the Crocs brand. We had a strong holiday season with positive consumer response to our new product introductions. International grew double digits, and sales in North America outperformed our expectations. While improving the trajectory of North America remains our top priority in 2026, we're making good progress against our five strategic pillars for the Crocs brand. First, we're driving brand relevance globally as the clog market share leader. During the year, clogs represented 74% of our mix with sales up slightly to last year, led by strong consumer response to our diversified clog franchises. We scaled existing franchises, like our sports-inspired Echo, by introducing newness, such as the Echo RO. We also introduced a bay, a platform height style for her, to great success internationally. We have seen strong early reads in our DTC channels for our crafted clog, which will add a wide variety of upper materializations that we plan to scale in 2026. We're excited about the short and long-term prospects for this new franchise. During the fourth quarter, our line business was particularly robust in both North America and international, fueled by strong consumer response to newness, including the unforgettable clog. In North America, we're carefully managing our classic franchise, focusing on maintaining tight inventory control and driving further segmentation across our key partners. Internationally, the classic clog grew nicely in 2025. Second, we're making strong inroads in scaling our product pillars outside of clogs through new category expansion. Sandals had a very good year and represented 13% of our mix, closing in on the $450 million mark. Sales growth was robust in North America. where we not only took market share, but also took advantage of an extended selling season beyond the traditional spring-summer period. In 2025, our style sandals led the way fueled by strong full-price selling of our Brooklyn, Getaway, and Miami franchises. While sandal awareness is roughly half that of clogs, we saw an encouraging mid-single-digit increase in sandal awareness during 2025 versus 2024. Looking forward into 2026, we believe continued newness in our existing franchises, along with the introduction of our new Saturday franchise, an updated personalizable two-strap sandal underscores an opportunity to gain further market share in this category. Jibbitz, our unique vehicle for self-expression, represented 8% of sales. Within Jibbitz, we have seen continued growth of our elevated charms. Beyond Jibbitz, We have expanded what personalization looks like and introduced a collection of bags, bag charms, and accessories. Third, we are fueling consumer engagement through disruptive social and digital marketing. In 2025, we launched many high-impact partnerships. Examples included our multi-year NFL partnership, which continues to scale successfully, the launch of Stranger Things, which promptly sold out, and the cult classic Twilight CoLab that is currently selling for three times the MSRP across the resale marketplaces. At the end of January, we announced an extremely exciting multi-year global partnership with Lego, bringing together two icons of self-expression and originality. Last month, we teased our disruptive Lego brick clog at Paris Fashion Week, and next week, this clog will be available to consumers. We have a robust pipeline of new product launches together with Lego that will be centered around FootWeb and of course Jibbitz. Rounding out January, we debuted our new omnichannel global brand campaign, Wonderfully Unordinary. Fourth, we'll continue to create compelling consumer experiences in all our channels. In 2025, we leaned into our first mover advantage in social commerce. which is a powerful channel to reach consumers and also increasingly a commerce engine. We remain the number one footwear brand on TikTok Shop in the US, and we anticipate significant future growth in social selling, including on this platform. In 2025, we launched seven new markets globally with TikTok Shop and have more on our roadmap for 2026. Finally, we're continuing to gain market share across the world in our international markets. During 2025, international grew 11% on top of 19% the prior year. Broad-based strength was led by our direct-to-consumer channel, which grew 23%. In China, our second largest market, we grew 30% on top of 64% last year, and the country now represents approximately 8% of sales. During the fourth quarter, we had a successful Double 11 shopping festival fueled by strong acceleration of our line clog offerings. We believe we have significant future growth opportunity internationally. Our average market share in China, India, Japan, Germany, and France represented approximately one-third of the market share we have in our established markets. We ended the year with approximately 2,600 Crocs monobranded stores and kiosks, In 2026, we plan to continue expanding our footprint internationally and see an opportunity to open between 200 and 250 doors, both in our tier one markets and within distributed markets around the world. Now turning to HeyDude. We prioritized our efforts in 2025 around stabilizing the brand in North America with a renewed focus on our core consumer. While we're doing the work to return the brand to growth, we're encouraged by the progress we have made in 2025. Let me share more about what gives me conviction in our strategic plan. First, we're building a community laser-focused on our core consumer. Our Hey Dude Country campaign plays into our brand's affinities, including music, travel, and pre-imposed sports, while appealing to our laid-back, no-fuss consumer. We're also building our community through social platforms, In 2025, Adud was the number two footwear brand on TikTok shop. We're encouraged that our brand awareness ended the year at 39%, a healthy nine percentage point gain from one year ago. We have also seen an uptick in brand purchase intent amongst our core male consumer. Second, our product direction is clear. We are building the core and thoughtfully adding more. We are strengthening our leadership within the slip-on category, led by our icons, Diwali and Wendy. In January, we launched our stretch jersey across all channels, following a successful test during the holiday quarter. This product that we were fondly referred to as a t-shirt for your feet is already appealing to both him and her. Stretch socks is continuing to perform well in its second year with favorable consumer and retailer response. As we look into the spring, We will scale our sandals across various price points and expand our successful H2O program that caters to a broad range of outdoor activities important to our target consumer. We also see an opportunity to significantly grow our already successful work program as we bring comfort and safety to hardworking Americans. Third, we're focused on stabilizing the North American marketplace in the back half of 2025 We took two decisive actions. One, accelerated returns and markdown allowances to our retailers to improve inventory health while elevating our brand presentation at wholesale. And two, we pulled back on unproductive performance marketing. While these two actions constrained our revenue growth by approximately $45 million in the second half of 2025, they have been effective in cleaning up the channel and establishing a more profitable foundation for future growth. The fourth quarter was the 10th consecutive quarter of positive ASP growth year-on-year supported by channel and product mix. In conclusion, we're focused on driving the next chapter of our growth story. We believe we have compelling strategies to grow both of our brands, driven by a clear consumer focus, innovative product and marketing, and our multi-channel global go-to-market capabilities. I'm incredibly confident in our talented team's abilities to continue to execute against these strategies. I will now turn the call over to Patrick.