Fossil Group, Inc.

Good afternoon, ladies and gentlemen. Welcome to the Fossil Group First Quarter 2021 Earnings Call. At this time, all parties are in a listen-only mode. This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company. Now, we'll turn the call over to Christine Greene of the Blue Shirt Group to begin.

Hello, everyone, and thank you for joining us. With us today on the call are Costa Kartsotis, Chairman and CEO of Sunil Doshi, Chief Financial Officer, Jeff Boyer, Chief Operating Officer, and Greg McKelvey, EVP and Chief Commercial Officer. I would like to remind you that information made available during this conference call contains forward-looking information, and actual results could differ materially from those that will be discussed during this call. Fossil Group's policy on forward-looking statements And additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in the company's Form 8K and 10Q reports filed with the SEC. In addition, FOSSIL assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. All references to sales during today's call reflect constant currency results unless otherwise indicated. Please note that you can find a reconciliation and other information regarding non-GAAP financial measures discussed on this call in Fossil's earnings release, which was filed today on Form 8K and is available in the Investors section of FossilGroup.com. With that, I will now turn the call over to Costa to begin.

Good afternoon, everyone, and thank you for joining us today. We hope everyone is staying well. While COVID restrictions have been easing in several countries, our thoughts are with those being impacted by another wave of the pandemic, most notably in India, which is experiencing a tragic humanitarian crisis. Our thoughts and prayers go out to our associates, partners, and the community at large being affected by the tragedy. Because the global environment remains dynamic, we are continuing to operate with concern and flexibility, and we're prioritizing the health and safety of our team members, partners, and local communities. Turning now to our first quarter performance, we are pleased with our strong start to the year and feel particularly good about how the business is positioned. We are operating in a large addressable watch market and are seeing favorable trends in both the connected and traditional segments. First quarter net sales came in ahead of our expectations, driven by improving consumer demand in the Americas region. Total digital sales represented more than 40% of our global revenue mix, and our own websites grew 59%, underscoring the dramatic shift in our business from a wholesale-dominated model to a digital-first organization. We also delivered strong gross margins, above 50%, and continued to improve operating efficiency, which allowed us to generate positive adjusted EBITDA in the quarter. We also made further progress against our cost reduction initiatives, which allowed us to reach the $250 million target under our New World Fossil 2.0 program earlier than planned. After successfully resizing the organization and cost structure, we remain focused on driving operating efficiency going forward. Additionally, the structural economics of our business continue to improve with ongoing and outsized growth in digital. Looking at the first quarter from a regional lens, we continue to drive robust growth in mainland China with 45% sales growth versus a year ago and 81% sales growth since 2019. The balance of our Asia-Pacific business was more negatively impacted by the pandemic. In the EMEA region, pandemic-related restrictions and closures pressured sales in the quarter. While conditions remain challenging in several markets, We are beginning to see some easing restrictions in select countries such as the UK, Italy, and France. Within the Americas region, we saw low single-digit positive sales growth in the U.S., driven by easing restrictions and improving consumer confidence. Sales in Canada and Latin America were pressured by closures and restrictions in those markets during the period. In parts of the world where consumer confidence is strengthening and demand recovery is underway, we are seeing a return to growth in our brands and product categories. In Q1, traditional watches in both cores and fossil grew in the U.S. and captured share. In mainland China, Emporio Armani delivered strong sequential growth, driven by positive response to our tailored assortments for that region. Globally, our jewelry category saw broad-based growth in our largest brands. Longer term, the opportunity for growth across all of our product categories and brands remains significant. In the connected category, we are pleased to see our strategic initiatives bear fruit. With more emphasis on a core set of brands and SKUs and distribution that is focused on e-commerce, consumer electronics, and teleco channels, we drove growth in our Gen 5 platform in sales and margin. In Q1, Our Gen 5 platform officially expanded with an LTE product, which broadens our capabilities and functionality. Our innovation roadmap remains robust, fueled by our software and hardware capability that will further enable us to bring brand excitement and innovation to consumers. Our results in Q1 reinforce that our key strategic initiatives are working, and we will continue to focus on our efforts for the balance of 2021 on these same strategies, digital acceleration, product innovation, operating efficiency, and the growth opportunity in China. Over the past few years, we have brought a digital-first mindset to the entire organization and built the infrastructure needed to transform our business model. Our past and ongoing investments in capabilities and systems, coupled with an acceleration of digital consumer behavior, has gotten us to an inflection point in our business model. With digital now our largest channel, we are positioned to begin offsetting the top-line pressure that has persisted in other channels for the past several years. Importantly, we're seeing ongoing strength within both our owned and third-party e-commerce sites, as well as improving trends in wholesale.com. We ended Q1 with digital sales at 41% of our global mix, and that is trending higher in key markets. Given the robust capabilities we've built, we believe digital will continue its strong trajectory and ultimately exceed 50% of our total sales. The current economics on this business are already compelling, and we expect that to become increasingly profitable as we continue to build scale. Innovation continues to be at the heart of everything we do, and in Q1, we demonstrated how innovation not only drives growth but also supports our ESG strategy. Our program, Make Time for Good, encompasses our focus on being a purpose-driven organization. Our aim is to have the highest impact possible for our people, planet, and communities through our sustainability platform. I invite you to read more about our programs and initiatives on our investor relations website under sustainability. From a product lens, our efforts on sustainable and innovative raw materials came together in Q1 with our fossil cactus leather tote and limited-edition solar watches launched across several brands. In both cases, consumers reacted favorably, confirming our belief that product innovation and ESG are mutually beneficial. From a social lens, we further enhanced our Make Time for Good platform, where we are excited to announce that we will contribute 1% of our fossil e-commerce sales to the Fossil Foundation, whose goals include helping underserved youth around the world. Despite the ongoing global disruption driven by the pandemic, we are encouraged by improving consumer demand in key markets and our strong start to the year. As a result, we are raising our full year outlook to 12% to 16% sales growth and adjusted EBITDA margins to 5% to 7%. As always, we are grateful for the dedication and commitment of our teams globally, and we're all energized by the opportunity to deliver top-line growth and improved profitability this year, while continuing to position the business for longer-term success. And now I'll turn the call over to Sunil to discuss the financials.