Fossil Group, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Fossil Group third quarter 2021 earnings call. At this time, all parties are in 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, I'll turn the call over to Christine Greeny of Blue Shirt Group to begin.

Thanks, Shannon. Hello, everyone, and thank you for joining us. With us today on the call are Kosta Kartsotis, Chairman and CEO, Jeff Boyer, Chief Operating Officer, Sunil Doshi, Chief Financial 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, FOSL 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. During today's call, we will refer to constant currency results. Please note that you can find a reconciliation of actual results to constant currency results 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. Now I'll turn the call to Costa to begin.

Thanks, Christine. Good afternoon, everyone, and thanks for joining us today. We are pleased to deliver another quarter of strong performance driven by continued momentum across our key categories and regions. Our Q3 net sales grew 13% or 11% in constant currency. Gross margins remain strong at 53%, and we delivered double-digit adjusted operating margins of 11%. We are proud of our teams for continuing to deliver superior executions and remaining focused on our strategic priorities in what has been a dynamic environment for nearly two years. Our top-line performance is fueled by our digital-first focus, ongoing product innovation, and favorable watch category dynamics. Importantly, over the last several years, we have become a much more efficient organization, effectively transforming our company and positioning us to deliver profitable growth and to create long-term shareholder value. Most recently, we further strengthened our financial condition with the successful completion of a $150 million senior notes offering. More to come on this from Sunil later. It is great to see our digitally-led mindset drive measurable results into 2021. In the third quarter, digital sales grew 28% and doubled from 2019. Our digital sales penetration remains strong at approximately 40% of our overall sales mix. As a reminder, digital sales includes sales on our own e-commerce sites, global third-party platforms, and wholesale.com sites. During the quarter, we completed another key element of our strategic roadmap on digital. All 27 of our global websites now reside on our Salesforce platform. These websites cover our Fossil, Skagen, WatchStation, Michelle, and Zodiac brands. Specifically, Having our sites on one common platform allows us to more effectively scale our strategies to drive consumer engagement and personalization through digital means. Longer term, this will also enable us to deliver superior customer experiences across both digital and non-digital channels. Looking at the business from a regional lens, starting with the Americas, consumer demand in the United States remains strong, which continued to be led by our traditional watch category in jewelry. Better inventory management, reduced reliance on off-price channels, and an emphasis on digital channels is driving healthier, more profitable performance in the region. As we head into the holiday selling season, our inventories are in good position as we are able to pull forward some inventory buys. For added context, we have not experienced a significant impact from shipping headwinds in watches and jewelry. We have historically shipped these by air since they have a relatively small cube size and a low freight cost per unit. In leathers, we have experienced some delays and increased costs in shipping, but our plans have been calibrated accordingly. Our EMEA region reported a strong quarter of growth, with net sales up 21% despite continuing pandemic-related closures affecting brick-and-mortar traffic in certain locations. Led by digital channels, we captured demand for traditional watches and jewelry in the region. Looking ahead, we expect to see momentum build as markets continue to open up in key countries, including France, Germany, and Italy. And now turning to Asia, Q3 saw a notable change in sales trends between mainland China and India as pandemic factors shifted the markets. During the quarter, mainland China was impacted by new COVID-driven restrictions, and two weeks ago, China announced a new wave of closures and travel restrictions due to an increase in COVID cases across several provinces. In mainland China, sales in the quarter were down 1% compared to last year and up 55% versus 2019. Conversely, in India, an improving trend in COVID infections and vaccination rates across key cities resulted in improved traffic and spending. With solid inventory positions and effective marketing campaigns, our third quarter sales rebounded sharply, up 95% to last year and up 24% compared to 2019. While we navigate pandemic-driven traffic disruptions in the short term, we continue to view China and India as attractive high-growth markets with sustained long-term opportunities across our categories and brands. The demographics in this region are very compelling, with a significant middle class as a strong affinity for branded watches and accessories. And over many years, we have invested significant resources and built strong capabilities in both China and India. This has enabled us to deepen our understanding of the consumer and build brand equity in these markets, which we believe gives us a long-term sustainable advantage. Let me now turn to Q3 performance by brands and product categories. Importantly, the traditional watch category remains healthy and continues to show signs of strengthening consumer demand. During the quarter, we saw broad-based strength across all three regions and achieved strong double-digit growth in both our Fossil and Coors brands, as our iconic styles resonate with consumers. We also continue to see momentum in our jewelry category, which also delivered robust performance across all regions in the quarter. In the connected category, although sales were down versus last year, we executed against our strategy to focus on best-in-class products with key brands, sold primarily through DTC and our digital distribution channels. This strategy has resonated with consumers and is driving better economics for the category. In September, we launched Gen 6, which represents a meaningful step forward in our product roadmap. With this latest generation, based on Qualcomm's 4100 chipset, battery life continues to improve with 30-minute charging. Consumers now have more flexibility to leverage the full potential of the device. In 2022, our Gen 6 product will bring to market advanced Wear OS technology, as well as Amazon's Alexa and our own companion app. While early in its launch, we are pleased with the global consumer response to Gen 6 as we enter the holiday season. As we previously shared, we have been investing in marketing to reignite brand heat. The global campaigns we launched this year have been fueling sales growth and bringing additional customers into the fossil ecosystem. We are focusing on storytelling with a consistent brand voice and emphasizing icons, collaborations, partnerships, and sustainability. We are encouraged by recent market data and strong sellout trends, which indicate that our efforts are bearing fruit and helping us gain share. This holiday season, you can expect to see us lean into key markets, brands, and gift-giving options, with an emphasis on digital and social marketing campaigns. We expect a strong finish to the year based on our current momentum, which is driven by the energy and focused execution of our teams around the world. To that end, we are raising our full-year outlook and now expect to deliver sales growth of 17% to 19%, an adjusted EBITDA margin in the range of 8.5% to 9.5%. As we look ahead to next year, we expect to achieve strong top-line growth, as our categories have only partially rebounded from the pandemic due to their discretionary nature. We also anticipate that our programs to improve our operations and capture efficiencies will will enable us to continue driving leverage in the model. And now I'll turn the call over to Sunil for more detail.