Deckers Outdoor Corporation

Good afternoon.

Sending an increase of 16% versus prior year. On a constant currency basis, revenue grew 15% versus last year. Growth in the quarter was primarily driven by broad base UGG growth across regions and channels, delivering $1.07 billion of revenue with global DTC increasing 20% as brand heat remains robust with all DTC regions exhibiting a double-digit percentage growth in the period. and continued strong demand across the HOCA ecosystem of access points, with particular strength in the DTC channel, which increased 38% versus last year, contributing to the brand's total revenue of $429 million in the quarter. Notably, HOCA's DTC performance for the quarter was aided by global increases in consumer acquisition, which was up 31% versus last year, and consumer retention, which was up 35% versus last year. Additionally, I would note that this quarter's revenue growth was aided by a higher percentage of full-price selling as well as the UGG brand select price increases, both of which contributed to dollar growth outpacing unit growth. While we will always manage our brands with the intent to deliver high levels of full-price selling, the level we experienced this year, particularly for UGG in its peak season, is one we don't expect will always repeat. This dynamic, combined with a larger than expected impact from price increases due to the strength of performance from affected styles, is part of the catalyst for our increased full year expectations for UGG growth. Gross margins for the quarter was 58.7%, which was up 580 basis points from last year's 53%. As compared to last year, gross margin in the quarter benefited from higher mix of UGG full price selling, freight savings, select pricing action and favorable brand and product mix, favorable channel mix with DTC continuing to grow faster than wholesale, and favorable foreign currency exchange rates. While we are exceptionally proud of these remarkable results, we remain mindful that the outsized margin expansion seen this quarter is above normalized levels and is not something we anticipate will repeat to the same degree. While we do see opportunities to continue to deliver top-tier profitability through our key strategies, items that we anticipate may not repeat in a normalized environment include the extremely low levels of promotional activity achieved for our two major brands, considerable benefits from UGG pricing actions, and very low freight costs that are now on the rise, as well as other potential macroeconomic factors such as foreign currency exchange rate fluctuations. SG&A dollar spend in the third quarter was $429 million, up 23% versus last year's $350 million. As a percent of revenue, SG&A was 150 basis points higher than last year, primarily due to investment in talent to support key functions within our growing organization and higher marketing spend. Our tax rate was 21.9%, which is lower than last year's 23.7%. These results, combined with favorable interest income relative to last year and a lower share count, drove record diluted earnings per share of $15.11, which compares to last year's $10.48 diluted earnings per share, representing EPS growth of 44%. Turning to our balance sheet, at December 31, 2023, we ended this fiscal third quarter with $1.65 billion of cash and equivalents. Inventory was $539 million, down 25% versus the same point in time last year. And during the period, we had no outstanding borrowings. On inventory specifically, I'd note that with the strong levels of selling that we have seen this year, we are now below normal operating levels for the current size of our organization. And heading into next year, we expect to see incremental inventory investment to keep up with growth. Today's inventory position reflects the upside that has already been captured in the quarter just completed, which could have a small impact on sales in the fourth quarter. During the third quarter, we repurchased approximately $100 million worth of shares at an average price of $507.95. As of December 31, 2023, the company had approximately $1.05 billion remaining authorized for share repurchase. Now, moving into our updated guidance for fiscal year 2024. Based on the strong demand experienced in the third quarter, we are increasing our full year revenue guidance to be approximately $4.15 billion, up from our previous guidance of approximately $4.025 billion. This increase now equates to full year growth expectations of approximately 14% versus last year. From a brand perspective, we now expect UGG revenue growth of low double digits, up from our prior expectation of mid-single digits. This full year increase is the result of the strong DTC demand that we experienced and fulfilled in the third quarter. Full year HOCA revenue growth of approximately 25%, with strong third quarter sell-through driving wholesale refill upside in the fourth quarter, reflecting our disciplined marketplace management. In addition to our fiscal year 2024 updated revenue outlook, gross margin is now expected to be approximately 54.5% as UGG experienced high levels of full price selling, including key styles contributing incremental margin from price increases as brand heat continued to drive strong demand. SG&A as a percentage of sales is now expected to be approximately 34.5%, as we have identified areas to accelerate spend in Q4 with revenue growth exceeding expectations for fiscal year 2024. We believe this additional spend, part of which represents top-of-funnel marketing opportunities, gives our brands the opportunity to defend their current positions of strength, setting the foundation for the future. Additionally, I would note that some of the third and fourth quarter spending timing dynamics relate to unrealized FX gains recorded in Q3 that we expect will be offset in Q4 as rates have recently moved in the opposite direction. With these updates, we are increasing our operating margin for the year and now expect it to be approximately 20%, reflecting the improvement in gross margin experienced. Our effective tax rate is now projected to be approximately 22%. And finally, with these updates, we are increasing our diluted earnings per share expectations to now be in the range of $26.25 to $26.50. Please note this guidance excludes any charges that may be considered one time in nature and does not contemplate any impact from additional share repurchases. Additionally, our guidance assumes no meaningful deterioration of current risks and uncertainties, which include but are not limited to changes in consumer confidence and recessionary pressures, inflationary pressures, geopolitical tensions, supply chain disruptions, and fluctuations in foreign currency exchange rate. This guidance update represents a $3.25 increase on the prior top end of our diluted earnings per share guidance range. Based on the success that we've seen this year with strong sell-through and high levels of full price selling, there are a few business dynamics related to the fourth quarter that we would like to highlight, including U.S. wholesale shipments that went out at the tail end of the third quarter this year that have historically occurred in the fourth quarter. meaningful revenue from UGG closeouts last year that will not repeat this year, and low levels of inventory on key styles that have been driving the business this fiscal year. We of course still expect to deliver a strong fourth quarter that is now projected to round out Decker's fourth consecutive year of at least mid-teens top-line revenue growth, while also consistently delivering exceptional high levels of operating profitability. We would note that some of the benefit to our operating profitability we're seeing are outsized and may not repeat in future years. But we remain dedicated to delivering operating profitability in the top tier among our peer group, even as we continue to invest in our organization to enable future growth. As we've said in the past, if revenue growth comes faster than our ability to keep pace with investments, some of the related profit expansion may flow through to the bottom line near term. However, we continue to recognize the importance of funding our strategic initiatives moving into next year and maintain a focus on the long-term vision for our brands. We will continue to be disciplined in our approach as we enter our final fiscal quarter and begin planning for next fiscal year. Our largest brands are two of the healthiest and most in demand in our industry. With a robust balance sheet and our diligent operating approach, we are well positioned to drive future success and look forward to providing more details on our year-end call. Thanks, everyone. And now I'll hand the call back to Dave for his final remarks.

Thanks, Steve. We are extremely proud of our brand's year-to-date performance, which have produced record revenue and earnings results. As we look beyond fiscal year 2024, I believe we have an incredibly strong innovation pipeline for the UGG and HOCA brands, giving us further confidence in our ability to build upon this year's exceptional growth. Thinking into the next few years, we believe HOCA remains our primary growth vehicle with considerable opportunity for both region and category expansion as awareness of the brand's innovative performance product increases further and continue to position UGG for growth through the development of category hybrids that celebrate heritage brand codes to resonate with target consumers across global markets. Decker's strategic focus on marketplace management, omnichannel strategy, and flexible operating model continues to be the driving force behind our sustained success. We remain focused on executing against our long-term objectives while continuing to deliver high levels of profitability and driving shareholder value. Additionally, I'd like to recognize and thank all of our employees across the organization for their consistent and dedicated focus to driving results aligned with our long-term strategic vision. Our employees continue to go above and beyond while upholding Decker's values. Before we turn to Q&A, I want to give Stefano a moment to say a few words. Stefano?