CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in thousands, except per share data)

Three Months Ended March 31,

2023

2022

Revenues

$                   884,166

$                   660,148

Cost of sales

407,796

335,224

Gross profit

476,370

324,924

Selling, general and administrative expenses

241,442

206,247

Income from operations

234,928

118,677

Foreign currency gains (losses), net

(403)

480

Interest income

171

102

Interest expense

(42,637)

(19,252)

Other expense, net

(293)

(947)

Income before income taxes

191,766

99,060

Income tax expense

42,223

26,300

Net income

$                   149,543

$                     72,760

Net income per common share:

Basic

$                          2.42

$                          1.22

Diluted

$                          2.39

$                          1.19

Weighted average common shares outstanding:

Basic

61,836

59,823

Diluted

62,629

60,896

CROCS, INC. AND SUBSIDIARIES

EARNINGS PER SHARE

(UNAUDITED)

(in thousands, except per share data)

Three Months Ended March 31,

2023

2022

Numerator:

Net income

$                   149,543

$                     72,760

Denominator:

Weighted average common shares outstanding – basic

61,836

59,823

Plus: Dilutive effect of stock options and unvested restricted stock units

793

1,073

Weighted average common shares outstanding – diluted

62,629

60,896

Net income per common share:

Basic

$                          2.42

$                          1.22

Diluted

$                          2.39

$                          1.19

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and par value amounts)

March 31,
2023

December 31,
2022

ASSETS

Current assets:

Cash and cash equivalents

$          125,687

$          191,629

Restricted cash – current

2

2

Accounts receivable, net of allowances of $25,960 and $24,493, respectively

418,959

295,594

Inventories

476,112

471,551

Income taxes receivable

3,083

14,752

Other receivables

31,481

18,842

Prepaid expenses and other assets

59,338

33,605

Total current assets

1,114,662

1,025,975

Property and equipment, net of accumulated depreciation and amortization of $104,088 and
$97,136, respectively

190,492

181,529

Intangible assets, net of accumulated amortization of $130,768 and $125,014, respectively

1,798,918

1,800,167

Goodwill

711,560

714,814

Deferred tax assets, net

533,480

528,278

Restricted cash

3,240

3,254

Right-of-use assets

233,981

239,905

Other assets

9,302

7,875

Total assets

$       4,595,635

$       4,501,797

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$          232,383

$          230,821

Accrued expenses and other liabilities

201,821

239,424

Income taxes payable

109,632

89,211

Current borrowings

32,970

24,362

Current operating lease liabilities

57,560

57,456

Total current liabilities

634,366

641,274

Deferred tax liabilities, net

301,968

302,030

Long-term income taxes payable

228,165

224,837

Long-term borrowings

2,250,288

2,298,027

Long-term operating lease liabilities

209,817

215,119

Other liabilities

2,531

2,579

Total liabilities

3,627,135

3,683,866

Commitments and contingencies

Stockholders’ equity:

Common stock, par value $0.001 per share, 250.0 million shares authorized, 109.8 million
and 109.5 million issued, 62.0 million and 61.7 million outstanding, respectively

110

110

Treasury stock, at cost, 47.8 million and 47.7 million shares, respectively

(1,705,896)

(1,695,501)

Additional paid-in capital

805,078

797,614

Retained earnings

1,968,742

1,819,199

Accumulated other comprehensive loss

(99,534)

(103,491)

Total stockholders’ equity

968,500

817,931

Total liabilities and stockholders’ equity

$       4,595,635

$       4,501,797

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

Three Months Ended March 31,

2022

Cash flows from operating activities:

Net income

$                    149,543

$                   72,760

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

13,136

7,895

Operating lease cost

18,199

14,231

Share-based compensation

7,464

8,275

Other non-cash items

383

9,695

Changes in operating assets and liabilities, net of acquired assets and assumed liabilities:

Accounts receivable

(122,144)

(130,661)

Inventories

(5,220)

(28,124)

Prepaid expenses and other assets

(35,859)

(14,584)

Accounts payable, accrued expenses and other liabilities ⁽¹⁾

(31,824)

(11,226)

Right-of-use assets and operating lease liabilities

(17,421)

(14,742)

Income taxes ⁽¹⁾

33,674

17,716

Cash provided by (used in) operating activities

9,931

(68,765)

Cash flows from investing activities:

Purchases of property, equipment, and software

(27,581)

(39,786)

Acquisition of HEYDUDE, net of cash acquired

—

(2,031,765)

Other

—

85

Cash used in investing activities

(27,581)

(2,071,466)

Cash flows from financing activities:

Proceeds from borrowings

214,634

2,240,163

Repayments of borrowings

(256,000)

(85,000)

Deferred debt issuance costs

(545)

(49,486)

Repurchases of common stock for tax withholding

(10,395)

(6,288)

Other

—

95

Cash provided by (used in) financing activities

(52,306)

2,099,484

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

4,000

(810)

Net change in cash, cash equivalents, and restricted cash

(65,956)

(41,557)

Cash, cash equivalents, and restricted cash—beginning of period

194,885

216,925

Cash, cash equivalents, and restricted cash—end of period

$                    128,929

$                 175,368

(1)

Amounts for the three months ended March 31, 2022 have been reclassified to conform to current period presentation.

CROCS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(UNAUDITED)

Non-GAAP cost of sales, gross profit, and gross margin reconciliation:

Three Months Ended March 31,

2023

2022

(in thousands)

GAAP revenues

$               884,166

$               660,148

GAAP cost of sales

$               407,796

$               335,224

Distribution centers ⁽¹⁾

(3,281)

(1,191)

HEYDUDE inventory fair value step-up ⁽²⁾

—

(27,927)

Inventory reserve in Russia ⁽³⁾

—

(1,800)

Total adjustments

(3,281)

(30,918)

Non-GAAP cost of sales

$               404,515

$               304,306

GAAP gross profit

$               476,370

$               324,924

GAAP gross margin

53.9 %

49.2 %

Non-GAAP gross profit

$               479,651

$               355,842

Non-GAAP gross margin

54.2 %

53.9 %

(1)

Represents expenses, including expansion costs and duplicate rent costs, related to our distribution centers in Dayton, Ohio and
Las Vegas, Nevada.

(2)

Represents a prior year write-up of HEYDUDE inventory costs to fair value upon the close of the acquisition on February 17, 2022.

(3)

Represents a prior year inventory reserve expense in our EMEALA segment associated with our pause of certain operations in Russia.

Non-GAAP gross margin reconciliation by brand:

Three Months Ended March 31,

2023

2022

(in thousands)

GAAP Crocs Brand gross margin

55.8 %

54.4 %

Non-GAAP adjustments:

Distribution centers ⁽¹⁾

0.5 %

0.2 %

Inventory reserve in Russia ⁽²⁾

— %

0.3 %

Non-GAAP Crocs Brand gross margin

56.3 %

54.9 %

(1)

Represents expenses, including expansion costs and duplicate rent costs, primarily related to our distribution centers in Dayton, Ohio.

(2)

Represents a prior year inventory reserve expense in our EMEALA segment associated with our pause of certain operations in Russia.

HEYDUDE Brand:

Three Months Ended March 31,

2023

2022

(in thousands)

GAAP HEYDUDE Brand gross margin

49.6 %

25.6 %

Non-GAAP adjustments:

Inventory fair value step-up ⁽¹⁾

— %

24.3 %

Non-GAAP HEYDUDE Brand gross margin

49.6 %

49.9 %

(1)

Represents a prior year write-up of HEYDUDE inventory costs to fair value upon the close of the acquisition on February 17, 2022.

Non-GAAP selling, general and administrative reconciliation:

Three Months Ended March 31,

2023

2022

(in thousands)

GAAP revenues

$               884,166

$               660,148

GAAP selling, general and administrative expenses

$               241,442

$               206,247

Information technology project discontinuation

(4,119)

—

HEYDUDE acquisition and integration costs ⁽¹⁾

(1,286)

(20,601)

Duplicate headquarters rent ⁽²⁾

(1,067)

—

Bad debt impact in Russia ⁽³⁾

—

(5,267)

Other ⁽⁴⁾

(2,360)

—

Total adjustments

(8,832)

(25,868)

Non-GAAP selling, general and administrative expenses ⁽⁵⁾

$               232,610

$               180,379

GAAP selling, general and administrative expenses as a percent of revenues

27.3 %

31.2 %

Non-GAAP selling, general and administrative expenses as a percent of revenues

26.3 %

27.3 %

(1)

Represents costs related to the integration of HEYDUDE in the three months ended March 31, 2023 and costs related to the acquisition of HEYDUDE
in the three months ended March 31, 2022.

(2)

Represents duplicate rent costs associated with our upcoming move to a new headquarters.

(3)

Represents prior year bad debt expense associated with the impact of the war between Russia and Ukraine on wholesale partners in Russia.

(4)

Includes various restructuring costs, as well as costs associated with the implementation of a new enterprise resource planning system.

(5)

Non-GAAP selling, general and administrative expenses are presented gross of tax.

Non-GAAP income from operations and operating margin reconciliation:

Three Months Ended March 31,

2023

2022

(in thousands)

GAAP revenues

$               884,166

$               660,148

GAAP income from operations

$               234,928

$               118,677

Non-GAAP cost of sales adjustments ⁽¹⁾

3,281

30,918

Non-GAAP selling, general and administrative expenses adjustments ⁽²⁾

8,832

25,868

Non-GAAP income from operations

$               247,041

$               175,463

GAAP operating margin

26.6 %

18.0 %

Non-GAAP operating margin

27.9 %

26.6 %

(1)

See ‘Non-GAAP cost of sales, gross profit, and gross margin reconciliation’ above for more details.

(2)

See ‘Non-GAAP selling, general and administrative expenses and selling, general and administrative expenses as a percent of revenues reconciliation’ above for more details.

Non-GAAP income tax expense (benefit) and effective tax rate reconciliation:

Three Months Ended March 31,

2023

2022

(in thousands)

GAAP income from operations

$               234,928

$               118,677

GAAP income before income taxes

191,766

99,060

Non-GAAP income from operations ⁽¹⁾

$               247,041

$               175,463

GAAP non-operating income (expenses):

Foreign currency gains (losses), net

(403)

480

Interest income

171

102

Interest expense

(42,637)

(19,252)

Other expense, net

(293)

(947)

Non-GAAP income before income taxes

$               203,879

$               155,846

GAAP income tax expense

$                 42,223

$                 26,300

Tax effect of non-GAAP operating adjustments

3,070

7,622

Impact of intra-entity IP transfers ⁽²⁾

(4,821)

(3,107)

Non-GAAP income tax expense

$                 40,472

$                 30,815

GAAP effective income tax rate

22.0 %

26.5 %

Non-GAAP effective income tax rate

19.9 %

19.8 %

(1)

See ‘Non-GAAP income from operations and operating margin reconciliation’ above for more details.

(2)

In the fourth quarter of 2020, and subsequently in the fourth quarter of 2021, we made changes to our international legal structure, including an intra-entity transfer of certain intellectual property rights, primarily to align with current and future international operations. The transfers resulted in a step-up in the tax basis of intellectual property rights and correlated increases in foreign deferred tax assets based on the fair value of the transferred intellectual property rights. This adjustment represents the current period impact of these transfers. The prior year adjustment also includes the release of the valuation allowance as a result of a tax law change.

Non-GAAP net income per share reconciliation:

Three Months Ended March 31,

2023

2022

(in thousands, except per share data)

Numerator:

GAAP net income

$                   149,543

$                     72,760

Non-GAAP cost of sales adjustments ⁽¹⁾

3,281

30,918

Non-GAAP selling, general and administrative expenses adjustments ⁽²⁾

8,832

25,868

Tax effect of non-GAAP adjustments

1,751

(4,515)

Non-GAAP net income

$                   163,407

$                   125,031

Denominator:

GAAP weighted average common shares outstanding – basic

61,836

59,823

Plus: GAAP dilutive effect of stock options and unvested restricted stock units

793

1,073

GAAP weighted average common shares outstanding – diluted

62,629

60,896

GAAP net income per common share:

Basic

$                          2.42

$                          1.22

Diluted

$                          2.39

$                          1.19

Non-GAAP net income per common share:

Basic

$                          2.64

$                          2.09

Diluted

$                          2.61

$                          2.05

(1)

See ‘Non-GAAP cost of sales, gross profit, and gross margin reconciliation’ above for more information.

(2)

See ‘Non-GAAP selling, general and administrative expenses and selling, general and administrative expenses as a percent of revenues reconciliation’ above for more information.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL GUIDANCE 

Full Year 2023:

Approximately:

Non-GAAP operating margin and operating income reconciliation:

GAAP operating margin

25% to 26%

Non-GAAP adjustments, primarily related to capital investments to support growth ⁽¹⁾

1 %

Non-GAAP operating margin

26% to 27%

Non-GAAP effective tax rate reconciliation:

GAAP effective tax rate

23 %

Non-GAAP adjustments, primarily related to amortization of intellectual property ⁽¹⁾⁽²⁾

(3) %

Non-GAAP effective tax rate

20 %

Non-GAAP diluted earnings per share reconciliation:

GAAP diluted earnings per share

$10.70 to $11.26

Non-GAAP adjustments, primarily related to capital investments to support growth and amortization of intellectual property ⁽¹⁾⁽²⁾

$0.47

Non-GAAP diluted earnings per share

$11.17 to $11.73

(1)

For the full year 2023, we expect to incur approximately $30 million in costs primarily related to capital investments to support growth and to be fairly balanced across COGS and SG&A.

(2)

In the fourth quarter of 2020, and subsequently in the fourth quarter of 2021, we made changes to our international legal structure, including an intra-entity transfer of certain intellectual property rights, primarily to align with current and future international operations. This adjustment represents the amortization of the deferred tax asset related to these intellectual property rights in this period.

CROCS, INC. AND SUBSIDIARIES

REVENUES BY SEGMENT AND CHANNEL

(UNAUDITED)

Three Months Ended March 31,

% Change

Constant
Currency

% Change ⁽¹⁾

Favorable (Unfavorable)

2023

2022

Q1 2023-2022

Q1 2023-2022

(in thousands)

Revenues:

North America

$   351,308

$   319,450

10.0 %

10.3 %

Asia Pacific

140,002

95,847

46.1 %

54.8 %

EMEALA

157,467

129,921

21.2 %

25.1 %

Brand corporate

1

7

(85.7) %

(85.7) %

Crocs Brand revenues

648,778

545,225

19.0 %

21.6 %

HEYDUDE Brand revenues ⁽²⁾

235,388

114,923

104.8 %

105.7 %

Total consolidated revenues

$   884,166

$   660,148

33.9 %

36.2 %

(1)

Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” for more information.

(2)

We acquired HEYDUDE on February 17, 2022 and, as a result, added the HEYDUDE Brand as a new operating segment. Therefore, the amounts shown above for the three months ended March 31, 2022 represent results during the partial period beginning on February 17, 2022 through March 31, 2023 (the “Partial Period”).

Three Months Ended March 31,

% Change

Constant
Currency %
Change ⁽¹⁾

Favorable (Unfavorable)

2023

2022

Q1 2023-2022

Q1 2023-2022

(in thousands)

Crocs Brand:

Wholesale

$   410,563

$   344,258

19.3 %

22.4 %

Direct-to-consumer

238,215

200,967

18.5 %

20.3 %

Total Crocs Brand

648,778

545,225

19.0 %

21.6 %

HEYDUDE Brand:

Wholesale

167,863

86,919

93.1 %

94.3 %

Direct-to-consumer

67,525

28,004

141.1 %

141.1 %

Total HEYDUDE Brand ⁽²⁾

235,388

114,923

104.8 %

105.7 %

Total consolidated revenues

$   884,166

$   660,148

33.9 %

36.2 %

(1)

Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See ‘Reconciliation of GAAP Measures to Non-GAAP Measures’ above for more information.

(2)

We acquired HEYDUDE on February 17, 2022 and, as a result, added the HEYDUDE Brand as a new operating segment. Therefore, the amounts shown above for the three months ended March 31, 2022 represent results during the Partial Period.

CROCS, INC. AND SUBSIDIARIES

DIGITAL SALES PERCENTAGE AND DIRECT-TO-CONSUMER COMPARABLE SALES
(UNAUDITED) 

Digital sales, which includes sales through our company-owned websites, third party marketplaces, and e-tailers, as a percent of
total revenues, by operating segment were:

Three Months Ended March 31,

2023

2022

Digital sales as a percent of total revenues:

Crocs Brand

30.1 %

32.8 %

HEYDUDE Brand ⁽¹⁾

30.1 %

25.9 %

Total

30.1 %

31.6 %

(1) We acquired HEYDUDE on February 17, 2022 and, as a result, added the HEYDUDE Brand as a new operating segment.
      Therefore, the amounts shown above for the three months ended March 31, 2022 represent results during the Partial Period.

Direct-to-consumer (“DTC”) comparable sales for the Crocs Brand were as follows:

Constant Currency ⁽¹⁾

2023

2022

Direct-to-consumer comparable sales: ⁽²⁾

Crocs Brand

19.2 %

16.6 %

HEYDUDE Brand ⁽³⁾

40.6 %

N/A

(1)

Reflects period over period change on a constant currency basis, which is a non-GAAP financial measure. See “Use of Non-GAAP
Financial Measures” for more information.

(2)

Comparable store status, as included in the DTC comparable sales figures above, is determined on a monthly basis. Comparable
store sales include the revenues of stores that have been in operation for more than twelve months. Stores in which selling square
footage has changed more than 15% as a result of a remodel, expansion, or reduction are excluded until the thirteenth month in
which they have comparable prior year sales. Temporarily closed stores are excluded from the comparable store sales calculation
during the month of closure and in the same month in the following year. Location closures in excess of three months are excluded
until the thirteenth month post re-opening. E-commerce comparable revenues are based on same site sales period over period.
E-commerce sites that are temporarily offline or unable to transact or fulfill orders (“site disruption”) are excluded from the
comparable sales calculation during the month of site disruption and in the same month in the following year. E-commerce site
disruptions in excess of three months are excluded until the thirteenth month after the site has re-opened.

(3)

We acquired HEYDUDE on February 17, 2022 and, as a result, added the HEYDUDE Brand as a new operating segment. As such,
in the three months ended March 31, 2022, we did not disclose DTC comparable sales for the HEYDUDE Brand.