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Crocs, Inc. Reports Record Third Quarter Revenues; Raises Full Year 2019 Outlook

NIWOT, Colo.--(BUSINESS WIRE)--

Expects 2019 Revenues to Grow 11% to 12% and Reach Record Levels; Expects 2020 Revenues to Grow 12% to 14%

Crocs, Inc. (CROX), a world leader in innovative casual footwear for men, women, and children, today announced its third quarter 2019 financial results.

Andrew Rees, President and Chief Executive Officer, said, “We delivered an excellent quarter highlighted by 20% top-line growth and record third quarter revenues of $313 million. Our Americas business delivered exceptional growth, driven in part by another highly successful back to school season. Based on the strength of our recent performance and start to the fourth quarter, we are raising our full year guidance to 11% to 12% revenue growth over 2018, which would result in record annual sales for our Company. The Crocs brand momentum continues to gain pace, and for 2020, we anticipate revenue growth over 2019 of 12% to 14%.”

Third Quarter 2019 Operating Results:

  • Revenues were $312.8 million, growing 19.8% over the third quarter of 2018, or 21.0% on a constant currency basis. Currencies negatively impacted our revenues by approximately $3.0 million, while store closures reduced our revenues by approximately $4.0 million. Wholesale revenues grew 25.4%, e-commerce revenues grew 28.2%, and retail comparable store sales grew 12.5%.
  • Gross margin was 52.4%, compared to 53.3% in last year’s third quarter. Adjusted gross margin, which excludes 120 basis points of non-recurring expenditures related to the relocation of our U.S. distribution center, was 53.6%. Adjusted gross margin rose 30 basis points compared to last year’s third quarter. Lower promotions and higher clog sales in the Americas and savings from exiting our company-operated manufacturing facilities last year more than offset various headwinds, including channel mix, higher distribution costs, and 130 basis points of reduced purchasing power associated with currency. For a reconciliation of gross margin to adjusted gross margin, see the ‘Non-GAAP cost of sales and gross margin reconciliation’ schedule below.
  • Selling, general and administrative expenses (“SG&A”) were $123.9 million, down from $125.2 million in the third quarter of 2018. Non-recurring charges were $0.8 million compared to $5.7 million in last year’s third quarter. SG&A improved 830 basis points and represented 39.6% of revenues compared to 47.9% in the third quarter of 2018, as we continued to drive leverage across the business. Our adjusted SG&A improved 640 basis points to 39.4% of revenues versus 45.8% in last year’s third quarter. For a reconciliation of SG&A to adjusted SG&A, see the ‘Non-GAAP selling, general and administrative expenses reconciliation’ schedule below.
  • Income from operations rose 187.0% to $39.9 million from $13.9 million in the third quarter of 2018, and operating margin rose 750 basis points to 12.8%. Excluding non-recurring gross margin and SG&A charges, adjusted income from operations rose 126.9% to $44.4 million and adjusted operating margin was 14.2% compared to 7.5% in the third quarter of 2018, as detailed on the 'Non-GAAP income from operations and operating margin reconciliation' schedule below.
  • Net income attributable to common stockholders was $35.7 million, up from $6.5 million in the third quarter of 2018. Excluding non-recurring gross margin and SG&A charges and pro forma adjustments related to the Company’s previously outstanding Series A Preferred Stock, adjusted net income attributable to common stockholders was $40.2 million and $14.8 million in the third quarters of 2019 and 2018, respectively, as detailed on the 'Non-GAAP earnings per share reconciliation' schedule below.
  • Diluted earnings per share rose to $0.51, up from $0.07 in the third quarter of 2018. Excluding non-recurring gross margin and SG&A charges and pro forma adjustments related to the Series A Preferred Stock, adjusted diluted earnings per share was $0.57 compared to $0.19 in the third quarter of 2018, as detailed on the 'Non-GAAP earnings per share reconciliation' schedule below.

Balance Sheet and Cash Flow Highlights:

  • Cash and cash equivalents were $87.9 million as of September 30, 2019, compared to $203.0 million as of September 30, 2018. During the third quarter of 2019, the Company repurchased approximately 1.0 million shares of its common stock for $25.0 million, as detailed below.
  • Inventory increased 18.8% to $139.8 million as of September 30, 2019 compared to $117.7 million as of September 30, 2018, while our inventory turnover ratio increased to 4.5 turns per year.
  • Capital expenditures during the nine months ended September 30, 2019 were $32.9 million compared to $5.2 million during the same period in 2018. The increase primarily reflects expenditures on the relocation of the Company’s U.S. distribution center from California to Ohio.
  • At September 30, 2019, there were $185.0 million of borrowings outstanding on the Company’s credit facility.

Share Repurchase Activity:

During the third quarter of 2019, the Company repurchased approximately 1.0 million shares of its common stock for $25.0 million, at an average price of $23.99 per share. As of September 30, 2019, approximately $522 million remained of the Company’s share repurchase authorization.

Financial Outlook:

Fourth Quarter 2019:

With respect to the fourth quarter of 2019, the Company expects:

  • Revenues to be between $245 and $255 million compared to $216.0 million in the fourth quarter of 2018. The Company expects fourth quarter 2019 revenues to be negatively impacted by approximately $2 million of currency changes and approximately $2 million resulting from store closures.
  • Adjusted gross margin to be approximately 50% compared to 46.2% in the fourth quarter of 2018. Gains from increased pricing and higher clog sales plus leveraging our fixed supply chain costs are expected to more than offset approximately 100 basis points of reduced purchasing power associated with currency, along with changes in channel mix. On a GAAP basis, gross margin is expected to be approximately 49%, which includes 100 basis points of non-recurring charges associated with the Company’s new U.S. distribution center.
  • SG&A to be approximately 47% of revenues compared to 52.7% of revenues in 2018. Non-recurring charges during the quarter are expected to be immaterial compared to $4.6 million in the fourth quarter of 2018.

Full Year 2019:

With respect to 2019, the Company now expects:

  • Revenues to grow 11% to 12% over 2018 revenues of $1,088.2 million, compared to prior guidance of 9% to 11%. The Company expects 2019 revenues to be negatively impacted by approximately $28 million of currency changes and approximately $20 million resulting from store closures.
  • Adjusted gross margin to be approximately 51%, compared to prior guidance of 50.5%, reflecting the increased strength of the Americas business. The 50 basis point reduction from 51.5% in 2018 reflects an expectation of approximately 120 basis points of reduced purchasing power associated with currency, along with higher freight and distribution costs and channel mix, partially offset by higher clog sales, higher pricing, reduced promotions, and savings from exiting our company-operated manufacturing facilities last year. On a GAAP basis, gross margin is expected to be approximately 50%, reflecting non-recurring charges of approximately 100 basis points associated with the Company’s new U.S. distribution center.
  • SG&A to be approximately 40% of revenues, unchanged from prior guidance. Non-recurring charges in 2019 are expected to be approximately $3 million. In 2018, SG&A was 45.7% of revenues and included $21.1 million of non-recurring charges.
  • Adjusted operating margin to be approximately 11%, which meets the Company’s near-term target of returning to a low double-digit operating margin. Including the non-recurring charges associated with the new U.S. distribution center and certain SG&A costs, the Company now anticipates a GAAP operating margin of approximately 10%.
  • A 2019 tax rate of approximately 12%, down from our prior guidance of 15%.
  • Capital expenditures to be approximately $60 million, compared to prior guidance of approximately $65 million, reflecting the movement of certain expenditures into 2020, and up from $12 million in 2018.

2020 Preview:

With respect to 2020 revenues, the Company expects 12% to 14% growth over 2019 revenues. This estimate assumes that currency will negatively impact results by approximately $10 million.

Conference Call Information:

A conference call to discuss third quarter 2019 results is scheduled for today, Wednesday, October 30, 2019 at 8:30 a.m. ET. The call participation number is (877) 790-7808. A replay of the conference call will be available two hours after the completion of the call at (800) 585-8367. International participants can dial (647) 689-5638 to take part in the conference call, and can access a replay of the call at (416) 621-4642. All of these calls will require the use of the conference identification number 8095853. The call will also be streamed live on the Crocs website, www.crocs.com, and that audio recording will be available at www.crocs.com through October 30, 2020.

About Crocs, Inc.:

Crocs, Inc. (CROX) is a world leader in innovative casual footwear for women, men, and children, combining comfort and style with a value that consumers know and love. The vast majority of shoes within Crocs’ collection contains Croslite™ material, a proprietary, molded footwear technology, delivering extraordinary comfort with each step.

In 2019, Crocs declares that expressing yourself and being comfortable are not mutually exclusive. To learn more about Crocs or our global Come As You Are™ campaign, please visit www.crocs.com or follow @Crocs on Facebook, Instagram and Twitter.

Forward-Looking Statements:

This news release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding prospects, expectations and our revenues, gross margin, SG&A, operating margin, tax, and capital expenditure outlook. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from any future results, performances, or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the following: current global financial conditions; the effect of competition in our industry; our ability to effectively manage our future growth or declines in revenues; changing consumer preferences; our ability to maintain and expand revenues and gross margin; our ability to accurately forecast consumer demand for our products; our ability to successfully implement our strategic plans; our ability to develop and sell new products; our ability to obtain and protect intellectual property rights; the effect of potential adverse currency exchange rate fluctuations and other international operating risks; and other factors described in our most recent Annual Report on Form 10-K under the heading “Risk Factors” and our subsequent filings with the Securities and Exchange Commission. Readers are encouraged to review that section and all other disclosures appearing in our filings with the Securities and Exchange Commission.

All information in this document speaks as of October 30, 2019. We do not undertake any obligation to update publicly any forward-looking statements, including, without limitation, any estimates provided in the “Financial Outlook” section above, whether as a result of the receipt of new information, future events, or otherwise.

Category:Investors

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

Revenues

$

312,766

 

 

$

261,064

 

 

$

967,614

 

 

$

872,216

 

Cost of sales

148,942

 

 

122,005

 

 

476,796

 

 

411,884

 

Gross profit

163,824

 

 

139,059

 

 

490,818

 

 

460,332

 

Selling, general and administrative expenses

123,940

 

 

125,164

 

 

370,525

 

 

383,451

 

Income from operations

39,884

 

 

13,895

 

 

120,293

 

 

76,881

 

Foreign currency gains (losses), net

585

 

 

233

 

 

(893

)

 

1,587

 

Interest income

167

 

 

422

 

 

493

 

 

847

 

Interest expense

(2,505

)

 

(126

)

 

(6,743

)

 

(371

)

Other income (expense), net

(34

)

 

160

 

 

(48

)

 

229

 

Income before income taxes

38,097

 

 

14,584

 

 

113,102

 

 

79,173

 

Income tax expense

2,421

 

 

4,092

 

 

13,518

 

 

17,850

 

Net income

35,676

 

 

10,492

 

 

99,584

 

 

61,323

 

Dividends on Series A convertible preferred stock

 

 

(3,000

)

 

 

 

(9,000

)

Dividend equivalents on Series A convertible preferred stock related to redemption value accretion and beneficial conversion feature

 

 

(972

)

 

 

 

(2,854

)

Net income attributable to common stockholders

$

35,676

 

 

$

6,520

 

 

$

99,584

 

 

$

49,469

 

Net income per common share:

 

 

 

 

 

 

 

Basic

$

0.52

 

 

$

0.08

 

 

$

1.40

 

 

$

0.60

 

Diluted

$

0.51

 

 

$

0.07

 

 

$

1.38

 

 

$

0.58

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

69,097

 

 

67,821

 

 

71,003

 

 

68,223

 

Diluted

70,176

 

 

72,774

 

 

72,342

 

 

71,104

 

CROCS, INC. AND SUBSIDIARIES

EARNINGS PER SHARE

(UNAUDITED)

(in thousands, except per share data)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands, except per share data)

Numerator:

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

35,676

 

 

$

6,520

 

 

$

99,584

 

 

$

49,469

 

Less: Net income allocable to Series A Convertible Preferred stockholders (1)

 

 

(1,114

)

 

 

 

(8,319

)

Remaining net income available to common stockholders - basic and diluted

$

35,676

 

 

$

5,406

 

 

$

99,584

 

 

$

41,150

 

Denominator:

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

69,097

 

 

67,821

 

 

71,003

 

 

68,223

 

Plus: dilutive effect of stock options and unvested restricted stock units for both periods and Series A Convertible Preferred Stock in 2018

1,079

 

 

4,953

 

 

1,339

 

 

2,881

 

Weighted average common shares outstanding - diluted

70,176

 

 

72,774

 

 

72,342

 

 

71,104

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

Basic

$

0.52

 

 

$

0.08

 

 

$

1.40

 

 

$

0.60

 

Diluted

$

0.51

 

 

$

0.07

 

 

$

1.38

 

 

$

0.58

 

(1) Represents the amount which would have been paid to preferred stockholders in the event the Company had declared a dividend on its common stock.

 

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and par value amounts)

 

September 30,
2019

 

December 31,
2018

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

87,909

 

 

$

123,367

 

Accounts receivable, net of allowances of $20,921 and $20,477, respectively

121,716

 

 

97,627

 

Inventories

139,839

 

 

124,491

 

Income taxes receivable

7,380

 

 

3,041

 

Other receivables

9,523

 

 

7,703

 

Restricted cash - current

1,469

 

 

1,946

 

Prepaid expenses and other assets

23,427

 

 

22,123

 

Total current assets

391,263

 

 

380,298

 

Property and equipment, net of accumulated depreciation and amortization of $83,750 and $80,956, respectively

42,266

 

 

22,211

 

Intangible assets, net

47,222

 

 

45,690

 

Goodwill

1,534

 

 

1,614

 

Deferred tax assets, net

10,174

 

 

8,663

 

Restricted cash

1,757

 

 

2,217

 

Right-of-use assets

183,040

 

 

 

Other assets

8,259

 

 

8,208

 

Total assets

$

685,515

 

 

$

468,901

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

85,938

 

 

$

77,231

 

Accrued expenses and other liabilities

88,762

 

 

102,171

 

Income taxes payable

13,266

 

 

5,089

 

Current operating lease liabilities

45,486

 

 

 

Total current liabilities

233,452

 

 

184,491

 

Long-term income taxes payable

5,633

 

 

4,656

 

Long-term borrowings

185,000

 

 

120,000

 

Long-term operating lease liabilities

143,632

 

 

 

Other liabilities

274

 

 

9,446

 

Total liabilities

567,991

 

 

318,593

 

Stockholders’ equity:

 

 

 

Preferred stock, par value $0.001 per share, 4.0 million shares authorized, none outstanding

 

 

 

Common stock, par value $0.001 per share, 250.0 million shares authorized, 104.0 million and 103.0 million issued, 68.6 million and 73.3 million outstanding, respectively

104

 

 

103

 

Treasury stock, at cost, 35.4 million and 29.7 million shares, respectively

(532,220

)

 

(397,491

)

Additional paid-in capital

492,399

 

 

481,133

 

Retained earnings

220,572

 

 

121,215

 

Accumulated other comprehensive loss

(63,331

)

 

(54,652

)

Total stockholders’ equity

117,524

 

 

150,308

 

Total liabilities and stockholders’ equity

$

685,515

 

 

$

468,901

 

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

Nine Months Ended September 30,

 

2019

 

2018

Cash flows from operating activities:

 

 

 

Net income

$

99,584

 

 

$

61,323

 

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

 

 

 

Depreciation and amortization

17,508

 

 

21,535

 

Operating lease cost

44,776

 

 

 

Share-based compensation

11,020

 

 

9,320

 

Other non-cash items

(688

)

 

6,076

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net of allowances

(30,619

)

 

(37,394

)

Inventories

(17,178

)

 

4,468

 

Prepaid expenses and other assets

(3,501

)

 

5,271

 

Accounts payable, accrued expenses and other liabilities

1,955

 

 

15,271

 

Operating lease liabilities

(49,668

)

 

 

Cash provided by operating activities

73,189

 

 

85,870

 

Cash flows from investing activities:

 

 

 

Purchases of property, equipment, and software

(32,852

)

 

(5,224

)

Proceeds from disposal of property and equipment

302

 

 

1,325

 

Cash used in investing activities

(32,550

)

 

(3,899

)

Cash flows from financing activities:

 

 

 

Proceeds from bank borrowings

310,000

 

 

 

Repayments of bank borrowings

(245,000

)

 

(680

)

Dividends—Series A convertible preferred stock (1)

(2,985

)

 

(9,000

)

Repurchases of common stock

(133,475

)

 

(37,046

)

Other

(3,275

)

 

31

 

Cash used in financing activities

(74,735

)

 

(46,695

)

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

(2,299

)

 

(5,133

)

Net change in cash, cash equivalents, and restricted cash

(36,395

)

 

30,143

 

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

127,530

 

 

177,055

 

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

$

91,135

 

 

$

207,198

 

(1)

Represents $3.0 million paid to induce conversion of Series A Convertible Preferred Stock to common stock for the nine months ended September 30, 2019 and $9.0 million paid in Series A Convertible Preferred Stock cash dividends for the nine months ended September 30, 2018.

CROCS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

In addition to financial measures presented on the basis of accounting principles generally accepted in the United States of America (“GAAP”), we present “Non-GAAP cost of sales”, “Non-GAAP gross margin”, “Non-GAAP selling, general, and administrative expenses”, “Non-GAAP net income attributable to common stockholders”, “Non-GAAP operating margin”, “Non-GAAP weighted average common shares outstanding - basic and diluted”, and “Non-GAAP basic and diluted net income per common share”, which are non-GAAP financial measures. Non-GAAP results exclude the impact of items that management believes affect the comparability or underlying business trends in our condensed consolidated financial statements in the periods presented.

We also present certain information related to our current period results of operations through “constant currency,” which is a non-GAAP financial measure and should be viewed as a supplement to our results of operations and presentation of reportable segments under GAAP. Constant currency represents current period results that have been retranslated using exchange rates used in the prior year comparative period to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations.

Management uses non-GAAP results to assist in comparing business trends from period to period on a consistent basis in communications with the board of directors, stockholders, analysts, and investors concerning our financial performance. We believe that these non-GAAP measures are useful to investors and other users of our condensed consolidated financial statements as an additional tool for evaluating operating performance and trends. For the three and nine months ended September 30, 2019, management believes it is helpful to evaluate our results excluding the impacts of the Series A Preferred Stock transaction and various adjustments relating to special or non-recurring items. Investors should not consider these non-GAAP measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

CROCS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(UNAUDITED)

Non-GAAP cost of sales and gross margin reconciliation:

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

GAAP revenues

$

312,766

 

 

$

261,064

 

 

$

967,614

 

 

$

872,216

 

 

 

 

 

 

 

 

 

GAAP cost of sales

$

148,942

 

 

$

122,005

 

 

$

476,796

 

 

$

411,884

 

New distribution center (1)

(3,678

)

 

 

 

(7,981

)

 

 

Other

(42

)

 

 

 

(175

)

 

 

Total adjustments

(3,720

)

 

 

 

(8,156

)

 

 

Non-GAAP cost of sales

$

145,222

 

 

$

122,005

 

 

$

468,640

 

 

$

411,884

 

 

 

 

 

 

 

 

 

GAAP gross margin

$

163,824

 

 

$

139,059

 

 

$

490,818

 

 

$

460,332

 

GAAP gross margin as a percent of revenues

52.4

%

 

53.3

%

 

50.7

%

 

52.8

%

 

 

 

 

 

 

 

 

Non-GAAP gross margin

$

167,544

 

 

$

139,059

 

 

$

498,974

 

 

$

460,332

 

Non-GAAP gross margin as a percent of revenues

53.6

%

 

53.3

%

 

51.6

%

 

52.8

%

(1) Represents non-recurring expenses related to our new distribution center in Dayton, Ohio.

Non-GAAP selling, general and administrative expenses reconciliation:

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

GAAP revenues

$

312,766

 

 

$

261,064

 

 

$

967,614

 

 

$

872,216

 

 

 

 

 

 

 

 

 

GAAP selling, general and administrative expenses

$

123,940

 

 

$

125,164

 

 

$

370,525

 

 

$

383,451

 

Closure of manufacturing and distribution facilities (1)

 

 

(5,063

)

 

 

 

(12,138

)

Non-recurring expenses associated with cost reduction initiatives (2)

(809

)

 

(616

)

 

(1,698

)

 

(4,406

)

Total adjustments

(809

)

 

(5,679

)

 

(1,698

)

 

(16,544

)

Non-GAAP selling, general and administrative expenses (3)

$

123,131

 

 

$

119,485

 

 

$

368,827

 

 

$

366,907

 

 

 

 

 

 

 

 

 

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

39.6

%

 

47.9

%

 

38.3

%

 

44.0

%

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

39.4

%

 

45.8

%

 

38.1

%

 

42.1

%

(1) Represents non-recurring expenses associated with the 2018 closures of company-operated Mexico and Italy manufacturing and distribution facilities.
(2) Non-recurring expenses associated with cost reduction initiatives in 2019 and the SG&A reduction plan in 2018.
(3) Non-GAAP selling, general and administrative expenses are presented gross of tax.

 

CROCS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(UNAUDITED)

Non-GAAP income from operations and operating margin reconciliation:

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

GAAP revenues

$

312,766

 

 

$

261,064

 

 

$

967,614

 

 

$

872,216

 

 

 

 

 

 

 

 

 

GAAP income from operations

$

39,884

 

 

$

13,895

 

 

$

120,293

 

 

$

76,881

 

Non-GAAP cost of sales adjustments (1)

3,720

 

 

 

 

8,156

 

 

 

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

809

 

 

5,679

 

 

1,698

 

 

16,544

 

Non-GAAP income from operations

$

44,413

 

 

$

19,574

 

 

$

130,147

 

 

$

93,425

 

 

 

 

 

 

 

 

 

GAAP operating margin

12.8

%

 

5.3

%

 

12.4

%

 

8.8

%

Non-GAAP operating margin

14.2

%

 

7.5

%

 

13.5

%

 

10.7

%

(1) See 'Non-GAAP cost of sales reconciliation' above for more details.
(2) See 'Non-GAAP selling, general and administrative expenses reconciliation' above for more details.

 

CROCS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(UNAUDITED)

Non-GAAP earnings per share reconciliation: (1)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands, except per share data)

Numerator:

 

 

 

 

 

 

 

GAAP net income attributable to common stockholders

$

35,676

 

 

$

6,520

 

 

$

99,584

 

 

$

49,469

 

Less: GAAP adjustment for net income allocable to Series A Preferred stockholders

 

 

(1,114

)

 

 

 

(8,319

)

GAAP remaining net income available to common stockholders- basic and diluted

$

35,676

 

 

$

5,406

 

 

$

99,584

 

 

$

41,150

 

 

 

 

 

 

 

 

 

GAAP net income attributable to common stockholders

$

35,676

 

 

$

6,520

 

 

$

99,584

 

 

$

49,469

 

Preferred share dividends and dividend equivalents (2)

 

 

3,972

 

 

 

 

11,854

 

Non-GAAP cost of sales adjustments (3)

3,720

 

 

 

 

8,156

 

 

 

Non-GAAP selling, general and administrative expenses adjustments (4)

809

 

 

5,679

 

 

1,698

 

 

16,544

 

Pro forma interest (5)

 

 

(1,407

)

 

 

 

(4,221

)

Non-GAAP net income attributable to common stockholders

$

40,205

 

 

$

14,764

 

 

$

109,438

 

 

$

73,646

 

Denominator:

 

 

 

 

 

 

 

GAAP weighted average common shares outstanding - basic

69,097

 

 

67,821

 

 

71,003

 

 

68,223

 

Plus: GAAP dilutive effect of stock options and unvested restricted stock units in both periods and Series A Preferred in 2018

1,079

 

 

4,953

 

 

1,339

 

 

2,881

 

GAAP weighted average common shares outstanding - diluted

70,176

 

 

72,774

 

 

72,342

 

 

71,104

 

 

 

 

 

 

 

 

 

GAAP weighted average common shares outstanding - basic

 

 

67,821

 

 

 

 

68,223

 

Plus: Non-GAAP weighted average converted common shares outstanding adjustment (6)

 

 

6,897

 

 

 

 

6,897

 

Non-GAAP weighted average common shares outstanding - basic (7)

 

 

74,718

 

 

 

 

75,120

 

Plus: Non-GAAP dilutive effect of stock options and unvested restricted stock units (8)

 

 

1,780

 

 

 

 

1,752

 

Non-GAAP weighted average common shares outstanding - diluted (9)

 

 

76,498

 

 

 

 

76,872

 

 

 

 

 

 

 

 

 

GAAP net income per common share:

 

 

 

 

 

 

 

Basic

$

0.52

 

 

$

0.08

 

 

$

1.40

 

 

$

0.60

 

Diluted

$

0.51

 

 

$

0.07

 

 

$

1.38

 

 

$

0.58

 

 

 

 

 

 

 

 

 

Non-GAAP net income per common share:

 

 

 

 

 

 

 

Basic (10)

$

0.58

 

 

$

0.20

 

 

$

1.54

 

 

$

0.98

 

Diluted (11)

$

0.57

 

 

$

0.19

 

 

$

1.51

 

 

$

0.96

 

(1)

Non-GAAP earnings per share calculation for the three and nine months ended September 30, 2018 assumes the repurchase and conversion of the Series A Convertible Preferred Stock occurred on December 31, 2017 ("the Conversion").

(2)

Adjustment adds back quarterly dividends and dividend equivalents for the Series A Convertible Preferred Stock in calculating non-GAAP net income attributable to common stockholders for the three and nine months ended September 30, 2018.

(3)

See 'Non-GAAP cost of sales and gross margin reconciliation' above for more information.

(4)

See 'Non-GAAP selling, general and administrative expenses reconciliation' above for more information.

(5)

Pro forma interest for the three and nine months ended September 30, 2018 assumes borrowings of $120.0 million were outstanding for all of 2018 at a rate of 4.69% to partially finance the Conversion. Calculation assumes no repayments and no financing fees.

(6)

Adjustment represents the incremental increase in weighted average common shares outstanding for the three and nine months ended September 30, 2018 resulting from the Conversion.

(7)

Non-GAAP weighted average common shares outstanding - basic for the three and nine months ended September 30, 2018 assumes the Conversion.

(8)

Adjustment reflects the dilutive impact of stock options and restricted stock units for the three and nine months ended September 30, 2018.

(9)

Non-GAAP weighted average common shares outstanding - diluted for the three and nine months ended September 30, 2018 assumes the Conversion.

(10)

Non-GAAP net income per common share - basic for the three and nine months ended September 30, 2018 assumes the Conversion and the non-GAAP income attributable to common shareholders.

(11)

Non-GAAP net income per common share - diluted for the three and nine months ended September 30, 2018 assumes the Conversion and the non-GAAP income attributable to common shareholders.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL GUIDANCE

Fourth Quarter 2019:

Approximately:

Non-GAAP gross margin reconciliation:

 

GAAP gross margin as a percent of revenues

 

49%

Non-recurring charges associated with the Company’s new distribution center

 

1%

Non-GAAP gross margin as a percent of revenues

 

50%

Full Year 2019:

 

Non-GAAP gross margin reconciliation:

 

GAAP gross margin as a percent of revenues

 

50%

Non-recurring charges associated with the Company’s new distribution center

 

1%

Non-GAAP gross margin as a percent of revenues

 

51%

Non-GAAP operating margin reconciliation:

 

GAAP operating margin

 

10%

Non-recurring charges associated with the Company’s new distribution center and certain SG&A costs

 

1%

Non-GAAP operating margin

 

11%

CROCS, INC. AND SUBSIDIARIES

REVENUES BY SEGMENT

(UNAUDITED)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

% Change

 

Constant Currency
% Change (1)

 

 

2019

 

2018

 

2019

 

2018

 

Q3 2019-2018

 

YTD
2019-2018

 

Q3 2019-2018

 

YTD
2019-2018

 

 

(in thousands)

Americas:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale

 

$

75,660

 

 

$

44,883

 

 

$

216,846

 

 

$

171,477

 

 

68.6

%

 

26.5

%

 

69.0

%

 

27.6

%

Retail

 

78,141

 

 

65,247

 

 

182,116

 

 

156,557

 

 

19.8

%

 

16.3

%

 

19.8

%

 

16.4

%

E-commerce

 

31,391

 

 

26,827

 

 

85,796

 

 

70,515

 

 

17.0

%

 

21.7

%

 

17.1

%

 

21.9

%

Total Americas

 

185,192

 

 

136,957

 

 

484,758

 

 

398,549

 

 

35.2

%

 

21.6

%

 

35.4

%

 

22.2

%

Asia Pacific:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale

 

36,655

 

 

40,938

 

 

169,468

 

 

172,152

 

 

(10.5

)%

 

(1.6

)%

 

(10.0

)%

 

1.9

%

Retail

 

20,133

 

 

22,942

 

 

60,901

 

 

71,359

 

 

(12.2

)%

 

(14.7

)%

 

(9.6

)%

 

(10.7

)%

E-commerce

 

17,463

 

 

11,283

 

 

53,353

 

 

45,134

 

 

54.8

%

 

18.2

%

 

56.9

%

 

22.9

%

Total Asia Pacific

 

74,251

 

 

75,163

 

 

283,722

 

 

288,645

 

 

(1.2

)%

 

(1.7

)%

 

0.2

%

 

2.0

%

EMEA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale

 

34,058

 

 

29,373

 

 

144,685

 

 

130,150

 

 

16.0

%

 

11.2

%

 

19.9

%

 

18.7

%

Retail

 

9,347

 

 

10,345

 

 

25,453

 

 

29,601

 

 

(9.6

)%

 

(14.0

)%

 

(7.4

)%

 

(9.4

)%

E-commerce

 

9,869

 

 

7,701

 

 

28,821

 

 

23,138

 

 

28.2

%

 

24.6

%

 

33.2

%

 

31.5

%

Total EMEA

 

53,274

 

 

47,419

 

 

198,959

 

 

182,889

 

 

12.3

%

 

8.8

%

 

16.1

%

 

15.7

%

Total segment revenues

 

312,717

 

 

259,539

 

 

967,439

 

 

870,083

 

 

20.5

%

 

11.2

%

 

21.7

%

 

14.2

%

Other businesses

 

49

 

 

1,525

 

 

175

 

 

2,133

 

 

(96.8

)%

 

(91.8

)%

 

(96.9

)%

 

(91.8

)%

Total consolidated revenues

 

$

312,766

 

 

$

261,064

 

 

$

967,614

 

 

$

872,216

 

 

19.8

%

 

10.9

%

 

21.0

%

 

13.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total wholesale

 

$

146,422

 

 

$

116,719

 

 

$

531,174

 

 

$

475,912

 

 

25.4

%

 

11.6

%

 

26.8

%

 

15.3

%

Total retail

 

107,621

 

 

98,534

 

 

268,470

 

 

257,517

 

 

9.2

%

 

4.3

%

 

10.1

%

 

5.9

%

Total e-commerce

 

58,723

 

 

45,811

 

 

167,970

 

 

138,787

 

 

28.2

%

 

21.0

%

 

29.6

%

 

23.8

%

Total consolidated revenues

 

$

312,766

 

 

$

261,064

 

 

$

967,614

 

 

$

872,216

 

 

19.8

%

 

10.9

%

 

21.0

%

 

13.9

%

(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.

CROCS, INC. AND SUBSIDIARIES

RETAIL STORE COUNTS

(UNAUDITED)

 

 

June 30, 2019

 

Opened

 

Closed

 

September 30,
2019

Type:

 

 

 

 

 

 

 

 

Outlet stores

 

192

 

 

6

 

 

4

 

 

194

 

Retail stores

 

112

 

 

 

 

3

 

 

109

 

Kiosk/store in store

 

66

 

 

 

 

1

 

 

65

 

Total

 

370

 

 

6

 

 

8

 

 

368

 

Operating segment:

 

 

 

 

 

 

 

 

Americas

 

165

 

 

1

 

 

1

 

 

165

 

Asia Pacific

 

146

 

 

4

 

 

4

 

 

146

 

EMEA

 

59

 

 

1

 

 

3

 

 

57

 

Total

 

370

 

 

6

 

 

8

 

 

368

 

 

 

12/31/2018

 

Opened

 

Closed/
Transferred

 

September 30,
2019

Type:

 

 

 

 

 

 

 

 

Outlet stores

 

195

 

 

10

 

 

11

 

 

194

 

Retail stores

 

120

 

 

1

 

 

12

 

 

109

 

Kiosk/store-in-store

 

68

 

 

1

 

 

4

 

 

65

 

Total

 

383

 

 

12

 

 

27

 

 

368

 

Operating segment:

 

 

 

 

 

 

 

 

Americas

 

168

 

 

1

 

 

4

 

 

165

 

Asia Pacific

 

153

 

 

10

 

 

17

 

 

146

 

EMEA

 

62

 

 

1

 

 

6

 

 

57

 

Total

 

383

 

 

12

 

 

27

 

 

368

 

CROCS, INC. AND SUBSIDIARIES

COMPARABLE RETAIL STORE SALES AND DIRECT TO CONSUMER COMPARABLE STORE SALES

(UNAUDITED)

Comparable retail sales and direct to consumer sales by operating segment were:

 

Constant Currency (1)

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Comparable retail store sales: (2)

 

 

 

 

 

 

 

Americas

19.1

%

 

19.9

%

 

17.1

%

 

13.0

%

Asia Pacific

(4.2

)%

 

3.2

%

 

(1.2

)%

 

3.4

%

EMEA

2.4

%

 

15.1

%

 

6.3

%

 

11.4

%

Global

12.5

%

 

15.0

%

 

11.4

%

 

10.1

%

 

Constant Currency (1)

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Direct-to-consumer comparable store sales (includes retail and e-commerce): (2)

 

 

 

 

 

 

 

Americas

18.5

%

 

21.6

%

 

18.6

%

 

15.2

%

Asia Pacific

11.7

%

 

8.4

%

 

5.6

%

 

10.4

%

EMEA

9.5

%

 

19.3

%

 

13.8

%

 

15.4

%

Global

15.9

%

 

17.9

%

 

14.4

%

 

13.8

%

(1)

Reflects period over period 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)

Comparable store status 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. Location closures in excess of three months are excluded until the thirteenth month post re-opening. E-commerce revenues are based on same site sales period over period.

 

 

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