8-K
Crocs, Inc. (CROX)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 27, 2020
CROCS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 0-51754 | 20-2164234 | |
|---|---|---|---|
| (State or other jurisdiction | (Commission File Number) | (I.R.S. Employer | |
| of incorporation) | Identification No.) | ||
| 13601 Via Varra | 80020 | ||
| Broomfield, | Colorado | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (303) 848-7000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading symbol: | Name of each exchange on which registered: |
|---|---|---|
| Common Stock, par value $0.001 per share | CROX | The Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.45) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On October 27, 2020, Crocs, Inc. (the “Company”) issued a press release reporting its results of operations for the three and nine months ended September 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit<br><br>No. | Description |
|---|---|
| 99.1 | Crocs, Inc. press release dated October 27, 2020. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CROCS, INC. | ||
|---|---|---|
| Date: October 27, 2020 | By: | /s/ Anne Mehlman |
| Anne Mehlman | ||
| Executive Vice President and Chief Financial Officer |
2
Document
Exhibit 99.1
| Investor Contact: | Cori Lin, Crocs, Inc. |
|---|---|
| (303) 848-5053 | |
| clin@crocs.com | |
| PR Contact: | Melissa Layton, Crocs, Inc. |
| (303) 848-7885 | |
| mlayton@crocs.com |
Crocs, Inc. Reports Record Third Quarter Results
Third Quarter Revenue of $362 million Grew 16%
Operating Income Rose 81% and Operating Margin Expanded to 19.9%
Record Third Quarter Diluted EPS of $0.91 Increased 78%
___________________________________________________________________________
BROOMFIELD, COLORADO — October 27, 2020 — Crocs, Inc. (NASDAQ: CROX), a world leader in innovative casual footwear for women, men, and children, today announced its third quarter 2020 financial results.
Andrew Rees, Chief Executive Officer, said, “We achieved record third quarter revenue and EPS despite the challenges presented by the global COVID-19 pandemic. Our extraordinary performance and strong cash flow generation demonstrates the strength of the Crocs brand and product offering globally. I am tremendously proud of how we have executed as a team and am excited for our future.”
Third Quarter 2020 Highlights
•Record third quarter revenues at $361.7 million after record third quarter revenues were achieved in 2019. Revenues increased 15.7%, or 15.9% on a constant currency basis, with growth in all three channels.
•Digital sales grew 35.5% to represent 37.7% of revenue versus 32.2% last year with growth in all regions.
•Retail comparable store sales grew 16.2%.
•Operating income increased 80.7% to $72.1 million and operating margins expanded 710 basis points to 19.9%.
•Diluted earnings per share grew 78.4% to a quarterly record of $0.91.
Amounts referred to as “Adjusted” are Non-GAAP measures and include adjustments that are described under the heading “Reconciliation of GAAP Measures to Non-GAAP Measures.” A reconciliation of these amounts to their GAAP counterparts are contained in the schedules below.
Third Quarter 2020 Operating Results
•Revenues were $361.7 million, an increase of 15.7% from the same period last year, or 15.9% on a constant currency basis. E-commerce revenues grew 36.3%, wholesale revenues grew 12.4%, and retail revenues increased 8.9%.
•Gross margin of 57.2% increased 480 basis points compared to 52.4% in the same period last year. Adjusted gross margin of 57.4% rose 380 basis points from the same period last year.
•SG&A expenses of $134.7 million increased from $123.9 million in the same period last year and SG&A as a percent of revenue improved by 240 basis points to 37.2%. Adjusted SG&A improved to 36.6% of revenues versus 39.4% for the same period last year.
•Income from operations increased 80.7% to $72.1 million from $39.9 million for the same period last year. Operating margin rose 710 basis points to 19.9%. Adjusted income from operations rose 69.7% to $75.4 million and adjusted operating margin was 20.8% compared to 14.2% for the same period last year.
•Diluted earnings per share increased 78.4% to a quarterly record of $0.91, as compared to $0.51 for the same period last year. Adjusted diluted earnings per share were $0.94, or 64.9% above the $0.57 for the same period last year.
Third Quarter 2020 Geographic Summary
•Americas: Revenues of $234.0 million increased 27.3% on a constant currency basis.
•Asia Pacific: Revenues of $67.7 million decreased 9.0% on a constant currency basis.
•EMEA: Revenues of $60.0 million increased 10.7% on a constant currency basis.
Third Quarter 2020 Channel Summary
•Wholesale: Revenues increased 12.4% to $164.5 million compared to $146.4 million for the same period last year.
•Retail: Revenues increased 8.9% to $117.2 million compared to $107.6 million for the same period last year.
•E-Commerce: Revenues increased 36.3% to $80.0 million compared to $58.7 million for the same period last year.
•Digital sales, which includes sales through our company-owned websites, third party marketplaces, and e-tailers, grew 35.5% to 37.7% of total revenues versus 32.2% for the same period last year.
•Direct-to-consumer comparable sales, which includes retail and e-commerce, grew 23.8% versus 15.9% for the same period last year.
Balance Sheet and Cash Flow
•Cash and cash equivalents were $123.6 million as of September 30, 2020, compared to $108.3 million as of December 31, 2019.
•Inventories increased to $174.1 million as of September 30, 2020, compared to $172.0 million as of December 31, 2019 and $139.8 million as of September 30, 2019 as in-transit inventories were up approximately $20 million from the same period last year.
•Capital expenditures during the nine months ended September 30, 2020 were $33.2 million, relatively flat to the same period last year.
•Borrowings at September 30, 2020 were $135.0 million after repaying $140.0 million in debt during the third quarter. Our liquidity position remains strong with $364.4 million in available borrowing capacity.
Stock Repurchase Activity
We have a track record of investing to fuel growth and returning capital to shareholders. During the third quarter of 2020, we did not repurchase any shares. Earlier in the year we temporarily suspended the share repurchase program to maximize liquidity and flexibility during the COVID-19 pandemic. As of September 30, 2020, we repurchased $39.2 million of shares this year and approximately $469 million in capacity remains under the share repurchase authorization.
Financial Outlook
In these unprecedented times, we will continue to provide forward visibility when appropriate. Excluding the potential impact of any future COVID-related shutdowns in major markets, we expect:
•Revenues: Fourth quarter revenue to grow between 20% and 30% compared to 2019. This translates into full year 2020 revenue growth of approximately 5% to 7%.
•Tax rate: A 2020 tax rate of approximately 11% as we project to utilize deferred tax assets that were previously subject to a valuation allowance.
•Capital expenditures: Approximately $50 million of capital expenditures for 2020, which reflects investment to support future growth.
Conference Call Information
A conference call to discuss third quarter 2020 results is scheduled for today, Tuesday, October 27, 2020, at 8:30 am ET. To receive conference call details, please register at the Investor Relations section of the Crocs website, investors.crocs.com. The webcast will also be available live and on replay through October 27, 2021 at this site.
About Crocs, Inc.
Crocs, Inc. (Nasdaq: 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 2020, 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 press release includes estimates, projections, and statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, statements regarding potential impacts to our business related to the COVID-19 pandemic, our financial condition, brand and liquidity outlook, and expectations regarding our 2020 revenue, tax rate, capital expenditures, and cash flow. 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: the COVID-19 pandemic and related government, private sector, and individual consumer responsive actions; current global financial conditions, including economic impacts resulting from the COVID-19 pandemic; 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 speak only as of the date of this press release. We do not undertake any obligation to update publicly any forward-looking statements.
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, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Revenues | $ | 361,736 | $ | 312,766 | $ | 974,445 | $ | 967,614 |
| Cost of sales | 154,967 | 148,942 | 453,581 | 476,796 | ||||
| Gross profit | 206,769 | 163,824 | 520,864 | 490,818 | ||||
| Selling, general and administrative expenses | 134,683 | 123,940 | 371,371 | 370,525 | ||||
| Income from operations | 72,086 | 39,884 | 149,493 | 120,293 | ||||
| Foreign currency gains (losses), net | (516) | 585 | (1,434) | (893) | ||||
| Interest income | 43 | 167 | 189 | 493 | ||||
| Interest expense | (1,502) | (2,505) | (5,593) | (6,743) | ||||
| Other income (expense), net | (27) | (34) | 901 | (48) | ||||
| Income before income taxes | 70,084 | 38,097 | 143,556 | 113,102 | ||||
| Income tax expense | 8,195 | 2,421 | 14,025 | 13,518 | ||||
| Net income | $ | 61,889 | $ | 35,676 | $ | 129,531 | $ | 99,584 |
| Net income per common share: | ||||||||
| Basic | $ | 0.92 | $ | 0.52 | $ | 1.92 | $ | 1.40 |
| Diluted | $ | 0.91 | $ | 0.51 | $ | 1.89 | $ | 1.38 |
| Weighted average common shares outstanding: | ||||||||
| Basic | 67,473 | 69,097 | 67,606 | 71,003 | ||||
| Diluted | 68,385 | 70,176 | 68,608 | 72,342 |
CROCS, INC. AND SUBSIDIARIES
EARNINGS PER SHARE
(UNAUDITED)
(in thousands, except per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Numerator: | ||||||||
| Net income | $ | 61,889 | $ | 35,676 | $ | 129,531 | $ | 99,584 |
| Denominator: | ||||||||
| Weighted average common shares outstanding - basic | 67,473 | 69,097 | 67,606 | 71,003 | ||||
| Plus: Dilutive effect of stock options and unvested restricted stock units | 912 | 1,079 | 1,002 | 1,339 | ||||
| Weighted average common shares outstanding - diluted | 68,385 | 70,176 | 68,608 | 72,342 | ||||
| Net income per common share: | ||||||||
| Basic | $ | 0.92 | $ | 0.52 | $ | 1.92 | $ | 1.40 |
| Diluted | $ | 0.91 | $ | 0.51 | $ | 1.89 | $ | 1.38 |
CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and par value amounts)
| September 30,<br>2020 | December 31,<br>2019 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 123,562 | $ | 108,253 |
| Accounts receivable, net of allowances of $21,206 and $18,797, respectively | 139,474 | 108,199 | ||
| Inventories | 174,119 | 172,028 | ||
| Income taxes receivable | 8,426 | 1,341 | ||
| Other receivables | 9,593 | 8,711 | ||
| Restricted cash - current | 1,565 | 1,500 | ||
| Prepaid expenses and other assets | 15,570 | 25,350 | ||
| Total current assets | 472,309 | 425,382 | ||
| Property and equipment, net of accumulated depreciation and amortization of $86,252 and $79,604, respectively | 56,321 | 47,405 | ||
| Intangible assets, net of accumulated amortization of $94,627 and $82,760, respectively | 40,147 | 47,095 | ||
| Goodwill | 1,649 | 1,578 | ||
| Deferred tax assets, net | 23,273 | 24,747 | ||
| Restricted cash | 1,810 | 2,292 | ||
| Right-of-use assets | 197,402 | 182,228 | ||
| Other assets | 9,134 | 8,075 | ||
| Total assets | $ | 802,045 | $ | 738,802 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 119,108 | $ | 95,754 |
| Accrued expenses and other liabilities | 100,294 | 108,677 | ||
| Income taxes payable | 9,467 | 4,207 | ||
| Current operating lease liabilities | 49,741 | 48,585 | ||
| Total current liabilities | 278,610 | 257,223 | ||
| Long-term income taxes payable | 5,098 | 4,522 | ||
| Long-term borrowings | 135,000 | 205,000 | ||
| Long-term operating lease liabilities | 155,349 | 140,148 | ||
| Other liabilities | 1 | 4 | ||
| Total liabilities | 574,058 | 606,897 | ||
| Commitments and contingencies | ||||
| Stockholders’ equity: | ||||
| Preferred stock, par value $0.001 per share, 5.0 million shares authorized including 1.0 million authorized as Series A Convertible Preferred Stock, none outstanding | — | — | ||
| Common stock, par value $0.001 per share, 250.0 million shares authorized, 105.0 million and 104.0 million issued, 67.5 million and 68.2 million outstanding, respectively | 105 | 104 | ||
| Treasury stock, at cost, 37.5 million and 35.8 million shares, respectively | (587,983) | (546,208) | ||
| Additional paid-in capital | 508,055 | 495,903 | ||
| Retained earnings | 370,016 | 240,485 | ||
| Accumulated other comprehensive loss | (62,206) | (58,379) | ||
| Total stockholders’ equity | 227,987 | 131,905 | ||
| Total liabilities and stockholders’ equity | $ | 802,045 | $ | 738,802 |
CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
| Nine Months Ended September 30, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| Cash flows from operating activities: | ||||
| Net income | $ | 129,531 | $ | 99,584 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 20,251 | 17,508 | ||
| Operating lease cost | 45,818 | 44,776 | ||
| Inventory donations | 8,873 | 23 | ||
| Provision for doubtful accounts, net | 5,720 | 2,132 | ||
| Share-based compensation | 10,809 | 11,020 | ||
| Other non-cash items | 3,632 | (2,843) | ||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable | (38,937) | (30,619) | ||
| Inventories | (14,873) | (17,178) | ||
| Prepaid expenses and other assets | 7,706 | (3,501) | ||
| Accounts payable, accrued expenses and other liabilities | 25,243 | 1,955 | ||
| Operating lease liabilities | (45,133) | (49,668) | ||
| Cash provided by operating activities | 158,640 | 73,189 | ||
| Cash flows from investing activities: | ||||
| Purchases of property, equipment, and software | (33,193) | (32,852) | ||
| Proceeds from disposal of property and equipment | 434 | 302 | ||
| Other | (168) | — | ||
| Cash used in investing activities | (32,927) | (32,550) | ||
| Cash flows from financing activities: | ||||
| Proceeds from bank borrowings | 150,000 | 310,000 | ||
| Repayments of bank borrowings | (220,000) | (245,000) | ||
| Dividends—Series A convertible preferred stock ^(1)^ | — | (2,985) | ||
| Repurchases of common stock | (39,159) | (133,475) | ||
| Other | (1,792) | (3,275) | ||
| Cash used in financing activities | (110,951) | (74,735) | ||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 130 | (2,299) | ||
| Net change in cash, cash equivalents, and restricted cash | 14,892 | (36,395) | ||
| Cash, cash equivalents, and restricted cash—beginning of period | 112,045 | 127,530 | ||
| Cash, cash equivalents, and restricted cash—end of period | $ | 126,937 | $ | 91,135 |
^(1)^ For the nine months ended September 30, 2019, represents $3.0 million paid to induce conversion of Series A Convertible Preferred Stock to common stock.
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 profit,” “Non-GAAP gross margin,” “Non-GAAP selling, general, and administrative expenses,” “Non-GAAP net income,” “Non-GAAP income from operations”, “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, 2020, management believes it is helpful to evaluate our results excluding the impacts of 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, gross profit, and gross margin reconciliation:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | ||||||||
| (in thousands) | |||||||||||
| GAAP revenues | $ | 361,736 | $ | 312,766 | $ | 974,445 | $ | 967,614 | |||
| GAAP cost of sales | $ | 154,967 | $ | 148,942 | $ | 453,581 | $ | 476,796 | |||
| New distribution centers ^(1)^ | (897) | (3,678) | (2,636) | (7,981) | |||||||
| COVID-19 inventory write-off ^(2)^ | — | — | (2,396) | — | |||||||
| Other | (119) | (42) | (119) | (175) | |||||||
| Total adjustments | (1,016) | (3,720) | (5,151) | (8,156) | |||||||
| Non-GAAP cost of sales | $ | 153,951 | $ | 145,222 | $ | 448,430 | $ | 468,640 | |||
| GAAP gross profit | $ | 206,769 | $ | 163,824 | $ | 520,864 | $ | 490,818 | |||
| GAAP gross margin | 57.2 | % | 52.4 | % | 53.5% | 50.7 | % | ||||
| Non-GAAP gross profit | $ | 207,785 | $ | 167,544 | $ | 526,015 | $ | 498,974 | |||
| Non-GAAP gross margin | 57.4 | % | 53.6 | % | 54.0% | 51.6 | % |
^(1)^Represents expenses, including expansion costs, related to our distribution centers in Dayton, Ohio and Dordrecht, the Netherlands.
^(2)^Represents an inventory write-off in our Asia Pacific segment associated with the impact of COVID-19.
Non-GAAP selling, general and administrative expenses reconciliation:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| (in thousands) | ||||||||||||
| GAAP revenues | $ | 361,736 | $ | 312,766 | $ | 974,445 | $ | 967,614 | ||||
| GAAP selling, general and administrative expenses | $ | 134,683 | $ | 123,940 | $ | 371,371 | $ | 370,525 | ||||
| Donations of inventory | (50) | — | (9,970) | — | ||||||||
| COVID-19 severance costs | — | — | (2,403) | |||||||||
| COVID-19 impact of bad debt expense ^(1)^ | 48 | — | (4,433) | — | ||||||||
| Other COVID-19 costs ^(2)^ | (183) | — | (827) | — | ||||||||
| Duplicate headquarters rent ^(3)^ | (426) | — | (1,120) | — | ||||||||
| Non-recurring expenses associated with cost reduction initiatives in 2019 | — | (809) | — | (1,698) | ||||||||
| Other ^(4)^ | (1,652) | — | (2,133) | — | ||||||||
| Total adjustments | (2,263) | (809) | (20,886) | (1,698) | ||||||||
| Non-GAAP selling, general and administrative expenses ^(5)^ | $ | 132,420 | $ | 123,131 | $ | 350,485 | $ | 368,827 | ||||
| GAAP selling, general and administrative expenses as a percent of revenues | 37.2 | % | 39.6 | % | 38.1 | % | 38.3 | % | ||||
| Non-GAAP selling, general and administrative expenses as a percent of revenues | 36.6 | % | 39.4 | % | 36.0 | % | 38.1 | % |
^(1)^ Represents bad debt expense associated with the impact of COVID-19 on wholesale partners in our Asia Pacific and Americas segments.
^(2)^ Represents costs incurred in response to the COVID-19, including hazard pay, cleaning costs, and legal costs.
^(3)^ Represents ongoing duplicate rent costs associated with our move to our new headquarters in Broomfield, Colorado, while we conclude the lease for our former headquarters in Niwot, Colorado.
^(4)^ Represents non-recoverable duties, non-recurring costs related to the closure of company-owned retail stores in Australia, employee severance costs, and various other immaterial items.
^(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 September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| (in thousands) | ||||||||||||
| GAAP revenues | $ | 361,736 | $ | 312,766 | $ | 974,445 | $ | 967,614 | ||||
| GAAP income from operations | $ | 72,086 | $ | 39,884 | $ | 149,493 | $ | 120,293 | ||||
| Non-GAAP cost of sales adjustments ^(1)^ | 1,016 | 3,720 | 5,151 | 8,156 | ||||||||
| Non-GAAP selling, general and administrative expenses adjustments ^(2)^ | 2,263 | 809 | 20,886 | 1,698 | ||||||||
| Non-GAAP income from operations | $ | 75,365 | $ | 44,413 | $ | 175,530 | $ | 130,147 | ||||
| GAAP operating margin | 19.9 | % | 12.8 | % | 15.3 | % | 12.4 | % | ||||
| Non-GAAP operating margin | 20.8 | % | 14.2 | % | 18.0 | % | 13.5 | % |
^(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 reconciliation' above for more details.
Non-GAAP earnings per share reconciliation:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| (in thousands, except per share data) | ||||||||
| Numerator: | ||||||||
| GAAP net income | $ | 61,889 | $ | 35,676 | $ | 129,531 | $ | 99,584 |
| Non-GAAP cost of sales adjustments ^(1)^ | 1,016 | 3,720 | 5,151 | 8,156 | ||||
| Non-GAAP selling, general and administrative expenses adjustments ^(2)^ | 2,263 | 809 | 20,886 | 1,698 | ||||
| Non-GAAP other income adjustment ^(3)^ | — | — | (919) | — | ||||
| Tax effect of non-GAAP adjustments ^(4)^ | (649) | — | (6,109) | — | ||||
| Non-GAAP net income | $ | 64,519 | $ | 40,205 | $ | 148,540 | $ | 109,438 |
| Denominator: | ||||||||
| GAAP weighted average common shares outstanding - basic | 67,473 | 69,097 | 67,606 | 71,003 | ||||
| Plus: GAAP dilutive effect of stock options and unvested restricted stock units | 912 | 1,079 | 1,002 | 1,339 | ||||
| GAAP weighted average common shares outstanding - diluted | 68,385 | 70,176 | 68,608 | 72,342 | ||||
| GAAP net income per common share: | ||||||||
| Basic | $ | 0.92 | $ | 0.52 | $ | 1.92 | $ | 1.40 |
| Diluted | $ | 0.91 | $ | 0.51 | $ | 1.89 | $ | 1.38 |
| Non-GAAP net income per common share: | ||||||||
| Basic | $ | 0.96 | $ | 0.58 | $ | 2.20 | $ | 1.54 |
| Diluted | $ | 0.94 | $ | 0.57 | $ | 2.17 | $ | 1.51 |
^(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 reconciliation' above for more information.
^(3)^ Represents a fair value adjustment associated with our donations of inventory.
^(4)^ In the three months and nine months ended September 30, 2019, non-GAAP adjustments were in jurisdictions subject to a full valuation allowance, and thus had no material net tax impact.
CROCS, INC. AND SUBSIDIARIES
REVENUES BY SEGMENT
(UNAUDITED)
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | % Change | Constant Currency % Change ^(1)^ | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | Q3 2020-2019 | YTD 2020-2019 | Q3 2020-2019 | YTD 2020-2019 | ||||||||||
| (in thousands) | |||||||||||||||||
| Americas: | |||||||||||||||||
| Wholesale | $ | 98,025 | $ | 75,660 | $ | 256,258 | $ | 216,846 | 29.6 | % | 18.2 | % | 31.8 | % | 19.8 | % | |
| Retail | 89,748 | 78,141 | 158,587 | 182,116 | 14.9 | % | (12.9) | % | 14.9 | % | (12.9) | % | |||||
| E-commerce | 46,274 | 31,391 | 138,510 | 85,796 | 47.4 | % | 61.4 | % | 47.5 | % | 61.6 | % | |||||
| Total Americas | 234,047 | 185,192 | 553,355 | 484,758 | 26.4 | % | 14.2 | % | 27.3 | % | 15.0 | % | |||||
| Asia Pacific: | |||||||||||||||||
| Wholesale | 28,842 | 36,655 | 109,705 | 169,468 | (21.3) | % | (35.3) | % | (21.1) | % | (33.9) | % | |||||
| Retail | 19,652 | 20,133 | 51,643 | 60,901 | (2.4) | % | (15.2) | % | (2.7) | % | (13.3) | % | |||||
| E-commerce | 19,210 | 17,463 | 65,388 | 53,353 | 10.0 | % | 22.6 | % | 9.2 | % | 24.4 | % | |||||
| Total Asia Pacific | 67,704 | 74,251 | 226,736 | 283,722 | (8.8) | % | (20.1) | % | (9.0) | % | (18.5) | % | |||||
| EMEA | |||||||||||||||||
| Wholesale | 37,630 | 34,058 | 136,507 | 144,685 | 10.5 | % | (5.7) | % | 8.3 | % | (3.9) | % | |||||
| Retail | 7,789 | 9,347 | 15,970 | 25,453 | (16.7) | % | (37.3) | % | (15.1) | % | (35.9) | % | |||||
| E-commerce | 14,552 | 9,869 | 41,771 | 28,821 | 47.5 | % | 44.9 | % | 43.3 | % | 46.4 | % | |||||
| Total EMEA | 59,971 | 53,274 | 194,248 | 198,959 | 12.6 | % | (2.4) | % | 10.7 | % | (0.7) | % | |||||
| Total segment revenues | 361,722 | 312,717 | 974,339 | 967,439 | 15.7 | % | 0.7 | % | 15.9 | % | 1.9 | % | |||||
| Other businesses | 14 | 49 | 106 | 175 | (71.4) | % | (39.4) | % | (71.4) | % | (39.4) | % | |||||
| Total consolidated revenues | $ | 361,736 | $ | 312,766 | $ | 974,445 | $ | 967,614 | 15.7 | % | 0.7 | % | 15.9 | % | 1.9 | % | |
| Total wholesale | $ | 164,511 | $ | 146,422 | $ | 502,576 | $ | 531,174 | 12.4 | % | (5.4) | % | 13.1 | % | (3.8) | % | |
| Total retail | 117,189 | 107,621 | 226,200 | 268,470 | 8.9 | % | (15.7) | % | 9.0 | % | (15.1) | % | |||||
| Total e-commerce | 80,036 | 58,723 | 245,669 | 167,970 | 36.3 | % | 46.3 | % | 35.4 | % | 47.3 | % | |||||
| Total consolidated revenues | $ | 361,736 | $ | 312,766 | $ | 974,445 | $ | 967,614 | 15.7 | % | 0.7 | % | 15.9 | % | 1.9 | % |
^(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,<br>2020 | Opened | Closed | September 30,<br>2020 | |
|---|---|---|---|---|
| Type: | ||||
| Outlet stores | 191 | — | 5 | 186 |
| Retail stores | 104 | — | 4 | 100 |
| Kiosk/store in store | 65 | — | — | 65 |
| Total | 360 | — | 9 | 351 |
| Operating segment: | ||||
| Americas | 165 | — | — | 165 |
| Asia Pacific | 142 | — | 6 | 136 |
| EMEA | 53 | — | 3 | 50 |
| Total | 360 | — | 9 | 351 |
| December 31, 2019 | Opened | Closed/Transferred | September 30,<br>2020 | |
| --- | --- | --- | --- | --- |
| Type: | ||||
| Outlet stores | 193 | 5 | 12 | 186 |
| Retail stores | 109 | 3 | 12 | 100 |
| Kiosk/store-in-store | 65 | 1 | 1 | 65 |
| Total | 367 | 9 | 25 | 351 |
| Operating segment: | ||||
| Americas | 165 | 2 | 2 | 165 |
| Asia Pacific | 145 | 5 | 14 | 136 |
| EMEA | 57 | 2 | 9 | 50 |
| Total | 367 | 9 | 25 | 351 |
CROCS, INC. AND SUBSIDIARIES
DIGITAL SALES PERCENTAGE, COMPARABLE RETAIL STORE SALES, AND DIRECT-TO-CONSUMER COMPARABLE SALES
(UNAUDITED)
Digital sales, which includes sales through our company-owned website, third party marketplaces, and e-tailers, as a percent of total revenues, by operating segment were:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Digital sales as a percent of total revenues: | ||||||||
| Americas | 30.8 | % | 26.9 | % | 38.9 | % | 28.0 | % |
| Asia Pacific | 42.3 | % | 32.9 | % | 39.0 | % | 27.6 | % |
| EMEA | 59.8 | % | 49.6 | % | 53.5 | % | 39.6 | % |
| Global | 37.7 | % | 32.2 | % | 41.8 | % | 30.3 | % |
Comparable retail store sales and direct-to-consumer store sales by operating segment are shown below.
| Constant Currency ^(1)^ | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| Comparable retail store sales: ^(2)^ | ||||||||
| Americas | 22.3 | % | 19.1 | % | 21.8 | % | 17.1 | % |
| Asia Pacific | 2.8 | % | (4.2) | % | (0.8) | % | (1.2) | % |
| EMEA | (4.7) | % | 2.4 | % | (5.6) | % | 6.3 | % |
| Global | 16.2 | % | 12.5 | % | 13.0 | % | 11.4 | % |
| Constant Currency ^(1)^ | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| Direct-to-consumer comparable sales (includes retail and e-commerce): ^(2)^ | ||||||||
| Americas | 30.7 | % | 18.5 | % | 40.1 | % | 18.6 | % |
| Asia Pacific | 5.2 | % | 11.7 | % | 10.9 | % | 5.6 | % |
| EMEA | 22.9 | % | 9.5 | % | 28.7 | % | 13.8 | % |
| Global | 23.8 | % | 15.9 | % | 29.8 | % | 14.4 | % |
^(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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