Good day, and welcome to the Crocs, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Senior Vice President, Investor Relations and Strategic Finance for Crocs, Inc. Please go ahead.

Good morning, and thank you for joining us to discuss Crocs, Inc. Fourth Quarter and Full Year 2025 Results. With me today are Andrew Rees, Chief Executive Officer, and Patraic Reagan, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask that you limit to one per caller. Before we begin, I would like to remind you that some of the information provided on this call is forward-looking and, accordingly, is subject to the Safe Harbor provisions of the federal securities laws. These statements involve known and unknown risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to differ materially. Please refer to our Annual Report on Form 10-Ks filed with the SEC for more information on these risks and uncertainties. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I will turn the call over to Andrew Rees, Crocs, Inc. Chief Executive Officer.

Thank you, Erinn, and good morning, everyone. Thank you for joining us today. 2025 ended on a strong note, as we reported a better than expected holiday season fueled by new products and authentic consumer connections. Our powerful value creation model drove strong free cash flow, which we returned to shareholders in the form of repurchases and debt pay down. We continue to invest thoughtfully and strategically behind our brands in support of building an even stronger foundation to fuel long-term profitable growth. For the full year of 2025, we delivered revenue of over $4,000,000,000 with approximately $3,300,000,000 from the Crocs brand, and $715,000,000 from HeyDude. Crocs brand grew for the eighth consecutive year. International revenues, comprising almost half of our Crocs brand sales, grew double digits. Direct-to-consumer was over half of our enterprise revenue and grew faster than our wholesale business. Strong free cash flow generation of $659,000,000 enabled us to pay down $128,000,000 in debt and buy back approximately 6,500,000 shares for $577,000,000, representing approximately 10% of our shares outstanding. Before going further into 2025 highlights, I would like to start by taking a moment to reflect on a milestone we recently achieved. Earlier this week, on February 8, we surpassed the 20-year mark as a public company. Since our IPO, we have established ourselves as a world leader in innovative casual footwear for all. In addition to creating one of the greatest and most recognizable icons of our time, the Classic Clog, we have built a powerful and defensible business model that is increasingly diversified across brands, products, channels, and geographies with distribution in over 85 countries. We have emerged as a disruptor in social and digital marketing and commerce while building strong communities of loyal brand fans. In the last 20 years, we have relentlessly served…

Thank you, Andrew, and good morning, everyone. During 2025, we made significant progress against several strategic initiatives that I am confident will lay the groundwork for sustainable long-term growth. Looking back, we took several decisive actions to build upon our already strong foundation. These actions included: one, recalibrating our promotional activity in Crocs brand DTC channels; two, managing sell-in across wholesale for the Crocs brand; for HeyDude, three, reducing unproductive performance marketing spend; and four, accelerating wholesale cleanup actions. In addition, we effectively executed our $50,000,000 cost savings program and actioned $100,000,000 of additional cost savings for 2026 as we previously communicated. Now, let us dig into our results. For the full year, enterprise revenue of just over $4,000,000,000 was down approximately 2% to prior year. Crocs brand revenue of $3,300,000,000 was up 1% to prior year driven by DTC up 3%, partially offset by wholesale, which was down 1%. Growth was driven by units up 2% to prior year to a total of 129,000,000 pairs sold, while brand ASPs were roughly flat to prior year. North America was down 7% to prior year at $1,700,000,000. This was tied to both the decision to pull back on promotional activity in our DTC channels earlier in the year as well as carefully managing our sell-in to the North American market. For North America, DTC and wholesale were 41% and 59% respectively, as we work to better manage channel sell-in. To reiterate Andrew’s comments, expansion in international markets is one of our key strategic pillars, and we are pleased to report another year of double-digit growth. Revenue was up 11% versus prior year to $1,600,000,000 led by DTC up 23% and wholesale up 5%. We gained market share in China, which grew revenues by 30% to last year with balanced growth across…

We will now open for questions. Our first question comes from Jonathan Robert Komp with Baird. Please go ahead.

Hi, good morning. Thank you. I am hoping you might unpack the North America Crocs outlook a bit here. Could you share a little bit more drivers for the first quarter? And as you think about the shape of the year, is there potential to get back towards growth later in the year? And any visibility you have there would be great. Thank you.

Thanks, Jonathan. I will let Patraic give you shaping for the year, and then I will give you strategic rationale.

Yes. So, Jonathan, as you heard in prepared remarks, we feel that for North America we will see run rate improvement as we move throughout the year. But for the full year, what we are really thinking is slight improvement from what we saw in 2025. Just as a reminder, what we did in the second half of last year was really beginning to take some strategic actions so that we would improve our outlook as we got into 2026. And with that, what you will see in first half is you are continuing to lap those unanniversaried actions, and then as we get into the back half of 2026, we will start to see some slight improvement as we go through the year.

And I think what I would add to that, Jonathan, is it is a very clear priority for us to return the Crocs brand to growth in North America. As an element of context, I would also remind everybody that the Crocs brand in 2026 will actually be bigger internationally than it is in the U.S., and we are very confident in about a 10% growth rate for our international business. What we think is going to return Crocs North America to growth is really three strategic pillars. Number one is clog iterations and innovation. We are managing the inventory of the Classic Clog carefully in the marketplace. We pulled back on discounting, particularly on the Classic Clog on our digital channels, which is creating some of the headwind. We are introducing a significant number of new innovative products into the marketplace that are clog based. Our crafted clog, we are introducing the Crocband, and we are also introducing a 2.0 version of our very successful Echo franchise later in the year. In addition, diversification, so growth of sandals and growth outside of clogs, including slippers and personalization. We took market share in sandals last year. We are very confident we are going to continue to take market share in 2026 in sandals. And then the last thing is really disruptive social and digital selling. We continue to outperform and be the number one and two footwear brand on TikTok Shop, and we are very confident that our digital prowess and our ability to ignite these innovative channels and reach the consumers extremely effectively will allow us to continue to lead. So that is what we are doing to address it, and we have given you what I describe as a very prudent guidance for this year.

That is great. Very helpful. Thank you.

Thanks, Jonathan. The next question comes from Adrienne Eugenia Yih-Tennant with Barclays. Please go ahead.

Great. Thank you very much. It really is nice to see the improvement in holiday and then the expansion for this year. Andrew, I was wondering if you can help just to follow on your comments from the last question. Can you help contextualize the amount of newness that you are bringing to market this year, both Crocs and at HeyDude? We saw a lot of it at FNPL, so that was very promising, but just kind of contextualizing that with regard to how much newness you have brought to the market in the past couple of years and how this year is quite differentiated. And then kind of just following on that, I have to ask about AI-specific investments. How much of your CapEx are you allocating to tech investments to support AI? And do you have any benefit of that kind of playing into the guidance this year? Thank you very much.

So let me try and add a little color to the newness point, and then I will hit on AI. From a newness perspective, I did add in my response to Jonathan a fair amount of context there, but I think there are probably two critical pillars for Crocs in terms of newness. They are the diversification of our clog franchise, so adding those other clog pillars. We are particularly excited about the crafted, because it adds a materialized upper to our clog, which we think broadens the wearing occasion. I would add the clog category continues to grow around the world. We can see it being a very on-trend silhouette and a strong growth category, and we are by far the market share leader in that category, so we can exploit that growth on a global basis. Then from a sandal perspective, I think there are two aspects there. One is our core style franchises, so Getaway, Miami, and Brooklyn will continue to grow and scale, and we have added patterns within those franchises. We have added colors, and we have broadened those franchises, and we think they have global growth trajectory. But we are also introducing—and we are quite excited about some of the early reads—a very compelling two-strap. We have got early reads on that in EMEA and here in North America, and we are quite excited about that. Two-strap is a very popular sandal silhouette, and we think that is a nice growth opportunity which we add into our sandal mix. From a HeyDude perspective, again, a lot of newness there. We introduced already this year stretch jersey, which we kind of talk about as a t-shirt for your feet. Very soft, very flexible, very lightweight, and super comfortable. It is a bit of a lower…

And Adrienne, just to put a bow on this one, one of the reasons that we are going after the $100,000,000 in cost savings that we have been talking about now for a couple of quarters is to give us flexibility as we identify what Andrew mentioned earlier in terms of all the experimentation we are doing in the space. We are not embedding anything from an upside standpoint into the P&L for the year for AI initiatives, but we are actively in the space.

Fantastic. We love to see the trends moving in your direction. Good luck.

The next question comes from Rick Patel with Raymond James. Please go ahead. Thank you. Good morning, everyone.

Question on Crocs guidance for North America in 2026. Can you talk about the assumptions underpinning the new guide as we think about pricing versus units? Any color on pricing in particular and any changes that have been made and any on the horizon? And also, if pulling back on promotions are a factor in continued ASP improvements and driving a slight improvement in margin for the year.

I think Patraic gave you pretty clear color to the North American Crocs guidance. I think your specific question is really about pricing. I would say no, there are no significant price changes implied in the North American guidance. We have taken select price increases on select products, probably more internationally than North America, and we have taken some price increases on select products within HeyDude. But I would say price is not a material driver of our intended 2026 performance. In terms of promo pullback, the other piece that you highlighted, the key thing there is just the anniversarying of the strategic decisions that we made mid last year. Those will anniversary through 2026 and will represent some drag to our sales trajectory during that period, which we have embedded in the guidance we provided. Thanks very much.

The next question comes from Tom Nikic with Needham. Please go ahead.

Hey, thanks very much for taking my question. So I just wanted to clarify something on the gross margins. I think you said flat in Q1 with a 100 basis point tariff headwind. Can you just kind of clarify what the offsets are in Q1? And I think you said a bigger tariff headwind in Q2. Given that Q1 is flat, should we assume Q2 down then getting better in the back half? Thanks.

Yes.

So it is a great question and obviously a lot going on in the space. First, let me start off by saying we are guiding up slightly on the full year, and that is as a result of all the hard work that we are doing within supply chain to really build out efficiencies as it relates to not just tariffs, but continuing our focus on being as efficient as we can in the space. As you heard Andrew mention, price is not a big component within what we are planning to do this year in terms of margin expansion. It is all really centered around the work that is going on. With that as a backdrop, as it relates to the first quarter in your question and why I say that, you heard us talk about really needing to think about it as a bit Q4 to Q1 to Q2. We saw slightly higher than expected tariffs in Q4. The fact of the matter is this is a challenge to predict from a flow standpoint, and so we saw a little bit higher than expected in Q4 as we flowed inventory through. We have actually seen a little bit lower than we expected 90 days ago as it relates to Q1, and so we wanted to be transparent with you all in terms of the 100 basis point headwind that we are seeing. That is actually below what we were thinking just 90 days ago. And then Q2, we think, is closer to what real run rate is as it relates to tariffs, and so that is roughly up about 200 basis points of headwind. Then as we get through Q1, Q2 with that nuance, we start to get into the second half and then all of this is in the base, as long as there are no changes from a tariff policy standpoint. Everything is in the base, and then we get to a much more normalized run rate. Hopefully, that gives you a little bit more context around the challenge that we have in this space.

Very helpful. Thanks very much, and best of luck this year.

The next question goes to Aubrey Leland Tianello with BNP Paribas. Please go ahead.

Hey, good morning. Thanks for taking the questions. I wanted to ask on the cost savings program. Last quarter, you mentioned it was too early to say how much of the $100,000,000 will drop through the bottom line. I would love to know if there are any updates on how you are thinking about flow through and what is included in the guide? Thanks.

Yes. A great question. As you heard a little bit earlier, one is we are just continually focusing on being as efficient as we can. Part of that is that we are building these cost savings initiatives into our plan so that we are able to fuel investment. We spoke a little bit earlier about what we are doing with AI. We are doing these programs to both be able to capitalize on some of those opportunities and, frankly, that we may catch an edge on that we do not have visibility to just yet. So we are reserving a little bit of flexibility into what we are doing, as well as flowing dollars to the bottom line. Where we are right now, we are planning SG&A flattish to the year as you have seen. Certainly, some of the programs that we have put in place around org efficiency, around spend efficiency, are cutting through from that standpoint. As you see our gross margin guide, some of the cost efficiency work that we are doing there is helping to offset some of the headwinds that we talked about from tariffs, etc., and we are flowing that into our gross margin outlook. All of that is embedded into the guide for the year, and we will continue to work through this as we make our way through 2026. We feel great about where the work is today.

Great. The next question comes from Peter McGoldrick with Stifel. Please go ahead.

Yes, thanks for taking my question. As we think about the double digit international Crocs brand outlook, can you help us think about the regional brand development? You shared some nice commentary on China growing from an 8% base. I am curious to know about the other regions as well and countries as we think of the 2026 embedded outlook? Thank you.

Great. Thank you, Peter.

So let me just give you some details, but also put it all in context. During 2025, we grew international 11% on top of 19% prior year, so it has been a sustained double-digit growth driver for us. For China, you already highlighted that you captured that, but we grew 30% in 2025, and we continue to be confident that we can grow across all of our channels in China. It is a tricky market in China right now, but clearly our brand is resonating and we have the ability to continue to grow. Other markets where we have seen strong growth and we expect to see strong growth in 2026 are Japan, which returned to growth in 2025. We have been putting considerable time and effort in Japan over the last couple of years. It is a big footwear market, large population, highly affluent population, so we are excited to see that return to growth, and we think we are on the right trajectory there. Western Europe is also performing well—UK, France, and Germany in particular—again, double-digit growth in 2025, and we are confident about continued performance there into 2026. India is also important to us. We have been focusing on and making some strategic investments in India in terms of setting us up for future sustained growth, and we are excited about the prospects for India in 2026, but also for the medium to long term.

Very good. Thank you.

Thank you. The next question comes from Brooke Siler Roach with Goldman Sachs. Please go ahead.

Good morning and thank you for taking our question. Andrew, I wanted to dive a bit deeper on the North America wholesale channel. How are conversations trending regarding shelf space preservation and order books for the year? And how do you view the health of the consumer in that channel amidst a competitive environment? Thank you.

Let me take that in reverse order.

The health of the consumer, our view is they remain bifurcated. The higher end consumer has plenty of disposable income and is shopping. The lower end consumer is still a bit tentative, and we think that likely continues through 2026. There has been plenty of talk about rebates and things like that. That has not been a significant factor for us historically, and we will see what happens. The market remains super competitive. If I took both of our brands from a shelf space perspective, we have been fairly clear we are working hard to make sure that both of our brands have the right inventory in the right retailers and that we are well positioned relative to our future consumer demand. We are working hard from a Crocs perspective to make sure that our Classic key core franchise is appropriately positioned, but also getting new product into the marketplace. We talk about diversifying the clog franchise. We feel good about where we are from a Crocs perspective, but that does represent a drag to sell-in as we have articulated in our guidance. For HeyDude, we worked really hard and spent quite a lot of money in the back half of last year to right-size inventories, and we think we are there. We look at sell-out relative to our inventories on hand, and they are at parity at this point. We are excited to be at that point and be able to strategically rebuild the business from a wholesale perspective for HeyDude. The other thing I would say as an overlay, it is all about newness. When we introduce new products that resonate with consumers, we can see really nice trajectory in terms of sell-out and sell-in. The consumer is definitely receptive to newness, and that is the important driver of success in this business.

Great. Thanks so much.

Thank you. The next question comes from Anna A. Andreeva with Piper Sandler. Please go ahead.

Great. Thank you so much for taking our questions and congrats. Nice results. Just wanted to follow up on the actions at HeyDude between the wholesale cleanup and the performance marketing change. Andrew, I think you just said the cleanup actions are fully behind us. Can you talk about if you are adding more partners in wholesale to the brand at this stage, and just what are those conversations looking like? And just as a follow-up on Crocs, if you think about the adjacent categories, I think you said with sandals penetration was similar at 13%, which I think implies mid-single-digit growth category, and you called out strength in the U.S. Can you talk about how international performed, and how do you think about that penetration over time?

A lot of questions there, Anna. Let me try and hit some of them and double click on the important ones. I think we have talked about the HeyDude cleanup, so I think you have got that. The derivative question there was, are we adding more partners? I would say we are not really adding significant more partners for HeyDude, but we do think there is significant growth in key partners. That will come through more shoes on shelf and more shoes in more stores, but we have to earn our way back to that growth pathway, and we are very focused on that. Your second piece was around sandals. Thirteen percent overall share for sandals grew nicely in North America last year. We are confident in growth next year. We took market share. Our growth was significantly above the market for North America. I would say growth in sandals internationally was slower than North America last year, but we have strong aspirations for sandal growth internationally in 2026. Part of that was by design. We were very much focused in some of our key developing markets on really penetrating the market with the Classic Clog and landing our icon. When you have relatively small footprints in some of these key markets, you have to be strategic about what you put on the shelf, but we do think there is a nice sandal growth available to us in key markets like India and Southeast Asia, where we are confident about future trajectory 2026 and beyond.

Then, Anna, just want to jump back to HeyDude for a moment. Number one is, as you saw in the prepared remarks, we are calling HeyDude to return to growth in the second half of this year. That goes back to all of the strategic actions that we took in the back half of 2025, which will then start to bear fruit in terms of where we are going with the brand. We feel very confident about the trajectory there. The other component is in terms of cleanup, cleanup is continuing to make progress, and everything that we are looking at from a KPI standpoint related to inventory, inventory on hand, sell-out rate, or sell-in rate is all moving in the right direction. We feel like a little bit more than six months into the efforts, what we are seeing looks very positive, and we are focused on where we are going. We also know that we have to finish the play. Part of finishing that play is the work that remains to be done in the first half of the year.

Alright. Thank you so much. Terrific. Best of luck.

The next question comes from Jim Duffy with Stephens. Please go ahead. Good morning. Thanks for the question. Can you talk about the performance of HeyDude stores and what the store opening plan is for 2026?

I would say we are pleased with the performance of our HeyDude stores. As you know, the majority of stores, in fact almost all the stores open, are really outlet stores. We think that is a pretty unique opportunity to do multiple jobs for the brand—keep our inventories clean and fresh, as well as benefit from strong traffic in the outlet malls to drive commercial success. We are pleased with the stores. We opened 23 stores last year with an actual total 75 at year end. Our opening rate in 2026 would probably be a little bit less than that, but we think our stores do a really nice job in terms of generating strong commercial outcomes as well as broadening consumers’ perspective about the brand.

Great. And then international wholesale looks like it was up about low single digits in constant currency over the last three quarters. Anything to highlight as to why that channel has slowed, and then what kind of opportunity do you see for international wholesale going forward?

As we highlighted, the growth in international was driven by DTC, and that is really two components. One is our digital prowess, which extends across the globe, and also store openings. If you look at the number of stores we have and store openings on an international basis, that is where we have focused our store openings. As we look at a lot of international wholesale, the vast majority of those sales go into our distributors. I do not think there is any real story about why it slowed, but we are confident in future international wholesale growth.

Great. Thanks and best of luck. The next question comes from Mitch Kummetz with Seaport Research.

Yes. Thanks for taking my questions. First question, I just wanted to drill down a little bit more on the path of HeyDude returning to growth in the back half. How much of that is just lapping the $45,000,000 cleanup that took place in the back half of 2025 versus other factors? And I am curious if you can speak to what you are seeing in terms of the fall order book from a wholesale perspective.

Yes, Mitch, great question. As we mentioned earlier, it has been some great progress that we have made in terms of HeyDude, and we continue to feel really bullish about where the brand is going. As it relates to the $45,000,000 in the second half of 2025, we felt it was important to quantify as best we could the actions that we took and what resulted in coming out of the marketplace. As we think about now, we have been doing the hard work at cleaning up inventory. We are doing the hard work of looking at our consumer base. As a note, our awareness for the brand has improved nine percentage points from 30% to 39% just in the last six months or so. We feel like we are gaining a lot of traction as it relates to consumer and product newness. As you think about the second half, part of that obviously will be lapping what we took out, but we are also excited about what we see in terms of product newness coming and continuing to sell in from a greater breadth standpoint on the products that we introduced in the back half of last year and into the first half of this year.

And can you say if you have got a positive fall order book?

We do not comment on our order book, Mitch. We have not done that for many years now.

Alright. That is fair. And then a second question, just on the SG&A, thinking about the shape of the year, I know that you said dollars flat year over year. Do you expect that to be kind of consistent across the quarters, or would you expect the dollar spending to mirror the sales growth per quarter?

As we think about the shape of SG&A through the year, obviously we have cyclicality in our business as it relates to quarters. As we go through from an SG&A standpoint, we see that ebb and flow as a percentage of sales. From an SG&A perspective, Q1 will be up slightly as we kick off the year, and as we work our way through, we will start to see more traction from the programs that we are putting in, in addition to—I just want to stress again—the $100,000,000 that we have targeted and identified. In our process of delivering it, yes, through the lens of dropping some to the bottom line, we are focused on giving ourselves investment flexibility as we make our way through the year. When you think about the complexion of 2025 to 2026, we are repivoting both brands, and we are reserving the flexibility to deploy some of those savings back into the P&L to accelerate Crocs brand, HeyDude, and some of the other areas that we are experimenting from an investment standpoint. I mentioned AI earlier, but there are a bunch of others. That is a little bit more color in terms of how we are thinking about things.

Okay.

That is helpful. Thanks, and good luck. We have time for one more question. The final question goes to Jonathan Robert Komp with Baird. Please go ahead.

Hi, thanks for sneaking me in one more. Any more color as we think about first half and back half progression from an operating profit standpoint? It looks like Q1 and implied the first half down year over year for operating profit. Second half looks like it could be implied up double digits. Any more color as we think about the shape and anything that would be helpful for modeling? Thank you.

Jonathan, I think you are hitting it. If you think about the construction of the year, similar to 2025, there is a big first half, second half story. Second half of last year, we have talked quite a bit about the actions that we took that impacted second half of last year. We are rounding that out in the first half of 2026, and you will see some headwinds from a revenue standpoint. If you think about that trajectory of 2025 into 2026, how you are thinking about the year from an EBIT standpoint is how we are thinking about it as well. There is a first half, second half story.

Okay. Thanks again.

This concludes our question and answer session. I would like to turn the conference back over to Andrew Rees for any closing remarks.

Yes. I just want to say thank you very much for joining us today. I appreciate everybody’s interest in our company and their thoughtful questions. Thank you very much, and have a great day.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.