Inc. A LEADER IN GLOBAL CASUAL FOOTWEAR - JANUARY 2023
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, Inc.
A LEADER IN GLOBAL CASUAL FOOTWEAR
JANUARY 2023
| Confidential
FORWARD LOOKING STATEMENTS
This document includes estimates, projections, and statements relating to our plans, commitments, objectives, and expectations 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 our supply chain challenges, cost inflation, the COVID-19 pandemic, our financial
condition, brand and liquidity outlook, and expectations regarding our future revenue, margins, non-GAAP adjustments, tax rate, earnings per share, gross leverage, and capital expenditures, the
acquisition of HEYDUDE and benefits thereof, Crocs' strategy, plans, objectives, expectations (financial or otherwise) and intentions, future financial results and growth potential, including our
plans for international growth, statements regarding full year, fourth quarter 2022, 2023 and long term financial outlook and future profitability, cash flows, and brand strength, market share,
anticipated product portfolio and our ability to deliver sustained, highly profitable growth and create significant shareholder value. 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: our expectations regarding supply chain disruptions; the COVID-19 pandemic
and related government, private sector, and individual consumer responsive actions; cost inflation; 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 January 10, 2023. We do not undertake any obligation to update publicly any forward-looking statements, except as required by applicable law.
2
BUSINESS
UPDATE
ANDREW REES,
CHIEF EXECUTIVE OFFICER
| Confidential
CROCS, INC. EXPECTS TO REPORT
AN EXCEPTIONAL 2022
• Expect revenues of ~$3.55B* with growth of ~53%
− Crocs Brand revenues expected to be up ~15% to ~$2.65B or ~19% constant currency
− HEYDUDE Brand revenues expected to be >$890M; on a pro forma basis** revenues
expected to have increased ~70% to nearly $1B
• Continue to expect industry-leading adjusted operating margin of ~27%*
• HEYDUDE acquisition continues to outperform from a growth, consumer resonance and profit
perspective. Upon acquisition, expected pro forma** revenues of $700M-$750M, and now
expect revenues to be nearly $1B
• Strong cash flow drove ~$550M reduction in borrowings from $2.9B in Q1 to ~$2.3B in Q4
− Repaid $300M on Term Loan B in Q4
* FY 2022E reflects expected estimated revenues and guidance for non-GAAP operating margin. Full 2022 financial results to be announced in February 2023. See reconciliation to GAAP equivalents in Appendix. 4
** Pro forma includes HEYDUDE for the period prior to acquisition close (assuming the acquisition had closed on the first day of such trailing twelve month period).
INVESTMENT HIGHLIGHTS
• A Global Leader in Casual Footwear with $160B Total Addressable Market
• Two Iconic, High-Growth Scale Brands Aligned to Long-Term Consumer Trends
• Diversified Sources of Growth Across Brands, Categories, Geographies and
Channels
• Industry-Leading Margins and Cash Flow Generation Allowing to Deleverage
Quickly and then Return Capital to Shareholders
• Best-in-Class Management Team with Track Record of Delivering Financial Targets
and Exceptional TSR
5
A GLOBAL LEADER IN
BRANDED CASUAL FOOTWEAR
Full Year Pro Forma 2022E Revenue*
($ in bn)
* SAP Capital IQ consensus estimates for competitors as of 1/4/2023. Crocs Inc. pro forma FY 2022E reflects expected estimated revenues. Pro forma includes HEYDUDE for the period prior to acquisition 6
close (assuming the acquisition had closed on the first day of such trailing twelve month period). Full 2022 financial results to be announced in February 2023.
$160B TOTAL ADDRESSABLE MARKET
Significant Positions in ~$305B Non-Athletic Footwear Market
Casual
Other (e.g., $125B
flats, wedges)
$142B
Clogs Sandals
$8B $30B
* Total addressable market sizes based on management estimates. 7
TWO ICONIC, HIGH-GROWTH
SCALE BRANDS
2022E Revenues* ~$2.65B ~$1.0B PF **
2022E Revenue Growth* 19% CC ~70% PF **
2022E Crocs, Inc. Non-GAAP
Operating Margin*
~27%
* FY 2022E reflects expected estimated revenues and guidance for non-GAAP operating margin. Full 2022 financial results to be announced in February 2023. See reconciliation to GAAP equivalents in Appendix. 8
** Pro forma includes HEYDUDE for the period prior to acquisition close (assuming the acquisition had closed on the first day of such trailing twelve month period).BRANDS ALIGNED TO
LONG-TERM CONSUMER TRENDS
CASUALIZATION COMFORT-LED SUSTAINABILITY PERSONALIZATION
FUNCTIONALITY
9DIVERSIFIED SOURCES OF GROWTH
FY2022E Revenue Mix*
Brand Product
HEYDUDE Other
27% Casual
45%
Clogs
55%
Crocs
73%
Geography Digital Penetration** Channel
International
29% Digital DTC
37% 45%
Americas Wholesale
71% 55%
* FY 2022E reflects expected estimated revenues and mix. All figures are approximate. Full 2022 financial results to be announced in February 2023.
10
** Digital sales include Crocs.com, heydude.com, third-party marketplaces (e.g. Tmall), and e-tailers (e.g. Amazon, Zappos, Zalando).OPPORTUNITY TO GROW AND SCALE
INTERNATIONAL MARKETS
~38% % International Revenues*TRACK RECORD OF VALUE CREATION
$5.6B 54%
SHAREHOLDER ANNUALIZED TOTAL
VALUE CREATION SHAREHOLDER RETURN
SINCE 2017* SINCE 2017*
2nd Best Performer in S&P 500 over the past 5 years had Crocs Inc. been in the S&P 500**
* From December 31, 2017 to December 31, 2022. Shareholder value creation defined as increase in market capitalization.
** Source: BCG.NEAR-TERM CATALYSTS
• Significant new product introductions planned for 2023 for both brands
• All regions expected to grow, with growth led by international markets
• Robust marketing to drive double-digit Crocs sandal growth
• Deepen assortments for HEYDUDE within top US Wholesale accounts
• Debt repayment to achieve goal of ≤ 2.0x gross leverage by mid-2023
• Opportunity for share repurchase after achieving goal of ≤ 2.0x gross leverage
depending on stock price and interest rates
13VALUE
CREATION
ROADMAP
ANNE MEHLMAN,
EVP & CHIEF FINANCIAL OFFICER
| ConfidentialSIGNIFICANT VALUE CREATION
FROM BOTH BRANDS
Industry Exceptional
High Revenue
Leading Cash Flow
Growth
Profitability Generation
15EXPECT INDUSTRY-LEADING MARGINS
AND CASH FLOW GENERATION
High Revenue Growth Industry Leading Profitability Industry Leading Profitability Exceptional Cash
Flow Generation
~53% ~55% ~27% ~$1B
2022E Revenue 2022E Q3 YTD 2022E Non-GAAP 2022E Adjusted
Growth* Non-GAAP Gross Margin* Operating Margin* EBITDA**
* FY 2022E reflects expected estimates for revenues and guidance for non-GAAP operating margin. Full financial results to be announced in February 2023. See reconciliation to GAAP equivalents in Appendix
** FY 2022E Adjusted EBITDA estimated based on estimates displayed within the presentation for revenues and non-GAAP operating margin plus annualized Q3 YTD actual depreciation and amortization. 165TH YEAR OF CROCS BRAND
REVENUE GROWTH
~$2.65B
$2.3B
$1.4B
$1.2B
$1.0B $1.1B
2017 2018 2019 2020 2021 2022E
YOY ~15%
(1.2%) 6.3% 13.1% 12.6% 66.9%
Growth ~19% CC
Transformation &
Profitable Growth with 20 consecutive quarters of growth (excluding Q1/Q2 2020)
Brand Re-ignition
* Reflects Crocs Brand revenues presented in billions. FY 2022E reflects expected estimated revenues. Full financial results to be announced in February 2023. 17CROCS BRAND 2022 GROWTH EXPECTED TO
BE LED BY DIGITAL AND INTERNATIONAL
FY22E Revenue Growth*
~18%
2022E Digital Growth*
~35%
~32%
~38%
2022E Digital Penetration*
~15%
~6%
Asia Pacific EMEALA Americas
2022E DTC
DTC Comparable Comparable Sales Growth*
Sales Growth ~12%
* Reflects Crocs Brand revenues. FY 2022E reflects expected estimated revenues. Full financial results to be announced in February 2023. 18HEYDUDE PRO FORMA REVENUES*
NEARLY $1B
~$1B
$580M
$191M
$20M $56M
2018 2019 2020 2021 2022E PF**
YOY -- 180% 239% 204% ~70%
Growth
Expect ~37% Digital Penetration**
* Pro forma includes HEYDUDE for the period prior to acquisition close (assuming the acquisition had closed on the first day of such trailing twelve month period).
19
** Reflects HEYDUDE Brand unaudited revenues prior to 2021 presented in millions. FY 2022E reflects expected estimated revenues and digital penetration. Full financial results to be announced in February 2023.2023E REVENUE GROWTH EXPECTED IN ALL BRANDS AND REGIONS 2023E Revenues ~$3.9B − 4.0B 2023E Revenue Growth* 10% − 13% * FY 2023E reflects expected estimated revenues at constant currency rates. 20
CAPITAL ALLOCATION PRIORITIES
BRAND RETURN OF
DEBT
GROWTH CAPITAL TO
PAYDOWN
INVESTMENT SHAREHOLDERS
21SIGNIFICANT CASH FLOW GENERATION
FUELS RAPID DELEVERAGING
Net Debt / Adjusted EBITDA Repaid additional
$300M in Q4
2.9x
2.4x
≤ 2.0x
0.8x
YE 2021 PF YE 2021 for HEYDUDE PF Q3 2022 Mid-Year 2023E
Gross
1.1x 3.1x 2.5x ≤2.0x
Leverage
1. Assumes excess free cash flow used to repay borrowings. Net Debt / Adjusted EBITDA calculated as: (Total Gross Debt - Cash and Cash Equivalents) / TTM Adjusted EBITDA.
a. Adjusted EBITDA calculated as Adjusted Operating Income plus depreciation and amortization. Please refer to Appendix for definition and Non-GAAP reconciliation of Adjusted Operating Income. 22
b. Pro forma ("PF") includes HEYDUDE for the period prior to acquisition close (assuming the acquisition had closed on the first day of such trailing twelve month period).TRACK RECORD OF SIGNIFICANT RETURN
OF CAPITAL TO SHAREHOLDERS
2014-2022 Total Share Repurchase Average Price
$1.6B $38
* As of December 31, 2022, Crocs, Inc. had 61,749,296 shares of its common stock, par value $0.001 per share, outstanding.
23INVESTMENT HIGHLIGHTS
• A Global Leader in Casual Footwear with $160B Total Addressable Market
• Two Iconic, High-Growth Scale Brands Aligned to Long-Term Consumer Trends
• Diversified Sources of Growth Across Brands, Categories, Geographies and
Channels
• Industry-Leading Margins and Cash Flow Generation Allowing to Deleverage
Quickly and then Return Capital to Shareholders
• Best-in-Class Management Team with Track Record of Delivering Financial Targets
and Exceptional TSR
24APPENDIX
25NON-GAAP RECONCILIATIONS
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” and “Non-GAAP gross margin, “Non-GAAP income from operations,” “Non-GAAP operating margin, “Adjusted EBITDA”, which are non-GAAP financial measures. We also
present future period guidance for “Non-GAAP operating margin,” “Non-GAAP operating income.” 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 nine months ended September 30, 2022 and 2022E, 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.
26NON-GAAP RECONCILIATIONS
Non-GAAP Cost of Sales, Gross Profit, and Gross Margin Reconciliation:
Nine Months Ended
September 30, 2022
(in thousands)
GAAP revenues $ 2,609,823
GAAP cost of sales $ 1,245,864
Distribution centers (1) (4,896)
HEYDUDE inventory fair value step-up (2) (62,238)
Inventory reserve in Russia (3) (200)
Total adjustments (67,334)
Non-GAAP cost of sales $ 1,178,530
GAAP gross profit $ 1,363,959
GAAP gross margin 52.3%
Non-GAAP gross profit $ 1,431,293
Non-GAAP gross margin 54.8%
(1) Represents expenses, including expansion costs and duplicate rent costs, related to our distribution centers in Dayton, Ohio and Dordrecht, the Netherlands.
(2) Primarily represents a step-up of HEYDUDE inventory costs to fair value upon the close of the acquisition on February 17, 2022.
(3) Represents the net impact of an inventory reserve expense in our EMEALA segment associated with the continued shutdown of our direct operations in Russia.
27NON-GAAP RECONCILIATIONS
Non-GAAP Operating Margin Guidance and Adjusted EBITDA Reconciliation:
Full Year 2022 Financial Guidance:
Approximately:
Non-GAAP operating margin and operating income reconciliation:
GAAP operating margin and operating income 23%
Non-GAAP adjustments, primarily associated with the HEYDUDE acquisition (1) 4%
Non-GAAP operating margin and operating income 27%
Full Year 2022 Estimate:
Approximately:
(in thousands)
Adjusted EBITDA reconciliation:
GAAP revenues $3,550,000
Non-GAAP operating margin and operating income 27%
Non-GAAP operating income $958,500
Annualized Depreciation & Amortization for 9 months ended 9/30/2022 (2) $35,331
Adjusted EBITDA $993,831
(1) For the full year 2022, we expect to incur $55 million in SG&A costs, primarily associated with the HEYDUDE acquisition and integration, and a total $75 million in cost of sales, primarily related to the
write up of HEYDUDE inventory costs to fair market value at the close of acquisition.
(2) Depreciation and amortization for the nine months ended September 30, 2022 was $26,498,000.
28, Inc.
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