Revenues and Gross Margin Exceeded
GuidanceIncome from Operations Grew 418% and Diluted
Earnings Per Share Rose to $0.07Raises Full Year
Guidance
___________________________________________________________________________
Crocs, Inc. (NASDAQ: CROX) a world leader in innovative casual
footwear for men, women, and children, today announced its third
quarter 2018 financial results.
Andrew Rees, President and Chief Executive Officer, said, “By
executing against our strategic priorities, we drove strong
quarterly performance with revenues up 7.3%, gross margin
increasing 250 basis points to 53.3% and income from operations
increasing 418% to $13.9 million. Our diluted EPS was $0.07,
improving significantly compared to last year’s third quarter $0.03
loss. We achieved these strong results by continuing to grow our
brand strength and demand for our clogs and sandals. We anticipate
a strong finish to the year and have increased our 2018 guidance
accordingly, and we are excited about our growth prospects for
2019.”
Third Quarter 2018 Operating Results:
- Revenues were $261.1 million, a 7.3%
increase over the third quarter of 2017, or 9.3% on a constant
currency basis. This growth was achieved despite the loss of
approximately $15 million due to operating fewer stores and
business model changes. E-commerce grew 23.2%, wholesale grew 9.3%,
and retail comparable store sales increased 15.0%.
- Gross margin was 53.3%, improving 250
basis points over last year’s third quarter.
- Selling, general and administrative
expenses (“SG&A”) were $125.2 million compared to $120.8
million in the third quarter of 2017. This was higher than guidance
due to incentive compensation and other variable costs associated
with higher revenues. As a percent of revenues, SG&A improved
170 basis points to 47.9%. Third quarter 2018 results included $6.3
million of non-recurring charges compared to $3.6 million in last
year’s third quarter. Those charges consisted of $5.0 million
incurred in connection with the closure of the Company’s
manufacturing facilities, approximately $3.7 million of which were
non-cash, and $1.3 million associated with the Company’s SG&A
reduction plan.
- Income from operations increased to
$13.9 million from $2.7 million in last year’s third quarter. Net
income attributable to common stockholders was $6.5 million, or
$0.07 per diluted share, compared to a loss of $2.3 million, or a
$0.03 loss per diluted share, in last year’s third quarter. We had
72.8 million and 71.9 million weighted average diluted common
shares outstanding during the three months ended September 30,
2018 and 2017, respectively.
Balance Sheet and Cash Flow Highlights:
- Cash and cash equivalents as of
September 30, 2018 increased 13.9% to $203.0 million compared
to $178.2 million as of September 30, 2017 in response to higher
sales and gross margins in combination with a disciplined approach
to expenses. At September 30, 2018, there were no borrowings
outstanding on our credit facility, and in November 2018, we
increased the size of the facility to $150 million from $100
million.
- Inventory declined 16.1% to $117.7
million as of September 30, 2018 compared to $140.3 million as
of September 30, 2017, reflecting the Company’s continued focus on
inventory management.
- Cash provided by operating activities
increased 6.8% to $85.9 million during the first nine months of
2018 compared to $80.4 million during the first nine months of
2017.
- Capital expenditures during the first
nine months of 2018 were $5.2 million compared to $14.3 million
during the same period in 2017, as the Company incurred lower
technology-related expenditures.
Share Repurchase Activity:
During the third quarter of 2018, the Company repurchased
604,000 shares of its common stock for $11.1 million, at an average
price of $18.39 per share. As of September 30, 2018,
approximately $182 million of the Company’s current $500 million
share repurchase authorization remained available for future share
repurchases.
Financial Outlook:
Fourth Quarter 2018:
With respect to the fourth quarter of 2018, the Company
expects:
- Revenues of $195 to $205 million
compared to $199.1 million in the fourth quarter of 2017, including
a negative currency impact estimated at $5 million.
- Gross margin to be approximately 80 to
100 basis points above last year’s 45.4% rate.
- SG&A to be approximately $10
million below last year’s fourth quarter SG&A of $120.7
million. This includes non-recurring charges of approximately $2
million compared to $9.4 million of non-recurring charges in the
fourth quarter of 2017.
Full Year 2018:
With respect to 2018, the Company now expects:
- Revenues to be 4 to 5% higher than 2017
revenues of $1,023.5 million, up from prior guidance of a low
single digit increase based on the strength of our results.
- Gross margin to increase approximately
100 basis points over 2017 gross margin of 50.5%, up from our prior
guidance of a 70 to 100 basis point increase.
- SG&A to be approximately $495
million compared to last year’s $499.9 million and prior guidance
calling for SG&A to be slightly higher than $485 million. This
change reflects increased incentive compensation and other variable
costs associated with higher revenues. Non-recurring charges are
expected to be $19 million. Approximately $13 million of that
amount relates to the closure of our manufacturing facilities,
approximately $6 million of which will be non-cash. Non-recurring
charges in 2017 were $17 million.
- Income from operations to be slightly
under $60 million compared to $17.3 million in 2017 and our prior
guidance of $50 million.
- Depreciation and amortization to be
approximately $30 million compared to $33.1 million in 2017.
- Income tax expense of approximately $17
million compared to $7.9 million in 2017.
2019 Preview:
With respect to 2019 revenues, the Company expects a mid-single
digit increase over 2018 revenues. We anticipate that e-commerce
and wholesale growth will more than offset lower retail revenues
associated with our reduced store count, which we expect to reduce
revenues by approximately $25 million. Adding back that $25 million
reduction, we would expect 2019 revenues to be up mid to high
single digits over our anticipated 2018 revenues.
Conference Call Information:
A conference call to discuss third quarter 2018 results is
scheduled for today, Thursday, November 8, 2018 at 8:30 a.m.
EST. The call participation number is (888) 771-4371. A replay of
the conference call will be available two hours after the
completion of the call at (888) 843-7419. International
participants can dial (847) 585-4405 to take part in the conference
call, and can access a replay of the call at (630) 652-3042. All of
these calls will require the use of the conference identification
number 47676603. 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 November 8, 2019.
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. Every pair of
shoes within Crocs’ collection contains Croslite™ material, a
proprietary, molded footwear technology, delivering extraordinary
comfort with each step.
In 2018, Crocs reinforces its mission of “everyone comfortable
in their own shoes” with the second year of its global Come As You
Are™ campaign. To learn more about Crocs or Come As You
Are, 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 revenue, gross margin,
SG&A, income from operations, depreciation and amortization,
and tax expense 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 November 8,
2018. 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, 2018 2017 2018
2017 Revenues $ 261,064 $ 243,273 $ 872,216 $
824,401 Cost of sales 122,005 119,810 411,884
397,547 Gross profit 139,059 123,463 460,332 426,854
Selling, general and administrative expenses 125,164 120,778
383,451 379,141 Income from operations 13,895
2,685 76,881 47,713 Foreign currency gains (losses), net 233 (257 )
1,587 181 Interest income 422 269 847 576 Interest expense (126 )
(167 ) (371 ) (539 ) Other income, net 160 54 229
187 Income before income taxes 14,584 2,584 79,173
48,118 Income tax expense 4,092 955 17,850
13,519 Net income 10,492 1,629 61,323 34,599 Dividends on
Series A convertible preferred stock (3,000 ) (3,000 ) (9,000 )
(9,000 ) Dividend equivalents on Series A convertible preferred
stock related to redemption value accretion and beneficial
conversion feature (972 ) (892 ) (2,854 ) (2,621 ) Net income
(loss) attributable to common stockholders $ 6,520 $ (2,263
) $ 49,469 $ 22,978 Net income (loss) per common
share: Basic $ 0.08 $ (0.03 ) $ 0.60 $ 0.26
Diluted $ 0.07 $ (0.03 ) $ 0.58 $ 0.26
Weighted average common shares outstanding: Basic 67,821
71,895 68,223 73,212 Diluted 72,774
71,895 71,104 74,160
EARNINGS PER SHARE
(UNAUDITED)
(in thousands, except per share
data)
Three Months Ended September 30, Nine Months Ended
September 30, 2018 2017 2018
2017 (in thousands, except per share
data) Numerator: Net income (loss) attributable to common
stockholders $ 6,520 $ (2,263 ) $ 49,469 $ 22,978 Less: Net income
allocable to Series A Preferred stockholders (1) (1,114 ) —
(8,319 ) (3,642 ) Remaining net income (loss) available to common
stockholders - basic and diluted $ 5,406 $ (2,263 ) $ 41,150
$ 19,336 Denominator: Weighted average common shares
outstanding - basic 67,821 71,895 68,223 73,212 Plus: dilutive
effect of stock options and unvested restricted stock units 4,953
— 2,881 948 Weighted average common
shares outstanding - diluted 72,774 71,895 71,104
74,160 Net income (loss) per common share:
Basic $ 0.08 $ (0.03 ) $ 0.60 $ 0.26 Diluted $ 0.07 $ (0.03 ) $
0.58 $ 0.26 (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, 2018 December 31,
2017 ASSETS Current assets: Cash and cash equivalents $
203,046 $ 172,128 Accounts receivable, net of allowances of $20,508
and $31,389, respectively 110,478 83,518 Inventories 117,684
130,347 Income taxes receivable 11,872 3,652 Other receivables
9,387 10,664 Restricted cash - current 1,908 2,144 Prepaid expenses
and other assets 25,856 22,596 Total current assets
480,231 425,049 Property and equipment, net of accumulated
depreciation and amortization of $81,043 and $91,806, respectively
24,216 35,032 Intangible assets, net 48,196 56,427 Goodwill 1,634
1,688 Deferred tax assets, net 12,567 10,174 Restricted cash 2,244
2,783 Other assets 8,858 12,542 Total assets $
577,946 $ 543,695 LIABILITIES AND
STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 57,125
$ 66,381 Accrued expenses and other liabilities 99,793 84,446
Income taxes payable 24,683 5,515 Current portion of borrowings and
capital lease obligations 11 676 Total current
liabilities 181,612 157,018 Long-term income taxes payable 4,334
6,081 Other liabilities 9,679 12,298 Total
liabilities 195,625 175,397 Commitments and
contingencies: Series A convertible preferred stock, par value
$0.001 per share, 1.0 million shares authorized, 0.2 million
outstanding, liquidation preference $203 million 185,288 182,433
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 million shares authorized, 96.0
million and 94.8 million issued, 67.6 million and 68.8 million
outstanding, respectively 96 95 Treasury stock, at cost, 28.4
million and 26.0 million shares, respectively (371,107 ) (334,312 )
Additional paid-in capital 383,090 373,045 Retained earnings
239,900 190,431 Accumulated other comprehensive loss (54,946 )
(43,394 ) Total stockholders’ equity 197,033 185,865
Total liabilities and stockholders’ equity $ 577,946 $
543,695
CROCS, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
(in thousands)
Nine Months Ended September 30, 2018
2017 Cash flows from operating activities: Net income
$ 61,323 $ 34,599 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
21,535 24,701 Unrealized foreign currency (gain) loss, net (2,028 )
1,017 Share-based compensation 9,320 6,851 Other non-cash items
8,104 (1,208 ) Changes in operating assets and liabilities:
Accounts receivable, net of allowances (37,394 ) (9,068 )
Inventories 4,468 12,435 Prepaid expenses and other assets 5,271
12,997 Accounts payable, accrued expenses and other liabilities
15,271 (1,909 ) Cash provided by operating activities 85,870
80,415 Cash flows from investing activities: Purchases of property,
equipment, and software (5,224 ) (14,263 ) Proceeds from disposal
of property and equipment 1,325 1,562 Cash used in
investing activities (3,899 ) (12,701 ) Cash flows from financing
activities: Proceeds from bank borrowings — 5,500 Repayments of
bank borrowings and capital lease obligations (680 ) (8,222 )
Dividends—Series A convertible preferred stock (9,000 ) (9,000 )
Repurchases of common stock (37,046 ) (25,645 ) Other 31
(233 ) Cash used in financing activities (46,695 ) (37,600 ) Effect
of exchange rate changes on cash, cash equivalents, and restricted
cash (5,133 ) 499 Net change in cash, cash equivalents, and
restricted cash 30,143 30,613 Cash, cash equivalents, and
restricted cash—beginning of period 177,055 152,646
Cash, cash equivalents, and restricted cash—end of period $ 207,198
$ 183,259
CROCS, INC. AND SUBSIDIARIESNON-GAAP
MEASURES(UNAUDITED)
In addition to financial measures presented on the basis of
accounting principles generally accepted in the United States of
America (“U.S. GAAP”), we 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 U.S. 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. We believe they also
provide a useful baseline for analyzing trends in our operations.
Investors should not consider these non-GAAP measures in isolation
from, or as a substitute for, financial information prepared in
accordance with U.S. GAAP.
CROCS, INC. AND SUBSIDIARIES
REVENUES BY CHANNEL
(UNAUDITED)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
% Change
Constant Currency % Change
(1)
2018 2017 2018
2017
Q3 2018-2017
YTD 2018-2017 Q3 2018-2017
YTD 2018-2017 (in thousands) Wholesale:
Americas $ 44,883 $ 41,642 $ 171,477 $ 169,975 7.8 % 0.9 % 12.2 %
2.2 % Asia Pacific (2) 40,938 36,286 172,152 155,541 12.8 % 10.7 %
16.1 % 7.6 % Europe (2) 29,373 28,576 130,150 116,932 2.8 % 11.3 %
5.5 % 3.8 % Other businesses 1,525 254 2,133
545 500.4 % 291.4 % 515.0 % 288.3 % Total wholesale 116,719
106,758 475,912 442,993 9.3 % 7.4 % 12.9 % 4.9 % Retail: Americas
65,247 57,404 156,557 145,809 13.7 % 7.4 % 13.9 % 7.4 % Asia
Pacific (2) 22,942 29,497 71,359 87,631 (22.2 )% (18.6 )% (22.1 )%
(21.0 )% Europe (2) 10,345 12,434 29,601
35,751 (16.8 )% (17.2 )% (13.3 )% (18.5 )% Total retail
98,534 99,335 257,517 269,191 (0.8 )% (4.3 )% (0.2 )% (5.3 )%
E-commerce: Americas 26,827 21,413 70,515 58,552 25.3 % 20.4 % 25.7
% 20.3 % Asia Pacific 11,283 9,537 45,134 35,483 18.3 % 27.2 % 19.6
% 22.2 % Europe 7,701 6,230 23,138 18,182
23.6 % 27.3 % 25.4 % 20.8 % Total e-commerce 45,811
37,180 138,787 112,217 23.2 % 23.7 % 24.1 %
21.0 % Total revenues $ 261,064 $ 243,273 $ 872,216
$ 824,401 7.3 % 5.8 % 9.3 % 3.8 % (1) Reflects
year over year change as if the current period results were in
constant currency, which is a non-GAAP financial measure. See
“Non-GAAP Measures” on page 8 for more information. (2) In the
third quarter of 2018, certain revenues previously reported within
the ‘Asia Pacific’ segment were shifted to the ‘Europe’ segment.
The previously reported amounts for wholesale and retail revenues
in these regions for the three and nine months ended September 30,
2017 have been revised to conform to the current year presentation.
See ‘Impacts on revenue of segment composition change’ table below
for more information.
Impacts on revenue of segment composition change:
Three Months EndedSeptember 30,
2017
Nine Months EndedSeptember 30,
2017
Increase (Decrease) (in thousands) Wholesale: Asia
Pacific $ (4,719 ) $ (21,545 ) Europe 4,719 21,545 Retail: Asia
Pacific — (2,827 ) Europe — 2,827
CROCS, INC. AND SUBSIDIARIES
RETAIL STORE COUNTS
(UNAUDITED)
June 30,2018
Opened
Closed/Transferred
September 30,2018
Company-operated retail locations: Type: Kiosk/store in store 69 —
— 69 Retail stores 126 1 6 121 Outlet stores 203 2
6 199 Total 398 3 12 389 Operating segment: Americas
169 1 1 169 Asia Pacific 161 2 8 155 Europe 68 — 3
65 Total 398 3 12 389
December 31,2017
Opened
Closed/Transferred
September 30,2018
Company-operated retail locations: Type: Kiosk/store-in-store 71 —
2 69 Retail stores 161 1 41 121 Outlet stores 215 3
19 199 Total 447 4 62 389 Operating
segment: Americas 175 1 7 169 Asia Pacific 186 3 34 155 Europe 86
— 21 65 Total 447 4 62
389
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 EndedSeptember
30,
Nine Months EndedSeptember
30,
2018 2017 2018
2017 Comparable retail store sales: (2) Americas 19.9 % 2.8
% 13.0 % (0.3 )% Asia Pacific (3) 3.2 % (2.9 )% 3.4 % (1.8 )%
Europe 15.1 % (2.1 )% 11.4 % (2.1 )% Global 15.0 % 0.4 % 10.1 %
(1.0 )%
Constant Currency (1)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2018 2017 2018 2017 Direct to consumer
comparable store sales (includes retail and e-commerce): (2)
Americas 21.6 % 9.2 % 15.2 % 2.4 % Asia Pacific (3) 8.4 % 3.7 %
10.4 % 8.6 % Europe (3) 19.3 % 4.9 % 15.4 % 2.5 % Global 17.9 % 7.0
% 13.8 % 4.3 % (1) Reflects period over period change as if
the current period results were in constant currency, which is a
non-GAAP financial measure. See “Non-GAAP Measures” on page 8 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. (3) In the third quarter of
2018, certain revenues and expenses previously reported within the
‘Asia Pacific’ segment were shifted to the ‘Europe’ segment. The
previously reported amounts for comparable retail store sales and
direct to consumer store sales for the three months ended September
30, 2017 were not impacted. The previously reported amounts for
comparable retail store sales and direct to consumer store sales
for the nine months ended September 30, 2017 have been revised to
conform to the current period presentation. The adjustments for
this revision had the following impacts: Asia Pacific comparable
retail stores decreased by 0.1%; Europe comparable retail stores
increased by 0.2%; Asia Pacific direct to consumer comparable store
sales increased by 0.2%; Europe direct to consumer comparable store
sales decreased by 0.1%.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181108005212/en/
Crocs, Inc.Investor Contacts:Marisa Jacobs,
303-848-7322mjacobs@crocs.comorMedia Contact:Ryan
Roccaforte, 303-848-7116rroccaforte@crocs.com
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