Crocs Inc.

07/30/2026 | Press release | Distributed by Public on 07/30/2026 10:24

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Business Overview
Crocs, Inc. and our consolidated subsidiaries (collectively the "Company," "we," "us," or "our") are engaged in the design, development, worldwide marketing, distribution, and sale of casual lifestyle footwear and accessories for all. We strive to be the world leader in innovative casual footwear for all, combining comfort and style with a value that consumers want.
Known or Anticipated Trends
Based on our recent operating results and current perspectives on our operating environment, we anticipate certain trends will continue to impact our operating results:
•We continue to operate in an environment where consumers are feeling the effects of elevated interest rates, inflation, and future expected price increases, among other things, and as a result, there is more pressure on discretionary spending. Given this, our wholesale partners are also acting cautiously. In addition, geopolitical tensions have remained elevated across the globe and are having an adverse impact on the global economy. Most recently, the conflict in the Middle East has caused, and may continue to cause, a reduction in our revenues for several of our distributor markets and an increase in the costs of raw materials and transportation associated with elevated oil prices. Furthermore, as of June 30, 2026, the United States ("U.S.") has imposed tariffs on foreign imports from multiple countries, including, most relevant to us, a 10% tariff on all imports from Vietnam, China, Indonesia, India, and Cambodia, respectively. On February 20, 2026, the United States Supreme Court ruled the President did not have the requisite authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA). On March 4, 2026, the Court of International Trade ordered U.S. Customs and Border Protection to begin the refund process for all importers who were subject to IEEPA duties. While the timing remains uncertain, we currently estimate that we are eligible to receive a total of approximately $70 million in refunds related to these tariffs. As of June 30, 2026, no refunds were realized or considered realizable; accordingly, no benefit has been recognized under the gain contingency model. Subsequent to June 30, 2026, we received approximately $20 million of IEEPA tariff refunds. The corresponding benefit is expected to be recognized within 'Cost of sales' in the condensed consolidated statements of operations during the third quarter of 2026. Additionally, in July 2026, the aforementioned 10% tariffs expired and were replaced with new tariffs ranging from 10% to 12.5%. At this time, it remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of additional tariffs on goods imported into the U.S., tax policy related to international commerce, increased export control, sanctions and investment restrictions, trade matters, war, or foreign policy in general. We are continuing to monitor developments with respect to these policy changes and proposals.
•We continue to prioritize growth in North America for both brands, while making progress on our long-term strategic initiatives. Specifically for the Crocs Brand, we believe this will be driven by product innovation, diversification within key product categories, including growth within our sandals business, and ultimately prioritizing stricter segmentation and pricing discipline across the marketplace. For the HEYDUDE Brand, we are focused on our core consumer, refining our product offering within the slip-on category, and refreshing the marketplace. For both brands, scaling digital capabilities continues to be a priority.
•Our liquidity position remains strong with $170.3 million in cash and cash equivalents and $880.4 million in available borrowing capacity as of June 30, 2026. Our total borrowings were $1.3 billion as of June 30, 2026. We repurchased $250.6 million of our common stock during the quarter.
Use of Non-GAAP Financial Measures
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 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 prior year average foreign exchange rates for the comparative period to enhance the visibility of the underlying business trends, excluding the impact of foreign currency exchange rates on reported amounts.
Management uses constant currency to assist in comparing business trends from period to period on a consistent basis in communications with the Board, stockholders, analysts, and investors concerning our financial performance. We believe constant currency is useful to investors and other users of our condensed consolidated financial statements as an additional tool
to evaluate operating performance and trends. Investors should not consider constant currency in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP.
Key Performance Indicators
Management utilizes the key performance metrics of gross margin and operating margin to gauge the Company's operational efficiency and market competitiveness, identify trends, formulate financial projections, and make strategic decisions. Management continuously monitors and analyzes these metrics in an effort to ensure we remain agile, competitive, and aligned with our long-term growth objectives. The titles and/or definitions of certain of these metrics may vary from company to company. As a result, our calculation of certain of these metrics may not be comparable to similarly titled metrics used by other companies.
Gross Margin
Gross margin is defined as gross profit divided by revenues. Management uses this metric and believes it is useful for investors because it provides insights into profitability, cost management, and pricing strategy.
Operating Margin
Operating margin is defined as income from operations divided by revenues. Management uses this metric and believes it is useful for investors because it provides a comprehensive view of profitability from its core business operations, excluding the effects of financing and tax considerations.
Second Quarter 2026 Financial and Operational Highlights
Revenues were $1,179.5 million for the second quarter of 2026, a 2.6% increase compared to the second quarter of 2025. The increase was due to the net effects of: (i) higher average selling price on a constant currency basis ("ASP") driven by both brands, which increased revenues by $37.9 million, or 3.3%; (ii) lower unit sales volume in the HEYDUDE Brand, partially offset by higher unit sales volume in the Crocs Brand, which resulted in a decrease in revenues of $14.1 million, or 1.2%; and (iii) net changes in exchange rates, which increased revenues by $6.3 million, or 0.6%.
The following were significant developments affecting our businesses and capital structure during the three months ended June 30, 2026:
•Crocs Brand revenues increased by 4.3%, or 3.7% on a constant currency basis, compared to the same period in 2025. HEYDUDE Brand revenues decreased 5.7%, or 5.8% on a constant currency basis, compared to the same period in 2025.
•Gross margin was 59.4%, a decrease of 230 basis points from last year's second quarter, primarily due to unfavorable duties for both brands, as a result of the aforementioned incremental tariffs. Unfavorable product mix in the Crocs Brand also contributed to the decrease, partially offset by lower product costs in the Crocs Brand.
•Selling, general and administrative expenses ("SG&A") were $415.0 million compared to $398.2 million in the second quarter of 2025, primarily due to higher costs in the direct-to-consumer ("DTC") channel, including investments in the channel driven by the Crocs Brand, partially offset by reduced marketing costs for the HEYDUDE Brand. As a percent of revenues, SG&A increased to 35.2% of revenues compared to 34.6% of revenues in the second quarter of 2025.
•There were no asset impairments compared to $738.1 million in the second quarter of 2025, primarily driven by the partial impairment in the prior year of the HEYDUDE indefinite-lived trademark and HEYDUDE Brand reporting unit goodwill. Refer to Note 3 - Goodwill and Intangible Assets, Net in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q.
•Income from operations increased to $285.7 million from a loss from operations of $427.5 million in last year's second quarter. The increase is driven primarily by asset impairments that did not recur in the current year, as described above. Net income was $204.9 million, or $4.13 per diluted share, compared to a net loss of $492.3 million, or a net loss per diluted share of $8.82, in last year's second quarter.
Results of Operations
Three Months Ended June 30, Six Months Ended June 30, % Change
Favorable (Unfavorable)
2026 2025 2026 2025
Q2 2026-2025
YTD 2026-2025
($ in thousands, except per share data)
Revenues
$ 1,179,468 $ 1,149,373 $ 2,100,925 $ 2,086,706 2.6 % 0.7 %
Cost of sales
478,761 440,537 877,273 836,321 (8.7) % (4.9) %
Gross profit
700,707 708,836 1,223,652 1,250,385 (1.1) % (2.1) %
Selling, general and administrative expenses
415,029 398,237 733,829 716,812 (4.2) % (2.4) %
Goodwill impairment
- 307,000 - 307,000 100.0 % 100.0 %
Asset impairments
- 431,115 3,301 431,115 100.0 % 99.2 %
Income (loss) from operations
285,678 (427,516) 486,522 (204,542) 166.8 % 337.9 %
Foreign currency (losses) gains, net
(2,302) 434 (3,927) 5,307 (630.4) % (174.0) %
Interest income
583 371 918 704 57.1 % 30.4 %
Interest expense
(19,909) (22,523) (40,368) (45,289) 11.6 % 10.9 %
Other (expense) income, net
(127) 627 (378) 152 (120.3) % (348.7) %
Income (loss) before income taxes
263,923 (448,607) 442,767 (243,668) 158.8 % 281.7 %
Income tax expense
59,036 43,675 100,324 88,511 (35.2) % (13.3) %
Net income (loss)
$ 204,887 $ (492,282) $ 342,443 $ (332,179) 141.6 % 203.1 %
Net income (loss) per common share:
Basic
$ 4.17 $ (8.82) $ 6.89 $ (5.94) 147.3 % 216.0 %
Diluted
$ 4.13 $ (8.82) $ 6.83 $ (5.94) 146.8 % 215.0 %
Gross margin (1)
59.4 % 61.7 % 58.2 % 59.9 % (230) bp (170) bp
Operating margin (1)
24.2 % (37.2) % 23.2 % (9.8) % 6,140 bp 3,300 bp
(1) Changes for gross margin and operating margin are shown in basis points ("bp").
Revenues By Channel
Three Months Ended June 30, Six Months Ended June 30, % Change
Constant Currency % Change (1)
Favorable (Unfavorable)
2026 2025 2026 2025
Q2 2026-2025
YTD 2026-2025
Q2 2026-2025
YTD 2026-2025
(in thousands)
Crocs Brand:
Wholesale $ 441,499 $ 464,679 $ 887,321 $ 941,484 (5.0) % (5.8) % (5.4) % (7.4) %
Direct-to-consumer 558,938 494,911 880,532 779,715 12.9 % 12.9 % 12.0 % 11.5 %
Total Crocs Brand 1,000,437 959,590 1,767,853 1,721,199 4.3 % 2.7 % 3.7 % 1.2 %
HEYDUDE Brand:
Wholesale 82,564 99,760 165,966 210,453 (17.2) % (21.1) % (17.4) % (21.8) %
Direct-to-consumer 96,467 90,023 167,106 155,054 7.2 % 7.8 % 7.1 % 7.7 %
Total HEYDUDE Brand 179,031 189,783 333,072 365,507 (5.7) % (8.9) % (5.8) % (9.4) %
Total consolidated revenues $ 1,179,468 $ 1,149,373 $ 2,100,925 $ 2,086,706 2.6 % 0.7 % 2.0 % (0.6) %
(1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" above for more information.
Revenues. In the three months ended June 30, 2026, revenues increased compared to the same period in 2025, primarily due to higher ASP of $37.9 million, or 3.3%, driven by favorable channel mix and pricing in both brands, partially offset by unfavorable product mix in both brands. Net foreign currency fluctuations also increased revenues by $6.3 million, or 0.6%, primarily due to favorable fluctuations in the Chinese Yuan, partially offset by unfavorable fluctuations in the South Korean Won. The overall increase in revenues was partially offset by lower volume of $14.1 million, or 1.2%, driven by the HEYDUDE Brand.
Revenues also increased in the six months ended June 30, 2026, primarily due to higher ASP of $72.4 million, or 3.5%, driven by favorable channel mix and pricing in both brands, partially offset by unfavorable product mix in both brands. Net foreign currency fluctuations also increased revenues by $28.0 million, or 1.3%, primarily due to favorable fluctuations in the Euro and Chinese Yuan, partially offset by unfavorable fluctuations in the South Korean Won. The overall increase in revenues was partially offset by lower volume of $86.2 million, or 4.1%, driven by both brands.
Gross margin. Gross margin decreased in the three months ended June 30, 2026, to 59.4% compared to 61.7% in the same period in 2025, primarily due to incremental duties of 170 basis points and unfavorable product and customer mix in the Crocs Brand of 100 basis points, partially offset by lower product costs in the Crocs Brand of 100 basis points.
Gross margin in the six months ended June 30, 2026, was 58.2% compared to 59.9% in 2025. This was primarily driven by incremental duties of 130 basis points and unfavorable product and customer mix in the Crocs Brand of 110 basis points, partially offset by lower product costs in the Crocs Brand of 80 basis points.
Selling, general and administrative expenses. SG&A increased $16.8 million, or 4.2%, during the three months ended June 30, 2026, compared to the same period in 2025, primarily due to higher DTC costs of $12.2 million, driven by increased share of marketplaces and rent expense as a result of investments in the channel. Increased compensation costs of $5.6 million and other net increases in other costs of $6.5 million also contributed to the increase. The overall increase in SG&A was partially offset by reduced marketing costs of $7.5 million, driven by the HEYDUDE Brand as part of our previously announced cost savings initiatives.
SG&A expenses increased $17.0 million, or 2.4%, during the six months ended June 30, 2026, compared to the same period in 2025, primarily due to higher DTC costs of $20.2 million, driven by increased share of marketplaces and rent expense as a result of investments in the channel. Increased compensation costs of $6.2 million and other net increases in other costs of $3.3 million also contributed to the increase. The overall increase in SG&A was partially offset by reduced marketing costs of $12.7 million, driven by the HEYDUDE Brand as part of our previously announced cost savings initiatives.
Goodwill and Asset impairments. In the three months ended June 30, 2026, there were no impairments. During the six months ended June 30, 2026, there were impairment charges of $3.3 million related to HEYDUDE leasehold improvement assets. Impairments were $738.1 million during the three and six months ended June 30, 2025, primarily due to non-cash impairment charges of $430.0 million related to the indefinite-lived HEYDUDE trademark and $307.0 million for HEYDUDE Brand reporting unit goodwill. For additional information, refer to Note 3 - Goodwill and Intangible Assets, Net in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q.
Foreign currency (losses) gains, net. Foreign currency (losses) gains, net, consist of realized and unrealized foreign currency gains and losses from the remeasurement and settlement of monetary assets and liabilities denominated in non-functional currencies as well as realized and unrealized gains and losses on foreign currency derivative instruments. During the three months ended June 30, 2026, we recognized realized and unrealized net foreign currency losses of $2.3 million compared to gains of $0.4 million during the three months ended June 30, 2025.
During the six months ended June 30, 2026, we recognized realized and unrealized net foreign currency losses of $3.9 million compared to gains of $5.3 million during the six months ended June 30, 2025.
Interest expense. Interest expense during the three months ended June 30, 2026, decreased $2.6 million, or 11.6%, compared to the three months ended June 30, 2025. Interest expense during the six months ended June 30, 2026, decreased $4.9 million, or 10.9%, compared to the six months ended June 30, 2025. The decrease in interest expense for the three and six months ended June 30, 2026, was due to lower outstanding borrowings and lower weighted average interest rates on the Term Loan B Facility (as defined herein) and the Revolving Facility (as defined herein) in the current year.
Income tax expense. During the three months ended June 30, 2026, income tax expense increased $15.4 million compared to the same period in 2025. The effective tax rate for the three months ended June 30, 2026, was 22.4% compared to an effective tax rate of (9.7)% for the same period in 2025. The effective tax rate was the result of quarterly tax expense compared to the impact of the income (loss) before income taxes related to the impairments of the indefinite-lived HEYDUDE trademark and HEYDUDE Brand reporting unit goodwill in the three months ended June 30, 2025. As a result of a prior year intra-entity transaction, the value of the intellectual property for tax purposes is subject to revaluation and therefore there are not similar impacts for tax as a result of the intellectual property impairment. Our effective income tax rate, for each period presented, also differs from the federal U.S. statutory rate due to differences in income tax rates between U.S. and foreign jurisdictions.
During the six months ended June 30, 2026, income tax expense increased $11.8 million compared to the same period in 2025. The effective tax rate for the six months ended June 30, 2026, was 22.7% compared to an effective tax rate of (36.3)% for the same period in 2025. The effective tax rate was the result of year-to-date tax expense compared to the impact of the income (loss) before income taxes related to the impairments of the indefinite-lived HEYDUDE trademark and HEYDUDE Brand reporting unit goodwill in the six months ended June 30, 2025. As a result of a prior year intra-entity transaction, the value of the intellectual property for tax purposes is subject to revaluation and therefore there are not similar impacts for tax as a result of the intellectual property impairment. Our effective income tax rate, for each period presented, also differs from the federal U.S. statutory rate due to differences in income tax rates between U.S. and foreign jurisdictions.
Reportable Operating Segments
The following table sets forth information related to our reportable operating segments, including a comparison of revenues and operating income by segment:
Three Months Ended June 30, Six Months Ended June 30, % Change
Constant Currency
% Change (1)
Favorable (Unfavorable)
2026 2025 2026 2025
Q2 2026-2025
YTD 2026-2025
Q2 2026-2025
YTD 2026-2025
(in thousands)
Revenues:
Crocs Brand revenues
$ 1,000,437 $ 959,590 $ 1,767,853 $ 1,721,199 4.3 % 2.7 % 3.7 % 1.2 %
HEYDUDE Brand revenues 179,031 189,783 333,072 365,507 (5.7) % (8.9) % (5.8) % (9.4) %
Total consolidated revenues
$ 1,179,468 $ 1,149,373 $ 2,100,925 $ 2,086,706 2.6 % 0.7 % 2.0 % (0.6) %
Income (loss) from operations:
Crocs Brand income from operations
$ 352,081 $ 358,355 $ 605,239 $ 631,999 (1.8) % (4.2) % (1.9) % (5.6) %
HEYDUDE Brand income (loss) from operations
22,431 (705,944) 38,470 (682,702) 103.2 % 105.6 % 103.3 % 105.8 %
Enterprise corporate
(88,834) (79,927) (157,187) (153,839) (11.1) % (2.2) % (9.6) % (1.5) %
Total consolidated income (loss) from operations
$ 285,678 $ (427,516) $ 486,522 $ (204,542) 166.8 % 337.9 % 166.8 % 342.4 %
(1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" for more information.
Crocs Brand
Revenues. Crocs Brand revenues increased in the three months ended June 30, 2026, compared to the same period in 2025, primarily due to higher ASP, driven by favorable channel mix and price increases in international markets, partially offset by unfavorable product mix. Higher volume and net foreign currency fluctuations also increased revenues, primarily due to favorable fluctuations in the Chinese Yuan, partially offset by unfavorable fluctuations in the South Korean Won.
The increase in Crocs Brand revenues in the six months ended June 30, 2026, compared to the same period in 2025 is primarily due to higher ASP, due to favorable channel mix and price increases in international markets, partially offset by unfavorable product mix. Net foreign currency fluctuations also increased revenues, primarily due to favorable fluctuations in the Euro and Chinese Yuan, partially offset by unfavorable fluctuations in the South Korean Won. The overall increase was partially offset by lower volume.
Income from Operations. Income from operations for our Crocs Brand segment was $352.1 million for the three months ended June 30, 2026, a decrease of $6.3 million, or 1.8%, compared to the same period in 2025. Gross margin was 62.6%, a decrease of 150 basis points, primarily due to incremental duties and unfavorable product mix, partially offset by lower product costs.
SG&A for our Crocs Brand segment increased $17.4 million, or 6.8%, during the three months ended June 30, 2026, compared to the same period in 2025. This increase was primarily due to higher costs in the DTC channel, driven by increased share of marketplaces and rent expense as a result of investments in the channel. Compensation costs also contributed to the increase.
During the six months ended June 30, 2026, income from operations for our Crocs Brand was $605.2 million, a decrease of $26.8 million, or 4.2%, compared to the same period in 2025. Gross margin was 61.2%, a decrease of 140 basis points, primarily due to incremental duties and unfavorable product mix, partially offset by lower product costs.
SG&A for our Crocs Brand increased $31.6 million, or 7.1%, during the six months ended June 30, 2026, compared to the same period in 2025, primarily due to higher costs in the DTC channel, driven by increased share of marketplaces and rent expense as a result of investments in the channel. Compensation and marketing costs also contributed to the increase.
HEYDUDE Brand
Revenues. For the three months ended June 30, 2026, HEYDUDE Brand revenues decreased compared to the same period in 2025, primarily due to lower volume. The overall decrease in revenues was partially offset by higher ASP, primarily due to favorable channel mix and reduced discounting, partially offset by unfavorable product mix.
During the six months ended June 30, 2026, revenues decreased compared to the same period in 2025, primarily due to lower volume. The overall decrease in revenues was partially offset by higher ASP, primarily due to favorable channel mix and reduced discounting, partially offset by unfavorable product mix.
Income from Operations. Income from operations for the HEYDUDE Brand segment was $22.4 million for the three months ended June 30, 2026, an increase of $728.4 million, compared to the same period in 2025. Gross margin was 43.1%, a decrease of 710 basis points, primarily due to incremental duties and unfavorable channel and product mix.
SG&A, including impairments, for the HEYDUDE Brand segment decreased $746.6 million, or 93.2%, during the three months ended June 30, 2026, compared to the same period in 2025. This decrease was primarily due to the partial impairment of the indefinite-lived HEYDUDE trademark and HEYDUDE Brand reporting unit goodwill in the second quarter of 2025, that did not recur in the current year. Reduced costs for both fixed and variable marketing also contributed to the decrease.
Income from operations for the HEYDUDE Brand was $38.5 million for the six months ended June 30, 2026, an increase of $721.2 million, compared to the same period in 2025. Gross margin was 43.5%, a decrease of 500 basis points, primarily due to unfavorable product mix, incremental duties, and unfavorable channel mix, partially offset by higher ASP.
SG&A, including impairments, for the HEYDUDE Brand decreased $753.6 million, or 87.6%, during the six months ended June 30, 2026, compared to the same period in 2025. This decrease was primarily due to the partial impairment of the indefinite-lived HEYDUDE trademark and HEYDUDE Brand reporting unit goodwill in the second quarter of 2025, that did not recur in the current year. Reduced costs for both fixed and variable marketing also contributed to the decrease. The overall decrease was partially offset by current year impairment charges related to HEYDUDE leasehold improvement assets.
Enterprise Corporate
During the three months ended June 30, 2026, total net costs within 'Enterprise corporate' increased $8.9 million, or 11.1%, compared to the same period in 2025. This was primarily due to increased compensation costs and other corporate costs. These increases were partially offset by decreases resulting from our cost savings initiatives.
During the six months ended June 30, 2026, total net costs within 'Enterprise corporate' increased $3.3 million, or 2.2%, compared to the same period in 2025. This was primarily due to increased compensation costs and other corporate costs. These increases were partially offset by decreases resulting from our cost savings initiatives.
Store Locations
As of June 30, 2026, we had 484 company-operated retail locations for the Crocs Brand, inclusive of 207 retail locations in North America and 277 retail locations internationally. As of June 30, 2026, we had 75 company-operated retail locations for the HEYDUDE Brand. As of June 30, 2025, we had 412 company-operated retail locations for the Crocs Brand, inclusive of 191 retail locations in North America and 221 retail locations internationally. As of June 30, 2025, we had 63 company-operated retail locations for the HEYDUDE Brand.
Financial Condition, Capital Resources, and Liquidity
Liquidity
Our liquidity position as of June 30, 2026, was:
June 30, 2026
(in thousands)
Cash and cash equivalents $ 170,276
Available borrowings 880,416
As of June 30, 2026, we had $170.3 million in cash and cash equivalents and up to $880.4 million of available borrowings, including $865.4 million of remaining borrowing availability under the Revolving Facility (as defined below) and $15.0 million of remaining borrowing availability under the Citibank Facility (as defined below). As of June 30, 2026, the Term Loan B Facility (as defined below) was fully drawn and there was no available borrowing capacity. We believe that cash flows from operations, our cash and cash equivalents on hand, and available borrowings under our Revolving Facility will be sufficient to meet our ongoing liquidity needs and capital expenditure requirements for at least the next twelve months. On July 27, 2026, the Board approved a $1.5 billion increase to our share repurchase authorization, after which approximately $2.0 billion remained available for future common stock repurchases.
Additional future financing may be necessary to fund our operations and there can be no assurance that, if needed, we will be able to secure additional debt or equity financing on terms acceptable to us or at all. Although we believe we have adequate sources of liquidity over the long term, the success of our operations, global economic conditions, and the pace of sustainable growth in our markets, among other things, could each impact our business and liquidity.
Repatriation of Cash and Cash Equivalents
As a global business, we have cash balances in various countries and amounts are denominated in various currencies. Fluctuations in foreign currency exchange rates impact our results of operations and cash positions. Future fluctuations in foreign currencies may have a material impact on our cash flows and capital resources. Cash balances held in foreign countries may have additional restrictions and covenants associated with them which could adversely impact our liquidity and our ability to timely access and transfer cash balances between entities.
All of the cash held outside of the U.S. could be repatriated to the U.S. as of June 30, 2026, without incurring additional U.S. federal income taxes. In some countries, repatriation of certain foreign balances is restricted by local laws. These limitations may affect our ability to fully utilize our cash resources for needs in the U.S. or other countries and could adversely affect our liquidity. As of June 30, 2026, we held $151.8 million of our total $170.3 million in cash and cash equivalents in international locations. This cash is primarily used for the ongoing operations of the business in the locations in which the cash is held. Of the $151.8 million, an insignificant amount is currently restricted by local laws or otherwise.
Senior Revolving Credit Facility
In July 2019, the Company and certain of its subsidiaries (the "Borrowers") entered into a Second Amended and Restated Credit Agreement (as amended, the "Credit Agreement"), with the lenders named therein and PNC Bank, National Association, as a lender and administrative agent for the lenders. Since that time, we have amended the Credit Agreement, which, as amended to date, provides for a revolving credit facility of $1.0 billion, which can be increased by an additional $400.0 million subject to certain conditions (the "Revolving Facility"). Borrowings under the Credit Agreement bear interest at a variable interest rate based on (A) a Base Rate (defined as the highest of (i) the Overnight Bank Funding Rate (as defined in the Credit Agreement), plus 0.25%, (ii) the Prime Rate (as defined in the Credit Agreement), and (iii) the Daily Simple SOFR (as defined in the Credit Agreement), plus 1.00%), plus an applicable margin ranging from 0.25% to 0.875% based on our leverage ratio or 1.35% to 1.975% for the Daily Simple SOFR based on the leverage ratio, inclusive of a 0.10% SOFR adjustment, or (B) the Term SOFR Rate (as defined in the Credit Agreement), plus an applicable margin ranging from 1.35% to 1.975% based on our leverage ratio for one-month interest periods and three-month interest periods, inclusive of a 0.10% SOFR adjustment. Borrowings under the Credit Agreement are secured by all of the assets of the Borrowers and guaranteed by certain other subsidiaries of the Borrowers.
The Credit Agreement requires us to maintain a minimum interest coverage ratio of 3.00 to 1.00, and a maximum leverage ratio of 3.25 to 1.00 (subject to adjustment in certain circumstances). The Credit Agreement permits, among other things, (i) stock repurchases subject to certain restrictions, including after giving effect to such stock repurchases, the maximum leverage ratio does not exceed certain levels; and (ii) certain acquisitions so long as there is borrowing availability under the Credit Agreement of at least $40.0 million. As of June 30, 2026, we were in compliance with all financial covenants under the Credit Agreement.
As of June 30, 2026, the total commitments available from the lenders under the Revolving Facility were $1.0 billion. At June 30, 2026, we had $134.0 million in outstanding borrowings and $0.6 million in outstanding letters of credit under the Revolving Facility, which reduces amounts available for borrowing under the Revolving Facility. As of June 30, 2026, and December 31, 2025, we had $865.4 million and $937.4 million, respectively, of available borrowing capacity under the Revolving Facility, which matures in November 2027.
Term Loan B Facility
On February 17, 2022, the Company entered into a credit agreement (the "Original Term Loan B Credit Agreement") with Citibank, N.A., as administrative agent and lender, which was amended on August 8, 2023, (the "August 2023 Amendment") and on February 13, 2024 (the "February 2024 Amendment"). The Original Term Loan B Credit Agreement, as amended by the August 2023 Amendment and the February 2024 Amendment, is referred to herein as the "Term Loan B Credit Agreement."
The Original Term Loan B Credit Agreement provided for an aggregate term loan B facility in the principal amount of $2.0 billion. Prior to the February 2024 Amendment, the outstanding balance was $820.0 million. Among other things, the February 2024 Amendment provided for a new $820.0 million tranche of term loans (the "2024 Refinancing Term Loans" and, such facility, the "Term Loan B Facility"), to refinance the then-outstanding principal balance. The 2024 Refinancing Term Loans are secured by substantially all of the Company's and each subsidiary guarantor's assets on a pari passu basis with their obligations arising from the Term Loan B Credit Agreement and is scheduled to mature on February 17, 2029, subject to certain exceptions set forth in the Term Loan B Credit Agreement. Additionally, subject to certain conditions, including, without limitation, satisfying certain leverage ratios, the Company may, at any time, on one or more occasions, add one or more new classes of term facilities and/or increase the principal amount of the loans of any existing class by requesting one or more incremental term facilities.
Pursuant to the reduced interest rate margins applicable to the 2024 Refinancing Term Loans, each term loan borrowing which is an alternate base rate borrowing bears interest at a rate per annum equal to the Alternate Base Rate (as defined in the Term Loan B Credit Agreement), plus 1.25%. Each term loan borrowing which is a term SOFR borrowing bears interest at a rate per annum equal to the Adjusted Term SOFR Rate (as defined in the Term Loan B Credit Agreement) plus 2.25%.
As of June 30, 2026, the Term Loan B Facility was fully drawn with no remaining borrowing capacity, and we had $500.0 million in outstanding principal on the Term Loan B Facility.
The Term Loan B Credit Agreement also contains customary affirmative and negative covenants, incurrence financial covenants, representations and warranties, events of default and other provisions. As of June 30, 2026, we were in compliance with all financial covenants under the Term Loan B Credit Agreement.
Asia Revolving Credit Facility
During the six months ended June 30, 2026, we had one revolving credit facility in Asia with Citibank (China) Company Limited, Shanghai Branch (the "Citibank Facility"), which, as amended, provides up to an equivalent of $15.0 million.
As of June 30, 2026, and December 31, 2025, we had no borrowings outstanding on the Citibank Facility.
Senior Notes Issuances
In March 2021, the Company completed the issuance and sale of $350.0 million aggregate principal amount of 4.250% Senior Notes due March 15, 2029 (the "2029 Notes"), pursuant to the indenture related thereto (as amended and/or supplemented to date, the "2029 Notes Indenture"). Additionally, in August 2021, the Company completed the issuance and sale of $350.0 million aggregate principal amount of 4.125% Senior Notes due August 15, 2031 (the "2031 Notes"), pursuant to the indenture related thereto (as amended and/or supplemented to date, "the 2031 Notes Indenture" and, together with the 2029 Notes Indenture, the "Indentures" and, each, an "Indenture"). Interest on each of the 2029 Notes and the 2031 Notes (collectively, the "Notes") is payable semi-annually.
The Company has the option to redeem all or any portion of the 2029 Notes, at once or over time, at any time on or after March 15, 2024, at a redemption price equal to 100% of the principal amount thereof, plus a premium declining ratably on an annual basis to par and accrued and unpaid interest, if any, to, but excluding, the date of redemption. The Company also had the option to redeem some or all of the 2029 Notes at any time before March 15, 2024, at a redemption price of 100% of the principal amount to be redeemed, plus a "make-whole" premium and accrued and unpaid interest, if any, to, but excluding, the date of redemption. In addition, at any time before March 15, 2024, the Company could have redeemed up to 40% of the aggregate principal amount of the 2029 Notes at a redemption price of 104.250% of the principal amount with the proceeds from certain equity issuances, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
The Company will have the option to redeem all or any portion of the 2031 Notes, at once or over time, at any time on or after August 15, 2026, at a redemption price equal to 100% of the principal amount thereof, plus a premium declining ratably on an annual basis to par and accrued and unpaid interest, if any, to, but excluding, the date of redemption. The Company will also have the option to redeem some or all of the 2031 Notes at any time before August 15, 2026, at a redemption price of 100% of the principal amount to be redeemed, plus a "make-whole" premium and accrued and unpaid interest, if any, to, but excluding, the date of redemption. In addition, at any time before August 15, 2024, the Company could have redeemed up to 40% of the aggregate principal amount of the 2031 Notes at a redemption price of 104.125% of the principal amount with the proceeds from certain equity issuances, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
The Notes rank pari passu in right of payment with all of the Company's existing and future senior debt, including the Credit Agreement, and are senior in right of payment to any of the Company's future debt that is, by its term, expressly subordinated in right of payment to the Notes. The Notes are unconditionally guaranteed by each of the Company's restricted subsidiaries that is a borrower or guarantor under the Credit Agreement and by each of the Company's wholly-owned restricted subsidiaries that guarantees any debt of the Company or any guarantor under any syndicated credit facility or capital markets debt in an aggregate principal amount in excess of $25.0 million.
The Indentures contain covenants that, among other things, limit the ability of the Company and its restricted subsidiaries to incur additional debt or issue certain preferred stock; pay dividends or repurchase or redeem capital stock or make other restricted payments; declare or pay dividends or other payments; incur liens; enter into certain types of transactions with the Company's affiliates; and consolidate or merge with or into other companies. As of June 30, 2026, we were in compliance with all financial covenants under the Notes.
Cash Flows
Six Months Ended June 30, $ Change % Change
2026 2025 Favorable (Unfavorable)
(in thousands)
Cash provided by operating activities
$ 270,768 $ 218,565 $ 52,203 23.9 %
Cash used in investing activities
(38,729) (31,946) (6,783) (21.2) %
Cash used in financing activities
(187,395) (173,241) (14,154) (8.2) %
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(4,724) 7,125 (11,849) (166.3) %
Net change in cash, cash equivalents, and restricted cash
$ 39,920 $ 20,503 $ 19,417 94.7 %
Operating Activities. Cash provided by operating activities consists of net income adjusted for non-cash items and changes in working capital. Cash provided by operating activities increased $52.2 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, driven by net increases in cash related to changes in operating assets and liabilities of $112.4 million, primarily due to the change in inventories, accrued expenses, and other liabilities, and income taxes, partially offset by a decrease in net income, adjusted for non-cash items, of $60.2 million.
Investing Activities. There was a $6.8 million increase in cash used in investing activities for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, due to an increase in purchases of property, equipment, and software.
Financing Activities. Cash used in financing activities increased by $14.2 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase in cash used in financing activities was primarily due to an increase of $62.0 million in repurchases of common stock. The overall increase was partially offset by a net increase in proceeds from borrowings of $47.0 million and other decreases in cash used of $0.8 million.
Contractual Obligations
There have been no significant changes to the contractual obligations reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, other than borrowings and repayments on the Revolving Facility.
Off-Balance Sheet Arrangements
We had no material off-balance sheet arrangements as of June 30, 2026, other than certain purchase commitments, which are described in Note 13 - Commitments and Contingencies in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales, and expenses, and related disclosure of contingent assets and liabilities. We evaluate our assumptions and estimates on an on-going basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Impairment of Goodwill and Indefinite-Lived Intangible Assets
We evaluate the carrying value of our indefinite-lived intangible assets and goodwill at least annually or when an interim triggering event has occurred indicating potential impairment. During the six months ended June 30, 2026, there were no triggering events for the HEYDUDE Brand indefinite-lived intangible assets (which consists solely of the HEYDUDE trademark) (the "trademark") and the HEYDUDE Brand reporting unit (the "reporting unit") goodwill. Certain factors, such as failure to achieve forecasted revenue growth rates, EBITDA, or increases in the discount rates, have the potential to create variances in the estimated fair values of our goodwill and indefinite-lived intangible assets that could result in impairment charges in future periods.
For a complete discussion of our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2025, and Note 1 - Basis of Presentation and Summary of Significant Accounting Policies in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q. There have been no other significant changes in our critical accounting policies or their application since December 31, 2025.
Recent Accounting Pronouncements
See Note 2 - Recent Accounting Pronouncements in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q for a description of recently adopted accounting pronouncements and issued accounting pronouncements that we believe may have an impact on our condensed consolidated financial statements when adopted.
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