Crocs Inc.
10/30/2025 | Press release | Distributed by Public on 10/30/2025 12:39
Quarterly Report for Quarter Ending September 30, 2025 (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 increased across the globe. In 2025, the United States ("U.S.") has imposed tariffs on foreign imports from multiple countries, including, most relevant to us, a total tariff of 20%, 30%, 19%, 50%, and 19% on all imports from Vietnam, China, Indonesia, India, and Cambodia, respectively. We are continuing to monitor developments with respect to these policy changes and proposals. We have begun to mitigate the potential impacts of tariffs and the resulting effect on the consumer, including diversifying our sourcing mix, refining our cost structure, and implementing select price increases. See the risk factor under "Government actions and regulations, such as export restrictions, tariffs, and other trade protection measures could adversely affect our business" in the section entitled "Risk Factors" under Item 1A in this report for additional information. For the Crocs Brand, we continued reducing promotional activity in North America, primarily in our digital DTC channel, during the three months ended September 30, 2025, in an effort to protect brand health and profitability. For the HEYDUDE Brand, we continued right-sizing the inventory in our wholesale channel, including accelerating returns, in an effort to elevate our brand presentation in the channel and establishing a foundation for future growth.
•We are prioritizing returning to 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, growth within our sandals business, and ultimately prioritizing stricter segmentation and pricing discipline across the marketplace. For the HEYDUDE Brand, we are focused on refining our marketing toward our target consumers, focusing on our core product offering, and refreshing the marketplace.
•Our liquidity position remains strong with $154.0 million in cash and cash equivalents and $862.4 million in available borrowing capacity as of September 30, 2025. Our total borrowings were $1.3 billion as of September 30, 2025. We repurchased $202.9 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.
Third Quarter 2025 Financial and Operational Highlights
Revenues were $996.3 million for the third quarter of 2025, a 6.2% decrease compared to the third quarter of 2024. The decrease was due to the net effects of: (i) lower unit sales volume in both brands, which resulted in a decrease in revenues of $116.6 million, or 11.0%; (ii) higher average selling price on a constant currency basis ("ASP") driven by both brands, which increased revenues by $44.8 million, or 4.2%; and (iii) net favorable changes in exchange rates, which increased revenues by $5.9 million, or 0.6%.
The following were significant developments affecting our businesses and capital structure during the three months ended September 30, 2025:
•Crocs Brand revenues decreased by 2.5%, or 3.2% on a constant currency basis, compared to the same period in 2024. HEYDUDE Brand revenues decreased 21.6%, or 21.7% on a constant currency basis.
•Gross margin was 58.5%, a decrease of 110 basis points from last year's third quarter, primarily due to unfavorable duties for both brands as a result of the aforementioned incremental tariffs.
•Selling, general and administrative expenses ("SG&A") were $375.3 million compared to $363.5 million in the third quarter of 2024, primarily as a result of increased investment in talent and higher costs in the DTC channel. As a percent of revenues, SG&A increased to 37.7% of revenues compared to 34.2% of revenues in the third quarter of 2024.
•Income from operations decreased to $207.7 million from $269.8 million in last year's third quarter. Net income was $145.8 million, or $2.70 per diluted share, compared to $199.8 million, or $3.36 per diluted share, in last year's third quarter.
Results of Operations
| Three Months Ended September 30, | Nine Months Ended September 30, |
% Change Favorable (Unfavorable) |
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| 2025 | 2024 | 2025 | 2024 |
Q3 2025-2024
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YTD 2025-2024
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| (in thousands, except per share, margin, and average selling price data) | |||||||||||||||||||||||||||||||||||
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Revenues
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$ | 996,301 | $ | 1,062,200 | $ | 3,083,007 | $ | 3,112,335 | (6.2) | % | (0.9) | % | |||||||||||||||||||||||
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Cost of sales
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413,293 | 428,861 | 1,249,614 | 1,275,003 | 3.6 | % | 2.0 | % | |||||||||||||||||||||||||||
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Gross profit
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583,008 | 633,339 | 1,833,393 | 1,837,332 | (7.9) | % | (0.2) | % | |||||||||||||||||||||||||||
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Selling, general and administrative expenses
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375,348 | 363,510 | 1,092,160 | 991,255 | (3.3) | % | (10.2) | % | |||||||||||||||||||||||||||
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Goodwill impairment
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- | - | 307,000 | - | - | % | (100.0) | % | |||||||||||||||||||||||||||
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Asset impairments
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- | - | 431,115 | 24,081 | - | % | (1,690.3) | % | |||||||||||||||||||||||||||
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Income from operations
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207,660 | 269,829 | 3,118 | 821,996 | (23.0) | % | (99.6) | % | |||||||||||||||||||||||||||
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Foreign currency gains (losses), net
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2,957 | (332) | 8,264 | (3,928) | 990.7 | % | 310.4 | % | |||||||||||||||||||||||||||
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Interest income
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531 | 1,366 | 1,235 | 2,908 | (61.1) | % | (57.5) | % | |||||||||||||||||||||||||||
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Interest expense
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(21,711) | (26,203) | (67,000) | (85,927) | 17.1 | % | 22.0 | % | |||||||||||||||||||||||||||
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Other income (expense), net
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(9) | 237 | 143 | 302 | (103.8) | % | (52.6) | % | |||||||||||||||||||||||||||
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Income (loss) before income taxes
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189,428 | 244,897 | (54,240) | 735,351 | (22.6) | % | (107.4) | % | |||||||||||||||||||||||||||
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Income tax expense
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43,612 | 45,096 | 132,123 | 154,189 | 3.3 | % | 14.3 | % | |||||||||||||||||||||||||||
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Net income (loss)
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$ | 145,816 | $ | 199,801 | $ | (186,363) | $ | 581,162 | (27.0) | % | (132.1) | % | |||||||||||||||||||||||
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Net income (loss) per common share:
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Basic
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$ | 2.72 | $ | 3.38 | $ | (3.38) | $ | 9.69 | (19.5) | % | (134.9) | % | |||||||||||||||||||||||
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Diluted
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$ | 2.70 | $ | 3.36 | $ | (3.38) | $ | 9.62 | (19.6) | % | (135.1) | % | |||||||||||||||||||||||
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Gross margin (1)
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58.5 | % | 59.6 | % | 59.5 | % | 59.0 | % | (110) | bp | 50 | bp | |||||||||||||||||||||||
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Operating margin(1)
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20.8 | % | 25.4 | % | 0.1 | % | 26.4 | % | (460) | bp | (2,630) | bp | |||||||||||||||||||||||
(1)Changes for gross margin and operating margin are shown in basis points ("bp").
Revenues By Channel
| Three Months Ended September 30, | Nine Months Ended September 30, | % Change |
Constant Currency % Change (1)
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| Favorable (Unfavorable) | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 |
Q3 2025-2024
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YTD 2025-2024
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Q3 2025-2024
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YTD 2025-2024
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| (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Crocs Brand: | |||||||||||||||||||||||||||||||||||||||||||||||
| Wholesale | $ | 364,356 | $ | 395,564 | $ | 1,305,839 | $ | 1,292,847 | (7.9) | % | 1.0 | % | (8.4) | % | 1.3 | % | |||||||||||||||||||||||||||||||
| Direct-to-consumer | 471,873 | 462,534 | 1,251,588 | 1,223,056 | 2.0 | % | 2.3 | % | 1.2 | % | 2.1 | % | |||||||||||||||||||||||||||||||||||
| Total Crocs Brand | 836,229 | 858,098 | 2,557,427 | 2,515,903 | (2.5) | % | 1.7 | % | (3.2) | % | 1.7 | % | |||||||||||||||||||||||||||||||||||
| HEYDUDE Brand: | |||||||||||||||||||||||||||||||||||||||||||||||
| Wholesale | 69,402 | 113,018 | 279,855 | 361,600 | (38.6) | % | (22.6) | % | (38.7) | % | (22.6) | % | |||||||||||||||||||||||||||||||||||
| Direct-to-consumer | 90,670 | 91,084 | 245,725 | 234,832 | (0.5) | % | 4.6 | % | (0.7) | % | 4.5 | % | |||||||||||||||||||||||||||||||||||
| Total HEYDUDE Brand | 160,072 | 204,102 | 525,580 | 596,432 | (21.6) | % | (11.9) | % | (21.7) | % | (11.9) | % | |||||||||||||||||||||||||||||||||||
| Total consolidated revenues | $ | 996,301 | $ | 1,062,200 | $ | 3,083,007 | $ | 3,112,335 | (6.2) | % | (0.9) | % | (6.8) | % | (0.9) | % | |||||||||||||||||||||||||||||||
(1)Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" above for more information.
Revenues.In the three months ended September 30, 2025, revenues decreased compared to the same period in 2024, primarily due to lower volume of $116.6 million, or 11.0%, driven by both brands. The overall decrease in revenues was partially offset by higher ASP of $44.8 million, or 4.2%, driven by favorable channel mix in both brands and reduced discounting for the
HEYDUDE Brand. Net favorable foreign currency fluctuations of $5.9 million, or 0.6%, primarily in the Euro, also increased revenues.
Revenues also decreased in the nine months ended September 30, 2025, primarily due to lower volume of $36.6 million, or 1.2%, driven by the HEYDUDE Brand, partially offset by higher volume in the Crocs Brand. The overall decrease in revenues was partially offset by higher ASP of $8.2 million, or 0.3%, mainly due to favorable channel mix in both brands and reduced discounting in the HEYDUDE Brand. This was offset in part by unfavorable product mix in both brands and increased discounting in the Crocs Brand.
Gross margin.Gross margin decreased in the three months ended September 30, 2025, to 58.5% compared to 59.6% in the same period in 2024, primarily due to incremental duties of 230 basis points and higher distribution and logistics costs of 80 basis points, partially offset by lower product costs of 60 basis points, favorable brand mix of 50 basis points, and higher ASP in the HEYDUDE brand of 50 basis points.
Gross margin in the nine months ended September 30, 2025, was 59.5% compared to 59.0% in 2024. This was primarily driven by lower product costs of 50 basis points, favorable brand mix of 30 basis points, and favorable customer mix of 30 basis points in the Crocs Brand, partially offset by unfavorable duties of 70 basis points.
Selling, general and administrative expenses. SG&A increased $11.8 million, or 3.3%, in the three months ended September 30, 2025, compared to the same period in 2024, driven by increased investment in talent of $17.6 million, higher DTC costs, driven by investment in the channel, of $9.4 million, reduced marketing costs, primarily in variable marketing, of $6.2 million, lower professional services fees, including consulting, of $5.0 million, and net decreases in other costs of $4.0 million.
SG&A expenses increased $100.9 million, or 10.2%, during the nine months ended September 30, 2025, compared to the same period in 2024, primarily driven by increased investment in talent and marketing of $52.4 million and $18.0 million, respectively, higher DTC costs, including investment in the channel and variable costs, of $33.0 million, and net decreases in other costs of $2.5 million.
Goodwill and Asset impairments. In the three months ended September 30, 2025 and 2024, there were no asset impairments. Asset impairments increased $714.0 million during the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to non-cash impairment charges in the current year of $430.0 million related to the indefinite-lived HEYDUDE trademark and $307.0 million for HEYDUDE Brand reporting unit goodwill. The increase in asset impairments was partially offset by prior year non-cash impairment charges of $18.2 million for information technology systems related to the HEYDUDE integration, $5.5 million for our former HEYDUDE Brand warehouses in Las Vegas, Nevada, and $0.4 million for our former Crocs Brand warehouse in Oudenbosch, the Netherlands, none of which recurred in the current year. 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 gains (losses), net.Foreign currency gains (losses), 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 September 30, 2025, we recognized realized and unrealized net foreign currency gains of $3.0 million compared to losses of $0.3 million during the three months ended September 30, 2024.
During the nine months ended September 30, 2025, we recognized realized and unrealized net foreign currency gains of $8.3 million compared to losses of $3.9 million during the nine months ended September 30, 2024.
Interest expense.Interest expense during the three months ended September 30, 2025, decreased $4.5 million, or 17.1%, compared to the three months ended September 30, 2024. Interest expense during the nine months ended September 30, 2025, decreased $18.9 million, or 22.0%, compared to the nine months ended September 30, 2024. The decrease in interest expense for the three and nine months ended September 30, 2025, 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 September 30, 2025, income tax expense decreased $1.5 million compared to the same period in 2024. The effective tax rate for the three months ended September 30, 2025, was 23.0% compared to an effective tax rate of 18.4% for the same period in 2024, a 4.6% increase. This increase in the effective tax rate was primarily driven by a shift in the mix of our domestic and foreign earnings. 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 nine months ended September 30, 2025, income tax expense decreased $22.1 million compared to the same period in 2024. The effective tax rate for the nine months ended September 30, 2025, was (243.6)% compared to an effective tax rate of 21.0% for the same period in 2024, a 264.6% decrease. The effective tax rate was impacted by the HEYDUDE impairments in 2025, as described above, which are not deductible for tax purposes. As a result of a prior year intra-entity transaction, the value of the intellectual property for tax purposes is subject to revaluation and therefore there are not similar impacts for tax as a result of the intellectual property impairment. Our effective income tax rate, for each period presented, also differs from the federal U.S. statutory rate due to differences in income tax rates between U.S. and foreign jurisdictions.
Reportable Operating Segments
The following table sets forth information related to our reportable operating segments, including a comparison of revenues and operating income by segment:
| Three Months Ended September 30, | Nine Months Ended September 30, | % Change |
Constant Currency
% Change (1)
|
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| Favorable (Unfavorable) | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 |
Q3 2025-2024
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YTD 2025-2024
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Q3 2025-2024
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YTD 2025-2024
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| (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||||||||||||||
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Crocs Brand revenues
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$ | 836,229 | $ | 858,098 | $ | 2,557,427 | $ | 2,515,903 | (2.5) | % | 1.7 | % | (3.2) | % | 1.7 | % | |||||||||||||||||||||||||||||||
| HEYDUDE Brand revenues | 160,072 | 204,102 | 525,580 | 596,432 | (21.6) | % | (11.9) | % | (21.7) | % | (11.9) | % | |||||||||||||||||||||||||||||||||||
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Total consolidated revenues
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$ | 996,301 | $ | 1,062,200 | $ | 3,083,007 | $ | 3,112,335 | (6.2) | % | (0.9) | % | (6.8) | % | (0.9) | % | |||||||||||||||||||||||||||||||
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Income (loss) from operations:
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Crocs Brand income from operations
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$ | 272,719 | $ | 313,264 | $ | 904,718 | $ | 932,921 | (12.9) | % | (3.0) | % | (12.8) | % | (2.5) | % | |||||||||||||||||||||||||||||||
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HEYDUDE Brand income (loss) from operations
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6,750 | 26,191 | (675,952) | 108,704 | (74.2) | % | (721.8) | % | (73.2) | % | (721.5) | % | |||||||||||||||||||||||||||||||||||
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Enterprise corporate
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(71,809) | (69,626) | (225,648) | (219,629) | (3.1) | % | (2.7) | % | (3.0) | % | (2.7) | % | |||||||||||||||||||||||||||||||||||
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Total consolidated income (loss) from operations
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$ | 207,660 | $ | 269,829 | $ | 3,118 | $ | 821,996 | (23.0) | % | (99.6) | % | (22.7) | % | (98.9) | % | |||||||||||||||||||||||||||||||
(1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" for more information.
Crocs Brand
Revenues.Crocs Brand revenues decreased in the three months ended September 30, 2025, compared to the same period in 2024, primarily due to lower volume. The overall decrease was partially offset by higher ASP, driven by favorable channel mix. Net favorable foreign currency fluctuations, primarily in the Euro, also increased revenues.
The increase in Crocs Brand revenues in the nine months ended September 30, 2025, compared to the same period in 2024 was due to higher volume. The overall increase in Crocs Brand revenues was offset in part by lower ASP, mainly due to unfavorable product mix and increased discounting, partially offset by favorable channel mix.
Income from Operations.Income from operations for our Crocs Brand segment was $272.7 million for the three months ended September 30, 2025, a decrease of $40.5 million, or 12.9%, compared to the same period in 2024. Gross margin was 61.8%, a decrease of 70 basis points, primarily due to unfavorable duties, partially offset by lower product costs.
SG&A for our Crocs Brand segment increased $21.1 million, or 9.5%, during the three months ended September 30, 2025, compared to the same period in 2024. This increase was primarily due to higher costs in the DTC channel, including investment in the channel and variable costs, and increased investments in talent and marketing.
During the nine months ended September 30, 2025, income from operations for our Crocs Brand was $904.7 million, a decrease of $28.2 million, or 3.0%, compared to the same period in 2024. Gross margin was 62.3%, an increase of 50 basis points, primarily due to lower product costs and favorable customer mix, partially offset by unfavorable duties.
SG&A, including asset impairments, for our Crocs Brand increased $67.4 million, or 10.8%, during the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to higher costs in the DTC channel, including investment in the channel and variable costs, and increased investments in talent and marketing.
HEYDUDE Brand
Revenues. For the three months ended September 30, 2025, HEYDUDE Brand revenues decreased compared to the same period in 2024, primarily due to lower volume. The overall decrease in revenues was partially offset by higher ASP, primarily due to favorable channel mix as we expand our retail footprint and reduced discounting.
During the nine months ended September 30, 2025, revenues decreased compared to the same period in 2024, 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, slightly offset by unfavorable product mix.
Income (Loss) from Operations. Income from operations for the HEYDUDE segment was $6.8 million for the three months ended September 30, 2025, a decrease of $19.4 million, or 74.2%, compared to income from operations in the same period in 2024. Gross margin was 42.3%, a decrease of 560 basis points, primarily due to unfavorable duties and higher distribution and logistics costs, partially offset by higher ASP.
SG&A for the HEYDUDE Brand segment decreased $10.6 million, or 14.8%, during the three months ended September 30, 2025, compared to the same period in 2024. This decrease was primarily due to reduced marketing costs, primarily in variable marketing.
Loss from operations for the HEYDUDE segment was $676.0 million for the nine months ended September 30, 2025, a decrease of $784.7 million, or 721.8%, compared to income from operations in the same period in 2024. Gross margin was 46.6%, a decrease of 110 basis points, primarily due to unfavorable duties and unfavorable channel mix.
SG&A, including asset impairments, for the HEYDUDE Brand segment increased $744.9 million, or 423.4%, during the nine months ended September 30, 2025, compared to the same period in 2024. This is primarily due to the partial impairment of the indefinite-lived HEYDUDE trademark and HEYDUDE Brand reporting unit goodwill, as discussed above, which was partially offset by prior year impairments costs of the right-of-use assets for our former HEYDUDE Brand warehouses in Las Vegas, Nevada, that did not recur in the current year. SG&A also increased overall for the HEYDUDE Brand due to higher costs in the DTC channel, including investment in the channel and variable costs.
Enterprise Corporate
During the three months ended September 30, 2025, total net costs within 'Enterprise corporate' increased $2.2 million, or 3.1%, compared to the same period in 2024. This increase was primarily due to an increased investment in talent and higher information technology costs, partially offset by lower professional services fees, including consulting.
During the nine months ended September 30, 2025, total net costs within 'Enterprise corporate' increased $6.0 million, or 2.7%, compared to the same period in 2024. This was primarily due to an increased investment in talent and higher information technology costs, partially offset by a prior year non-cash impairment charge for information technology systems related to the HEYDUDE integration that did not recur in the current year.
Store Locations
As of September 30, 2025, we had 427 company-operated retail locations for the Crocs Brand, inclusive of 199 retail locations in North America and 228 retail locations internationally. As of September 30, 2025, we had 75 company-operated retail locations for the HEYDUDE Brand. As of September 30, 2024, we had 372 company-operated retail locations for the Crocs Brand, inclusive of 173 retail locations in North America and 199 retail locations internationally. As of September 30, 2024, we had 43 company-operated retail locations for the HEYDUDE Brand.
Financial Condition, Capital Resources, and Liquidity
Liquidity
Our liquidity position as of September 30, 2025, was:
| September 30, 2025 | |||||
| (in thousands) | |||||
| Cash and cash equivalents | $ | 153,970 | |||
| Available borrowings | 862,416 | ||||
As of September 30, 2025, we had $154.0 million in cash and cash equivalents and up to $862.4 million of available borrowings, including $847.4 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 September 30, 2025, 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.
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 September 30, 2025, 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 September 30, 2025, we held $152.2 million of our total $154.0 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 $152.2 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 required or requires, as applicable, us to maintain a minimum interest coverage ratio of 3.00 to 1.00, and a maximum leverage ratio of (i) 4.00 to 1.00 from the quarter ended March 31, 2022, through, and including, the quarter ended December 31, 2023, (ii) 3.75 to 1.00 for the quarter ended March 31, 2024, (iii) 3.50 to 1.00 for the quarter ended June 30, 2024, and (iv) 3.25 to 1.00 for the quarter ended September 30, 2024, and thereafter (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 September 30, 2025, we were in compliance with all financial covenants under the Credit Agreement.
As of September 30, 2025, the total commitments available from the lenders under the Revolving Facility were $1.0 billion. At September 30, 2025, we had $152.0 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 September 30, 2025, and December 31, 2024, we had $847.4 million and $809.4 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, to among other things, finance a portion of the cash consideration for the HEYDUDE acquisition, 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 September 30, 2025, 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, which matures on February 17, 2029.
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 September 30, 2025, we were in compliance with all financial covenants under the Term Loan B Credit Agreement.
Asia Revolving Credit Facility
During the nine months ended September 30, 2025, 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 September 30, 2025 and December 31, 2024, 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 had or will have, as applicable, 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 September 30, 2025, we were in compliance with all financial covenants under the Notes.
Cash Flows
| Nine Months Ended September 30, | $ Change | % Change | |||||||||||||||||||||
| 2025 | 2024 | Favorable (Unfavorable) | |||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
|
Cash provided by operating activities
|
$ | 457,901 | $ | 670,549 | $ | (212,648) | (31.7) | % | |||||||||||||||
|
Cash used in investing activities
|
(45,120) | (50,857) | 5,737 | 11.3 | % | ||||||||||||||||||
|
Cash used in financing activities
|
(444,398) | (583,673) | 139,275 | 23.9 | % | ||||||||||||||||||
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
5,462 | 429 | 5,033 | 1,173.2 | % | ||||||||||||||||||
|
Net change in cash, cash equivalents, and restricted cash
|
$ | (26,155) | $ | 36,448 | $ | (62,603) | (171.8) | % | |||||||||||||||
Operating Activities. Cash provided by operating activities consists of net income (loss) adjusted for non-cash items and changes in working capital. Cash provided by operating activities decreased $212.6 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, driven by decreases in operating assets and liabilities of $181.1 million, primarily due to the change in income taxes and a larger increase in inventory units compared to the prior period, as well as higher unit cost as a result of incremental duties. Additionally, lower net income (loss), adjusted for non-cash items, of $31.5 million contributed to the decrease.
Investing Activities.There was a $5.7 million decrease in cash used in investing activities for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. This was due to a decrease in purchases of property, equipment, and software.
Financing Activities.Cash used in financing activities decreased by $139.3 million in the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The decrease in cash used in financing activities was primarily
due to a decrease in repayments, net of borrowings, of $210.2 million. There were other decreases in cash used of $5.1 million. The overall decrease in cash used in financing activities was partially offset by an increase of $76.0 million in repurchases of common stock, including excise tax.
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, 2024, other than borrowings and repayments on the Revolving Facility.
Off-Balance Sheet Arrangements
We had no material off-balance sheet arrangements as of September 30, 2025, 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 Statementsof 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 second quarter of the fiscal year ended 2025, there was a triggering event 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. The triggering event was due to downward revisions, during the second quarter of the fiscal year ended 2025, to our internal HEYDUDE Brand forecast as a result of the extended time we believed it would take us to stabilize the HEYDUDE Brand and return it to growth. This was partly due to the current and projected impact of a weak U.S. consumer and the disproportionate impact of tariffs on HEYDUDE Brand products, which became evident in the second quarter of the fiscal year ended 2025. As a result, we completed quantitative assessments for the trademark and the reporting unit goodwill in the second quarter of the fiscal year ended 2025, and recognized non-cash impairment charges of $430.0 million and $307.0 million, respectively. For more detailed information about our accounting conclusions and key assumptions used, 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.
Our goodwill balance as of September 30, 2025 and December 31, 2024, was $404.7 million and $711.5 million, respectively. As of September 30, 2025, a goodwill amount of $403.0 million was assigned to the HEYDUDE Brand segment.
Our impairment evaluations represent a critical accounting policy as they require significant judgments and assumptions that we believe to be reasonable but that are inherently uncertain and unpredictable. The primary assumptions developed by management and used in the quantitative assessments included annual revenue growth rates, averaging approximately 8% for both the trademark and reporting unit goodwill, projected earnings before interest, taxes, depreciation, and amortization ("EBITDA") margins, averaging approximately 20% for both the trademark and reporting unit goodwill, and a market-based discount rate of 15% for both the trademark and reporting unit goodwill, which was based on, most significantly, a risk-free rate of return, an equity market risk premium, and a company-specific risk premium. Changes in the assumptions used to estimate the fair value of our goodwill and indefinite-lived intangible assets could result in additional impairment charges in future periods as the key assumptions are inherently uncertain, require significant judgment and are subject to change based on, among others, industry and geopolitical conditions, our ability to navigate changing macroeconomic conditions and trends as well as the timing and success of strategic initiatives.
Certain factors, such as failure to achieve forecasted revenue growth rates, EBITDA margins, 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 additional impairment charges in future periods. Refer to the risk factor under "Government actions and regulations, such as export restrictions, tariffs, and other trade protection measures could adversely affect our business" in the section entitled "Risk Factors" under Item 1A in this report for additional information.
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, 2024, and Note 1 - Basis of Presentation and Summary of Significant Accounting Policies and 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. There have been no other significant changes in our critical accounting policies or their application since December 31, 2024, except as described above.
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 Statementsof 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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