Crocs, Inc. (CROX)

ITEM 2. 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

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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.

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Results of Operations

(1) Changes for gross margin and operating margin are shown in basis points (“bp”).

Revenues By Channel

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

Crocs, Inc. and its 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. The vast majority of shoes within the Crocs Brand’s collection contain Croslite™ material, a proprietary, molded footwear technology, delivering extraordinary comfort with each step. The HEYDUDE Brand provides an innovative loafer concept that is differentiated through easy on and off, quality, and comfort. The broad appeal of our footwear has allowed us to market our products through a wide range of distribution channels. We currently sell our products in more than 85 countries, through two distribution channels: wholesale and direct-to-consumer. Our wholesale channel includes domestic and international multi-brand retailers, mono-branded partner stores, e-tailers, and distributors; our direct-to-consumer channel includes company-operated retail stores, company-operated e-commerce sites, and third-party marketplaces.

Known or Anticipated Trends

Based on our recent operating results and our assessment of the current operating environment, we anticipate certain trends will continue to impact our future 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. The United States (“U.S.”) has imposed tariffs on foreign imports from multiple countries, including, most relevant to us, an incremental tariff of 20%, 20%, 19%, 18%, 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 are continuing 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. Refer to the risk factor under “Risks Related to International Operations — Government actions and regulations, such as export restrictions, tariffs, and other trade protection measures could adversely affect our business” included in Item 1A. Risk Factors of this Annual Report on Form 10-K for additional information.

•We have taken cost saving actions across the business that are designed to simplify the organization and reduce our cost base. These cost reduction initiatives include approximately $50 million of gross cost savings achieved for the year ended December 31, 2025, and approximately $100 million of gross cost savings identified for 2026. In connection with these initiatives, we incurred charges of just over $14 million during the year ended December 31, 2025, primarily related to operational workforce reductions. The estimates of the duration of these initiatives, the charges and expenditures that we expect to incur in connection therewith, and the timing thereof, are subject to a number of assumptions and actual amounts may differ materially from estimates. In addition, we may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of these initiatives.

•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. For both brands, scaling digital capabilities continues to be a priority.

•Our liquidity position remains strong with approximately $130.4 million in cash and cash equivalents and $952 million in available borrowing capacity as of December 31, 2025. Our total borrowings were $1.2 billion as of December 31, 2025. We repurchased $577.2 million of our common stock during the year.

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

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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 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, operating margin, footwear unit sales, and average footwear selling price 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.

Footwear Unit Sales

Footwear unit sales is defined as wholesale and DTC footwear only sales. Management uses this metric and believes it is useful for investors because it provides a direct measure of our sales volume and can offer valuable insights into its market performance and growth potential.

Average Footwear Selling Price

Average footwear selling price is defined as footwear and footwear accessories revenues divided by footwear units. Management uses this metric and believes it is useful for investors because it provides insights into our pricing strategy, market positioning, and revenue generation capabilities.

2025 Financial and Operational Highlights

Revenues were $4,040.6 million for the year ended December 31, 2025, a 1.5% decrease compared to the year ended December 31, 2024. The decrease was due to the net effects of: (i) lower unit sales volume in the HEYDUDE Brand, which decreased revenues by $87.4 million, or 2.1%; (ii) higher average selling price on a constant currency basis (“ASP”) driven by the HEYDUDE Brand, which increased revenues by $16.5 million, or 0.4%; and (iii) net favorable changes in exchange rates, which increased revenues by $9.4 million, or 0.2%.

The following were significant developments affecting our businesses during the year ended December 31, 2025:

•We grew Crocs Brand revenues 1.5% compared to the same period in 2024. HEYDUDE Brand revenues decreased 13.3%.

•Gross margin was 58.3% compared to 58.8% in 2024, a decrease of 50 basis points, primarily due to unfavorable duties for both brands as a result of the aforementioned incremental tariffs.

•Selling, general & administrative expenses (“SG&A”) were $1,469.4 million compared to $1,364.3 million 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 36.4% of revenues compared to 33.3% in 2024.

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•Asset impairments were $738.1 million, primarily driven by the partial impairment of the HEYDUDE indefinite-lived trademark and HEYDUDE Brand reporting unit goodwill. Refer to Note 4 — Goodwill and Intangible Assets, Net in the accompanying notes to the consolidated financial statements included in Part II - Item 8. Financial Statements of this Annual Report on Form 10-K.

•Income from operations was $149.5 million for the year ended December 31, 2025, compared to income from operations of $1,021.9 million for the year ended December 31, 2024. Net loss was $81.2 million, or $1.50 per diluted share, compared to net income of $950.1 million, or $15.88 per diluted share, in 2024.

Results of Operations

Comparison of the Years Ended December 31, 2025, and 2024

A discussion of our comparison between 2025 and 2024 is presented below. A discussion of the changes in our results of operations between the years ended December 31, 2024, and December 31, 2023, has been omitted from this Annual Report on Form 10-K but may be found in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 13, 2025, which is available free of charge on the SEC’s website at www.sec.gov and our corporate website (www.crocs.com).

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