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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended December 31, 2023
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-36436

DECKERS OUTDOOR CORPORATION
(Exact name of registrant as specified in its charter)

Delaware95-3015862
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

250 Coromar Drive, Goleta, California 93117
(Address of principal executive offices and zip code)
(805) 967-7611
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per shareDECKNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of the close of business on January 18, 2024, the number of outstanding shares of the registrant’s common stock, par value $0.01 per share, was 25,668,220.




DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
For the Three and Nine Months Ended December 31, 2023, and 2022

TABLE OF CONTENTS

Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.Defaults Upon Senior Securities*
Item 4.Mine Safety Disclosures*
Item 5.
Item 6.

*Not applicable.

1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-Q for our third fiscal quarter ended December 31, 2023 (Quarterly Report), and the information and documents incorporated by reference within this Quarterly Report, contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements other than statements of historical fact contained in, or incorporated by reference within, this Quarterly Report. We have attempted to identify forward-looking statements by using words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” or “would,” and similar expressions or the negative of these expressions. Specifically, this Quarterly Report, and the information and documents incorporated by reference within this Quarterly Report, contain forward-looking statements relating to, among other things:

the operational challenges faced by our warehouses and distribution centers (DCs), wholesale partners, global third-party logistics providers (3PLs), and third-party carriers, including as a result of global supply chain disruptions and labor shortages;
availability of materials and manufacturing capacity, and reliability of overseas production and storage;
global geopolitical tensions, including the impact of economic sanctions on our transportation and energy costs;
global economic trends, including foreign currency exchange rate fluctuations, changes in interest rates, inflationary pressures, changes in commodity pricing, and recessionary concerns;
the expansion of our brands and product offerings;
changes to the geographic and seasonal mix of our brands and products;
our plans to divest the Sanuk brand and the related terms and timing;
changes to our product distribution strategies, including product allocation and segmentation strategies;
trends impacting the purchasing behavior of wholesale partners and consumers;
changes in consumer preferences impacting our brands and products, and the footwear and fashion industries;
the impact of seasonality and weather on consumer behavior and the demand for our products;
our business, operating, investing, capital allocation, marketing, and financing plans and strategies;
expansion of and investments in our Direct-to-Consumer (DTC) capabilities, including our distribution facilities and e-commerce platforms;
the expansion of our retail store footprint;
the impacts of pandemics and incidence of disease on our business and the businesses of our customers, consumers, suppliers, and business partners;
the effects of climate change, including changes in the regulatory environment and consumer demand to mitigate these effects, and the resulting impact on our business;
the impact of our efforts to continue to advance sustainable and socially conscious business operations, and to meet the expectations our investors and other stakeholders have with respect to our environmental, social and governance practices;
our interpretation of global tax regulations and changes in tax laws that may impact our tax liability and effective tax rates;
our cash repatriation strategy regarding earnings of non-United States (US) subsidiaries and the resulting tax impacts;
the outcomes of legal proceedings, including the impact they may have on our business and intellectual property rights; and
the value of goodwill and other intangible assets, and potential write-downs or impairment charges.

Forward-looking statements represent management’s current expectations and predictions about trends affecting our business and industry and are based on information available at the time such statements are made. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy or completeness. Forward-looking statements involve numerous known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements predicted, assumed, or implied by the forward-looking statements. Some of the risks and uncertainties that may cause our actual results to materially differ from those expressed or implied by these forward-looking statements are described in Part II, Item 1A, “Risk Factors,” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” within this Quarterly Report, as well as in our other filings with the Securities and Exchange Commission (SEC). You should read this Quarterly Report, including the information and documents incorporated by reference herein, in its entirety and with the understanding that our actual future results may be materially different from the results expressed or implied by these forward-looking statements. Moreover, new risks and uncertainties emerge occasionally, and it is not possible for management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual future results to be materially different from any results expressed or implied by any forward-looking statements. Except as required by applicable law or the listing rules of the New York Stock Exchange, we expressly disclaim any intent or obligation to update any forward-looking statements. We qualify all our forward-looking statements with these cautionary statements.
2

PART I. FINANCIAL INFORMATION

References within this Quarterly Report to “Deckers,” “we,” “our,” “us,” “management,” or the “Company” refer to Deckers Outdoor Corporation, together with its consolidated subsidiaries. UGG® (UGG), HOKA® (HOKA), Teva® (Teva), Sanuk® (Sanuk), and Koolaburra by UGG® (Koolaburra) are some of the Company’s trademarks. Other trademarks or trade names appearing elsewhere within this Quarterly Report are the property of their respective owners. The trademarks and trade names within this Quarterly Report are referred to without the ® and ™ symbols, but such references should not be construed as any indication that their respective owners will not assert their rights to the fullest extent under applicable law.

Unless otherwise indicated, all figures herein are expressed in thousands, except for per share and share data.

3

ITEM 1. FINANCIAL STATEMENTS

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollar and share data amounts in thousands, except par value)

December 31, 2023March 31, 2023
ASSETS(AUDITED)
Cash and cash equivalents$1,650,802 $981,795 
Trade accounts receivable, net of allowances ($49,835 and $32,504 as of December 31, 2023, and March 31, 2023, respectively)
331,677 301,511 
Inventories538,963 532,852 
Prepaid expenses36,138 33,788 
Other current assets75,905 55,523 
Income tax receivable15,369 4,784 
Total current assets2,648,854 1,910,253 
Property and equipment, net of accumulated depreciation ($348,875 and $317,508 as of December 31, 2023, and March 31, 2023, respectively) (Note 11)
300,815 266,679 
Operating lease assets232,179 213,302 
Goodwill13,990 13,990 
Other intangible assets, net of accumulated amortization ($82,866 and $81,033 as of December 31, 2023, and March 31, 2023, respectively)
35,798 37,457 
Deferred tax assets, net68,950 72,592 
Other assets46,873 41,930 
Total assets$3,347,459 $2,556,203 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable$507,161 $265,605 
Accrued payroll86,378 63,781 
Operating lease liabilities51,124 50,765 
Other accrued expenses160,570 86,753 
Income tax payable109,350 17,322 
Value added tax payable12,859 13,154 
Total current liabilities927,442 497,380 
Long-term operating lease liabilities222,867 195,723 
Income tax liability52,585 62,032 
Other long-term liabilities40,375 35,335 
Total long-term liabilities315,827 293,090 
Commitments and contingencies (Note 5)
Stockholders’ equity
Common stock (par value $0.01 per share; 125,000 shares authorized; shares issued and outstanding of 25,650 and 26,176 as of December 31, 2023, and March 31, 2023, respectively)
256 262 
Additional paid-in capital255,994 232,932 
Retained earnings1,890,314 1,571,574 
Accumulated other comprehensive loss (Note 8)
(42,374)(39,035)
Total stockholders’ equity2,104,190 1,765,733 
Total liabilities and stockholders’ equity$3,347,459 $2,556,203 

See accompanying notes to the condensed consolidated financial statements.
4

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(dollar and share data amounts in thousands, except per share data)

Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Net sales (Note 2, Note 10, and Note 11)
$1,560,307 $1,345,640 $3,328,005 $2,835,715 
Cost of sales643,738 633,111 1,481,993 1,406,513 
Gross profit916,569 712,529 1,846,012 1,429,202 
Selling, general, and administrative expenses428,670 349,869 1,062,760 882,370 
Income from operations (Note 10)
487,899 362,660 783,252 546,832 
Interest income(11,895)(3,571)(33,271)(6,669)
Interest expense911 1,155 2,927 3,245 
Other income, net(170)(228)(1,138)(968)
Total other income, net(11,154)(2,644)(31,482)(4,392)
Income before income taxes499,053 365,304 814,734 551,224 
Income tax expense (Note 4)
109,134 86,642 182,716 126,189 
Net income389,919 278,662 632,018 425,035 
Other comprehensive income (loss), net of tax
Unrealized (loss) gain on cash flow hedges(3,645)(2,083)110 (237)
Foreign currency translation gain (loss)10,722 14,169 (3,449)(15,084)
Total other comprehensive income (loss), net of tax7,077 12,086 (3,339)(15,321)
Comprehensive income$396,996 $290,748 $628,679 $409,714 
Net income per share
Basic$15.19 $10.55 $24.35 $16.00 
Diluted$15.11 $10.48 $24.20 $15.90 
Weighted-average common shares outstanding (Note 9)
Basic25,664 26,418 25,953 26,570 
Diluted25,811 26,586 26,114 26,740 

See accompanying notes to the condensed consolidated financial statements.
5

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(amounts in thousands)

Nine Months Ended December 31, 2023
Additional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders’
Equity
Common Stock
SharesAmount
Balance, March 31, 202326,176 $262 $232,932 $1,571,574 $(39,035)$1,765,733 
Stock-based compensation1 — 6,877 — — 6,877 
Shares issued upon vesting3 — — — — — 
Exercise of stock options8 — 548 — — 548 
Shares withheld for taxes— — (698)— — (698)
Repurchases of common stock (Note 8)
(52)(1)— (25,468)— (25,469)
Excise taxes related to repurchases of common stock— — — (123)— (123)
Net income— — — 63,552 — 63,552 
Total other comprehensive loss— — — — (8,299)(8,299)
Balance, June 30, 202326,136 261 239,659 1,609,535 (47,334)1,802,121 
Stock-based compensation1 — 9,802 — — 9,802 
Shares issued upon vesting24 — 1,165 — — 1,165 
Exercise of stock options8 — 533 — — 533 
Shares withheld for taxes— — (7,759)— — (7,759)
Repurchases of common stock (Note 8)
(347)(3)— (185,466)— (185,469)
Excise taxes related to repurchases of common stock— — — (1,693)— (1,693)
Net income— — — 178,547 — 178,547 
Total other comprehensive loss— — — — (2,117)(2,117)
Balance, September 30, 202325,822 258 243,400 1,600,923 (49,451)1,795,130 
Stock-based compensation— — 11,846 — — 11,846 
Shares issued upon vesting2 — — — — — 
Exercise of stock options22 — 1,444 — — 1,444 
Shares withheld for taxes— — (696)— — (696)
Repurchases of common stock (Note 8)
(196)(2)— (99,695)— (99,697)
Excise taxes related to repurchases of common stock— — — (833)— (833)
Net income— — — 389,919 — 389,919 
Total other comprehensive income— — — — 7,077 7,077 
Balance, December 31, 202325,650 $256 $255,994 $1,890,314 $(42,374)$2,104,190 


6

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(amounts in thousands)
(continued)

Nine Months Ended December 31, 2022
Additional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders’
Equity
Common Stock
SharesAmount
Balance, March 31, 202226,982 $270 $210,825 $1,352,685 $(24,955)$1,538,825 
Stock-based compensation 1 — 3,735 — — 3,735 
Shares withheld for taxes— — (43)— — (43)
Repurchases of common stock (Note 8)
(384)(4)— (99,989)— (99,993)
Net income— — — 44,849 — 44,849 
Total other comprehensive loss— — — — (14,966)(14,966)
Balance, June 30, 202226,599 266 214,517 1,297,545 (39,921)1,472,407 
Stock-based compensation 1 — 6,779 — — 6,779 
Shares issued upon vesting27 — 1,046 — — 1,046 
Exercise of stock options27 — 1,830 — — 1,830 
Shares withheld for taxes— — (5,059)— — (5,059)
Repurchases of common stock (Note 8)
(173)(1)— (50,246)— (50,247)
Net income— — — 101,524 — 101,524 
Total other comprehensive loss— — — — (12,441)(12,441)
Balance, September 30, 202226,481 265 219,113 1,348,823 (52,362)1,515,839 
Stock-based compensation — 7,479 — — 7,479 
Shares issued upon vesting2 — — — — — 
Exercise of stock options1 — 40 — — 40 
Shares withheld for taxes— — (312)— — (312)
Repurchases of common stock (Note 8)
(127)(1)— (44,621)— (44,622)
Net income— — — 278,662 — 278,662 
Total other comprehensive income— — — — 12,086 12,086 
Balance, December 31, 202226,358 $264 $226,320 $1,582,864 $(40,276)$1,769,172 

See accompanying notes to the condensed consolidated financial statements.
7

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in thousands)

Nine Months Ended December 31,
20232022
OPERATING ACTIVITIES
Net income$632,018 $425,035 
Reconciliation of net income to net cash provided by (used in) operating activities:
Depreciation, amortization, and accretion40,901 35,089 
Amortization on cloud computing arrangements1,651 1,572 
Loss on extinguishment of debt 226 
Bad debt expense2,212 3,692 
Deferred tax expense (benefit)2,850 (343)
Stock-based compensation28,687 18,130 
Loss on disposal of long-lived assets235 18 
Impairment of operating lease and other long-lived assets1,129 2,085 
Changes in operating assets and liabilities:
Trade accounts receivable, net(32,379)(27,345)
Inventories(6,111)(216,569)
Prepaid expenses and other current assets(22,498)(47,782)
Income tax receivable(10,585)13,712 
Net operating lease assets and lease liabilities8,188 (6,339)
Other assets(6,595)14,641 
Trade accounts payable242,496 161,512 
Other accrued expenses92,042 42,681 
Income tax payable92,028 63,936 
Other long-term liabilities(4,411)(6,068)
Net cash provided by operating activities1,061,858 477,883 
INVESTING ACTIVITIES
Purchases of property and equipment(74,078)(56,059)
Proceeds from sales of property and equipment34 6 
Net cash used in investing activities(74,044)(56,053)
FINANCING ACTIVITIES
Loan origination costs on revolving credit facilities (1,537)
Proceeds from issuance of stock 1,165 1,046 
Proceeds from exercise of stock options2,525 1,870 
Repurchases of common stock(310,635)(194,862)
Cash paid for shares withheld for taxes(9,153)(5,414)
Net cash used in financing activities(316,098)(198,897)
Effect of foreign currency exchange rates on cash and cash equivalents(2,709)(8,617)
Net change in cash and cash equivalents669,007 214,316 
Cash and cash equivalents at beginning of period981,795 843,527 
Cash and cash equivalents at end of period$1,650,802 $1,057,843 


8

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in thousands)
(continued)

Nine Months Ended December 31,
20232022
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during the period
Income taxes, net of refunds of $237 and $1,286, as of December 31, 2023, and 2022, respectively
$108,202 $59,418 
Interest1,358 1,415 
Operating leases49,283 45,244 
Non-cash investing activities
Changes in accounts payable and accrued expenses for purchases of property and equipment(10,162)(2,696)
Accrued for asset retirement obligation assets related to leasehold improvements1,094 1,051 
Leasehold improvements acquired through tenant allowances8,127  
Non-cash financing activities
Accrued excise taxes related to repurchases of common stock2,649  

See accompanying notes to the condensed consolidated financial statements.
9

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Nine Months Ended December 31, 2023, and 2022
(dollar amounts in thousands, except share and per share data)
Note 1. General

The Company. Deckers Outdoor Corporation and its wholly owned subsidiaries (collectively, the Company) is a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories developed for both everyday casual lifestyle use and high-performance activities. The Company’s proprietary brands include the UGG, HOKA, Teva, Sanuk, and Koolaburra brands.

The Company sells its products through quality domestic and international retailers, international distributors, and directly to its global consumers through its DTC business, which is comprised of its e-commerce websites and retail stores. Independent third-party contractors manufacture all of the Company’s products.

A significant part of the UGG brand’s business has historically been seasonal, requiring the Company to build inventory levels during certain quarters in its fiscal year to support higher selling seasons, which has contributed to variation in its results from quarter to quarter. However, as the Company continues to take steps to diversify and expand its product offerings by creating more year-round styles, and as net sales of the HOKA brand, which generally occur more evenly throughout the year, continue to increase as a percentage of the Company’s aggregate net sales, the Company has seen, and expects to continue to see, the impact from seasonality decrease over time.

Basis of Presentation. The unaudited condensed consolidated financial statements and accompanying notes thereto (referred to herein as condensed consolidated financial statements) as of December 31, 2023, and for the three and nine months ended December 31, 2023 (the current period), and 2022 (the prior period) are prepared in accordance with generally accepted accounting principles in the US (US GAAP) for interim financial information pursuant to Rule 10-01 of Regulation S-X issued by the SEC. Accordingly, the condensed consolidated financial statements do not include all the information and disclosures required by US GAAP for annual financial statements and accompanying notes thereto. The condensed consolidated balance sheet as of March 31, 2023, is derived from the Company’s audited consolidated financial statements. In the opinion of management, the condensed consolidated financial statements include all normal and recurring entries necessary to fairly present the results of the interim periods presented but are not necessarily indicative of actual results to be achieved for full fiscal years or other interim periods. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023 (prior fiscal year), which was filed with the SEC on May 26, 2023 (2023 Annual Report).

Consolidation. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates. The preparation of the Company’s condensed consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the amounts reported. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, authoritative accounting pronouncements and other factors that management believes to be reasonable. In addition, the Company has considered the potential impact of macroeconomic factors, including inflation, foreign currency exchange rate volatility, changes in interest rates, changes in commodity pricing, changes in discretionary spending and recessionary concerns, on its business and operations. Although the full impact of these factors is unknown and cannot be reasonably estimated, the Company believes it has made appropriate accounting estimates and assumptions based on the facts and circumstances available as of the reporting date. However, actual results could differ materially from these estimates and assumptions, which may result in material effects on the Company’s financial condition, results of operations, and liquidity. To the extent there are differences between these estimates and actual results, the Company’s condensed consolidated financial statements may be materially affected.

10

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Nine Months Ended December 31, 2023, and 2022
(dollar amounts in thousands, except share and per share data)
Significant areas requiring the use of management estimates and assumptions relate to inventory write-downs; trade accounts receivable allowances, including variable consideration for net sales provided to customers, such as the sales return asset and liability; contract assets and liabilities; stock-based compensation; impairment assessments, including goodwill, other intangible assets, and long-lived assets; depreciation and amortization; income tax receivables and liabilities; uncertain tax positions; the fair value of financial instruments; the reasonably certain lease term; lease classification; and the Company’s incremental borrowing rate (IBR) utilized to measure its operating lease assets and lease liabilities.

Foreign Currency Translation. The Company considers the US dollar as its functional currency. The Company’s wholly owned foreign subsidiaries have various assets and liabilities, primarily cash, receivables, and payables, which are denominated in currencies other than its functional currency. The Company remeasures these monetary assets and liabilities using the exchange rate at the end of the reporting period, which results in gains and losses that are recorded in selling, general, and administrative (SG&A) expenses in the condensed consolidated statements of comprehensive income as incurred. In addition, the Company translates assets and liabilities of subsidiaries with reporting currencies other than US dollars into US dollars using the exchange rates at the end of the reporting period, which results in financial statement translation gains and losses recorded in other comprehensive income or loss (OCI) in the condensed consolidated statements of comprehensive income.

Reportable Operating Segments. The Company’s six reportable operating segments include the worldwide wholesale operations of the UGG brand, HOKA brand, Teva brand, Sanuk brand, and Other brands (primarily consisting of the Koolaburra brand), as well as DTC (collectively, the Company’s reportable operating segments). Refer to Note 10, “Reportable Operating Segments,” for further information on the Company’s reportable operating segments.

During October 2023, the Company announced that it intends to divest the Sanuk brand as it focuses on allocating resources that best align with its long-term objectives.

Recent Accounting Pronouncements. The Financial Accounting Standards Board has issued Accounting Standards Updates (ASU) that have been adopted and not yet adopted by the Company as stated below.

Recently Adopted. The following is a summary of an ASU adopted by the Company and its impact:

StandardDescriptionImpact Upon Adoption
ASU 2022-04 - Supplier Finance Program (SFP)
The ASU requires that a buyer in a SFP disclose qualitative and quantitative information about its program on an interim basis, including the nature of the SFP and key terms, outstanding amounts as of the end the reporting period, and presentation in its financial statements.

The interim portion of this ASU is effective on a retrospective basis for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted.

The annual requirement that requires a buyer in a SFP disclose an activity roll forward of outstanding balances as of the end of the reporting period has not yet been adopted.

This annual portion of this ASU is effective on a retrospective basis for fiscal years beginning after December 15, 2023. Early adoption is not permitted.
The Company retrospectively adopted this ASU beginning on April 1, 2023, except for the roll forward requirements.

Refer to Note 12, “Supplier Finance Program,” for further information on the Company’s SFP key terms and outstanding balances recorded in the condensed consolidated balance sheets.

Management is currently evaluating the impact of this ASU on its annual consolidated financial statements. The Company plans to adopt the annual roll forward requirement beginning with its fiscal year ending March 31, 2025.

11

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Nine Months Ended December 31, 2023, and 2022
(dollar amounts in thousands, except share and per share data)
Not Yet Adopted. The following is a summary of each ASU that has been issued and is applicable to the Company, but which has not yet been adopted, as well as the planned period of adoption, and the expected impact on the Company upon its adoption:

StandardDescription
Planned Periods of Adoption
Expected Impact on Adoption
ASU 2023-07 - Improvements to Reportable Segment Disclosures
The ASU requires annual and interim disclosures of significant segment expenses, including an amount and composition description for other segment items, and how reported measures of profit or loss are used by the chief operating decision maker (CODM) in assessing segment performance and deciding how to allocate resources. The ASU is effective on a retrospective basis for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted.
Q4 fiscal year (FY) 2025
and
Q1 FY 2026
The Company is currently evaluating the impact of the adoption of this ASU on its annual and interim consolidated financial statements.
ASU 2023-09 - Improvements to Income Tax Disclosures
The ASU requires annual disclosures of prescribed standard categories for the components of the effective tax rate reconciliation, disclosure of income taxes paid disaggregated by jurisdiction, and other income-tax related disclosures. The ASU is effective on a prospective basis, with retrospective application permitted, for fiscal years beginning after December 15, 2024. Early adoption is permitted.
Q4 FY 2026
The Company is currently evaluating the impact of the adoption of this ASU on its annual and interim consolidated financial statements.

Note 2. Revenue Recognition

Disaggregated Revenue. Refer to Note 10, “Reportable Operating Segments,” for further information on the Company’s disaggregation of revenue by reportable operating segment.

Sales Return Asset and Liability. Sales returns are a refund asset for the right to recover the inventory and a refund liability for the stand-ready right of return. The refund asset for the right to recover the inventory is recorded in other current assets and the related refund liability is recorded in other accrued expenses in the condensed consolidated balance sheets.

The following tables summarize changes in the estimated sales returns for the periods presented:
Recovery AssetRefund Liability
Balance, March 31, 2023$15,685 $(45,322)
Net additions to sales return liability*52,700 (221,702)
Actual returns(43,081)180,736 
Balance, December 31, 2023$25,304 $(86,288)

Recovery AssetRefund Liability
Balance, March 31, 2022$11,491 $(39,867)
Net additions to sales return liability*55,080 (182,914)
Actual returns(41,202)146,695 
Balance, December 31, 2022$25,369 $(76,086)

*Net additions to the sales return liability include a provision for anticipated sales returns, which consists of both contractual return rights and discretionary authorized returns.

12

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Nine Months Ended December 31, 2023, and 2022
(dollar amounts in thousands, except share and per share data)
Contract Liabilities. Contract liabilities are recorded in other accrued expenses in the condensed consolidated balance sheets and include loyalty programs and other deferred revenue.

Loyalty Programs. Activity related to loyalty programs was as follows:
Nine Months Ended December 31,
20232022
Beginning balance
$(13,144)$(10,883)
Redemptions and expirations for loyalty certificates and points recognized in net sales35,518 32,096 
Deferred revenue for loyalty points and certificates issued(45,002)(41,354)
Ending balance
$(22,628)$(20,141)

Deferred Revenue. Activity related to deferred revenue was as follows:
Nine Months Ended December 31,
20232022
Beginning balance$(13,448)$(15,804)
Additions of customer cash payments(53,615)(41,782)
Revenue recognized45,739 46,138 
Ending balance$(21,324)$(11,448)

Refer to Note 2, “Revenue Recognition,” in the Company’s consolidated financial statements in Part IV of the 2023 Annual Report for further information on the Company’s variable consideration accounting policies, including sales return asset and liability, as well as contract liabilities.

Note 3. Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis. Refer to Note 4, “Fair Value Measurements,” in the Company’s consolidated financial statements in Part IV of the 2023 Annual Report for further information on the Company’s fair value accounting policies.

Assets and liabilities that are measured on a recurring basis at fair value in the condensed consolidated balance sheets are as follows:
As ofMeasured Using
December 31, 2023Level 1Level 2Level 3
Money-market funds (1)
$1,276,423 $1,276,423 $ $ 
Non-qualified deferred compensation asset (2)
10,853 10,853   
Non-qualified deferred compensation liability (2)
(15,066)(15,066)  
Designated Derivative Contracts asset (3)
233  233  
Designated Derivative Contracts liability (3)
(86) (86) 

As ofMeasured Using
March 31, 2023Level 1Level 2Level 3
Money-market funds (1)
$675,468 $675,468 $ $ 
Non-qualified deferred compensation asset (2)
8,399 8,399   
Non-qualified deferred compensation liability (2)
(11,326)(11,326)  

(1) Money-market funds are recorded in cash and cash equivalents in the condensed consolidated balance sheets.
(2) As of December 31, 2023, the non-qualified deferred compensation asset of $10,853 is recorded in other assets in the condensed consolidated balance sheets, and of the $15,066 non-qualified deferred compensation liability, $408 is recorded in other accrued expenses and $14,658 is recorded in other long-term liabilities in the condensed consolidated balance sheets. As of March 31, 2023, the non-qualified deferred compensation asset of $8,399 is recorded in other assets in the condensed consolidated balance sheets, and of the $11,326 non-qualified deferred compensation liability, $737 is recorded in other accrued expenses and $10,589 is recorded in other long-term liabilities in the condensed consolidated balance sheets.
(3) The fair value of Designated Derivative Contracts is determined using quoted forward spot rates at the end of the applicable reporting period from counterparties, which are corroborated by market-based pricing (Level 2), with related assets and liabilities recorded in other current assets and other accrued expenses, respectively, in the condensed consolidated balance sheets. Refer to Note 7, “Derivative Instruments,” for further information, including the definition of the term Designated Derivative Contracts.

Note 4. Income Taxes

Income tax expense and the effective income tax rate were as follows:
Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Income tax expense$109,134 $86,642 $182,716 $126,189 
Effective income tax rate21.9 %23.7 %22.4 %22.9 %

The tax provisions during the three and nine months ended December 31, 2023, and 2022 were computed using the estimated effective income tax rate applicable to each of the domestic and foreign taxable jurisdictions for the fiscal years ending March 31, 2024 (current fiscal year), and March 31, 2023, respectively, and were adjusted for discrete items that occurred within the periods presented above.

During the three months ended December 31, 2023, the net decrease in the effective income tax rate, compared to the prior period, was primarily due to higher net discrete tax benefits relating to increased return to provision benefits and decreased uncertain tax positions, as well as changes in jurisdictional mix of worldwide income before income taxes.

During the nine months ended December 31, 2023, the net decrease in the effective income tax rate, compared to the prior period, was primarily driven by higher net discrete tax benefits relating to increased return to provision benefits and decreased uncertain tax positions.

Note 5. Commitments and Contingencies

There were no material changes outside the ordinary course of business during the nine months ended December 31, 2023, to the purchase obligations disclosed in the 2023 Annual Report. Refer to Note 7, “Commitments and Contingencies,” in the Company’s consolidated financial statements in Part IV of the 2023 Annual Report for further information on the Company’s contractual obligations and commitments.

Leases. The Company primarily leases retail stores, showrooms, offices, and distribution facilities under operating lease contracts. Some of the Company’s operating leases contain extension options between one to 15 years. Historically, the Company has not entered into finance leases and its lease agreements generally do not contain residual value guarantees, options to purchase underlying assets, or material restrictive covenants.

13

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Nine Months Ended December 31, 2023, and 2022
(dollar amounts in thousands, except share and per share data)
Supplemental information for amounts presented in the condensed consolidated statements of cash flows related to operating leases, were as follows:
Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Non-cash operating activities
Operating lease assets obtained in exchange for lease liabilities*$32,929 $12,849 $67,668 $26,058 
Reductions to operating lease assets for reductions to lease liabilities*(79)(1,241)(7,750)(1,649)

*Amounts disclosed include non-cash additions or reductions resulting from lease remeasurements.

Litigation. From time to time, the Company is involved in various legal proceedings, disputes, and other claims arising in the ordinary course of business, including employment, intellectual property, and product liability claims. Although the results of these matters cannot be predicted with certainty, the Company believes it is not currently a party to any legal proceedings, disputes, or other claims for which a material loss is considered probable and for which the amount (or range) of loss is reasonably estimable. However, regardless of the merit of the claims raised or the outcome, these matters can have an adverse impact on the Company as a result of legal costs, diversion of management’s time and resources, and other factors.

Note 6. Stock-Based Compensation

Under the 2015 Stock Incentive Plan (2015 SIP), the Company grants various types of stock-based compensation, including time-based restricted stock units (RSUs), performance-based restricted stock units (PSUs), and long-term incentive plan PSUs (LTIP PSUs), to key personnel, including employees and directors. During the nine months ended December 31, 2023, no additional awards were granted under the 2015 SIP, with the exception of the RSU and LTIP PSU awards summarized below. Refer to Note 8, “Stock-Based Compensation,” in the Company’s consolidated financial statements in Part IV of the 2023 Annual Report for further information on previously granted awards under the 2015 SIP.    

Annual Awards. The Company granted the following awards under the 2015 SIP during the periods presented, which were recorded in the condensed consolidated statements of comprehensive income:

Nine Months Ended December 31,
20232022
Shares GrantedWeighted-average grant date fair value per shareShares GrantedWeighted-average grant date fair value per share
RSUs
36,674 $552.73 50,923 $337.44 

RSUs are subject to time-based vesting criteria and typically vest in equal annual installments over three years following the date of grant. Stock-based compensation is recorded net of estimated forfeitures in SG&A expenses in the condensed consolidated statements of comprehensive income. Future unrecognized stock-based compensation for annual awards, including RSUs outstanding, as of December 31, 2023, is $22,160.

14

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Nine Months Ended December 31, 2023, and 2022
(dollar amounts in thousands, except share and per share data)
Long-Term Incentive Plan Awards. During the nine months ended December 31, 2023, the Company approved awards under the 2015 SIP for the issuance of PSUs (2024 LTIP PSUs), which were awarded to certain members of the Company’s management team, including the Company’s named executive officers and vice presidents. The 2024 LTIP PSUs are subject to vesting based on service conditions over three years. The Company must meet certain revenue and pre-tax income performance targets individually over 36-month reporting periods for the fiscal years ending March 31, 2024, 2025, and 2026 (collectively, the Measurement Periods). The 2024 LTIP PSUs incorporate a relative total stockholder return (TSR) modifier for the 36-month performance period (commencing April 1, 2023) ending March 31, 2026 (collectively, the Performance Periods). To the extent financial performance is achieved above the threshold levels for each of these performance criteria, the number of 2024 LTIP PSUs that vest will increase up to a maximum of 200% of the targeted amount for that award. No vesting of any portion of the 2024 LTIP PSUs will occur if the Company fails to achieve the pre-established minimum revenue and pre-tax income amounts for each reporting period. Following the determination of the Company’s achievement with respect to the revenue and pre-tax income criteria for the Measurement Periods, the vesting of each 2024 LTIP PSU will be subject to adjustment based on the application of the TSR modifier. The amount of the adjustment will be determined based on a comparison of the Company’s TSR relative to the TSR of a pre-determined set of peer group companies for the Performance Periods. A Monte-Carlo simulation model was used to determine the grant date fair value by simulating a range of possible future stock prices for the Company and each member of the peer group over the Performance Periods.

The Company granted awards of 20,846 2024 LTIP PSUs at the target performance level during the nine months ended December 31, 2023. The weighted-average grant date fair value per share of these 2024 LTIP PSUs was $633.91. Based on the Company’s current long-range forecast, the Company determined that the achievement of at least the minimum threshold target performance criteria was probable as of December 31, 2023. Future unrecognized stock-based compensation for the current performance attainment level of all LTIP PSUs outstanding as of December 31, 2023, including the 2024 LTIP PSUs discussed above, the 2023 LTIP PSUs, and the 2022 LTIP PSUs, is $27,204.

Note 7. Derivative Instruments

The Company enters into foreign currency forward or option contracts (derivative contracts) with maturities of 15 months or less to manage foreign currency risk and certain of these derivative contracts are designated as cash flow hedges of forecasted sales (Designated Derivative Contracts).

The after-tax unrealized gains or losses from changes in fair value of Designated Derivative Contracts are recorded as a component of accumulated other comprehensive loss (AOCL) in the condensed consolidated balance sheets and are reclassified to net sales in the condensed consolidated statements of comprehensive income in the same period or periods as the related sales are recognized. When it is probable that a forecasted transaction will not occur, the Company discontinues hedge accounting and the accumulated gains or losses in AOCL related to the hedging relationship are immediately recorded in OCI in the condensed consolidated statements of comprehensive income. Refer to Note 1, “General,” in the Company’s consolidated financial statements in Part IV of the 2023 Annual Report for further information regarding the Company’s derivative instruments accounting policy.

As of December 31, 2023, the Company has the following Designated Derivative Contracts recorded at fair value in the condensed consolidated balance sheets:

Notional value$46,235 
Fair value recorded in other current assets233 
Fair value recorded in other accrued expenses(86)

As of December 31, 2023, three counterparties hold the Company’s outstanding derivative contracts, all of which are expected to mature in the next three months. As of March 31, 2023, the Company had no outstanding derivative contracts.

15

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Nine Months Ended December 31, 2023, and 2022
(dollar amounts in thousands, except share and per share data)
The following table summarizes the effect of Designated Derivative Contracts and the related income tax effects of unrealized gains or losses recorded in the condensed consolidated statements of comprehensive income for changes in AOCL:

Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
(Loss) gain recorded in OCI$(1,318)$(1,270)$3,798 $1,535 
Reclassifications from AOCL into net sales(3,503)(1,479)(3,652)(1,848)
Income tax benefit (expense) in OCI1,176 666 (36)76 
Total$(3,645)$(2,083)$110 $(237)

The non-performance risk of the Company and its counterparties did not have a material impact on the fair value of its derivative contracts. As of December 31, 2023, the amount of unrealized gains on derivative contracts recorded in AOCL is expected to be reclassified into net sales within the next three months. Refer to Note 8, “Stockholders’ Equity,” for further information on the components of AOCL.

Note 8. Stockholders’ Equity

Stock Repurchase Program. The Company’s Board of Directors has approved various authorizations under the Company’s stock repurchase program to repurchase shares of its common stock in the open market or in privately negotiated transactions, subject to market conditions, applicable legal requirements, and other factors (collectively, the stock repurchase program). As of December 31, 2023, the aggregate remaining approved amount under the stock repurchase program is $1,046,000. The stock repurchase program does not obligate the Company to acquire any amount of common stock and may be suspended at any time at the Company’s discretion.

Stock repurchase activity under the Company’s stock repurchase program was as follows:
Nine Months Ended December 31,
20232022
Dollar value of shares repurchased (1) (2)
$310,635 $194,862 
Total number of shares repurchased (3)
595,660 685,075 
Weighted average price per share paid$521.50 $284.44 

(1) The dollar value of shares repurchased excludes the cost of broker commissions, excise taxes, and other costs.
(2) May not calculate on rounded dollars.
(3) All share repurchases were made pursuant to the Company’s stock repurchase program in open-market transactions.

Accumulated Other Comprehensive Loss. The components within AOCL, net of tax, recorded in the condensed consolidated balance sheets are as follows:
 December 31, 2023March 31, 2023
Unrealized gain on cash flow hedges$110 $ 
Cumulative foreign currency translation loss(42,484)(39,035)
Total $(42,374)$(39,035)

16

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Nine Months Ended December 31, 2023, and 2022
(dollar amounts in thousands, except share and per share data)
Note 9. Basic and Diluted Shares

The reconciliation of basic to diluted weighted-average common shares outstanding was as follows:
 Three Months Ended December 31,Nine Months Ended December 31,
 2023202220232022
Basic25,664,000 26,418,000 25,953,000 26,570,000 
Dilutive effect of equity awards147,000 168,000 161,000 170,000 
Diluted25,811,000 26,586,000 26,114,000 26,740,000 
Excluded
RSUs and PSUs1,000 2,000 1,000 17,000 
LTIP PSUs92,000 105,000 92,000 105,000 
Deferred Non-Employee Director Equity Awards 1,000  2,000 
Employee Stock Purchase Plan1,000 1,000   

Excluded Awards. The equity awards excluded from the calculation of the dilutive effect have been excluded due to one of the following: (1) the shares were antidilutive; (2) the necessary conditions had not been satisfied for the shares to be deemed issuable based on the Company’s performance for the relevant performance period; or (3) the Company recorded a net loss during the period presented (such that inclusion of these equity awards in the calculation would have been antidilutive). The number of shares stated for each of these excluded awards is the maximum number of shares issuable pursuant to these awards. For those awards subject to the achievement of performance criteria, the actual number of shares to be issued pursuant to such awards will be based on Company performance in future periods, net of forfeitures, and may be materially lower than the number of shares presented, which could result in a lower dilutive effect.

Note 10. Reportable Operating Segments

Information reported to the CODM, who is the Company’s Chief Executive Officer (CEO), President, and Principal Executive Officer (PEO), is organized into the Company’s six reportable operating segments and is consistent with how the CODM evaluates performance and allocates resources. The Company does not consider international operations to be a separate reportable operating segment, and the CODM reviews such operations in the aggregate with the reportable operating segments.

Segment Net Sales and Income from Operations. The Company evaluates reportable operating segment performance primarily based on net sales and income (loss) from operations. The wholesale operations of each brand are managed separately because each requires different marketing, research and development, design, sourcing, and sales strategies. The income (loss) from operations of each of the reportable operating segments includes only those costs which are specifically related to each reportable operating segment, which consist primarily of cost of sales, research and development, design, sales and marketing, depreciation, amortization, and the direct costs of employees within those reportable operating segments.

The Company does not allocate corporate overhead costs or non-operating income and expenses to reportable operating segments, which include unallocable overhead costs associated with the Company’s warehouses and DCs, certain executive and stock-based compensation, accounting, finance, legal, information technology (IT), human resources, and facilities, among others. Inter-segment sales from the Company’s wholesale reportable operating segments to the DTC reportable operating segment are at the Company’s cost, and there is no inter-segment profit on these inter-segment sales, nor are they reflected in income (loss) from operations of the wholesale reportable operating segments as these transactions are eliminated in consolidation.

17

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Nine Months Ended December 31, 2023, and 2022
(dollar amounts in thousands, except share and per share data)
Reportable operating segment information, with a reconciliation to the condensed consolidated statements of comprehensive income, was as follows:
Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Net sales
UGG brand wholesale$402,876 $374,082 $976,262 $873,249 
HOKA brand wholesale252,222 223,872 776,042 678,792 
Teva brand wholesale20,449 25,180 67,731 91,662 
Sanuk brand wholesale2,140 3,040 11,958 18,826 
Other brands wholesale24,474 20,169 55,763 49,721 
Direct-to-Consumer858,146 699,297 1,440,249 1,123,465 
Total$1,560,307 $1,345,640 $3,328,005 $2,835,715 

Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Income (loss) from operations
UGG brand wholesale$153,653 $114,372 $336,421 $257,120 
HOKA brand wholesale83,654 68,658 252,051 201,850 
Teva brand wholesale2,047 3,976 10,637 19,206 
Sanuk brand wholesale(3,886)(1,048)(3,430)1,768 
Other brands wholesale2,521 (1,851)6,939 3,517 
Direct-to-Consumer401,075 292,693 588,792 393,849 
Unallocated overhead costs(151,165)(114,140)(408,158)(330,478)
Total$487,899 $362,660 $783,252 $546,832 

Segment Assets. Assets allocated to each reportable operating segment include trade accounts receivable, net, inventories, property and equipment, net, operating lease assets, goodwill, other intangible assets, net, and certain other assets that are specifically identifiable for one of the Company’s reportable operating segments. Unallocated assets are those assets not directly related to a specific reportable operating segment and generally include cash and cash equivalents, deferred tax assets, net, and various other corporate assets shared by the Company’s reportable operating segments.

Assets allocated to each reportable operating segment, with a reconciliation to the condensed consolidated balance sheets, are as follows:
December 31, 2023March 31, 2023
Assets
UGG brand wholesale$387,631 $261,683 
HOKA brand wholesale385,832 446,450 
Teva brand wholesale65,979 94,735 
Sanuk brand wholesale28,582 41,405 
Other brands wholesale22,662 24,448 
Direct-to-Consumer289,785 219,194 
Total assets from reportable operating segments
1,180,471 1,087,915 
18

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Nine Months Ended December 31, 2023, and 2022
(dollar amounts in thousands, except share and per share data)
December 31, 2023March 31, 2023
Unallocated cash and cash equivalents1,650,802 981,795 
Unallocated deferred tax assets, net68,950 72,592 
Unallocated other corporate assets447,236 413,901 
Total$3,347,459 $2,556,203 

Note 11. Concentration of Business

Regions and Customers. The Company sells its products globally to customers and consumers in various countries, with net sales concentrations as follows:
Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
International net sales$511,918 $438,797 $1,112,048 $926,648 
% of net sales32.8 %32.6 %33.4 %32.7 %
Net sales in foreign currencies$415,505 $329,911 $856,820 $631,982 
% of net sales26.6 %24.5 %25.7 %22.3 %
Ten largest global customers as % of net sales22.5 %24.6 %25.2 %27.4 %

For the three and nine months ended December 31, 2023, and 2022, no single foreign country comprised 10.0% or more of the Company’s total net sales. For the three and nine months ended December 31, 2023, and 2022, no single global customer accounted for 10.0% or more of the Company’s net sales.

As of December 31, 2023, the Company has two customers that represent 29.0% of trade accounts receivable, net, compared to no customers that represent 10.0% of trade accounts receivable, net, as of March 31, 2023. Management performs regular evaluations concerning the ability of the Company’s customers to satisfy their obligations to the Company and recognizes an allowance for doubtful accounts based on these evaluations.

Cash and Cash Equivalents. The Company maintains a portion of its cash in Federal Deposit Insurance Corporation (FDIC) insured bank deposit accounts which, at times, may exceed federally insured limits. To date, the Company has not experienced any losses in such accounts. The Company does not believe, based on the size and strength of the banking institutions used, it is exposed to any significant credit risks in cash.

Suppliers. The Company’s production is concentrated at a limited number of independent manufacturing factories, primarily in Asia. Sheepskin is the principal raw material for certain UGG brand products and most of the Company’s sheepskin is purchased from two tanneries in China, which is sourced primarily from Australia and the United Kingdom (UK).

Long-Lived Assets. Long-lived assets, which consist of property and equipment, net, recorded in the condensed consolidated balance sheets, are as follows:
 December 31, 2023March 31, 2023
United States$272,195 $244,529 
Foreign*28,620 22,150 
Total$300,815 $266,679 

*No single foreign country’s property and equipment, net, represents 10.0% or more of the Company’s total property and equipment, net, as of December 31, 2023, and March 31, 2023.

19

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Nine Months Ended December 31, 2023, and 2022
(dollar amounts in thousands, except share and per share data)
Note 12. Supplier Finance Program

The Company has a voluntary SFP administered through a third-party platform that provides the Company’s independent manufacturers and suppliers of inventory (inventory suppliers) the opportunity to sell their receivables due from the Company to participating financial institutions in advance of the invoice due date, at the sole discretion of both inventory suppliers and the financial institutions. The Company is not party to the agreements between these third parties and has no economic interest in an inventory suppliers’ decision to sell a receivable.

The Company’s payment obligations, including the amounts due and payment terms, which generally do not exceed 90 days, are not impacted by the inventory suppliers’ election to participate in the SFP, and the Company provides no guarantees to any third parties under the SFP. Accordingly, amounts due to inventory suppliers that elected to participate in the SFP are presented in trade accounts payable in the condensed consolidated balance sheets.

As of December 31, 2023, and March 31, 2023, the Company had $7,176 and $7,740, respectively, of balances outstanding related to the SFP recorded in trade accounts payable in the condensed consolidated balance sheets.

Note 13. Subsequent Events

On February 1, 2024, Dave Powers announced his intention to retire from his position as Chief Executive Officer and President of the Company, effective August 1, 2024. On the same date, the Company announced that Stefano Caroti will be appointed as President and Chief Executive Officer, effective August 1, 2024.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read together with our condensed consolidated financial statements and the related notes, included in Part I, Item 1, “Financial Statements,” within this Quarterly Report, and the audited consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of our 2023 Annual Report.

Certain statements made in this section constitute “forward-looking statements,” which are subject to numerous risks and uncertainties. Our actual results of operations may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those set forth in the section titled “Cautionary Note Regarding Forward-Looking Statements” and Part II, Item 1A, “Risk Factors,” within this Quarterly Report.

Overview

We are a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories developed for both everyday casual lifestyle use and high-performance activities. We market our products primarily under five proprietary brands: UGG, HOKA, Teva, Sanuk, and Koolaburra. We believe our products are distinctive and appeal to a broad demographic. We sell our products through quality domestic and international retailers, international distributors, and directly to our global consumers through our DTC business, which is comprised of our e-commerce websites and retail stores. We seek to differentiate our brands and products by offering diverse lines that emphasize authenticity, functionality, quality, and comfort, and products tailored to a variety of activities, seasons, and demographic groups. All of our products are manufactured by independent third-party manufacturers.

Financial Highlights

Consolidated financial performance highlights for the nine months ended December 31, 2023 (current fiscal year), compared to the prior period, were as follows:

Net sales increased 17.4% to $3,328,005.
Channel
Wholesale channel net sales increased 10.3% to $1,887,756.
DTC channel net sales increased 28.2% to $1,440,249.
Geography
Domestic net sales increased 16.1% to $2,215,957.
International net sales increased 20.0% to $1,112,048.
Gross margin increased 510 basis points to 55.5%.
Income from operations increased 43.2% to $783,252.
Diluted earnings per share increased 52.2% to $24.20 per share.

Trends and Uncertainties Impacting Our Business and Industry

We expect our business and industry will continue to be impacted by several important trends and uncertainties, including the following:

Supply Chain

To support our growing business, we continue to expand our network of global warehouses, DCs, and 3PLs, while diversifying and increasing the number of third-party manufacturers we engage, which has resulted in higher costs in the current fiscal year. We expect to continue to invest in and build upon these infrastructure capabilities to continue meeting customer and consumer demand, which may result in higher costs in future periods.

21

Brand and Omni-Channel Strategy

We remain focused on increasing global consumer awareness and adoption of the HOKA brand, which has continued to positively impact our financial results and seasonality trends. Our efforts to drive HOKA brand performance are primarily focused on launching innovative and diverse product offerings and global marketing campaigns to drive brand awareness, further expanding the HOKA brand presence through our DTC channel, and distribution management.

Our ongoing global marketplace management strategies continue to drive UGG and HOKA brand awareness, as well as consumer acquisition and retention by building brand acceptance and heat through localized marketing investments.

Our long-term growth strategy remains focused on building our DTC channel to represent an increased portion of our total net sales, as well as prioritizing consumer experience to drive increases in acquisition and retention to sustain strong market positions and a high level of demand for our brands, which has benefited gross margins in the current fiscal year.

Gross margins for the UGG brand in the current fiscal year have benefited from favorable full-priced selling, including from selective price increases on popular UGG brand styles. While gross margins continue to be an area of strategic focus, these results may not repeat in future periods.

As we continue to focus on effective resource allocation and the execution of our long-term objectives, we intend to divest the Sanuk brand.

Refer to Part I, Item 1A, “Risk Factors,” of our 2023 Annual Report for detailed information on the risks and uncertainties that may cause our actual results to differ materially from our expectations.

Reportable Operating Segment Overview

Our six reportable operating segments include the worldwide wholesale operations of the UGG brand, HOKA brand, Teva brand, Sanuk brand, and Other brands (primarily consisting of the Koolaburra brand), as well as DTC. Information reported to the CODM, who is our CEO, President, and PEO, is organized into these reportable operating segments and is consistent with how the CODM evaluates our performance and allocates resources.

UGG Brand. The UGG brand is one of the most iconic and recognized brands in our industry, which highlights our successful track record of building niche brands into lifestyle and fashion market leaders. With loyal consumers around the world, the UGG brand has proven to be a highly resilient line of premium footwear, apparel, and accessories with expanded product offerings and a growing global audience that appeals to a broad demographic.

HOKA Brand. The HOKA brand is an authentic premium line of year-round performance footwear that offers enhanced cushioning and inherent stability with minimal weight, as well as apparel and accessories. Originally designed for ultra-runners, the brand now appeals to world champions, taste makers, and everyday athletes. Strong marketing and strategic marketplace presence has fueled both domestic and international sales growth of the HOKA brand, which has quickly become a leading brand within run and outdoor specialty wholesale accounts and is growing within selective key accounts. As a result, the HOKA brand is bolstering its net sales, which continue to increase as a percentage of our aggregate net sales and positively impact seasonality trends.

Teva Brand. The Teva brand created the very first sport sandal when it was founded in the Grand Canyon in 1984. Since then, the Teva brand has grown into a multi-category modern outdoor lifestyle brand offering a range of performance, casual, and trail lifestyle products, and has emerged as a leader in footwear sustainability observed through recent growth fueled by young and diverse consumers passionate for the outdoors and the planet.

Sanuk Brand. The Sanuk brand originated in Southern California surf culture and has emerged as a lifestyle brand with a presence in the relaxed casual shoe and sandal categories with a focus on innovation in comfort and sustainability. The Sanuk brand’s use of unexpected materials and unconventional construction, combined with its fun and playful branding, are key elements of the brand’s identity.

22

Other Brands. Other brands consist primarily of the Koolaburra brand. The Koolaburra brand is a casual footwear fashion line that uses plush materials and is intended to target the value-oriented consumer in order to complement the UGG brand offering.

Refer to the “Reportable Operating Segment Overview,” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2023 Annual Report for further discussion of our outlook on consumer demand drivers for our UGG, HOKA, Teva, Sanuk, and Other brands products.

Direct-to-Consumer. Our DTC business encompasses all of our brands and is comprised of our e-commerce websites and retail stores, which are intertwined and interdependent in an omni-channel marketplace. We believe many of our consumers interact with both our e-commerce websites and retail stores before making purchasing decisions in store and online.

Our net sales related to the businesses and stores outlined below are recorded in our DTC reportable operating segment, except for net sales from our partner retail stores, which are recorded in our brands’ respective wholesale reportable operating segments.

E-Commerce Business. Our global e-commerce business provides us with an opportunity to directly engage and connect with our consumers and communicate a consistent message that promotes our brands’ promises and awareness of key brand initiatives, offers targeted information to specific consumer demographics, and drives consumers to our retail stores.

Retail Business. Our global Company-owned mono-branded retail stores are predominantly UGG brand concept stores and UGG brand outlet stores, as well as HOKA brand stores, which we continue to launch in strategic locations. Through our outlet stores, we sell some of our discontinued styles from prior seasons, full price in-line products, as well as products made specifically for the outlet stores.

Flagship Stores. Global concept stores include flagship stores, which are primarily located in major tourist locations. These are premium mono-branded stores in key markets designed to showcase UGG and HOKA brand products. Flagship stores provide broader product offerings and generate greater traffic that enhance our interaction with consumers and increase brand loyalty.

Shop-in-Shop Stores (SIS). SIS are concept stores that are operated by us or non-employees within a department store, which we lease from the store owner by paying a percentage of store sales and for which we own the inventory.

Partner Retail Stores. Represent UGG and HOKA mono-branded stores which are wholly owned and operated by third parties and not included in the total count of our global Company-owned retail stores.

Use of Non-GAAP Financial Measures

Throughout this Quarterly Report we provide certain financial information on a constant currency basis, excluding the effect of foreign currency exchange rate fluctuations, which we disclose in addition to certain financial measures calculated and presented in accordance with US GAAP (non-GAAP financial measures). We provide these non-GAAP financial measures to provide information that may assist investors in understanding our results of operations and assessing our prospects for future performance. However, the information presented on a constant currency basis, as we present such information, may not necessarily be comparable to similarly titled information, presented by other companies, and may not be appropriate measures for comparing our performance relative to other companies. For example, to calculate our constant currency information, we calculate the current period financial information using the foreign currency exchange rates that were in effect during the previous comparable period, excluding the effects of foreign currency exchange rate hedges and remeasurements in the condensed consolidated financial statements. Further, we report comparable DTC sales on a constant currency basis for DTC operations that were open throughout the current and prior reporting periods, and we may adjust prior reporting periods to conform to current year accounting policies. These non-GAAP financial measures are not intended to represent and should not be considered more meaningful measures than, or alternatives to, measures of financial or operating performance as determined in accordance with US GAAP. Constant currency measures should not be considered in isolation as an alternative to US dollar measures that reflect current period foreign currency exchange
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rates or to other financial or operating measures presented in accordance with US GAAP. We believe evaluating certain financial and operating measures on a constant currency basis is important as it excludes the impact of foreign currency exchange rate fluctuations that are not indicative of our core results of operations and are largely outside of our control.

Seasonality

Our business is seasonal, with the highest percentage of UGG and Koolaburra brand net sales occurring in the quarters ending September 30th and December 31st and the highest percentage of Teva and Sanuk brand net sales occurring in the quarters ending March 31st and June 30th. Net sales for the HOKA brand occur more evenly throughout the year, reflecting the brand’s year-round performance product offerings. Due to the magnitude of the UGG brand relative to our other brands, our aggregate net sales in the quarters ending September 30th and December 31st have historically significantly exceeded our aggregate net sales in the quarters ending March 31st and June 30th. However, as we continue to take steps to diversify and expand our product offerings by creating more year-round styles, and as net sales of the HOKA brand continue to increase as a percentage of our aggregate net sales, we have seen and expect to continue to see the impact from seasonality decrease over time.

Results of Operations

Three Months Ended December 31, 2023, Compared to Three Months Ended December 31, 2022. Results of operations were as follows:
 Three Months Ended December 31,
 20232022Change
 Amount%Amount%Amount%
Net sales$1,560,307 100.0 %$1,345,640 100.0 %$214,667 16.0 %
Cost of sales643,738 41.3 633,111 47.0 (10,627)(1.7)
Gross profit916,569 58.7 712,529 53.0 204,040 28.6 
Selling, general, and administrative expenses428,670 27.4 349,869 26.0 (78,801)(22.5)
Income from operations487,899 31.3 362,660 27.0 125,239 34.5 
Total other income, net(11,154)(0.7)(2,644)(0.1)8,510 321.9 
Income before income taxes499,053 32.0 365,304 27.1 133,749 36.6 
Income tax expense109,134 7.0 86,642 6.4 (22,492)(26.0)
Net income389,919 25.0 278,662 20.7 111,257 39.9 
Total other comprehensive income, net of tax7,077 0.4 12,086 0.9 (5,009)(41.4)
Comprehensive income$396,996 25.4 %$290,748 21.6 %$106,248 36.5 %
Net income per share
Basic$15.19 $10.55 $4.64 44.0 %
Diluted$15.11 $10.48 $4.63 44.2 %

Net Sales. Net sales by location, and by brand and channel were as follows:
Three Months Ended December 31,
20232022Change
AmountAmountAmount%
Net sales by location
Domestic$1,048,389 $906,843 $141,546 15.6 %
International511,918 438,797 73,121 16.7 
Total$1,560,307 $1,345,640 $214,667 16.0 %
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Three Months Ended December 31,
20232022Change
AmountAmountAmount%
Net sales by brand and channel   
UGG brand   
Wholesale$402,876 $374,082 $28,794 7.7 %
Direct-to-Consumer668,978 556,366 112,612 20.2 
Total1,071,854 930,448 141,406 15.2 
HOKA brand
Wholesale252,222 223,872 28,350 12.7 
Direct-to-Consumer177,051 128,264 48,787 38.0 
Total429,273 352,136 77,137 21.9 
Teva brand    
Wholesale20,449