DECKERS OUTDOOR CORP [DECK] Filings

10-Q 1 deck-20240930.htm 10-Q deck-20240930

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 September 30, 2024


☐			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)


Delaware			95-3015862
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	DECK	New 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 filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller 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 October 11, 2024, the number of outstanding shares of the registrant’s common stock, par value $0.01 per share, was 151,921,988.

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

For the Three and Six Months Ended September 30, 2024, and 2023

TABLE OF CONTENTS


		Page

	Cautionary Note Regarding Forward-Looking Statements	2

	PART I - Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37

	PART II - Other Information
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Mine Safety Disclosures	*
Item 5.	Other Information	40
Item 6.	Exhibits	41

	Signatures	42

*Not applicable.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for our second fiscal quarter ended September 30, 2024 (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:

•changes in consumer preferences impacting our brands and products, and the footwear and fashion industries;

•global economic trends, including foreign currency exchange rate fluctuations, changes in interest rates, inflationary pressures, changes in commodity pricing, and recessionary concerns;

•the ability to effectively compete in a highly competitive footwear, apparel, and accessories industry;

•our business, operating, investing, capital allocation, marketing, and financing plans and strategies;

•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;

•trends, seasonality, and weather impacting the demand for our products and the purchasing behavior of wholesale partners and consumers;

•changes to the geographic and seasonal mix of our brands and products;

•availability of materials and manufacturing capacity, and reliability of overseas production and storage;

•changes to our product distribution strategies, including product allocation and segmentation strategies;

•the impact of our efforts to continue to advance sustainable and socially conscious business operations, and to meet the expectations that our investors and other stakeholders have with respect to our environmental, social and governance practices;

•the effects of climate change, natural disasters, and the impacts of public health issues, and the related changes in the regulatory environment and consumer demand to mitigate these effects, and the resulting impact on our business and the businesses of our customers, consumers, suppliers, and business partners;

•expansion of our brands, product offerings, and investments in our Direct-to-Consumer (DTC) capabilities, including our distribution facilities, e-commerce websites, and our retail store footprint;

•global geopolitical tensions, including the impact of economic sanctions on our transportation and energy costs;

•security breach or other disruption to our information technology (IT) systems, or those of our vendors;

•our interpretation of applicable global tax regulations and changes in tax laws and audits 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), which are available free of charge on the SEC’s website at www.sec.gov and our website at ir.deckers.com. 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.

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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), Koolaburra by UGG® (Koolaburra), and AHNU® (AHNU) are some of our 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.

On September 13, 2024, we effected a six-for-one forward stock split of our common stock and a proportional increase in our authorized shares of common stock, without changing the par value of $0.01 per share. The common stock commenced trading on a post-stock split adjusted basis on September 17, 2024. Prior period results included in this Quarterly Report, including per share and share data, as well as stockholders’ equity balances, have been retroactively adjusted, as applicable, to reflect the effectiveness of the stock split. Refer to Note 1, “General,” for further information regarding the stock split.

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ITEM 1. FINANCIAL STATEMENTS

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(dollar and share data amounts in thousands, except par value)


	September 30, 2024		March 31, 2024
ASSETS			(AUDITED)
Cash and cash equivalents	$	1,225,681	$	1,502,051
Trade accounts receivable, net of allowances ($49,416 and $27,331 as of September 30, 2024, and March 31, 2024, respectively)	537,137		296,565
Inventories	777,891		474,311
Prepaid expenses	46,548		34,284
Other current assets	80,216		92,713
Income tax receivable	33,821		43,559

Total current assets	2,701,294		2,443,483
Property and equipment, net of accumulated depreciation ($378,588 and $349,138 as of September 30, 2024, and March 31, 2024, respectively) (Note 11)	319,580		302,122
Operating lease assets	217,401		225,669
Goodwill	13,990		13,990
Other intangible assets, net of accumulated amortization ($25,152 and $91,314 as of September 30, 2024, and March 31, 2024, respectively)	15,906		27,083
Deferred tax assets, net	73,322		72,584
Other assets	56,643		50,648
Total assets	$	3,398,136	$	3,135,579
LIABILITIES AND STOCKHOLDERS’ EQUITY

Trade accounts payable	$	536,581	$	378,503
Accrued payroll	60,091		123,653
Operating lease liabilities	48,662		53,581
Other accrued expenses	138,768		106,785
Income tax payable	75,920		52,338
Value added tax payable	15,618		5,133

Total current liabilities	875,640		719,993
Long-term operating lease liabilities	209,961		213,298
Income tax liability	37,662		52,470
Other long-term liabilities	51,634		42,350
Total long-term liabilities	299,257		308,118

Commitments and contingencies (Note 5)

Stockholders’ equity
Common stock (par value $0.01 per share; 750,000 shares authorized; shares issued and outstanding of 152,008 and 153,554 as of September 30, 2024, and March 31, 2024, respectively)	1,520		1,536
Additional paid-in capital	252,212		243,050
Retained earnings	2,013,265		1,913,615
Accumulated other comprehensive loss (Note 8)	(43,758)		(50,733)
Total stockholders’ equity	2,223,239		2,107,468
Total liabilities and stockholders’ equity	$	3,398,136	$	3,135,579

See accompanying notes to the condensed consolidated financial statements.

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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 September 30,				Six Months Ended September 30,
	2024		2023		2024		2023
Net sales (Note 2, Note 10, and Note 11)	$	1,311,320	$	1,091,907	$	2,136,667	$	1,767,698
Cost of sales	578,048		508,888		933,395		838,255
Gross profit	733,272		583,019		1,203,272		929,443
Selling, general, and administrative expenses	428,186		358,402		765,379		634,090
Income from operations (Note 10)	305,086		224,617		437,893		295,353
Interest income	(14,797)		(10,089)		(32,049)		(21,376)
Interest expense	1,151		1,011		2,182		2,016
Other income, net	(180)		(622)		(305)		(968)
Total other income, net	(13,826)		(9,700)		(30,172)		(20,328)
Income before income taxes	318,912		234,317		468,065		315,681
Income tax expense (Note 4)	76,591		55,770		110,119		73,582
Net income	242,321		178,547		357,946		242,099

Other comprehensive income (loss), net of tax
Unrealized (loss) gain on cash flow hedges	(4,322)		3,403		(3,466)		3,755
Foreign currency translation gain (loss)	15,097		(5,520)		10,441		(14,171)
Total other comprehensive income (loss), net of tax	10,775		(2,117)		6,975		(10,416)
Comprehensive income	$	253,096	$	176,430	$	364,921	$	231,683
Net income per share
Basic	$	1.59	$	1.14	$	2.35	$	1.55
Diluted	$	1.59	$	1.14	$	2.34	$	1.54
Weighted-average common shares outstanding (Note 9)
Basic	152,240		156,188		152,552		156,586
Diluted	152,778		157,070		153,127		157,503

See accompanying notes to the condensed consolidated financial statements.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(amounts in thousands)


	Six Months Ended September 30, 2024
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balance, March 31, 2024	153,554	$	1,536	$	243,050	$	1,913,615	$	(50,733)	$	2,107,468
Stock-based compensation	2	—		8,231		—		—		8,231
Shares issued upon vesting	6	—		—		—		—		—
Exercise of stock options	54	1		600		—		—		601

Shares withheld for taxes	—	—		(495)		—		—		(495)
Repurchases of common stock (Note 8)	(1,062)	(11)		—		(151,956)		—		(151,967)
Excise taxes related to repurchases of common stock	—	—		—		(1,181)		—		(1,181)
Net income	—	—		—		115,625		—		115,625
Total other comprehensive loss	—	—		—		—		(3,800)		(3,800)
Balance, June 30, 2024	152,554	1,526		251,386		1,876,103		(54,533)		2,074,482
Stock-based compensation	2	—		11,657		—		—		11,657
Shares issued upon vesting	129	1		1,637		—		—		1,638
Exercise of stock options	9	—		93		—		—		93

Shares withheld for taxes	—	—		(12,561)		—		—		(12,561)
Repurchases of common stock (Note 8)	(686)	(7)		—		(104,316)		—		(104,323)
Excise taxes related to repurchases of common stock	—	—		—		(843)		—		(843)
Net income	—	—		—		242,321		—		242,321
Total other comprehensive income	—	—		—		—		10,775		10,775
Balance, September 30, 2024	152,008	$	1,520	$	252,212	$	2,013,265	$	(43,758)	$	2,223,239

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(amounts in thousands)

(continued)


	Six Months Ended September 30, 2023
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balance, March 31, 2023	157,054	$	1,571	$	230,841	$	1,572,356	$	(39,035)	$	1,765,733
Stock-based compensation	4	—		6,877		—		—		6,877
Shares issued upon vesting	16	—		—		—		—		—
Exercise of stock options	47	—		548		—		—		548

Shares withheld for taxes	—	—		(698)		—		—		(698)
Repurchases of common stock (Note 8)	(314)	(3)		—		(25,466)		—		(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, 2023	156,807	1,568		237,568		1,610,319		(47,334)		1,802,121
Stock-based compensation	3	—		9,802		—		—		9,802
Shares issued upon vesting	144	1		1,164		—		—		1,165
Exercise of stock options	46	—		533		—		—		533

Shares withheld for taxes	—	—		(7,759)		—		—		(7,759)
Repurchases of common stock (Note 8)	(2,082)	(21)		—		(185,448)		—		(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, 2023	154,918	$	1,548	$	241,308	$	1,601,725	$	(49,451)	$	1,795,130

See accompanying notes to the condensed consolidated financial statements.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)


	Six Months Ended September 30,
	2024		2023
OPERATING ACTIVITIES
Net income	$	357,946	$	242,099
Reconciliation of net income to net cash provided by (used in) operating activities:
Depreciation, amortization, and accretion	33,750		25,138

Amortization on cloud computing arrangements	1,082		1,131


Bad debt expense	8,845		6,905
Deferred tax expense (benefit)	1,295		(1,266)

Stock-based compensation	19,916		16,719


Loss on disposal of assets	2,811		145


Impairment of operating lease and other long-lived assets	—		793




Changes in operating assets and liabilities:
Trade accounts receivable, net	(249,306)		(193,071)
Inventories	(306,855)		(193,480)
Prepaid expenses and other current assets	182		(35,269)
Income tax receivable	9,737		(8,488)
Net operating lease assets and lease liabilities	(778)		8,909
Other assets	(7,018)		(1,886)
Trade accounts payable	155,774		215,374

Other accrued expenses	(21,506)		(1,479)
Income tax payable	23,582		44,171
Other long-term liabilities	(7,357)		(4,917)
Net cash provided by operating activities	22,100		121,528

INVESTING ACTIVITIES


Purchases of property and equipment	(45,367)		(57,436)
Proceeds from sale of assets	10,925		34





Net cash used in investing activities	(34,442)		(57,402)

FINANCING ACTIVITIES



Proceeds from issuance of stock	1,638		1,165
Proceeds from exercise of stock options	694		1,081
Repurchases of common stock	(256,290)		(210,938)
Cash paid for shares withheld for taxes	(13,056)		(8,457)

Net cash used in financing activities	(267,014)		(217,149)
Effect of foreign currency exchange rates on cash and cash equivalents	2,986		(5,721)
Net change in cash and cash equivalents	(276,370)		(158,744)
Cash and cash equivalents at beginning of period	1,502,051		981,795
Cash and cash equivalents at end of period	$	1,225,681	$	823,051

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)

(continued)


	Six Months Ended September 30,
	2024		2023
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during the period
Income taxes	$	90,833	$	47,150
Interest	798		955
Operating leases	33,269		31,370
Non-cash investing activities
Changes in trade accounts payable and other accrued expenses for purchases of property and equipment	2,309		(12,957)
Accrued for asset retirement obligation assets related to leasehold improvements	1,372		718
Leasehold improvements acquired through tenant allowances	—		8,127


Non-cash financing activities


Accrued excise taxes related to repurchases of common stock	2,024		1,816

See accompanying notes to the condensed consolidated financial statements.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or 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 five proprietary brands include the UGG, HOKA, Teva, Koolaburra, and AHNU brands. Refer to the section titled “Reportable Operating Segments,” below within this Note 1, “General,” for more information on the sale of the Sanuk brand during the three months ended September 30, 2024.

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 business and retail stores. Independent third-party contractors manufacture all of the Company’s products.

Seasonality. 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 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 September 30, 2024, and for the three and six months ended September 30, 2024 (current period), and 2023 (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, 2024, 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, 2024 (prior fiscal year), which was filed with the SEC on May 24, 2024 (2024 Annual Report).

Forward Stock Split and Authorized Share Increase. On September 13, 2024, the Company (i) effected a six-for-one forward stock split of its common stock and preferred stock (the stock split), and (ii) increased the number of authorized shares of its common stock from 125,000,000 to 750,000,000, and the number of authorized shares of its capital stock from 130,000,000 to 755,000,000 (the authorized share increase). The stock split and the authorized share increase were effected through the filing of an amendment to the Company’s Amended and Restated Certificate of Incorporation (Charter Amendment) with the Secretary of State of the State of Delaware, which was approved by the Company’s stockholders at the Annual Meeting of Stockholders held on September 9, 2024 (Annual Meeting). The Charter Amendment did not provide for any increase in the number of authorized shares of preferred stock, which remains at 5,000,000 shares. There are no shares of preferred stock outstanding as of September 30, 2024, and March 31, 2024. As a result of the stock split, every one share of common stock outstanding on September 6, 2024, the record date for the stock split, was automatically split into six shares of common stock. The common stock commenced trading on a post-stock split adjusted basis on September 17, 2024.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or share data)

All prior period results included in the condensed consolidated financial statements and the related notes within this Quarterly Report have been retroactively adjusted to reflect the effectiveness of the stock split and the authorized share increase. Specifically, all share and per share amounts have been adjusted, including: (i) the number of shares authorized and outstanding on the condensed consolidated balance sheets, (ii) the weighted-average common shares outstanding and the associated earnings per share amounts in the condensed consolidated statements of comprehensive income, as well as the weighted average common shares outstanding disaggregated in Note 9, “Basic and Diluted Shares,” (iii) the number of shares underlying stock awards and the weighted-average grant date fair value of annual stock awards in Note 6, “Stock-Based Compensation,” and (iv) the total number of shares repurchased and the weighted average price per share paid in Note 8, “Stockholders’ Equity.” Further, as there was no change to par value, an amount equal to the par value of the increased shares resulting from the stock split for shares issued was reclassified to common stock from additional paid-in capital, and for share repurchases was reclassified to retained earnings from common stock, in the condensed consolidated balance sheets and the condensed consolidated statements of stockholders’ equity.

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, 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.

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 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. As of September 30, 2024, the Company’s five reportable operating segments include the worldwide wholesale operations of the UGG brand, HOKA brand, Teva brand, and Other brands (primarily consisting of the Koolaburra brand, as well as the recently launched AHNU brand), as well as DTC (collectively, the Company’s reportable operating segments).

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or share data)

During the three months ended September 30, 2024, the Company entered into an agreement pursuant to which the buyer agreed to purchase the Sanuk brand and certain related assets which was completed on August 15, 2024 (Sanuk Brand Sale Date). The Company determined that the divestiture of the Sanuk brand did not represent a strategic shift that had or will have a major effect on the condensed consolidated results of operations, and therefore results of this business were not classified as discontinued operations. The Company’s financial results for its reportable operating segments present the former Sanuk brand through the Sanuk Brand Sale Date for the current period. Refer to Note 10, “Reportable Operating Segments,” for further information on the Company’s reportable operating segments.

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 and its impact on the Company:

Standard

Description

Impact 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 of 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 prospective 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.

This ASU did not have a material impact on the recognition, measurement, or presentation of supplier finance programs in the Company’s annual and interim consolidated financial statements. However, it did result in additional disclosure.

Refer to Note 11, “Supplier Finance Program,” for further information on the Company’s SFP key terms and outstanding balances recorded in the condensed consolidated balance sheets.

The Company plans to adopt the annual roll forward requirement beginning with its fiscal year (FY) ending March 31, 2025, and does not expect the adoption to have a material impact on its consolidated financial statements.

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 adoption:

Standard

Description

Planned Period 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 FY 2025
and
Q1 FY 2026

The Company is currently evaluating the impact of the adoption of this ASU on its disclosures in 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 disclosures in its annual and interim consolidated financial statements.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or share data)

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 Asset		Refund Liability
Balance, March 31, 2024	$	13,866	$	(55,327)
Net additions to sales return liability (1)	32,846		(123,196)
Actual returns	(26,056)		114,513
Balance, September 30, 2024	$	20,656	$	(64,010)


	Recovery Asset		Refund Liability
Balance, March 31, 2023	$	15,685	$	(45,322)
Net additions to sales return liability (1)	24,298		(106,824)
Actual returns	(24,192)		97,969
Balance, September 30, 2023	$	15,791	$	(54,177)

(1) 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.

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:


	Six Months Ended September 30,
	2024		2023
Beginning balance	$	(17,586)	$	(13,144)
Redemptions and expirations for loyalty certificates and points recognized in net sales	11,103		10,022
Deferred revenue for loyalty points and certificates issued	(13,536)		(11,269)
Ending balance	$	(20,019)	$	(14,391)

Deferred Revenue. Activity related to deferred revenue was as follows:


	Six Months Ended September 30,
	2024		2023
Beginning balance	$	(9,591)	$	(13,448)
Additions of customer cash payments	(50,829)		(33,089)
Revenue recognized	36,332		30,032
Ending balance	$	(24,088)	$	(16,505)

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or share data)

Refer to Note 2, “Revenue Recognition,” in the Company’s consolidated financial statements in Part IV of the 2024 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 2024 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 of		Measured Using
	September 30, 2024		Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money-market funds	$	842,807	$	842,807	$	—	$	—
Other current assets:
Designated Derivative Contracts asset	103		—		103		—
Non-Designated Derivative Contracts asset	45		—		45		—
Other assets:
Non-qualified deferred compensation asset	16,406		16,406		—		—
Total assets measured at fair value	$	859,361	$	859,213	$	148	$	—

Liabilities:
Other accrued expenses:
Designated Derivative Contracts liability	$	(4,688)	$	—	$	(4,688)	$	—
Non-qualified deferred compensation liability	(1,200)		(1,200)		—		—
Other long-term liabilities:
Non-qualified deferred compensation liability	(24,358)		(24,358)		—		—

Total liabilities measured at fair value	$	(30,246)	$	(25,558)	$	(4,688)	$	—


	As of		Measured Using
	March 31, 2024		Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money-market funds	$	1,152,083	$	1,152,083	$	—	$	—



Other assets:
Non-qualified deferred compensation asset	13,553		13,553		—		—
Total assets measured at fair value	$	1,165,636	$	1,165,636	$	—	$	—

Liabilities:
Other accrued expenses:
Non-qualified deferred compensation liability	$	(408)	$	(408)	$	—	$	—

Other long-term liabilities:
Non-qualified deferred compensation liability	(16,229)		(16,229)		—		—

Total liabilities measured at fair value	$	(16,637)	$	(16,637)	$	—	$	—

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or share data)

The fair value of Designated Derivative Contracts and Non-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 and Non-Designated Derivative Contracts.

NOTE 4. INCOME TAXES

Income tax expense and the effective income tax rate were as follows:


	Three Months Ended September 30,						Six Months Ended September 30,
	2024			2023			2024			2023
Income tax expense	$	76,591		$	55,770		$	110,119		$	73,582
Effective income tax rate	24.0		%	23.8		%	23.5		%	23.3		%

The tax provisions during the three and six months ended September 30, 2024, and 2023, 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, 2025, and March 31, 2024, respectively, and were adjusted for discrete items that occurred within the periods presented above. During the current period, the net increase in the effective income tax rate, compared to the prior period, was primarily due to the effects of discrete items, including a change in valuation allowance on tax attributes and a change in return-to-provision differences, partially offset by net discrete tax benefits for stock-based compensation.

Recent Tax Law Changes. The Organization for Economic Co-operation and Development (commonly known as OECD) has released Pillar Two model rules introducing a 15% global minimum tax rate for large multinational corporations to be effective starting with tax periods ending in 2024. Various jurisdictions the Company operates in have enacted or plan to enact legislation beginning in calendar year 2024 or in subsequent years. The enactment of Pillar Two legislation did not have a material effect on the Company’s condensed consolidated statements of comprehensive income during the current period. The Company will continue to monitor and reflect the impact of such legislative changes in future periods, as each of the respective jurisdictions enact the legislation and the legislation becomes effective.

NOTE 5. COMMITMENTS AND CONTINGENCIES

Leases. The Company primarily leases retail stores, showrooms, offices, and distribution facilities under operating lease contracts. There were no material changes outside the ordinary course of business during the six months ended September 30, 2024, to the operating lease terms disclosed in the 2024 Annual Report.

Supplemental information for amounts presented in the condensed consolidated statements of cash flows related to operating leases, were as follows:


	Three Months Ended September 30,				Six Months Ended September 30,
	2024		2023		2024		2023
Non-cash operating activities (1)
Operating lease assets obtained in exchange for lease liabilities	$	3,762	$	13,152	$	16,098	$	34,739
Reductions to operating lease assets for reductions to lease liabilities	(15)		(7,606)		(1,121)		(7,671)

(1) Amounts disclosed include non-cash additions or reductions resulting from lease remeasurements, as well as reductions for tenant improvement allowances.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or share data)

Operating lease liabilities recorded in the condensed consolidated balance sheets exclude an aggregate of $15,734 of undiscounted minimum lease payments due pursuant to leases signed but not yet commenced during the six months ended September 30, 2024, and through October 11, 2024, primarily for a new HOKA brand retail store lease in Paris that the Company expects will be operational during the quarter ending December 31, 2024.

Purchase Obligations. There were no material changes outside the ordinary course of business during the six months ended September 30, 2024, to purchase obligations disclosed in the 2024 Annual Report.

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.

Refer to Note 7, “Commitments and Contingencies,” in the Company’s consolidated financial statements in Part IV of the 2024 Annual Report for further information on the Company’s contractual obligations and commitments.

NOTE 6. STOCK-BASED COMPENSATION

Stock Incentive Plans. In September 2015, the Company’s stockholders approved the 2015 Stock Incentive Plan (2015 SIP), which initially reserved 7,650,000 shares of the Company’s common stock for issuance to employees, directors, consultants, independent contractors, and advisors. The 2015 SIP provided for the issuance of a variety of stock-based compensation awards, including time-based restricted stock units (RSUs), performance-based restricted stock units (PSUs), long-term incentive plan PSUs (LTIP PSUs), stock appreciation rights, stock bonuses, incentive stock options (ISOs), and non-qualified stock options (NQSOs). Refer to Note 8, “Stock-Based Compensation,” in the Company’s consolidated financial statements in Part IV of the 2024 Annual Report for additional information about the terms of the 2015 SIP.

In September 2024, the Company’s stockholders approved the 2024 Stock Incentive Plan (2024 SIP), which is intended to replace the 2015 SIP. Consistent with the 2015 SIP, the primary purpose of the 2024 SIP is to encourage ownership in the Company by key personnel, whose long-term service is considered essential to the Company’s continued success. As a result of the stock split, the number of shares of common stock reserved for issuance under the 2024 SIP and the number of shares underlying outstanding equity awards and the exercise price of stock options were adjusted proportionately.

The 2024 SIP initially reserves 7,800,000 shares of the Company’s common stock for issuance to employees, directors, consultants, and independent contractors, less one share for every one share granted under the 2015 SIP after March 31, 2024 and prior to September 9, 2024, the effective date of the 2024 SIP, subject to an increase from the return of shares under the 2015 SIP as described below. The terms of the 2024 SIP are substantially similar to the terms of the 2015 SIP. The 2024 SIP provides for the issuance of a variety of stock-based compensation awards, including RSUs, PSUs, LTIP PSUs, stock appreciation rights, stock bonuses, ISOs, and NQSOs. The maximum aggregate number of shares that may be issued to employees under the 2024 SIP through the exercise of ISOs is 4,500,000.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or share data)

The Company will not grant any further equity awards under the 2015 SIP. Outstanding awards under the 2015 SIP will remain outstanding, unchanged and subject to the terms of the 2015 SIP and their respective award agreements. Shares subject to awards that are forfeited, expire or are otherwise terminated without shares being issued, or shares withheld to pay the exercise price of an award or to satisfy tax withholding obligations, including shares subject to awards granted under the 2015 SIP that are outstanding after March 31, 2024, will be returned to the pool of shares available for grant and issuance under the 2024 SIP. As of September 30, 2024, 7,822,608 shares of common stock remained available for future issuance under the 2024 SIP, subject to adjustment for future stock splits, stock dividends, and similar changes in capitalization.

Annual Stock Awards. The Company granted the following awards under the 2015 SIP during the periods presented:


	Six Months Ended September 30,
	2024			2023
Award Type	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Shares	Weighted-Average Grant Date Fair Value
RSUs	144,462	$	157.94	212,226	$	91.65
LTIP PSUs (1)	68,556	171.82		125,076	105.65

(1) The amounts granted are at the target performance level under the terms of the applicable LTIP PSUs.

During the six months ended September 30, 2024, with the exception of the RSU and LTIP PSU awards summarized above, no additional material awards were granted under the 2015 SIP.

For the LTIP PSUs granted during fiscal years ending March 31, 2025, 2024, and 2023, the Company expects to exceed the minimum threshold target performance criteria based on the Company’s current long-range forecast as of September 30, 2024. Refer to Note 8, “Stock-Based Compensation,” in the Company’s consolidated financial statements in Part IV of the 2024 Annual Report for further information on the Company’s prior grants, including terms of each grant under the 2015 SIP.

There were no awards granted under the 2024 SIP during the six months ended September 30, 2024.

Employee Stock Purchase Plans. In September 2015, the Company’s stockholders approved the 2015 Employee Stock Purchase Plan (2015 ESPP), which authorized 6,000,000 shares of the Company’s common stock for sale to eligible employees using after-tax payroll deductions. Following the issuance of shares under the 2015 ESPP to employees who are participating in the offering period ending February 28, 2025, the 2015 ESPP will be terminated, and no new offering periods under the 2015 ESPP will commence thereafter. Refer to Note 8, “Stock-Based Compensation,” in the Company’s consolidated financial statements in Part IV of the 2024 Annual Report for additional information related to the terms of the 2015 ESPP.

In September 2024, the Company’s stockholders approved the 2024 Employee Stock Purchase Plan (2024 ESPP), which is intended to replace the 2015 ESPP. The 2024 ESPP reserves 6,000,000 shares of the Company’s common stock for sale to eligible employees. The terms of the 2024 ESPP are substantially similar to the terms of the 2015 ESPP. Each offering period under the 2024 ESPP is anticipated to run for approximately six months with purchases occurring on the last day of each offering period at a 15% discount to the closing price on that date. The first offering period is expected to commence on March 1, 2025.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or share data)

Unrecognized Stock-Based Compensation. Total remaining unrecognized stock-based compensation as of September 30, 2024, related to non-vested awards that the Company considers probable to vest and the weighted-average period over which the cost is expected to be recognized in future periods, is as follows:


Award Type	Unrecognized Stock-Based Compensation		Weighted-Average Remaining Vesting Period (Years)
RSUs	$	30,176	1.4

LTIP PSUs	26,295		1.2
Total	$	56,471

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 2024 Annual Report for further information regarding the Company’s derivative instruments accounting policy.

The Company also enters into derivative contracts that are not designated as cash flow hedges (Non-Designated Derivative Contracts), to offset a portion of the anticipated gains and losses on certain intercompany balances until the expected time of repayment. Changes in the fair value of Non-Designated Derivative Contracts are recorded in SG&A expenses in the condensed consolidated statements of comprehensive income. The changes in fair value for these contracts are generally offset by the remeasurement gains or losses associated with the underlying foreign currency-denominated intercompany balances, which are recorded in SG&A expenses in the condensed consolidated statements of comprehensive income.

As of September 30, 2024, the Company has the following derivative contracts recorded at fair value in the condensed consolidated balance sheets:


	Designated Derivative Contracts		Non-Designated Derivative Contracts		Total
Notional value	$	191,009	$	11,144	$	202,153
Fair value recorded in other current assets	103		45		148
Fair value recorded in other accrued expenses	(4,688)		—		(4,688)

As of September 30, 2024, four counterparties hold the Company’s outstanding derivative contracts, all of which are expected to mature in the next six months. As of March 31, 2024, the Company had no outstanding derivative contracts.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or 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 September 30,				Six Months Ended September 30,
	2024		2023		2024		2023
(Loss) gain recorded in OCI	$	(5,488)	$	4,705	$	(4,356)	$	5,116
Reclassifications from AOCL into net sales	(228)		(170)		(228)		(149)
Income tax benefit (expense) in OCI	1,394		(1,132)		1,118		(1,212)
Total	$	(4,322)	$	3,403	$	(3,466)	$	3,755

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 September 30, 2024, the amount of unrealized gains on derivative contracts recorded in AOCL is expected to be reclassified into net sales within the next six 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 (Board) 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 September 30, 2024, the aggregate remaining approved amount under the stock repurchase program is $685,413. 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:


	Six Months Ended September 30,
	2024		2023
Total number of shares repurchased (1)	1,747,680		2,396,328
Weighted average price per share paid	$	146.65	$	88.03
Dollar value of shares repurchased (2) (3)	$	256,290	$	210,938

(1) All share repurchases were made pursuant to the Company’s stock repurchase program in open-market transactions.

(2) The dollar value of shares repurchased excludes the cost of broker commissions, excise taxes, and other costs.

(3) May not calculate on rounded dollars.

Subsequent to September 30, 2024, through October 11, 2024, the Company repurchased 85,960 shares at a weighted average price of $158.54 per share for $13,628 and had $671,785 remaining authorized under the stock repurchase program.

Accumulated Other Comprehensive Loss. The components within AOCL, net of tax, recorded in the condensed consolidated balance sheets, are as follows:


	September 30, 2024		March 31, 2024
Unrealized loss on cash flow hedges	$	(3,466)	$	—
Cumulative foreign currency translation loss	(40,292)		(50,733)
Total	$	(43,758)	$	(50,733)

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or 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 September 30,		Six Months Ended September 30,
	2024	2023	2024	2023
Basic	152,240,000	156,188,000	152,552,000	156,586,000
Dilutive effect of equity awards	538,000	882,000	575,000	917,000
Diluted	152,778,000	157,070,000	153,127,000	157,503,000

Excluded
RSUs	91,000	112,000	92,000	199,000
LTIP PSUs	422,000	700,000	422,000	700,000

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. Refer to Note 6, “Stock-Based Compensation,” within this Quarterly Report and to Note 8, “Stock-Based Compensation,” in the Company’s consolidated financial statements in Part IV of the 2024 Annual Report for further information on the Company’s equity incentive plans.

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 five reportable operating segments and is consistent with how the CODM evaluates performance and allocates resources. 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, 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.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or share data)

Reportable operating segment information, with a reconciliation to the condensed consolidated statements of comprehensive income, was as follows:


	Three Months Ended September 30,				Six Months Ended September 30,
	2024		2023		2024		2023
Net sales
UGG brand wholesale	$	512,401	$	451,841	$	654,954	$	573,386
HOKA brand wholesale	362,344		262,973		695,076		523,820
Teva brand wholesale	12,132		12,150		43,491		47,282
Sanuk brand wholesale (1)	1,895		3,348		6,328		9,818
Other brands wholesale	24,881		29,862		28,586		31,289
Direct-to-Consumer (1)	397,667		331,733		708,232		582,103
Total	$	1,311,320	$	1,091,907	$	2,136,667	$	1,767,698


	Three Months Ended September 30,				Six Months Ended September 30,
	2024		2023		2024		2023
Income (loss) from operations
UGG brand wholesale	$	195,494	$	165,902	$	233,924	$	182,768
HOKA brand wholesale	115,941		81,873		240,635		168,397
Teva brand wholesale	(1,216)		(647)		5,573		8,590
Sanuk brand wholesale (1)	(3,258)		(303)		(1,655)		456
Other brands wholesale	2,023		6,459		466		4,418
Direct-to-Consumer (1)	143,447		112,255		249,857		187,717
Unallocated overhead costs	(147,345)		(140,922)		(290,907)		(256,993)
Total	$	305,086	$	224,617	$	437,893	$	295,353

(1) Represents financial results from July 1, 2024 and April 1, 2024, through the Sanuk Brand Sale Date for the current period. Refer to the section titled “Reportable Operating Segments,” in Note 1, “General,” for further information.

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.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or share data)

Assets allocated to each reportable operating segment, with a reconciliation to the condensed consolidated balance sheets, are as follows:


	September 30, 2024		March 31, 2024
Assets
UGG brand wholesale	$	803,422	$	247,136
HOKA brand wholesale	448,495		436,147
Teva brand wholesale	39,776		81,703
Sanuk brand wholesale (1)	929		18,526
Other brands wholesale	41,390		9,379
Direct-to-Consumer	285,241		263,840
Total assets from reportable operating segments	1,619,253		1,056,731
Unallocated cash and cash equivalents	1,225,681		1,502,051
Unallocated deferred tax assets, net	73,322		72,584
Unallocated other corporate assets	479,880		504,213
Total	$	3,398,136	$	3,135,579

(1) Effective on the Sanuk Brand Sale Date, the Sanuk brand and certain related assets were sold and the balance as of September 30, 2024 primarily represents unsold accounts receivable yet to be collected, all within the former Sanuk brand wholesale reportable operating segment. Refer to the section titled “Reportable Operating Segments,” in Note 1, “General,” for further information.

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 September 30,						Six Months Ended September 30,
	2024			2023			2024			2023
International net sales	$	457,410		$	343,874		$	766,901		$	600,130
% of net sales	34.9		%	31.5		%	35.9		%	33.9		%
Net sales in foreign currencies	$	375,182		$	292,344		$	552,806		$	441,315
% of net sales	28.6		%	26.8		%	25.9		%	25.0		%
Ten largest global customers as % of net sales	32.5		%	33.6		%	27.6		%	27.9		%

For the three and six months ended September 30, 2024, and 2023, no single foreign country comprised 10.0% or more of the Company’s total net sales. For the three and six months ended September 30, 2024, and 2023, no single global customer accounted for 10.0% or more of the Company’s total net sales.

As of September 30, 2024, the Company has one customer that represents 12.1% of trade accounts receivable, net, compared to two customers that in total represented 31.2% of trade accounts receivable, net as of March 31, 2024. 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.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Six Months Ended September 30, 2024, and 2023

(dollar amounts in thousands, except per share or share data)

Long-Lived Assets. Long-lived assets, which consist of property and equipment, net, recorded in the condensed consolidated balance sheets, are as follows:


	September 30, 2024		March 31, 2024
United States	$	282,872	$	270,561
Foreign (1)	36,708		31,561
Total	$	319,580	$	302,122

(1) 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 September 30, 2024, and March 31, 2024.

NOTE 12. SUPPLIER FINANCE PROGRAM

Supplier Finance Program. The Company has a voluntary SFP administered through a third-party platform that provides the Company’s independent manufacturers that supply its 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 September 30, 2024, and March 31, 2024, the Company had $2,354 and $3,483, respectively, of balances outstanding related to the SFP recorded in trade accounts payable in the condensed consolidated balance sheets. Payments made in connection with the SFP are reported as cash used in operating activities in the trade accounts payable line item of the condensed consolidated statements of cash flows.

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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 2024 Annual Report, filed with the SEC on May 24, 2024, which is available free of charge on the SEC’s website at www.sec.gov and our website at ir.deckers.com.

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, Koolaburra, and AHNU. 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 Company-owned e-commerce websites and retail stores. We seek to differentiate our brands and products by offering diverse lines that emphasize fashion, performance, authenticity, functionality, quality, and comfort, and products tailored to a variety of activities, seasons, and demographic groups. Independent third-party contractors manufacture all of our products.

FINANCIAL HIGHLIGHTS

Consolidated financial performance highlights for the six months ended September 30, 2024, compared to the prior period, were as follows:

•Net sales increased 20.9% to $2,136,667.

◦Channel

▪Wholesale channel net sales increased 20.5% to $1,428,435.

▪DTC channel net sales increased 21.7% to $708,232.

◦Geography

▪Domestic net sales increased 17.3% to $1,369,766.

▪International net sales increased 27.8% to $766,901.

•Gross margin increased 370 basis points to 56.3%.

•Income from operations increased 48.3% to $437,893.

•Diluted earnings per share increased 51.9% to $2.34 per share.

RECENT DEVELOPMENTS

CEO Transition. Effective August 1, 2024, Dave Powers retired as CEO and President of our Company. Our Board appointed Stefano Caroti as CEO and President, to succeed Mr. Powers, effective August 1, 2024. At the Annual Meeting, Mr. Powers was elected to continue to serve as a member of our Board, and Mr. Caroti was elected as a member of our Board, effective September 9, 2024. The promotion of Mr. Caroti represents the culmination of our Board’s active engagement in a planned multi-year succession process.

Forward Stock Split and Authorized Share Increase. On September 13, 2024, we effected the stock split and the authorized share increase. Our financial results included within this Quarterly Report have been retroactively adjusted to reflect the effectiveness of the stock split and the authorized share increase. Refer to Note 1, “General,” in the condensed consolidated financial statements within this Quarterly Report for further information.

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Sanuk Brand Asset Sale. During the three months ended September 30, 2024, we entered into an agreement pursuant to which the buyer agreed to purchase the Sanuk brand and certain related assets which was completed on the Sanuk Brand Sale Date of August 15, 2024.

Financial results for our reportable operating segments present the former Sanuk brand through the Sanuk Brand Sale Date for the current period. Refer to the section titled “Reportable Operating Segments,” in Note 1, “General,” of our condensed consolidated financial statements in Part I, Item 1 within this Quarterly Report for further information.

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, which have not materially changed from those included in our 2024 Annual Report. Refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2024 Annual Report for further discussion. Refer to Part I, Item 1A, “Risk Factors,” of our 2024 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

As of September 30, 2024, our five reportable operating segments include the worldwide wholesale operations of the UGG brand, HOKA brand, Teva brand, and Other brands, 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 footwear 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 that appeal to a growing global audience and a broad demographic.

HOKA Brand. The HOKA brand is an authentic premium line of year-round performance footwear, which offers enhanced cushioning and inherent stability with minimal weight. Originally designed for ultra-runners, the brand now appeals to world champions, taste makers, and everyday athletes. Expanded marketing and strategic marketplace presence have 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 across its ecosystem of access points. The HOKA brand’s product line includes running, trail, hiking, fitness, and lifestyle footwear offerings, as well as select apparel and accessories.

Teva Brand. The Teva brand, born in the depths of the Grand Canyon, has long been a favored brand among outdoor adventurers across the globe. Today, building on its foundation as a leader in sport sandals and its authentic outdoor heritage, the Teva brand’s thoughtfully designed and accessible products are built for a range of outdoor pursuits, connecting with a vibrant, diverse audience passionate about exploration. The Teva brand’s collection includes a variety of footwear options, from classic sandals and shoes to boots, all crafted for the demands of the outdoors.

Other Brands. Other brands consist primarily of the Koolaburra brand, as well as the recently launched AHNU 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. The AHNU brand’s footwear products fuse high-performance technology with timeless style crafted for everyday wear.

Refer to the section titled “Reportable Operating Segment Overview,” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2024 Annual Report for further discussion of our outlook on consumer demand drivers for our products.

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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. Net sales from our e-commerce websites and retail stores 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.

As of September 30, 2024, we have a total of 178 global retail stores (including 139 UGG brand retail stores and 39 HOKA brand retail stores), which includes 92 concept stores and 86 outlet stores.

Refer to the section titled “Reportable Operating Segment Overview” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2024 Annual Report for further details on our DTC reportable operating segment, including retail store definitions, as well as our former Sanuk brand. Refer to the section titled “Recent Developments” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” within this Quarterly Report, for discussion on the sale of the Sanuk brand.

USE OF NON-GAAP FINANCIAL MEASURES

We disclose financial measures calculated and presented in accordance with US GAAP; however, throughout this Quarterly Report we provide certain financial information on a non-GAAP basis (non-GAAP financial measures). We provide non-GAAP financial measures to provide information that may assist investors in understanding our results of operations and assessing our prospects for future performance, which consist of constant currency measures. 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. However, our 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.

We calculate our constant currency non-GAAP financial measures for current period financial information, such as total net sales 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. We also 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. 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. Constant currency measures should not be considered in isolation as an alternative to US dollar measures that reflect current period foreign currency exchange rates or to other financial or operating measures presented in accordance with US GAAP.

SEASONALITY

Refer to Note 1, “General,” of our condensed consolidated financial statements in Part I, Item 1 within this Quarterly Report and to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2024 Annual Report for detailed information on the seasonality of our business.

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023. Results of operations were as follows:


	Three Months Ended September 30,
	2024				2023				Change
	Amount		%		Amount		%		Amount		%
Net sales	$	1,311,320	100.0	%	$	1,091,907	100.0	%	$	219,413	20.1	%
Cost of sales	578,048		44.1		508,888		46.6		(69,160)		(13.6)
Gross profit	733,272		55.9		583,019		53.4		150,253		25.8
Selling, general, and administrative expenses	428,186		32.7		358,402		32.8		(69,784)		(19.5)
Income from operations	305,086		23.2		224,617		20.6		80,469		35.8
Total other income, net	(13,826)		(1.1)		(9,700)		(0.9)		4,126		42.5
Income before income taxes	318,912		24.3		234,317		21.5		84,595		36.1
Income tax expense	76,591		5.8		55,770		5.1		(20,821)		(37.3)
Net income	242,321		18.5		178,547		16.4		63,774		35.7
Total other comprehensive income (loss), net of tax	10,775		0.8		(2,117)		(0.2)		12,892		609.0
Comprehensive income	$	253,096	19.3	%	$	176,430	16.2	%	$	76,666	43.5	%
Net income per share
Basic	$	1.59			$	1.14			$	0.45	39.5	%
Diluted	$	1.59			$	1.14			$	0.45	39.5	%

Net Sales. Net sales by location, and by brand and channel were as follows:


	Three Months Ended September 30,
	2024		2023		Change
	Amount		Amount		Amount		%
Net sales by location
Domestic	$	853,910	$	748,033	$	105,877	14.2	%
International	457,410		343,874		113,536		33.0
Total	$	1,311,320	$	1,091,907	$	219,413	20.1	%
Net sales by brand and channel
UGG brand
Wholesale	$	512,401	$	451,841	$	60,560	13.4	%
Direct-to-Consumer	177,464		158,649		18,815		11.9
Total	689,865		610,490		79,375		13.0
HOKA brand
Wholesale	362,344		262,973		99,371		37.8
Direct-to-Consumer	208,552		160,988		47,564		29.5
Total	570,896		423,961		146,935		34.7
Teva brand
Wholesale	12,132		12,150		(18)		(0.1)
Direct-to-Consumer	9,860		9,355		505		5.4
Total	21,992		21,505		487		2.3

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Three Months Ended September 30,