Crocs, Inc.: Form 10-Q for the period ended Sep 30, 2026

Business Overview

Crocs, Inc. and our consolidated subsidiaries (collectively the “Company,” “we,” “us,” or “our”) are engaged in the design, development, worldwide marketing, distribution, and sale of casual lifestyle footwear and accessories for all. We strive to be the world leader in innovative casual footwear for all, combining comfort and style with a value that consumers want.

Known or Anticipated Trends

Based on our recent operating results and current perspectives on our operating environment, we anticipate certain trends will continue to impact our operating results:

• We continue to operate in an environment where consumers are feeling the effects of elevated interest rates, inflation, and future expected price increases, among other things, and as a result, there is more pressure on discretionary spending. Given this, our wholesale partners are also acting cautiously. In addition, geopolitical tensions have remained elevated across the globe and are having an adverse impact on the global economy. Most recently, the conflict in the Middle East has caused, and may continue to cause, a reduction in our revenues for several of our distributor markets and an increase in the costs of raw materials and transportation associated with elevated oil prices. Furthermore, as of September 30, 2026, the United States (“U.S.”) has imposed tariffs on foreign imports from multiple countries ranging from 10% to 12.5%, including countries most relevant to us such as Vietnam, China, Indonesia, India, and Cambodia. On February 20, 2026, the United States Supreme Court ruled the President did not have the requisite authority to impose tariffs under the International Emergency Economic Powers Act (“IEEPA”). On March 4, 2026, the Court of International Trade ordered U.S. Customs and Border Protection to begin the refund process for all importers who were subject to IEEPA duties. While the timing remains uncertain, we currently estimate that we are eligible to receive a total of approximately $75 million to $80 million in refunds related to these tariffs, including interest. As of September 30, 2026, we received approximately $67 million of IEEPA tariff refunds, including interest. Of this amount, approximately $64 million of benefit is recorded within ‘Cost of sales’ and approximately $3 million of benefit is recorded within ‘Interest income’ in the condensed consolidated statements of operations during the three months ended September 30, 2026. These refunds are non-recurring. The tariffs that remain in effect continue to increase our product costs. At this time, it remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of additional tariffs on goods imported into the U.S., tax policy related to international commerce, increased export control, sanctions and investment restrictions, trade matters, war, or foreign policy in general. We are continuing to monitor developments with respect to these policy changes and proposals.
• We continue to make progress on our long-term strategic initiatives, including prioritizing growth in North America for both brands. Specifically for the Crocs Brand, we believe this will be driven by product innovation, diversification within key product categories, including growth within our sandals business, and ultimately prioritizing stricter segmentation and pricing discipline across the marketplace. For the HEYDUDE Brand, we are focused on our core consumer, refining our product offering within the slip-on category, and refreshing the marketplace. For both brands, scaling digital capabilities continues to be a priority.
• Our liquidity position remains strong with $163.5 million in cash and cash equivalents and $901.4 million in available borrowing capacity as of September 30, 2026. Our total borrowings were $1.3 billion as of September 30, 2026. We repurchased $250.0 million of our common stock during the quarter.

Use of Non-GAAP Financial Measures

In addition to financial measures presented on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP”), we present certain information related to our results of operations through “constant currency,” which is a non-GAAP financial measure and should be viewed as a supplement to our results of operations and presentation of reportable segments under U.S. GAAP. Constant currency represents current period results that have been retranslated using prior year average foreign exchange rates for the comparative period to enhance the visibility of the underlying business trends, excluding the impact of foreign currency exchange rates on reported amounts.

Management uses constant currency to assist in comparing business trends from period to period on a consistent basis in communications with the Board, stockholders, analysts, and investors concerning our financial performance. We believe constant currency is useful to investors and other users of our condensed consolidated financial statements as an additional tool to evaluate operating performance and trends. Investors should not consider constant currency in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP.

Key Performance Indicators

Management utilizes the key performance metrics of gross margin and operating margin to gauge the Company’s operational efficiency and market competitiveness, identify trends, formulate financial projections, and make strategic decisions. Management continuously monitors and analyzes these metrics in an effort to ensure we remain agile, competitive, and aligned with our long-term growth objectives. The titles and/or definitions of certain of these metrics may vary from company to company. As a result, our calculation of certain of these metrics may not be comparable to similarly titled metrics used by other companies.

Gross Margin

Gross margin is defined as gross profit divided by revenues. Management uses this metric and believes it is useful for investors because it provides insights into profitability, cost management, and pricing strategy.

Operating Margin

Operating margin is defined as income from operations divided by revenues. Management uses this metric and believes it is useful for investors because it provides a comprehensive view of profitability from its core business operations, excluding the effects of financing and tax considerations.

Third Quarter 2026 Financial and Operational Highlights

Revenues were $1,042.6 million for the third quarter of 2026, a 4.6% increase compared to the third quarter of 2025. The increase was due to the net effects of: (i) higher unit sales volume in both brands, which resulted in an increase in revenues of $37.6 million, or 3.8%; (ii) higher average selling price on a constant currency basis (“ASP”) driven by the Crocs Brand, which increased revenues by $9.0 million, or 0.9%; and (iii) net changes in exchange rates, which were approximately flat.

The following were significant developments affecting our businesses and capital structure during the three months ended September 30, 2026:

• Crocs Brand revenues increased by 4.4% on a reported and constant currency basis, compared to the same period in 2025. HEYDUDE Brand revenues increased 6.1%, or 6.2% on a constant currency basis, compared to the same period in 2025.
• Gross margin was 66.2%, an increase of 770 basis points from last year’s third quarter, primarily due to IEEPA refunds and lower duties for both brands. Favorable channel mix and lower product costs in the Crocs Brand also contributed to the increase, partially offset by unfavorable product mix in the Crocs Brand.
• Selling, general and administrative expenses (“SG&A”) were $397.8 million compared to $375.3 million in the third quarter of 2025, primarily due to higher costs in the direct-to-consumer (“DTC”) channel, including investments in the channel driven by the Crocs Brand. Higher compensation and marketing costs for the Crocs Brand also contributed to the increase. As a percent of revenues, SG&A increased to 38.2% of revenues compared to 37.7% of revenues in the third quarter of 2025.
• Income from operations increased to $291.9 million from $207.7 million in last year’s third quarter. Net income was $216.8 million, or $4.52 per diluted share, compared to $145.8 million, or $2.70 per diluted share, in last year’s third quarter.

Results of Operations

($ in thousands, except per share data)

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

Revenues By Channel

(in thousands)

(1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” above for more information.

Revenues. In the three months ended September 30, 2026, revenues increased compared to the same period in 2025, primarily due to higher unit sales volume of $37.6 million, or 3.8%, driven by both brands and higher ASP of $9.0 million, or 0.9%, driven by increased pricing in both brands and favorable channel mix in the Crocs Brand, partially offset by unfavorable channel mix in the HEYDUDE Brand and unfavorable product mix in both brands. Net foreign currency fluctuations were approximately flat.

Revenues also increased in the nine months ended September 30, 2026, primarily due to higher ASP of $89.3 million, or 2.9%, driven by favorable channel mix and increased pricing in both brands, partially offset by unfavorable product mix in both brands. Net foreign currency fluctuations also increased revenues by $27.7 million, or 0.9%, primarily due to favorable fluctuations in the Chinese Yuan and Euro, partially offset by unfavorable fluctuations in the South Korean Won, Indian Rupee, and Japanese Yen. The overall increase in revenues was partially offset by lower unit sales volume of $56.5 million, or 1.8%, driven by both brands.

Gross margin. Gross margin increased in the three months ended September 30, 2026, to 66.2% compared to 58.5% in the same period in 2025, primarily due to IEEPA refunds of 630 basis points, lower duties of 130 basis points, favorable channel mix of 70 basis points, and lower product costs in the Crocs Brand of 40 basis points, partially offset by unfavorable product mix in the Crocs Brand of 130 basis points.

Gross margin in the nine months ended September 30, 2026, was 60.9% compared to 59.5% in 2025. This was primarily driven by IEEPA refunds of 210 basis points, favorable channel mix of 50 basis points, and lower product costs in the Crocs Brand of 50 basis points, partially offset by unfavorable product mix in the Crocs Brand of 110 basis points and incremental duties of 40 basis points.

Selling, general and administrative expenses. SG&A increased $22.5 million, or 6.0%, during the three months ended September 30, 2026, compared to the same period in 2025, primarily due to higher DTC costs of $9.2 million, driven by increased share of marketplaces and rent expense as a result of investments in the channel. Increased compensation costs of $3.7 million, increased variable marketing costs driven by the Crocs Brand of $3.7 million, and other net increases in other costs of $5.9 million also contributed to the increase.

SG&A expenses increased $39.5 million, or 3.6%, during the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to higher DTC costs of $29.4 million, driven by increased share of marketplaces and rent expense as a result of investments in the channel. Increased compensation costs of $9.8 million and other net increases in other costs of $9.3 million also contributed to the increase. The overall increase in SG&A was partially offset by reduced marketing costs of $9.0 million, driven by the HEYDUDE Brand as part of our previously announced cost savings initiatives.

Goodwill and Asset impairments. In the three months ended September 30, 2026, and 2025, there were no impairments. During the nine months ended September 30, 2026, there were impairment charges of $3.3 million related to HEYDUDE leasehold improvement assets. Impairments were $738.1 million during the nine months ended September 30, 2025, primarily due to non-cash impairment charges of $430.0 million related to the indefinite-lived HEYDUDE trademark and $307.0 million for HEYDUDE Brand reporting unit goodwill. For additional information, refer to Note 3 — Goodwill and Intangible Assets, Net in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q.

Foreign currency gains (losses), net. Foreign currency gains (losses), net, consist of realized and unrealized foreign currency gains and losses from the remeasurement and settlement of monetary assets and liabilities denominated in non-functional currencies as well as realized and unrealized gains and losses on foreign currency derivative instruments. During the three months ended September 30, 2026, we recognized realized and unrealized net foreign currency gains of $1.3 million compared to gains of $3.0 million during the three months ended September 30, 2025.

During the nine months ended September 30, 2026, we recognized realized and unrealized net foreign currency losses of $2.7 million compared to gains of $8.3 million during the nine months ended September 30, 2025.

Interest Income. Interest income during the three months ended September 30, 2026, increased $2.8 million compared to the three months ended September 30, 2025. Interest income during the nine months ended September 30, 2026, increased $3.0 million compared to the nine months ended September 30, 2025. The increase in interest income for the three and nine months ended September 30, 2026, was due to interest on IEEPA tariff refunds received during the three months ended September 30, 2026 that were not present in the prior year.

Interest expense. Interest expense during the three months ended September 30, 2026, decreased $2.7 million, or 12.2%, compared to the three months ended September 30, 2025. Interest expense during the nine months ended September 30, 2026, decreased $7.6 million, or 11.3%, compared to the nine months ended September 30, 2025. The decrease in interest expense for the three and nine months ended September 30, 2026, was due to lower outstanding borrowings on the Revolving Facility (as defined herein) and lower weighted average interest rates on the Term Loan B Facility (as defined herein) and the Revolving Facility in the current year.

Income tax expense. During the three months ended September 30, 2026, income tax expense increased $17.1 million compared to the same period in 2025. The effective tax rate for the three months ended September 30, 2026, was 21.9% compared to an effective tax rate of 23.0% for the same period in 2025. The change in the effective tax rate was the result of a shift in the mix of our domestic and foreign earnings. Our effective income tax rate, for each period presented, also differs from the federal U.S. statutory rate due to differences in income tax rates between U.S. and foreign jurisdictions.

During the nine months ended September 30, 2026, income tax expense increased $28.9 million compared to the same period in 2025. The effective tax rate for the nine months ended September 30, 2026, was 22.4% compared to an effective tax rate of (243.6)% for the same period in 2025. The change in the effective tax rate was the result of year-to-date tax expense compared to the impact of the income (loss) before income taxes related to the impairments of the indefinite-lived HEYDUDE trademark and HEYDUDE Brand reporting unit goodwill in the nine months ended September 30, 2025. As a result of a prior year intra-entity transaction, the value of the intellectual property for tax purposes is subject to revaluation and therefore there are not similar impacts for tax as a result of the intellectual property impairment. Our effective income tax rate, for each period presented, also differs from the federal U.S. statutory rate due to differences in income tax rates between U.S. and foreign jurisdictions.

Reportable Operating Segments

The following table sets forth information related to our reportable operating segments, including a comparison of revenues and operating income by segment:

(in thousands)

(1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” for more information.

Crocs Brand

Revenues. Crocs Brand revenues increased in the three months ended September 30, 2026, compared to the same period in 2025, primarily due to higher unit sales volume. Higher ASP, driven by price increases in international markets and favorable channel mix, partially offset by unfavorable product mix, also contributed to the increase. Net foreign currency fluctuations were approximately flat.

The increase in Crocs Brand revenues in the nine months ended September 30, 2026, compared to the same period in 2025 is primarily due to higher ASP, due to favorable channel mix and price increases in international markets, partially offset by unfavorable product mix. Net foreign currency fluctuations also increased revenues, primarily due to favorable fluctuations in the Chinese Yuan and Euro, partially offset by unfavorable fluctuations in the South Korean Won, Indian Rupee, and Japanese Yen. The overall increase was partially offset by lower unit sales volume.

Income from Operations. Income from operations for our Crocs Brand segment was $334.3 million for the three months ended September 30, 2026, an increase of $61.6 million, or 22.6%, compared to the same period in 2025. Gross margin was 68.6%, an increase of 680 basis points, primarily due to IEEPA refunds, lower duties, favorable channel mix, and lower product costs, partially offset by unfavorable product mix.

SG&A for our Crocs Brand segment increased $20.4 million, or 8.3%, during the three months ended September 30, 2026, compared to the same period in 2025. This increase was primarily due to higher costs in the DTC channel, driven by increased share of marketplaces and rent expense as a result of investments in the channel. Higher marketing and compensation costs also contributed to the increase.

During the nine months ended September 30, 2026, income from operations for our Crocs Brand was $939.6 million, an increase of $34.9 million, or 3.9%, compared to the same period in 2025. Gross margin was 63.7%, an increase of 140 basis points, primarily due to IEEPA refunds, favorable channel mix, and lower product costs, partially offset by unfavorable product mix and incremental duties.

SG&A for our Crocs Brand increased $52.0 million, or 7.5%, during the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to higher costs in the DTC channel, driven by increased share of marketplaces and rent expense as a result of investments in the channel. Higher marketing and compensation costs also contributed to the increase.

HEYDUDE Brand

Revenues. For the three months ended September 30, 2026, HEYDUDE Brand revenues increased compared to the same period in 2025, primarily due to higher unit sales volume. The overall increase in revenues was partially offset by lower ASP, primarily due to unfavorable channel and product mix, partially offset by reduced discounting.

During the nine months ended September 30, 2026, revenues decreased compared to the same period in 2025, primarily due to lower unit sales volume. The overall decrease in revenues was partially offset by higher ASP, primarily due to reduced discounting and favorable channel mix, partially offset by unfavorable product mix.

Income from Operations. Income from operations for the HEYDUDE Brand segment was $38.0 million for the three months ended September 30, 2026, an increase of $31.3 million, compared to the same period in 2025. Gross margin was 55.1%, an increase of 1,280 basis points, primarily due to IEEPA refunds and lower duties.

SG&A, including impairments, for the HEYDUDE Brand segment decreased $5.4 million, or 8.8%, during the three months ended September 30, 2026, compared to the same period in 2025. This decrease was primarily due to reduced compensation costs and reduced marketing costs, primarily in fixed marketing.

Income from operations for the HEYDUDE Brand was $76.5 million for the nine months ended September 30, 2026, an increase of $752.4 million, compared to the same period in 2025. Gross margin was 47.4%, an increase of 80 basis points, primarily due to IEEPA refunds and higher ASP, partially offset by unfavorable product mix.

SG&A, including impairments, for the HEYDUDE Brand decreased $759.0 million, or 82.4%, during the nine months ended September 30, 2026, compared to the same period in 2025. This decrease was primarily due to the partial impairment of the indefinite-lived HEYDUDE trademark and HEYDUDE Brand reporting unit goodwill in the second quarter of 2025, that did not recur in the current year, partially offset by current year impairment charges related to HEYDUDE leasehold improvement assets. Reduced costs for both fixed and variable marketing also contributed to the decrease.

Enterprise Corporate

During the three months ended September 30, 2026, total net costs within ‘Enterprise corporate’ increased $8.6 million, or 12.0%, compared to the same period in 2025. This was primarily due to increased compensation costs and other corporate costs. These increases were partially offset by decreases resulting from our cost savings initiatives.

During the nine months ended September 30, 2026, total net costs within ‘Enterprise corporate’ increased $12.0 million, or 5.3%, compared to the same period in 2025. This was primarily due to increased compensation costs and other corporate costs. These increases were partially offset by decreases resulting from our cost savings initiatives.

Store Locations

As of September 30, 2026, we had 500 company-operated retail locations for the Crocs Brand, inclusive of 208 retail locations in North America and 292 retail locations internationally. As of September 30, 2026, we had 78 company-operated retail locations for the HEYDUDE Brand. As of September 30, 2025, we had 427 company-operated retail locations for the Crocs Brand, inclusive of 199 retail locations in North America and 228 retail locations internationally. As of September 30, 2025, we had 75 company-operated retail locations for the HEYDUDE Brand.

Financial Condition, Capital Resources, and Liquidity

Liquidity

Our liquidity position as of September 30, 2026, was:

(in thousands)

As of September 30, 2026, we had $163.5 million in cash and cash equivalents, $1.3 billion of outstanding borrowings, and up to $901.4 million of available borrowings on our credit facilities as further discussed in Note 7 — Borrowings in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q.

We believe that cash flows from operations, our cash and cash equivalents on hand, and available borrowings under our Revolving Facility will be sufficient to meet our ongoing liquidity needs and capital expenditure requirements for at least the next twelve months.

Additional future financing may be necessary to fund our operations and there can be no assurance that, if needed, we will be able to secure additional debt or equity financing on terms acceptable to us or at all. Although we believe we have adequate sources of liquidity over the long term, the success of our operations, global economic conditions, and the pace of sustainable growth in our markets, among other things, could each impact our business and liquidity.

Certain of our debt agreements contain covenants that, among other things, limit the ability of the Company and its restricted subsidiaries to incur additional debt or issue certain preferred stock; pay dividends or repurchase or redeem capital stock or make other restricted payments; declare or pay dividends or other payments; incur liens; enter into certain types of transactions with the Company’s affiliates; and consolidate or merge with or into other companies. As of September 30, 2026, we were in compliance with all financial covenants under our existing debt agreements.

Repatriation of Cash and Cash Equivalents

As a global business, we have cash balances in various countries and amounts are denominated in various currencies. Fluctuations in foreign currency exchange rates impact our results of operations and cash positions. Future fluctuations in foreign currencies may have a material impact on our cash flows and capital resources. Cash balances held in foreign countries may have additional restrictions and covenants associated with them which could adversely impact our liquidity and our ability to timely access and transfer cash balances between entities.

All of the cash held outside of the U.S. could be repatriated to the U.S. as of September 30, 2026, without incurring additional U.S. federal income taxes. In some countries, repatriation of certain foreign balances is restricted by local laws. These limitations may affect our ability to fully utilize our cash resources for needs in the U.S. or other countries and could adversely affect our liquidity. As of September 30, 2026, we held $88.9 million of our total $163.5 million in cash and cash equivalents in international locations. This cash is primarily used for the ongoing operations of the business in the locations in which the cash is held. Of the $88.9 million, an insignificant amount is currently restricted by local laws or otherwise.

Cash Flows

(in thousands)

Operating Activities. Cash provided by operating activities consists of net income adjusted for non-cash items and changes in working capital. Cash provided by operating activities increased $103.3 million for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, driven by net increases in cash related to changes in operating assets and liabilities of $86.3 million, primarily due to the change in income taxes and accounts payable, and an increase in net income, adjusted for non-cash items, of $17.0 million. The change in income taxes is due to timing of payments and refunds. The change in accounts payable is due to increased inventory purchases to match demand.

Investing Activities. There was an $8.5 million increase in cash used in investing activities for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, due to an increase in purchases of property, equipment, and software.

Financing Activities. Cash used in financing activities increased by $28.1 million for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. The increase in cash used in financing activities was primarily due to an increase of $104.0 million in repurchases of common stock and other increases in cash used of $13.1 million. The overall increase in cash used was partially offset by a net increase in proceeds from borrowings of $89.0 million.

Contractual Obligations

There have been no significant changes to the contractual obligations reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, other than borrowings and repayments on our debt.

Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements as of September 30, 2026, other than certain purchase commitments, which are described in Note 12 — Commitments and Contingencies in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales, and expenses, and related disclosure of contingent assets and liabilities. We evaluate our assumptions and estimates on an on-going basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Impairment of Goodwill and Indefinite-Lived Intangible Assets

We evaluate the carrying value of our indefinite-lived intangible assets and goodwill at least annually or when an interim triggering event has occurred indicating potential impairment. During the nine months ended September 30, 2026, there were no triggering events for the HEYDUDE Brand indefinite-lived intangible assets (which consists solely of the HEYDUDE trademark) (the “trademark”) and the HEYDUDE Brand reporting unit (the “reporting unit”) goodwill. Certain factors, such as failure to achieve forecasted revenue growth rates, EBITDA, or increases in the discount rates, have the potential to create variances in the estimated fair values of our goodwill and indefinite-lived intangible assets that could result in impairment charges in future periods.

For a complete discussion of our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2025, and Note 1 — Basis of Presentation and Summary of Significant Accounting Policies in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q. There have been no other significant changes in our critical accounting policies or their application since December 31, 2025.

Recent Accounting Pronouncements

See Note 2 — Recent Accounting Pronouncements in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q for a description of recently adopted accounting pronouncements and issued accounting pronouncements that we believe may have an impact on our condensed consolidated financial statements when adopted.

Interest Rate Risk

We centrally manage our debt and investment portfolios considering investment opportunities and risks, tax consequences, and overall financing strategies. Our exposure to market risk includes interest rate fluctuations in connection with our credit facilities and certain financial instruments.

Borrowings under our Term Loan B Facility and Revolving Facility, both further described in Note 7 — Borrowings in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q, bear interest at a variable rate and are therefore subject to risk based upon prevailing market interest rates. Interest rates fluctuate as a result of many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control.

As of September 30, 2026, we had borrowings with a face value of $1.3 billion, comprised of the Notes, which carry a fixed rate, the Term Loan B Facility, and borrowings under our Revolving Facility. We also had $0.6 million in outstanding letters of credit under our Revolving Facility as of September 30, 2026. As of December 31, 2025, we had long-term borrowings with a face value of $1.3 billion and $0.6 million in outstanding letters of credit under our Revolving Facility.

A hypothetical increase of 1% in the interest rate on the variable rate borrowings under our Term Loan B Facility and Revolving Facility would increase our interest expense over the next twelve months by $6.1 million based on the balances outstanding for these borrowings as of September 30, 2026.

Foreign Currency Exchange Risk

Changes in exchange rates have a direct effect on our reported U.S. Dollar condensed consolidated financial statements because we translate the operating results and financial position of our international subsidiaries to U.S. Dollars using current period exchange rates. Specifically, we translate the statements of operations of our foreign subsidiaries into the U.S. Dollar reporting currency using exchange rates in effect during each reporting period. As a result, comparisons of reported results between reporting periods may be impacted significantly due to differences in the exchange rates in effect at the time such exchange rates are used to translate the operating results of our international subsidiaries.

An increase of 1% of the value of the U.S. Dollar relative to foreign currencies when translating our financial results would have decreased our revenues and income before taxes during the three months ended September 30, 2026, by $4.6 million and $1.6 million, respectively. During the nine months ended September 30, 2026, an increase of 1% of the value of the U.S. Dollar relative to foreign currencies would have decreased our revenues and income before taxes by $15.3 million and $4.5 million, respectively. This analysis does not account for transactional fluctuations in accounts, such as those driven by purchasing power, which is defined as purchasing foreign goods in the U.S. Dollar but recognizing the cost in foreign currencies. The volatility of the exchange rates is dependent on many factors that cannot be forecasted with reliable accuracy.

In order to manage exposure to fluctuations in foreign currency and to reduce the volatility in earnings caused by fluctuations in foreign exchange rates, we may enter into forward foreign exchange contracts to buy or sell various foreign currencies. Changes in the fair value of these forward contracts are recognized in earnings in the period that the changes occur or in the period in which the hedged transaction affects earnings for derivatives classified as non-hedged or hedged, respectively, as defined in Note 6 — Derivative Financial Instruments in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q. As of September 30, 2026, the U.S. Dollar notional value of our total derivatives was $34.5 million. The fair value of these contracts at September 30, 2026, was an insignificant liability.

We perform a sensitivity analysis to determine the effects that market risk exposures may have on the fair values of our foreign currency forward exchange contracts. To perform the sensitivity analysis, we assess the risk of changes in fair values from the effect of hypothetical changes in foreign currency exchange rates. This analysis assumes a like movement by the foreign currencies in our hedge portfolio against the U.S. Dollar. As of September 30, 2026, a 10% appreciation in the value of the U.S. Dollar would result in a net increase in the fair value of our derivative portfolio of $3.2 million.

See Part I - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q for a discussion of the impact of the change in foreign exchange rates on our U.S. Dollar condensed consolidated statements of operations for the three and nine months ended September 30, 2026, and 2025.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures as such item is defined under Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as of September 30, 2026. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2026, to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures that, by their nature, can only provide reasonable assurance regarding management’s control objectives.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the three months ended September 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2025.