DECKERS OUTDOOR CORPORATION 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 2022 Annual Report. Certain statements made in this section constitute "forward-looking statements," which are subject to numerous risks and uncertainties, including those described in this section. 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 entitled "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 lifestyles use and high-performance activities. We market our products primarily under five proprietary brands: UGG, HOKA, Teva, Sanuk, and Koolaburra. We believe that our products are distinctive and appeal to a broad demographic. We sell our products through quality domestic and international retailers, international distributors, and directly to our global consumers through our DTC business, which is comprised of our e-commerce websites and retail stores. We seek to differentiate our brands and products by offering diverse lines that emphasize authenticity, functionality, quality, and comfort, and products tailored to a variety of activities, seasons, and demographic groups. All of our products are currently manufactured by independent manufacturers.
Financial Highlights
Consolidated financial performance highlights for the three months ended
•Net sales increased 21.8% to$614,461 . •Channel ?Wholesale channel net sales increased 24.7% to$429,361 . ?DTC channel net sales increased 15.4% to$185,100 . •Geography ?Domestic net sales increased 14.4% to$384,515 . ?International net sales increased 36.4% to$229,946 . •Gross profit as a percentage of net sales (gross margin) decreased 360 basis points to 48.0%. •Income from operations decreased 8.9% to$56,341 . •Diluted earnings per share decreased by$0.05 per share to$1.66 per share.
Trends and Uncertainties Impacting Our Business and Industry
We expect our business and the industry in which we operate will continue to be impacted by several important trends and uncertainties, including the following:
Supply Chain
•Similar to other companies in our industry, we continue to experience global
supply chain challenges. Extended transit lead times and ocean freight cost
pressures, including due to container shortages and port congestion, had the
most significant impact on our business and results of operations during the
current fiscal quarter. Although we are beginning to see improvements in transit
lead times compared to the prior period, these disruptions required a higher
usage of air freight (almost exclusively for the HOKA brand) and we continued to
incur higher ocean freight costs compared to the prior period, which negatively
impacted our gross margin during the current fiscal quarter. We expect to
continue to experience negative impacts from ocean freight costs in future
periods. As we manage product availability in all channels, we believe we can
reduce the need for higher air freight costs through the early procurement of
inventory in the country of sale, which has resulted in higher levels of
inventory to allow us to maintain expected service
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levels. We remain focused on implementing our long-term growth strategy and will
continue to be flexible in adapting to fluid conditions, including implementing
additional measures to mitigate the effects of supply chain disruptions.
•We continue to encounter headwinds transitioning to our new European 3PL as
that provider refines its system and delivery levels, which have exacerbated
supply chain pressures. While this transition has been difficult in the current
logistics environment, we believe this is a critical investment to create
long-term capacity to facilitate future growth.
Brand and Omni-Channel Strategy
•We remain focused on accelerating consumer adoption of the HOKA brand globally with all geographic regions and distribution channels experiencing significant year-round growth, which has positively impacted our seasonality trends. Our efforts to drive HOKA brand performance are primarily focused on distribution management, launching innovative product offerings and global marketing campaigns to drive brand awareness, and further expanding the HOKA brand presence through select owned and operated retail stores. For example, we are working towards opening our first US HOKA brand permanent location inNew York City during spring of calendar year 2023, with an elevated store design fit for our premier performance brand. •Our marketplace strategies inEurope andAsia (international reset strategies) have continued to drive UGG brand awareness and consumer acquisition by building a foundation of diversified and counter-seasonal product acceptance, especially with younger consumers, through localized marketing investments. However, we expect negative impacts to potential UGG brand international growth due to unfavorable foreign currency exchange rates anticipated to continue during our fiscal year endingMarch 31, 2023 (current fiscal year). •We continue to adopt selective price increases as appropriate by brand and product, which we believe can help mitigate the impacts of higher freight costs and experienced some benefits during the current fiscal quarter for the HOKA brand.
Refer to Part I, Item 1A, "Risk Factors," of our 2022 Annual Report, for detailed information on the risks and uncertainties that have the potential to cause our actual results to differ materially from our expectations.
Reportable Operating Segment Overview
Our six reportable operating segments include the worldwide wholesale operations of the UGG brand, HOKA brand, Teva brand, Sanuk brand, and Other brands, as well as DTC. Information reported to the CODM, who is our CEO, President, and PEO, is organized into these reportable operating segments and is consistent with how the CODM evaluates our performance and allocates resources. UGG Brand. The UGG brand is one of the most iconic and recognized brands in our industry, which highlights our successful track record of building niche brands into lifestyle and fashion market leaders. With loyal consumers around the world, the UGG brand has proven to be a highly resilient line of premium footwear, apparel, and accessories with expanded product offerings and a growing global audience that appeals to a broad demographic. HOKA Brand. The HOKA brand is an authentic premium line of year-round performance footwear that offers enhanced cushioning and inherent stability with minimal weight, apparel, and accessories. Originally designed for ultra-runners, the brand now appeals to world champions, taste makers, and everyday athletes. Strong marketing has fueled both domestic and international sales growth of the HOKA brand, which has quickly become a leading brand within run and outdoor specialty wholesale accounts and is rapidly growing within selective key accounts. As a result, the HOKA brand is bolstering its net sales, which continue to increase as a percentage of our aggregate net sales.Teva Brand . The Teva brand created the very first sport sandal when it was founded in theGrand Canyon in 1984. Since then, the Teva brand has grown into a multi-category modern outdoor lifestyle brand offering a range of performance, casual, and trail lifestyle products, and has emerged as a leader in footwear sustainability observed through recent growth fueled by young and diverse consumers passionate for the outdoors and the planet. 21 -------------------------------------------------------------------------------- Table of Contents Sanuk Brand. The Sanuk brand originated inSouthern California surf culture and has emerged into a lifestyle brand with a presence in the relaxed casual shoe and sandal categories with a focus on innovation in comfort and sustainability. The Sanuk brand's use of unexpected materials and unconventional constructions, combined with its fun and playful branding, are key elements of the brand's identity. Other Brands. Other brands consist primarily of the Koolaburra brand. The Koolaburra brand is a casual footwear fashion line using plush materials and is intended to target the value-oriented consumer in order to complement the UGG brand offering.
Refer to the "Reportable Operating Segment Overview," in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of our 2022 Annual Report for further discussion of our outlook on consumer demand drivers for our UGG, HOKA, Teva, Sanuk, and Other brands products.
Direct-to-Consumer. Our DTC business encompasses all our brands and is comprised of our e-commerce websites and retail stores that are intertwined and interdependent in an omni-channel marketplace.
•E-Commerce Business. Our global e-commerce business provides us with an opportunity to directly engage with and communicate a consistent brand message to consumers that is in line with our brands' promises, encourages awareness of key brand initiatives, offers targeted information to specific consumer demographics, and drives consumers to our retail stores. •Retail Business. Our global Company-owned retail stores are predominantly UGG brand concept stores and UGG brand outlet stores, as well as new openings for HOKA brand stores. •Flagship Stores. Primarily located in major tourist locations, these are lead stores in prominent locations designed to showcase UGG and HOKA brand products in mono branded stores that are typically larger than our general concept stores with broader product offerings and greater traffic that enhance our interaction with our consumers and increase brand loyalty. •Shop-in-Shop Stores (SIS). Concept stores for which we own the inventory and that are operated by us or non-employees within a department store, which we lease from the store owner by paying a percentage of SIS store sales. •Partner Retail Stores. Represent UGG and HOKA mono branded stores which are wholly owned and operated by third parties and not included in the total count of our global Company-owned retail stores.
Our net sales related to the businesses and stores above are recorded in our DTC reportable operating segment, except for the net sales for Partner Retail Stores, which are recorded in each respective brand's wholesale reportable operating segment, as applicable.
Use of Non-GAAP Financial Measures
Throughout this Quarterly Report we provide certain financial information on a
constant currency basis, excluding the effect of foreign currency exchange rate
fluctuations, which we disclose in addition to certain financial measures
calculated and presented in accordance with US GAAP. We provide these non-GAAP
financial measures to provide information that may assist investors in
understanding our financial and operating results, and assessing our prospects
for future performance. However, the information presented on a constant
currency basis, as we present such information, may not necessarily be
comparable to similarly titled information, presented by other companies, and
may not be appropriate measures for comparing our performance relative to other
companies. For example, in order to calculate our constant currency information,
we calculate the current period financial information using the foreign currency
exchange rates that were in effect during the previous comparable period,
excluding the effects of foreign currency exchange rate hedges and
remeasurements in the condensed consolidated financial statements. Further, we
report comparable DTC sales on a constant currency basis for DTC operations that
were open throughout the current and prior reporting periods, and we may adjust
prior reporting periods to conform to current year accounting policies.
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These non-GAAP financial measures are not intended to represent and should not
be considered to be more meaningful measures than, or alternatives to, measures
of operating performance as determined in accordance with US GAAP. Constant
currency measures should not be considered in isolation as an alternative to US
dollar measures that reflect current period foreign currency exchange rates or
to other financial measures presented in accordance with US GAAP. We believe
evaluating certain financial and operating measures on a constant currency basis
is important as it excludes the impact of foreign currency exchange rate
fluctuations that are not indicative of our core results of operations and are
largely outside of our control.
Seasonality
Our business is seasonal, with the highest percentage of UGG and Koolaburra brand net sales occurring in the quarters endingSeptember 30th andDecember 31st and the highest percentage of Teva and Sanuk brand net sales occurring in the quarters endingMarch 31st andJune 30th . Net sales for the HOKA brand occur more evenly throughout the year reflecting the brand's year-round performance product offerings. Due to the magnitude of the UGG brand relative to our other brands, our aggregate net sales in the quarters endingSeptember 30th andDecember 31st have historically significantly exceeded our aggregate net sales in the quarters endingMarch 31st andJune 30th . However, as we continue to take steps to diversify and expand our product offerings by creating more year-round styles, and as net sales of the HOKA brand continue to increase as a percentage of our aggregate net sales, we expect the impact from seasonality to continue to decrease over time. However, our seasonality has been impacted by supply chain challenges and it is unclear whether these impacts will be minimized or exaggerated in future periods as a result of these disruptions.
Results of Operations
Three Months Ended
Three Months Ended June 30,
2022 2021 Change
Amount % Amount % Amount %
Net sales $ 614,461 100.0 % $ 504,678 100.0 % $ 109,783 21.8 %
Cost of sales 319,709 52.0 244,175 48.4 (75,534) (30.9)
Gross profit 294,752 48.0 260,503 51.6 34,249 13.1
Selling, general, and
administrative expenses 238,411 38.8 198,671 39.4 (39,740) (20.0)
Income from operations 56,341 9.2 61,832 12.2 (5,491) (8.9)
Other (income) expense, net (661) (0.1) 181 - 842 465.2
Income before income taxes 57,002 9.3 61,651 12.2 (4,649) (7.5)
Income tax expense 12,153 2.0 13,527 2.7 1,374 10.2
Net income 44,849 7.3 48,124 9.5 (3,275) (6.8)
Total other comprehensive (loss)
income, net of tax (14,966) (2.4) 3,351 0.7 (18,317) (546.6)
Comprehensive income $ 29,883 4.9 % $ 51,475 10.2 % $ (21,592) (41.9) %
Net income per share
Basic $ 1.67 $ 1.73 $ (0.06)
Diluted $ 1.66 $ 1.71 $ (0.05)
23-------------------------------------------------------------------------------- Table of ContentsNet Sales . Net sales by location, and by brand and channel were as follows: Three Months Ended June 30, 2022 2021 Change Amount Amount Amount %
Net sales by location
Domestic $ 384,515 $ 336,059 $ 48,456 14.4 %
International 229,946 168,619 61,327 36.4
Total $ 614,461 $ 504,678 $ 109,783 21.8 %
Net sales by brand and channel
UGG brand
Wholesale $ 137,862 $ 135,056 $ 2,806 2.1 %
Direct-to-Consumer 70,059 77,986 (7,927) (10.2)
Total 207,921 213,042 (5,121) (2.4)
HOKA brand
Wholesale 231,885 151,147 80,738 53.4
Direct-to-Consumer 98,141 61,966 36,175 58.4
Total 330,026 213,113 116,913 54.9
Teva brand
Wholesale 46,895 43,359 3,536 8.2
Direct-to-Consumer 12,725 15,118 (2,393) (15.8)
Total 59,620 58,477 1,143 2.0
Sanuk brand
Wholesale 10,726 10,382 344 3.3
Direct-to-Consumer 3,431 4,664 (1,233) (26.4)
Total 14,157 15,046 (889) (5.9)
Other brands
Wholesale 1,993 4,306 (2,313) (53.7)
Direct-to-Consumer 744 694 50 7.2
Total 2,737 5,000 (2,263) (45.3)
Total $ 614,461 $ 504,678 $ 109,783 21.8 %
Total Wholesale $ 429,361 $ 344,250 $ 85,111 24.7 %
Total Direct-to-Consumer 185,100 160,428
24,672 15.4
Total $ 614,461 $ 504,678 $ 109,783 21.8 %
Total net sales increased primarily due to increased HOKA brand wholesale and
DTC channel sales. Further, we experienced an increase of 20.2% in total volume
of pairs sold to 11,900 from 9,900 compared to the prior period. On a constant
currency basis, net sales increased by 23.5% compared to the prior period.
Drivers of significant changes in net sales, compared to the prior period, were
as follows:
•Wholesale net sales of the HOKA brand increased globally, resulting primarily
from market share gains with existing customer accounts, as well as core
franchise updates, the addition of new styles, and select door expansion with
strategic accounts.
•DTC net sales increased primarily due to higher global net sales for the HOKA
brand in e-commerce, including through consumer acquisition and retention,
partially offset by lower domestic sales for the UGG brand due to product mix
shifts into sandals away from seasonal fall styles. Comparable DTC net sales for
the 13 weeks ended July 3, 2022 , increased by 14.9%, primarily due to growth in
the e-commerce business globally for the HOKA brand.
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•International net sales, which are included in the reportable operating segment
net sales presented above, increased by 36.4% and represented 37.4% and 33.4% of
total net sales for the three months ended June 30, 2022 , and 2021,
respectively. These increases were primarily driven by higher international
sales for the HOKA brand in Europe in the wholesale channel, which includes
earlier distributor shipments.
Gross Profit. Gross margin decreased to 48.0% from 51.6%, compared to the prior
period, primarily due to higher freight costs, as we incurred an increase in
ocean container rates and air freight usage. Further, we experienced an
unfavorable product mix shift and normalized promotional activity for the UGG
brand, an unfavorable channel mix shift to wholesale, and unfavorable changes in
foreign currency exchange rates. These unfavorable margin pressures were
partially offset by favorable HOKA price increases and a favorable brand mix
shift with increased HOKA penetration.
Selling, General and Administrative Expenses. The net increase in SG&A expenses, compared to the prior period, was primarily the result of the following:
•Increased other variable net selling expenses of approximately
•Increased net foreign currency-related losses of$8,900 , primarily driven by unfavorable changes in the US dollar exchange rate against Asian and Canadian foreign currency exchange rates. •Increased payroll and related costs of approximately$6,700 , primarily due to higher headcount, including for warehouse teams, and other related compensation, partially offset by lower annual performance-based compensation and stock-based compensation.
•Increased other operating expenses of approximately
•Increased allowances for trade accounts receivable of approximately
•Increased variable advertising and promotion expenses of approximately$1,900 , primarily due to higher promotional marketing expenses for the HOKA brand to drive global brand awareness and market share gains, highlight new product categories, and provide localized marketing.
•Increased impairments of operating lease and other long-lived assets of
approximately
Income from Operations. Income (loss) from operations by reportable operating
segment was as follows:
Three Months Ended June 30,
2022 2021 Change
Amount Amount Amount %Income (loss) from operations
UGG brand wholesale $ 30,665 $ 35,838 $(5,173) (14.4) %
HOKA brand wholesale 69,616 46,363 23,253 50.2
Teva brand wholesale 12,493 14,503 (2,010) (13.9)
Sanuk brand wholesale 2,466 3,404 (938) (27.6)
Other brands wholesale (469) 2,707 (3,176) (117.3)
Direct-to-Consumer 41,220 39,683 1,537 3.9
Unallocated overhead costs (99,650) (80,666) (18,984) (23.5)
Total $ 56,341 $ 61,832 $ (5,491) (8.9) %
25-------------------------------------------------------------------------------- Table of Contents The decrease in total income from operations, compared to the prior period, was primarily due to higher costs of goods sold as a percentage of net sales primarily driven by higher freight costs, partially offset by higher net sales and lower SG&A expenses as a percentage of net sales.
Drivers of significant net changes in total income from operations, compared to the prior period, were as follows:
•The increase in income from operations of HOKA brand wholesale was due to higher net sales, as well as lower SG&A expenses as a percentage of net sales, partially offset by lower gross margin due to higher freight costs.
•The increase in unallocated overhead costs was primarily due to higher operating expenses, including higher foreign currency related losses and warehousing fees.
Income Tax Expense. Income tax expense and our effective income tax rate were as
follows:
Three Months Ended June 30,
2022 2021
Income tax expense $ 12,153 $ 13,527
Effective income tax rate 21.3 % 21.9 %
The decrease in our effective income tax rate, compared to the prior period, was
primarily due to lower income from operations, and changes in jurisdictional mix
of worldwide income before income taxes. Further, there were higher net discrete
tax benefits, primarily due to foreign return to provision adjustments,
partially offset by higher reserves for uncertain tax position adjustments for
foreign and state audits, and a lower deduction for stock-based compensation.
Foreign income before income taxes was $33,023 and $21,178 and worldwide income
before income taxes was $57,002 and $61,651 during the three months ended June
30, 2022 , and 2021, respectively. The increase in foreign income before income
taxes as a percentage of worldwide income before income taxes, compared to the
prior period, was primarily due to higher foreign sales at a higher gross profit
as a percentage of worldwide sales, as well as lower foreign operating expenses
as a percentage of worldwide sales.
Net Income. The decrease in net income, compared to the prior period, was due to
higher sales at lower gross margin. Net income per share decreased, compared to
the prior period, due to lower net income, partially offset by lower
weighted-average common shares outstanding driven by further stock repurchases.
Total Other Comprehensive (Loss) Income, Net of Tax. The increase in total other
comprehensive loss, net of tax, compared to the prior period, was due to higher
foreign currency translation losses relating to changes to our net asset
position for unfavorable Asian and European foreign currency exchange rates.
Liquidity
We finance our working capital and operating requirements using a combination of our cash and cash equivalents balances, cash provided from ongoing operating activities, and, to a lesser extent, available borrowings under our revolving credit facilities. Our working capital requirements begin when we purchase raw materials and inventories and continue until we ultimately collect the resulting trade accounts receivable. Given the historical seasonality of our business, our working capital requirements fluctuate significantly throughout the fiscal year, and we utilize available cash to build inventory levels during certain quarters in our fiscal year to support higher selling seasons. While the impact of seasonality has been mitigated to some extent, we expect our working capital requirements will continue to fluctuate from period to period. As ofJune 30, 2022 , our cash and cash equivalents are$695,230 . While we are subject to uncertainty surrounding the pandemic, we believe our cash and cash equivalents balances, cash provided from ongoing operating activities, and available borrowings under our revolving credit facilities, will provide sufficient liquidity to enable us to meet our working capital requirements and contractual obligations for at least the next 12 months. 26 -------------------------------------------------------------------------------- Table of Contents Our liquidity may be impacted by additional factors, including our results of operations, the strength of our brands, impacts of seasonality and weather conditions, our ability to respond to changes in consumer preferences and tastes, the timing of capital expenditures and lease payments, our ability to collect our trade accounts receivables in a timely manner and effectively manage our inventories, including estimating inventory requirements that require earlier purchasing windows to manage supply chain constraints, our ability to respond to the impacts and disruptions caused by the pandemic, and our ability to respond to economic, political, and legislative developments. Furthermore, we may require additional cash resources due to changes in business conditions, strategic initiatives, or stock repurchase strategy, a national or global economic recession, or other future developments, including any investments or acquisitions we may decide to pursue, although we do not have any present commitments with respect to any such investments or acquisitions. If there are unexpected material impacts to our business in future periods from the pandemic and we need to raise or conserve additional cash to fund our operations, we may seek to borrow under our revolving credit facilities, seek new or modified borrowing arrangements, or sell additional debt or equity securities. The sale of convertible debt or equity securities could result in additional dilution to our stockholders, and equity securities may have rights or preferences that are superior to those of our existing stockholders. The incurrence of additional indebtedness would result in additional debt service obligations, as well as covenants that would restrict our operations and further encumber our assets. In addition, there can be no assurance that any additional financing will be available on acceptable terms, if at all. Although we believe we have adequate sources of liquidity over the long term, a prolonged or more severe economic recession, inflationary pressure, or a slow recovery could adversely affect our business and liquidity. Repatriation of Cash. During the three months endedJune 30, 2022 , and 2021, no cash and cash equivalents were repatriated. As ofJune 30, 2022 , andMarch 31, 2022 , we have$145,699 and$133,053 , respectively, of cash and cash equivalents outside the US and held by foreign subsidiaries, a portion of which may be subject to additional foreign withholding taxes if it were to be repatriated. Beginning with the tax year endedMarch 31, 2018 , pursuant to the Tax Reform Act, an installment election was made to pay the one-time transition tax on the deemed repatriation of foreign subsidiaries' earnings over eight years. The cumulative remaining balance as ofJune 30, 2022 , is$38,263 . We continue to evaluate our cash repatriation strategy and we currently anticipate repatriating current and future unremitted earnings of non-US subsidiaries only to the extent they already have been subject to US tax, if such cash is not required to fund ongoing foreign operations. Our cash repatriation strategy, and by extension, our liquidity, may be impacted by several additional considerations, which include clarifications of, future changes to, or interpretations of global tax law and regulations, and our actual earnings for current and future periods. Refer to Note 5, "Income Taxes," of our consolidated financial statements in Part IV of our 2022 Annual Report for further information on the impacts of the recent Tax Reform Act. Stock Repurchase Program. We continue to evaluate our capital allocation strategy and to consider further opportunities to utilize our global cash resources in a way that will profitably grow our business, meet our strategic objectives, and drive stockholder value, including by potentially repurchasing additional shares of our common stock. The stock repurchase program does not obligate us to acquire any amount of common stock and may be suspended at any time at our discretion. As ofJune 30, 2022 , the aggregate remaining approved amount under our stock repurchase program is$354,014 . OnJuly 27, 2022 , our Board of Directors approved an increase of$1,200,000 to our stock repurchase authorization, bringing the aggregate outstanding share repurchase authorization to approximately$1,500,000 at this date.
Capital Resources
Revolving Credit Facilities. During the three months endedJune 30, 2022 , we made no borrowings or repayments under our revolving credit facilities. As ofJune 30, 2022 , we have no outstanding balances under our revolving credit facilities and available borrowings for all revolving credit facilities is$466,243 . There were no changes to the terms and borrowing availability under our revolving credit facilities disclosed in our 2022 Annual Report.
Debt Covenants. As of
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Cash Flows
The following table summarizes the major components of our condensed consolidated statements of cash flows for the periods presented:
Three Months Ended June 30,
2022 2021 Change
Amount Amount Amount %
Net cash used in operating activities
$ 7,411 20.4 % Net cash used in investing activities (12,467) (15,515) 3,048 19.6 Net cash used in financing activities (100,036) (82,182) (17,854) (21.7) Effect of foreign currency exchange rates on cash and cash equivalents (6,873) 1,380 (8,253) (598.0) Net change in cash and cash equivalents$ (148,297) $ (132,649)
Operating Activities. Our primary source of liquidity is net cash provided by operating activities, which is primarily driven by our net income after non-cash adjustments and changes in working capital. The decrease in net cash used in operating activities during the three months endedJune 30, 2022 , compared to the prior period, was primarily due to favorable net income after non-cash adjustments of$3,850 , as well as a net favorable change in operating assets and liabilities of$3,561 . The changes in operating assets and liabilities were primarily due to net favorable changes in trade accounts payable, prepaid expenses and other current assets, and other assets, partially offset by net unfavorable changes in inventories, trade accounts receivable, net, and net operating lease assets and lease liabilities.
Investing Activities. The decrease in net cash used in investing activities
during the three months ended
Financing Activities. The increase in net cash used in financing activities
during the three months ended
Contractual Obligations
As previously disclosed in our 2022 Annual Report as a subsequent event, during the three months endedJune 30, 2022 , we signed a lease for additional space, which we expect to be operational in the third quarter of our next fiscal year, at our US warehouse and DC inMooresville, Indiana with an initial lease term of ten years for a minimum commitment of approximately$46,000 . Except as described above, there were no material changes outside the ordinary course of business during the three months endedJune 30, 2022 to the contractual obligations and other commitments as ofMarch 31, 2022 disclosed in our 2022 Annual Report.
Critical Accounting Policies and Estimates
Management must make certain estimates and assumptions that affect the amounts
reported in the condensed consolidated financial statements, based on historical
experience, existing and known circumstances, authoritative accounting
pronouncements, and other factors that management believes to be reasonable, but
actual results could differ materially from these estimates. The full impact of
the ongoing pandemic and related macroeconomic factors, including inflation,
rising interest rates, and recessionary pressures, are unknown and cannot be
reasonably estimated for certain key estimates. However, we made appropriate
accounting estimates based on the facts and circumstances available as of the
reporting date. To the extent there are differences between these estimates and
actual results, our condensed consolidated financial statements may be
materially affected. Refer to the section "Use of Estimates" within Note 1,
"General," of our condensed consolidated financial statements in Part I, Item 1
within this Quarterly Report, for a summary of applicable key estimates and
assumptions. There have been no material changes to the critical accounting
policies and key estimates and assumptions disclosed in our 2022 Annual Report.
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