Core Points - Rocky Brands, Inc. has declared a quarterly cash dividend of $0.155 per share of outstanding common stock [1] - The dividend will be paid on December 15, 2025, to shareholders of record as of the close of business on December 1, 2025 [1] - Future dividends and their payment dates are subject to quarterly determination by the board of directors [1]

Financial Performance - Net sales increased by 7.0% to $122.5 million in Q3 2025 compared to $114.6 million in Q3 2024, with growth across all reportable segments: Wholesale, Retail, and Contract Manufacturing [74]. - Year-to-date net sales for 2025 reached $342.3 million, a 5.1% increase from $325.7 million in 2024, primarily driven by growth in the Retail segment [80]. - Total net sales for the nine months ended September 30, 2025 were $342.3 million, a 5.1% increase from $325.7 million in the prior year, driven by increased demand in wholesale and retail segments [95]. - Retail net sales rose by 15.1% to $95.9 million for the nine months ended September 30, 2025, attributed to growth in the Lehigh CustomFit business and enhanced e-commerce sales [96]. - Wholesale segment net sales increased by 6.1% to $89.1 million in Q3 2025, attributed to higher demand and tariff-related price increases [84]. - Operating income for the nine months ended September 30, 2025, was $27.6 million, or 8.1% of net sales, compared to $22.6 million, or 6.9% of net sales, in the prior year [83]. Margins and Expenses - Gross margin improved by 210 basis points to 40.2% in Q3 2025, driven by favorable shifts in product mix and price increases, particularly in rubber-boot brands [74][77]. - Operating expenses increased to $37.5 million, or 30.6% of net sales, in Q3 2025, up from $33.6 million, or 29.3% of net sales, in Q3 2024, due to higher logistics and selling costs [78][91]. - Total operating expenses for the nine months ended September 30, 2025 were $112.0 million, representing 32.7% of net sales, an increase from 31.7% in the prior year [102]. - Wholesale gross margin increased to $94.8 million, or 40.0% of net sales, compared to $86.0 million, or 37.0% of net sales, for the same period last year, reflecting a favorable product mix [99]. Cash Flow and Debt - Net cash used in operating activities for the nine months ended September 30, 2025 was $1.3 million, a significant decrease from $28.4 million provided in the same period last year [111]. - An increase in inventory resulted in a cash use of $26.9 million for the nine months ended September 30, 2025, compared to $2.6 million in the prior year, driven by tariffs and anticipated demand [112]. - As of September 30, 2025, the company maintained cash and cash equivalents of $3.3 million and had $40.1 million available under its ABL Facility [106]. - Total debt decreased by 7.5% to $139.0 million as of September 30, 2025, reflecting continued debt repayments [74]. - Interest expense for the three months ended September 30, 2025 decreased to $2.5 million from $3.2 million in the prior year, a reduction of 21.6% due to lower debt levels and interest rates [92]. Tax and Legal Matters - Income tax expense increased by 25.9% to $2.0 million for the three months ended September 30, 2025, compared to $1.6 million in the same period last year [93]. - The effective tax rate decreased to 22.1% for the nine months ended September 30, 2025, down from 23.4% in the previous year, primarily due to the earnings mix between the U.S. and international subsidiaries [105]. - The Company is contingently liable for lawsuits, taxes, and other matters arising in the normal course of business, with no off-balance sheet arrangements or related party transactions affecting financial results [117]. Strategic Initiatives - The company is implementing sourcing shifts to leverage manufacturing facilities in the Dominican Republic and Puerto Rico to mitigate tariff impacts [68]. - A share repurchase program was announced on February 25, 2025, allowing for the repurchase of up to $7.5 million of the Company's outstanding common stock [116]. Accounting and Market Risk - The Company has identified critical accounting policies that impact estimates and assumptions in financial reporting, with historical results not materially differing from estimates [118]. - There have been no material changes to market risk as disclosed in the Annual Report for the year ended December 31, 2024 [121].

Group 1 - The investment strategy focuses on long-only investment, evaluating companies from an operational and buy-and-hold perspective [1] - The approach does not prioritize market-driven dynamics or future price action, instead emphasizing the long-term earnings power of companies [1] - Most recommendations will be holds, indicating a cautious stance in a bullish market, with only a small fraction of companies deemed suitable for purchase at any time [1] Group 2 - The analysis aims to provide important information for future investors while maintaining a healthy skepticism towards market optimism [1]

Core Insights - Rocky Brands, Inc. reported an EPS of $1.03, exceeding analysts' expectations of $0.90, while revenue was $122.5 million, slightly below the forecast of $122.915 million [1][6] Financial Performance - The company experienced a 7% increase in net sales, reaching $122.5 million compared to the same quarter in the previous year [2] - Income from operations increased by 16.5% to $11.7 million, up from $10.1 million in the prior year [3] - Net income rose by 36.6%, indicating improved efficiency in converting sales into profit [3] Margins and Ratios - Gross margin improved by 210 basis points to 40.2% of net sales from 38.1%, reflecting enhanced cost management strategies [2] - The price-to-earnings (P/E) ratio is approximately 11.99, and the price-to-sales ratio is 0.48, suggesting a relatively low market valuation compared to revenue [4] - The enterprise value to sales ratio is 0.77, indicating the company's valuation is less than its annual sales when considering debt and cash [4] Investment Metrics - The earnings yield stands at 8.34%, indicating a solid return on investment for shareholders [5] - The debt-to-equity ratio is 0.56, reflecting a moderate level of debt compared to equity [5] - A current ratio of 2.76 highlights strong liquidity, demonstrating the company's ability to cover short-term liabilities with its short-term assets [5]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Financial Data and Key Metrics Changes - Sales for Q3 2025 increased by 7% to $122.5 million, with gross profit at $49.3 million, representing 40.2% of net sales, up from 38.1% in Q3 2024 [12][16] - Adjusted diluted EPS was $1.03, a 34% increase compared to Q3 2024 [3][16] - Gross margins improved by 210 basis points, driven by higher wholesale and retail margins [13][16] Business Line Data and Key Metrics Changes - Wholesale net sales increased by 6.1% to $89.1 million, retail net sales rose by 10.3% to $29.5 million, and contract manufacturing net sales grew by 4.1% to $3.9 million [12][16] - XTRATUF brand showed strong growth, particularly in U.S. wholesale, which increased by double digits [4][5] - Muck brand continued its positive trajectory with double-digit growth in U.S. wholesale, supported by successful collaborations and improved inventory positions [6][8] Market Data and Key Metrics Changes - The company experienced a challenging consumer environment, with cautious spending observed among consumers [21][23] - E-commerce business showed recovery in September after a sluggish period in July and August, indicating strong marketplace performance [29][31] Company Strategy and Development Direction - The company is diversifying its sourcing base to mitigate the impact of higher tariffs, including adding new manufacturing partners outside of China and Vietnam [3][4] - Plans to manufacture approximately 50% of inventory needs in-house by 2026, up from 30% in 2025, to improve gross margins [18][19] - The company is focusing on expanding its direct-to-consumer business and enhancing marketing investments to support growth [15][19] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the fourth quarter, balancing strong brand momentum with concerns about the broader consumer environment [11][19] - Anticipated that headwinds from higher tariffs will abate midway through 2026, with expectations for improved gross margins in the second half of next year [12][18] - Management noted that Q4 2025 is expected to be the worst quarter from a tariff perspective, with improvements anticipated in 2026 [35] Other Important Information - The company reported a decrease in total debt by 7.5% year-over-year, totaling $139 million [16][17] - Inventory levels increased by 12.7% year-over-year, primarily due to higher tariffs and increased production in-house [16][17] Q&A Session Summary Question: Thoughts on the consumer environment - Management noted that the consumer environment is dynamic, with cautious spending observed, but products are still selling well [21][23] Question: Quantifying delayed sales due to supply chain issues - Delays in sourcing changes resulted in a few million dollars in missed inventory, with expectations that bringing more products in-house will help margins in 2026 [25] Question: Insights on third-quarter results versus expectations - Management expressed satisfaction with Q3 results despite challenges, noting strong performance in marketplace and e-commerce [29][31] Question: Pockets of weakness and fourth-quarter guidance - Durango brand showed some weakness due to pulled-forward orders, while other brands like XTRATUF and Georgia Boot performed well [32][33] Question: Implied profit guidance for the fourth quarter - Management indicated that pricing will help offset tariff impacts, but Q4 margins are expected to be depressed due to timing of tariff effects [34][35] Question: Potential impact of consumer stimulus in 2026 - Management is prepared to take advantage of any consumer stimulus, with positive momentum expected for XTRATUF in 2026 [39][40]

Financial Performance - Net sales increased 7.0% to $122.5 million compared to $114.6 million in Q3 2024[5] - Net sales for the three months ended September 30, 2025, were $122.54 million, an increase of 6.4% compared to $114.55 million for the same period in 2024[21] - Income from operations rose 16.5% to $11.7 million, or 9.6% of net sales, compared to $10.1 million, or 8.8% of net sales, in Q3 2024[9] - Income from operations for the three months ended September 30, 2025, increased to $11.74 million, a 16.5% rise from $10.07 million in 2024[21] - Net income increased 36.6% to $7.2 million, or $0.96 per diluted share, compared to $5.3 million, or $0.70 per diluted share, in the prior year[11] - Net income for the three months ended September 30, 2025, was $7.21 million, compared to $5.28 million in 2024, reflecting a year-over-year growth of 36.6%[21] - Adjusted net income grew 33.4% to $7.8 million, or $1.03 per diluted share, compared to $5.8 million, or $0.77 per diluted share, in Q3 2024[11] - Adjusted net income for the three months ended September 30, 2025, was $7.75 million, up from $5.81 million in 2024, indicating a 33.5% increase[23] - Basic income per share for the three months ended September 30, 2025, was $0.96, compared to $0.71 for the same period in 2024, marking a 35.2% increase[23] Margins and Expenses - Gross margin improved by 210 basis points to 40.2% of net sales, up from 38.1% in the same quarter last year[8] - Gross margin for the three months ended September 30, 2025, was $49.28 million, representing a gross margin percentage of 40.2%, up from 38.1% in the same period of 2024[21] - Operating expenses were $37.6 million, or 30.6% of net sales, compared to $33.6 million, or 29.3% of net sales, in Q3 2024[7] - Operating expenses for the three months ended September 30, 2025, were $37.54 million, up from $33.58 million in 2024, reflecting an increase of 11.7%[21] Debt and Inventory - Total debt decreased 7.5% year-over-year to $139.0 million as of September 30, 2025[13] - Inventories increased 12.7% to $193.6 million compared to $171.8 million on the same date last year[14] Future Outlook - The company anticipates that price increases and diversified sourcing will help mitigate the impact of higher tariffs on margins in the coming quarters[4] - The strength of the brand portfolio and enhanced supply chain is expected to capture growth opportunities in 2026 and beyond[4] Non-GAAP Measures - Total non-GAAP adjustments for the three months ended September 30, 2025, amounted to $692,000, which impacted the comparability of financial results[24] - The company emphasizes the usefulness of non-GAAP measures for evaluating operating performance and trends in operations[24]

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[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [ITEM 1 – FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201%20%E2%80%93%20FINANCIAL%20STATEMENTS) This section presents unaudited condensed consolidated financial statements and notes, detailing operations, accounting policies, and financial items [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :-------------------- | :------------ | :---------------- | :------------ | | Cash and cash equivalents | $2,779 | $3,719 | $4,107 | | Trade receivables – net | $66,367 | $71,983 | $62,968 | | Inventories – net | $186,836 | $166,701 | $174,973 | | Total current assets | $261,469 | $246,439 | $249,159 | | Total Assets | $471,020 | $457,300 | $467,874 | | Total current liabilities | $94,775 | $90,407 | $86,848 | | Long-term debt | $124,167 | $120,376 | $144,073 | | Total Liabilities | $231,955 | $225,076 | $244,062 | | Total Shareholders' Equity | $239,065 | $232,224 | $223,812 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Sales | $105,647 | $98,258 | $219,720 | $211,164 | | Cost of Goods Sold | $62,366 | $60,220 | $129,431 | $128,977 | | Gross Margin | $43,281 | $38,038 | $90,289 | $82,187 | | Operating Expenses | $36,125 | $33,530 | $74,427 | $69,695 | | Income from Operations | $7,156 | $4,508 | $15,862 | $12,492 | | Interest Expense and Other – net | $(2,519) | $(6,131) | $(4,874) | $(10,785) | | Net Income (Loss) | $3,608 | $(1,243) | $8,550 | $1,308 | | Basic EPS | $0.48 | $(0.17) | $1.15 | $0.18 | | Diluted EPS | $0.48 | $(0.17) | $1.14 | $0.18 | [Condensed Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) Condensed Consolidated Statements of Shareholders' Equity (in thousands) | Metric (in thousands) | December 31, 2023 | June 30, 2024 | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :------------ | :---------------- | :------------ | | Total Shareholders' Equity | $223,555 | $223,812 | $232,224 | $239,065 | | Net Income (H1) | | $2,550 | | $8,550 | | Dividends Paid (H1) | | $(2,200) | | $(2,312) | | Stock Compensation Expense (H1) | | $651 | | $786 | | Repurchase of Common Stock (H1) | | - | | $(201) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $2,042 | $23,875 | | Net cash used in investing activities | $(3,872) | $(430) | | Net cash provided by (used in) financing activities | $890 | $(23,808) | | Decrease in cash and cash equivalents | $(940) | $(363) | | Cash and cash equivalents, End of Period | $2,779 | $4,107 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [1. Nature of Operations and Basis of Presentation](index=7&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20BASIS%20OF%20PRESENTATION) - Rocky Brands, Inc. is a leading designer, manufacturer, and marketer of premium quality footwear and apparel under brands like Muck, Rocky, Georgia Boot, Durango, Lehigh, XTRATUF, Ranger, and Michelin[17](index=17&type=chunk) - Products are organized around six target markets: work, outdoor, western, commercial military, duty, and military, with complementary apparel and accessories[17](index=17&type=chunk) [2. Accounting Standards Updates](index=7&type=section&id=2.%20ACCOUNTING%20STANDARDS%20UPDATES) Accounting Standards Updates | Standard | Description | Anticipated Adoption Periods | Effect on Consolidated Financial Statements | | :------- | :---------- | :--------------------------- | :------------------------------------------ | | ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures | Requires expanded income tax disclosures, primarily related to effective tax rate reconciliation and income taxes paid | Q4 2025 | Not expected to have a material impact | | ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses | Requires expanded disclosures on comprehensive income to improve expenses and address requests for more detailed information about expense types | Q4 2027 (fiscal year) Q1 2028 (interim period) | Still assessing the impact | [3. Fair Value](index=8&type=section&id=3.%20FAIR%20VALUE) - The company uses a three-level fair value hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[21](index=21&type=chunk)[28](index=28&type=chunk) - Fair values of cash, receivables, and payables approximate carrying values due to their short-term nature; long-term credit facilities and other short-term financing obligations also approximate fair value (Level 2)[22](index=22&type=chunk) - Deferred compensation assets are classified as trading securities (Level 1) and liabilities within deferred liabilities[23](index=23&type=chunk) [4. Revenue](index=8&type=section&id=4.%20REVENUE) - Products are distributed through three segments: Wholesale (over 10,000 retail locations globally), Retail (direct-to-consumer via web platforms, e-commerce, third-party marketplaces, and Rocky Outdoor Gear Store), and Contract Manufacturing (U.S. Military, private label)[25](index=25&type=chunk)[35](index=35&type=chunk) - Revenue is recognized when performance obligations are satisfied, generally upon shipment or at the point of sale for retail customers, measured as the net sales price[26](index=26&type=chunk) - Net sales price includes estimates for variable consideration such as discounts, allowances, customer rebates, markdowns, and product returns, based on historical and anticipated trends[27](index=27&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - As of June 30, 2025, December 31, 2024, and June 30, 2024, there were no contract receivable or contract liability balances outstanding[32](index=32&type=chunk) [5. Trade Receivables](index=10&type=section&id=5.%20TRADE%20RECEIVABLES) - The company maintains an allowance for credit losses based on historical experience, age of receivables, insurance status, and identification of difficult-to-collect accounts[36](index=36&type=chunk) Allowance for Credit Losses (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :-------------------- | :------------ | :---------------- | :------------ | | Allowance for credit losses | $0.8 | $1.0 | $0.9 | [6. Inventory](index=11&type=section&id=6.%20INVENTORY) Inventory Components (in thousands) | Inventory Component (in thousands) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--------------------------------- | :------------ | :---------------- | :------------ | | Finished goods | $169,710 | $149,328 | $156,043 | | Raw materials | $16,313 | $16,671 | $18,006 | | Work-in-process | $813 | $702 | $924 | | Total | $186,836 | $166,701 | $174,973 | - The asset associated with the returns reserve included within inventories was approximately **$0.9 million** at June 30, 2025, **$0.9 million** at December 31, 2024, and **$0.7 million** at June 30, 2024[37](index=37&type=chunk) [7. Goodwill & Identified Intangible Assets](index=11&type=section&id=7.%20GOODWILL%20%26%20IDENTIFIED%20INTANGIBLE%20ASSETS) - Goodwill remained unchanged during the six months ended June 30, 2025, at **$47,844 thousand**[9](index=9&type=chunk)[38](index=38&type=chunk) Intangible Assets (in thousands) | Intangible Assets (in thousands) | June 30, 2025 Carrying Amount | December 31, 2024 Carrying Amount | June 30, 2024 Carrying Amount | | :------------------------------- | :---------------------------- | :-------------------------------- | :---------------------------- | | Trademarks (indefinite-lived) | $74,654 | $74,654 | $78,654 | | Patents (subject to amortization) | $27 | $32 | $40 | | Customer relationships (subject to amortization) | $29,747 | $31,137 | $32,526 | | Total intangible assets other than goodwill | $104,428 | $105,823 | $111,220 | - The Muck brand impairment of **$4,000 thousand** relates to the year ended December 31, 2024[38](index=38&type=chunk)[39](index=39&type=chunk) - Amortization expense for intangible assets was **$0.7 million** for each of the three months ended June 30, 2025 and 2024, and **$1.4 million** for the six months ended June 30, 2025 and 2024[41](index=41&type=chunk) [8. Long-Term Debt](index=12&type=section&id=8.%20LONG-TERM%20DEBT) - On April 26, 2024, the company refinanced its debt, establishing a **$175.0 million** asset-based lending (ABL) facility and a **$50.0 million** term loan facility, collateralized by domestic assets[43](index=43&type=chunk) - As of June 30, 2025, borrowing capacity under the ABL Facility was **$45.7 million**[43](index=43&type=chunk) Debt Components (in thousands) | Debt Component (in thousands) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :---------------------------- | :------------ | :---------------- | :------------ | | Term Facility outstanding | $30,942 | $35,123 | $49,303 | | ABL Facility (SOFR borrowings) | $103,300 | $91,300 | $100,278 | | ABL Facility (Prime borrowings) | $288 | $4,577 | $5,377 | | Total debt | $134,530 | $131,000 | $154,958 | | Long-term debt (net of current portion and issuance costs) | $124,167 | $120,376 | $144,073 | - The company was in compliance with all credit facility covenants, including minimum fixed charge coverage ratio and restrictions on dividends and share repurchases, as of June 30, 2025[47](index=47&type=chunk) [9. Taxes](index=13&type=section&id=9.%20TAXES) Effective Tax Rate | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :----------------------------- | :----------------------------- | | Effective Tax Rate | 22.2% | 23.4% | - The company's tax years 2019 through 2024 remain open to examination by most taxing authorities[50](index=50&type=chunk) - No interest and penalties on uncertain tax positions were recognized during the three and six months ended June 30, 2025 and 2024, and no material changes are expected in the next 12 months[51](index=51&type=chunk) [10. Earnings Per Share](index=15&type=section&id=10.%20EARNINGS%20PER%20SHARE) Weighted Average Shares Outstanding (in thousands) | Shares (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic - weighted average shares outstanding | 7,461 | 7,429 | 7,460 | 7,423 | | Diluted - weighted average shares outstanding | 7,493 | 7,429 | 7,493 | 7,466 | | Anti-dilutive securities | 179 | 54 | 179 | 103 | - Due to a net loss for the three months ended June 30, 2024, zero dilutive restricted share units and stock options were included as their effect would be anti-dilutive[52](index=52&type=chunk) [11. Supplemental Cash Flow Information](index=15&type=section&id=11.%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) Supplemental Cash Flow Information (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Interest paid | $4,593 | $5,436 | | Federal, state, and local income taxes paid, net | $1,639 | $219 | | Property, plant, and equipment purchases in accounts payable | $800 | $921 | | Right-of-use assets obtained in exchange for operating lease liabilities, net of terminations | $57 | $23 | [12. Segment Information](index=15&type=section&id=12.%20SEGMENT%20INFORMATION) - The company operates in three reportable segments: Wholesale, Retail, and Contract Manufacturing[54](index=54&type=chunk) - Net sales to foreign countries represented approximately **3.6%** and **2.7%** of net sales for the three months ended June 30, 2025 and 2024, respectively, and **2.8%** and **2.4%** for the six months ended June 30, 2025 and 2024, respectively[58](index=58&type=chunk) Segment Net Sales (in thousands) | Segment Net Sales (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Wholesale | $73,092 | $68,258 | $147,877 | $148,050 | | Retail | $29,746 | $26,110 | $66,386 | $56,517 | | Contract Manufacturing | $2,809 | $3,890 | $5,457 | $6,597 | | Total Net Sales | $105,647 | $98,258 | $219,720 | $211,164 | Segment Gross Margin (in thousands) | Segment Gross Margin (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Wholesale | $29,478 | $25,432 | $59,588 | $54,463 | | Retail | $13,455 | $12,234 | $30,200 | $27,036 | | Contract Manufacturing | $348 | $372 | $501 | $688 | | Total Gross Margin | $43,281 | $38,038 | $90,289 | $82,187 | [13. Commitments and Contingencies](index=17&type=section&id=13.%20COMMITMENTS%20AND%20CONTINGENCIES) - The company is involved in ordinary course legal proceedings, with no materially adverse financial impact expected[62](index=62&type=chunk) - A gain contingency exists for an estimated **$7.9 million** potential refund from overpaid duties due to HTS code misclassification in 2021-2022, of which **$5.1 million** has been received to date; no refunds were received in H1 2025 or H1 2024[63](index=63&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=18&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial performance, condition, and operational results, highlighting key drivers, strategies, and liquidity [BUSINESS OVERVIEW](index=18&type=section&id=BUSINESS%20OVERVIEW) - The company is a leading designer, manufacturer, and marketer of premium footwear and apparel across Wholesale, Retail, and Contract Manufacturing segments, serving work, outdoor, western, duty, commercial military, and military markets[64](index=64&type=chunk) - Strategic sourcing shifts to manufacturing facilities in the Dominican Republic and Puerto Rico were implemented in H1 2025 to mitigate adverse impacts from additional tariffs[65](index=65&type=chunk) - Inventory purchases were accelerated in 2025 ahead of new tariffs to mitigate potential business impact[65](index=65&type=chunk)[70](index=70&type=chunk) - The Retail segment's growth outpaced Wholesale and Contract Manufacturing, driven by Lehigh CustomFit expansion, digital marketing emphasis, and increased e-commerce/third-party marketplace sales[66](index=66&type=chunk) - Q2 2025 saw increased net sales (**7.5%**) and gross margin (**230 bps to 41.0%**) compared to Q2 2024, with H1 2025 net sales up **4.1%** and gross margin up **220 bps to 41.1%**[67](index=67&type=chunk)[72](index=72&type=chunk) - Interest expense declined in Q2 and H1 2025 due to lower interest rates following the April 2024 debt refinancing and reduced outstanding principal balances[69](index=69&type=chunk) [RESULTS OF OPERATIONS](index=18&type=section&id=RESULTS%20OF%20OPERATIONS) [Three Months Ended June 30, 2025 compared to Three Months Ended June 30, 2024](index=20&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) Results of Operations - Three Months Ended June 30 (in thousands, %) | Metric (in thousands) | Q2 2025 | Q2 2024 | Inc./(Dec.) $ | Inc./(Dec.) % | | :-------------------- | :------ | :------ | :------------ | :------------ | | **NET SALES:** | | | | | | Wholesale | $73,092 | $68,258 | $4,834 | 7.1% | | Retail | $29,746 | $26,110 | $3,636 | 13.9% | | Contract Manufacturing | $2,809 | $3,890 | $(1,081) | (27.8)% | | Total Net Sales | $105,647 | $98,258 | $7,389 | 7.5% | | **GROSS MARGIN:** | | | | | | Wholesale Margin % | 40.3% | 37.3% | 3.0% | | | Retail Margin % | 45.2% | 46.9% | (1.7)% | | | Contract Manufacturing Margin % | 12.4% | 9.6% | 2.8% | | | Total Margin % | 41.0% | 38.7% | 2.3% | | | **OPERATING EXPENSES:** | | | | | | Operating Expenses | $36,125 | $33,530 | $2,595 | 7.7% | | % of Net Sales | 34.2% | 34.1% | 0.1% | | | **INTEREST EXPENSE AND OTHER:** | | | | | | Interest expense | $2,496 | $6,131 | $(3,635) | (59.3)% | | **INCOME TAXES:** | | | | | | Effective Tax Rate | 22.2% | 23.4% | (1.3)% | | - Wholesale net sales increased due to increased demand across key styles and brands, favorable weather, and a stronger inventory position, supported by strategic expansion of the outdoor category's lifestyle component[82](index=82&type=chunk) - Retail net sales growth was driven by Lehigh CustomFit business expansion (due to sales organization realignment and increased consumer spending/subsidy utilization), increased third-party marketplace presence, and e-commerce promotions[83](index=83&type=chunk) - Contract Manufacturing net sales decreased primarily due to no new U.S. Military contracts in 2025[84](index=84&type=chunk) - Retail gross margin percentage decreased due to Lehigh representing a larger portion of sales (lower margin) and increased promotional activity/competitive pricing on e-commerce/third-party platforms[87](index=87&type=chunk) - The significant decrease in interest expense was largely due to a **$2.6 million** loan extinguishment charge in Q2 2024 and lower interest rates/debt levels post-refinancing[90](index=90&type=chunk) [Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024](index=23&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) Results of Operations - Six Months Ended June 30 (in thousands, %) | Metric (in thousands) | H1 2025 | H1 2024 | Inc./(Dec.) $ | Inc./(Dec.) % | | :-------------------- | :------ | :------ | :------------ | :------------ | | **NET SALES:** | | | | | | Wholesale | $147,877 | $148,050 | $(173) | (0.1)% | | Retail | $66,386 | $56,517 | $9,869 | 17.5% | | Contract Manufacturing | $5,457 | $6,597 | $(1,140) | (17.3)% | | Total Net Sales | $219,720 | $211,164 | $8,556 | 4.1% | | **GROSS MARGIN:** | | | | | | Wholesale Margin % | 40.3% | 36.8% | 3.5% | | | Retail Margin % | 45.5% | 47.8% | (2.3)% | | | Contract Manufacturing Margin % | 9.2% | 10.4% | (1.2)% | | | Total Margin % | 41.1% | 38.9% | 2.2% | | | **OPERATING EXPENSES:** | | | | | | Total Operating Expenses | $74,427 | $69,695 | $4,732 | 6.8% | | % of Net Sales | 33.9% | 33.0% | 0.9% | | | **INTEREST EXPENSE AND OTHER:** | | | | | | Interest expense | $4,896 | $10,642 | $(5,746) | (54.0)% | | **INCOME TAXES:** | | | | | | Income Tax Expense | $2,438 | $399 | $2,039 | 511.0% | | Effective Tax Rate | 22.2% | 23.4% | (1.2)% | | - Wholesale net sales slightly decreased due to a blanket commercial military order in Q1 2024 that elevated prior year sales, partially offset by increased demand in key styles and lifestyle expansion in Q2 2025[93](index=93&type=chunk) - Retail net sales increased due to growth in Lehigh CustomFit (sales organization realignment, increased consumer spending/subsidy utilization) and higher sales through third-party marketplaces and owned e-commerce websites[94](index=94&type=chunk) - Contract Manufacturing net sales decreased due to no new U.S. Military contracts and a general decrease in contract manufacturing sales[95](index=95&type=chunk) - Wholesale gross margin percentage increased due to a more favorable product mix, manufacturing efficiencies, strategic sourcing shifts, and the lower-margin commercial military order in the prior year[97](index=97&type=chunk) - Retail gross margin percentage decreased due to increased promotional activity and competitive pricing on e-commerce and third-party marketplace platforms[98](index=98&type=chunk) - Contract Manufacturing gross margin decreased due to reduced economies of scale at the Puerto Rico manufacturing facility[99](index=99&type=chunk) - Operating expenses as a percentage of net sales increased due to higher selling and outbound logistics costs associated with increased Retail sales and greater marketing investments[100](index=100&type=chunk) - Interest expense decreased significantly due to a **$2.6 million** loan extinguishment charge in H1 2024 and lower interest rates/debt levels post-refinancing[101](index=101&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=26&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) - Principal liquidity sources are income from operations and access to the ABL Facility; as of June 30, 2025, cash and cash equivalents were **$2.8 million**, with **$45.7 million** available under the ABL Facility[104](index=104&type=chunk) - Working capital fluctuates seasonally, typically lowest in Q1 and highest in Q2/Q3, funded by operations or the ABL Facility[105](index=105&type=chunk) - Outstanding borrowings were **$103.6 million** under the ABL Facility and **$30.9 million** under the Term Facility as of June 30, 2025[106](index=106&type=chunk) - Net cash provided by operating activities decreased to **$2.0 million** in H1 2025 from **$23.9 million** in H1 2024, primarily due to increased cash used for inventory purchases (**$20.1 million** in H1 2025 vs **$5.8 million** in H1 2024) driven by tariffs and anticipated demand[109](index=109&type=chunk)[110](index=110&type=chunk) - Net cash used in investing activities increased to **$3.9 million** in H1 2025 from **$0.4 million** in H1 2024, mainly due to higher capital expenditures for manufacturing and IT[112](index=112&type=chunk) - Net cash provided by financing activities was **$0.9 million** in H1 2025, a shift from **$23.8 million** used in H1 2024, driven by proceeds from the revolving facility offset by term loan and dividend payments[113](index=113&type=chunk) - A share repurchase program of up to **$7.5 million** was announced on February 25, 2025, effective until February 24, 2026[114](index=114&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=27&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) - Financial statement preparation requires management estimates and assumptions, which are evaluated ongoingly and based on historical experience and reasonable assumptions[116](index=116&type=chunk) - Critical accounting policies and estimates are detailed in the Annual Report on Form 10-K for the year ended December 31, 2024[117](index=117&type=chunk) [SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES REFORM ACT OF 1995](index=27&type=section&id=SAFE%20HARBOR%20STATEMENT%20UNDER%20THE%20PRIVATE%20SECURITIES%20REFORM%20ACT%20OF%201995) - The report contains forward-looking statements subject to risks and uncertainties, including dependence on sales forecasts, changes in consumer demand, seasonality, competition, reliance on suppliers, international trade risks, and cybersecurity[118](index=118&type=chunk) - Investors are cautioned that assumptions underlying forward-looking statements may be inaccurate, and the company assumes no obligation to update them[118](index=118&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=28&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) No material changes to market risk disclosures have occurred since the Annual Report on Form 10-K for December 31, 2024 - No material changes to market risk disclosures as presented in the Annual Report on Form 10-K for the year ended December 31, 2024[119](index=119&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=28&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance that material information is accumulated, processed, summarized, and reported timely[121](index=121&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[123](index=123&type=chunk) [PART II -- OTHER INFORMATION](index=28&type=section&id=PART%20II%20--%20OTHER%20INFORMATION) [ITEM 1A. RISK FACTORS](index=28&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section highlights new tariffs on imported products as a material risk, potentially impacting business, financial condition, and operations - Additional tariffs on products imported to the U.S. from countries like China, Vietnam, Dominican Republic, India, Cambodia, and Mexico pose a significant risk[125](index=125&type=chunk) - These tariffs may materially increase cost of goods sold, reduce gross margins, create consumer/economic uncertainty, reduce product demand, and negatively impact the carrying value of indefinite intangible assets[125](index=125&type=chunk)[127](index=127&type=chunk) - The company is implementing strategies like reevaluating sourcing countries, negotiating costs, and adjusting pricing, but there is no assurance these will fully offset the potential negative impact[126](index=126&type=chunk) [ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=29&type=section&id=ITEM%202%20-%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) No unregistered equity sales occurred, and no shares were repurchased under the common stock repurchase program during Q2 2025 - No unregistered sales of equity securities occurred during the period[128](index=128&type=chunk) - The company announced a **$7,500,000** share repurchase plan on February 25, 2025, effective until February 24, 2026[114](index=114&type=chunk)[131](index=131&type=chunk) Common Stock Repurchase Program | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Maximum Shares that May Yet be Purchased Under Plans or Programs | | :----- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------------------- | | April 1, 2025 - April 30, 2025 | - | - | $7,299,140 | | May 1, 2025 - May 31, 2025 | - | - | $7,299,140 | | June 1, 2025 - June 30, 2025 | - | - | $7,299,140 | | Total | - | - | $7,299,140 | [ITEM 5. OTHER INFORMATION](index=29&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[132](index=132&type=chunk) [ITEM 6. EXHIBITS](index=30&type=section&id=ITEM%206.%20EXHIBITS) This section lists exhibits filed with Form 10-Q, including officer certifications and XBRL financial statements - Exhibits include Certification Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Principal Financial Officer (31.2*) and Section 1350 Certification of Principal Executive Officer/Principal Financial Officer (32**)[135](index=135&type=chunk) - Financial statements from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, are attached as Exhibits 101 in Inline XBRL format[135](index=135&type=chunk) [SIGNATURES](index=31&type=section&id=SIGNATURES) The report is signed by Thomas D. Robertson, Chief Operating Officer, Chief Financial Officer, and Treasurer - The report was signed on August 7, 2025, by Thomas D. Robertson, Chief Operating Officer, Chief Financial Officer, and Treasurer (Principal Financial and Accounting Officer)[139](index=139&type=chunk)

Core Insights - Rocky Brands, Inc. (NASDAQ: RCKY) reported strong Q2 results, leading to a significant increase in stock price [1] - The company demonstrated robust sales momentum during the quarter, positively impacting earnings [1] - Rocky Brands raised its earnings guidance for 2025, indicating confidence in future performance [1] Financial Performance - The Q2 results showcased strong sales growth, contributing to improved earnings figures [1] - The company's ability to raise guidance for 2025 reflects a positive outlook based on current performance trends [1]