Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-34382 ROCKY BRANDS, INC. (Exact name of Registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) Ohio No. 31-1364046 (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT ...

Core Insights - The article discusses the investment strategies and achievements of Paul Franke, a seasoned investor with 38 years of trading experience, emphasizing his unique stock selection methods and performance metrics [1]. Group 1: Investment Strategies - Paul Franke employs a contrarian stock selection style, utilizing daily algorithm analysis of fundamental and technical data to identify investment opportunities [1]. - His system, named "Victory Formation," focuses on supply/demand imbalances indicated by specific stock price and volume movements [1]. - The "Bottom Fishing Club" articles highlight deep-value candidates or stocks showing significant upward technical momentum reversals [1]. - "Volume Breakout Report" articles analyze positive trend changes supported by strong price and volume trading actions [1]. Group 2: Performance Metrics - Franke was consistently ranked among the top investment advisors nationally during the 1990s, recognized for his macro views on stock markets and commodities [1]. - He achieved the 1 ranking in the Motley Fool® CAPS stock picking contest during parts of 2008 and 2009, out of over 60,000 portfolios [1]. - As of September 2024, he is ranked in the Top 3% of bloggers by TipRanks® for 12-month stock picking performance based on suggestions made over the last decade [1]. Group 3: Risk Management - Franke advises investors to implement stop-loss levels of 10% or 20% on individual stock choices and to maintain a diversified portfolio of at least 50 well-positioned stocks to enhance regular stock market outperformance [1].

Rocky Brands (RCKY) Q1 2025 Earnings Call April 29, 2025 09:19 PM ET Speaker0 Ladies and gentlemen, greetings, and welcome to the Rocky Brands Inc. First Quarter Fiscal twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Cody McAllister of ICR. Please go ahead. Speaker1 Thank you, and thanks ...

Rocky Brands (RCKY) Q1 2025 Earnings Call April 29, 2025 04:30 PM ET Company Participants Cody McAlester - VP - Investor RelationsJason Brooks - Chairman & Chief Executive OfficerThomas Robertson - COO & CFO Conference Call Participants Janine Stichter - Managing Director & Analyst - Consumer Retail & Lifestyle BrandsJonathan Komp - Senior Research Analyst Operator Ladies and gentlemen, greetings, and welcome to the Rocky Brands Inc. First Quarter Fiscal twenty twenty five Earnings Conference Call. At this ...

Rocky Brands (RCKY) Q1 2025 Earnings Call April 29, 2025 04:30 PM ET Company Participants Cody McAlester - VP - Investor RelationsJason Brooks - Chairman & Chief Executive OfficerThomas Robertson - COO & CFO Conference Call Participants Janine Stichter - Managing Director & Analyst - Consumer Retail & Lifestyle BrandsJonathan Komp - Senior Research Analyst Operator Ladies and gentlemen, greetings, and welcome to the Rocky Brands Inc. First Quarter Fiscal twenty twenty five Earnings Conference Call. At this ...

[Performance Overview](index=1&type=section&id=First%20Quarter%202025%20Overview) Rocky Brands began Q1 2025 with strong retail sales growth and improved profitability, while addressing new U.S. tariffs - Retail segment sales grew **20%**, driven by direct-to-consumer and Lehigh safety shoe businesses, indicating healthy demand[3](index=3&type=chunk) - The company plans Q2 price increases and reduced China sourcing to mitigate higher U.S. tariffs, utilizing Dominican Republic and Puerto Rico facilities[3](index=3&type=chunk) Q1 2025 Key Performance Highlights (YoY) | Metric | Q1 2025 | Change | | :--- | :--- | :--- | | Net Sales | $114.1 Million | +1.1% | | Income from Operations | $8.7 Million | +8.8% | | Net Income | $4.9 Million | +88.5% | | Diluted EPS | $0.66 | +94.1% | | Adjusted Net Income | $5.5 Million | +77.9% | | Total Debt | $128.6 Million | -17.5% | [First Quarter 2025 Financial Review](index=1&type=section&id=First%20Quarter%202025%20Review) Q1 2025 saw net sales rise 1.1% to $114.1 million, driven by retail growth, improved gross margin, and lower interest expenses [Sales Performance by Segment](index=1&type=section&id=Sales%20Performance%20by%20Segment) Retail segment sales surged **20.4%** to **$36.6 million**, offsetting a **6.3%** decline in Wholesale sales to **$74.8 million** Net Sales by Segment (Q1 2025 vs. Q1 2024) | Segment | Q1 2025 Sales | Q1 2024 Sales | % Change | | :--- | :--- | :--- | :--- | | Wholesale | $74.8 million | $79.8 million | -6.3% | | Retail | $36.6 million | $30.4 million | +20.4% | | Contract Manufacturing | $2.7 million | $2.7 million | 0.0% | | **Total Net Sales** | **$114.1 million** | **$112.9 million** | **+1.1%** | [Profitability Analysis](index=1&type=section&id=Profitability%20Analysis) Q1 2025 profitability improved with gross margin expanding to **41.2%** and net income surging **88.5%** due to lower interest expenses - Gross margin increased by **210 basis points** to **41.2%**, driven by improved Wholesale margins and a higher mix of Retail sales[5](index=5&type=chunk) - Operating expenses rose due to increased selling and logistics costs supporting direct-to-consumer business growth[6](index=6&type=chunk) - Interest expense decreased to **$2.4 million** from **$4.5 million** year-over-year, due to lower rates from April 2024 debt refinancing and reduced debt levels[9](index=9&type=chunk) Profitability Metrics (Q1 2025 vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Gross Margin | $47.0M (41.2%) | $44.1M (39.1%) | +6.5% | | Income from Operations | $8.7M | $8.0M | +8.8% | | Net Income | $4.9M | $2.6M | +88.5% | | Diluted EPS | $0.66 | $0.34 | +94.1% | | Adjusted Net Income | $5.5M | $3.1M | +77.9% | [Balance Sheet Review](index=2&type=section&id=Balance%20Sheet%20Review) As of March 31, 2025, the balance sheet strengthened with a **17.5%** reduction in total debt to **$128.6 million** Key Balance Sheet Items (as of March 31, 2025) | Account | March 31, 2025 | March 31, 2024 | % Change (YoY) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $2.6 million | $3.1 million | -16.1% | | Inventories | $175.5 million | $165.1 million | +6.3% | | Total Debt (net) | $128.6 million | $155.95 million* | -17.5% | - *Note: Total debt for March 31, 2024, is derived from the sum of current and long-term debt components[18](index=18&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section provides unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Operations, and GAAP to non-GAAP reconciliations [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were **$468.2 million**, with total liabilities decreasing to **$232.0 million**, increasing shareholders' equity Condensed Consolidated Balance Sheet (in thousands) | | March 31, 2025 | March 31, 2024 | |:---|---:|---:| | **Total current assets** | $258,681 | $247,338 | | **TOTAL ASSETS** | **$468,223** | **$466,527** | | **Total current liabilities** | $98,085 | $74,748 | | **TOTAL LIABILITIES** | **$232,010** | **$241,232** | | **Total shareholders' equity** | **$236,213** | **$225,295** | | **TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY** | **$468,223** | **$466,527** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2025 net sales reached **$114.1 million**, with net income significantly increasing to **$4.9 million**, or **$0.66** per diluted share Condensed Consolidated Statements of Operations (in thousands, except per share data) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |:---|---:|---:| | **NET SALES** | **$114,073** | **$112,906** | | GROSS MARGIN | $47,008 | $44,149 | | INCOME FROM OPERATIONS | $8,706 | $7,983 | | **NET INCOME** | **$4,941** | **$2,550** | | Diluted EPS | $0.66 | $0.34 | [Reconciliation of GAAP to Non-GAAP Measures](index=6&type=section&id=Reconciliation%20of%20GAAP%20Measures%20to%20Non-GAAP%20Measures) Non-GAAP adjustments exclude acquisition-related amortization, showing Q1 2025 adjusted net income of **$5.5 million**, a **77.9%** increase year-over-year GAAP to Non-GAAP Reconciliation Highlights (in thousands, except per share data) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |:---|---:|---:| | **NET INCOME, AS REPORTED (GAAP)** | **$4,941** | **$2,550** | | Total Non-GAAP Adjustments | $692 | $692 | | Tax Impact of Adjustments | ($154) | ($162) | | **ADJUSTED NET INCOME (Non-GAAP)** | **$5,479** | **$3,080** | | **DILUTED EPS, AS REPORTED (GAAP)** | **$0.66** | **$0.34** | | **ADJUSTED DILUTED EPS (Non-GAAP)** | **$0.73** | **$0.41** | [Supplementary Information](index=3&type=section&id=Supplementary%20Information) This section includes investor conference call details, a corporate profile, forward-looking statements, and non-GAAP financial measure explanations - A conference call and live webcast will be held on April 29, 2025, at 4:30 pm ET to discuss Q1 2025 results[14](index=14&type=chunk) - Rocky Brands designs, manufactures, and markets footwear and apparel under brands like Rocky®, Georgia Boot®, Durango®, and The Original Muck Boot Company®[15](index=15&type=chunk) - Non-GAAP measures exclude acquisition-related intangible asset amortization, aiding management in evaluating operating performance and analyzing business trends[23](index=23&type=chunk)[25](index=25&type=chunk)

Part I [Business](index=4&type=section&id=Item%201.%20Business) Rocky Brands, Inc. designs, manufactures, and markets premium footwear and apparel across three segments: Wholesale, Retail, and Contract Manufacturing - The company's business is organized into three reportable segments: Wholesale, Retail, and Contract Manufacturing[15](index=15&type=chunk)[17](index=17&type=chunk) Brand Portfolio and Retail Price Points | Brand | Description | Suggested Retail Price Range (USD) | | :--- | :--- | :--- | | **Muck** | Premium rubber and neoprene boots | $55.00 - $265.00 | | **Rocky** | Premium footwear, apparel, and accessories | $80.00 - $415.00 (Footwear) | | **Georgia Boot** | Moderately priced work and rugged lifestyle footwear | $109.00 - $280.00 | | **Durango** | Premium western footwear | $120.00 - $655.00 | | **Lehigh** | Occupational safety footwear | $91.00 - $295.00 | | **XTRATUF** | Footwear for fishing and outdoor markets | $50.00 - $195.00 | | **Ranger** | Value-priced pac-boots for wet/cold weather | $48.00 - $100.00 | | **Michelin** | Licensed premier price point work footwear | $210.00 - $237.00 | - The company's growth strategy includes expanding into new target markets, cross-selling brands to retailers, growing internationally and through e-commerce, increasing the Lehigh business-to-business platform, and acquiring new brands[44](index=44&type=chunk) - Manufacturing and sourcing are diversified across company-owned facilities in the Dominican Republic, Puerto Rico, and China, and third-party facilities in China, Vietnam, India, and Mexico[48](index=48&type=chunk) - As of December 31, 2024, the company had approximately **2,535 employees**, with about **1,690** working in manufacturing facilities[62](index=62&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces numerous risks, including business risks such as difficulties in brand expansion, reliance on international manufacturing, and changing consumer trends - A majority of products are produced in China, the Dominican Republic, Puerto Rico, Vietnam, India, and Mexico, exposing the company to risks of international commerce, including tariffs, political instability, and transportation costs[75](index=75&type=chunk) - The business is subject to intense competition from companies with greater resources, and its financial success is influenced by the success of its wholesale customers[90](index=90&type=chunk)[91](index=91&type=chunk) - The company is in the process of a multi-year implementation of a new enterprise resource planning (ERP) system, which carries risks of business disruption, inefficiencies, and potential impacts on internal controls over financial reporting[113](index=113&type=chunk) - Cybersecurity breaches pose a material risk due to reliance on digital technologies for operations, data collection, and e-commerce, potentially leading to reputational damage, financial liabilities, and business disruption[114](index=114&type=chunk) - The company's debt facilities contain restrictive covenants, and increases in interest rates could adversely affect financial results[88](index=88&type=chunk)[89](index=89&type=chunk) [Unresolved Staff Comments](index=28&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[123](index=123&type=chunk) [Cybersecurity](index=28&type=section&id=Item%201C.%20Cybersecurity) Rocky Brands has established a robust cybersecurity program aligned with industry standards (CIS, COBIT, NIST) to manage risks - The company's cybersecurity program is aligned with frameworks from the Center for Internet Security (CIS), Control Objectives for Information Technologies (COBIT), and National Institute of Standards Technology (NIST)[124](index=124&type=chunk) - The Board's Audit Committee has primary oversight responsibility for cybersecurity risks, with one committee member holding a Certificate in Cyber-Risk Oversight from the National Association of Corporate Directors[128](index=128&type=chunk) - No cybersecurity incidents during the year ended December 31, 2024, had a material impact on the company's business, operations, or financial condition[127](index=127&type=chunk) [Properties](index=30&type=section&id=Item%202.%20Properties) The company owns and leases various properties for its corporate, manufacturing, distribution, and retail operations - Principal properties include owned facilities in Nelsonville, OH (corporate offices, retail store), Logan, OH (distribution), and Chuzhou, China (manufacturing), as well as leased facilities in Puerto Rico and the Dominican Republic (manufacturing) and Reno, NV (distribution)[132](index=132&type=chunk) [Legal Proceedings](index=30&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in litigation from time to time in the normal course of business - The company is party to routine litigation but does not expect any material adverse impact from these proceedings[133](index=133&type=chunk) [Mine Safety Disclosures](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[134](index=134&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Rocky Brands' common stock is traded on the NASDAQ Global Select Market under the symbol 'RCKY' - The company's common stock trades on the NASDAQ under the symbol 'RCKY'[137](index=137&type=chunk) - On February 24, 2025, the board of directors approved a new share repurchase program for up to **$7.5 million** of the company's outstanding common stock[139](index=139&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal year 2024 saw a net sales decrease, improved gross margin, and reduced debt, despite lower operating income 2024 Financial Highlights vs. 2023 | Metric | 2024 | 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $453.8M | $461.8M | ($8.1M) | (1.7)% | | Gross Margin % | 39.4% | 38.7% | +70 bps | N/A | | Income from Operations | $31.1M | $35.4M | ($4.3M) | (12.1)% | | Net Income | $11.4M | $10.4M | +$1.0M | +9.6% | | Diluted EPS | $1.52 | $1.41 | +$0.11 | +7.8% | | Total Debt (net) | $128.7M | $173.1M | ($44.4M) | (25.7)% | | Inventory | $166.7M | $169.2M | ($2.5M) | (1.5)% | - In April 2024, the company refinanced its debt, resulting in a new **$175.0 million** revolving credit facility and a **$50.0 million** term facility, incurring a one-time expense of **$2.6 million**[148](index=148&type=chunk) Net Sales by Segment (in thousands) | Segment | 2024 | 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Wholesale | $313,340 | $337,019 | $(23,679) | (7.0)% | | Retail | $126,868 | $116,960 | $9,908 | 8.5% | | Contract Manufacturing | $13,564 | $7,854 | $5,710 | 72.7% | - Operating expenses increased by **$4.7 million**, driven by higher outbound freight costs from increased Retail sales and a **$4.0 million** non-cash impairment charge for the Muck trademark[172](index=172&type=chunk)[179](index=179&type=chunk) - Cash flow from operating activities was **$52.8 million** in 2024, used to pay down **$44.2 million** in debt during the year[185](index=185&type=chunk)[190](index=190&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure is to interest rate fluctuations related to its variable-rate ABL and Term Facilities - The primary market risk is interest rate fluctuations on the Term Facility and ABL Facility, which are tied to variable rates like SOFR[213](index=213&type=chunk) - As of December 31, 2024, the company had **$131.0 million** of debt outstanding under its credit facilities and did not have any interest rate management agreements in place[214](index=214&type=chunk)[216](index=216&type=chunk) [Financial Statements and Supplementary Data](index=46&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for the fiscal year ended December 31, 2024, and the accompanying notes - The independent registered public accounting firm, Deloitte & Touche LLP, issued an unqualified opinion on the consolidated financial statements as of December 31, 2024[222](index=222&type=chunk) - The auditor identified the valuation of Goodwill for the Wholesale and Retail reporting units and the Muck trademark as a Critical Audit Matter, due to the materiality of the assets and the significant judgments involved in forecasting and valuation[228](index=228&type=chunk)[233](index=233&type=chunk) Consolidated Financial Data (in thousands) | Metric | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Balance Sheet** | | | | Total Current Assets | $246,439 | $258,173 | | Total Assets | $457,300 | $479,385 | | Total Current Liabilities | $90,407 | $71,529 | | Total Liabilities | $225,076 | $255,830 | | Total Shareholders' Equity | $232,224 | $223,555 | | **Income Statement** | | | | Net Sales | $453,772 | $461,833 | | Gross Margin | $179,010 | $178,598 | | Income from Operations | $31,066 | $35,372 | | Net Income | $11,387 | $10,426 | - In the fourth quarter of 2024, the company recognized a **$4.0 million** impairment charge related to the Muck trademark, reducing its carrying value to an estimated fair value of **$37.9 million** due to changes in projected revenue growth[232](index=232&type=chunk)[290](index=290&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=80&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on any matter of accounting principles or practices, or financial statement disclosure - None reported[373](index=373&type=chunk) [Controls and Procedures](index=80&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024[374](index=374&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2024, based on the COSO framework[376](index=376&type=chunk) - No material changes were made to the company's internal control over financial reporting during the most recent fiscal quarter[375](index=375&type=chunk) [Other Information](index=82&type=section&id=Item%209B.%20Other%20Information) During the fourth quarter of 2024, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the three months ended December 31, 2024[384](index=384&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=82&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's Proxy Statement for the 2025 Annual Meeting of Shareholders - The required information is incorporated by reference from the Company's Proxy Statement for the 2025 Annual Meeting of Shareholders[387](index=387&type=chunk) [Executive Compensation](index=82&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's Proxy Statement for the 2025 Annual Meeting of Shareholders - The required information is incorporated by reference from the Company's Proxy Statement[388](index=388&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=82&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Information regarding security ownership of certain beneficial owners, management, and related shareholder matters is incorporated by reference from the company's Proxy Statement for the 2025 Annual Meeting of Shareholders - The required information is incorporated by reference from the Company's Proxy Statement[389](index=389&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=82&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's Proxy Statement for the 2025 Annual Meeting of Shareholders - The required information is incorporated by reference from the Company's Proxy Statement[390](index=390&type=chunk) [Principal Accounting Fees and Services](index=82&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's Proxy Statement for the 2025 Annual Meeting of Shareholders - The required information is incorporated by reference from the Company's Proxy Statement[391](index=391&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=83&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements and all exhibits filed as part of the Annual Report on Form 10-K - The list of documents filed includes the Consolidated Financial Statements and various exhibits[394](index=394&type=chunk) - Key filed exhibits include the Amended and Restated ABL Loan and Security Agreement (Exhibit 10.14) and the 2024 Omnibus Incentive Plan (Exhibit 10.15)[395](index=395&type=chunk) [Form 10-K Summary](index=85&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section is not applicable - Not applicable[397](index=397&type=chunk)

Group 1 - The core investment strategy focuses on long-only investment, evaluating companies from an operational and buy-and-hold perspective, rather than market-driven dynamics [1] - The articles emphasize understanding the long-term earnings power of companies and the competitive dynamics within their industries [1] - The majority of recommendations will be holds, indicating a cautious approach to investment opportunities [1] Group 2 - A very small fraction of companies are considered a buy at any given time, highlighting a selective investment strategy [1] - Hold articles are intended to provide valuable information for future investors and introduce skepticism in a generally bullish market [1]

Rocky Brands, Inc. (NASDAQ:RCKY) Q4 2024 Earnings Conference Call February 25, 2025 4:30 PM ET Company Participants Brendon Frey - IR, ICR Jason Brooks - CEO Tom Robertson - COO & CFO Conference Call Participants Jonathan Komp - Baird Ethan Saghi - BTIG Operator Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Rocky Brands Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a qu ...

Financial Data and Key Metrics Changes - For Q4 2024, sales increased 1.7% year-over-year to $128.1 million, or 8.8% when excluding non-recurring sales from Q4 2023 [30] - Gross profit was $53.2 million, representing 41.5% of net sales, compared to $50.7 million or 40.3% in the same period last year, indicating a 120 basis point increase in gross margin [31] - Net income for Q4 2024 was $4.8 million or $0.64 per diluted share, down from $6.7 million or $0.91 per diluted share in Q4 2023 [36] Business Line Data and Key Metrics Changes - Wholesale sales were $81.3 million, a decrease of 5.2%, but up 4.5% on a recurring basis [30] - Retail sales increased 15.3% to $43.6 million, marking the segment's highest ever quarterly sales figure [30] - Contract manufacturing sales increased 39.1% to $3.2 million [30] Market Data and Key Metrics Changes - The direct-to-consumer channel saw strong demand, particularly for Durango and XTRATUF brands, contributing to record sales volumes [6][10] - The Georgia Boot brand experienced a slight increase in Q4 due to better boot weather and strong demand [14] - The commercial military and duty segments were down as expected, influenced by a sizable military blanket purchase agreement from the previous year [21] Company Strategy and Development Direction - The company plans to increase investments in marketing to enhance brand awareness and drive traffic to retail and wholesale partners [7] - There is a focus on launching new products and expanding into new categories, particularly for the Durango brand [10] - The company aims to reduce reliance on Chinese manufacturing, anticipating that total goods from China will be below 35% by the end of 2025 [43] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2025, noting that consumer purchasing behaviors have been unpredictable, leading retailers to be cautious with inventory commitments [27] - The company expects low single-digit revenue growth for 2025, driven by strong retail segment gains and steady wholesale growth [44] - Management acknowledged the impact of increased tariffs on products sourced from China, projecting a modest decline in gross margins [45] Other Important Information - The company reported a $4 million non-cash trademark impairment charge related to the Muck brand during Q4 [33] - Cash and cash equivalents stood at $3.7 million, with total indebtedness down 25.7% compared to the end of the previous year [39][40] - A new share repurchase program of up to $7.5 million was approved by the Board [40] Q&A Session Summary Question: Can you clarify recent mixed indicators and sell-through performance? - Management noted good sell-through from retailers but acknowledged their cautious approach moving forward [50][51] Question: What factors give confidence in low single-digit revenue growth for the year? - The order book is up year-over-year, but retailers are exhibiting cautious behavior in ordering [52][53] Question: Can you clarify the tariff impact on gross margins? - The 110 basis point impact is based on existing tariffs, and the company is evaluating options to mitigate this [56][59] Question: What are the key growth drivers for 2025? - Key drivers include XTRATUF, Muck, and Durango, with a focus on women's and kids' offerings [64][66] Question: Update on sourcing exposure to Mexico and potential tariffs? - The company sources a small proportion from Mexico, and while tariffs would negatively impact, it may disrupt competitors more significantly [81][82] Question: What is the current momentum across brands and categories? - The Muck and XTRATUF brands have continued strong performance into Q1, with e-commerce also showing positive trends [84][85]