Rocky Brands (NasdaqGS:RCKY) FY 2026 Conference January 12, 2026 02:30 PM ET Company ParticipantsThomas Robertson - CFO and COOJason Brooks - President and CEOConference Call ParticipantsJonathan Komp - Senior Research AnalystJonathan KompLet's get started here. I'm Jonathan Komp, a senior analyst from Baird. Very pleased to host Rocky Brands today. You may know Rocky as a company with more than 90 years of operating history and a leading designer, manufacturer, marketer of rugged boots and outdoor gear. A ...

Rocky Brands (NasdaqGS:RCKY) FY 2026 Conference January 12, 2026 02:30 PM ET Company ParticipantsThomas Robertson - CFO and COOJason Brooks - President and CEOConference Call ParticipantsJonathan Komp - Senior Research AnalystJonathan KompLet's get started here. I'm Jonathan Komp, a Senior Analyst from Baird. Very pleased to host Rocky Brands today. You may know Rocky as a company with more than 90 years of operating history and a leading designer, manufacturer, marketer of rugged boots and outdoor gear. A ...

Rocky Brands (NasdaqGS:RCKY) FY 2026 Conference January 12, 2026 02:30 PM ET Speaker1Let's get started here. I'm Jonathan Komp, a senior analyst from Baird. Very pleased to host Rocky Brands today. You may know Rocky as a company with more than 90 years of operating history and a leading designer, manufacturer, marketer of rugged boots and outdoor gear. A couple of household names in the portfolio you may know: Rocky Boots, Georgia Boots, Durango, more recently the Original Muck Boot brand, as well as XTRAT ...

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]