Market Performance - U.S. stocks showed mixed trading results, with the Nasdaq Composite gaining approximately 0.5% [1] - The Dow increased by 0.02% to 44,639.69, while the S&P 500 rose by 0.21% to 6,384.38 [1] - Utilities shares experienced a rise of 0.8%, while energy stocks fell by 1.2% [1] Commodities - Crude oil prices increased by 0.8% to $69.73, while gold rose by 1% to $3,356.50 [5] - Silver prices decreased by 1.3% to $37.775, and copper fell by 0.9% to $5.5750 [5] European Markets - European shares were mostly higher, with the eurozone's STOXX 600 gaining 0.01% and Spain's IBEX 35 Index rising by 0.21% [6] - London's FTSE 100 fell by 0.08%, while Germany's DAX 40 and France's CAC 40 rose by 0.20% and 0.26%, respectively [6] Asian Markets - Asian markets closed mixed, with Japan's Nikkei 225 down by 0.05% and Hong Kong's Hang Seng down by 1.36% [7] - China's Shanghai Composite rose by 0.17%, and India's BSE Sensex gained 0.18% [7] Company Earnings - Wingstop Inc. shares surged by 24% to $360.20 after reporting better-than-expected second-quarter EPS and sales [9] - FTAI Aviation Ltd. shares increased by 20% to $137.34 following strong quarterly EPS and sales [9] - Rocky Brands Inc. shares rose by 26% to $29.00 after announcing better-than-expected quarterly earnings [9] - Vyne Therapeutics Inc. shares plummeted by 74% to $0.3764 after failing to meet trial endpoints [9] - Sos Ltd. shares dropped by 55% to $2.7184 after announcing a $7.5 million registered direct offering [9] - Avis Budget Group, Inc. shares fell by 15% to $172.40 following worse-than-expected quarterly EPS and sales [9] Economic Indicators - The U.S. economy expanded at an annualized rate of 3% in the second quarter, recovering from a 0.5% contraction in the previous quarter [11] - Private businesses added 104,000 jobs in July, surpassing market estimates of a 75,000 increase [11] - Crude oil inventories in the U.S. rose by 7.698 million barrels, contrasting with market expectations of a 2 million barrel decline [11]

Financial Data and Key Metrics Changes - Reported net sales for Q2 increased by 7.5% to $105.6 million, with wholesale sales up 7.1% to $73.1 million and retail net sales up 13.9% to $29.7 million [19] - Adjusted EPS more than tripled to $0.55 per diluted share compared to $0.17 per diluted share a year ago [22] - Gross profit was $43.3 million, representing 41% of net sales, an increase from 38.7% in the same period last year [19][20] - Operating income increased by 58.7% to $7.2 million, or 6.8% of net sales [21] Business Line Data and Key Metrics Changes - The Outdoor category, led by Extra Tough and Muck, is emerging as a key growth engine alongside traditional work and Western strengths [6] - Extra Tough maintained its position as the fastest-growing brand, with strong demand and expanding distribution [7] - Muck delivered its best quarter-to-quarter comparison since 2023, with strong performance driven by improved inventory positions and favorable weather [9] - Durango achieved high single-digit growth, while Georgia Boot showed progressive improvement throughout the quarter [10][11] Market Data and Key Metrics Changes - U.S. Wholesale significantly outpaced last year with strong double-digit growth, and e-commerce growth was equally strong [8] - The Outdoor category made up about one-third of sales for Q2, indicating its growing importance [41] - The work category remains the largest segment, followed by outdoor, with growth primarily in Extra Tough and Muck [40] Company Strategy and Development Direction - The company is focused on shifting production to its Dominican Republic and Puerto Rican facilities to mitigate tariff impacts and improve cost competitiveness [60][61] - The strategic positioning and operational efficiencies are expected to drive continued growth and increased shareholder value [16] - The company is optimistic about military prospects, having earned a USMC hot weather boot certification [15] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding consumer demand, noting positive sell-through rates in key categories despite some volatility [46][47] - The company is increasing its 2025 revenue guidance to a growth of 45% compared to 2024 levels, up from previous low single-digit expectations [23] - Management highlighted the importance of maintaining competitive pricing while ensuring retailer margins are preserved [33] Other Important Information - The company has approximately $11 million of incremental tariffs on the balance sheet that will impact the P&L over the remainder of the year [22] - Inventory at the end of Q2 was $186.8 million, up 6.8% year-over-year, driven by higher tariffs [22] Q&A Session Summary Question: How have the supply chain shifts been going? - Management reported being ahead of schedule in shifting production to the Dominican Republic and Puerto Rico, with boots already inbound [28][29] Question: How is pricing flowing through to retail partners? - Management noted some pushback but overall positive reception, with price increases implemented in June [31][32] Question: What are the drivers behind the guidance raise? - The guidance increase is primarily driven by strong Q2 performance and positive order indications for the second half of the year [34][35] Question: How does the outdoor business compare to the work business? - The outdoor category is growing faster than the work category, which remains the largest segment [40][41] Question: What is the state of consumer demand? - Management indicated mixed signals, with positive sell-through in certain categories but caution due to market volatility [46][47] Question: What are the prospects for market share gains from in-house manufacturing? - Management believes in-house operations will provide a competitive advantage, with plans to increase in-house production to around 45% [61][62] Question: What is the breakdown between wholesale and direct-to-consumer sales? - Management disclosed that over half of retail sales come from the Lehigh business, with branded e-commerce growing [65][66] Question: How much debt is expected to be paid down in the second half of the year? - Management anticipates a debt reduction of 10% to 13% from the prior year, though not as significant as the previous year [70]

Financial Performance - Net sales increased 7.5% to $105.6 million compared to $98.3 million in Q2 2024[5] - Income from operations rose 58.7% to $7.2 million, up from $4.5 million in the same quarter last year[9] - Net income increased to $3.6 million or $0.48 per diluted share, compared to a net loss of $1.2 million or $0.17 per diluted share in Q2 2024[11] - Adjusted net income increased to $4.1 million or $0.55 per diluted share, compared to $1.3 million or $0.17 per diluted share in the prior year[11] - Net sales for the three months ended June 30, 2025, were $105,647 million, a 7.3% increase from $98,258 million in the same period of 2024[23] - Income from operations for the three months ended June 30, 2025, was $7,156 million, up 58.5% from $4,508 million in 2024[23] - Net income for the six months ended June 30, 2025, reached $8,550 million, significantly higher than $1,308 million in the same period of 2024[23] - Adjusted net income for the three months ended June 30, 2025, was $4,146 million, compared to $1,276 million in 2024, marking an increase of 225.5%[25] - Basic earnings per share for the three months ended June 30, 2025, were $0.48, compared to a loss of $0.17 per share in 2024[25] Sales and Revenue Breakdown - Wholesale net sales increased 7.1% to $73.1 million, while retail net sales rose 13.9% to $29.7 million[5] - Gross margin improved by 230 basis points to 41.0% of net sales, up from 38.7% in Q2 2024[6] - Gross margin for the six months ended June 30, 2025, improved to $90,289 million, compared to $82,187 million in 2024, reflecting a year-over-year increase of 9.5%[23] Expenses and Debt - Operating expenses were $36.1 million, or 34.2% of net sales, compared to $33.5 million, or 34.1% of net sales in Q2 2024[7] - Adjusted operating expenses for the three months ended June 30, 2025, were $35,433 million, a decrease from $32,838 million in the same period of 2024[25] - Total debt decreased 13.1% year-over-year to $132.5 million as of June 30, 2025[13] - The company reported a significant reduction in interest expense, with net interest expense for the three months ended June 30, 2025, at $(2,519) million, down from $(6,131) million in 2024[25] Inventory and Bookings - Inventories increased 6.8% to $186.8 million compared to $175.0 million a year ago[14] - Bookings for the U.S. Wholesale business for the second half of 2025 are solidly up year-over-year, indicating positive momentum[4] Non-GAAP Adjustments - Total non-GAAP adjustments for the six months ended June 30, 2025, amounted to $1,384 million, compared to $3,981 million in 2024, indicating a decrease in adjustments impacting comparability[25]

Sales Performance - Net sales increased by 1.1% to $114.1 million in Q1 2025 compared to $112.9 million in Q1 2024, driven by growth in the Retail segment [84]. - Retail net sales grew by 20.5% to $36.6 million, while Wholesale net sales decreased by 6.3% to $74.8 million due to a prior year commercial military order [89]. Gross Margin and Operating Income - Gross margin improved by 210 basis points to 41.2%, with Wholesale gross margin increasing to 40.3% and Retail gross margin at 45.7% [83][85]. - Income from operations rose to $8.7 million, or 7.6% of net sales, compared to $8.0 million, or 7.1% of net sales in the prior year [87]. Operating Expenses and Interest - Operating expenses rose to $38.3 million, or 33.6% of net sales, reflecting higher selling and logistics costs associated with increased Retail sales [86]. - Interest expense decreased by 46.8% to $2.4 million due to lower interest rates following debt refinancing in April 2024 [97]. Debt and Liquidity - Total debt decreased by 17.5% to $128.6 million, contributing to reduced interest expenses [83]. - As of March 31, 2025, the company maintained cash and cash equivalents of $2.6 million and had $53.0 million available under its ABL Facility [99]. - As of March 31, 2025, the company has outstanding borrowings of $97.7 million under its ABL Facility and $33.0 million under its Term Facility, maintaining compliance with covenants and restrictions [101]. - The company anticipates that cash generated from operations will provide sufficient liquidity to fund operations and debt obligations for the next twelve months and beyond [103]. Cash Flow and Investments - Net cash provided by operating activities for the three months ended March 31, 2025, was $1.2 million, a significant decrease from $17.4 million for the same period in 2024 [104]. - The increase in inventory resulted in a cash use of $8.8 million for the three months ended March 31, 2025, compared to a cash source of $4.1 million for the same period in 2024 [105]. - The company reported a net cash used in financing activities of $1.7 million for the three months ended March 31, 2025, down from $18.5 million in the same period of 2024 [108]. - Net cash used in investing activities was $0.7 million for the three months ended March 31, 2025, compared to $0.3 million for the same period in 2024, primarily due to capital expenditures [107]. Shareholder Actions - A share repurchase program of up to $7.5 million of the company's outstanding common stock was announced on February 25, 2025 [109]. Tax and Accounting - The effective tax rate decreased to 22.2% from 23.4% due to changes in projected income from international operations [98]. - 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 [110]. - The company has identified critical accounting policies that may affect the reported financial statements, with historical results not materially differing from estimates [111]. Inventory and Accounts Receivable - Inventory increased by 6.3% to $175.5 million as a strategic move to prepare for the latter half of 2025 [83]. - An increase in accounts receivable resulted in a cash use of $1.9 million for the three months ended March 31, 2025, compared to a cash source of $6.0 million for the same period in 2024 [106].

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Financial Data and Key Metrics Changes - Reported net sales for Q1 increased 1.1% year over year to $114.1 million, slightly ahead of expectations [17] - Retail sales increased 20.5% to $36.6 million, while wholesale sales decreased by 6.3% to $74.8 million [18] - Gross profit for Q1 was $47 million, representing 41.2% of sales, the highest gross margin reported in Q1 [18] - Adjusted net income for Q1 was $5.5 million or $0.73 per diluted share, compared to $3.1 million or $0.41 per diluted share a year ago [20] Business Line Data and Key Metrics Changes - The XTRA TUF brand experienced double-digit growth, with bookings up approximately 80% versus last year [8] - MUC brand saw better-than-expected growth, particularly in the women's segment, with double-digit increases [9] - Rocky work category delivered the strongest performance, while Rocky Outdoor returned to growth with a single-digit increase [12] Market Data and Key Metrics Changes - The retail segment showed healthy demand, particularly in the B2B Lehigh business, which saw high teens sales growth [14] - Direct-to-consumer business grew faster than Lehigh, driven by marketplace volumes [15] - Wholesale sales were impacted by a planned reduction in commercial military sales, contributing to the overall decline [17] Company Strategy and Development Direction - The company plans to implement price increases on most footwear styles in response to higher tariffs [6] - Efforts are being made to reduce sourcing from China, with a goal to have less than 20% of total volume from China by year-end [27] - The company is leveraging its manufacturing facilities in the Dominican Republic and Puerto Rico to mitigate tariff impacts [37] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a higher degree of uncertainty for the remainder of the year but expressed confidence in maintaining financial targets [16] - The company is well-positioned to navigate current challenges due to its diversified sourcing structure and strong brand portfolio [6] - Management noted that consumer demand has not shown signs of panic despite economic uncertainties [34] Other Important Information - Interest expense decreased significantly to $2.4 million from $4.5 million year over year due to lower interest rates from refinancing [19] - Inventory levels increased by 6.3% year over year, reflecting proactive measures taken in anticipation of tariff impacts [21] Q&A Session Summary Question: Can you elaborate on the guidance and the migration out of China? - Management indicated a strong inventory position allowing them to navigate tariff impacts and transition sourcing out of China effectively [26][27] Question: What are wholesale partners saying about consumer ability to absorb price increases? - Management noted that retail partners are cautiously optimistic, with no significant panic from consumers regarding price increases [34] Question: How are pricing increases being planned? - The company is focused on preserving gross profit dollars while implementing price increases to offset higher costs [46][47] Question: What is the capacity shift to third-party manufacturers in Vietnam, India, and Cambodia? - Management confirmed that approximately 90-92% of products have found new homes, with ongoing efforts to transition remaining capacity [56]

Financial Data and Key Metrics Changes - Reported net sales for Q1 increased 1.1% year over year to $114.1 million, slightly ahead of expectations [18] - Retail sales increased 20.5% to $36.6 million, while wholesale sales decreased by $5 million or 6.3% to $74.8 million [19] - Gross profit for Q1 was $47 million, representing 41.2% of sales, the highest gross margin reported in Q1, compared to 39.1% in the same period last year [19] - Adjusted net income for Q1 was $5.5 million or $0.73 per diluted share, compared to $3.1 million or $0.41 per diluted share a year ago [21] Business Line Data and Key Metrics Changes - The rubber boot business, particularly the XTRA TUF brand, experienced strong demand with a 20% top line growth in the retail segment [5][6] - MUC brand also saw better than expected growth due to improved winter weather, with women's business delivering double-digit increases [10] - The Rocky brand group showed increases in both work and outdoor categories, with Rocky work delivering the strongest performance [12][13] Market Data and Key Metrics Changes - The company is shifting sourcing from China to countries like Vietnam, Cambodia, and India, aiming to reduce reliance on Chinese manufacturing [7][28] - The company anticipates total volume out of China to be just less than 20% by the end of the year [28] Company Strategy and Development Direction - The company plans to implement price increases on the majority of footwear styles in early June to mitigate the impact of higher tariffs [7][29] - The strategy includes diversifying sourcing and increasing production in the Dominican Republic and Puerto Rico [7][37] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a higher degree of uncertainty for the remainder of the year but expressed confidence in maintaining financial targets due to strong Q1 performance [17] - The company is prepared to navigate the current retail environment with a diverse brand portfolio and functional footwear [18] Other Important Information - Interest expense decreased significantly to $2.4 million from $4.5 million year over year due to lower interest rates from debt refinancing [21] - Inventory at the end of Q1 was $175.5 million, up 6.3% compared to the previous year, as the company accelerated receipts to avoid tariff impacts [22] Q&A Session Summary Question: Can you elaborate on the guidance and the migration out of China? - Management indicated a good inventory position allowing them to transition products out of China and into other countries, expecting to reduce volume from China to less than 20% by year-end [27][28] Question: What are your wholesale partners saying about consumer ability to absorb price increases? - Management noted that there hasn't been significant panic from consumers, and retail partners are cautiously navigating the situation [34][36] Question: Can you clarify the guidance regarding revenue and gross margin? - Management confirmed that while revenue assumptions remain unchanged, they expect lower gross margin percentages but aim to maintain gross profit dollars [42][43] Question: How are you planning the price increases? - The company plans to implement price increases to preserve gross profit dollars while being mindful of retail dynamics [45][46] Question: What is the capacity shift to third-party manufacturers in Vietnam and Cambodia? - Management stated that they have found homes for about 90-92% of their products and are working to secure the remaining capacity [56][57]

Financial Data and Key Metrics Changes - Reported net sales for Q1 increased 1.1% year over year to $114.1 million, slightly ahead of expectations [18] - Retail sales increased 20.5% to $36.6 million, while wholesale sales decreased by $5 million or 6.3% to $74.8 million [18] - Gross profit for Q1 was $47 million, representing 41.2% of sales, the highest gross margin reported in Q1, compared to 39.1% in the same period last year [19] - Adjusted net income for Q1 was $5.5 million or $0.73 per diluted share, compared to $3.1 million or $0.41 per diluted share a year ago [21] Business Line Data and Key Metrics Changes - The rubber boot business, particularly the XTRA TUF brand, experienced strong demand with double-digit growth in Q1 [6][8] - MUC brand also saw better than expected growth, particularly in the women's segment, driven by improved winter weather [10] - The Rocky brand group showed increases in both work and outdoor categories, with Rocky work delivering the strongest performance [12][13] - Georgia Boot faced a softer March due to economic uncertainty, but new product introductions continued to perform well [11] Market Data and Key Metrics Changes - Retail segment saw a 20% top line growth, indicating strong demand across distribution channels [5] - The company is shifting sourcing from China to countries like Vietnam, Cambodia, and India, aiming to reduce reliance on Chinese manufacturing [7][28] - The B2B Lehigh business reported high teens sales growth, marking the third consecutive quarter of double-digit gains [16] Company Strategy and Development Direction - The company plans to implement price increases on most footwear styles in response to higher tariffs, while maintaining flexibility to adjust prices based on future changes [7][29] - There is a focus on diversifying sourcing to mitigate tariff impacts, with a goal to reduce product sourced from China to less than 20% by year-end [28] - The company aims to maintain gross profit dollars despite anticipated pressure on gross margins due to tariffs [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged growing macroeconomic uncertainty but expressed confidence in navigating the current retail environment due to a diverse brand portfolio [5][18] - The company reiterated its full-year 2025 guidance, expecting low single-digit revenue growth over 2024 levels [23] - Management noted that consumer demand has not shown panic despite rising prices, indicating a stable retail environment [34] Other Important Information - Interest expense decreased significantly to $2.4 million from $4.5 million year over year due to lower interest rates from refinancing [20][21] - Inventory levels increased by 6.3% year over year, as the company accelerated receipts to mitigate tariff impacts [22] Q&A Session Summary Question: Can you elaborate on the guidance and the migration out of China? - Management indicated a strong inventory position allowing them to navigate tariff impacts and transition sourcing out of China effectively [27][28] Question: What are wholesale partners saying about consumer ability to absorb price increases? - Management noted that retail partners are cautiously optimistic, with no significant panic from consumers regarding price increases [32][34] Question: How much capacity is being shifted to third-party manufacturers in Vietnam and India? - Management stated that approximately 90-92% of products have found new homes, with ongoing efforts to transition the remaining 8% from China [56][57]

[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)