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]

Financial Data and Key Metrics Changes - For Q4 2024, sales increased by 1.7% year-over-year to $128.1 million, or 8.8% when excluding non-recurring sales from Q4 2023 [30] - Gross profit for Q4 was $53.2 million, representing 41.5% of net sales, up from 40.3% in the same period last year [31] - Net income for Q4 was $4.8 million, or $0.64 per diluted share, compared to $6.7 million, or $0.91 per diluted share in Q4 2023 [36] - For the full year, net sales were down 1.7% on a reported basis but up 5.3% on a recurring basis to $453.8 million [37] 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 by 15.3% to $43.6 million, marking the segment's highest ever quarterly sales figure [30] - Contract manufacturing sales increased by 39.1% to $3.2 million [30] Market Data and Key Metrics Changes - The direct-to-consumer channel saw strong demand, particularly for the Durango and XTRATUF brands, leading to the highest sales volume quarter for the retail segment [6][7] - The Georgia Boot brand experienced a slight increase in Q4, driven by better boot weather and strong demand [14] Company Strategy and Development Direction - The company plans to increase investments in marketing to drive brand awareness and 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 third-party exposure in manufacturing from China to below 35% by the end of 2025 while maintaining a competitive cost structure [43] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2025, anticipating low single-digit revenue growth, driven by strong retail segment gains and steady wholesale growth [44] - There is recognition of consumer uncertainty affecting retail partners' inventory commitments, but sell-through rates have been strong [27][41] - The company expects to face pressure from increased tariffs on products sourced from China, impacting gross margins modestly [46] Other Important Information - The company recorded a $4 million non-cash trademark impairment charge related to the Muck brand during Q4 [33] - A new share repurchase program of up to $7.5 million has been 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 cautious with inventory orders [52][53] Question: Can you clarify the tariff impact on gross margins? - The 110 basis points impact is based on existing tariffs, and the company is evaluating pricing strategies to mitigate this [56][59] Question: What are the key growth drivers for 2025? - Key drivers include strong performance from XTRATUF, Muck, and women's and kids' offerings from Durango [64][66] Question: What is the sourcing exposure to Mexico and potential tariff impacts? - The company sources a very small proportion from Mexico, and while it would negatively impact them, it may disrupt competitors more significantly [81][82] Question: How is the momentum carried into the beginning of 2025? - The Muck and XTRATUF brands have continued strong performance, but guidance remains cautious due to non-recurring sales and inventory shifts [84][86]

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]

Financial Performance - Fourth quarter net sales increased 1.7% to $128.1 million compared to $126.0 million in Q4 2023, or 8.8% after excluding non-recurring sales[5] - Full year 2024 net sales decreased 1.7% to $453.8 million compared to $461.8 million in 2023, but increased 5.3% when excluding non-recurring sales[13] - Net sales for Q4 2024 were $128,054,000, a slight increase of 0.87% compared to $125,952,000 in Q4 2023[31] - Retail segment sales for Q4 increased 15.3% to $43.6 million compared to $37.8 million in Q4 2023[5] - Contract Manufacturing segment sales increased 72.2% to $13.6 million compared to $7.9 million in 2023[13] Profitability - Adjusted net income for Q4 2024 rose 22.7% to $8.9 million, or $1.19 per diluted share, compared to $7.3 million, or $0.98 per diluted share in Q4 2023[12] - Net income for Q4 2024 was $4,801,000, a decrease of 28.4% from $6,712,000 in Q4 2023[31] - The company reported a basic income per share of $0.64 for Q4 2024, down from $0.91 in Q4 2023[31] Expenses and Margins - Fourth quarter gross margin improved by 120 basis points to 41.5% of net sales, up from 40.3% in the same period last year[6] - Operating expenses for Q4 2024 were $44.7 million, or 34.9% of net sales, compared to $36.0 million, or 28.6% of net sales in Q4 2023[8] - Operating expenses increased to $44,674,000 in Q4 2024, up 24.1% from $35,993,000 in Q4 2023[31] Debt and Liabilities - Total debt decreased by $44.4 million or 25.7% year-over-year to $128.7 million as of December 31, 2024[7] - Total current assets decreased to $246,439,000 as of December 31, 2024, down from $258,173,000 in 2023[29] - Total liabilities decreased to $225,076,000 as of December 31, 2024, compared to $255,830,000 in 2023[29] - Interest expense for 2024 decreased to $17.0 million from $21.2 million in 2023, driven by lower interest rates and reduced debt levels[17] Shareholder Actions - The company announced a new share repurchase program of up to $7.5 million of its outstanding common stock[23] Non-GAAP Measures - Excluded returns related to a supplier dispute for calculating non-GAAP measures, as these returns were inconsistent in size with normal business operations[36] - Supplier dispute inventory adjustment excluded from cost of goods sold for non-GAAP measures, facilitating evaluation of current operating performance[36] - Trademark impairment costs excluded from non-GAAP measures, as they do not reflect current operating performance[36] - Amortization of acquisition-related intangible assets excluded for non-GAAP measures, due to inconsistency in size and impact from acquisition valuation[36] - Costs associated with the closure of the Rock Island manufacturing facility excluded from non-GAAP measures, as they do not reflect current operating performance[37] - Restructuring costs related to headcount reductions excluded from non-GAAP measures, facilitating evaluation of current operations[37] - Term debt extinguishment costs excluded from non-GAAP measures, as they are one-time costs not reflecting current operating performance[37] - Gain on the sale of the brand Servus excluded from non-GAAP measures, as it does not accurately reflect current operating performance[37] Future Outlook - The company expressed optimism about carrying fourth quarter momentum into 2025 and investing in growth for enhanced earnings[27]

Company Overview - Rocky Brands, Inc. (NASDAQ: RCKY) is a manufacturer of boots and other footwear [1] - The company reported weak Q3 results, attributing falling wholesale revenues to transitory weakness [1] Financial Performance - The Q3 results showed a decline in wholesale revenues, indicating challenges in the current market environment [1] - Management anticipates better growth moving forward due to improved capacity and stronger wholesale bookings [1] Future Outlook - Rocky Brands expects to see growth in the upcoming periods as they enhance their production capacity and secure better wholesale orders [1]

Net Sales Performance - Net sales decreased 8.8% to $114.6 million in Q3 2024 compared to $125.6 million in Q3 2023, driven by a decline in Wholesale net sales partially offset by increases in Retail and Contract Manufacturing net sales[78] - Retail net sales increased 9.2% to $26.8 million in Q3 2024, driven by growth in the Lehigh CustomFit platform[89] - Contract Manufacturing net sales increased 172.7% to $3.8 million in Q3 2024 due to a multi-year U.S. Military contract awarded in Q4 2023[90] - Wholesale net sales for the nine months ended September 30, 2024 decreased by $19.1 million (7.6%) compared to the same period in 2023, primarily due to the sale of the Servus brand and changes in the distributor model[99] - Retail net sales for the nine months ended September 30, 2024 increased by $4.2 million (5.3%) compared to the same period in 2023, driven by growth in the Lehigh CustomFit platform and e-commerce business[100] - Contract Manufacturing net sales for the nine months ended September 30, 2024 increased by $4.8 million (86.8%) compared to the same period in 2023, due to a multi-year contract with the U.S. Military[101] - Total net sales for the nine months ended September 30, 2024 decreased by $10.2 million (3.0%) compared to the same period in 2023[99] Gross Margin Performance - Gross margin increased 110 basis points to 38.1% in Q3 2024, driven by a favorable Wholesale product mix and higher Retail net sales[81] - Wholesale gross margin increased to 37.5% in Q3 2024, up from 34.7% in Q3 2023, due to lower promotional activity[92] - Contract Manufacturing gross margin increased to 12.0% in Q3 2024, up from 11.5% in Q3 2023, driven by higher-margin U.S. Military sales[94] - Wholesale gross margin for the nine months ended September 30, 2024 increased to 37.0% from 35.5% in the same period in 2023, driven by the divestiture of the Servus brand and product mix[102] - Retail gross margin for the nine months ended September 30, 2024 decreased to 46.5% from 48.5% in the same period in 2023, due to increased Lehigh sales and promotional efforts[103] - Contract Manufacturing gross margin for the nine months ended September 30, 2024 increased to 11.0% from 7.3% in the same period in 2023, driven by higher-margin sales to the U.S. Military[104] Operating Expenses and Costs - Operating expenses increased 4.1% to $33.6 million in Q3 2024, primarily due to incremental brand building and advertising programs[95] - Operating expenses for the nine months ended September 30, 2024 decreased by $4.0 million (3.7%) compared to the same period in 2023, due to restructuring and cost-saving initiatives[105] Debt and Interest Expenses - Total debt decreased 29.7% to $150.3 million as of September 30, 2024[80] - Interest Expense and Other - net decreased 43.7% to $3.2 million in Q3 2024, driven by lower debt levels and interest rates[96] - Interest Expense and Other - net for the nine months ended September 30, 2024 decreased by $2.0 million (12.4%) compared to the same period in 2023, due to debt refinancing and lower interest rates[106] Inventory and Tax Expenses - Inventory decreased 11.8% to $171.8 million as of September 30, 2024[80] - Income Tax Expense for the nine months ended September 30, 2024 increased by $1.0 million (105.2%) compared to the same period in 2023, driven by a shift in the mix of domestic and foreign earnings[107] Market Risk and Forward-Looking Statements - No material changes to market risk as disclosed in the Annual Report for the year ended December 31, 2023[124] - Forward-looking statements involve risks and uncertainties including sales forecasts, consumer demand changes, and economic factors[121] - The company assumes no obligation to update any forward-looking statements[122]

Group 1 - Rocky Brands, Inc. (NASDAQ: RCKY) reported Q3 2024 results with revenues down year-over-year and more challenged margins [1] - This marks a change in the trend of revenues and operating margins that had previously been growing when adjusted for non-recurring factors [1] - The company is experiencing a shift in financial performance, moving away from a trend of deleveraging [1]

Financial Data and Key Metrics Changes - The company reported third-quarter sales of $114.5 million, down 2.4% year-over-year, with wholesale sales down 9.7% to $84 million, retail sales up 11.8% to $26.8 million, and contract manufacturing sales at $3.6 million, up from $0.2 million last year [28] - Gross profit was $43.6 million or 38.1% of sales, compared to $46.5 million or 37% of sales in the same period last year, reflecting a 110 basis point increase in gross margin [29] - Net income for the third quarter was $5.3 million or $0.70 per diluted share, down from $6.8 million or $0.93 per diluted share in the third quarter of 2023 [34] Business Line Data and Key Metrics Changes - Durango saw double-digit growth, with strong bookings across key accounts and farm and ranch partners, setting up for a strong finish to the year [10] - XTRATUF maintained strong momentum, driven by new product introductions and collaborations, with significant sell-through rates for new collections [12][13] - Muck experienced headwinds due to unfavorable weather, but at-once orders trended higher compared to a year ago, indicating brand resilience [15] - Georgia Boots faced challenges from changes in order size and frequency, but recent product adjustments have begun to drive increased retail volumes [17] - Rocky work footwear was flat year-over-year, with improved results from independent retailers and branded websites [19] Market Data and Key Metrics Changes - Retail sales showed notable strength, particularly for XTRATUF and Durango, with double-digit revenue gains [23] - The B2B Lehigh business saw double-digit sales growth, attributed to a realignment of the sales organization and the addition of over 200 new accounts [24] Company Strategy and Development Direction - The company is focused on adding manufacturing and sourcing capacity to meet future demand, with expectations for a strong spring season in 2025 [9] - Strategic investments are being made in Durango and XTRATUF to capitalize on their momentum, while also leaning into value propositions for other brands to drive higher volumes [25] - The company aims to improve overall top-line performance throughout 2025, with a focus on sustainable and profitable growth [37] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the near-term macroeconomic environment but remains optimistic about growth prospects heading into 2025 [8] - The company anticipates full-year sales to be at the low end of the initial range of $450 million to $460 million, with gross margins expected to be similar to 2023 [36][37] Other Important Information - The company reported a decrease in total debt by 13.2% from December 31, and a decrease of 29.7% since September 30 last year [35] - Cash and cash equivalents stood at $3.7 million at the end of the third quarter, down from $4.5 million at the end of 2023 [35] Q&A Session Summary Question: Can you elaborate on the delays and inventory shortages? - Management indicated that demand for XTRATUF outpaced forecasts, leading to inventory shortages, and they are working to increase capacity to meet demand [41][42] Question: How does the company view its promotional strategy in light of cautious consumer spending? - Management noted that they were less promotional this year compared to last year, as inventory levels improved and they did not feel the need to drive promotions [43][44][46] Question: What are the updated thoughts on Wholesale growth for the second half? - Management expects retail sales to grow slightly more than initially anticipated, while wholesale business is targeted to be relatively flat [50][53] Question: What is the current visibility for brands trending well and correcting issues for underperforming brands? - Management expressed good visibility for Q1, particularly for XTRATUF and Durango, and plans to continue investing in underperforming brands [55][56] Question: What are the expectations for inventory and debt levels by year-end? - Management anticipates inventory will be down seven figures but not as much as initially expected due to increased demand, and they expect to pay down an additional $10 million to $12 million in debt [61][62]

Financial Performance - Net sales for Q3 2024 decreased 8.8% to $114.6 million compared to $125.6 million in Q3 2023, or 2.4% excluding non-recurring sales[2] - Operating income was $10.1 million, down from $14.3 million in the same quarter last year[6] - Net income for Q3 2024 was $5.3 million, or $0.70 per diluted share, compared to $6.8 million, or $0.93 per diluted share in Q3 2023[8] - Adjusted net income was $5.8 million, or $0.77 per diluted share, down from $8.0 million, or $1.09 per diluted share in the prior year[8] - Net sales for the three months ended September 30, 2024, were $114,554,000, a decrease of 8.5% compared to $125,614,000 for the same period in 2023[15] - Income from operations for the three months ended September 30, 2024, was $10,071,000, a decline of 29.0% from $14,279,000 in the prior year[15] - Net income for the three months ended September 30, 2024, was $5,279,000, down 22.7% from $6,827,000 in the same period of 2023[15] - Adjusted net income for the three months ended September 30, 2024, was $5,809,000, compared to $8,048,000 in the same period last year, a decrease of 27.5%[16] - Basic earnings per share for the three months ended September 30, 2024, were $0.71, down from $0.93 in the same period of 2023, a decline of 23.7%[15] Margins and Expenses - Gross margin increased by 110 basis points to 38.1% in Q3 2024 from 37.0% in Q3 2023[4] - Operating expenses rose to $33.6 million, or 29.3% of net sales, compared to $32.3 million, or 25.7% of net sales in the prior year[5] - Gross margin for the three months ended September 30, 2024, was $43,646,000, representing a gross margin percentage of 38.1%, down from 37.1% in the prior year[15] - Operating expenses increased to $33,575,000 for the three months ended September 30, 2024, compared to $32,259,000 in the same period last year, reflecting a rise of 4.1%[15] Debt and Inventory - Inventories decreased by 11.8% year-over-year to $171.8 million as of September 30, 2024[9] - Total debt decreased by 29.7% year-over-year to $150.3 million as of September 30, 2024[10] - Interest expense decreased to $3.3 million from $5.8 million a year ago due to lower debt levels and interest rates[7] Adjustments and Non-GAAP Measures - The company highlighted the impact of supplier disputes on net sales, with adjusted net sales reflecting a significant adjustment from reported figures[16] - The company excluded costs related to the closure of the Rock Island manufacturing facility for non-GAAP measures, as these costs did not reflect current operating performance[19] - Supplier dispute inventory adjustments were excluded from non-GAAP measures as they were unique to a resolved dispute with a manufacturing supplier[19] - Returns related to supplier disputes were excluded from certain non-GAAP measures to facilitate a useful evaluation of current operating performance[19] - The company emphasized that adjustments for non-GAAP measures provide investors with additional means to evaluate net sales trends and expense trends[19] - The adjustments made for non-GAAP measures were aimed at facilitating a useful evaluation of current operating performance and comparisons to past results[19] - The company highlighted that the adjustments for amortization charges are significantly impacted by the valuation of acquisitions, thus providing a clearer picture of operating performance[19] Other Notable Events - The company reported a gain on the sale of the Servus brand, which included the disposal of non-financial assets and related expenses[21] - Restructuring costs were incurred due to severance expenses associated with headcount reductions following the integration of the acquired performance and lifestyle footwear business of Honeywell International Inc. in 2022 and the sale of Servus in 2023[19] - Term debt extinguishment costs were recorded during Q2 2024, including prepayment penalties and accelerated amortization of deferred financing fees[20] - The company reported an adjusted operating income of $10,763,000 for the three months ended September 30, 2024, down from $15,822,000 in the same period last year, a decrease of 32.5%[16] - The weighted average number of diluted shares outstanding for the three months ended September 30, 2024, was 7,503,000, compared to 7,375,000 in the prior year[15]

Financial Performance - Net sales for Q2 2024 decreased by 1.6% to $98.3 million compared to $99.8 million in Q2 2023[65] - Operating income for Q2 2024 increased by 104.7% to $4.5 million from $2.2 million in Q2 2023[65] - For the first half of 2024, net sales increased by 0.4% to $211.2 million compared to $210.3 million in the first half of 2023[66] - Income from operations for the first half of 2024 was $12.5 million, or 5.9% of net sales, compared to $6.4 million, or 3.0% of net sales in the same period last year[73] - Total net sales for the six months ended June 30, 2024, were $211.2 million, a slight increase of 0.4% compared to $210.3 million for the same period in 2023[81] Debt and Expenses - Total debt decreased by 31.3% to $152.4 million as of June 30, 2024[65] - Operating expenses for Q2 2024 were $33.5 million, or 34.1% of net sales, down from $35.4 million, or 35.4% of net sales in Q2 2023[71] - Operating expenses decreased by 7.0% to $69.7 million, representing 33.0% of net sales, down from 35.7% in the same period last year[85] - Interest expense increased by 4.8% to $10.8 million, influenced by a term loan extinguishment charge and lower debt levels compared to the previous year[86] Sales Breakdown - Wholesale net sales decreased by 2.3% to $148.1 million for the six months ended June 30, 2024, down from $151.5 million in the prior year, primarily due to the sale of the Servus brand and non-recurring military sales[81][82] - Retail net sales increased by 3.5% to $56.5 million, driven by growth in e-commerce and targeted digital marketing efforts[82] - Contract Manufacturing segment sales increased by 18.7% to $3.9 million in Q2 2024, driven by a new multi-year contract with the U.S. Military[74] - Contract manufacturing net sales surged by 58.5% to $6.6 million, attributed to a multi-year contract with the U.S. Military[82] Margins and Gains - Gross margin for Q2 2024 was $38.0 million, or 38.7% of net sales, compared to $37.6 million, or 37.6% of net sales in Q2 2023[70] - Gross margin for the six months ended June 30, 2024, was $82.2 million, or 38.9% of net sales, compared to $81.3 million, or 38.7% of net sales in the prior year[83] - The company divested the Servus brand in Q1 2023, recording a gain of approximately $1.3 million[63] Cash Flow and Capital Expenditures - Net cash provided by operating activities was $23.9 million for the six months ended June 30, 2024, compared to $19.7 million in the same period of 2023[93] - Capital expenditures for the six months ended June 30, 2024, were $2.4 million, slightly up from $2.3 million in the prior year[89] Tax and Accounting - The effective tax rate for the six months ended June 30, 2024, was 23.4%, up from 20.9% in the prior year, primarily due to a shift in the mix of domestic and foreign earnings[87] - The company has identified critical accounting policies for estimates and assumptions in its Annual Report on Form 10-K for the year ended December 31, 2023[100] - There have been no material changes to the company's market risk as disclosed in Item 7A of the Annual Report on Form 10-K for the year ended December 31, 2023[102] - The company does not assume any obligation to update forward-looking statements, which involve risks and uncertainties[102] Cost-Saving Initiatives - The company implemented cost-saving initiatives in 2023, resulting in reduced operating expenses as a percentage of net sales[71]