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)

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]