Rocky Brands, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Rocky Brand's third quarter fiscal 2020 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, press star zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded. I would now turn the conference over to Brendan Frey of ICR. Please go ahead.

Thank you, and thanks to everyone joining us today. Before we begin, please note that today's session, including the Q&A period, may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such statements are based on information and assumptions available at this time and are subject to changes, risks, and uncertainties, which may cause actual results to differ materially. We assume no obligation to update such statements. For a complete discussion of the risks and uncertainties, please refer to today's press release and our reports filed with the Securities and Exchange Commission, including our 10-K for the year ended December 31, 2019. And I'll now turn the conference over to Jason Brooks, Chief Executive Officer of Rocky Brands. Jason?

Thank you, Brendan. With me on today's call is Tom Robertson, our Chief Financial Officer. We hope everyone on the call and listening via the webcast is staying safe and healthy. As you saw from our earnings release, it was an outstanding quarter from both a top and bottom line perspective. Our results were fueled by the resurgence of our wholesale business combined with the continued strength of our direct-to-consumer channels. Following a challenging second quarter when many of our retail partner stores were either closed or experiencing reduced traffic levels due to COVID-19 restrictions, wholesale trends bounced back nicely in Q3. Like we discussed on our last earnings call, sell-through started to pick up in June as the number of new cases started to slow and stores reopened. This momentum accelerated as we moved into the third quarter, driven by strong full-price selling. Tom will go through the financials in more detail, but here are just a few of the highlights. Net sales increased 15.8% to $77.8 million. Gross margin improved 120 basis points, and earnings per share grew 38.7% to $1.04. Our recent performance amidst the ongoing health pandemic underscores the strong consumer connections we forged in the desirability of our product lines, the importance of our brands to our wholesale partners, and the work we've done creating a more nimble and efficient organization that has been able to quickly adapt to the changing market conditions. Looking at our third quarter results in more details, starting with our wholesale segment, With all of our wholesale doors open and many resuming normalized hours and operations, and the U.S. consumer in a much stronger position, the selling environment at the start of third quarter was dramatically better than just three months earlier. With many of our retailers reducing inventory levels and canceling receipts early in the pandemic, there was definitely pent-up demand for product as consumers started to return to stores in greater numbers. This is reflected in our strong sell-in results as wholesale revenue increased 19.3% for the quarter. More importantly, sell-through was also strong compared with a year-ago period per the data we received from several of our large retailers. In terms of category and brand performance, Work, our largest category, was up 20% led by Georgia Boot as the brand's new collections performed very well at key retailers like Tractor Supply, Boot Barn, Coastal Farm, and Ranch, along with many of our smaller independent accounts. We've also seen interest spike in several of Georgia's core items, such as the Romeo and the Giant, driven by more casual work from home policies that are still in effect in many parts of the country. Our Western category experienced a dramatic turnaround from the second quarter, increasing 27% year over year. As consumer shopping in stores and online responded very favorably to our Durango brand's new series like the Rebel Pro and the Maverick. Kids' product has also been a huge hit recently, as have our USA and Texas flag boots. The Rocky brand had another solid quarter. Our outdoor business has held up well during this pandemic, as travel restrictions have kept people closer to home and social distancing requirements have benefited outdoor activities. Sales were also helped by several compelling new products introduced this year, particularly with our rubber boot category, which have resonated strongly with our core consumer. Rocky Western experienced strength across its entire customer base thanks to key product introductions like our new Legacy 32 boot that brings a unique look and improved level of fit and comfort to the Western market, and expanded programs with many of our major independent accounts. Finally, Rocky work grew at its fastest pace in some time as it continued to supply essential workers that have remained on the job throughout the pandemic with safety footwear. With respect to Rocky Commercial Military Division, the business posted a substantial year-over-year increase thanks to in large part to our work with Atlantic Diving Supply, or ADS, on supplying military footwear forces of several bases around the world with one of our insulated waterproof S2V boots. This great partnership also yielded a large order with the U.S. Marine Corps for our popular Tropic Weather boot. Turning to our retail segment, Strong growth in our e-commerce channel, which consists of both our branded websites and online marketplaces, fueled another double-digit gain in the quarter. Total web sales were up 50% with Georgia, Rocky, and Durango all increasing strong double digits. Even as consumers resumed shopping at brick-and-mortar retail in greater numbers, we continue to see increased engagement online with both existing and new customers. The work we've done enhancing the functionality of our branded desktop and mobile sites and expanding our direct-to-consumer efforts on marketplaces, particularly Amazon, where you will recall we gained seller-fulfilled prime status last year, has proved us the opportunity to capitalize on this change in buying behavior. Meanwhile, our Lehigh safety business remained active, signing up new accounts, which will provide a nice tailwind 2021 and beyond. In terms of current business, trends have improved since the second quarter, when many Lehigh customers were operating with reduced workforces, in order to maintain social distancing. Many companies have resumed more normalized operations and have allowed us back on site to execute our iFit events. We are also deploying new digital tactics to drive demand when our teams aren't on site, such as enhanced contact techniques and a virtual fitting program that is currently in beta testing and expected to roll out before the end of the year. Lastly, in terms of our manufacturing facilities, both Puerto Rico and the Dominican Republic are running at 100%. We've recently had to adjust productivity to keep up with demand for some key styles and compensate for some of our suppliers who have been shifting constraint due to COVID-related This ability to dial up and dial down our production schedules in response to the market, volatility, and speed to market underscore the benefits of a vertically integrated manufacturing structure, which we believe is a key competitive advantage. I am very pleased with how our organization has performed under the circumstances. We've emerged from a challenging second quarter and quickly capitalized on the wholesale opportunities created by the improving store environment while continuing to deliver great service to consumers who are direct to consumer channel. Our teams are doing a great job executing our growth strategies while continuing to provide and prioritize the health and safety of our employees, our consumers, and the communities we operate in. While it is still unclear what impact COVID-19 will have on our industry and the overall economy over the near and long term, we are feeling better about our outlook for the remainder of this year based on our recent performance and current momentum. We do expect trends to moderate from third quarter levels as the pent-up demand we experienced early in the store reopening process continues to fade. That said, our brands and products remain in high demand, with consumers which should drive solid gains in both our wholesale and retail segments during the fourth quarter. Looking beyond this year, I am confident that the combination of our people, business model, and balance sheet has Rocky well-positioned to emerge from this period of uncertainty poised for sustained success. I will now turn the call over to Tom to review the financials in more detail. Tom?