Rocky Brands, Inc.

Good afternoon ladies and gentlemen thank you for standing by and welcome to the rocky brands first quarter 2022 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 please press star zero for operator assistance at that time i would like to remind everyone that this conference call is being recorded and we'll now turn the conference over to Mr. Brendan Frey of ICR.

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 and 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 31st, 2021. 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. Following a successful 2021, the new year has gotten off to a good start as demand for our portfolio of leading brands continues to be strong. We experienced solid growth across our wholesale and retail segments and throughout our diverse mix of distribution channels including western, work, farm and ranch, outdoor, and family retail. The combination of healthy inventory positions and additional fulfillment capacity allowed us to better capitalize on the market opportunities we are creating through our product and marketing strategies and focus on operational excellence. Unfortunately, the current cost environment and tight labor market has required us to spend more temporarily to bring our new distribution facility in Reno up to speed. While this limited our ability to flow more of our revenue outperformance to the bottom line, we are making good progress gaining greater efficiencies and expect we'll be able to translate more of our top-line growth into enhanced profitability as the year proceeds. Tom will go through the numbers in more details, but the quarter was highlighted by net sales of 167 million, representing an increase of 91% over the same period last year and a gain of 32% on a pro forma basis. Underlying these results were very strong performance for each of our brands, starting with Durango. The brand continued to experience robust demand finishing the quarter with mid-double-digit growth in both key and field accounts driven by strong sell-through. Durango's strategy of diversifying the line into new offerings, particularly in work and core Western, has been very beneficial as our farm and ranch and true Western retail partners have posted large year-over-year increases. Not only has demand remained incredibly strong, but we've been able to capture the demand with strong inventory and improving logistics capabilities, leading the increased shelf space again this quarter. Turning to Georgia, the brand generated solid gains over 2021 as demand was once again strong. New opportunities and expansion of current programs continue to drive business as the market looks for answers to the limited supply at retail. especially in key categories that Georgia is an established leader. For example, Georgia experienced tremendous growth of its popular lager collection, growing strong double digits in part because we were able to fill an inventory void created by peers reliant on Asian production. We produced this line of boots in our own factory in the Dominican Republic and therefore are able to control inventory flow much more precisely and capitalize on the opportunities. The Rocky brand, which spans work, outdoor, western, commercial military, and duty footwear, also had a very solid quarter. Strong growth in Rocky outdoor and western was coupled with flat sales in work due to the timing of key orders in the year-ago period that we didn't anniversary. Whether it be hunting product or rugged outdoor footwear for general outdoor activities, we saw ongoing strength as consumers continued the trend of getting outdoors and being active. We are encouraged by the resiliency of the demand we saw this quarter. Unlike previous years where Q1 outdoor sales are boosted by off-price sales of discontinued or overstocked product from the past fall hunting season, This was not the case in Q1 of 2022. The overall outlook for Rocky work, outdoor and western for the balance of 2022 remains solid. With respect to Rocky commercial military and duty divisions, continued efforts over the past few quarters materialized in first quarter results exceeding expectations. The arrival of much needed inventory helped commercial military sales continue the positive trend established in the fourth quarter. While our public service business had one of the best quarters as we've increased production of our duty footwear in our Puerto Rican facility. Although there were a multitude of variable contributions to the growth in both categories, the drawdown of the pandemic restrictions in the military and numerous municipalities allowed our military members and public servants to train and work more often than in the last 12 months. Our MUC and Extra Tough brands both posted sizable gains in the first quarter. For MUC, core styles remain in high demand and sold through very well in farm and ranch and outdoor channels, while most new spring 2022 product is just now arriving, creating a nice tailwind for Q2. MUC certainly has a good backlog and we are working to return to normal retail inventory positions. Additionally, we are beginning to see orders increase with most of our retail partners as they look ahead to fall and winter, which are the key seasons for the Muck brand. At the same time, Extra Tough continues to gain momentum, especially with the brand's key outdoor and fishing retail partners. We are experiencing growth on two fronts – both on a door productivity basis as accounts expand into new styles, as well as expansion of doors from our existing accounts. This expansion position uses for a strong 2022 as our current backlog will only strengthen as we continue to launch new Extra Tough products this year. Turning now to our retail segment, first quarter traffic and conversion of our own e-commerce sites was up nicely year over year, even as we pulled back on expensive performance marketing. In addition to double-digit e-commerce growth for both Rocky and Georgia, the first quarter was highlighted by the launch of a new I Am Extra Tough campaign on March 1st. The campaign has been a fantastic success for the brand thus far, generating a groundswell of demand and positive sentiment across both core and new consumer segments with more than 500,000 video views to date. While we are pleased with our first quarter e-commerce results, our fulfillment expansion activities did hinder our ability to ship all DTC orders in a timely manner. This was most pronounced with our Muckin' Extra Tough brand. as most of this inventory is processed in our new Reno, D.C., which wasn't fully operational until early April. We are excited to have all inventory now in our distribution and fulfillment system and look forward to taking advantage of our enhanced capabilities to better capture the direct demand for all our brands. Meanwhile, our Lehigh B2B retail business has had a very strong start to 2022, driven by significant growth in both new and existing accounts. This cumulative in March representing the highest single revenue month for custom fit in Lehigh's history. With prices going up across the footwear industry, Many of our customers have increased the subsidy amounts for their employees, helping fuel our top-line performance. Additionally, many accounts are beginning to view providing safety PPE, such as footwear, orthotics, and compression socks, as a tool to drive employee retention. With its wide offering of safety products, Lehigh has been able to organically drive additional revenue with existing accounts. And as COVID concerns have continued to bait, our number of onsite IFITS events is gaining pace, which combined with our email and SMS strategy is driving higher account participation rates, increasing our account revenue and penetration rate. Overall, I am very pleased with our start to 2022. Our continued focus on operational excellence combined with our comprehensive portfolio of brands, have put us in a great position for upside in a challenging environment as we've seen over the past few years. Our strategies, people, and ability to satisfy every niche of the boot markets are what will drive our success this year and into the future. I'll now turn the call over to Tom. Tom?