Rocky Brands, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Rocky Brand second quarter 2024 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 any time. I would like to remind everyone that this conference call is being recorded, and I will now turn the conference over to Cody McAllister of ICR.

Thank you, and thanks to everyone for 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, 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, 2023. And I'll now turn the conference over to Jason Brooks, Chief Executive Officer of Rocky Brands.

Thank you, Cody. With me on today's call is Tom Robertson, our Chief Operating and Chief Financial Officer. After our prepared remarks, we will be happy to take any questions. Our second quarter results modestly exceeded our expectations as we continue to effectively navigate an unprecedented consumer environment. I'll share more detail momentarily, but similar to last quarter, Durango and ExtraTuff led the way with double-digit year-over-year gains that offset some anticipated softness in other areas of our business. It is during a less robust macroeconomic backdrops like the present that this benefits of our diversified brand portfolio stands out. Over the past several years, we have taken action to improve the company's financial profile in order to reinvest in growth and drive increased shareholder value. This is evidenced by higher gross margins and lower operating expenses, both of which contributed to the improvements in earnings. We took a significant step forward, further enhancing our earnings power during the second quarter with the refinancing of our debt and simplification of our capital structure. The new credit and term facility we signed with Bank of America in April is projected to generate approximately $4.4 million in annualized interest expense savings starting in 2025. Before I hand it over to Tom for more detailed looking at the financials, I'll take a few moments to walk through our second quarter brand and channel performance. Starting with Durango, it continues to be one of the best performing Western brands in the channel, delivering strong double-digit gains this quarter. We experienced continued strength in bookings across key accounts and farm and ranch partners, along an acceleration in at-once business. The team is working to supply chain with more of the brand's core in-demand product, which along with a positive response to the fall 2024 line, sets Durango up to build upon its strong first half over the remainder of the year. Like Durango, Extra Tough maintained its strong momentum from early in the year and, again, outperformed expectations with a strong double-digit gain in Q2. Deliveries for spring 2024 were very healthy, and we also feel numerous replenishment orders for existing products as customers' appetite for Extra Tough continues to expand rapidly. Along with strong demand for its legacy outdoor products, Extra Tough saw a positive reception for new colors and collaborations with the launch of its 2024 spring line. The brand continues to see strong demand across a number of niche outdoor verticals, such as sport fishing and outdoor recreation that are leading not only in increased sales but increased distribution with large retailers that position Extra Tough for continued success. Moving forward, the team remains focused on securing new bookings for its upcoming spring 2025 line and filling in replenishment aggressively this year while maintaining efforts to source sufficient inventory to fulfill the strong and growing demand for the brand. Muck had a good start to the quarter with the launch of its spring 2024 line, Unfortunately, the unfavorable spring weather patterns in several areas of the country led to slower retail turns, and as a result, slower than anticipated restocks late in the quarter. Retail partners are making progress in working through the inventory, and we anticipate getting back into a more normal restock cadence. Even with a lack of adequate weather to drive demand, we continue to see strong engagement with customers throughout our new website, enhanced marketing campaign highlighting the brand's heritage, and influencer partnerships that are amplifying visibility. As a result, we continue to add a MUX account base and anticipate a rebound heading into the important fall season. Shifting to Georgia, it was a challenging second quarter for our work category, and the brand wasn't immune. Georgia continues to see more over-inventory pressure from smaller accounts, However, the team was able to offset much of this pressure with mid-single-digit increases with our key accounts business, which has largely resumed its normal order cadence, but the COVID-related supply chain disruptions and the excess inventory purchases that follow are behind us. Similarly, rocky work was also under pressure for much of Q2. However, momentum did build later in the quarter. Following a difficult April and May, we saw a notable uptick with June up nicely versus a year ago period. The late quarter rebound fueled by new and innovative product introductions in the last 12 months leaves us optimistic that Rocky Work can continue to trend positively in the second half of the year. In fact, the brand continued to expand distribution with key national suppliers, as well as with catalog and direct-to-consumer sites this quarter. positioning the brand for a stronger reach going forward. Meanwhile, our work repositioning Rocky Western with new value-driven product at more competitive price points continued in the second quarter. Unfortunately, it has taken longer than planned to move through the older, higher priced inventory in the channel, which is impacting sell-in. That said, we are encouraged by the initial reception of our new, more affordable product and remain confident that our current strategy for Rocky Western will continue to gain traction with consumers, retailers over the coming quarters. With respect to Rocky Outdoor, last year's poor hunting season continues to weigh on the business, limiting the typical bulk shipments that typically occur in the second quarter ahead of the start to the new season this fall. While the hunting market overall remains challenging, We saw our non-hunting footwear led by rugged casual styles trend positively this quarter. This is helping to expand the brand's retail partner base and reach a broader consumer audience. Lastly, in wholesale, our commercial military duty segment was down in line with our expectations as we completed the 2023 Military Blanket Purchase Agreement in Q1. A delay in the military budget release for 2024 is also impacting our sales cadence versus last year. Solid gains in our duty fire collection and our postal business helped to partially offset the current military headwinds. Shifting to retail, our branded e-commerce sites continue to trend nicely positive. Double-digit revenue gains from our extra tough Durango, Georgia, and Rocky sites led the way for our digital channel. We also utilized our dot-com business to move some overstock inventory in the quarter ahead of restocking our large wholesale channel with many of our brand's best sellers. Lastly, our B2B Lehigh business was flat compared to the second quarter of 2023. However, key customer account spending improved for Q1, driven by a shift in focus to exiting account retention and growth. Last year, we shared that we implemented a significant realignment of our sales organization to improve our sales pipeline and provide greater continuing in an account set up rollout and implementation. These changes are driving results leading to an improved sales pipeline that positions Lehigh for a return to growth in the second half. Before I turn the call over to Tom, I wanted to thank the entire Rocky team for their continued hard work this quarter and a solid first half of the year. While the operating environment remains a challenge, I am pleased to see our efforts with top line expansion and expense management, along with our improved balance sheet, deliver positive results and begin to translate into value for our shareholders. As we look to the second half of 2024, I am cautiously optimistic that we can continue to build on our momentum and drive continued success. I'll now turn the call over to Tom to cover the financial details. Tom?