Rocky Brands, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Rocky Brands' fourth quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided for you at that time. If anyone has 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. I will now turn the conference over to your host, Brendan Frey of ICR. Thank you. You may begin.

Thanks, Rob, 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 Securities and Exchange Commission, including our 10-K for the year ended December 31, 2023. I 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 Operating and Chief Financial Officer. After our prepared remarks, we would be happy to take questions. The fourth quarter marked a solid conclusion to 2024, a year in which we navigated Microeconomic headwinds, lapped business model changes, and non-reoccurring sales from 2023 that made our year-over-year comparisons more difficult. Looking at our results on an apples-to-apples basis, the performance of our core business was encouraging, especially in the fourth quarter while sales trends accelerated as the holiday season progressed, led by demand for our Durango and Extra Tough brands. Demand was particularly strong in our direct to consumer channel, which fueled the highest ever sales volume quarter for our retail segment. At the same time, reoccurring wholesale sales returned to a growth in Q4, increasing mid single digits for the quarter. Helping to drive our recent top line performance was additional investments in demand creation. We under invested in marketing in a year ago period and made the decision to bring spending back in line with historical levels this fourth quarter. We are pleased with the momentum this generated and we plan to make further incremental investments going forward to increase brand awareness and drive traffic to our sites and our wholesale partner doors. Before I hand over Tom, For a more detailed look at the financials, I'll take a few moments to walk through our brand and channel performance. Much like last quarter, our Durango and Extra Tough brands were the standouts in our portfolio that helped deliver better anticipated top line results in Q4. Durango built upon its recent momentum, driven by strong sell through across key accounts and farm and ranch partners and an uptick in at-once business. Our recent work to clear overstock and discontinued styles allowed us to better position our inventory to meet the strongest pockets of demand, serve new niches, and accelerate turn rates. In the near term, we are excited about the launch of new on-trend products as well as expanding the brand into new categories, providing potential catalysts for upside with Durango. Extra Tough delivered another exceptional quarter, finishing with strong double-digit gains. Growth was strong in both the wholesale and e-com channels, driven by better-than-expected holiday performance and strong consumer reception to both our core product and new Fall 24 styles. Of particular note, this summer's new tailgate collection of ankle deck boots in sports-inspired colorways, along with our new Kids Tufts collection, continue to be successful and drive incremental growth for the brand. These new products are opening up a whole new customer set with women's and kids' offerings now making up approximately 40% of the brand's sales collectively. Overall, Extra Tough performed very well in 2024, surpassing expectations and ending the year with a strong momentum. Our focus remains on the launches of our highly anticipated 2025 summer, fall, and holiday lines, keeping our customer shelves well-stocked and the Extra Tough brand top of mind for our consumers. Our other rubber-based brand, Muck, delivered solid overall performance in the fourth quarter, driven largely by cold, wet weather across much of the US, particularly late in the quarter. In fact, December was the best month for the brand in some time. While some factory delays and capacity issues were headwinds in the period, this dynamic allowed us to work through closeout items and position the brand for continued success into the new year. Our new digital advertising efforts continue to drive incremental demand, helping delivery a successful holiday for the brand's new fall 2024 styles. Looking ahead, we increased our digital campaign spend in December and pivoted focus to our Arctic cold weather products and are optimistic that we can continue December's momentum into the first quarter. Georgia Boot delivered a slight increase in Q4 compared to a year ago period. A combination of better boot weather and post-election clarity drove a strong November and December for the brand. Throughout the quarter, we saw solid demand across our account base and also had success adding new accounts in the period. Throughout 2024, the Georgia team has focused on finding and delivering the value sweet spot for our work-based product. This strategy is now beginning to deliver results, with new product being adopted by a number of our large retail partners in the fourth quarter without cannibalizing existing SKUs. Looking ahead, we remain cautiously optimistic that we can continue to build Georgia from here with our new product approach. Turning to Rocky, we saw pockets of strength across the work, western, and outdoor segments in our DTC channel. However, the promotional holiday period and continuing inventory challenge for key retail partners weighed on overall fourth quarter results. Our work segment was the best performing during the period with modest declines compared to a year ago. We continue to adjust the work product mix and value propositions to better match consumer needs while offering unique product that will set us apart from other work competitors. While the work team had a challenging quarter in wholesale, we were pleased with the level of work demand on our own DTC site, demonstrating that our new product continues to resonate with consumers. In Rocky Western, similar efforts to reposition with new value-driven product at more competitive price points are gaining traction. However, the elevated level of holiday promotions in the marketplace during the fourth quarter pressured demand, and slowed our progress. We continue to believe our revamped strategy and product is resonating with our customers as we saw steady DTC volumes during the period, along with solid dropship sales through specialty Western distributors that provided confidence in our more value-focused strategy moving forward. With respect to rocky outdoor, another poor season for hunting and outdoor weather in the critical narrow sales window weighed on fourth quarter sales. As we shared, back-to-back years of more mild weather has led to an over inventory of hunting footwear and apparel with many of our key retail partners. While better boot weather later in the quarter did help offset some of the early weaknesses, The short seasonal window, primarily October through early November, for much of the hunting specialty product made it challenging to make up ground. Looking ahead, we are optimistic that our non-hunting footwear led by rugged, casual styles will continue to provide a degree of mitigation as the more hunting-focused inventory works its way through our retail partners. Lastly, in our commercial military and duty segments, was down in line with our expectations. We are still facing a sizable military blanket purchase agreement that elevated 2023 sales on a comparison basis. Additionally, in Q4, we saw hesitancy to spend allocated monies due to anticipated administrative change. We did see some offsets to these headwinds, primarily from the continuing strength of our fire category. Looking ahead to 2025, we anticipate being able to return the segment to a positive comparison with 2023's elevated sales behind us. Shifting to retail, our branded e-commerce sites and marketplace business continued their recent positive momentum in the fourth quarter. Across our digital platforms, we successfully navigated and consented holiday shopping season through targeted promotional strategies and enhanced consumer engagement initiatives. Notable areas of strength included Extra Tough and Durango, which both delivered their best month ever in December. Strong double-digit gains in Rocky and solid increases for Muck and Georgia online. Shifting to our B2B Lehigh business, sales were up double digits compared to a year ago perioding. marking two consecutive quarters of double-digit growth. We credit recent success to our work in the first half of the year to significantly realigning our sales organization to improve our sales pipeline and provide greater continuation in account setup, rollout, and implementation. These positive results continue to accelerate with new account openings jumping meaningly for Q3 and forward. Along with these sizable gains, customer spending continues to be strong, which inspires confidence that Lehigh will be able to continue its momentum into the new year. We feel good about the overall health of our business as 2025 gets underway. Like any portfolio, we expect varying degrees of performance among our brands and channels, but collectively, we're expecting another year of solid growth. Our optimism is being somewhat tempered by continued uncertainty around the consumers as recent purchasing behaviors has been more unpredictable, which is causing many retailers to be cautious with their inventory commitments in general. However, based on the sell through of our brands over the past several months, both in stores and online, we believe we are in a position well versus the competition to continue gaining share in our categories. In closing, I want to thank the entire Rocky Brands team for their hard work this past year and their commitment to delivering great product and great experience for our consumers. I also want to thank our loyal consumers, retail customers, suppliers and shareholders for our ongoing support of our brands and company. I will now turn the call over to Tom. Tom?