Rocky Brands, Inc.

Greetings and welcome to the Rocky Brands, Inc. First Quarter Fiscal 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please signal the operator by pressing star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Cody McAllister 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 31st, 2024. 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 questions. It has been a good start to 2025 despite growing macroeconomic uncertainty. During the first quarter, we experienced healthy demand within our brand portfolio and throughout our distribution channels, led by a 20% top-line growth in our retail segment. Demand was especially strong for our rubber boot business, which includes both Extra Tough and Muck. The Extra Tough brand has been gaining momentum for several quarters with sell through online and at wholesale accelerating in Q1 as we increased our inventory position in key styles. With better full price selling overall and retail increasing meaningfully as a percentage of the total sales, we achieved record first quarter gross margins and our second highest gross margin ever only behind the fourth quarter of last year. Combined with this significant reduction in interest expense following our refinancing in April last year and continued debt pay down, we increased adjusted debt income 78% year over year. Since our last earnings call in February, The world we are operating in has become much more dynamic, following higher tariffs imposed by the U.S. on most all trade partners, particularly China. While the situation is very fluid and the outcome of ongoing negotiations is uncertain, we've moved quickly to mitigate the impact of the higher tariffs and believe we have a sound plan in place to protect our gross profit dollars under multiple scenarios. Based on current tariff rates, we expect to implement price increases on the majority of our footwear styles in early June and will maintain flexibility to adjust prices accordingly based on any future changes as they are announced. We are also accelerating our efforts to reduce the amount of products we source from China. This includes procuring more footwear from partners in Vietnam, Cambodia, India, and as well shifting production to our manufacturing facilities in the Dominican Republic and Puerto Rico. While we anticipate that higher prices will put some pressure on the consumer demand, we believe the strength of our brands and the functionality of our products, along with our diversified sourcing structure, has us well positioned to navigate current situation and allow us to achieve our financial targets for the year. Before I hand the call over to Tom for a more detailed look at the financials, I'll take a few moments to walk through our quarter brand and channel performance. Starting with Extra Tough, the brand continues its recent momentum and delivered another exceptional quarter with double digit growth in Q1. Importantly, we have seen the brand continue to expand its reach into new regions and niches. growing in popularity across the inland U.S. and the new demographics outside of its core male consumer. In fact, at our spring 25 deliveries, our most popular new styles are the women's duck camo and ivory-colored ankle deck boots. The brand performs strongly across key accounts, including sporting goods retailers, fishing shops, and even Western stores. with independent customers keeping pace as well. Many retailers saw excellent sell-through on both proven classics and new colors, demonstrating strong retail demand for the brand. We also successfully launched Extra Tough at a key sporting retailer in Q1, leading to added styles, replenishment orders, and door expansions. Bookings are up approximately 80% versus last year, And as we move further into the spring season, we have many exciting launches ahead, including a summer delivery of the new Guy Harvey styles, including our first Guy Harvey's Kid ankle deck boot, as well as a collaboration with the U.S. Rowing Team, an online exclusive with pro teamer Andrew Cotton, and the launch of our partnership as an official boot sponsor of the Sport Fishing Championships. Overall, there is a lot to be excited about with Extra Tough in the months to come. MUC also started 2025 with a better than expected growth. Better winter weather in much of the United States compared to the warm, dry patterns of the previous two years led to a significant uptick in the brand's performance. Our women's business was a surprise standout, delivering a double-digit increase in the period, Additionally, improved inventory positions and key styles contributed to the successful quarter. From a marketing standpoint, our enhanced digital advertising continued to deliver strong results with a focused approach on the work and utility category during cold weather periods. In February, we took steps to consolidate our digital media buying, allowing for more nimble allocation to capitalize the best ROI. Coming off an exceptional 2024, the Durango brand sell-in to wholesale moderated in the first quarter do impart to difficult comparisons and timing shifts as some Q1's orders were delivered early in late 2024. That said, we did see some underlying strength, particularly online and with our at once business, which was positive in the quarter, and we anticipate large volume orders in the back half of 2025 as retailers optimize their inventory levels. Importantly, our inventory position and top styles remain strong heading into the second quarter. While January and February were positive for Georgia Boot, March was notably softer as the field customer base slowed orders due to the economic uncertainty. Additionally, we saw some sizable orders come a later this year, following into Q2, while we also did not anniversary some large orders from 2024, many of which were driven by retailers resetting assortments that are now established. Despite the sluggish orders from our retail partners, recent introductions like the Romeo Superlight continue to perform well to the point that we are chasing inventory in the first quarter. Other new offerings that are focused on hitting key price points while maintaining comfort and quality have resonated with retailers and consumers alike, continuing to sell through and recently being added at several major retailers for later this year. Turning to our Rocky brand group, both our work and outdoor categories showed increase compared to last year, with Rocky Work delivering the strongest performance. Workstyle saw solid expansion with key national safety shoe distributor partners and regional and local shoe distributors in the period that drove its success. Rocky Outdoor, we were pleased to see a return to growth after a string of consecutive difficult quarters. The brand delivered single-digit increase over last year through solid distribution with e-commerce partners, national chains, and independent retailers across the country. A renewed snake boot program with a prominent national retailer and strong sales on our e-commerce site contribute to the increase. Additionally, a longer winter season in most of the country provided extended opportunities with insulated boot selling, which has not been seen the case in recent seasons. New additions to our growing rugged casual business contributed to the solid quarter as well. While Rocky Western sales were down in Q1, it was largely to a touch comparison from elevated off-price sales of discontinued product in Q1 last year that did not anniversary in 2025. Particularly offset this headwind was the introduction of a Western boot to a key farm and ranch multi-store chain in the Northwest, along with solid sales with our e-commerce dropship partners. Lastly, in wholesale, our commercial military and duty segment was down in Q1, largely in line with our projections. The expected decrease was due to the benefit of a year ago from a sizable commercial military blanket purchase agreement that elevated early 2024 sales. On top of this, the order implemented by the Department of Government Efficiency in February freezing all government purchasing cards was also a headwind in the first quarter. Shifting to retail, our B2B Lehigh business had a terrific quarter with sales increasing high teams, marking the third consecutive quarter of double digit gains. As a realignment of our sales team reaches its one year anniversary and new processes are firmly in place, the business is firing on all cylinders. Customer spending continues to be strong with improved subsidy utilization and increase in average subsidy dollars year over year. New customer acquisition remains robust, with the addition of 190 new accounts this quarter, with no indication of a market slowdown to date. Our direct-to-consumer business, which consists of our own branded websites and leading third-party marketplaces, grew at an even faster pace than Lehigh. led by marketplace volumes as clear through a good deal discontinued inventory in the quarter. Looking ahead, we acknowledge that there is a higher degree of uncertainty over the remainder of the year than we will outline our guidance in February. Our confidence in maintaining our outlook stems from our better than expected first quarter performance, the positive effect recent sales have had on our future bookings, and our ability to mitigate the impact of tariffs through recent inventory investments. Pricing actions in our diversified sourcing structure. I look forward to updating you on our progress on our second quarter call in July. I'll now turn the call over to Tom.