Q1 2024 Rocky Brands Inc Earnings Call

Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Rocky Brands first quarter 2024 earnings conference call.

Good afternoon, ladies and gentlemen, and thank you for standing by.

Speaker Change: Welcome to the Rocky brands first quarter 'twenty 'twenty four earnings conference call.

Operator: 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 for questions. If anyone has any difficulties hearing the conference, please press star zero for an operator's assistance at any time. I would like to remind everyone that this conference call is being recorded, and we'll now turn the conference over to Brendon Frey of ICR. Please go ahead, sir.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: Following the presentation, we will conduct a question and answer session.

Speaker Change: Instructions will be provided at that time for you to queue for questions.

Speaker Change: If anyone has any difficulties hearing the conference. Please press star zero for operator assistance at any time.

Speaker Change: I would like to remind everyone that this conference call is being recorded and will now turn the conference over to Brendon Frey of ICR. Please go ahead Sir.

Brendon Frey: 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 Risks and Uncertainty,

Brendon Frey: Thank you and thanks to everyone joining us today.

Brendon Frey: 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.

Speaker Change: 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.

Speaker Change: 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.

Brendon Frey: Please refer to today's press release and our reports filed with the Securities and Exchange Commission, including our 10K for the year ended December 31st, 2023. I'll now turn the conference over to Jason Brooks, Chief Executive Officer of Rocky Brands.

Speaker Change: I'll now turn the conference over to Jason Brooks, Chief Executive Officer of Rocky brands Jason.

Jason S. Brooks: Thank you Brendan.

Jason S. Brooks: 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.

Jason S. Brooks: With me on today's call is Tom Robertson, our chief operating and Chief Financial Officer.

Jason S. Brooks: After our prepared remarks, we'd be happy take any questions.

Jason S. Brooks: We are pleased with our first quarter results as sales and earnings came in ahead of our expectations, following the implementation of several cost-saving initiatives throughout last year. We have reinvested a portion of the savings into additional advertising programs, which fuel stronger than anticipated growth and meaningful expensive leverage. I'll go into more detail about the drivers of our top line performance momentarily, but we are encouraged by the momentum we experienced across our business, highlighted by double-digit gains for our Durango and our Extra Tough brands.

Jason S. Brooks: We are pleased with our first quarter results as sales and earnings came in ahead of our expectations. Following the implementation of several cost saving initiatives throughout last year.

Jason S. Brooks: We have reinvested a portion of the savings into additional advertising programs, which fueled stronger than anticipated growth and meaningful expensive leverage I'll go into more detail about the drivers of our top line performance momentarily, but we are encouraged by the momentum we have.

Jason S. Brooks: Experienced across our business highlighted by double digit gains for our Durango, and our extra tough brands.

Jason S. Brooks: While the micro economic outlook remains uncertain, we continue to be cautiously optimistic that the business is well positioned to generate enhanced profitability and increase shareholder value as 'twenty 'twenty four unfolds.

Jason S. Brooks: While the microeconomic outlook remains uncertain, we continue to be cautiously optimistic that the business is well positioned to generate enhanced profitability and increase shareholder value as 2024 unfolds. Before Tom covers the numbers, I'll spend a few minutes going through the first quarter sales performance by category and brand.

Speaker Change: Before Tom covers the numbers I'll spend a few minutes going through the first quarter sales performance by category and brand.

Jason S. Brooks: In our sales channel, the majority of retailers have right-sized their inventories, and reorders are now more closely aligned with sell-through, bringing greater stability to our sell-in cadence to start 2024. While this has benefited the work, western, and outdoor categories to different degrees based on partner inventory levels, we are pleased to see this start to return to normalcy across the industry. Our work category, which includes our Georgia, Rocky, and Select styles under the Muck and Extra Tough brands, had several bright spots in the quarter.

In our Seo channel the majority of retailers have right size their inventories and Reorders are now more closely aligned with sell through bringing greater stability to our sell in cadence to start 2024.

Tom Robertson: Well this has benefited the work western and outdoor categories to different degrees based on partner inventory levels. We are pleased to see this start to return to normalcy across the industry.

Our work category, which includes our Georgia, Rocky and select styles under the muck and extra tough brands had several bright spots in the quarter.

Jason S. Brooks: Georgia Boot delivered a single-digit sales increase in the quarter, driven by strong demand for our legacy product and several new product launches. Last year's selective price decreases on certain Georgia styles are resonating with consumers, leading to faster sell through.

Tom Robertson: Georgia Boot delivered a single digit sales increase in the quarter driven by strong demand for our legacy products in several new product launches.

Tom Robertson: Last year's selective price decreases on certain Georgia styles are resonating with consumers leading to faster sell through.

Jason S. Brooks: Importantly, Georgia's sell-through is now better translating to improved sell-in, leading to strong gains with both key accounts and online retail partners. In fact, we saw strong double-digit growth this quarter with several of our large key accounts, and the strong growth trajectory with online retail partners has advanced beyond what was established last year. As the industry backdrop improves, we expect Georgia growth to accelerate.

Tom Robertson: Importantly, Georgia sell through is now better translating to improved sell in leading to strong gains with both key accounts and online retail partners.

Tom Robertson: In fact, we saw strong double digit growth this quarter with several of our large key accounts and the strong growth trajectory with online retail partners has advanced beyond what was established last year.

Tom Robertson: As the industry backdrop improves we expect GA growth to accelerate.

While rocky work remained under some pressure early in the year as key retail partners worked through certain slower selling product. The business is improving and is now in a better position at retail to take receipt of the brand's best sellers.

Jason S. Brooks: While Rocky Work remained under some pressure early in the year, as key retail partners worked through certain slower-selling products, the business is improving and is now in a better position at retail to take receipt of the brand's best sellers. During Q1, we also shipped a new line of Rocky work boots that brings both value and quality to the competitive work boot market. This new product line, made in our own Dominican facility, should provide both top line and margin contributions as we move through 2024.

Tom Robertson: During Q1, we also shipped a new line of Rocky work boots that brings both a value and quality to the competitive work boot market.

Tom Robertson: This new product line made in our own Dominican facility should provide both topline and margin contributions as we move through 2024.

Jason S. Brooks: Shifting to our rubber work boot business, the first quarter was highlighted by the start of the celebration of the Muck Brand's 25th anniversary. To support this milestone event, we introduced a redesigned homepage in conjunction with the launch of an enhanced marketing campaign highlighting the MUCS heritage and influencer partnerships that are amplifying visibility.

Tom Robertson: Shifting to our rubber work boot business. The first quarter was highlighted by starting the celebration of the brand's 25th anniversary.

Tom Robertson: To support this milestone event, we introduced a redesigned homepage in conjunction with the launch of an enhanced marketing campaign, highlighting the MX heritage and Influencer partnerships that are amplifying visibility.

Jason S. Brooks: Interest in the legacy MUC product remains solid, especially in the U.S., where brand sales were up mid-single digits as our recent marketing efforts helped to accelerate demand as the first quarter progressed. Turning to our Western category, Durango delivered a very good first quarter, lifted by strong bookings across key accounts and farm and ranch partners, along with an acceleration of at-once visits. With moderate partner inventory levels, better than expected consumer demand for key Durango styles led to some brief and early stockouts.

Tom Robertson: Interest in the legacy product remains solid, especially in the U S where brand sales were up mid single digits as our recent marketing efforts help to accelerate demand as the first quarter progressed.

Tom Robertson: Turning to our western category Durango delivered a very good first quarter lifted by strong bookings across key accounts and farm and ranch partners, along with an acceleration of at once business with moderate partner inventory levels better than expected consumer demand.

And for key Durango styles led to some brief and early stock outs. However, we moved quickly and we were able to fulfill orders late in the quarter and ship additional inventory of in demand products, which should lead to even higher turns for Durango going forward. This coupled.

Jason S. Brooks: However, we moved quickly, and we were able to fulfill orders late in the quarter and ship additional inventory of in-demand product, which should lead to even higher terms for Durango going forward. This, coupled with an improving wholesale climate and the addition of new distribution channels in late 2023 and early 2024, have positioned Durango to build upon its strong first quarter resort. For Rocky Western, our focus in the first quarter was on improving inventory health and setting the business up for better full-price selling later in the year. Sales were up low double digits, driven primarily by discounting of overstock product, which key Western promotional retailers.

Tom Robertson: With an improving wholesale climate and the addition of new distribution channels in late 2023 in early 2024 have position Durango to build upon its strong first quarter resorts.

Tom Robertson: For Rocky Western our focus in the first quarter was on improving inventory health in setting the business up for better full priced selling later in the year sales were up low double digits, driven primarily by discounting of overstock product, which key western <unk>.

Tom Robertson: Notional retailers.

Jason S. Brooks: At the same time, we've reduced the SKU count and eliminated duplicate styles to better focus on the Rocky Western line for its key demographic with more targeted product. Our Outdoor category delivered solid growth with a very strong performance from Extra Tough, more than offsetting modest declines in Rocky and Muck. Demand for extra tough outdoor styles continues to build with healthy double-digit growth in both our wholesale and direct e-commerce channels. After helping our wholesale customers rebalance inventories last year, bookings and at-once orders for key styles accelerated, leaving us chasing some inventory, with higher-than-expected turns, on a new spring item and legacy product.

Tom Robertson: At the same time, we've reduced SKU count and eliminated duplicate styles to better focus on Rocky Western line on its key demographic with more targeted product.

Tom Robertson: Our outdoor category delivered solid growth with a very strong performance from extra tough more than offsetting modest declines in rocky and Marc.

Tom Robertson: Demand for extra tough outdoor styles continued to build with healthy double digit growth in both our wholesale and direct E Commerce channel after helping our wholesale customers rebalance inventories last year bookings and at once orders for key styles accelerated leaving us chasing some.

Tom Robertson: Inventory.

Tom Robertson: With a higher than expected turns.

Tom Robertson: On a new spring items and legacy products. Looking ahead, we are focused on securing new bookings and filling your replenishment aggressively while maintaining efforts to source sufficient inventory for extra tough.

Jason S. Brooks: Looking ahead, we are focused on securing new bookings and filling in replenishment aggressively while maintaining efforts to source sufficient inventory for extra tough. With respect to Rocky and Muck sales, we're pressured by a mild winter throughout the country that limited sales of insulated and rubber footwear. While these outdoor categories remain challenged, casual styles like our Rocky Ridge Top and Outback Hikers and the Muck Gardening and Dog Walking Boots and Shoes have shown very positive results.

Tom Robertson: With respect to Rocky and MX sales were pressured by a mild winter throughout the country that limited sales of insulated and rubber footwear. While these outdoor categories remained challenged casual styles like our Rocky Ridge top and Outback hikers and the Mut gardening and dog walk.

Talking boots and shoes have shown very positive results.

Jason S. Brooks: Going forward, we are introducing new, non-hunting, value-driven products in the category that we believe will help improve sales. Lastly, in wholesale, commercial military sales were up meaningfully in the first quarter as the team completed its last shipment under an elevated purchase agreement to a customer that supplies the U.S. Army with footwear and other gear. Shifting to retail, each of our branded e-commerce sites for Rocky, Georgia, Durango, Muck, and Extra Tough posted strong traffic and sales increases this quarter, with total channel sales up double digits compared to Q1 of 2023. We also utilized our websites to move some overstock inventory in the quarter, which was at a higher margin compared to the traditional discount wholesaler channel.

Tom Robertson: Going forward, we are introducing new non hunting value driven products in the category that we believe will help improve sales.

Tom Robertson: Lastly in wholesale commercial military sales were up meaningful in the first quarter as the team completed its last shipment under an elevated purchase agreement to a customer that supplies to the U S Army with footwear and other gear.

Tom Robertson: Shifting to recap each of our branded e-commerce sites for Rocky, Georgia, Durango, Muck and extra tough posted strong traffic and sales increases this quarter with total channel sales up double digits compared to Q1 of 2023.

Tom Robertson: We also utilized our websites to move some overstock inventory in the quarter, which was at a higher margin compared to the traditional discount wholesaler channel.

Tom Robertson: Lastly, our reoccurring.

Jason S. Brooks: Lastly, our recurring, Custom Fit B2B Lehigh business was up over last year's first quarter as we had several account renewals and onboarded new accounts in the quarter. At the same time, companies refresh their budgets, increase subsidies, and open employee eligibility to start the new year, paving the way for continued improvement as we progress through 2024. In addition to the discontinuation of some cruise line programs that offset our custom fit gains in Q1, I want to point out that we recently realigned our sales organization to improve our sales pipeline and provide greater continuity in account setup, rollout, and implementation.

Tom Robertson: Custom fit b to B Lehigh business was up over last year's first quarter as we had several account renewals and onboarding new accounts in the quarter.

Tom Robertson: At the same time company's refreshed their budgets increased subsidies and open employee eligibility to start the new year paving the way for continued improvement as we progress through 2024.

Tom Robertson: In addition to the discontinuation of some cruise line programs that offset our custom fit gains in Q1 I wanted to point out that we recently realigned our sales organization to improve our sales pipeline and provide greater continuation and account setup rollout.

Tom Robertson: And implementation, while these changes disrupted sales as they were rolled out we expect that positively impact the business in the future quarters.

Jason S. Brooks: While these changes disrupted sales as they were rolled out, we expect they'll positively impact the business in future quarters. Before I turn the call over to Tom, I want to thank the entire Rocky team for a promising start to 2024. The moderation of partner inventory levels and subsequent return of wholesale demand is allowing a strong sell-through and resilient consumer demand we've seen across the brand portfolio translate into better financial results.

Tom Robertson: Before I turn the call over to Tom I want to thank the entire rocky team for a promising start to 2020 for the moderation of partner inventory levels and subsequent return of wholesale demand is allowing a strong sell through and resilient consumer demand we've seen across the.

Our brand portfolio translate into better financial results. This improving industry dynamic coupled with our continued focus on top line expansion expense discipline and balance sheet improvement should provide a strong foundation for favorable results in the year ahead.

Jason S. Brooks: This improving industry dynamic, coupled with our continued focus on top line expansion, expense discipline, and balance sheet improvement, should provide a strong foundation for favorable results in the year ahead. I'll now turn the call over to Tom to cover the financial details. Tom?

I'll now turn the call over the call to Tom to cover the financial details Tom.

Tom Robertson: Thanks, Jason as Jason discussed we are optimistic about the start of 2024 as the diversity of our product categories and steady consumer demand for our brands has allowed us definitely navigate the current retail environment.

Tom Robertson: As Jason discussed, we are optimistic about the start of 2024 as the diversity of our product categories and steady consumer demand for our brands has allowed us to adeptly navigate the current retail environment. Reported net sales for the first quarter increased 2.2% year over year to $112.9 million. Excluding the service brand net sales from a year ago period, net sales increased 7.6% or 9.3% when you also factor in the Canadian distribution model change we made in late 2023. By segment, wholesale sales excluding the service brand and the Canadian distribution model change were up 8.5% to $79.8 million.

Tom Robertson: Ported net sales for the first quarter increased two 2% year over year to $112 $9 million.

Tom Robertson: Excluding the service brand net sales from a year ago period, net sales increased seven 6% or nine 3%. When you also factor in the Canadian distribution model change we made in late 2023.

Tom Robertson: By segment wholesale sales, excluding the service brand and the Canadian distribution model change were up eight 5% to $79 8 million retail sales increased 5% to $30 4 million.

Tom Robertson: Retail sales increased 5% to $30.4 million after factoring in the Canadian distribution model change. And contract manufacturing sales were $2.7 million. Turning to gross profit, for the first quarter, gross profit was $44.1 million, or 39.1% of sales compared to $43.8 million, or 39.6% of sales in the same period last year. Gross margin in the first quarter of 2023 benefited from a net $1.3 million tariff recovery. Despite the recovery, gross margins were up 70 basis points year over year, driven by the divestiture of the service brand, which carried a lower gross margin than the rest of our product portfolio.

Tom Robertson: After factoring in the Canadian distribution model change in contract manufacturing sales were $2 7 million.

Tom Robertson: Turning to gross profit for the first quarter gross profit was $44 $1 million or <unk> 39, 1% of sales compared to $43 $8 million or <unk> 39, 6% of sales in the same period last year.

Tom Robertson: Gross margin in the first quarter of 2023 benefited from a net one $3 million tariff recovery.

Tom Robertson: Minus the recovery gross margins were up 70 basis points year over year, driven by the divestiture of the service brand, which carries lower gross margin than the rest of our product portfolio.

Tom Robertson: Reported gross margins by segment were as follows, wholesale down 20 basis points to 36.4%, retail flat at 48.7%, and contract manufacturing up to 11.7% from 8.1%. Excluding the tariff recovery wholesale margins were up 140 basis points. Operating expenses were $36.2 million, or 32% of net sales in the first quarter of 2024, compared to $39.6 million, or 35.9% of net sales last year. On an adjusted basis, operating expenses were $35.5 million this year, or 31.4% of net sales, and $38.8 million, or 35.2% of net sales a year ago. The decrease in operating expenses was largely attributable to cost, savings, reviews, and operational efficiencies achieved through strategic restructuring initiatives implemented in 2023, as well as lower freight expenses in the current year.

Tom Robertson: <unk> gross margins by segment were as follows wholesale down 20 basis points to 36, 4% retail flat at 48, 7% and contract manufacturing up to 11, 7% from eight 1%.

Tom Robertson: Excluding the tariff recovery wholesale margins were up 140 basis points.

Tom Robertson: Operating expenses were $36 2 million or 32% of net sales in the first quarter of 2024 compared to $39 6 million or <unk> 35, 9% of net sales last year.

Tom Robertson: On an adjusted basis operating expenses were $35 $5 million this year or 31, 4% of net sales and $38 8 million.

Tom Robertson: Or 35, 2% of net sales a year ago.

The decrease in operating expenses was largely attributable to cost savings reviews, and operational efficiencies achieved through strategic restructuring initiatives implemented in 2023 as well as lower freight expenses in the current year.

Operator: Income from operations was $8 million, or 7.1% of net sales, compared to 4.2 million, or 3.8% of net sales in the year-ago period. Adjusted operating income was $8.7 million, or 7.7% of net sales, compared with adjusted operating income of $4.9 million, or 4.5% of net sales a year ago. For the first quarter of this year, interest expense was $4.5 million, compared with $6 million in the year-ago period. The decrease reflects lower debt levels in the quarter compared with the first quarter of 2023.

Tom Robertson: Income from operations was $8 million or seven 1% of net sales compared to $4 2 million or three 8% of net sales in the year ago period.

Adjusted operating income was $8 7 million or seven 7% of net sales compared with adjusted operating income of $4 9 million or four 5% of net sales a year ago for.

Tom Robertson: For the first quarter of this year interest expense was $4 $5 million compared with $6 million in the year ago period. The decrease reflects lower debt levels in the quarter compared with the first quarter of 2023.

Operator: On a gap basis, we reported net income of $2.6 million, or $0.34 per diluted share, compared with a net loss of $0.4 million, or $0.05 per diluted share, in the first quarter of 2023. Adjusted net income for the first quarter of 2024 was $3.1 million, or $0.41 per diluted share, compared to an adjusted net loss of $0.8 million, or $0.12 per diluted share, a year ago Turning to our balance sheet, at the end of the first quarter, cash and cash equivalents stood at $3.1 million, and our total debt, net of unamortized debt issuance costs, totaled $156 million, a decrease of 29% since March 31st last year.

Tom Robertson: On a GAAP basis, we reported net income of $2 $6 million or <unk> 34 per diluted share compared with a net loss of <unk> 4 million or <unk> <unk> per diluted share in the first quarter of 2023.

Tom Robertson: Adjusted net income for the first quarter of 2024 was $3 $1 million or <unk> 41 per diluted share compared to adjusted net loss of <unk> 8 million or call cents per diluted share a year ago.

Tom Robertson: Turning to our balance sheet at the end of the first quarter cash and cash equivalents stood at $3 $1 million and our total debt net of unamortized debt issuance cost totaled $156 million.

Tom Robertson: <unk> of 29% since March 31 last year.

Operator: As we announced yesterday, we signed an upsized, amended, and extended ABL facility with Bank of America. The new facility amends and restates our existing revolving $175 million credit facility and is comprised of a $175 million revolving credit facility and a $50 million term facility. We will utilize a portion of the proceeds from the refinancing to retire our existing senior secured term loan facility with TCW Asset Management. We project these transactions will generate interest savings of $2.9 million over the remainder of 2024, offset by fees and amortization associated with the retirement of the Senior Secured Term Loan Facility of approximately $2.6 million.

Tom Robertson: As we announced yesterday, we signed an upsized amended and extended ABL facility with Bank of America, the new facility, which amends and restates, our existing revolving $175 million credit facility and is comprised of a $175 million revolving credit facility and a $50 million term facility.

Tom Robertson: We utilized a portion of the proceeds from the refinancing to retire our existing senior secured term loan facility with TCW asset management.

Tom Robertson: We project these transactions will generate interest savings of $2 $9 million over the remainder of 2024 offset by fees and amortization associated with the retirement of the senior secured term loan facility of approximately $2 6 million starting in 2025. These transactions are expected to.

Operator: Starting in 2025, these transactions are expected to generate a combined annualized savings of approximately $4.4 million. Inventories at the end of the first quarter were $165.1 million, down 26.3% compared to $224.1 million a year ago and up 2.4% compared to $169.2 million at the end of 2023. With respect to our outlook, based on the first quarter performance, we now expect revenue to be towards the high end of our range of $450 to $460 million.

Tom Robertson: Generated a combined annualized savings of approximately $4 $4 million.

Tom Robertson: Inventories at the end of the first quarter were $165 $1 million down 26, 3% compared to 2000.

$224 $1 million a year ago and.

Tom Robertson: Two 4% compared to $169 2 million at the end of 2023 with.

Tom Robertson: With respect to our outlook based on the based on the first quarter performance. We now expect revenue to be towards the high end of our range of $450 million to $460 million, we still expect margin to remain consistent or to see slight improvements from the 38, 9% adjusted gross margins we delivered in 2023.

Operator: We still expect margin to remain consistent or to see slight improvements from the 38.9% adjusted gross margin we delivered in 2023, partially offset by SG&A deleverage due to investments in marketing of our brands, as well as performance-based compensation. Finally, with the additional $2.9 million in savings from the combined refinancing transactions, we now expect 2024 adjusted interest expense to be down approximately $7.9 million from 2023 versus our prior guidance of approximately $5 That concludes our prepared remarks. Operator, we are now ready for questions.

Tom Robertson: Partially offset by SG&A deleverage due to investments in marketing of our brands as well as performance based compensation.

Tom Robertson: Finally, the additional $2 $9 million in savings from the combined refinancing transactions. We now expect 2024 adjusted interest expense to be down approximately $7 $9 million from 2023 versus our prior guidance of approximately $5 million.

Speaker Change: That concludes our prepared remarks, operator, we're now ready for questions.

Speaker Change: Okay.

Speaker Change: Thank you very much ladies and gentlemen, we will be conducting a question and the mountain sensation now.

Operator: Thank you very much. Ladies and gentlemen, we will be conducting a question and answer session now. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the queue. You may press star and then 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. Our first question is from Jonathan Komp of Boone. Please go ahead.

Speaker Change: We'd like to ask a question. Please press star and then one on your telephone keypad.

Speaker Change: Information time will indicate your line is in the question queue.

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Speaker Change: All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Our first question is from Jonathan Komp update. Please go ahead.

Jonathan Robert Komp: Yes, hi, good afternoon. Thank you.

Jonathan Robert Komp: Yeah, hi, good afternoon. Thank you. Any other questions, Tom? Hey, guys.

Speaker Change: Hey, Jonathan.

Speaker Change: Sure.

Tom Robertson: Tom, first question: if you look at the underlying growth rate you highlighted, I think in the press release you indicated about 7%. Excluding the non-comparable revenue last year, and the guidance for the year now is the higher end of 450 to 460, which would be, I think, 4%. Unknown Attendee, Brendon Frey, Jeffrey Lick, Cody McAllister, Sarah OConnor, Rocky Brands, The moderated pace of underlying growth for the year.

Speaker Change: Hey, guys.

Jonathan Robert Komp: First question, if I could follow up just on the guidance commentary.

Speaker Change: If you if you look at the underlying growth rate you highlighted I think in the press release, you didn't give it up 7%.

Speaker Change: Excluding the non comparable revenue last year.

Speaker Change: And the guidance for the year now is at the higher end of 450 to 460, which would be I think 4%.

Speaker Change: Underlying growth so any any color as you look ahead, you know if there was something.

Speaker Change: And in the first quarter that was unsustainable or.

What you're building into the outlook in terms of the.

Speaker Change: The moderated pace of underlying growth for the year.

Speaker Change: Yeah, Hey, John Thanks for the question you know I think as we look at Q1, you know there were a couple of opportunities. We took advantage of from a closeout perspective, which is why our margins probably came in slightly under where we had internally.

Tom Robertson: Yeah, hey, John, thanks for the question. You know, I think as we look at Q1, there were a couple opportunities that we took advantage of from a closeout perspective, which was why our margins probably came in slightly under where we had internally forecasted them. And so I think some of those sales were certainly incremental. You know, if those opportunities arise in the future, we'll continue to take advantage of them to convert inventory to cash.

Speaker Change: <unk> asked for them and so I think some of the some of those sales were certainly incremental if those opportunities arise in the future. We'll continue to take advantage of those to convert inventory to cash, but we don't necessarily get into our into our model.

Tom Robertson: But, you know, we don't necessarily fit into our model. And I think, you know, I think there's just overall just kind of a sense of being cautious here about the future and what it holds for the rest of the year. But we feel good about the, you know, the higher end of that range that we guided to.

Speaker Change: And I think yes, I think there's just all overall just kind of a sense of.

Speaker Change: Being cautious here about about the future and what it holds for.

Speaker Change: The rest of the year, but we feel good about the you know the higher end of that range that we guided to.

Tom Robertson: Yeah, I would just add, John, that with the election year; election years always seem to be an odd year. So depending on, you know, where that kind of ends up as the year goes through. I think we're just being cautious, and that was one other reason why.

Speaker Change: Yes, I would just add John that with the election year election years always seem to be an odd year. So.

Speaker Change: Pending.

Speaker Change: Where that kind of ends up as the year goes through I think I think we're being cautious and that was one other reason why yeah. One other thing that jumped to my mind to John is that Jason called out in his remarks that we were at the end of a of a contract.

Tom Robertson: Yeah, one other thing that jumped in my mind, too, John, is that Jason called out in his remarks that we were at the end of a contract for our commercial military product. And so, you know, we see that, you know, if there's another opportunity, we'll certainly bid on them and try to win those. But that's something that we won't see or we don't have planned for the next three quarters.

Speaker Change: For our commercial military product.

Speaker Change: And so we see that theres another opportunity will certainly bid on them and try to windows, but thats something that we won't see or we don't have planned in the next three quarters.

Tom Robertson: That's really helpful. And if I could follow up on the wholesale performance, is there any way to talk, maybe across? Maybe there's differences across brands or segments or categories, but, how would you characterize the first quarter performance? Unknown Speaker As it relates to underlying consumer demand, any changes that you're seeing and sort of a sell through indication versus, Yeah, really, sort of a catch up in the sell in versus the sell through and how should we think about, you know, those those dynamics going forward?

Speaker Change: That's really helpful and if I could follow up on the wholesale performance is there any way to talk maybe across.

Speaker Change: Maybe there's differences across brands or segments or categories, but how.

Speaker Change: How would you characterize the first quarter performance.

As it relates to underlying consumer demand any changes that you're seeing in sort of a sell through indications versus.

Speaker Change: Yeah.

Speaker Change: Sort of a catch up in the sell in versus sell through and how should we think about those.

Speaker Change: Those dynamics going forward.

Speaker Change: Yeah. That's a great question, John I think it's something that we continue to evaluate right we.

Tom Robertson: Yeah, that's a great question, John. I think it's something that we continue to evaluate, right? I think we talked about this on the last earnings call. We have data that we gather from some of our retail partners about their sell-through. And in particular, in the Durango brand and the Extra Tough brand, we're seeing, you know, really great sell-through. So the sell-in then to the retailer is positive. The work category is probably the one area, right, and that touches Georgia and Rocky. It might even touch Durango a little bit, but it's a phenomenon, as Western just seems to be a little hotter right now. And then there is the MUC brand as well.

Speaker Change: Well I think we talked about this on the last earnings call. We have data that we gather from some of our retail partners about their sell through.

Speaker Change: And in particular in the Durango brand and the extra tough brand.

Speaker Change: We're seeing really great sell through so the sell in and then to the retailer is as being positive.

Speaker Change: The work category is probably the one area right and that touches Georgia and Rocky.

It might even touch Durango, a little bit, but it's a phenomenon as western just seems to be a little more hot right now.

Speaker Change: And then the muck brand as well so from a work standpoint.

Tom Robertson: So from a work standpoint, sell-through at retail is not as good, and so I think that's why we're seeing the sell-in not quite as hot. And then the worst category is the outdoor hunting category because that really just took a turn because the weather was bad. And hopefully, we'll see some stronger weathering patterns come this year and be able to pick some up there. But I think that covers and hopefully answers your question. Yeah, I think the only other call out.

Sell through at retail is not as good and so I think that's why we're seeing the sell in not quite as hot and then the worst category is is the outdoor hunting category.

And that really just took a the weather was bad and hopefully we will see some some stronger weathering patterns come this year.

Speaker Change: And then be able to pick some up there, but I think that that covers and hopefully answers your question.

Tom Robertson: The only other call out there that I have is that, you know, a meaningful increase that we saw kind of across the board was with key accounts. So key accounts performed very well for us and started to buy back in. And as Jason alluded to earlier, more of that normal cadence. And so we're starting to see more normalized behavior, which is good for Q1 and hopefully the rest of the year.

Jonathan Robert Komp: Okay, and can you remind me? Have you given a rough split of how much your business is key account oriented versus versus

The only other call out there that I have is that.

Speaker Change: A meaningful increase that we saw kind of across the board was accounts. So T accounts performed very well for us and started to buy back in and as Jason alluded to earlier more of that normal cadence and so we're starting to see more normalized behavior, which is which is good for Q1 and hopefully the rest of the year.

Speaker Change: Okay and can you remind me have you given a rough split how much of your business or key account oriented versus persons.

Speaker Change: Key accounts.

Speaker Change: We have we have not shared that John before and we'll probably keep that one to ourselves for now.

Tom Robertson: We have not shared that before, John, and we'll probably keep that one to ourselves for now.

Jonathan Robert Komp: Okay, it makes sense. The last two are just modeling questions. Tom, any color... Q2 revenue, should we expect it to be the low point? And I think you're cycling a fair amount of non-comparable business yet. So any any color there you can offer and then, SG&A, I know you're still talking about leverage for the year after achieving pretty big, pretty meaningful leverage in the first quarter. So how should we think about that? the quarterly progression on the SG&A spend. Thanks again.

Speaker Change: Okay. It makes sense last last two just modeling questions Tom any color Q.

Speaker Change: Q2 revenue should we expect it to be the low point and I think you're quite green a fair amount of non comparable business yet so any any color. There you can offer in that.

Speaker Change: SG&A I know you're still talking to.

Speaker Change: The leverage for the year after achieving pretty big.

Speaker Change: Meaningful leverage in the first quarter, so how should we think about.

Speaker Change: The quarterly progression on the SG&A spend thanks.

Speaker Change: Thanks again.

Speaker Change: Yeah. So from a top line perspective, yes, we have we have Q2 being our are our low point.

Tom Robertson: Yeah, you know, so from a top line perspective, yeah, we have Q2 being our low point for the year, and then, you know, obviously accelerating in the third and fourth quarters, which are typically our strongest quarters. We have the fourth quarter, given what we've seen in the e-commerce space, as our largest quarter for 2024. As for SG&A spin, you know, I think that you'll see kind of a low point from an SG&A spend in the second quarter as well.

Speaker Change: For the year.

Speaker Change: And then obviously accelerated in the third and fourth quarter, which are typically our strongest quarters. We have we had the fourth quarter given what we've seen in the E. Commerce space is our largest quarter for 2024.

Speaker Change: SG&A spend relates you know I think that Youll see kind of a low point from an SG&A spend in the second quarter as well, you'll see a lot of those investments that we've talked about you know a lot of that being digital spend you'll see that when we hit our peak season in Q3.

Tom Robertson: You'll see a lot of those investments that we've talked about, you know, a lot of that being digital spend, you'll see that when we hit our peak season and Q3 and Q4 as well. You know, I think we talked about slight de-leverage, you know, with a slightly increased SG&A spend in 2024. You know, one thing I just wanted to make sure we got across on the call is that we are protecting, and we're trying to protect our operating income comparability to the prior year.

Speaker Change: And in Q4 as well.

Speaker Change: Thank you.

Speaker Change: We talked about a slight deleverage.

Speaker Change: With a slight slightly increased SG&A spend in 2000.

Speaker Change: For one thing I just wanted to make sure we got across on the call is that we are we are.

Speaker Change: <unk>, we're trying to protect our operating income.

Speaker Change: Comparability to the prior year and so as we see what happens with sales throughout the rest of the year, we'll we'll we'll adjust our plan and we've learned how to flex that muscle like we did last year and can pull back on on discretionary spend to help protect that operating income.

Tom Robertson: And so, you know, as we see what happens with sales throughout the rest of the year, we'll adjust our plan. And we've learned how to, you know, flex that muscle like we did last year. We can pull back on discretionary spend to help protect that operating income for 2024.

Speaker Change: For 2024.

Speaker Change: Okay got it thanks again.

Jonathan Robert Komp: Okay, thanks again.

Speaker Change: Thanks, Sean.

Speaker Change: Thank you very much.

Operator: The next question is from Janine Stichter of DTIG. Please go ahead.

Speaker Change: The next question is from Jenny Stitcher of BT I G. Please go ahead.

Janine Marie Hoffman Stichter: Hey, thanks. A couple for me.

Janine Marie Hoffman Stichter: Hey, Thanks, a couple for me.

Janine Marie Hoffman Stichter: Just on the it sounds like you took some some of the cost savings and redirected that into higher advertising spend can you just talk a little bit more about that from our standpoint. It seemed like some of the upside or the most of the upside was on the wholesale side versus the retail side of the business.

Janine Marie Hoffman Stichter: I understand that this is something that impacts those channels or how to think about where the where the benefit is there.

Speaker Change: Yeah, So I'll start Tom probably will add on thanks for the question. It is more of a wholesale play and for US. It's really about just staying in front of the consumers we want to make sure that the consumers are aware of our brands are aware of our new.

Jason S. Brooks: First, it sounds like you took some of the cost savings and redirected that into higher advertising spend. Can you just talk a little bit more about that? From our standpoint, it seemed like some of the upside, or most of the upside, was on the wholesale side versus the retail side of the business. I just want to understand if this is something that impacts both channels or how to think about where the benefit is there.

Jason S. Brooks: Yeah, so I'll start, Tom, and probably I'll add on. Thanks for the question. It is more of a wholesale play, and for us, it's really about just staying in front of the consumers. We want to make sure that consumers are aware of our brands, are aware of our new products that we're introducing, and continue to drive that business to our retail partners and also drive it to our own websites, where, obviously, we make a little bit better margin.

Products that we're introducing and continuing to drive that business to our retail partners and also drive them to our own websites.

Speaker Change: We're obviously, we make a little bit better margin, but we feel like we have to continue to.

Jason S. Brooks: But we feel like we have to continue to drive the brands and support the brands, so investing back in them is important. And it really focuses mainly on wholesale. We do a little bit from a retail standpoint on the dot coms, but not enough. The budget that we did for Lehigh is really state of the art.

Speaker Change: Drive the brands and support the brand so investing back in them is important.

Speaker Change: And and it really focuses mainly on wholesale.

Speaker Change: So a little bit from a retail standpoint from the dotcoms, but not not the budget that we did for Lehigh has really stayed about the same.

Okay, Great and then it sounds like I know you were chasing an extra half in Durango, and you were able to fulfill some of those with Atlas theaters, but are there any of that that spills over into Q2, and then I guess bigger picture and you know how is the fact that you're seeing out of stocks and having to chase is that encouraging or are your wholesale partners.

Tom Robertson: Okay, great. And then it sounds like, you know, you were chasing in Extra Tough and Durango; you were able to fulfill some of those orders at once. But is there any of that that spilled over into Q2? And then, I guess, the bigger picture, you know, how is the fact that you're seeing out of stocks and having to chase? Is that encouraging your wholesale partners to place orders earlier? I just had to think about that dynamic of all at once for subprime orders. Yeah, I'll take this one, and Jason can certainly add in. You know, I think that

Speaker Change: To place orders earlier, just how to think about that dynamic of at once or is that fine waters.

Speaker Change: Yeah I'll take this one and Jason can certainly add in you know I think that there was maybe a slight spillover, but not but not much into into Q2, I'm, particularly proud of the team for getting all the inventory here and getting that turned around towards the end of the quarter. So we saw phenomenal turn of that inventory in March.

Tom Robertson: Yeah, I'll take this one, and Jason can certainly add in. You know, I think that there was maybe a slight spillover, but not, but not much into Q2. I'm particularly proud of the team for getting all the inventory here and getting it turned around towards the end of the quarter. So, we saw a phenomenal turn of that inventory in March. Very proud of the team for that.

Tom Robertson: I think what we're seeing is that we're stepping on the gas pedal. Our in-transit inventory is up, particularly on the styles that we're chasing. And yes, you're dead right.

Speaker Change: Proud of the team for that.

Jason S. Brooks: I think what we're seeing is is where we're stepping on the gas paddle our in transit inventory is up.

Jason S. Brooks: Particularly on the on the styles that we're chasing.

Jason S. Brooks: And yes, you're dead right, where we are.

Jason S. Brooks: Every every account to book it if they want it.

Tom Robertson: We are telling every, every account to book it if they want it. You know, I think if you think about what's happened with your supply chain over the last few years, you know, with every pulling back on inventory, particularly in Asia, over the last year, 18 months, getting these factories back up, getting them restaffed to production levels, you know, from two years ago, is taking a little bit more time.

Jason S. Brooks: I think if you think about what's happened with supply chain over the last few years with the every eight pulling back on inventory, particularly in Asia over the last year 18 months.

Jason S. Brooks: Getting these factories back up getting them re staffed.

Jason S. Brooks: 222 production levels from.

Jason S. Brooks: From two years ago is taking a little bit more time. So we're trying to you know, particularly for.

Tom Robertson: So, we're trying to, you know, particularly for, you know, the muck boots, the core styles of the tour boot and the extra tough and the Durango product, we're trying to get people to book those as aggressively as they can for fall before our busy season.

Jason S. Brooks: Mark.

Jason S. Brooks: <unk>.

Jason S. Brooks: Core styles with detour boot and the extra tough on the Durango product.

Jason S. Brooks: We're trying to get people to book that as aggressively as they can for fall with before our busy season.

Speaker Change: Perfect. Thanks, so much.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you very much.

Operator: Ladies and gentlemen, we have no further questions in the queue, and we'd like to turn the call back to Jason Brooks for some closing remarks.

Speaker Change: I just need somebody I have no further questions in the queue and I would like to turn the call back to you Tessa brooksville, sometimes in a box.

Tessa: Great. Thank you very much just wanted to again reiterate Tom.

Jason S. Brooks: Great, thank you very much. Just want to again reiterate Tom and I's appreciation for the Rocky team. We are excited about Q1 in 2024 and how we've executed in the first three months of the year. And we look forward to finishing strong, and we thank our investors for their commitment. And Thank you all so much.

Tessa: Tom and I as depreciation to the Rocky team.

Tessa: We are excited about Q1 and in 2024 and how we've executed in the first three months of the year and we look forward to finishing strong than we think.

Thank our investors for their commitment and.

Speaker Change: Thank you all so much.

Speaker Change: Thank you very much.

Operator: Ladies and gentlemen, that concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Ladies and gentlemen that concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Speaker Change: Okay.

Operator: ??? ??? ??? ??? ??? ???

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Okay.

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