Earnings call transcript: Rocky Brands Q2 2025 earnings beat expectations

Rocky Brands Inc. (RCKY) reported its second-quarter earnings for 2025, showcasing a significant earnings beat with an EPS of $0.55 compared to the forecasted $0.25, representing a 120% surprise. The company also exceeded revenue expectations, reporting $105.6 million against a projected $102.54 million. Despite these positive results, the stock price fell by 2.21% in after-hours trading, closing at $23.5. According to InvestingPro analysis, the company currently appears undervalued based on its Fair Value calculation, with an impressive free cash flow yield of 18%. InvestingPro subscribers can access 8 additional key insights about RCKY’s valuation and growth potential.

Key Takeaways

• Rocky Brands’ EPS of $0.55 beat forecasts by 120%.
• Revenue increased by 7.5% year-over-year to $105.6 million.
• Stock price dropped by 2.21% in after-hours trading.
• Strong performance in retail sales with a 13.9% increase.
• Expansion plans for the ExtraTough brand into new demographics.

Company Performance

Rocky Brands demonstrated robust performance in Q2 2025, driven by a diversified portfolio and strategic initiatives. The company reported a 7.5% year-over-year increase in net sales, with notable growth in both wholesale and retail segments. The retail sales surge of 13.9% highlights the effectiveness of their consumer engagement strategies. The company’s strategic focus on expanding its product lines and enhancing its manufacturing capabilities has positioned it well against industry competitors.

Financial Highlights

• Revenue: $105.6 million, up 7.5% YoY
• Earnings per share: $0.55, up 224% YoY
• Gross Profit: $43.3 million, 41% of net sales
• Operating Income: $7.2 million, up 58.7%

Earnings vs. Forecast

Rocky Brands exceeded expectations with an EPS of $0.55 against a forecast of $0.25, marking a significant 120% surprise. Revenue also outperformed forecasts, reaching $105.6 million compared to an expected $102.54 million. This strong performance is a continuation of the company’s positive trend, with substantial improvements in profitability and sales metrics.

Market Reaction

Despite the impressive earnings beat, Rocky Brands’ stock fell by 2.21% in after-hours trading, closing at $23.5. This decline may reflect investor caution amid broader market trends or concerns over future challenges. With a beta of 2.34 and a volatile trading pattern identified by InvestingPro, the stock shows higher sensitivity to market movements than average. The stock trades between its 52-week range of $11.93 to $35.69, demonstrating significant price swings. A comprehensive Pro Research Report available on InvestingPro provides detailed analysis of these price movements and their implications.

Outlook & Guidance

Rocky Brands projects a 4-5% increase in revenue for 2025, with an expected EPS rise of approximately 10% to around $2.79. The company remains cautious about potential tariff impacts in Q4 but is optimistic about its brand expansion and direct-to-consumer strategies.

Executive Commentary

"Our performance demonstrates our diversified portfolio’s resilience," stated CEO Jason Brooks, highlighting the company’s strategic positioning. CFO Tom Robertson added, "The outdoor category is certainly growing at a rate faster than our other areas," emphasizing the company’s focus on high-growth segments.

Risks and Challenges

• Potential tariff impacts in Q4 could affect profitability.
• Supply chain shifts may introduce operational complexities.
• Market saturation in core segments could limit growth.
• Macroeconomic pressures might dampen consumer spending.
• Interest rate fluctuations could impact financial costs.

Q&A

During the earnings call, analysts inquired about the progress of the company’s supply chain shifts and pricing strategies. Management reassured that these initiatives are progressing ahead of schedule, with consumer demand showing resilience in key categories. Continued investment in direct-to-consumer channels was also highlighted as a strategic priority.

Full transcript - Rocky Brands Inc (RCKY) Q2 2025:

Conference Operator: Afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Rocky Brands Second Quarter twenty twenty five 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.

I I would like to remind everyone that this conference call is being recorded. And we’ll now turn the conference over to Brendan Frey of ICR.

Brendan Frey, IR Representative, ICR: Thank you, and thanks to everyone joining us today. Before we begin, note that today’s session, including the Q and 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 ks for the year ended 12/31/2024.

I’ll now turn the conference over to Jason Brooks, Chief Executive Officer of Rocky Brands. Jason?

Jason Brooks, Chief Executive Officer, Rocky Brands: Thank you, Brendan. With me today is Tom Robertson, our Chief Operating and Chief Financial Officer.

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: After our

Jason Brooks, Chief Executive Officer, Rocky Brands: prepared remarks, we’ll take your questions. We delivered very good Q2 results, significantly outperforming both last year and our own expectations through a strong execution across our diversified portfolio. High single digit revenue growth and adjusted EPS that more than tripled to $0.55 per diluted share demonstrates the power of our multi brand strategy and operational excellence. Three key drivers powered this performance. First, broad based revenue momentum.

Multiple brands and channels contributed year over year growth with strong full price selling driving a two thirty basis point gross margin expansion despite challenging consumer conditions. Second, disciplined cost management. We controlled our fixed cost base effectively delivering 59% operating income growth while reducing interest expense and debt levels year over year. Third, our Outdoor category ReAssurance led by ExtraTough and MUC, Outdoor is reemerging as a key growth engine alongside our traditional work and Western strengths. This outdoor transformation is particularly significant through the 2021 acquisition of the Extra Tough and MUC, we added two functional brands with deep fishing and farming routes respectively.

Now especially with Extra Tough, we’re building lifestyle components that broaden distribution and consumer reach. We are excited about the prospect of attracting more consumers to the brands and believe we are just starting to tap into an opportunity with a long runway of growth. Let me walk you through our Q2 brand performance. ExtraTough maintained its position as our fastest growing brand, building accelerating momentum across multiple quarters. We’re working hard just to keep pace with demand and our expanding distribution network.

U. S. Wholesale significantly outpaced last year increasing strong double digits with e commerce growth equally as strong in the second quarter. Key Q2 wins include sustained strength with authorized online partners, expansions into boot and western retailers and new placement with prominent big box outdoor and fashion parts. Our fallwinter twenty five lineup excites us.

Fleece lined ADBs, expanded tailgate collection styles and a new Sesame Street children’s line. Next, Muck delivered its best quarter to quarter comparison since 2023. Improved inventory positions, particularly in best selling chore styles combined with favorable weather drove strong performance. Men’s business posted solid mid single digit gains with double digit growth across the Upper Midwest, Northeast and Southwest. Our women’s business achieved strong double digit increases versus Q2 twenty twenty four led by triple digit growth in the Muxtr two collection including the Chicken Print series.

New digital advertising focus on working utility customers deliver our best campaign results in company history, driving brand awareness and e commerce gains. Strategic partnerships include a collaboration with country star Dierks Bentley furthering amplifying our reach. Durango achieved a high single digit growth driven by strong key account performance. Field accounts improved Q2 versus Q1 with momentum accelerating through May and June. Farm and Ranch remained consistent with steady replenishment positioning us well for the second half of the year.

Our inventory composition of new releases and legacy favorites continues delivering results. Georgia Boot finished down modestly, but showed progressive. Improvement throughout the quarter. Tariff related timing shifts delayed a new fall product shipment by one month. Key accounts remained stable, driven by a large e commerce partner and a work in Western retailer chain returning to normal purchasing patterns.

Farm and Ranch softened due to Pacific Northwest weather impacts and inventory overstocks while field accounts faced macroeconomic headwinds in May. The late quarter pickup should continue into the fall as our price point focused offerings resonate broadly. Rocky work, outdoor and western all grew for the first time in several quarters with outdoor and western up double digits driven by new products, strong best seller demand and key partnership expansions. Profitability improved significantly through increased full price selling versus the prior year’s overstock focus. The work category strength came from online sales and improved farm store performance plus continued expansion with national safety shoe distributors driving best seller safety toe product.

Outdoor showed encouraging signs despite lacking Q2 hunting seasonality with hiking collections performing exceptionally well on our e commerce site and partner platforms. Western work Western hybrid products excelled, particularly in our ironskull safety toe Western pull on at major industry outlets supported by strong online and farm store performance. Commercial military and duty rebounded nicely, exceeding Q2 expectations after a difficult start. Public service division performed well, particularly USPS and the Code Red fire assortment. While commercial military segment momentum shifted as the U.

S. Government deployed allocated funds for the first time in months. We secured three substantial U. S. Navy orders offsetting last year’s contract sales.

Looking ahead, we’re optimistic about military prospects. Rocky Brands recently earned a USMC hot weather boot certification, enabling us to pursue large bid opportunities and provide individual marine sales going forward. In retail, our B2B Lehigh business grew mid teens versus last year. As our sales team realignment reaches its one year anniversary, new processes are generating sustainable double digit growth. Customer acquisition and spending remains strong with improved subsidy utilization and higher average subsidy dollars year over year, largely offsetting supply chain and tariff pressure.

Before turning to Tom, I want to thank the entire team for exceptional execution during a dynamic quarter. Despite the global tariff uncertainty and economic pressures, our performance demonstrates our diversified portfolio’s resilience. I’m particularly proud of how quickly we’ve adapted to the changing trade conditions, leveraging our Dominican Republic and Puerto Rican facility and implementing strategic sourcing changes that offset much tariff impact. While we remain appropriately cautious about the broader environment, our strategic positioning, manufacturing flexibility and robust brand portfolio positions us well for continued growth and increased shareholder value. The momentum across key brands like Extra Tough and Durango combined with our operational efficiencies and strong balance sheet gives us confidence to navigate the challenges while capitalizing on significant opportunities ahead.

I will now turn the call over to Tom.

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: Thank you, Jason. The acceleration of both the top and bottom line we delivered in Q2 is a testament not only to the strength and resilience of our diverse brand portfolio, but also a reflection of the hard work of the entire organization. Our teams did an excellent job capitalizing on new opportunities and implementing strategic shifts throughout the period, allowing us to outperform expectations in a difficult operating environment. Reported net sales for the second quarter increased 7.5% to $105,600,000 By segment, wholesale sales net increased 7.1% to $73,100,000 retail net sales increased 13.9% to $29,700,000 and contract manufacturing net sales were $2,800,000 Turning to gross profit. For the second quarter, profit was $43,300,000 or 41% of net sales compared to $38,000,000 or 38.7% of net sales in the same period last year.

The two thirty basis point improvement in gross margin was primarily driven by higher wholesale margins combined with a higher percentage of retail sales, which carry higher gross margins than our wholesale and contract manufacturing segments. Reported gross margins by segment were as follows: wholesale, up 300 basis points to 40.3% retail down 170 basis points to 45.2% and contract manufacturing margins were 12.4%. Operating expenses were $36,100,000 or 34.2% of net sales compared to $33,500,000 or 34.1% of net sales last year. Excluding $700,000 of acquisition related amortization in both periods, adjusted operating expenses were $35,400,000 and $32,800,000 respectively. The increase in operating expenses was driven primarily by higher selling costs associated with the increase in direct to consumer sales and incremental marketing investments to drive growth.

Income from operations increased 58.7% to $7,200,000 or 6.8 percent of net sales compared to $4,500,000 or 4.6% of net sales last year. On an adjusted basis, operating income was $7,800,000 or 7.4% of net sales compared to $5,200,000 or 5.3 percent of net sales a year ago. For the second quarter of this year, interest expense was $2,500,000 compared with $6,100,000 last year, inclusive of a $2,600,000 one time term loan extinguishment charge for the prior year period. Excluding the one time term loan extinguishment charge, interest expense in the second quarter for twenty twenty four was $3,500,000 The decrease reflects lower interest rates as a result of the debt refinancing we completed in April 2024 as well as lower debt levels. On a GAAP basis, net income was $3,600,000 or $0.48 per diluted share compared to a net loss of $1,200,000 or a loss of $0.17 per diluted share in the 2024.

Adjusted net income was $4,100,000 or $0.55 per diluted share compared to $1,300,000 or $0.17 per diluted share a year ago. Turning to our balance sheet. At the end of the second quarter, cash and cash equivalents were $2,800,000 and our total debt net of unamortized debt issuance costs totaled $132,500,000 a decrease of 13.1% since June 30. Inventories at the end of the second quarter were $186,800,000 up 6.8% compared to $175,000,000 a year ago, with the increase driven by higher tariffs as pairs are relatively consistent year over year. As we mentioned last quarter, we purposely accelerated receipts in the first half of the year after the initial round of tariffs were announced and we continue to bring product in early to avoid the impact of higher tariffs announced later this year.

That said, we have approximately $11,000,000 of incremental tariffs on the balance sheet that will flow through our P and L over the remainder of the year, with the bulk of the impact occurring in the fourth quarter. With respect to our outlook, based on the second quarter performance and inclusive of tariffs that have been announced this year through today, combined with the mitigation actions, we are increasing our prior year 2025 guidance. Revenue is now expected to increase between 45% compared to 2024 levels, up from our prior guidance for revenue to grow in the low single digit range. We are forecasting gross margins to be down roughly 70 basis points from the 39.4% reported in 2024, inclusive of roughly $11,000,000 of headwinds from tariffs currently in place, partially offset by our pricing actions. It is important to note that the margin benefits of shifting production to our own Dominican Republic and Puerto Rico facilities will take time to fully materialize with the largest margin benefits beginning in 2026.

SG and A is still expected to be up in dollars from an increase in our marketing spend to support growth and higher logistics costs from the projected increase in retail sales. However, we are now expecting to realize modest expense leverage versus last year on higher sales. Finally, we now expect 2025 EPS to increase approximately 10% over last year’s $2.54 a share, up from our prior forecast for EPS to be down slightly year over year. In terms of the quarterly shape of the second half, we are expecting growth in gross margins to be stronger in the third quarter versus the fourth quarter as we’ve adopted an appropriate conservative view on Q4, when most of the impact from tariffs on pricing and costs will hit consumers and our P and L. In addition, the fourth quarter includes a sequential step up in marketing spend to drive demand during the key holiday season.

That concludes our prepared remarks. Operator, we are now ready for questions.

Conference Operator: Thank you. We will now be conducting a question and answer session. Please proceed with your question.

John, Analyst: Yeah. Hi. Good afternoon. Thank you. I want to start, if I could ask just how things have gone in terms of shifting the supply chain.

I know you talked quite a bit on the last call about some of the changes, but any reaction or results so far there? And then separately on pricing, could you just comment on how you’re seeing the pricing flow through either through your own retail business or the price increases you passed along to some of your wholesale partners?

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: Hey, Thanks for being on the call. I’ll take the first part on sourcing and then just Jason lay on the pricing. But we’re ahead of schedule in getting our production shifted from other countries. I would tell you that we are at our expectation really as we see it now in China from a go forward standpoint. Again, things could shift and change after August 1, which seems to be a date that we’re going to get some more news on tariffs.

But I think what we’re most proud about is our ability to shift production to our Dominican Republic facility first, and now we’re starting to shift production to our Puerto Rican facility. We are ahead of schedule in the Doctor, and we have boots inbound to us now and we have for a couple of weeks. So we’re excited to see that plan coming to fruition. We’ll just be cautious about any changes that come about August 1, whether there’s an extension with the deadline or if there’s more color on changes. But everything is going as planned from a sourcing and manufacturing perspective.

We just need to see the game changes here later this week.

Jason Brooks, Chief Executive Officer, Rocky Brands: Yes. And then from a pricing standpoint, I would tell you that pretty much all of our retail partners were understanding. We got a little pushback, but I think the world really The U. S. Knew where everything was and that things were coming.

We’ve heard of some of our competitors having significantly higher price increases. And then we’ve heard some that have had lower than what we took. So it’s taken us some time. That price increase went into effect in June and we’ve had to work with some of our retail partners to get it into place throughout June. So it was a process, but I feel pretty good about where we’re at.

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: Yes. I think just to add on there, we were particularly cautious when we did our price increase to make sure that we maintain retailers margins at MAP or minimum advertised price. So we think that helped with delivering the message, because we know that not all brands took that position.

John, Analyst: Okay, that’s helpful color. And then as a follow-up, I want to ask about the guidance raise. Tom, as you think about the drivers of the increase, could you help us understand just how much was related to second quarter outperformance versus any change in how you’re thinking about the back half in any of the order indications you’re seeing? Just want to get a better understanding of the drivers?

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: Yes. So if you look at the updating guidance, I think we’re the win in Q2 from a top line perspective is essentially the implied increase that we have for the rest of the year. As we look to the third and fourth quarter, our bookings for Q3 continue to look very strong, but we’ll also and more importantly, we’ll be in a better inventory position for MUC and Extra Tough, particularly in the third quarter than we were in the prior year. And so we feel stronger about the third quarter than we do the fourth. And then there’s always this cautious ness in us with the price increase and seeing how that plays out of retail because the reality is we haven’t had enough time to see how the market actually price increase.

But we do think we’re very competitive compared to what our peers and other brands have done.

Jason Brooks, Chief Executive Officer, Rocky Brands: Yes. Just to add, I think one of the things that we are really pleased with is pretty much all of the brands. Georgia was kind of flat down a little, but we’ve seen Rocky come back a little bit, right? Durango has been doing pretty good. Extra Tough has been strong.

And then now we’ve seen muck kind of come back. We’re anticipating because of what Tom said about us having better inventory in Q3 and Q4 that we’ll hopefully see that driver happen with all of the brands and maybe even Georgia will start to see some pickup too. So I think the fact that we’ve got the brands all kind of moving in the right direction is really a positive for us as well.

John, Analyst: And last one for me. Could you just maybe give us an update? How would you frame up the relative size of the outdoor versus work business across your brand portfolio? And any comment on sort of relative top line revenue growth rates for the year? Thanks again.

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: Yes. So I would say that our outdoor category is certainly growing at a rate faster than our other areas.

Jason Brooks, Chief Executive Officer, Rocky Brands: We’re trying to look it up here, John, real quick.

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: The work category is our biggest though. The work category is our biggest category, with followed by the outdoor category, with a lot of that growth happening in extra tough and mock as Jason touched on in his prepared remarks. As we look at it for the quarter, the outdoor category made up about a third of the sales for Q2. And so I think that as we get into the Q3 and Q4, we’ll see that acceleration continue. And so outdoor is going to continue to be a bigger piece of total pie.

John, Analyst: That’s very helpful. Thanks again.

Jason Brooks, Chief Executive Officer, Rocky Brands: Thank you.

Conference Operator: Thank you. Our next question comes from the line of Janine Assischer with BTIG. Please proceed with your question.

Janine Assischer, Analyst, BTIG: Hi. Good afternoon. Hoping just to get your thoughts on on how you’re feeling about the state of the consumer versus when we last spoke. You know, on one hand, see a nice increase in in retail sales there in q two, but then you do mention weakened develop visibility into consumer demand. Just curious what signals you are getting from the consumer.

I know it’s still early, but any data or thoughts you have on the sell throughs since you have raised prices would be really helpful. Thank you.

Jason Brooks, Chief Executive Officer, Rocky Brands: Yeah, great question by the way, because I would tell you that the consumer is a little confusing right now. When you read the data that we get from our retail partners and we look at the sell through, we’re getting really positive information there. And I know not all categories in the marketplace are getting the same kind of results. But when you look at the work category, the farm and ranch, the outdoor category, we’re seeing pretty good sell through at those retailers. And so we’re excited about that.

We again are pretty cautious and trying to be cautiously optimistic about it. But it seems like guy is doing okay, but they’re also very fickle. And, you can see one week where the numbers are really strong and then the next week maybe not so. So we’re just following through it and seeing where it ends up, but I think we again are cautiously optimistic that they’re doing okay. Yes.

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: I think Janine, just to dive in a little bit. If we look to our e commerce websites to give us the biggest pulse or barometer of how pricing is impacting the customer. And so when we look at June, the pricing our price increase went in effective June 1 on the websites. And so we actually saw similar growth in June as we saw in the rest of the quarter from an e commerce perspective. In July, so far, it’s relatively flat on e commerce on our ecommerce websites.

There are some challenging comps in there for prime days and things like that. So so we’re gonna keep our eye on this, but there doesn’t appear to be a dramatic shift on the websites one way or the other with the pricing going into place.

Janine Assischer, Analyst, BTIG: All right. That’s helpful color. And then maybe just on ExtraTough, really interesting about the lifestyle opportunity there. If you could just maybe help us size up what the opportunity looks like there and how you would expect that to evolve within the next year or so?

Jason Brooks, Chief Executive Officer, Rocky Brands: Yeah, I’ll jump in. I’m sure Tom will add. He loves extra tough. One of the things we’re seeing is the move from men’s to women’s and then also kids. So we are seeing some pretty good growth in women’s footwear and some pretty good growth in kids footwear, which is expanding into probably more use for maybe what we would talk about maybe soccer moms or even as just a normal rain boots.

So if it’s just raining out there, they’re kicking those on instead of some other rubber boot that they used to have maybe. And so it’s it’s still very functional product and use of it, but the activity is being done and the color ways that are being done and the people that are using it are really just kind of blowing it up. And then we’re seeing more expansion inland. So the farther you could get away from the water, we’re starting to see more people use it in those areas as well.

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: Yes. I mean, Jason pretty much hit it. But I think as you look to, we continue to expand the ADB Sport line. That is our fastest growing collection in ExtraTough. And what we’ve been able to realize, and you can see this migration in your sales to heat maps, that it’s more than just fishing consumers now.

It’s being carried by retailers that normally wouldn’t even sell to that demographic. And so it’s really exciting to see it on in retailers and on retailers websites that’s really going to broaden the reach of the brand to new consumers. And in that coupled with, we’ve got more and more different type of different footwear products, and we’ve also added some apparel assortment to the brand as well. So our RipTie collection, our Anna sandal collection is performing well, and so we’re excited to see where that would go because extra tough has been so much of the six inch ankle deck boot to most consumers. Those same consumers wear flip flops, they wear EVA shoes as well, and so we want them grab extra tough instead of grabbing a brand that they were wearing before.

Janine Assischer, Analyst, BTIG: Awesome, thanks so much.

Jason Brooks, Chief Executive Officer, Rocky Brands: Thank you.

Conference Operator: Thank you. And as our final question, we have from the line of Bruce Jeller with Jeller Ventures. Please proceed with your question.

Bruce Jeller, Analyst, Jeller Ventures: Hey, good afternoon gentlemen. Hi Bruce. Hey, congratulations on doing a very admirable job in a difficult consumer environment here.

Jason Brooks, Chief Executive Officer, Rocky Brands: Thank you.

Bruce Jeller, Analyst, Jeller Ventures: My first question relates to, are you seeing the prospects for or any actual market share gains related to your ability to manage or to manufacture product in house?

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: Yeah, I’ll start with this one, Bruce. I think we’re going to continue to leverage our in house operations. We’ve touched on the Dominican Republic and Puerto Rico. We are going to be able to keep our costs better than some of our peers. And it’s also making us more nimble and flexible.

And so if you just take Rubber Group production, for example, we will have twice the amount of volume come out of The Dominican Republic, which currently is at 10% compared to what we did in 2024 and through the date in 2025. And so that’s going to materialize because a lot of our peers we have a lot of the capacity in both in house and outsourced in The Dominican Republic. And a lot of our peers are geographies that have higher tariffs. And so we should be able to be more competitive than our peers in that situation.

Bruce Jeller, Analyst, Jeller Ventures: That’s great. And what percentage of your overall product will be manufactured in house, say, next year and full calendar year 2026?

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: So we’re we’re still working on on that number, but I would I would put the number, probably somewhere closer to 45%. We are going to push as much as we can, and if we can hit 50%, that would be ideal. But we’re making this transition between as quickly as we can, but we’re doing it very methodically to make sure that we don’t have any quality issues or things like that that would turn away a customer.

Bruce Jeller, Analyst, Jeller Ventures: That’s great to hear. It seems like a real competitive advantage at this point in time. I have another question related to your overall mix of business. It seems like maybe it’s been shifting a little bit more towards your own direct to consumer ecommerce. Over the past few years.

Can you or do you disclose the breakdown between wholesale and direct to consumer? And can you discuss how that has been shifting recently and what the implications are on your overall gross margin mix going forward as that continues to move towards direct to consumer?

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: Yes. So we don’t disclose our DTC being in our branded websites. We do have the retail segment obviously, which we disclose. I would tell you that in that retail segment, about half of the sales a little bit more than half of the sales are Lehigh business, and the other half being, our growth, our branded e commerce websites and our marketplace sales where we’re selling directly on marketplaces. And as we touched on in prepared remarks, Lehi continues to grow at the mid teens numbers.

And so with the total increase of 13.9%, we saw the branded websites fall a little short of the average there from a blended standpoint. But I think the really unique thing is the DTC breakout between brands and the differences in the percentage of sales there. And so when you look at a brand such as Extra Tough, it is a much higher percentage its sales are online. And part of that’s driven probably by the consumer buying it and the lack of ExtraTough’s presence in some big box retailers, which is getting better. But extra tough is by far the leader in our DTC business.

Jason Brooks, Chief Executive Officer, Rocky Brands: And I think I’ll just add, Bruce. It’s absolutely somewhere we are focused on and have been focused on over the last four or five years. And but we do have to balance it, right? We do have a very big wholesale business that we have to manage with our wholesale customers and try to make sure that we can both live together there. But the reality is everybody has their own websites and that’s what we’re going to try to drive people to.

And hopefully their experience is good there and we can continue to grow that business.

Bruce Jeller, Analyst, Jeller Ventures: Great. Thanks for the update on that. And my last question relates to the balance sheet. You guys have done a great job over the last twelve to eighteen months so with getting the balance sheet back into more comfortable shape. I believe typically you do pretty well in terms of cash generation in the second half of the year.

Based on where you stand today and the guidance you’ve laid out, how much debt do you think you will be able to pay down in the second half of this year?

Tom Robertson, Chief Operating and Chief Financial Officer, Rocky Brands: It’s a really good question. The reality of it is that these tariffs are have been a strain on cash flow. Ideally, we’ll the price increase will realize that and convert that. I don’t think we will see the same pay down that we saw in the last half of last year. But to continue to have debt down 10%, 13% from prior year is certainly something we see to be able to do.

Bruce Jeller, Analyst, Jeller Ventures: Terrific. Well, congrats again and best of luck in the second half.

Jason Brooks, Chief Executive Officer, Rocky Brands: Thanks, Bruce. And we’ll keep working on that debt, I promise you.

Bruce Jeller, Analyst, Jeller Ventures: I know you will. Thank you.

Conference Operator: You. And we have reached the end of the question and answer session. Therefore, will now turn the call back over to Jason Brooks for closing remarks.

Jason Brooks, Chief Executive Officer, Rocky Brands: Great. Thank you. First, I just want to thank the Rocky team here. They have really been doing an amazing job for the 2025 and put us in an amazing position to finish 2025 strong. And I look forward to working with all of you to make that happen.

And thank you to our shareholders and our board members and let’s finish strong in 2025 team. Thank you.

Conference Operator: Thank you. This concludes today’s conference. And you may disconnect your lines at this time. We thank you for your participation. Have a great day.

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