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Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Rocky Brands first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star 0 for operator assistance at any time. I would like to remind everyone that this conference is being recorded. I will now turn the conference over to Brendon Frey of ICR.

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 Securities and Exchange Commission, including our 10-K for the year ended December 31st, 2025. I'll now turn the conference over to Jason Brooks, Chief Executive Officer of Rocky Brands. Jason?

Thank you, Brendon. With me on today's call is Tom Robertson, our Chief Operating and Chief Financial Officer. After our prepared remarks, we will take your questions. We are pleased to report a solid start to 2026 as we sustained a strong sales momentum we experienced in the back half of last year. Q1 sales increased 9% following the 9% increase we achieved in the fourth quarter of 2025. Our performance was driven by legacy styles and compelling new product introductions in key categories that fueled robust D2C growth and improving wholesale trends. The extended winter weather across much of the Eastern U.S. provided a favorable backdrop for our cold weather offerings, while our spring collections gained traction as the quarter progressed. What's particularly encouraging is the quality of our growth.

We are seeing consistent full price selling with key brick-and-mortar accounts, as well as digital partners. Especially on our own branded websites, our strategic focus on expanding distribution, introducing compelling new products at key price points, and leveraging technology platforms like the BOA continues to resonate with our retailers and our consumers. Tom will go through the financials in detail shortly. From a profitability standpoint, Q1 was in line with our expectations. The year-over-year change in gross and operating margins was driven primarily by higher tariffs, which was expected and included in our outlook for this year.

The good news is that the headwind from higher tariffs starts to lessen in the second quarter, which along with our current top-line momentum, gives us a clear line of sight for returning gross margins to 40% range and delivering meaningful earnings growth in the second half of the year. Let me walk you through our first quarter brand performances. XTRATUF started 2026 with exceptional momentum, delivering high teen growth over last year as all channels contributed to the brand's strong performance. U.S. wholesale was up low double digits, while our e-commerce business continued its impressive trajectory from Q4, posting substantial growth. Marketplace sales also gained momentum throughout the quarter. Our product mix reflected both the strength of our core offerings and successful new introductions.

The 15-inch legacy boot, our Ankle Deck Boot, and the Ankle Deck Boot Sport in key colors like duck camo and olive remain top sellers. We're particularly pleased with the reception of our spring 2026 line, which was highlighted by the brown ADB Sport and the men's black Deep Storm ADB, and our highly anticipated Kids' Tuff Cruisers collection. Distribution gains were broad-based across big box sporting good retailers, outdoor-focused key accounts, specialty lifestyle independents, and Western-focused partners. Our well-established marine channel also delivered solid results to the start of the year. This diverse channel strength, combined with a compelling product innovation, positions XTRATUF for continued success through 2026. Muck delivered its best first quarter in over three years, posting high teen growth versus last year.

This outstanding performance reflected strength across all channels: wholesale, e-commerce, marketplace, and international as the brand capitalized on favorable weather conditions and strong product availability. Extended winter weather across most of the U.S. drove exceptional demand for our Arctic collections, which became the biggest contributor to the brand's growth in both men's and women's collections. Our marketing team effectively leveraged social media and digital advertising to capitalize on these favorable weather patterns through February and early March. Equally important was our focus on maintaining strong inventory positions on our core chore and chore steel styles, which continued to perform well across multiple channels. A major highlight was early delivery and reception of our new Rainscape spring collection, which contributed meaningfully to the brand's growth in the quarter. From a channel perspective, our hardware business grew significantly, driven by continued partnership expansions with a national hardware retailer.

Also of note, the sporting goods channel showed meaningful improvements after several challenging quarters as Muck regained shelf space from competitors for our legacy Arctic styles. Durango delivered a solid start to the year with single-digit growth, driven by consistent field account momentum throughout the quarter. We saw particularly strong performance in Texas, where the Hispanic market segment showed meaningful improvement over last year with double-digit increases. Florida and Georgia also posted strong double-digit gains, fueled by demand for our Rebel Work, and our new Shyloh collection. A highlight in our key account business was exceptional growth with a major Western retailer, which increased over 30% for the quarter. This was driven by exclusive styles and successful expansion into new categories, including the Shyloh and our women's Crush fashion series.

The March delivery of exciting spring products, including category extensions in the Shyloh and Crush updates and our new Workhorse work collection, provided additional momentum heading into the second quarter. Georgia Boot faced a challenging January but rebounded strongly in February and March, both of which exceeded prior year sales. While the quarter finished with a slight single-digit decline versus last year, this was primarily timing driven as several meaningful wholesale orders booked in late March carried into April, positioning us well for the current quarter. Adding to our optimism for Georgia is the continued strength of the brand's digital channels, as both e-commerce and marketplace were both up healthy double digits in Q1, and that momentum has carried into early part of Q2. Product innovation continues to drive Georgia Boot's success.

Our Carbon Flex Wedge collection remains one of the brand's most successful launches, performing exceptionally well across both field and key accounts. Notably, the BOA-equipped version has quickly become a top-performing item in the overall line, and we will continue to expand the Boa technology across future assortments. Additionally, our new Core 37 Farm and Ranch assortment was among the top-performing introductions for fall 2026 and began shipping this quarter, delivering strong value at a key price point across multiple categories. Rocky Work, Outdoor, and Western started 2026 with a positive result as wholesale sales continued strengthening through greater in-line product sales versus last year's off-price focus. The outdoor segment's growth was highlighted by increased programs with key upper Midwest retailers and a prominent Midwest online retailer who began featuring Rocky again after several years.

We also saw solid sales with independent retailers carrying our deep line of insulated and waterproof footwear. New spring deliveries and replenishment orders for our new Western collection were pivotal in reviving a category that had been challenged in recent periods. Our new Ride LTE series of Western work boots introduced late in Q4 has been a hit with retailers. We are already receiving significant replenishment orders from partners who brought the product in before the end of the year. In Work, we continue to gain strength with key industry footwear suppliers across Texas and the Northeast, along with prominent mid-tier footwear retailers. Technology leadership remains a key differentiator. Our premium Ram's Horn BOA composite toe product showed mid-teen growth and has quickly become one of the leading boots in the industry safety toe market.

Commercial, Military, and Public Service delivered a solid start to 2026, posting low single-digit growth over the prior period. This performance represents continued positive momentum from our strong Q4 2025 finish and marks a significant improvement in trajectory compared to the beginning of last year. The Commercial Military segment led the way with high single-digit growth, driven by the exceptional performance with Army & Air Force Exchange Service, which posted strong double-digit increases. The Navy Exchange also had a phenomenal quarter with significant growth fueled by our S2V steel toe boots. Our S2V collection continues to be a growth driver for the division, with the S2V Predator and related styles performing exceptionally well across both field and key accounts. Turning to our B2B Lehigh business, it continued its strong momentum from Q4. Growing high single digits versus the first quarter of last year.

This performance was driven by continued success in new customer acquisition, a direct result of a strategic structural changes we've made to our sales force. We are also seeing positive trends in subsidy utilization and average subsidy dollars as companies work to provide consistent product assortments for their employees despite rising costs. While we are monitoring potential impacts from the tariff uncertainty and fuel costs later in the year, the effect on Q1 was minimal and the overall health of the business remains very strong. Finally, our partnership with Bollé Eyewear continues to strengthen and deliver results, with accounts that committed in Q4 2025 now onboarding and rescinding their subsidies for 2026. The response to this prescription safety eyewear program remains very positive and is generating meaningful incremental sales as an extension of our managed PPE programs.

To reiterate, we are pleased with our first quarter performance, and we are encouraged by the sell-in and sell-out trends we are seeing across the brand portfolio. We look forward to getting past these tough tariff comparisons so our bottom line results better reflect the strength of our business and the benefits of our operating model. With that, I will turn it over to Tom to review the financials. Tom?

Thank you. Echoing Jason's sentiment, I am very pleased with the start of our 2026. The momentum we experienced in our business last year carried over into the new year, driving strong top-line growth despite the challenging tariff environment we anticipated. Reported net sales for the first quarter increased 9.1% year-over-year to $124.4 million, which was in line with our expectations. By segment, wholesale sales increased $3.6 million or 4.8% to $78.4 million. Retail sales increased 16.5% to $42.7 million, and contract manufacturing sales were $3.3 million. Turning to gross profit.

For the first quarter, gross profit was $45.4 million or 36.5% of sales, compared to $47 million or 41.2% of sales in the same period last year. The 470 basis point decrease was driven by a little over $7 million in higher tariffs compared with the year-ago period, and to a much lesser extent, an increase in sales of discontinued styles. This was partly offset by strong full-price selling, favorable channel mix with higher retail sales, and the benefit of price increases implemented in Q2 of 2025. Reported gross margins by segment were as follows: Wholesale margins were 34.4% versus 40.3%, with the change driven by significant impact of tariffs.

Retail margins were 42.6% versus 45.7%, also reflecting higher tariffs compared with a year ago. Contract manufacturing margins improved to 9.2% from 5.8%. Operating expenses were $41.8 million or 33.6% of net sales in the first quarter of 2026, compared to $38.3 million or 33.6% of net sales last year. Excluding the $700,000 of acquisition-related amortization in the first quarter of this year and last year, adjusted operating expenses were $41.1 million and $37.6 million, respectively, in Q1 of 2026 and Q1 of 2025. As a percentage of net sales, adjusted operating expenses were 33.0% in both periods.

The increase in operating expenses was driven primarily by higher logistics costs associated with the increase in retail sales. Income from operations was $3.6 million or 2.9% of net sales, compared to $8.7 million or 7.6% of net sales in the year ago period. Adjusted operating income was $4.3 million or 3.5% of net sales, compared to adjusted operating income of $9.4 million or 8.2% of net sales a year ago, reflecting the impact of higher tariffs in the first quarter of 2026. For the first quarter of this year, interest expense was $2.1 million, compared with $2.4 million in the year ago period. This decrease reflects lower debt levels.

On a GAAP basis, we reported net income of $1.3 million or $0.17 per diluted share, compared to net income of $4.9 million or $0.66 per diluted share in the first quarter of 2025. Adjusted net income for the first quarter of 2026 was $1.8 million or $0.24 per diluted share, compared to adjusted net income of $5.5 million or $0.73 per diluted share a year ago. Turning to our balance sheet, at the end of the first quarter, cash and cash equivalents stood at $1.7 million, and our debt, net of unamortized debt issuance costs, totaled $122.2 million, a decrease of 5% since March 31st last year.

Inventories at the end of the first quarter were $172.6 million, down 1.6% compared to $175.5 million a year ago, and down 4.7% compared to $181.1 million at the end of 2025. We are pleased with our inventory management as we successfully navigated the tariff environment while maintaining appropriate stock levels to support our growth. With respect to our outlook, based on our first quarter performance, we are reiterating our full year 2026 guidance provided on our fourth quarter call. For 2026, we continue to expect revenue to increase approximately 6% over 2025, with our retail segment growing faster than wholesale.

While we are still forecasting gross margins to be down modestly from the 40.9% we reported in 2025, this includes roughly $10 million in higher tariffs that will hit our P&L in the first half of the year, split roughly 70/30 between Q1 and Q2 versus our prior view of 80/20. SG&A is expected to be up in dollars as we've increased our marketing spend to support growth. As a percentage of revenue, we expect to lever by approximately 80 basis points. Interest expense will take another step down this year based on year-end debt levels. The decrease will be more modest than what we realized in 2025. This translates into EPS growth in the low teen range.

For modeling purposes, we still expect Q2 gross margins to improve from Q1 levels, but to a lesser degree than initially thought, as approximately $1 million more in higher tariffs are expected to flow to the P&L in Q1, shifted into Q2 due to the timing of certain product sales. Therefore, while we're still forecasting year-over-year decline in profitability to lessen in Q2 versus Q1, the improvement will not be as meaningful as we anticipated at the start of the year due to the shifts. Due to this shift, we now expect Q2 EPS to be down somewhere in the neighborhood of $0.20 versus Q2 last year.

We look forward to having the current tariff headwinds largely behind us as we exit Q2, which will drive gross margins back above 40% and allow us to translate our top-line momentum into strong earnings growth for the second half of the year. That concludes our prepared remarks. Operator, we are now ready for questions.

Thank you. Our first question comes from the line of Jonathan Komp with Baird. Please proceed.

Yeah, hi, good afternoon. I wanna start by asking just what you're observing in the environment, if you've seen any major shifts across your brands or your major partners, given some of the uncertainty in the environment, just overall, you know, your sense of health of the consumer demand and, you know, the orders that you're seeing.

Yeah. John. Thanks. I would tell you that we feel pretty positive. As I talked about the brands, right, XTRATUF is still seeing really nice momentum. We've seen Muck kind of make a little bit of a turn here, and, you know, Rocky and Durango. I think we're feeling pretty positive about it. The hardware business is been pretty positive. As we talked about, you know, Western business seems to be going pretty good for us. You know, the one area that we still aren't seeing a huge uptick is in commercial military, where we haven't seen any contracts from our U.S. government. That's something that we'll continue to focus on and work.

I don't know if you had anything to add, Tom.

Yeah. I would tell you know, really throughout the first quarter and even in April, you know, we saw general at-once trends being up, you know, compared to LY. Also, you know, looking out into the future, our order book looks very strong for the rest of the year. So we have not seen a big change in behavior from any of our consumers. I think, you know, one of the things we're trying to dissect a little bit is around, you know, with the success of particularly the Muck brand in, you know, Q4 and in Q1 of this year, you know, the order book is very strong.

You know, we believe that retailers are gonna be stocking back up on inventory that they sold through over the last six months.

Maybe to follow up, but more related to the cost environment, can you talk about any surcharges you're seeing come through or any expectations as you think about freight and, you know, down the road product costs of higher costs that you might see?

Yeah, certainly. You know, we definitely experienced, you know, higher freight fuel, surcharges at the end of the first quarter. That's continued obviously into the first month here of the second quarter. It's something we're monitoring closely. You know, that also drove a little bit of the increase in our logistics costs that we called out in the prepared remarks. You know, the thing that we're really trying to keep our eye on, quite frankly, is, you know, there's a lot of oil-based products that are in our outsoles of our shoes and in some of the rubber, you know, compounds that go into our rubber boot products. We're keeping a close eye on that. You know, we've seen some slight price increases.

We're being, you know, being warned of larger ones if this doesn't, you know, settle in here or get resolved, you know, relatively soon. We're keeping a very close eye on that.

Then when you look at the back half, Tom, could you maybe just walk through some of the pieces that are giving you confidence in, you know, I think you said pretty healthy or strong earnings growth year-over-year in the back half?

Yeah. I mean, I think the thing that's given us the most confidence is the order book, right? We are really up in future orders across all brands. You know, certain brands, particularly our rubber products, are standing out with Muck and XTRATUF. We're seeing, you know, strong orders for particularly Q3 and for Q4. Just trying to decipher if, you know, that means that, you know, the retailers are gonna be doing more ordering and less at once. It's just, you know, allowing us to try to make the best decisions to get inventory here for the last half of the year.

Maybe just last one. Tariffs for the year, what's your current thinking around, you know, the impact from the rates that you're paying today? Anything you might share on the refund front as well. Thank you.

Yeah. You know, let's start with the refunds. You know, obviously the ACE Portal opened up, at, you know, a week or so ago.

The twentieth.

Yeah, the twentieth. You know, we have started that refund process, requesting our refunds. You know, the guidance that we provided assumes no refunds were captured, right? That would be all upside. You know, the total request that we're seeking is about $20.5 million. TBD on when that gets paid. We're gonna continue to work through the process of getting all of our refunds submitted. The system is not working perfectly for us, but we've heard that from a lot of other peers of ours, we'll continue to push through that.

In the guidance that we've given, we've kind of forecasted the future tariff impact of these Section 122s at this 10%. I know we're kind of waiting to see what happens with the Section 301 investigations, you know, later this summer. We'll, you know, we'll update guidance as we have more clarity on what the future of tariffs look like. Hopefully we're able to capture these refunds, you know, in the next, you know, Q2 or Q3.

Okay. Thanks again for all the color.

Thanks, Jonathan.

Thanks, Jonathan.

Thank you. Our next question comes from the line of Janine Stichter with BTIG. Please proceed.

Hi. Congratulations on the momentum. Wanted to ask a bit more about the sell-in sell-through trends you're seeing. I think you mentioned that you're really pleased with both the sell-in and the sell-through. Can you help us understand where those fit? Are you currently at a point where broadly across all brands, the sell-through is outpacing the sell-in? Would you expect that to kinda catch up as the year progresses? Just wanna understand what you're seeing from both the sell-in and sell-through perspective.

Yeah. Thank you, Janine. Appreciate it. I think, you know, if we, if we look back into Q4, we had a tremendous success there. You know, a 9% growth in Q4 from 2024 to 2025. We saw that sell through at retail. I think that's really allowed the retailer to continue to fill in not only at once, which we continue to see in Q1, but it also has allowed them to feel what we believe to be is just more comfortable in their bookings for, you know, Q3 and Q4. Our product typically is a little bit more heavily weighted to waterproof and insulated type product. XTRATUF's a little unique in that it's still a good fall product, but we're seeing some pretty good bookings from them in the Q2, Q3, Q4 as well. I think we're just feeling comfortable as the at-once business continues to happen.

Then we're seeing the pre-books for fall. Not all the brands at the same level, but we are seeing it in pretty good pretty good across all the brands as we move into the second and into third and fourth quarter.

Just to add on there, you know, I think Jason had it in his prepared remarks, but really important to call out that we had the inventory to execute and capture sales when weather came in Q4 and in Q1, right? That investment in inventory is paying dividends. We think we've, you know, particularly with the Muck brand, that we've gained some shelf space back. That's exciting to hear, you know, given that, you know, we think four years, five years ago when we acquired the brands, we lost a little, but we think we've gained a lot of that back. Our numbers would prove that out.

The other thing that I think that I'm probably most excited about, and it's really across all brands, our new product for the spring 2026 and fall 2026, is, you know, arguably the best booking season we've ever had. We're excited to see how this plays out at retail. I know we haven't seen it check through retail yet. We're starting to see it certainly on the spring product. But we'll continue to monitor that, and that's probably the, you know, the thing I'm most positive about.

Great. That's helpful. Maybe just you mentioned that the Hispanic consumer had improved. I think you called out Texas. Can you unpack that a little bit more what's been going on there?

Yeah. I think there was just some areas in 2025 where that market was slowed a little bit, and particularly in the Western, you know, areas. We have just seen that some of those retail partners are seeing better sell-through in that area, in particularly the Hispanic market. Just seeing some better sell-through in those retail stores.

Super helpful. Thank you. I'll pass it on.

Thank you.

Thank you. As a reminder, it is star one to ask a question. Thank you. Our next question comes from the line of Bruce Geller with Geller Ventures. Please proceed.

Hi, good afternoon, gentlemen.

Hey, Bruce.

Hey, Bruce.

I'm trying to get a better sense of the overall tariff impact. It seems based on what you said today, that it cost you in the first quarter roughly $0.70 a share on an after-tax basis. Ex the tariffs, you would have earned close to $1 a share. Is that a fair statement?

I think that's a fair statement.

If you get this $20 million refund, that's over $2 a share after tax. Is it fair to say that the earnings power of the company is approximately $2 per share higher than you've earned in the last 12 months because of these tariffs, or is that offset somewhat by the new tariffs that have been put on?

Yeah, yeah, I guess you were. You know, in 2025, we had just, I'm going off memory here, just over $10 million of tariff impact, and then the $10 million we're calling out for 2026. If it was like a rolling 12 months, you know, that's I think the math that you're doing there. Yes, I mean, I think that math works. You know, I think we're

There's variables. There's other variables in there, Bruce, that are, you know, that complicate things, right?

Sure.

Yeah. We, you know, we recognize that we have the 10% tariffs in place right now that we know are already being challenged in court. We know the Section 301s are coming at us. We're monitoring that closely. You know, I think last I read, you know, the goal of the 301s were to get the 301 tariff back to what those reciprocal rates were, you know, pre the Supreme Court ruling. We'll continue to monitor that closely.

Okay. With the tariffs that are in place right now, just the 10%, excluding the potential for the 301s, how much of a year-over-year or how much of a hit on a 12-month basis would you say that the tariffs that have now been eliminated cost you? Again, I'm trying to get a sense of the earnings power because you know, last year reported, or in the last 12 months, you've reported roughly $2.50 a share in earnings. It sounds to me like the earnings power could be $2 more than that. That's on a base that, you know, now seems to be growing on a nice trajectory.

I think your logic is correct, and maybe this will help articulate it. If we were to take out the IEEPA impact in the first quarter of 2026, we would have shown a slight margin improvement over 2025 results. You know, we took pricing obviously, when the tariffs came out. The pricing we, you know, we took, was based on the tariffs at the time, was also the planned mitigation strategies, which we've been working through.

If we look at, you know, the current landscape today, we would see some slight improvements, partially driven by all these sourcing changes that the team has made, you know, including, you know, making more of our products in the Dominican Republic, which had a more favorable tariff rate, up until the Supreme Court ruling. We anticipate hopefully that recovering, or getting back to normal here in the future.

Okay, thanks. Just one other question. I know you don't really like to talk about specific customers, but I personally have noticed I've been getting a lot of digital ads lately from Boot Barn regarding the XTRATUF brand. To my knowledge, historically, you guys had not sold XTRATUF at Boot Barn. I'm just curious if this is something that has recently come to fruition. If so, is it just online or are these boots now going into the stores as well? Because that seems to me like it could be pretty material if that's accurate.

In my prepared remarks, I talk a little bit about the Western retail category for XTRATUF. There's been a little bit of expansion into that area. It's slow right now in all that area, but we do see a really positive potential opportunity there. Maybe more than just that retailer that you talked about, but there is definitely a little bit of opportunity there.

Great. Thank you very much, gentlemen.

Thanks.

Thanks, Bruce.

Thank you. There are no further questions at this time. I'd like to pass the call back over to management for any closing remarks.

Great. Thank you very much. First, I'd like to thank the entire Rocky Brands team and the efforts that they have put in here in Q1, helping Rocky be the best company it can be. I'd also like to thank our board of directors and our shareholders for their support, and we look forward to our continued success in 2026. Thank you all very much for your time today.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.