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RB

ROCKY BRANDS, INC. (RCKY)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 beat on revenue and EPS versus S&P Global consensus: revenue $105.6M vs $102.5M estimate (+3.0%); adjusted diluted EPS $0.55 vs $0.245 estimate (+$0.31); GAAP diluted EPS was $0.48 [functions.GetEstimates Q2 2025]*.
  • Gross margin expanded 230 bps YoY to 41.0% on stronger wholesale margins and higher retail mix; operating margin improved 220 bps YoY to 6.8% despite higher selling/marketing costs tied to DTC growth .
  • 2025 outlook raised: revenue +4% to +5% (from low single-digit), EPS now ~+10% YoY (vs “down slightly” prior); gross margin now seen down ~70 bps vs 2024’s 39.4%, with ~$11M tariff headwind (bulk in Q4) partially offset by pricing and sourcing actions .
  • Stock catalysts: sustained XTRATUF/Muck momentum and raised EPS outlook vs tariff headwinds; management flagged stronger Q3 vs Q4 cadence (tariff impact and elevated Q4 marketing) , plus a $0.155 dividend declared for payment on Sept 16, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Broad-based growth with outdoor outperformance: “XTRATUF maintains its position as our fastest growing brand… U.S. wholesale significantly outpaced last year… e-commerce growth equally as strong,” while Muck delivered its best comparison since 2023; Durango grew high single digits .
  • Margin expansion and pricing: gross margin +230 bps to 41.0% on higher wholesale margins and retail mix; price increases implemented in June with retailer buy-in and maintained retail partner margins at MAP to support sell-through .
  • Guidance raised despite tariffs: revenue +4–5%, EPS ~+10% YoY; stronger Q3 setup with better inventory in Muck/XTRATUF and solid bookings; lowered interest expense from 2024 refinancing also aided profitability .

What Went Wrong

  • Retail/DTC costs pressured opex: operating expenses rose to $36.1M (34.2% of sales) on higher selling costs tied to DTC and increased marketing; adjusted opex also increased YoY .
  • Contract manufacturing softness: segment sales fell to $2.8M from $3.9M YoY .
  • Tariff and consumer visibility risks: ~$11M tariff headwind to flow through 2H (bulk Q4); management remains “cautiously optimistic” on consumer, with weekly volatility and Q4 conservatism due to pricing impacts and heavier marketing .

Financial Results

Headline metrics vs prior quarters

MetricQ4 2024Q1 2025Q2 2025
Revenue ($M)$128.054 $114.073 $105.647
GAAP Diluted EPS ($)$0.64 $0.66 $0.48
Adjusted Diluted EPS ($)$1.19 $0.73 $0.55
Gross Margin %41.5% 41.2% 41.0%
Operating Income ($M)$8.504 $8.706 $7.156
Operating Margin %6.6% 7.6% 6.8%
Interest Expense ($M)$3.043 $2.356 $2.519

Q2 2025 vs prior year (select metrics)

MetricQ2 2024Q2 2025
Revenue ($M)$98.258 $105.647
Gross Margin %38.7% 41.0%
Operating Income ($M)$4.508 $7.156
GAAP Diluted EPS ($)$(0.17) $0.48
Adjusted Diluted EPS ($)$0.17 $0.55

Q2 2025 vs S&P Global consensus

MetricConsensusActual
Revenue ($M)$102.535*$105.647
Primary EPS ($)$0.245*$0.55 (Adjusted diluted EPS)
EBITDA ($M)$8.40*$9.60*

Values marked with * retrieved from S&P Global.

Segment breakdown (sales and margins)

SegmentQ2 2024 Sales ($M)Q2 2025 Sales ($M)Q2 2025 GM%
Wholesale$68.3 $73.1 40.3%
Retail$26.1 $29.7 45.2%
Contract Manufacturing$3.9 $2.8 12.4%

Balance sheet and cash KPIs

KPIDec 31, 2024Mar 31, 2025Jun 30, 2025
Cash & Equivalents ($M)$3.719 $2.557 $2.779
Total Debt, net ($M)$128.7 $128.6 $132.5
Inventory ($M)$166.701 $175.508 $186.836

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue GrowthFY 2025Low single-digit increase +4% to +5% YoY Raised
Gross Margin %FY 2025“Modest” decline YoY; +110 bps China tariff headwind plus additional March/Apr tariffs; intent to hold gross profit dollars ~70 bps down from 39.4% FY24 (tariffs ~$11M; pricing offsets) Maintained (refined magnitude)
SG&AFY 2025Up in dollars; % of revenue similar to FY24 Up in dollars; now modest leverage vs FY24 on higher sales Improved leverage outlook
EPSFY 2025Just below FY24 adjusted EPS of $2.54 ~+10% YoY vs $2.54 Raised
Quarterly cadence2H 2025Not specifiedStronger Q3 than Q4; Q4 bears bulk of tariff impact + higher marketing New detail
Tariff impact2H 2025Additional pressure expected ~$11M to flow through rest of year, bulk in Q4 Quantified
DividendQ3 2025N/A$0.155 per share payable Sept 16, 2025 Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Supply chain & tariff mitigationAccelerating shift out of China; inventory buffer; leverage DR/PR; expect lower gross margin % but maintain gross profit dollars “Ahead of schedule” shifting to DR now and PR next; ~$11M tariff headwind mostly Q4; pricing enacted; Q3 stronger than Q4 Execution progressing; near-term cost headwind, long-term margin opportunity
Pricing & retailer responsePrice increases planned for early June; preserve gross profit dollars Price hike implemented in June; retailers largely receptive; maintained retailer margins at MAP Implemented; monitoring elasticity
Brand performance (XTRATUF/Muck/Durango)XTRATUF momentum; Muck growth on better winter; Durango moderated after strong 2024 XTRATUF fastest growing; Muck best comp since 2023; Durango high single-digit growth Outdoor accelerating
DTC/LehighRetail +20% in Q1; Lehigh high-teens; marketplace volumes strong Retail +13.9%; Lehigh mid-teens growth; DTC selling costs lifted opex Continued growth with cost investment
Military/Public ServiceNew US military contract supported Q4’24; Q1 decline lapped 2024 BPA Rebound with three U.S. Navy orders; USMC boot certification Improving
Balance sheet & interestDebt down 25.7% YoY at FY-end; refinancing lowered interest Interest expense down YoY; debt -13.1% YoY; expect less 2H paydown due to tariffs Healthier vs LY; tariff drag near-term

Management Commentary

  • “We delivered very good Q2 results, significantly outperforming both last year and our own expectations… Three key drivers powered this performance… broad-based revenue momentum… disciplined cost management… outdoor category resurgence, led by XTRATUF and The Original Muck Boot Company.” — Jason Brooks, CEO .
  • “We’re ahead of schedule in getting our production shifted… to our Dominican Republic facility first, and now… Puerto Rico.” — Tom Robertson, COO & CFO .
  • “Based on the second quarter performance… we are increasing our prior year 2025 guidance… revenue +4% to +5%… 2025 EPS to increase approximately 10% over last year’s $2.54.” — Tom Robertson .
  • “Bookings for our U.S. Wholesale business for the second half are up solidly year-over-year… plans include leveraging our manufacturing facilities in the Dominican Republic and Puerto Rico to mitigate the impact from higher tariffs.” — Jason Brooks .

Q&A Highlights

  • Supply chain shift ahead of schedule: DR production already inbound; PR transition starting; watching potential tariff developments around Aug 1 .
  • Pricing acceptance and strategy: June increases largely accepted; RCKY maintained retailer margins at MAP; monitoring elasticity via e-commerce data (June growth held; July flattish due to comps) .
  • Guidance drivers: Q2 outperformance largely accounts for FY raise; stronger conviction in Q3 given improved Muck/XTRATUF inventory; cautious on Q4 given tariff pass-through and higher marketing .
  • Outdoor mix: Outdoor ~1/3 of Q2 sales and growing faster than other categories; work remains largest category .
  • In-house manufacturing: Targeting ~40–45% in-house production in 2026, potentially up to 50% if feasible; competitive cost and agility advantages vs peers .
  • Balance sheet: Expect less 2H debt paydown than last year due to tariff cash drag, but still aim to keep debt ~10–13% below prior year .

Estimates Context

  • Q2 2025 vs consensus: revenue $105.647M vs $102.535M estimate; adjusted diluted EPS $0.55 vs Primary EPS consensus $0.245; EBITDA $9.60M vs $8.40M estimate *.
  • Forward consensus (context): Q3 2025 revenue estimate $122.915M; Primary EPS estimate $0.90; Q4 2025 revenue estimate $134.050M; Primary EPS estimate $0.485*. Management’s color implies stronger Q3 vs Q4 given tariff timing and seasonal marketing [functions.GetEstimates].
  • Implication: Sell-side likely to raise FY revenue/EPS assumptions post-guide raise and margin resiliency, while trimming Q4 margin expectations to reflect concentrated tariff headwind and stepped-up marketing .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Beat-and-raise quarter: Clear beats on revenue and EPS with FY25 revenue and EPS guidance raised despite tariff overhang; set-up favors Q3 strength .
  • Outdoor momentum as growth engine: XTRATUF and Muck are driving mix and gross margin; continued wholesale/e-commerce expansion is a positive narrative driver .
  • Tariff risk quantified and managed: ~$11M headwind (bulk Q4) mitigated via pricing and sourcing shifts (DR/PR), with larger margin benefits starting 2026 .
  • DTC/Lehigh growth carries opex: Higher selling and marketing tied to DTC lifted opex; however, management still expects SG&A leverage on higher sales in FY25 .
  • Interest expense tailwind intact: Refinancing and lower debt continue to reduce interest burden; YoY debt down 13.1% as of 6/30/25 .
  • Watch inventory build: Inventories up 12.1% vs FY-end due to accelerated receipts to front-run tariffs; execution on sell-through and pricing is key to working capital normalization .
  • Income return: $0.155 dividend declared for Sept 16, 2025, signals confidence in cash generation amidst tariff management .