Rocky Brands (RCKY) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales were $98.3 million, down 1.6% year-over-year, but up 6.1% excluding non-recurring sales from the prior year.

• Operating income more than doubled to $4.5 million, driven by higher gross margins and lower operating expenses.

• Net loss per share was $0.17; adjusted net income per share was $0.17, compared to $0.00 last year.

• Inventory was reduced by 20% year-over-year to $175 million, and total debt decreased 31.3% to $152.4 million.

• Debt refinancing and capital structure simplification are expected to generate $4.4 million in annualized interest expense savings starting in 2025.

Financial highlights

• Gross margin improved to 38.7% of net sales, up 110 basis points from last year, driven by improved wholesale margins and a higher mix of retail sales.

• Operating expenses were $33.5 million (34.1% of net sales), down from $35.4 million (35.4%) last year.

• Adjusted operating income was $5.2 million (5.3% of net sales), down from $5.7 million (5.6%) last year.

• Interest expense was $6.1 million, including a $2.6 million one-time term loan extinguishment charge; adjusted interest expense was $3.5 million.

• Cash and cash equivalents at quarter-end were $4.1 million, up from $3.1 million a year ago.

Outlook and guidance

• Net sales for 2024 expected toward the high end of $450–$460 million.

• Gross margin guidance revised to slightly below last year’s 38.9% due to rising ocean freight rates and channel mix.

• Q3 gross margins anticipated to decrease sequentially from Q2, with a rebound expected in Q4.

• Management expects sufficient liquidity for at least the next twelve months, supported by the new ABL facility and cash from operations.

• Annualized savings of $4.4 million expected from debt refinancing beginning in 2025.