RCKY - Earnings call transcript Q2 2021

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Operator

Good afternoon, ladies and gentlemen and thank you for standing by. Welcome to the Rocky Brands' Second Quarter Fiscal 2021 Earnings Conference Call. At this time, all participants are in a listen-only.

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. we'll conference now, Ray to And ICR. of Instructions] turn over the Brandon [Operator proceed. Please,

Brendon Frey

thanks and you, everyone Thank to joining us today.

differ please actual contain and to uncertainties, defined information and Before obligation Q&A statements. are XXXX. Such Litigation subject begin, note available results no based session, of may materially. today's to which we on are including Reform period We Act may and the at forward-looking changes, such by as assumptions to risks statements statements assume cause Private Securities that the update this time

For I'll please for and XX-K a our turn to over now Brands. Exchange press Chief complete reports discussion to and And our including the of the Officer the conference year risk and release of Brooks, Securities Rocky Commission, Jason refer ended uncertainties, filed December Executive the with XXXX. today's XX,

Jason Brooks

on quarter me Officer. which is With has first strong We Brandon. half brands for and a products our Robertson, gains Financial followed inventory fantastic had trends you, are today's second the enhanced engagement, quarter, recent of of effective XXXX. year and our very Chief Demand call Thank second a Tom fulfillment, and innovative particularly our in consumer and been restaurant outdoor growing over markets. and The been product, strong. share past introductions, fueling Work, have timely combination management

also period, well, Servus, bolstered with XXXX here XXX was and more Adjusted brands but basis two Our get XTRATUF, and adjusted $XXX highlights. the portfolio, Tom detail but very into line XXX% the lifestyle Ranger addition about few and for in in opportunities earnings compared March. sales the are moment, by a footwear points ago to rose collectively, adding just also I'll our year go The margin the following per and completed of excitement increased of XX.X% performance a our full acquired Net a gross more XXX% share to the will in second through integration Muck our detail, up business million. of are performing the were Honeywell's top financial numbers Company, especially once Neos, the quarter organizations. results acquisition brands, Original Boot this we've growth bottom $X.XX. to of to

on it Our third even reported have strength which would however, in our looking which strong XXXX, experienced and of second against been congestion COVID. our the to internally late quarter. important I results acquired our quarter, the due we one, or eliminates from provide and to brands; better-understand easy in said benefit the shifted our to comparison very better, at color To what underlying due as from refer the think and the is Ohio second some some the facility quarter quarter results way, separate distribution to Boston orders demand two, groups, existing another of we business,

Our and up Ohio with ago. group compared grew year-over-year two years was XX% XX%

basis to been group respectively. business quarter performance group Boston our that and XX% on by fire. in incredible The retail first its momentum with from growth maintained wholesale, digits. Beginning wholesale, with Western quarter our remains brand our a Durango and strong segments. business second the increasing both sales, two-year triple a one increased I'm prior driven the on XX% our The share pleased Ohio results, wasn't While in the has and year included recent of

and western styles legacy demand highs. reaching new introductions, new product, Work As product, are for especially

key channel along our experiencing farm with and network, strong are e-tail in key including field We gains wholesale ranch partners. especially accounts, and the across

customer important industry many by with shelf much of has relative healthier led new issues. case at the the inventory struggled acquisitions As the been brand. has been Durango's who the This positions, to and have start of for retail peers has its to the performance since pandemic, strong space stock gains boosted

Turning has broadly footwear more for reopens posted Work, the Work and Boot strong to need economy very surged. the another as quarter Georgia

strong to the addition, heavily-concentrated addition disruptive well with and as large as exclusive exceptional commercial of wholesale to of Western strong fueled compared retail a online when received. retail styles the spans Durango, a included returned in-line well shift a partners, the brand's new to business. of year strong buying driven large consumer with benefited fulfill to Western Similar Sales consumers premium from have programs network growth. sellers, as the Rocky in chain The quarter our boost demand was plus had were to that The delivery in-person This supply new wins In of well ago advantage mortar as both category. back been due the delivering Western which competitor product, traditional Work, and was smaller new to by the channel Rocky issues to very collections another shopping Work brick outdoor, new sales independent pandemic. retail key accounts. as with best partners Work across and robust the and take brand more that provided military able

terms presence to position Rocky accelerated key dramatically outdoors challenged our across In and division, The is the innovative restrained news non-hunting including demand strong, remained second That supply material raw as product sales bit several quarter terms outpace was to traffic growth With growing due retailers as picked up a commercial key category the has uptick with to outdoor for business in manufacturing tops through year, the in the we've in styles. channel. depleted into availability. respect our are sell season, we more had which Rocky has of military business, the in in boot earlier good heading inventory new of the strong Rocky foot this retail where said, introductions.

to to of us business put prospects the the adjustments the on making over a in this position are growth for We better capitalize remainder year.

Turning to retail segment. our

are country QX most XXXX in a very year-over-year that the on e-commerce Ohio basis. encouraged group consistent channel sales when remain we Following increase of of triple-digit a down, shut in our was

growth on the efforts comparisons recovery recently, by business expanding fueled normalizes this for environment Plus with done, As work Target the sales our our particularly and direct-to-consumer Safety year-over-year, and market we've expect of e-commerce gain the ease, sites further up we functionality sales Meanwhile, resume to marketplaces, and eBay. our channel Shoe QX the enhancing XX% increasing continues in and Lehigh its QX. more Amazon from XX% see

new companies normalized accounts As of to our a have more resumed and events. continued iFit pick level activity has up, existing to with more and record led operations, on-site

standout. Boston the on-site continue email the our by of also We pipeline quarters. on On expect based further restrictions and momentum is the most remainder traction in our improving the accounts Muck was driven portfolio, tough is people. group. account XX% I people, we largest inventory. which for popular base. cited coming earlier implementation Recent primary which starting with orders focus XTRATUF, Europe, the I'll to over and The I call, a XTRATUF, well. Shifting business for SMS systems our areas: acquired healthy that demand strong across of our in update largely in strategy, is of main forward our new seeing outlined sales on a brands and trend the and to Meanwhile, on driven two provide of brief by and three Muck in the products last increase XXXX being participation rates is each, extra for region for the to signs as loosening this growing of translating saw we year new and with are next the

achieved are coming part over people brands interactions Our they the reason is of as and years. success the Based on people the the same foundation to Honeywell discussions Rocky the the are with the over the Rocky of of we've through and true for acquisition. process,

fully teams our the of our and while two great engaged brands. powerhouse are are drive organizations to We combined support integrating the power harnessing and

the off and this In for months. we've to Honeywell's ERP at over systems, as with brands, world-class is underway. we significant the couple years. consumers customers executing acquired be terms We to system business the the under Rocky's is process in critical Rocky This quarter and expect been still our newest migrating completed made step service have fourth last providing of

started Ohio the process back be to mid-August. expect April completed We by inventory inventory. Finally, and acquired to facility in the in distribution our state-of-the-art moving

portfolios we've new important brand savings technology realize able excited the shift and to across powerful brands. first for time With over After made critical we'll confident create growth in I've future our to people, meaningfully our the been to investments be we more fulfillment our business. we've these the steps, brands. we we'll Rocky for lowering about are assembled the by collective extremely new execute for cost leveraging the never strengths focus opportunities

drive in near long this pandemic from and we results have increased before, greater during, right people value that call Tom? and Tom. and shareholder I'll Our to the the profitability the the over strategies are emerging over turn and to now as underscore we term. place

Tom Robertson

Jason. Thanks,

COVID, As most last partners outlined, was quarter were close as year, the impacted very which compared fueled doors. significantly-reduced quarter we wholesale experienced another their or Jason our forced to for our as traffic, with second retail demand temporarily strong business especially had strong gains negatively of brands by our

the of business Our footwear overall in this we the March results Honeywell's also year. completed of performance in acquisition reflect and that lifestyle

sales sales million XXX.X% the to XX.X% increased second sales wholesale $XX.X up and quarter manufacturing to results. Retail increased Net increasing to contract Now, $XXX.X for sales million. million. XXX% $X.X the XX.X% year-over-year were $XXX.X to million with

our $XX $XX and this quick brands do segment quarter with were approximately recently for to from for engaged segment our year as we is the because Manufacturing. some decision million Boston million volatility in contract them approximately of million second found combine from in business, profile retail. we group made includes A the acquired wholesale a sales Contract note; $X couple partners similar The in and to margin third rename of our year-to-year, these label manufacturing the programs to the military retail is private

gross to Turning profit.

increased million in point period purchase and largest by margins or in includes excluding from increase, easier manufacturing of up in segment basis tariffs we're Operating were in was this to profit driver while last margin the to were closure follows. last and these as acquisition-related increase the second retail, year. Wholesale, gross net XX.X%; the of selling sales three This XXX the expenses basis and account by XX.X% promotional related items: amortization. quarter, year-ago of million less compared XX.X%. expenses the sales manufacturing of $X quarter. to to improvement million were XX.X% gross as year. margin synergies XXXX, increased quarter year-over-year $X.X includes $XX.X XX.X% last approximately Gross higher or segments primarily million XX.X%. respectively; year approximately XX.X% all sales, second contract in the the to $X.X XX.X% and acquisition-related Included against margin were follows. experienced contract $XXX,XXX we expenses benefited gross or due XX.X% second facilities same or at gross the due margins higher million retail, of volumes, Adjusted segment For million of manufacturing temporary last in of this the adjustment, COVID-XX, some higher attributable margin year's net XX.X% comparison $XX.X as XX.X%; Wholesale, $XX.X adjusted million compared point with sales in XXX.X% approximately of to for quarter margins wholesale, manufacturing in year's year's second quarter gross of and gross $XX.X inventory to XXX year were XX.X% or a to our

we percent by X.X% expenses, primarily X.X% net driven The these to as March small expenses operating the QX respectively. million sales, the net Adjusted $XX the in of adjusted operations X.X% which facility expenses accounting in income, last in $X.X and acquisition-related of operating excludes or of Excluding million XXXX sales $X.X sales million net of shutdowns increased was from brands expenses and the of this purchase million expenses the inventory of net adjustment to acquired or X.X% $X.X operating XX.X%. year associated were that in year. QX the from Income sales year-ago compared sales the was or and a increase of expenses XXX.X% in or manufacturing period. the

for interest million $X.X year, interest expense compared $X.X For on The reflects the $X.XX credit the diluted essentially interest fund year. second increase to senior Adjusted with ago. to in compared $X.XX diluted million million XX.X% increase income Footwear share, payments income year or $X.X facility for year a acquisition. no adjusted share, $X.X diluted net a of per the term quarter share this increased or per the the XXX% income quarter diluted million, loan and of Honeywell net use to share $X.X million this of $X.XX was or per $X.XX was an or we quarter income expense Net of year-ago second to net in of compared period. per last

to At the facility at asset stood of total equivalents Turning cash our our under second loan senior consisting and senior our and sheet. end facility. our and secured debt, million $XXX.X cash balance borrowings million, back term $X.X the quarter, of secured credit million $XXX

over June with of up provide quarter, year the we third for performance $XX With As borrowing our still our brands good some to on on respect expecting in XXXX, our acquired now XXXX. revenue credit to are approximately the to from to Ohio combined under XX, XX% Boston With regard XX%. thoughts second quarter increase XXXX, outlook, revenues million increase available expecting updated of approximate in guidance group our to over $XXX we approximately group, revenue the million facility. XX% generated on to had the Based of start strong we're we of to standalone recent a most full our XXXX. want

we revenues XXXX XX% As on when based the recognize of will the transaction a reminder, roughly closed.

our incorporate the Our revenue Asia where XX% we projections roughly global revised chain, annual supply in the of disruptions current resource inventory. in particularly

challenging, Puerto While projected of Republic become is to of Illinois, Rock our in provide a revenue the industry. QX advantage the clear, risk portion a competitive some own versus facilities and in would that manufacturing Dominican shift our If more rest conditions Rico, XXXX. Island, there

we are freight That the prepared costs XXXX to slightly reflecting that emerged. now down terms consolidated the questions. logistics we approximately margin, have be higher concludes for ready previous and our expecting Operator, margins now In of of gross for recently XX%, costs remarks. from XX%, inbound are estimate

Operator

Our conduct question-and-answer [Operator proceed. will Thank BTIG. session. you. we At question with this Please, a from Lyon time comes Instructions] first Camilo

Camilo Lyon

everyone. here. gross they How margin the takes Thank as couple you. maybe touch afternoon, that, you wanted Great a on Good some us if on could give I to puts really the just results quarter. are of topics, and you? relate beneath

on think into the and the having costing the about more we outlook chain broadly, supply the told margin. component you what costs So, impact and us incremental the on gross about Boston I'll acquisition How could. just have that's are perhaps should business. I brands any start if to group from there forward? also, And there going if a offset follow-up, and the of see the layered being the I that

Tom Robertson

to brand higher two Hey, Tom. about Awesome. group margins so of we slightly Ohio the today, take of if Muck is our particular thanks, business Camilo. brands the acquired in those the parts, carry brands, Yes, post-acquisition, Boston This group. think particularly than kind the

raise certainly will from mix the And perspective so, overall help that a margins.

the mix The piece is of pie. the total business, segment natural would much-smaller has consider now that which other become consideration our of be a to margin contract business segment lower a manufacturing

that. So, the overall margins will benefit from

Asia, inbound year. Xx relates paying certain higher current and freight what from Asia, Xx supply container significantly costs the of seeing As logistics we're chain out costs, we're time this it last to to

meaningful about And when a payer on so, talking per [ph] that's basis. you're

have So, increase third at price into this year July the beginning we of of that effect the during will quarter. announced go

definitely Rico benefit Rock the in prices third particularly So, coming Asia, -- I significant and we'll we think coming the freight is we're my of a same battling I prepared container not XX% But the in a that see as increased industry these quarter. benefit help that fourth portion of costs some Illinois, from rate the I from we're mitigate the than having more We think certain everybody seeing that either or seeing benefit in the inbound business issue quarter Island, for. which Dominican, certainly our from remarks. do Puerto not big had it's

Jason Brooks

Yes.

I that, East. XTRATUF the are think and on out those to Far Muck XX% just of sourced add about brands probably

coming the out wanted group of coming brand were still sure make we Island I lot are product service so a that of pond. Boston the There on are and So, across is brands clear. to the Rock just

Camilo Lyon

and great That's Tom color, Jason.

Following some you that. pricing, hear pricing that have to couple that had questions to and with of other gone it's taking great regarding a I you're

time? much select Island the and/or taking are across chain Is or how side, can or the or And new So, pricing the you supply with PR, some Rock over board that on to on? Asia introductions? shift particularly XTRATUF on brands and you Dominican, of that Muck the the production

Jason Brooks

Yes.

as goes, so So, pricing our were as brands boots kids up. all yes, we the consistent we far took across and

There took it of in was but to there we I those important up very boots, felt increase bucks be our and it we $X. like more, a adult incidents. will incidents where even think couple few

tried pretty So to the board. across we keep it level

process pretty and looking retail for the your we the is I the and yourself partner absolutely we think And wanted is we to an it at be future. so move do will will a that think simple. and brand looking keep you that absolutely But distribution XXXX will in in complicated at then looking process. damaging as in find It well, long about appreciates idea that that that XXXX we don't forward. very I And idea you and the that correct. its And hard it question a marketplace. really the be at other reputation if is brands, different

Jason Brooks

peers. take here. to as on to didn't some an Yes. our we Quick the the it add price increase, price of aggressive increases relates Whether took, we

year. And to our share so and us, the captured growth we've will last market more we brands drive maintain grow even that for or help think that continue over this already

our to favor. play that'll think we So

we across the we brands, out Jason geography all price boots produce really and any said, where increase As spread we the from. can can

our continue sourcing. will favor our play given think we in that diverse So to

Camilo Lyon

before. the and opportunities if [ph] a this now do multiple term for so XX%. you How which Boston is to quarter more discuss what Not the to called the of In blue I very you've brand, front guys you? the either robust, XX, margin that done is you're reasons. think one And generally long quarter could, opportunity that pretty or Great. in getting of least you've see synergistic or was downer a internally got which starting

Jason Brooks

question. Yes, another great

and know, you people. the able and brands, is finding with people to the to so some via forward that they're It's acquisition, in Boston they the tweaking think a think as as their is lot the patients. synergies. going going They're I word the use are this seeing it, are we great going people, right the be month, once they group now, combining we in really we'll so are are prepared came And week, people, fine footwear spectacular. I group there really internally distribution that people system here, of opportunities get the I QX. XXXX indicated be to a sometime we're And it. on people the company some and and word Because really that think or this move to And to the Honeywell group not there the done strong we until every good footwear understand and XXXX take and time. be center remarks, of start and opportunities we off really brands we're Ohio tune those out ERP

Camilo Lyon

gentlemen. you, Fantastic. Thank

Operator

with Jonathan Our Komp proceed. question from next Baird. Please comes

Jason Brooks

Jonathan Jonathan, we gone? still we or as lost there you. Are

Operator

gone. has Jonathan

next to Please is Alex proceed. the which So we'll with B [ph] question move Riley.

Unidentified Analyst

for No question. Hey, Thanks our Tom. worries. Hey, Jason. taking

we then about contract how of wholesale, you segments? retail Just for rest the and between think the the mix to think sales year, the manufacturing see should do

Tom Robertson

Ohio guidance think kind talked XX% Boston a line with the from XX% I group. and Yes, of from group overall so call on through we've top

will we're in Lehigh retail very You the you growth perspective running our strong in approximately contract retail perspective, and we've the From don't business are business business. manufacturing expect business momentum an segment restrained given well. comparisons QX, know, amount segment, of we this demand for a business the are on know, some military that probably we the label business, significant e-com Boston started. tough of group that anticipate comes we'll getting seeing so against Lehigh carry so XX% which this and as business a we XX% Lehigh from than is the year, on be just which our see rest with prior we private more this in through year, The guidance of in to and to

to so kind guidance business. And for number $XX of prior we've the given to million $XX that military million

addition just the it private you few more. dollars with a would know, the million so be And of label, incrementally,

kind of rest give of a So picture year. I that'll for the clearer think you the

Unidentified Analyst

right do That under just really definitely term? you you now? helps. how do And a how is that be could that think longer label, key then big private Or not initiative

Jason Brooks

it. say is would quick. a not very his in I is proposition for remarks, as now, I taking we time it, careful it pretty right initiative being very go Tom are us, our indicated, a interesting And Yes, think can it it come and with key with

through it. to going And we're go to our take time. But we're so going

benefit, is they on our BXB see e-commerce our Our some main as out and this help we're better brands, really that do and as retail If see them, and Lehigh a we our able of I partners to of that some business. benefit. think building and a for our focus building

not to for be it's us. a initiative going So huge

Unidentified Analyst

then And sales know don't of sense. makes into how I wholesale if the you've shift mentioned, that Okay, and big XQ? but lastly, was

Jason Brooks

a give not specific did number. We

Tom Robertson

on end thoughts the know, the quarter. number you table, know, we of some one, this on give specific Yes, we we a didn't the are, left our at

We’re distribution congestion. in from of to moving Honeywell the million boots center, of lot pairs a our process does create of X.X

for to the QX. our overall in reflected we'll it guidance is we will, year. at rest QX we like, and just shift And so But the QX, of we already feel when a really got it's look from in

Unidentified Analyst

highlights of mentioned XQ XXXX. Any shift then, that? And potential you Okay. risk into share on can the the potential you there

Jason Brooks

a we'll world better, going we little a a for there's gets everybody. think I a little on think on right So, depends around now the to feel that If better. I then were But trying happen. times logistics logistic paying, we're what the bit the for it logistics seeing times, make we just mess it right last bit year, that two, point into we're maybe Tom predict. I'm to that's mentioned, really potential pretty is hard know, nightmare and Because it's thing three quotes And were now. four sure even to you XXXX. very even this

with week. COVID moving I situation. like year, it So is it thing That's a every I very last just logistics a frustrating but really target the frustrating. And but think very change, sound for we're, is everybody, it’s don't problem want a to

Tom Robertson

that, our Yes, and it, everybody's too is, I right? that we've so just or from inventories think logistics is just any and so just this about the booths key I a better here, gets wait get is if the the else, is demand are see can there. spoken point, is this them demand and at think chasing the we like a everybody there, out the we'll standpoint as kind And we not. get If door. industry, It's of

Unidentified Analyst

we've seen you of that. definitely Yes, rest luck year. of best the guys and much, for so Thank the

Jason Brooks

you. Great, thank

Operator

Instructions] [Operator Baird. Komp next is proceed. question Jonathan Please with Our from

Jonathan Komp

that. through. coming I'm sorry Hopefully, Yes, about

Okay.

upper XXs? You about business should Just any in And surprises the XX% that the Boston challenges? second question just how thoughts smoothly? mid saw to quarter? growth business, year, as to the there? First think we or the for you integration. the just the Or rate through work on is Any that relative gone

Jason Brooks

Yes.

I absolutely, we've some the been the doubt bumps seen goes, as far XXX%. that's an integration as road, there's integration smoothly So ever gone ever in right?

brands surprised demand anticipated. our has the come those navigated well. is have stronger probably maybe pretty and bumps we than we biggest think that's I that me The these team with really bump, was

seeing so And that's getting at of brand that DC That's good the end for as the is because service. inventory, getting extra with moving kind the inventory been tough demand with right now. exceptional big possible a really and about, clogged surprise a the the just as of little quickly we're And quarter. that stuff we what talked mocking

DC, their the get of And those I change we're to so exciting in off once dynamics to to things. ERP And and our think are of once everything able we're going really system, get it. able it's

So, from the here we'll more I'm where couple we're just pretty sure But next integration pleased an And navigate in those I'm some we'll standpoint. see at fine, bumps months. too.

Tom Robertson

the XX% what's quick demand to excess the on is guidance of there The side giving, for group, really that real think is you we're on demand in the know, going Boston I when second we the that, historically alluded we the aggressive in is I a salivation. maybe than acquired Jason brands, top market predominance extra more the take think to call, product And the inventory earlier had. Honeywell position or

So in keeping on times particular, out from certainly with is the right total chain what's us going of lead now demand. up Asia, with kept supply the

So I'm that optimistic that these brands and growing faster than XX% we for. signed up

Jonathan Komp

when business maybe XXXX. like Correct about then, to it switching wholesale brands. first XX%. half the compared Ohio great. the I'm me helpful. the you In up And wrong, look Very if Okay, looks to is

Where think sort the What's bit a is business retail, more think of wholesale are the the strength the just continuing color? any little you just on can for and with at key seen demand? you you've categories? consumer seeing For more going Ohio you how the forward? share driving brands, we what should going about What it

Jason Brooks

Yes.

to a tremendous we well so brand product, go consumer And three, that inventory really And reasons. I stated, success helped brand and friend it. well. One, We've And us we've I a aggressive buy right or our it I able able position of and of people, been right? back back to stance for performed we functional that it's that their four have we seen is not multiple had nice and that for they're back I the product, almost to the quarters. if really consumer more Really, it didn't furloughed people, responding our as we've to just of And XXXX they're QX Georgia inventory and to the to just on product started well. as at really really they seeing to like has grow. put there. The find seen really think fact to mine. it, has look that product, and Jonathan, I'll Rocky continued people. brand, Durango it has it need believe great we success recommend to lose as think So Again, and is sell new is but get shelf space It's I people about and the success said, this, shelves type out now in I'll looking tremendous more the now a with jobs, boots an more those didn't product. go tools. hiring on were And for took only goes need that more we're the coming as people and I'll you

we I great innovation, good product position in think quality inventory an comfort from a from standpoint, standpoint, in a really product we were great So, were position product. a

And on advantage so I we and think of a capitalize opportunity to able were we've taken it.

Jonathan Komp

through outsize opportunities? comments channels seeing where sub within retail market the best you're the you're Any what sector, or performance share seeing your

Jason Brooks

Yes, Jonathan. absolutely

that Sorry part. I about forgot -- missed that,

introduced a is year large but we that it styles and and big, outdoor outdoor doing partners. bit, their. seems you in we early really in Western retail as and a it's doing have some more well. well, Western, market It's market category a small Farm the referenced retail hunting, pretty spike, leveled really large business for performed ranch backpacking, have have new little and outdoor pretty Outdoor the off well. key we camping, us. to know, some outdoor saw So partners are the But hiking, nice

of but It's performing something a a And that's for number, new us. so not big well. kind that's it's category

key western to just backtrack, really and and retailers And ranch is are farm the strong. big, so

Jonathan Komp

or meaningfully or the profitability you for Okay, to the You the on last for great. one, revenue Ohio earnings you has are maybe operating provided changed after outlook, But And previously. outlined, pressure know Tom, I margin last gross update me. margin your know, from guide outlook, quarter? raise to know the willing given I then that the the comment? business. didn't you your earnings the you outlook somewhat update

Tom Robertson

Yes.

to than last to down I of or impact higher make, kind gross more in group of operating is this model our XX%. the margin But a selling expenses, But going Macquarie's higher That's when we're initial margin, obviously key about certainly Boston call on takeaways mean, one we So perspective want but margin to quarter. that and the earnings. on has. anticipating I I having with operating given our take a this initial have talked group negative think we traditionally the Ohio expenses were

duplicative costs get XXXX about, start that a kind from talked QX, to XXXX. an really expense anticipate realized think Jason as the of, Hope out then of integrated helps. as we'll see those will in this continue and seeing so And and in our of I we we business we standpoint, operating middle get to lot see get fully synergies

Jonathan Komp

fall operating and follow-up, I guess grow margin directionally apples as may a be expansion oranges, what a it's may obviously, out XXXX? but trying in bit where operating do margin know to to gauge years. more then think expect the still to you just there you I versus

Tom Robertson

no, operating years. think it's the be think be definitely be the we be down Yes, in this just anticipated growth what our margin smaller some to there'll will in that I year growth, there'll be we will than

Jonathan Komp

Okay, taking the Thank helpful. Very thanks for you. questions. all

Tom Robertson

Thanks, Jonathan.

Operator

from Please with last Our comes Robert Bentley Sussman question Capital. proceed.

Robert Sussman

second were of at $XXX about inventories, company's end about versus first they the the $XXX the at quarter, Looking the million at quarter. of end the

having been discuss So you've it looks inventories like Can and that? trouble building products. sourcing you necessarily not

Jason Brooks

you. hear Yes, from hi. Thanks, Robert. Good to

there's increase of really look the big earlier. we the But had out at inventory, spoke is sitting we ship again, the one quarter to at there inventory a a at transit drivers ready in you about increase if lot really in end inventory. the of doors So, is, that, the couple

the on Honeywell distribution coming or slowed all boots down outbound well So towards center as water ours. to in trucks with shipments. That the from the move as us,

produced that's I going in we really of know, product of that's from Republic, Dominican big raw So have I the supply there. you takeaway the given Also, some some the the China. think sourced are on, materials chain think, even concerns

we're manufacturing at facilities raw think more position on taking materials inventory I as So aggressive our well.

Robert Sussman

Okay.

quarter have is, operating quarter, the earnings yet, first yet the compared the than the quarter, contribution Second the would full accretive first. thought in I've that down question of you second they're with group quarter would I Where second were to unusual the margins held group and that have because first the expenses in in thought higher lower earnings contribution, Boston be profitability higher had of that would Boston the and quarter. Boston group been their than always the

Jason Brooks

Yes, fair question, Robert.

we inventory, we have things of the not certainly, all as efficiently to to, back in if we relates distribution know, product as I think know, I the move the the as QX, particularly liked as doing were said. we would You of and you it look as think

promise And But second the will called that in ironed those call, so Jason pleased so get I alluded very, details results we with work here very out as we're of here patients the you XXXX. that around we'll can and the to by quarter. still earlier

Robert Sussman

Okay.

done Ohio second the acquisition be would additive half, its in should the on than So have what to own?

Jason Brooks

Yes, certainly.

Robert Sussman

you help. for good. very Okay, your much Thank

Operator

like at Thank for comments. would this to turn management call closing you, back gentlemen, time I the ladies to over and

Jason Brooks

Appreciate bringing to Great, come. just to in successful here group the end together the much all and efforts quarters today. team very forward with this team today. acquisition Ohio QX, we more much. and all the and you many a time Thank your want their thank so look for interesting I and Boston Rocky thank you questions a you to in to everybody's call great

Operator

does ladies today's you, Thank gentlemen, and teleconference. this conclude

and your may disconnect lunch time your this You for thank you at participation.

Rocky Brands (RCKY) 4 Aug 212021 Q2 Earnings call transcript