Rocky Brands Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 28, 2024

There are 7 speakers on the call.

Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Rocky Brands 4th Quarter and Full Year 2023 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.

Operator

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.

Speaker 1

Thank you, and thanks to everyone joining us today. Before we begin, please 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 December 31, 2022.

Speaker 1

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

Speaker 2

Thank you, Brendan. With me on today's call is Tom Robertson. After Tom and I's prepared remarks, we will be happy to take questions. Our company has transformed significantly over the past few years following the impact from COVID. The organization did a very good job navigating the early days of the pandemic, integrating a large acquisition, bringing on a new distribution center and servicing our customers and consumers during this volatile market conditions.

Speaker 2

While 2023 had its share of challenges, the fundamentals of our business are solid and we are in a great position operationally and financially to invest in our growth. Encouragingly, our reported results improved throughout the year as solid sell through of our products, coupled with over inventory levels continuing to improve at the majority of our wholesale accounts, positively impacted our sell in. Despite some unexpected headwinds in the 4th quarter, net sales improved sequentially from the 3rd quarter and year over year declines moderated to their lowest levels in 2023, due in part to high single digit growth in our direct e commerce channel. Equally important, we made great progress strengthening our balance sheet throughout 2023, highlighted by a $66,000,000 or 28 percent reduction in our inventories and an $84,000,000 or 33 percent decline in our debt levels compared with the end of 2022. Tom will cover the numbers in more detail shortly, but first I want to spend a few minutes reviewing performance by category and brands.

Speaker 2

Starting with work, the 4 brands that make up this category Georgia, Rocky and Select Styles under the Muck and Extra Tough brands continue to improve this quarter with several areas to highlight. The Georgia brand continued to build momentum from the Q3 as partner inventory constraints that stalled reorders throughout 2023 began to moderate, driving wholesale demand to the strongest level of the year. The brand saw strong sell in with several of our largest accounts in the farm and ranch segment this quarter, increasing sales with these customers on both a sequential basis and compared to a year ago period. Additionally, this year's cost savings and subsequent selective price decreases on certain Georgia styles helped spur a notable pickup in demand for the brand. While the recent inventory backlogs caused many accounts to be more conservative and narrow our new orders to best selling SKUs.

Speaker 2

2 new product introductions in 2023 that have been well received drove outsized demand this quarter, contributing significantly to Georgia's recent progress. Hello, this is Jason Brooks. We got cut off there for a minute. So I will start with the Georgia brand. The Georgia brand continued to build momentum from the Q3 as a partner inventory constraints that stalled reorders throughout 2023 began to moderate, driving wholesale demand to the strongest levels of the year.

Speaker 2

The brand saw strong sell in with several of our largest accounts in the Farm and Ranch segment this quarter, increasing sales with these customers on both a sequential basis and compared to a year ago period. Additionally, this year's cost savings and subsequent selective price decreases on certain Georgia styles helped spur a notable pickup in demand for the brand. While the recent inventory backlogs caused many accounts to be more conservative and narrow new orders to best selling SKUs, 2 new product introductions in 2023 that have been well received drove outsized demand this quarter. Contributing significantly to Georgia's recent progress. Strong sell through for these new styles demonstrates that the Georgia brand remains relevant and in demand with consumers, even in the current environment.

Speaker 2

Our Rocky Work brand remained challenged this quarter, with excess inventory levels continuing to impact replenishment orders. However, there was some positive momentum, particularly with new higher priced products. We've seen strong sell through with the top tier work boots and we introduced a new line of similar product at retailers for more moderate prices in the Q4. This new product line made in our own Dominican facility should provide solid top line and margin contributions for the Rocky work in the years ahead. Shifting to our rubber boot based work product, both the Muck and Extra Tough brands on their positive 2023 momentum in the Q4.

Speaker 2

The Muck brand delivered a positive year over year comparison, underscoring the work we've done in recent quarters to reinvigorate the brand. As we continue to adjust Muck's brand message to communicate more directly with our targeted audience, we've seen the brand's marketing metrics significantly outperform industry benchmarks and consumers demand has resonated in kind. For the first time this year, we saw year over year growth in the U. S. Wholesale market for the muck work.

Speaker 2

Also helping fuel this demand, Muck decreased prices on several legacy products in November and also introduced 12 new styles

Speaker 1

for the fall winter season.

Speaker 2

While above average temperatures to start the fall 'twenty three season posted a slight headwind, we are confident that Muck is well positioned coming into 2024. Extra Tough carried its positive momentum from Q3 into Q4 outpacing expectations driven by significant year over year growth in both the U. S. Wholesale market and the e commerce channel. We saw partner inventory positions improve as the quarter progressed, driving stronger bookings for 2024 in the period.

Speaker 2

At the same time, we persistently added at once business for in demand styles that resulted in very strong sell through and left us chasing inventory in key sizes. With awareness of Extra Tough Surging, we will look to capitalize on the growing relevance of the brand and ensuring product availability for our growing Extra Tough consumer base in 2024. Turning now to our Western business, while many top accounts are currently operating on replenishment only ordering, Durango was able to secure several nice bookings in the period that accelerated 4th quarter results, well ahead of the trend earlier in the year. We saw strong orders from key accounts in both replenishment inventories due to the strong sell through and to the stock for holiday 'twenty three and early 'twenty four. We also saw the best quarter of the year from our field accounts with new distribution channels and an improving retail climate acting as positive catalyst for the brand.

Speaker 2

Most importantly, customers are reporting that they are now in significantly improved inventory positions, which allow with our focus on modernizing our inventory to eliminate slow moving styles and better stock or best sellers to take advantage of growing demand, positions the brand for higher turns and more favorable results going forward. Our Rocky Western business continues to stabilize and we saw several bright spots this quarter across the channel. This included strong growth with our own e commerce channel along with solid results from our dotcom partners and within key western boot retailers who saw better sell through in the quarter. Looking ahead, we are optimistic that the improving retail trends we've seen this quarter will allow our overall Western business to return to its historical growth trajectory. Outdoor, which includes styles under our Rocky, Muck and Extra Tough brands began to stabilize in the 4th quarter after a very difficult 1st 9 months of the year, particularly for our Rocky Outdoor Boot and Apparel lines.

Speaker 2

Though the quarter was still challenged by unfavorable weather conditions, e commerce gains, improving wholesale trends and partner inventory improvements help the category reposition to take advantage of improving trends going forward. Also, as I mentioned when we discussed our work product, both Extra Tough and Muck brands delivered a notable improvement in this quarter, driven in part by new penetration of the outdoor product and more outdoor focused marketing. Last but not least, within our wholesale segment, commercial military was a bright spot in the 4th quarter as it has been all year. Orders from suppliers of the U. S.

Speaker 2

Army and for the division's Code Red Fire collection drove a great Q4 to cap off the strongest year in recent memory for this business. Shifting to our retail segment, sales increased low single digits compared to a year ago period, thanks to a very solid quarter for our direct e commerce channel. Each of our branded sites, Rocky, Georgia, Durango, Muck and Extra Tough saw double digit traffic and sales increases in the quarter. We continue to enhance our digital marketing efforts, allowing us to engage with consumers more directly and we expect this trend to continue going forward, which should positively impact the segment's growth and margin profile. Lastly, our B2B Lehigh business was down year over year in line with expectations as we lapped a very strong quarter of growth in 2022.

Speaker 2

We expect that sales will rebound in 2024 as comparisons ease and events bookings continue to increase. Along with the introduction of the several new key accounts slated for this year. As ready as I am to put 2023 behind us, I am pleased that the work we did strengthening our product innovation, brand building, consumer connections and fulfillment capabilities started to translate into improved results towards the end of the year. By focusing on controlling what we can control, we exited 2023 with good momentum and well situated to deliver growth, enhanced earnings in 2024. Before I turn the call over to Tom, I want to thank the entire Rocky team for their efforts and the commitment to excellence.

Speaker 2

We have weathered the ups and downs over the past 4 years and have emerged a stronger organization that I am confident will benefit the business, our shareholders over the next year and long term. Thank you. Tom?

Speaker 3

Thanks, Jason. As Jason shared, we are pleased to see recent top line pressures to our wholesale business begin to moderate this quarter, resulting in sequential quarter over quarter growth in sales and the lowest level of year over year declines we've seen all year. For the 4th quarter, sales decreased 9.3% year over year to $126,000,000 or 6% when you exclude service brand sales of $4,900,000 from the year ago period. By segment on a reported basis, wholesale sales decreased 13.3% or 8.8%, excluding service to $85,800,000 Retail sales increased 1.5 percent to $37,800,000 and contract manufacturing sales were $2,300,000 Turning to gross profit. For the Q4, gross profit was $50,700,000 or 40.3 percent of sales compared to $56,700,000 or 40.8 percent of sales in the same period last year.

Speaker 3

The 50 basis point decrease in gross margin as a percentage of net sales was mainly attributable to a tough year over year comparison related to a tariff recovery within an approximate impact of $2,400,000 in the prior year period. This was partially offset by a higher mix of retail segment sales, which carry higher gross margins in the wholesale and contract manufacturing segments. Gross margins by segment were as follows: wholesale down 120 basis points to 35.4%. However, excluding the tariff recovery benefit a year ago, wholesale gross margins were up 120 basis points. Meanwhile, retail gross margins were down 30 basis points to 52.9% and contract manufacturing was down 13 down to 13.7%.

Speaker 3

Operating expenses were 36 $100,000 or 28.6 percent of net sales in the Q4 of 2023 compared to $43,100,000 or 31 percent of net sales last year. On an adjusted basis, operating expenses were $35,200,000 in the current year period $41,400,000 in a year ago. The decrease largely attributable to cost savings reviews and operational efficiencies that we achieved through strategic restructuring initiatives implemented over the past year. As a percentage of sales, adjusted operating expenses were 27.9% in the 4th quarter of 2023 compared to 29.8% in a year ago. Income from operations was $14,700,000 or 11.7 percent of net sales compared to $13,600,000 or 9.8 percent of net sales in the year ago period.

Speaker 3

Adjusted operating income was $15,500,000 or 12.3 percent of net sales compared to adjusted operating income of $15,300,000 or 11% of net sales a year ago. For the Q4 of 2023, interest expense was $5,300,000 compared with $5,900,000 in the year ago period. The decrease reflects lower debt levels in the quarter compared to the Q4 of 2022. On a GAAP basis, we reported net income of $6,700,000 or $0.91 per diluted share compared to net income of 6,500,000

Speaker 1

dollars or $0.89 per diluted share

Speaker 3

in the Q4 of 2022. Adjusted net income for the Q4 of 2023 was $7,300,000 or $0.98 per diluted share compared to adjusted net income of $7,900,000 or $1.08 per diluted share a year ago. Effective tax rate for the Q4 of 2023 increased to 29% compared to 16.1% a year ago. The year over year increase, which was higher than our initial projections, was driven primarily by a return to provision adjustment resulting from foreign tax credits recognized in the Q4 of 2023. Turning to our full year results.

Speaker 3

While the year was challenged by our wholesale partners working through excess inventories, we're encouraged by solid retail sell through and the growing performance of our e commerce sites. 2023 was also a year in which we made great progress strengthening our balance sheet and positioning the company for future growth. For the full year, net sales were down 25 percent or 24.3 percent on an adjusted basis to $463,400,000 Excluding Neos and Service Brand sales, which were divested in September of 2022 March of 2023, respectively, adjusted net sales decreased approximately 20.9%. By segment, wholesale decreased 30.5% or 27.2% excluding the Neos and Service Brands, retail was up 1.4% and contract manufacturing decreased 48.4%. In terms of profitability, adjusted operating income decreased 13.7 percent to $41,900,000 while adjusted operating margins increased 110 basis points to 9 percent of net sales.

Speaker 3

Adjusted net income was $14,300,000 and adjusted EPS was $1.93 For the full year, interest expense was $22,700,000 an increase of 24% compared with $18,300,000 in 2022. And our effective tax rate for 2023 was 26.3% compared to 20.6% in the prior year, which was above our projected tax rate for 2023 of 20.8 percent due to the foreign tax credit adjustment in the 4th quarter I mentioned a moment ago. Turning to our balance sheet. At the end of the 4th quarter, cash and cash equivalents stood at $4,500,000 and our debt totaled $173,100,000 We made excellent progress paying down our debt over the last 12 months with total indebtedness 32.6% lower compared to the end of last year. A big part of the debt pay down has been driven by our ability to strategically reduce our inventory levels.

Speaker 3

At the end of the 4th quarter, inventories were $169,200,000 down $66,200,000 or 28.1 percent compared to $235,400,000 a year ago. Now to our outlook. Before I get into how we are thinking about 2024, I want to highlight a couple of business changes that impact year over year comparisons. First, as you recall, we sold the Service brand at the end of the Q1 of last year. Following the sale, we continued to manufacture and supply product to the new owners of the brand for several months as part of the transition process.

Speaker 3

The second change had to do with our distribution in Canada. In November, we switched from direct operations to a distributor model for our Rocky, Georgia Boot, Durango, Muck and Extra Tough brands. While this decision negatively impacts our top line in the near term, it contributes positively to profitability as there is little to no SG and A associated with the new agreement. In addition to these two changes, we also fulfilled an elevated amount of orders to a customer that supplies the U. S.

Speaker 3

Army with footwear. This temporary spike in demand was driven by escalation in global geopolitical events and given their current inventory position, we do not expect this level of sell in to repeat itself. In total, we anticipate approximately $26,000,000 in revenue from 2023 will not reoccur in 2024. Looking at this year, we expect revenue to be in the range of $450,000,000 to $460,000,000 This represents approximately 3% to 4% growth over 2023's adjusted base of $438,000,000 which excludes the aforementioned non recurring revenue. In terms of cadence of revenue, we expect to see slight growth in the first half of the year before accelerating in the second half.

Speaker 3

We expect margin gross margin to remain consistent with consistent or to see slight improvement from the adjusted gross margins we delivered in 2023. This will be partially offset by SG and A deleverage as 2024 includes investments in marketing for our brands as well as performance based compensation as we did not pay any bonuses in 2023. The biggest change year over year will be in our interest expense as a result of the progress we made paying down our debt. Based on the year end debt levels and current interest rates, we expect interest expense to be down approximately $5,000,000 That concludes our prepared remarks. Operator, we are now ready for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer Your first question comes from the line of Jeanine Stitchter with BTIG. Please go ahead.

Speaker 4

Hi. Thanks for taking my questions. First on the Rocky brand, I think you mentioned some excess inventory in the channel there. I was hoping you could elaborate a bit on that. And then more broadly on channel inventories, if there's any other pockets of excess.

Speaker 4

It sounds like in general, it's pretty clean. And then also wanted to ask about Extra Tough, you have some really nice momentum there. I would just love to hear more about how you're thinking about potential for that to become more of a year round business and just to round out the selling period making it more less of a seasonal business. Thank you.

Speaker 2

Yes. Thank you, Janine. There's a lot of questions in there. So I think the first one was about Rocky and some inventory. I think in all of the brands, we are in a pretty good inventory position on from our own inventory.

Speaker 2

And I feel like most of the retailers have gotten themselves into a pretty good place from an inventory position. Although I do believe they are still being very cautious about how they are booking orders and filling in. There is this conversation going around, obviously we are in election year. So I think that makes everybody a little bit nervous. But I believe that we are in a pretty good position and our retailers are in a pretty good position.

Speaker 2

There's still some cautiousness around that. The other one I remember was extra tough. I think the first one was Rocky and the last one was Extra Tough. I'm not sure if you remember the math. Yes, I

Speaker 3

think the extra tough brand, it's unique in that since it's more of a summer brand, everything from a boating and fishing perspective. So we've seen success or the seasonality of that business maybe leans a little more Q2 as people load in for most of the East Coast fishing, which happens in the summer months. However, we have introduced new products like the Ancladeck glacier trek boot, which is a fleece line version. And we also have the trolling pack selection, which is also fleece line. And so we're seeing people embrace that product for their fall and winter boot as well, as well as we've also launched some new sandals, slides and flip flops that we anticipate selling strong in the spring as well.

Speaker 2

Yes, I would just add that in general, if you think of all of our brands, I talk about us not being very sexy in Rocky, Georgia, Durango and Muck. Extra Tough is probably the sexiest brand we have and we see a big opportunity for expansion there. We want to be really careful about how we do it and try to control that and make sure we don't go too fast and too broad too quick. So we are really excited about that brand and I think there is a big opportunity in upside.

Speaker 4

Perfect. That's helpful. And then maybe one last one, if you could just elaborate on the DTC strength you're seeing with e commerce. Maybe just a little bit more about what you've been doing there to drive the strong growth in that business?

Speaker 2

Yes, I think the same thing everybody else is doing, right. We are doing more advertising on social media. We are appealing to the younger crowd. We are getting in front of them via the Instagrams, all the platforms out there and introducing them to our brands and we are seeing a lot more traffic to our own websites. We are seeing a lot more transactions through our own website and so I think the brands are resonating and even back to the extra tough, I would tell you that, that is one brand that even more resonates from an Internet e commerce kind of standpoint.

Speaker 2

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

Speaker 3

Yes. I think as we look into 2024, I called out in the guidance the investment in marketing and a lot of those investments in marketing are going

Speaker 1

to be

Speaker 3

happening digitally, whether it's through social media or pay per click or search. So we're going to continue to drive consumers to our websites and it's really the extra top brand to Jason's point, it's really apparent that consumer is much quicker to buy online than some of our other brands with almost a third of the sales in the Q4 for extra stuff happening through our own e commerce channel. So we're excited about the trajectory of our e commerce business and continue to invest in it in 2024.

Speaker 2

I do want to add though, it's a balancing act. Our wholesale partners are very important to us and we have to navigate that as well as we go through this.

Speaker 4

Great. Thanks so much.

Operator

Your next

Speaker 1

Good afternoon, Jason and Tom. I was wondering if you could talk a little hi, thanks for taking the question. I was wondering if you could hit on Lehigh. And just as we look at last year as the baseline and as we filter through into 2024, you'd mentioned compares get a little easier as the year wears on. Maybe just talk about where that business is, any key account wins, also some of the stuff that you had going with the technology, just kind of curious how that business is holding up and what we should think about for 2024?

Speaker 3

Yes. I'll kick this one off, Jeff. The Lehigh business for us has grown over the last several years. I think this year was a little challenging for it. 2022, I think that the PPE world and the safety management HR managers of the world had more dollars in their budgets in 2022.

Speaker 3

And we saw that particularly at the end of 2022 when we saw people get incremental vouchers or subsidies to buy additional products, whether it be footwear or footbeds or orthotics. And so we knew we had a very tough comparison going into 2023. We guided the business or we expect the business to be down in 2020 in the Q4 of 2023 and it actually it met our expectations. And so I think we saw a little bit earlier in the year too where we saw we started to see some businesses pulling back a little bit on their spin as they were doing their own SG and A savings or budget cuts. And so we feel that we've opened up some new key accounts at the end of this year that kicked off in January.

Speaker 3

So we feel good about the business in 2024 and presumably we would get back to growth for the Lehigh business in 2024.

Speaker 1

Great. And just one kind of follow-up, kind of building on what Janine was talking about. I'm just curious in terms of the national accounts, the bigger kind of needle movers. I'm just curious, not asking you to name names, where things stand in terms of their willingness to maybe be a little more aggressive on call it less than buying to need and actually pre booking and ordering a little more aggressively?

Speaker 2

Yes. Good question, Jeff. I think we have seen this loosen up a little bit. They are definitely being more active, not only in regards to at once business, but some booking business as well, or at least forecasting and giving us that information. So we've definitely seen that open up in the outdoor category, the farm and ranch category, the western category And so that's been a good sign.

Speaker 2

I will say, it is still everybody still seems to be pretty cautious and what they're doing it and how they're doing it, but it's definitely changed a little bit for us.

Speaker 3

Yes, I think I think Jeff just to add on, as we look at our bookings for the rest of the year, bookings are up. But the calculus we're trying to do is does that mean they're going to their behavior will shift back a little bit more normalized where they're booking 40% of the product and ordering at 1 60%, because we saw that kind of we saw the at once increase over the last couple of years as to Jason's point, the buyers remain more cautious and conservative. So we're trying to figure out what the new normal is, but we'll wait and see.

Speaker 1

Great. I appreciate it. I'll let someone else have a chance to ask a question. Best of luck.

Speaker 3

Thanks, Jeff. Thanks, Jeff.

Operator

Your next question comes from the line of Jonathan Komp with Baird. Please go ahead.

Speaker 5

Hi, good afternoon. Thank you. Just two questions for me. I think first, looking at the underlying revenue growth you're expecting for the year, can you just give any more color by segment or category how you're thinking about the growth on a relative basis based on what you see? And then separately, just on the operating margin commentary, Tom, could you maybe just be specific, so are you using the right numbers, what margin you see for 2024?

Speaker 5

And any ability to drive less deleverage even on slower sales or maybe you could quantify the incentive compensation headwind for this year that you outlined? Thank you.

Speaker 2

Thanks, Sean. Yes. So I'll kick off with a little bit of growth. I think as we look at all the brands, we would look at them all about equal, except for the Extra Tough brand. We think there is probably a little bit more upside there.

Speaker 2

But the Rocky, Georgia, Durango, Muck brands, probably all pretty similar kind of growth rates. And then our Lehigh division, I would say, we're anticipating or expecting a little bit higher growth rate there for 2024 as well.

Speaker 3

Yes. I think to add on to that, just for modeling purposes to help out, the $26,000,000 that we caught out of non recurring revenue, dollars 23,000,000 of that would well, 20 of that would show up, I'm sorry, in the wholesale segment. And so that's where you'll see that comparison with the other 6 being slipped between retail and contract manufacturing. Just also to give a little color from a quarterly perspective, that $26,000,000 I would say about $7,000,000 to $8,000,000 comes out of Q1 and Q2, dollars 8,000,000 in Q3 and then about $3,000,000 in Q4. Just so all the analysts can get their kind of their quarters lined up a little bit.

Speaker 3

And then John, the last question I believe you had was around Margin. Operating expenses. Is that correct?

Speaker 5

Just operating margin for the year, could you just clarify what operating margin roughly you're expecting and any ability to drive deleverage on the slower sales growth or if you could give any more color on the G and A expenses including the incentive compensation reset? Thank you.

Speaker 3

Yes. So I would say from a dollar standpoint, we're looking at a few $1,000,000 increase from an operating expense perspective. Our goal is going to be to try to keep that operating margin flat with LY. However, as we sit today, we've got it just slightly under 2023 numbers.

Speaker 5

Okay. Thanks again.

Speaker 3

Thanks, Joe. Thanks, Joe.

Operator

Your final question comes from the line of Bruce Giler, who is a private investor. Please go ahead.

Speaker 6

Hey, good afternoon gentlemen.

Speaker 2

Hey, Bruce.

Speaker 6

Hey, you made some really impressive progress this year on the balance sheet. And I'm curious where you think this can continue to go in 2024. Can you generate some incremental cash from inventory? If so, can you give some guidance around that? And in terms of debt pay down, similarly, I would imagine a lot of those proceeds would be channeled into debt paydown.

Speaker 6

It seems to me based on some preliminary numbers, you should be able to get your debt to EBITDA ratio down below 3% in the current year. And if that's the case, what are also the prospects for refinancing your debt, which would I think further enhance the earnings growth considering you've still got about $2 a share in interest expense locked up in the P and L?

Speaker 3

Yes. Hey Bruce, I'll take this one. It's Tom. So from an inventory perspective, we've been targeting that 30% of sales as a long term number from an inventory perspective. So that would suggest that is another $25,000,000 $30,000,000 of inventory to come off.

Speaker 3

We will see how this Canadian distribution change that should help also help that number going forward. And you're exactly right. The working capital improvements there will go to paying down debt And then in your math on the leverage ratio is correct too. We've got ourselves in kind of the mid to 2 range from a total leverage ratio standpoint. And so we'll continue to work with our lenders to try to find the right solution from a credit facility standpoint.

Speaker 3

But I would anticipate that given where this leverage ratio is, we'll be able to unlock some savings here in 2024 from an interest expense standpoint from where we sit today.

Speaker 6

Okay, thanks. I also had a question on the revenue guidance. I think you mentioned $450,000,000 to $460,000,000 which would be about flattish versus LY, but you also noted that you expected modest growth in the first half with accelerating growth in the second half. So there's a bit of a disconnect there because you implied that there's going to be growth throughout the year, but the aggregate number does not imply any growth. So maybe I misheard that, but if you could provide some clarification that would be great.

Speaker 3

Yes, absolutely. So the comment of the 3% to 4% growth is driving back to what we're considering kind of the new base, which was like $438,000,000 which was essentially this year's results minus that non reoccurring revenue of $26,000,000 that we talked about. And so if you were to look at that and I tried to give a little color on each quarter on what that new base would be. But I would say, you would see kind of lower growth at 2% to 3% range in the first half of the year and then maybe the 4% to 5% in the second half of the year to get to that blended 3 to 4 that we guided to.

Speaker 6

Okay. Thank you.

Operator

There are no further questions at this time. I will now turn the call back over to Jason Brooks for closing remarks. Please go ahead.

Speaker 2

Thank you, Eric. I just wanted to thank the Rocky team one more time. 2023 was an incredibly complicated challenging year and our company and the people in the company really stepped up and did an amazing job navigating it. I know we are all excited about 2024 and the future of Rocky Brands and I look forward to working with you all to make that happen. And I also just want to say thanks to our investors and their support in 2023 and look forward to proving to you guys that we have a great 'twenty four in the future ahead of us.

Speaker 2

So thank you all.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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