Delta Galil Reports Record Third Quarter 2021 Results

Sales Increased 31% to $501.1 Million, with Online Sales up 102%

Record Q3 Gross Margin of 39.6%, All-Time High EBIT Margin of 10.6% and Net Margin attributed to shareholders and excluding non-core items of 7.0%

EBIT in Q3 2021 increased by 58% to $53.0 million compared to $33.6 million in Q3 2020; Net income excluding Non-core items attributed to shareholders in Q3 2021 increased by 76% to $34.5 million compared to $19.6 million in Q3 2020

Strong Balance Sheet with Cash Balance of $211 Million and Equity of $610 Million

Company Signs Global Licensing Agreement for Polo Ralph Lauren Women’s Intimates and Sleepwear Collection

Company Increased Its Dividend to $7 million, or $0.274 Per Share

Company Raises Full-Year Guidance; Now Expects 14% Increase In Sales Compared to 2019 and 91% Increase In Net Income Compared to 2019

Delta Galil Industries, Ltd. (DELT/Tel Aviv Stock Exchange), the global manufacturer and marketer of branded and private label apparel products for men, women and children, as well as leisurewear, activewear and denim, today reported strong financial results for the third quarter ended September 30, 2021.

Isaac Dabah, CEO of Delta Galil, stated: “We are very pleased with the strong growth in sales and margins in the quarter reflected in all of our operating segments and geographic regions.”

Third Quarter 2021 Highlights

• Sales were $501.1 million, a 31% increase from $382.9 million in the same quarter last year.
• Organic sales, excluding Bare Necessities, which was acquired in October of 2020, increased by 23% in the third quarter.
• Company’s own websites’ sales increased 102% to $52.4 million.
• Gross margin increased by 150 basis points to a quarter high of 39.6%.
• Operating margin increased to an all-time high of 10.6%, versus 8.8% in Q3 2020.
• Net income attributed to shareholders and excluding Non-core items was a Q3 record $34.5 million, a 76% increase from $19.6 million for the third quarter of 2020.
• Q3 diluted earnings per share excluding non-core items, rose to $1.31, compared to $0.77 per share in the third quarter of 2020.
• Strong balance sheet highlighted by $210.8 million in cash and $609.9 million in equity as of September 30, 2021.
• Net financial debt was $134.8 million, down by $151.6 million versus September 30, 2020.
• Declared a dividend of $7 million, or $0.274 per share, to be distributed on November 23, 2021. The determining and “ex-dividend” date will be November 11, 2021.
• Company signs long-term global licensing agreement for Polo Ralph Lauren women’s intimates and sleepwear collection.

Isaac Dabah, CEO of Delta Galil, stated: “We are very pleased with our performance this quarter, which represents a strong trend of three consecutive quarters of record revenues, four consecutive quarters of record gross margin and five consecutive quarters of record operating margin. We saw a significant increase in EBIT, driven by higher sales in all segments and geographic areas with improved products, customers and channels mix, and saw the benefits of operational and financial efficiencies we implemented over the last 15 months.

“As part of our strategy to enhance our branded portfolio, we have signed a long-term global licensing agreement with Polo Ralph Lauren for women’s intimates and sleepwear. This partnership represents a significant addition to our licensing portfolio, and we’re thrilled to be working with such an iconic and timeless brand. It marks another significant step in our growth strategy of partnering with leading global brands and comes on the heels of our recent global licensing agreements with Adidas and Wolford.

“During the quarter, we continued our focus on digital innovation. With our merged Bare Necessities and Brayola platform, we are now in the process of introducing our own brands through our digital channel. We have exciting plans to grow this area, which we expect to increase sales and profitability overtime.

“We have solid plans in place, a strong balance sheet and operating cash flow, all of which position us well to continue on the growth trajectory we enjoyed this quarter,” Mr. Dabah concluded.

Sales

The Company reported sales of $501.1 million for the third quarter of 2021, a 31% increase from $382.9 million for the third quarter of 2020. Sales for the first nine months of 2021 were $1,373.0 million, up 39% from $986.5 million in the comparable period last year. Excluding the sales of Bare Necessities, which was acquired in October 2020, sales increased by 23% and 30% in the third quarter and the first nine months of the year, respectively, compared to the same periods last year. Effective as of the second quarter of 2021, Delta Galil reorganized its business segments to better reflect and align with its strategic focus. The new segments – Brands (owned and licensed), Private Label, Delta Israel, 7 for All Mankind and Online Retailer – all contributed to the recent sales growth. Growth also was seen across all geographic regions.

Digital Sales

E-commerce sales on the Company’s own website for the third quarter and first nine months of 2021 rose 102% and 141% to $52.4 million and $186.4 million, respectively, compared to comparable periods in 2020. Excluding Bare Necessities, own website e-commerce sales declined 8% in the third quarter of 2021, compared to the same quarter in 2020, but increased 28% in the first nine months of the year compared to the same period last year.

EBIT

EBIT for the third quarter increased 58% to $53.0 million compared to $33.6 million in the third quarter of 2020. EBIT for the first nine months of 2021 increased to $123.4 million, compared to a negative EBIT of $50.5 million for the first nine months of 2020. Excluding non-core items, EBIT for the first nine months of 2021 was $123.4 million, compared to EBIT of $1.5 million for the same period last year.

Net Income

Net income for the third quarter was $32.5 million, compared to net income of $19.5 million for the third quarter of 2020. Excluding non-core items, net of tax, which included a loss from early redemption of bonds, net income for the third quarter was $36.4 million, compared to net income of $19.5 million for the third quarter of 2020.

Net income attributed to shareholders excluding non-core items increased by 76% to $34.5 million, compared to $19.6 million in Q3 2020.

Net income for the first nine months of 2021 was $74.8 million, compared to a net loss of $64.3 million for the same period last year. Excluding non-core items, net of tax, net income for the first nine months of 2021 was $78.7 million, compared to a net loss of $23.5 million for the same period last year.

Net income attributed to shareholders excluding Non-core items in the first nine months of 2021 amounted to $ 74.2 million compared to a loss of $23.1 million in the first nine months of 2020.

Diluted Earnings Per Share

Diluted earnings per share rose to $1.16 for the third quarter of 2021, compared to $0.77 in the third quarter of 2020. Diluted earnings per share before non-core items amounted to $1.31 for the 2021 third quarter, compared to $0.77 for the third quarter of 2020.

Diluted earnings per share for the first nine months of 2021 were $2.70, compared to a diluted loss per share of $2.50 for the same period of 2020. Diluted earnings per share excluding non-core items were $2.85 for the first nine months of 2021, compared to a loss per share of $0.90 for the comparable period last year.

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA excluding the IFRS 16 impact, was $60.7 million in the third quarter of 2021, compared to $41.4 million in the third quarter of 2020. For the first nine months of 2021, EBITDA was $148.1 million, compared to $25.4 million in the same period last year.

Operating cash flow for the third quarter of 2021 was $12.9 million, compared with $41.6 million in the third quarter of 2020. Excluding IFRS 16 and non-core items, operating cash flow was $4.7 million, compared to $27.8 million in the third quarter of 2020. The decrease compared with the year-ago period was primarily due to increase in operational working capital attributed mainly to increase in inventory towards the expected continuance increase in sales and the increased lead time.

Operating cash flow totaled $94.5 million for the first nine months of 2021, compared to $124.9 million for the first nine months last year. Excluding IFRS 16 and non-core items, operating cash flow was $63.0 million for the first nine months of 2021, compared to $85.9 million for the same period last year.

Net financial debt as of September 30, 2021 was $134.8 million, compared to $286.4 million as of September 30, 2020, and $236.3 million as of December 31, 2020.

In order to flatten the debt payment curve and extend the duration of the loan embedded in the bonds series, the Company fully redeemed its debentures series B on August 23, 2021, in a total amount of approximately $115 million, using bank term loans and available cash.

Equity on September 30, 2021, was $609.9 million or 34.9% of the total balance sheet, compared to $436.4 million or 26.8% of the total balance sheet a year earlier.

Delta Galil declared a dividend of $7 million, or $0.274 per share, to be distributed on November 23, 2021. The determining and “ex-dividend” date will be November 11, 2021.

2021 Financial Guidance

Delta Galil raised its 2021 financial guidance, excluding non-core items and based on IFRS 16 and current market conditions and assuming there is no resurgence of the COVID-19 pandemic that leads to quarantines and/or lockdowns in any countries in which the company sells or manufactures its products:

• Full-year 2021 sales are expected to range between $1,900 million and $1,940 million, representing an increase of 4%, compared to mid-point of prior guidance and up 14% from 2019 sales of $1,690.2 million.
• Full-year 2021 EBIT is expected to range between $180 million and $186 million, representing an increase of 11%, compared to mid-point of prior guidance and up 73% from 2019 EBIT of $106.0 million.
• Full-year 2021 EBITDA is expected to range between $280 million and $286 million, representing an increase of 7%, compared to mid-point of prior guidance and up 45% from 2019 EBITDA of $195.6 million.
• Full-year 2021 net income is expected to range between $113 million and $117 million, representing an increase of 15%, compared to mid-point of prior guidance and up 91% from 2019 net income of $60.2 million.
• Full-year 2021 diluted EPS is expected to range between $4.00 and $4.15, representing an increase of 15%, compared to mid-point of prior guidance and up 73% from 2019 EPS of $2.36.

About Delta Galil Industries

Delta Galil Industries is a global manufacturer and marketer of branded and private label apparel products for men, women and children. Since its inception in 1975, the Company has continually strived to create products that follow a body-before-fabric philosophy, placing equal emphasis on comfort, aesthetics and quality. Delta Galil develops innovative seamless apparel including bras, shapewear and socks; intimate apparel for women; extensive lines of underwear for men and branded Men’s underwear including the brands Schiesser, Eminence, Athena & Liabel; babywear, activewear, sleepwear such as the PJ Salvage brand, and leisurewear. Delta Galil also designs, develops markets and sells branded denim and apparel under the brand 7 For All Mankind®, and ladies apparel under the brands Splendid® and Ella Moss®, among others. In addition, it sells its products under brand names licensed to the company, including Wilson, Spalding, Tommy Hilfiger and others. For more information, visit www.deltagalil.com.

Safe Harbor Statement

Matters discussed in this press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "anticipate," "believe," "estimate," "may" "intend," "expect" and similar expressions identify such forward-looking statements. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein, and while expected, there is no guarantee that we will attain the aforementioned anticipated developmental milestones. These forward-looking statements are based largely on the expectations of the Company and are subject to a number of risks and uncertainties. These include, but are not limited to, risks and uncertainties associated with: the impact of economic, competitive and other factors affecting the Company and its operations, markets, product, and distributor performance, the impact on the national and local economies resulting from terrorist actions, and U.S. actions subsequently; and other factors detailed in reports filed by the Company.

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