Delta Galil Reports Fourth Quarter and Record Full Year 2022 Results

Company Beats Its 2022 Sales and EBITDA Guidance and Meets all Other Profitability Targets Despite Challenging Economic Conditions

2022 Sales Increased 4% (7% in constant currency), to a Record $2,031.5 Million

2022 EBIT Before Non-Core Items Increased 1% to a Record $190.2 Million, or 9.4% of Sales

Strong Fourth Quarter Operating Cash Flow Excluding IFRS 16 of $85.1 Million

Reduced Year End Inventory by $51 Million Versus September 30, 2022

Declares $8 Million Dividend for Fourth Quarter 2022

Initiates 2023 Guidance Reflecting Sales in line with Record 2022 Sales and Higher Year-over-Year Profitability

Delta Galil Industries, Ltd. (DELT/Tel Aviv Stock Exchange), the global manufacturer and marketer of branded and private label intimate, activewear, loungewear and denim apparel for men, women and children, today reported financial results for the fourth quarter and full year ended December 31, 2022.

Fourth Quarter 2022 Highlights (Comparisons are to Prior Year Period Unless Otherwise Noted)

• Sales decreased 6% (2% in constant currency) to $544.4 million
• EBIT before non-core items decreased 12% to $56.9 million, or 10.5% of sales
• EBITDA excluding IFRS 16 impact decreased 12% to $65.6 million
• Diluted earnings per share decreased 16% to $1.35
• Operating cash flow excluding IFRS 16 impact increased 47% to $85.1 million
• Inventory was reduced $51 million from September 30, 2022
• The Company declared a dividend of $8 million, or $0.312 per share, which will be distributed on March 14, 2023, with a record and “ex-dividend” date of February 22, 2023

2022 Full Year Highlights (Comparisons are to Prior Year Period)

• Sales increased 4% (7% in constant currency) to a record $2,031.5 million
• EBIT before non-core items increased 1% to a record $190.2 million, or 9.4% of sales
• EBITDA excluding IFRS 16 impact increased 1% to $224.2 million
• Diluted earnings per share decreased 3% to $4.14
• The Company’s balance sheet remains strong with $194.9 million in cash and short-term deposits, and record equity of $710.3 at December 31, 2022

Isaac Dabah, CEO of Delta Galil, stated: “We achieved record annual sales in 2022, driven by sales growth across all of our geographies and within all of our segments, on a constant currency basis. Our performance throughout the year is especially noteworthy as our global teams continued to navigate challenging economic conditions, increased customer inventories and higher promotional activities. During the fourth quarter, we reduced our inventories and generated strong cash flows which further strengthened our balance sheet.”

Mr. Dabah continued, “While we expect challenging market conditions to continue throughout 2023, we believe we are well positioned to grow sales and improve profitability in the second half of the year. During 2023, we will continue to invest in our digital capabilities and further extend our leading private label offerings to iconic and digitally native global brands. We expect to launch new brands, such as Polo Ralph Lauren, and expand our existing brands globally. As part of our commitment to sustainability, we plan to launch an exciting new global collection at Organic Basics. Finally, we plan to further enhance our flexible global supply chain with a new factory in Vietnam and Egypt.”

“We remain focused on pursuing our growth strategies which include acquisitions and strategic collaborations, streamlining our global cost base, strengthening our balance sheet, and returning capital to shareholders. I am proud of our team’s success during a challenging 2022, and I am excited about the long-term opportunities we are pursuing,” concluded Mr. Dabah.

Sales

The Company reported fourth quarter sales of $544.4 million, a 6% decrease (2% in constant currency) from $578.0 million in the fourth quarter of 2021. Sales for the full year were $2,031.5 million, a 4% increase (7% in constant currency) from $1,951.0 million in 2021. Sales in constant currency increased across all geographies and in all segments in 2022.

Digital Sales

E-commerce sales on the Company’s own websites were $62.8 million in the fourth quarter, representing a 6% decrease (1% in constant currency), compared to $66.9 million in the fourth quarter of 2021. E-commerce sales on the Company’s own websites for the full year decreased 13% (10% in constant currency) and amounted to $220.6 million, compared to $253.6 million in 2021. The decline followed a shift in consumer behavior back towards physical retail stores after COVID-19 related lockdowns. Excluding Bare Necessities and Organic Basics, which were acquired in October 2020 and July 2022, respectively, sales on the company’s own websites in the fourth quarter and full year 2022 increased by 59% and 78%, respectively, compared to the same periods in 2019.

EBIT

EBIT in the fourth quarter decreased 12% to $57.2 million, from $64.7 million last year. EBIT before non-core items in the fourth quarter decreased 12% to $56.9 million, from $64.7 million in the fourth quarter of 2021.

EBIT for the full year decreased 2% to $185.1 million, from $188.1 million in 2021. For the full year 2022, EBIT before non-core items increased 1% to $190.2 million, from $188.1 million in 2021.

Net Income

Net income for the fourth quarter decreased 17% to $37.7 million, from $45.5 million in the fourth quarter of 2021. Net income excluding non-core items, net of tax, was $37.4 million, compared to $45.5 million in the fourth quarter of 2021.

Net income for the full year decreased 4% to $115.4 million, from $120.3 million in 2021. Net income excluding non-core items, net of tax, was $120.6 million, compared to $124.2 million in 2021.

Diluted Earnings Per Share

Diluted earnings per share for the fourth quarter decreased 16% to $1.35, from $1.60 in the fourth quarter of 2021. Diluted earnings per share attributable to the Company’s shareholders, before non-core items, net of tax, were $1.34, compared to $1.60 in the fourth quarter of 2021.

Diluted earnings per share for the full year decreased 3% to $4.14, compared to $4.29 in 2021. Diluted earnings per share attributable to the Company’s shareholders, before non-core items, net of tax, were $4.33 from $4.44 in 2021.

EBITDA, Cash Flow, Net Debt, Equity, and Dividend

EBITDA excluding IFRS 16 impact for the fourth quarter decreased 12% to $65.6 million, from $75.0 million in the fourth quarter of 2021. For the full year, EBITDA excluding IFRS 16 impact increased 1% to $224.2 million, from $223.0 million in 2021.

Operating cash flow excluding IFRS 16 impact and non-core items increased by 47% to $85.1 million in the fourth quarter, compared to $57.8 million in the fourth quarter of 2021. Operating cash flow excluding IFRS 16 impact and non-core items for the full year was a use of $19.3 million, compared to positive operating cash flow of $120.8 million in 2021. The year-over-year reduction in operating cash flow reflects elevated investments in working capital, primarily due to reduction in accounts payables due to lower purchasing.

Net financial debt as of December 31, 2022, was $217.4 million, compared to $281.7 million at September 30, 2022, and $95.2 million as of December 31, 2021. The year-over-year increase in net debt is primarily due to capital expenditures and the use of operating cash flow in 2022.

Equity at December 31, 2022 was at a record level of $710.3 million, up 9% compared to $649.2 million at December 31, 2021.

Delta Galil declared a dividend of $8 million, or $0.312 per share, to be distributed on March 14, 2023. The record and “ex-dividend” date will be February 22, 2023.

2023 Financial Guidance

Delta Galil’s 2023 guidance excludes non-core items and includes IFRS 16 impact, and it is based on exchange rates of 1.03 USD to 1 Euro and 3.45 NIS to 1 USD.

Constant Currency - Excluding the Impact of Foreign Currency

This release refers to “reported” amounts in accordance with Generally Accepted Accounting Principles (“GAAP”), which include translation and transactional impacts from foreign currency exchange rates. The release also refers to “constant dollar” amounts, which exclude the impact of translating foreign currencies into USD (U.S. dollars), and is considered a non-GAAP financial measure.

These constant currency performance measures should be viewed in addition to, and not in lieu of, or superior to, Delta Galil’s operating performance measures calculated in accordance with GAAP.

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 endeavored 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; underwear for men including under its owned brands Schiesser, Eminence, and Athena; babywear, activewear, sleepwear, and loungewear including under its owned P.J. Salvage and Delta brands. Delta Galil also designs, develops markets and sells branded denim and apparel under the brand 7 For All Mankind®, and ladies’ and kids’ apparel under the brand Splendid®. In addition, the Company sells its products under brand names licensed to it, including adidas, Wolford, Wilson, Columbia, 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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