Delta Galil Reports First-Quarter 2024 Results

Net Income Increased 300% to $12.0 Million

Total Sales Increased 2%, Demonstrating the Strength of Delta’s Brands as well as the Value and Offerings the Company Provides its Private Label Partners

Gross Margin Increased to a First Quarter Record of 42.3%

First-Quarter EBIT Increased 80% to $26.0 Million, and EBIT Before Non-Core Items Increased 48% to $29.4 Million

First-Quarter Net-profit Before Non-Core Items Increased 86% to $14.5 Million

Operating Cash Flow, Excluding IFRS 16, Increased 114% to a First Quarter record of $23.5 Million

Strong Balance Sheet with Equity of $764.6 Million and Net Debt to EBITDA, Excluding IFRS 16, of 0.7x

Doubles the declared divided to $8.0 Million for First Quarter 2024, compared to $4.0 Million for First Quarter 2023

Management Updates 2024 Guidance, and with the Strong Start to the Year, Expects 2024’s Annual Financial Results to be in the Mid to Upper-Range of its original Guidance

Delta Galil Industries, Ltd. (DELG/Tel Aviv Stock Exchange), the global manufacturer and marketer of branded and private label intimate, activewear, loungewear and denim apparel for ladies, men, and children, today reported financial results for the first quarter ended March 31, 2024.

• First-quarter sales increased 2% to $450.8 million, driven by growth across most of the Company’s segments
• First-quarter online sales of the Company’s own brands increased 18%
• Gross margin improved 320 basis points to a first-quarter record of 42.3%
• First quarter EBIT before non-core items increased by 48% to $29.4 million, or 6.5% of sales compared to $19.8 million, or 4.5% of sales, for the same period last year
• First quarter net-income before non-core items increased by 86% to $14.5 million, or 3.2% of sales compared to $7.8 million, or 1.8% of sales, for the same period last year
• First-quarter diluted earnings per share before non-core items increased 88% to $0.49
• Operating cash flow, for the three months ended March 31, 2024, excluding IFRS 16, improved 114% to a record Quarter one level of $23.5 million
• Strong balance sheet with $187.4 million in cash and shareholders’ equity of $764.6 million at March 31, 2024
• Net debt, excluding IFRS 16, declined 38% to $139.0 million, compared to $224.0 million at March 31, 2023
• Doubles the declared divided to $8.0 million for first quarter 2024, compared to $4.0 million for first quarter 2023

Isaac Dabah, CEO of Delta Galil, stated, “Delta’s solid first-quarter results demonstrate the strength of our brands, the remarkable value and offerings we provide to our Private Label partners, and the successful implementation of the strategies we are pursuing to deliver strong revenue and earnings growth. Our performance during the first quarter is especially encouraging as we returned to year-over-year growth in sales with strong profitability and record first quarter operating cash flow. This is a testament to the hard work and dedication of our global teams, and the success of recent initiatives aimed at driving sales, improving operating efficiencies and realigning our manufacturing capabilities.”

Mr. Dabah concluded, “Our strong balance sheet and capital position provide us with additional flexibility to execute our growth oriented strategic plan. During the first quarter we successfully completed the previously announced acquisition of Passionata, which adds a complementary intimate brand with a strong global and millennial following to our portfolio. In addition, we continue to pursue opportunities for both our owned and licensed brands that we believe will drive growth and profitability in 2024 and beyond.”

Sales

The Company reported first-quarter 2024 sales of $450.8 million, a 2% increase from $442.5 million in the first quarter of 2023, driven by growth across most of the Company’s segments.

Gross Margin

Gross margin in the first quarter of 2024 increased to a first quarter record of 42.3%, compared to 39.1% for the same period last year. The 320-basis point expansion was due primarily to a better customer and channel mix, improved profitability of our factories due to higher volume, and lower freight costs.

EBIT

EBIT in the first quarter of 2024 increased by 80% to $26.0 million, or 5.8% of sales compared to $14.4 million, or 3.3% of sales in the prior-year period. EBIT before non-core items increased by 48% to $29.4 million, or 6.5% of sales, compared to $19.8 million, or 4.5% of sales, in the first quarter of 2023.

The increase in EBIT was due to higher sales and gross margin, partially offset by higher SG&A expenses.

Non-Core Items

For the first quarter of 2024, expenses associated with the Company’s previously disclosed realignment plan for Bare Necessities were $3.4 million, compared to $5.4 million related to the realignment plan of the first quarter of 2023.

Net Income

Net income in the first quarter of 2024 increased 300% to $12.0 million, compared to $3.0 million in the first quarter last year. Net income, excluding non-core items, net of tax, increased by 86% to $14.5 million, compared to $7.8 million in the first quarter of 2023.

Diluted Earnings Per Share

Diluted earnings per share in the first quarter of 2024 were $0.39, compared to $0.08 in the first quarter of 2023. Diluted earnings per share, excluding non-core items, net of tax, were $0.49 compared to $0.26 in the first quarter of 2023.

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

EBITDA excluding IFRS 16 impact in the first quarter of 2024 was $37.7 million, compared to $28.5 million in the first quarter of 2023.

Cash flow generated from operating activities, excluding IFRS 16, was a first quarter record of $23.5 million, compared to $11.0 million in the first quarter of 2023. The significant year-over-year improvement in operating cash flow was primarily attributed to the higher EBITDA.

Net financial debt, excluding IFRS 16, at March 31, 2024, was $139.0 million, compared to $224.0 million at March 31, 2023. The year-over-year reduction in net debt is primarily due to the strong operating cash flow, partially offset by growth-oriented capital expenditures and dividend payments.

Equity on March 31, 2024, was a first quarter record of $764.6 million, up 8.7% from $703.1 million on March 31, 2023.

Delta Galil declared a dividend of $8.0 million, or $0.31 per share, which will be distributed on June 10, 2024. The record and “ex-dividend” date will be May 30, 2024.

2024 Financial Guidance

Based on the strong start to the year, and current outlook, management expects 2024’s financial results to be in the mid to upper part of its original guidance range. The Company’s guidance excludes non-core items, including IFRS 16, is based on ex-rates of $1.05 to 1 Euro and NIS 3.74 to 1$, and is based on current tax rates, which include 2024 first quarter implementation of the Organization for Economic Co-operation and Development (OECD) Pillar Two minimum effective corporate tax.

These forward-looking statements are based largely on the expectations of the Company and are subject to uncertainties including macroeconomic trends. Actual results may differ materially from those included in the guidance as result of risks and uncertainties which cannot be fully predicted. There is no certainty that the aforementioned conditions will occur, and actual results may be significantly different from those forecasted or implied below.

Based on the Company's order book and projections, the Company expects growth in 2024 to materialize mostly in the second half of the year.

The Company's expectations depend, among others, on the following: returning to normalized inventory levels at our main customers driving higher demand and improving profitability, expanding into new categories, launching new global collections, increasing production levels in our new factories in Vietnam and Egypt, implementing realignment plans including the new plan for Bare Necessities in the first quarter of 2024, improving backlog of innovative products and launching new brands and license agreements.

Constant Currency - Excluding the Impact of Foreign Currency

This release refers to “reported” amounts in accordance with IFRS 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 U.S. dollars, and are 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, it sells its products under brand names licensed to the company, 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, tax rates in the various countries the company operates in, 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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