Delta Galil Industries Ltd. · TASE:DELG
Delta Galil Industries — Q2 2023 Earnings Presentation
26 slides from Delta Galil Industries's earnings presentation, August 2023
Slide 1: Welcome to Q2-2023 Results
WELCOME TO Q2-2023 RESULTS August 2023 1
Slide 2: Q2 2023 Results Overview disclaimer
DELTA | Q2 2023 RESULTS OVERVIEW מצגת זו אינה מהווה ואין לפרשה כהצעה או הזמנה לרכישה ו/או הקצאת ניירות ערך של דלתא גליל תעשיות בע"מ ("החברה") .מצגת זו אינה מתיימרת לכלול את כל המידע העשוי להיות רלוונטי לצורך קבלת החלטה כלשהי בנוגע להשקעה בניירות הערך של החברה ובכלל .האמור במצגת הינו תמצ
Slide 3: Q2-2023 Results
Q2-2023 RESULTS DELTA | Q2 2023 RESULTS OVERVIEW Sales decrease impacted by global slowdown Strong gross margin despite a highly-promotional environment Strong operating cash flow SALES GROSS MARGIN EBIT** $443.6M 40.4% $30.9M (10%), (9%) C$* +190 BPS (30%) EBIT MARGIN** NET PROFIT MARGIN** OPERATIN
Slide 4: Q2-2023 Highlights
Q2-2023 HIGHLIGHTS DELTA | Q2 2023 RESULTS OVERVIEW • Sales decreased by 10% (-9% on C$) vs. Q2-2022, impacted by global slowdown • Our own Branded Web sales increased, driven by higher traffic • Continued strong growth of Skims with multiple new expansion opportunities • Strong gross margin of 40.4
Slide 5: Quarterly Trend Analysis
QUARTERLY TREND ANALYSIS DELTA | Q2 2023 RESULTS OVERVIEW • Q2-2023 Sales down 10% or 9% on C$ impacted by global slowdown and due to major customers’ ongoing focus on inventory reduction • Gross margin increased to 40.4% due to favorable customer mix and lower freight costs, partially offset by hig
Slide 6: Lower EBIT % despite strong gross margin, mainly due to higher SG&A
LOWER EBIT % DESPITE STRONG GROSS MARGIN, DELTA | Q2 2023 RESULTS OVERVIEW MAINLY DUE TO HIGHER SG&A Q2-2022 Gross margin 38.5% Var Q2-2022 EBIT%* 9.0% Var Customer & product mix SG&A Freight Cost Positive FX impact Segment Mix SG&A de-leverage Manufacturing impact SG&A cost increase Higher discount
Slide 7: Q2-2023 Financial Highlights vs. Q2-2022
Q2-2023 FINANCIAL HIGHLIGHTS VS. Q2-2022 DELTA | Q2 2023 RESULTS OVERVIEW Total Sales Gross Profit EBIT (BOT) Q2-2022 Q2-2023 Q2-2022 Q2-2023 Q2-2022 Q2-2023 $491.3M $443.6M $189.0M $179.1M $44.0M $30.9M Own Branded Websites Sales* Gross Margin EBIT Margin (BOT) Q2-2022 Q2-2023 Q2-2022 Q2-2023 Vs. Q
Slide 8: Q2-2023 One-Time Items Breakdown
Q2-2023 ONE-TIME ITEMS BREAKDOWN DELTA | Q2 2023 RESULTS OVERVIEW Headcount One-time items Cash ($M) Non Cash ($M) Total ($M) Reduction Q2 Bogart China realignment plan * 5.3 0.7 6.0 550 Change in fair value of Bogart's acquisition earnout (4.0) (4.0) Deal cost (mostly Delta Israel) 0.7 0.7 Total on
Slide 9: Q2-2023 Update by Segment
DELTA | Q2 2023 RESULTS OVERVIEW Q2-2023 SEGMENT UPDATE BY 9
Slide 10: Private Label
PRIVATE LABEL DELTA | Q2 2023 RESULTS OVERVIEW We are the partner of choice to iconic and digitally-native global brands Strong EBIT% with 140 BPS increase despite lower sales ($M) Q2-2023 Q2-2022 Var SALES 191.6 221.3 (13%) EBIT 22.0 22.5 (2%) EBIT% 11.5% 10.1% 1.4% SALES decreased by 13%, mostly d
Slide 11: Brands
BRANDS DELTA | Q2 2023 RESULTS OVERVIEW Our Brands segment includes a comprehensive portfolio of top intimate apparel and activewear brands ($M) Q2-2023 Q2-2022 Var SALES 127.3 134.8 (6%) EBIT 3.0 6.5 (54%) EBIT% 2.3% 4.8% (2.5%) SALES decreased by 6%, mainly driven by lower sales to major retailers
Slide 12: Delta Israel
DELTA ISRAEL DELTA | Q2 2023 RESULTS OVERVIEW Delta, our legacy brand, is the leading intimate apparel brand in Israel with a unique proposition of selling to the entire family ($M) Q2-2023 Q2-2022 Var Var C$ * SALES 53.0 59.0 (10%) (2%) EBIT 8.3 11.4 (27%) EBIT% 15.6% 19.3% (3.7%) SALES in NIS decr
Slide 13: Delta Israel Growth Strategy
DELTA ISRAEL GROWTH STRATEGY DELTA | Q2 2023 RESULTS OVERVIEW Growing from 3 local brands with 211 stores to 5 brands, including 2 global leaders, and 280 stores in 3 years BATH & BODY WORKS VICTORIA'S SECRET STORES GROWTH PLAN Launched brand, opening 5 Launched brand and e-comm stores and e-comm si
Slide 14: 7 For All Mankind
7 FOR ALL MANKIND DELTA | Q2 2023 RESULTS OVERVIEW 7 For All Mankind is the originator of American premium denim, born in LA in 2000 ($M) Q2-2023 Q2-2022 Var SALES 51.9 53.9 (4%) EBIT 2.7 6.4 (57%) EBIT% 5.3% 11.9% (6.6%) SALES decreased by 4%, due to lower performance in US wholesale, partially off
Slide 15: Other (Bare Necessities & Organic Basics)
OTHER (BARE NECESSITIES & ORGANIC BASICS) DELTA | Q2 2023 RESULTS OVERVIEW Bare Necessities is a leading online multi-brand intimate apparel and swimwear retailer Organic Basics is a sustainable digital apparel brand which we acquired in Q3-2022 ($M) Q2-2023 Q2-2022 Var SALES 23.2 30.4 (23%) EBIT (4
Slide 16: Organic Basics
ORGANIC BASICS DELTA | Q2 2023 RESULTS OVERVIEW Organic Basics is a sustainable digital-first apparel brand selling women’s and men’s underwear, activewear and base layers Business Update • Launched new Gen-Z focused brand in July with elevated logo, photography and marketing aesthetic • Planning a
Slide 17: YTD-2023 Results
YTD-2023 RESULTS 17
Slide 18: YTD-2023 Financial Highlights vs. YTD-2022
YTD-2023 FINANCIAL HIGHLIGHTS VS. YTD-2022 DELTA | Q2 2023 RESULTS OVERVIEW Total Sales Gross Profit EBIT (BOT) YTD-2022 YTD-2023 YTD-2022 YTD-2023 YTD-2022 YTD-2023 $975.1M $886.0M $372.3M $352.0M $78.2M $50.7M Own Branded Websites Sales* Gross Margin EBIT Margin (BOT) YTD-2022 YTD-2023 YTD-2022 YT
Slide 19: Q2-2023 vs. Q1-2023 – EBIT% Bridge
* Q2-2023 VS. Q1-2023 – EBIT% BRIDGE DELTA | Q2 2023 RESULTS OVERVIEW A significantly higher EBIT (+56%) and EBIT% (+250BPS) at slightly higher sales level Q1-2023 Gross margin 39.1% Var Q1-2023 EBIT%* 4.5% Var Favorable Customer mix SG&A Lower freight and FOB costs Reduction in distribution centers
Slide 20: Strong Balance Sheet
STRONG BALANCE SHEET DELTA | Q2 2023 RESULTS OVERVIEW $ in millions June 30 2022 % OF TOTAL June 30 2023 % OF TOTAL $180.8M Cash & short term deposits CASH PORTFOLIO 182.6 10% 180.8 10% INVENTORY 519.4 29% 452.0 26% OTHER CURRENT ASSETS 234.2 13% 231.0 13% $189.5M Net Debt TOTAL CURRENT ASSETS 936.2
Slide 21: Inventory Trend
* INVENTORY TREND DELTA | Q2 2023 RESULTS OVERVIEW 5 consecutive quarters of reduced inventory change rate 3 consecutive quarters of lower inventory 50% 45% Excess 35% inventory 33% 31% 23% 23% Significant inventory reduction Gradual inventory Reduction in during COVID build-up inventory growth 2% r
Slide 22: We expect strong H2-2023
H2-2023 DELTA | Q2 2023 RESULTS OVERVIEW We expect strong H2-2023 due to the following: • H2 positively impacted by our strong seasonality trend • Strong DTC performance with high margins • Favorable customer mix led by Skims • Solid Back-to-School performance • Improved margins due to lower logisti
Slide 23: 2023 Guidance
2023 GUIDANCE DELTA | Q2 2023 RESULTS OVERVIEW We reiterate 2023 full-year guidance, including the expectation of meaningfully higher gross and operating margins in the second half of 2023, and with lower inventory and debt levels $ in millions 2023 GUIDANCE 2022 ACTUAL 2023 GUIDANCE VS. 2022 ACTUAL
Slide 24: 2024 - Return to Growth in Sales and Profitability
2024 - RETURN TO GROWTH IN DELTA | Q2 2023 RESULTS OVERVIEW SALES AND PROFITABILITY Normalized inventory at our Our Egypt new socks facility and new customers will drive strong demand Vietnam plant for Bogart fully operative Reduced own inventory levels Our realignment plan will will improve margins
Slide 25: Thank You
THANK YOU 25
Slide 26: Q2-2023 IFRS 16 Impact
Q2-2023 IFRS 16 IMPACT DELTA | Q2 2023 RESULTS OVERVIEW $ in millions Q2-2023 EBIT 3.9 EBITDA 17.1 Finance expenses 2.4 Net income 1.2 26
Delta Galil Industries — Q2 2023 Earnings Presentation on 6ix