Delta Galil Reports Strong Third-Quarter 2024 Results of Profitable Growth

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Business Wire

Tue, Nov 19, 2024, 12:20 PM 17 min read

CAESAREA, Israel, November 19, 2024--(BUSINESS WIRE)--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 third quarter ended September 30, 2024.

Third Quarter 2024 Highlights (comparisons are to prior year period unless otherwise noted)

Record third quarter sales increased 13% to $524.2 million, driven by growth across all channels
Record third quarter gross margin of 41.6% up 70 basis points
Third quarter EBIT increased 13% to $52.3 million, or 10.0% of sales
Third quarter net income increased by 9% to $32.0 million, or 6.1% of sales
Third-quarter diluted earnings per share increased 6% to $1.16
Third-quarter operating cash flow, excluding IFRS 16 increased 23% to $37.2 million
Strong balance sheet with $108.2 million in cash and record shareholders’ equity of $797.8 million at September 30, 2024
Net debt, excluding IFRS 16, declined 9% to $162.5 million, compared to $178.0 million at September 30, 2023
Net Debt to EBITDA, excluding IFRS 16, of 0.8x
Dividend declared of $8.1 million, or $0.31 per share, which will be distributed on December 10, 2024, with a record and "ex-dividend" date of November 27, 2024
The Company reaffirms its 2024 full-year guidance

Isaac Dabah, CEO of Delta Galil, stated, "Delta Galil delivered record third quarter revenue, gross profit and gross margin, leading to a 14% increase in EBITDA, excluding IFRS 16, compared to the prior year quarter. Record top-line results were driven by growth across all channels including record third quarter DTC sales. In addition, we have produced five consecutive quarters of record gross margin reflecting the continued success of the strategies we are pursuing to enhance our operating efficiencies and realign our manufacturing capabilities."

Mr. Dabah added, "I am encouraged by the strong operating and financial results we have achieved through the first nine months of 2024. This is a testament to the diversified business model we have developed, the strategies we are pursuing and the talent of our global workforce. During the third quarter, we published our 2023 ESG report highlighting our commitment to a greener, inclusive, and ethical world. We also announced a strategic partnership with Reliance Retail Ventures, the largest retail company in India that is aimed at driving growth and introducing our legacy of innovation within the intimate apparel sector to the Indian market."

Sales

The Company reported record third quarter 2024 sales of $524.2 million, a 13% increase from $463.0 million in the third quarter of 2023.

Sales for the nine-month period of 2024 were $1,446.4 million, a 7% increase from $1,349.1 million in the prior-year period.

Gross Margin

The Company reported a record third quarter gross margin of 41.6% as compared to 40.9% for the same period last year. The 70-basis point expansion was due primarily to higher volume and improved efficiency of our factories as well as a more favorable channel mix.

Gross margin in the nine months of 2024 increased by 180-basis points to 41.9%, compared to 40.1% in the prior-year period.

EBIT

EBIT in the third quarter of 2024 increased by 13% to $52.3 million, or 10.0% of sales compared to $46.1 million, in the prior-year period.

EBIT in the nine months of 2024 was $116.1 million, or 8.0% of sales, compared to $88.8 million, or 6.6% of sales in the same period last year. EBIT before non-core items in the nine months of 2024 was $119.4 million, or 8.3% of sales, compared to $96.9 million, or 7.2% of sales, in the nine months of 2023.

The increase in EBIT was due to higher sales and gross margin, partially offset by some SG&A cost for investing in new licenses and brand launch activities, as well as lower other income in 2024 which included $3.8 million insurance refund back in 2023.

Non-Core Items

The Company recorded no non-core items in its third quarters of 2024 and 2023.

In the first nine months of 2024, expenses associated with the Company’s previously disclosed realignment plan for Bare Necessities were $3.4 million, compared to $11.4 million of expenses related to realignment plans, $4.0 benefit from the change in the fair value of earn-out liability, and $0.7 million of deal costs in the first nine months of 2023.

Net Income

Net income in the third quarter of 2024 increased 9% to $32.0 million, compared to $29.5 million in the third quarter last year.

Net income in the nine months of 2024 increased 37% to $65.1 million, compared to $47.6 million in the same period last year. Net income excluding non-core items, net of tax, increased 26% to $67.6 million, compared to $53.8 million in the first nine months of 2023.

Diluted Earnings Per Share

Diluted earnings per share in the third quarter of 2024 were $1.16, compared to $1.09 in the third quarter of 2023.

Diluted earnings per share in the nine months of 2024 were $2.29, compared to $1.71 in the same period last year. Diluted earnings per share, excluding non-core items, net of tax, were $2.39 in the first nine months of 2024 compared to $1.94 in the same period of 2023.

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

EBITDA, excluding IFRS 16, in the third quarter of 2024 was $60.5 million, compared to $53.2 million in the third quarter of 2023. In the nine months of 2024, EBITDA, excluding IFRS 16, was $144.7 million, compared to $119.7 million in the nine months of 2023.

Cash flow generated from operating activities, excluding IFRS 16, was $37.2 million, compared to $30.3 million in the third quarter of 2023. Cash flow generated from operating activities, excluding IFRS 16, was $88.8 million in the nine months of 2024, compared to $99.6 million in the nine months of 2023. The year-over-year reduction in nine-month operating cash flow was primarily attributable to changes in working capital, mainly inventory, to support expected sales growth and new product launches.

Net financial debt, excluding IFRS 16, at September 30, 2024, was $162.5 million, compared to $178.0 million at September 30, 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 September 30, 2024, was a record of $797.8 million, up 10% from $725.8 million on September 30, 2023.

Delta Galil declared a dividend of $8.1 million, or $0.31 per share, which will be distributed on December 10, 2024, with a record and "ex-dividend" date of November 27, 2024.

2024 Financial Guidance

The Company reaffirms its 2024 guidance based on the Company’s solid year-to-date performance.

	Full Year 2024 Guidance (in millions, except per share amount)	2023 Results (in millions, except per share amount)

Sales	$1,991.0 – 2,031.0	$1,857.7

EBIT	$173.0 – 183.0	$153.0
EBITDA	$266.3 – 276.3	$246.8
Net income	$106.9 – 114.7	$91.6
Diluted EPS ($)	$3.82 – 4.11	$3.25

The Company’s guidance excludes non-core items and includes IFRS 16

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 above.

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, Organic Basics, 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.


DELTA GALIL INDUSTRIES LTD.
Concise Consolidated Balance Sheets
As of September 30, 2024

	September 30		December 31
	2024	2023	2023
	(Unaudited)		(Audited)
	Thousands of Dollars


Assets
Current assets:
Cash and cash equivalents	106,646	147,521	174,463
Restricted Cash	1,511	2,922	2,950
Short-term deposit	-	6,365	-
Trade receivables	237,677	211,591	241,216
Taxes on income receivable	2,412	989	77
Others	52,107	49,547	48,920
Financial derivative	99	34	228
Inventory	478,596	423,313	361,416
Assets held for sale	1,773	1,799	1,773
Total current assets	880,821	844,081	831,043

Non-current assets:
Investments in associated companies accounted using the equity method and long-term receivables	11,699	13,185	14,897
Investment property	2,614	2,596	2,679
Fixed assets, net of accumulated depreciation	286,441	242,003	250,343
Goodwill	146,023	144,018	145,577
Intangible assets, net of accumulated amortization	299,299	267,233	277,952
Assets in respect of usage rights	244,236	215,305	237,177
Deferred tax assets	33,533	18,497	28,016
Financial derivative	233	264	903
Total non-current assets	1,024,078	903,101	957,544
Total assets	1,904,899	1,747,182	1,788,587


DELTA GALIL INDUSTRIES LTD.
Concise Consolidated Balance Sheets
As of September 30, 2024

	September 30		December 31
	2024	2023	2023
	(Unaudited)		(Audited)
	Thousands of Dollars

Liabilities and Equity
Current liabilities:
Short-term bank loans	6,801	22,704	822
Current maturities of bank loans	21,336	23,913	24,105
Current maturities of bonds	29,630	29,194	29,597
Financial derivative	1,506	2,001	1,380
Current maturities of leases liabilities	55,224	49,217	52,583
Trade payables	284,384	194,241	168,637
Taxes on income payable	27,546	29,937	35,182
Provision for restructuring plan	2,863	5,919	3,574
Others accounts payable	161,774	136,773	165,791
Total current liabilities	591,064	493,899	481,671

Non-current liabilities:
Bank loans	126,643	141,293	140,790
Severance pay liabilities, net	5,619	5,393	5,327
Liabilities in respect of leases	212,045	186,139	204,746
Other non-current liabilities	54,055	53,165	53,241
Bonds	78,933	108,109	96,496
Deferred taxes liabilities	36,022	31,422	35,812
Financial derivative	2,671	1,973	2,122
Total non-current liabilities	515,988	527,494	538,534
Total liabilities	1,107,052	1,021,393	1,020,205

Equity:
Equity attributable to equity holders of the parent company:
Share capital	23,714	23,714	23,714
Share premium	124,795	127,896	127,861
Other capital reserves	30,290	16,260	28,133
Retained earning	608,303	544,771	571,846
Treasury shares	(10,602)	(13,703)	(13,668)
	776,500	698,938	737,886
Minority interests	21,347	26,851	30,496
Total equity	797,847	725,789	768,382
Total liabilities and equity	1,904,899	1,747,182	1,788,587


DELTA GALIL INDUSTRIES LTD.
Concise Consolidated Statement of Income
For the 9-month and 3-month periods ending September 30, 2024

	Nine months ended September 30		Three months ended September 30
	2024	2023	2024	2023
	(Unaudited)
	Thousands of Dollars
	(Excluding earning per share figures)


Sales	1,446,439	1,349,079	524,234	463,039
Cost of sales	840,275	807,616	305,959	273,578
Gross profit	606,164	541,463	218,275	189,461
% of sales	*41.9%*	40.1%	*41.6%*	40.9%
Selling and marketing expenses	411,477	380,850	142,268	127,314
% of sales	*28.4%*	28.2%	*27.1%*	27.5%
General and administrative expenses	75,629	68,286	24,078	20,397
% of sales	*5.2%*	5.1%	*4.6%*	4.4%
Other income, net and Share in profits of associated company	(355)	(4,537)	(328)	(4,373)
Operating income excluding non-core items	119,413	96,864	52,257	46,123
% of sales	*8.3%*	7.2%	*10.0%*	10.0%
Non-core items	3,360	8,087	-	-
Operating income	116,053	88,777	52,257	46,123
Finance expenses, net	31,535	29,297	9,699	8,788
Income before taxes on income	84,518	59,480	42,558	37,335
Taxes on income	19,403	11,919	10,513	7,839
Net income for the period	65,115	47,561	32,045	29,796
Net income for the period excluding non-core items, net of tax	67,552	53,820	32,045	29,496

Net income for the period attributed to the company's shareholders excluding non-core items, net of tax	62,588	51,041	30,524	28,722

Attribution of net earnings for the period:
Attributed to company's shareholders	60,151	44,844	30,524	28,722
Attributed to non-controlling interests	4,964	2,717	1,521	774
	65,115	47,561	32,045	29,496

Net diluted earnings per share attributed to company's shareholders	2.29	1.71	1.16	1.09

Net diluted earnings per share, before non-core items, net of tax, attributable to Company's shareholders	2.39	1.94	1.16	1.09


DELTA GALIL INDUSTRIES LTD.
Concise Consolidated Cash Flow Reports
For the 9-month and 3-month periods ending September 30, 2024

	Nine months ended September 30		Three months ended September 30
	2024	2023	2024	2023
	(Unaudited)
	Thousands of Dollars

Cash flows from operating activities:
Net income for the period	65,115	47,561	32,045	29,496
Adjustments required to reflect cash flows deriving from operating activities	116,331	118,424	39,314	25,128
Interest paid in cash	(24,891)	(25,490)	(10,372)	(8,594)
Interest received in cash	3,134	2,768	869	1,523
Taxes on income paid in cash, net	(34,104)	(6,182)	(12,530)	(4,756)
Net cash generated from operating activities	125,585	137,081	49,326	42,797

Cash flows from investment activities:
Change in short-term deposit, net	-	53,989	-	35,415
Purchase of fixed assets and assets under construction	(61,195)	(28,012)	(25,306)	(6,832)
Purchase of intangible assets	(26,761)	(3,399)	(5,337)	(1,679)
Proceeds from selling of fixed asset	392	483	144	39
Others	2,235	487	557	(334)
Net cash generated from (used in) Investing activities	(85,329)	23,548	(29,942)	26,609

Cash flows from financing activities:
Dividends paid to non-controlling interest holders in consolidated subsidiary	(13,644)	(1,934)	(10,945)	(534)
Long term payables credit for fixed assets purchase	(3,993)	(5,044)	(1,181)	(1,478)
Lease principal repayment	(36,834)	(37,492)	(12,113)	(12,540)
Repayment of bonds	(15,940)	(31,080)	(15,940)	(15,940)
Dividend paid	(24,933)	(19,040)	(7,932)	(7,012)
Receipt of a long-term loans from banking corporations	4,990	32,694	2,831	32,694
Repayment of long-term loans from banking corporations	(22,228)	(42,574)	(14,267)	(38,842)
Short-term credit from banking corporations, net	5,831	(28,775)	(21,512)	(8,236)
Others	(60)	(3,180)	(60)	(2,461)
Net cash used in financing activities	(106,811)	(136,425)	(81,119)	(54,349)
Net increase (decrease) in cash and cash equivalents	(66,555)	24,204	(61,735)	15,057

Exchange rate differences and revaluation of cash and cash equivalents, net	(1,262)	(3,332)	4,089	(2,419)

Balance of cash and cash equivalents at the beginning of the period, net	174,463	126,649	164,292	134,883
Balance of cash and cash equivalents at the end of the Period, net	106,646	147,521	106,646	147,521


DELTA GALIL INDUSTRIES LTD.
Concise Consolidated Cash Flow Reports
For the 9-month and 3-month periods ending September 30, 2024

	Nine months ended September 30		Three months ended September 30
	2024	2023	2024	2023
	(Unaudited)
	Thousands of Dollars

Adjustments required to reflect cash flows from operating activities:
Revenues and expenses not involving cash flow:
Depreciation	23,968	25,807	8,023	7,920
Amortization	50,010	47,582	16,042	15,126
Exchange rate (gains) losses	281	110	(243)	118
Interest on loans and bonds	16,171	18,894	7,323	6,234
Interest received in cash	(3,134)	(2,768)	(869)	(1,523)
Taxes on income paid in cash, net	34,104	6,182	12,530	4,756
Deferred taxes on income, net	(5,745)	(913)	393	1,287
Interest due to lease agreements	8,720	6,596	3,049	2,360
Severance pay liability, net	251	(860)	59	(28)
Change in restructuring accrual	(711)	3,078	(188)	(1,152)
Income from decrease of earn-out liability	-	(4,000)	-	-
Capital loss (gain)	(105)	(42)	(15)	164
Change to the benefit component of options granted to employees	1,543	1,823	794	97
Credit losses (gains) from trade receivables	1,314	(459)	268	(714)
Share in profits of associated company accounted for using the equity method	(205)	(407)	(185)	(203)
Others	(409)	2,546	1,877	(580)
	126,053	103,169	48,858	33,862
Changes to operating assets and liabilities:
Decrease (increase) in trade receivables	2,261	21,360	(19,828)	(31,397)
Decrease (increase) in other receivable and balances	(3,215)	(7,608)	943	(4,669)
Decrease (increase) in trade payables	115,653	(20,903)	54,213	4,253
Decrease (increase) in other payables	(7,587)	(37,098)	8,552	(726)
Decrease (Increase) in inventory	(116,834)	59,504	(53,424)	23,805
	(9,722)	15,255	(9,544)	(8,734)
	116,331	118,424	39,314	25,128