Delta Galil Reports Record Second Quarter 2022 Results

·18 min read

Sales increased 8% year-over-year, (up 11% in constant dollars) to a record $491.3 million

Operating income excluding non-recurring items increased 4% year-over-year to a record $44.0 million

Net income per diluted share, excluding non-recurring items, increased 4% year-over-year -- and 51% sequentially -- to a record $1.01 per diluted share

Company declares a $6 million dividend for second quarter 2022, an increase compared to second quarter 2021

Company reiterates full-year 2022 guidance in constant dollar basis and expects to achieve mid-to-low range of sales guidance

CAESAREA, Israel, August 15, 2022--(BUSINESS WIRE)--Delta Galil Industries, Ltd. (DELT/Tel Aviv Stock Exchange), the global manufacturer and marketer of branded and private label intimate apparel products for men, women and children, as well as leisurewear, activewear and denim, today reported record financial results for the second quarter and first half ended June 30, 2022.

Second Quarter 2022 Highlights (Comparisons are to Prior Year Period)

  • Sales reached record levels for the sixth consecutive quarter, increasing 8%, or 11% in constant dollars, to $491.3 million, versus $455.8 million last year.

  • Operating income excluding non-recurring items increased 4% to a record $44 million.

  • Net income excluding non-recurring items increased 3% to a record $28.1 million, compared to $27.3 million.

  • Diluted earnings per share (EPS), adjusted for non-recurring items, increased 4% to a record $1.01, compared to $0.97 per share.

  • EBITDA excluding IFRS 16 increased 2% to a record $52.1 million.

  • Balance sheet remains strong with $182.6 million in cash and short-term deposits, and $641.6 million in equity as of June 30, 2022.

  • Delta Galil declared a dividend of $6.0 million, or $0.235 per share, to be distributed on September 6, 2022. The "record" and "ex-dividend" date will be August 22, 2022.

Isaac Dabah, CEO of Delta Galil, stated, "Positive momentum continued across many aspects of our business and we produced record second quarter and year-to-date financial results. Our record results reflect the powerful and diversified platform we have built, our innovative products, compelling brands, broad customer base and the successful execution of our growth strategy. We remain focused on maintaining robust levels of profitability as we successfully control operating costs and leverage our SG&A expenses."

Mr. Dabah, continued, "We believe we are well positioned to successfully navigate the challenging retail environment while pursuing our long-term growth initiatives. In July 2022, as part of our global strategy to grow our digital presence and increase our focus on sustainable apparel and brands, we acquired Organic Basics, a digitally-native brand known for its sustainably and ethically made underwear, activewear and base layers. We see a significant opportunity to grow the Organic Basics brand globally, particularly in the U.S. and Europe, and we are excited to launch an expanded collection of products in 2023. We are confident that our diversified business model, strong balance sheet and global workforce will position us to meet our targets, and we expect 2022 to be a record year for sales and profitability."

Sales

The Company reported record sales of $491.3 million in the second quarter of 2022, an 8% increase from $455.8 million in the second quarter of 2021. In constant dollars, second quarter sales increased 11% from the prior-year period. Record second-quarter sales were driven primarily by strong growth within the Company’s Private Label segment. The Company reported record first-half sales of $975.1 million, a 12% increase from $871.9 million in the prior-year period. In constant dollars, first-half sales increased 14% from the prior-year period.

Digital Sales

Own website sales in the second quarter of 2022 declined 15% to $53.7 million, compared to $63.4 million in the prior-year period, following a shift in consumer behavior back to physical retail locations as stores reopened after COVID-19 related lockdowns. Own website sales in the first half of 2022 declined 19% to $108.5 million, compared to $134.1 million in the prior-year period.

Excluding Bare Necessities, which was acquired in October 2020, own website sales in the second quarter and first half of 2022 increased by 93% and 100%, respectively, compared to the same periods in 2019.

Gross Profit

Gross profit in the second quarter of 2022 increased 1% to $189.0 million, or 38.5% of total sales, compared to $187.3 million, or 41.1% of total sales in the prior-year period. The year-over-year reduction in second-quarter gross margin is attributable mainly to increased freight and raw material costs, the increased mix of Private Label sales--which are characterized by lower gross margins but higher operating margins--and the devaluation of the Euro compared to the USD, partially offset by a favorable customer mix, and increased profitability of the Company’s factories. Gross profit in the first half of 2022 increased 8% to $372.3 million, or 38.2% of total sales, compared to $346.3 million, or 39.7% of total sales, in the first half of 2021.

EBIT, Excluding Non-Recurring Items

EBIT excluding non-recurring items in the second quarter of 2022 increased 4% to $44.0 million, compared to $42.4 million in the prior-year period. The increase was driven by higher sales, operating leverage. EBIT excluding non-recurring items in the first half of 2022 increased 11% to $78.2 million, compared to $70.4 million in the prior-year period.

Net Income, Excluding Non-Recurring Items

Net income excluding non-recurring items in the second quarter of 2022 increased 3% to $28.1 million, compared to $27.3 million in the prior-year period. Net income excluding non-recurring items in the first half of 2022 increased 11% to $47.1 million, compared to $42.4 million in the prior-year period.

Diluted Earnings Per Share, Excluding Non-Recurring Items

Diluted earnings per share excluding non-recurring items in the second quarter of 2022 increased 4% to $1.01, compared to diluted earnings per share of $0.97 in the prior-year period. Diluted earnings per share excluding non-recurring items in the first half of 2022 increased 9% to $1.68, compared to diluted earnings per share of $1.54 in the prior-year period.

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

EBITDA excluding IFRS 16 in the second quarter of 2022 increased 2% to $52.1 million, compared to $50.9 million in the comparable period last year. EBITDA excluding IFRS 16 in the first half of 2022 increased 8% to $94.7 million, compared to $87.4 million in the comparable period last year.

Net cash used in operating activities excluding IFRS 16 was $15.7 million in the second quarter of 2022, compared to net cash provided by operating activities of $36.9 million in the prior-year period. The year-over-year reduction in operating cash flow reflects higher investments in working capital, mainly inventory, to better support growth and service seasonal inventory requirements. Net cash used in operating activities excluding IFRS 16 was $68.3 million in the first half of 2022, compared to net cash provided by operating activities of $58.3 million in the same period in 2021.

Net financial debt excluding IFRS 16 as of June 30, 2022, was $218.4 million, compared to $124.6 million as of June 30, 2021. At June 30, 2022, the ratio of net financial debt excluding IFRS 16 to trailing 12-month EBITDA was 0.9 times, compared to 0.7 times at June 30, 2021.

Delta Galil declared a dividend of $6.0 million, or $0.235 per share, to be distributed on September 6, 2022. The "record" and "ex-dividend" date will be August 22, 2022.

Non-recurring items

The Company is focused on realigning its manufacturing footprint to improve production flexibility and efficiencies while reducing its manufacturing presence in China. As a result, during the second quarter of 2022, the Company ceased operations at Bogart's Shenzhen Factory and moved its operating activity to a new factory in Vietnam. The Company recorded a $5.5 million expense during the second quarter of 2022 associated with employee severance and related costs.

2022 Financial Guidance

Delta Galil’s 2022 guidance excludes non-recurring items and includes IFRS 16, and assumes there is no major 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. The Company reiterates its guidance on a constant currency basis and expects to achieve the mid-to-low range of its sales guidance.

Rapid changes in currency exchange rates have impacted the Company’s reported sales. On a constant currency (USD) basis (*), full year 2022 sales would benefit from additional sales of $45 million or 2%.

Full-Year 2022
Guidance Range
(in millions)

Estimated Year-Over-
Year Growth Rate

2021
Results
(in millions)

Low

High

Low

High

Sales

$2,082

$2,108

7%

8%

$1,951

EBIT

$210

$220

12%

17%

$188.1

EBITDA

$312

$322

9%

12%

$286.8

Net income

$138

$145

11%

17%

$124.2

EPS, diluted

$4.80

$5.09

8%

15%

$4.44

(*) based on the following exchange rate: 1.03 $ per 1 Euro, 3.30 NIS per 1$

Earnings Presentation

The Company will host an in-person investor meeting to discuss second quarter 2022 results and its business outlook at the Tel Aviv Stock Exchange on August 15, 2022 at 9:00 a.m. Israel Daylight Time. A recording of the presentation will be available later in the week at deltagalil.com/investor-relations/events-presentations.

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. This 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, our operating performance measures calculated in accordance with GAAP. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.

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 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, 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.

Source: Delta Galil Industries, Ltd.

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of June 30, 2022

June 30

December 31

2022

2021

2021

(Unaudited)

(Audited)

Thousands of Dollars

Assets

Current assets:

Cash and cash equivalents

147,827

279,881

230,129

Restricted Cash

5,294

898

5,845

Short-term deposit

29,469

-

-

Trade receivables

180,688

171,443

202,140

Taxes on income receivable

11,636

12,175

11,272

Others

41,584

37,621

43,511

Financial derivative

310

1,635

1,615

Inventory

519,392

357,432

395,158

Total current assets

936,201

861,085

889,670

Non-current assets:

Investments in associated companies accounted using

the equity method and long-term receivables

12,262

11,008

12,593

Investment property

2,692

3,215

2,997

Fixed assets, net of accumulated depreciation

216,072

206,886

212,999

Goodwill

144,309

149,366

147,447

Intangible assets, net of accumulated amortization

276,071

289,095

287,109

Assets in respect of usage rights

201,419

201,740

191,213

Deferred tax assets

18,872

15,838

18,705

Financial derivative

2,824

26,186

12,098

Total non-current assets

874,521

903,334

885,161

Total assets

1,810,722

1,764,419

1,774,831

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of June 30, 2022

June 30

December 31

2022

2021

2021

(Unaudited)

(Audited)

Thousands of Dollars

Liabilities and Equity

Current liabilities:

Short-term bank loans

28,147

13

-

Current maturities of bank loans

6,795

13,839

7,501

Current maturities of debentures

30,730

39,013

32,102

Financial derivative

676

365

-

Current maturities of liabilities in respect of leases

47,614

56,678

51,776

Trade payables

251,697

213,159

247,662

Taxes on income payable

21,251

21,977

27,070

Provision for restructuring plan

7,343

17,789

8,879

Others

157,730

152,575

172,607

Total current liabilities

551,983

515,408

547,597

Non-current liabilities:

Bank loans

164,681

59,747

117,122

Severance pay liabilities less plan assets

7,774

8,996

7,075

Liabilities in respect of leases

170,700

169,670

158,851

Other non-current liabilities

76,495

72,318

78,891

Debentures

162,211

312,647

176,316

Deferred taxes liabilities

35,227

40,389

39,797

Financial derivative

39

-

-

Total non-current liabilities

617,127

663,767

578,052

Total liabilities

1,169,110

1,179,175

1,125,649

Equity:

Equity attributable to equity holders of the parent company:

Share capital

23,714

23,714

23,714

Share premium

128,445

129,982

129,500

Other capital reserves

20,778

53,534

53,335

Retained earning

456,538

370,033

432,189

Treasury shares

(14,252)

(15,789)

(15,307)

615,223

561,474

623,431

Minority interests

26,389

23,770

25,751

Total equity

641,612

585,244

649,182

Total liabilities and equity

1,810,722

1,764,419

1,774,831

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Statement of Income

For the 3-month and 6-month periods ending June 30, 2022

Six months ended June 30

Three months ended June 30

2022

2021

2022

2021

(Unaudited)

Thousands of Dollars

(Excluding earning per share figures)

Sales

975,124

871,906

491,251

455,771

Cost of sales

602,841

525,605

302,260

268,500

Gross profit

372,283

346,301

188,991

187,271

% of sales

38.2%

39.7%

38.5%

41.1%

Selling and marketing expenses

252,822

230,838

125,712

121,194

% of sales

25.9%

26.5%

25.6%

26.6%

General and administrative expenses

45,433

45,065

22,207

23,254

% of sales

4.7%

5.2%

4.5%

5.1%

Other Expenses (income), net and Share in profits of associated company accounted for using the equity method

(4,159)

2

(2,921)

381

Operating income excluding non-recurring items

78,187

70,396

43,993

42,442

% of sales

8.0%

8.1%

9.0%

9.3%

Non-core items

5,467

-

5,467

-

Operating income

72,720

70,396

38,526

42,442

Finance expenses, net

18,089

17,298

8,417

8,319

Income before taxes on income

54,631

53,098

30,109

34,123

Taxes on income

13,025

10,747

7,448

6,853

Net income for the period

41,606

42,351

22,661

27,270

Net income for the period excluding non-core items, net of tax

47,073

42,351

28,128

27,270

Attribution of net earnings for the period:

Attributed to company's shareholders

39,019

39,659

21,271

25,113

Attributed to non-controlling interests

2,587

2,692

1,390

2,157

41,606

42,351

22,661

27,270

Net diluted earnings per share attributed to company's shareholders (in US Dollars)

1.47

1.54

0.80

0.97

Net diluted earnings per share, before non-core items net of tax attributable to Company's shareholders (in US Dollars)

1.68

1.54

1.01

0.97

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Cash Flow Reports

For the 3-month and 6-month periods ending June 30, 2022

Six months ended June 30

Three months ended June 30

2022

2021

2022

2021

(Unaudited)

Thousands of Dollars

Cash flows from operating activities:

Net income for the period

41,606

42,351

22,661

27,270

Adjustments required to reflect cash flows

deriving from (used in) operating activities

(61,095)

51,578

(15,921)

30,534

Interest paid in cash

(12,675)

(15,055)

(5,190)

(7,050)

Interest received in cash

122

161

31

72

Taxes on income refund (paid) in cash, net

(10,126)

2,559

(3,892)

(569)

Net cash generated from (used in) operating activities

(42,168)

81,594

(2,311)

50,257

Cash flows from investment activities:

Short-term deposit

(29,469)

-

(29,469)

-

Acquisition of fixed assets

(14,804)

(10,714)

(7,084)

(5,005)

Acquisition of intangible assets

(3,240)

(1,682)

(1,872)

(691)

Change in short-term deposit, net

-

(1,750)

-

-

Proceeds from selling of fixed asset

90

643

10

55

Others

551

(2,116)

98

-

Net cash used in Investing activities

(46,872)

(15,619)

(38,317)

(5,641)

Cash flows from financing activities:

Dividends paid to non-controlling interest holders

in consolidated subsidiary

(2,117)

(220)

(572)

(220)

Long term payables credit for fixed assets purchase

(5,397)

(2,491)

(2,341)

(959)

Lease principle repayment

(26,151)

(23,293)

(13,438)

(13,392)

Dividend paid

(15,963)

(3,514)

(6,032)

(3,514)

Receipt of a long-term loans from banking corporations

53,800

-

-

-

Repayment of long-term loans from banks

(3,542)

(46,304)

(1,553)

(43,566)

Short-term credit from banking corporations, net

28,198

(10,999)

11,839

(14,007)

Repayment of bank loan used to acquisition of a subsidiary

(792)

(3,001)

(393)

(1,457)

Net proceeds from issuance of a subsidiary

-

77,156

-

-

Others

(5,454)

-

(4,189)

-

Net cash generated from ( used in) financing activities

22,582

(12,666)

(16,679)

(77,115)

Net increase (decrease) in cash and cash equivalents

(66,458)

53,309

(57,307)

(32,499)

Exchange rate differences and revaluation of cash

and cash equivalents, net

(15,844)

(4,271)

(12,705)

401

Balance of cash and cash equivalents

at the beginning of the period, net

230,129

230,843

217,839

311,979

Balance of cash and cash equivalents at the end of the Period, net

147,827

279,881

147,827

279,881

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Cash Flow Reports

For the 3-month and 6-month periods ending June 30, 2022

Six months ended June 30

Three months ended June 30

2022

2021

2022

2021

(Unaudited)

Thousands of Dollars

Adjustments required to reflect cash flows

from operating activities:

Revenues and expenses not involving cash flow:

Depreciation

16,000

17,511

7,688

8,723

Amortization

30,213

31,776

15,180

15,801

Cash erosion, net

399

(1,878)

394

(2,554)

Interest paid in cash

8,338

9,464

3,219

4,762

Interest received in cash

(122)

(161)

(31)

(72)

Taxes on income paid (received) in cash, net

10,126

(2,559)

3,892

569

Deferred taxes on income, net

(8,515)

5,867

(6,108)

1,704

Interest due to lease agreements

4,337

5,591

1,971

2,288

Severance pay liability, net

-

240

-

112

Change in restructuring accrual

(1,554)

(9,036)

2,533

(4,871)

Decrease in liabilities in respect of leases due to rent payments relief

-

(3,391)

-

(332)

Capital loss from sale of fixed assets

(22)

(240)

(11)

(68)

Change to the benefit component of options granted to employees

1,875

1,620

727

770

Impairment loss (profit) on trade receivables

19

40

93

(174)

Share in profits of associated company accounted for using the equity method

(280)

(38)

(240)

(32)

Others

2,059

731

491

3,630

62,873

55,537

29,798

30,256

Changes to operating assets and liabilities:

Decrease (increase) in trade receivables

9,545

23,651

(2,547)

15,893

Decrease in other receivable and balances

1,917

9,092

2,448

4,447

Decrease (increase) in trade payables

5,849

26,175

(3,692)

6,516

Decrease (increase) in other payables

(5,478)

11,703

11,564

17,209

Increase in inventory

(135,801)

(74,580)

(53,492)

(43,787)

(123,968)

(3,959)

(45,719)

278

(61,095)

51,578

(15,921)

30,534

View source version on businesswire.com: https://www.businesswire.com/news/home/20220814005019/en/

Contacts

For more information:
Nissim Douek
+972-54-5201178
Nissim@unik.co.il

U.S. Media Contact:
Stacy Berns
Berns Communications Group
+1-212-994-4660
sberns@bcg-pr.com