Delta Galil

Earnings Release • Feb 26, 2024

Q4-2023 RESULTS

F E B R U A R Y 2024

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 תמצית בלבד ואינו ממצה את מלוא הנתונים אודות החברה ופעילותה ואינו יכול להחליף עיון בתשקיף המדף של החברה ובדוחות השנתיים, התקופתיים והמיידים שפרסמה החברה )ובכלל זה, הדוח התקופתי לשנת 2023 שפורסם ביום 25 בפברואר 2024 )מס' אסמכתא: 2024-01-019458( )"הדוח התקופתי"(, הכוללים את המידע המלא והמחייב אודות החברה וניירות הערך שתציע, בטרם קבלת החלטה בדבר השקעה בניירות הערך של החברה.

האסטרטגיה העסקית של החברה המוצגת במצגת נכונה למועד זה ועשויה להשתנות בעתיד, בין היתר, בהתחשב בתנאי השוק ובהתאם להחלטות האורגנים המוסמכים של החברה. העובדות והנתונים ששימשו בסיס למידע המפורט במצגת זו מבוססים על מידע כפי שהוא ידוע לחברה במועד הכנת מצגת זו, ובכלל זה נתונים שפורסמו על ידי גופים חיצוניים לחברה, אשר תוכנם לא נבדק על ידי החברה באופן עצמאי ולפיכך החברה אינה אחראית לנכונותם.

האמור במצגת זו כולל גם מידע צופה פני עתיד, כהגדרתו בחוק ניירות ערך, התשכ"ח - 1968 כגון תחזיות, יעדים, מטרות, הערכות, אומדנים ומידע אחר המתייחסים לאירועים ועניינים עתידיים, שהתממשותם אינה ודאית ואינה בשליטת החברה. מידע צופה פני עתיד אינו מהווה עובדה מוכחת והוא מבוסס אך ורק על הערכה סובייקטיבית של החברה במועד הכנת המצגת.

המידע הצופה פני עתיד הכלול במצגת עשוי שלא להתממש, כולו או חלקו, או להתממש באופן שונה מכפי שנצפה, לרבות עקב השפעת גורמים חיצוניים רבים אשר אינם בשליטת החברה, כגון שינויים בסביבה המאקרו כלכלית של החברה, שינויים במגמות עולמיות, שינויים בסביבת הריבית והאינפלציה, שינויים בשערי חליפין, שינויים במחירי השינוע, החלטות נגידי הבנקים בעולם ובישראל, שינויים במצב השווקים בהם פועלת החברה או הרגלי הצריכה של הצרכנים בשווקים אלה, המצב הכלכלי והביטחוני בשווקי היעד, שינויים בשיעורי המיסוי במדינות בהן פועלת החברה וכן מהתרחשות איזה מגורמי הסיכון המפורטים בדוח התקופתי.

בנוסף, המצגת עשויה לכלול מידע המוצג באופן שונה מהאופן שבו הוצג בדיווחי החברה לציבור עד כה, כך שבמצגת עשויים להיכלל נתונים המוצגים באופן ו/או אפיון ו/או בעריכה ו/או בפילוח שונים מאלה שהוצגו בדוחותיה, במצגות החברה או בדיווחיה בעבר, כאשר נתונים אלה נכונים למועד הצגתם בלבד. החברה אינה מחויבת בעדכון או שינוי כל תחזית או הערכה הכלולים במצגת זו כאמור על מנת שישקפו אירועים או נסיבות שיחולו לאחר מועד המצגת. לפיכך, קוראי מצגת זו מוזהרים, כי התוצאות וההישגים בפועל של החברה בעתיד עלולים להיות שונים באופן מהותי מאלה שהוצגו במצגת זו, ויש לקחת בחשבון כי נתוני עבר אינם מצביעים בהכרח על ביצועים בעתיד.

בהעדר אינדיקציה אחרת, הנתונים הכספיים הנכללים במצגת זו מתייחסים לרבעון רביעי המסתיים בחודש דצמבר ,2023 כמפורט בדוח רבעון .4

1

2023 MAIN ACHIEVEMENTS

23

NEW BRANDS

Passionata acquisition an iconic innovative French brand; a unique mix of comfort and sensuality

NEW BRANDS

Passionata acquisition an iconic innovative French brand; a unique mix of comfort and sensuality

Florence by mills a new licensing deal with Millie Bobby Brown

NEW BRANDS

Passionata acquisition an iconic innovative French brand; a unique mix of comfort and sensuality

Florence by mills a new licensing deal with Millie Bobby Brown

Organic Basics launch a sustainable digital first underwear and basics brand based in Copenhagen.

Q4 23

8

NEW BRANDS

Passionata acquisition an iconic innovative French brand; a unique mix of comfort and sensuality

Florence by mills a new licensing deal with Millie Bobby Brown

Organic Basics launch -

a sustainable digital first underwear and basics brand based in Copenhagen.

PRIVATE LABEL

Continued growth with SKIMS with

expansion to ready to wear

NEW BRANDS

Passionata acquisition an iconic innovative French brand; a unique mix of comfort and sensuality

Florence by mills a new licensing deal with Millie Bobby Brown

Organic Basics launch a sustainable digital first underwear and basics brand based in Copenhagen.

PRIVATE LABEL

Continued growth with SKIMS with expansion to ready to wear

Increase penetration into the growing activewear category through special fabrics, bonding techniques and hybrid technologies

Egypt Socks Factory

New socks factory in Egypt to increase capacity and penetration into the US market

DELTA ISRAEL

Licensee of the leading global lingerie brand Victoria's Secret

New license with Bath & Body Works, a global leader in body care and home fragrance

Expanding our sport brand's awareness in digital and retail and with launch of men's collection

2023 RESULTS

RECORD GROSS MARGIN AND OPERATING CASH FLOW

GROSS MARGIN 40.9% +230 BPS

EBIT* \$153.0M (20%)

EBIT MARGIN* 8.2% (120) BPS

NET PROFIT MARGIN* 4.9% (100) BPS

OPERATING CF** \$181.9M +\$201.2M

Q4 23

DELTA G ALIL RESULTS OVERVIEW

All-time record

2023 HIGHLIGHTS

• Sales decreased by 8% on C\$ vs. 2022, driven by all segments except Delta Israel
• Growth of Skims and Lulu with multiple new expansion opportunities
• DTC channel with increase driven by all segments (on C\$)
• Delta Israel with record year in sales and gross profit (on C\$)
• Private label with record EBIT margin of 12.1% despite lower sales
• All-time record gross margin of 40.9%, despite highly-promotional environment
• All -time record operating cash flow* of \$181.9M
• Successful execution of our inventory reduction plan resulted in inventory reduction of \$125.9M in 2023
• Implemented realignment plans of \$11.4M (\$9.2M in cash) in line with our long -term growth strategy
• \$27.5M dividend declared for 2023

DELTA G ALIL RESULTS OVERVIEW

Q4 - 2023 RESULTS

Remarkable profitability despite challenging wholesale environment

EBIT MARGIN 11.0% +50 BPS

NET PROFIT MARGIN 7.4% +50 BPS

OPERATING CF* \$82.3M -\$2.8M

All –time record

Rounded numbers. *Excludes IFRS 16 impact

DELTA G ALIL RESULTS OVERVIEW

Q4 23

Q4 - 2023 HIGHLIGHTS

• Sales decreased by 6% on C\$ vs. Q4-2022, driven by all segments except Delta Israel
• Own web sales increased in all segments, driven by higher traffic
• Growth of VS, Skims and Nike with multiple new expansion opportunities
• All-time record gross margin of 43.1%
• Strong EBIT margin of 11.0% vs. 10.5% in Q4-2022
• Delta Israel with record quarter in sales (on C\$), profitability and strong operating cashflow
• Private label EBIT margin of 14.7% at Q3-2023 record level despite lower sales
• Strong operating cashflow** of \$82.3M, with record annual of \$181.9M
• Moody's (Midroog) maintained our strong credit rating of Aa3.il
• \$9M dividend declared for Q4-2023, \$27.5M dividend declared for 2023

QUARTERLY TREND ANALYSIS

• Sales decreased by 7% vs. Q4-2022, driven by all segments except Delta Israel, impacted by challenges in the wholesale channel
• Record gross margin increased to 43.1%, mainly driven by favorable customer, segment and channel mix, lower freight costs and improved utilization of our factories
• EBIT margin increased to 11% despite lower sales, driven by higher gross margin

-10.0%

-100. 0

0.0%

0.0

1. 0%

10.0

1. 0%

20.0

1. 0%

30.0

1. 0%

40.0

1. 0%

50.0

1. 0%

DELTA G ALIL RESULTS OVERVIEW

EBIT MARGIN ANALYSIS

Strong EBIT margin despite lower sales and SG&A de-leverage, due to record Q4 gross margin

		*

Q4-2023 FINANCIAL HIGHLIGHTS VS. Q4-2022

Total Sales			Gross Profit			EBIT
Q4-2022	Q4-2023		Q4-2022	Q4-2023		Q4-2022	Q4-2023
\$544.4M	\$508.6M		\$216.3M	\$219.1M		\$56.9M	\$56.2M
Own Branded Websites Sales*			Gross Margin			EBIT Margin
			Q4-2022	Q4-2023		Q4-2022	Q4-2023
Vs. Q4-2022	16%		39.7%	43.1%		10.5%	11.0%
EBITDA**			Net Income			Net Debt / EBITDA**
Q4-2022	Q4-2023		Q4-2022	Q4-2023		Q4-2022	Q4-2023
\$65.6M	\$62.9M		\$37.4M	\$37.8M		1.0	0.7
	Operating CF**			Days Inventory Outstanding***			CAPEX****
Q4-2022	Q4-2023		Q4-2022	Q4-2023		Q4-2022	Q4-2023

All-time record

*Excluding Bare Necessities. Up 7% Including Bare Necessities **Excluding IFRS 16 ***99 Normalized DIO assuming Q4-2023 COGS at the same level of LY

****in Q4-2023, capex includes significant investments in Delta Israel warehouse / new stores and new Egypt factory

Q4-2023 UPDATE BY SEGMENT

DELTA G ALIL RESULTS OVERVIEW

PRIVATE LABEL

We are the partner of choice to iconic and digitally-native global brands

EBIT margin at Q3-2023 record level despite lower sales

(\$M)	Q4 2023 -	Q4 2022 -	Var
SALES	168 9	199 6	(15%)
EBIT	24 9	25 2	(1%)
EBIT%	14 7%	12 6%	1% 2

SALES decreased 15%, as a result of major customers acting more conservatively, partially offset by significant growth with leading customers

EBIT % increased by 210 BPS, mainly driven by favorable customer mix and higher utilization of our factories

GROWTH INITIATIVES

• Continuous growth with Skims in both existing and new categories
• Nike returned to growth with increased penetration into the US market
• Strong pipeline of innovative products to be launched in 2024
• New launches with major customers: SKIMS, Victoria's Secret, Walmart, Target & PVH
• Entering Kirkland Private Label Costco Jeans category

Q4 23

Fully vertical operating model from design to distribution

BRANDS

Our Brands segment includes a comprehensive portfolio of top intimate apparel and activewear brands

(\$M)	Q4 2023 -	Q4 2022 -	Var
SALES	186 1	195 6	(5%)
EBIT	14 4	16 0	(10%)
EBIT%	7 7%	8 2%	(0 4%)

SALES decreased by 5%, driven by lower sales of wholesale customers, partially offset by DTC growth

EBIT % at similar level, despite lower sales, higher discounts & promotions and expenses related to new licenses, due to higher gross margin.

GROWTH INITIATIVES

• Further expand our DTC channels including opening new stores for Schiesser, Eminence and Splendid
• New licensing deal with Florence by Mills launched in Q1-2024
• Further expansion of adidas sales globally
• Launch of 'Lauren by Polo Ralph Lauren' in 2024
• Passionata full launch in July-2024

DELTA G ALIL RESULTS OVERVIEW

Q4 23

Owned: Schiesser, Eminence, Splendid, P.J. Salvage

Licensed: Columbia, Polo Ralph Lauren, Tommy Hilfiger, Calvin Klein Kids, adidas, Wolford

DELTA ISRAEL

Delta, our legacy brand, is the leading intimate apparel brand in Israel with a unique proposition of selling to the entire family

In NIS achieved record sales, gross profit, EBIT and net profit despite the war, political and economic situation

(\$M)	Q4 2023 -	Q4 2022 -	Var	C\$* Var
SALES	83 8	83 3	1%	9%
EBIT	21 5	14 6	47%
EBIT%	25 6%	17 5%	1% 8

SALES in NIS increased by 9%, driven by higher stores comps in all brands +12.3% and higher online +9.8% (Including Victoria's Secret online +17.4%)

EBIT increased 47%, mainly driven by higher sales, higher GM, lower advertising expenses and SG&A leverage

NET PROFIT (in NIS) increased from 36.5M to 64.6M (from 12.5% to 20.4% of sales, respectively) Strong operating cashflow** of 44.9M vs. 27.6M in Q4-2022.

210 retail stores, digital & wholesale channels

DELTA ISRAEL - STORES GROWTH PLAN

12/26	12/25	12/24	12/23
182	180	178	173	Delta
37	35	33	31	fix
12	10	8	6	Panta Rei
11	රට	5	0	VICTORIA'S SECRET
30	20	8	O	Bath & Body Works
272	253	232	210	0ה"כ

7 FOR ALL MANKIND

7 For All Mankind is the originator of American Premium Denim, born in LA in 2000

(\$M)	Q4 2023 -	Q4 2022 -	Var
SALES	9 57	63 2	(8%)
EBIT	2 3	5 3	(57%)
EBIT%	3 9%	4% 8	(4 5%)

SALES decreased by 8%, mainly driven by reduction in major wholesale customers in US and EU

EBIT decreased by 57%, mainly driven by lower sales and SG&A deleverage

GROWTH INITIATIVES

• Expand into new product categories to grow RTW sales in DTC channels.
• Increase Men's category share across all channels and geographies
• Continue international expansion including Brazil, China, Mexico and new market
• Leverage the global organization to increase margins and efficiencies

The originator of American Premium Denim

The brand that forever changed the way people think about denim

Marketed through DTC and wholesale channels globally

OTHERS (BARE NECESSITIES & ORGANIC BASICS)

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)	Q4 2023 -	Q4 2022 -	Var
SALES	18 2	20 2	(10%)
EBIT	(5 9)	(4 0)
EBIT%	(32 7%)	(19 9%)	(12 9%)

SALES decreased 10%, due to reduction of 13% in Bare Necessities, driven by continued softness in traffic, partially offset by increased Organic Basics sales of 37%

EBIT decreased \$1.9M, mainly driven by reduced sales at Bare Necessities and SG&A deleverage

Q4 23

Bare Necessities

The largest US online independent digital platform intimate apparel retailer, building a personal, long-lasting connection with our customer. We ensure your every bra-wearing moment is extraordinary

A sustainable digital first underwear and basics brand based in Copenhagen. Organic Basics believes in comfort and sustainability for all, making products both earth and people -friendly.

Q4 BUSINESS UPDATE

• 1 in Google Search in Organic Apparel and Intimate's category lead to a +60% increase in Organic Search traffic

• Q4 sales increased by 37% to \$1.7 M
• US sales tripled after US Fulfillment Center opened on Nov 1
• US focused growth will continue in 2024 with a brand launch planned in Q 1, celebrity collaboration planned for H2 as well as launch of a large US wholesale partner

BARE NECESSITIES STRATEGIC PIVOT:

From 3P Marketplace Towards Delta-Owned Brands Platform

Transformation of marketplace to Delta-Owned Brands as Core, Propelled by a Selective Vendor Marketplace Driving Sustainable Profitability

Estimated annual saving of \$7M (\$4.3M in 2024)

Harnessing Bare Necessities' ~1.5 Million Monthly Visitors to Propel Delta-Owned Brands

Through organizational and marketing focus and by leveraging the brand recognition and higher margin potential of Delta Brands, we anticipate enhanced profitability over time.

Reducing 3 rd Party Vendors to Curated Group of ~20 Key Vendors

Consolidating vendor base to 20 key third-party vendors from the current 100+, enforcing a minimum margin requirement, and transitioning to a drop-ship/consignment model

Key Drivers

Workforce Optimization

Significant reduction of workforce, enhancing organizational efficiency and productivity.

Technology Infrastructure Upgrade:

Migration from current legacy local server towards Shopify, which will upgrade site experience and significantly reduce IT costs.

2023 FINANCIAL HIGHLIGHTS VS. 2022

Total Sales		Gross	Profit		EBIT	(BOT)
YTD-2022	YTD-2023		YTD-2022	YTD-2023		YTD-2022	YTD-2023
\$2 5M 031 ,	\$1 857 7M ,		\$785 2M	\$760 6M	\$190	2M	\$153 0M
Branded Own	Websites Sales*		Gross	Margin		EBIT	(BOT) Margin
			YTD-2022	YTD-2023		YTD-2022	YTD-2023
Vs YTD-2022	17%		38 6%	40 9%	9	4%	8 2%
EBITDA**			(BOT) Net Income			Operating	CF**
YTD-2022	YTD-2023		YTD-2022	YTD-2023		YTD-2022	YTD-2023
\$224 2M	\$182 6M		\$120 6M	\$91 6M	(19	3)	181 9

All-time record

*Excluding Bare Necessities. Down 1% Including Bare Necessities **Excluding IFRS 16

STRONG BALANCE SHEET

\$ in millions

Cash & short term deposits

0.7 Net Debt /EBITDA \$123.4M Net Debt *

1.73 Current Ratio Vs. 1.58 in Q4-2022

December 31 ²⁰²² % OF TOTAL December 31 ²⁰²³ % OF TOTAL CASH PORTFOLIO 194.9 11% 177.4 10% INVENTORY 487.3 26% 361.4 20% OTHER CURRENT ASSETS 284.3 15% 292.2 16% TOTAL CURRENT ASSETS 966.5 52% 831.0 46% NON CURRENT ASSETS 884.2 48% 957.5 54% TOTAL ASSETS 1,850.7 100% 1,788.6 100% CURRENT LIABILITIES 611.3 33% 481.7 27% DEBENTURES 130.0 7% 96.5 5% OTHER NON-CURRENT LIABILITIES 399.1 22% 442.0 25% TOTAL LONG TERM LIABILITIES 529.0 29% 538.5 30% EQUITY 710.3 38% 768.4 43% TOTAL LIABILITIES AND EQUITY 1,850.7 100% 1,788.6 100%

*Excluding IFRS16 impact Rounded numbers

All –time record

33

Q4 23

INVENTORY TREND ANALYSIS

• Reduction of \$126M in 2023 - exceeded our target of \$100M, which contributed to record cashflow from operations
• 5 consecutive Qs of inventory reduction
• The significant reduction vs. December 2022 is driven by our commitment to reduce inventory levels by:
  • Enhanced planning and purchasing
  • Selling existing basics / NOS items
  • Stringent management
  • Clearance of aged items
• Inventory days reduced by 22 days from 134 in to 112 (normalized 35 days reduction)

Inventory Value, \$M

2024 GUIDANCE

	2023 ACTUAL		2024 GUIDANCE	\$ in millions
Sales	857 1 7 ,	951 1 ,	-	2 031 ,
EBIT*	153 0	163 0	-	183 0
EBITDA*	246 8	256 3	-	276 3
Net Income*	91 6	99 1	-	114 7
EPS*(\$) Diluted	3 25	3 52	-	4 11

Based on our order file and projections, we expect the growth to materialize mostly in the second half of the year

2024 guidance 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 are prior to the adoption of the Pillar 2 new tax legislation

FOR GROWTH IN SALES AND PROFITABILITY 2024 INDICATORS

Normalized inventory at our customers will drive strong demand	Full utilization of our factories and launch of new Egypt socks factory	Organic Basics full year United States Launch
Continuous growth with Skims in both existing and new categories	Our realignment plans will yield increased profits	Focus on growth in strategic categories: activewear, loungewear and bras
Launching Florence by Mills	VS, Walmart and Target return to growth will present opportunities	Passionata acquisition will yield increased sales

DELTA G ALIL RESULTS OVERVIEW

THANK YOU