Max Stock Ltd

Good morning and good afternoon everyone and thank you for joining us again today. I'm Talia Sesler, Chief Corporate Development and IR Officer and with me on the call is Nir Dagan, our Deputy CEO and Head of Finance. As always, Nir will start with a review of our first quarter 2024 financials, and I will be presenting the second part of the presentation. Before we start, as a reminder, there is a presentation accompanying today's prepared remarks. The slides are available on our IR site at ir.maxtop.co.il. And on slide number two, there is our standard disclaimer language. I think everyone is familiar with it. So with that, I'll turn the floor over to you, Nir, to go through the financials.

Thanks Talia. Starting on slide 3, we were very pleased to deliver strong growth to start 2024 across many key metrics. We delivered first quarter revenue of 313.2 million shekels representing growth of 12% from the first quarter of 2023. Our top-line performance was driven by the addition of five new stores in the period, combined with a 4% increase in comparable store sales. Comparable store sales were impacted by a shift in Passover holiday into the second quarter of 2024, compared to falling in the first quarter of 2023. Neutralizing the impact by comparing January through April sales in both period, we had a very strong comparable store sale of more than 10%. We also delivered 90 basis points of gross margin expansion in the period. These factors, along with lower netting expenses, were the main driver beyond a roughly 24% increase in adjusted net income attribute attributable to shareholders in the first quarter. Turning to slide 4, to look at some of our long-term trends, our revenue CAGR from the first quarter of 2020 to the first quarter of 2024 is almost 16% and we expanded the gross margin more than 200 basis points over the same period to 42.3%. We see similar trend for adjusted EBITDA which excluded the impact of IFRS 16 and stock-based compensation and adjusted EPS attributable to shareholders, which have grown at a CAGR of more than 14% and 14.7% since the first quarter of 2020. slide five and six. Turning to slide five and six and going back further to 2017 and looking at our annual performance, we are very pleased with roughly 2.5 times growth we've achieved in revenue and gross profit over the past seven years. Along with doubling of adjusted EBITDA and adjusted EPS during the same time period. Also note on slide five, that over the period, despite the changing macro environment, our annual growth margin was between 39 to 41%, and we are recently broken above to a range and eclipsed 42%. Slide seven. Turning to slide seven, we have very strong operating cash flow. As a result, we've been actively retained value to shareholders through annual dividend and share buyback. Since 2017, we had retained approximately of $370 million to our shareholders, including $60 million year-to-date in 2024, with trading 12 months dividend yield of about 5%. Per forma, for our dividend distribution in April 24, we had 58.3 million in net cash at the end of the first quarter, providing ample liquidity and financial flexibility to continue to reward shareholders and execute on our growth strategy. I'll now turn the call back to Talia to cover some of our long-term growth drivers.

Thank you, Nir. Starting on slide number nine, as we mentioned last quarter, one of our key initiatives in 2024 was moving to a new logistics and distribution center to help enable the next stage of growth for us. I'm pleased to share that the transition is progressing as planned, including our estimates regarding a required investment of 30 million. About half of the 16 million capex you can see in Q1 this year was related to the new center. This initiative will support our future growth in Israel while potentially extracting operational efficiencies. Slide number 10, turning to our store expansion strategy, we added five new owned stores and reopened one store in the past 12 months, adding a total of 8,800 net square meters to our footprint. Already in 2024, we've added three stores to our fleet, one new location in Yavne in February, one in Kiryat Yam in March, and just last month we opened a new store in Nesher, replacing our old store in the city, which closed in March this year. These three locations have added a total of 4.7K net square meters of selling space and 3.9K net square meters after deducting the net size of the store that was closed in Escher. On slide number 11, you can see that our store opening strategy has progressed steadily since 2020, despite the macroeconomic environment, as we've grown our combined owned and franchised store count from 50 to 66 at the end of the first quarter of 2024. Looking just at our own store fleet, which generates more than 90% of our revenue, we have grown net square meter in Israel by almost 50% since 2020. With significant white space for continued expansion, both in Israel and abroad, we believe we are positioned to continue to advance our store growth strategy in the years ahead. Now turning to slide 12 to cover some of the relevant KPIs for our store fleet. As Nir discussed, a comparable store sales growth of 4% for the first quarter was solid. However, it was impacted by a shift in the timing of the Passover holiday into the second quarter of 2024 compared to falling in the first quarter last year. When comparing the January through April periods year over year, comparable store sales grew at a robust rate of 10.3%. This is reflecting the ongoing strength of our business combined with the strong consumer demand that Israel has experienced since the start of the year, as evidenced by a 14% increase in Passover holiday credit card sales and the overall rebound we've seen in GDP. Q1-24 GDP was up about 14% after it went down by about 22% in Q4-23 as a result of the beginning of the Scourge of Iran war. We believe that although a 10% same-store sales growth for the four-month period is probably unusually high, the accelerated demand for our products has created a new base from which we expect to grow at a more normalized level growth of roughly 3%. This notable acceleration was driven by strong traffic, partially offset by a decrease in average basket size, sorry, average basket price, resulting from a decline in the average item price. And again, we simultaneously expanded the company's gross margins while driving an increase in volume across all our store field. On slide number 13, as we look at our pipeline over the next few years, we expect to open four additional stores and we're currently expanding one existing store, adding a total of approximately 6,000 net square meters. Just this year, we plan to add one of these locations and complete the store expansion, which will increase our selling space by about 3,000 gross square meters by the end of the year. Of course, these are just our signed pipeline stores and there are additional stores under various negotiation stages. On slide number 14, you can see the evolution of our store expansion strategy and the significant white space opportunity that still lays ahead in the long term. uh at the end of march 2024 we have about 65 000 net square meters representing growth of 60 from 2019 and looking ahead we believe we can expand our current footprint at additional almost seven almost seventy percent to a hundred and ten thousand uh net square meters uh this long-term target would result in a 2.7 expansion of max stock over an 11-year period, a truly exceptional growth. Now, before we proceed with our Q&A session, I would like to express my sincere gratitude to every member of the MacStore team for their dedication and efforts for their professionalism, which have contributed significantly to our impressive start, bless you, to our impressive start in 2024. Even as the operating environment in Israel faces continued headwinds, we remain encouraged by the sustained momentum and consistent acceleration in our key operating metrics, enabled by strong execution of our growth strategies. The combination of these robust trends and established position as a market leader and the growth opportunities that lay before us provide us a great deal of optimism for the year ahead. And now we're ready to take your questions. One moment. Nothing? Nothing.

So I guess it's all clear.

It was probably too early for you.

The results are too good, so there's nothing.

Probably a combination of both. In any event, we're here for you for any questions that you have later on, whether it's today or in the coming days or weeks. We will be more than happy to set up a call with you and discuss anything that is relevant. Thank you very much, everyone, and see you next quarter.