Max Stock Ltd

Good morning and good afternoon, everyone, and thank you for joining us today. I'm Talia Sesler, Chief Corporate Development and IR Officer. With me is Paz Oz, our Chief Financial Officer. Paz will review our first quarter 2026 results and I'll present the second part of the presentation. Before we start, there is a presentation accompanying today's remarks. As always, the slides are available on our IR site at ir.maxtalk.com. And on slide number two, we have our standard disclaimer language, which I'm sure everyone is familiar with. And with that, I'll turn it over to Paz, Paz, please.

Thanks, Talia. We are pleased to report a strong start to 2026. Revenue reached 400 million shekels, representing growth of 19 versus last year. This performance was driven primarily by comparable store sales growth of 17%, which demonstrate the underlying strengths of our business model and the value proposition which continue to deliver to Israeli consumers. Our high teens comparable store sales growth reflect, among other factors, the timing of the Passover holiday and increase in the average price per item, driving by a favorable product mix and growth in sales of items characterized by a higher average price. Comparable store sales increased almost 10% for the period January till April 2026 compared to January till April 2025, a period with no holiday timing impact. We expanded gross margin by 330 basis points to 45.6%, marking the highest first quarter gross margin in company history. This expansion was primarily driven by favorable currency dynamics, lower shipping costs, and improved supplier agreements as we leverage our growing scale. Additionally, in the first quarter of last year, we incurred excess logistics costs due to the closure of the Asia Logistics Center as part of the transition to our new centralized DC. Looking forward and assuming similar macroeconomic conditions, we believe we can deliver gross margin of approximately 45% in the next few quarters. This gross margin improvement combined with our operational leverage powered 57% growth in adjusted EBITDA and 470 basis point increase in adjusted EBITDA margin, expanding it to 19%. Now that financing expenses net increasing to approximately 12 million shekels in the first quarter of 2026 from almost 1 million shekels in the first quarter of 2025 due largely to a loss of approximately 5 million shekel related to revaluation of future dollar hedging transaction resulting from the appreciation of the Israeli shekel. If the dollar remains at or near its current level or continues to drop through the end of Q1, The second quarter, we will record further hedging losses due to the subsequent revaluation of our forward contracts next quarter. Most importantly, we achieved gap net income of almost 50 million shekels, an increase of 57% year over year. Net income margin reached 12% and our adjusted EPS attributable to shareholders increased 55% to 0.33 shekels, representing strong profitability across the board. Looking at our first quarter trends over multiple years on slide 4, you can see the consistent momentum we have built in the business. Since 2023, revenue has grown at a CAGR of almost 13%, while we have expanded gross margin by 420 basis points. Adjusted EBITDA has grown at an impressive CAGR of 27%, with margin expanding 570 basis points to 19%. Our adjusted EPS has grown at a CAGR of almost 30%, underscoring our ability to scale the business profitably while delivering increasing returns to shareholders. Our capital structure remains very strong. We ended the quarter with 188 million shekels in cash and net cash of 160 million shekels. This is before distributing 80 million shekels in dividend that took place after the quarter ended in April 2026. We have ample liquidity and financial flexibility to execute on our growth strategies while continuing to reward our shareholders. Moving to slide six, our free cash flow performance underscores the quality of our earning and the cash generative nature of our business model. In the first quarter, we generated 30 million shekels in free cash flow, representing a 40% conversion rate relative to our adjusted EBITDA. Looking at our track record, we have generated approximately 739 million shekels in cumulative free cash flow since 2017 and distributed approximately 559 million shekels through dividends, about 75% of that cumulative free cash flow. As I mentioned in the previous slide, 80 million shekels was distributed in April this year. Our capital allocation philosophy balances growth investment with consistent shareholders returns and our strong balance sheet gives us the flexibility to continue both. I will now turn the call back to Talia.

Thank you, Paz. Now let's discuss what's driving this strong performance across our business. On slide number eight, our three largest categories each delivered healthy double-digit growth in the quarter. Housewares, our largest category at almost a third of sales, increased more than 20%, followed by party supplies, storage and consumables that were up approximately 18%. and toys and baby that was up approximately 15%. On the next slide, slide number nine, you can see that our other category, which consists of more than 25 subcategories, grew 32% year over year. These smaller lines of business continue to scale and provide us with another important top line growth drivers for the years ahead. On slide number 10, On slide number 10, we have the details of our sales growth by category. The bridge really illustrates the breadth of our performance since Q1 last year. Within our other category, confectionery and snacks, Purim customs and accessories and home and personal care products were all significant contributors to the increase year over year. In addition to higher demand, confectionery and snacks, as well as home and personal care products, also benefited from our decision to gradually transition these categories from a licensed shopping shop to direct ownership model. Beyond the favorable impact of the Passover holiday, which we will discuss on the next slide, we saw a positive effect on the average price per item this quarter, driven by growth in the sales of higher priced item. What does it mean? For example, we shifted to selling larger packs with more units per pack. So instead of selling six hangers for 10 shekels, we now sell 16 pack for 20. This means that the price per individual hanger actually decreased, but the overall pack price went up, encouraging a larger basket size. Another example, today we are venturing into higher quality merchandise that we didn't carry in the past, offering it at significantly lower market prices and the demand for it has been tremendous. On the next slide, slide number 11, looking at the key KPIs for our store fleet, the numbers reflect strong underlying trends. As Paz mentioned earlier, first quarter 2026 comparable store sales growth reached 16.9%. And even as you normalize the impact from the timing of Passover, comp same store sales are up almost 10%. Per my earlier comment about mix, you can see that the outsized growth in average basket, you can see the outsized growth in average basket. This is helping fuel sales productivity metrics, such as annualized sales per net score meters, which reached record levels in this period on an annual basis. These results demonstrate that our value proposition continue to resonate with Israeli consumers and that we're driving excellent productivity from existing store base. On slide number 12, I'm excited to highlight one of our major accomplishment in the first quarter, the opening of our new flagship store in Beersheba. At 4,300 net square meters, this is one of our largest stores and showcases the full breadth of our product offering and store experience. This type of format and location represents the type of high impact store opening that drives both near-term results and long-term brand building. On slide number 13, in addition to Beersheba, we also opened a new company-owned max store in Orakeva during the first quarter. This 760 net square meter store, while smaller than our flagship format, represents our successful big box concept that we deploy in markets that can support a full max assortment, but in a more compact footprint. On slide number 14, looking ahead, our pipeline remains robust with four high-quality stores expected to open over the next 12 months, two planned for the second half of 2026 and two more in the first half of 2027. Combined, these four stores represent approximately 7,700 gross square meters or 5,500 net square meters of new selling space. And this pipeline keeps us on track with our target of opening three to five new company-owned stores annually. Finally, before we move to Q&A, I want to recognize the entire Maxtalk team for the strong execution that deliver these outstanding results. The strengths of our first quarter 2026 performance reflect our proven business model, operational capabilities, and our disciplined growth strategy. Looking ahead, we expect business trends to remain favorable for the remainder of the year. We're encouraged with our recent momentum and how well we're executing across all aspects of our business. We continue to invest in growth through our store expansion program and we're delivering value to both our customers and our shareholders. We're very pleased with how the year has started and remain focused on executing on our long-term strategy. Now we're ready for questions. Congratulations on strong comparable store sales year to date. Can you talk about the current operating environment in Israel? Is the consumer experience any added pressure from higher gas prices or other headwinds from the ongoing geopolitical events in the region? Okay, great question. Well, I'll say first generally that the overall health of the Israeli consumer is still strong when we look at the general macroeconomic trends. Unemployment rate is below 3%. Inflation rate is below 2%. Bank of Israel interest rate is at 4% and is expected to go down because of the strength of the shekel. So overall, the economy is doing well. We did have some impact from the rising, the roaring lion operation, but it was temporary. And overall, we see the consumer still there with strong demand. In terms of gas prices, I know that it's very typical and common in the US to measure how it actually impacts traffic. We do not do the same thing in Israel. We do not think that it's a main issue. In Israel, typically the stores are relatively close by and we don't think that it's a main differentiator in terms of the decision to shop. And then the next question. Can you highlight traffic versus ticket dynamics and how to think about the introduction of higher price points? Okay, so that's another great question. So overall, when we look at the first quarter, we see that the main driver is is the increase in the average basket size. So I'm rounding up numbers. We had roughly 17% in same store sales growth, of which about 14%, slightly more than that, came from an increase in the average basket price. And the remainder is volume. But note, that this strength also reflected the positive impact of the timing of the Passover holiday. So the main, if we look at January through April, it's about 10%. Here we did not disclose, we do not disclose the increase or the change in the average basket, but we can generally say that the main contributor was the increase in average basket size. Overall, we are actually very optimistic about this dynamics, although we constantly monitor it and we know that rDNA is in the lower ticket items. Despite that, we think that if we augment this supply of smaller ticket items with higher price ticket and we see the demand for that because we always provide it at extremely discounted prices, we see that the consumer is there and we think that there is a potential to continue to see a benefit to our same-store sales growth from this dynamic of higher prices. average prices. It's not raising prices for similar items, but rather providing different quality types of the same items for various consumers and for various consumers. events, I would say. And as I said, we constantly monitor it. And if we see that it is not the right way for us, we will make the adjustments. Can you also highlight trends within gross margins? So as Paz mentioned, the main reasons for the expansion in gross margins, the first one is the strength of the Israeli shekel. Obviously we buy in US dollars and we sell in shekels. So as we saw the dollar, further depreciating and the Israeli shekel further appreciating, it's a benefit for us. Shipping costs were also relatively moderate and they're also denominated in dollar. So there's like a double benefit there. And then we also see this potential, I mean, the benefit from better supplier terms. And in addition, also remember that in the past, in the equivalent quarter last year, we had, I would say, incremental costs coming from the transition to our centralized DC. So we saw higher logistic costs there. If we think about gross margins going forward, I think we feel quite comfortable that the next quarters will be at around 45%, given the current macroeconomic environment. Anything else? No, there is something in the chat. No, okay. Okay. All right. Thank you very much, everyone. We appreciate your time and appreciate you joining us. We will be happy to further speak with you over Zoom or in Antakya if you are planning to attend the conference and wish you all the very best and a great day or afternoon. Thank you.