Max Stock Ltd. (MAXO) Earnings Call Transcript & Summary

Good morning, everyone, and good afternoon, and thank you, everyone, for joining us today and for our U.S. investors, we hope you had a wonderful Memorial Day. I'm Talia Sessler, Chief Corporate Development and IR Officer. And with me, as usual, on the call today is Nir Dagan, our Deputy CEO and Head of Finance. Nir will start with a review of our first quarter 2025 results, and I will be presenting the second part of the presentation. Before that, as a reminder, there is a presentation accompanying today's prepared remarks. The slides as always are available on our IR website at ir.maxstock.co.il. And Slide #2 has our standard disclaimer language. I'm sure everyone is familiar with it. With that, I'll turn it over to Nir to go through the financials. Nir, please.

Thanks, Talia. Slide 3. Our first quarter performance represents a strong start to the year, accelerating as the quarter progressed. Revenue was ILS 339 million, representing growth of more than 8% from the first quarter of 2024. This growth was driven by a 3% increase in comparable store sales due largely to increased seasonal sales due to the timing of the Passover holiday. However, normalizing the effect of the holiday shift by comparing January through April of 2025 to the same period in 2024, comparable store sales grew even faster at 3.3%. The highlights, the growing momentum we've carried past the first quarter into April as well. Gross margin was 42.3%, in line with the previous year period. In the first quarter, we were able to offset temporary elevated logistic costs as we transitioned to the new distribution center with further trade and supply chain efficiencies from the increase in direct import versus locally sourced inventory, made possible thanks to the new logistics center. This combined factor led to low-teens growth in adjusted EBITDA, GAAP net income and adjusted EPS attributable to shareholders. Turning to Slide 4. You see some of our long-term first quarter trends. Our revenue CAGR from the first quarter of 2022 to the first quarter of 2025 is 10.6%, and our gross profit CAGR was 13.6% over the same period with gross margin up 330 basis points compared to the first quarter of 2022. Adjusted EBITDA, which excluded the impact of IFRS 16 and base compensation -- stock-based compensation, has grown at a CAGR of 14.7% since the first quarter of 2022. And adjusted EPS attributed to shareholders has grown at a CAGR of 18.8% since the first quarter of 2022. Both adjusted EBITDA and adjusted net income as a percentage of revenue continued to show strength over a 3-year period with EBITDA margin at 14.1%, above our upper end EBITDA target, and the robust adjusted net income attributed to shareholder margin of 8.6%. Note that there were onetime items this quarter that had an offset effect. On one hand, interest expenses net decreased by about ILS 4.1 million, primarily due to income from hedging transition and foreign currency differentials. The onetime hedging and FX gain was almost fully offset by other expenses that totaled about ILS 4 million in the period and were related to close of one legacy DC as part of the transition into the new logistics center as well as the closing of our Portugal operations and one owned Max branch in Gush Etzion. I'll now turn the call back to Talia.

Thank you, Nir. Turning to Slide #5. Since 2017, we have generated approximately ILS 545 million in cash flow that we have used to simultaneously fuel our rapid growth and reward our shareholders. This is a reflection of our superior store-level unit economics, coupled with clear top line growth drivers and low CapEx. Over the same period of time, we have returned about 80% of that cash flow or approximately ILS 439 million to our shareholders, including ILS 70 million year-to-date through a special onetime dividend. Slide #6, you can see that we remain in a strong financial position with net cash of about ILS 88 million or ILS 18.3 million if we pro forma out the dividend distribution that occurred last month after the quarter ended. With our history of strong cash flow generation, we have ample liquidity and financial flexibility to execute upon our growth strategy going forward. Shifting now to discuss our key growth drivers moving forward on Slide #8. On this slide, you can see our 6 core categories. And you can also see that our largest contributors, housewares, along with party supplies, storage and consumables, which collectively drive nearly 45% of our sales, delivered strong double-digit gains in the first quarter. Toys & Baby and Arts & Crafts also delivered strong gains in the period. Office & School Supplies were down in the period as were Apparel Basics with the latter driven largely by softer winter season. On Slide #9, our other category, which represented approximately 29% of sales in the first quarter were up 7% compared to Q1 2024. The more than 25 smaller subcategories that comprise this segment continue to scale, providing us with another top line growth drivers for the years ahead. Next, on Slide #10 to cover some of the relevant KPIs for our store fleet, starting with comp store sales growth. Looking at just Q1, as Nir said, we delivered 3% comparable store sales growth compared to a 4% same-store sales growth in the prior year period. The timing of the Passover holiday drove a positive mix effect on our average basket size that increased 3% this quarter. However, again, as we discussed earlier, looking at January through April, a period that neutralizes the shift of the holiday, you can see that we delivered solid 3.3% comparable store sales growth on top of the double-digit growth we had last quarter with volume growth replacing some of the positive mix effect due to the holiday. On Slide #11. As most of you know, store growth is one of our primary growth drivers. And on Slide #11, you can see the evolution of our store expansion strategy and the significant whitespace opportunity that still lies ahead. As of the end of May this year, we have about 66,000 net square meters, representing growth of 63% from 2019 and, looking ahead to 2030, we believe we can expand our current footprint at additional 66% to 110,000 square meters with 73,000 net square meters, reflecting our current owned selling space plus our pipeline stores. Then on the next slide, Slide #12. As we look at our store pipeline for 2025 and 2026, you can see we've already opened one store in Gedera in February, adding almost 2,000 net square meters of selling space to our fleet. We have 4 additional stores in the pipeline, 2 in 2025 that will add approximately 4,700 net square meters. And then in 2026, we have additional 2 stores planned in the first half of the year that will add another 2,600 net square meters. Our target of opening 3 to 5 owned stores each year remains the same, and there are other further new stores that are in various negotiation stages, including very advanced stages. And then on Page 13, a brief update on the migration to our new DC in Shomria. In 2024, we began the process of moving to a new DC to help enable our next stage of growth and extract further operational efficiencies. We're happy to say that the first phase of the process is now complete, with automation completed as of April this year. And our second legacy center now consolidated into Shomria as of February. Our third DC will remain in place to serve as the company's headquarter and for any necessary additional storage. From a CapEx perspective, we remain in line with the original ILS 30 million plan projection with ILS 30 million invested as of today. With our first quarter margins already seeing a tailwind from the new DC, we look forward to fully capturing new efficiencies, including the more efficient cost structure, automation, improved accuracy and longer term, the phasing out of TPLs. Looking ahead, as we continue to grow, there is a potential expansion of our new DC by an additional 10,000 net square meter, a process that will take some time as it is subject to obtaining regulatory approvals and also obviously completion of the construction. On Slide #14, the last one we are delighted to announce our inclusion in the Tel Aviv 125 index earlier this month, a significant milestone in Max Stock journey since our IPO in September 2020. This achievement validates our strategic direction and reflects the market recognition of our responsible scaling, efficient expansion and consistent value delivery across all aspects of our business. We're immensely proud of our team's execution that made it possible, along with our strong start to 2025. And with that, we're ready to take any questions. Any questions, please write them in the Q&A box. Also in the chart, if the Q&A is not available for any reason, we don't see anything.

Hello. If there are no...

Let me double check here. Nothing here. Okay. All right. There's one, I think, here, just. Okay. So yes, that's a good point. We're going to be in Nantucket at Jefferies Consumer Conference in June. So we'll be more than happy to meet you in person if you are planning to attend this conference. And if not, we'll be very happy to stick with you offline and clarify any of your questions. So thank you very much, and have a great day or afternoon.

Bye.