Max Stock Ltd. ($MAXO)

Good morning, and good afternoon, everyone, and thank you for joining us today. I'm Talia Sessler, Chief Corporate Development and IR Officer. And with me on the call today is Paz Oz, our Chief Financial Officer. Paz will start with a review of our fourth quarter and full year 2025 results, 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.maxstock.co.il. And on Slide #2 is our standard disclaimer page. I think everyone is familiar with it. So with that, I'll turn the floor over to Paz to go through the financials. Paz, please.

Okay. Thanks, Talia. Good day, everyone. I am pleased to be addressing you for the first time as CFO of Max Stock, and I'm delighted to share our strong fourth quarter results, which represent a great finish to another outstanding year of Max Stock. We delivered fourth quarter revenue of ILS 352.6 million, representing growth of 7.5% from the fourth quarter of 2024. Our top line performance was driven by 5.3% increase in comparable store sales, demonstrating the continued strength and resilience of our business model. We delivered an exceptional 330 basis points of gross margin expansion in the period to 45.2%, the first time in company history that the gross margin exceeds 45%. This year-over-year improvement was driven by increasing the portion of direct merchandise sourcing supported by our new advanced logistics center, leveraging increased scale to secure more favorable agreements and pricing with suppliers, benefit from the strength of the Israeli shekel versus the USD and favorable shipping cost. These factors were the main driver behind the impressive 280 basis points expansion in adjusted EBITDA margin to almost 70% and our strong adjusted EBITDA growth of 28% to almost ILS 60 million in the fourth quarter. Looking forward and assuming similar macroeconomic conditions, we believe we can deliver gross margin of 44% and above in the next few quarters. Net financing expenses increased this quarter largely due to almost ILS 13 million loss from hedging transaction revaluation from several future quarters due to strengthening of the shekel vs USD. Most importantly, we achieved GAAP net income of ILS 33 million, representing growth of 15.5% year-over-year with a 9.4% net income margin. Our adjusted EPS attributable to shareholders grew 19% to ILS 0.22. It's important to note that net income growth includes these hedging losses, but also benefited from a lower tax rate versus a year ago due to the closure of our operation in Portugal. Now before we dive into our financial results, I'd like to provide an update on Operation Roaring Lion. Okay. So since the beginning of the operation, nearly all our retail location have remained fully operational, working on a modified schedule. While shipping costs have increased and we have experienced some minor disruption, we have not experienced any material impact on our supply chain. The shekel to USD exchange rate remains strong, which is obviously a good thing for us. This was not -- this was no material impact on the levels of our employee staffing and importantly, our growth and expansion plans remain on track, and we continue to execute on our store opening pipeline. With that context, let me now turn to our strong fourth quarter financial results. Turning to Slide 5 to look at our fourth quarter trends over a multiyear period, our revenue has grown at a CAGR of almost 12%. Since 2022, we expanded gross margin by 400 basis points compared to Q4 2022. Adjusted EBITDA has grown at an impressive CAGR of almost 21% with margin expanding by 280 basis points to almost 70%. Our adjusted EPS has grown 57% since Q4 2022, underscoring our ability to profitably scale the business. Moving to Slide 6. Our full year 2025 performance was truly record breaking. We delivered revenue of ILS 1.4 billion, representing growth of over 7% from 2024. Our top line performance was driven by a 4.4% increase in comparable store sales with annual sales per net square meters, reaching nearly ILS 21,000. Like the first quarter, our top line results combined with exceptional gross margin expansion of 220 basis points to almost 44% fueled a 200 basis points increase in adjusted EBITDA margin to 16.4% and robust 22.4% growth in adjusted EBITDA to almost ILS 234 million for the full year. We achieved GAAP net income of almost ILS 138 million, representing growth of 13.6% with a 9.6% net income margin and adjusted EPS growth of 14.6% to ILS 0.90. Additionally, we generated strong cash flow from operating activity of ILS 292 million and ended the year with a net cash position of ILS 129 million. Looking at our annual performance over a longer period on Slide 7. Our results show consistent year-over-year improvement. Since 2022 revenue has grown at a CAGR of almost 11%, while gross margin has expanded by 400 basis points. And we are particularly proud of the almost 19% CAGR we have achieved in adjusted EPS for our shareholders over the same time. On Slide 8, you can see the main KPIs for the quarter and full year. For Q4, we delivered 5.3% comparable store sales growth, driven by both positive change in average basket size of 4.3% and volume growth. For the full year, we achieved [indiscernible] comparable store sales growth with average basket size increasing 3.6%. Turning to Slide 9. This chart demonstrates the increasing contribution of net income attributable to shareholders, which has grown significantly over the past 3 years outpacing total net income growth. On 2025, adjusted net income attributable to shareholders reached ILS 125 million representing 1.7x growth compared to 2022, and we achieved almost 91% of our adjusted net income attributable to shareholders compared to 85% 3 years ago, demonstrating the compounding value creation for our shareholders. First, this morning, we announced a special onetime dividend distribution of ILS 80 million or ILS 0.57 per share to be paid on April 15. And as you can see on Slide 10, our strategy of profitable growth, coupled with disciplined capital allocation generates very strong returns for shareholders. We have a very strong balance sheet with over ILS 160 million in cash and almost ILS 130 million in net cash as of December 31, 2025, and that is after all the dividend distribution we made thus far. On Slide 11, you can see our performance is our IPO in 2020. That was based on 2019 figures. Over this 6 years period, we have delivered impressive results. Revenue has grown 1.9x to ILS 1.4 billion at a CAGR of 11.5%. Sales per next square meters have increased to 1.2x, a CAGR of 3.3%. Adjusted EBITDA margins have expanded by 280 basis points to 16.4%, and adjusted EPS attributable to shareholders has grown 2.2x at the CAGR of 13.7%. Before I turn the call back to Talia. I want to provide an update on our financial targets for the mid long terms on Slide 12. All of our targets remain unchanged, and we are increasing our targeted EBITDA margins by 200 basis points. So looking ahead and compared to financial year 2025 as our baseline. We are targeting annual revenue growth in the low to mid-teens, which includes other potential growth engines beyond our core business. We continue to target 3% annual same-store sales growth for own and majority owned stores. We are targeting Pre-IFRS 16 adjusted EBITDA margin of approximately 15% to 16% vs our previous guidance of 13% to 14%. This is assuming similar macro conditions and the current shipping costs. This reflects our confidence in continuing to drive gross margin gain while investing in growth. For unit growth, we remain committed to opening 3 to 5 new Max Stock store annually, referring to gross opening of company-owned or majority-owned stores. And we expect adjusted annual EPS growth to be similar to revenue growth. I will now turn the call back to Talia.

Thank you, Paz. Now turning to the key attributes of our business and financial model, as we've demonstrated consistently over multiple years and across various economic cycles, Max Stock has a resilient economic model. On Slide #15, you can see how we've performed strongly across various economic environment over the past 6 years. From 2020 through 2025 we've navigated COVID, supply chain disruptions, inflation, legislative process and ongoing conflicts, including the Sword of Iron War and Operation Rising Lion. Despite these challenges, our total sales have grown from about ILS 186 million in 2020 to approximately ILS 1.4 billion in 2025, representing a 5-year CAGR of 10%. At the same time, our gross margins have expanded from 38.9% to 43.9%, and our adjusted EPS has grown from ILS 0.55 to ILS 0.90 at a 5-year CAGR of 10.3%. Moving to our second key attribute, clear top line growth drivers. As you can see on Slide 17, there remains a significant white space opportunity in Israel. When we compare door store penetration, the U.S. has about 3.3x more dollar stores per capita than Israel. On average, 1 store serves about 29,000 people in Israel compared to roughly 9,000 people in the U.S. This demonstrates the sustainability of our model and the opportunity we have to continue expanding our footprint. On Slide 18, you can see our store expansion road map. We've grown from approximately 40,000 net square meters at the end of 2019 to approximately 67,000 net square meters currently representing growth of 66%. And looking ahead to 2030, we believe we can expand to approximately 110,000 net square meters, which would be a 2.7x increase over an 11-year period from 2018 to 2030 representing additional growth of 64% from our current footprint. Slide 19. Just yesterday, we opened a new store in Or Akiva. This 760 net square meter store Max Stock is located at the Orot Mall and serves an addressable direct population of over 60,000 people across multiple cities and towns. Additionally, in the next few days, we expect to open an impressive 4,300 net square meter flagship store in Beer Sheba. This location serves an addressable direct population of over 200,000 people and will be our second store in the southern city. Looking at our pipeline, we have 3 additional signed contracts representing approximately 58,000 gross square meters or 4,100 net square meters. 2 stores Ad Halom and Gan Yavne are expected to open in 2026. And Ofakim is expected to open in the first half of 2027. Additionally, we have other stores under various negotiation stages. Our target of opening 3 to 5 stores per year remains unchanged. Turning to same-store sales growth, trends on Slide 20. We've delivered an average annual same-store sales growth of 6% from 2017 through 2025, while there is natural variability year-to-year ranging from negative 1.5% in 2022 to 14% in 2017, our consistent performance demonstrates the underlying strength of our business model. In 2025, we delivered 4.4% comp store sales growth which we view as solid performance, particularly considering we're lapping very strong growth of 9.9% in 2024. Our historical performance is also the reason why we're confident that we can deliver a 3% same-store sales growth also going forward. Then on Slide 21, you can see our category performance for 2025, 5 of our 6 core categories delivered growth, led by party supplies, storage and consumable, which grew an impressive 13.3%, followed by housewares, our largest category, increasing 5.3%. Our Other category on Slide 22, which represented approximately 26% of our 2025 revenue and comprises of 27 subcategories was up 12.8% year-over-year. These smaller subcategories continue to scale and provide us with another important top line growth driver. And then on -- turning to Slide 23. Our growing online social presence continue to expand our reach, particularly with younger consumers. By the end of 2025, we had 364,000 followers on Facebook, representing a 10% growth since 2025 -- since 2022. Our Instagram following grew 85% to 352,000 followers. And most impressively, our TikTok following has grown more than 1,000% since 2022 to 114,000 followers. This organic growth in social media engagement helps us drive awareness and store traffic without significant advertising spend. Moving to our third key attribute, superior KPIs on Slide 24. Max Stock consistently delivers best-in-class performance metrics and demonstrate the strength that demonstrate a strength of our business model. On Slide 25, you can see our annual sales per net square meter compared to leading value retailers globally at approximately $6,700 per square meter, Max Stock ranks among the top performance in the value retail space. This metric demonstrates our ability to drive exceptional productivity from our store footprint, which is a testament to our compelling product assortment, strategic store location and the strong value proposition we offer to our Israeli consumers. Then Slide 26 provides a comprehensive operational benchmarking comparison with our global peers. Looking at our performance across multiple dimensions, we delivered an approximately 11% revenue CAGR for 2022 to 2025, which positions us competitively in the mid-range of our peer group. More importantly, our 2025 gross adjusted EBITDA and net margins are among the highest in the sector, reflecting our direct sourcing capabilities and our ability to convert top line gains and strong gross margins into bottom line profitability while also investing in future growth. And then moving to our fourth key attribute on Slide 27, gross margin efficiencies. On Slide 28, you can see how our improving purchasing -- how we are improving our purchasing power with scale. Our average quarterly revenue has grown from about ILS 262 million in 2022 to about ILS 357 million in 2025. This increased scale obviously allows us to negotiate better terms with our suppliers. On Slide 29, we show our continued progress in increasing direct sourcing of merchandise. We've grown from 50% direct import in 2019 to 70% this year in 2025 with a target of reaching approximately 85% direct import in the future. This shift allows us to capture better margins, have more control over product selection and reduce our reliance on local suppliers. And then on Slide 30. Further increasing our direct sourcing of merchandise will require expansion of our distribution center in Shomriya, our new distribution center. As shown on this slide, the facility has the potential to expand by approximately 10,000 square meters by the -- from the current 31,000 square meters to 41,000 square meters. This expansion is unlikely to happen this year and is subject to various regulatory approvals, but, if and once completed, it will provide us with additional necessary capacity, and we're working relentlessly to achieve approvals and to progress with that initiative. On Slide 31, as I conclude my prepared remarks, I want to thank our incredible team for their dedication and hard work throughout 2025 and also through the current Roaring Lion operation. Their efforts have driven another year of record performance and have positioned Max Stock for continued success. We're excited about the opportunities ahead. As we execute our growth strategy, expand our store footprint and continue delivering exceptional value to both our customers and our shareholders. With that, we're now ready to take any questions.

No questions, Talia.

I'll double check. Yes. No questions. Okay. We'll definitely speak with you later on. Please be in touch. Many thanks for joining us today, and see you next quarter.

Bye-bye.

Okay. Actually, we just -- there is a question. Can you repeat the question, please?

Can you highlight traffic, via ticketing guide?

Okay. In terms of our guidance of 3% same-store sales growth, we typically do not split it to ticket and traffic. There are years that sales store sales growth is more driven by volume in other years where it is more basket size driven. This year, it was a combination. I would say about 75% was driven by basket size increase, primarily a reflection of, I would say, positive mix effect. And another 25% was driven primarily by volume. But guiding us, looking forward, we don't typically speak anything. Anything else? All right. Thank you, everyone. Have a good day.