Delta Apparel Reports Second Quarter Fiscal 2024 Results

Delta Apparel, Inc. (NYSE:DLA), a provider of core activewear, lifestyle apparel, and on-demand digital print strategies, today announced financial results for its fiscal year 2024 second quarter ended March 30, 2024.

For the second quarter ended March 30, 2024:

• Net sales were $78.9 million compared to prior year period net sales of $110.3 million. Salt Life Group segment net sales were $15.5 million compared to prior year period net sales of $18.9 million. Net sales in the Delta Group segment were $63.4 million compared to $91.3 million in the prior year period.

• Gross margins were 4.3% compared to 14.7% in the prior year period, driven primarily by production curtailments in the Delta Group segment. Adjusted for the cost impacts of these product curtailments ("Production Curtailment Costs"), first quarter gross margins were 14.4%. Delta Group segment gross margins were (6.3%) compared to 5.5% in the prior year period. Adjusted for the Production Curtailment Costs, Delta Group segment gross margins were 6.3%. Salt Life Group segment gross margins were 47.5% versus 59% in the prior year period, driven primarily by price discounting activity and the timing of inventory receipts.

• Selling, general, and administrative expenses ("SG&A") decreased from $19.3 million in the prior year period to $17.9 million, while SG&A as a percentage of sales increased over the prior year period to 22.8%.

• Operating loss increased from $5.3 million in the prior year period to $24.4 million. Adjusting for the Production Curtailment Costs, the costs associated with strategic restructuring actions (the "Restructuring Costs"), and an $8.8 million non-cash impairment charge on the goodwill in our DTG2Go business (the "Impairment Charge"), operating loss was $6.0 million. Delta Group segment operating loss increased from $7.4 million to $22.4 million. Adjusted for the Production Curtailment Costs, Restructuring Costs, and Impairment Charge, Delta Group segment operating loss was $3.9 million. Operating income in the Salt Life Group segment was $197 thousand compared to $4.6 million in the prior year period.

• Net interest expense was $3.5 million compared to $3.7 million in the prior year period, with the decrease driven by lower borrowings partially offset by the elevated interest rate environment.

• Earnings before interest, taxes, depreciation and amortization ("EBITDA") was a loss of $20.9 million. Adjusted for the Production Curtailment Costs, Restructuring Costs, and Impairment Charge, EBITDA was a loss of $2.4 million. Delta Group segment EBITDA was a loss of $19.4 million. Adjusted for the Production Curtailment Costs, Restructuring Costs, and Impairment Charge, Delta Group segment EBITDA was a loss of $1.0 million. Salt Life Group segment EBITDA was $744 thousand.

• Net loss increased to $36.3 million, or $5.15 per share, from a net loss of $7.0 million, or $1.00 per share. Adjusted for the Production Curtailment Costs, Restructuring Costs, and Impairment Charge, net loss was $17.8 million, or $2.53 per share.

• Net inventory as of March 30, 2024, was $156.9 million, a year-over-year decrease of 35% from inventory of $243.2 million at March 2023 and a sequential decrease of almost 40% from inventory of $258.9 million at December 2022.

• Debt outstanding under our U.S. revolving credit facility was $95.8 million at March 30, 2024, a year-over-year reduction of $57.4 million from March 2023. Total net debt, including capital lease financing and cash on hand, was $126.2 million as of March 30, 2024, an approximately 35% reduction from $194.3 million at March 2023.

• Cash on hand and availability under our U.S. revolving credit facility totaled $11.8 million as of March 30, 2024, an increase of $4.4 million from December 2023 and a decrease of $2.4 million from September 2023.

• Capital spending was $200 thousand during the second quarter compared to $2 million during the prior year second quarter.

No Conference Call

The Company will not be holding a conference call to discuss its financial results for its fiscal year 2024 second quarter.

Non-GAAP Financial Measures

Reconciliations of GAAP gross margins to non-GAAP gross margins, GAAP operating income to non-GAAP operating income, GAAP net income to non-GAAP net income, GAAP net income to non-GAAP EBITDA, GAAP net income to non-GAAP adjusted EBITDA, and GAAP operating income to non-GAAP EBITDA and adjusted EBITDA are presented in tables accompanying the selected financial data included in this release and provide useful information to evaluate the Company's operational performance. A description of the amounts excluded on a non-GAAP basis are provided in conjunction with these tables. Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP EBITDA and non-GAAP adjusted EBITDA should be evaluated in light of the Company's financial statements prepared in accordance with GAAP.

About Delta Apparel, Inc.

Delta Apparel, Inc., along with its operating subsidiaries DTG2Go, LLC, Salt Life, LLC, and M.J. Soffe, LLC, is a vertically-integrated, international apparel company that designs, manufactures, sources, and markets a diverse portfolio of core activewear and lifestyle apparel products under the primary brands of Salt Life®, Soffe®, and Delta. The Company is a market leader in the direct-to-garment digital print and fulfillment industry, bringing proprietary DTG2Go technology and innovation to customer supply chains. The Company specializes in selling casual and athletic products through a variety of distribution channels and tiers, including outdoor and sporting goods retailers, independent and specialty stores, better department stores and mid-tier retailers, mass merchants and e-retailers, the U.S. military, and through its business-to-business e-commerce sites. The Company's products are also made available direct-to-consumer on its websites at www.saltlife.com, www.soffe.com and www.deltaapparel.com as well as through its branded retail stores. The Company's operations are located throughout the United States, Honduras and El Salvador. Additional information about the Company is available at www.deltaapparelinc.com.

Cautionary Note Regarding Forward-Looking Statements

This press release may contain "forward-looking" statements that involve risks and uncertainties. Any number of factors could cause actual results to differ materially from anticipated or forecasted results, including, but not limited to, our ability to obtain necessary liquidity and/or access capital or that such liquidity or capital will be available on terms acceptable to us or at all; the general U.S. and international economic conditions; the impact of the COVID-19 pandemic and government/social actions taken to contain its spread on our operations, financial condition, liquidity, and capital investments, including recent labor shortages, inventory constraints, and supply chain disruptions; significant interruptions or disruptions within our manufacturing, distribution or other operations; deterioration in the financial condition of our customers and suppliers and changes in the operations and strategies of our customers and suppliers; the volatility and uncertainty of cotton and other raw material prices and availability; the competitive conditions in the apparel industry; our ability to predict or react to changing consumer preferences or trends; our ability to successfully open and operate new retail stores in a timely and cost-effective manner; the ability to grow, achieve synergies and realize the expected profitability of acquisitions; changes in economic, political or social stability at our offshore locations or in areas in which we, or our suppliers or vendors, operate; our ability to attract and retain key management; the volatility and uncertainty of energy, fuel and related costs; material disruptions in our information systems related to our business operations; compromises of our data security; significant changes in our effective tax rate; significant litigation in either domestic or international jurisdictions; recalls, claims and negative publicity associated with product liability issues; the ability to protect our trademarks and other intellectual property; changes in international trade regulations; our ability to comply with trade regulations; changes in employment laws or regulations or our relationship with employees; negative publicity resulting from violations of manufacturing standards or labor laws or unethical business practices by our suppliers and independent contractors; the inability or refusal of suppliers or other third-parties, including those related to transportation, to fulfill the terms of their contracts with us; continued operating losses and restrictions on our ability to borrow capital or service our indebtedness; interest rate fluctuations increasing our obligations under our variable rate indebtedness; the ability to raise additional capital; the impairment of acquired intangible assets; foreign currency exchange rate fluctuations; the illiquidity of our shares; price volatility in our shares and the general volatility of the stock market; and the other factors set forth in the "Risk Factors" contained in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and as updated in our subsequently filed Quarterly Reports on Form 10-Q. Except as may be required by law, Delta Apparel, Inc. expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

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