News Details

• Q4 Revenue Up 6.0% to $135.0 million; up 4.8% on a Constant Currency Basis
• Q4 Net Income Attributable to Controlling Interest of $15.1 million; Diluted EPS of $0.44; Adjusted diluted EPS of $0.53
• FY16 Revenue Up 7.8% to $538.5 million; up 8.4% on a Constant Currency Basis
• FY16 Net Income Attributable to Controlling Interest of $74.6 million; Diluted EPS of $2.15; Adjusted diluted EPS of $2.33
• Enters into Lowe's with "Transform™" Overlay Solution in the United States
• Company Provides 2017 Annual Guidance for Revenues and Adjusted EBITDA

MP MENASHE, Israel--(BUSINESS WIRE)-- Caesarstone Ltd. (NASDAQ:CSTE), a manufacturer of high quality engineered quartz surfaces, today reported financial results for its fourth quarter and fiscal year ended December 31, 2016.

Revenue in the fourth quarter of 2016 increased by 6.0% to $135.0 million as compared to $127.4 million in the same quarter of the prior year. On a constant currency basis, fourth quarter revenue growth was 4.8%. Growth as reported was driven primarily by sustained strong performances in Canada and Australia, up 20.0% and 17.5%, respectively; a 2.8% decline in the U.S. was better than expected and contributed to the Company's outperformance of recent financial guidance for the fourth quarter and full year.

Yonathan Melamed, Interim Chief Executive Officer, commented, "We are pleased to have momentum in our U.S. business which has begun to benefit from investment in our sales and marketing capabilities. Our brand continues to demonstrate global strength and we continue to innovate new products that position us as a clear market leader and establish further growth opportunities for the Company."

The Company is pleased to announce two significant developments in line with its growth strategy and leadership position. The Company's new collaboration with Lowe's Home Improvement in the United States focuses on a new quartz countertop overlay solution called "Transform™ by Caesarstone." Transform is a 13-millimeter quartz overlay surface that can be installed in one day over an existing kitchen countertop. The Company views this solution as a breakthrough product for consumers interested in refinishing without a costly renovation. The Company expects sales of Transform to commence in the first quarter of 2017. The Company also began direct distribution in the U.K. in January 2017 to leverage the opportunity for its products in that market.

Gross margin in the fourth quarter was 38.1% compared to a margin of 37.9% in the same period of the prior year. Lower raw material costs and increased mix of higher margin products were partially offset by higher costs in Richmond-Hill and an increased portion of IKEA revenue, which generates lower margin due to its fabrication and installation component.

Operating expenses in the fourth quarter were $32.3 million, or 23.9% of revenues, as compared to $25.6 million, or 20.1% of revenues, in the same quarter last year. Excluding legal settlements and loss contingencies, operating expenses in the fourth quarter were $29.2 million, or 21.6% of revenues, compared with $25.6 million or 20.1% of revenues last year. This was primarily due to strategic investments in sales and marketing capabilities in the United States designed to drive revenue growth.

Operating income in the fourth quarter was $19.1 million compared to $22.6 million in the same quarter last year. Operating margin excluding legal settlements and loss contingencies was 16.5% this quarter compared to 17.7% in the same quarter last year.

Adjusted EBITDA, which excludes share-based compensation, legal settlements and loss contingencies and non-recurring items, was $30.0 million in the fourth quarter of 2016, a margin of 22.2%. This compares to adjusted EBITDA of $30.4 million in the prior year's fourth quarter, a margin of 23.9%.

Finance expense in the fourth quarter was $1.0 million compared to $0.7 million during the same period in the prior year. The increase was primarily due to higher revolving credit usage and banking activity.

The Company's net income attributable to controlling interest was $15.1 million for the fourth quarter of 2016 compared to $18.7 million in the same quarter last year. Adjusted diluted net income per share for the fourth quarter was $0.53 on 34.4 million shares compared to last year's fourth quarter level of $0.55 on 35.5 million shares.

Full-Year Results

Revenues for the full year of 2016 grew by 7.8% to a new record of $538.5 million compared to $499.5 million in 2015. On a constant currency basis, growth was 8.4% year over year. Full-year revenue growth was led by Canada and Australia, which grew at rates of 21.2% and 18.7% as reported and 25.4% and 19.0% on a constant currency basis, respectively.

Gross margin was 39.5% compared to 40.1% in 2015. The gross margin decline year-over-year was driven primarily by higher costs in the Richmond Hill plant, partially offset by lower raw material costs, increased content of higher margin products and better efficiency in the plants in Israel.

Operating expenses in 2016 were 22.2% of revenue compared to 20.8% in the prior year, primarily reflecting an increased investment in sales and marketing capabilities, particularly in the United States.

Operating income margin in 2016 was 17.2% compared to 19.3% in 2015, also reflecting the lower gross margin and the increase in sales and marketing expenses described above.

Adjusted EBITDA in 2016 increased by 3.7% to a record of $130.3 million, a margin of 24.2%, compared to $125.7 million, a margin of 25.2%, in 2015.

Net income attributable to controlling interest was $74.6 million for the full year of 2016 compared to $77.8 million in 2015. Adjusted net income attributable to controlling interest was $81.2 million compared to $83.7 million in 2015. Adjusted diluted earnings per share were $2.33 on 34.8 million shares in 2016, compared to $2.36 on 35.5 million shares in the prior year.

The Company's balance sheet as of December 31, 2016 continued to strengthen with cash, cash equivalents and short-term bank deposits of $106.3 million, an increase of $38.2 million net of commercial loans relative to 2015 year-end. The Company's cash, cash equivalents and short-term bank deposits grew despite its repurchase of 1.1 million ordinary shares for a total of $39.4 million during the year.

Guidance

The Company today issued guidance for the full-year of 2017. It expects its 2017 revenue to be in the range of $580 million to $595 million, and adjusted EBITDA to be in the range of $119 million to $126 million.

Conference Call Details

Yonathan Melamed, the Company's Interim CEO, and Yair Averbuch, the Company's Chief Financial Officer, will host a conference call today at 8:30 a.m. ET to discuss the results, followed by a question and answer session for the investment community. A live webcast of the call can be accessed at ir.caesarstone.com. To access the call, dial toll-free 1-877-407-4018 or +1-201-689-8471 (international). The toll-free Israeli number is 1 80 940 6247. Upon dialing in, please request to join the Caesarstone Fourth Quarter Earnings Call.

To listen to a telephonic replay of the conference call, dial toll-free 1-877-870-5176 or +1-858-384-5517 (international) and enter pass code 13653395. The replay will be available beginning at 11:30 a.m. ET on Wednesday, February 8, 2017 and will last through 11:59 p.m. ET on February 15, 2017.

About Caesarstone

Caesarstone manufactures high quality engineered quartz surfaces, which are used in both residential and commercial buildings as countertops, vanities, wall cladding, floors and other interior surfaces. The wide variety of colors, styles, designs and textures of Caesarstone® products, along with Caesarstone's inherent characteristics such as hardness, non-porous, scratch and stain resistance and durability, provide consumers with excellent surfaces for their internal spaces which are highly competitive to granite, manufactured solid surfaces and laminate, as well as to other engineered quartz surfaces. Caesarstone's four collections of products — Classico, Supernatural, Motivo, and Concetto — are available in over 50 countries around the world. For more information about the Company, please visit our website www.caesarstone.com. (CSTE-E)

Non-GAAP Financial Measures

The non-GAAP measures presented by the Company should be considered in addition to, and not as a substitute for, comparable GAAP measures. A reconciliation of GAAP net income attributable to controlling interest to adjusted net income attributable to controlling interest and net income to Adjusted EBITDA are provided in the schedules within this release. The Company provides these non-GAAP financial measures because it believes that they present a better measure of the Company's core business and management uses the non-GAAP measures internally to evaluate the Company's ongoing performance. Accordingly, the Company believes that they are useful to investors in enhancing an understanding of the Company's operating performance.

Forward-Looking Statements

Information provided in this press release may contain statements relating to current expectations, estimates, forecasts and projections about future events that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the Company's plans, objectives and expectations for future operations, including its projected results of operations and the expected timing of expanding its manufacturing facilities. These forward-looking statements are based upon management's current estimates and projections of future results or trends. Actual results may differ materially from those projected as a result of certain risks and uncertainties. These factors include, but are not limited to: the strength of the home renovation and construction sectors; economic conditions within any of our key existing markets; actions by our competitors; changes in raw material prices, particularly polymer resins and pigments; fluctuations in currency exchange rates; the success of our expansion efforts in the United States; the outcome of silicosis claims and the claim by our former quartz processor; unpredictability of seasonal fluctuations in revenues; delays in manufacturing and other factors discussed under the heading "Risk Factors" in our most recent annual report on Form 20-F and other documents filed with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

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Investor Relations:
James Palczynski
Partner
ICR, Inc.
+1 (203) 682-8229

Source: Caesarstone Ltd.

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