News Details

- Revenue of $123.9 Million -

- Net Income of $12.8 Million, or $0.37 Per Share -

- Adjusted Net Income of $14.1 Million, or $0.41 Per Share -

- Adjusted EBITDA of $23.7 Million -

- Global Growth Acceleration Plan Drove Higher Adjusted EBITDA and Margin -

- Generated Cash Flow From Operations of $28.2 Million, Enhancing Cash Position (*) to $155.7 Million -

- Completed Majority Stake Acquisition of Lioli Ceramica in October, Establishing Position as Leading Premium, Multi-Material Countertop Company -

- Declares Dividend of $0.14 per share -

MP MENASHE, Israel--(BUSINESS WIRE)-- Caesarstone Ltd. (NASDAQ: CSTE), a leading developer and manufacturer of high-quality engineered surfaces, today reported financial results for its third quarter ended September 30, 2020.

“I am encouraged by the ongoing disciplined execution of our Global Growth Acceleration Plan to improve our business over the long-term,” commented Yuval Dagim, Chief Executive Officer. “The benefits of our team’s collective efforts are emerging, with visible progress in our third quarter results, as we realized our highest adjusted EBITDA and margin in over two years. In addition, we are encouraged with the improvement in year-over-year sales trends compared to the second quarter 2020. Most importantly, we delivered this performance while maintaining the health and safety of our employees, customers and partners across the globe.”

Mr. Dagim continued, “We have also kept a sharp focus on executing strategic investments to further solidify our position as a leading premium, multi-material countertop Company. Our recent majority stake acquisition of Lioli Ceramica is directly aligned with this strategy that leverages our brand, distribution, sales and global scale to efficiently enlarge our addressable market. As we integrate Lioli and make additional progress on other initiatives, we remain confident in the prospects for our business as the recovery continues.”

Ophir Yakovian, Chief Financial Officer, added, “Our diligent efforts to improve our operations allowed us to generate further cost savings and create additional efficiencies to mitigate the COVID-19 pandemic related business disruptions, primarily in our Americas region. We are extremely pleased with our ability to improve our results while carefully managing our working capital to produce strong cash flow from operations of $28.2 million during the third quarter. Looking at the remainder of the year, our significant cash position (*) in excess of $155 million provides us with the capacity to continue to accelerate initiatives to transform our business.”

(*) Cash position is defined as cash and cash equivalents and short-term bank deposits and long and short-term investment in marketable securities less debt from financial institutions.

Third Quarter 2020 Results

Revenue in the third quarter of 2020 was $123.9 million compared to $142.8 million in the prior year quarter. On a constant currency basis, third quarter revenue was lower by 14.4% year-over-year, driven primarily by COVID-19 pandemic related business disruptions, particularly in the Americas region.

Gross margin in the third quarter was 31.4% compared to 29.8% in the prior year quarter. Adjusted gross margin in the second quarter was 31.4% compared to 29.9% in the prior year quarter. The year-over-year improvement in gross margin mainly reflects improved product mix, lower raw material costs and improved efficiency partly offset by the impact of lower sales volume, lower sale prices and less favorable regional mix.

Operating expenses in the third quarter were $23.8 million, or 19.2% of revenue, compared to $29.7 million, or 20.8% of revenue in the prior year quarter. Excluding legal settlements and loss contingencies, operating expenses improved to 18.8% of revenue, compared to 19.5% in the prior year quarter mainly due to lower marketing and sales expenses combined with lower general and administrative expenses.

Operating income in the third quarter was $15.0 million compared to operating income of $12.9 million in the prior year quarter. The year-over-year difference mainly reflects higher gross margin and lower operating expenses.

Adjusted EBITDA, which excludes expenses for share-based compensation, legal settlements and loss contingencies and for non-recurring items, was $23.7 million in the third quarter, representing a margin of 19.1%. This compares to adjusted EBITDA of $22.5 million, representing a margin of 15.8%, in the prior year quarter. The year-over-year margin improvement primarily reflects higher gross margin and lower operating expenses as a percentage of revenue.

Finance (income) expenses in the third quarter was $0.1 million income compared to finance expenses of $4.1 million in the prior year quarter. The difference was mainly a result of the favorable impact of foreign currency exchange rates.

Net income for the third quarter was $12.8 million compared to net income of $7.1 million in the prior year quarter. Diluted net income per share for the third quarter was $0.37 compared to diluted net income per share of $0.21 in the prior year quarter. Adjusted diluted net income per share for the third quarter was $0.41 on 34.5 million shares, compared to adjusted diluted net income per share of $0.29 on 34.6 million shares in the prior year quarter.

Balance Sheet & Liquidity

The Company's balance sheet as of September 30, 2020 remained strong, including cash, cash equivalents and short-term bank deposits and short and long-term marketable securities of $155.7 million with no debt from financial institutions. The Company believes it has a strong financial position and the flexibility required to support its global operations and strategic plan.

Dividend

The Company’s dividend policy provides for a quarterly cash dividend of up to 50% of reported net income on a year-to-date basis, less any amount already paid as dividend for the respective period (the “calculated dividend”), subject in each case to approval by the Company’s board of directors. No dividend is paid if it would be less than $0.10 per share.

In accordance with the Company’s dividend policy, the board of directors declared a cash dividend of $0.14 per share for the third quarter and the nine months ended September 30, 2020. The dividend will be paid on December 9, 2020 to shareholders of record as of November 18, 2020. The dividend payment is subject to withholding tax of 20%.

Webcast and Conference Call Details

The Company will host a live webcast and conference call today at 8:30 a.m. ET to discuss the results, followed by a question and answer session for the investment community. The live webcast of the call can be accessed at ir.caesarstone.com. For those unable to access the webcast, the conference call will be accessible by dialing 1-877-407-4018 (domestic) 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 Third Quarter Earnings Call.

To listen to a telephonic replay of the conference call, dial toll-free 1-844-512-2921 (domestic) or +1-412-317-6671 (international) and enter pass code 13711696. The replay will be available beginning at 11:30 a.m. ET on Wednesday, November 4, 2020 and will last through 11:59 p.m. ET on Wednesday, November 11, 2020.

About Caesarstone

Caesarstone is a concept and lifestyle-driven company with a customer-centered approach to designing, developing, and producing high-end engineered surfaces used in residential and commercial buildings. Our products offer superior aesthetic appeal and perfected functionality through a distinct variety of colors, styles, textures, and finishes used in countertops, vanities, wall cladding, floors, and other interior surfaces. Marked by their inherent longevity characteristics such as non-porousness, scratch and stain resistance, and durability, the company’s product umbrella offers a highly desirable alternative to other surfaces. Strong commitment to service has fostered growing customer loyalty in over 50 countries where the five distinct Caesarstone product collections are available: Classico, Supernatural, Metropolitan, Concetto and Outdoor. For more information please visit our website: www.caesarstone.com.

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. Reconciliations of GAAP gross profit to adjusted gross profit, GAAP net income (loss) to adjusted net income (loss) and net income (loss) to Adjusted EBITDA are provided in the schedules to this release. To calculate revenues growth rates that exclude the impact of changes in foreign currency exchange rates, the Company converts actual reported results from local currency to U.S. dollars using constant foreign currency exchange rates in the current and comparable period. 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 relate to the Company's plans, objectives and expectations for future operations, including estimations relating to the impact of the COVID-19 pandemic and mitigation measures in connection thereto, expectations of the results of the Company’s business optimization initiative and its projected results of operations. 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, both known or unknown. These factors include, but are not limited to: the impact of the COVID-19 pandemic on end-consumers, the global economy and the Company’s business and results of operations; the ability of the company to realign aspects of its business based on the business optimization initiative, the strength of the home renovation and construction sectors; intense competitive pressures; the outcome of silicosis and other bodily injury claims; regulatory requirements relating to hazards associated with exposure to silica dust; manufacturing of existing products and managing required changes in production and supply chain; economic conditions within any of our key existing markets changes in raw material prices; fluctuations in currency exchange rates; the success of our expansion efforts in the United States; unpredictability of seasonal fluctuations in revenues; disturbances to the Company’s operations or the operations of its suppliers, distributors, customers or other third parties 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:
ICR, Inc. - Rodny Nacier
CSTE@icrinc.com
+1 646 277-1237

Source: Caesarstone Ltd.