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Caesarstone Reports First Quarter 2021 Financial Results

May, 05, 2021

– Record First Quarter Revenue Grew 15.4% Over Prior Year to $146.0 Million –

– Per Share Diluted Net Income of $0.41 and Adjusted Diluted EPS of $0.42 –

– Gross Margin Expanded 90 Basis Points to 29.7% –

– Adjusted EBITDA Increased 54.1% to $20.3 Million at a 13.9% Margin –

– Strong Net Cash Position(*) of $105.3 Million at Quarter End –

– Declares Dividend of $0.21 per share –

– Reiterates Outlook for 2021 Revenue and Adjusted EBITDA Growth –

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 first quarter ended March 31, 2021.

“We are extremely pleased to produce another consecutive quarter of growth as we continue to successfully execute our strategy to transform Caesarstone into a leading premium, multi-material countertop company,” commented Yuval Dagim, Caesarstone’s Chief Executive Officer. “Our recently completed accretive acquisitions of Omicron and Lioli Ceramica are already contributing to results, helping us to deliver record first quarter revenue. Our collective actions since we announced our Global Growth Acceleration Plan two years ago have allowed us to establish an efficient global operating platform, resulting in our third consecutive quarter of year-on-year EBITDA margin expansion. We are encouraged with the progress we have made integrating Lioli and Omicron and are excited to further realize the unique benefits of each platform as a combined business. As we move forward, we will continue to leverage our innovative go-to-market initiatives, world-class brand and multi-material product offerings to drive additional value for our shareholders.”

(*) 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.

First Quarter 2021 Results

Revenue in the first quarter of 2021 grew 15.4% to $146.0 million compared to $126.6 million in the prior year quarter. On a constant currency basis, first quarter revenue was higher by 9.8% year-over-year, due primarily to the contribution of acquisitions.

Gross margin in the first quarter improved to 29.7% compared to 28.8% in the prior year quarter. Adjusted gross margin in the first quarter was 30.1% compared to 28.9% in the prior year quarter. The year-over-year improvement in gross margin mainly reflects better product mix, improved efficiency and more favorable currency exchange rates, partly offset by the impact of higher manufacturing unit costs due to lower fixed cost absorption and lower selling prices.

Operating expenses in the first quarter were $33.3 million, or 22.8% of revenue, compared to $34.1 million, or 27.0% of revenue in the prior year quarter. Excluding legal settlements and loss contingencies, operating expenses were 22.3% of revenue, compared to 24.7% in the prior year quarter, mainly due to higher revenues.

Operating income grew to $10.0 million compared to operating income of $2.3 million in the prior year quarter. The year-over-year growth mainly reflects higher gross margin and lower legal settlements and loss contingencies.

Adjusted EBITDA, which excludes expenses for share-based compensation, legal settlements and loss contingencies and for non-recurring items, grew 54.1% year-over-year to $20.3 million in the first quarter, representing a margin of 13.9%. This compares to adjusted EBITDA of $13.1 million, representing a margin of 10.4%, in the prior year quarter. The year-over-year margin improvement primarily reflects the higher gross margin.

Finance income in the first quarter was $5.3 million compared to finance income of $0.9 million in the prior year quarter. The difference was primarily a result of the favorable impact of foreign currency exchange rates and raw material hedging activity.

Net Income attributable to controlling interest for the first quarter was $14.2 million compared to net income of $2.7 million in the prior year quarter. Net income per share for the first quarter was $0.41 compared to net income per share of $0.08 in the prior year quarter. Adjusted diluted net income per share for the first quarter was $0.42 on 34.5 million shares, compared to adjusted diluted net income per share of $0.13 in the prior year quarter on a similar share count.

Balance Sheet & Liquidity

The Company's balance sheet as of March 31, 2021 remained strong, including cash, cash equivalents and short-term bank deposits and short and long-term marketable securities of $118.7 million and total debt to financial institutions of $13.4 million.

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 $0.21 per share for the three months ended March 31, 2021. The dividend will be paid on June 1, 2021 to shareholders of record as of May 18, 2021. The dividend payment is subject to withholding tax of 20%.

Outlook

The Company reiterates its expectation for 2021 revenue and Adjusted EBITDA to be higher year-over-year. The company anticipates revenue to grow faster than EBITDA in 2021 mainly due to higher shipping and raw material costs, coupled with a return to more normalized levels of sales and marketing expenses and other investments to support the Company’s growth initiatives. The Company’s outlook includes the investment costs associated with its Global Growth Acceleration Plan. The Company’s outlook also assumes that both pandemic related business restrictions will fade and that the supply environment will improve as the year progresses.

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 First 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 13718692. The replay will be available beginning at 11:30 a.m. ET on Wednesday, May 5, 2021 and will last through 11:59 p.m. ET on Wednesday, May 12, 2021.

About Caesarstone

Caesarstone is a concept and lifestyle-driven company with a customer-centered approach to designing, developing, and producing high-end engineered stone countertops, 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 diverse countertop applications, marked by inherent longevity. Strong commitment to service has fostered growing customer loyalty in over 50 countries where the Caesarstone product collections are available: Classico, Supernatural, Metropolitan 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, integration of the company’s acquisitions and its projected outlook and 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, economic conditions in our key markets, raw material shortages and prices, fluctuations in home renovation and construction sectors; the company’s ability to compete with lower-priced products and other intense competitive pressures; the outcome of silicosis and other bodily injury claims; regulatory requirements relating to hazards associated with exposure to silica dust; ability to efficiently manufacture products and managing required changes in production and supply chain in light of our recent acquisitions; fluctuations in currency exchange rates; the success of our expansion efforts in the United States; unpredictability of seasonal fluctuations in revenues 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.

Caesarstone Ltd. and its subsidiaries
Condensed consolidated balance sheets
 
As of
U.S. dollars in thousands March 31, 2021 December 31, 2020
(Unaudited) (Audited)
ASSETS
 
CURRENT ASSETS:
 
Cash and cash equivalents and short-term bank deposits

$ 99,820

$ 114,248

Short-term available for sale marketable securities

11,697

8,112

Trade receivables, net

84,533

84,822

Other accounts receivable and prepaid expenses

35,425

26,481

Inventories

155,402

152,073

 
Total current assets

386,877

385,736

 
LONG-TERM ASSETS:
 
Severance pay fund

3,766

4,007

Other long-term receivables

3,773

3,837

Deferred tax assets, net

7,763

8,359

Long-term deposits and prepaid expenses

768

1,675

Operating lease right-of-use assets

121,531

123,928

Long-term available for sale marketable securities

7,170

10,926

Property, plant and equipment, net

219,631

222,883

Goodwill and intangible assets, net

58,717

59,570

 
Total long-term assets

423,119

435,185

 
Total assets

$ 809,996

$ 820,921

 
LIABILITIES AND EQUITY
 
CURRENT LIABILITIES:
 
Short-term bank credit

$ 4,403

$ 13,122

Trade payables

59,846

55,063

Related parties and other loans

2,227

2,221

Short term legal settlements and loss contingencies

19,277

31,039

Accrued expenses and other liabilities

54,391

55,570

 
Total current liabilities

140,144

157,015

 
LONG-TERM LIABILITIES:
 
Long-term bank and other loans and financing liability of land from a related party

17,213

20,706

Legal settlements and loss contingencies long-term

21,660

21,910

Deferred tax liabilities, net

6,456

6,943

Long-term lease liabilities

108,743

112,719

Accrued severance pay

5,129

5,303

Long-term warranty provision

1,274

1,274

 
Total long-term liabilities

160,475

168,855

 
REDEEMABLE NON-CONTROLLING INTEREST

7,500

7,701

 
EQUITY:
 
Ordinary shares

371

371

Treasury shares - at cost

(39,430)

(39,430)

Additional paid-in capital

160,651

160,083

Capital fund related to non-controlling interest

(5,587)

(5,587)

Accumulated other comprehensive loss

1,008

1,083

Retained earnings

384,864

370,830

 
Total equity

501,877

487,350

 
Total liabilities and equity

$ 809,996

$ 820,921

 
Caesarstone Ltd. and its subsidiaries
Condensed consolidated statements of income

Three months ended
March 31,

U.S. dollars in thousands (except per share data)

2021

2020

(Unaudited)
 
Revenues

$ 146,032

$ 126,557

Cost of revenues

102,730

90,156

 
Gross profit

43,302

36,401

 
Operating expenses:
Research and development

1,105

780

Marketing and selling

18,276

18,629

General and administrative

13,143

11,867

Legal settlements and loss contingencies, net

740

2,838

 
Total operating expenses

33,264

34,114

 
Operating income

10,038

2,287

Finance income, net

(5,333)

(869)

 
Income before taxes

15,371

3,156

Taxes on income

1,529

478

 
Net income

$ 13,842

$ 2,678

 
Net loss attributable to non-controlling interest

348

-

 
Net income attributable to controlling interest

$ 14,190

$ 2,678

Basic net income per ordinary share (*)

$ 0.41

$ 0.08

Diluted net income per ordinary share (*)

$ 0.41

$ 0.08

Weighted average number of ordinary shares used in computing basic income per ordinary share

34,439,783

34,399,916

Weighted average number of ordinary shares used in computing diluted income per ordinary share

34,489,432

34,448,505

 
  (*) The numerator for the calculation of net income per share for the three months ended March 31, 2021 has been decreased by approximately $0.2 million, to reflect the adjustment to redemption value associated with the redeemable non-controlling interest.
 
Caesarstone Ltd. and its subsidiaries
Selected Condensed consolidated statements of cash flows
 

Three months ended
March 31,

U.S. dollars in thousands

2021

2020

(Unaudited)
Cash flows from operating activities:
 
Net income

$ 13,842

$ 2,678

Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization

8,908

7,115

Share-based compensation expense

567

906

Accrued severance pay, net

69

(86)

Changes in deferred tax, net

101

(1,060)

Capital (gain) loss

(2)

17

Legal settlements and loss contingencies, net

740

2,838

Decrease (increase) in trade receivables

179

(3,075)

Decrease (increase) in other accounts receivable and prepaid expenses

(9,299)

2,268

Increase in inventories

(3,344)

(11,737)

Increase in trade payables

2,987

2,009

Increase (decrease) in warranty provision

(9)

52

Changes in right of use assets

2,328

2,576

Changes in lease liabilities

(3,968)

(515)

Amortization of premium and accretion of discount on marketable securities, net

70

-

Changes in Accrued interest related to Marketable Securities

13

-

Decrease in accrued expenses and other liabilities including related parties

(11,020)

(580)

 
Net cash provided by operating activities

2,162

3,406

 
 
Cash flows from investing activities:
 
Repayment of assumed shareholders loan related to acquisition

(1,966)

-

Purchase of property, plant and equipment

(4,727)

(8,500)

Proceeds from sale of property, plant and equipment

4

8

Investment in marketable securities

78

-

Increase in long term deposits

48

(731)

 
Net cash used in investing activities

(6,563)

(9,223)

 
 
Cash flows from financing activities:
 
Changes in short-term bank credits and long-term loans

(9,704)

(459)

Repayment of a financing leaseback related to Bar-Lev transaction

(323)

(305)

 
Net cash used in financing activities

(10,027)

(764)

 
 
Effect of exchange rate differences on cash and cash equivalents

-

(927)

 
Decrease in cash and cash equivalents and short-term bank deposits

(14,428)

(7,508)

Cash and cash equivalents and short-term bank deposits at beginning of the period

114,248

139,372

 
Cash and cash equivalents and short-term bank deposits at end of the period

$ 99,820

$ 131,864

 
Non - cash investing:
Changes in trade payables balances related to purchase of fixed assets

(158)

(564)

 
Caesarstone Ltd. and its subsidiaries
 

Three months ended
March 31,

U.S. dollars in thousands

2021

2020

(Unaudited)
Reconciliation of Gross profit to Adjusted Gross profit:
Gross profit

$ 43,302

$ 36,401

Share-based compensation expense (a)

105

131

Amortization of assets related to acquisitions

534

-

Adjusted Gross profit (Non-GAAP)

$ 43,941

$ 36,532

(a) Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the Company.
Caesarstone Ltd. and its subsidiaries
 

Three months ended
March 31,

U.S. dollars in thousands

2021

2020

(Unaudited)
Reconciliation of Net Income to Adjusted EBITDA:
Net income

$ 13,842

$ 2,678

Finance income, net

(5,333)

(869)

Taxes on income

1,529

478

Depreciation and amortization related to acquisitions

8,908

7,115

Legal settlements and loss contingencies, net (a)

740

2,838

Share-based compensation expense (b)

567

906

 
Adjusted EBITDA (Non-GAAP)

$ 20,253

$ 13,146

(a) Consists of legal settlements expenses and loss contingencies, net, related to product liability claims and other adjustments to on-going legal claims, including related legal fees.
(b) Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the Company.
Caesarstone Ltd. and its subsidiaries
 

Three months ended
March 31,

U.S. dollars in thousands (except per share data)

2021

2020

(Unaudited)
Reconciliation of net income attributable to controlling interest to adjusted net income attributable to controlling interest:
Net income attributable to controlling interest

$ 14,190

$ 2,678

Legal settlements and loss contingencies, net (a)

740

2,838

Amortization of assets related to acquisitions, net of tax

826

-

Share-based compensation expense (b)

567

906

Non cash revaluation of lease liabilities (c)

(1,862)

(1,471)

Total adjustments

271

2,273

Less tax on non-tax adjustments (d)

27

344

Total adjustments after tax

244

1,929

 
Adjusted net income attributable to controlling interest (Non-GAAP)

$ 14,434

$ 4,607

Adjusted diluted EPS (e)

$ 0.42

$ 0.13

 
(a) Consists of legal settlements expenses and loss contingencies, net, related to product liability claims and other adjustments to on-going legal claims, including related legal fees.
(b) Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the Company.
(c) Exchange rate differences deriving from revaluation of lease contracts in accordance with FASB ASC 842.
(d) Tax adjustments for the three months ended March 31, 2021 and 2020, based on the effective tax rates.
(e) In calculating adjusted diluted (Non-GAAP) EPS for the three months ended March 31, 2021 and 2020, the diluted weighted average number of shares outstanding excludes the effects of share-based compensation expense in accordance with FASB ASC 718.
Caesarstone Ltd. and its subsidiaries
Geographic breakdown of revenues by region
 

Three months ended
March 31,

U.S. dollars in thousands

2021

2020

(Unaudited)
 
USA

$ 70,831

$ 60,055

Canada

17,779

18,558

Latin America

858

506

America's

89,468

79,119

 
Australia

27,172

22,354

Asia

7,777

2,831

APAC

34,949

25,185

 
EMEA

12,718

11,340

 
Israel

8,897

10,913

 
Total Revenues

$ 146,032

$ 126,557

 
Caesarstone Ltd. and its subsidiaries

Geographic breakdown of revenues by region - Supplemental data

 
Three months ended
U.S. dollars in thousands 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/30/2019
(Unaudited)
 
USA

$ 70,831

$ 53,618

$ 52,097

$ 41,726

$ 60,055

$ 64,659

$ 64,805

$ 64,590

$ 56,417

Canada

17,779

20,325

19,174

14,435

18,558

20,575

21,881

23,341

20,178

Latin America

858

1,387

124

132

506

735

1,434

1,351

596

America's

89,468

75,330

71,395

56,293

79,119

85,969

88,120

89,282

77,191

 
Australia

27,172

29,953

27,746

23,534

22,354

26,000

28,642

28,294

25,214

Asia

7,777

7,122

2,881

1,732

2,831

3,932

3,675

3,311

4,596

APAC

34,949

37,075

30,627

25,266

25,185

29,932

32,317

31,605

29,810

 
EMEA

12,718

14,408

11,422

8,031

11,340

9,464

11,719

11,418

10,455

 
Israel

8,897

10,083

10,478

9,447

10,913

8,502

10,683

8,766

10,741

 
Total Revenues

$ 146,032

$ 136,896

$ 123,922

$ 99,037

$ 126,557

$ 133,867

$ 142,839

$ 141,071

$ 128,197

 
 
Year-over-year % change
3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020
(Unaudited)
 
USA

17.9%

-17.1%

-19.6%

-35.4%

6.4%

Canada

-4.2%

-1.2%

-12.4%

-38.2%

-8.0%

Latin America

69.6%

88.8%

-91.4%

-90.2%

-15.1%

America's

13.1%

-12.4%

-19.0%

-36.9%

2.5%

 
Australia

21.6%

15.2%

-3.1%

-16.8%

-11.3%

Asia

174.7%

81.1%

-21.6%

-47.7%

-38.4%

APAC

38.8%

23.9%

-5.2%

-20.1%

-15.5%

 
EMEA

12.2%

52.2%

-2.5%

-29.7%

8.5%

 
Israel

-18.5%

18.6%

-1.9%

7.8%

1.6%

 
Total Revenues

15.4%

2.3%

-13.2%

-29.8%

-1.3%

 
 
Year-over-year % change in constant currency (*)
3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020
(Unaudited)
 
USA

17.9%

-17.1%

-19.6%

-35.4%

6.4%

Canada

-9.6%

-2.4%

-11.7%

-36.0%

-7.1%

Latin America

69.8%

88.7%

-91.3%

-90.2%

-15.2%

America's

11.8%

-12.7%

-18.8%

-36.4%

2.7%

 
Australia

2.8%

7.9%

-7.1%

-11.5%

-3.3%

Asia

169.5%

80.7%

-21.2%

-45.9%

-37.1%

APAC

21.5%

17.5%

-8.7%

-15.1%

-8.5%

 
EMEA

3.3%

45.8%

-5.9%

-26.9%

11.4%

 
Israel

-24.6%

9.4%

-4.5%

4.5%

-1.5%

 
Total Revenues

9.8%

-0.4%

-14.4%

-28.3%

0.5%

 
(*) Change in revenues at constant currency is calculated so that revenues can be viewed without the impact of fluctuations s in foreign currency exchange rates, thereby facilitating period-to-period comparisons of business performance. Change in revenues adjusted for currency are calculated by translating current period activity in local currency using the comparable prior-year period’s currency conversion rate. Exchange rates used, are the representative exchange rate published by the Bank of Israel for the relevant periods.

 

Investor Relations:
ICR, Inc. - Rodny Nacier
CSTE@icrinc.com
+1 646 277-1237

Source: Caesarstone Ltd.

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