- Revenue of $99.0 Million, With Encouraging
Demand Improvement in All Regions During June -
- Net Loss of $5.9 Million, or ($0.17) Per
Share -
- Adjusted Net Loss of $3.5 Million, or
($0.10) Per Share -
- Adjusted EBITDA of $6.5 Million -
- Strong Liquidity Position With $130.1
Million in Cash and Marketable Securities -
Caesarstone Ltd. (NASDAQ:CSTE), a leading developer and
manufacturer of high-quality engineered surfaces, today reported
financial results for its second quarter ended June 30, 2020.
Yuval Dagim, Chief Executive Officer, commented, “Our proactive
actions taken in March allowed us to effectively right size our
resources and mitigate the impact of the unprecedented environment
brought on by the COVID-19 pandemic. At the same time, we continue
to focus on factors that are in our control, such as executing our
Global Growth Acceleration Plan and making strategic investments to
strengthen our position as a leading premium countertop Company.
With our strong cash position, we will continue to execute this
strategy to improve our business over the long-term, most
particularly in areas of product innovation, production processes,
technology, and go-to-market capabilities. Looking ahead, we are
fortunate to have a talented workforce, leading products and solid
financial resources to deliver on our focused approach to value
creation in the quarters and years ahead.”
Ophir Yakovian, Chief Financial Officer, added, “Second quarter
sales in all of our four global regions were better than initially
expected at the onset of the pandemic. We experienced the majority
of adverse impacts in our Americas region during April and May.
Since that time, we have been encouraged to see sequential
improvement in June as more customers opened for business and
demand began to return. As we look to the balance of 2020, we
recognize that there is potential for additional limitations
through national and local government orders aimed to safeguard the
public from the pandemic. That said, we will continue to focus on
managing cash, controlling costs and adjusting our production as
needed to appropriately manage our inventory in this volatile
environment. We remain committed to our strategy and continue
allocating resources to enhance our position as a global, premium
countertop expert with a leading and valued customer-focused
brand.”
Second Quarter 2020 Results
Revenue in the second quarter of 2020 was $99.0 million
compared to $141.1 million in the prior year quarter. On a constant
currency basis, second quarter revenue was lower by 28.3%
year-over-year, driven by extended shelter-in-place guidelines,
particularly during the first two months of the quarter with the
biggest impact in the Americas region.
Gross margin in the second quarter was 20.4% compared to
28.2% in the prior year quarter. Adjusted gross margin in the
second quarter was 20.5% compared to 27.3% in the prior year
quarter. The lower adjusted gross margin primarily reflects lower
sales volume and less favorable regional and product mix as well as
currency exchange headwinds, partially offset by lower raw material
prices.
Operating loss in the second quarter was $2.9 million
compared to operating income of $10.6 million in the prior year
quarter. The year-over-year difference mainly reflects lower gross
margin.
Adjusted EBITDA, which excludes expenses for share-based
compensation, legal settlements and loss contingencies and for
non-recurring items, was $6.5 million in the second quarter,
representing a margin of 6.6%. This compares to adjusted EBITDA of
$19.2 million, representing a margin of 13.6%, in the prior year
quarter.
Finance expense in the second quarter was $2.5 million
compared to $1.8 million in the prior year quarter. The difference
was primarily a result of the unfavorable impact of foreign
currency exchange rates.
Net loss for the second quarter was $5.9 million compared
to net income of $6.4 million in the prior year quarter. Loss per
share for the second quarter was ($0.17) compared to diluted net
income per share of $0.19 in the prior year quarter. Adjusted
diluted net loss per share for the second quarter was ($0.10) on
34.5 million shares, compared to adjusted diluted net income per
share of $0.23 on a similar share count in the prior year
quarter.
Balance Sheet & Liquidity
The Company believes it has a strong financial position and the
flexibility required to support its global operations during this
volatile period. The Company's balance sheet as of June 30, 2020
remained strong, including cash, cash equivalents and short-term
bank deposits and short and long term marketable securities of
$130.1 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. Pursuant to the Company’s
dividend policy, the Company does not intend to pay a dividend for
the second quarter of 2020, based on its reported net loss for the
period.
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. Due to potential
extended wait times to access the conference call via dial-in, the
Company encourages use of the webcast. 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 Second 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 13706779. The replay will be
available beginning at 11:00 a.m. ET on Wednesday, August 5, 2020
and will last through 11:59 p.m. ET on Wednesday, August 12,
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.
Caesarstone Ltd. and its subsidiariesCondensed consolidated
balance sheets As of U.S. dollars in
thousands June 30, 2020 December 31, 2019
(Unaudited) (Audited) ASSETS CURRENT ASSETS:
Cash and cash equivalents and short-term bank deposits
$
117,064
$
139,372
Short-term available for sale marketable securities
2,025
-
Trade receivables, net
67,007
78,282
Other accounts receivable and prepaid expenses
27,987
34,066
Inventories
133,611
122,686
Total current assets
347,694
374,406
LONG-TERM ASSETS: Severance pay fund
3,510
3,475
Other long-term receivables
3,577
3,176
Deferred tax assets, net
8,513
7,881
Long-term deposits and prepaid expenses
4,260
2,887
Operating lease right-of-use assets
73,544
72,047
Long-term available for sale marketable securities
10,978
-
Property, plant and equipment, net
201,980
204,776
Goodwill
34,804
35,218
Total long-term assets
341,166
329,460
Total assets
$
688,860
$
703,866
LIABILITIES AND EQUITY CURRENT LIABILITIES:
Trade payables
37,274
53,072
Related party and other loan
2,076
2,212
Short term legal settlements and loss contingencies
23,377
28,300
Accrued expenses and other liabilities
44,414
42,782
Total current liabilities
107,141
126,366
LONG-TERM LIABILITIES: Long-term loan and financing
liability of land from a related party
7,044
7,915
Legal settlements and loss contingencies long-term
27,891
21,505
Long-term lease liabilities
65,264
64,638
Accrued severance pay
4,373
4,333
Long-term warranty provision
1,372
1,385
Total long-term liabilities
105,944
99,776
EQUITY: Ordinary shares
371
371
Treasury shares - at cost
(39,430
)
(39,430
)
Additional paid-in capital
158,932
157,225
Capital fund related to non-controlling interest
(5,587
)
(5,587
)
Accumulated other comprehensive loss
(3,740
)
(3,288
)
Retained earnings
365,229
368,433
Total equity
475,775
477,724
Total liabilities and equity
$
688,860
$
703,866
Caesarstone Ltd. and its subsidiaries Condensed
consolidated statements of income (loss)
Three months ended June
30,
Six months ended June
30,
U.S. dollars in thousands (except per share data)
2020
2019
2020
2019
(Unaudited)
(Unaudited)
Revenues
$
99,037
$
141,071
$
225,594
$
269,268
Cost of revenues
78,865
101,308
169,021
198,236
Gross profit
20,172
39,763
56,573
71,032
Operating expenses: Research and development
763
1,280
1,543
2,222
Marketing and selling
11,435
15,579
30,064
32,653
General and administrative
9,241
10,572
21,108
21,605
Legal settlements and loss contingencies, net
1,637
1,729
4,475
3,305
Total operating expenses
23,076
29,160
57,190
59,785
Operating income (loss)
(2,904
)
10,603
(617
)
11,247
Finance expenses, net
2,507
1,825
1,638
2,147
Income (loss) before taxes
(5,411
)
8,778
(2,255
)
9,100
Taxes on income (loss)
471
2,364
949
3,091
Net income (loss)
$
(5,882
)
$
6,414
$
(3,204
)
$
6,009
Basic net income (loss) per ordinary share
$
(0.17
)
$
0.19
$
(0.09
)
$
0.17
Diluted net income (loss) per ordinary share
$
(0.17
)
$
0.19
$
(0.09
)
$
0.17
Weighted average number of ordinary shares used in computing basic
income (loss) per ordinary share
34,412,369
34,380,799
34,406,107
34,373,848
Weighted average number of ordinary shares used in computing
diluted income (loss) per ordinary share
34,412,369
34,425,797
34,406,107
34,427,899
Caesarstone Ltd. and its subsidiaries
Selected Condensed consolidated
statements of cash flows
Six months ended June
30,
U.S. dollars in thousands
2020
2019
(Unaudited)
Cash flows from operating activities:
Net income (loss)
$
(3,204
)
$
6,009
Adjustments required to reconcile net income (loss) to net cash
provided by operating activities: Depreciation and amortization
14,102
14,862
Share-based compensation expense
1,707
1,884
Accrued severance pay, net
7
(8
)
Changes in deferred tax, net
(640
)
(1,242
)
Capital loss
22
338
Legal settlements and loss contingencies, net
4,475
3,305
Decrease (increase) in trade receivables
9,942
(10,479
)
Decrease (increase) in other accounts receivable and prepaid
expenses
3,172
(4,726
)
Decrease (increase) in inventories
(12,621
)
21,571
Decrease in trade payables
(16,117
)
(9,800
)
Decrease in warranty provision
(98
)
(82
)
Changes in right of use assets
(1,347
)
(74,159
)
Changes in lease liabilities
1,554
76,385
Amortization of premium and accretion of discount on marketable
securities, net
6
-
Changes in Accrued interest related to Marketable Securities
(8
)
-
Increase in accrued expenses and other liabilities including
related party
4,173
2,088
Net cash provided by operating activities
5,125
25,946
Cash flows from investing
activities: Purchase of property, plant and equipment
(12,459
)
(11,955
)
Proceeds from sale of property, plant and equipment
6
54
Investment in marketable securities
(13,002
)
-
Increase in long term deposits
(711
)
(192
)
Net cash used in investing activities
(26,166
)
(12,093
)
Cash flows from financing
activities: Changes in short-term bank credit and
loans, net
(459
)
(7,771
)
Repayment of a financing leaseback related to Bar-Lev transaction
(610
)
(588
)
Net cash used in financing activities
(1,069
)
(8,359
)
Effect of exchange rate differences on cash and cash
equivalents
(198
)
304
Decrease in cash and cash equivalents and short-term bank
deposits
(22,308
)
5,798
Cash and cash equivalents and short-term bank deposits at beginning
of the period
139,372
93,562
Cash and cash equivalents and short-term bank deposits at
end of the period
$
117,064
$
99,360
Non - cash investing:
Changes in trade payables balances related to purchase of fixed
assets
(954
)
(2,500
)
Caesarstone Ltd. and its subsidiaries
Three months ended June
30,
Six months ended June
30,
U.S. dollars in thousands
2020
2019
2020
2019
(Unaudited)
(Unaudited)
Reconciliation of Gross profit to Adjusted Gross profit:
Gross profit
$
20,172
$
39,763
$
56,573
$
71,032
Share-based compensation expense (a)
122
63
253
139
Non-recurring import related income
-
(2,611
)
-
(1,501
)
Other non-recurring items (b)
-
1,367
$
-
1,367
Adjusted Gross profit (Non-GAAP)
$
20,294
$
38,582
$
56,826
$
71,037
(a)
Share-based compensation includes
expenses related to stock options and restricted stock units
granted to employees and directors of the Company.
(b)
Relates mainly to one time
amortization of machinery equipment with no future alternative
use.
Caesarstone Ltd. and its subsidiaries
Three months ended June
30,
Six months ended June
30,
U.S. dollars in thousands
2020
2019
2020
2019
(Unaudited)
(Unaudited)
Reconciliation of Net Income (loss) to Adjusted EBITDA: Net
income (loss)
$
(5,882
)
$
6,414
$
(3,204
)
$
6,009
Finance expenses, net
2,507
1,825
1,638
2,147
Taxes on income
471
2,364
949
3,091
Depreciation and amortization
6,987
8,099
14,102
14,862
Legal settlements and loss contingencies, net (a)
1,637
1,729
4,475
3,305
Share-based compensation expense (b)
801
832
1,707
1,884
Non-recurring import related expense (income)
-
(2,611
)
-
(1,501
)
Other non-recurring items (c)
-
504
-
993
Adjusted EBITDA (Non-GAAP)
$
6,521
$
19,156
$
19,667
$
30,790
(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)
Three and six months ended June
30, 2019 relates to non-recurring expenses related to North
American region establishment and one time charge related to
reduction in headcount.
Caesarstone Ltd. and its subsidiaries
Three months ended June
30,
Six months ended June
30,
U.S. dollars in thousands (except per share data)
2020
2019
2020
2019
(Unaudited)
(Unaudited)
Reconciliation of net income (loss) to adjusted net income:
Net income (loss)
$
(5,882
)
$
6,414
$
(3,204
)
$
6,009
Legal settlements and loss contingencies, net (a)
1,637
1,729
4,475
3,305
Share-based compensation expense (b)
801
832
1,707
1,884
Non cash revaluation of lease liabilities (c)
1,256
799
(215
)
2,226
Non-recurring import related income (d)
-
(2,611
)
-
(1,501
)
Other non-recurring items (e)
-
1,704
-
2,193
Total adjustments
3,694
2,453
5,967
8,107
Less tax on non-tax adjustments (f)
1,310
871
2,116
2,875
Total adjustments after tax
2,384
1,582
3,851
5,232
Adjusted net income (loss) (Non-GAAP)
$
(3,498
)
$
7,996
$
647
$
11,241
Adjusted diluted EPS (g)
$
(0.10
)
$
0.23
$
0.02
$
0.33
(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)
Three and six months ended June
30, 2019 relates mainly to non-recurring import related expenses
and relocation expenses of Caesarstone USA headquarters, the
Company's subsidiary.
(e)
Three and six months ended June
30, 2019 relates to non-recurring expenses related to North
American region establishment and one time charge related to
reduction in headcount.
(f)
Tax adjustments for the three and
six months ended June 30, 2020, based on the effective tax rates of
the comparative periods.
(g)
In calculating adjusted diluted
(Non-GAAP) EPS for the six month ended June 30, 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 June
30,
Six months ended June
30,
U.S. dollars in thousands
2020
2019
2020
2019
(Unaudited)
(Unaudited)
USA
$
41,726
$
64,590
$
101,781
$
121,007
Canada
14,435
23,342
32,993
43,520
Latin America
132
1,351
638
1,947
America's
56,293
89,283
135,412
166,474
Australia
23,534
28,292
45,888
53,506
Asia
1,732
3,311
4,563
7,907
APAC
25,266
31,603
50,451
61,413
EMEA
8,031
11,419
19,371
21,874
Israel
9,447
8,766
20,360
19,507
Total Revenues
$
99,037
$
141,071
$
225,594
$
269,268
Caesarstone Ltd. and its subsidiaries
Geographic breakdown of
revenues by region - Supplemental data
Three months ended U.S. dollars in thousands
6/30/2020 3/31/2020
12/31/2019 9/30/2019 6/30/2019
3/30/2019 12/31/2018
9/30/2018 6/30/2018 (Unaudited)
USA
$ 41,726
$ 60,055
$ 64,659
$ 64,805
$ 64,590
$ 56,417
$ 60,200
$ 61,933
$ 60,358
Canada
14,435
18,558
20,575
21,881
23,341
20,178
23,834
25,140
27,349
Latin America
132
506
735
1,434
1,351
596
1,212
1,635
1,738
America's
56,293
79,119
85,969
88,120
89,282
77,191
85,246
88,708
89,445
Australia
23,534
22,354
26,000
28,642
28,294
25,214
33,484
33,968
34,731
Asia
1,732
2,831
3,932
3,675
3,311
4,596
4,929
4,189
4,221
APAC
25,266
25,185
29,932
32,317
31,605
29,810
38,413
38,157
38,952
EMEA
8,031
11,340
9,464
11,719
11,418
10,455
9,954
11,115
11,721
Israel
9,447
10,913
8,502
10,683
8,766
10,741
9,268
9,709
9,125
Total Revenues
$ 99,037
$ 126,557
$ 133,867
$ 142,839
$ 141,071
$ 128,197
$ 142,881
$ 147,689
$ 149,243
Year-over-year % change
6/30/2020 3/31/2020
12/31/2019 9/30/2019 6/30/2019
(Unaudited)
USA
-35.4%
6.4%
7.4%
4.6%
7.0%
Canada
-38.2%
-8.0%
-13.7%
-13.0%
-14.7%
Latin America
-90.2%
-15.1%
-39.4%
-12.3%
-22.3%
Americas
-36.9%
2.5%
0.8%
-0.7%
-0.2%
Australia
-16.8%
-11.3%
-22.3%
-15.7%
-18.5%
Asia
-47.7%
-38.4%
-20.2%
-12.3%
-21.5%
APAC
-20.1%
-15.5%
-22.1%
-15.3%
-18.9%
EMEA
-29.7%
8.5%
-4.9%
5.4%
-2.6%
Israel
7.8%
1.6%
-8.3%
10.0%
-3.9%
Total Revenues
-29.8%
-1.3%
-6.3%
-3.3%
-5.5%
Year-over-year % change in
constant currency (*)
6/30/2020 3/31/2020 12/31/2019
9/30/2019 6/30/2019
(Unaudited)
USA
-35.4%
6.4%
7.4%
4.6%
7.0%
Canada
-36.0%
-7.1%
-13.6%
-12.1%
-11.6%
Latin America
-90.2%
-15.2%
-39.4%
-12.3%
-22.3%
Americas
-36.4%
2.7%
0.9%
-0.4%
0.7%
Australia
-11.5%
-3.3%
-18.2%
-10.0%
-12.0%
Asia
-45.9%
-37.1%
-14.7%
-8.8%
-18.6%
APAC
-15.1%
-8.5%
-17.8%
-9.9%
-12.7%
EMEA
-26.9%
11.4%
-4.4%
10.9%
2.8%
Israel
4.5%
-1.5%
-14.0%
7.8%
-3.5%
Total Revenues
-28.3%
0.5%
-5.5%
-1.5%
-2.9%
(*) 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200805005080/en/
Investor Relations: ICR, Inc. - Rodny Nacier
CSTE@icrinc.com +1 646 277-1237
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