- 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
-
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.
Caesarstone Ltd. and its subsidiariesCondensed consolidated
balance sheets As of U.S. dollars in
thousands September 30, 2020 December 31, 2019
(Unaudited) (Audited) ASSETS CURRENT ASSETS:
Cash and cash equivalents and short-term bank deposits
$
135,975
$
139,372
Short-term available for sale marketable securities
10,325
-
Trade receivables, net
68,671
78,282
Other accounts receivable and prepaid expenses
27,374
34,066
Inventories
127,487
122,686
Total current assets
369,832
374,406
LONG-TERM ASSETS: Severance pay fund
3,639
3,475
Other long-term receivables
3,398
3,176
Deferred tax assets, net
7,929
7,881
Long-term deposits and prepaid expenses
4,115
2,887
Operating lease right-of-use assets
78,287
72,047
Long-term available for sale marketable securities
9,432
-
Property, plant and equipment, net
198,610
204,776
Goodwill
35,425
35,218
Total long-term assets
340,835
329,460
Total assets
$
710,667
$
703,866
LIABILITIES AND EQUITY CURRENT LIABILITIES:
Trade payables
39,951
53,072
Related party and other loan
2,210
2,212
Short term legal settlements and loss contingencies
23,276
28,300
Accrued expenses and other liabilities
44,848
42,782
Total current liabilities
110,285
126,366
LONG-TERM LIABILITIES: Long-term loan and financing
liability of land from a related party
6,914
7,915
Legal settlements and loss contingencies long-term
27,661
21,505
Long-term lease liabilities
69,385
64,638
Accrued severance pay
4,513
4,333
Long-term warranty provision
1,267
1,385
Total long-term liabilities
109,740
99,776
EQUITY: Ordinary shares
371
371
Treasury shares - at cost
(39,430
)
(39,430
)
Additional paid-in capital
159,561
157,225
Capital fund related to non-controlling interest
(5,587
)
(5,587
)
Accumulated other comprehensive loss
(2,309
)
(3,288
)
Retained earnings
378,036
368,433
Total equity
490,642
477,724
Total liabilities and equity
$
710,667
$
703,866
Caesarstone Ltd. and its
subsidiaries
Condensed consolidated
statements of income
Three months endedSeptember 30, Nine months
endedSeptember 30, U.S. dollars in thousands (except per
share data)
2020
2019
2020
2019
(Unaudited) (Unaudited) Revenues
$
123,922
$
142,839
$
349,516
$
412,107
Cost of revenues
85,068
100,215
254,089
298,451
Gross profit
38,854
42,624
95,427
113,656
Operating expenses: Research and development
930
962
2,473
3,184
Marketing and selling
14,231
17,419
44,295
50,072
General and administrative
8,194
9,451
29,302
31,056
Legal settlements and loss contingencies, net
452
1,853
4,927
5,158
Total operating expenses
23,807
29,685
80,997
89,470
Operating income
15,047
12,939
14,430
24,186
Finance (income) expenses, net
(52
)
4,053
1,586
6,200
Income before taxes
15,099
8,886
12,844
17,986
Taxes on income
2,292
1,758
3,241
4,849
Net income
$
12,807
$
7,128
$
9,603
$
13,137
Basic net income per ordinary share
$
0.37
$
0.21
$
0.28
$
0.38
Diluted net income per ordinary share
$
0.37
$
0.21
$
0.28
$
0.38
Weighted average number of ordinary shares used in computing basic
income per ordinary share
34,422,128
34,390,244
34,411,480
34,379,402
Weighted average number of ordinary shares used in computing
diluted income per ordinary share
34,453,647
34,442,592
34,455,129
34,438,797
Caesarstone Ltd. and its subsidiariesSelected Condensed
consolidated statements of cash flows Nine months
endedSeptember 30, U.S. dollars in thousands
2020
2019
(Unaudited) Cash flows from operating
activities: Net income
$
9,603
$
13,137
Adjustments required to reconcile net income to net cash provided
by operating activities: Depreciation and amortization
21,160
21,617
Share-based compensation expense
2,335
2,852
Accrued severance pay, net
16
(78
)
Changes in deferred tax, net
(46
)
(1,359
)
Capital loss
342
342
Legal settlements and loss contingencies, net
4,927
5,158
Compensation paid by a shareholder
-
Foreign currency translation gains
-
Decrease (increase) in trade receivables
9,155
(14,930
)
Decrease (increase) in other accounts receivable and prepaid
expenses
3,740
(7,787
)
Decrease (increase) in inventories
(4,375
)
33,466
Decrease in trade payables
(15,263
)
(9,292
)
Increase (decrease) in warranty provision
(342
)
97
Changes in right of use assets
(5,245
)
(73,969
)
Changes in lease liabilities
5,761
77,318
Amortization of premium and accretion of discount on marketable
securities, net
69
-
Changes in Accrued interest related to Marketable Securities
(87
)
-
Increase in accrued expenses and other liabilities including
related party
1,535
1,202
Net cash provided by operating activities
33,285
47,774
Cash flows from investing
activities: Purchase of property, plant and equipment
(15,544
)
(15,770
)
Proceeds from sale of property, plant and equipment
7
52
Investment in marketable securities
(19,728
)
-
Increase in long term deposits
(407
)
(200
)
Net cash used in investing activities
(35,672
)
(15,918
)
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
(924
)
(891
)
Net cash used in financing activities
(1,383
)
(8,662
)
Effect of exchange rate differences on cash and cash
equivalents
373
80
Increase (decrease) in cash and cash equivalents and
short-term bank deposits
(3,397
)
23,274
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
$
135,975
$
116,836
Non - cash investing:
Changes in trade payables balances related to purchase of fixed
assets
(438
)
(2,463
)
Caesarstone Ltd. and its subsidiaries Three months
endedSeptember 30, Nine months endedSeptember 30,
U.S. dollars in thousands
2020
2019
2020
2019
(Unaudited) (Unaudited) Reconciliation of Gross
profit to Adjusted Gross profit: Gross profit
$
38,854
$
42,624
$
95,427
$
113,656
Share-based compensation expense (a)
100
136
353
274
Non-recurring import related income
-
-
-
(1,501
)
Other non-recurring items (b)
-
-
-
1,367
Adjusted Gross profit (Non-GAAP)
$
38,954
$
42,760
$
95,780
$
113,796
(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
endedSeptember 30, Nine months endedSeptember 30,
U.S. dollars in thousands
2020
2019
2020
2019
(Unaudited) (Unaudited) Reconciliation of Net
Income to Adjusted EBITDA: Net income
$
12,807
$
7,128
$
9,603
$
13,137
Finance (income) expenses, net
(52
)
4,053
1,586
6,200
Taxes on income
2,292
1,758
3,241
4,849
Depreciation and amortization
7,058
6,755
21,160
21,617
Legal settlements and loss contingencies, net (a)
452
1,853
4,927
5,158
Share-based compensation expense (b)
628
968
2,335
2,852
Non-recurring import related income
-
-
-
(1,501
)
Acquisition and integration related expenses
477
-
477
-
Other non-recurring items (c)
-
-
-
993
Adjusted EBITDA (Non-GAAP)
$
23,662
$
22,515
$
43,329
$
53,305
(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) Nine months ended September 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 endedSeptember 30, Nine months
endedSeptember 30, U.S. dollars in thousands (except per
share data)
2020
2019
2020
2019
(Unaudited) (Unaudited) Reconciliation of net
income to adjusted net income: Net income
$
12,807
$
7,128
$
9,603
$
13,137
Legal settlements and loss contingencies, net (a)
452
1,853
4,927
5,158
Share-based compensation expense (b)
628
968
2,335
2,852
Non cash revaluation of lease liabilities (c)
227
1,123
12
3,349
Non-recurring import related income (d)
-
-
-
(1,501
)
M&A related expenses
477
-
477
-
Other non-recurring items (e)
-
-
-
2,193
Total adjustments
1,784
3,944
7,751
12,051
Less tax on non-tax adjustments (f)
481
1,063
2,090
3,249
Total adjustments after tax
1,303
2,881
5,661
8,802
Adjusted net income (Non-GAAP)
$
14,110
$
10,009
$
15,264
$
21,939
Adjusted diluted EPS (g)
$
0.41
$
0.29
$
0.44
$
0.64
(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)
Nine months ended September 30, 2019 relates mainly to
non-recurring import related expenses and relocation expenses of
Caesarstone USA headquarters, the Company's subsidiary. (e) Nine
months ended September 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 nine months ended September 30, 2020, based on the
effective tax rates of the comparative periods. (g) In calculating
adjusted diluted (Non-GAAP) EPS for the three and nine month ended
September 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 endedSeptember 30, Nine
months endedSeptember 30, U.S. dollars in thousands
2020
2019
2020
2019
(Unaudited) (Unaudited) USA
$
52,097
$
64,805
$
153,878
$
185,812
Canada
19,174
21,884
52,167
65,404
Latin America
124
1,433
762
3,380
America's
71,395
88,122
206,807
254,596
Australia
27,746
28,641
73,634
82,147
Asia
2,881
3,676
7,444
11,583
APAC
30,627
32,317
81,078
93,730
EMEA
11,422
11,717
30,793
33,591
Israel
10,478
10,683
30,838
30,190
Total Revenues
$
123,922
$
142,839
$
349,516
$
412,107
Caesarstone Ltd. and its subsidiaries Geographic
breakdown of revenues by region - Supplemental data
Three months ended U.S. dollars in thousands
9/30/2020 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
$
52,097
$
41,726
$
60,055
$
64,659
$
64,805
$
64,590
$
56,417
$
60,200
$
61,933
$
60,358
Canada
19,174
14,435
18,558
20,575
21,881
23,341
20,178
23,834
25,140
27,349
Latin America
124
132
506
735
1,434
1,351
596
1,212
1,635
1,738
America's
71,395
56,293
79,119
85,969
88,120
89,282
77,191
85,246
88,708
89,445
Australia
27,746
23,534
22,354
26,000
28,642
28,294
25,214
33,484
33,968
34,731
Asia
2,881
1,732
2,831
3,932
3,675
3,311
4,596
4,929
4,189
4,221
APAC
30,627
25,266
25,185
29,932
32,317
31,605
29,810
38,413
38,157
38,952
EMEA
11,422
8,031
11,340
9,464
11,719
11,418
10,455
9,954
11,115
11,721
Israel
10,478
9,447
10,913
8,502
10,683
8,766
10,741
9,268
9,709
9,125
Total Revenues
$
123,922
$
99,037
$
126,557
$
133,867
$
142,839
$
141,071
$
128,197
$
142,881
$
147,689
$
149,243
Year-over-year % change 9/30/2020
6/30/2020 3/31/2020 12/31/2019
9/30/2019 (Unaudited) USA
-19.6
%
-35.4
%
6.4
%
7.4
%
4.6
%
Canada
-12.4
%
-38.2
%
-8.0
%
-13.7
%
-13.0
%
Latin America
-91.4
%
-90.2
%
-15.1
%
-39.4
%
-12.3
%
America's
-19.0
%
-36.9
%
2.5
%
0.8
%
-0.7
%
Australia
-3.1
%
-16.8
%
-11.3
%
-22.3
%
-15.7
%
Asia
-21.6
%
-47.7
%
-38.4
%
-20.2
%
-12.3
%
APAC
-5.2
%
-20.1
%
-15.5
%
-22.1
%
-15.3
%
EMEA
-2.5
%
-29.7
%
8.5
%
-4.9
%
5.4
%
Israel
-1.9
%
7.8
%
1.6
%
-8.3
%
10.0
%
Total Revenues
-13.2
%
-29.8
%
-1.3
%
-6.3
%
-3.3
%
Year-over-year % change in constant currency (*)
9/30/2020 6/30/2020 3/31/2020
12/31/2019 9/30/2019 (Unaudited) USA
-19.6
%
-35.4
%
6.4
%
7.4
%
4.6
%
Canada
-11.7
%
-36.0
%
-7.1
%
-13.6
%
-12.1
%
Latin America
-91.3
%
-90.2
%
-15.2
%
-39.4
%
-12.3
%
America's
-18.8
%
-36.4
%
2.7
%
0.9
%
-0.4
%
Australia
-7.1
%
-11.5
%
-3.3
%
-18.2
%
-10.0
%
Asia
-21.2
%
-45.9
%
-37.1
%
-14.7
%
-8.8
%
APAC
-8.7
%
-15.1
%
-8.5
%
-17.8
%
-9.9
%
EMEA
-5.9
%
-26.9
%
11.4
%
-4.4
%
10.9
%
Israel
-4.5
%
4.5
%
-1.5
%
-14.0
%
7.8
%
Total Revenues
-14.4
%
-28.3
%
0.5
%
-5.5
%
-1.5
%
(*) 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201104005020/en/
Investor Relations: ICR, Inc. - Rodny Nacier
CSTE@icrinc.com +1 646 277-1237
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