Caesarstone Reports Second Quarter 2021 Financial Results

– Record Quarterly Revenue of $163.5 Million, Up 65.1% Over Prior Year –

– Net Income Attributable to Controlling Interest of $1.7 Million, or $0.05 Per Share –

– Adjusted Net Income of $7.2 Million, or $0.21 Per Share –

– Adjusted EBITDA of $18.8 Million, Up 187.9% Over Prior Year –

– Strong Net Cash Position^(*) of $107.8 Million at Quarter End –

– Reiterates Outlook for 2021 Revenue and Adjusted EBITDA Growth –

MP MENASHE, Israel – August 4, 2021 - 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, 2021.

“I am very pleased with our ability to deliver record sales during the second quarter driven by strong performance across our business, as well as the positive contributions from our recent accretive acquisitions of Omicron and Lioli” commented Yuval Dagim, Caesarstone’s Chief Executive Officer. “This achievement is attributable to the focused execution of our Global Growth Acceleration Plan as we continue to leverage our world-class brand and innovative go-to-market initiatives to enhance customer experience and engagement. To that point, our new CS Connect platform represents a technological leap for our business, transforming the way we communicate with our customers and consumers, and we are highly encouraged by the initial feedback we have received. Looking to the second half of 2021, we have a strong balance sheet in place with ample capital to build on our success as we further execute our growth strategy to transform Caesarstone into a leading premium, multi-material countertop company.”

(*) 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.

Second Quarter 2021 Results

Revenue in the second quarter of 2021 grew 65.1% to a record of $163.5 million compared to $99.0 million in the prior year quarter. On a constant currency basis, second quarter revenue was higher by 55.5% year-over-year. Sales growth was primarily driven by improved demand across the majority of our global footprint, as economies around the world continue to recover from the pandemic, in addition to the contribution of our recent acquisitions.

Gross margin in the second quarter improved to 28.0% compared to 20.4% in the prior year quarter. Adjusted gross margin in the second quarter was 28.1% compared to 20.5% in the prior year quarter. The year-over-year improvement in gross margin mainly reflects better regional and product mix, more favorable currency exchange rates, enhanced productivity in our factories, and growing demand since the beginning of the pandemic which were partly offset by lower sales prices and higher raw material and shipping inflation.

Operating expenses in the second quarter were $40.6 million, or 24.8% of revenue, compared to $23.1 million, or 23.3% of revenue in the prior year quarter. Excluding legal settlements and loss contingencies, operating expenses were 22.3% of revenue, compared to 21.6% in the prior year quarter, mainly due to higher marketing and selling expenses related to initiatives under the Company’s Global Growth Acceleration Plan.

Operating income grew to $5.2 million compared to operating loss of $2.9 million in the prior year quarter. The year-over-year growth mainly reflects higher gross profit.

Adjusted EBITDA, which excludes expenses for non-cash share-based compensation, legal settlements and loss contingencies and for non-recurring items, more than doubled year-over-year to $18.8 million in the second quarter, representing a margin of 11.5%. This compares to adjusted EBITDA of $6.5 million, representing a margin of 6.6%, in the prior year quarter. The year-over-year margin improvement primarily reflects the higher gross margin.

Finance expense in the second quarter was $3.1 million compared to finance expense of $2.5 million in the prior year quarter. The difference was primarily a result of higher credit cards fees due to higher volume as well as interest related to bank loan.

Net Income attributable to controlling interest for the second quarter was $1.7 million compared to net loss of $5.9 million in the prior year quarter. Net income per share for the second quarter was $0.05 compared to net loss per share of $0.17 in the prior year quarter. Adjusted diluted net income per share for the second quarter was $0.21 on 34.6 million shares, compared to adjusted diluted net loss per share of $0.10 in the prior year quarter on 34.5 million shares.

Balance Sheet & Liquidity

As of June 30, 2021, the Company’s balance sheet remained strong, including cash, cash equivalents and short-term bank deposits and short and long-term marketable securities of $121.1 million and total debt to financial institutions of $13.3 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 2021, based on its reported net income attributable to controlling interest for the period.

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 raw material and shipping costs, coupled with a return to more normalized levels of sales and marketing expenses and other investments to support growth initiatives. The Company’s outlook includes the investment costs associated with its Global Growth Acceleration Plan. The Company’s outlook also assumes that pandemic related business restrictions will continue to fade 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 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 13721368. The replay will be available beginning at 11:30 a.m. ET on Wednesday, August 4, 2021 and will last through 11:59 p.m. ET on Wednesday, August 11, 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.

Contacts:

Investor Relations:

ICR, Inc. - Rodny Nacier

+1 646 277-1237

    

    

		As of
U.S. dollars in thousands		June 30, 2021				December 31, 2020
		(Unaudited)				(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents and short-term bank deposits		$	101,288			$	114,248
Short-term available for sale marketable securities			13,246				8,112
Trade receivables, net			86,970				84,822
Other accounts receivable and prepaid expenses			39,609				26,481
Inventories			167,495				152,073
Total current assets			408,608				385,736
LONG-TERM ASSETS:
Severance pay fund			3,932				4,007
Long-term deposits			3,763				3,837
Deferred tax assets, net			9,034				8,359
Other long-term receivables			404				1,675
Operating lease right-of-use assets			119,829				123,928
Long-term available for sale marketable securities			6,596				10,926
Property, plant and equipment, net			218,562				222,883
Goodwill and intangible assets, net			57,743				59,570
Total long-term assets			419,863				435,185
Total assets		$	828,471			$	820,921
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term bank credit		$	13,314			$	13,122
Trade payables			73,844				55,063
Related parties and other loans			2,229				2,221
Short term legal settlements and loss contingencies			23,361				31,039
Accrued expenses and other liabilities			58,670				55,570
Total current liabilities			171,418				157,015
LONG-TERM LIABILITIES:
Long-term bank and other loans and financing liability of land from a related party			6,597				20,706
Legal settlements and loss contingencies long-term			25,770				21,910
Deferred tax liabilities, net			6,025				6,943
Long-term lease liabilities			107,978				112,719
Accrued severance pay			5,296				5,303
Long-term warranty provision			1,283				1,274
Total long-term liabilities			152,949				168,855
REDEEMABLE NON-CONTROLLING INTEREST			7,111				7,701
EQUITY:
Ordinary shares			371				371
Treasury shares - at cost			(39,430	)			(39,430	)
Additional paid-in capital			161,079				160,083
Capital fund related to non-controlling interest			(5,587	)			(5,587	)
Accumulated other comprehensive loss			1,306				1,083
Retained earnings			379,254				370,830
Total equity			496,993				487,350
Total liabilities and equity		$	828,471			$	820,921

        

		Three months ended June 30,								Six months ended June 30,
U.S. dollars in thousands (except per share data)		2021				2020				2021				2020
		(Unaudited)								(Unaudited)
Revenues		$	163,462			$	99,037			$	309,494			$	225,594
Cost of revenues			117,678				78,865				220,408				169,021
Gross profit			45,784				20,172				89,086				56,573
Operating expenses:
Research and development			1,114				763				2,219				1,543
Marketing and selling			23,594				11,435				41,870				30,064
General and administrative			11,794				9,241				24,937				21,108
Legal settlements and loss contingencies, net			4,109				1,637				4,849				4,475
Total operating expenses			40,611				23,076				73,875				57,190
Operating income (loss)			5,173				(2,904	)			15,211				(617	)
Finance expenses (income), net			3,095				2,507				(2,238	)			1,638
Income (loss) before taxes			2,078				(5,411	)			17,449				(2,255	)
Taxes on income			598				471				2,127				949
Net income (loss)		$	1,480			$	(5,882	)		$	15,322			$	(3,204	)
Net loss attributable to non-controlling interest			225				-				573				-
Net income (loss) attributable to controlling interest		$	1,705			$	(5,882	)		$	15,895			$	(3,204	)
Basic net income (loss) per ordinary share (*)		$	0.05			$	(0.17	)		$	0.45			$	(0.09	)
Diluted net income (loss) per ordinary share (*)		$	0.05			$	(0.17	)		$	0.45			$	(0.09	)
Weighted average number of ordinary shares used in computing basic income (loss)     per ordinary share			34,451,071				34,412,369				34,449,483				34,406,107
Weighted average number of ordinary shares used in computing diluted income (loss)     per ordinary share			34,539,958				34,412,369				34,525,127				34,406,107

                       

Caesarstone Ltd. and its subsidiaries Selected Condensed consolidated statements of cash flows

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		Six months ended June 30,
U.S. dollars in thousands		2021				2020
		(Unaudited)
Cash flows from operating activities:
Net income (loss)		$	15,322			$	(3,204	)
Adjustments required to reconcile net income(loss) to net cash provided by operating activities:
Depreciation and amortization			17,689				14,102
Share-based compensation expense			996				1,707
Accrued severance pay, net			72				7
Changes in deferred tax, net			(1,856	)			(640	)
Capital (gain) loss			(4	)			22
Legal settlemnets and loss contingencies, net			4,849				4,475
Decrease (increase) in trade receivables			(2,307	)			9,942
Decrease (increase) in other accounts receivable and prepaid expenses			(8,985	)			3,172
Increase in inventories			(15,383	)			(12,621	)
Increase (decrease) in trade payables			19,049				(16,117	)
Increase (decrease) in warranty provision			16				(98	)
Changes in right of use assets			3,987				(1,347	)
Changes in lease liabilities			(4,277	)			1,554
Amortization of premium and accretion of discount on marketable securities, net			204				6
Changes in Accrued interest related to Marketable Securities			27				(8	)
Increase (decrease) in accrued expenses and other liabilities including related parties			(6,311	)			4,173
Net cash provided by operating activities			23,088				5,125
Cash flows from investing activities:
Repayment of assumed shareholders loan related to acquisition			(1,966	)			-
Repayment of contingent consideration related to acquisition			(1,780	)
Purchase of property, plant and equipment			(12,472	)			(12,459	)
Proceeds from sale of property, plant and equipment			5				6
Investment in marketable securities, net			(1,042	)			(13,002	)
Decrease (increase) in long term deposits			40				(711	)
Net cash used in investing activities			(17,215	)			(26,166	)
Cash flows from financing activities:
Dividend paid			(7,234	)			-
Changes in short-term bank credits and long-term loans			(10,983	)			(459	)
Repayment of a financing leaseback related to Bar-Lev transaction			(650	)			(610	)
Net cash used in financing activities			(18,867	)			(1,069	)
Effect of exchange rate differences on cash and cash equivalents			34				(198	)
Decrease in cash and cash equivalents and short-term bank deposits			(12,960	)			(22,308	)
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		$	101,288			$	117,064
Non - cash investing:
Changes in trade payables balances related to purchase of fixed assets			(316	)			(954	)

		Three months ended June 30,								Six months ended June 30,
U.S. dollars in thousands		2021				2020				2021				2020
		(Unaudited)								(Unaudited)
Reconciliation of Gross profit to Adjusted Gross profit:
Gross profit		$	45,784			$	20,172			$	89,086			$	56,573
Share-based compensation expense (a)			37				122				142				253
Amortization of assets related to acquisitions			160				-				694				-
Adjusted Gross profit (Non-GAAP)		$	45,981			$	20,294			$	89,922			$	56,826

		Three months ended June 30,								Six months ended June 30,
U.S. dollars in thousands		2021				2020				2021				2020
		(Unaudited)								(Unaudited)
Reconciliation of Net Income (loss) to Adjusted EBITDA:
Net income (loss)		$	1,480			$	(5,882	)		$	15,322			$	(3,204	)
Finance expenses (income), net			3,095				2,507				(2,238	)			1,638
Taxes on income			598				471				2,127				949
Depreciation and amortization related to acquisitions			8,781				6,987				17,689				14,102
Legal settlements and loss contingencies, net (a)			4,109				1,637				4,849				4,475
Contingent consideration adjustment related to acquisition			284				-				284				-
Share-based compensation expense (b)			429				801				996				1,707
Adjusted EBITDA (Non-GAAP)		$	18,776			$	6,521			$	39,029			$	19,667

		Three months ended June 30,								Six months ended June 30,
U.S. dollars in thousands (except per share data)		2021				2020				2021				2020
		(Unaudited)								(Unaudited)
Reconciliation of net income (loss) attributable to controlling     interest to adjusted net income (loss) attributable to controlling interest:
Net income (loss) attributable to controlling interest		$	1,705			$	(5,882	)		$	15,895			$	(3,204	)
Legal settlements and loss contingencies, net (a)			4,109				1,637				4,849				4,475
Contingent consideration adjustment related to acquisition			284				-				284				-
Amortization of assets related to acquisitions, net of tax			561				-				1,387				-
Share-based compensation expense (b)			429				801				996				1,707
Non cash revaluation of lease liabilities (c)			889				1,256				(973	)			(215	)
Total adjustments			6,272				3,694				6,543				5,967
Less tax on non-tax adjustments (d)			770				1,310				797				2,116
Total adjustments after tax			5,502				2,384				5,746				3,851
Adjusted net income (loss) attributable to controlling interest (Non-GAAP)		$	7,207			$	(3,498	)		$	21,641			$	647
Adjusted diluted EPS (e)		$	0.21			$	(0.10	)		$	0.63			$	0.02

                    

		Three months ended
U.S. dollars in thousands		6/30/2021				3/31/2021				12/31/2020				9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019				6/30/2019
		(Unaudited)
USA		$	77,844			$	70,831			$	53,618			$	52,097			$	41,726			$	60,055			$	64,659			$	64,805			$	64,590
Canada			21,946				17,779				20,325				19,174				14,435				18,558				20,575				21,881				23,341
Latin America			741				858				1,387				124				132				506				735				1,434				1,351
America's			100,531				89,468				75,330				71,395				56,293				79,119				85,969				88,120				89,282
Australia			31,597				27,172				29,953				27,746				23,534				22,354				26,000				28,642				28,294
Asia			7,370				7,777				7,122				2,881				1,732				2,831				3,932				3,675				3,311
APAC			38,967				34,949				37,075				30,627				25,266				25,185				29,932				32,317				31,605
EMEA			15,852				12,718				14,408				11,422				8,031				11,340				9,464				11,719				11,418
Israel			8,112				8,897				10,083				10,478				9,447				10,913				8,502				10,683				8,766
Total Revenues		$	163,462			$	146,032			$	136,896			$	123,922			$	99,037			$	126,557			$	133,867			$	142,839			$	141,071

    

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