CSTE Caesarstone Ltd

 

Caesarstone Reports Third Quarter 2024 Financial Results

- Maintaining Operational Discipline and Strategic Focus Amid Significant Market Headwinds -

 

- Revenue of $107.6 Million -

 

- Net Cash Position Improves to $108.9 Million, Reinforcing Strong Balance Sheet -

 

- Reaffirms Full Year Outlook to Deliver Positive Operating Cash Flow and Moderates Adjusted EBITDA Expectations -

MP MENASHE, Israel – November 13, 2024 - 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, 2024.

Yos Shiran, Caesarstone’s Chief Executive Officer commented, “Our third quarter results reflect revenue pressure across all our regional markets, putting weight on our business. The entire Caesarstone team’s unwavering commitment to our success remains evident with our transformation initiatives and optimized manufacturing footprint helping to drive a higher gross margin year-over-year. Our team is making progress in a difficult environment and maintaining tight control of operating expenses. That operational discipline and working capital management generated positive cash flow this quarter, keeping us on track for another full year of positive operating cash flow. With meaningful savings realized from our ongoing restructuring actions, we continue to make targeted investments in innovative products, brand development and marketing programs to help stimulate demand. We are confident in the direction of the Company and will continue to take decisive actions to restore profitable growth.”

Third Quarter 2024 Results

Revenue in the third quarter of 2024 was $107.6 million, compared to $142.4 million in the prior year quarter. On a constant currency basis, third quarter revenue was down 24.8% year-over-year primarily due to lower volumes. Volumes were primarily impacted by global economic headwinds, particularly in renovation and remodeling channels, across the Company’s main regions resulting in lower demand accompanied by greater competitive pressures.

Gross margin in the third quarter of 2024 improved to 19.9% compared to 19.1% in the prior year quarter. Adjusted gross margin in the third quarter was 19.8%, stable with the prior year quarter. Gross margin was stable on lower revenues mainly due to the benefits of an improved production footprint, partially offset by unfavorable product mix and increased shipping and material costs.

Operating expenses in the third quarter of 2024 were $25.4 million, or 23.6% of revenue, compared to $29.2 million, or 20.5% of revenue in the prior year quarter. The higher percentage is primarily due to lower revenues. Restructuring expenses during the quarter included a capital gain of $6.9 million from the sale of undeveloped land at the Company’s Richmond Hill Facility. Excluding legal settlements and loss contingencies and restructuring expenses, operating expenses were 28.1% of revenue, compared to 23.7% in the prior year quarter.

Operating loss in the third quarter of 2024 was $4.1 million compared to $2.0 million in the prior year quarter, with the difference primarily reflecting lower gross profit.

Adjusted EBITDA in the third quarter of 2024, which excludes expenses for non-cash share-based compensation, legal settlements and loss contingencies, and other non-recurring items, was a loss of $4.1 million, compared to a gain of $1.9 million in the prior year quarter.

Finance income in the third quarter of 2024 was $0.3 million compared to $1.3 million in the prior year quarter. The difference primarily reflects foreign currency exchange rate fluctuations.

Net loss attributable to controlling interest for the third quarter of 2024 was $4.2 million compared to net loss of $0.9 million in the prior year quarter. Net loss per share for the third quarter was $0.12 compared to net loss per share of $0.03 in the prior year quarter. Adjusted diluted net loss per share for the third quarter was $0.24 on 34.8 million shares, compared to Adjusted diluted net loss per share of $0.20 in the prior year quarter on 34.6 million shares.

Balance Sheet & Liquidity

On June 26, 2024, Caesarstone entered into an agreement for the sale of 69 acres of undeveloped land associated with its Richmond Hill Facility located in Bryan County for approximately $10.0 million. The transaction closed in the third quarter of 2024. The Company continues to look for avenues to monetize the remainder of the property, consisting of 51 acres of developed land and associated structures.

During the third quarter of 2024, the Company generated positive cash flow from operations of $16.3 million, mainly attributable to the land sale and working capital improvements, compared to operating cash flow of $28.2 million in the third quarter of 2023. As of September 30, 2024, the Company’s balance sheet included cash, cash equivalents and short-term bank deposits of $114.1 million and total debt to financial institutions of $5.2 million. The Company’s net cash position as of September 30, 2024, was $108.9 million compared to $83.5 million as of December 31, 2023.

US Legal Proceedings Update

The Company is one of several defendants named in 79 pending lawsuits in the United States alleging injury associated with exposure of fabricators and their employees to respirable crystalline silica dust. On August 8, 2024, the Company filed a Form 6-K in connection with a single claim in the U.S. following a jury decision against the Company. Adequate provisions and insurance receivables related to this decision were recorded by the Company during the third quarter. While this single decision will not have a material adverse effect on the Company, the Company cannot provide assurance as to the outcome of other pending litigation or that such litigation will not have a material adverse impact on its business, financial position, results of operations or cash flows.

Outlook

The Company reaffirms its expectation to deliver positive operating cash flow for the full year 2024, with cash generated in the first nine months more than offsetting a modest decline in the fourth quarter. The Company reiterates its expectation to realize restructuring-related cost savings of approximately $20.0 million in full year 2024 and $35.0 million thereafter compared to full year 2023. Given persistent macroeconomic pressures across the Company’s global footprint and increased shipping and material costs in the second half of 2024, Caesarstone now expects its full year Adjusted EBITDA loss to be in the range of $10 to $11 million.

Webcast and Conference Call Details

The Company will host a webcast and conference call today, November 13, 2024, at 8:30 a.m. ET to discuss the results, followed by a question and answer session for the investment community. The live webcast can be accessed through the Investor Relations section of the Company’s website at ir.caesarstone.com. For those unable to access the webcast, the conference call will be accessible domestically or internationally, by dialing 1-833-816-1463 and 1-412-542-4167, respectively. The toll-free Israeli number is 1 80 921 3284. Upon dialing in, please request to join the Caesarstone Third Quarter 2024 Earnings Conference Call.

To listen to a telephonic replay of the conference call, dial toll-free 1-844-512-2921 or +1-412-317-6671 (international) and enter pass code 10192828. The replay will be available beginning at 12:30 p.m. ET on Wednesday, November 13, 2024 and will last through 11:59 p.m. ET on Wednesday, November 20, 2024.

About Caesarstone

Caesarstone is a global leader of premium surfaces, specializing in countertops that create dynamic spaces of inspiration in the heart of the home. Established in 1987, its multi-material portfolio of over 100 colors combines the company’s innovative technology with its powerful design passion. Spearheading high-quality, sustainable surfaces, Caesarstone delivers functional resilience with timeless beauty, for a vast range of applications, including kitchen countertops, bathroom vanities, and more, for indoor and outdoor spaces.

Since it pioneered quartz countertops over thirty years ago, the brand has expanded into porcelain and natural stone and is on the ground in more than 50 countries worldwide while enhancing customer experience through the expansion of groundbreaking digital platforms & services. More information on Caesarstone: caesarstoneus.com, Facebook, LinkedIn  and Instagram

The Company has filed its annual report on Form 20-F for the year ended December 31, 2023 with the U.S. securities and exchange commission (“SEC”) and can be accessed on its website.

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" within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “goals," “intend,” “seek,” “anticipate,” “believe,” “could,” “continue,” “expect,” “estimate,” “may,” “plan,” “outlook,” “future” and “project” and other similar expressions that predict, project or indicate future events or trends or that are not statements of historical matters. Such forward-looking statements include statements regarding the Company’s goals and plans, intentions, expectations, assumptions, goals and beliefs regarding the Company’s business. Actual results may differ materially from those projections and estimates due to various risks and uncertainties, both known or unknown. These factors include, but are not limited to: the effects of global and regional economy and geo-politics on the Company’s business and operations including the length, duration and impact of the war in Israel, the Houthi’s disruption to the movement of goods in the Red Sea and trade disruptions such as Turkey’s decision not to trade with Israel; the outcome of silicosis and other bodily injury claims, and the availability relevant insurance; regulatory changes and requirements relating to the manufacturing and fabrication of our products; the outcome of our restructuring efforts, of the closure of the Sdot Yam and Richmond Hill Facilities, the estimated closure costs and the estimated potential savings relating to said closures, the ability to sell or sublease all or part of these facilities; our ability to effectively collaborate with production business partners; our R&D and product introduction efforts, managing constraints in the global supply chain and effectively procuring raw materials and goods as well as fluctuations in their price; our ability to protect our brand, technology and intellectual property, as well as our freedom to operate; competitive pressures; disruptions to our information technology systems, fluctuations in currency exchange rates against the U.S. dollar; our ability to successfully integrate our acquisitions; our ability to meet ESG goals and targets; and other risks and uncertainties discussed under the sections "Risk Factors" and “Special Note Regarding Forward-Looking Statements and Risk Factor Summary” in our most recent annual report on Form 20-F filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2024, and in other documents filed by Caesarstone with the SEC, which are available free of charge at www.sec.gov. 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.

Investor Relations:

ICR, Inc. - Rodny Nacier

+1 (646) 200-8870

Caesarstone Ltd. and its subsidiaries  Condensed consolidated balance sheets

Caesarstone Ltd. and its subsidiaries

		Three months ended September 30,								Nine months ended September 30,
U.S. dollars in thousands		2024				2023				2024				2023
		(Unaudited)								(Unaudited)
Reconciliation of Gross profit to Adjusted Gross profit:
Gross profit		$	21,366			$	27,189			$	77,687			$	68,659
Share-based compensation expense (a)			42				16				78				153
Amortization of assets related to acquisitions			70				71				212				215
Residual operating expenses (income) related to closed plants after closing			(36	)			1,011				576				2,795
Other non recuring items			(152	)			(152	)			41				(152	)
Adjusted Gross profit (Non-GAAP)		$	21,290			$	28,135			$	78,594			$	71,670

        

(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 September 30,								Nine months ended September 30,
U.S. dollars in thousands		2024				2023				2024				2023
		(Unaudited)								(Unaudited)
Reconciliation of Net Loss to Adjusted EBITDA:
Net loss		$	(4,228	)		$	(778	)		$	(18,521	)		$	(57,352	)
Finance income, net			(297	)			(1,292	)			(2,851	)			(4,816	)
Taxes on income			451				83				2,442				7,332
Depreciation and amortization			4,437				7,472				13,379				22,711
Legal settlements and loss contingencies, net (a)			2,077				(1,259	)			5,613				(2,346	)
Contingent consideration adjustment related to acquisition			28				75				(53	)			240
Share-based compensation expense (b)			525				61				1,610				556
Restructuring expenses (income) and Impairment related to long lived assets (c)			(6,911	)			(3,349	)			(6,821	)			20,224
Residual operating expenses (income) related to closed plants after closing			(36	)			1,011				1,606				2,795
Other non recuring items			(152	)			(152	)			41				(152	)
Adjusted EBITDA (Non-GAAP)		$	(4,106	)		$	1,872			$	(3,555	)		$	(10,808	)

(a)	Consists primarily of legal settlements expenses and loss contingencies, net, related to product liability claims.
(b)	Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the Company.
(c)	Including long-lived assets impairment and restructuring expenses related to plants closure. Q3'24 also includes capital gain related to sale of undeveloped land in the Richmond Hill plant.

Caesarstone Ltd. and its subsidiaries

		Three months ended September 30,								Nine months ended September 30,
U.S. dollars in thousands (except per share data)		2024				2023				2024				2023
		(Unaudited)								(Unaudited)
Reconciliation of net loss attributable to controlling interest to adjusted net loss attributable to controlling interest:
Net loss attributable to controlling interest		$	(4,222	)		$	(887	)		$	(18,488	)		$	(57,135	)
Legal settlements and loss contingencies, net (a)			2,077				(1,259	)			5,613				(2,346	)
Contingent consideration adjustment related to acquisition			28				75				(53	)			240
Amortization of assets related to acquisitions, net of tax			534				582				1,603				1,608
Share-based compensation expense (b)			525				61				1,610				556
Acquisition and integration related expenses			-				-				-				-
Non cash revaluation of lease liabilities (c)			344				(2,092	)			(3,016	)			(5,094	)
Restructuring expenses (income) and Impairment related to long lived assets (d)			(6,911	)			(3,349	)			(6,821	)			20,224.00
Residual operating expenses (income) related to closed plants after closing			(36	)			1,011				1,606				2,795
Other non recuring items			(152	)			(152	)			41				(152	)
Total adjustments			(3,591	)			(5,123	)			583				17,831
Less tax on non-tax adjustments (e)			587				760				(88	)			(2,614	)
Total adjustments after tax			(4,178	)			(5,883	)			671				20,445
Adjusted net loss attributable to controlling interest (Non-GAAP)		$	(8,400	)		$	(6,770	)		$	(17,817	)		$	(36,690	)
Adjusted loss per share (f)		$	(0.24	)		$	(0.20	)		$	(0.51	)		$	(1.06	)

(a)	Consists primarily of legal settlements expenses and loss contingencies, net, related to product liability claims.
(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 diffrences deriving from revaluation of lease contracts in accordance with FASB ASC 842.
(d)	Including long-lived assets impairment and restructuring expenses related to plants closure. Q3'24 also includes capital gain related to sale of undeveloped land in the Richmond Hill plant.
(e)	Tax adjustments for the three and nine  months ended September 30, 2024 and 2023, based on the effective tax rates.
(f)	In calculating adjusted (Non-GAAP) loss per share, 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 September 30,								Nine months ended September 30,								Three months ended September 30,								Nine months ended September 30,
U.S. dollars in thousands		2024				2023				2024				2023
		(Unaudited)								(Unaudited)				(Audited)				YoY % change				YoY % change CCB
USA		$	52,388			$	65,880			$	173,206			$	211,361				-20.5	%			-20.5	%			-18.1	%			-18.1	%
Canada			14,207				18,956				47,643				57,712				-25.1	%			-23.8	%			-17.4	%			-16.6	%
Latin America			239				1,650				1,148				2,468				-85.5	%			-85.5	%			-53.5	%			-53.5	%
America's			66,834				86,486				221,997				271,541				-22.7	%			-22.9	%			-18.2	%			-18.1	%
Australia			17,443				27,326				58,518				79,539				-36.2	%			-37.7	%			-26.4	%			-25.7	%
Asia			6,435				6,747				16,260				20,069				-4.6	%			6.1	%			-19.0	%			-19.2	%
APAC			23,878				34,073				74,778				99,608				-29.9	%			-29.0	%			-24.9	%			-24.4	%
EMEA			11,627				15,185				35,263				45,395				-23.4	%			-26.0	%			-22.3	%			-23.3	%
Israel			5,295				6,650				13,320				20,162				-20.4	%			-24.5	%			-33.9	%			-33.1	%
Total Revenues		$	107,634			$	142,394			$	345,358			$	436,706				-24.4	%			-24.8	%			-20.9	%			-20.7	%

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