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CSTE Caesarstone

Filed: 5 May 21, 4:07pm


Exhibit 99.1
Caesarstone Reports First Quarter 2021 Financial Results

– 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 – May 5, 2021 - 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.

Contacts:

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



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 settlemnets 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 diffrences deriving from revaluation of lease contracts in accoradance 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.