Caesarstone Reports First Quarter 2021 Financial Results

Rhea-AI Summary

Caesarstone Ltd. (CSTE) reported a strong first quarter of 2021, with revenue rising 15.4% to $146.0 million, driven by acquisitions and better product mix. Adjusted EBITDA increased 54.1%, reaching $20.3 million, reflecting improved efficiency and higher gross margins of 30.1%. Net income surged to $14.2 million ($0.41 per share), compared to $2.7 million in the same quarter last year. The company declared a quarterly dividend of $0.21 per share, payable June 1, 2021. Looking ahead, Caesarstone expects revenue and Adjusted EBITDA to grow in 2021 despite anticipated shipping and raw material cost pressures.

Positive

• Revenue grew 15.4% to $146.0 million compared to $126.6 million in Q1 2020.
• Adjusted EBITDA increased 54.1% to $20.3 million with a margin of 13.9%.
• Net income surged to $14.2 million ($0.41 per share) from $2.7 million ($0.08 per share) in Q1 2020.
• Declared a quarterly dividend of $0.21 per share, reflecting strong financial health.

Negative

• Higher shipping and raw material costs expected to pressure margins.
• Operating expenses were $33.3 million, 22.8% of revenue, down from 27.0% last year, but still reflect rising costs.

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.

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 settlements 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 differences deriving from revaluation of lease contracts in accordance 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.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210505005138/en/

FAQ

What were Caesarstone's Q1 2021 earnings results?

Caesarstone reported revenue of $146.0 million and net income of $14.2 million in Q1 2021.

What is Caesarstone's outlook for 2021?

Caesarstone expects revenue and Adjusted EBITDA to be higher year-over-year, despite anticipated shipping and raw material cost pressures.

What is the dividend declared by Caesarstone for Q1 2021?

Caesarstone declared a cash dividend of $0.21 per share for the three months ended March 31, 2021.

How did Caesarstone's gross margin change in Q1 2021?

Gross margin improved to 29.7% in Q1 2021 compared to 28.8% in Q1 2020.

What were the total operating expenses for Caesarstone in Q1 2021?

Operating expenses were $33.3 million in Q1 2021, or 22.8% of revenue.