– Record Second Quarter Revenue up 10.3% to
$180.3 Million; up 13.7% on a Constant Currency Basis –
– Net Income attributable to Controlling
Interest of $11.1 Million, or $0.32 Per Share –
– Adjusted EPS of $0.20 –
– Adjusted EBITDA of $17.1 Million –
– In July 2022, Acquired a Leading
Distributor in Sweden, Establishing First Direct Go-To-Market
Presence in E.U. –
– Declares Dividend of $0.25 per share
–
– Reiterates Full Year 2022 Outlook
–
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, 2022.
Yuval Dagim, Caesarstone’s Chief Executive Officer commented,
“We were happy to produce second quarter results that were in-line
with our expectations as we demonstrated further progress against
our multi-pronged growth strategy. We achieved our 6th consecutive
quarter of double-digit year-over-year revenue growth, including
nearly 20% growth in the U.S. while also implementing successful
pricing actions that helped us continue to mitigate increasing
costs of raw materials and shipping and improve our margins on a
sequential basis. Our best-in-class product offerings, successful
integration of our acquired businesses, and targeted efforts to
enhance customer experience through the expansion of our digital
platforms are all driving fundamental improvements across our
business. Moving into the second half of 2022, we are introducing
new product families across our regions and will evaluate
additional pricing actions as needed. In line with our strategic
plan, we are also enhancing our go-to-market strategy in Europe
through the acquisition of a leading distributor in Sweden with
annual revenues of ~$4 million, which we acquired in July 2022.
With an estimated 60% to 70% of our business in our key markets
tied to the historically resilient repair and remodel end market, I
am confident that we have the right plan in place to deliver on our
strategic objectives while navigating through a complex global
environment. In doing so, we will continue to leverage our
world-class brand, innovative go-to-market initiatives, and
multi-material product offerings to drive additional value for our
shareholders.”
Second Quarter 2022 Results
Revenue in the second quarter of 2022 grew 10.3% to a
second quarter record of $180.3 million compared to $163.5 million
in the prior year quarter. On a constant currency basis, second
quarter revenue was higher by 13.7% year-over-year. Revenue growth
was primarily driven by higher pricing across the majority of our
global footprint particularly in North America.
Gross margin in the second quarter of 2022 was 26.4%
compared to 28.0% in the prior year quarter. Adjusted gross margin
in the second quarter was 26.4% compared to 28.1% in the prior year
quarter. The year-over-year reduction in gross margin mainly
reflects higher shipping and raw material price increases and
unfavorable foreign exchange rate fluctuations, which were
partially offset by favorable product mix and selling price
increases.
Operating expenses in the second quarter of 2022 were
$41.2 million, or 22.8% of revenue, compared to $40.6 million, or
24.8% of revenue in the prior year quarter mainly due to lower
expense for legal settlements. Excluding legal settlements and loss
contingencies, adjusted operating expenses were 22.1% of revenue,
compared to 22.3% in the prior year quarter, mainly due to higher
revenues.
Operating income in the second quarter of 2022 was $6.4
million compared to $5.2 million in the prior year quarter. The
year-over-year increase mainly reflects higher gross profit and
lower legal settlements and loss contingencies.
Adjusted EBITDA in the second quarter of 2022, which
excludes expenses for non-cash share-based compensation, legal
settlements and loss contingencies and for non-recurring items, was
$17.1 million, representing a margin of 9.5%. This compared to
adjusted EBITDA of $18.8 million, representing a margin of 11.5%,
in the prior year quarter. The year-over-year decrease primarily
reflects the lower gross margin.
Finance income in the second quarter of 2022 was $6.4
million compared to finance expense of $3.1 million in the prior
year quarter. The difference was primarily a result of favorable
foreign currency exchange rate fluctuations.
Net income attributable to controlling interest for the
second quarter of 2022 was $11.1 million compared to $1.7 million
in the prior year quarter. Net income per share for the second
quarter was $0.32 compared to net income per share of $0.05 in the
prior year quarter. Adjusted diluted net income per share for the
second quarter was $0.20 on 34.6 million shares, compared to
adjusted diluted net income per share of $0.21 in the prior year
quarter on 34.5 million shares.
Balance Sheet & Liquidity
As of June 30, 2022, the Company’s balance sheet remained
strong, including cash, cash equivalents and short-term bank
deposits and short and long-term marketable securities of $62.2
million and total debt to financial institutions of $18.0
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 $0.25 per share for the three months ended June 30,
2022. The dividend will be paid on September 7, 2022 to
shareholders of record as of August 17, 2022. The dividend payment
is subject to withholding tax of ~20.5%.
Outlook
The Company reiterates its expectation for 2022 revenue to be in
the range of $710 million to $725 million, implying approximately
11% growth over 2021 at the midpoint, driven by volume and price
improvements in its markets. Additionally, the Company reaffirms
its expectation for Adjusted EBITDA as a percentage of sales to be
similar compared to 2021, primarily attributable to higher sales
and selling prices that are anticipated to offset increased costs
in connection with raw material inputs, particularly polyester, and
shipping.
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 1-877-451-6152 (domestic) or 1-201-389-0879,
(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 13730170. The replay will be
available beginning at 11:30 a.m. ET on Wednesday, August 3, 2022
and will last through 11:59 p.m. ET on Wednesday, August 10,
2022.
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" 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
sustainability goals and plans, intentions, expectations,
assumptions, goals and beliefs regarding the Company’s business and
sustainability vision. These forward-looking statements also may
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, and expectations of the results of the Company’s business
optimization initiatives. 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 effects
of global economy and geo-politics on the Company’s business and
operations; managing constraints in the global supply chain, raw
material shortages, increased prices and effects of challenges in
global shipping and transportation; Company’s ability to pass all
or some of these increases to its customers; the strength of the
home renovation and construction sectors; intense competitive
pressures; disruptions to our information technology systems
globally, including by deliberate cyber-attacks; the degree of the
Company’s ability to develop, produce and deliver high quality and
safe products; fluctuations in currency exchange rates against the
U.S. Dollar; Company’s ability to raise funds to finance our
current and future capital needs; Company’s ability to build-out
and expand into certain markets and successfully integrate our
acquisitions; the Company’s ability to effective manage its
relationship with key suppliers; the outcome of silicosis and other
bodily injury claims; regulatory requirements relating to hazards
associated with our operations and products; efficiently
manufacturing our products and managing changes in production and
supply chain; economic conditions within any of our key existing
markets; the success of our expansion efforts in the United States;
the extent of the Company’s ability to meet its ESG goals and
targets, management of GHG and other emissions; the impacts of
conditions in Israel, such as negative economic, labor or
geopolitical events; the 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, 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 15, 2022, 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.
Caesarstone Ltd. and its subsidiariesCondensed consolidated
balance sheets As of U.S. dollars in
thousands June 30, 2022 December 31, 2021
(Unaudited) (Audited) ASSETS CURRENT ASSETS:
Cash and cash equivalents and short-term bank deposits
$
53,483
$
74,315
Short-term available for sale marketable securities
6,405
11,228
Trade receivables, net
94,788
82,815
Other accounts receivable and prepaid expenses
38,187
35,443
Inventories
252,112
204,725
Total current assets
444,975
408,526
LONG-TERM ASSETS: Severance pay fund
3,415
4,090
Other long-term receivables
3,500
3,832
Deferred tax assets, net
11,649
10,880
Long-term deposits and prepaid expenses
399
449
Operating lease right-of-use assets
143,287
154,652
Long-term available for sale marketable securities
2,327
8,647
Property, plant and equipment, net
210,344
221,150
Goodwill and intangible assets, net
52,907
55,427
Total long-term assets
427,828
459,127
Total assets
$
872,803
$
867,653
LIABILITIES AND EQUITY CURRENT LIABILITIES:
Short-term bank credit
$
12,291
$
12,523
Trade payables
96,304
81,369
Related parties and other loans
1,608
2,276
Short term legal settlements and loss contingencies
16,690
22,592
Accrued expenses and other liabilities
63,753
64,534
Total current liabilities
190,646
183,294
LONG-TERM LIABILITIES: Long-term bank and other loans
and financing liability of land from a related party
10,409
6,240
Legal settlements and loss contingencies long-term
21,819
20,859
Deferred tax liabilities, net
4,417
4,992
Long-term lease liabilities
124,282
143,324
Accrued severance pay
4,744
5,500
Long-term warranty provision
1,285
1,280
Total long-term liabilities
166,956
182,195
REDEEMABLE NON-CONTROLLING INTEREST
7,983
7,869
EQUITY: Ordinary shares
371
371
Treasury shares - at cost
(39,430
)
(39,430
)
Additional paid-in capital
162,797
161,929
Capital fund related to non-controlling interest
(5,587
)
(5,587
)
Accumulated other comprehensive income (loss), net
(5,903
)
(704
)
Retained earnings
394,970
377,716
Total equity
507,218
494,295
Total liabilities and equity
$
872,803
$
867,653
Caesarstone Ltd. and its subsidiariesCondensed consolidated
statements of income
Three months ended
Six months ended
June 30,
June 30,
U.S. dollars in thousands (except per share data)
2022
2021
2022
2021
(Unaudited) (Unaudited) Revenues
$
180,272
$
163,462
$
350,710
$
309,494
Cost of revenues
132,747
117,678
260,013
220,408
Gross profit
47,525
45,784
90,697
89,086
Operating expenses: Research and development
1,190
1,114
2,094
2,219
Sales and Marketing
24,884
23,594
48,259
41,870
General and administrative
13,761
11,794
26,548
24,937
Legal settlements and loss contingencies, net
1,334
4,109
458
4,849
Total operating expenses
41,169
40,611
77,359
73,875
Operating income
6,356
5,173
13,338
15,211
Finance income, net
(6,445
)
3,095
(7,793
)
(2,238
)
Income before taxes
12,801
2,078
21,131
17,449
Taxes on income
1,571
598
3,245
2,127
Net income
$
11,230
$
1,480
$
17,886
$
15,322
Net loss (income) attributable to non-controlling interest
(83
)
225
(511
)
573
Net income attributable to controlling interest
$
11,147
$
1,705
$
17,375
$
15,895
Basic net income per ordinary share (*)
$
0.32
$
0.05
$
0.50
$
0.45
Diluted net income per ordinary share (*)
$
0.32
$
0.05
$
0.50
$
0.45
Weighted average number of ordinary shares used in computing basic
income per ordinary share
34,479,635
34,451,071
34,479,978
34,449,483
Weighted average number of ordinary shares used in computing
diluted income per ordinary share
34,524,257
34,539,958
34,527,107
34,525,127
(*) The numerator for the calculation of
net income per share for the three and six months ended June 30,
2022 and 2021, has been decreased by approximately $0.1 and $0.1
million, and $0.1 and $0.2 million respectively, to reflect the
adjustment to redemption value associated with the redeemable
non-controlling interest.
Caesarstone Ltd. and its subsidiariesSelected Condensed
consolidated statements of cash flows Six months
ended June30, U.S. dollars in thousands
2022
2021
(Unaudited) Cash flows from operating
activities: Net income
$
17,886
$
15,322
Adjustments required to reconcile net income to net cash provided
by operating activities: Depreciation and amortization
18,023
17,689
Share-based compensation expense
868
996
Accrued severance pay, net
(72
)
72
Changes in deferred tax, net
(1,219
)
(1,856
)
Capital (gain) loss
(2
)
(4
)
Legal settlements and loss contingencies, net
458
4,849
Increase in trade receivables
(13,923
)
(2,307
)
Increase in other accounts receivable and prepaid expenses
(2,363
)
(8,985
)
Increase in inventories
(50,543
)
(15,383
)
Increase in trade payables
13,987
19,049
Increase (decrease) in warranty provision
(35
)
16
Changes in right of use assets
10,088
3,987
Changes in lease liabilities
(18,807
)
(4,277
)
Amortization of premium and accretion of discount on marketable
securities, net
146
204
Changes in Accrued interest related to Marketable Securities
64
27
Decrease in accrued expenses and other liabilities including
related parties
(2,307
)
(6,311
)
Net cash provided by (used in) operating activities
(27,751
)
23,088
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
(8,611
)
(12,472
)
Proceeds from sale of property, plant and equipment
7
5
Maturity of (investment in) marketable securities
10,801
(1,042
)
Decrease in long term deposits
134
40
Net cash provided by (used in) investing activities
2,331
(17,215
)
Cash flows from financing
activities: Dividend paid
-
(7,234
)
Changes in short-term bank credits and long-term loans, including
related parties
5,752
(10,983
)
Repayment of a financing leaseback related to Bar-Lev transaction
(648
)
(650
)
Net cash provided by (used in) financing activities
5,104
(18,867
)
Effect of exchange rate differences on cash and cash
equivalents
(516
)
34
Decrease in cash and cash equivalents and short-term bank
deposits
(20,832
)
(12,960
)
Cash and cash equivalents and short-term bank deposits at beginning
of the period
74,315
114,248
Cash and cash equivalents and short-term bank deposits at
end of the period
$
53,483
$
101,288
Non - cash investing:
Changes in trade payables balances related to purchase of fixed
assets
(867
)
(316
)
Caesarstone Ltd. and its subsidiaries Three months
endedJune 30, Six months endedJune 30, U.S. dollars
in thousands
2022
2021
2022
2021
(Unaudited) (Unaudited) Reconciliation of Gross
profit to Adjusted Gross profit: Gross profit
$
47,525
$
45,784
$
90,697
$
89,086
Share-based compensation expense (a)
59
37
149
142
Amortization of assets related to acquisitions
76
160
154
694
Adjusted Gross profit (Non-GAAP)
$
47,660
$
45,981
$
91,001
$
89,922
(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 endedJune 30, Six months endedJune
30, U.S. dollars in thousands
2022
2021
2022
2021
(Unaudited) (Unaudited) Reconciliation of Net
Income to Adjusted EBITDA: Net income
$
11,230
$
1,480
$
17,886
$
15,322
Finance income, net
(6,445
)
3,095
(7,793
)
(2,238
)
Taxes on income
1,571
598
3,245
2,127
Depreciation and amortization
8,823
8,781
18,023
17,689
Legal settlements and loss contingencies, net (a)
1,334
4,109
458
4,849
Contingent consideration adjustment related to acquisition
-
284
-
284
Acquisition and integration related expenses
80
-
80
-
Share-based compensation expense (b)
480
429
868
996
Adjusted EBITDA (Non-GAAP)
$
17,073
$
18,776
$
32,767
$
39,029
(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.
Caesarstone Ltd. and its
subsidiaries
Three months endedJune 30, Six months endedJune
30, U.S. dollars in thousands (except per share data)
2022
2021
2022
2021
(Unaudited) (Unaudited) Reconciliation of net
income attributable to controlling interest to adjusted net income
attributable to controlling interest: Net income attributable
to controlling interest
$
11,147
$
1,705
$
17,375
$
15,895
Legal settlements and loss contingencies, net (a)
1,334
4,109
458
4,849
Contingent consideration adjustment related to acquisition
-
284
-
284
Amortization of assets related to acquisitions, net of tax
498
561
1,000
1,387
Share-based compensation expense (b)
480
429
868
996
Acquisition and integration related expenses
80
-
80
-
Non cash revaluation of lease liabilities (c)
(7,478
)
889
(9,407
)
(973
)
Total adjustments
(5,086
)
6,272
(7,001
)
6,543
Less tax on non-tax adjustments (d)
(690
)
770
(1,075
)
797
Total adjustments after tax
(4,396
)
5,502
(5,926
)
5,746
Adjusted net income attributable to controlling interest
(Non-GAAP)
$
6,751
$
7,207
$
11,449
$
21,641
Adjusted diluted EPS (e)
$
0.20
$
0.21
$
0.33
$
0.63
(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 differences deriving from
revaluation of lease contracts in accordance with FASB ASC 842.
(d)
Tax adjustments for the three and six
months ended June 30, 2022 and 2021, based on the effective tax
rates.
(e)
In calculating adjusted diluted (Non-GAAP)
EPS for the three and six months ended June 30, 2022 and 2021, 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
endedJune 30, Six months endedJune 30, Three months
ended June 30, Six months ended June 30, U.S. dollars
in thousands
2022
2021
2022
2021
(Unaudited) (Unaudited) YoY % change YoY %
change CCB YoY % change YoY % change CCB
USA
$
93,039
$
77,844
$
178,276
$
148,675
19.5
%
19.5
%
19.9
%
19.9
%
Canada
25,363
21,946
49,097
39,725
15.6
%
20.0
%
23.6
%
26.1
%
Latin America
1,272
741
2,047
1,599
71.7
%
71.8
%
28.0
%
28.0
%
America's
119,674
100,531
229,420
189,999
19.0
%
20.0
%
20.7
%
21.3
%
Australia
30,195
31,597
55,734
58,769
-4.4
%
3.1
%
-5.2
%
1.7
%
Asia
8,157
7,370
17,882
15,147
10.7
%
15.0
%
18.1
%
19.6
%
APAC
38,352
38,967
73,616
73,916
-1.6
%
5.4
%
-0.4
%
5.4
%
EMEA
15,827
15,852
31,050
28,570
-0.2
%
11.7
%
8.7
%
18.1
%
Israel
6,419
8,112
16,624
17,009
-20.9
%
-19.6
%
-2.3
%
1.1
%
Total Revenues
$
180,272
$
163,462
$
350,710
$
309,494
10.3
%
13.7
%
13.3
%
16.1
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220803005100/en/
Investor Relations: ICR, Inc. - Rodny Nacier
CSTE@icrinc.com +1 (646) 200-8870
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