CSTE - Earnings call transcript Q4 2020

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Operator

Greetings and welcome to the Caesarstone Limited Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Cray of Investor Relations. Thank you.

begin. may You

Brad Cray

conference and that by operator, differ events Ophir to I company's statements. and in everyone. Caesarstone's questions expectations to Thank constitute current statements may Dagim, good results reflect Caesarstone's or materially. joined forward-looking today's statements Certain Yuval Financial caution and actual and Chief am may responses Chief various you you, We Officer. morning call such Executive that Yakovian, the Officer; only

to refer most please information, risk on factors XX-F company's more For filings the in the SEC. recent Form contained report annual with and subsequent the

And In adjusted addition, adjusted found most this the the and reconciliation website. is on The EBITDA directly loss, share, non-GAAP ahead. the net in measures, financial reference company's company release Yuval. to Please will over company's per go on to fourth constant certain you. would can to GAAP currency. Relations non-GAAP to which measures XXXX earnings income turn the these posted I comparable the call, adjusted of Investor income profit, net call measures now gross including like be loss make quarter adjusted Thank

Yuval Dagim

executed business continue prioritized Since transformation. we'll further our so. the COVID-XX on employees morning, results, we Caesarstone. to everyone. and our as and fourth demonstrated issued health a the have we safety quarter results QX pandemic, Brad, do you, of very dynamic Thank streamlining in business marking our we during of XXXX good close successful to for and a Today, a onset year significant our progress

us discussed the Growth The offering, Plan initiatives premium while build platform who to global potential, multi-material have new are the that for the operating company. X remain since progress launch and under we integral we growth engines Growth has are, through team this foundations experience are a We engagement, premium, the in strategic focused members power allowed unlocking period. improving multi-material Plan countertop our a market Last customer executing the Acceleration for competitive and we as Global pillars quarter, to expansion. announced to our made global Ceasarstone's and challenging especially in footprint the which Acceleration Global grateful

to to working the provided strategic each In to us strategic objectives. capital strong of we excellence as under commitment Our projects accelerate and XXXX, during of implementation make the year flexibility on M&A our the progress new introduced management avenue with significant a accretive the many pillar.

of and position Ceramica, the financial cutting-edge a & Lioli supplier porcelain strong premier Tile, U.S. of stone Our supported in X recent successful completion the accretive and producer acquisitions; slabs; the Omicron Granite a

allowing relates pillars, strategic countertop premium, to has to market become addressable leading expanded Caesarstone As our beyond company. our it Lioli multi-material quotes a

goal U.S. capabilities our approach augments network global direct markets, with efficiency. with of strategically market The centers share our providing to the with distribution Omicron our integrated our aligned a attractive us existing the also of while pillar Caesarstone's enhance markets. leverage increase improving the located go-to-market by objective throughout to to time, same incorporates customers vertically end to us best in approach acquisition better this Omicron allowing directly to expansion to service footprint at Our provide our logistical is U.S. more

recently At Connect called Connect long step approach will the purchase a that creating change capabilities more consumer in effectively journey. point, partners our and fabricator that and help experience which to One both platform conversion digital customers' partnership consumers of customers CS for manage increase platform to satisfaction. leap we Connect technological our CS to over drive and Global CRM position better further K&B we the customer launched our differentiate the the and and the rates doing Caesarstone is our the we we in test win strengthening is Australian this, markets. easy-to-use of initiatives this an a with sales network innovative Plan our term. Acceleration them to In connect Growth higher under enhances Caesarstone We in customers by our a way CS communicate through are believe avenues engagement.

place feedback effectively our Additionally, company pursue enter sustainable received Ceasarstone activity, We website long-term the much world-class leverage strong we as foundation brand North consumer recent and revamp now and aims the of to right have XXXX elevate American engagement a and to far. in more to growth. great with so

financial give the strong on the While pandemic the of plan. position strategy immediate our to continuing impact uncertain, clear confidence executing and remain us global our and outlook economic continue

our Our proven dedicated in challenging turn results focus have results, on capture are With market quarters ability years additional XXXX share our execute the well call in improvement under situated conditions. outlook. details our ahead. market provide driving on to achievements I who to and we now will to Ophir, will and over

Ophir Yakovian

will morning, results. I fourth by and start Yuval, you, everyone. quarter our Thank good discussing

primarily For quarter year. acquisition the $XXX.X This as continues contribution our at last currency by the lower million from pandemic-related the Americas, impact impacted fourth U.S. than the business stores. of our be decline as IKEA down offset our the disruption, partially America acquisition have which to Ceramica. accounted currency Lioli particularly impact to constant in The were fourth On channel other global revenue ongoing roughly on regions. In from fourth all of to region, box performance basis, in Americas lower at was stores, of growth the North and In XX.X% continue was sales the included business as grew sales of activity. revenue big to in to restrictions XX% better plan. well sales by U.S. increase Canada, offset quarter increased to factor $XXX.X Depot the the by activity contribution our This for quarter. compared X.X% a Home due Lioli partially X.X% same to XXXX, quarter pandemic-related million was period constant compared in year, million by $X.X last business

which we While APAC are sales currency in In core our direct demand by the year-over-year, have a channels our sequential were sales Australia sales where and to has the faster by constant government in we lower encouraged for of were actions. part presence, gives our region, majority in indirect are Furthermore, us XX.X%. as been continues up improvement. confidence recovery region, up. we helped ramp performance accounts the the than expectations, stimulus better seeing

the our from the grew sales currency sales. XX.X%, In in lockdowns in sales earlier APAC in were sales the included sales indirect region, Lioli quarter. first following a addition, in pent-up reflecting region in and contribution constant fourth in the the primarily up EMEA markets, in the the to addition time In contribution currency basis, from year for direct region. both the constant Lioli X.X% were on In the the Israel, rigid demand the acquisition of

we fourth our Looking performance, were to P&L quarter year-over-year at pleased a fourth quarter margin on our improve basis.

and Our XX.X% margin improved focused costs, quarter. execution operating less by our the that's improve volume, raw year of prices XXX that significant a mix, improved XXXX, sales business. mix. our that exchange in our lower facility rates lower margin. and improved continue partially full initiatives currency in across adjusted to mainly note results The material XX.X% to margin Adjusted less of offset our benefit quarter the and basis drag lower product reflects efficiency, more sales favorable gross from gross we XXXX year-over-year fourth efficiencies the compared production to prior higher potential regional was important It on favorable and to a to points operated than to gross is

XXXX, be of in were the As operating turn, expect year-over-year. quarter in utilization. a first reminder, to XXXX higher the in of capacity at quarter lower gross the we first margin we And

earnings our operating and more was of and expectation the our $XX.X reflects revenue contingencies, compared to loss higher margin sales million in quarter compared to margin level margin XX.X% year XXX normalized last quarter. and to quarter expenses legal EBITDA of The or compared count. XX.X% share the share adjusted in The significant to increased the line XX.X% quarter. fourth in the as settlement the diluted in of in per quarters were investment our cutting. in quarter to following XX.X% we a to future compared the million, returned marketing of the on growth, Adjusted in increase per prior to share two $X.XX cost year-over-year gross Adjusted support basis similar brand primarily $X.XX year earnings diluted improvement prior same representing a for year. Excluding XX.X% year were period with $XX.X last of point

performance currency at were basis, the a by financial XX.X%. looking Sales XX.X% were off sales our highlights. year full constant on year Now down for full

margin cost gross reflects improved less prior margin mix, contingencies efficiency, raw compared lower loss in product volume, XX.X% of costs Operating lower higher revenue price last the year, and regional partially focused offset primarily Adjusted Our due compared to impact and lower year. settlement to favorable input in margin. improve and gross by efficiencies sales XX.X% improved adjusted execution annual excluding sales was led XX.X% growth our expenses, mainly were lower legal revenue. raw and mix. to material of margin the to adjusted gross EBITDA XX.X% to The lower material and

per higher year-over-year share $XX.X Our due was year, year margin exchange gross last XX.X% mainly in changes. million foreign the a rate million, the margin XX.X% with EBITDA were $X.XX Adjusted $XX primarily compared full diluted $X.XX prior by to margin. impacted XXXX adversely a to earnings year compared adjusted margin to improvement,

enabled over XXXX XXXX $XX We assuming net XXXX. profitable challenges Omicron strong results. the $XX Turning to $X a our the pro company's Omicron was basis, to contributed further us forma and have approximately On on invest the Caesarstone's the revenue December our million of to acquired We and while of in balance in sheet. acquisition million, of of successfully XX, company future balance debt. consideration million in to growth. sheet completed would weather

and Our $XX operations during control our production capital helped costs, prudent capacity from to manage flow cash and improved the us working efficiency operational during strong year. of XXXX million generate effort

strong solid sheet that can shareholders. of we of short- our execute us and cash, net institutions $XX $XXX confident produce million, returns sheet, deposits position leaves of XXXX for to balance with balance of marketable Our strong cash as million. bank and on to long-term XXXX, December us financial in securities plan providing our and total This a cash equivalent included long-term $XXX XX, debt short-term million,

adjusted material higher year-over-year offset Moving This compared XXXX higher a will than revenue higher faster with similar anticipate XXXX to be impact revenue outlook shipping We to that raw and expectation margin XXXX. grow costs. EBITDA in revenue to our outlook. by gross and with EBITDA assumes

impacts, to we significant which will support sales or to return expenses and to expect Furthermore, costs normalized we pandemic-related addition, delayed due more during growth. XXXX marketing reduced of return. sales now In to levels temporarily

that assumes beginning acquisition a outlook fade quarter, return restrictions Our will contribution to organic by progresses. growth growth XXXX. expect the In in be driven year first by to the we as of pandemic-related business of quarter revenue second the the followed

not focusing closing comments. also but We XXXX, in turn be XXXX. are call and pleased beyond position us faster-growing that, leaner right on the making back only and to to let company support expansion the With a me for investment growth to as Yuval

Yuval Dagim

Ophir. conclusion, extremely their of commitment our results. you, and for proud unwavering Thank In business our to the I'm improve transform Caesarstone

positioning culture, demonstrated Our introduced of fostered success we improved XXXX. a in global corporate in broaden our significant market. competitive quarter that more productive plan year closed a time, addressable first acceleration we our our have progress fourth the that reach since Since growth and the out

M&A have and to offering countertop growth utilized as presence multi-material premium, available lever leading company. expand now our accretive for a as We

the questions. with create next our XXXX, for outcomes and you, move Thank positive now forward updating I'm confident into further look long-term we to business. for we to ultimately our ready open our progress which you are strategic will As on We quarter. plan, call

Operator

Instructions]. [Operator

Our come Company. Garner of from with the The first Reuben line Benchmark question

Reuben Garner

how finance exchange was So Can maybe what forward? us to P&L. rates. and what just works fourth charge the it predominantly a was tell line, you the said expect going about just that you first, to that below it question quarter clarification and related it The had

Ophir Yakovian

there a charge, revaluation to item, mainly of will any against balance that It one recur. countries, don't is fluctuation. the weakness relates off will be see dollar Australian created is in -- won't this mainly see thing that the dollar some we Ophir. assuming that fluctuation noncash something the its I and Israeli major lease a it's shekel Reuben, the assuming of of course, that as sheet charge. liabilities which is we It's, not This mean,

Reuben Garner

more all That's that needed Perfect. know, Okay. sense. I makes to much

nice XXXX, and than by and congrats, -- your EBITDA growth close Talking is results. there you the at puts can on on growing more looking of the give the guess, takes, the I way, kind any about So of revenue comments. revenue outlook, your color lower

give that both a and of average some markets profile revenue are think organic I us -- might the to which kind color make growth those going faster And least Can like? at you look more lot overall? sense. than the then of slower on what company be growing maybe

Yuval Dagim

can my and the sentence. add I some colors end Yes, start, at of Ophir will more

the the the think when year I of those if the we growth and the multi-material the Lioli the is last it one, only will pillars, as guess the remember fully M&A and is be business. for see M&A First, last XXXX go-direct And the Omicron, X full had first and year, engines play about what our strategy, in year. pillars on strategy XX part being under year to new XXXX will you be of going some be I business X our part full customer latest now our come December of the expansion, And we into we engagement. we of footprint experiencing talked

full -- our from first last the year beginning will are the the Yes. last -- year we quarter the our of strategy. with quarter moving second the be company Obviously, when of execution end first ahead like hit of growth year, in steam the will this COVID-XX So end major be happening this onwards. first or when

XXXX, volume growth on business as see mean, gross for for year, say can from We the Israel, positive and to driven expect COVID-XX U.K. that, we -- will in see and margin a Canada, costs certain we We the disruptions by acquisitions. in the we some I shipping the full higher be expect -- the driver some but in to see similar in quarter still the we're in areas other I acquisition, kind raw to we level in third and areas. terms prices higher of year, material be we and a expenses, move revenue are both expenses, than from will that coming. to grow OpEx additional that revenue headwind the And normalized reason coming that and but X recent some we the we EBITDA the more operating is operating this a growth expect of said the this are seeing to going have of EBITDA. be

Operator

Instructions]. [Operator

of with next Oppenheimer. Asaf come from questions line Our the Chandali

Asaf Chandali

the kind revenue it's the growth previously Prior year think small compare the should the with about if the I million. in can annual relatively really for number on it So business? congrats we on quarter how backdrop. start I'm was million. were during for the $X.X challenging the not rate number, it number, as full we now separately. growth If reported reflecting the really solid you, very Lioli. despite results, to for versus the close, Maybe Thank just if we annualize of us mistaken, It's thinking within but Revenues modeling. that, by consolidated nice way, be $XX reporting we them helpful a

Yuval Dagim

is Lioli, plant opening to deal of market take to And for new markets. Asaf, And is in obviously, serve most Lioli the of are it our we of us. know stage the that this content planning important current addressable not Lioli India the volume during the the company. from to is

for our much all is most higher the the -- we is countertop this application revenue intend plant, and itself. us, revenue onelined from see to where but moment, are, take get most a clouding, this Obviously, transitional application. this XXXX we right as when those the expecting margins in go-to-market at we're as them to we But So like you the devoted and you and the both have terms to to to is that of the volume Lioli of flowing around if year revenues. plant the the pretty is win of of

Asaf Chandali

Okay.

'XX Okay, how the margin they third items great. and you XXXX, Any quite in puts after it second think margins, onetime in half 'XX second target. quarter, still be strength gross closer to of us about be XX%-plus XXXX saw were helpful gross in that the XQ profile XQ still take On half -- is going to that's confident kind we thinking us? some for Do we Or would the develop you there? the number, you the should the strong we from feel how the XXXX? expect into of neutralized takes even of should in really long-term

Ophir Yakovian

First, XX% believe, XXXX, be to our aim long-term XXXX. a target. long-term still we margin is do XX% term valid, to and will in similar to the gross we target as

basis. flip cost other which inflation -- costs volumes, weeks. and unit We see have we the shipping the the raw expecting the we be that pretty on on lower a higher in is we what will -- significant per But the are that logistic past have prices -- material cost coming obviously, in is side, something seeing on in few

expect we prior we quarter, margin year-over-year first than the quarter. The in are factories our done lower less we've utilizing a because gross

the but change progress improve revenue margins year year. So that that with over the the gross and -- will as in the we growth should

Asaf Chandali

Great. Okay.

will maybe two, to impact turning expect related in see separate can one, reporting? are kind Number report Omicron, segment So to hope I it's if how guess consolidated this gross on of there to revenues, you will Acceleration headwind of on and gross into Global strategy? plan General maybe kind be to want Omicron integrating And a us the opportunity just of you consolidated to because you numbers? margins. gross even of margin can part take how the about I I I kind to a margin about something the thinking fit question. Number a separate you we guys imagine then meaningful talk

Yuval Dagim

of first the which actually and in portfolio more to closer or bolt-on is footprint one, our is our of one with and the Asaf. the very two in Omicron foremost, acquisition pillars, the Sure, of executing other Omicron And is, much which acquisition extending pillars, strategy multi-material strategy. is The customers. our a line go-direct the of

we introducing natural it. in business, porcelain be also natural from part our And portfolio will once directly is stone Lioli our now forward of are business U.S. year be stone an integral be this has Obviously, Omicron So to porcelain to which porcelain the collection the our and business coming of as the impressive part going us business, very we'll a the naturally. from future new going later launching in coming in

deal no presence our dramatically. of So improving very customers when footprint distribution the market. Omnicom, We is in and the nice to to and an Florida proximity region this in now our have Valley. had the locations with we centers, with additional XX course, Omicron And Ohio

So bolt-on all is in all, a it acquisition.

We will like. if which that be will And business separately structure, the it's of Caesarstone are going into reflects regional the a integration of that on, that full as reporting forward mainly on be be part Caesarstone. not the you also going integration waking we to

Asaf Chandali

this Okay. maybe from Great. But I end ask how queue. I'll others. the back And we one Omicron? kind question other nobody in before question the expect direct should guess Should to or I of other Should any -- has my just that the jump last we about sales continue? company this thinking similar be we actions strategy from to expect being on ground? deals

Yuval Dagim

very laid We looking on help the are no there's out we speed hidden our Asaf, that -- execution [indiscernible]. strategy. us We businesses clearly. strategy of to more Obviously, our can up

should part ongoing integral from So of be other side. the considered. will at that effort will And market -- part becoming system our kind businesses an of be that and be can looking be an

Camille engagement of strategy launching that partners, engagement sure loyalty which intensively business we our be part consumer rates; which haven't better through and in their working they our to purchase last -- are to journey conversion the will In pillar on quite addition, we a we go-to-market side, on with CS also and our help to and on side, platform, studios the call manage customers. we higher mentioned Connect, the especially our capabilities new get that, customer we on a is make the have

Operator

with is Garner Benchmark queue the the Rejoining Company. Reuben

Reuben Garner

you year. -- what the those was know in the don't revenue way. back you I to maybe XXXX I the kicked we I a a no guess, XXXX, your can impacted there, are what got reasonable both remind of as from what middle part there. there. guys. longer business, those happened they're add acquisitions and kind back revenue Can accretion you XXXX us of to 'XX Is ask And year. maybe standpoint, Back 'XX, just to this -- by off. that, second the of a first X way expected about to look levels that can But And think more. had couple to Obviously, I deals? seem us this hopefully, at think then expected progress is shutdowns, profitability year, give especially are get on you get do outlook be organically? all, just through it Sorry from Do the accretive? think you I the

Yuval Dagim

with have or and we to a and is We'll COVID-XX XXXX than the see environment in altogether -- XXXX quarter. are first the not are still the -- higher altogether. don't servicing we it around obviously, disclosing revenue we breakdown, We be the see expecting but

it's goes. will the We the see believe as be in going a to year we bit is growth significant. progresses, full increase where to So XXXX a breakdown of think of the it that revenue. early for disclose But too us the I

Reuben Garner

going it's in be and for run do from would Is marketing here? fourth on Okay. even you more Did So the you you reasonable to And of think to side, that terms the that sales level that there go more rate higher Or right? I the forward? then that, so hear million going marketing quarter. selling referenced be normal and $XX a think in that to I that moving a on in dollars, expenses? back is that got

Yuval Dagim

Plan, and and in to we years looking our here executed we will previous it we projects where and more them marketing. coming Acceleration a are progressing Global be the reflection the with them on or of heading sales implemented market. fruition, with cost are Growth Obviously, are think more that good I on our as

support But the line So with those. accept of those coming in engines to the our the those our And expectations. can also to some them. projects revenues our pace entirely launching new will are new in decision if pace the coming and of benefits with growth and are see behind profits be markets investment

will be S&M we dealing very So on last done with we and much with control very the very spend years, have management a close X X, of good that. spend the as in

Reuben Garner

what's then then year? you'd cost price there any And environment mentioned Okay. can kind of like are higher not that What I pricing material inflation. inflation. and definitely this are you're shipping talking And inflation seeing any guess, What understandable. Is in? percentage the the you seeing we the get to the shipping expectation is imagine cost? materials part one I'd about? offset you only

Yuval Dagim

the year, too too bit so raw a Reuben, to have forward increase it's this the do but previous note in markets. from a year bit that some specific early, to going are It's in early, see price materials. vibes still deals We we

the might We are plants now cost. markets environment, to the shipping to and the we in Obviously, from preparing we part and already offset higher some goods the increase a is to price bring our raw of and greater at that the shipping market. cost materials our to business efficiencies are any goods have plants business

that think are companies is I many global with. now this something experiencing

Reuben Garner

of in slower specifically assume which then about that. a what of perspective? have But better. repair outlook back quarters I been in couple that construction, specifically your the is doing -- the would just the from seeing remodel and the is business there that little organic even of the market to thinking and well Okay. market, last you I comps maybe and on here have is me. going than I portion an kind from Americas for new Is and what a U.S.A. a getting you're And I shutdown thought. broadly there of that the there States then portion coming something markets understand pretty Can for perspective? want next of impact talk all one

Yuval Dagim

at think our I I impact is, guess, around exposure U.S., the the In the major to IKEA. moment

the IKEA improving exclusive weeks. we our it as behind our was they them. sales to QX, expectations, quarters. an IKEA few gradually will with And greater -- deal see growth the in have over market, to coming but In the back We coming still are was are they last still some

So more the we and we are Omicron markets major business. and exposure to Obviously, -- increase I -- the will situation, the our some the in of direct to have impact -- of acquisition U.S. when presence in is in that be think obviously part in more less of directly the remedy non-direct Caesarstone moving regions the

So next U.S. closing guess, over us, the faster the demonstrating I faster continuing few in you'll see the -- quarters, growth and gap

Reuben Garner

Great. good the of XXXX. Congrats on end And luck this year.

Operator

any back turn further Yuval no are to the There like over for comments. questions to at closing this would Dagim I time. call

Yuval Dagim

We for look you progress quarter. you to next on Thank very you much. our morning. attention this forward updating Thank

Operator

conclude Thank you teleconference. for your participation. today's This does

your You day. great at time. may disconnect a lines Have this

Caesarstone (CSTE) 24 Feb 212020 Q4 Earnings call transcript