CSTE - Earnings call transcript Q1 2021

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Operator

Greetings and welcome to the Caesarstone first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

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

You may begin.

Brad Cray

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

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

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

Yuval Dagim

Brad Thank everyone. morning and you good

by recent to year-on-year were Ceramica. record EBITDA $XXX of by and Omicron we global two M&A was to we acceleration accretive marked XX% establish operating taken quarter growth another to quarter to actions Our have third to platform, first acquisition quarter first since efficient produce result implement successfully global of We continue growth we a our as helped of while ago, straight our plan our execute demonstrated tool of Caesarstone expansion. a have consecutive company. allowed pleased important leading collective countertop an The revenue as margin million, into to announced quarter also a transform strategy This our using years growth an us premium Lioli strategy. multi-material

are for to of very attributable our and are results the entire execution team, am I whom encouraging Our superb grateful.

to continue are accretive long important to line term to As acquisitions tool we and and we report drive that as our Omicron an with view progressing in M&A plan. pleased are we mentioned have sustainable integrations of Lioli previously, growth

begin our integrated. our strategy year potential in collection see through the expect The of in we this world-renowned of Caesarstone Omicron anticipated porcelain our and execute combined porcelain second coming throughout half Caesarstone brand is premium in We sale as to select great markets. to be of leveraging we to multi-material on the slabs new the months once fully the integration business completed introduce

pleased with are revenue the quarter in We performance our while business Omicron Ceasarstone's to with in first the augmenting performance strong contribution U.S. the of

countertop lever products Depot is channel And by doubled we U.S. are Home our nearly sales markets. with launch especially purchasing in of the compared our consumer year. reach to multi-material point, And will global with further excited our progress offerings. pilot is as and as our penetration longstanding Connect to during products customers. fortify are area approach simplified to is journey. big that process the program We expand our we increase CS conversion Connect several with test we further to continued Caesarstone at growth to To track important U.S. expand focus new us partnerships discussed believe CS important key our customers' box rates sales we into our happy Another branded that technology progress into of this and the the on are for Australia. the A the we and have made in stores. the first last leverage to as area, previously, a Caesarstone simplifying Separately, we for consistent the quarter

and some by of our start plan projects still year. many global the we are highly across our pandemic there to While lingering way the momentum footprint, encouraged of impacts our positive under part are as

financial We operation I call will clear and value the position, efficient provide over now to have details turn will a our additional Ophir, a our and place more strong results for a shareholders. to strategy create who in on outlook.

Ophir Yakovian

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

For revenue in the year-over-year of constant last currency acquisitions. the acquisition period higher of the and $XX XX.X% to million, $XXX Lioli our contribution compared the global primarily first Ceramica. period. Omicron contribution quarter X.X% compared approximately by from of was revenue basis, a The quarter same XXXX, On first year, increased million included to year growth increase representing to to due prior

COVID-XX expected. quarter related In U.S. our regions. than Depot the first were from January mainly continued to in In were pandemic-related the our Israel, our ended Home began sales In Americas, to our impact indirect Passover sales. currency a to sales the Canada, the happy U.S. business currency impact from box constant X.X%. actions. the offset Australia, sales the with APAC lockdown, continued sales driven where majority slow partially in to timing XXXX. Lioli third sequential related momentum U.K., continues sales additive which our strong first In the COVID-XX the partially positive to government basis, restrictions the impacted also demand to in our as markets. of constant of quarter. be Omicron constant are the on well better offset which up of currency sales recovery performance by the was into In we to impact was This acquisition. rigid quarter see stimulus We increased of second country's XX.X% XX.X% first see the In APAC related late government at were primarily on results In looking were stores, our improved down in XX.X%. was which by in improvement our the region, EMEA U.S., as at and by experienced our we benefits in region, solid lower Contribution sales restrictions accounts at the the Canada, for quarter, from constant by up and performance big sales currency Now IKEA region and holiday. the grew were as In activity stores. channel region, performance

We XXX from business. pleased points rates, basis our Looking P&L first margin XX.X% year-over-year our improvement as points the to improve gross year-over-year we gross XX.X% to our compared year to by quarter XX.X% impact margin due loss in were of in higher by more efficiencies performance. margin lower to The was Operating benefit to to a improve quarter. gross costs at product the exchange higher XX The to manufacturing continue excluding partially offset favorable revenue better to XX.X% mainly basis unit improved basis fixed revenue. to reflected lower cost across primarily were our Adjusted actions mix, decrease of on prior XX.X% legal and efficiencies improved the contingencies, quarter. and compared prices. and in prior expenses, settlement selling currency due year absorption

higher XX.X% $XX.X period earnings the $X.XX we year. a future XX.X% compared adjusted the a to our marketing year-over-year or to in remain per Adjusted expect we to reflects year share million, count. basis gross year on were investment in and return to per representing margin diluted similar to the compared quarter margin diluted EBITDA prior a the expenses of quarter. XXX share in The first normalized earnings of our Adjusted operating Going elevated a brand point to quarter in million in support level margin growth. same last increased the as $X.XX XX.X% to forward, compared more improvement $XX.X share of sales and primarily last

balance to Turning sheet. our

with date that Board of on with our financial quarter record confidence and XX, strength million. providing of XX successfully our and during solid total of first share per to cash payment and give a a net May cash debt position we of to XXXX. income June The us policy of dividend continues equivalent As our institution of In had performance $XX.X bank with strategic XXXX, long the term X, accordance of $X.XX million, initiatives. of million can XXXX, dividend on short date a marketable with our $XXX.X short sheet declared our term March based and execute $XXX.X securities cash, balance us of Caesarstone a and net deposit

moment light of in outlook. like the Moving first would our the Caesarstone to across tight industry. environment I on comment impact to a supply to take to the material inflation raw of

will will margins to quarter headwinds the will year. these timing, in While to be that in a we we to second did in coming costs headwind inflation regards we the continue material quarters. us impact anticipate not of from the first experience XXXX, material the significant remainder a throughout start that shipping and impact higher and our raw of quarter anticipate the In

through mitigate partially increases initiatives. to expect We other this impact and price cost-cutting

of materials materials, sold breakdown XX% component accounted the goods both goods for products is accounted cost approximately been in in material have the XX% in while less quartz and quartz than our engineered of to changing excludes relatively a some prone dynamic for of which raw sold XXXX, while of approximately of polyester raw our acts on significant logistics Quartz as context In cost sold, been costs Since additional raw for the raw price to material strategy cost For accounted is polyester of XXXX, hedging of our costs stable our of to our facilities. using the the polyester, which materials and the our XXXX, price in the Historically, XXXX. purchase materials to delivering have This of we for related exposure price accounted the our our including product. main XX% of to costs OEM agent used of binding XXXX. our in more approximately prices. fluctuation. reduce material quartz XX% raw a product,

hedging offset operating of our therefore on are finance to income. do results our just polyester not expenses the and prices However, impact

similar year-over-year progresses. and that impact to to fluctuation in as offset revenue carefully raw year higher With costs. revenue we outlook accordingly XXXX to anticipate update continue revenue faster adjusted will to will impact, will continue than We you our EBITDA with grow margin said, EBITDA be with raw the higher compared expectation monitor XXXX materials material higher of This shipping by XXXX. the in we and the and that assumes price gross

to we growth. continue sales marketing our sales to level expenses increase addition, more In our and normalized support to

or reduced XXXX temporarily we As pandemic-related significant also are to delayed returning. a now costs which due impacts, reminder, during

that will assumes improve closing the growth With comments. me of Yuval driven growth let restrictions In that, revenue progresses. both by return with call will environment to turn Our outlook to for we expect quarter, second a supply contribution well. year pandemic-related the as the acquisition fade business that the and as the to organic be back

Yuval Dagim

quarter first results. on Thank execution focused you a started of the We our Ophir. strong And note. resulted plan XXXX positive in

out As our worked the support roll continue sincere our health our employees all safety and customers to our achieve of and prioritize tirelessly we growth will express vaccines the members of to across and global globe, objectives. our to who gratitude team

our Moving are multi-material and our product our to now on forward, call we ready to unfolds. update enhancing forward as world-class initiatives, quarter. we global operating have look brand progress platform our We And value for focused next innovative go-to-market the additional open by further leveraging to the questions. Caesarstone offerings shareholders are Thank drive year built further you. for you on we

Operator

Instructions]. [Operator

come with Benchmark first with Reuben Company. Our your Garner question. question proceed Please will from

Reuben Garner

good to guys. Well, morning. Good Thanks, afternoon you good evening,

acceleration the maybe me the was in topline. in tell way organic business? volume It I you that a growth you an rest maybe are the gave constant I the you expectation number, I start comp. signs to quarter U.S., through the will recovery? any year? think to Are easy the you returns. as seeing your currency encouraging. like What you Can a us is mentioned of what but likely organic the talk about on about in So That's about move seeing U.S.? growth And the particularly of an what second revenue you know in

Yuval Dagim

Hi Rueben. Good morning.

quarter-to-quarter. And optimistic between as really first in do First the see change U.S. I progress see like being start January, with even what great February momentum a in to the we the March. on would we see from quarter, the I to think We

some with continues And us quarter as of momentum the to second well. that

first the comparison the quarter, in last kind the All-in-all, So year, obviously, of all-in-all, unorganically as recovery difficult of will X% the quarter. believe that down well. organically we nice first and organically the do see a first to is although very quarter be we to U.S.

Something later April March that well. and as in completely recovers in on

Reuben Garner

sequentially? Wait. you I versus that? sorry. What am will down QX look Can repeat QX? is That's X% like what

Yuval Dagim

No.

Ophir Yakovian

through We see in this progress year as the said U.S. we were down year. No. expect last momentum into to is see performance organically, and good we compared What to the Yuval that X%. the U.S., in improved QX

year. I delivered improved. by are there Omicron think the easy we to course, first the performance, with revenue and with But the last Of quarter are that Also, integration much will of compared comps first happy we Omicron quarter there the performance the the in U.S. be in in expect still, and very

Reuben Garner

it. Got

margin said this similar year Okay. And that gross be year, I then will on think the to the full you commentary, XXXX.

like you can So now, the about margins XX%. your to talk three averaged us, last gross quarters

You end have markets. got recovering

As we is this only been improve move where year, to the through of few revenue quarters. have from the the I going rest last you assume

right in How the next are few kind XX% And you quarters. is the inflation are of looking I because much how implies kind And few that secondly, seeing? last XX% guidance that the factors? in price/cost of then Your one, other the margin between the am what's difference I that under the at guess, much the way? gross quarters you maybe is XX%? and of of for

Yuval Dagim

I mean it of is of difference. the most

First, it at you looking right. are

seeing to We shipping. as also is polyester, few supply see us, what of a and an There's a are compared tight what have material past raw That's we see seen inflation today we in chain. a for material which price important significant coming the price We XX%. from months. over prices headwind mainly very

increase will some impacting do mentioned. to significant chain it's come yes, margin. headwind these do we the be mitigate. see tightly cost think see will as will expect plan a prices by on level. it do in our revenue So to headwinds. base, to do the year, mitigate improvement back higher that, to in market right there at this selected least looking But we the where gross in more thing do supply we expect more you price it's partially, a managing a that, increase. We and But by a normalized we and very And be that to at We as progress our

Reuben Garner

Okay.

number same of have the north guess, on quarters line XX%. margin mean been you some I targets have but last about think I line. guidance. unsustainable? are that. I year? have know you are I is couple of gross longer to questioning as do that think EBITDA last mean a But So also heard through you you better put the And we your don't quarters topline. how pressure, give three I of I have specific XX% above we got the term EBITDA the up that this XX% move going rest But obviously, of

Yuval Dagim

margin. lower are to the revenue expect mainly to we But margin is this to lower, do And lower profitability And faster we year. we this gross fact will year. first EBITDA on quarter's to is gross this due looking EBITDA revenue results. sustainable the EBITDA. the with be very than be due will both and But think don't grow the grow to that happy the forward, First, that going

Reuben Garner

Congrats will jump here. let else I in again. And Thanks guys. someone Okay.

Yuval Dagim

Thank you Reuben.

Operator

Instructions]. you. Thank [Operator

comes question from proceed The Benchmark Company. next with Please with your Our Garner question. Reuben

Reuben Garner

Hi guys.

back would I figured I jump Sorry, in.

a couple then We I of internationally? So What expect quick of vaccine heard you to and a over U.S. about just It taken the going I opening up. first you understand, the return has continuing? a seeing have there Are read growth? are in trend back nice things Israel, Do And that the follow-ups. tough market. recovery that well quarter. talked dynamic on to and very had in sort maybe that was Australia. about

those give markets Just two yours? us big of update can any on you

Yuval Dagim

Yes. Sure Reuben.

of the the the it's quarter we first to markets. do of we and year, or number do the And this fruits a in some First, strategy. that see buds of in of outcomes early our nice the it execution think I of see

as those We the this growth we are of on and launching a engines and introduce growth to year more engines more progresses. few year journey are the

currency. the see currency experiencing we in are two constant we performing market or Australia, And in countries are growth you see and we some nice recovery Australia. local quite As mentioned, on basis do for where well you

And this a latest As bit softer in believe QX. for offset Passover holiday we January. a the fact the year, bit will earlier just to coming the Israel, be we some that have during We ended that of lockdown experienced was year. it

Reuben Garner

Okay. is And then the last one me for follow-up gross goods. the just on margin and a of cost

are that be as percentage is shipping? materials. raw materials a of So then How raw element a you as And shipping much how your much would told kind are of seeing you quartz aspect goods? percentage up? in your inflation are cost that polyester your us how of much much and of how And What of business?

Yuval Dagim

of sold be, in of was finished look XXXX remain costs, of goods, goods assuming of shipping as three-four, million, material that impact, at for $X will raw So goods sold. say, you shipping it's the will cost XXXX. $X And XX% say, in of cost million estimation the levels. costs XX% so current when at,

Reuben Garner

you Okay. And move quarter. as guys year. congrats on Great. you the Thank good the again. luck through And

Yuval Dagim

you Thank Reuben.

Ophir Yakovian

you. Thank

Operator

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

Yuval Dagim

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

Operator

conference. today's conclude does This

disconnect Have You for Thank may wonderful a you your your now lines. participation. day.

Caesarstone (CSTE) 9 May 212021 Q1 Earnings call transcript