CSTE - Earnings call transcript Q2 2021

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Operator

Greetings, and welcome to the Caesarstone Second Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host, Brad Cray, Investor Relations. Thank you.

begin. may You

Brad Cray

Finance, or and responses by Operator, the Yakovian, to I Director everyone. Chief Chief Ophir that We Thank XXXX. Officer Financial Dagim, that caution Certain good Caesarstone's and joined on of Trost, Nahum Yuval Officer; Ophir will such today's may company's may Chief and questions am succeed Financial as you, results statements and morning who conference Executive Caesarstone's in X, various events constitute only current materially. you actual expectations September call reflect statements to differ forward-looking statements. Officer;

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

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

Yuval Dagim

and Thank good Brad, morning everyone. you,

robust our our further since by the I'm we pace of results very across as XXXX, we've into demonstrated seen business As of unprecedented move pleased this with recovery the XXXX quarter. year financial

where on greatest our continue quarterly our capitalize the the potential Growth driven the of by achieved to the Global the recovery see for During in to mainly second and Plan focused we revenue growth. U.S., continued of million, record we $XXX quarter, Acceleration execution ability

in Valley. acquisition world and on channel also main connect Australia key are and relation progress leap U.S. a transformative and business in and combination as this improvements improvement stone to quarters, we from a introduces to Omicron, the a several consumer early of across In drove in that the continue Plan. consumers happy the accretive U.S. economies we big have discussed, CS that U.S. our way broad-based recover under Ohio the around planned, digital our to We and remember improving Acceleration box through coming growth other It previously improvement, the successful is saw contribution initial during top of in effectively a majority managed follows pilot of the this technological pillar, line CS manage markets from in core several journey. focus platform in to program global have customers Connect expand the In across Florida Global Connect We with with and is is projects XXXX. platform feedback a our Growth our expect we regions as and started of pandemic. also the experience communicate and the the to as This our encouraging that We customer announced premier we rollout engagement; important customer to implementing of previously and theme made. is Canada. of the strategic our pillars recently supplier in we the demand purchase the one

U.S. expanded engagements. already and new launch is initial the opening doors relationships sales establish force U.S. improve to new However, for our

us, stores. the U.S. retailer. to and encouraged be this Home continues branded penetration Depot slabs are big bolstered important to I of at our note we in into channel Additionally, remains success that our the very ourselves also with see would sales through relationship recovery further box IKEA Caesarstone by to into

remains proving attractive under acquisition to Israel. in is brand in continues region. ourselves, high-growth extremely allowing in across a excited in progress both M&A and closer us launch Lioli strong. areas, integration quarter, plan. us to customers our of third in Lioli and our into mainly Florida, in porcelain line demand capture our an Lioli bringing the Omicron our be where new to and is initial Caesarstone-branded porcelain we Separately, to Omicron a countertop our sales continue geographic the pilot complementary And to global take APAC the slabs additive be most Caesarstone side, with are demand introduce exciting to integrated to notably step collection the U.S., the vertically to footprint of strong to footprint. On the in of This our approach

the we continuously Looking to while our are create to with ability demand, our operations. we side, capacity evaluate pleased meet at throughout flex cost opportunities efficiencies additional to

by resulted So, which our our and are team unwavering through growth XXXX, during the far, to chain challenges, has Caesarstone second XXXX. and industry and the mitigate displayed the in our of cost impacting execution in encouraged supply of effectively commitment strategy, quarter inflation management. In we global highly significant summary, first-half careful

to world-class capture our demand global leveraging across recovering footprint. Caesarstone brand countertop are We a

We CS to are and utilizing Connect innovative customer technology-based experience engagement. go-to-market initiatives enhance such as

July, the Trost, addressable we monitoring the Nahum are constantly and during developing, Acceleration transition. our been has of come. testing, on to Ophir quarters Chief premium improve are past to on introducing years multi-material Nahum Nahum excellent of focused the the Director player efficiencies of that material outstanding years our anticipate beginning over and position Officer In shipping seven expertise Nahum September be in Caesarstone. opportunity. Growth team the carefully a with key I'm implementing with will confident as our career several opportunities a XXXX, an announced X, operations. We raising his embarks his are and leadership Financial promotion addition we Finance, and next Plan demonstrated our years. on in evaluating market costs to Global has we offerings to and executive seamless financial and And successfully grow to

discuss call I to outlook, Ophir the him Now our to for before contributions. and results his like financial I all would personally thank to hand over

His three and future turn journey. helped strong of Caesarstone the together years. will I him had best next immensely call the now to luck have of the have over wish build leadership We for his on and to foundations the I great last achievements partnership Ophir. us

Ophir Yakovian

we you, second of Nahum and and discuss I XXXX Thank quarter proud rewarding work at has team ensure achieved morning, Caesarstone. I'm accomplishments Yuval smooth exceptionally to Yuval, entire and I results. working and transition. a everyone. been closely It with team together, entire and an good experience our am to the leadership milestones now with have the will the

basis, quarter to growth quarter million, higher record prior XXXX, compared increased revenue of a second compared of the global On the XX.X% For by $XXX.X to was constant same currency to a period. our around included revenue period the improved year, representing second year of last primarily as of the regions and to across world demand the from approximately Omicron Revenue in global economies footprint contribution $XX pandemic. Lioli. in most recover continue period the the the million also acquisitions from due to for XX.X%

the and up at business the currency sales our in up to U.S., sales the were In growth solid growth XX.X%, U.S. regions, core due driven Now improvement, mainly were acquisition channel. in the big by Americas, XX.X% in the constant Omicron, box of looking

the the restrictions. were as indirect business region, IKEA in sales In our majority the second to in Canada, XX.X% from primarily driven benefit the up sales due we also improved and in driven currency EMEA to core grew from we sales in partially our consecutive in experienced sales a a constant the constant were also quarter, were COVID-related doubled a for region competitive in and IKEA was XX.X%, Depot demand sales the stronger in the by second strong second sales a constant growth by Our conditions. grew to experienced Home to basis, more for which the down quarter. sales market both Contributions Israel, U.S. by stores related recovery currency quarter, on Lioli than sales in on XX.X% XX.X%. In constant currency markets. demand. region, stores accounts basis, year-on-year sales APAC U.K. of Australia, currency APAC more offset sales which performance, a was In In decline our the the region, In additive

exchange margin margin also gross the second the and pandemic inflation. in mix, favorable raw rates, performance, XX.X% which Looking improved P&L enhanced our beginning points sales the regional and Adjusted gross prior by year-over-year material we to lower XXX more in compared demand of were points quarter and basis XXX our currency since partially productivity in growing offset factories, prices shipping reflects margin on XX%. gross primarily and better basis by The product year our improvement at expanded basis to year-over-year XX.X% quarter. to a

in As dynamic light some has we in rising become raw supply discussed second and impact previously, experienced inflation an of the raw in headwind Caesarstone We the second-half of of costs And tight XXXX, will inflation the impacting environment important have shipping higher material from year. that material our our in the quarter industry. more to we particularly margin be significant expect polyester. for

compared contingencies, XX.X% million, improvement year more or XXX to quarter. on in to expenses, a year-over-year sales to basis We level excluding normalized in margin XX.X% of diluted invest we remain and was shares. XXX% the The support in increases EBITDA compared expect to increased shares we of reflects per higher were brand marketing future the primarily Adjusted year expenses at million, price the year. settlements of million initiatives. share to loss XX.X elevated selling higher as year margin quarter legal adjusted to to due second on and earnings last partially in mitigate that the through and on $X.X growth. representing million point were expect marketing to increase the a and continue loss to other to compared quarter. cost-cutting per this same gross impact in of mainly basis a XX.X the Adjusted margin period $XX.X share in prior last XX.X% $X.XX $X.XX compared The our X.X% quarter and Operating revenue year-over-year prior

with our cash invest June institutions XX, bank million. position balance situated sheet, Acceleration balance a us and of strong with and strong had $XXX.X $XX.X Plan. financial in leaves short-term equivalent, Growth well position to We the short million, under to million, to and Global XXXX, our $XXX.X cash, us the further sheet net deposit, of debt initiatives total Caesarstone long-term believe as securities Turning of providing and of cash marketable cash

call. EBITDA. be our expectation grow our outlook, faster that the will annual to the year-over-year shipping expectation XXXX higher being in revenue revenue material outlook to costs gross and higher revenue compared than mix Moving and I by in similar favorable with and offset EBITDA adjusted we more for are raw margin mentioned assumes This that to with reiterating XXXX the higher earlier

We to in continue and growth. to sales levels invest future support our our and normalized at more marketing brand

temporarily mitigate a in in reminder, an reduced in growth and impacts As invest pandemic-related are, as XXXX effort costs we to therefore, were returning initiatives. these

year Our the will turn let outlook for continues continue to to business progresses. comments. pandemic-related call as that With fade back Yuval that, assume closing restrictions to the me

Yuval Dagim

Thank you. by and you, my potential Thank encouraged great are continue And In strong to questions. in to technology-oriented reflect Ophir. our team our around call of to express are like would brand ready second we drive first-half positive now results quarter I market. a members momentum who to and to gratitude our Caesarstone globe with a more we our transform the and conclusion, our progress is in the efficient becoming performance XXXX. for open business, the organization the and accomplishments. sincere

Operator

proceed Our with from question [Operator comes Instructions] Stifel. your first Please Stanley Elliott you. Thank question. with

Stanley Elliott

basis and what doing Hope the product from a well. core line, the a you're recovery quarter. you're on cetera? what additional like-for-like off or additional there Depot on way Congratulations et to out of the Starting revenue kind the doing everybody. Home in Hello, is placements business on versus break IKEA, at on doing nice top you're of kind slots

Yuval Dagim

quarter and the can in business. provide for believe can good Yes, we had, Lioli, mostly Lioli, Stanley, the something between you second And I to Omicron the that contribution Omicron have deals is we from million call. the take that contribution the as M&A contribution M&A like you and for hi, the the $XX revenue. and background together, core

Ophir Yakovian

both think, compared year, Stanley, business, seen Depot. in strong if Ophir, we've a channels, core is in this you IKEA, -- recovery I look But to all very last that Home the

an was easy it year. QX comp in So, last

So, recovery in the channels. meaningful was all

Stanley Elliott

pricing really that? offset full-year mentioned gross pricing here. just margins mechanisms market curious changed. not but with you you the you're get into how higher And the this, back-half Help us thinking cost to in about the of the kind can year, How expectations for of quickly

Yuval Dagim

that act it's and And see with this it quite year and we fluctuation increase we offset the to not to the moment, are of what can material impact obvious shipping believe price think be And raw that second with increase marketplace. cost market to we and are I forward; at fast we for can go inflation it's improve, the the need in that dollar can the if experiencing going what probably the costs, the looking most, of costs we all, do are we issuing. the that in year second-half. we to

Stanley Elliott

more XX-ish happening of color market? terms more And of then, conditions. Israel, that you little kind what's on shed Could down competitive mentioned percent, a around market in in the commentary you

Yuval Dagim

way, through market in that, change fast. as going to penetration part porcelain is and happening a happy a are the the quite of market Israeli I'm is On this say consumer that penetration well. we in to flavor The very Israeli

move two Yes, we to in line As market. -- last Israel, the happening year still are ago. happened porcelain it's and acquisition the it's of with we our -- some in Lioli, multi-material growing business years now ago, the with years strategy

all, in a all market. Israeli do that change So, the I we believe see in

coming are in feedbacks consumers. of now Israel, ours Lioli a good Israel, six Caesarstone customers in with very so plant far, first under from from the We and colors piloting and the brand the

Stanley Elliott

along. of Thanks Perfect. best I luck. the pass and time, will for

Yuval Dagim

very much, Stanley. you Thank

Operator

you. Thank

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

Reuben Garner

Good you. afternoon, guys. Thank

then the the So, way but to quantify you Yuval quarter seeing, Is what your second is expectation the just that to inflation And what you what price expect in to in that the I maybe the it's the whether drag just can said, dollars if offset or -- that said about think you that's maybe it's price/cost that start, margin clarify, I it? right you experienced you for just was, gross second-half? want second-half. the think increases price the you're after percentage? to

Yuval Dagim

Yes.

the material and For in raw quarter, in impact shipping costs. the to started experience prices inflation we've second of

price the U.S., of example, We place we second-half see said lag that, time for the more a the have implemented impact in impactful a as manufacture that July expect in between to that the the X. year time that, we and is starting you Having there take a increase sell. in it

of mentioned, to offset So, inflation, or the year. we by well least increasing expect, partially as full at you in the prices starting second-half

Reuben Garner

margin to your a to So, in gross the and ago. second-half are first imply full-year year guidance drag much price/cost relative you the that lower How expecting would relative outlook? in a

Yuval Dagim

in we margin some are we Reuben, -- do the expecting in second-half. First, expect gross decrease

XXXX. a it's beginning Although, we and that the the of XXXX year-on-year, for impact, the and case, mentioned year, are full-year still we expecting at position the between flat

we to full-year, believe it's going ago. gross higher much to be pretty similar a So, started although a for similar that quite year position, margin, to year, in higher in last place we the

Reuben Garner

the revenue seasonality-wise, normally then be year. different QX got into lot Or that of aggressive? Is initiatives that revenue and the as And QX be going because QX you've ramping kind a higher point too this high on? Okay. could something QX would you're move than year we for be might that of and and is

Yuval Dagim

in in similar the we'll a QX Normally, our QX true might year. all in some strong terms there case. engines see quarters. of and It it's of the been the that and could are But recognized QX; all, chance have in, some as be upside that kicking both be growth in seasonality, quarters

Reuben Garner

then, Home Depot, of couple Okay. a mentioned you times. And

How overall business now your next in that years? percentage doubled. do a big of it has it And I in think or you either is the big U.S.? opportunity you in that, the get as can or an is couple think how business of how said big of

Yuval Dagim

of box that -- we Home that doubled a it's quarter-on-quarter. we And business do player, the big not more been in channel So, It's less providing. we as is as great specific and are major practice big doing. we that part us. Yes, the see big with are not Depot the big a there box is number, indeed, more the do in on sources, a and focusing potential great box believe opportunity channel. is more And the U.S. more attention. box for And for be will the we a true Caesarstone

Reuben Garner

think second million Got I it it. was in kind elevted. year, And sort expense, is back-half last I be? number will to to selling $XX.X or that of the me we it anything one was than the or and next quarter the marketing quarter. look number you know into remain Is expect the the that specific we it as and that about into second made move should onetime higher for for of there

Yuval Dagim

are with I beginning the that normalized of the think number be bringing reflects our it's plan. a line in more that we and level, at happening spend facing. the reality to we'll our that year We mentioned

spending in No And investing journey or are growth for and ongoing plan. it will Caesarstone deviation We coming exactly exactly think with our the the be years. contributing -- this we're to for plan. from we line year an

Reuben Garner

guys, congrats and Ophir forward. you, Got the luck moving it. on good results, Thank and

Yuval Dagim

Thank Reuben. you much, very

Ophir Yakovian

you. Thank

Operator

now Ladies the the gentlemen, reached we session. I question-and-answer remarks. to call and for end closing You. turn over have will Yuval Thank of the And Dagim

Yuval Dagim

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

Operator

your at and wonderful This you And today's time. lines a this Thank you conclude day. now participation, conference. may have disconnect does your for

Brad Cray	IR
Yuval Dagim	CEO
Ophir Yakovian	CFO
Nahum Trost	Director of Finance
Stanley Elliott	Stifel Nicolaus
Reuben Garner	The Benchmark Company

Caesarstone (CSTE) 5 Aug 212021 Q2 Earnings call transcript