CSTE - Earnings call transcript Q2 2022

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Operator

Greetings. Welcome to the Caesarstone Second Quarter 2022 Earnings Call. At this time, all participants are in listen-only mode. Brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. pleasure your my from Brad now Relations. Investor is to host introduce Cray It you. Thank

begin. may You

Brad Cray

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

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, of measures earnings go you. A share, addition will make quarter directly profit, income 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 second 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

with in our a strategy, we of for million. XXXX growth period complex were as marked resulting The sixth $XXX.X second in Overall, expectations quarter of revenues environment. quarter line further results global second through which of Caesarstone, significant our we progress quarter our demonstrated navigating while double-digit record multi-pronged against largely another by year-over-year America, led North progress of in consecutive our achieved revenue growth

In the a pricing increasing we sequential by XX% were were a in to helped mitigate actions we our while quarters raw shipping. able also improve able turn, from in US, largest for our market two row. implementing on quarter, almost for and impacts as the margins that basis us materials successfully expected costs to grow During revenues

the driven be solid from the big our continues our results. XXXX. to US & integration the of Granite in by quarter providing to Omicron box are successful in from Benefits organic growth also contributions Our fourth acquired of growth sales business channel our Tile

the As annualized In we excited path leading our our exceptionally engagement, with share, of customer as presence with CS million is sales July report a work first that us markets help establishing in a grow step market EU. to presence over business digital to additional XXXX our in well. we a $X we hub our go-to-market important us region strategy in gain Europe Sweden, increase providing owned innovative this an experience directly Connect Acquiring performing by to platform distributor in to direct are direct time in the in in our by and Caesarstone. acquired to is regards

the in the well this America. expanding North are path to reach We of across platform further

We new product several also our exciting new of collection. regions, introducing including of the are introduction our recent pebbles families in

that will on porcelain our brand launched the of under and strategy, be Additionally, of this our year. remain growth furtherance introducing our multi-material quarter new we in third global collection focused Caesarstone in

rising increases While environment, upon to announced builds April. our in recently This we carefully raw are our we plan, materials. additional price XXXX strategic increase offset executing in are monitoring the January an help against growth and the previous and cost price of July shipping cost

volatility despite some the XXXX, Plan confident continue quarter-to-quarter we of of half Acceleration that fundamental will through. improvements Global in we execution our are second to the Growth business providing into that work for Moving is our

inventory and and have I investment significant our through ever place to we supply than feel the the We demand. that management are products the are to right objectives. of to have well These actions uncertainty the aware positioned include: improve we accomplish to chain better that actions years, in our match past of the economic period over ahead taken potential four confident lies

efficiencies improved cost at the savings. in facility setup in American shorter US region, lead North Richmond better Hill times locally Next, resulting us the our to serve has in a put and

countertop Third, local establishing right our much leadership These introduction seen with more organization leadership allowed diversified and lastly, as attractive us a to allow we helped decision-making the in closely resources. our multi-material ability and chain global us new the better core our team significant industry along growth the taken product to and Plan quartz. years. quicker the an strategy have disciplines other pressures regional has realignment our addressable into provided the prioritize beyond Acceleration also has with through through actions for supply and push global crisis our structure has of Global business cost and together. teams actions has pandemic, market us with working other regional have inflationary more with the global a and categories to Growth And our our allocate streamline expanded significant Fourth,

offerings multi-material As leverage on now initiatives we additional financial will the to call more turn to continue our forward, to and go-to-market view that, drive our value world-class discuss product I Nahum to innovative and brand, for details will results our shareholders. outlook. With

Nahum Trost

mainly our second million year. XX.X% everyone. were of constant driven in the Global second basis growth in to sales by strong year, will second the higher was our were a by up $XXX.X morning, primarily results. currency good of grew up America. XX.X% currency a the compared and US, footprint, same North compared quarter growth. Yuval, On start to million revenue quarter $XXX.X revenue XX%, last global across organic to and discussing higher constant I US. second pricing In you, the Canada XX.X% the particularly to in quarter period due record the sales due to quarter Thank by In last Americas,

in growth sales basis constant issues from year-over-year continued saw XX.X%, In performance well quarter, region, EMEA on indirect chain In on region business. and a to second double-digit in strong UK, in constant experienced July. constant growth. reflecting sales year-over-year continuing grew our year-on-year accounts growth currency basis, XX% such a products. up currency despite region, the products by currency as sales in natural the IKEA supply in also EMEA the XX.X% currency for of our experience basis, were as improved that competitive the headwinds constant region. primarily on constant and other ancillary our In Australia driven majority sales We strong solid currency lower in the the with up X.X%, a the sales as Canada, during were reflecting In in by performance APAC which channels all were sales solid stone mainly pressures Israel

Looking at P&L our performance. second quarter

year-over-year favorable Our in fluctuations gross shipping gross the by gross higher XX.X% compared exchange partially raw primarily reflected were margin increases. for prices to margin, the margin XX.X% rate that was offset in and quarter. material and foreign price quarter. selling The XX.X% product prior-year and Adjusted unfavorable mix difference was

experience cost we global As we our the second associated have from discussed were in we ongoing materials, mainly the rising increases shipping impacted industry. In pressure XXXX, quarters, tight raw from footprint. and across quarter given to previous with our supply shipping of continue costs environment impacting

and impact July XXXX material effect our we partially the higher that expect expect an markets. several raw this persist. went additional We in of to through impact during costs increase In shipping mitigate of unfavorable to price response, into

that XXXX, increase prior-year our into in January price XX.X% quarter first increase that quarter second of and April Operating into price effect went effect XX.X% expenses X, revenues compared quarter. the on XXXX. to went were The in

higher were the record compared earnings million, of on earnings in decline, and of adjusted in Excluding and due diluted quarter to was of the prior-year net gross in the year, September primarily date our operating share, XX.X% income per contingencies, last during representing loss declared a a the our date margin. prior-year second and the for share count. reflects dividend XX, to August on compared the $X.XX $XX.X in share legal similar The of year-over-year diluted $X.XX of period, expenses Based performance X, quarter settlements X.X% a same second per $XX.X share Adjusted payment quarter the a compared or was revenues. with EBITDA XX.X% in quarter, the decline million, of margin Adjusted $X.XX quarter. year-to-date mainly margin quarter period XX.X% the a XXXX. to Board in per to revenue of

financial Caesarstone's balance sheet strategic and institutions us short a debt of million. our with XXXX on balance cash to equivalents securities balance resources total execute to provides sheet, million XX, cash, with bank to as sheet short-term $XX We initiatives. that our of Turning of marketable $XX.X our included and ample an June deposits and believe long-term

Moving to our outlook.

of approximately of range the to of price for the The implies the markets. to million growth are key We XX% mainly at growth This in XXXX guidance $XXX are the revenue over range. reiterating our drivers of midpoint million. $XXX XXXX improvements in be

EBITDA continue and of We with higher increased We materials raw and adjusted to selling anticipate offset to sales prices in a XXXX. shipping. sales to to cost remain expect connection similar as percentage the compared

our Growth to Acceleration also Our comments. costs Plan. back associated that, the me Global closing let for outlook includes Yuval investment the with With turn call

Yuval Dagim

Overall, are our customer improvements the expansion our our of business. through all best-in-class Nahum. and CS fundamental experience Connect acquired targeted offerings, driving successful of integration platform product enhance efforts Thank our to you the across businesses

$X to billion to achieve with our to countertop this player levers global commitment We available us confident by team's a us achieve long-term goal remain Our excellence to in is becoming have we foundations XXXX. goal. the of providing strong

seated in quarters. prudent initiatives well careful open ahead, the beyond. our cost will continue position XXXX call price you increases go-to-market operational you for Looking to and global coming and of product complex in place, leader improving the as progress premium management environment on brand, questions. updating the innovative to look navigate in we our With are to countertop to necessary. where we margins with multi-material forward the our now again ready are a on our and global I and and offerings advance Thank strong leverage, operating implementation we focus the

Operator

Instructions] from question-and-answer will question Thank Benchmark The we time, Company. Reuben you. this The have At we session. conducting first Garner be from comes a [Operator

Thomas Henry

Good changes prior on call-outs are full Garner. you the there for break any And of year Can guide? regional This price assumptions afternoon. in guide? Thomas revenue new terms is Reuben Henry the versus in the versus volume down

Yuval Dagim

Hi, Thomas.

bit mostly What revenue our we a elaborating Originally, be going dominated will for growth a volume more. Nahum to and against and growth last we by general by one-third is double forecast digit in see the thought prices. of two-thirds probably it's in year prices. by be Just year

think, volume. dominant by more becoming it's rather I prices than

Nahum Trost

Yes.

of portion in during did second coming this our already increase that are year revenues, price the are July April, our we portion we in from we coming see after in our two higher and reiterating from regions also of guidance across increases lower first continuing prices the the As majority price increases January in we as with and volume.

Thomas Henry

or you. XXXX any in Thank half are embedded benefits of Great. these there are deflation freight perhaps cost areas outlook, other from likely or the And second events?

Yuval Dagim

embedded way be decrease us the of We At we there raw or cost moment, in of currently shipping XXXX. the year. cost no to the will benefited current rest that forecast. are the changes to have and probably material advised from -- the took Any kind

Thomas Henry

All question. you. one And right. Thank last

growth? of will Given down you past few to perhaps back? the in spending slow anticipate or there uncertainty drive planning terms do the investments you rates changes any you're pull the and months, over in global to changes are And

Nahum Trost

we necessary actions remainder did we for we change in the our... taking controlling year, than including major any Currently, as but in that the other the all quarters the don't previous -- expenses currently see we of two are

Yuval Dagim

monitoring addition, in we are Thomas -- quite inventory carefully levels. We our

we service ability the the quite adjust in markets far, seen so our haven't to all levels necessary customer inventory with and future. drop At moment, any monitor strong as we our serve As continue in appropriately. we the demand those to them feel and

Thomas Henry

Thank you. the quarter. for luck Good

Yuval Dagim

Thank you, Thomas.

Nahum Trost

you. Thank

Operator

Stanley next Thank is we from you. Elliott [Operator Instructions] The Stifel. have question from

Unidentified Analyst

Do you expand do you Good expand margin your morning. year-over-year little bit This when is could the gross of the was you on return expect back And to expect if year? for them half wondering assumptions to to Stanley. a throughout the growth? year. sequentially Andrew I them on for

Nahum Trost

first the assume Given are of can year. second and results you slight -- that can for the reiterating over year we half the we our guidance full the a improvement half

and kept material prices, just a cost shipping level, as we Although, at high stable. raw cost Yuval but of mentioned,

-- another So we introduced and increase. price

see how to half. So we second need still the comes in that

Unidentified Analyst

than Got bit fits the a Sweden? it. any color on strategy more Could how Thanks. How many countries little other you in into acquisition other give it locations your and and Sweden?

Yuval Dagim

have we major in a in question. having revenue Thanks one acquire a are distributors. opportunity our It direct part to specific the was expansion. In we first our business strategy, and in by distributors of of Sure. footprint as for to one the Sweden European go to And pillar being direct our done still good regarding and have global Europe, our continent.

We for the acting the are be Sweden that a see we'll northern Europe and part progressive for as of in in to this business expecting us be hub will how future.

Unidentified Analyst

it. you're seeing through you repair any Got about what -- are new July, remodel? in of trends America talk could or given and sort you markets And the the are slowing, North construction seeing across in

Yuval Dagim

are through far experiencing of long, as year so all the to product dominant quite R&R kind Well, our demand channels. we we're strong more in

too make with construction sure big to major It of to we exposed suppose, new projects. revenue prices decision not fixed less with channels. portion are a is, I coming are that to quite We strategic

far So, slowdown. major so any experienced we haven't

Unidentified Analyst

you. Got Thank it.

Yuval Dagim

Andrew. you, Thank

Nahum Trost

Thank you.

Operator

you. question-and-answer I end this turn call like stage at to ahead, the Please, go to closing of And we back the Dagim reached sir. session. for remarks. and gentlemen, have Thank Ladies would our Yuval

Yuval Dagim

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

Nahum Trost

you. Thank

Operator

gentlemen, you Thank concludes Thank joining us. for conference. you. today's Ladies that and then

You disconnect lines. may your now

Caesarstone (CSTE) 3 Aug 222022 Q2 Earnings call transcript