CSTE - Earnings call 3 2023 | Caesarstone Ltd.

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Operator

Greetings and welcome to the Caesarstone Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Cray, Investor Relations. Thank you.

You may begin.

Brad Cray

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

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

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

Yosef Shiran

we're also will were crimes. October We're but heinous confident X. towards that Brad. our acts open of will have day, on Israel only questions. I in vicious, will justice results. us quarter like you discuss thank the prevail, our to before Good involved results details expressing saddened by horrific and everyone for to third joining will additional regarding these all activity cover for that and that by in violence our then discuss and business committing the occurred Nahum call financial we I terror start you, exercise not who Israel would Thank

third others on accounted with continuity production market and our global in which are customers and business We're these and continue Israel, war, smoothly our aspect to quarter. with events. rehabilitation to serving to by supporting been the about whose is other the damaged addition globally. The townships, are people and donate in Israeli impacted for revenues of have thoughts running south in families We X,XXX Israel to supporting impacted surfaces committed of strategy, ability we overall to the X% employees, our during or of lost one the affected impact the in our operations homes customers, have Israel to material our no decided our activities. the remain and of Our kitchen focused

Now, quarter third focus from further maintained We we our results. total flow generated actions. million. against executing to quarter $XX will global our million our third of $XX.X on of sharp robust adding our our We over straight to year-to-date cash move operations, just restructuring

made through implementation production results improve optimize our strategic our the sequentially we're progress SKUs Our our of in workforce, and of same realign plans At utilize on the structure, moved time, cost footprint. In our improved as strategic regards various initiatives price our we point significant quarter. production transitioning schedule our third-party better we resources, optimization, to under the to to production manufacturers. of network lower with

be to portion transitioned XX% products the a end year. of significant expect our and of by sourced We roughly have production our the now of

We're in to positive environment sequential complex navigating higher this adjusted with economic With margin an drive quarter collections quarter global second progress, that benefits the during trends completed line with conditions, of dynamics, significant of we're prudently in this including reaping In this sales. R&D improvement landscape, addressing across which facility, we're coming to this through activity area remodel innovation of to launch to competitive third efforts We're our and create of and elevating working from operating on our through an addition, in softer produced in manufacturing and XX.X%. In exciting our sales we pricing months. million. Concurrently, recovery closure initial Yam footprint. aim and margin gross Sdot market innovative $X.X adjusted our challenging the structure, the year. track our a investing EBITDA the we global marketing, into challenging translating are

our decision. In I'm conclusion, maintain profitability the past done market, work Now comment Australian on Safe Australian This team an recommends this recently take to our recent Australian of agency, would both to that market publicly team engineered Government our a I'm stone made report market. a adapt in actions. ban confident in was that regardless to this developments like of the moment stone. our its engineered strong I about statutory Australian restructuring with improvements Australia, of in on is will quarter, other. report the moving our and stronger and exact terms execute decision Work the and on walk right available. is be of predict state the in proud share to and diligently next value. Thank now the outcome pending We that and or our can Australian matter the balance this partial over direction leverage At government ban, to sheet total to now of it federal we the details working Nahum a performance. you, I financial our and to will much the through transform decisions We're have ban create ultimate recommendation strategy The a on decision turn difficult business. steps. time, call Government's to whether we're Government

Nahum Trost

Thank good morning you, Yos, everyone. and

mainly quarter global remodel interest revenue to third spending. year. rate The XX.X% compared result results, our of conditions, primarily has higher million global was by third as in driven the decrease $XXX.X at which the Looking market North residential a renovation was the third of quarter million impacted particularly in last softer of and in quarter channels, $XXX.X American

U.S. In revenues the strong the partially markets, has big improved competitive our constant was mainly were dollar tied residential were U.S. particularly large quarter a markets, the our on addition, by currency and in lesser softer by constant down our of were residential basis, XX.X% other commencing Canada's dynamics landscape impact for commercial year. market basis, activity, by XXXX, slowed more The our of markets revenues This sales X.X% business. half the were on the of all similar sales the been XX.X%, of slower U.S. a pronounced between revenue third outside box quarter also for down in lower as revenues market constant since to products. a customers by sales constant X.X% end our higher of although our with performance generated In dollar sales roughly Australia's off this the conditions, and On a in The impacted offset results third-party against year-over-year softer the experiencing XX.X%. sales reflecting distributors. second U.S. reflect in to down currency currency second which extent. difference basis, other in sales currency was In U.S., impact

promised. produced Looking that sequential as at quarter I our gross significantly third P&L we margin a start by higher performance, noting will

Our impact The production gross factors were of margin quarter. cost $XX.X year XX.X% compared mainly million absorption, first utilization. revenues, the third in was prior $XX.X quarter quarter, similar on lower lower costs adjusted unit by increased expenses margin the to XX.X%, prior margin the decrease These was our in Gross compared was and gross quarter were revenues. shipping for benefits in gross the margin XX% margin year-over-year was lower in mainly quarter. XX.X% related partially reflected footprint. Operating in the the by manufacturing lower the lower to million and to which our the offset driven of fixed to costs, the improved capacity of year lower

the The adjusted restructuring expenses and legal from quarter get operating our $X.X EBITDA the line XX.X% settlements, back year. percentage second second was EBITDA to profitability higher primarily quarter, to quarter. reflects of the The lower compared million, strong to revenue sequential to expenses, improved Adjusted prior adjusted lost sequentially quarter. contingencies, the plan revenues. compared half results Excluding in XX.X% resulted of the operating mainly improvement were the in third with in in for

debt XX, Turning Caesarstone's short-term to as and sheet. total September cash and $X.X sheet marketable with included a institutions equivalents financial $XX.X to securities cash, deposits of bank our short-term million. XXXX, million, of balance of balance

the During quarter $X.X million XXXX. This of third cash cash our flow to reduction operations generated mainly compared driven flow $XX.X by positive third in the from of million, we quarter, inventory of efforts.

Our XX, maintain the XXXX. In December million. In $XX planned. outlook net will capital XX, in our efforts, $XX.X the year our potential to X% was of compared to based and on compared cost lease million reiterating EBITDA We're the XXXX revenues. In on and outlook flow as million of XXXX, as associated $XX $XX.X revenues accepting plant, reductions bids generate cash approximately anticipated in to to Israel $XX with of year improved positive to to with of million are we're second reminder, for from outlook Yam the impact restructuring $XX cash XXXX. we $XX to to beyond improvements, net savings could factors to still as realize Yam the similar of have above is sublet June progressing a allow September as other occurred due quarter a XX, significant regards to the of an plant up This million the an during war position. end and noncancelable XXXX, expectation the third outlook, operations portions quarter adjusted inventory as our in process annualized to our near-term the us cash which the of to actions million reduction million. Sdot our This of position fourth for terror, to cash the which Sdot XXXX, and full in working summary, and our agreement closure, optimization recognize savings which of regards quarter of expectation of

the stronger we much questions. now unlock value ready us forward. With have We business in a move situated which to for additional to our call as now sheet, open leaves that, balance well we're

Operator

ahead. from We [Operator Benchmark the The first the Reuben question Garner is Company. Instructions] will go of now question-and-answer Please begin session.

Reuben Garner

mostly by last our a mind, of from there Caesarstone impacted would like First leading of thinking a third third all, that if in maybe basis? sounds is showing month. I a any other It kind to happened to gradual with the what don't or start and the maybe and guys, and quarter you there going the of third not team factors second necessarily improvement to not quarter. function, is the to fourth. of the the then third that was but the that more Israel like function -- step guess everyone on margins prayers impact improvement be thoughts to of or kind are Is sequential I look the fourth are

Yosef Shiran

in almost quarter, according fourth the QX. the to our generate in general overall Reuben, X% in sales, seasonality current in than impact that we so thank is In missing the There at QX -- will So situation for general, higher also results. usually X% you. Israeli will market least be not or the is

in expect we other low expect performance following revenues. plan. So we restructuring the And terms our cost of side on better

addition, we're to In marketing, higher going we'll spend. have higher invest marketing so on

So all and in we future. the better for cost all, but better similar performance EBITDA, expect setup

Reuben Garner

Okay.

to just is clear, business your essentially X be that expectation near Is so, in to the And right? your on going term. based Israel

Yosef Shiran

of we But, X. war to the how first not It's know will know don't develop. don't all, continue yet. We

we side, result. incur a is seems we positive So -- it may as market on But positive quite now, frozen. some the may

it close took to as we X. So

Reuben Garner

Understood.

Nahum Trost

that what before But QX. revenues, taken that add see seasonality -- we should revenues, we you mean in we be the into in expect any normal Israeli despite reduction events. is previous near Israeli to the reduction it's I to the expect to see the in before so despite And This term Nahum. to something seasonality so consideration. the used to the see in COVID, Reuben, normal years. said, unusual

Reuben Garner

that remarks, it. end. XX% like product by you year coming in look third-party manufactured And up of into did vendors the Got number prepared being mentioned by XXXX? your to What

Yosef Shiran

XX% is production. our in of terms

In terms time of there sales, because less it's bit is a differences.

this into Sales be year. coming we increase, increase the sales. in see expect will sales is And increase, And over it another lower was a see than But of to and not QX again, terms XXXX, production quarter. XX% we gradual gradual previous In XX%. of around XX%.

Reuben Garner

specific initiative compete those exactly remember your times. are marketing Okay. investments? be there? then guess, you the And are priced pricing And you what geographies of to the pricing. kind and or a I there What's expected leading ramped? expenses dollar of, then in What environment? Is I used, spend in you know market you couple pricing the about mentioned kind? I the from this marketing some benefit but talked term And too the where product that is -- what can't of to being highly to was optimization

Yosef Shiran

few are Yeah, so a there aspects.

at all other mainly the markets. expenses to marketing but market, also aimed of first the U.S. So

increase So and to order in our we're customers. brand the to reach trying to spend marketing elevate traditional

so the our of next in be third-party strategic partners, In terms we around to production XX%. at strategic estimate year partners,

So produced production will by be XX% our of our partners.

So approach additional and to to competitive be neglected will past the end, lot channels -- allow to in And that now us us and this investing in we're addition in end, all we compete will end. that open the in this more a us in the the innovation lower will allow to are allow and in fields, and we across this better in -- the middle also to us. higher

So this nutshell. is in a

Reuben Garner

leading are is channels, that box And U.S.? retail big you -- channels that those in the Is what -- to? the

Yosef Shiran

went to channel, reinforce there. also I so stone in that commercial kitchen in channels of not bath, our includes the to also get neglected, quite going also we box, also bad which we're to say, channels, maybe yes, the maybe last when of most But so commercial the and but states, back mainly out suppliers other year. No, but the channel retail, performed and big hand

Reuben Garner

luck Great. the of And safe. through rest year. the Good stay

Yosef Shiran

Thank you.

Nahum Trost

Thanks.

Operator

Please question of next from is Stifel. The Stanley Elliott ahead. go

Stanley Elliott

Nice sales working out. you've percent see longer all to as Can of you capital about inventory job mean, done of a voice. talk nice I pulling hear a term? your how you

a the the we now kind to Your the capital third where to you'd business. just relative party a of transforming end like -- part of for it for base, larger this would curious go. historical working a look more revenue levels, And here model have of still some for model to import ways could with think up

Nahum Trost

Nahum. it's Stanley,

around rightfully, improvement Our at that back of in were and working improved we're percentage inventory out is general, that elevated we days still out inventory of for revenues, expect area now to XXX -- believe, terms last around as room level, specifically we normalized capital less, there working days. XX% we of to around an the a more of year. working capital said in And revenues. be XXX And levels in be we're to of or of inventory. And capital aiming terms you of

Stanley Elliott

priced Perfect. the any detail of And categories? quarter too might the just kind on market? versus in you is certain SKU comment maybe competitive price in high then Did that And have that landscape, kind the the you in just you of the find were volumes around seen, U.S. specifically?

Nahum Trost

market that So soft volume to the in are U.S. the Stanley, we decreasing back believe mainly related of on the inflation only conditions higher a not the globally,

the other saw in regions as results You well.

projects higher in of on projects. a interest the back in and it's way or innovation the back customers results higher on So of rate, postponing certain which residential inflation

impact major and globally the we U.S. the is this So that saw in

Yos the In channel, big earlier. as mentioned we On positive saw commercial said. the we're see In to starting we signs. hand, signs, other box some the positive as channel,

So this is on the other end.

Stanley Elliott

actually their interesting it's down struggle? so sales I Was about some your more day comment. I channel of you in better incremental box of market of big doing comment or being more think SKU, performing bit fabricators they've than The mean, talked you're a really mentioned the which having a just were Yeah. modestly. better that maybe was

Yosef Shiran

No.

quite small. So there is our portion

offering boxes. -- and others. growth. to So focus It's the potential including of contractors matter and And we also a a have of the it's lot different commercial consumers, big only offer right and not

because part fighting decline, so competition same as the that of these everybody So accelerates situations for dollars. course, markets, of the under to the to is said, what add and the just Nahum market -- to a also

the and market we sales, on situation -- that also the competition. So from increasing suffer we I think

things believe However, that we're will perform the to doing than many allow future. we market in us better the

Stanley Elliott

guys. it me. That's for Great, luck. Best of

Yosef Shiran

much. very you Thank

Nahum Trost

you. Thank

Operator

concludes This like to Yos over turn the Shiran closing back I session. for our question-and-answer remarks. conference to would

Yosef Shiran

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

Operator

you is presentation. now today's Thank attending concluded. conference for The

You may disconnect. now

Caesarstone (CSTE) 8 Nov 232023 Q3 Earnings call transcript