CSTE - Earnings call transcript Q1 2024

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Operator

Greetings, and welcome to the Caesarstone First Quarter 2024 Earnings Conference Call. [Operator Instructions]. Please note that today's event is being recorded. I would now like to introduce you to our host for today, Brad Cray of ICR. Thank you, and you may begin, sir.

Brad Cray

good everyone and the operator, you, morning on to line. Thank Caesarstone's joined Financial Officer; by am Chief Officer. Yos Chief I Caesarstone's Shiran, Executive Trost, and Nahum Certain to and forward-looking statements conference may statements. questions constitute responses in today's various call

caution company's expectations the results differ and reflect or current materially. events you that actual We statements may only such that

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

will make adjusted addition, to this per on the company adjusted EBITDA income, In financial non-GAAP loss share, adjusted including net reference measures, constant profit, call, certain income currency. and adjusted net gross loss

will XXXX of can activity is posted to earnings comparable The Yos. questions. non-GAAP results Relations the to ahead. on the we business open GAAP and our the Please these I discuss company's be now cover and most whom On financial will the regarding over additional to measures before the in call you, would Yos Investor today's call, for directly quarter release, details reconciliation call found website. go then which measures Thank first turn company's like

Yosef Shiran

first you Thank day, Good everyone, discuss and results. XXXX joining you, us to thank our Brad. quarter for

are Our positive a full adjusted our first year quarter in goals results of from flow EBITDA with line to operations. deliver and cash

Australia, regulatory in to XXXX the in changes persistent the in adaptability economic of resilience start team and headwinds, demonstrated Our has face of ongoing global Israel. and conflict

revenue these we revenue progress strategic approach growth. decisively drive first strategy from and short transformation, revenues to significant we and to fell the Despite in prioritizes are our and working challenges, resume improve and shifting branding of research to development, quarter, made that our manufacturing-centric our marketing in expectations a have execution Yet growth.

We our having network of transforming to manufacturing our production business global transitioned production are footprint, XX% our over of partners. successfully

products. with and us our demand align production the allow for better to levels should sources This

this shift, growing making production are in we courts have in strong capabilities we Although still capabilities and Porcelain.

of benefits Richmond restructuring half margin to plant XXXX. XXXX our expansion. approximately $XX first We more the are Sdot-Yam have million compared and second closures quarter and are which year in should to contributed results these impact on actions, the Hill to pronounced see of ultimately save beginning the gross on pace by a to annually The next us

are additional innovation has reinvested and efforts savings These year, position. plan announcing Since restructuring flow cash to of objectives operations positive primary One our getting into higher and improve net drive generate to our marketing financial from our cash partially revenues. last been

We have net made sheet solid strategic initiative in progress positioned from to operations. we With balance are ample and delivering XXXX. plan on continue flow cash cash, objectives well fortified on continue executing this to our positive and

team U.S. and markets. separated each respective allow have Furthermore, leadership our better we teams focus opportunities Canadian to on the to their in

our XXXX, of we which full the products will consist collection of of us quarter collection [indiscernible] markets. alternative will allow products of year, by end a Regarding Australian have market in the of crystalline shift with regulations comply the development the of the products we new begun the that of have silica the our to of majority end position market. the available been with compliant retain the in in products, and Australian them proactive offering alternative second to a By free leading

market and our on dynamics, conclusion, focused is we footprint. while our further through firmly brand innovation and progress navigate In refining production current strategy as XXXX enhancing development,

sales across while in our costs manufacturing premium reducing the profitability growth offering R&D, porcelain brand are our marketing base committed business. to increasing expansion the our drive and We investment of to and

the you. its details to walk call the over financial turn to rise can And Caesarstone that I through to performance. Nahum now confident remain potential. you We Thank of will our

Nahum Trost

everyone. morning, good and Yos, you, Thank

basis, due first our to first results. volumes On market million down driven quarter by softer in constant global at of last was compared in lower currency conditions. The primarily first million year. were revenue quarter a the was quarter to the sales Global $XXX.X $XXX.X XX%. Looking decrease

our channel In interest the tied XX.X%, the residential partially of favorable impacted pressures. offset U.S., less commercial were related renovation big markets housing ASP product resulted mainly our by on market the addition, sales In competitive by and projects, down mix revenues. lower sales in and end soft were and book impact to higher to rates

XX.X% by currency during conditions materials In the war alternative on new regulations dynamics XXXX. as first approximately Canada a the were activity. basis, introduced constant in half and basis mainly Israel, a constant experiencing the in of reflecting up a that comply were which XX.X% the of regional [indiscernible] similar with a currency first Australia off on U.S. significantly as result quarter, sales X.X% lower diminished mainly on has sales to we constant lesser then basis, sales currency extent. sales market but market on by as were a slower terror,

On encouraging. a sequential Israel improved sales XX.X%, basis, is which in

Looking at our performance. first quarter P&L

margin restructuring to quarter. partially to in enhancements to XXXX. and enhanced sustainable ramp to are gross on a of footprint, margins continue for notable a is through efforts. Adjusted should our margin our result We XX.X% efficiency believe due of production was XX.X% margin previous was the quarter. in improvement our compared Our these The the XX.X% gross the prior year-over-year year basis

recent XXX plant address points from inventory timing The in imposed I access gross Turkey. and moment would mainly of related trade like Australia the the of first Hill take basis restrictions margin Richmond sold, also quarter. to to our during to by benefits reflects the roughly a

recently raw trade the been a in plant and impact announced years could from have term. negative production the several our on Turkey Bar-Lev for We restrictions short sourcing materials have

to any are for seeking We sources alternative actively raw materials potential disruptions. minimize

increase an results. significant restrictions, we facility, foresee negative do our manufacturing overall in these our production While not due currently to cost on at Bar-Lev we anticipate financial a impact

the were quarter first in the in million prior quarter. million $XX.X $XX.X expenses compared to operating year Our

revenue operating of in prior XX.X% adjusted revenues. XX.X% mainly quarter. the loss resulted and lower compared were the higher expenses year The from settlements percentage to legal Excluding contingencies,

$X.X million, year $X.X quarter. the stable million Adjusted first the prior to relatively compared was the EBITDA quarter in in

Turning support to with to our strong a objectives. Caesarstone has sheet. planned strategic balance sheet our ample balance liquidity

of to XX, the deposits $XX.X million cash, short-term cash financial March As equivalents debt totaled of with and million. bank to total XXXX, institutions $X.X

$X.X the quarter we from positive of of During quarter, generated first operations another cash flow million.

to million XXXX. Our was March XX, net cash compared XXXX, December as million of XX, as position of $XX.X $XX.X

the In based significant be to leaner regards our year of XXXX. initiatives for outlook underway, focus are our in and outlook, EBITDA reiterating our on restructuring our we operations on adjusted profitability, our to full positive

to first we sequential full we quarter of another increase due year seasonality. cash positive in from to the operations. addition, expect revenues continue Historically, compared to quarter second In in the flow see a

reiterate regards January which which closure, we to of Sdot-Yam $XX XXXX, realize the occurred $XX thereafter. the expectation Richmond occurred and savings second during plant million closure, In XXXX XXXX million of during quarter to plant of Hill our and in

We of cash cost have noncancelable us lease facility, the associated Sdot-Yam portions begun inflows to top recognize our manufacturing savings. the planned agreement with additional on which sublet of to will allow

the monetize for looking also our site. Hill are to Richmond alternative best We

reflected cost flow even strategic to positive restructure in to improved mainly margin structure lower our in our gross benefits the actions on this yield our financial cash conclusion, have optimize quarter, and and begun to marketing In production top to business initiatives and in growth With to committed our volume. aim initiatives, strategic open sales to are enhance to remain efficiency our that, questions. drive now line. the call We we for ready and our sustained

Operator

comes first session. begin the Instructions] question-and-answer will question Company. Benchmark The today's [Operator We from And Garner with now Reuben

Reuben Garner

Good afternoon, Thanks. guys.

gross to margin level And I talk about So sustainable was, 'XX? I think, how upside environment there? strong guess as Can than performance you surprised that pretty expected. what of despite XX% a weaker the of rest plus to through we the volume a go kind is start, what you

Nahum Trost

it's Reuben, Nahum.

the restructuring the mentioned Australia. expedited and the margin actions inventory year. We gross the points Richmond basis last in of connection So of the with in future mostly Hill sales already that connection closure the with excess in took regulations we in XXX we roughly that its plant reflects

inventory sale of expedited So we items. the certain

is these basis So significantly usual, items the XXX higher points. than

than cost other materials from raw side. better on on positive the But restructuring we favorable production that, landed is specifically the from This actions, prices benefited basically. and mix, source

and On the mentioned, volume a impact the negative margins. unfavorable was also significant the product lower as also you other hand, in resulted that mix

Yosef Shiran

-- that general, also the we that last stronger, we add we in is heavy margin. the we reflects have think it in and gross the of just platform I that in through will may benefits going that will to see estimate the that I our restructuring year. also -- Reuben in been continue And

Reuben Garner

of accelerated those -- much did So benefit how of how and revenue sales share inventory? some product from much the revenue

Nahum Trost

breaking. can repeat, please? was line The So you

Reuben Garner

much how -- of you Can from Yes. accelerated inventory? revenue that. sale that the about Sorry did benefit

Nahum Trost

fully terms how so -- XXX revenue, the with that but of it items significant In was wasn't it were a inventory significant, gross it covered on had impact, mainly So margin. provision, revenue? much those

Reuben Garner

for the year it. you revenue I outlook achieve inventory first mean do breakeven little What breakeven? Okay. the sort that? were And item, you of Got about the to achieve million. that full help how to from EBITDA, number revenue in full need do you be of on year your what quarter I to to breakeven at but targets need know we bit onetime had think $XXX a that? hit you

Nahum Trost

the discussed revenues QX on also full to year. revenues. and we then and QX not do see do same than lower QX expect previous as provide third terms we for the and previously, second lowest is that in So see seasonality But of we years, meaning guidance quarter, slightly to and the in QX the we used trends quarter in the improvement specific

XXXX. expect we show or to be to continue through profits higher margins we do higher as -- And

more that flow. complete on taking positive we also Hill with the reiterated a and outlook, that as expect significant restructuring And And cash As are -- regard we overall more expensive to will more give impact the us from full we a operating significant EBITDA for plant. actions a results. the inventory year our the positive Richmond most came

Reuben Garner

in has far? the much million of How $XX realized thus savings been

Nahum Trost

full number The $XX for million year. is the the

expect quarter. continue plant. to as Richmond And XXXX, closing benefit and through the we X of back the more gain Hill to more basically again, we savings we So and expect on

Operator

The Stanley with Stifel. next comes Elliott from question

Andrew Maser

on Andrew for is This Stanley.

I'm wondering big-box you repair and trends that. said April? do on or remodel think expand you any than this U.S. you relatively I What's volumes even if seen outlook could And commentary the you've into stores on better of for business. year? have your are trends other for that parts then for holding intra-quarter U.S. up

Yosef Shiran

Thanks. Yes.

better happening. reduces analysis residential that high believe of rates side. on performed activity segment. why in we depresses We interest We the than the it big say have cannot the that the residential general, boxes in we on So global the is or

still are sales within and well, boxes big doing On so hand, the other these channels. our

And Australia, other other in step-by-step, improvement the like hope expand the will forward, our we as residential contractors to will again, And effort our places, activity going states markets will in that segment. channels more Canada, as in like segment. and in continue the developer the in also efforts States see we on in we the specifically, we all see well

Andrew Maser

And what update And going? then feedback porcelain on us I'm been that customers the an give rollout. wondering you so from if has far? could early like How is

Yosef Shiran

So or in are relating States in the to other the rollout you areas?

Andrew Maser

U.S.

Yosef Shiran

Yes.

we yes, very for still Overall, states. small to in the porcelain the is started promising. activity the porcelain So but Caesarstone, offer

products a it, offering We improving collection, additional are. in are lot expanding within the the porcelain investing

very terms of future important for in significant but numbers, So is in terms Caesarstone. yet potential the of it it's of the not

Andrew Maser

flows for then inventory that could is and earnings. you you last or me. much plant to Hill would I wonder Richmond when quantify left expect how one cash if the at hit And

Nahum Trost

so but to majority and we also the QX. and through the of majority extent a earnings and is in reflected the -- in gross the sold discussed in margin, lesser was So it the digested inventory of QX, as --

So done in of is basically, most it QX.

impact Let's say Richmond the not the QX, of will we that all see Hill. after of negative inventory

Operator

to concludes to at like turn for conference would closing Shiran session. our I time, question-and-answer back now And this over any the Yos remarks. this

Yosef Shiran

this attention Bye. quarter. forward your you for progress all next and to we you look on our thank morning, And you. Thank Yes. updating

Operator

has you you now may disconnect. Thank conference The presentation, now for attending concluded. today's and

Caesarstone (CSTE) 8 May 242024 Q1 Earnings call transcript