Caesarstone Reports Second Quarter 2020 Financial Results

- Revenue of $99.0 Million, With Encouraging Demand Improvement in All Regions During June -

- Net Loss of $5.9 Million, or ($0.17) Per Share -

- Adjusted Net Loss of $3.5 Million, or ($0.10) Per Share -

- Adjusted EBITDA of $6.5 Million -

- Strong Liquidity Position With $130.1 Million in Cash and Marketable Securities -

MP MENASHE, Israel - August 5, 2020 - Caesarstone Ltd. (NASDAQ: CSTE), a leading developer and manufacturer of high-quality engineered surfaces, today reported financial results for its second quarter ended June 30, 2020.

Yuval Dagim, Chief Executive Officer, commented, “Our proactive actions taken in March allowed us to effectively right size our resources and mitigate the impact of the unprecedented environment brought on by the COVID-19 pandemic. At the same time, we continue to focus on factors that are in our control, such as executing our Global Growth Acceleration Plan and making strategic investments to strengthen our position as a leading premium countertop Company. With our strong cash position, we will continue to execute this strategy to improve our business over the long-term, most particularly in areas of product innovation, production processes, technology, and go-to-market capabilities. Looking ahead, we are fortunate to have a talented workforce, leading products and solid financial resources to deliver on our focused approach to value creation in the quarters and years ahead.”

Ophir Yakovian, Chief Financial Officer, added, “Second quarter sales in all of our four global regions were better than initially expected at the onset of the pandemic. We experienced the majority of adverse impacts in our Americas region during April and May. Since that time, we have been encouraged to see sequential improvement in June as more customers opened for business and demand began to return. As we look to the balance of 2020, we recognize that there is potential for additional limitations through national and local government orders aimed to safeguard the public from the pandemic. That said, we will continue to focus on managing cash, controlling costs and adjusting our production as needed to appropriately manage our inventory in this volatile environment. We remain committed to our strategy and continue allocating resources to enhance our position as a global, premium countertop expert with a leading and valued customer-focused brand.”

Second Quarter 2020 Results

Revenue in the second quarter of 2020 was $99.0 million compared to $141.1 million in the prior year quarter. On a constant currency basis, second quarter revenue was lower by 28.3% year-over-year, driven by extended shelter-in-place guidelines, particularly during the first two months of the quarter with the biggest impact in the Americas region.

Gross margin in the second quarter was 20.4% compared to 28.2% in the prior year quarter. Adjusted gross margin in the second quarter was 20.5% compared to 27.3% in the prior year quarter. The lower adjusted gross margin primarily reflects lower sales volume and less favorable regional and product mix as well as currency exchange headwinds, partially offset by lower raw material prices.

Operating loss in the second quarter was $2.9 million compared to operating income of $10.6 million in the prior year quarter. The year-over-year difference mainly reflects lower gross margin.

Adjusted EBITDA, which excludes expenses for share-based compensation, legal settlements and loss contingencies and for non-recurring items, was $6.5 million in the second quarter, representing a margin of 6.6%. This compares to adjusted EBITDA of $19.2 million, representing a margin of 13.6%, in the prior year quarter.

Finance expense in the second quarter was $2.5 million compared to $1.8 million in the prior year quarter. The difference was primarily a result of the unfavorable impact of foreign currency exchange rates.

Net loss for the second quarter was $5.9 million compared to net income of $6.4 million in the prior year quarter. Loss per share for the second quarter was ($0.17) compared to diluted net income per share of $0.19 in the prior year quarter. Adjusted diluted net loss per share for the second quarter was ($0.10) on 34.5 million shares, compared to adjusted diluted net income per share of $0.23 on a similar share count in the prior year quarter.

Balance Sheet & Liquidity

The Company believes it has a strong financial position and the flexibility required to support its global operations during this volatile period. The Company's balance sheet as of June 30, 2020 remained strong, including cash, cash equivalents and short-term bank deposits and short and long term marketable securities of $130.1 million.

Dividend

The Company’s dividend policy provides for a quarterly cash dividend of up to 50% of reported net income on a year-to-date basis, less any amount already paid as dividend for the respective period (the “calculated dividend”), subject in each case to approval by the Company’s board of directors.  No dividend is paid if it would be less than $0.10 per share. Pursuant to the Company’s dividend policy, the Company does not intend to pay a dividend for the second quarter of 2020, based on its reported net loss for the period.

Webcast and Conference Call Details

The Company will host a live webcast and conference call today at 8:30 a.m. ET to discuss the results, followed by a question and answer session for the investment community. The live webcast of the call can be accessed at ir.caesarstone.com. Due to potential extended wait times to access the conference call via dial-in, the Company encourages use of the webcast.  For those unable to access the webcast, the conference call will be accessible by dialing 1-877-407-4018 (domestic) or +1-201-689-8471 (international). The toll-free Israeli number is 1 80 940 6247. Upon dialing in, please request to join the Caesarstone Second Quarter Earnings Call.

To listen to a telephonic replay of the conference call, dial toll-free 1-844-512-2921 (domestic) or +1-412-317-6671 (international) and enter pass code 13706779. The replay will be available beginning at 11:00 a.m. ET on Wednesday, August 5, 2020 and will last through 11:59 p.m. ET on Wednesday, August 12, 2020.

About Caesarstone

Caesarstone is a concept and lifestyle-driven company with a customer-centered approach to designing, developing, and producing high-end engineered surfaces used in residential and commercial buildings. Our products offer superior aesthetic appeal and perfected functionality through a distinct variety of colors, styles, textures, and finishes used in countertops, vanities, wall cladding, floors, and other interior surfaces. Marked by their inherent longevity characteristics such as non-porousness, scratch and stain resistance, and durability, the company’s product umbrella offers a highly desirable alternative to other surfaces. Strong commitment to service has fostered growing customer loyalty in over 50 countries where the five distinct Caesarstone product collections are available: Classico, Supernatural, Metropolitan, Concetto and Outdoor. For more information please visit our website: www.caesarstone.com.

Non-GAAP Financial Measures

The non-GAAP measures presented by the Company should be considered in addition to, and not as a substitute for, comparable GAAP measures. Reconciliations of GAAP gross profit to adjusted gross profit, GAAP net income (loss) to adjusted net income (loss) and net income (loss) to Adjusted EBITDA are provided in the schedules to this release. To calculate revenues growth rates that exclude the impact of changes in foreign currency exchange rates, the Company converts actual reported results from local currency to U.S. dollars using constant foreign currency exchange rates in the current and comparable period. The Company provides these non-GAAP financial measures because it believes that they present a better measure of the Company's core business and management uses the non-GAAP measures internally to evaluate the Company's ongoing performance. Accordingly, the Company believes that they are useful to investors in enhancing an understanding of the Company's operating performance.

Forward-Looking Statements

Information provided in this press release may contain statements relating to current expectations, estimates, forecasts and projections about future events that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to the Company's plans, objectives and expectations for future operations, including estimations relating to the impact of the COVID-19 pandemic and mitigation measures in connection thereto, expectations of the results of the Company’s business optimization initiative and its projected results of operations. These forward-looking statements are based upon management's current estimates and projections of future results or trends. Actual results may differ materially from those projected as a result of certain risks and uncertainties, both known or unknown. These factors include, but are not limited to: the impact of the COVID-19 pandemic on end-consumers, the global economy and the Company’s business and results of operations; the ability of the company to realign aspects of its business based on the business optimization initiative, the strength of the home renovation and construction sectors; intense competitive pressures; the outcome of silicosis and other bodily injury claims; regulatory requirements relating to hazards associated with exposure to silica dust; manufacturing of existing products and managing required changes in production and supply chain; economic conditions within any of our key existing markets  changes in raw material prices; fluctuations in currency exchange rates; the success of our expansion efforts in the United States; unpredictability of seasonal fluctuations in revenues; disturbances to the Company’s operations or the operations of its suppliers, distributors, customers or other third parties and other factors discussed under the heading "Risk Factors" in our most recent annual report on Form 20-F and other documents filed with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.