Caesarstone reports third quarter 2022 financial results
Mp menashe, israel--(business wire)--caesarstone ltd. (nasdaq: cste), a leading developer and manufacturer of high-quality engineered surfaces, today reported financial results for its third quarter ended september 30, 2022. yuval dagim, caesarstone’s chief executive officer commented, “our third quarter results represent further progress against our multi-faceted growth strategy to transform caesarstone into a leading premium, multi-material countertop company. we produced our 7th consecutive quarter of double-digit revenue growth on a constant currency basis, leading to another quarter of record revenue. we are implementing successful pricing actions that are helping to mitigate increasing costs of raw materials and shipping, and we plan to enact additional actions in the months ahead. we also continue to benefit from the successful integration of our acquired businesses in addition to the expansion of our innovative digital platforms across our global footprint. while the execution of our strategy remains effective, foreign exchange rates as a result of appreciation of the u.s dollar against all other currencies have become an increasing headwind to our top and bottom line, as reflected in third quarter results. price is more than offsetting softening volume attributable to the challenging macroeconomic environment, particularly in the u.s., which has weighed on renovation and new construction activity. as a result of these macroeconomic conditions, we have already taken measures to align our production and inventory levels to new conditions in the market and plan to continue to take actions to reduce costs. we have revised our full year 2022 outlook predominately to reflect unfavorable foreign exchange rate impacts that are expected to continue through year end, as well as higher shipping and other related costs. i am proud of our entire team’s efforts to execute the initiatives under our global growth acceleration plan during these complex times. i am confident that we have the right plan in place to create additional value in our business by leveraging our world-renowned brand, multi-material product offerings, and innovative go-to-market initiatives.” third quarter 2022 results revenue in the third quarter of 2022 grew 10.6% to a third quarter record of $180.7 million compared to $163.3 million in the prior year quarter. on a constant currency basis, third quarter revenue was higher by 14.9% year-over-year. revenue growth was primarily driven by higher pricing across the majority of our global footprint particularly in north america. gross margin in the third quarter of 2022 was 23.0% compared to 26.2% in the prior year quarter. adjusted gross margin in the third quarter was 23.1% compared to 26.3% in the prior year quarter. the majority of the year-over-year reduction in gross margin reflected unfavorable foreign currency exchange rate fluctuations as a result of appreciation of the u.s dollar against all other currencies, with the remainder attributable to higher logistics, shipping and raw material costs, which were partially offset by pricing actions. operating expenses in the third quarter of 2022 were $38.5 million, or 21.3% of revenue, compared to $33.9 million, or 20.7% of revenue in the prior year quarter mainly due to higher marketing and selling expenses. excluding legal settlements and loss contingencies, adjusted operating expenses were 20.9% of revenue, compared to 21.0% in the prior year quarter. operating income in the third quarter of 2022 was $3.2 million compared to $8.9 million in the prior year quarter. the year-over-year decrease mainly reflects higher operating expenses. adjusted ebitda in the third quarter of 2022, which excludes expenses for non-cash share-based compensation, legal settlements and loss contingencies and for non-recurring items, was $13.4 million, representing a margin of 7.4%. this compared to adjusted ebitda of $17.7 million, representing a margin of 10.8% in the prior year quarter. the year-over-year decrease primarily reflects the lower gross margin. finance expenses in the third quarter of 2022 was $4.3 million compared to finance expense of $2.4 million in the prior year quarter. the difference primarily reflects changes in value of financial assets and liabilities denominated in currencies other than u.s. dollars, a result of foreign currency exchange rate fluctuations. net loss attributable to controlling interest for the third quarter of 2022 was $0.5 million compared to net income of $5.9 million in the prior year quarter. net loss per share for the third quarter was $0.02 compared to net income per share of $0.17 in the prior year quarter. adjusted diluted net income per share for the third quarter was $0.01 on 34.6 million shares, compared to adjusted diluted net income per share of $0.20 in the prior year quarter on a similar share count. balance sheet & liquidity as of september 30, 2022, the company’s balance sheet included cash, cash equivalents and short-term bank deposits and short and long-term marketable securities of $66.2 million and total debt to financial institutions of $34.5 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 third quarter of 2022, based on its reported net loss attributable to controlling interest for the period. outlook the company revises its expectation for 2022 revenue to be in the range of $690 million to $700 million, compared to a prior range of $710 million to $725 million, with the decrease predominantly attributable to the impact of foreign currency exchange rates. additionally, the company has moderated its volume expectations for the year due to softening economic conditions as higher interest rates and inflation have continued to pressure renovation and new construction activity, particularly in the u.s. additionally, the company revises its expectation for adjusted ebitda as a percentage of revenues to be approximately 8.0% to 8.5% for the full year 2022 compared to 10.6% in 2021 due predominantly to unfavorable foreign currency exchange rates and to a lesser extent due to higher shipping and logistics related costs. webcast and conference call details the company will host a 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 can be accessed through the investor relations section of the company’s website at ir.caesarstone.com. for those unable to access the webcast, the conference call will be accessible domestically or internationally, by dialing 1-855-327-6837 and 1-631-891-4304, respectively. the toll-free israeli number is 1 80 945 8327. upon dialing in, please request to join the caesarstone third quarter 2022 earnings conference call. to listen to a telephonic replay of the conference call, dial toll-free 1-844-512-2921 or + 1-412-317-6671 (international) and enter pass code 10020291. the replay will be available beginning at 11:30 a.m. et on wednesday, november 9, 2022 and will last through 11:59 p.m. et on wednesday, november 16, 2022. about caesarstone caesarstone is a global leader of premium surfaces, specializing in countertops that create dynamic spaces of inspiration in the heart of the home. established in 1987, its multi-material portfolio of over 100 colors combines the company’s innovative technology with its powerful design passion. spearheading high-quality, sustainable surfaces, caesarstone delivers functional resilience with timeless beauty, for a vast range of applications, including kitchen countertops, bathroom vanities, and more, for indoor and outdoor spaces. since it pioneered quartz countertops over thirty years ago, the brand has expanded into porcelain and natural stone and is on the ground in more than 50 countries worldwide while enhancing customer experience through the expansion of groundbreaking digital platforms & services. more information on caesarstone: caesarstoneus.com, facebook, twitter, youtube, pinterest, and instagram 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" within the meaning of the “safe harbor” provisions of the united states private securities litigation reform act of 1995. forward-looking statements may be identified by the use of words such as “goals," “intend,” “seek,” “anticipate,” “believe,” “could,” “continue,” “expect,” “estimate,” “may,” “plan,” “outlook,” “future” and “project” and other similar expressions that predict, project or indicate future events or trends or that are not statements of historical matters. such forward looking statements include statements regarding the company’s sustainability goals and plans, intentions, expectations, assumptions, goals and beliefs regarding the company’s business and sustainability vision. these forward-looking statements also may 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, and expectations of the results of the company’s business optimization initiatives. 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 effects of global economy and geo-politics on the company’s business and operations; managing constraints in the global supply chain, raw material shortages, increased prices and effects of challenges in global shipping and transportation; company’s ability to pass all or some of these increases to its customers; the strength of the home renovation and construction sectors; intense competitive pressures; disruptions to our information technology systems globally, including by deliberate cyber-attacks; the degree of the company’s ability to develop, produce and deliver high quality and safe products; fluctuations in currency exchange rates against the u.s. dollar; company’s ability to raise funds to finance our current and future capital needs; company’s ability to build-out and expand into certain markets and successfully integrate our acquisitions; the company’s ability to effective manage its relationship with key suppliers; the outcome of silicosis and other bodily injury claims; regulatory requirements relating to hazards associated with our operations and products; efficiently manufacturing our products and managing changes in production and supply chain; economic conditions within any of our key existing markets; the success of our expansion efforts in the united states; the extent of the company’s ability to meet its esg goals and targets, management of ghg and other emissions; the impacts of conditions in israel, such as negative economic, labor or geopolitical events; the 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, risks and uncertainties discussed under the sections "risk factors" and “special note regarding forward-looking statements and risk factor summary” in our most recent annual report on form 20-f filed with the securities and exchange commission (the “sec”) on march 15, 2022, and in other documents filed by caesarstone with the sec, which are available free of charge at www.sec.gov. 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. caesarstone ltd. and its subsidiaries condensed consolidated balance sheets september 30, 2022 december 31, 2021 (unaudited) (audited) $ 58,560 $ 74,315 6,590 11,228 90,183 82,815 32,553 35,443 247,141 204,725 435,027 408,526 3,360 4,090 3,147 3,832 14,669 10,880 394 449 142,253 154,652 1,002 8,647 199,786 221,150 53,741 55,427 418,352 459,127 $ 853,379 $ 867,653 $ 28,968 $ 12,523 84,505 81,369 291 2,276 14,067 22,592 64,012 64,534 191,843 183,294 5,514 6,240 22,303 20,859 4,519 4,992 122,374 143,324 4,672 5,500 1,251 1,280 160,633 182,195 7,978 7,869 371 371 (39,430 ) (39,430 ) 163,171 161,929 (5,587 ) (5,587 ) (11,418 ) (704 ) 385,818 377,716 492,925 494,295 $ 853,379 $ 867,653 caesarstone ltd. and its subsidiaries condensed consolidated statements of income three months ended september 30, nine months ended september 30, 2022 2021 2022 2021 $ 180,727 $ 163,341 $ 531,437 $ 472,835 139,110 120,607 399,123 341,015 41,617 42,734 132,314 131,820 853 820 2,947 3,039 23,821 21,261 72,080 63,131 13,187 12,162 39,735 37,099 601 (385 ) 1,059 4,464 38,462 33,858 115,821 107,733 3,155 8,876 16,493 24,087 4,307 2,403 (3,486 ) 165 (1,152 ) 6,473 19,979 23,922 (788 ) 603 2,457 2,730 $ (364 ) $ 5,870 $ 17,522 $ 21,192 (99 ) 78 (610 ) 651 $ (463 ) $ 5,948 $ 16,912 $ 21,843 $ (0.02 ) $ 0.17 $ 0.49 $ 0.62 $ (0.02 ) $ 0.17 $ 0.48 $ 0.62 34,493,599 34,463,460 34,485,587 34,472,016 34,493,599 34,529,130 34,543,319 34,558,509 caesarstone ltd. and its subsidiaries selected condensed consolidated statements of cash flows nine months ended september 30, 2022 2021 (unaudited) $ 17,522 $ 21,192 27,223 26,491 1,243 1,387 (84 ) 70 (4,001 ) (1,587 ) 65 (3 ) 1,060 4,464 (10,810 ) (1,139 ) 1,377 (12,349 ) (50,098 ) (24,880 ) 3,305 13,843 (128 ) 8 10,533 (18,863 ) (19,663 ) 19,128 193 304 44 25 (2,073 ) (6,646 ) (24,292 ) 21,445 (2,245 ) - - (1,966 ) - (1,780 ) (12,771 ) (26,024 ) 9 7 11,901 (927 ) 341 (150 ) (2,765 ) (30,840 ) (8,625 ) (7,234 ) 21,947 (11,096 ) (859 ) (981 ) 12,463 (19,311 ) (1,161 ) (492 ) (15,755 ) (29,198 ) 74,315 114,248 $ 58,560 $ 85,050 (441 ) (737 ) three months ended september 30, nine months ended september 30, 2022 2021 2022 2021 (unaudited) (unaudited) $ 41,617 $ 42,734 $ 132,314 $ 131,820 79 72 228 214 80 79 234 773 $ 41,776 $ 42,885 $ 132,777 $ 132,807 three months ended september 30, nine months ended september 30, 2022 2021 2022 2021 $ (364 ) $ 5,870 $ 17,522 $ 21,192 4,307 2,403 (3,486 ) 165 (788 ) 603 2,457 2,730 9,200 8,802 27,223 26,491 602 (385 ) 1,060 4,464 57 - 57 284 - - 80 - 375 391 1,243 1,387 $ 13,389 $ 17,684 $ 46,156 $ 56,713 three months ended september 30, nine months ended september 30, 2022 2021 2022 2021 (unaudited) (unaudited) $ (463 ) $ 5,948 $ 16,912 $ 21,843 602 (385 ) 1,060 4,464 57 - 57 284 548 502 1,548 1,889 375 391 1,243 1,387 - - 80 - (796 ) 430 (10,203 ) (543 ) 786 938 (6,215 ) 7,481 311 56 (764 ) 854 476 882 (5,451 ) 6,628 $ 13 $ 6,830 $ 11,461 $ 28,471 $ 0.01 $ 0.20 $ 0.33 $ 0.82 (a) consists primarily of legal settlements expenses and loss contingencies, net, related to product liability claims. (b) share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the company. (c) exchange rate differences deriving from revaluation of lease contracts in accordance with fasb asc 842. (d) tax adjustments for the three and nine months ended september 30, 2022 and 2021, based on the effective tax rates. (e) in calculating adjusted diluted (non-gaap) eps for the three and nine months ended september 30, 2022 and 2021, the diluted weighted average number of shares outstanding excludes the effects of share-based compensation expense in accordance with fasb asc 718. caesarstone ltd. and its subsidiaries geographic breakdown of revenues by region three months ended september 30, nine months ended september 30, three months ended september 30, nine months ended september 30, 2022 2021 2022 2021 (unaudited) (unaudited) yoy % change yoy % change ccb yoy % change yoy % change ccb $ 87,623 $ 79,065 $ 265,899 $ 227,740 10.8 % 10.8 % 16.8 % 16.8 % 23,607 22,479 72,704 62,204 5.0 % 8.7 % 16.9 % 19.8 % 1,470 1,485 3,517 3,084 -1.0 % -1.0 % 14.0 % 14.1 % 112,700 103,029 342,120 293,028 9.4 % 10.2 % 16.8 % 17.4 % 31,204 29,215 86,938 87,984 6.8 % 14.6 % -1.2 % 6.1 % 8,834 7,232 26,716 22,379 22.2 % 28.8 % 19.4 % 21.0 % 40,038 36,447 113,654 110,363 9.9 % 17.4 % 3.0 % 9.2 % 17,004 14,106 48,054 42,676 20.5 % 41.1 % 12.6 % 25.8 % 10,985 9,759 27,609 26,768 12.6 % 16.5 % 3.1 % 4.4 % $ 180,727 $ 163,341 $ 531,437 $ 472,835 10.6 % 14.9 % 12.4 % 15.5 %
