Caesarstone reports fourth quarter and full year 2020 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 fourth quarter and full year ended december 31, 2020. “we made significant progress streamlining the business in 2020 as we successfully executed on our business transformation during a year marked by unprecedented global economic challenges,” commented yuval dagim, chief executive officer. “we now enter 2021 as a much stronger company, with the right foundation in place to more effectively leverage caesarstone’s world-class brand to pursue sustainable long-term growth. this includes further implementation of innovative go-to-market initiatives developed under our global growth acceleration plan to unlock value. our strong financial position supported the successful execution of two accretive transactions in recent months that are directly aligned with our strategy to enhance our position as a leading premium, multi-material countertop company. with our dedicated focus on driving results, we are well situated to capture additional market share.” “we were encouraged to finish 2020 with annual year-over-year improvement in gross margin and adjusted ebitda margin,” added ophir yakovian, chief financial officer. “following two quarters of significant cost cutting, we increased operating expenses to a more normalized level to support our brand and future growth. caesarstone’s strong balance sheet enabled us to successfully weather the challenges of 2020 and to further invest in accretive future growth. we are happy with our 2020 operating cash flow of $47.6 million and our significant net cash position(*) of $110.6 million that provides us with the confidence we can execute on our plan in 2021, to produce strong long-term returns for our shareholders.” (*) cash position is defined as cash and cash equivalents and short-term bank deposits and long and short-term investment in marketable securities less debt from financial institutions. fourth quarter 2020 results revenue in the fourth quarter of 2020 grew 2.3% to $136.9 million compared to $133.9 million in the prior year quarter. on a constant currency basis, fourth quarter revenue was slightly lower by 0.4% year-over-year, due primarily to pandemic related disruptions, particularly in the americas region, partially offset by the contribution from the lioli acquisition and growth in all other regions. gross margin in the fourth quarter improved 200 basis points to 28.1% compared to 26.1% in the prior year quarter. adjusted gross margin in the fourth quarter was 28.6% compared to 26.4% in the prior year quarter. the year-over-year improvement in gross margin mainly reflects lower raw material costs, more favorable currency exchange rates, better product mix, and improved efficiency partly offset by the impact of lower sales volume, lower sale prices and less favorable regional mix. operating expenses in the fourth quarter were $30.4 million, or 22.2% of revenue, compared to $34.5 million, or 25.8% of revenue in the prior year quarter. excluding legal settlements and loss contingencies, operating expenses were 21.2% of revenue, compared to 20.4% in the prior year quarter, mainly due to increased investments to support the company’s growth initiatives. operating income grew to $8.1 million compared to operating income of $0.5 million in the prior year quarter. the year-over-year growth mainly reflects higher gross margin and lower legal settlements and loss contingencies. adjusted ebitda, which excludes expenses for share-based compensation, legal settlements and loss contingencies and for non-recurring items, grew 19.1% year-over-year to $18.8 million in the fourth quarter, representing a margin of 13.7%. this compares to adjusted ebitda of $15.7 million, representing a margin of 11.8%, in the prior year quarter. the year-over-year margin improvement primarily reflects the higher gross margin. finance (income) expenses in the fourth quarter were $8.6 million compared to finance income of $0.6 million in the prior year quarter. the difference was mainly a result of the unfavorable impact of foreign currency exchange rates. net loss attributable to controlling interest for the fourth quarter was $2.4 million compared to net loss of $0.3 million in the prior year quarter. net loss per share for the fourth quarter was $0.07 compared to net loss per share of $0.01 in the prior year quarter. adjusted diluted net income per share for the fourth quarter was $0.05 on 34.5 million shares, compared to adjusted diluted net income per share of $0.16 on 34.6 million shares in the prior year quarter. full year 2020 results revenue in the full year 2020 was $486.4 million compared to $546.0 million in the prior year. on a constant currency basis, 2020 revenue was lower by 11.1% year-over-year, primarily due to pandemic related disruptions impacting our business since the second quarter of 2020. gross margin in 2020 expanded to 27.5% compared to 27.2% in the prior year. adjusted gross margin in 2020 was 27.7%, compared to 27.3% in the prior year. the higher adjusted gross margin mainly reflects improved efficiency, lower raw material costs and improved product mix partly offset by the impact of lower sales volume, lower sale prices and less favorable regional mix. operating expenses in 2020 were $111.4 million, or 22.9% of revenue compared to $124.0 million, or 22.7% of revenue in the prior year. excluding legal settlements and loss contingencies, operating expenses were 21.6% of revenue, compared to 20.4% of revenue in the prior year mainly due to lower revenues partly offset by cost cutting efforts to mitigate pandemic related impacts. operating income in 2020 was $22.5 million compared to $24.7 million in the prior year. adjusted ebitda, which excludes expenses for share-based compensation, legal settlements and loss contingencies and for non-recurring items, was $62.1 million in 2020, representing a margin of 12.8%. this compares to adjusted ebitda of $69.0 million, representing a margin of 12.6% in the prior year. this year-over-year margin improvement primarily reflects the higher gross margin. finance expenses in 2020 were $10.2 million compared to $5.6 million in the prior year. the difference was primarily a result of the adverse impact of foreign currency exchange rates. net income attributable to controlling interest for the full year 2020 was $7.2 million compared to net income of $12.9 million in the prior year. diluted net income per share for 2020 was $0.21 compared to $0.37 in the prior year. adjusted diluted net income per share for 2020 was $0.48 compared to $0.77 in the prior year. balance sheet & liquidity the company's balance sheet as of december 31, 2020 remained strong, including cash, cash equivalents and short-term bank deposits and short and long-term marketable securities of $133.2 million and total debt to financial institutions of $22.6 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 fourth quarter of 2020, based on its reported net loss attributable to controlling interest for the period. outlook the company anticipates 2021 revenue and adjusted ebitda to be higher year-over-year. the company anticipates revenue to grow faster than ebitda in 2021 mainly due to headwinds from higher shipping and raw material costs, coupled with a return to more normalized levels of sales and marketing expenses and other investments to support the company’s growth initiatives. the company’s outlook includes the investment costs associated with its global growth acceleration plan. the company’s outlook also assumes the pandemic related business restrictions will fade as the year progresses. 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. 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 fourth 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 13715282. the replay will be available beginning at 11:30 a.m. et on wednesday, february 24, 2021 and will last through 11:59 p.m. et on wednesday, march 3, 2021. about caesarstone caesarstone is a concept and lifestyle-driven company with a customer-centered approach to designing, developing, and producing high-end engineered stone countertops, 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 diverse countertop applications, marked by inherent longevity. strong commitment to service has fostered growing customer loyalty in over 50 countries where the caesarstone product collections are available: classico, supernatural, metropolitan 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. $ 114,248 $ 139,372 8,112 - 84,822 78,282 26,481 34,066 152,073 122,686 385,736 374,406 4,007 3,475 3,837 3,176 8,359 7,881 1,675 2,887 123,928 72,047 10,926 - 222,883 204,776 59,570 35,218 435,185 329,460 $ 820,921 $ 703,866 $ 13,122 $ - 55,063 53,072 2,221 2,212 31,039 28,300 55,570 42,782 157,015 126,366 20,706 7,915 21,910 21,505 6,943 112,719 64,638 5,303 4,333 1,274 1,385 168,855 99,776 7,701 - 371 371 (39,430 ) (39,430 ) 160,083 157,225 (5,587 ) (5,587 ) 1,083 (3,288 ) 370,830 368,433 487,350 477,724 $ 820,921 $ 703,866 caesarstone ltd. and its subsidiaries condensed consolidated statements of income u.s. dollars in thousands (except per share data) 2020 2019 2020 2019 $ 136,896 $ 133,867 $ 486,412 $ 545,974 98,381 98,884 352,470 397,335 38,515 34,983 133,942 148,639 1,501 962 3,974 4,146 17,752 16,698 62,047 66,770 9,779 9,625 39,081 40,681 1,392 7,201 6,319 12,359 30,424 34,486 111,421 123,956 8,091 497 22,521 24,683 8,613 (622) 10,199 5,578 (522) 1,119 12,322 19,105 1,459 1,394 4,700 6,243 $ (1,981) $ (275) $ 7,622 $ 12,862 (404) - (404) - $ (2,385) $ (275) $ 7,218 $ 12,862 $ (0.07) $ (0.01) $ 0.21 $ 0.37 $ (0.07) $ (0.01) $ 0.21 $ 0.37 34,436,345 34,397,410 34,419,129 34,383,895 34,436,345 34,397,410 34,473,911 34,459,599 2020 2019 $ 7,622 $ 12,862 29,460 28,587 2,858 3,632 (14 ) (246 ) (895 ) (1,509 ) 340 326 6,319 12,359 6,070 (5,032 ) 9,318 (6,346 ) 313 35,303 (17,938 ) (6,663 ) (371 ) 69 (26,738 ) 1,319 30,710 2,602 161 - (1 ) - 404 5,786 47,618 83,049 (28,962 ) - (19,824 ) (23,590 ) 13 66 (19,185 ) - (347 ) (63 ) (68,305 ) (23,587 ) (4,821 ) (5,160 ) (18 ) (7,771 ) (1,245 ) (1,196 ) (6,084 ) (14,127 ) 1,647 475 (25,124 ) 45,810 139,372 93,562 $ 114,248 $ 139,372 (356 ) (3,235 ) 2020 2019 2020 2019 $ 38,515 $ 34,983 $ 133,942 $ 148,639 63 10 416 285 - - - (1,501 ) 529 - 529 - - 294 - 1,661 $ 39,107 $ 35,287 $ 134,887 $ 149,084 (a) share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the company. (b) in 2019, relates mainly to one time amortization of machinery equipment with no future alternative use, and one time inventory write down due to discontinuation of certain product group manufacturing. 2020 2019 2020 2019 $ (1,981 ) $ (275 ) $ 7,622 $ 12,862 8,613 (622 ) 10,199 5,578 1,459 1,394 4,700 6,243 8,300 6,970 29,460 28,587 1,392 7,201 6,319 12,359 523 779 2,858 3,632 - - - (1,501 ) 444 - 921 - - 294 - 1,286 $ 18,750 $ 15,741 $ 62,079 $ 69,046 (a) consists of legal settlements expenses and loss contingencies, net, related to product liability claims and other adjustments to on-going legal claims, including related legal fees. (b) share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the company. (c) in 2019, relates mainly to non-recurring expenses related to north american region establishment, one time charge related to reduction in headcount and certain activities including discontinuation of certain product group manufacturing. caesarstone ltd. and its subsidiaries 2020 2019 2020 2019 $ (2,385 ) $ (275 ) $ 7,218 $ 12,862 1,392 7,201 6,319 12,359 446 - 446 - 523 779 2,858 3,632 3,177 266 3,189 3,615 - - - (1,501 ) 444 - 921 - - 294 - 2,486 5,982 8,540 13,733 20,591 1,955 2,791 4,488 6,729 4,027 5,749 9,245 13,862 $ 1,642 $ 5,474 $ 16,463 $ 26,724 $ 0.05 $ 0.16 $ 0.48 $ 0.77 (a) consists of legal settlements expenses and loss contingencies, net, related to product liability claims and other adjustments to on-going legal claims, including related legal fees. (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 diffrences deriving from revaluation of lease contracts in accoradance with fasb asc 842. (d) in 2019, relates mainly to non-recurring import related expenses and relocation expenses of caesarstone usa headquarters, the company's subsidiary. (e) in 2019, relates to non-recurring expenses related to north american region establishment, one time charge related to reduction in headcount and certain activities including discontinuation of certain product group manufacturing and one time amortization of machinery equipment with no future alternative use. (f) tax adjustments for the three and twelve months ended december 31, 2020, based on the effective tax rates of the comparative periods. (g) in calculating adjusted diluted (non-gaap) eps for the three and twelve months ended december 31, 2020, the diluted weighted average number of shares outstanding excludes the effects of share-based compensation expense in accordance with fasb asc 718. u.s. dollars in thousands 2020 2019 2020 2019 $ 53,618 $ 64,659 $ 207,496 $ 250,471 20,325 20,575 72,492 85,979 1,387 735 2,149 4,115 75,330 85,969 282,137 340,565 29,953 26,002 103,587 108,149 7,122 3,931 14,566 15,514 37,075 29,933 118,153 123,663 14,408 9,463 45,201 43,054 10,083 8,502 40,921 38,692 $ 136,896 $ 133,867 $ 486,412 $ 545,974 geographic breakdown of revenues by region - supplemental data $ 53,618 $ 52,097 $ 41,726 $ 60,055 $ 64,659 $ 64,805 $ 64,590 $ 56,417 $ 60,200 $ 61,933 $ 60,358 20,325 19,174 14,435 18,558 20,575 21,881 23,341 20,178 23,834 25,140 27,349 1,387 124 132 506 735 1,434 1,351 596 1,212 1,635 1,738 75,330 71,395 56,293 79,119 85,969 88,120 89,282 77,191 85,246 88,708 89,445 29,953 27,746 23,534 22,354 26,000 28,642 28,294 25,214 33,484 33,968 34,731 7,122 2,881 1,732 2,831 3,932 3,675 3,311 4,596 4,929 4,189 4,221 37,075 30,627 25,266 25,185 29,932 32,317 31,605 29,810 38,413 38,157 38,952 14,408 11,422 8,031 11,340 9,464 11,719 11,418 10,455 9,954 11,115 11,721 10,083 10,478 9,447 10,913 8,502 10,683 8,766 10,741 9,268 9,709 9,125 $ 136,896 $ 123,922 $ 99,037 $ 126,557 $ 133,867 $ 142,839 $ 141,071 $ 128,197 $ 142,881 $ 147,689 $ 149,243 -17.1 % -19.6 % -35.4 % 6.4 % 7.4 % 4.6 % 7.0 % -1.2 % -12.4 % -38.2 % -8.0 % -13.7 % -13.0 % -14.7 % 88.8 % -91.4 % -90.2 % -15.1 % -39.4 % -12.3 % -22.3 % -12.4 % -19.0 % -36.9 % 2.5 % 0.8 % -0.7 % -0.2 % 15.2 % -3.1 % -16.8 % -11.3 % -22.3 % -15.7 % -18.5 % 81.1 % -21.6 % -47.7 % -38.4 % -20.2 % -12.3 % -21.5 % 23.9 % -5.2 % -20.1 % -15.5 % -22.1 % -15.3 % -18.9 % 52.2 % -2.5 % -29.7 % 8.5 % -4.9 % 5.4 % -2.6 % 18.6 % -1.9 % 7.8 % 1.6 % -8.3 % 10.0 % -3.9 % 2.3 % -13.2 % -29.8 % -1.3 % -6.3 % -3.3 % -5.5 % -17.1 % -19.6 % -35.4 % 6.4 % 7.4 % 4.6 % 7.0 % -2.4 % -11.7 % -36.0 % -7.1 % -13.6 % -12.1 % -11.6 % 88.7 % -91.3 % -90.2 % -15.2 % -39.4 % -12.3 % -22.3 % -12.7 % -18.8 % -36.4 % 2.7 % 0.9 % -0.4 % 0.7 % 7.9 % -7.1 % -11.5 % -3.3 % -18.2 % -10.0 % -12.0 % 80.7 % -21.2 % -45.9 % -37.1 % -14.7 % -8.8 % -18.6 % 17.5 % -8.7 % -15.1 % -8.5 % -17.8 % -9.9 % -12.7 % 45.8 % -5.9 % -26.9 % 11.4 % -4.4 % 10.9 % 2.8 % 9.4 % -4.5 % 4.5 % -1.5 % -14.0 % 7.8 % -3.5 % -0.4 % -14.4 % -28.3 % 0.5 % -5.5 % -1.5 % -2.9 %
