Caesarstone reports second quarter 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 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. $ 117,064 $ 139,372 2,025 - 67,007 78,282 27,987 34,066 133,611 122,686 347,694 374,406 3,510 3,475 3,577 3,176 8,513 7,881 4,260 2,887 73,544 72,047 10,978 - 201,980 204,776 34,804 35,218 341,166 329,460 $ 688,860 $ 703,866 37,274 53,072 2,076 2,212 23,377 28,300 44,414 42,782 107,141 126,366 7,044 7,915 27,891 21,505 65,264 64,638 4,373 4,333 1,372 1,385 105,944 99,776 371 371 (39,430 ) (39,430 ) 158,932 157,225 (5,587 ) (5,587 ) (3,740 ) (3,288 ) 365,229 368,433 475,775 477,724 $ 688,860 $ 703,866 three months ended june 30, six months ended june 30, 2020 2019 2020 2019 (unaudited) (unaudited) $ 99,037 $ 141,071 $ 225,594 $ 269,268 78,865 101,308 169,021 198,236 20,172 39,763 56,573 71,032 763 1,280 1,543 2,222 11,435 15,579 30,064 32,653 9,241 10,572 21,108 21,605 1,637 1,729 4,475 3,305 23,076 29,160 57,190 59,785 (2,904 ) 10,603 (617 ) 11,247 2,507 1,825 1,638 2,147 (5,411 ) 8,778 (2,255 ) 9,100 471 2,364 949 3,091 $ (5,882 ) $ 6,414 $ (3,204 ) $ 6,009 $ (0.17 ) $ 0.19 $ (0.09 ) $ 0.17 $ (0.17 ) $ 0.19 $ (0.09 ) $ 0.17 34,412,369 34,380,799 34,406,107 34,373,848 34,412,369 34,425,797 34,406,107 34,427,899 caesarstone ltd. and its subsidiaries selected condensed consolidated statements of cash flows six months ended june 30, 2020 2019 (unaudited) $ (3,204 ) $ 6,009 14,102 14,862 1,707 1,884 7 (8 ) (640 ) (1,242 ) 22 338 4,475 3,305 9,942 (10,479 ) 3,172 (4,726 ) (12,621 ) 21,571 (16,117 ) (9,800 ) (98 ) (82 ) (1,347 ) (74,159 ) 1,554 76,385 6 - (8 ) - 4,173 2,088 5,125 25,946 (12,459 ) (11,955 ) 6 54 (13,002 ) - (711 ) (192 ) (26,166 ) (12,093 ) (459 ) (7,771 ) (610 ) (588 ) (1,069 ) (8,359 ) (198 ) 304 (22,308 ) 5,798 139,372 93,562 $ 117,064 $ 99,360 (954 ) (2,500 ) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 (unaudited) (unaudited) $ 20,172 $ 39,763 $ 56,573 $ 71,032 122 63 253 139 - (2,611 ) - (1,501 ) - 1,367 $ - 1,367 $ 20,294 $ 38,582 $ 56,826 $ 71,037 (a) share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the company. (b) relates mainly to one time amortization of machinery equipment with no future alternative use. three months ended june 30, six months ended june 30, 2020 2019 2020 2019 (unaudited) (unaudited) $ (5,882 ) $ 6,414 $ (3,204 ) $ 6,009 2,507 1,825 1,638 2,147 471 2,364 949 3,091 6,987 8,099 14,102 14,862 1,637 1,729 4,475 3,305 801 832 1,707 1,884 - (2,611 ) - (1,501 ) - 504 - 993 $ 6,521 $ 19,156 $ 19,667 $ 30,790 (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) three and six months ended june 30, 2019 relates to non-recurring expenses related to north american region establishment and one time charge related to reduction in headcount. three months ended june 30, six months ended june 30, 2020 2019 2020 2019 (unaudited) (unaudited) $ (5,882 ) $ 6,414 $ (3,204 ) $ 6,009 1,637 1,729 4,475 3,305 801 832 1,707 1,884 1,256 799 (215 ) 2,226 - (2,611 ) - (1,501 ) - 1,704 - 2,193 3,694 2,453 5,967 8,107 1,310 871 2,116 2,875 2,384 1,582 3,851 5,232 $ (3,498 ) $ 7,996 $ 647 $ 11,241 $ (0.10 ) $ 0.23 $ 0.02 $ 0.33 (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 differences deriving from revaluation of lease contracts in accordance with fasb asc 842. (d) three and six months ended june 30, 2019 relates mainly to non-recurring import related expenses and relocation expenses of caesarstone usa headquarters, the company's subsidiary. (e) three and six months ended june 30, 2019 relates to non-recurring expenses related to north american region establishment and one time charge related to reduction in headcount. (f) tax adjustments for the three and six months ended june 30, 2020, based on the effective tax rates of the comparative periods. (g) in calculating adjusted diluted (non-gaap) eps for the six month ended june 30, 2020, the diluted weighted average number of shares outstanding excludes the effects of share-based compensation expense in accordance with fasb asc 718. three months ended june 30, six months ended june 30, 2020 2019 2020 2019 (unaudited) (unaudited) $ 41,726 $ 64,590 $ 101,781 $ 121,007 14,435 23,342 32,993 43,520 132 1,351 638 1,947 56,293 89,283 135,412 166,474 23,534 28,292 45,888 53,506 1,732 3,311 4,563 7,907 25,266 31,603 50,451 61,413 8,031 11,419 19,371 21,874 9,447 8,766 20,360 19,507 $ 99,037 $ 141,071 $ 225,594 $ 269,268 geographic breakdown of revenues by region - supplemental data $ 41,726 $ 60,055 $ 64,659 $ 64,805 $ 64,590 $ 56,417 $ 60,200 $ 61,933 $ 60,358 14,435 18,558 20,575 21,881 23,341 20,178 23,834 25,140 27,349 132 506 735 1,434 1,351 596 1,212 1,635 1,738 56,293 79,119 85,969 88,120 89,282 77,191 85,246 88,708 89,445 23,534 22,354 26,000 28,642 28,294 25,214 33,484 33,968 34,731 1,732 2,831 3,932 3,675 3,311 4,596 4,929 4,189 4,221 25,266 25,185 29,932 32,317 31,605 29,810 38,413 38,157 38,952 8,031 11,340 9,464 11,719 11,418 10,455 9,954 11,115 11,721 9,447 10,913 8,502 10,683 8,766 10,741 9,268 9,709 9,125 $ 99,037 $ 126,557 $ 133,867 $ 142,839 $ 141,071 $ 128,197 $ 142,881 $ 147,689 $ 149,243 -35.4% 6.4% 7.4% 4.6% 7.0% -38.2% -8.0% -13.7% -13.0% -14.7% -90.2% -15.1% -39.4% -12.3% -22.3% -36.9% 2.5% 0.8% -0.7% -0.2% -16.8% -11.3% -22.3% -15.7% -18.5% -47.7% -38.4% -20.2% -12.3% -21.5% -20.1% -15.5% -22.1% -15.3% -18.9% -29.7% 8.5% -4.9% 5.4% -2.6% 7.8% 1.6% -8.3% 10.0% -3.9% -29.8% -1.3% -6.3% -3.3% -5.5% -35.4% 6.4% 7.4% 4.6% 7.0% -36.0% -7.1% -13.6% -12.1% -11.6% -90.2% -15.2% -39.4% -12.3% -22.3% -36.4% 2.7% 0.9% -0.4% 0.7% -11.5% -3.3% -18.2% -10.0% -12.0% -45.9% -37.1% -14.7% -8.8% -18.6% -15.1% -8.5% -17.8% -9.9% -12.7% -26.9% 11.4% -4.4% 10.9% 2.8% 4.5% -1.5% -14.0% 7.8% -3.5% -28.3% 0.5% -5.5% -1.5% -2.9% (*) change in revenues at constant currency is calculated so that revenues can be viewed without the impact of fluctuations s in foreign currency exchange rates, thereby facilitating period-to-period comparisons of business performance. change in revenues adjusted for currency are calculated by translating current period activity in local currency using the comparable prior-year period’s currency conversion rate. exchange rates used, are the representative exchange rate published by the bank of israel for the relevant periods.
