Financial Data and Key Metrics - Global revenue for Q2 2024 was $119.4 million, down 16.9% YoY (16.3% on a constant currency basis) [9] - Gross margin improved significantly to 22.9% in Q2 2024, compared to 8.3% in the prior year quarter [11] - Adjusted gross margin was 23.8% in Q2 2024, compared to 9.6% in the prior year quarter [11] - Operating expenses were $36.6 million (30.6% of revenue) in Q2 2024, down from $58.8 million (40.9% of revenue) in the prior year quarter [12] - Operating loss in Q2 2024 was $9.3 million, compared to $46.9 million in the prior year quarter [13] - Adjusted EBITDA in Q2 2024 was a loss of $0.1 million, compared to a loss of $13.4 million in the prior year quarter [13] - Cash, cash equivalents, and short-term bank deposits totaled $103.6 million as of June 30, 2024, with a net cash position of $97.7 million [14] Business Line Performance - US sales declined by 13.8% to $59.8 million, driven by softer residential end markets and less favorable product mix [9] - Canada sales were down 15.9% on a constant currency basis, experiencing similar market dynamics as the US [10] - Australia sales declined by 20.8% on a constant currency basis, reflecting slower market conditions and regulatory changes [10] - EMEA region saw a decline of 14.9% on a constant currency basis, due to slow market conditions in the UK, Sweden, and indirect EMEA business [10] - Israel sales were down 38.9% on a constant currency basis, mainly due to reduced regional activity caused by geopolitical tensions [10] Market Performance - The company faced global economic headwinds, particularly in residential renovation and remodeling channels, leading to lower demand and competitive pressures [9] - The transition to alternative materials in Australia, due to new regulations banning quartz products, impacted sales [10] - Geopolitical developments, such as trade restrictions from Turkey, increased production costs in Israel [16] Strategic Direction and Industry Competition - The company is driving cost efficiencies, with the closure of Sdot-Yam and Richmond-Hill facilities expected to deliver annual cost savings of $20 million in 2024 and $30 million annually thereafter [5] - Over 60% of production is now sourced from global manufacturing partners, improving margins and aligning production to demand [5] - The company is focusing on differentiated products to improve sales mix and mitigate pricing pressures [6] - Investments in the porcelain business, including increasing the stake in Lioli Ceramica from 60% to 81%, are seen as key growth drivers [6] - The company is developing zero crystalline silica product lines to adapt to regulatory changes in Australia [6] - Efforts to monetize non-operational assets, such as selling undeveloped land at Richmond Hill, are ongoing [7] Management Commentary on Operating Environment and Future Outlook - The company is navigating persistent macroeconomic challenges and specific hurdles in the residential remodeling and renovation sectors [8] - Management expects to deliver positive operating cash flow for the full year of 2024, with the majority weighted towards the first half [18] - Full-year 2024 adjusted EBITDA is expected to be a loss in the mid-single-digit million-dollar range, due to increased shipping and material costs [18] - The company is focusing on cost efficiencies, optimizing production footprint, and strategic investments in sales, marketing, and R&D to drive profitability as market conditions stabilize [19] Other Important Information - The company is facing 43 silicosis-related lawsuits in the US, with the first case currently in trial [17] - Increased sea freight fees are expected to add $3 million to $4 million per quarter to costs, impacting Q4 2024 more significantly [15] - The company is finalizing the subletting of available areas within the Sdot Yam manufacturing facility, expected to generate additional cash flows in 2025 [7] Q&A Session Summary Question: Impact of shipping costs and potential pricing actions - Shipping costs are expected to increase by $3 million to $4 million per quarter in H2 2024, with additional negative impacts from raw material sourcing [20] - The company expects shipping costs to decrease in the future but cannot predict the exact timing or extent [21] Question: Revenue assumptions for H2 2024 - The company assumes similar market dynamics in H2 2024 as seen in H1 2024 [22] Question: Potential for further cost reductions - The company has become more agile with lower fixed costs, allowing for better cost control and capacity adjustments as needed [23] Question: Decremental margins and sensitivity analysis - The company does not provide specific sensitivity analysis but highlights the significant gross margin improvement from 15% in Q2 2023 to 23% in Q2 2024, driven by restructuring efforts [25] Question: Monetization of Richmond Hill and Israel facilities - The company expects to receive several tens of millions of dollars for the developed portion of the Richmond Hill property [27] - Subletting of the Sdot Yam facility is expected to generate several million dollars in cash flow starting in 2025 [28] Question: Increased stake in Lioli Ceramica - The company views porcelain as a key growth driver and increased its stake in Lioli Ceramica to 81% to strengthen its position in the market [30] - The impact on margins is not expected to be material in the short term [32]

Company Performance - CaesarStone reported a quarterly loss of $0.14 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.12, and an improvement from a loss of $0.69 per share a year ago, indicating a significant year-over-year recovery [1] - The company posted revenues of $119.43 million for the quarter ended June 2024, missing the Zacks Consensus Estimate by 3.57% and down from $143.68 million year-over-year, showing a decline in revenue performance [2] - Over the last four quarters, CaesarStone has surpassed consensus EPS estimates only once, indicating inconsistent earnings performance [2] Stock Performance - CaesarStone shares have increased approximately 40.4% since the beginning of the year, significantly outperforming the S&P 500's gain of 9.9%, suggesting strong market interest [3] - The current consensus EPS estimate for the upcoming quarter is -$0.08 on revenues of $127.62 million, and for the current fiscal year, it is -$0.43 on revenues of $493.84 million, indicating expectations of continued losses [7] Industry Outlook - The Zacks Industry Rank for Building Products - Miscellaneous, to which CaesarStone belongs, is currently in the bottom 41% of over 250 Zacks industries, suggesting a challenging environment for the sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact CaesarStone's stock performance [5]

Revenue Performance - Revenue for Q1 2024 was $118.3 million, down 21.0% year-over-year from $150.6 million due to lower volumes and price pressures[4]. - Total revenues for the three months ended March 31, 2024, were $118,292, a decrease of 21.5% compared to $150,633 in the same period of 2023[34]. - Revenues from the USA decreased by 19.8% to $60,999, down from $76,070 in 2023[34]. Profitability and Margins - Gross margin improved to 24.5% in Q1 2024, compared to 19.7% in the prior year quarter, driven by an improved production footprint and lower raw material costs[5]. - Gross profit for the same period was $28,987, down from $29,602, reflecting a slight decline in profitability[26]. - Adjusted EBITDA for the three months ended March 31, 2024, was $635, down from $717 in 2023, indicating a decrease of 11.4%[28]. Expenses and Losses - Operating expenses were $34.6 million, or 29.2% of revenue, up from 23.6% in the prior year quarter, primarily due to lower revenues[6]. - Operating loss for Q1 2024 was $5.6 million, an improvement from $5.9 million in the prior year quarter, mainly due to higher gross margin[7]. - The net loss attributable to controlling interest increased to $5,087, compared to a loss of $3,778 in the prior year, representing a 34.6% increase in losses[30]. - The company reported a basic net loss per ordinary share of $0.15 for Q1 2024, compared to $0.11 in Q1 2023[30]. Cash Flow and Financial Position - The company generated positive cash flow from operations of $8.7 million in Q1 2024, compared to $7.9 million in Q1 2023[10]. - Cash flows from operating activities provided $8,743, an increase from $7,937 in the same period last year[25]. - As of March 31, 2024, the company's net cash position was $89.4 million, an increase from $83.5 million as of December 31, 2023[10]. - Cash and cash equivalents at the end of the period increased to $96,152, compared to $45,987 at the end of Q1 2023[25]. Future Outlook - The company reaffirms its expectation to deliver positive adjusted EBITDA for the full year 2024 and positive operating cash flow[11]. - The company anticipates restructuring-related cost savings of approximately $20.0 million in 2024 and $30.0 million thereafter compared to 2023[11]. Research and Development - Research and development expenses increased to $1,212, up from $1,046, reflecting a 15.9% rise in investment in innovation[25]. Finance Income - Finance income decreased to $0.7 million in Q1 2024 from $2.3 million in the prior year quarter, primarily due to foreign currency exchange rate fluctuations[8].

Financial Data and Key Metrics Changes - Global revenue in Q1 2024 was $118.3 million, down from $150.6 million in Q1 2023, representing a decrease of approximately 21% on a constant currency basis [17][21] - Adjusted EBITDA for Q1 2024 was $0.6 million, relatively stable compared to $0.7 million in the prior-year quarter [7] - Gross margin improved to 24.5% in Q1 2024 from 19.7% in the prior-year quarter, driven by enhanced production efficiency and restructuring efforts [19][21] Business Line Data and Key Metrics Changes - U.S. sales decreased by 19.8%, primarily due to soft residential end markets and a less favorable product mix [2] - Sales in Australia were down approximately 17.5% on a constant currency basis, reflecting slower market conditions [18] - Canada sales decreased by 9.9% on a constant currency basis, experiencing similar market dynamics as the U.S. [36] Market Data and Key Metrics Changes - Sales in Israel fell by 39.3% on a constant currency basis, mainly due to the war on terror, although sequentially, sales improved by 68.9% [37] - The company noted that competitive pressures impacted sales across various markets [17] Company Strategy and Development Direction - The company is focused on enhancing innovation and brand development while refining its production footprint [6] - A strategic shift from a manufacturing-centric approach to prioritizing R&D, marketing, and branding is underway [31] - The closure of the Sdot Yam and Richmond Hill plants is expected to save approximately $30 million annually, with some savings reinvested into innovation and marketing [32][58] Management's Comments on Operating Environment and Future Outlook - Management acknowledged persistent global economic headwinds and regulatory changes in Australia as challenges but expressed confidence in the company's strategic transformation [31] - The company reiterated its outlook for positive adjusted EBITDA and cash flow from operations for the full year of 2024 [21][63] Other Important Information - The company has a strong balance sheet with cash and equivalents totaling $96.2 million and a net cash position of $89.4 million as of March 31, 2024 [39] - The company is actively seeking alternative sources for raw materials due to recent trade restrictions imposed by Turkey [38] Q&A Session Summary Question: How much did revenue benefit from the accelerated sale of inventory? - Management indicated that the accelerated sales contributed approximately 260 basis points to gross margin but did not significantly impact revenue [61] Question: What revenue number is needed to achieve breakeven on EBITDA for the full year? - Management did not provide specific revenue guidance but expects seasonal trends to continue, with Q1 typically being the lowest quarter [44] Question: Can you expand on the performance in U.S. big box stores? - Management noted that big box stores performed better than the residential segment, attributing this to high interest rates affecting residential activity [50] Question: How is the rollout of porcelain products progressing? - The company has started offering porcelain in the U.S., which is still small in volume but shows promising potential for future growth [53] Question: How much inventory is left at the Richmond Hill plant? - Most of the inventory was sold in Q1, with minimal remaining inventory expected to impact cash flows or earnings after Q2 [54]

CaesarStone (CSTE) came out with a quarterly loss of $0.13 per share versus the Zacks Consensus Estimate of a loss of $0.16. This compares to loss of $0.17 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 18.75%. A quarter ago, it was expected that this maker of quartz surface slabs would post a loss of $0.14 per share when it actually produced a loss of $0.28, delivering a surprise of -100%.Over the last four quarters, the com ...

For those looking to find strong Construction stocks, it is prudent to search for companies in the group that are outperforming their peers. Has CaesarStone (CSTE) been one of those stocks this year? By taking a look at the stock's year-to-date performance in comparison to its Construction peers, we might be able to answer that question.CaesarStone is one of 98 individual stocks in the Construction sector. Collectively, these companies sit at #1 in the Zacks Sector Rank. The Zacks Sector Rank includes 16 di ...

PART I [Key Information](index=11&type=section&id=ITEM%203%3A%20Key%20Information) This section outlines significant business, operational, legal, shareholder, and geopolitical risks that could adversely affect the company's financial condition and operations [Risk Factors](index=11&type=section&id=Risk%20Factors) The company faces substantial risks from economic downturns, operational challenges, significant silicosis litigation, evolving silica regulations, geopolitical instability, and intense competition - Sales are highly dependent on home renovation and new construction sectors, with **60%-70% of revenue** in key markets linked to residential renovations and remodeling[32](index=32&type=chunk) - Increasing reliance on third-party production partners (PBPs) in Asia and Europe introduces risks related to IP retention, quality control, and logistics[50](index=50&type=chunk) - Significant litigation risk from silicosis-related bodily injury claims exists, with **172 pending lawsuits globally** and an estimated total exposure of **$25.7 million** for claims in Israel and Australia as of December 31, 2023[91](index=91&type=chunk)[92](index=92&type=chunk) - Regulatory changes, including Australia's ban on engineered stone containing crystalline silica starting July 1, 2024, pose a material threat to the company's second-largest market[99](index=99&type=chunk)[79](index=79&type=chunk) 2023 Revenue Breakdown by Currency | Currency | Percentage of Revenue | | :--- | :--- | | U.S. Dollar | 49.3% | | Australian Dollar | 18.8% | | Canadian Dollar | 13.4% | | Euro | 6.4% | | New Israeli Shekel (NIS) | 3.9% | 2023 Raw Material Cost Composition | Raw Material | Percentage of Total Raw Material Cost | | :--- | :--- | | Minerals (Quartz, etc.) | 38.2% | | Polyester | 31.6% | [Information on the Company](index=45&type=section&id=ITEM%204%3A%20Information%20on%20the%20Company) This section details Caesarstone's corporate history, global multi-material surface operations, organizational structure, and physical assets, covering product lines, distribution, R&D, manufacturing, and competitive landscape [History and Development of the Company](index=45&type=section&id=History%20and%20Development%20of%20the%20Company) Founded in Israel in 1987 and listed on Nasdaq in 2012, Caesarstone expanded globally through acquisitions and underwent significant manufacturing restructuring in 2023 - The company was founded in **1987** in Israel and listed on the Nasdaq Global Select Market in **March 2012**[201](index=201&type=chunk)[202](index=202&type=chunk) - Strategic acquisitions include a majority stake in Lioli (India-based porcelain producer) in **October 2020** and Omicron (U.S. stone supplier) in **December 2020**[202](index=202&type=chunk) - In **2023**, the company restructured its manufacturing network, ceasing operations at its Sdot Yam, Israel, and Richmond Hill, GA, USA, facilities[203](index=203&type=chunk) Capital Expenditures (USD Million) | Year | Capital Expenditures (USD Million) | | :--- | :--- | | 2023 | $11.2 | | 2022 | $17.8 | | 2021 | $31.5 | [Business Overview](index=46&type=section&id=Business%20Overview) Caesarstone operates in the global countertop industry, focusing on engineered quartz and porcelain for kitchen surfaces, utilizing a multi-channel distribution strategy and emphasizing innovation and brand marketing Quartz Penetration in Key Markets (by volume) | Region | 2022 | 2020 | 2016 | | :--- | :--- | :--- | :--- | | United States | 21% | 20% | 14% | | Australia | 48% | 47% | 45% | | Canada | 27% | 28% | 24% | | Israel | 53% | 67% | 87% | 2023 Financial Highlights (USD in thousands) | Metric | Value (USD in thousands) | | :--- | :--- | | Revenue | $565,200 | | Net Loss (attributable to controlling interest) | $(107,700) | | Adjusted EBITDA Loss | $(9,400) | | Adjusted Net Loss (attributable to controlling interest) | $(46,400) | - The company's four largest markets (United States, Australia, Canada, Israel) accounted for **84.2% of total revenues** in **2023**[219](index=219&type=chunk) - In **2023**, products sourced from third-party Production Business Partners (PBPs) accounted for approximately **22.4% of revenues**, with plans for further increase in **2024**[248](index=248&type=chunk) [Organizational Structure](index=57&type=section&id=Organizational%20Structure) Caesarstone Ltd. is an Israeli company with six wholly-owned direct subsidiaries globally and a majority interest in an Indian subsidiary, operating under a regional structure - Caesarstone Ltd. is an Israeli company with wholly-owned subsidiaries in Australia, Singapore, UK, Canada, Sweden, and the USA[280](index=280&type=chunk) - The company holds a majority, consolidating interest in Lioli, located in India[280](index=280&type=chunk) [Property, Plants and Equipment](index=58&type=section&id=Property%2C%20Plants%20and%20Equipment) As of December 31, 2023, Caesarstone's key facilities include headquarters and R&D in Caesarea, manufacturing in Bar-Lev, Israel, and Morbi, India, with the Richmond Hill, GA facility closed as part of restructuring - The company's main manufacturing facilities are located in Bar-Lev, Israel, and Morbi, India[282](index=282&type=chunk) - The Richmond Hill, Georgia, manufacturing facility closed in mid-January **2024** as part of a restructuring plan, expected to generate approximately **$20 million in annual savings**[286](index=286&type=chunk) - The company's Israeli facilities, including headquarters and the Bar-Lev plant, are on land leased from Kibbutz Sdot-Yam under long-term agreements[283](index=283&type=chunk)[286](index=286&type=chunk) [Operating and Financial Review and Prospects](index=60&type=section&id=ITEM%205%3A%20Operating%20and%20Financial%20Review%20and%20Prospects) This section analyzes Caesarstone's financial performance, covering operating results, revenue by geography, cost of revenues, margins, operating expenses, liquidity, capital resources, debt, capital expenditures, R&D, and critical accounting estimates [Operating Results](index=60&type=section&id=Operating%20Results) In 2023, Caesarstone's revenue decreased by **18.2%** to **$565.2 million**, gross margin contracted to **16.3%**, and the company reported a net loss of **$108.2 million** due to lower sales volume and increased costs Key Financial Metrics (USD in thousands) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenues | $565,231 | $690,806 | $643,892 | | Gross Profit | $91,939 | $163,245 | $171,498 | | Gross Margin | 16.3% | 23.6% | 26.6% | | Operating Income (Loss) | $(88,028) | $(58,687) | $27,429 | | Net Income (Loss) | $(108,240) | $(56,366) | $17,889 | Revenue by Geographic Region (USD in thousands) | Region | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | United States | $271,647 | $342,293 | $305,353 | | Canada | $75,462 | $93,377 | $84,467 | | Australia | $106,223 | $116,284 | $118,714 | | EMEA | $59,908 | $63,320 | $60,836 | | Israel | $22,747 | $36,444 | $39,430 | | Asia | $25,959 | $34,607 | $30,390 | | Latin America | $3,285 | $4,481 | $4,702 | | **Total** | **$565,231** | **$690,806** | **$643,892** | - The **2023** gross margin decrease was primarily due to increased manufacturing costs from lower capacity utilization, higher logistics costs per unit, and higher raw material prices[332](index=332&type=chunk)[333](index=333&type=chunk) - The company recorded pre-tax non-cash impairment charges of **$47.9 million** in **2023** and **$71.3 million** in **2022** related to goodwill and long-lived assets, triggered by market capitalization declines and macroeconomic conditions[338](index=338&type=chunk) [Liquidity and Capital Resources](index=68&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2023, the company had **$91.1 million** in cash, with net cash from operating activities at **$66.5 million** in 2023, and management expects sufficient liquidity for the next twelve months despite material lease and purchase obligations Cash Flow Summary (USD in thousands) | Cash Flow Activity | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $66,529 | $(23,311) | $20,684 | | Net cash used in investing activities | $(40,526) | $(7,285) | $(34,885) | | Net cash (used in) provided by financing activities | $(23,779) | $9,156 | $(25,254) | - The significant increase in cash from operating activities in **2023** was mainly due to lower inventory levels, reduced raw material and shipping costs, and the Sdot Yam plant closure impact[355](index=355&type=chunk) - As of December 31, 2023, the company had material cash requirements including **$138.1 million** in lease obligations and **$18.6 million** in purchase obligations[349](index=349&type=chunk)[350](index=350&type=chunk) - As of December 31, 2023, outstanding bank credits and debts totaled **$5.1 million**, all payable within **12 months**[351](index=351&type=chunk) [Critical Accounting Estimates](index=72&type=section&id=Critical%20Accounting%20Estimates) This section details critical accounting estimates including revenue recognition, lease accounting, credit loss allowance, inventory valuation, impairment of goodwill and long-lived assets, and provisions for silicosis-related legal claims - The company's allowance for credit losses was **$12.2 million** as of December 31, 2023, determined by evaluating individual customer receivables, financial conditions, and credit history[386](index=386&type=chunk) - Inventory provisions for slow-moving or obsolete items increased to **$27.4 million** as of December 31, 2023, from **$21.7 million** in 2022[387](index=387&type=chunk) - In **2023**, the company recorded significant impairment charges on long-lived assets totaling **$27.5 million** for Richmond Hill, **$1.0 million** for Sdot Yam, and **$16.6 million** for the Sdot Yam right-of-use asset due to plant closures[393](index=393&type=chunk)[385](index=385&type=chunk) - The company's goodwill was fully impaired in **2022** with a charge of **$44.8 million**, and the balance remained at **$0** as of December 31, 2023[389](index=389&type=chunk)[845](index=845&type=chunk) - Accounting for legal contingencies, particularly product liability claims, is a critical estimate, with accruals recorded when a loss is probable and estimable[396](index=396&type=chunk) [Directors, Senior Management and Employees](index=77&type=section&id=ITEM%206%3A%20Directors%2C%20Senior%20Management%20and%20Employees) This section provides comprehensive information on the company's executive officers, directors, their compensation, board practices, committee structures, employee numbers, labor relations, and share ownership of key personnel and major shareholders [Directors and Senior Management](index=77&type=section&id=Directors%20and%20Senior%20Management) The company's leadership includes executive officers and a nine-member board of directors, chaired by Dr. Ariel Halperin, with Yosef (Yos) Shiran as CEO since March 2022, adhering to Nasdaq and Israeli law requirements for independent and external directors - Yosef (Yos) Shiran was re-appointed as Chief Executive Officer in **March 2022**[407](index=407&type=chunk) - The Board of Directors consists of **nine members**, chaired by Dr. Ariel Halperin, with **five directors** considered independent under Nasdaq rules[405](index=405&type=chunk)[460](index=460&type=chunk) - The board includes two external directors, Nurit Benjamini and Lily Ayalon, as required by Israeli Companies Law, both possessing financial and accounting expertise[460](index=460&type=chunk)[469](index=469&type=chunk) [Compensation](index=81&type=section&id=Compensation) In **2023**, aggregate compensation for executive officers was **$6.5 million**, with CEO Yos Shiran receiving a monthly salary of **NIS 214,000**, a potential annual cash bonus up to **$1.2 million**, and a significant stock option grant - Aggregate compensation for current executive officers in **2023** was **$6.5 million**[429](index=429&type=chunk) - CEO Yos Shiran was granted options to purchase **1,000,000 ordinary shares**, vesting over **four years**, with an exercise price of **$4.68**[431](index=431&type=chunk) 2023 Compensation for Top 5 Covered Executives (USD) | Name and Principal Position | Salary (USD) | Bonus (USD) | Equity-Based Compensation (USD) | Total (USD) | | :--- | :--- | :--- | :--- | :--- | | Yos Shiran (CEO) | 781,776 | 600,000 | 368,247 | 1,755,123 | | Ken Williams (President, Americas) | 405,731 | 62,387 | 29,511 | 499,851 | | Nahum Trost (CFO) | 292,661 | 42,358 | 76,088 | 457,295 | | Erez Margalit (VP R&D) | 318,312 | 42,358 | 45,277 | 454,910 | | David Cullen (MD, APAC) | 375,731 | 32,255 | 31,697 | 452,924 | [Board Practices](index=85&type=section&id=Board%20Practices) As a foreign private issuer, Caesarstone follows Israeli corporate governance for shareholder meeting quorums, maintains a nine-member board with independent directors, and operates Audit, Nominating, and Compensation Committees adhering to both Israeli and Nasdaq requirements - The company utilizes the "home country practice exemption" for Nasdaq's shareholder meeting quorum, setting its quorum at **25% of voting power** for board-initiated meetings, instead of the Nasdaq-required **33 1/3%**[458](index=458&type=chunk)[164](index=164&type=chunk) - The company has an Audit Committee, Nominating Committee, and Compensation Committee, each composed entirely of independent directors[489](index=489&type=chunk)[499](index=499&type=chunk)[500](index=500&type=chunk) - Israeli Companies Law mandates specific composition and duties for the Audit and Compensation committees, requiring all external directors to be members and constitute a majority[490](index=490&type=chunk)[502](index=502&type=chunk) - The company adopted a formal compensation policy, re-approved by shareholders in **October 2023**, governing compensation for all executive officers and directors as required by Israeli law[506](index=506&type=chunk) [Employees](index=99&type=section&id=Employees) As of December 31, 2023, Caesarstone had **1,813 employees globally**, a decrease due to restructuring and the Sdot Yam facility closure, with satisfactory employee relations and no history of work stoppages Global Workforce by Category (as of Dec 31) | Department | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Manufacturing and operations | 1,080 | 1,339 | 1,397 | | Research and development | 19 | 17 | 24 | | Sales, marketing, service and support | 533 | 557 | 651 | | Management and administration | 181 | 198 | 200 | | **Total** | **1,813** | **2,111** | **2,272** | - The global workforce decreased by **298 employees** in **2023**, primarily due to the company's restructuring plan and the closure of the Sdot Yam facility[535](index=535&type=chunk) [Major Shareholders and Related Party Transactions](index=100&type=section&id=ITEM%207%3A%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section details the company's ownership structure, with Kibbutz Sdot-Yam and Tene Investment as controlling shareholders (**40.6%** combined), and outlines extensive related party transactions, including **$10.2 million** paid to Kibbutz Sdot-Yam in **2023** [Major Shareholders](index=101&type=section&id=Major%20Shareholders) As of March 1, 2024, Kibbutz Sdot-Yam and Tene Investment are joint controlling shareholders with a combined **40.6%** stake, alongside other major shareholders like The Phoenix Holdings Ltd. (**11.4%**) and Global Alpha Capital Management Ltd. (**8.6%**) Major Shareholders (as of March 1, 2024) | Name of Beneficial Owner | Percentage of Shares Beneficially Held | | :--- | :--- | | Mifalei Sdot-Yam Agricultural Cooperative Society Ltd. | 40.6% | | Tene Investment in Projects 2016, L.P. | 40.6% | | The Phoenix Holdings Ltd. | 11.4% | | Global Alpha Capital Management Ltd. | 8.6% | - Kibbutz Sdot-Yam and Tene are joint controlling shareholders with a combined **40.6% stake** due to a shareholders' voting agreement[551](index=551&type=chunk)[554](index=554&type=chunk) [Related Party Transactions](index=104&type=section&id=Related%20Party%20Transactions) Caesarstone has extensive related party transactions, primarily with Kibbutz Sdot-Yam, including land use, manpower, and services agreements totaling **$10.2 million** in **2023**, and a management services agreement with Tene for **NIS 750,000** annually Payments to Kibbutz Sdot-Yam (excluding VAT) | Year | Amount (USD Million) | | :--- | :--- | | 2023 | $10.2 | | 2022 | $11.3 | | 2021 | $11.0 | - Key agreements with Kibbutz Sdot-Yam include land use for Sdot-Yam and Bar-Lev facilities, a manpower agreement, and a general services agreement[559](index=559&type=chunk) - In **2021**, lease fees for Sdot-Yam and Bar-Lev facilities increased to **NIS 18.6 million** and **NIS 8.1 million** annually, respectively, following an independent appraisal[566](index=566&type=chunk) - The company has a management services agreement with Tene for Executive Chairman services and business development advice, with an annual fee of **NIS 750,000**[582](index=582&type=chunk)[584](index=584&type=chunk) [Financial Information](index=109&type=section&id=ITEM%208%3A%20Financial%20Information) This section addresses the company's legal proceedings, primarily **172 pending silicosis lawsuits** with an estimated **$25.7 million** exposure, and its dividend policy, which allows for up to **50% of net income** but saw no distributions in **2023** [Legal Proceedings](index=109&type=section&id=Legal%20Proceedings) The company faces significant legal challenges from **172 pending silicosis-related bodily injury claims globally** as of December 31, 2023, with an estimated **$25.7 million** exposure in Israel and Australia, and limited insurance coverage for new Australian cases since **September 2020** - As of December 31, 2023, the company was subject to **172 pending lawsuits globally** related to occupational illnesses, primarily silicosis[593](index=593&type=chunk) - The estimated total exposure for pending claims in Israel and Australia is approximately **$25.7 million**[597](index=597&type=chunk) - The company has product liability insurance, but its Australian policy ceased coverage for newly diagnosed silicosis-related claims as of **September 2020**, potentially increasing future uninsured liabilities[95](index=95&type=chunk) [Dividends](index=110&type=section&id=Dividends) Caesarstone's dividend policy allows for a quarterly cash dividend of up to **50% of year-to-date net income**, with the last dividend of **$0.25 per share** paid in Q3 **2022**, and no dividends distributed in **2023** - The company's dividend policy allows for a quarterly cash dividend of up to **50% of year-to-date reported net income** attributable to controlling interest[601](index=601&type=chunk) - No dividends were distributed during **2023**; the last dividend paid was **$0.25 per share** in the third quarter of **2022**[601](index=601&type=chunk) [Additional Information](index=111&type=section&id=ITEM%2010%3A%20Additional%20Information) This section covers corporate and legal details, including articles of association, material related-party contracts, absence of Israeli exchange controls, and a detailed summary of Israeli and U.S. federal income tax considerations for the company and its shareholders [Taxation](index=113&type=section&id=Taxation) The company's complex tax situation includes Israel's standard **23% corporate tax rate** and a reduced **7.5% 'Preferred Enterprise' rate** for its Bar-Lev facility, with detailed Israeli and U.S. federal income tax implications for shareholders, including PFIC risk analysis - The standard corporate tax rate in Israel is **23%**, but the company benefits from a reduced rate of **7.5%** on income from its 'Preferred Enterprise' facility in Bar-Lev[622](index=622&type=chunk)[632](index=632&type=chunk)[634](index=634&type=chunk) - Dividends paid to Israeli individuals from a 'Preferred Enterprise' are subject to a **20% withholding tax**, while non-Israeli residents generally face a **25% rate**, potentially reduced by tax treaties[633](index=633&type=chunk)[647](index=647&type=chunk)[649](index=649&type=chunk) - The company does not believe it was a Passive Foreign Investment Company (PFIC) for the **2023** taxable year, noting this status is an annual factual determination not guaranteed for future years[668](index=668&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=124&type=section&id=ITEM%2011%3A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces significant market risks from foreign currency fluctuations, particularly the NIS and AUD, with a **10% NIS decrease** increasing **2023 operating income by $7.5 million**, and a **10% AUD decrease** decreasing it by **$7.1 million**, partially hedged by forward contracts Revenue by Currency | Currency | 2023 Revenue % | 2022 Revenue % | 2021 Revenue % | | :--- | :--- | :--- | :--- | | Australian Dollar | 18.8% | 16.8% | 18.4% | | Canadian Dollar | 13.4% | 13.5% | 13.1% | - The company has significant exposure to the NIS and AUD; a **10% decrease in NIS** vs. USD would have increased **2023 operating income by $7.5 million**, while a **10% decrease in AUD** vs. USD would have decreased it by **$7.1 million**[687](index=687&type=chunk)[689](index=689&type=chunk) - As of December 31, 2023, the company held foreign currency forward contracts with a total notional value of **$21.2 million** to hedge its exposure[693](index=693&type=chunk)[38](index=38&type=chunk) [Controls and Procedures](index=126&type=section&id=ITEM%2015%3A%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with an unqualified audit report from the independent registered public accounting firm - Management concluded that as of December 31, 2023, the company's disclosure controls and procedures were effective[702](index=702&type=chunk) - Management assessed internal control over financial reporting based on the COSO **2013** framework and concluded it was effective as of December 31, 2023[704](index=704&type=chunk) - The independent registered public accounting firm issued an unqualified audit report on the effectiveness of the company's internal control over financial reporting[705](index=705&type=chunk) [Governance and Other Disclosures](index=127&type=section&id=ITEM%2016%3A%20Governance%20and%20Other%20Disclosures) This section covers governance and compliance, including audit committee financial experts, a Code of Ethics, **$1.077 million** in principal accountant fees in **2023**, Israeli corporate governance practices for quorums, and a NIST-based cybersecurity risk management program with no material incidents identified Principal Accountant Fees (USD in thousands) | Fee Category | 2023 | 2022 | | :--- | :--- | :--- | | Audit fees | $954 | $743 | | Audit-related fees | $58 | $1 | | Tax fees | $44 | $82 | | All other fees | $21 | $193 | | **Total** | **$1,077** | **$1,019** | - The company has implemented a cybersecurity risk management program based on the NIST framework, with oversight provided by the Audit Committee[725](index=725&type=chunk)[726](index=726&type=chunk)[729](index=729&type=chunk) - The company has not identified any cybersecurity risks or prior incidents that have materially affected or are reasonably likely to materially affect its business, operations, or financial condition[728](index=728&type=chunk) PART III [Financial Statements](index=131&type=section&id=ITEM%2018%3A%20Financial%20Statements) This section presents the audited consolidated financial statements for Caesarstone Ltd. and its subsidiaries as of December 31, 2023, prepared under U.S. GAAP, including balance sheets, income statements, cash flows, and comprehensive notes Consolidated Balance Sheet Highlights (As of Dec 31, USD in thousands) | Account | 2023 | 2022 | | :--- | :--- | :--- | | **Total Assets** | **$579,855** | **$752,981** | | Cash and cash equivalents | $54,623 | $52,081 | | Inventories | $136,446 | $238,232 | | Property, plant and equipment, net | $123,480 | $169,292 | | **Total Liabilities** | **$257,007** | **$324,032** | | **Total Equity** | **$315,059** | **$421,046** | Consolidated Income Statement Highlights (Year Ended Dec 31, USD in thousands) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenues | $565,231 | $690,806 | $643,892 | | Gross Profit | $91,939 | $163,245 | $171,498 | | Operating Loss | $(88,028) | $(58,687) | $27,429 (Income) | | Net Loss | $(108,240) | $(56,366) | $17,889 (Income) | | Basic and Diluted EPS | $(3.13) | $(1.66) | $0.51 | Consolidated Cash Flow Highlights (Year Ended Dec 31, USD in thousands) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $66,529 | $(23,311) | $20,684 | | Net cash used in investing activities | $(40,526) | $(7,285) | $(34,885) | | Net cash from (used in) financing activities | $(23,779) | $9,156 | $(25,254) |

The Construction group has plenty of great stocks, but investors should always be looking for companies that are outperforming their peers. CaesarStone (CSTE) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? A quick glance at the company's year-to-date performance in comparison to the rest of the Construction sector should help us answer this question.CaesarStone is one of 98 individual stocks in the Construction sector ...

Caesarstone Ltd. (NASDAQ:CSTE) Q4 2023 Earnings Conference Call February 21, 2024 8:30 AM ET Company Participants Brad Cray - IR Yosef Shiran - CEO Nahum Trost - CFO Conference Call Participants Reuben Garner - The Benchmark Company Stanley Elliott - Stifel Operator Greetings, and welcome to the Caesarstone Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Cray of ICR. Thank you. You may ...

Exhibit 99.1 Caesarstone Reports Fourth Quarter and Full Year 2023 Financial Results - Fourth Quarter Revenue of $128.5 Million and Full Year Revenue of $565.2 Million - - Full Year Cash Flow from Operations of $66.5 Million - - Initiated Restructuring Actions During 2023 to Reignite Long-term Growth and Profitability - - Expects to Realize Restructuring-Related Cost Savings of Approximately $20.0 Million in Full Year 2024 and $30.0 Million Thereafter Compared to Full Year 2023 - MP MENASHE, Israel – Februa ...