Caesarstone(CSTE) - 2023 Q2 - Quarterly Report

First Quarter 2023 Earnings Report Financial & Operational Highlights Caesarstone reported Q1 2023 revenues of $150.6 million, a net loss of $3.8 million, and positive operating cash flow, alongside a new global restructuring plan - Q1 2023 Key Financial Metrics | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Revenues | $150.6 Million | $170.4 Million | | Net (Loss) Income Attributable to Controlling Interest | ($3.8 Million) | $6.2 Million | | (Loss) Earnings Per Share | ($0.11) | $0.18 | | Cash Flow from Operations | $7.9 Million | ($23.3 Million) | - The company has initiated a global restructuring plan, commencing with the permanent closure of its oldest manufacturing facility in Sdot-Yam, Israel, to improve efficiencies and reduce operating costs[1][4] Global Restructuring and Cost Optimization The company is closing its Sdot-Yam, Israel facility, its oldest plant, as the first major step in a comprehensive restructuring plan, expecting $10.0 to $15.0 million in annualized cash savings and incurring $4.0 to $8.0 million in closure costs - The closure of the Sdot-Yam facility is expected to result in annualized cash savings of approximately $10.0 to $15.0 million[5] - The company expects to incur estimated cash costs of $4.0 million to $8.0 million related to the facility closure, starting in Q2 2023 and continuing for 12 months[2] - The restructuring includes a headcount reduction of approximately 150 employees, mostly associated with the Sdot-Yam facility[4] - The decision to close the facility was also driven by the impractical investment needed to upgrade the plant to meet future Israeli environmental emission regulations[22] Detailed Financial Performance Q1 2023 revenue decreased 11.6% to $150.6 million, with gross margin contracting to 19.7%, resulting in an operating loss of $5.9 million and a net loss of $3.8 million Revenue First-quarter revenue decreased 11.6% to $150.6 million, driven by lower volumes, with Americas declining 13.5% and EMEA growing 4.6% - Q1 2023 revenue was $150.6 million, compared to $170.4 million in Q1 2022. On a constant currency basis, revenue decreased by 8.9% year-over-year, mainly due to lower volume partially offset by pricing actions[24] - Geographic Breakdown of Revenues (USD in thousands) | Region | Q1 2023 | Q1 2022 | YoY % Change | | :--- | :--- | :--- | :--- | | USA | $76,070 | $85,237 | (10.8)% | | Canada | $18,324 | $23,734 | (22.8)% | | Australia | $25,396 | $25,539 | (0.6)% | | EMEA | $15,922 | $15,223 | 4.6% | | Israel | $7,416 | $10,205 | (27.3)% | | Total Revenues | $150,633 | $170,438 | (11.6)% | Profitability Q1 2023 profitability sharply declined, with gross margin falling to 19.7%, resulting in an operating loss of $5.9 million and Adjusted EBITDA plummeting to $0.7 million - Gross margin was 19.7% compared to 25.3% in the prior year quarter, primarily due to lower fixed cost absorption from reduced capacity utilization, higher raw material costs, and unfavorable FX rates[6] - Profitability Metrics (USD in thousands) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Gross Profit | $29,602 | $43,172 | | Operating (Loss) Income | ($5,918) | $6,982 | | Net (Loss) Income | ($3,851) | $6,656 | | Adjusted EBITDA | $717 | $15,694 | - Adjusted diluted net loss per share was $0.17, compared to adjusted diluted net income per share of $0.14 in the prior year quarter[27] Balance Sheet, Liquidity, and Cash Flow The company significantly improved cash management, generating $7.9 million in operating cash flow, driven by decreased inventories, and improving its net cash position to $33.3 million - Generated positive cash flow from operations of $7.9 million in Q1 2023, compared to cash used in operations of $23.3 million in Q1 2022[28][16] - The improvement in operating cash flow was largely due to a $26.8 million decrease in inventories during the quarter[16] - The company's net cash position (cash and marketable securities less total debt) improved to $33.3 million as of March 31, 2023, from $28.2 million as of December 31, 2022[28] Shareholder Returns and Outlook Caesarstone will not pay a Q1 2023 dividend due to net loss and has withdrawn full-year 2023 guidance, now prioritizing positive operating cash flow - The company will not pay a dividend for the first quarter of 2023, based on its reported net loss and dividend policy[29] - The company is no longer providing a full-year outlook for revenues or Adjusted EBITDA margin due to slow macroeconomic conditions and volatile trends[30] - The company's amended outlook prioritizes cash flow, with the expectation to generate positive cash flow from operations and end 2023 with an improved net cash position[30] Consolidated Financial Statements and Non-GAAP Reconciliations This section presents unaudited consolidated financial statements for Q1 2023, including Balance Sheets, Income Statements, Cash Flows, and reconciliations of GAAP to non-GAAP measures Condensed Consolidated Balance Sheets As of March 31, 2023, the company reported total assets of $710.5 million, total liabilities of $286.2 million, and total equity of $416.3 million - Balance Sheet Highlights (USD in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash, cash equivalents & short-term deposits | $45,987 | $52,081 | | Inventories | $211,179 | $238,232 | | Total Current Assets | $374,546 | $407,858 | | Total Assets | $710,481 | $752,981 | | Total Current Liabilities | $139,085 | $164,984 | | Total Liabilities | $286,165 | $324,032 | | Total Equity | $416,294 | $421,046 | Condensed Consolidated Statements of Income (Loss) For Q1 2023, the company reported revenues of $150.6 million, a gross profit of $29.6 million, and a net loss of $3.9 million - Income Statement Highlights (USD in thousands) | Account | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Revenues | $150,633 | $170,438 | | Gross Profit | $29,602 | $43,172 | | Operating (Loss) Income | ($5,918) | $6,982 | | Net (Loss) Income | ($3,851) | $6,656 | | Diluted (Loss) Income Per Share | ($0.11) | $0.18 | Condensed Consolidated Statements of Cash Flows In Q1 2023, net cash provided by operating activities was $7.9 million, with net cash used in investing activities of $1.5 million and financing activities of $12.6 million - Cash Flow Highlights (USD in thousands) | Account | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $7,937 | ($23,260) | | Net provided by (used in) investing activities | ($1,452) | $741 | | Net cash used in financing activities | ($12,620) | ($1,334) | | Decrease in cash and cash equivalents | ($6,094) | ($23,782) | Reconciliation of GAAP to Non-GAAP Measures This section provides reconciliations for key non-GAAP metrics, including Adjusted Gross Profit of $29.7 million, Adjusted EBITDA of $0.7 million, and Adjusted Net Loss of $6.0 million for Q1 2023 - Reconciliation of Net Income (Loss) to Adjusted EBITDA (USD in thousands) | | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net income (loss) | ($3,851) | $6,656 | | Adjustments... | | | | Adjusted EBITDA (Non-GAAP) | $717 | $15,694 | - Reconciliation to Adjusted Net Income (Loss) (USD in thousands) | | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net income (loss) attributable to controlling interest | ($3,778) | $6,228 | | Adjustments... | | | | Adjusted net income (loss) (Non-GAAP) | ($6,042) | $4,698 | | Adjusted earning (loss) per share | ($0.17) | $0.14 |