Caesarstone Reports 3rd Quarter 2014 Results
Caesarstone Reports Third Quarter 2014 Results
- Third Quarter Revenue Up 30.7% to a New Record of $123.3 million
- Diluted EPS of $0.75; Adjusted diluted EPS of $0.76, up 63.1%
- Raises Full Year Guidance for Revenue and Adjusted EBITDA
- Declares a Special Dividend of $0.57 per Share, Record date of November 26, 2014
MP MENASHE, Israel--(BUSINESS WIRE)-- Caesarstone Sdot-Yam Ltd. (NASDAQ:CSTE), a manufacturer of high quality engineered quartz surfaces, today reported financial results for its third quarter ended September 30, 2014.
Revenue in the third quarter of 2014 increased by 30.7% to $123.3 million compared to $94.3 million in the same quarter of the prior year. On a constant currency basis, third quarter revenue growth was 31.1% compared to the same period last year.
Growth in revenue was broad-based with strong continued increases in the United States, Australia and Canada, up 47.8%, 36.3% and 27.2%, respectively, compared to the same period in the prior year.
Yosef Shiran, Chief Executive Officer, commented, "We are pleased with our results for the third quarter in the United States, which continues to be our largest and fastest growing market, as well as in Australia and Canada. We were happy to see success this quarter from our new product, Calacatta Nuvo, which we recently launched in our key markets. Strong demand for our product offering, along with improved manufacturing throughput, contributed to our significant increase in revenue, profitability and cash flow."
Gross margin in the third quarter was 43.7% compared to 44.5% in the same period in the prior year. Significant favorable product mix and scale were offset by strong growth from IKEA, which includes lower-margin fabrication and installation revenue, as well as some impact from foreign exchange fluctuations and, to a lesser extent, raw material price increases.
Operating expenses in the third quarter were $22.7 million, or 18.4% of revenue. Benefits of scale drove this improved performance in comparison to the prior year's third quarter level of $21.1 million, or 22.4% of revenue.
Operating income in the third quarter grew by 49.3% to $31.2 million, a margin of 25.3%, compared to $20.9 million, a margin of 22.2%, in the third quarter of 2013.
Adjusted EBITDA, which excludes share-based compensation expense, the excess cost of acquired inventory and other non-recurring costs, increased by 42.4% to $35.9 million in the third quarter, a margin of 29.1%. This compares to adjusted EBITDA of $25.2 million, a margin of 26.8% in the third quarter of the prior year.
Finance income in the third quarter was $1.0 million compared to finance expense of $1.1 million during the same period in the prior year. The change was predominantly related to the impact of foreign exchange rate fluctuations.
The Company reported net income attributable to controlling interest for the third quarter of 2014 of $26.5 million compared to $16.1 million in the same quarter in the prior year. Diluted earnings per share for the third quarter were $0.75 on 35.3 million shares. This compares to $0.46 per diluted ordinary share on 35.3 million shares in the prior year's third quarter. On an adjusted basis, diluted earnings per share in the third quarter were $0.76 compared to $0.47 in the prior year.
The Company's balance sheet as of September 30, 2014 remained solid with cash and short term bank deposits of $77.7 million. The Company also noted today that it remains on schedule with respect to its capacity expansion project in Richmond Hill, Georgia for its sixth and seventh lines to begin production in the second quarter and fourth quarter of 2015, respectively. The Company also continues to prepare for further manufacturing capacity at its Richmond Hill facility to serve additional expected demand.
The Company announced today it will pay a special dividend of $0.57 per ordinary share to shareholders of record on November 26, 2014, payable on December 23, 2014. The Company believes that, due to its strong cash balance, recent operating cash flow and outlook for the business, this dividend will not affect its ability to fund its growth strategy, anticipated capital expenditures and working capital needs for the foreseeable future. The dividend payment is subject to withholding tax as discussed in the taxation section of the Company's annual report on Form 20-F for the year ended December 31, 2013.
Following the strong third quarter, the Company today increased its revenue guidance for the full year of 2014 to a new range of $445 to $450 million as compared to its prior range of $435 million to $445 million.
Additionally, the Company raised its expected range of adjusted EBITDA for the full year to $115 million to $118 million, compared to its prior expected range of $112 million to $117 million.
Conference Call Details
Yosef Shiran, the Company's Chief Executive Officer, and Yair Averbuch, the Company's Chief Financial Officer, will host a conference call today, November 5, 2014, at 8:30 a.m. ET to discuss the results of the third quarter ended September 30, 2014, followed by a question and answer session for the investment community. A live webcast of the call can be accessed at ir.caesarstone.com. To access the call, dial toll-free 1-888-539-3696 or +1-719-457-2083 (international). Israeli participants can dial in at 1-80-924-5906. The pass code is 7387896.
To listen to a telephonic replay of the conference call, dial toll-free 1-877-870-5176 or +1-858-384-5517 (international) and enter pass code 7387896. The replay will be available beginning at 11:30 a.m. ET on November 5, 2014 and will last through 11:59 PM ET November 19, 2014.
Caesarstone manufactures high quality engineered quartz surfaces, which are used in both residential and commercial buildings as countertops, vanities, wall cladding, floors and other interior surfaces. The wide variety of colors, styles, designs and textures of Caesarstone® products, along with Caesarstone's inherent characteristics such as hardness, non-porous, scratch and stain resistance and durability, provide consumers with excellent surfaces for their internal spaces which are highly competitive to granite, manufactured solid surfaces and laminate, as well as to other engineered quartz surfaces. Caesarstone's four collections of products — Classico, Supremo, Motivo and Concetto — are available in over 50 countries around the world. For more information about the Company, please visit our website www.caesarstone.com. (CSTE-E).
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. A reconciliation of GAAP net income attributable to controlling interest to adjusted net income attributable to controlling interest and net income to Adjusted EBITDA are provided in the schedules within this release. 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.
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 generally relate to the Company's plans, objectives and expectations for future operations, including its projected results of operations and the expected timing of expanding its manufacturing facilities. 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. These factors include, but are not limited to: the strength of the home renovation and construction sectors; economic conditions within any of our key existing markets; actions by our competitors; changes in raw material prices; unpredictability of seasonal fluctuations in revenue; the outcome of silicosis claims and the claim by our former quartz processor; fluctuations in currency exchange rates; delays in manufacturing if our suppliers are unable to supply raw materials; and other factors discussed under the heading "Risk Factors" in the final prospectus for our initial public offering 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.
Investor Relations Contact
+1 (203) 682-8229