Caesarstone Reports First Quarter 2015 Results

  • First Quarter Revenue Up 14.2% to a First Quarter Record of $107.8 million
  • Net Income attributable to Controlling Interest Up 23.3% to $16.4 million
  • First Quarter diluted EPS up 24.3% to $0.46
  • Maintains Full Year Guidance for Sales and Adjusted EBITDA
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 first quarter ended March 31, 2015.
Revenues in the first quarter of 2015 increased by 14.2% to $107.8 million compared to $94.4 million in the same quarter of the prior year. Growth in revenues was driven primarily by a continued increase in U.S. sales, which were up 27.6% to $48.0 million compared to $37.6 million in the same period in the prior year. On a constant currency basis, first quarter revenue growth was 22.9% compared to the same period of the prior year, also reflecting strength in Canada and Australia.
Yosef Shiran, Chief Executive Officer, commented, "We are excited to see continued momentum for the Caesarstone brand, particularly in our key markets, the United States, Canada and Australia, where our growth remains strong. Caesarstone continues to be a market leader, known for quality and innovation. We are happy to announce the commencement of production at our new U.S. facility, which is currently in commissioning stage, and we look forward to seeing the benefit of our additional capacity."
Gross margin in the first quarter was 42.0% compared to 41.5% in the same period in the prior year. This year-over-year increase was driven primarily by favorable product mix, benefits of scale and improved utilization of production lines in Israel. These factors were partially offset by negative exchange rate fluctuations, start-up costs related to the U.S. manufacturing facility and continued growth in lower-margin fabrication and installation revenue in North America.
Operating expenses in the first quarter were $24.6 million, or 22.8% of revenues. This compares to the prior year first quarter level of $21.9 million, or 23.2% of revenues. The improvement compared to the prior year was primarily due to leverage associated with the revenue growth.
Operating income in the first quarter was up 20.1% to $20.7 million, representing an operating margin of 19.2%, compared to $17.3 million, an operating margin of 18.3%, in the first quarter of 2014.
Adjusted EBITDA, which excludes share-based compensation expense, increased by 15.3% to $25.5 million in the first quarter, a margin of 23.7%. This compares to adjusted EBITDA of $22.1 million, a margin of 23.4% in the first quarter of the prior year.
Finance expenses in the first quarter were $1.9 million compared to $1.6 million during the same period in the prior year. The increase was partially due to lower interest income as the Company utilized cash to fund its new U.S. production facility.
The Company reported net income attributable to controlling interest for the first quarter of 2015 of $16.4 million compared to $13.3 million in the same quarter in the prior year. Diluted net income per share for the first quarter was $0.46 on 35.5 million shares compared to $0.37 per diluted share on 35.4 million shares in the prior year's first quarter. On an adjusted basis, net income per share in the first quarter was $0.46 compared to $0.39 in the prior year.
The Company's balance sheet as of March 31, 2015 included cash, cash equivalents and short-term bank deposits of $41.1 million.
The Company's U.S. manufacturing facility in Richmond Hill, Georgia remains on track, and has begun commissioning for its first line in the U.S., with the second line in the U.S. expected to begin production in the fourth quarter of 2015. The Company increased its expected capital expenditure related to the first and second lines in its new U.S. manufacturing facility from $115 million to $130 million.
Guidance Reiterated
The Company today maintained its revenue guidance for the full year of 2015 of $515 million to $525 million and its expected range of adjusted EBITDA for the full year of $123 million to $129 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, May 6, 2015, at 8:30 a.m. ET to discuss the results of the first quarter ended March 31, 2015, followed by a question and answer session for the investment community. A live webcast of the call can be accessed at To access the call, dial toll-free 1-888-504-7963 or +1-719-325-2281 (international). Israeli participants can dial in at 1-80-924-5906. The pass code is 5813505.
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 5813505. The replay will be available beginning at 11:30 a.m. ET on May 6, 2015 and will last through 11:59 PM ET May 20, 2015.
About Caesarstone
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 (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.
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 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, particularly polymer resins and pigments; fluctuations in currency exchange rates; the success of our expansion efforts in the United States; the outcome of silicosis claims and the claim by our former quartz processor; unpredictability of seasonal fluctuations in revenues; ; delays in manufacturing if our suppliers are unable to supply raw materials; 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 forwardlooking statements, whether as a result of new information, future events or otherwise.