Caesarstone Company Overview · Caesarstone invented the engineered quartz countertop 2 in Israel:...
Transcript of Caesarstone Company Overview · Caesarstone invented the engineered quartz countertop 2 in Israel:...
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Caesarstone
Company OverviewMarch, 2019
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Disclaimer
Written and oral statements made in this presentation and responses to various questions that reflect our
views about our future performance, the Company’s financial position, business strategy and plans and
objectives of management for future operations constitute “forward-looking statements” under the Private
Securities Litigation Reform Act of 1995. These statements, which contain words such as "believe,”
“expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “will,” “may,” “should”, “plan”, “seek” and
similar expressions or references to future periods, reflect the beliefs and expectations of the Company
and are subject to risks and uncertainties, including those described under “Risk factors” in the
Company’s most recent Annual Report on Form 20-F filed with the Securities and Exchange
Commission, that may cause actual results to differ materially from the results discussed in our forward-
looking statements. These risks and uncertainties include, among other factors, 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 and other factors. These and other factors
could adversely affect the outcome and financial effects of the plans and events described herein.
These forward-looking statements are made only as of the date hereof, and neither the Company, nor
any of its respective agents, employees or advisors intend, undertake or have any duty or obligation to
supplement, amend, update or revise any of the forward-looking statements contained in this
presentation, whether as a result of new information, future events or otherwise. The information and
opinions contained in this document are provided as at the date of this presentation and are subject to
change without notice.
This presentation includes certain non-GAAP measures, which should all be considered in addition to,
and not as a substitute for, comparable GAAP measures. A reconciliation of GAAP gross profit to
adjusted gross profit, GAAP net income to adjusted EBITDA and adjusted net income are provided
below. 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. However these measures should not be considered as substitutes for GAAP measures
and may be inconsistent with similar measures presented by other companies.
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Presenting Today
Ophir Yakovian, Chief Financial Officer
Yuval Dagim, Chief Executive Officer
• Mr. Yakovian joined as CFO in 2018
• Nearly 20 years of experience in various financial and leadership roles
• Formerly served as CFO of Lumenis Ltd. (previously NASDAQ: LMNS),
Tnuva Group and Perion Network Ltd. (NASDAQ:PERI)
• Certified Public Accountant
• Mr. Dagim joined as CEO in 2018
• Over 28 years of experience in global business and leadership across
multiple industries, including building materials, consumer and construction
• Successfully spearheaded numerous organizational enhancements and
global business developments at several companies
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A Global Leader in the Attractive Quartz Surface Market
1 Source: Freedonia February 2017 study; company market share derived from company volume sales data and Freedonia global market size
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Caesarstone invented the engineered
quartz countertop;
Solid global distribution platform -
Proven track record of innovation
and sustainable growth
Diversified geographical revenue
A Global market leaderPremium brand, with superior
customer value proposition
World-class capabilities in:
Experienced and motivated
management team
Attractive
financial profile
Caesarstone surfaces are a centrepiece in millions of homes around the world
Product and the market
with ~9% global market share (by volume)1
across approximately 45 countries
with North America portion of ~58%
Manufacturing, R&D and Marketing
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Caesarstone’s Superior Value Proposition
Non Porous
Scratch Resistant
Multi-functional
Easy Fabrication
Flexible
Stain Resistant
Heat Resistant
Impact Resistant
Versatile Designs
Killer application - Superior to any natural stone
Low cost of ownership & Ever lasting beauty
Quartz received the highest overall score
among countertop materials”
Consumer Reports Magazine, USA“
With computers, quartz has supplanted granite
as the people’s choice”
The Washington post, USA “
To me, Caesarstone is where beauty
and function come together”
Mario Batali, Prominent Chef, USA“
Endorsement
You walk into a home and you see the kitchen has Caesarstone
in it. It changes the way you look at the value of that house”
Ty Pennington, TV Personality, USA“
Caesarstone - where creativity meets quality
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2018
Region
Split
Singapore
Israel
Canada
USA
Australia
UK
Leading Global Footprint with Diverse Revenue Mix
CS partners along the value chain
31 Caesarstone Direct Sales in 6 countries (DC & offices)
45 Caesarstone Distributors
relevant in the direct sales market
2018
Channels
Split
22.8% - Australia
41.5% - USA17.3% - Canada
6.9% - Israel
6.0% - Europe
5.5% - ROW10%
Indirect
distribution
90%
Direct
distribution
~240 KArchitects & Designers
~18 KKitchen & Bath
~9 KFabricators
~9 KDevelopers/builders
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World Class Manufacturing and R&D Capabilities
Leading by Innovation
3 Production sites
Caesarstone invented the engineered quartz
countertop
2 in Israel: Sdot Yam and Bar-lev – 5 lines
1 in The US, Richmond hill – 2 lines
Since then, our R&D capabilities have advanced to maintain
the company’s product line at the forefront of the industry
Our technologies, product & colors, have been a role
model to a long list of followers
The company intends to accelerate the investment in
R&D and boost the throughput of its capabilities
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A Comprehensive and Lucrative Product Offering
Our wide range
of evergreen colors
and designs
Classico
Hand-incorporated
semi-precious
stones
Concetto
Inspired by the
industrial trend
Proprietary
technology
Supernatural
Inspired by nature
Luxurious marble &
granite designs
Proprietary
technology
P r e m i u m P o s i t i o n i n g
Metropolitan
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Pioneering Innovative Designs
and Technology
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Color Leadership
Rugged Concrete 4033
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Pioneering Innovative Designs
and Colors
Proprietary Technology
Excava 4046
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Pioneering Innovative Designs
and Colors
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A Trend Setter
Cloudburst concrete 4011
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Financial Section
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Growth and Profitability
198.8
259.7296.6
356.6
447.4499.5
538.5588.1 575.9
2010 2011 2012 2013 2014 2015 2016 2017 2018
78.3104.3
127.4
162.1
189.7200.2
212.5197.2
165.5
39.4% 40.2%43.0% 45.5% 42.4%
40.1% 39.5%33.5%
28.8%
2010 2011 2012 2013 2014 2015 2016 2017 2018
50.558.8
69.4
91.7
116.6125.7 130.3
100.4
75.2
25.4%22.6% 23.4%
25.7% 26.1% 25.2% 24.2%
17.1%
13.1%
2010 2011 2012 2013 2014 2015 2016 2017 2018
¹ Adjusted net income attributable to controlling interest
29.834.8
44.0
64.0
82.583.7 81.2
49.8
36.1
15.0%13.4%
14.8%
17.9% 18.4% 16.8%15.1%
8.5%
6.3%
2010 2011 2012 2013 2014 2015 2016 2017 2018
Revenue ($mm) Adjusted Gross Profit and % Margin ($mm)
Adj. EBITDA and % Margin ($mm) Adj. Net Income and % Margin ($mm)1
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Q4’18 Financial Performance
$148.1M$142.9M
Q4'17 Q4'18
(0.7%) CCB
( 3.6%)
$46.3M$39.2M
Q4'17 Q4'18
M$
31.3% 27.4%% margin
(15.5%)
$21.0M$17.8M
Q4'17 Q4'18
14.2% 12.5%
M$
% margin
(14.9%)
(2.2%) (0.7%) 0.2% (1.3%)o Higher average cost per unit in Israel related mostly to
increased volume of differentiated products
o Adverse currency exchange impact
o Inventory and logistical inefficiencies and higher raw
material costs
o Favorable geographic and product
mix
$7.7M$7.0M
Q4'17 Q4'18
0.22$ 0.20$EPS
M$
(9.1%)
Revenue Adj. Gross Profit
Adj. EBITDA Adj. Net Income
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Thank You
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Adjusted EBITDA Reconciliation
(1) Consists of legal settlements expenses and loss contingencies, net, in 2017 related primarily to Kfar Giladi arbitration, as well as to product liability claims and other adjustments to on-going legal claims.
(2) One time bonus paid by a shareholder to Company's employees.
(3) Consists of charges to cost of goods sold for the difference between the higher carrying cost of the inventory of two of the Company's subsidiaries- Caesarstone USA's inventory at the time of its acquisition and inventory that was purchased from its
distributor and Caesarstone Australia Pty Limited's inventory that was purchased from its distributor, and the standard cost of the Company's inventory- which adversely impacts the Company's gross margins until such inventory is sold. The majority
of the inventory acquired from Caesarstone USA was sold in 2011, and the majority of the inventory acquired from the Australian distributor was sold in 2012.
(4) Share-based compensation includes expenses related to stock options and restricted stock units granted to employees of the Company. In addition, includes expenses for phantom awards granted and related payroll expenses as a result of
exercises.
(5) Consists of direct expenses related to a follow-on offering that closed in June 2014.
(6) Relates to an adjustment of provision for taxable employee fringe benefits as a result of a settlement with the Israel Tax Authority and with the National Insurance Institute of Israel.
(7) Relates mainly to non-recurring import related expenses and relocation expenses of Caesarstone USA headquarters (Company's subsidiary).
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Adjusted Net Income Attributable to Controlling Interest Reconciliation
(1) Consists of legal settlements expenses and loss contingencies, net, in 2017 related primarily to Kfar Giladi arbitration, as well as to product liability claims and other One time bonus paid by a shareholder to Company's employees.
(2) Consists of charges to cost of goods sold for the difference between the higher carrying cost of the inventory of two of the Company's subsidiaries- Caesarstone USA's inventory at the time of its acquisition and inventory that was purchased from its
distributor and Caesarstone Australia Pty Limited's inventory that was purchased from its distributor, and the standard cost of the Company's inventory- which adversely impacts the Company's gross margins until such inventory is sold. The majority
of the inventory acquired from Caesarstone USA was sold in 2011, and the majority of the inventory acquired from the Australian distributor was sold in 2012.
(3) Share-based compensation includes expenses related to stock options and restricted stock units granted to employees of the Company. In addition, includes expenses for phantom awards granted and related payroll expenses as a result of
exercises.
(4) Consists of direct expenses related to a follow-on offering that closed in June 2014.
(5) Relates to an adjustment of provision for taxable employee fringe benefits as a result of a settlement with the Israel Tax Authority and with the National Insurance Institute of Israel.
(6) Relates to an adjustment of provision for taxable employee fringe benefits as a result of a settlement with the Israeli Tax Authority and with the National Insurance Intitute of Israel.
(7) Relates mainly to non-recurring import related expenses and relocation expenses of Caesarstone USA headquarters (Company's subsidiary).
(8) Tax adjustments for the three and twelve months ended December 31, 2017 and 2016 were based on the effective tax rates for these periods, respectively.
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Adjusted Gross Profit Reconciliation
(1) Relates mainly to non-recurring import related expenses.
USD (0,000) 2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017A 2018A
Gross profit $78,288 $104,294 $127,395 $162,118 $189,651 $200,225 $212,486 $197,223 $163,414
Non- recurring items (1) $0 $0 $0 $0 $0 $0 $0 $0 $2,104
Adjusted Gross profit $78,288 $104,294 $127,395 $162,118 $189,651 $200,225 $212,486 $197,223 $165,518
% of sale 39.4% 40.2% 43.0% 45.5% 42.4% 40.1% 39.5% 33.5% 28.7%