Caesarstone Ltd. Q1 FY2025 earnings call

• Continued stabilization despite global economic headwinds, with modest sequential revenue and adjusted EBITDA improvement. - Shifted over 70% of production to global manufacturing network for flexibility and resilient gross margins. - Expect to complete Lioli Ceramica minority acquisition this quarter. - Made progress on zero crystalline silica products in Australia, with majority available and more to launch. - Addressing U.S. tariffs affecting half of revenues by optimizing supply chain and evaluating pricing adjustments. - Strong balance sheet with $85.3 million net cash, and progress on subleasing Sdot Yam facility for cash savings. - Pivot to R&D, marketing, and brand development ongoing to strengthen competitive position.

Global revenue for the first quarter was $99.6 million, down from $118.3 million in the prior year quarter. On a constant currency basis, revenue was down 14.5% year-over-year. In the U.S., sales were $49.1 million, down 19.4%, primarily due to softer residential and commercial markets. Canada sales were down 11.5% CC, Australia down ~28.2% CC mainly due to silica ban and market conditions, EMEA was up 16.4% CC, and Israel was up 13.2% CC. Gross margin in Q1 was 21.3% vs 24.5% prior year, impacted by lower volumes and product mix but partially offset by restructuring savings and production footprint improvements.

• Withdrew full year 2025 outlook due to macroeconomic pressures and U.S. tariffs. - On track to realize $10 million in incremental cost savings in 2025 from plant closures and manufacturing optimization.

• U.S. tariffs on imports affecting half of revenues, actively addressing via supply chain optimization and pricing. - Lawsuits with 357 injured persons, $50 million provision recorded, $31.6 million insurance receivable, with some claims only reasonably possible or at early stages with uncertain liability.

Q: Nice sequential improvement in margins from Q4 to Q1. Walk through how much savings flowed through and other factors in gross margin improvement.

A: Nahum said some relates to modest revenue increase, restructuring actions taken earlier, and benefits from restructuring in Q1. FX also had a negative impact but restructuring actions helped.

Q: Expect revenue to move higher as year persists?

A: Nahum said historically Q2 and Q3 are usually higher than Q1, and expect gradual increase as year progresses based on seasonality and actions taken.

Q: Tariffs on U.S. business, how to mitigate?

A: Yos said working with manufacturing partners on prices and considering price adjustments in U.S. to balance competitiveness and margins.

Q: Lawsuits, $50 million provision and insurance receivable?

A: Nahum explained $50 million provision reflects probable exposure, with only 2 U.S. claims probable in that, 18 others reasonably possible, and majority of U.S. claims at early stage with uncertain liability, and $31.6 million insurance receivable.