Caesarstone Ltd. Q1 FY2026 earnings call

Restructuring and Manufacturing Transformation

• The company completed the full transition of quartz production from the closed Barlev facility to its global third-party manufacturing partner network; porcelain production remains at the wholly-owned Loyoli facility in India.
• Completed restructuring actions are expected to generate $22 million in annualized cash savings by 2027, bringing total cumulative annual savings since 2023 to over $100 million.
• Restructuring cash costs totaled $0.4 million in Q1 2026; an additional $3 million to $5 million in cash restructuring costs are expected for the remainder of 2026. Management is actively evaluating further cost reduction opportunities, including distribution center consolidation, to support the path to profitability.

Commercial and Regional Progress

• Australia is a top-performing region, with growing market acceptance of the company's Zero Silica ICON products driving three straight quarters of year-over-year growth, supporting the recapture of its leading market position.
• In North America, the company is implementing targeted commercial actions to improve channel productivity and strengthen key customer relationships amid ongoing macro and competitive headwinds.
• The company holds full ownership of Loyoli Ceramica for porcelain production, and remains focused on improving operational execution and commercial alignment for this long-term growth category.

Margin and Cost Optimization

• Gross margin expanded 100 basis points year-over-year despite lower revenues, confirming that restructuring actions are improving the company's earnings profile, with benefits from the flexible, asset-light production model starting to flow through financial results.
• The company has implemented a U.S. price increase to partially offset higher average import tariffs of 15%, and is working with manufacturing partners to optimize supply chains as the trade environment evolves.

Caesarstone reports Q1 2026 global revenue of $88.7 million, a 14.9% year-over-year decline on a constant currency basis, compared to $99.6 million in Q1 2025. By regional segment: 1. U.S.: Revenue of $40 million, representing approximately 45% of total global revenue, down from $49.1 million year-over-year amid persistent market softness and competitive pressure. 2. Canada: Revenue decreased 23.8% year-over-year on a constant currency basis, driven by the same market dynamics impacting the U.S. 3. Australia: Revenue of $17.1 million, representing ~19.3% of total global revenue, up from $13.8 million year-over-year, an 11.2% constant currency increase, marking the third consecutive quarter of year-over-year growth. 4. EMEA: Revenue decreased 10.3% year-over-year on a constant currency basis, primarily due to shipment timing in the indirect distributor channel, which management expects to normalize in Q2 2026; direct operations in Sweden and the UK remained stable. 5. Israel: Revenue of $4.2 million, down from $5 million year-over-year, impacted by the ongoing regional Middle East conflict. On a profitability level, gross margin reached 22.3% (up 100 basis points year-over-year), adjusted gross margin reached 23.9% (up 270 basis points year-over-year). Operating expenses totaled $39.2 million (44.1% of revenue), and adjusted EBITDA was a loss of $7.5 million, compared to a loss of $7.1 million year-over-year. As of March 31, 2026, the company held a net cash position of $50.4 million.

• The company reaffirmed that it remains on track to achieve positive adjusted EBITDA in the third quarter of 2026, assuming no material deterioration in global economic or geopolitical conditions.
• Management expects the 10.3% year-over-year revenue decline in the EMEA segment, driven by shipment timing in the indirect distributor channel, to normalize when the company moves into the second quarter of 2026.
• Cumulative annual cash savings from completed restructuring actions are projected to exceed $100 million by 2027, with the 2026 restructuring actions adding approximately $22 million in annualized savings.
• Additional cash restructuring costs of $3 million to $5 million are expected for the remainder of 2026, tied to ongoing restructuring activities.

• Macroeconomic headwinds and intense competitive pressures are negatively impacting demand, particularly across the North American market, leading to lower-than-prior-year revenues.
• The ongoing regional conflict in the Middle East has reduced demand in Israel, and broader geopolitical volatility has increased product and sea freight costs, which are expected to negatively impact results primarily in the second half of 2026.
• Evolving U.S. trade policy creates material cost pressure: the company currently faces an average 15% tariff on imports to the U.S., and a pending ITC ruling on quartz imports could impose additional tariffs as high as 40% for out-of-quota imports, with a final decision expected within 60 days of the call.
• The company faces 711 active silica-related injury lawsuits across Israel, Australia, and the U.S., with ongoing coverage dispute proceedings with certain insurance carriers; the timing and ultimate financial outcome of these legal matters remain uncertain.
• While a U.S. legislative bill limiting industry liability for third-party fabrication-related injuries is viewed constructively by management, it remains in an early stage with an uncertain outcome.
• External uncertainty around macroeconomic conditions, consumer confidence, and housing market activity continues to pressure overall global revenue.

There were no questions asked or answered during the portion of the conference call transcript provided.