Business Wire | Feb 24, 2021 07:00AM EST

Caesarstone Reports Fourth Quarter and Full Year 2020 Financial Results

Feb. 24, 2021

MP MENASHE, Israel--(BUSINESS WIRE)--Feb. 24, 2021--Caesarstone Ltd. (NASDAQ: CSTE), a leading developer and manufacturer of high-quality engineered surfaces, today reported financial results for its fourth quarter and full year ended December 31, 2020.

"We made significant progress streamlining the business in 2020 as we successfully executed on our business transformation during a year marked by unprecedented global economic challenges," commented Yuval Dagim, Chief Executive Officer. "We now enter 2021 as a much stronger Company, with the right foundation in place to more effectively leverage Caesarstone's world-class brand to pursue sustainable long-term growth. This includes further implementation of innovative go-to-market initiatives developed under our Global Growth Acceleration Plan to unlock value. Our strong financial position supported the successful execution of two accretive transactions in recent months that are directly aligned with our strategy to enhance our position as a leading premium, multi-material countertop company. With our dedicated focus on driving results, we are well situated to capture additional market share."

"We were encouraged to finish 2020 with annual year-over-year improvement in gross margin and adjusted EBITDA margin," added Ophir Yakovian, Chief Financial Officer. "Following two quarters of significant cost cutting, we increased operating expenses to a more normalized level to support our brand and future growth. Caesarstone's strong balance sheet enabled us to successfully weather the challenges of 2020 and to further invest in accretive future growth. We are happy with our 2020 operating cash flow of $47.6 million and our significant net cash position(*) of $110.6 million that provides us with the confidence we can execute on our plan in 2021, to produce strong long-term returns for our shareholders."

(*) Cash position is defined as cash and cash equivalents and short-term bank deposits and long and short-term investment in marketable securities less debt from financial institutions.

Fourth Quarter 2020 Results

Revenue in the fourth quarter of 2020 grew 2.3% to $136.9 million compared to $133.9 million in the prior year quarter. On a constant currency basis, fourth quarter revenue was slightly lower by 0.4% year-over-year, due primarily to pandemic related disruptions, particularly in the Americas region, partially offset by the contribution from the Lioli acquisition and growth in all other regions.

Gross margin in the fourth quarter improved 200 basis points to 28.1% compared to 26.1% in the prior year quarter. Adjusted gross margin in the fourth quarter was 28.6% compared to 26.4% in the prior year quarter. The year-over-year improvement in gross margin mainly reflects lower raw material costs, more favorable currency exchange rates, better product mix, and improved efficiency partly offset by the impact of lower sales volume, lower sale prices and less favorable regional mix.

Operating expenses in the fourth quarter were $30.4 million, or 22.2% of revenue, compared to $34.5 million, or 25.8% of revenue in the prior year quarter. Excluding legal settlements and loss contingencies, operating expenses were 21.2% of revenue, compared to 20.4% in the prior year quarter, mainly due to increased investments to support the Company's growth initiatives.

Operating income grew to $8.1 million compared to operating income of $0.5 million in the prior year quarter. The year-over-year growth mainly reflects higher gross margin and lower legal settlements and loss contingencies.

Adjusted EBITDA, which excludes expenses for share-based compensation, legal settlements and loss contingencies and for non-recurring items, grew 19.1% year-over-year to $18.8 million in the fourth quarter, representing a margin of 13.7%. This compares to adjusted EBITDA of $15.7 million, representing a margin of 11.8%, in the prior year quarter. The year-over-year margin improvement primarily reflects the higher gross margin.

Finance (income) expenses in the fourth quarter were $8.6 million compared to finance income of $0.6 million in the prior year quarter. The difference was mainly a result of the unfavorable impact of foreign currency exchange rates.

Net loss attributable to controlling interest for the fourth quarter was $2.4 million compared to net loss of $0.3 million in the prior year quarter. Net loss per share for the fourth quarter was $0.07 compared to net loss per share of $0.01 in the prior year quarter. Adjusted diluted net income per share for the fourth quarter was $0.05 on 34.5 million shares, compared to adjusted diluted net income per share of $0.16 on 34.6 million shares in the prior year quarter.

Full Year 2020 Results

Revenue in the full year 2020 was $486.4 million compared to $546.0 million in the prior year. On a constant currency basis, 2020 revenue was lower by 11.1% year-over-year, primarily due to pandemic related disruptions impacting our business since the second quarter of 2020.

Gross margin in 2020 expanded to 27.5% compared to 27.2% in the prior year. Adjusted gross margin in 2020 was 27.7%, compared to 27.3% in the prior year. The higher adjusted gross margin mainly reflects improved efficiency, lower raw material costs and improved product mix partly offset by the impact of lower sales volume, lower sale prices and less favorable regional mix.

Operating expenses in 2020 were $111.4 million, or 22.9% of revenue compared to $124.0 million, or 22.7% of revenue in the prior year. Excluding legal settlements and loss contingencies, operating expenses were 21.6% of revenue, compared to 20.4% of revenue in the prior year mainly due to lower revenues partly offset by cost cutting efforts to mitigate pandemic related impacts.

Operating income in 2020 was $22.5 million compared to $24.7 million in the prior year.

Adjusted EBITDA, which excludes expenses for share-based compensation, legal settlements and loss contingencies and for non-recurring items, was $62.1 million in 2020, representing a margin of 12.8%. This compares to adjusted EBITDA of $69.0 million, representing a margin of 12.6% in the prior year. This year-over-year margin improvement primarily reflects the higher gross margin.

Finance expenses in 2020 were $10.2 million compared to $5.6 million in the prior year. The difference was primarily a result of the adverse impact of foreign currency exchange rates.

Net income attributable to controlling interest for the full year 2020 was $7.2 million compared to net income of $12.9 million in the prior year. Diluted net income per share for 2020 was $0.21 compared to $0.37 in the prior year. Adjusted diluted net income per share for 2020 was $0.48 compared to $0.77 in the prior year.

Balance Sheet & Liquidity

The Company's balance sheet as of December 31, 2020 remained strong, including cash, cash equivalents and short-term bank deposits and short and long-term marketable securities of $133.2 million and total debt to financial institutions of $22.6 million.

Dividend

The Company's dividend policy provides for a quarterly cash dividend of up to 50% of reported net income on a year-to-date basis, less any amount already paid as dividend for the respective period (the "calculated dividend"), subject in each case to approval by the Company's board of directors. No dividend is paid if it would be less than $0.10 per share. Pursuant to the Company's dividend policy, the Company does not intend to pay a dividend for the fourth quarter of 2020, based on its reported net loss attributable to controlling interest for the period.

Outlook

The Company anticipates 2021 revenue and Adjusted EBITDA to be higher year-over-year. The company anticipates revenue to grow faster than EBITDA in 2021 mainly due to headwinds from higher shipping and raw material costs, coupled with a return to more normalized levels of sales and marketing expenses and other investments to support the Company's growth initiatives. The Company's outlook includes the investment costs associated with its Global Growth Acceleration Plan. The Company's outlook also assumes the pandemic related business restrictions will fade as the year progresses.

Webcast and Conference Call Details

The Company will host a live webcast and conference call today at 8:30 a.m. ET to discuss the results, followed by a question and answer session for the investment community. The live webcast of the call can be accessed at ir.caesarstone.com. For those unable to access the webcast, the conference call will be accessible by dialing 1-877-407-4018 (domestic) or +1-201-689-8471 (international). The toll-free Israeli number is 1 80 940 6247. Upon dialing in, please request to join the Caesarstone Fourth Quarter Earnings Call.

To listen to a telephonic replay of the conference call, dial toll-free 1-844-512-2921 (domestic) or +1-412-317-6671 (international) and enter pass code 13715282. The replay will be available beginning at 11:30 a.m. ET on Wednesday, February 24, 2021 and will last through 11:59 p.m. ET on Wednesday, March 3, 2021.

About Caesarstone

Caesarstone is a concept and lifestyle-driven company with a customer-centered approach to designing, developing, and producing high-end engineered stone countertops, used in residential and commercial buildings. Our products offer superior aesthetic appeal and perfected functionality through a distinct variety of colors, styles, textures, and finishes used in diverse countertop applications, marked by inherent longevity. Strong commitment to service has fostered growing customer loyalty in over 50 countries where the Caesarstone product collections are available: Classico, Supernatural, Metropolitan and Outdoor. For more information please visit our website: www.caesarstone.com.

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. Reconciliations of GAAP gross profit to adjusted gross profit, GAAP net income (loss) to adjusted net income (loss) and net income (loss) to Adjusted EBITDA are provided in the schedules to this release. To calculate revenues growth rates that exclude the impact of changes in foreign currency exchange rates, the Company converts actual reported results from local currency to U.S. dollars using constant foreign currency exchange rates in the current and comparable period. 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 relate to the Company's plans, objectives and expectations for future operations, including estimations relating to the impact of the COVID-19 pandemic and mitigation measures in connection thereto, expectations of the results of the Company's business optimization initiative and its projected results of operations. 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, both known or unknown. These factors include, but are not limited to: the impact of the COVID-19 pandemic on end-consumers, the global economy and the Company's business and results of operations; the ability of the company to realign aspects of its business based on the business optimization initiative, the strength of the home renovation and construction sectors; intense competitive pressures; the outcome of silicosis and other bodily injury claims; regulatory requirements relating to hazards associated with exposure to silica dust; manufacturing of existing products and managing required changes in production and supply chain; economic conditions within any of our key existing markets changes in raw material prices; fluctuations in currency exchange rates; the success of our expansion efforts in the United States; unpredictability of seasonal fluctuations in revenues; disturbances to the Company's operations or the operations of its suppliers, distributors, customers or other third parties 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 forward-looking statements, whether as a result of new information, future events or otherwise.

Caesarstone Ltd. and its subsidiariesCondensed consolidated balance sheets

As ofU.S. dollars in thousands December 31, December 31, 2020 2019 (Unaudited) (Audited)ASSETS CURRENT ASSETS: Cash and cash equivalents and short-term bank $ 114,248 $ 139,372 depositsShort-term available for sale marketable 8,112 - securitiesTrade receivables, net 84,822 78,282

Other accounts receivable and prepaid 26,481 34,066 expensesInventories 152,073 122,686

Total current assets 385,736 374,406

LONG-TERM ASSETS: Severance pay fund 4,007 3,475

Other long-term receivables 3,837 3,176

Deferred tax assets, net 8,359 7,881

Long-term deposits and prepaid expenses 1,675 2,887

Operating lease right-of-use assets 123,928 72,047

Long-term available for sale marketable 10,926 - securitiesProperty, plant and equipment, net 222,883 204,776

Goodwill and intangible assets, net 59,570 35,218

Total long-term assets 435,185 329,460

Total assets $ 820,921 $ 703,866

LIABILITIES AND EQUITY CURRENT LIABILITIES: Short-term bank credit $ 13,122 $ -

Trade payables 55,063 53,072

Related parties and other loans 2,221 2,212

Short term legal settlements and loss 31,039 28,300 contingenciesAccrued expenses and other liabilities 55,570 42,782

Total current liabilities 157,015 126,366

LONG-TERM LIABILITIES: Long-term loan and financing liability of 20,706 7,915 land from a related partyLegal settlements and loss contingencies 21,910 21,505 long-termDeferred tax liabilities, net 6,943

Long-term lease liabilities 112,719 64,638

Accrued severance pay 5,303 4,333

Long-term warranty provision 1,274 1,385

Total long-term liabilities 168,855 99,776

REDEEMABLE NON-CONTROLLING INTEREST 7,701 -

EQUITY: Ordinary shares 371 371

Treasury shares - at cost (39,430 ) (39,430 )

Additional paid-in capital 160,083 157,225

Capital fund related to non-controlling (5,587 ) (5,587 )interestAccumulated other comprehensive loss 1,083 (3,288 )

Retained earnings 370,830 368,433

Total equity 487,350 477,724

Total liabilities and equity $ 820,921 $ 703,866

Caesarstone Ltd. and its subsidiaries Condensed consolidated statements of income

Three months endedDecember 31,Twelve months endedDecember 31,U.S. dollars in thousands (except per share data)

2020

2019

2020

2019

(Unaudited)(Audited)(Unaudited)(Audited)Revenues$ 136,896

$ 133,867

$ 486,412

$ 545,974

Cost of revenues98,381

98,884

352,470

397,335

Gross profit38,515

34,983

133,942

148,639

Operating expenses:Research and development1,501

962

3,974

4,146

Marketing and selling17,752

16,698

62,047

66,770

General and administrative9,779

9,625

39,081

40,681

Legal settlements and loss contingencies, net1,392

7,201

6,319

12,359

Total operating expenses30,424

34,486

111,421

123,956

Operating income8,091

497

22,521

24,683

Finance (income) expenses, net8,613

(622)

10,199

5,578

Income (loss) before taxes(522)

1,119

12,322

19,105

Taxes on income1,459

1,394

4,700

6,243

Net income (loss)$ (1,981)

$ (275)

$ 7,622

$ 12,862

Net Income attributable to non-controlling interest(404)

-

(404)

-

Net income (loss) attributable to controlling interest$ (2,385)

$ (275)

$ 7,218

$ 12,862

Basic net income (loss) per ordinary share$ (0.07)

$ (0.01)

$ 0.21

$ 0.37

Diluted net income (loss) per ordinary share$ (0.07)

$ (0.01)

$ 0.21

$ 0.37

Weighted average number of ordinary shares used in computing basic income (loss) per ordinary share34,436,345

34,397,410

34,419,129

34,383,895

Weighted average number of ordinary shares used in computing diluted income (loss) per ordinary share34,436,345

34,397,410

34,473,911

34,459,599

Caesarstone Ltd. and its subsidiariesCondensed consolidated statements of income

Three months ended Twelve months ended December 31, December 31,U.S. dollars inthousands (except per 2020 2019 2020 2019share data)

(Unaudited) (Audited) (Unaudited) (Audited) Revenues $ 136,896 $ 133,867 $ 486,412 $ 545,974

Cost of revenues 98,381 98,884 352,470 397,335

Gross profit 38,515 34,983 133,942 148,639

Operating expenses:Research and 1,501 962 3,974 4,146developmentMarketing and selling 17,752 16,698 62,047 66,770

General and 9,779 9,625 39,081 40,681administrativeLegal settlements and 1,392 7,201 6,319 12,359loss contingencies, net Total operating 30,424 34,486 111,421 123,956expenses Operating income 8,091 497 22,521 24,683

Finance (income) 8,613 (622) 10,199 5,578expenses, net Income (loss) before (522) 1,119 12,322 19,105taxesTaxes on income 1,459 1,394 4,700 6,243

Net income (loss) $ (1,981) $ (275) $ 7,622 $ 12,862

Net Income attributable (404) - (404) -to non-controllinginterest Net income (loss) $ (2,385) $ (275) $ 7,218 $ 12,862attributable tocontrolling interestBasic net income (loss) $ (0.07) $ (0.01) $ 0.21 $ 0.37per ordinary shareDiluted net income $ (0.07) $ (0.01) $ 0.21 $ 0.37(loss) per ordinaryshareWeighted average numberof ordinary shares used 34,436,345 34,397,410 34,419,129 34,383,895in computing basicincome (loss) perordinary shareWeighted average numberof ordinary shares used 34,436,345 34,397,410 34,473,911 34,459,599in computing dilutedincome (loss) perordinary shareCaesarstone Ltd. and its subsidiariesSelected Condensed consolidated statements of cash flowsTwelve months endedDecember 31,U.S. dollars in thousands2020

2019

(Unaudited)(Audited)Cash flows from operating activities:Net income$

7,622

$

12,862

Adjustments required to reconcile net income to net cash provided by operating activities:Depreciation and amortization29,460

28,587

Share-based compensation expense2,858

3,632

Accrued severance pay, net(14

)

(246

)

Changes in deferred tax, net(895

)

(1,509

)

Capital loss340

326

Legal settlemnets and loss contingencies, net6,319

12,359

Decrease (increase) in trade receivables6,070

(5,032

)

Decrease (increase) in other accounts receivable and prepaid expenses9,318

(6,346

)

Decrerase in inventories313

35,303

Decrease in trade payables(17,938

)

(6,663

)

Increase (decrease) in warranty provision(371

)

69

Changes in right of use assets(26,738

)

1,319

Changes in lease liabilities30,710

2,602

Amortization of premium and accretion of discount on marketable securities, net161

-

Changes in Accrued interest related to Marketable Securities(1

)

-

Increase in accrued expenses and other liabilities including related parties404

5,786

Net cash provided by operating activities47,618

83,049

Cash flows from investing activities:Net cash paid for acquisitions(28,962

)

-

Purchase of property, plant and equipment(19,824

)

(23,590

)

Proceeds from sale of property, plant and equipment13

66

Investment in marketable securities(19,185

)

-

Increase in long term deposits(347

)

(63

)

Net cash used in investing activities(68,305

)

(23,587

)

Cash flows from financing activities:Dividend paid(4,821

)

(5,160

)

Changes in short-term bank credit and loans, net(18

)

(7,771

)

Repayment of a financing leaseback related to Bar-Lev transaction(1,245

)

(1,196

)

Net cash used in financing activities(6,084

)

(14,127

)

Effect of exchange rate differences on cash and cash equivalents1,647

475

Increase (decrease) in cash and cash equivalents and short-term bank deposits(25,124

)

45,810

Cash and cash equivalents and short-term bank deposits at beginning of the period139,372

93,562

Cash and cash equivalents and short-term bank deposits at end of the period$

114,248

$

139,372

Non - cash investing:Changes in trade payables balances related to purchase of fixed assets(356

)

(3,235

)

Caesarstone Ltd. and its subsidiariesSelected Condensed consolidated statements of cash flows

Twelve months ended December 31,U.S. dollars in thousands 2020 2019

(Unaudited) (Audited)Cash flows from operating activities: Net income $ 7,622 $ 12,862

Adjustments required to reconcile net income tonet cash provided by operating activities:Depreciation and amortization 29,460 28,587

Share-based compensation expense 2,858 3,632

Accrued severance pay, net (14 ) (246 )

Changes in deferred tax, net (895 ) (1,509 )

Capital loss 340 326

Legal settlemnets and loss contingencies, net 6,319 12,359

Decrease (increase) in trade receivables 6,070 (5,032 )

Decrease (increase) in other accounts receivable 9,318 (6,346 )and prepaid expensesDecrerase in inventories 313 35,303

Decrease in trade payables (17,938 ) (6,663 )

Increase (decrease) in warranty provision (371 ) 69

Changes in right of use assets (26,738 ) 1,319

Changes in lease liabilities 30,710 2,602

Amortization of premium and accretion of discount 161 - on marketable securities, netChanges in Accrued interest related to Marketable (1 ) - SecuritiesIncrease in accrued expenses and other 404 5,786 liabilities including related parties Net cash provided by operating activities 47,618 83,049

Cash flows from investing activities: Net cash paid for acquisitions (28,962 ) -

Purchase of property, plant and equipment (19,824 ) (23,590 )

Proceeds from sale of property, plant and 13 66 equipmentInvestment in marketable securities (19,185 ) -

Increase in long term deposits (347 ) (63 )

Net cash used in investing activities (68,305 ) (23,587 )

Cash flows from financing activities: Dividend paid (4,821 ) (5,160 )

Changes in short-term bank credit and loans, net (18 ) (7,771 )

Repayment of a financing leaseback related to (1,245 ) (1,196 )Bar-Lev transaction Net cash used in financing activities (6,084 ) (14,127 )

Effect of exchange rate differences on cash and 1,647 475 cash equivalents Increase (decrease) in cash and cash equivalents (25,124 ) 45,810 and short-term bank depositsCash and cash equivalents and short-term bank 139,372 93,562 deposits at beginning of the period Cash and cash equivalents and short-term bank $ 114,248 $ 139,372 deposits at end of the period Non - cash investing:Changes in trade payables balances related to (356 ) (3,235 )purchase of fixed assets Caesarstone Ltd. and its subsidiariesThree months endedDecember 31,Twelve months endedDecember 31,U.S. dollars in thousands2020

2019

2020

2019

(Unaudited)(Unaudited)Reconciliation of Gross profit to Adjusted Gross profit:Gross profit$

38,515

$

34,983

$

133,942

$

148,639

Share-based compensation expense (a)63

10

416

285

Non-recurring import related income-

-

-

(1,501

)

Amortization of assets related to acquisitions529

-

529

-

Other non-recurring items (b)-

294

-

1,661

Adjusted Gross profit (Non-GAAP)$

39,107

$

35,287

$

134,887

$

149,084

Caesarstone Ltd. and its subsidiaries Three months ended Twelve months ended December 31, December 31,U.S. dollars in thousands 2020 2019 2020 2019

(Unaudited) (Unaudited)Reconciliation of Gross profit toAdjusted Gross profit:Gross profit $ 38,515 $ 34,983 $ 133,942 $ 148,639

Share-based compensation expense 63 10 416 285 (a)Non-recurring import related income - - - (1,501 )

Amortization of assets related to 529 - 529 - acquisitionsOther non-recurring items (b) - 294 - 1,661

Adjusted Gross profit (Non-GAAP) $ 39,107 $ 35,287 $ 134,887 $ 149,084

(a) Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the Company.

(b) In 2019, relates mainly to one time amortization of machinery equipment with no future alternative use, and one time inventory write down due to discontinuation of certain product group manufacturing.

(a) Share-based compensation includes expenses related to stock optionsand restricted stock units granted to employees and directors of theCompany.

(b) In 2019, relates mainly to one time amortization of machinery equipmentwith no future alternative use, and one time inventory write down due todiscontinuation of certain product group manufacturing.

Caesarstone Ltd. and its subsidiariesThree months endedDecember 31,Twelve months endedDecember 31,U.S. dollars in thousands2020

2019

2020

2019

(Unaudited)(Unaudited)Reconciliation of Net Income (loss) to Adjusted EBITDA:Net income (loss)$

(1,981

)

$

(275

)

$

7,622

$

12,862

Finance (income) expenses, net8,613

(622

)

10,199

5,578

Taxes on income1,459

1,394

4,700

6,243

Depreciation and amortization related to acquisitions8,300

6,970

29,460

28,587

Legal settlements and loss contingencies, net (a)1,392

7,201

6,319

12,359

Share-based compensation expense (b)523

779

2,858

3,632

Non-recurring import related income-

-

-

(1,501

)

Acquisitions related expenses444

-

921

-

Other non-recurring items (c)-

294

-

1,286

Adjusted EBITDA (Non-GAAP)$

18,750

$

15,741

$

62,079

$

69,046

(a) Consists of legal settlements expenses and loss contingencies, net, related to product liability claims and other adjustments to on-going legal claims, including related legal fees. (b) Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the Company. (c) In 2019, relates mainly to non-recurring expenses related to North American region establishment, one time charge related to reduction in headcount and certain activities including discontinuation of certain product group manufacturing.

Caesarstone Ltd. and its subsidiaries Three months ended Twelve months ended December 31, December 31,U.S. dollars in thousands 2020 2019 2020 2019

(Unaudited) (Unaudited)Reconciliation of Net Income(loss) to Adjusted EBITDA:Net income (loss) $ (1,981 ) $ (275 ) $ 7,622 $ 12,862

Finance (income) expenses, net 8,613 (622 ) 10,199 5,578

Taxes on income 1,459 1,394 4,700 6,243

Depreciation and amortization 8,300 6,970 29,460 28,587 related to acquisitionsLegal settlements and loss 1,392 7,201 6,319 12,359 contingencies, net (a)Share-based compensation expense 523 779 2,858 3,632 (b)Non-recurring import related - - - (1,501 )incomeAcquisitions related expenses 444 - 921 -

Other non-recurring items (c) - 294 - 1,286

Adjusted EBITDA (Non-GAAP) $ 18,750 $ 15,741 $ 62,079 $ 69,046

(a) Consists of legal settlements expenses and loss contingencies, net, related to product liability claims and other adjustments to on-going legal claims, including related legal fees. (b) Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the Company. (c) In 2019, relates mainly to non-recurring expenses related to North American region establishment, one time charge related to reduction in headcount and certain activities including discontinuation of certain product group manufacturing.

Caesarstone Ltd. and its subsidiaries

Three months ended Twelve months ended December 31, December 31,U.S. dollars in thousands (except 2020 2019 2020 2019 per share data) (Unaudited) (Unaudited)Reconciliation of net income(loss) attributable to controllinginterest to adjusted net incomeattributable to controllinginterest:Net income (loss) attributable to $ (2,385 ) $ (275 ) $ 7,218 $ 12,862 controlling interestLegal settlements and loss 1,392 7,201 6,319 12,359 contingencies, net (a)Amortization of assets related to 446 - 446 - acquisitions, net of taxShare-based compensation expense 523 779 2,858 3,632 (b)Non cash revaluation of lease 3,177 266 3,189 3,615 liabilities (c)Non-recurring import related - - - (1,501 )income (d)Acquisitions related expenses 444 - 921 -

Other non-recurring items (e) - 294 - 2,486

Total adjustments 5,982 8,540 13,733 20,591

Less tax on non-tax adjustments 1,955 2,791 4,488 6,729 (f)Total adjustments after tax 4,027 5,749 9,245 13,862

Adjusted net income attributable to $ 1,642 $ 5,474 $ 16,463 $ 26,724 controlling interest (Non-GAAP)Adjusted diluted EPS (g) $ 0.05 $ 0.16 $ 0.48 $ 0.77

(a) Consists of legal settlements expenses and loss contingencies, net, related to product liability claims and other adjustments to on-going legal claims, including related legal fees. (b) Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the Company. (c) Exchange rate diffrences deriving from revaluation of lease contracts in accoradance with FASB ASC 842. (d) In 2019, relates mainly to non-recurring import related expenses and relocation expenses of Caesarstone USA headquarters, the Company's subsidiary. (e) In 2019, relates to non-recurring expenses related to North American region establishment, one time charge related to reduction in headcount and certain activities including discontinuation of certain product group manufacturing and one time amortization of machinery equipment with no future alternative use. (f) Tax adjustments for the three and twelve months ended December 31, 2020, based on the effective tax rates of the comparative periods. (g) In calculating adjusted diluted (Non-GAAP) EPS for the three and twelve months ended December 31, 2020, the diluted weighted average number of shares outstanding excludes the effects of share-based compensation expense in accordance with FASB ASC 718.

Caesarstone Ltd. and its subsidiariesGeographic breakdown of revenues by region Three months ended Twelve months ended December 31, December 31,U.S. dollars in thousands 2020 2019 2020 2019

(Unaudited) (Unaudited) USA $ 53,618 $ 64,659 $ 207,496 $ 250,471

Canada 20,325 20,575 72,492 85,979

Latin America 1,387 735 2,149 4,115

America's 75,330 85,969 282,137 340,565

Australia 29,953 26,002 103,587 108,149

Asia 7,122 3,931 14,566 15,514

APAC 37,075 29,933 118,153 123,663

EMEA 14,408 9,463 45,201 43,054

Israel 10,083 8,502 40,921 38,692

Total Revenues $ 136,896 $ 133,867 $ 486,412 $ 545,974

Caesarstone Ltd. and its subsidiariesGeographic breakdown of revenues by region - Supplemental data

Three months endedU.S. dollars in thousands12/31/20209/30/20206/30/20203/31/202012/31/20199/30/20196/30/20193/30/201912/31/20189/30/20186/30/2018(Unaudited)USA$

53,618

$

52,097

$

41,726

$

60,055

$

64,659

$

64,805

$

64,590

$

56,417

$

60,200

$

61,933

$

60,358

Canada20,325

19,174

14,435

18,558

20,575

21,881

23,341

20,178

23,834

25,140

27,349

Latin America1,387

124

132

506

735

1,434

1,351

596

1,212

1,635

1,738

America's75,330

71,395

56,293

79,119

85,969

88,120

89,282

77,191

85,246

88,708

89,445

Australia29,953

27,746

23,534

22,354

26,000

28,642

28,294

25,214

33,484

33,968

34,731

Asia7,122

2,881

1,732

2,831

3,932

3,675

3,311

4,596

4,929

4,189

4,221

APAC37,075

30,627

25,266

25,185

29,932

32,317

31,605

29,810

38,413

38,157

38,952

EMEA14,408

11,422

8,031

11,340

9,464

11,719

11,418

10,455

9,954

11,115

11,721

Israel10,083

10,478

9,447

10,913

8,502

10,683

8,766

10,741

9,268

9,709

9,125

Total Revenues$

136,896

$

123,922

$

99,037

$

126,557

$

133,867

$

142,839

$

141,071

$

128,197

$

142,881

$

147,689

$

149,243

Caesarstone Ltd. and its subsidiariesGeographic breakdown of revenues by region - Supplemental data

Three months endedU.S. dollars in 12/31/ 9/30/2020 6/30/ 3/31/2020 12/31/ 9/30/2019 6/30/2019 3/30/2019 12/31/ 9/30/2018 6/30/2018thousands 2020 2020 2019 2018 (Unaudited) USA $ 53,618 $ 52,097 $ 41,726 $ 60,055 $ 64,659 $ 64,805 $ 64,590 $ 56,417 $ 60,200 $ 61,933 $ 60,358

Canada 20,325 19,174 14,435 18,558 20,575 21,881 23,341 20,178 23,834 25,140 27,349

Latin America 1,387 124 132 506 735 1,434 1,351 596 1,212 1,635 1,738

America's 75,330 71,395 56,293 79,119 85,969 88,120 89,282 77,191 85,246 88,708 89,445

Australia 29,953 27,746 23,534 22,354 26,000 28,642 28,294 25,214 33,484 33,968 34,731

Asia 7,122 2,881 1,732 2,831 3,932 3,675 3,311 4,596 4,929 4,189 4,221

APAC 37,075 30,627 25,266 25,185 29,932 32,317 31,605 29,810 38,413 38,157 38,952

EMEA 14,408 11,422 8,031 11,340 9,464 11,719 11,418 10,455 9,954 11,115 11,721

Israel 10,083 10,478 9,447 10,913 8,502 10,683 8,766 10,741 9,268 9,709 9,125

Total Revenues $ 136,896 $ 123,922 $ 99,037 $ 126,557 $ 133,867 $ 142,839 $ 141,071 $ 128,197 $ 142,881 $ 147,689 $ 149,243

Year-over-year % change12/31/20209/30/20206/30/20203/31/202012/31/20199/30/20196/30/2019(Unaudited)USA-17.1

%

-19.6

%

-35.4

%

6.4

%

7.4

%

4.6

%

7.0

%

Canada-1.2

%

-12.4

%

-38.2

%

-8.0

%

-13.7

%

-13.0

%

-14.7

%

Latin America88.8

%

-91.4

%

-90.2

%

-15.1

%

-39.4

%

-12.3

%

-22.3

%

America's-12.4

%

-19.0

%

-36.9

%

2.5

%

0.8

%

-0.7

%

-0.2

%

Australia15.2

%

-3.1

%

-16.8

%

-11.3

%

-22.3

%

-15.7

%

-18.5

%

Asia81.1

%

-21.6

%

-47.7

%

-38.4

%

-20.2

%

-12.3

%

-21.5

%

APAC23.9

%

-5.2

%

-20.1

%

-15.5

%

-22.1

%

-15.3

%

-18.9

%

EMEA52.2

%

-2.5

%

-29.7

%

8.5

%

-4.9

%

5.4

%

-2.6

%

Israel18.6

%

-1.9

%

7.8

%

1.6

%

-8.3

%

10.0

%

-3.9

%

Total Revenues2.3

%

-13.2

%

-29.8

%

-1.3

%

-6.3

%

-3.3

%

-5.5

%

Year-over-year % change in constant currency (*)12/31/20209/30/20206/30/20203/31/202012/31/20199/30/20196/30/2019(Unaudited)USA-17.1

%

-19.6

%

-35.4

%

6.4

%

7.4

%

4.6

%

7.0

%

Canada-2.4

%

-11.7

%

-36.0

%

-7.1

%

-13.6

%

-12.1

%

-11.6

%

Latin America88.7

%

-91.3

%

-90.2

%

-15.2

%

-39.4

%

-12.3

%

-22.3

%

America's-12.7

%

-18.8

%

-36.4

%

2.7

%

0.9

%

-0.4

%

0.7

%

Australia7.9

%

-7.1

%

-11.5

%

-3.3

%

-18.2

%

-10.0

%

-12.0

%

Asia80.7

%

-21.2

%

-45.9

%

-37.1

%

-14.7

%

-8.8

%

-18.6

%

APAC17.5

%

-8.7

%

-15.1

%

-8.5

%

-17.8

%

-9.9

%

-12.7

%

EMEA45.8

%

-5.9

%

-26.9

%

11.4

%

-4.4

%

10.9

%

2.8

%

Israel9.4

%

-4.5

%

4.5

%

-1.5

%

-14.0

%

7.8

%

-3.5

%

Total Revenues-0.4

%

-14.4

%

-28.3

%

0.5

%

-5.5

%

-1.5

%

-2.9

%

Year-over-year % change 12/31/ 9/30/ 6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 2020 2020 2020 2020 2019 2019 2019 (Unaudited) USA -17.1 % -19.6 % -35.4 % 6.4 % 7.4 % 4.6 % 7.0 %

Canada -1.2 % -12.4 % -38.2 % -8.0 % -13.7 % -13.0 % -14.7 %

Latin 88.8 % -91.4 % -90.2 % -15.1 % -39.4 % -12.3 % -22.3 %AmericaAmerica's -12.4 % -19.0 % -36.9 % 2.5 % 0.8 % -0.7 % -0.2 %

Australia 15.2 % -3.1 % -16.8 % -11.3 % -22.3 % -15.7 % -18.5 %

Asia 81.1 % -21.6 % -47.7 % -38.4 % -20.2 % -12.3 % -21.5 %

APAC 23.9 % -5.2 % -20.1 % -15.5 % -22.1 % -15.3 % -18.9 %

EMEA 52.2 % -2.5 % -29.7 % 8.5 % -4.9 % 5.4 % -2.6 %

Israel 18.6 % -1.9 % 7.8 % 1.6 % -8.3 % 10.0 % -3.9 %

Total 2.3 % -13.2 % -29.8 % -1.3 % -6.3 % -3.3 % -5.5 %Revenues Year-over-year % change in constant currency (*) 12/31/ 9/30/ 6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 2020 2020 2020 2020 2019 2019 2019 (Unaudited) USA -17.1 % -19.6 % -35.4 % 6.4 % 7.4 % 4.6 % 7.0 %

Canada -2.4 % -11.7 % -36.0 % -7.1 % -13.6 % -12.1 % -11.6 %

Latin 88.7 % -91.3 % -90.2 % -15.2 % -39.4 % -12.3 % -22.3 %AmericaAmerica's -12.7 % -18.8 % -36.4 % 2.7 % 0.9 % -0.4 % 0.7 %

Australia 7.9 % -7.1 % -11.5 % -3.3 % -18.2 % -10.0 % -12.0 %

Asia 80.7 % -21.2 % -45.9 % -37.1 % -14.7 % -8.8 % -18.6 %

APAC 17.5 % -8.7 % -15.1 % -8.5 % -17.8 % -9.9 % -12.7 %

EMEA 45.8 % -5.9 % -26.9 % 11.4 % -4.4 % 10.9 % 2.8 %

Israel 9.4 % -4.5 % 4.5 % -1.5 % -14.0 % 7.8 % -3.5 %

Total -0.4 % -14.4 % -28.3 % 0.5 % -5.5 % -1.5 % -2.9 %Revenues(*) Change in revenues at constant currency is calculated so that revenues can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of business performance. Change in revenues adjusted for currency are calculated by translating current period activity in local currency using the comparable prior-year period's currency conversion rate. Exchange rates used, are the representative exchange rate published by the Bank of Israel for the relevant periods. View source version on businesswire.com: https://www.businesswire.com/news/home/20210224005133/en/

CONTACT: Investor Relations: ICR, Inc. - Rodny Nacier CSTE@icrinc.com +1 646 277-1237