Business Wire | Nov 4, 2020 07:00AM EST

Caesarstone Reports Third Quarter 2020 Financial Results

Nov. 04, 2020

MP MENASHE, Israel--(BUSINESS WIRE)--Nov. 04, 2020--Caesarstone Ltd. (NASDAQ: CSTE), a leading developer and manufacturer of high-quality engineered surfaces, today reported financial results for its third quarter ended September 30, 2020.

"I am encouraged by the ongoing disciplined execution of our Global Growth Acceleration Plan to improve our business over the long-term," commented Yuval Dagim, Chief Executive Officer. "The benefits of our team's collective efforts are emerging, with visible progress in our third quarter results, as we realized our highest adjusted EBITDA and margin in over two years. In addition, we are encouraged with the improvement in year-over-year sales trends compared to the second quarter 2020. Most importantly, we delivered this performance while maintaining the health and safety of our employees, customers and partners across the globe."

Mr. Dagim continued, "We have also kept a sharp focus on executing strategic investments to further solidify our position as a leading premium, multi-material countertop Company. Our recent majority stake acquisition of Lioli Ceramica is directly aligned with this strategy that leverages our brand, distribution, sales and global scale to efficiently enlarge our addressable market. As we integrate Lioli and make additional progress on other initiatives, we remain confident in the prospects for our business as the recovery continues."

Ophir Yakovian, Chief Financial Officer, added, "Our diligent efforts to improve our operations allowed us to generate further cost savings and create additional efficiencies to mitigate the COVID-19 pandemic related business disruptions, primarily in our Americas region. We are extremely pleased with our ability to improve our results while carefully managing our working capital to produce strong cash flow from operations of $28.2 million during the third quarter. Looking at the remainder of the year, our significant cash position (*) in excess of $155 million provides us with the capacity to continue to accelerate initiatives to transform our business."

(*) 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.

Third Quarter 2020 Results

Revenue in the third quarter of 2020 was $123.9 million compared to $142.8 million in the prior year quarter. On a constant currency basis, third quarter revenue was lower by 14.4% year-over-year, driven primarily by COVID-19 pandemic related business disruptions, particularly in the Americas region.

Gross margin in the third quarter was 31.4% compared to 29.8% in the prior year quarter. Adjusted gross margin in the second quarter was 31.4% compared to 29.9% in the prior year quarter. The year-over-year improvement in gross margin mainly reflects improved product mix, lower raw material costs and improved efficiency partly offset by the impact of lower sales volume, lower sale prices and less favorable regional mix.

Operating expenses in the third quarter were $23.8 million, or 19.2% of revenue, compared to $29.7 million, or 20.8% of revenue in the prior year quarter. Excluding legal settlements and loss contingencies, operating expenses improved to 18.8% of revenue, compared to 19.5% in the prior year quarter mainly due to lower marketing and sales expenses combined with lower general and administrative expenses.

Operating income in the third quarter was $15.0 million compared to operating income of $12.9 million in the prior year quarter. The year-over-year difference mainly reflects higher gross margin and lower operating expenses.

Adjusted EBITDA, which excludes expenses for share-based compensation, legal settlements and loss contingencies and for non-recurring items, was $23.7 million in the third quarter, representing a margin of 19.1%. This compares to adjusted EBITDA of $22.5 million, representing a margin of 15.8%, in the prior year quarter. The year-over-year margin improvement primarily reflects higher gross margin and lower operating expenses as a percentage of revenue.

Finance (income) expenses in the third quarter was $0.1 million income compared to finance expenses of $4.1 million in the prior year quarter. The difference was mainly a result of the favorable impact of foreign currency exchange rates.

Net income for the third quarter was $12.8 million compared to net income of $7.1 million in the prior year quarter. Diluted net income per share for the third quarter was $0.37 compared to diluted net income per share of $0.21 in the prior year quarter. Adjusted diluted net income per share for the third quarter was $0.41 on 34.5 million shares, compared to adjusted diluted net income per share of $0.29 on 34.6 million shares in the prior year quarter.

Balance Sheet & Liquidity

The Company's balance sheet as of September 30, 2020 remained strong, including cash, cash equivalents and short-term bank deposits and short and long-term marketable securities of $155.7 million with no debt from financial institutions. The Company believes it has a strong financial position and the flexibility required to support its global operations and strategic plan.

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.

In accordance with the Company's dividend policy, the board of directors declared a cash dividend of $0.14 per share for the third quarter and the nine months ended September 30, 2020. The dividend will be paid on December 9, 2020 to shareholders of record as of November 18, 2020. The dividend payment is subject to withholding tax of 20%.

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 Third 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 13711696. The replay will be available beginning at 11:30 a.m. ET on Wednesday, November 4, 2020 and will last through 11:59 p.m. ET on Wednesday, November 11, 2020.

About Caesarstone

Caesarstone is a concept and lifestyle-driven company with a customer-centered approach to designing, developing, and producing high-end engineered surfaces 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 countertops, vanities, wall cladding, floors, and other interior surfaces. Marked by their inherent longevity characteristics such as non-porousness, scratch and stain resistance, and durability, the company's product umbrella offers a highly desirable alternative to other surfaces. Strong commitment to service has fostered growing customer loyalty in over 50 countries where the five distinct Caesarstone product collections are available: Classico, Supernatural, Metropolitan, Concetto 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 September 30, December 31, 2020 2019 (Unaudited) (Audited)ASSETS CURRENT ASSETS: Cash and cash equivalents and short-term $ 135,975 $ 139,372 bank depositsShort-term available for sale marketable 10,325 - securitiesTrade receivables, net 68,671 78,282

Other accounts receivable and prepaid 27,374 34,066 expensesInventories 127,487 122,686

Total current assets 369,832 374,406

LONG-TERM ASSETS: Severance pay fund 3,639 3,475

Other long-term receivables 3,398 3,176

Deferred tax assets, net 7,929 7,881

Long-term deposits and prepaid expenses 4,115 2,887

Operating lease right-of-use assets 78,287 72,047

Long-term available for sale marketable 9,432 - securitiesProperty, plant and equipment, net 198,610 204,776

Goodwill 35,425 35,218

Total long-term assets 340,835 329,460

Total assets $ 710,667 $ 703,866

LIABILITIES AND EQUITY CURRENT LIABILITIES: Trade payables 39,951 53,072

Related party and other loan 2,210 2,212

Short term legal settlements and loss 23,276 28,300 contingenciesAccrued expenses and other liabilities 44,848 42,782

Total current liabilities 110,285 126,366

LONG-TERM LIABILITIES: Long-term loan and financing liability of 6,914 7,915 land from a related partyLegal settlements and loss contingencies 27,661 21,505 long-termLong-term lease liabilities 69,385 64,638

Accrued severance pay 4,513 4,333

Long-term warranty provision 1,267 1,385

Total long-term liabilities 109,740 99,776

EQUITY: Ordinary shares 371 371

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

Additional paid-in capital 159,561 157,225

Capital fund related to non-controlling (5,587 ) (5,587 )interestAccumulated other comprehensive loss (2,309 ) (3,288 )

Retained earnings 378,036 368,433

Total equity 490,642 477,724

Total liabilities and equity $ 710,667 $ 703,866

Caesarstone Ltd. and its subsidiaries

Condensed consolidated statements of income

Three months endedSeptember 30,Nine months endedSeptember 30,U.S. dollars in thousands (except per share data)2020

2019

2020

2019

(Unaudited)(Unaudited)Revenues$

123,922

$

142,839

$

349,516

$

412,107

Cost of revenues85,068

100,215

254,089

298,451

Gross profit38,854

42,624

95,427

113,656

Operating expenses:Research and development930

962

2,473

3,184

Marketing and selling14,231

17,419

44,295

50,072

General and administrative8,194

9,451

29,302

31,056

Legal settlements and loss contingencies, net452

1,853

4,927

5,158

Total operating expenses23,807

29,685

80,997

89,470

Operating income15,047

12,939

14,430

24,186

Finance (income) expenses, net(52

)

4,053

1,586

6,200

Income before taxes15,099

8,886

12,844

17,986

Taxes on income2,292

1,758

3,241

4,849

Net income$

12,807

$

7,128

$

9,603

$

13,137

Basic net income per ordinary share$

0.37

$

0.21

$

0.28

$

0.38

Diluted net income per ordinary share$

0.37

$

0.21

$

0.28

$

0.38

Weighted average number of ordinary shares used in computing basic income per ordinary share34,422,128

34,390,244

34,411,480

34,379,402

Weighted average number of ordinary shares used in computing diluted income per ordinary share34,453,647

34,442,592

34,455,129

34,438,797

Caesarstone Ltd. and its subsidiaries

Condensed consolidated statements of income

Three months ended Nine months ended September 30, September 30,U.S. dollars in 2020 2019 2020 2019thousands (exceptper share data) (Unaudited) (Unaudited) Revenues $ 123,922 $ 142,839 $ 349,516 $ 412,107

Cost of revenues 85,068 100,215 254,089 298,451

Gross profit 38,854 42,624 95,427 113,656

Operating expenses:Research and 930 962 2,473 3,184developmentMarketing and 14,231 17,419 44,295 50,072sellingGeneral and 8,194 9,451 29,302 31,056administrativeLegal settlements 452 1,853 4,927 5,158and losscontingencies, net Total operating 23,807 29,685 80,997 89,470expenses Operating income 15,047 12,939 14,430 24,186

Finance (income) (52 ) 4,053 1,586 6,200expenses, net Income before taxes 15,099 8,886 12,844 17,986

Taxes on income 2,292 1,758 3,241 4,849

Net income $ 12,807 $ 7,128 $ 9,603 $ 13,137

Basic net income per $ 0.37 $ 0.21 $ 0.28 $ 0.38ordinary shareDiluted net income $ 0.37 $ 0.21 $ 0.28 $ 0.38per ordinary shareWeighted averagenumber of ordinaryshares used in 34,422,128 34,390,244 34,411,480 34,379,402computing basicincome per ordinaryshareWeighted averagenumber of ordinaryshares used in 34,453,647 34,442,592 34,455,129 34,438,797computing dilutedincome per ordinaryshareCaesarstone Ltd. and its subsidiariesSelected Condensed consolidated statements of cash flowsNine months endedSeptember 30,U.S. dollars in thousands2020

2019

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

9,603

$

13,137

Adjustments required to reconcile net income to net cash provided by operating activities:Depreciation and amortization21,160

21,617

Share-based compensation expense2,335

2,852

Accrued severance pay, net16

(78

)

Changes in deferred tax, net(46

)

(1,359

)

Capital loss342

342

Legal settlements and loss contingencies, net4,927

5,158

Compensation paid by a shareholder-

Foreign currency translation gains-

Decrease (increase) in trade receivables9,155

(14,930

)

Decrease (increase) in other accounts receivable and prepaid expenses3,740

(7,787

)

Decrease (increase) in inventories(4,375

)

33,466

Decrease in trade payables(15,263

)

(9,292

)

Increase (decrease) in warranty provision(342

)

97

Changes in right of use assets(5,245

)

(73,969

)

Changes in lease liabilities5,761

77,318

Amortization of premium and accretion of discount on marketable securities, net69

-

Changes in Accrued interest related to Marketable Securities(87

)

-

Increase in accrued expenses and other liabilities including related party1,535

1,202

Net cash provided by operating activities33,285

47,774

Cash flows from investing activities:Purchase of property, plant and equipment(15,544

)

(15,770

)

Proceeds from sale of property, plant and equipment7

52

Investment in marketable securities(19,728

)

-

Increase in long term deposits(407

)

(200

)

Net cash used in investing activities(35,672

)

(15,918

)

Cash flows from financing activities:Changes in short-term bank credit and loans, net(459

)

(7,771

)

Repayment of a financing leaseback related to Bar-Lev transaction(924

)

(891

)

Net cash used in financing activities(1,383

)

(8,662

)

Effect of exchange rate differences on cash and cash equivalents373

80

Increase (decrease) in cash and cash equivalents and short-term bank deposits(3,397

)

23,274

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$

135,975

$

116,836

Non - cash investing:Changes in trade payables balances related to purchase of fixed assets(438

)

(2,463

)

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

Nine months ended September 30,U.S. dollars in thousands 2020 2019

(Unaudited)Cash flows from operating activities: Net income $ 9,603 $ 13,137

Adjustments required to reconcile net income tonet cash provided by operating activities:Depreciation and amortization 21,160 21,617

Share-based compensation expense 2,335 2,852

Accrued severance pay, net 16 (78 )

Changes in deferred tax, net (46 ) (1,359 )

Capital loss 342 342

Legal settlements and loss contingencies, net 4,927 5,158

Compensation paid by a shareholder -

Foreign currency translation gains -

Decrease (increase) in trade receivables 9,155 (14,930 )

Decrease (increase) in other accounts receivable 3,740 (7,787 )and prepaid expensesDecrease (increase) in inventories (4,375 ) 33,466

Decrease in trade payables (15,263 ) (9,292 )

Increase (decrease) in warranty provision (342 ) 97

Changes in right of use assets (5,245 ) (73,969 )

Changes in lease liabilities 5,761 77,318

Amortization of premium and accretion of discount 69 - on marketable securities, netChanges in Accrued interest related to Marketable (87 ) - SecuritiesIncrease in accrued expenses and other 1,535 1,202 liabilities including related party Net cash provided by operating activities 33,285 47,774

Cash flows from investing activities: Purchase of property, plant and equipment (15,544 ) (15,770 )

Proceeds from sale of property, plant and 7 52 equipmentInvestment in marketable securities (19,728 ) -

Increase in long term deposits (407 ) (200 )

Net cash used in investing activities (35,672 ) (15,918 )

Cash flows from financing activities: Changes in short-term bank credit and loans, net (459 ) (7,771 )

Repayment of a financing leaseback related to (924 ) (891 )Bar-Lev transaction Net cash used in financing activities (1,383 ) (8,662 )

Effect of exchange rate differences on cash and 373 80 cash equivalents Increase (decrease) in cash and cash equivalents (3,397 ) 23,274 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 $ 135,975 $ 116,836 deposits at end of the period Non - cash investing:Changes in trade payables balances related to (438 ) (2,463 )purchase of fixed assetsCaesarstone Ltd. and its subsidiariesThree months endedSeptember 30,Nine months endedSeptember 30,U.S. dollars in thousands2020

2019

2020

2019

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

38,854

$

42,624

$

95,427

$

113,656

Share-based compensation expense (a)100

136

353

274

Non-recurring import related income-

-

-

(1,501

)

Other non-recurring items (b)-

-

-

1,367

Adjusted Gross profit (Non-GAAP)$

38,954

$

42,760

$

95,780

$

113,796

Caesarstone Ltd. and its subsidiaries Three months ended Nine months ended September 30, September 30, U.S. dollars in thousands 2020 2019 2020 2019

(Unaudited) (Unaudited) Reconciliation of Gross profit to Adjusted Gross profit: Gross profit $ 38,854 $ 42,624 $ 95,427 $ 113,656

Share-based compensation expense 100 136 353 274 (a) Non-recurring import related - - - (1,501 ) income Other non-recurring items (b) - - - 1,367

Adjusted Gross profit (Non-GAAP) $ 38,954 $ 42,760 $ 95,780 $ 113,796

(a)Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the Company.(b)Relates mainly to one time amortization of machinery equipment with no future alternative use.(a) Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors of the Company.(b) Relates mainly to one time amortization of machinery equipment with no future alternative use.Caesarstone Ltd. and its subsidiariesThree months endedSeptember 30,Nine months endedSeptember 30,U.S. dollars in thousands2020

2019

2020

2019

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

12,807

$

7,128

$

9,603

$

13,137

Finance (income) expenses, net(52

)

4,053

1,586

6,200

Taxes on income2,292

1,758

3,241

4,849

Depreciation and amortization7,058

6,755

21,160

21,617

Legal settlements and loss contingencies, net (a)452

1,853

4,927

5,158

Share-based compensation expense (b)628

968

2,335

2,852

Non-recurring import related income-

-

-

(1,501

)

Acquisition and integration related expenses477

-

477

-

Other non-recurring items (c)-

-

-

993

Adjusted EBITDA (Non-GAAP)$

23,662

$

22,515

$

43,329

$

53,305

Caesarstone Ltd. and its subsidiaries Three months ended Nine months ended September 30, September 30, U.S. dollars in thousands 2020 2019 2020 2019

(Unaudited) (Unaudited) Reconciliation of Net Income to Adjusted EBITDA: Net income $ 12,807 $ 7,128 $ 9,603 $ 13,137

Finance (income) expenses, net (52 ) 4,053 1,586 6,200

Taxes on income 2,292 1,758 3,241 4,849

Depreciation and amortization 7,058 6,755 21,160 21,617

Legal settlements and loss 452 1,853 4,927 5,158 contingencies, net (a) Share-based compensation expense (b) 628 968 2,335 2,852

Non-recurring import related income - - - (1,501 )

Acquisition and integration related 477 - 477 - expenses Other non-recurring items (c) - - - 993

Adjusted EBITDA (Non-GAAP) $ 23,662 $ 22,515 $ 43,329 $ 53,305

(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)Nine months ended September 30, 2019 relates to non-recurring expenses related to North American region establishment and one time charge related to reduction in headcount. Consists of legal settlements expenses and loss contingencies, net, related(a) 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. Nine months ended September 30, 2019 relates to non-recurring expenses(c) related to North American region establishment and one time charge related to reduction in headcount.Caesarstone Ltd. and its subsidiariesThree months endedSeptember 30,Nine months endedSeptember 30,U.S. dollars in thousands (except per share data)2020

2019

2020

2019

(Unaudited)(Unaudited)Reconciliation of net income to adjusted net income:Net income$

12,807

$

7,128

$

9,603

$

13,137

Legal settlements and loss contingencies, net (a)452

1,853

4,927

5,158

Share-based compensation expense (b)628

968

2,335

2,852

Non cash revaluation of lease liabilities (c)227

1,123

12

3,349

Non-recurring import related income (d)-

-

-

(1,501

)

M&A related expenses477

-

477

-

Other non-recurring items (e)-

-

-

2,193

Total adjustments1,784

3,944

7,751

12,051

Less tax on non-tax adjustments (f)481

1,063

2,090

3,249

Total adjustments after tax1,303

2,881

5,661

8,802

Adjusted net income (Non-GAAP)$

14,110

$

10,009

$

15,264

$

21,939

Adjusted diluted EPS (g)$

0.41

$

0.29

$

0.44

$

0.64

Caesarstone Ltd. and its subsidiaries Three months ended Nine months ended September 30, September 30,U.S. dollars in thousands (except per 2020 2019 2020 2019 share data) (Unaudited) (Unaudited)Reconciliation of net income to adjustednet income:Net income $ 12,807 $ 7,128 $ 9,603 $ 13,137

Legal settlements and loss 452 1,853 4,927 5,158 contingencies, net (a)Share-based compensation expense (b) 628 968 2,335 2,852

Non cash revaluation of lease 227 1,123 12 3,349 liabilities (c)Non-recurring import related income (d) - - - (1,501 )

M&A related expenses 477 - 477 -

Other non-recurring items (e) - - - 2,193

Total adjustments 1,784 3,944 7,751 12,051

Less tax on non-tax adjustments (f) 481 1,063 2,090 3,249

Total adjustments after tax 1,303 2,881 5,661 8,802

Adjusted net income (Non-GAAP) $ 14,110 $ 10,009 $ 15,264 $ 21,939

Adjusted diluted EPS (g) $ 0.41 $ 0.29 $ 0.44 $ 0.64

(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 differences deriving from revaluation of lease contracts in accordance with FASB ASC 842.(d)Nine months ended September 30, 2019 relates mainly to non-recurring import related expenses and relocation expenses of Caesarstone USA headquarters, the Company's subsidiary.(e)Nine months ended September 30, 2019 relates to non-recurring expenses related to North American region establishment and one time charge related to reduction in headcount.(f)Tax adjustments for the three and nine months ended September 30, 2020, based on the effective tax rates of the comparative periods.(g)In calculating adjusted diluted (Non-GAAP) EPS for the three and nine month ended September 30, 2020, the diluted weighted average number of shares outstanding excludes the effects of share-based compensation expense in accordance with FASB ASC 718. Consists of legal settlements expenses and loss contingencies, net, related(a) 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 differences deriving from revaluation of lease contracts in accordance with FASB ASC 842. Nine months ended September 30, 2019 relates mainly to non-recurring import(d) related expenses and relocation expenses of Caesarstone USA headquarters, the Company's subsidiary. Nine months ended September 30, 2019 relates to non-recurring expenses(e) related to North American region establishment and one time charge related to reduction in headcount.(f) Tax adjustments for the three and nine months ended September 30, 2020, based on the effective tax rates of the comparative periods. In calculating adjusted diluted (Non-GAAP) EPS for the three and nine month(g) ended September 30, 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 regionThree months endedSeptember 30,Nine months endedSeptember 30,U.S. dollars in thousands2020

2019

2020

2019

(Unaudited)(Unaudited)USA$

52,097

$

64,805

$

153,878

$

185,812

Canada19,174

21,884

52,167

65,404

Latin America124

1,433

762

3,380

America's71,395

88,122

206,807

254,596

Australia27,746

28,641

73,634

82,147

Asia2,881

3,676

7,444

11,583

APAC30,627

32,317

81,078

93,730

EMEA11,422

11,717

30,793

33,591

Israel10,478

10,683

30,838

30,190

Total Revenues$

123,922

$

142,839

$

349,516

$

412,107

Caesarstone Ltd. and its subsidiariesGeographic breakdown of revenues by region Three months ended Nine months ended September 30, September 30,U.S. dollars in thousands 2020 2019 2020 2019

(Unaudited) (Unaudited) USA $ 52,097 $ 64,805 $ 153,878 $ 185,812

Canada 19,174 21,884 52,167 65,404

Latin America 124 1,433 762 3,380

America's 71,395 88,122 206,807 254,596

Australia 27,746 28,641 73,634 82,147

Asia 2,881 3,676 7,444 11,583

APAC 30,627 32,317 81,078 93,730

EMEA 11,422 11,717 30,793 33,591

Israel 10,478 10,683 30,838 30,190

Total Revenues $ 123,922 $ 142,839 $ 349,516 $ 412,107

Caesarstone Ltd. and its subsidiariesGeographic breakdown of revenues by region - Supplemental dataThree months endedU.S. dollars in thousands9/30/20206/30/20203/31/202012/31/20199/30/20196/30/20193/30/201912/31/20189/30/20186/30/2018(Unaudited)USA$

52,097

$

41,726

$

60,055

$

64,659

$

64,805

$

64,590

$

56,417

$

60,200

$

61,933

$

60,358

Canada19,174

14,435

18,558

20,575

21,881

23,341

20,178

23,834

25,140

27,349

Latin America124

132

506

735

1,434

1,351

596

1,212

1,635

1,738

America's71,395

56,293

79,119

85,969

88,120

89,282

77,191

85,246

88,708

89,445

Australia27,746

23,534

22,354

26,000

28,642

28,294

25,214

33,484

33,968

34,731

Asia2,881

1,732

2,831

3,932

3,675

3,311

4,596

4,929

4,189

4,221

APAC30,627

25,266

25,185

29,932

32,317

31,605

29,810

38,413

38,157

38,952

EMEA11,422

8,031

11,340

9,464

11,719

11,418

10,455

9,954

11,115

11,721

Israel10,478

9,447

10,913

8,502

10,683

8,766

10,741

9,268

9,709

9,125

Total Revenues$

123,922

$

99,037

$

126,557

$

133,867

$

142,839

$

141,071

$

128,197

$

142,881

$

147,689

$

149,243

Year-over-year % change9/30/20206/30/20203/31/202012/31/20199/30/2019(Unaudited)USA-19.6

%

-35.4

%

6.4

%

7.4

%

4.6

%

Canada-12.4

%

-38.2

%

-8.0

%

-13.7

%

-13.0

%

Latin America-91.4

%

-90.2

%

-15.1

%

-39.4

%

-12.3

%

America's-19.0

%

-36.9

%

2.5

%

0.8

%

-0.7

%

Australia-3.1

%

-16.8

%

-11.3

%

-22.3

%

-15.7

%

Asia-21.6

%

-47.7

%

-38.4

%

-20.2

%

-12.3

%

APAC-5.2

%

-20.1

%

-15.5

%

-22.1

%

-15.3

%

EMEA-2.5

%

-29.7

%

8.5

%

-4.9

%

5.4

%

Israel-1.9

%

7.8

%

1.6

%

-8.3

%

10.0

%

Total Revenues-13.2

%

-29.8

%

-1.3

%

-6.3

%

-3.3

%

Year-over-year % change in constant currency (*)9/30/20206/30/20203/31/202012/31/20199/30/2019(Unaudited)USA-19.6

%

-35.4

%

6.4

%

7.4

%

4.6

%

Canada-11.7

%

-36.0

%

-7.1

%

-13.6

%

-12.1

%

Latin America-91.3

%

-90.2

%

-15.2

%

-39.4

%

-12.3

%

America's-18.8

%

-36.4

%

2.7

%

0.9

%

-0.4

%

Australia-7.1

%

-11.5

%

-3.3

%

-18.2

%

-10.0

%

Asia-21.2

%

-45.9

%

-37.1

%

-14.7

%

-8.8

%

APAC-8.7

%

-15.1

%

-8.5

%

-17.8

%

-9.9

%

EMEA-5.9

%

-26.9

%

11.4

%

-4.4

%

10.9

%

Israel-4.5

%

4.5

%

-1.5

%

-14.0

%

7.8

%

Total Revenues-14.4

%

-28.3

%

0.5

%

-5.5

%

-1.5

%

Caesarstone Ltd. and its subsidiariesGeographic breakdown of revenues by region - Supplemental data Three months endedU.S. dollars in 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/30/2019 12/31/ 9/30/2018 6/30/2018thousands 2018 (Unaudited) USA $ 52,097 $ 41,726 $ 60,055 $ 64,659 $ 64,805 $ 64,590 $ 56,417 $ 60,200 $ 61,933 $ 60,358

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

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

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

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

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

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

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

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

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

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

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

Latin America -91.4 % -90.2 % -15.1 % -39.4 % -12.3 %

America's -19.0 % -36.9 % 2.5 % 0.8 % -0.7 %

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

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

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

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

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

Total Revenues -13.2 % -29.8 % -1.3 % -6.3 % -3.3 %

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

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

Latin America -91.3 % -90.2 % -15.2 % -39.4 % -12.3 %

America's -18.8 % -36.4 % 2.7 % 0.9 % -0.4 %

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

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

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

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

Israel -4.5 % 4.5 % -1.5 % -14.0 % 7.8 %

Total Revenues -14.4 % -28.3 % 0.5 % -5.5 % -1.5 %

(*) Change in revenues at constant currency is calculated so that revenues can be viewed without the impact of fluctuations s 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/20201104005020/en/

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