Caesarstone (CSTE) Q3 2026 Earnings Call Transcript

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DATE

Wednesday, Nov. 11, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Yosef Shiran
• Chief Financial Officer - Nahum Trost

TAKEAWAYS

• Revenue -- $96.3 million, representing a 7.2% decrease on a constant currency basis driven by soft demand and competitive pressure in the United States.
• Adjusted EBITDA -- Negative $100,000, representing an improvement of nearly $8 million compared to the third quarter of last year due to structural cost changes.
• Gross Margin -- 25.4%, an improvement of 810 basis points year over year reflecting the transition to a lower cost operating model.
• Adjusted Gross Margin -- 26.9%, excluding residual costs from closed plants, compared to 17.3% in the prior year quarter.
• U.S. Revenue -- $38.8 million, a 16.9% decrease reflecting lower quartz volumes in the core business and soft demand in commercial projects.
• Australia Revenue -- $22.4 million, an increase of 12.2% on a constant currency basis supported by the zero-silica ICON collection.
• Operating Expenses -- $81.4 million, representing 84.6% of revenue, compared to $33.7 million in the prior year quarter.
• Legal Settlement Expense -- $46.8 million, representing a loss contingency related to an October 26 California jury verdict regarding silica exposure.
• Net Loss -- $56.1 million, or $1.62 per share, compared to a net loss of $18.1 million in the prior year quarter.
• Adjusted Net Loss Per Share -- $0.05, based on 35 million shares.
• Net Cash Position -- $50.7 million as of Sept. 30, 2026, with no debt to financial institutions.
• Annualized Cash Savings -- $22 million, expected to be delivered once the Bar-Lev facility closure is fully implemented.
• Total Annualized Savings Target -- Over $100 million by 2027 compared to 2023 levels through cost reduction initiatives.
• U.S. Tariff Impact -- $10 million to $15 million in estimated annualized additional costs from the new quota-specific tariff.
• U.S. Revenue Contribution -- 40% of total revenue in the third quarter was generated in the United States market.
• Israel Revenue -- Decreased 24.9% on a constant currency basis due to market conditions and the timing of Jewish holidays.
• EMEA Revenue -- Increased 0.8% on a constant currency basis reflecting timing of shipments.
• Canada Revenue -- Decreased 0.7% on a constant currency basis as IKEA growth helped offset core business declines.
• Tariff Refund -- $900,000 included in third quarter gross margin resulting from a refund on previously paid U.S. EPA tariffs.
• U.S. Industry Quota -- 13 million square meters for the first year of the four-year quota-specific tariff period.

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RISKS

• Trost stated, "The verdict has created significant uncertainty regarding the company's financial condition," following a California jury assessment of $46.8 million in a case alleging injuries from silica exposure.
• Management noted that most products brought into the U.S. remain subject to broad-based import tariffs at an average rate of approximately 15%, which are additive to the new quota-specific tariffs.

SUMMARY

Caesarstone Ltd. (NASDAQ:CSTE) reported third quarter results that highlighted the completion of its transition to a global production model. Management stated that all quartz products are now produced by global partners, resulting in a more flexible operating model and expanded gross margins. Despite the structural progress, the company faced a significant revenue decline in the U.S. and a substantial legal charge following a California jury verdict. Management indicated that they are focusing on serving big box channels and scaling the porcelain and zero-silica offerings to drive long-term recovery.

• CEO Shiran noted that Australia grew for the fifth consecutive quarter as the "0 silica ICON collection is regaining our leading position in this important market."
• The company implemented price increases in the U.S. in September to help offset the impact of new import tariffs.
• Management reported that the Bar-Lev facility closure is expected to be finalized soon, with the majority of remaining inventory to be sold by the end of 2026.
• CFO Trost stated, "Adjusted EBITDA in the third quarter of 2026 was roughly breakeven," an improvement from a loss of $7.9 million in the prior year quarter.
• The company reported that its big box channel in the U.S. and Canada grew year over year, led by performance with IKEA.
• Management is currently reviewing sourcing and supply chain changes to further reduce the impact of U.S. tariffs.

INDUSTRY GLOSSARY

• ICON collection: A Caesarstone-developed product line of zero-silica surfacing materials intended to comply with health regulations and market demand.
• Silica: A natural mineral common in stone products; fine dust from silica is a health concern for fabricators if inhaled during the cutting process.
• Big box channel: Large retail distribution networks, such as IKEA, where Caesarstone products are sold directly to consumers.
• Adjusted EBITDA: A non-GAAP financial metric that adjusts earnings before interest, taxes, depreciation, and amortization to exclude non-recurring items like legal settlements and restructuring costs.
• Constant currency: A method of reporting financial results that eliminates the effects of foreign exchange rate fluctuations to provide a direct comparison between periods.

Full Conference Call Transcript

Operator: Greetings, and welcome to the Caesarstone Third Quarter 26 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host. Brad Cray of ICR.

Brad Cray: Thank you.

Operator: You may begin.

Brad Cray: Thank you, operator. And good morning to everyone on the line. I am joined by Yosef Shiran, Caesarstone's Chief Executive Officer and Nahum Trost, Caesarstone's Chief Financial Officer. Certain statements in today's conference call and on various questions may constitute forward-looking statements. We caution you that such statements reflect only the company's current expectations and that actual events or results may differ materially. For more information, please refer to the risks contained in the company's most recent annual report on Form 20 F and subsequent filings with the SEC. In addition, on this call, the company will make reference to certain non GAAP financial measures.

Including adjusted net loss/income, adjusted net loss/income per share, adjusted gross profit, adjusted EBITDA, and constant currency. The reconciliation of these non GAAP measures to the most directly comparable GAAP measures can be found in the company's third quarter 26 earnings release, which is posted on the company's Investor Relations website. On today's call, Yosef will discuss our business activity, and Nahum will then cover additional details regarding financial results. Thank you, and I would like to now turn the call over to Yosef Shiran. Please go ahead.

Yosef Shiran: Thank you, Brad, and good morning, everyone. The third quarter marked an important milestone in our efforts to restore Caesarstone's profitability. With meaningful progress in our underlying business, as reflected in our results. We achieved near breakeven adjusted EBITDA an improvement of nearly $8 million compared to the third quarter of last year. For the fourth consecutive quarter, we expanded gross margin year over year. To 25%, an increase of 800-basis-points and on an adjusted basis, gross margin was close to 27%. These results show that the structural changes we have implemented across our business are delivering benefits.

With all of our Quartz products now produced by our global production partners, Caesarstone has a lower cost base and more flexible operating model, and a stronger foundation for sustainable profitability. Global revenues were $96.3 million similar to the second quarter and 7.2% lower than last year in constant currency. Mainly reflecting soft demand and competitive pressure in the U.S. In the US, we are working closely with our key customers to strengthen our position. And our big box channel grew year over year. Led by IKEA. In Canada and EMEA, our revenues were stable and close to last year's levels on a constant currency basis.

Australia grew for the 5th consecutive quarter as our 0 silica ICON collection is regaining our leading position in this important market. We continue to invest in the Caesarstone brand in product innovation, and in our porcelain offering, which remain our long term growth drivers. Market conditions remain challenging, and our team is executing with discipline. Serving our customers well and keeping our costs lean. Our goal is to build on this progress and reach positive adjusted EBITDA on a sustained basis. And we will keep taking the actions needed to get there. Separately, we strongly disagree with the recent jury verdict in California and will consider our available post trial remedies as we evaluate its impact on our business.

In the meantime, we will continue to focus on serving our customers around the world. I will now turn the call over to Nahum.

Nahum Trost: Thank you, Yosef, and good morning, everyone. Looking at our third quarter results, global revenue was $96.3 million compared to $102 million in the prior year quarter. On a constant currency basis, revenue decreased approximately 7.2% year over year mainly reflecting competitive pressures and continued soft global demand. Particularly in The US. This was partially offset by continued growth in Australia. Breaking down our regional performance, US revenue was approximately $38.8 million compared to $46.7 million in the prior year quarter. A decrease of 16.9%. The decline was mainly due to lower quartz volumes in our core business. Demand remained soft in commercial projects, including new development, and in sales for stone suppliers.

Big box revenue improved year over year driven by strong performance with IKEA. Canada revenue decreased 0.7% on a constant currency basis. Compared to the prior year quarter. Growth in our IKEA business in Canada helped offset lower revenue in our core business. The core decline reflects lower housing completions, and a slow market. In Australia, revenue was $22.4 million compared to $18.5 million in the prior year quarter. An increase of 12.2% on a constant currency basis. Australia has now grown year over year for 5 consecutive quarters. Our zero-silica ICON products continue to support this recovery, although overall demand in Australia remains soft. EMEA revenue increased 0.8% on a constant currency basis.

Mainly reflecting the timing of shipments and our continued investment in the region. In Israel, revenue decreased 24.9% on a constant currency basis. Mainly reflecting slow market conditions and the timing of the Jewish holidays. Looking at our third quarter P&L performance. Gross margin was 25.4%, compared to 17.3% in the prior year quarter. An improvement of 810 basis points and up 140-basis-points sequentially from 24% in the second quarter. Adjusted gross margin, which excludes residual costs, related to our closed plants, was 26.9% compared to 17.3% in the prior year quarter. The improvement mainly reflects cost savings realized from closing our Bar-Lev facility and shifting production to our global production partners.

Third quarter gross margin also included a refund of a approximately $900,000 on previously paid U.S. EPA tariffs. These benefits were partially offset by higher tariffs and freight costs. Operating expenses were $81.4 million representing 84.6% of revenue. Compared to $33.7 million or 33% of revenue in the prior year quarter. The increase in total operating expenses was driven by higher legal settlements and loss contingencies expenses. As previously disclosed, we and our subsidiaries including Caesarstone USA Incorporated, are defendants in a number of cases alleging injuries related to exposure to silica particles while fabricating our products. On October 26, a California jury rendered a verdict in 1 such case. And apportioned 69% of the fault to Caesarstone.

Or approximately $46.8 million if assessed without modification. We strongly disagree with the jury's verdict, and will consider our available post trial remedies. The verdict has created significant uncertainty regarding the company's financial condition. For more information on this matter and other legal updates, please refer to our earnings release issued today. Excluding legal settlements and loss contingencies, impairment and restructuring, operating expenses improved to 28.8% of revenue from 29.1% in the prior year quarter. Adjusted EBITDA in the third quarter of 2026 was roughly breakeven. At a loss of $100,000 compared to a loss of $7.9 million in the prior year quarter and a loss of $1 million in the second quarter of 26.

The year over year improvement was driven mainly by the higher gross margin and the savings delivered by our cost reduction initiatives. Finance income was $1.2 million compared to finance expenses of $1.8 million in the prior year quarter. Primarily due to changes in foreign currency exchange rates. Net loss attributable to controlling interest was $56.1 million or $1.62 per share compared to $18.1 million or 52 cents per share in the prior year quarter. Adjusted diluted net loss per share was 5 cents on 35 million shares compared to $0.40 on 34.6 million shares in the third quarter of 2025. Turning to our cash position and balance sheet.

As of September 30, 2026 our net cash position was $50.7 million. With no debt to financial institutions. Compared to $51.8 million as of June 30, 2026. Now let me provide an update on several items. Our restructuring actions continue to deliver higher savings. And this is reflected in our third quarter gross margin. Inventory produced at Barlev represented a small portion of our third quarter revenue. And we expect to sell the vast majority of the remaining Barlev inventory held by our subsidiaries by the end of the year. Once fully implemented, the Bar-Lev closure is still expected to deliver approximately $22 million in annualized cash savings.

With potential for additional savings if we sublease space under the noncancelable long term lease for the facility. Together with our earlier actions, we expect total annualized savings to exceed $100 million by 2027. Measured against full-year 2023. Turning to The US tariff environment. Most of the products we bring into the US remain subject to broad based import tariffs. At an average rate of approximately 15%. The US accounted for approximately 40% of our third quarter revenues. Served by our global production network. The quote specific tariff rate quota took effect on August 15 for a 4-year period. In the 1st year, the industry quota is approximately 13 million square meters, assessed on a quarterly basis.

Imports within the quota carry an additional 25% tariff and imports above the quota carry an additional 50% tariff. Over the following 3 years, the tariff rates gradually decline and the quarter gradually increases. We estimate the annualized impact of these additional tariffs which apply on top of existing tariffs, at between $10 million and $15 million. We implemented price increases in the US in September to help offset this impact. We are also reviewing additional sourcing and supply chain changes to reduce the impact of these tariffs. Thank you for joining us this morning. We appreciate your support and look forward to updating you next quarter.

Operator: Thank you. The conference has now concluded. Thank you for attending today's call. You may now disconnect. Thank you.

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