Caesarstone Ltd.

Greetings and welcome to the Caesar Stone Limited fourth quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Cray from ICR. Thank you, Brad. You may begin.

Thank you, Operator, and good morning to everyone on the line. I am joined by Yuval Daguin, Caesarstone's Chief Executive Officer, and Nahum Trost, Caesarstone's Chief Financial Officer. Certain statements in today's conference call and responses to 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 risk factors contained in the company's most recent annual report on Form 20F 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 income, adjusted net 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 fourth quarter 2022 earnings release, which is posted on the company's investor relations website. Thank you, and I would now like to turn the call over to Yuval. Please go ahead.

Thank you, Brad, and good morning, everyone. I'm proud of the entire ScissorStone team's efforts as we finished 2022 with a record full year revenue of approximately $691 million. During the year, we focused diligently on executing our multi-pronged growth strategy as we navigated through a challenging demand environment that softened during the second half of 2022. Increasing interest rates and inflation pressured housing starts, and remodeling expenses, particularly impacting our U.S. and the Israeli business in Q4 2022. In addition, certain customers are lowering their inventory levels, and therefore we adjusted our production and are balancing SKUs as necessary. Our fourth quarter results were below our expectations given these evolving market conditions. While we expect our pricing initiatives to help offset lower market volumes during 2023, we continue to believe long-term renovation and remodel fundamentals in our key markets remain strong. With this in mind, we are focused on optimizing our global structure during 2023 to operate more efficiently and improve our scalability for new growth opportunities. In order to do so effectively, we are focused on leveraging our projects within our global growth acceleration plan to rationalize our costs, more efficiently manage our working capital, intensify our marketing efforts, and expand our US distribution footprint. I would like now to discuss a few of the actions that we have underway to improve our results as we head into 2023. We are temporarily reducing the effective capacity of our manufacturing facilities to meet the current demand, which should provide improved working capital. Second, we took actions during the second half of 2022 to reduce our headcount globally by approximately 9% across all business units and functions. We expect to continue to monitor our SG&I costs through spending hold on non-essential expenses and administrative functions during 2023. Third, we are carefully evaluating our global supply chain for additional bottlenecks we can take out as necessary this year. As we said in the past, in recent years, we have expanded our relationship with OEM manufacturers primarily based out of Asia. This has allowed us to not only diversify our supply chain, but also serve an increasing amount of the market at various price points. As a result, this has increased the portion of our products that are manufactured via OEM in low-cost countries, which has allowed to better capture demand in new construction activity, which tends to favor more entry-level products. Fourth, we remain committed to our technological and digital investments, such as our innovative CS Connect platform, which continues to be a bright spot and is accelerating our ability to improve customer experience and engagement throughout our business. And lastly, we plan to increase our marketing efforts in the U.S. and expand our distribution footprint in attractive and economically sound markets. We are funding these marketing investments by reinvesting a portion of the savings from our headcount and working capital reductions and other cost mitigation actions. In addition to these actions, we have also increased selling prices during Q1 of 2023 in our main markets to mitigate the impact of higher costs in our margins. I would like also to reiterate that our multi-material product pipeline, including ScissorStone branded porcelain slabs, provides us with encouraging growth prospects as we look forward. We are excited to introduce our ScissorStone branded global porcelain collection to North America during the first half of 2023, following a launch in the UK, Israel, and the Australian markets during the second half of 2022. Over the next several years, we expect that porcelain will become a primary driver for our revenue growth in our key markets. Through our successful penetration into big box, our acquisition of strategic distributors such as Omicron, and our ongoing organic expansion of scissors-thorn distribution centers, we have significantly diversified our sales channels. We estimate that in the U.S. business, approximately a quarter of our sales are through independent distributors today, compared to approximately half just a few years ago. We believe our broader channel exposure has allowed us to outperform the market and will continue to help us accelerate the success of new product introductions and our expanded multi-material offerings, such as porcelain. I'd like to take a moment to comment on recent developments in Australia in regards to increasing government attention on the engineered stone market. Various Australian federal and state authorities are exploring ways to mitigate the risks associated with fabrication of engineered stone, such as more rigorous licensing standards for fabricators, as well as limiting the sale of engineered stone with high level of silica. As a leader in this market, we continue to actively train and educate fabricators, customers, and others in the value chain on safe material handling and installation practices, as well as expedite additional development of our own low silica product offerings. It is important to note that we have been one of the most active in regards to safety throughout the entire supply chain. We will continue to do our part to bring quality solutions to all stakeholders. In conclusion, we continue to take prudent actions across the organization to drive additional efficiencies and rationalize our costs. The exciting projects we have planned for 2023 under our Global Growth Acceleration Plan give us confidence in our ability to achieve our objectives for this year. Looking ahead, we remain committed to strengthening our cost structure, elevating our multi-material product portfolio, and positioning our business for improved results in the quarters to come. With that, I will now turn the call to Nahum to discuss more details on our financial results and outlook.