– Record Third Quarter Revenue of $163.3 Million, Up 31.8% Over Prior Year Quarter –

– Net Income of $5.9 Million, or $0.17 Per Share –

– Adjusted Net Income of $6.8 Million, or $0.20 Per Share –

– Adjusted EBITDA of $17.7 Million –

– Strong Cash Position^(*) of $91.5 Million at Quarter End –

– Declares Dividend of $0.10 per share –

– Published Inaugural Global ESG Report in October –

– Reiterates Outlook for 2021 Revenue and Adjusted EBITDA Growth –

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, 2021.

Yuval Dagim, Caesarstone’s Chief Executive Officer commented, “I am encouraged to report third quarter results that were in-line with our expectations as we further executed towards the goals set out in our Global Growth Acceleration Plan. To that extent, we were very pleased to rollout our innovative digital CS Connect platform nationally across the U.S., which has received positive feedback and represents a critical milestone in our efforts to transform the way we communicate with our customers and consumers. Additionally, the integrations of our Omicron and Lioli acquisitions continue to drive positive momentum in our results, helping us to achieve record third quarter revenue of $163.3 million. We were also excited to publish our inaugural ESG report in October, which provides Caesarstone with a prudent framework to help create a more sustainable future for all. Overall, we are happy with the progress in our business as we continue to address the cost environment with additional announced price increases and execute on our previously communicated initiatives to drive long-term value for all of our stakeholders.”

(*) 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 2021 Results

Revenue in the third quarter of 2021 grew 31.8% to a third quarter record of $163.3 million compared to $123.9 million in the prior year quarter. On a constant currency basis, third quarter revenue was higher by 29.2% year-over-year. Sales growth was primarily driven by improved demand across the majority of our global footprint in addition to the contribution of our recent acquisitions.

Gross margin in the third quarter declined to 26.2% compared to 31.4% in the prior year quarter. Adjusted gross margin in the third quarter was 26.3% compared to 31.4% in the prior year quarter. The year-over-year difference in gross margin mainly reflects higher raw material prices, particularly polyester, and shipping price increases which were partially offset by favorable product mix, selling price increases and more favorable exchange rates.

Operating expenses in the third quarter were $33.9 million, or 20.7% of revenue, compared to $23.8 million, or 19.2% of revenue in the prior year quarter. Excluding legal settlements and loss contingencies, operating expenses were 21.0% of revenue, compared to 18.8% in the prior year quarter, mainly due to a return to normalized levels of marketing and selling expenses and investments related to initiatives under the Company’s Global Growth Acceleration Plan.

Operating income was $8.9 million compared to operating income of $15.0 million in the prior year quarter. The year-over-year decline mainly reflects higher operating expenses.

Adjusted EBITDA, which excludes expenses for non-cash share-based compensation, legal settlements and loss contingencies and for non-recurring items, was $17.7 million in the third quarter, representing a margin of 10.8%. This compares to adjusted EBITDA of $23.7 million, representing a margin of 19.1%, in the prior year quarter. The year-over-year margin decline primarily reflects the lower operating income.

Finance expense in the third quarter was $2.4 million compared to finance income of $0.1 million in the prior year quarter. The increase was mainly related to exchange rate fluctuations, higher credit card fees due to higher volume as well as interest related to bank loan.

Net Income attributable to controlling interest for the third quarter was $5.9 million compared to net income of $12.8 million in the prior year quarter. Net income per share for the third quarter was $0.17 compared to net income per share of $0.37 in the prior year quarter. Adjusted diluted net income per share for the third quarter was $0.20 on 34.6 million shares, compared to adjusted diluted net income per share of $0.41 in the prior year quarter on 34.5 million shares.

Balance Sheet & Liquidity

As of September 30, 2021, the Company’s balance sheet remained strong, including cash, cash equivalents and short-term bank deposits and short and long-term marketable securities of $104.7 million and total debt to financial institutions of $13.2 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. In accordance with the Company’s dividend policy, the board of directors declared a cash dividend of $0.10 per share for the third quarter and the nine months ended September 30, 2021. The dividend will be paid on November 30, 2021 to shareholders of record as of November 17, 2021. The dividend payment is subject to withholding tax of 20%.

Outlook

Based on year-to-date progress, the Company reiterates its expectation for 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 higher raw material and shipping costs, coupled with a return to more normalized levels of sales and marketing expenses and other investments to support growth initiatives. The Company’s outlook includes the investment costs associated with its Global Growth Acceleration Plan.

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 13724274. The replay will be available beginning at 11:30 a.m. ET on Wednesday, November 3, 2021 and will last through 11:59 p.m. ET on Wednesday, November 10, 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" within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as ”goals," “intend,” “seek,” “anticipate,” “believe,” “could,” “continue,” “expect,” “estimate,” “may,” “plan,” “outlook,” “future” and “project” and other similar expressions that predict, project or indicate future events or trends or that are not statements of historical matters. Such forward looking statements include statements regarding the Company’s sustainability goals and plans, intentions, expectations, assumptions, goals and beliefs regarding the Company’s business and sustainability vision. These forward-looking statements also may 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, and expectations of the results of the Company’s business optimization initiatives. 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; raw material shortages and prices and effects of challenges in global shipping; the ability of the company to realign aspects of its business based on the business optimization initiatives, the strength of the home renovation and construction sectors; intense competitive pressures; the extent of the Company’s ability to meet its ESG goals and targets, including the extent of the Company’s ability to maintain a healthy and safe environment for the Company’s employees; management of GHG and silica emissions; the degree of the Company’s ability to develop, produce and deliver high quality and safe products; the Company’s ability to effectively manage changes in its production and supply chain; the extent of the Company’s ability to build-out and expand into certain markets; the Company’s ability to effective manage its relationship with suppliers; the outcome of silicosis and other bodily injury claims; regulatory requirements relating to hazards associated with exposure to silica dust; efficiently manufacturing our products and managing 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; the 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, risks and uncertainties discussed under the sections "Risk Factors" and “Special Note Regarding Forward-Looking Statements and Risk Factor Summary” in our most recent annual report on Form 20-F filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2021, and in other documents filed by Caesarstone with the SEC, which are available free of charge at www.sec.gov. 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.

(*) 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.

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