Q2 2025 Caesarstone Ltd Earnings Call
The formal presentation.
Operator: Only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Cray of ICR. Thank you. You may begin.
How is it a reminder, this conference is being recorded.
It is now my pleasure to introduce your host that K of ICR. Thank you you may begin.
Thank you operator, and good morning to everyone on the line I am joined by Youre sure on <unk>, Chief Executive Officer, and whom trust.
Brad Cray: Thank you, operator, 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 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 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.
Jones, Chief Financial Officer.
Certain statements in todays conference call and responses to various questions may constitute forward looking statements.
We caution you that such statements reflect only the companys 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 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 or income per share.
Operator: Greetings and welcome to Caesarstone's second quarter 2025 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Cray of ICR. Thank you. You may begin.
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 second quarter 2025 earnings release, which is posted on the company's Investor Relations website.
Brad Cray: The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's Q2 2025 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 before we open the call for questions. Thank you, and I would now like to turn the call over to Yosef. Please go ahead.
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 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 lost income, adjusted net lost income per share, adjusted gross profit, adjusted EBITDA, and constant currency.
On today's call use will discuss our business activity and to whom will then cover additional details regarding financial results before we open the call for questions.
Thank you and I would now like to turn the call over to US. Please go ahead.
Thank you Rod and good morning, everyone. Thank you for joining us to discuss our second quarter 2025 results.
Yosef Shiran: Thank you, Brad, and good morning, everyone. Thank you for joining us to discuss our Q2 2025 results. Our Q2 results reflect persistent softness, mainly in repair and remodel activity across the industry. We are taking decisive actions to align our cost structure and improve profitability. To that point, during the quarter, we initiated incremental cost reductions that are expected to bring an additional $10 million of annualized savings commencing in H2 2025. This adds to the approximately $10 million in incremental cost savings we are already on track to realize in 2025 compared to 2024. Combined, this brings our total annualized cost savings since initiating our transformation to over $55 million compared to 2022. These measures add to the benefits we are attaining from our improved production footprint.
Our second quarter results reflect persistent softness mainly in repair and remodel activity across the industry.
We are taking decisive actions to align our cost structure and improve profitability. So.
So that point during the quarter, we initiated incremental cost reductions.
So I expect it to bring an additional $10 million of annualized savings commencing in the second half of 2025.
It adds to the approximately $10 million in incremental cost savings, we are already on track to realize in 2025 compared to 2024.
Brad Cray: The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's second quarter 2025 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 before we open the call for questions. Thank you, and I would now like to turn the call over to Yos. Please go ahead.
Combined this brings our total annualized cost savings since initiating our transformation to over $55 million compared to 2022.
These measures and to the benefits we are obtaining from our improved production footprint.
We have shifted over 70% of our production to our global manufacturing network, which provides us with enhanced operational flexibility.
Yosef Shiran: Thank you, Brad, and good morning, everyone. Thank you for joining us to discuss our second quarter 2025 results. Our second quarter results reflect persistent softness, mainly in repair and remodel activity across the industry. We are taking decisive actions to align our cost structure and improve profitability. To that point, during the quarter, we initiated incremental cost reductions that are expected to bring an additional $10 million of annualized savings, commencing in the second half of 2025. This adds to the approximately $10 million in incremental cost savings we are already on track to realize in 2025 compared to 2024. Combined, this brings our total annualized cost savings since initiating our transformation to over $55 million compared to 2022. These measures add to the benefits we are attaining from our improved production footprint.
Yosef Shiran: We have shifted over 70% of our production to our global manufacturing network, which provides us with enhanced operational flexibility. We continue to expand our production partnerships to further reinforce our competitiveness. Regarding our porcelain business, we are accelerating product development and expanding our porcelain portfolio to capture growing market opportunities in this attractive product category. In Australia, we continue to make solid progress with our zero crystalline silica products, ensuring our compliance with regulatory requirements while strengthening our competitive position. During the quarter, we completed development and launch of the full zero crystalline silica collection. In our other markets and in Australia, we expect to launch additional innovative products during the remainder of the year as well as for the next year. As we move forward, we remain focused on investing in our strategic transformation initiatives to better position Caesarstone to scale efficiently.
We continue to expand our production partnerships to further reinforce our competitiveness.
Regarding our porcelain business, we are accelerating product development and expanding our postal and portfolio to capture growing market opportunities in this attractive product category.
In Australia, we continue to make solid progress with our zero crystalline silica products and showing our compliance with regulatory requirements, while strengthening our competitive position.
During the quarter, we completed development and launch of the four zero crystalline silica collection.
In our other markets and in Australia, we expect to launch additional innovative products during the remainder of the year as well as for the next year.
As we move forward, we remain focused on investing in our strategic transformation initiatives to better position Caesar stone to scale efficiently.
Yosef Shiran: We have shifted over 70% of our production to our global manufacturing network, which provides us with enhanced operational flexibility. We continue to expand our production partnerships to further reinforce our competitiveness. Regarding our porcelain business, we are accelerating product development and expanding our porcelain products portfolio to capture growing market opportunities in this attractive product category. In Australia, we continue to make solid progress with our zero crystalline silica products, ensuring our compliance with regulatory requirements while strengthening our competitive position. During the quarter, we completed development and launch of the full zero crystalline silica products collection. In our other markets and in Australia, we expect to launch additional innovative products during the remainder of the year, as well as for the next year. As we move forward, we remain focused on investing in our strategic transformation initiatives to better position Caesarstone to scale efficiently.
The structural improvements, we have made including cost reductions and operational enhancements position us well to achieve higher levels of profitability as volumes improve.
Yosef Shiran: The structural improvements we've made, including cost reductions and operational enhancements, position us well to achieve higher levels of profitability as volumes improve. I'll now turn the call over to Nahum to review our financial results in more detail.
I'll now turn the call over to <unk> to review our financial results in more detail.
Thank you Yosef and good morning, everyone.
Looking at our second quarter results global revenue was $101 $1 million.
Nahum Trost: Thank you, Yosef, and good morning, everyone. Looking at our Q2 results, global revenue was $101.1 million compared to $119.4 million in the prior year Q2. On a constant currency basis, Q2 revenue was down 15.6% year-over-year due to lower volumes resulting from continued global economic headwinds affecting activity across all channels, in addition to competitive pressures. In the US, sales declined by 17% to $49.6 million, mainly reflecting softer market conditions in the residential channel, including business to stone suppliers, as well as challenges in the commercial segment. Our business with Lowe's remained a bright spot, increasing in double-digit percentages compared to Q2 2024.
Compared to $119 $4 million in the prior year quarter.
On a constant currency basis second quarter revenue was down 15, 6% year over year due.
Due to lower volumes, resulting from continued global economic headwinds.
Affecting activity across all channels in addition to competitive pressures.
In the U S sales declined by 17% to $49 $6 million, mainly reflecting softer market conditions in the residential channel, including business still stone suppliers.
Yosef Shiran: The structural improvements we've made, including cost reductions and operational enhancements, position us well to achieve higher levels of profitability as volumes improve. I'll now turn the call over to Nahum to review our financial results in more detail.
As well as challenges in the commercial segment.
Our business with Lowe's remained the bright spot increasing in double digit percentages compared to the second quarter of 2024.
Australia sales were down 18, 2% on a constant currency basis, reflecting the continued shifts in that region. Following the government's silica ban that became effective on July one 2024.
Nahum Trost: Australia sales were down 18.2% on a constant currency basis, reflecting the continued shifts in that region following the government's silica ban that became effective on 1 July 2024, combined with slower demand due to high interest rates and fewer new home completions. Canada sales decreased by 12.5% on a constant currency basis, with softer performance in our core business, mainly due to market conditions, partially offset by higher levels of big box activity. EMEA sales remained relatively stable, increasing by 0.7% on a constant currency basis. This reflects solid performance across both our direct and indirect channels, driven by stronger volumes and favorable order timing. Our expanded direct presence in Germany also contributed positively to the EMEA results. Israel sales declined by 21.6% on a constant currency basis, mainly given the impact of the regional conflict during the quarter. Looking at our Q2 P&L performance.
Nahum Trost: Thank you, Yos, and good morning, everyone. Looking at our second quarter results, global revenue was $101.1 million compared to $119.4 million in the prior year quarter. On a constant currency basis, second quarter revenue was down 15.6% year over year due to lower volumes resulting from continued global economic headwinds affecting activity across all channels in addition to competitive pressures. In the U.S., sales declined by 17% to $49.6 million, mainly reflecting softer market conditions in the residential channel, including business through stone suppliers, as well as challenges in the commercial segment. Our business withdrawals remained a bright spot, increasing in double-digit percentages compared to the second quarter of 2024.
Combined with slower demand due to high interest rates and fewer new home completions.
Canada sales decreased by 12, 5% on a constant currency basis with softer performance in our core business, mainly due to market conditions.
Partially offset by higher levels of big box activity.
EMEA sales remained relatively stable increasing about zillow <unk>, 7% on a constant currency basis.
This reflects solid performance across both our direct and indirect channels driven by stronger volumes and favorable order timing.
Our expanded direct presence in Germany also contributed positively to the EMEA results.
Israel sales declined by 21, 6% on a constant currency basis.
Nahum Trost: Australia sales were down 18.2% on a constant currency basis, reflecting the continued shifts in that region following the government's silica ban that became effective on July 1st, 2024, combined with slower demand due to high interest rates and fewer new home completions. Canada sales decreased by 12.5% on a constant currency basis, with softer performance in our core business, mainly due to market conditions, partially offset by higher levels of big box activity. EMEA sales remained relatively stable, increasing by 0.7% on a constant currency basis. This reflects solid performance across both our direct and indirect channels, driven by stronger volumes and favorable order timing. Our expanded direct presence in Germany also contributed positively to the EMEA results. Israel sales declined by 21.6% on a constant currency basis, mainly given the impact of the regional conflicts during the quarter.
Given the impact of the regional conflict during the quarter.
Looking at our second quarter P&L performance.
Gross margin was 19, 6% compared to 22, 9% in the prior year quarter.
Nahum Trost: Gross margin was 19.6%, compared to 22.9% in the prior year quarter. Adjusted gross margin was 19.7%, compared to 23.8% in the prior year quarter. The difference in gross margin was mainly driven by lower volumes and production, which resulted in lower fixed cost absorption and unfavorable product mix. These factors were partially offset by the ongoing benefits from our improved production footprint and continued cost optimization initiatives. Operating expenses in Q2 were $32.5 million, or 32.1% of revenue, compared to $36.6 million, or 30.6% of revenue, in the prior year quarter. Excluding legal settlements and loss contingencies and restructuring and impairment expenses, operating expenses were 30.1% of revenue, compared to 28.2% in the prior year quarter.
Adjusted gross margin was 19, 7% compared to 23, 8% in the prior quarter.
The difference in gross margin was mainly driven by lower volumes and production, which resulted in lower fixed cost absorption and unfavorable product mix.
These factors were partially offset by the ongoing benefits from our impulse production footprint and continued cost optimization initiatives.
Operating expenses in the second quarter was $32 5 million or 32, 1% of revenue.
Compared to $36 $6 million or 36% of revenue in the prior year quarter.
Excluding legal settlements and loss contingencies.
Restructuring and impairment expenses.
Nahum Trost: Looking at our second quarter P&L performance, gross margin was 19.6% compared to 22.9% in the prior year quarter. Adjusted gross margin was 19.7% compared to 23.8% in the prior year quarter. The difference in gross margin was mainly driven by lower volumes and production, which resulted in lower fixed cost absorption and unfavorable product mix. These factors were partially offset by the ongoing benefits from our improved production footprint and continued cost optimization initiatives. Operating expenses in the second quarter were $32.5 million, or 32.1% of revenue, compared to $36.6 million, or 30.6% of revenue in the prior year quarter. Excluding legal settlements and loss contingencies and restructuring and impairment expenses, operating expenses were 30.1% of revenue compared to 28.2% in the prior year quarter. The increase as percentage of revenue primarily reflects the impact of lower revenues against our relatively fixed cost base.
<unk> expenses were 31% of revenue compared to 28, 2% in the prior year quarter.
The increase as a percentage of revenue primarily reflects the impact of lower revenues against a relatively fixed cost base.
Nahum Trost: The increase as percentage of revenue primarily reflects the impact of lower revenues against our relatively fixed cost base, though we have made progress in absolute cost reduction and continue to closely monitor controllable expenses. Adjusted EBITDA in Q2 was a loss of $6.4 million, compared to a loss of $0.1 million in the prior year quarter. The year-over-year decline in Adjusted EBITDA primarily reflects lower revenues and gross margins. Adjusted diluted net loss per share for Q2 was $0.33 on 34.7 million shares, compared to adjusted diluted net loss per share of $0.14 in the prior year quarter on 35 million shares. Turning to our cash flow and balance sheet. We ended the quarter with a solid financial position. As of 30 June 2025, our balance sheet included total cash of $75.6 million and total debt to financial institutions of $3.2 million.
So we have made progress in absolute cost reduction and continue to closely monitor controllable expenses.
Adjusted EBITDA in the second quarter was a loss of $6 $4 million compared to a loss of <unk> 1 million in the prior year quarter.
The year over year decline in adjusted EBITDA, primarily reflects lower revenues and gross margins.
Adjusted diluted net loss per share for the second quarter was 33 cents on $34 7 million shares comp.
Compared to adjusted diluted net loss per share of 14 cents.
In the prior year quarter on 35 million shares.
Now turning to our cash flow and balance sheet.
We ended the quarter with a solid financial position as of June 32025.
Our balance sheet include a total cash of $75 6 million and total debt to financial institutions.
$3 2 million.
Our net cash position was $72 $4 million as of June 32025.
Nahum Trost: We have made progress in absolute cost reduction and continue to closely monitor controllable expenses. Adjusted EBITDA in the second quarter was a loss of $6.4 million compared to a loss of $0.1 million in the prior year quarter. The year-over-year decline in adjusted EBITDA primarily reflects lower revenues and gross margins. Adjusted diluted net loss per share for the second quarter was $0.33 on 34.7 million shares compared to adjusted diluted net loss per share of $0.14 in the prior year quarter on 35 million shares. Turning to our cash flow and balance sheet, we ended the quarter with a solid financial position. As of June 30, 2025, our balance sheet included total cash of $75.6 million and total debt to financial institutions of $3.2 million. Our net cash position was $72.4 million as of June 30, 2025.
Nahum Trost: Our net cash position was $72.4 million as of 30 June 2025. We continue to see the benefits of subleasing the majority of available land and building at our Sdot Yam facility and reiterate our expectation to generate cash savings of approximately $3 million during 2025. With regard to our Richmond Hill site, we have granted a potential buyer the right to acquire the site at a price approximating its book's value. The potential buyer has commenced the due diligence. I'd like to update you on a few matters. Regarding the multitude of US tariffs announced since April, we continue to actively assess the potential impact. As of 1 August, based on our mix of sources, we estimate a tariff impact in the range of 15% to 25% on products sold in the US. The US represents approximately half of our total revenues.
We continue to see the benefits of sub leasing the majority of available land and building it doubles tortillon facility and reiterate our expectation to generate cost savings of approximately $3 million during 2025.
With regard to our Richmond Hill site.
We have gone to the potential buyer of the right to acquire the site, it's a price approximating it's books value.
The potential buyer has commenced the due diligence.
Now I'd like to update you on a few matters regarding the multitude of U S tariffs announced since April.
We continue to actively assess the potential impact.
That's our focus first based on our mix of sources.
We estimate the tariff impact in the range of 15% to 25% on.
On product sold in the U S.
The U S represents approximately half of our total revenues.
Based on our current inventory levels, we expect the impact of these tariffs to be multiple announced.
Nahum Trost: Based on our current inventory levels, we expect the impact of these tariffs to be more pronounced as we move through the year. We are evaluating pricing actions in the US to balance market competitiveness with margin protection. Regarding bodily injury claims, as of 30 June 2025, we were subject to lawsuits involving 423 injured persons alleging injuries associated with exposure to respirable crystalline silica dust. These cases are spread across Israel, Australia, and the United States. We have recorded a provision of $44.9 million, representing our assessment of probable and estimable exposure, with insurance receivable for silicosis-related claims totaling to $25.6 million. During the quarter, 1 US silicosis claim was litigated, and the jury found in favor of the defendants, including Caesarstone.
Nahum Trost: We continue to see the benefits of subleasing the majority of available land and building at our Stott Yum facility and reiterate our expectation to generate cash savings of approximately $3 million during 2025. With regard to our Richmond Hill site, we have granted a potential buyer the right to acquire the site at a price approximating its book's value. The potential buyer has commenced the due diligence. I would like to update you on a few matters. Regarding the multitude of U.S. tariffs announced since April, we continue to actively assess the potential impact. As of August 1st, based on our mix of sources, we estimate a tariff impact in the range of 15% to 25% on products sold in the U.S. The U.S. represents approximately half of our total revenues.
As we move through the year.
We are evaluating pricing actions in the U S to balance market competitiveness with margin protection.
Regarding bodily injury claims as of June 32025, we will subject to lawsuits involving 423 injured persons alleging games release associated with exposure to a scalable crystalline silica dust.
These cases are split across Israel, Australia, and the United States, We have recorded a provision of $44 $9 million, representing our assessment of probable and estimable exposure with insurance receivable for silicosis related claims totaling $25 6 million.
During the quarter.
One use silicosis claim was litigated and the jury found in favor of the defendants, including Caesar stone.
We are encouraged by this outcome pending post trial motions and potential appeal.
Nahum Trost: Based on our current inventory levels, we expect the impact of these tariffs to be more pronounced as we move through the year. We are evaluating pricing actions in the U.S. to balance market competitiveness with margin protection. Regarding bodily injury claims, as of June 30, 2025, we were subject to lawsuits involving 423 injured persons alleging injuries associated with exposure to respirable crystalline silica dust. These cases are spread across Israel, Australia, and the United States. We have recorded a provision of $44.9 million representing our assessment of probable and estimated exposure, with insurance receivable for silicosis-related claims totaling $25.6 million. During the quarter, one U.S. silicosis claim was litigated, and the jury found in favor of the defendants, including Caesarstone Ltd. We are encouraged by this outcome pending post-trial motions and potential appeal. Though for accounting purposes, we estimate the loss for 25 of the remaining U.S.
Nahum Trost: We are encouraged by this outcome, pending post-trial motions and potential appeal, though for accounting purposes, we estimate the loss for 25 of the remaining US cases as only reasonably possible with a range between $0.5 to $13 million per claim. The other claims are at an early stage in which the amount of the possible loss cannot be reasonably estimated this time, given the preliminary stages, complexity of the claims, and the uncertainty as to our liability and the scope of the insurance coverage. In addition, California state courts are now acting to coordinate between certain aspects of the silicosis cases in the state and are awaiting the appointment of a coordination judge. This process could change the timing of the future litigation.
So for accounting purposes, we estimate the loss for 25 of the remaining use cases, it's only reasonably possible with a range between 0.5 to $13 million per claim.
The other claims now are at an early stage in which the amount of the possible loss cannot be reasonably estimated at this time given the preliminary stages.
Complexity of the claims and the uncertainty as to our reliability and the scope of the insurance coverage.
In addition.
California State quotes are now acting to coordinate between certain aspects of the silicosis cases in the state.
And are awaiting the appointment of a coordination judge.
So this process could change the timing of the future litigation.
Looking ahead.
We are confident that the structural improvements we have made to our business model will enable us to achieve higher levels of profitability on current sales level.
Nahum Trost: Looking ahead, we are confident that the structural improvements we have made to our business model will enable us to achieve higher levels of profitability on current sales levels. We remain focused on disciplined execution of our transformation strategy with the additional cost reduction measures we're initiating during the quarter, expected to contribute to further improvement in our cost structure. Our balance sheet provides us with the financial flexibility to navigate near-term headwinds while continuing to invest in our strategic priorities. We believe these investments, combined with our enhanced operational framework, position us well to capitalize on accretive opportunities as we move forward. With that, we are now ready to open the call for questions.
We remain focused on disciplined execution of our transformation strategy is the additional cost reduction measures we initiated during the quarter.
Nahum Trost: cases as only reasonably possible, with a range between $0.5 to $13 million per claim. The other claims are at an early stage in which the amount of the possible loss cannot be reasonably estimated this time, given the preliminary stages, the complexity of the claims, and the uncertainty as to our liability and the scope of the insurance coverage. In addition, California state courts are now acting to coordinate between certain aspects of the silicosis cases in the state and are awaiting the appointment of a coordination judge. This process could change the timing of the future litigation. Looking ahead, we are confident that the structural improvements we have made to our business model will enable us to achieve higher levels of profitability on current sales levels.
Expect it to contribute to further improvement.
Our cost structure.
Our balance sheet provides us with the financial flexibility to navigate near term headwinds, while continuing to invest in our strategic priorities.
We believe these investments combined with our enhanced operational framework.
Position us well to capitalize on accretive opportunities as we move forward.
Is that fair.
We are now ready to open the call for questions.
Thank you.
We will now begin the question and answer session.
Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Reuben Garner with Benchmark. Please go ahead.
To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Nahum Trost: We remain focused on disciplined execution of our transformation strategy, with the additional cost reduction measures we are initiating during the quarter expected to contribute to further improvement in our cost structure. Our balance sheet provides us with the financial flexibility to navigate near-term headwinds while continuing to invest in our strategic priorities. We believe these investments, combined with our enhanced operational framework, position us well to capitalize on accretive opportunities as we move forward. With that, we are now ready to open the call for questions.
At this time, we will pause momentarily to assemble our roster.
The first question comes from.
Gardner with benchmark. Please go ahead.
Thank you good morning, everyone.
Hi, good morning.
Reuben Garner: Thank you. Good morning, everyone.
Good morning.
Nahum Trost: Hi, good morning.
Uh huh.
Just wanted to start with a question on the revenue in the U S.
Yosef Shiran: Morning.
Reuben Garner: Just want to start with a question on the revenue in the US. Any signs that the silica cases in Australia are impacting demand in the States? I know it's a softer market. It's just tough to see other industries that are related not kind of seeing the level of declines. Is there something specific about the category or your products or your markets that's leading to more pressure than others?
Any signs that.
The silica cases in Australia are impacting demand in the states I know, it's a softer market, it's just tough to see.
Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchstone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble a roster. The first question comes from Reuben Garner with Benchmark. Please go ahead.
Other industries that are related not kind of seeing the level of declines is there something specific about the category or your products or your markets that's leading to.
More pressure than others.
No.
Hi, Robyn it's yours no I don't think there is a connection.
Yosef Shiran: No. Hi, Reuben. It's Yosef. No, I don't think there is a connection between the Australian cases to the US. We have enough cases in the US today, and anyway, I don't think that it has any impact on demand. We are suffering because of other reasons, but not because of this reason.
Between the Australian cases through the U S. We have.
Enough cases in the U S. Today.
And any way I don't think that it is.
And then you see any impact on on demand.
Reuben Garner: Thank you. Good morning, everyone.
We are suffering because of other reasons, but not because of this reason.
David Brown: Hi, good morning.
Reuben Garner: Morning. I just want to start with a question on the revenue in the U.S. Any signs that the silica cases in Australia are impacting demand in the States? I know it is a softer market. It is just tough to see other industries that are related not kind of seeing the level of declines. Is there something specific about the category or your products or your markets that is leading to more pressure than others?
Okay.
And then on the gross margin line.
Reuben Garner: Okay. On the gross margin line, can you talk about, looks like there was a little bit, maybe the top line was comparable to a little bit up Q1 to Q2, but the gross margin fell 150 basis points. That was a little surprising. Can you talk about what changed quarter over quarter there? What cost pressures, incremental cost pressures, did you see on the cost of goods front?
Can you talk about it looks like there was a little bit maybe the topline was comparable to a little bit up Q1 to Q2, but the gross margin fell.
Third 50 basis points that was a little surprising is can you talk about what changed quarter over quarter, there what cost pressures incremental cost pressures did you see on the cost of goods front.
Yes.
So the.
Nahum Trost: Yes, Reuben. It's Nahum. Hi. The small decline compared to Q1 relates partially to the production levels that we had in our Bar Lev plant here in Israel. Partially also as a result of the conflict that we experienced here during June. The production levels in our plant here in Bar Lev were lower, which resulted in lower fixed cost absorption, which impacted negatively the overall gross margin. In addition to that, we are adjusting prices to remain competitive in the market. This also impacted the Q2 gross margin.
The small decline compared to Q1 relates partially to the production levels that we had in our Ebola plenty renewed Brian.
Nahum Trost: No. Hi, Reuben. It's Yos. No, I don't think there is a connection between the Australian cases to the U.S. We have enough cases in the U.S. today. Anyway, I don't think that it has any impact on demand. We are suffering because of other reasons, but not because of this reason.
Partially also as a result of the conflict that we experienced during June.
Adoption levels in our plan here and believe we.
<unk>.
Resulted in lower fixed cost absorption, which impacted negatively.
The overall.
The overall gross margin in addition to that.
Reuben Garner: Okay. On the gross margin line, can you talk about, it looks like there was a little bit, maybe the top line was comparable to a little bit up Q1 to Q2, but the gross margin fell 150 bps. That was a little surprising. Can you talk about what changed quarter over quarter there? What cost pressures, incremental cost pressures did you see on the cost of goods front?
Uh huh.
We are adjusting prices.
And to remain competitive in the market. So this also impacted the <unk>.
Quarterly gross margin.
And how much were prices of the 15 or 16% revenue decline, how much was price year over year versus volume.
Reuben Garner: How much were prices of the 15% or 16% revenue decline? How much was price year-over-year versus volume?
Year over year.
Nahum Trost: Yes, Reuben. It's Nahum. So the small decline compared to Q1 relates partially to the production levels that we had in our Barlev plant here in Israel. Partially also as a result of the conflict that we experienced here during June, the production levels in our plant here in Barlev were lower, which resulted in lower fixed cost absorption, which impacted negatively the overall gross margin. In addition to that, we are adjusting prices to remain competitive in the market. This also impacted the second quarter gross margin.
This is where the six five.
Nahum Trost: Year over year, our prices were 6.5%, 650 basis points. This was one major impact compared to last year. The other impact, as I said, was the lower production utilization, 250 basis points. On the positive side, our improved production source mix, we reached to a 70% level, improved gross margin by 450 basis points, and also lower inventory charges improved the gross margin compared to last year by 320 basis points. Those were the main items.
<unk> 650 basis points.
So this was one major impact compared to last year. The other impact as I said was the lower production utilization to 150 basis points on the positive side our improved production.
So it's mix.
We look to a 70% level.
Improved gross margin by 450 basis points.
So lower inventory charges improved the gross margin compared to last year by 320 basis points. So those are the main the main items.
Okay, and then you implemented some cost saving actions.
Reuben Garner: Okay. You implemented some cost-saving actions. The Q2 SG&A came in really low. Did it already start happening there, in Q2, or was that from previous actions? We could see SG&A move lower sequentially through the year as some of the actions you've had to take hold.
The second quarter SG&A came in.
Reuben Garner: How much were prices of the 15% or 16% revenue decline? How much was priced year over year versus volume?
Really low I mean does it already start happening there in Q2 or was that from previous actions.
We could see SG&A move lower sequentially through the year as some of the actions you've had to take take take hold.
Nahum Trost: Year over year, prices were 6.5%, 650 basis points. So, this was one major impact compared to last year. The other impact, as I said, was the lower production utilization, 250 basis points. On the positive side, our improved production source mix, we reached to a 70% level, improved gross margin by 450 basis points, and also lower inventory charges improved the gross margin compared to last year by 320 basis points. So, those were the main items.
Thank you all right. It's a combination between actions that we took in previous quarters plus.
Nahum Trost: I think you're right. It's a combination between actions that we took in previous quarters plus a very tight control over those expenses that are within our control. We have been doing that in recent quarters, and we continue to plan, and we continue to do that also in future quarters to closely monitor those expenses. Yeah. It's a combination. We still did not see the impact of the incremental $10 million of savings. Those actions that we took will impact Q3 and Q4 and down the road.
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That's a very tight control over.
Over those expenses that are within that within our control.
And we.
We have been doing that in recent quarters, and we continue to plan and we continue to do that also in future quarters to closely monitor those expenses.
Yeah. So it's a combination we still did not see the incremental the impact of the incremental $10 million of savings.
Reuben Garner: Okay. Then you implemented some cost-saving actions. The second quarter, SG&A came in really low. Did it already start happening there in Q2, or was that from previous actions? You know, we could see SG&A move lower sequentially through the year as some of the actions you've had to take hold.
Those.
The actions that we took will will impact.
In Q4 and down demand.
Yeah.
Great. That's it for me guys. Thank you so much and good luck going forward.
Reuben Garner: Great. That's it for me, guys. Thank you so much, and good luck going forward.
Thank you. Thank you.
Nahum Trost: Thank you.
Okay.
Thank you.
Nahum Trost: I think you are right. It's a combination between actions that we took in previous quarters, plus a very tight control over those expenses that are within our control. We have been doing that in recent quarters, and we continue to plan, and we continue to do that also in future quarters to closely monitor those expenses. So it's a combination. We still did not see the impact of the incremental $10 million of savings. Those actions that we took will impact Q3 and Q4 and down the road.
This concludes our question and answer session.
Yosef Shiran: Thank you.
I would like to turn the conference back to York Sudan.
Operator: Thank you. This concludes our question and answer session. I would like to turn the conference back to Yosef Shiran for any closing remarks.
For any closing remarks.
Thank you for your attention.
Thank you for your attention. This morning, we look forward to updating you on our progress also next Wilton.
Yosef Shiran: Thank you for your attention this morning. We look forward to updating you on our progress also next quarter.
Thanks, a lot.
Okay.
Yosef Shiran: Thanks a lot. Bye.
Thank you the conference now has concluded. Thank you for attending today's presentation you may now disconnect.
Operator: Thank you. The conference now has concluded. Thank you for attending today's presentation. You may now disconnect.
Reuben Garner: Great. That's it for me, guys. Thank you so much, and good luck going forward.
Nahum Trost: Thank you.
David Brown: Thank you.
Operator: Thank you. This concludes our question and answer session. I would like to turn the conference back to Yosef Shiran for any closing remarks.
Nahum Trost: Thank you for your attention this morning. We look forward to updating you on our progress also next quarter.
Reuben Garner: Thanks a lot.
Operator: Thank you. The conference now has concluded. Thank you for attending today's presentation. You may now disconnect.