Caesarstone Ltd (CSTE) 2022 Q4 法說會逐字稿

Greetings, and welcome to the Caesarstone Limited Fourth Quarter 2022 Earnings Conference Call. (Operator Instructions). As a reminder, this conference is being recorded.

您好，歡迎來到 Caesarstone Limited 2022 年第四季度收益電話會議。 （操作員說明）。提醒一下，這次會議正在錄製中。

It is now my pleasure to introduce your host, Brad Cray from ICR. Thank you, Brad. You may begin.

現在我很高興向您介紹主持人，來自 ICR 的 Brad Cray。謝謝你，布拉德。你可以開始了。

Thank you, operator, and good morning to everyone on the line. I'm joined by Yuval Dagim, Caesarstone's Chief Executive Officer; and Nahum Trost, Caesarstone's Chief Financial Officer.

謝謝接線員，早上好。 Caesarstone 的首席執行官 Yuval Dagim 加入了我的行列；以及 Caesarstone 的首席財務官 Nahum Trost。

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.

今天電話會議中的某些陳述和對各種問題的回答可能構成前瞻性陳述。我們提醒您，此類陳述僅反映公司當前的預期，實際事件或結果可能存在重大差異。欲了解更多信息，請參閱公司最近的 20-F 表格年度報告以及隨後向美國證券交易委員會提交的文件中包含的風險因素。

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.

此外，在此次電話會議上，公司將參考某些非 GAAP 財務指標，包括調整後的淨收入、調整後的每股淨收入、調整後的毛利、調整後的 EBITDA 和固定匯率。這些非 GAAP 指標與最直接可比的 GAAP 指標的對賬可以在公司 2022 年第四季度的收益報告中找到，該報告發佈在公司的投資者關係網站上。

Thank you. And I would now like to turn the call over to Yuval. Please go ahead.

謝謝。我現在想把電話轉給 Yuval。請繼續。

Thank you, Brad, and good morning, everyone. I'm proud of the entire Caesarstone team's efforts as we finish 2022 with a record full year revenue of approximately $691 million. During the year, we focused diligently on executing our multipronged 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.

謝謝你，布拉德，大家早上好。我為整個 Caesarstone 團隊的努力感到自豪，因為我們將在 2022 年以創紀錄的約 6.91 億美元的全年收入結束。在這一年裡，我們努力專注於執行我們的多管齊下的增長戰略，因為我們度過了充滿挑戰的需求環境，該環境在 2022 年下半年有所緩和，利率和通貨膨脹率上升，房屋開工壓力和改造費用受到壓力，特別是影響了我們的美國和以色列2022 年第四季度的業務。此外，某些客戶正在降低庫存水平，因此我們調整了生產並在必要時平衡 SKU。

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.

鑑於這些不斷變化的市場條件，我們第四季度的業績低於我們的預期。雖然我們預計我們的定價舉措將有助於抵消 2023 年市場銷量下降的影響，但我們仍然相信，我們主要市場的長期翻新和改造基本面依然強勁。考慮到這一點，我們專注於在 2023 年優化我們的全球結構，以更高效地運營並提高我們的可擴展性以迎接新的增長機會。

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 U.S. 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.

為了有效地做到這一點，我們專注於在我們的全球增長加速計劃中利用我們的項目來合理化我們的成本，更有效地管理我們的營運資金，加強我們的營銷工作並擴大我們的美國分銷足跡。現在，我想討論一下我們在進入 2023 年時為改善業績而採取的一些行動。

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 head count globally by approximately 9% across all business units and functions. We expect to continue to monitor our SG&A costs through spending hold on nonessential 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.

我們正在暫時降低製造設施的有效產能以滿足當前需求，這應該會提供更好的營運資金。其次，我們在 2022 年下半年採取行動，將全球所有業務部門和職能部門的員工人數減少了約 9%。我們預計將在 2023 年通過暫停非必要開支和行政職能來繼續監控我們的 SG&A 成本。第三，我們正在仔細評估我們的全球供應鏈，以尋找我們今年可以根據需要解決的額外瓶頸。

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 product.

正如我們過去所說，近年來，我們擴大了與主要位於亞洲以外的 OEM 製造商的關係。這使我們不僅能夠使我們的供應鏈多樣化，而且能夠以不同的價位為越來越多的市場提供服務。因此，這增加了我們在低成本國家/地區通過 OEM 製造的產品的比例，這使得我們能夠更好地捕捉新建築活動的需求，而新建築活動往往更青睞入門級產品。

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 head count 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.

第四，我們繼續致力於我們的技術和數字投資，例如我們創新的 CS Connect 平台，它仍然是一個亮點，並正在加速我們改善客戶體驗和整個業務參與的能力。最後，我們計劃加大在美國的營銷力度，並擴大我們在有吸引力且經濟穩健的市場的分銷足跡。我們通過將裁員和營運資金減少以及其他成本緩解措施節省的部分資金進行再投資，為這些營銷投資提供資金。除了這些行動之外，我們還在 2023 年第一季度提高了主要市場的售價，以減輕成本上升對我們利潤率的影響。

I would like also to reiterate that our multi-material product pipeline, including Caesarstone-branded porcelain slabs, provides us with encouraging growth prospects as we look forward. We are excited to introduce our Caesarstone-branded global porcelain collection to North America during the first half of 2023 following a launch in the U.K., Israel and the Australian markets during the second half of 2022.

我還想重申，我們的多材料產品線，包括 Caesarstone 品牌的瓷板，在我們期待的時候為我們提供了令人鼓舞的增長前景。繼 2022 年下半年在英國、以色列和澳大利亞市場推出之後，我們很高興在 2023 年上半年向北美推出我們的 Caesarstone 品牌全球瓷器系列。

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 Caesarstone distribution centers, we have significantly diversified our sales channels. We estimate that in the U.S. business, approximately 1/4 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.

在接下來的幾年裡，我們預計瓷器將成為我們主要市場收入增長的主要驅動力。通過成功打入大賣場、收購 Omicron 等戰略分銷商以及持續有機擴張 Caesarstone 配送中心，我們的銷售渠道實現了顯著多元化。我們估計，在美國業務中，我們今天約有 1/4 的銷售額來自獨立分銷商，而幾年前約為一半。我們相信，我們更廣泛的渠道曝光使我們能夠跑贏市場，並將繼續幫助我們加速成功推出新產品和我們擴展的多材料產品（如瓷器）。

I'd like to take a moment to comment on recent developments in Australia in regards to increasing government attention on the engineered store 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 silicon. 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 quant solutions to all stakeholders.

我想花點時間談談澳大利亞政府對工程商店市場日益關注的近期發展。澳大利亞聯邦和各州當局正在探索降低人造石製造相關風險的方法，例如更嚴格的製造商許可標準以及限制含矽量高的人造石的銷售。作為該市場的領導者，我們繼續積極培訓和教育製造商、客戶和價值鏈中的其他人安全材料處理和安裝實踐，並加快我們自己的低二氧化矽產品系列的額外開發。值得注意的是，在整個供應鏈的安全方面，我們一直是最活躍的公司之一。我們將繼續儘自己的一份力量，為所有利益相關者提供量化解決方案。

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.

總之，我們繼續在整個組織內採取審慎的行動，以提高效率並使我們的成本合理化。我們在全球增長加速計劃下為 2023 年規劃的激動人心的項目讓我們對實現今年目標的能力充滿信心。展望未來，我們將繼續致力於加強我們的成本結構，提升我們的多材料產品組合，並定位我們的業務以在未來幾個季度取得更好的業績。

With that, I will now turn the call to Nahum to discuss more details on our financial results and outlook.

有了這個，我現在將把電話轉給內厄姆，討論有關我們財務業績和前景的更多細節。

Thank you, Yuval, and good morning, everyone. I will start by discussing our fourth quarter results. Global revenue in the fourth quarter was $159.4 million compared to $171.1 million in the fourth quarter of last year. On a constant currency basis, fourth quarter revenue was lower by 2.1% compared to the same period last year as sales improvement in the APAC region was more than offset by softer performance in all other regions given the challenging macroeconomic conditions.

謝謝 Yuval，大家早上好。我將從討論我們第四季度的業績開始。第四季度全球收入為 1.594 億美元，而去年第四季度為 1.711 億美元。按固定匯率計算，第四季度收入較去年同期下降 2.1%，原因是亞太地區的銷售增長被所有其他地區在充滿挑戰的宏觀經濟條件下的疲軟業績所抵消。

Looking at our fourth quarter P&L performance. Our gross margin was 19.4% for the quarter. Adjusted gross margin was 19.7% compared to 23.3% in the prior year quarter. The year-over-year difference in gross margin predominantly reflected increased manufacturing unit costs driven by lower fixed cost absorption resulting from lower capacity utilization, higher raw material and shipping costs, and unfavorable foreign currency exchange rates, as a result of appreciation of the U.S. dollar against all other currencies. This was partially offset by our several pricing actions.

看看我們第四季度的損益表現。我們本季度的毛利率為 19.4%。調整後的毛利率為 19.7%，而去年同期為 23.3%。毛利率的同比差異主要反映了製造單位成本的增加，這是由於較低的產能利用率、較高的原材料和運輸成本以及不利的外匯匯率導致的較低的固定成本吸收導致的，這是由於美國升值造成的。美元兌所有其他貨幣。這部分被我們的幾項定價行動所抵消。

Looking ahead to 2023, we expect the unfavorable impact of foreign exchange rates, higher raw material and shipping costs in our P&L to persist, primarily in the first half of the year, given that we started the year with higher unit cost in inventory, reflecting those previous periods of elevated material and shipping costs. In response, we have already taken actions to partially mitigate this impact with additional price increases, building upon our previously enacted price increases during 2022. Additionally, we have already taken measures to align our production and inventory levels to new conditions in the market, and we continue to take actions to reduce costs.

展望 2023 年，我們預計外匯匯率的不利影響、較高的原材料和運輸成本在我們的損益表中將持續存在，主要是在今年上半年，因為我們年初的庫存單位成本較高，反映那些以前材料和運輸成本高漲的時期。作為回應，我們已經採取行動，在我們之前製定的 2022 年提價的基礎上，通過額外提價來部分減輕這種影響。此外，我們已經採取措施使我們的生產和庫存水平與市場的新情況保持一致，並且我們繼續採取行動降低成本。

Operating expenses in the fourth quarter were $106.1 million compared to $36.3 million in the prior year quarter. Our operating expenses for the quarter included a onetime noncash impairment charge of $71.3 million related to goodwill and long-lived assets. Given our current market capitalization, together with softer macroeconomic conditions, higher interest rates and lower production utilization, a review of our goodwill and long-lived asset balances is required, which resulted in the above-mentioned impairment charges.

第四季度的運營費用為 1.061 億美元，而去年同期為 3630 萬美元。我們本季度的運營費用包括與商譽和長期資產相關的一次性非現金減值費用 7,130 萬美元。鑑於我們目前的市值，加上宏觀經濟狀況疲軟、利率上升和生產利用率降低，需要審查我們的商譽和長期資產餘額，這導致了上述減值費用。

Excluding legal settlements, loss contingencies and impairment charges, adjusted operating expenses were 22.2% of revenues compared to 21.9% in the prior year quarter. Adjusted EBITDA in the fourth quarter was $5.7 million, representing a margin of 3.6% compared to $11.5 million or a margin of 6.7% in the prior year quarter. The year-over-year difference primarily reflects the lower operating income.

不包括法律和解、或有損失和減值費用，調整後的運營費用佔收入的 22.2%，而去年同期為 21.9%。第四季度調整後的 EBITDA 為 570 萬美元，利潤率為 3.6%，而去年同期為 1150 萬美元，利潤率為 6.7%。同比差異主要反映了較低的營業收入。

Now looking at our full year financial performance highlights. Sales for the full year were up 7.3%, and on a constant currency basis, sales were up by 10.8% driven by growth in the United States and Canada. Adjusted gross margin for the year was 23.8% compared to 26.8% last year. The difference in the adjusted gross margin mainly reflects lower fixed cost absorption, higher raw material prices, unfavorable foreign currency exchange rates and shipping price increases, which were partially offset by favorable product mix and selling price increases.

現在看看我們全年的財務業績亮點。全年銷售額增長 7.3%，按固定匯率計算，受美國和加拿大增長的推動，銷售額增長 10.8%。本年度經調整的毛利率為 23.8%，而去年為 26.8%。調整後毛利率的差異主要反映了較低的固定成本吸收、較高的原材料價格、不利的外幣匯率和運費上漲，這些被有利的產品組合和銷售價格上漲部分抵消。

Excluding legal settlements, loss contingencies and the noncash impairment charges we incurred during the fourth quarter of 2022, adjusted operating expenses for the full year were 21.7% of revenue compared to 21.9% in the prior year. Our full year 2022 adjusted EBITDA was $51.9 million, a 7.5% margin compared to $68.2 million last year or a 10.6% margin, with the year-over-year change in margin primarily reflecting the lower gross margin.

不包括法律和解、或有損失和我們在 2022 年第四季度發生的非現金減值費用，全年調整後的運營費用佔收入的 21.7%，而去年同期為 21.9%。我們 2022 年全年調整後的 EBITDA 為 5190 萬美元，利潤率為 7.5%，而去年為 6820 萬美元，利潤率為 10.6%，利潤率的同比變化主要反映了較低的毛利率。

Turning to our balance sheet. Caesarstone balance sheet as of December 31, 2022, included cash, cash equivalents, short-term bank deposits and short- and long-term marketable securities of $59.2 million with a total debt to financial institutions of $31 million.

轉向我們的資產負債表。 Caesarstone 截至 2022 年 12 月 31 日的資產負債表包括現金、現金等價物、短期銀行存款和短期和長期有價證券 5920 萬美元，對金融機構的債務總額為 3100 萬美元。

Moving to our outlook. Given macroeconomic environment and low ability to predict the duration of the slowdown in global construction activity, we expect revenue for the full year of 2023 to be in the same range of the 2022 revenue. For 2023, we expect lower volume to be offset by pricing initiatives. Additionally, we expect a gradual and moderate improvement in adjusted EBITDA as a percentage of sales for the full year of 2023, primarily due to pricing initiatives and cost optimization efforts, which are expected to more than offset higher raw material and shipping costs in our inventory. While spot market cost for many of our major inputs, such as raw materials and shipping have stabilized in recent months, at year-end, our units in inventory were at a higher cost year-over-year.

轉向我們的前景。鑑於宏觀經濟環境和預測全球建築活動放緩持續時間的能力較低，我們預計 2023 年全年收入將與 2022 年收入處於同一範圍。對於 2023 年，我們預計較低的銷量將被定價舉措所抵消。此外，我們預計調整後的 EBITDA 佔 2023 年全年銷售額的百分比將逐步適度改善，這主要是由於定價舉措和成本優化工作，預計這將抵消我們庫存中較高的原材料和運輸成本.雖然近幾個月我們許多主要投入品（例如原材料和運輸）的現貨市場成本已趨於穩定，但到年底，我們的庫存單位成本同比較高。

Given the slower market and prior supply chain inefficiencies, we also ended the year with more days of inventory on hand than is typical. We, therefore, expect our margins to be higher in the second half of 2023 compared to the first half as we work through higher unit costs in inventory. We believe that the outlook we are providing to you today is also achievable and appropriate given the level of uncertainty in the industry.

鑑於市場放緩和之前的供應鏈效率低下，我們在年底的手頭庫存天數也比往常多。因此，我們預計 2023 年下半年的利潤率將高於上半年，因為我們要解決更高的庫存單位成本。我們相信，鑑於行業的不確定性程度，我們今天向您提供的展望也是可以實現和適當的。

We are well positioned and prepared to execute on the factors that are within our control. We believe we are taking a balanced and prudent approach to set expectations, and we will fully leverage all resources available to us to mitigate risk and capitalize on the market opportunities available to us.

我們已做好準備並準備好執行我們控制範圍內的因素。我們相信我們正在採取平衡和審慎的方法來設定預期，我們將充分利用我們可用的所有資源來降低風險並利用我們可用的市場機會。

With that, let me turn the call back to Yuval for closing comments.

有了這個，讓我把電話轉回 Yuval 以徵求意見。

Thank you, Nahum. Overall, as we look to 2023, we remain optimistic about our prospects for future growth as we work to transform Caesarstone into a leading, premium, multi-material countertop company. We have a large and addressable market opportunity in countertops combined with solid positioning in attractive geographies. 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 U.S. distribution footprint.

謝謝你，內厄姆。總體而言，展望 2023 年，我們對未來增長前景保持樂觀，因為我們致力於將 Caesarstone 轉變為領先的優質多材料檯面公司。我們在檯面領域擁有巨大且可尋址的市場機會，並在有吸引力的地區擁有穩固的定位。我們專注於在我們的全球增長加速計劃中利用我們的項目來合理化我們的成本，更有效地管理我們的營運資金，加強我們的營銷工作並擴大我們在美國的分銷足跡。

With our world-class brand multi-material countertop offerings, innovative go-to-market initiatives and dedicated focus on driving results, we believe we are well situated to capture market share and unlock further value in our business. I look forward to updating you again on our progress in the coming quarters.

憑藉我們世界一流的品牌多材料檯面產品、創新的上市計劃和專注於推動成果，我們相信我們有能力奪取市場份額並在我們的業務中釋放更多價值。我期待著再次向您介紹我們在未來幾個季度取得的進展。

Thank you, and we are now ready to open the call for questions.

謝謝，我們現在準備好開始提問了。

(Operator Instructions) We take our first question from the line of Reuben Garner with The Benchmark Company.

（操作員說明）我們從 The Benchmark Company 的魯本·加納 (Reuben Garner) 那裡提出我們的第一個問題。

So maybe to start on the gross margin line. Can you walk me through the bridge to how we got to (inaudible) from the peak? I thought some of the FX pressures would have reversed with the dollar weakening over the last several months. Maybe you could walk through that dynamic. Is that something that will start to benefit things as we move into 2023? Or am I just missing something in the FX formula?

所以也許從毛利率開始。你能帶我穿過橋到我們如何從山頂到達（聽不清）嗎？我認為隨著美元在過去幾個月走軟，一些外匯壓力可能會逆轉。也許你可以走過那個動態。隨著我們進入 2023 年，這會開始讓事情受益嗎？或者我只是在 FX 公式中遺漏了什麼？

Reuben, it's Nahum. You are not -- I don't think that you are missing. Although the FX environment was slightly better in Q4 compared to Q3, still the U.S. dollar is elevated compared to all other currencies in which we operate, especially when you compare it to Q4 of last year. And to add to that, in the beginning of 2023, we continue to see, even with a higher pace the U.S. dollar getting stronger against all other currencies in which we operate. So we do expect to see the same FX environment. So all in all, the FX on Q4 of 2022 when you compare it to Q4 of '21 had a negative impact of 320 basis points.

魯本，我是內厄姆。你不是——我不認為你失踪了。儘管與第三季度相比，第四季度的外匯環境略好，但與我們經營的所有其他貨幣相比，美元仍然處於高位，尤其是與去年第四季度相比時。此外，在 2023 年初，我們繼續看到，即使步伐加快，美元兌我們運營的所有其他貨幣也會走強。所以我們確實希望看到相同的 FX 環境。因此，總而言之，當您將 2022 年第四季度的外匯與 21 年第四季度進行比較時，它產生了 320 個基點的負面影響。

On top of that, Reuben, if you would like to complete the picture of the bridge, obviously, the higher ASP and the price increases that we did along the year had a positive impact of more than 700 basis points compared to last year, I mean. This was more than offset by the higher raw material costs 250 basis points, higher logistics and including the landed shipping cost of 210 basis points. And obviously, the fact that we reduced production in the second half of 2022 because in order to align our inventory balances had also a negative impact as there is a higher portion of unabsorbed expenses in our plants. So the higher overhead in the plants reduced the gross margin by 270 basis points. This is more or less the bridge between the two periods.

最重要的是，Reuben，如果你想完成這座橋的圖景，顯然，與去年相比，更高的平均售價和我們今年所做的價格上漲產生了超過 700 個基點的積極影響，我意思是。這被更高的原材料成本 250 個基點、更高的物流以及包括 210 個基點的到岸運輸成本所抵消。顯然，我們在 2022 年下半年減產，因為為了調整我們的庫存餘額，這也產生了負面影響，因為我們工廠中未吸收的費用比例更高。因此，工廠較高的間接費用使毛利率降低了 270 個基點。這或多或少是兩個時期之間的橋樑。

Okay. So the price offset, the volume declines and the logistics and the material inflation, but then you had an additional 300-or-so basis points of FX pressure?

好的。所以價格抵消了，銷量下降，物流和材料通脹，但你有額外的 300 左右的外匯壓力基點？

Correct. Exactly.

正確的。確切地。

If I look at that same math for 2023, how does that look? I assume the first half looks similar and in the second half, the FX -- you anniversary the FX impact, so you'll have more gross margin expansion in the second half?

如果我看一下 2023 年的相同數學，它看起來如何？我認為上半年看起來很相似，而在下半年，外匯——你是外匯影響的周年紀念日，所以你在下半年會有更多的毛利率擴張？

You're right. Those indicators that are within our control, we expect them to have a positive impact as -- gradually as we said in our outlook over 2023. Currently, our inventory balance and the cost of our inventory is elevated given the fact that they are still reflecting higher raw material cost. But as we will move along 2023, the higher inventory cost will flow to the P&L, and we will begin to see a bit lower inventory cost as the prices of the raw materials over the last few months began to stabilize in the market.

你說得對。那些在我們控制範圍內的指標，我們預計它們將產生積極影響——正如我們在 2023 年的展望中所說的那樣。目前，我們的庫存餘額和庫存成本都在上升，因為它們仍在反映原材料成本較高。但隨著 2023 年的到來，更高的庫存成本將流入損益表，隨著過去幾個月原材料價格在市場上開始趨於穩定，我們將開始看到庫存成本略有下降。

Okay. And then on the pricing side, what gives you confidence that you're going to be able to push price or hold the pricing increases that you've announced this quarter in the face of what appears to be depressed volume environment?

好的。然後在定價方面，是什麼讓您有信心面對看似低迷的銷量環境，您將能夠推高價格或保持本季度宣布的價格上漲？

Reuben, it's Yuval. First, it's fair to say that the price increases actions that we took in 2022, relatively well received in the market. We are not planning for further major increases in 2023. Our price increase for Q1 was low single-digit price increase globally. So we are moving to move annual price increases approach as other industries to mitigate some of our costs from the year before. We are not expecting further price increases during the rest of the year.

魯本，是尤瓦爾。首先，可以公平地說，我們在 2022 年採取的提價行動，在市場上的反響相對較好。我們不打算在 2023 年進一步大幅上漲。我們第一季度的價格上漲是全球低個位數的價格上漲。因此，我們正在採取與其他行業一樣的年度價格上漲方式，以減輕我們前一年的部分成本。我們預計今年剩餘時間價格不會進一步上漲。

Okay. And then if I'm hearing your outlook right for the full year, it sounds like gross margin is probably going to be under pressure and you're going to get to EBITDA margin expansion by kind of tightening the belt on spending. Is that the fair way to think about it? And what does that do for your growth outlook? I mean you've ramped up the spending in the last couple of years to try to drive growth in some other markets, the U.S. and Europe. Are those the initiatives that maybe you put on hold because it's a tough environment? Or are you pulling back in other areas?

好的。然後，如果我聽到你對全年的展望正確，聽起來毛利率可能會面臨壓力，你將通過收緊開支來擴大 EBITDA 利潤率。這是考慮它的公平方法嗎？這對您的增長前景有何影響？我的意思是你在過去幾年裡增加了支出，以試圖推動其他一些市場，美國和歐洲的增長。由於環境惡劣，您可能會擱置這些計劃嗎？還是在其他方面退縮了？

I think it's a fair comment as we are now trying to keep the tense between margin improvements and continue to push for the growth engines we already launched. We are not cutting marketing spend in 2023. Actually, we will be investing a bit more in the U.S. business of ours where we are recognizing the biggest opportunity for our company. And the margin improvement would be coming also from tight cost control on the rest of the markets of ours, but also, we are expecting to improve our COGS of goods sales spend as well.

我認為這是一個公平的評論，因為我們現在正試圖在提高利潤率和繼續推動我們已經推出的增長引擎之間保持緊張關係。我們不會在 2023 年削減營銷支出。實際上，我們將對我們的美國業務進行更多投資，我們認識到這對我們公司來說是最大的機會。利潤率的提高也將來自對我們其他市場的嚴格成本控制，而且，我們預計也將改善商品銷售支出的銷貨成本。

In addition, Reuben, take into consideration that the pricing actions that we completed during 2022 will be -- will have a full impact over 2023 on top of the additional price increase that we did in February. So this is one positive impact. And on the other hand, as just as we discussed now, we are expecting gradual moderate improvement in the cost of goods sold as we go through 2023. So it will come also from higher margins in gross margins as well.

此外，Reuben 考慮到我們在 2022 年完成的定價行動將——除了我們在 2 月份進行的額外價格上漲之外，還將對 2023 年產生全面影響。所以這是一個積極的影響。另一方面，正如我們現在討論的那樣，我們預計到 2023 年，銷售成本將逐漸適度改善。因此，這也將來自更高的毛利率。

Okay. So the gross margin pressures in the first half can be made up as the year progresses to get to something flat or up on the gross line.

好的。因此，隨著時間的推移，上半年的毛利率壓力可以得到彌補，使毛利率持平或上升。

Correct.

正確的。

Correct. Exactly.

正確的。確切地。

(Operator Instructions) We take our next question from the line of Brock Cannon with Stifel.

（操作員說明）我們從 Brock Cannon 和 Stifel 的系列中提出下一個問題。

This is Brock Cannon filling in for Stanley Elliott today. I'm going to run to it here. So looking at your porcelain rollout in the U.S. and Canada, what kind of price point are you expecting there compared to other countertop materials? And going along with that, what kind of relative margin you're expecting?

我是 Brock Cannon 今天代替 Stanley Elliott。我要跑到這裡。那麼看看你們在美國和加拿大推出的瓷器，與其他檯面材料相比，你期望那裡的價格是多少？隨之而來的是，您期望什麼樣的相對利潤率？

First, it's a good direction to where we are taking the company to. We are definitely becoming more and more a multi-material countertop company. We launched last year the porcelain offering in the U.K., Australia and Israel. And now in the second quarter of this year, we are moving to the launch in North America, U.S. and Canada. Price points will be similar to what we see in the market related to the countertop industry. But I may say that as a whole, the porcelain category in our business is margin accretive, so we are building on some gross margin and EBITDA margin improvements as we are progressing the penetration of Porcelain into the market and as part of our business.

首先，這是我們將公司帶到何處的好方向。我們肯定會越來越成為一家多材料檯面公司。我們去年在英國、澳大利亞和以色列推出了瓷器產品。現在在今年第二季度，我們將在北美、美國和加拿大推出。價格點將類似於我們在市場上看到的與檯面行業相關的價格點。但我可以說，作為一個整體，我們業務中的瓷器類別可以增加利潤率，因此隨著我們逐步將瓷器滲透到市場並作為我們業務的一部分，我們正在提高毛利率和 EBITDA 利潤率。

Okay. Great. And then moving on here, could you provide any update on how CS Connect is going and kind of the adoption there?

好的。偉大的。然後繼續說到這裡，您能否提供有關 CS Connect 的進展情況以及那裡的採用情況的任何最新信息？

Yes, sure, although still starting from a small base, we are expecting to double, if not tripling the revenue of 2022 this year in 2023. As you remember, we launched CS Connect in our three major markets, the U.S., Canada and Australia, and the momentum that we experienced in Q4 is continuing into 2023. So this is definitely acting as a growth engine, and we are looking forward to be servicing more and more customers in these three major markets of ours as it progresses.

是的，當然，雖然仍然是從一個小基數開始，但我們預計到 2023 年，如果今年的收入不是 2022 年的兩倍，即使不是三倍。你還記得，我們在美國、加拿大和澳大利亞這三個主要市場推出了 CS Connect ，我們在第四季度經歷的勢頭將持續到 2023 年。因此，這無疑是一個增長引擎，我們期待隨著它的發展為我們這三個主要市場中越來越多的客戶提供服務。

Great to hear that. And then last thing here, could you possibly provide any color on how things have been trending so far in the U.S. through February, possibly anything on volumes or R&R activity?

很高興聽到。然後這裡的最後一件事，你能否提供任何顏色，說明到目前為止美國到 2 月份的趨勢如何，可能是關於數量或 R&R 活動的任何信息？

Although we are not providing guidance for Q1. But we continue to see the same trends in the U.S. market as we as we saw it in Q4 after a strong H1 of 2022, we began to see the housing market decline in the second half of 2022, especially in Q4 of 2022. And so far, we see basically the same trend.

儘管我們沒有為第一季度提供指導。但我們繼續看到美國市場的趨勢與我們在 2022 年上半年的強勁表現之後在第四季度看到的趨勢相同，我們開始看到房地產市場在 2022 年下半年下滑，尤其是在 2022 年第四季度。因此到目前為止，我們看到的趨勢基本相同。

Ladies and gentlemen, we reached the end of the question-and-answer session, and I'd like to turn the call back over to Yuval Dagim, CEO, for closing comments. Over to you, sir.

女士們，先生們，我們的問答環節已經結束，我想將電話轉回給首席執行官 Yuval Dagim，以徵求結束意見。交給你了，先生。

Thank you for your attention this morning. We look forward to updating you on our progress next quarter. Thank you.

感謝您今天早上的關注。我們期待在下個季度向您通報我們的進展情況。謝謝。

Thank you.

謝謝。

Thank you, ladies and gentlemen. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

謝謝你們，女士們，先生們。今天的電話會議到此結束。此時您可以斷開您的線路，感謝您的參與。