Caesarstone Ltd. Aktie

Greetings, and welcome to the Caesarstone Second Quarter 2026 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to your host, Brad Cray of ICR. Thank you. Please go ahead.

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 20-F and subsequent filings with the SEC. In addition, on this call, the company will make reference to certain non-GAAP financial measures, including adjusted net loss, income, adjusted net loss, income per share, adjusted gross profit, adjusted EBITDA and constant currency. The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's second quarter 2026 earnings release, which is posted on the company's Investor Relations website.

On today's call, Yos will discuss our business activity and Nahum will then cover additional details regarding financial results. Thank you, and I would like to now turn the call over to Yos. Please go ahead.

Thank you, Brad, and good morning, everyone. The second quarter marked another step forward in our efforts to restore profitability. Gross margin improved meaningfully both year-over-year and sequentially, reaching 24% on low revenue and our adjusted EBITDA loss narrowed significantly to $1 million from $6.4 million a year ago and $7.5 million in the first quarter. These results demonstrate that the structural actions we have taken are delivering the expected benefits. With our optimized manufacturing footprint and global production partner network now in place, we have created a leaner, more flexible operating model that is improving margins, enhancing customer service and supporting our path to sustainable profitability.

Global revenues totaled $96.6 million, down approximately 7.7% year-over-year on a constant currency basis, reflecting competitive dynamics and soft market conditions, mainly in North America. While we are encouraged by the progress in profitability, restoring revenue growth remains our top priority. In North America, we continue to strengthen relationships with key customers and fabricators and expanding our presence in the big box channel, which grew year-over-year in the quarter. Australia delivered its fourth consecutive quarter of year-over-year growth, supported by our Zero Silica ICON collection as we continue to regain our leading position in that market. At the same time, we continue to invest in our long-term growth drivers, our brand, our innovation and our porcelain offering.

While the external environment remains challenging, we continue to focus on disciplined execution, delivering improved customer service through our production partner network and maintaining a lean cost structure. Late last week, the U.S. administration announced a new tariff-rate quota on imports of quartz surface products effective August 15. We are still assessing the potential impact on our business. However, these developments do not change our strategic priorities, and we remain confident that our operating model positions us well to deliver long-term value.

I will now turn the call over to Nahum.

Thank you, Yos, and good morning, everyone. Looking at our second quarter results, global revenue was $96.6 million compared to $101.1 million in the prior year quarter. On a constant currency basis, revenues declined approximately 7.7% year-over-year, primarily reflecting competitive pressures and continued softness in global demand, mainly in North America. These factors were partially offset by strength in Australia. Breaking down our regional performance. In the U.S., revenue was approximately $42.7 million compared to $49.6 million in the prior year quarter, a decrease of 14.1%.

The decline was driven by lower volumes in our core business, mainly reflecting soft conditions in the commercial channel, including new development and in our business through stone suppliers. Our big box business grew approximately 3% year-over-year, led by strong growth with IKEA. Canada revenue decreased 17.5% on a constant currency basis, mainly reflecting fewer housing completions and slow market conditions. In Australia, revenue was $20.3 million compared to $16.6 million in the prior year quarter, an increase of approximately 10.1% on a constant currency basis. This marked the fourth consecutive quarter of year-over-year growth in Australia, reflecting the continued recovery of our market position following the introduction of our Zero Silica ICON products. EMEA sales were down 9.8% on a constant currency basis, primarily due to the timing of orders shipped to customers in the period.

In Israel, revenue increased 32.4% on a constant currency basis, mainly reflecting a favorable comparison to the prior year period, which was impacted by the regional conflict. Looking at our second quarter P&L performance. Gross margin was 24% compared to 19.6% in the prior year quarter, an improvement of 440 basis points and up 170 basis points sequentially from 22.3% in the first quarter. Adjusted gross margin was 26.5% compared to 19.7% in the prior year quarter. The improvement mainly reflects the realization of cost savings from the closure of our Bar-Lev facility and the transition to our global network of production partners.

The quarter also benefited from a refund of $2 million received on previously paid U.S. IEEPA tariffs. Operating expenses were $33.4 million, representing 34.6% of revenue compared to $32.5 million or 32.1% of revenue in the prior year quarter. Excluding legal settlements and loss contingencies and impairment and restructuring expenses, operating expenses improved to 29.6% of revenue from 30.1% in the prior year quarter. The year-over-year increase in total operating expenses primarily reflects higher legal settlements and loss contingencies. Adjusted EBITDA in the second quarter of 2026 was a loss of $1 million compared to a loss of $6.4 million in the prior year quarter and a loss of $7.5 million in the first quarter of 2026.

The improvement primarily reflects the higher gross margin and the growing contribution of our cost savings initiatives. Finance expenses were $5 million compared to $5.7 million in the prior year quarter, resulting mainly from foreign currency exchange rate fluctuations. Adjusted diluted net loss per share for the second quarter was $0.10 on 34.6 million shares compared to an adjusted diluted net loss per share of $0.33 in the prior year quarter on 34.7 million shares.

Turning to our cash flow and balance sheet. As of June 30, 2026, the company had a net cash position of $51.8 million compared with $50.4 million as of March 31, 2026. During the quarter, the company repaid Lioli credit facility, leaving it with no outstanding debt to financial institutions. Now let me provide important context on several items. With quartz production fully transitioned to our global manufacturing partner network, our restructuring actions are contributing an increasing level of savings each quarter and our second quarter gross margin reflects this progress. Once fully implemented, we expect the Bar-Lev closure to generate annualized cash savings of approximately $22 million, bringing total expected annualized savings to more than $100 million by 2027 when compared to full year 2023.

Cash costs associated with the restructuring program in the second quarter of 2026 were $1.2 million, and we expect to incur additional cash costs of approximately $3 million to $4 million during the remainder of the year. Turning to the U.S. tariff environment. Broad-based import tariffs remain in effect across a wide range of countries and product categories and the average tariff applicable to the products we import into the U.S. market is approximately 15%. Approximately 44% of our second quarter revenues were generated in the United States, served by our global production network. We continue to work with our production partners to optimize our supply chain and our pricing actions in the U.S. market are helping to partially offset the higher cost of goods.

During the second quarter, we also received a refund of approximately $2 million on account of previously paid IEEPA tariffs, which benefited both our gross margin and our operating cash flow. I would also like to update you on a separate quartz-specific trade matter. On July 31, the U.S. administration issued its final determination imposing a 4-year tariff-rate quota on imports of quartz surface products effective August 15. During the first year, the industry's covered imports within an annual quota of approximately 13 million square meters assessed quarterly will be subject to an additional 25% tariff, while imports above the quota will be subject to an additional 50% tariff.

During the subsequent 3 years, the in-quota tariff will gradually decline to 19%, while the annual quota will increase to approximately 15.7 million square meters. We are evaluating the expected impact on our global production and supply network and intend to implement appropriate supply chain, sourcing and pricing actions to mitigate its effects. On legal proceedings, we are subject to approximately 800 individuals alleging injuries related to exposure to respirable crystalline silica dust, including approximately 600 in the U.S. As of June 30, 2026, we recorded a provision of $51.2 million, representing our best estimate of probable and reasonably estimable losses.

The vast majority of the U.S. claims are either at an early stage or considered only reasonably possible losses, and therefore, no provision was recorded in connection with those claims. As of the same date, we recorded $12 million of insurance receivables globally as coverage disputes are ongoing. We will continue to vigorously defend these claims. During the second quarter, we resolved 4 claims in California and received a favorable defense jury verdict in a Colorado claim, which assigned no liability to the company. Additionally, the company was dismissed from several cases in various states. Prior verdicts remain under appeal. These matters remain complex and at different stages of development, and we will continue to evaluate our reserves and insurance recoveries as facts and circumstances evolve. We and certain insurance carriers initiated proceedings in July 2025 regarding interpretation of our insurance coverage.

In conclusion, the second quarter demonstrated the strength of our new operating model. Gross margin expanded by 440 basis points and our adjusted EBITDA loss narrowed significantly on lower revenue. With the increasing contribution from completed restructuring actions, seasonal revenue patterns and continued progress in Australia, we entered the third quarter on track to achieve our previously stated goal of positive adjusted EBITDA. Following the new U.S. tariffs on quartz products, we are reassessing the timing of achieving positive adjusted EBITDA while evaluating the appropriate actions to mitigate the impact of these new tariffs.

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

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

Greetings, and welcome to the Caesarstone First Quarter 2026 Earnings Conference Call. 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.

Thank you, operator, and good morning to everyone on the line. I am joined by Yos 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. The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's first quarter 2026 earnings release, which is posted on the company's Investor Relations website.

On today's call, Yos will discuss our business activity and Nahum will then cover additional details regarding financial results. Thank you, and I would now like to turn the call over to Yos. Please go ahead.

Thank you, Brad, and good morning, everyone. Our first quarter results reflected meaningful structural progress in our transformation. Gross margin expanded by 100 basis points despite lower revenue, supported by our transition to a third-party manufacturing model and a more optimized production footprint. This provides further evidence that our restructuring actions are reshaping the company's earnings profile.

With the closure of Bar-Lev, quartz production is now fully transitioned to our global manufacturing partner network, excluding porcelain, which continues to be produced at our Lioli facility in India. We continue to expect these actions to generate annualized cash savings of approximately $22 million by 2027, bringing total savings since 2023 to more than $100 million.

Global revenues were approximately $89 million, down 15% year-over-year on a constant currency basis, reflecting macroeconomic headwinds and competitive pressures, particularly in North America. In North America, we are taking targeted commercial actions to improve channel productivity and strengthen key customer relationships. Australia continued to be a strong performing region, delivering solid revenue growth as we recapture our leading market position following the introduction of our zero silica ICON products. This reinforces that our brand and innovation can drive renewed commercial momentum when aligned with market needs.

The regional conflict in the Middle East, which began at the end of February, impacted demand in Israel. In addition, geopolitical volatility has increased product costs and sea freights, which we expect will affect our results mainly in the second half of 2026. Across the business, we are investing in our brand, strengthening R&D capabilities and enhancing our value proposition for customers and channel partners. Porcelain remains an important long-term growth category. With full ownership of Lioli Ceramica, we are focused on improving execution and commercial alignment.

Looking ahead, the external environment remains uncertain with evolving trade policies, macroeconomic pressures and competitive dynamics continuing to impact demand across global surface categories. We continue to focus on disciplined restructuring execution, stronger production partnerships and sustainable profitability. We are committed to building a stronger, more resilient and more profitable Caesarstone. I will now turn the call over to Nahum.

Thank you, Yos, and good morning, everyone. Looking at our first quarter results. Global revenue was $88.7 million compared to $99.6 million in the prior year quarter. On a constant currency basis, revenue declined approximately 14.9% year-over-year, primarily reflecting continued softness in global demand and competitive dynamics, mainly in North America. These factors were partially offset by the ongoing recovery in Australia.

Breaking down our regional performance. In the U.S., revenue was approximately $40 million compared to $49.1 million in the prior year quarter. The change reflected persistent market softness and competitive pressures. Canada revenue decreased 23.8% on a constant currency basis due to similar market dynamics as the U.S. In Australia, revenue was approximately $17.1 million compared to $13.8 million in the prior year quarter, an increase of approximately 11.2% on a constant currency basis. This marked the third consecutive quarter of year-over-year growth in Australia. The improvement reflects the growing acceptance of our ICON products in the market. We remain focused on building on this progress and further strengthening our competitive standing in Australia.

EMEA sales were down 10.3% on a constant currency basis, primarily driven by timing of shipments in our indirect distributor channel, which we expect to normalize as we move into the second quarter. Our direct business in Sweden and our U.K. operations were relatively stable in the period. In Israel, first quarter revenue was $4.2 million compared to $5 million in the prior year quarter, mainly as a result of the impact of the conflict in the area.

Looking at our first quarter P&L performance. Gross margin was 22.3% compared to 21.3% in the prior year quarter, an improvement of 100 basis points even on lower revenues. Adjusted gross margin was 23.9% compared to 21.2% in the prior year quarter. The improvement in gross margin reflects the benefit of our improved production footprint. With quartz production now fully transitioned to our global manufacturing partner network, we are beginning to capture the intended benefits of a more flexible, asset-light production model.

Operating expenses were $39.2 million, representing 44.1% of revenue compared to $35.9 million or 36.1% of revenue in the prior year quarter. Excluding legal settlements, loss contingencies and impairment and restructuring expenses, operating expenses were approximately 34.5% of revenue in the first quarter compared to 32.6% in the prior year quarter. The year-over-year difference is primarily a function of lower revenues.

Adjusted EBITDA in the first quarter of 2026 was a loss of $7.5 million compared to a loss of $7.1 million in the prior year quarter. This relatively stable performance despite lower revenue underscores the benefit of our strategic initiative. Finance expense was $1.2 million compared to finance income of $2.5 million in the prior year quarter, primarily due to foreign currency exchange rate fluctuations. Adjusted diluted net loss per share for the first quarter was $0.32 on 34.6 million shares compared to adjusted diluted net loss per share of $0.29 in the prior year quarter on 34.7 million shares.

Now turning to our cash flow and balance sheet. As of March 31, 2026, cash, cash equivalents and short-term bank deposits totaled to $52.3 million. Total debt to financial institutions was $1.8 million, resulting in a net cash position of $50.4 million. This compares to a net cash position of $57.5 million as of December 31, 2025.

Now let me provide important content on several items. Our restructuring plan has reached a significant milestone with the transition of our quartz production from our Bar-Lev facility to our global manufacturing partner network. We are now capturing an increasing contribution of cost savings from this action.

Based on restructuring actions completed to date, we expect to realize annual cash savings of more than $100 million by 2027 when compared to full year of 2023. There remains potential for additional savings as subleases are executed on noncancelable long-term lease agreements associated with our former facilities. Cash costs associated with restructuring program in the first quarter of 2026 were $0.4 million. And for the remainder of 2026, we expect to incur additional cash costs of approximately $3 million to $5 million related to ongoing restructuring activities.

Beyond the facility closures, our restructuring plan will continue to focus on identifying additional actions that can improve profitability and cash flow. This includes the evaluation of distribution center consolidation and other fixed cost reduction opportunities. These incremental actions are designed to reinforce our path to profitability, driven by the increasing run rate contribution from completed restructuring actions, additional fixed cost reductions, seasonal revenue improvement and continued progress in Australia, partially offset by tariff freight and geopolitical cost pressures.

Turning to the U.S. tariff environment. The U.S. government has implemented broad-based import tariffs across a wide range of countries and product categories. As it stands today, the average tariff applicable to the products we import into the U.S. market is approximately 15%. Approximately 45% of our revenues are generated in the United States and served by our global manufacturer partner network. We have been in active dialogue with our production partners to optimize our supply chain in response to the increased cost of goods, and we have implemented a price increase in the U.S. market to partially offset higher costs. We will continue to monitor the situation and take proactive steps to protect our margin profile as the tariff landscape evolves.

I would like also to comment on the ITC investigation, which is a separate court-based trade matter. The ITC has voted affirmatively on injury during the first quarter of 2026. On May 5, 2026, the commission issued its recommended remedies, including a proposed 4-year tariff rate quota structure applicable on an aggregated basis across imports with in-quota tariff of 25% ad valorem and out-of-quota tariff of 40% ad valorem. The proposed quota levels would increase annually, while tariff rates would gradually decline over the proposed remedy period.

President Trump is expected to issue a final determination within 60 days. We are assessing all potential outcomes and remain actively engaged in the process. We would seek to mitigate this impact through further supply chain optimization and appropriate pricing actions. On legal proceedings, as of March 31, 2026, we had 711 lawsuits alleged silica-related injuries. This includes 36 in Israel, 156 in Australia and 509 claims in the U.S. We have recorded a $48.8 million provision, representing our best estimate of probable losses with $11.6 million in insurance receivables.

In May, a jury in Colorado ruled in favor of Caesarstone, assigning no liability to the company. Also, during the first quarter of 2026, we settled 4 additional claims in California. These matters remain complex and at the different stages of development, and we will continue to evaluate our reserves and insurance recoveries as facts and circumstances evolve. We and certain insurance carriers initiated proceedings in July of 2025 regarding interpretation of our insurance coverage. These proceedings are still in early stages.

We also want to mention that the bill titled the Protection of Lawful Commerce in Stone Slab Products Act was introduced in the U.S. House of Representatives in 2025. The bill aims to ensure that manufacturers and distributors of stone slab products are not held liable for injuries caused by unsafe fabrication or alteration performed by third-party fabricators. The bill remains at an early legislative stage with no material progress beyond the initial subcommittee hearing in January 2026. The timing and the ultimate outcome remain uncertain, but we view the underlying intent of the legislation as a constructive step for our industry.

In conclusion, the quarter showed that our restructuring actions are beginning to flow through the P&L. Revenue remains pressured, but gross margin improved. Adjusted EBITDA was relatively stable year-over-year despite lower volume and our net cash position gives us the flexibility to continue executing. As consumer confidence and housing market activity normalize, we believe Caesarstone is well positioned to benefit from a recovery in countertop demand with a stronger cost structure and improved brand positioning than we had entering this period. Based on our current operating plan and assuming no material deterioration in global economic and geopolitical conditions, we remain on track to achieve positive adjusted EBITDA in the third quarter of 2026.

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

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

Greetings, and welcome to the Caesarstone Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Cray of ICR. Thank you, and you may begin.

Thank you, operator, and good morning to everyone on the line. I am joined by Yos 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. The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's third quarter 2025 earnings release, which is posted on the company's Investor Relations website. On today's call, Yos 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.

Thank you, Brad, and good morning, everyone. Thank you for joining us to discuss our third quarter 2025 results. We are rapidly advancing the transformation of our business model to focus on innovation, product development and marketing, while we continue to be deeply involved in the production and quality control activities with our production business partners. We are investing in strengthening the Caesarstone brand, expanding our porcelain offering and enhancing our R&D capabilities. As part of this strategic transformation and following careful evaluation, we have decided to move our production to our global manufacturing partners and close Bar-Lev manufacturing activity in order to further optimize our production footprint.

This strategic action is intended to increase competitiveness, improve our profitability and cash flow, enhance service and drive additional cost savings. These actions are expected to generate annualized cash savings of approximately $22 million and bring total savings since 2023 to over $85 million. Since launching our transformation strategy in 2023, we have fundamentally reshaped Caesarstone. Currently, over 70% of our production is sourced through global partners. And upon completion of the Bar-Lev closure, we will reach 100% outsourced production, excluding porcelain, where we continue to operate and invest in our plant in India.

These actions are necessary steps in reinforcing our competitive position and enabling a return to positive adjusted EBITDA in the third quarter of next year. But our transformation goes beyond manufacturing efficiency and cost savings. We are building a company focused on innovation, brand strength and customer value creation with a lighter capital production assets. In addition, our porcelain business represents an important growth factor. And in September, we signed a share purchase agreement to acquire the remaining shares of Lioli, bringing our ownership to 100%. This acquisition further strengthens our position in this expanding category and enables us to capture new market opportunities. To conclude, Caesarstone is a different company. We are more agile, more innovative and better positioned to scale efficiently as we move forward towards profitable growth over the long term. I now turn the call over to Nahum to review our financial results.

Thank you, Yos, and good morning, everyone. Looking at our third quarter results. Global revenue was $102.1 million compared to $107.6 million in the prior year quarter. On a constant currency basis, third quarter revenue decreased by 5.7% year-over-year, primarily due to lower volumes, reflecting continued global economic headwinds and competitive pressures. We have seen revenue levels stabilize in recent quarters, which is encouraging. Breaking down our regional performance. In the U.S., sales were down 10.9% to $46.7 million. The decline was driven by persistent softness in the market and competitive pressures.

Canada sales decreased by 10.8% on a constant currency basis with similar market dynamics as the U.S. Australia improved this quarter with sales up 8.5% on a constant currency basis, our first year-over-year growth in this market since the silica ban implementation. This reflects early recovery and the successful launch of our zero silica collection. EMEA delivered strong performance with sales up 12.4% on a constant currency basis, driven by growth in both indirect distributor channel and our direct business. Our expanded presence in Germany contributed positively. Israel sales increased by 2.5% on a constant currency basis as market conditions continue normalizing.

Now looking at our third quarter P&L performance. Gross margin in the third quarter was 17.3% compared to 19.9% in the prior year quarter. The decline was primarily due to lower volumes and production, which resulted in lower fixed cost absorption and costs associated with ramping up new products. These factors were partially offset by benefits from the transfer of production to our global network. Operating expenses in the third quarter were $33.7 million or 33% of revenue compared to $25.4 million or 23.6% of revenue in the prior year quarter. Excluding legal settlements and loss contingencies and restructuring and impairment expenses, operating expenses were $29.7 million or 29.1% of revenue compared to $30.2 million or 28.1% in the prior year quarter.

In absolute dollars, we reduced expenses by approximately $0.5 million with the higher percentage primarily driven by lower revenues. Adjusted EBITDA in the third quarter was a loss of $7.9 million compared to a loss of $4.1 million in the prior year quarter. Finance expenses was $1.8 million compared to finance income of $0.3 million in the prior year quarter, primarily due to foreign currency exchange rate fluctuations. Adjusted diluted net loss per share for the third quarter was $0.40 on 34.6 million shares compared to adjusted net loss per share of $0.24 in the prior year quarter on 35 million shares.

Turning to our cash and balance sheet. As of September 30, 2025, we had cash and short-term deposits of $69.3 million and total debt to financial institutions of $2.6 million for a net cash position of $66.7 million. Now let me provide important context on several items. The Bar-Lev facility closure that Yos mentioned will generate significant onetime charges and ongoing savings. We expect noncash impairment expenses of $40 million to $45 million and cash costs of $4 million to $8 million beginning in the fourth quarter of 2025 and continuing through 2026.

These estimates exclude a potential noncash write-down on the facility lease, which runs through 2032 and which we plan to sublease. Once fully implemented, we expect annualized cash savings of approximately $22 million with additional potential savings from subleasing the facility. Combined with prior cost reductions, our total annualized savings will exceed $85 million compared to 2022. Separately, with regard to our Richmond Hill site, discussions are progressing with a potential buyer to acquire the site at a price that is approximating its book value.

Regarding U.S. tariffs. We continue to monitor the impact of existing and proposed U.S. tariffs affecting various countries and product categories that are currently in a wide range on the majority of imported products. Approximately 48% of our revenues during the first 9 months of 2025 were generated in the U.S. market, served by our global production network. We are in continuous dialogue with our manufacturing partners to optimize our supply chain and recently announced a price increase in the U.S. market in order to mitigate the increased cost of goods imported to the U.S.

In addition to these tariffs on September 15, 2025, a petition was filed with ITC by a U.S. quartz manufacturer alleging serious injury caused to the entire U.S. domestic industry by imports of quartz surface products, seeking hard quartz of the quantity of court surfaces products that can be imported into the U.S. and/or tariffs of up to 50% on all quartz surfaces products that are imported into the U.S. from any country. Hundreds of objections were received to this petition by U.S. domestic businesses, including fabricators, and the process is in a very early stage.

On legal proceedings, as of September 30, 2025, we had 514 lawsuits alleging silica related injuries. This included 43 in Israel, 151 in Australia and 320 claims in the U.S. We have recorded a $46 million provision representing our best estimate of probable losses with $24.3 million in insurance receivables. In the U.S., during 2025, we won one case, which remains under appeal and settled another. In 2024, we received one adverse verdict, which is also currently under appeal. Remaining U.S. claims are in early stages, our loss is only reasonably possible. Given the complexity and the preliminary nature of these matters, we cannot reasonably estimate potential losses beyond our current provision.

We and certain insurance carriers initiated proceedings in July 2025 regarding interpretation of our insurance coverage. These proceedings are in early stages. We are also encouraged by a recent legislative development in the U.S. In September, a bill titled the Protection of Lawful Commerce in Stone Slab Products Act was introduced in the House of Representatives. The proposed legislation aims to ensure that manufacturing and distributors are not held liable for injuries caused by unset fabrication or alteration performed by third parties. While it remains in early stages and there is no guarantee of adoption into law, we see this as a constructive step towards restoring fairness and balance across the stone product supply chain.

Before we conclude, let me reinforce a few key points. Third quarter results reflect stabilizing trends in our top line compared to recent quarters. The structural transformation of our business is proceeding in line with our plan. Combined with over $85 million in cost savings, we have fundamentally repositioned Caesarstone for a long-term growth, and we have a line of sight to reach positive adjusted EBITDA in the third quarter of 2026. With that, we are now ready to open the call for questions.

[Operator Instructions] There are no further questions. This concludes the question-and-answer session. I would like to turn the conference back over to Yos Shiran for any closing remarks.

Thank you for your attention this morning. As we close out 2025 and move into 2026, our team remains focused on executing our transformation plan and positioning Caesarstone for sustainable, profitable growth. We appreciate your continued support and look forward to updating you on our progress next quarter.

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