Greetings. Welcome to the Caesarstone Second Quarter 2022 Earnings Call. At this time, all participants are in listen-only mode. Brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Brad Cray from Investor Relations. Thank you. You may begin.

Thank you, operator, and good morning to everyone. I am joined by Yuval Dagim 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 income, adjusted net income per share, adjusted gross profit, adjusted EBITDA and constant currency. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's second quarter 2022 earnings release, which is posted on the company's Investor Relations website. Thank you. And I would now like to turn the call over to Yuval. Please go ahead.

Thank you Brad and good morning everyone. The second quarter of 2022 marked another period of significant progress for Caesarstone, in which we achieved our sixth consecutive quarter of double-digit year-over-year revenue growth led by North America, resulting in record second quarter revenues of $180.3 million. Overall, our results were largely in line with our expectations as we demonstrated further progress against our multi-pronged growth strategy, while navigating through a complex global environment. During the quarter, we were able to grow revenues in the US, our largest market by almost 20% while also successfully implementing pricing actions that helped us mitigate impacts from increasing costs for raw materials and shipping. In turn, we were able to improve our margins on a sequential basis as expected for two quarters in a row. Our growth in the US continues to be driven by organic growth from the successful integration of our Omicron Granite & Tile business acquired in the fourth quarter of 2020. Benefits from our big box channel sales are also providing solid contributions to our results. As we work to increase our direct presence in our markets as a path to help us gain additional market share, we are excited to report that in July 2022 we acquired a leading distributor in Sweden, establishing our first direct go-to-market presence in the EU. Acquiring this business with $4 million of annualized sales is an important step in our strategy to grow in Europe over time by providing us with a hub in the region directly owned by Caesarstone. In regards to customer experience and engagement, our innovative digital CS Connect platform is performing exceptionally well. We are well in the path to expanding the reach of this platform further across North America. We are also introducing exciting new product families in…

Thank you, Yuval, and good morning, everyone. I will start by discussing our second quarter results. Global revenue grew 10.3% to a second quarter record of $180.3 million compared to $163.5 million in the second quarter of last year. On a constant currency basis second quarter revenue was higher by 13.7% compared to the same period last year, primarily due to higher pricing across our global footprint, particularly in North America. In the Americas, constant currency sales were up 20%, mainly due to the growth in Canada and the US. In the US, sales were up 19.5% driven by strong organic growth. We also experienced solid double-digit growth in our other products such as natural stone and ancillary products. In Canada, sales were up 20% year-on-year on a constant currency basis, driven by strong performance in all channels with IKEA sales continuing to experience strong year-over-year growth. In the APAC region, constant currency sales were up 5.4%, Australia which accounts for the majority of our sales in the region and saw year-over-year growth on a constant currency basis despite continued headwinds from supply chain issues that improved during July. In the EMEA region, constant currency sales grew 11.7%, primarily reflecting solid performance in the UK, as well as in our EMEA indirect business. In Israel on a constant currency basis, sales were lower by 19.6% in the second quarter, mainly reflecting competitive pressures in the region. Looking at our second quarter P&L performance. Our gross margin was 26.4% for the quarter. Adjusted gross margin was 26.4% compared to 28.1% in the prior-year quarter. The year-over-year difference in gross margin, primarily reflected higher shipping and raw material prices and unfavorable foreign exchange rate fluctuations that were partially offset by favorable product mix and selling price increases. As we have discussed in…

Thank you Nahum. Overall, our best-in-class product offerings, successful integration of our acquired businesses and targeted efforts to enhance the customer experience through the expansion of our CS Connect platform are all driving fundamental improvements across our business. Our team's commitment to excellence is providing us with strong foundations to achieve our long-term goal of becoming a $1 billion global countertop player by 2025. We remain confident in the levers we have available to us to achieve this goal. Looking ahead, we will continue to navigate the complex global operating environment with a prudent focus on improving our margins and operational leverage, careful cost management and the implementation of price increases where necessary. With our strong brand, premium product offerings and innovative go-to-market initiatives in place, we are well seated to advance our position as the multi-material global countertop leader in 2022 and beyond. I look forward to updating you again on our progress in the coming quarters. Thank you and we are now ready to open the call for questions.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] The first question we have comes from Reuben Garner from The Benchmark Company.

Good afternoon. This is Thomas Henry on for Reuben Garner. Can you break down the price versus volume assumptions in the new full year revenue guide? And are there any regional call-outs in terms of changes versus the prior guide?

Hi, Thomas. Just in general and Nahum will be elaborating a bit more. What we see in our revenue forecast for the year is a growth of double digit against last year mostly dominated by prices. Originally, we thought it's going to be probably one-third growth by volume and two-thirds by prices. I think, it's becoming more dominant by prices rather than volume.

Yes. As we are continuing with our price increases across the majority of our regions also in July after two price increases that we already did during this year first in January and the second in April, we see higher portion of the increase in revenues, as we are reiterating our guidance coming from prices and lower portion coming from volume.

Great. Thank you. And are there any benefits from freight or perhaps other areas of cost deflation embedded in the second half outlook, or are these likely 2023 events?

At the moment, there are no way benefited from shipping or raw material cost decrease embedded in the forecast. We kind of took the current cost that we have currently and -- to the rest of the year. Any changes will be probably advised us to 2023.

All right. Thank you. And one last question. Given the global uncertainty and changes in rates over the past few months, are there any changes in terms of the investments you're planning to drive growth? And do you anticipate spending perhaps to slow down or will you pull back?

Currently, we are taking all the necessary actions including controlling expenses as we did in the previous two quarters for the remainder of the year, but other than that we currently -- we don't see any major change in our...

We -- Thomas in addition, we are monitoring quite carefully our inventory levels. As we haven't seen any drop in demand so far, we continue to monitor those inventory levels and adjust them as necessary in the future. At the moment, we feel quite strong with our customer service and the ability to serve all our markets appropriately.

Thank you. Good luck for the quarter.

Thank you, Thomas.

Thank you.

Thank you. [Operator Instructions] The next question we have is from Stanley Elliott from Stifel.

Good morning. This is Andrew on for Stanley. I was wondering if you could expand a little bit on your gross margin assumptions for the back half of the year. Do you expect them to expand sequentially throughout the year? And when do you expect them to return to year-over-year growth?

Given that we are reiterating our guidance for the full year and the first half results we can -- you can assume a slight improvement over the second half of the year. Although, we kept prices, as Yuval just mentioned, cost of raw material and shipping cost at a high level, but stable. So -- and we introduced another price increase. So we still need to see how that comes in the second half.

Got it. Could you give a little bit more color on the acquisition in Sweden? How it fits into your strategy and how many locations and any other countries other than Sweden? Thanks.

Sure. Thanks for the question. In our strategy, we have one specific pillar regarding global footprint expansion. And as in Europe, we are still having a major part of our revenue being done by distributors. It was a good opportunity to go direct in Sweden and to acquire one of our distributors and to have our first direct business in the European continent. We are expecting this business in Sweden to be acting as a hub for us for the northern part of Europe and we'll see how that will be progressive in the future.

Got it. And could you talk about any trends you're seeing in North America in -- through July, given the new construction markets are sort of slowing, or what are you seeing across the repair and remodel?

Well, so far through all year long, we're kind of experiencing quite strong demand to our product as we are more dominant in the R&R channels. We are less exposed to new construction channels. It is, I suppose, quite a strategic decision to make sure that we are not coming with too big portion of revenue with fixed prices to major projects. So, so far we haven't experienced any major slowdown.

Got it. Thank you.

Thank you, Andrew.

Thank you.

Thank you. Ladies and gentlemen, at this stage we have reached the end of our question-and-answer session. And I would like to turn the call back to Yuval Dagim for closing remarks. Please, go ahead, sir.

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

Thank you.

Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.