© 2023 Matthews International Corporation. All Rights Reserved. © 2023 Matthews International Corporation. All Rights Reserved. Warehouse Automation systems tracking and distribution of products Product Manufactures and markets products and systems that employ different marking technologies, including laser and ink-jet printing IP protected process for advanced calendering processes Leader in the renewable energy market with advanced manufacturing solutions for lithium-ion batteries > Highly innovative and ...

Matthews International Corporation. (NASDAQ:MATW) Q2 2023 Earnings Conference Call April 28, 2023 9:00 AM ET Company Participants Bill Wilson - Senior Director of Corporate Development Joe Bartolacci - President & CEO Steven Nicola - CFO Conference Call Participants Daniel Moore - CJS Securities Liam Burke - B. Riley Justin Bergner - Gabelli Funds Operator Greetings. Welcome to the Matthews International Second Quarter Fiscal 2023 Financial Results. At this time, all participants are in a listen-only mode. ...

[PART I – FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited consolidated financial statements, including balance sheets, income statements, and cash flow statements, with detailed notes on accounting policies and segment performance [Consolidated Balance Sheets](index=2&type=section&id=Consolidated%20Balance%20Sheets) Total assets and shareholders' equity slightly increased, while total liabilities decreased from September 2022 to March 2023 | (Dollar amounts in thousands) | March 31, 2023 | September 30, 2022 | | :---------------------------- | :------------- | :----------------- | | Total current assets | $618,239 | $628,616 | | Total assets | $1,897,273 | $1,882,771 | | Total current liabilities | $394,441 | $411,375 | | Total liabilities | $1,384,882 | $1,395,695 | | Total shareholders' equity | $512,391 | $487,076 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) The company achieved a significant turnaround from net loss to net income for the six months ended March 2023, driven by increased sales and gross profit | (Dollar amounts in thousands, except per share data) | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :------------------------------------------------- | :------------------------------ | :------------------------------ | | Sales | $928,820 | $883,557 | | Gross profit | $288,553 | $256,156 | | Operating profit | $40,279 | $18,145 | | Interest expense | $(22,262) | $(12,767) | | Net income (loss) attributable to Matthews shareholders | $12,830 | $(21,708) | | Basic Earnings (loss) per share | $0.42 | $(0.68) | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Comprehensive income significantly increased to **$35,886 thousand** for the six months ended March 2023, driven by improved net income and positive foreign currency adjustments | (Dollar amounts in thousands) | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :---------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) | $12,772 | $(21,746) | | OCI, net of tax | $23,115 | $31,517 | | Comprehensive income (loss) | $35,886 | $9,771 | [Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) Shareholders' equity increased from **$487,076 thousand** to **$512,391 thousand**, driven by net income and translation adjustments, partially offset by dividends and treasury stock purchases | (Dollar amounts in thousands) | September 30, 2022 | March 31, 2023 | | :---------------------------- | :----------------- | :------------- | | Balance, Total Shareholders' Equity | $487,076 | $512,391 | | Net income (loss) | | $12,830 | | Total comprehensive income | | $35,945 | | Dividends | | $(14,126) | | Purchase of treasury stock | | $(2,739) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities decreased significantly, while cash used in investing and financing activities increased for the six months ended March 2023 | (Dollar amounts in thousands) | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :---------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $44,711 | $72,723 | | Net cash used in investing activities | $(31,203) | $(24,739) | | Net cash used in financing activities | $(44,899) | $(38,675) | | Net change in cash, cash equivalents and restricted cash | $(29,498) | $7,729 | [Note 1. Nature of Operations](index=9&type=section&id=Note%201.%20Nature%20of%20Operations) Matthews International Corporation operates globally across Memorialization, Industrial Technologies, and SGK Brand Solutions segments - Matthews International Corporation operates globally with facilities in North America, Europe, Asia, Australia, and Central and South America[25](index=25&type=chunk) - The company manages its businesses under three segments: * **Memorialization:** Bronze and granite memorials, caskets, cremation products, and equipment * **Industrial Technologies:** High-tech custom energy storage solutions, product identification, and warehouse automation * **SGK Brand Solutions:** Brand management, pre-media services, printing plates, imaging, digital asset management, merchandising, and marketing/design services[24](index=24&type=chunk) [Note 2. Basis of Presentation](index=9&type=section&id=Note%202.%20Basis%20of%20Presentation) Unaudited financial statements follow GAAP; highly inflationary accounting applies to Turkish subsidiaries, and new ASUs are not expected to have a material impact - Effective April 1, 2022, the Company applies highly inflationary accounting to its Turkish subsidiaries, remeasuring financial statements into USD and reflecting exchange gains/losses from monetary assets/liabilities in current earnings[27](index=27&type=chunk) - New Accounting Pronouncements: * **ASU No. 2021-08 (Business Combinations):** Improves accounting for acquired revenue contracts; effective fiscal 2024, not expected to have a significant impact * **ASU No. 2022-04 (Supplier Finance Programs):** Enhances transparency of supplier finance programs; effective fiscal 2024 (rollforward in fiscal 2025), not expected to have a material impact[30](index=30&type=chunk)[31](index=31&type=chunk) [Note 3. Revenue Recognition](index=11&type=section&id=Note%203.%20Revenue%20Recognition) Revenue is disaggregated by segment and geographic region, with revenue from services provided over time increasing for the three and six months ended March 2023 | Segment/Region | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :--------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | **Memorialization** | $222,889 | $220,004 | $429,391 | $430,710 | | **Industrial Technologies** | $125,514 | $78,154 | $234,657 | $152,485 | | **SGK Brand Solutions** | $131,177 | $146,820 | $264,772 | $300,362 | | **Total Sales** | $479,580 | $444,978 | $928,820 | $883,557 | | North America | $316,037 | $309,503 | $614,956 | $616,809 | | Europe | $143,373 | $114,387 | $271,554 | $223,458 | | Asia | $14,410 | $14,853 | $29,974 | $30,726 | - Revenue from products or services provided to customers over time accounted for approximately **13% of revenue** for the three and six months ended March 31, 2023, up from 9% and 11% respectively in the prior year[35](index=35&type=chunk) [Note 4. Fair Value Measurements](index=12&type=section&id=Note%204.%20Fair%20Value%20Measurements) Fair value measurements are categorized into a three-level hierarchy, with derivatives shifting from an unrealized gain to a net unrealized loss | (Dollar amounts in thousands) | March 31, 2023 | September 30, 2022 | | :---------------------------- | :------------- | :----------------- | | **Assets:** | | | | Derivatives | $10 | $14,421 | | Life insurance policies | $4,540 | $4,439 | | **Liabilities:** | | | | Derivatives | $6,511 | $0 | [Note 5. Inventories](index=13&type=section&id=Note%205.%20Inventories) Total inventories increased from **$225,440 thousand** to **$254,557 thousand**, primarily driven by increases in raw materials and work in process | (Dollar amounts in thousands) | March 31, 2023 | September 30, 2022 | | :---------------------------- | :------------- | :----------------- | | Raw materials | $67,449 | $52,586 | | Work in process | $110,508 | $94,804 | | Finished goods | $76,600 | $78,050 | | Total Inventories | $254,557 | $225,440 | [Note 6. Investments](index=13&type=section&id=Note%206.%20Investments) Non-current investments decreased from **$25,976 thousand** to **$23,805 thousand**, mainly due to purchasing the remaining interest in an Industrial Technologies business | (Dollar amounts in thousands) | March 31, 2023 | September 30, 2022 | | :---------------------------- | :------------- | :----------------- | | Life insurance policies | $4,540 | $4,439 | | Equity-method investments | $341 | $2,729 | | Other (primarily cost-method) investments | $18,924 | $18,808 | | Total Investments | $23,805 | $25,976 | - During Q2 fiscal 2023, the Company purchased the remaining ownership interest in a small Industrial Technologies business, previously an equity-method investment[39](index=39&type=chunk) [Note 7. Debt and Financing Arrangements](index=13&type=section&id=Note%207.%20Debt%20and%20Financing%20Arrangements) Total debt slightly decreased; the domestic credit facility was amended to SOFR, and the company utilized receivables financing to manage liquidity | (Dollar amounts in thousands) | March 31, 2023 | September 30, 2022 | | :---------------------------- | :------------- | :----------------- | | Revolving credit facilities | $452,471 | $480,107 | | 2025 Senior Notes | $298,231 | $297,961 | | Other borrowings | $21,057 | $13,434 | | Finance lease obligations | $6,268 | $7,066 | | Total debt | $778,027 | $798,568 | | Long-term debt | $775,202 | $795,291 | - The domestic credit facility was amended in March 2023 to implement SOFR as the replacement for LIBOR as the benchmark interest rate. The weighted-average interest rate on outstanding borrowings for this facility increased from **1.89%** (March 31, 2022) to **5.17%** (March 31, 2023)[40](index=40&type=chunk)[41](index=41&type=chunk) - The company utilizes a receivables purchase agreement (RPA) to sell trade receivables, with **$108,600 thousand** sold as of March 31, 2023 (up from **$96,600 thousand** at Sept 30, 2022). A new non-recourse factoring arrangement in the U.K. sold **$16,950 thousand** in receivables during the six months ended March 31, 2023[44](index=44&type=chunk)[45](index=45&type=chunk) [Note 8. Derivatives and Hedging Instruments](index=15&type=section&id=Note%208.%20Derivatives%20and%20Hedging%20Instruments) The company uses derivatives to manage foreign currency, debt, and interest rate exposures, replacing LIBOR-based swaps with SOFR-based ones and utilizing a cross currency swap as a net investment hedge | Interest Rate Swaps | March 31, 2023 | September 30, 2022 | | :------------------ | :------------- | :----------------- | | Notional amount | $175,000 | $125,000 | | Weighted-average maturity period (years) | 4.9 | 3.1 | | Weighted-average received rate | 4.81 % | 3.14 % | | Weighted-average pay rate | 3.83 % | 1.04 % | - LIBOR-based interest rate swaps were settled during Q2 fiscal 2023, resulting in **$10,474 thousand** cash proceeds, and new SOFR-based interest rate swaps with a notional amount of **$175,000 thousand** were entered into[49](index=49&type=chunk) - A U.S. Dollar/Euro cross currency swap with a notional amount of **$81,392 thousand** is designated as a net investment hedge of foreign operations, maturing in September 2027[51](index=51&type=chunk) [Note 9. Share-Based Payments](index=16&type=section&id=Note%209.%20Share-Based%20Payments) Equity incentive plans are in place for employees and directors; stock-based compensation cost decreased, with **$26,437 thousand** in unrecognized compensation cost for unvested awards | (Dollar amounts in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :---------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Stock-based compensation cost | $4,278 | $5,222 | $8,612 | $8,931 | | Restricted Shares and Units (Six Months Ended March 31, 2023) | Shares/Units | Weighted average Grant-date Fair Value | | :------------------------------------------------------------ | :----------- | :------------------------------------- | | Non-vested at September 30, 2022 | 1,459,233 | $33.78 | | Granted | 618,050 | $27.69 | | Vested | (201,153) | $35.05 | | Expired or forfeited | (139,978) | $40.78 | | Non-vested at March 31, 2023 | 1,736,152 | $30.90 | - As of March 31, 2023, total unrecognized compensation cost related to unvested stock-based awards was **$26,437 thousand**, expected to be recognized over a weighted average period of **2.3 years**[57](index=57&type=chunk) [Note 10. Earnings Per Share Attributable to Matthews' Shareholders](index=18&type=section&id=Note%2010.%20Earnings%20Per%20Share%20Attributable%20to%20Matthews'%20Shareholders) Basic and diluted EPS attributable to Matthews shareholders significantly improved for the three and six months ended March 2023, compared to prior year net losses | (Dollar amounts in thousands, except per share data) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) attributable to Matthews shareholders | $9,127 | $(1,905) | $12,830 | $(21,708) | | Basic EPS | $0.30 | $(0.06) | $0.42 | $(0.68) | | Diluted EPS | $0.29 | $(0.06) | $0.41 | $(0.68) | | Weighted-average basic shares outstanding (in thousands) | 30,778 | 31,692 | 30,741 | 31,695 | [Note 11. Pension and Other Postretirement Benefit Plans](index=18&type=section&id=Note%2011.%20Pension%20and%20Other%20Postretirement%20Benefit%20Plans) Net benefit costs for pension and postretirement plans varied significantly, with fiscal 2023 lump sum payments resulting in a **$1,271 thousand** non-cash charge, following a **$30,856 thousand** charge in fiscal 2022 | (Dollar amounts in thousands) | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :---------------------------- | :------------------------------ | :------------------------------ | | Net benefit cost (Pension) | $1,591 | $31,510 | | Net benefit cost (Other Postretirement) | $(176) | $106 | - In Q1 fiscal 2023, the Company made **$24,242 thousand** in lump sum payments to fully settle SERP and ORRP obligations, recognizing a **$1,271 thousand** non-cash charge[63](index=63&type=chunk) - In Q1 fiscal 2022, the Company terminated its DB Plan, making **$35,706 thousand** in contributions and recognizing a **$30,856 thousand** non-cash charge from the full settlement[64](index=64&type=chunk) [Note 12. Accumulated Other Comprehensive Income](index=19&type=section&id=Note%2012.%20Accumulated%20Other%20Comprehensive%20Income) AOCI attributable to Matthews improved from a loss of **$(190,191) thousand** to **$(167,076) thousand**, driven by positive currency translation adjustments, partially offset by cash flow hedge losses | (Dollar amounts in thousands) | Balance, September 30, 2022 | Balance, March 31, 2023 | | :---------------------------- | :-------------------------- | :---------------------- | | Post-retirement benefit plans | $5,182 | $5,951 | | Currency translation adjustment | $(203,310) | $(178,318) | | Cash Flow Hedges | $7,937 | $5,291 | | Total AOCI attributable to Matthews | $(190,191) | $(167,076) | | Reclassifications out of AOCI (Six Months Ended March 31, 2023) | Amount reclassified from AOCI | | :------------------------------------------------------------ | :---------------------------- | | Postretirement benefit plans (Net income) | $(537) | | Derivatives (Net income) | $1,702 | [Note 13. Income Taxes](index=23&type=section&id=Note%2013.%20Income%20Taxes) The company recorded an income tax expense of **$4,694 thousand** for fiscal 2023, a shift from a **$3,351 thousand** benefit in 2022, primarily due to consolidated pre-tax income - Consolidated income taxes for the first six months of fiscal 2023 were an expense of **$4,694 thousand**, compared to a benefit of **$3,351 thousand** for the same period in fiscal 2022[70](index=70&type=chunk) - The difference in income taxes is primarily due to consolidated pre-tax income in fiscal 2023 versus a pre-tax loss in fiscal 2022[70](index=70&type=chunk) - Unrecognized tax benefits (excluding penalties and interest) were **$4,529 thousand** at March 31, 2023, with a potential decrease of approximately **$1,425 thousand** in the next 12 months[71](index=71&type=chunk) [Note 14. Segment Information](index=24&type=section&id=Note%2014.%20Segment%20Information) The company operates through three segments; Adjusted EBITDA increased in Memorialization and Industrial Technologies, but decreased in SGK Brand Solutions for the six months ended March 2023 - The Company's primary measure of segment profitability is Adjusted EBITDA, defined as earnings before interest, income taxes, depreciation, amortization, and certain non-cash/non-recurring items[75](index=75&type=chunk) | (Dollar amounts in thousands) | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :---------------------------- | :------------------------------ | :------------------------------ | | **Sales:** | | | | Memorialization | $429,391 | $430,710 | | Industrial Technologies | $234,657 | $152,485 | | SGK Brand Solutions | $264,772 | $300,362 | | **Adjusted EBITDA:** | | | | Memorialization | $87,167 | $86,314 | | Industrial Technologies | $27,767 | $21,568 | | SGK Brand Solutions | $23,252 | $28,876 | | Total Adjusted EBITDA | $107,738 | $108,523 | [Note 15. Acquisitions](index=27&type=section&id=Note%2015.%20Acquisitions) Fiscal 2023 acquisitions included an Industrial Technologies subsidiary, Eagle Granite Company, and small SGK Brand Solutions firms, following fiscal 2022 acquisitions of OLBRICH and R+S Automotive - Fiscal 2023 Acquisitions: * **March 2023:** Purchased remaining ownership in an Industrial Technologies subsidiary for **$4,759 thousand** * **February 2023:** Acquired Eagle Granite Company (Memorialization segment) for **$18,384 thousand** (cash and deferred purchase price) * **Q1 2023:** Completed small acquisitions in SGK Brand Solutions for a combined **$1,932 thousand**[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) - Fiscal 2022 Acquisition: * **August 2022:** Acquired German engineering firms OLBRICH and R+S Automotive (Industrial Technologies segment) for approximately **€43.7 million** (**$44,469 thousand**)[86](index=86&type=chunk) [Note 16. Goodwill and Other Intangible Assets](index=28&type=section&id=Note%2016.%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill increased to **$708,767 thousand** with no impairment; net other intangible assets decreased to **$190,387 thousand**, and amortization expense decreased for the three and six months ended March 2023 | (Dollar amounts in thousands) | Net goodwill at September 30, 2022 | Net goodwill at March 31, 2023 | | :---------------------------- | :--------------------------------- | :----------------------------- | | Memorialization | $361,782 | $370,329 | | Industrial Technologies | $107,022 | $118,997 | | SGK Brand Solutions | $206,617 | $219,441 | | Consolidated | $675,421 | $708,767 | - The annual impairment review of goodwill and indefinite-lived intangible assets in Q2 fiscal 2023 determined no impairment charges were necessary, with the SGK Brand Solutions reporting unit's fair value exceeding its carrying value by approximately **9%**[88](index=88&type=chunk) | (Dollar amounts in thousands) | March 31, 2023 | September 30, 2022 | | :---------------------------- | :------------- | :----------------- | | Indefinite-lived trade names | $30,540 | $30,540 | | Definite-lived trade names | $33,378 | $32,956 | | Customer relationships | $119,475 | $132,129 | | Copyrights/patents/other | $6,994 | $6,529 | | Total Net Intangible Assets | $190,387 | $202,154 | | Amortization expense (3 months) | $10,517 | $11,953 | | Amortization expense (6 months) | $20,859 | $33,499 | [Note 17. Asset Write-Downs](index=29&type=section&id=Note%2017.%20Asset%20Write-Downs) In Q2 fiscal 2022, the company recorded **$10,486 thousand** in asset write-downs for its Russian operations within the SGK Brand Solutions segment due to regional instability - During Q2 fiscal 2022, the Company recorded asset write-downs totaling **$10,486 thousand** to reduce the carrying value of assets in its Russian operations (SGK Brand Solutions segment) to zero, due to the war between Russia and Ukraine[93](index=93&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, including segment results, liquidity, capital resources, and forward-looking information, with cautionary statements on non-GAAP measures [Cautionary Statements Regarding Forward Looking Statements and Non-GAAP Financial Measures](index=30&type=section&id=Cautionary%20Statements%20Regarding%20Forward%20Looking%20Statements%20and%20Non-GAAP%20Financial%20Measures) Forward-looking statements are subject to risks, and non-GAAP measures provide supplemental information on core operations, excluding non-recurring items - Forward-looking statements are subject to known and unknown risks, including economic conditions, foreign currency exchange rates, material costs, mortality/cremation rates, supply chain disruptions, labor shortages, competitive pressures, and global conflicts[95](index=95&type=chunk) - Non-GAAP financial measures, such as Adjusted EBITDA, are used to compare performance consistently by removing the impact of items not directly reflecting core operations, including acquisition/divestiture costs, ERP integration costs, strategic initiatives, stock-based compensation, and non-service pension/postretirement expense[96](index=96&type=chunk)[98](index=98&type=chunk)[112](index=112&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Consolidated sales increased, driven by Industrial Technologies, despite foreign currency impacts and lower SGK Brand Solutions sales; gross and operating profit improved, but interest expense rose | (Dollar amounts in thousands) | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :---------------------------- | :------------------------------ | :------------------------------ | | Consolidated Sales | $928,820 | $883,557 | | Gross profit | $288,553 | $256,156 | | Selling and administrative expenses | $227,400 | $204,500 | | Intangible amortization | $20,900 | $33,500 | | Interest expense | $22,300 | $12,800 | | Other income (deductions), net | $(551) | $(30,500) | | Income tax (provision) benefit | $(4,700) | $3,400 | | Net income (loss) | $12,772 | $(21,746) | - Sales for the six months ended March 31, 2023, increased by **$45,300 thousand** to **$928,800 thousand**, with an unfavorable foreign currency impact of **$27,000 thousand**[101](index=101&type=chunk) - Segment Sales Performance (Six Months Ended March 31, 2023 vs. 2022): * **Memorialization:** Slightly decreased to **$429,400 thousand** (from **$430,700 thousand**), due to lower casket unit sales offset by price realization, mausoleums, and cremation equipment sales * **Industrial Technologies:** Increased significantly to **$234,700 thousand** (from **$152,500 thousand**), driven by recent acquisitions (OLBRICH and R+S Automotive) and higher sales of engineered products * **SGK Brand Solutions:** Decreased to **$264,800 thousand** (from **$300,400 thousand**), due to unfavorable foreign currency impact, lower brand sales in the U.S. and Europe, and reduced retail-based sales[102](index=102&type=chunk) - Adjusted EBITDA for the six months ended March 31, 2023, was **$107,700 thousand**, slightly down from **$108,500 thousand** in the prior year. Memorialization and Industrial Technologies segments saw increases, while SGK Brand Solutions decreased[106](index=106&type=chunk) [Asset Write-Downs](index=34&type=section&id=Asset%20Write-Downs) In fiscal 2022, the company recorded **$10,500 thousand** in asset write-downs for its Russian operations within the SGK Brand Solutions segment due to the Russia-Ukraine war - The Company recorded asset write-downs totaling **$10,500 thousand** in Q2 fiscal 2022 for its Russian operations (SGK Brand Solutions segment) due to regional instability from the Russia-Ukraine war[111](index=111&type=chunk) [Non-GAAP Financial Measures](index=34&type=section&id=Non-GAAP%20Financial%20Measures) The company reconciles net income to Adjusted EBITDA, a non-GAAP measure used to assess core operating performance by excluding non-recurring and non-cash items | (Dollar amounts in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :---------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) | $9,125 | $(1,936) | $12,772 | $(21,746) | | Income tax provision (benefit) | $3,382 | $3,277 | $4,694 | $(3,351) | | Interest expense | $12,047 | $6,260 | $22,262 | $12,767 | | Depreciation and amortization | $24,148 | $23,724 | $47,877 | $57,225 | | Stock-based compensation | $4,278 | $5,222 | $8,612 | $8,931 | | Non-service pension and postretirement expense | $83 | $242 | $1,471 | $31,350 | | Total Adjusted EBITDA | $58,447 | $55,190 | $107,738 | $108,523 | [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) Operating cash decreased, while investing and financing cash increased; liquidity is managed via credit facilities, senior notes, and receivables financing, with capital spending funded by operations | (Dollar amounts in thousands) | Six Months Ended March 31, 2023 | Six Months Ended March 31, 2022 | | :---------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $44,700 | $72,700 | | Net cash used in investing activities | $(31,200) | $(24,700) | | Net cash used in financing activities | $(44,900) | $(38,700) | - Capital expenditures for fiscal 2023 are estimated at approximately **$70,000 thousand**, expected to be funded by operating cash flow[119](index=119&type=chunk) - The company has a **$750,000 thousand** senior secured revolving credit facility maturing in March 2025, with outstanding borrowings of **$451,500 thousand** at March 31, 2023. It also has **$299,600 thousand** of **5.25%** senior unsecured notes due December 1, 2025[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) | Contractual Cash Obligations (March 31, 2023) | Total | 2023 Remainder | 2024 to 2025 | 2026 to 2027 | After 2027 | | :-------------------------------------------- | :--------- | :------------- | :----------- | :----------- | :--------- | | Revolving credit facilities | $452,471 | $0 | $451,501 | $0 | $970 | | 2025 Senior Notes | $345,481 | $7,875 | $31,500 | $306,106 | $0 | | Finance lease obligations | $6,871 | $1,151 | $2,771 | $1,674 | $1,275 | | Non-cancelable operating leases | $82,856 | $12,862 | $42,280 | $21,127 | $6,587 | | Other | $38,741 | $8,431 | $15,892 | $5,963 | $8,455 | | Total contractual cash obligations | $926,420 | $30,319 | $543,944 | $334,870 | $17,287 | [Regulatory Matters](index=39&type=section&id=Regulatory%20Matters) The company's operations are subject to environmental laws and regulations, with ongoing assessments and remediation efforts at certain sites - The Company is subject to strict compliance with federal, state, and local environmental laws and regulations, and is currently performing environmental assessments and remediation at certain sites[138](index=138&type=chunk) [Acquisitions](index=39&type=section&id=Acquisitions) Details regarding the company's acquisitions are provided in Note 15 to the financial statements [Forward-Looking Information](index=39&type=section&id=Forward-Looking%20Information) Growth strategy focuses on internal growth and acquisitions; sales are influenced by EV/e-commerce, death/cremation rates, and economic conditions, with inflation and supply chain challenges expected - The Company's strategy for annual operating growth includes internal growth (organic growth, cost structure/productivity improvements, new product development, market expansion) and acquisitions with synergy benefits[140](index=140&type=chunk) - Key factors influencing sales growth: * **Industrial Technologies:** Economic/industrial market conditions, new product development, EV and e-commerce trends (over **$200,000 thousand** in new orders for energy storage solutions in Q1 fiscal 2023) * **Memorialization:** North America death rates, increasing cremation trend * **SGK Brand Solutions:** Global economic conditions, brand innovation, client marketing spending, government regulation[141](index=141&type=chunk) - Recent labor cost increases, supply chain challenges, and inflation are expected to impact results, with mitigation efforts through price realization and cost-reduction initiatives[142](index=142&type=chunk) [Critical Accounting Policies](index=40&type=section&id=Critical%20Accounting%20Policies) Management's financial statements rely on estimates; the Q2 fiscal 2023 impairment review found no goodwill or indefinite-lived intangible asset impairment - The annual impairment review of goodwill and indefinite-lived intangible assets in Q2 fiscal 2023 determined no impairment charges were necessary, as the estimated fair values for all goodwill reporting units exceeded their carrying values[145](index=145&type=chunk) - The estimated fair value of the SGK Brand Solutions reporting unit exceeded its carrying value by approximately **9%**[145](index=145&type=chunk) [Recently Issued Accounting Pronouncements](index=40&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) Information on recently issued accounting pronouncements is detailed in Note 2, 'Basis of Presentation,' within Item 1 - 'Financial Statements' [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in the company's market risk occurred during the three and six months ended March 31, 2023 - No material changes in the Company's market risk occurred during the three and six months ended March 31, 2023[147](index=147&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls over financial reporting - As of March 31, 2023, the Company's disclosure controls and procedures were effective to provide reasonable assurance that material information is accumulated, communicated, recorded, summarized, and properly reported[149](index=149&type=chunk) - There have been no changes in the Company's internal controls over financial reporting during the fiscal quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, these controls[150](index=150&type=chunk) [PART II – OTHER INFORMATION](index=42&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings and claims, none expected to have a material adverse effect on its financial condition or results - The Company is subject to various legal proceedings and claims in the ordinary course of business, with management not expecting a material adverse effect on financial condition, results of operations, or cash flows[152](index=152&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended September 30, 2022 - No material changes in risk factors from those disclosed in the Annual Report on Form 10-K for the fiscal year ended September 30, 2022[153](index=153&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase program, designed to enhance shareholder value and manage common stock holdings [Stock Repurchase Plan](index=42&type=section&id=Stock%20Repurchase%20Plan) The company's stock repurchase program aims to increase shareholder value, with **1,198,211 shares** remaining available for repurchase as of March 31, 2023 - The Company's stock repurchase program is designed to increase shareholder value, enlarge common stock holdings, and add to earnings per share[154](index=154&type=chunk) | Period | Total number of shares purchased | Weighted average price paid per share | Total number of shares purchased as part of a publicly announced plan | Maximum number of shares that may yet be purchased under the plan | | :------------ | :------------------------------- | :------------------------------------ | :------------------------------------------------------------------ | :---------------------------------------------------------------- | | October 2022 | — | $— | — | 1,294,842 | | November 2022 | 88,042 | $27.54 | 88,042 | 1,206,800 | | December 2022 | 983 | $27.54 | 983 | 1,205,817 | | January 2023 | — | — | — | 1,205,817 | | February 2023 | 549 | $37.09 | 549 | 1,205,268 | | March 2023 | 7,057 | $37.79 | 7,057 | 1,198,211 | | Total | 96,631 | $28.34 | 96,631 | | [Item 3. Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the company [Item 6. Exhibits and Reports on Form 8-K](index=44&type=section&id=Item%206.%20Exhibits%20and%20Reports%20on%20Form%208-K) This section lists all exhibits filed with the Form 10-Q, including corporate documents, loan agreements, certifications, and XBRL data [SIGNATURES](index=45&type=section&id=SIGNATURES) The report is duly signed by the President and CEO, Joseph C. Bartolacci, and CFO and Secretary, Steven F. Nicola, on April 28, 2023

Financial Performance - Q2 2023 sales increased to $479.6 million from $445 million in Q2 2022[56] - Year-to-date sales increased by 5.1% to $928.8 million[58] - The company reaffirms fiscal 2023 adjusted EBITDA in the range of $215 million to $235 million[17] - Net Debt Leverage Ratio was 3.5 as of March 31, 2023[34] Segment Performance - Industrial Technologies Q2 sales increased over 60% year-over-year[19] - Memorialization Q2 sales increased to $222.9 million from $220 million in Q2 2022[25] - SGK Brand Solutions Q2 sales decreased to $131.2 million from $146.8 million in Q2 2022, impacted by unfavorable currency[28, 29] Factors Affecting Performance - Unfavorable currency impacts affected SGK Brand Solutions sales by $5.9 million for Q2 and $16.7 million year-to-date[29] - U.S death rates have substantially normalized from higher pandemic levels, impacting unit volumes for caskets[13, 24] - Global economic conditions remain uncertain, including impact of currency rate changes, higher interest rates, labor costs and inflationary pressures[17]

Financial Data and Key Metrics Changes - For the fiscal 2023 first quarter, consolidated sales were $449.2 million, an increase of $10.6 million or 2.4% compared to $438.6 million in the same quarter last year [43] - The company's net income was $3.7 million, or $0.12 per share, compared to a loss of $19.8 million, or $0.62 per share, for the same quarter last year [44] - Adjusted EBITDA for the fiscal 2023 first quarter was $49.3 million, down from $53.3 million a year ago, with changes in currency rates negatively impacting adjusted EBITDA by $1.6 million [17][45] Business Line Data and Key Metrics Changes - The Industrial Technology segment reported sales of $109.1 million, a 47% increase from $74.3 million a year ago, driven by acquisitions [19] - Memorialization sales were $206.5 million, down from $210.7 million a year ago, with a constant currency decline of only 1.3% despite lower death rates [48] - SGK Brand Solutions segment sales were $133.6 million, down from $153.5 million a year ago, with currency rate changes negatively impacting sales by $10.7 million [22] Market Data and Key Metrics Changes - The company experienced strong order intake in the Industrial Technology segment, with total order intake during the first quarter reaching almost $270 million [40] - The European market conditions remain challenging, with SGK facing a $11 million revenue decline due to negative currency translation [13] Company Strategy and Development Direction - The company is focusing on growth in the energy storage business, with significant orders received from leading battery customers, indicating a strong market demand [5][11] - The company plans to continue its cost actions in SGK to improve comparables starting in the third quarter, while also managing economic uncertainties [7] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed fiscal 2023 EBITDA expectations to be between $215 million and $235 million, despite economic uncertainties [7] - The company expects continued consolidated sales growth, driven by high order rates in its fastest-growing businesses and subsiding commodity costs benefiting future margins [42] Other Important Information - Outstanding debt increased to $837 million as of December 31, 2022, with a leverage ratio based on net debt of 3.8 [24] - The company declared a quarterly dividend of $0.23 per share, payable on February 20, 2023 [25] Q&A Session Summary Question: Can you provide more detail regarding the increased order intake in energy storage? - Management indicated that approximately 90% of the $200 million in orders relates to lithium-ion battery production, with the remainder for emerging technologies like hydrogen fuel cells [30] Question: What is the expectation for profitability in the memorialization segment? - Management expects profitability to remain relatively flat, with pricing expected to remain sticky despite declining input costs [32] Question: How is the backlog for factory warehouse automation? - Management reported a strong backlog, with almost a full year booked out with orders, contributing to the $70 million in additional orders [59] Question: Are there signs of stabilization in the European market for SGK? - Management noted some relief in the U.K. market, but challenges persist in the German and Polish markets, with cost actions expected to yield benefits in the coming quarters [60] Question: How did the first quarter revenue compare to management expectations? - Management indicated that the memorialization business came in slightly higher than expected, while other segments were in line with guidance [62]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ____________________________________________________________ FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended December 31, 2022 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from _____ to _____ Commission File No. 0-09115 ____________________________________________________________ ...

| --- | --- | --- | --- | --- | |--------------------------------------------|-------|-----------------------------|-------|---------| | Sales | | Q1 2022 \n$ 438.6 $ 449.2 | | Q1 2023 | | Diluted earnings (loss) per share | | $ (0.62) $ 0.12 | | | | Non-GAAP Adjusted EPS* | | $ 0.74 $ 0.53 | | | | Net income (loss) attributable to Matthews | | $ (19.8) $ 3.7 | | | | Adjusted EBITDA* | | $ 53.3 $ 49.3 | | | Highlights MEMORIALIZATION ($ in millions)Q1 Sales * See supplemental slide for Adjusted EBITDA recon ...

Matthews International www.matw.com | Nasdaq: MATW | --- | --- | |--------------------------------------------------------|-------| | | | | INVESTOR PRESENTATION FOURTH QUARTER FISCAL YEAR 2022 | | DISCLAIMER Any forward-looking statements contained in this presentation are included pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in f ...

Matthews International Fourth Quarter Fiscal 2022 Earnings Teleconference November 18, 2022 www.matw.com | Nasdaq: MATW Joseph C. Bartolacci President and Chief Executive Officer Steven F. Nicola Chief Financial Officer DISCLAIMER Any forward-looking statements contained in this presentation are included pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties that may cause the Company ...

Matthews International Corporation (NASDAQ:MATW) Q4 2022 Earnings Conference Call November 18, 2022 9:00 AM ET Company Participants Bill Wilson - Senior Director of Finance & Corporate Development Joe Bartolacci - President & CEO Steven Nicola - CFO Conference Call Participants Daniel Moore - CJS Securities Liam Burke - B. Riley Justin Bergner - Gabelli Funds Operator Greetings, and welcome to the Matthews International Corporation Fourth Quarter and Fiscal Year 2022 Financial Results. At this time, all par ...