Matthews International (NasdaqGS:MATW) Q1 2026 Earnings call February 04, 2026 09:00 AM ET Company ParticipantsDan Stopar - CFOJoe Bartolacci - President and CEOConference Call ParticipantsColin Rusch - AnalystDaniel Moore - AnalystJustin Bergner - AnalystLiam Burke - AnalystOperatorGood day, everyone, and welcome to the Matthews International First Quarter Fiscal 2026 financial results. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during th ...

Financial Data and Key Metrics Changes - The company reported net income of $43.6 million, or $1.39 per share, compared to a net loss of $3.5 million, or -$0.11 per share a year ago, primarily due to a significant gain from the divestiture of the warehouse automation business [23] - Consolidated sales for the first quarter were $285 million, down from $402 million a year ago, reflecting divestitures of the SGK business and European packaging and tooling businesses [24] - Consolidated Adjusted EBITDA for the first quarter was $35.2 million, compared to $40 million a year ago, primarily due to lower operating performance in the engineering business [25] Business Line Data and Key Metrics Changes - The memorialization segment reported sales of $204.2 million, up from $190.5 million a year ago, with a 7% year-over-year increase driven by higher casket volumes and inflationary pricing [26] - The industrial technology segment's sales were $69 million, down from $80.5 million a year ago, primarily due to lower sales in the engineering business and the divestiture of the tooling business [27] - The brand solutions segment reported sales of $11.6 million, significantly down from $130.8 million a year ago, due to the divestiture of the SGK business [30] Market Data and Key Metrics Changes - The company noted strong demand for mausoleum construction, which is expected to positively impact the Gibraltar Construction business [10] - The energy solutions business faced challenges in the European market and U.S. battery space, but interest in their solutions remains strong, with over $100 million in the lead pipeline [16] Company Strategy and Development Direction - The company successfully executed a strategic pivot to reduce its leverage ratio below 3x, achieving this through the sale of its warehouse automation and Saueressig businesses [4][5] - Future cash realization is expected to be driven by a 40% interest in Propelis, with anticipated synergies exceeding $60 million [8] - The company is exploring strategic partnerships to enhance the adoption of its technologies without heavy capital expenditure [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the memorialization segment's growth, expecting a full year contribution from the Dodge acquisition to drive sales [19] - The company remains cautious about the timing of orders in the energy business due to slowed demand in North America and Europe [20] - Management highlighted the importance of patience in realizing the full value of their assets and maintaining a focus on shareholder returns [21] Other Important Information - The company reported cash flow used in operating activities of $52 million for the first quarter, reflecting typical seasonal lower earnings [31] - Outstanding debt at the end of the quarter was $537 million, with net debt declining by $173 million due to cash proceeds from divestitures [32] - The board declared a quarterly dividend of $0.255 per share, payable on February 23, 2026 [33] Q&A Session Summary Question: Can you discuss the potential customers for ultracapacitors and batteries in North America and Asia? - Management indicated ongoing conversations with OEMs and battery manufacturers in North America, emphasizing the shift towards dry battery electrode technology [36][37] Question: Are there any potential M&A opportunities in the energy sector? - Management noted a focus on joint development opportunities rather than acquisitions, as partnerships may provide necessary capital investments [39][40] Question: What are the expectations for the memorialization market in 2026? - Management expects continued growth in the memorialization segment, driven by the integration of the Dodge acquisition and inflationary pricing [48][50] Question: What is the anticipated revenue from energy storage in fiscal 2026? - Management projected revenue from energy storage to be in the range of $30-35 million [61] Question: What are the expectations for CapEx and free cash flow in fiscal 2026? - Management indicated CapEx should be around $25 million, with expectations for positive cash generation in the latter part of the fiscal year [62]

Financial Data and Key Metrics Changes - For the fiscal 2025 Fourth Quarter, the company reported a net loss of $27.5 million, or $0.88 per share, compared to a net loss of $68.2 million, or $2.21 per share, a year ago, primarily due to significant restructuring charges in the previous year [22] - Consolidated sales for the fiscal 2025 Fourth Quarter were $319 million, down from $447 million a year ago, mainly due to the divestiture of the SGK business [22] - Consolidated adjusted EBITDA for the fiscal 2025 Fourth Quarter was $51.5 million, compared to $58.1 million a year ago, reflecting the impact of the SGK divestiture [22][23] Business Line Data and Key Metrics Changes - Memorialization segment sales for the fiscal 2025 Fourth Quarter were $209.7 million, up from $196.8 million a year ago, with acquisitions contributing approximately $11 million [24] - Industrial technology segment sales for the fiscal 2025 Fourth Quarter were $93 million, down from $113.9 million a year ago, primarily due to lower sales in the engineering business [26] - Brand solution segment sales were $16.2 million for the quarter, down from $135.9 million a year ago, due to the divestiture of the SGK business [27] Market Data and Key Metrics Changes - The warehouse automation business experienced strong order rates, contributing to improved revenues and adjusted EBITDA in Q4 [11] - The market response to Propelus, the new company formed from the SGK divestiture, has been favorable, with an EBITDA run rate significantly higher than the $100 million initially assumed [5] Company Strategy and Development Direction - The company aims to simplify its corporate structure, expand in higher growth and margin businesses, and reduce costs, with significant actions taken throughout the year [4] - The divestiture of the warehouse automation unit is expected to significantly reduce total debt and strengthen the balance sheet [6] - The company is actively evaluating other strategic portfolio opportunities with the assistance of JPMorgan [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term value creation for shareholders, particularly with the expected benefits from the Propelus divestiture and warehouse automation sale [6][17] - The company anticipates adjusted EBITDA guidance of at least $180 million for fiscal 2026, factoring in the 40% interest in Propelus [17] Other Important Information - The company reduced its debt by $66 million and achieved a reduction in corporate costs of $8.5 million year-over-year [8] - The board declared an increase in the quarterly dividend to $0.2505 per share, marking the 32nd consecutive annual dividend increase [30] Q&A Session Summary Question: Can you talk about the opportunity set regarding solid state and ultra capacitors? - Management noted increased interest in dry battery electrode technology for energy storage applications beyond automotive, including data centers [33] Question: How should we think about M&A and augmenting the technology portfolio? - The focus is currently on reducing debt, with no immediate M&A plans as the company manages ongoing divestitures and restructuring [36] Question: Can you provide an update on beta testing for the new printhead solution? - The new printhead is set to begin deliveries in December, with significant market interest and a total addressable market exceeding $2 billion [46]