Matthews International(MATW) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company's revenue for Q1 2025 was $40 million, down from $45.5 million a year ago, primarily due to a decline in the industrial technology segment [9] - Adjusted EBITDA for the memorialization and brand solution segments remained relatively steady compared to last year [10] - Cash flow utilized in operating activities for Q1 2025 was $25 million, compared to $27.3 million a year ago [20] - Outstanding debt increased to $809 million at the end of Q1 2025, up from $776 million at the end of September [21] Business Line Data and Key Metrics Changes - Memorialization segment sales decreased to $190.5 million from $208.1 million year-over-year, primarily due to lower Granite Memorial sales and casket unit volumes [11] - Industrial technology segment sales fell to $80.5 million from $111.4 million, significantly impacted by a slowdown in the Tesla project and litigation effects [14] - SGK Brand Solutions segment reported sales of $130.8 million, a slight increase from $130.5 million a year ago, driven by improved pricing and higher sales in private label and European cylinder businesses [17] Market Data and Key Metrics Changes - The decline in memorialization sales was affected by the disposal of unprofitable European cremation operations [12] - The industrial technology segment's decline was primarily due to the energy business, with modest contributions from warehouse automation and product identification businesses [52] Company Strategy and Development Direction - The company is focused on debt reduction, with plans to apply proceeds from the SGK transaction to reduce debt significantly [22] - Cost reduction programs are expected to yield annual savings of up to $50 million, with significant portions coming from engineering and tooling operations in Europe [24] - The recent arbitration ruling against Tesla has clarified the company's rights to market and sell its advanced dry battery electrode technology, potentially opening new opportunities [7] Management's Comments on Operating Environment and Future Outlook - Management expects cash flow and net leverage ratio to improve over the remainder of the fiscal year, with a target net leverage ratio of three or less [22][117] - The company anticipates a slow ramp-up in sales growth for its DBE technology due to the nature of automotive EV production development [35] - Management expressed optimism about the recovery in warehouse automation and product identification businesses, expecting a strong year ahead [76] Other Important Information - The board declared a quarterly dividend of $0.25 per share, payable on February 24, 2025 [25] - The company purchased approximately 171,000 shares under its stock repurchase program, primarily related to withholding tax on equity compensation vesting [22] Q&A Session Summary Question: Can you provide insight on reestablishing momentum in DBE technology sales post-lawsuit? - Management indicated that the marketing efforts were significantly slowed due to the ongoing dispute, but they expect to ramp up sales as they expand their customer portfolio [35][38] Question: What was the impact of exiting the European cremation business on Granite sales? - The decline in revenues was more weighted towards granite volume, with the exit from the European business being a significant contributor [48][50] Question: How much of the decline in industrial technology sales relates to energy storage? - The majority of the decline was attributed to the energy business, with expectations for recovery in warehouse automation [52][54] Question: What are the next steps following the arbitration ruling against Tesla? - Management stated they have a definitive ruling in their favor, allowing them to market their proprietary solutions, but the next steps from Tesla are uncertain [57][60] Question: What is the expected timeline for achieving the $50 million cost savings? - Management expects to reach a run rate of $25 million to $30 million by the end of the current fiscal year, with the remainder achieved by the end of the next fiscal year [62] Question: How will the SGK transaction proceeds be used? - The expectation is to apply a substantial portion of the proceeds to reduce revolver debt, with a focus on improving the capital structure [108][111]