Matthews International(MATW) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net loss of $8.9 million or $0.29 per share for the second quarter of fiscal 2025, compared to a net income of $9 million or $0.29 per share a year ago [19] - Consolidated sales for the second quarter were $427.6 million, down from $471.2 million in the same quarter last year, primarily due to lower sales in the industrial technology segment [20] - Adjusted EBITDA for the second quarter was $51.4 million, down from $56.8 million a year ago, reflecting declines in industrial technologies and memorialization segments [21] Business Line Data and Key Metrics Changes - Memorialization segment sales were $205.6 million, down from $222.2 million year-over-year, primarily due to lower US casketed deaths and the disposal of unprofitable operations [22] - Industrial Technology segment sales decreased to $80.8 million from $116.1 million, mainly due to lower engineering sales and the shutdown of an unprofitable automotive business [25] - SGK Brand Solutions segment sales increased to $141.2 million from $132.9 million, driven by higher merchandising sales in the US and Asia Pacific markets [26] Market Data and Key Metrics Changes - The company has reengaged with multiple battery manufacturers and auto OEMs, issuing quotes exceeding $100 million, indicating significant demand for dry battery electrode technology [6] - The backlog for energy solutions remains at approximately $70 million, with growing interest in solid-state battery development and energy grid storage [12] - Sales for the warehouse automation segment were lower year-over-year, but there are signs of recovery with strong order intake and a healthy backlog [13] Company Strategy and Development Direction - The company is focusing on expanding its energy solutions business by retrofitting existing facilities with dry battery electrode technology, which could open new market opportunities [7] - The strategic divestiture of the SGK Brand Solutions segment is expected to generate approximately $400 million in total initial consideration, which will be used to reduce debt and potentially repurchase stock [8][9] - The partnership with Teradyne for warehouse automation aims to enhance cost and efficiency through autonomous robotic solutions [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the energy solutions business, noting significant interest from battery operators in South Korea, North America, and Europe [36] - The company anticipates stable results from the memorialization business and expects improved performance in warehouse automation in the second half of the fiscal year [16] - Management highlighted ongoing cost reduction initiatives expected to generate savings exceeding $50 million, with a focus on engineering and administrative costs [30] Other Important Information - The company plans to report its 40% interest in the new SGKSGS entity on a one-quarter lag, affecting the timing of reported adjusted EBITDA [32] - A quarterly dividend of $0.25 per share was declared, payable on May 26, 2025 [32] Q&A Session Summary Question: How does the $100 million in customer quotes compare to last year? - Management indicated that the current quotes are significantly higher than the same period last year, as the company was relatively out of the market during that time [36] Question: What are the expectations for organic growth in the memorialization segment? - Management noted that there was a normalization in death rates compared to last year, which contributed to the decline, but they expect continued normalization moving forward [41] Question: Can you elaborate on the cost reduction actions? - Management stated that the cost reduction actions are expected to yield $20 million this year and $30 million next year [42] Question: What is the status of customer engagement on the battery side? - Management confirmed that most of the $100 million in quotes are for mass production, indicating customers are beyond the testing phase [47] Question: Can you discuss the strategy for warehouse automation? - Management highlighted the partnership with Teradyne to enhance warehouse automation through robotics, positioning the company uniquely in the market [54] Question: Will the share repurchase authorization be expanded post-SGK close? - Management acknowledged the possibility of expanding the share repurchase authorization following the SGK transaction [64]