Matthews International(MATW) - 2023 Q1 - Earnings Call Transcript

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]