Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Matthews International Corp (NASDAQ:MATW) has re-engaged with multiple battery manufacturers and auto OEMs, issuing quotes in excess of $100 million for their dry battery electrode technology solutions.
• The company expects to receive $350 million in consideration from the SGK transaction, which will be used primarily to reduce debt.
• Matthews International Corp (NASDAQ:MATW) has entered into a partnership with Terradyne Incorporated to market autonomous robotic solutions, enhancing their warehouse automation offerings.
• The SGK brand solution segment reported its best sales quarter since the fourth quarter of fiscal 2022, driven by new account growth in the Americas.
• Cost reduction initiatives are on track to generate savings in excess of the initial $50 million projection, with $20 million expected this year and $30 million next year.

Negative Points

• Consolidated sales for the fiscal 2025 second quarter were $427.6 million, down from $471.2 million a year ago, primarily due to lower sales in the industrial technology segment.
• The company reported a net loss of $8.9 million for the quarter, compared to a net income of $9 million in the same period last year.
• Memorialization revenues declined by 7% in the second quarter compared to the prior year, mainly due to volume declines in bronze and granite businesses.
• Warehouse automation sales were lower year over year, reflecting a slow market recovery.
• Outstanding debt increased modestly during the quarter, with net debt at $782 million at the end of the current quarter.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with MATW.

Q: How does the $100 million plus in customer quotes since early February compare to the same period last year, and where are you seeing the most renewed interest? A: The $100 million plus in quotes is dramatically higher than the same period last year. Interest is coming from South Korea, North America, and Europe, with a growing interest in grid storage solutions. The dry battery electrode technology is applicable to all forms of battery storage, indicating significant market potential. - Joe Bartolay, CEO

Q: Can you discuss the year-over-year declines in the Memorialization segment and expectations for organic growth? A: The decline was partly due to higher than normal granite-related sales last year as we worked off pandemic backlogs. We are seeing normalization in death rates, which impacted this quarter's results. - Steve Nicola, CFO

Q: What is the status of the $50 million cost reduction initiative, and how much is expected to impact fiscal 2025 and 2026? A: The cost reduction is expected to contribute about $20 million this year and $30 million next year. - Steve Nicola, CFO

Q: Can you talk about the maturity of the testing process for battery customers and the potential for turnkey solutions? A: Most of the $100 million plus in quotes are for mass production, indicating customers are beyond the testing phase. We plan to have a production-level piece of equipment by September to allow customers to test and finalize specs. - Joe Bartolay, CEO

Q: Regarding warehouse automation, how do you plan to evolve this part of the business given current market trends? A: We are partnering with companies like Terraine to offer robotic solutions, enhancing productivity without relying on heavy hardware. Our focus is on expanding partnerships and making small investments to provide unique solutions in the warehouse execution software space. - Joe Bartolay, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.