Matthews International Corporation (MATW) Q1 2026 Earnings Call Transcript
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Overview
The earnings call summary and Q&A session reveal positive elements: strong adjusted EBITDA guidance, debt reduction plans, and Memorialization segment growth. The Q&A highlighted interest in DBE technology and successful price increases, reflecting a positive market sentiment. However, management's vague responses about Asia's customer base and Propelis' EBITDA contribute minor uncertainties. Overall, the optimistic guidance, strategic divestitures, and growth prospects, particularly in energy storage and Memorialization, suggest a stock price increase. Market cap data is unavailable, but the positive sentiment outweighs the concerns, predicting a 2%-8% stock price rise.
Key Financial Performance
Net Income $43.6 million or $1.39 per share compared to a net loss of $3.5 million or $0.11 a share a year ago. The change primarily reflected a significant gain recorded this year on the divestiture of the warehouse automation business, partially offset by losses recorded on the divestitures of the European packaging and tooling businesses, higher litigation and other strategic initiative costs and lower operating performance in the Industrial Technologies segment for the current quarter.
Consolidated Sales $285 million, compared to $402 million a year ago. The decrease primarily reflected the divestitures of the SGK business on May 1, 2025, and the European packaging and tooling businesses on December 1, 2025. The consolidated sales impact of these divestitures was approximately $120 million for the current quarter.
Adjusted EBITDA $35.2 million compared to $40 million a year ago. The decline primarily reflected lower operating performance by the engineering business. The Memorialization segment reported higher adjusted EBITDA for the quarter, while corporate and other nonoperating costs were higher in the current year.
Memorialization Segment Sales $204.2 million compared to $190.5 million for the same quarter a year ago. The Dodge acquisition contributed sales of approximately $10.4 million to the current quarter. Higher sales volumes for caskets, bronze and granite cemetery memorials, combined with inflationary price increases also contributed to the improvement in the segment's results.
Memorialization Segment Adjusted EBITDA $38.9 million compared to $36.6 million for the same quarter last year. The increase primarily resulted from the benefits of higher sales volume, inflationary price realization and cost savings initiatives, partially offset by the impact of higher labor and material costs. The Dodge acquisition and the disposition of the unprofitable European cremation equipment business also contributed to the increase in the segment's adjusted EBITDA.
Industrial Technologies Segment Sales $69 million compared to $80.5 million a year ago. The decline mainly resulted from lower sales for the segment's engineering business and the divestiture of the segment's tooling business on December 1, 2025. The decline was offset partially by higher sales for the warehouse automation business.
Industrial Technologies Segment Adjusted EBITDA Loss of $4.5 million compared to a profit of $1.8 million for the same quarter a year ago. The decrease primarily resulted from the impact of lower engineering sales, offset partially by the segment's cost reduction actions in its engineering business and the impact of lower compensation expense.
Brand Solutions Segment Sales $11.6 million for the quarter ended December 31, 2025, compared to $130.8 million a year ago. Sales for the current quarter were comprised of the months of October and November for the segment's European packaging operations, which were divested on December 1, 2025. The impact of this divestiture was a decrease of $3 million compared to the same quarter in the prior year. The remaining decrease resulted from the divestiture of the SGK business on May 1, 2025, which had an impact of approximately $115 million for the quarter.
Brand Solutions Segment Adjusted EBITDA $12.7 million for the current quarter compared to $12.3 million a year ago. The current quarter mainly reflects the company's 40% interest in Propelis as our European packaging business reported relatively breakeven results, and this was generally consistent with the same quarter a year ago.
Cash Flow Used in Operating Activities $52 million compared to $25 million a year ago. The first fiscal quarter is typically our slowest, generally reflecting a net operating cash outflow, and this is due primarily to seasonally lower earnings and the payment of year-end accruals, taxes, insurance and other annual payments. The quarter also reflected payments in connection with divestitures, litigation and other strategic initiatives.
Net Debt $506 million, declined by $173 million in the first quarter of fiscal 2026, driven by receipt of $240 million of cash proceeds from the divestitures of the warehouse automation business and the European packaging and tooling businesses.
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Operating Highlights
Axian printhead chip product: Made its public debut at PACK EXPO with strong market response. High interest resulted in a strong list of customers entering the early pipeline. Global interest continues to build, especially in the EMEA region. Positioned as a clear entry point into the CPG space with a total available market of over $3 billion. Production refinements have been completed, and production units are set to be placed this quarter.
Expansion in CPG space: Axian product has expanded the total available market to over $3 billion, with interest from both continuous inkjet and thermal inkjet customers.
Debt reduction and balance sheet improvement: Net debt reduced to roughly $500 million, achieving a leverage ratio below 3x. Early redemption of $300 million senior secured notes reduced annual interest expense by $12 million.
Cost synergies from Dodge acquisition: Integration of Dodge acquisition ahead of plan, with expected adjusted purchase price closer to $50 million and anticipated EBITDA contributions of over $12 million.
Memorialization segment performance: Reported a 7% year-over-year increase in sales, driven by inflationary pricing, higher casket volumes, and contributions from the Dodge acquisition.
Divestiture of warehouse automation business: Sold for $225 million, representing a 15x adjusted EBITDA multiple. Proceeds used to improve balance sheet and cash flow profile.
Sale of Saueressig business: Sold for $41 million, including cash, liabilities assumption, and promissory notes. Avoided significant restructuring costs and reduced pension liabilities.
Focus on Propelis: 40% interest in Propelis, which is outperforming expectations with an EBITDA run rate significantly higher than $100 million. Migration to SAP expected to activate $20 million in synergies, with a total synergy target exceeding $60 million.
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Risk or Challenges
Divestiture of Saueressig and European Packaging Businesses: The sale of Saueressig and European Packaging businesses avoided significant restructuring costs and pension liabilities but also resulted in lower revenues and EBITDA contributions, reflecting challenges in maintaining profitability and operational efficiency post-divestiture.
Industrial Technologies Segment Performance: The segment experienced a 14% year-over-year revenue decline due to lower sales in Energy Solutions and the impact of divestitures, highlighting challenges in sustaining growth and profitability in this segment.
Energy Solutions Business Challenges: The business faced near-term headwinds in the European and U.S. battery markets, with decreased expectations for the dry battery electrode market and delays in converting pipeline opportunities into orders, impacting revenue and growth potential.
Axian Product Launch Adjustments: The deliberate pause in Axian shipments to incorporate production refinements indicates challenges in scaling new product launches and meeting customer expectations promptly.
Memorialization Segment Mausoleum Sales: Declines in mausoleum sales due to project timing and lower cremation equipment sales reflect challenges in maintaining consistent revenue streams in this segment.
Debt and Financial Management: While debt reduction efforts have been successful, the company faces ongoing challenges in managing high litigation and strategic initiative costs, as well as the impact of foreign jurisdiction losses on tax benefits.
Transition Services Agreements: Temporary limitations on reducing overhead due to transition services agreements from recent sales pose challenges in achieving cost efficiency in the short term.
Energy Business Order Timing: The timing of orders in the energy business is uncertain, with demand in North America and Europe for additional battery capacity slowing, creating risks to revenue and operational planning.
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Guidance & Outlook
Adjusted EBITDA Guidance: The company expects adjusted EBITDA guidance to be at least $180 million for fiscal 2026.
Memorialization Segment Growth: A full year contribution from the Dodge acquisition is expected to enable growth in the Memorialization segment for fiscal 2026.
Energy Solutions Business: Additional cost reduction actions are planned for later this fiscal year to mitigate further declines in the business as the company works towards converting several opportunities into orders.
Propelis Group Contribution: The company anticipates reaping the full benefit of its investment in Propelis within an 18- to 24-month window, with potential repayment of preferred equity as soon as the third quarter of fiscal 2026.
Energy Market Trends: The company is awaiting decisions on several opportunities in the energy sector, including a $50 million U.S.-based opportunity for a battery separator line, with expectations for order conversions later this fiscal year.
Axian Product Launch: The Axian product is expected to move towards volume production following strong market reception and initial customer feedback. Partnerships are being sought to accelerate adoption and offset development costs.
Battery Super Cycle: The company anticipates a battery super cycle, with demand growth enabling next-generation technology platforms, including solid-state batteries, to reach full-scale mass production by 2026-2027.
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Shareholder Return Plan
Quarterly Dividend Declared: The Board declared a quarterly dividend of $0.255 per share on the company's common stock. The dividend is payable February 23, 2026, to stockholders of record February 9, 2026.
Stock Repurchase Program: The company purchased 206,123 shares under its stock repurchase program at an average cost of $25.04 per share. These repurchases were solely related to withholding tax obligations for vested equity compensation.
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Key Q&A
Q:Can you talk about the breadth and depth of potential customers for ultracapacitors and batteries domestically and in Asia outside of China?
A:In North America and Europe, conversations are ongoing with OEMs and battery manufacturers. There is a growing interest in DBE (dry battery electrode) technology, driven by tariffs on Chinese products and the need for Western alternatives. In Asia outside of China, discussions are still in the planning stages.
Q:Are there any technologies that could augment DBE that you might pursue as a tuck-in acquisition?
A:The focus is on joint development opportunities rather than acquisitions. Partnerships in mixing, material handling, and chemistry are being explored. Acquisitions are not a priority as the company owns the necessary equipment.
Q:Are there plans to optimize the capital structure further, or is the current capitalization the path forward?
A:The company is considering events like the repayment of preferred equity and potential equity exits from Propelis. With over $100 million in EBITDA and low debt, the company will discuss capital structure adjustments as these events approach.
Q:What are your expectations for the memorialization market, including caskets, memorials, and cremation, for calendar years 2025 and 2026?
A:The company expects growth in market share and price increases to offset inflation. Death rates are expected to grow at 1.5%-2%, while cremation rates will grow at a declining rate. Integration of Dodge business is expected to bring synergies and expand market share.
Q:What is the opportunity set for inorganic growth in the memorialization business?
A:Opportunities exist in selling caskets to Dodge customers in new markets and introducing new products. The company is open to accretive acquisitions but is not actively pursuing them. There is potential to add complementary products to the portfolio.
Q:What is the expected cadence of orders and revenue ramp for energy storage, and what is the revenue projection for fiscal 2026?
A:Orders are expected to pick up in the second half of the year, with a fiscal 2027 revenue ramp. A $50 million order has passed technical tests, and other smaller orders are in the pipeline. Fiscal 2026 revenue for energy storage is projected at $30-$35 million.
Q:What are the expectations for CapEx and free cash flow in fiscal 2026?
A:CapEx is expected to be around $25 million. Cash EBITDA is projected at $130 million after adjustments. The company expects to generate cash in the last three quarters of the year.
Q:Is quote activity increasing post-Tesla overhang, and is it concentrated on larger systems?
A:Quote activity is increasing but is not concentrated on larger systems. It involves customers capable of ordering larger systems, with a $50 million item being the largest in the portfolio.
Q:Have you been able to pass through price increases for bronze due to rising copper prices?
A:Price increases have been passed through to offset higher copper costs, but the rapid price movement poses challenges. The company buys opportunistically to manage costs.
Q:What is the status of the cremation business?
A:The cremation business is performing well after restructuring and facility consolidation. New products and services are generating interest, and the company expects a strong year ahead.
Q:What is the EBITDA contribution from Propelis for the quarter?
A:This quarter is seasonally light for Propelis, and the profit contribution is expected to be lower than the previous quarter.
Q:Has the tax liability from the warehouse automation sale been paid?
A:The tax liability will be paid through normal quarterly payments over the remainder of the year.
Q:What is the revenue impact of the sale of European packaging and industrial tooling businesses?
A:The sale removed $60 million in revenue from SGK Brand Solutions and $40 million from Industrial Technologies.
Q:What remains active in the electric vehicle pipeline for the energy storage business?
A:All active projects are related to EVs, including battery separator lines and calendar lines. The $100 million pipeline is primarily focused on the EV sector.
Q:How long was the chip program delayed due to customer requests on electrical security?
A:The program was delayed by 30-45 days due to minor tweaks requested by customers.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the breadth and depth of potential customers in Asia outside of China, as well as the exact timeline and scale of energy storage orders and revenue ramp. Additionally, they did not provide a clear EBITDA figure for Propelis this quarter, citing seasonal delays in financial statement development.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Axian
Construction
Dodge
IP
Matthews
Mausoleum
PACK EXPO
PIK interest
SGS
Surfaces
acquisition
adoption
battery cycle
capital
cash flow
contribution
cost
debt balance
decision
demand
energy
event result
inkjet
interest SGK
interest cash
move
note
partnership
pension liability
production Samsung
reduction
sale
scale production
space market
timing
value property
MATW Transcript
Matthews International Corporation (MATW) Q1 2026 Earnings Call Transcript
Positive2-4
The earnings call summary and Q&A session reveal positive elements: strong adjusted EBITDA guidance, debt reduction plans, and Memorialization segment growth. The Q&A highlighted interest in DBE technology and successful price increases, reflecting a positive market sentiment. However, management's vague responses about Asia's customer base and Propelis' EBITDA contribute minor uncertainties. Overall, the optimistic guidance, strategic divestitures, and growth prospects, particularly in energy storage and Memorialization, suggest a stock price increase. Market cap data is unavailable, but the positive sentiment outweighs the concerns, predicting a 2%-8% stock price rise.
EverGen Infrastructure Corp. (EVGN:CA) Q3 2025 Earnings Call Transcript
Unknown11-21
The earnings call presents a mixed outlook. Strong RNG production and carbon credit revenue, along with strategic initiatives for growth, are positives. However, challenges like prior capital constraints, lower tipping revenues, and increased operating costs weigh negatively. The Q&A session provided clarity on financing and operational improvements, but the absence of significant shareholder return announcements and only slight EBITDA improvements suggest a neutral impact on stock price.
Matthews International Corporation (MATW) Q4 2025 Earnings Call Transcript
Unknown11-21
The earnings call presents mixed signals: solid financial metrics with a focus on debt reduction and strategic divestitures, but weak guidance and unresolved issues like the Tesla lawsuit. Positive developments in product launches and certifications are offset by declines in Brand Solutions and cash flow. The Q&A reveals cautious optimism, but management's evasiveness on certain issues adds uncertainty. Overall, the sentiment is neutral, with no clear catalyst for a strong price movement.
Matthews International Corporation (MATW) Q3 2025 Earnings Call Transcript
Unknown8-6
The earnings call reveals mixed signals: decreased revenue and EBITDA due to SGK divestiture, but a significant debt reduction. The Q&A section highlights concerns about unclear management responses and slowing demand in energy storage. However, optimistic guidance on warehouse automation and new technology synergies balance these concerns. The lack of specific numbers in key areas and management's evasiveness tempers optimism, resulting in a neutral outlook for the stock price movement.
MATW Slides
Matthews International Q1 2026 slides: Divestitures boost income amid operational challenges2026-02-03
Matthews International Q4 2025 slides: Strategic divestitures reshape portfolio amid mixed results2025-11-20
Matthews International Q3 2025 slides: Net income surges despite revenue decline from divestiture2025-08-05
MATW Report
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