Matthews International Corporation

Greetings and welcome to the Matthews International Corporation first quarter fiscal 2023 financial results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bill Wilson, Senior Director of Corporate Finance. Thank you, Bill. You may begin.

Thank you, Paul. Good morning, everyone, and welcome to the Matthews International First Quarter Fiscal Year 2023 Results Conference Call. This is Bill Wilson, Senior Director of Corporate Development. With me today are Joe Bartolese, President and Chief Executive Officer, and Steve Nicola, our Chief Financial Officer. Before we start, I would like to remind you that our earnings release was posted on our website, www.matw.com, in the investor section last night. The presentation for our call can also be accessed in the investor section of the website. Any forward-looking statements in connection with this discussion are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Factors that could cause the company's results to differ from those disclosed today are set forth in the company's annual report on Form 10-K and other periodic filings with the SEC. In addition, We will be discussing non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables carefully as you consider these metrics. In connection with any forward-looking statements and non-GAAP financial information, please read the disclaimer included in today's presentation materials located on our website. And now I'll turn the call over to Joe.

Thank you, Bill. Good morning. We are pleased with our fiscal 23 first quarter results. During the quarter, we had higher revenue thanks to the particularly strong performance of our industrial technology segment. This segment is on track to have yet another strong year of growth thanks to the addition not only of Olberk Automotive and R&S, but most importantly, thanks to the recently announced $200 million plus in orders in the energy storage business. These orders cover client needs for new calendaring and coding equipment, spare parts, roller refurbishment, and maintenance. Aside from our historical clients, our orders were received from leading battery customers like Automotive Cell Company, otherwise known as ACC, a consortium consisting of Mercedes, Chrysler, Jeep, Fiat, Peugeot, and Saft. a global advanced battery manufacturer, and a subsidiary of Total Energies. These orders also include Ola Electric, an Indian e-mobility manufacturer with significant government backing with aspirations to be on the world stage. During the quarter, we also saw significant demand in orders from several hydrogen fuel cell component suppliers. These orders, although smaller, reflect a growing interest in our hydrogen fuel cell capabilities and give us confidence that, in time, this business will grow like our dry electrode battery technology has grown. Although we don't expect to announce $270 million of new orders every quarter, we will keep you apprised of significant orders as they are received. From fiscal 2020 to fiscal 2022, the energy business driven by our dry battery electrode technology has grown from $20 million to almost $100 million last year. This year, we are confident that our energy business, in total, will continue that strong growth. As for the entire technology segment, our total order intake during the first quarter was almost $270 million, a record amount of orders for this segment. So that's the $200 million of previously announced orders in our energy business, plus another $70 million in other businesses that comprise the industrial technology segment. The industrial technology segment reported roughly $230 million in revenue in fiscal 2020. But this year, it is on track to double those results. Warehouse automation and product identification had good order intake during the quarter as well from customers like Land's End, Luxottica, Louisiana Pacific, and Estaframe. As we've been saying for quite a while, This segment is comprised of our fastest-growing businesses with unique selling propositions, making our products and services must-haves for the industries that we serve. Our expectation is that revenues for this segment will approach $500 million this year. Our memorialization business also delivered very good results despite the post-COVID substantial normalization of death rates. Even with the lower volumes, our revenues remained strong, thanks to good funeral home product mix, strong cemetery product sales, and pricing throughout the business. Our margin in this business are beginning to normalize as some of the cost pressures that we have felt for the past year or so have begun to subside. This business has performed exceptionally well throughout the past several years and is poised to maintain that success into 2023. We continue to see strong order rates in our cemetery products business particularly our bronze cemetery business, which will help partially offset the lower casket sales that are expected. As I've said before, this segment has reset its normalized revenues to a level that is materially higher than just a few years ago. We currently expect EBITDA results to be relatively comparable to prior year, even with the lower volumes. In SGK, we continue to be challenged by the European market conditions, and negative currency translation. Revenues reported for the quarter were $11 million lower due to negative currency translation. We have begun actions to reduce the size of our European business, which we expect will help the coming quarters. Moreover, we still have one more quarter of difficult comparisons in this business, which began to feel the impact of the Ukraine war and significant currency degradation at the end of our second quarter last year. As we look forward to the balance of 2023, we are expecting continued consolidated sales growth. As discussed above, our order rates in our fastest-growing businesses remain high, which bodes well for the continued development of these businesses. Also, subsiding commodity costs in our memorialization business will benefit future quarters and allow us to return to more normal margins. Cost actions at SGK should make comparables more favorable starting in our third quarter. However, all of this positive news is offset by the economic uncertainties, which we cannot predict. Therefore, with these factors in mind, we are reaffirming our previously announced fiscal 2023 EBITDA expectations to be between $215 and $235 million. Although we have the orders in hand to potentially deliver towards the high end of this range, we remain prudent at this time, given the yet-to-be-determined timing of of our deliveries in the energy business. We will continue to provide updates as we progress through the year. I will now turn it over to Steve for our financial review.