Matthews International Corporation

Greetings. Welcome to the Matthews International Second Quarter Fiscal 2023 Financial Results. At this time, all participants are in a listen-only mode. A 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. Please note this conference is being recorded. I will now turn the conference over to your host, Bill Wilson, Senior Director of Corporate Development. You may begin.

Thank you, Shamali. Good morning, everyone, and welcome to the Matthews International Second Quarter Fiscal Year 2023 Earnings 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 want 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 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 discussed today are set forth in the company's annual report on Form 10-K and other periodic filings with the SEC. 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 we'll turn the call over to Joe.

Thank you, Bill. Good morning. Let me first thank all of our employees globally for the contributions to our continuing success last quarter. We are very pleased with our results for the fiscal 23 second quarter as we continue to see momentum and interest in our energy solutions business, growth in our warehouse automation business, and strong results in our memorialization segment despite the significant decline in COVID-related deaths. We are on target to meet our financial guidance for the current year and we remain focused on continuing to evolve our businesses to meet the opportunities before us. Consolidated sales increased by almost 8%, and adjusted EBITDA improved by 6% in the second quarter of fiscal 23 on a year-over-year basis. Importantly, on a constant currency basis compared to prior year, our sales increased 10%, and our EBITDA increased almost 9%, a strong performance in a challenging environment. Looking at our businesses, industrial technologies grew by over 60% year-over-year, primarily through higher sales from our energy storage solutions business, as well as the acquisitions of Ulbricht and R&S Automotive. The interest in our energy storage offerings remains strong as we engage with many industry leaders in the battery space, including most of the Asia Pacific-based battery manufacturers, as well as OEMs around the world, we stand positioned to continue to grow this business. Progress on the over $200 million of energy orders we announced last quarter is on track and going well. We look forward to sharing additional information in detail on new orders over the next few quarters as several of our discussions are approaching the final phase of negotiations. Although Ulbricht has yet to be a contributor to our bottom line, The acquisition was a clear message to the EV market that we now have the skills and the capacity to significantly grow our energy business. But for the Old Brook acquisition, I am doubtful our current and prospective customers would have entrusted us with the orders we have received, let alone the orders and relationships that we are discussing. We are beginning to raise our prices and reduce our costs at Old Brook as we look to position the business as a significant contributor to our overall results going forward. Our memorialization business grew despite the return to more normalized death rates following COVID. As stated in our earlier calls, we've evolved this business since COVID to a higher level of overall performance through market share gains, tuck-in acquisitions, our growing cremation products business, and significant capital investments designed to improve productivity This business is poised for continuing success. For example, memorialization sales grew by 44% when compared to fiscal 2020 first quarter, the immediately preceding quarter before COVID deaths began to emerge. These improvements assure us of a continued steady cash flow necessary to evolve our overall business and focus on reducing our debt. We are innovators at our core, And this attribute can clearly be seen in our product identification business, where we continue to make good progress in the development of our new products. For one of those products, which I've mentioned before, a silicon-based printhead, we have received external third-party revalidation of its value proposition, giving us increased confidence of the opportunity ahead as we move to production. Our external research confirms that the total cost of ownership of this new product can be up to 30% lower over the lifetime of competitive products. When coupled with the ability to meet changing marketing and coding demands like 2D codes or QR codes and ease of use, our business proposition gets stronger each day. In our warehouse automation business, we are in the early stages of a new phase of evolution at this business as well. As you are aware, we are a leading provider of warehouse execution software and pick-to-like technologies to help companies meet the demand of an ever-expanding e-commerce market. Our latest solution in this business will enable Matthews Proprietary Autonomous Vehicle Management Solutions to further penetrate the automated warehouse. This solution is still in its early stages, but we have great confidence in our ability to innovate in this space for further success. Moving on to SGK. The business continues to be impacted by a variety of elements, including unfavorable currency rate changes and difficult market conditions in Europe. However, the cost reduction actions we initiated in Europe last quarter are beginning to take effect and have mitigated some of the negative impact. Further actions to improve our cost structure in this business, particularly in Europe, are planned in the coming quarters, and we expect margin improvement throughout the remainder of fiscal 23 and into 24. As we look forward to the remainder of the year, we are expecting continued consolidated growth. We are only in the early stages of the energy solutions orders we announced in January of this year. As a result, we expect these orders to provide some benefit throughout the remainder of fiscal 23 and into and through the second quarter of fiscal 24. But given the nature of these significant orders, the timing of revenue recognition is subject to change. Backlog for our warehouse automation business remains strong, assuring us of another strong year in this business. We remain confident that our memorialization business will continue to perform despite a return to normalized death rates post-COVID. And as for SGK, we do see an improvement of the pricing environment, and as discussed earlier, we're also starting to realize the benefits from recently implemented cost reduction actions. With these factors in mind, In addition to the continuation of uncertain near-term economic environment, we remain cautious in our outlook. Consequently, we are maintaining our previous guidance for fiscal 2023 of adjusted EBITDA of between 215 million to 235 million. Although we have the orders to deliver a strong year, we have chosen to remain cautious on the timing of revenue recognition on the existing energy orders and the timing of future orders in this business. Let me now hand over the call to Steve, who will discuss the financial results for the quarter in greater detail.