Matthews International Corporation

Greetings, and welcome to the Matthews International Third 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 Development. Thank you, sir. You may begin.

Thank you, Christine. Good morning, everyone, and welcome to the Matthews International Third Quarter Fiscal Year 2023 Conference Call. This is Bill Wilson, Senior Director of Corporate Development. With me today are Joe Bartolucci, President and Chief Executive Officer, and Steve Nicola, Chief Financial Officer. Before we start, I'd 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 discussed 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 table carefully as you consider these metrics. In connection with any forward-looking statements in 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 their continuing contributions to our success last quarter. Again, this quarter, we're quite pleased with our results as all of our businesses performed well on a year-over-year basis. As we expected, we continue to see growth in our industrial technologies business driven by our recent significant orders and the ongoing interest in our energy solutions business. We also saw continued growth in our warehouse automation and our product identification businesses, which were solid contributors to our overall performance. In addition, we had strong results in our memorialization and improving results in SGK, which showed improvement year over year. Consolidated sales for the company increased by almost 12%. and adjusted EBITDA improved by 22%. All in all, a very good quarter. As I look at the performance of our individual businesses, the industrial technology segment grew by 66% over the prior year, primarily through higher sales for our energy storage solutions business, as well as benefits gained from the acquisitions of Olbert and R&S Automotive. These acquisitions increased our capacity provided the additional resources necessary to support our ability to execute on the recent orders and meet the growing demand for our energy solutions business. We are continuing to make progress on fulfilling the over $200 million of energy orders announced earlier this year. These orders, together with other orders that we have already received and orders that we anticipate in the near term, will carry over into next fiscal year and provide a very good start for another strong year in our energy solutions business. Discussions on additional business opportunities are ongoing, and we will continue to share our progress on new orders as they are finalized. Now that we have much of the required capacity and resources to meet increased demand, we are focusing on improving the operating platform at Ulbricht and RNS, which have impaired the performance of the business over the past few quarters. Beginning this quarter, cost actions will be taken over the next 12 to 18 months that will improve the performance of these acquisitions and contribute directly to the bottom line. We have been prevented from taking action earlier due to labor contracts in place at the time of our acquisition, but those contracts have now expired. In a memorialization business, we continue to outperform pre-pandemic results driven by the significant effort made by the team. We have retained much of the market share gains that we have made during COVID and improved our operating efficiencies. Thus, we have reset this business to a higher performance level than before the pandemic. As a result of those efforts and the recent acquisition of Eagle Granite, operating results in the memorialization segment grew by almost 3% in the fiscal 23 third quarter and by 29% when compared to the corresponding period before the pandemic began. Moving on to SGK. Topline results continue to be impacted by the market challenges in Europe and unfavorable currency rate changes. With that said, though, we were pleased with the direction of operating results for the quarter as SGK was able to pass along cost increases and take actions to improve its performance relative to prior year. We anticipate additional cost actions to be taken over the coming year geared towards further driving margin improvement in 2024. As for our warehouse automation business and the product identification business, we saw good results, but did see some softening in order activity in the warehouse business as we advised in our last quarterly earnings call. In particular, throughout the third quarter, we saw a decline in quoting activity, which began to strengthen early into the fourth quarter. It is still early to forecast the impact to fiscal 24 of any softening, but the recent impact The recent uptick in activity bodes well for another strong year next year. Our product identification business also contributed a good quarter driven by select price increases and volume increases. During the quarter, we made progress on our new print engine in our product identification business and our finalizing production plan this coming quarter. We expect to give you a better understanding of the timing of the rollout of the new product in our year-end earnings call. Looking ahead to the fourth quarter, we continue to feel good about our future outlook in all of our businesses. The entire industrial technology segment, and in particular, the strength of our energy solutions business, is expected to have another solid quarter. This performance, combined with continued steady results from memorialization and a trend towards improving results in SGK, give us the confidence to finish the year strong. As a reminder, the fourth quarter of fiscal 22 benefit from the closing of projects in our energy solutions business resulting in particularly strong results. Although we do not have similar project closures in our upcoming quarter, we do anticipate operating results in our industrial technology segment to remain relatively in line with prior year results as we make progress on the recent orders. We remain on track to recognize about half of those orders in fiscal 23 and the remainder over the first half of 24. This performance should result in about a 40% increase year over year in our energy solutions business, bringing our fiscal 23 revenue to about $140 million. Moreover, our total industrial technology segment is expected to report revenues that approach $500 million, more than double what they were in fiscal 2020. As I've laid out on earlier calls, the energy solutions business consists of large orders subject to revenue recognition accounting rules, Thus, the timing of our revenue recognition is not entirely in our control. Our memorialization business is expected to continue to perform well in the fourth quarter, and at SGK, as we noted earlier, we are expecting to see continued margin improvement on a year-over-year basis. The wild card in our forecast remains the economic environment, which continues to hinder our efforts in Europe. With that in mind, and given the aforementioned assumptions, we believe it is prudent to remain cautious on our outlook. Therefore, we are maintaining our previous guidance for fiscal 23 with our current projections of at least $220 million of adjusted EBITDA. Let me now hand it over to Steve, who will discuss the financial results for the quarter in detail.