Matthews International Corporation

Welcome to Matthews International fourth quarter and year end fiscal 2023 financial results call. 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 Stephen Nicola CFO. Thank you. You may begin.

Thank you, Sherry. Good morning. I'm Steve Nicola, Chief Financial Officer of Matthews, and with me on the call this morning is Joe Bartolese, our company's President and CEO. For your reference in today's call, our earnings release has been posted to the Investors section of our website, www.matw.com, along with the presentation. Before we start, please note that 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 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. Now I will turn the call over to Joe.

Okay. Thank you, Steve. Good morning. Again, this quarter we are very pleased with our results as the companies reported higher consolidated sales, while all of our business segments reported higher adjusted EBITDA. Our industrial technologies business again reported solid revenue growth in the fourth quarter, driven by the strong and ongoing interest in our energy solutions business. This growth enabled the segment to exceed the $500 million revenue target we set for the year. Industrial technologies revenue for the full year increased by over 50% in fiscal 23 from last year's sales of $335 million. Our memorialization business also performed well for the full year with stable revenues despite a continued decline in debt. Our sharp focus on improving productivity in the business coupled with improved price realization led to an 8% increase in adjusted EBITDA for the full year. At SGK, as expected, cost reduction actions resulted in higher adjusted EBITDA for the quarter and improved margins despite market conditions in Europe that still continue to be challenging. Based on the strength of our operating results, we exceeded our target, reduced our net leverage ratio, and also lowered our total debt outstanding as of year end. We expect further debt reduction in the coming year as we convert our increased working capital results from our growing industrial technology segment to cash. Consolidated sales for the company increased by 6.7% in adjusted EBITDA by 7% in fiscal 2023. Impressive results despite the sense of uncertainty hovering around the global markets fueled by geopolitical events and the interest rate concerns. We are poised to drive continued growth in sales and adjusted EBITDA in fiscal 2024, buoyed by the long-term opportunities being created by several of our businesses with special mention to our industrial technology segment. On a constant currency basis compared to prior year, our sales increased 8%, and our EBITDA increased 9%, a strong performance in a challenging environment. Carrying on to the performance of our individual businesses, let's begin with industrial technologies, which had strong growth in fiscal 2023, primarily through higher sales in our energy storage solutions business. Included in the year-over-year improvement are also benefits gained from the acquisitions of Olbrich and R&S Automotive that provided expanded capacity to execute and meet our growing demand for energy solutions. On our last call, we discussed actions to be taken in Old Brick and R&S that would ultimately improve their overall performance. As you can see from our strong fourth quarter results, those initiatives have begun, and we expect significant improvement in the operating results of these businesses in the coming year. We continue to actively engage in multiple discussions with several OEMs and battery manufacturers across the world on our energy solution services, And we expect to finalize orders for production scale equipment during 2024. We still have about 50% of the $200 million in energy orders announced this past January that we expect to fulfill during 2024, as customer delays have pushed out deliveries. We will continue to share our progress in any significant new orders as they are received. However, we exited 2023 with backlogs in our engineering and old brick businesses that were $190 million higher than at the beginning of the year, including an increase of $80 million in our energy business. As for our product identification and warehouse automation businesses, let me lead off with an update on developments at our product identification business. As you know, This business provides a comprehensive suite of advanced marketing and printing technologies, consumables, and software for industrial applications. These solutions include differentiated printing equipment, recurring ink consumables, and critical controller software. As you may recall, we have identified an opportunity to display incumbent continuous jet technology, which has proven to be too complex, environmentally challenged, and costly. Our new solution addresses a market opportunity of about $2 billion using a disposable printhead that is maintenance-free and reduces total cost of ownership significantly. The solution pairs flexibility, speed, and performance with low maintenance, convenience, and environmental friendliness. We continue to develop the economic performance model supporting the product and believe it could be the only available product in the market, able to address the growing need for 2D codes that are delivered at high rates of speed. 2D codes are expected to replace barcodes in certain applications due to their ability to deliver greater track and trace information, and we believe our product is perfectly positioned to meet this demand. We anticipate launching this solution sometime in the latter half of 2024 to early 2025. With respect to warehouse automation, we want our first European warehouse automation installation project and our first factory automation order, which will be delivered in fiscal 2024. We are excited about the opportunity to expand our available market, both by industry and geography. Fueled by the continued growth of our industrial technology segment, we are exploring ways to expand our product portfolio in this segment through acquisitions, which will augment our ability to grow each of the businesses with capacity, geography, and technology. As I've said before, our memorialization segment has been reset to a higher level than before the pandemic. While fiscal year revenues for the business remain stable, we delivered an adjusted EBITDA number that exceeded the amount reported for the full fiscal year before the pandemic by $30 million. Continued growth of our cremation products business, in addition to market share gains, productivity improvements, acquisitions, and pricing initiatives all contributed to this success. Moving on to SGK, this segment continues to be impacted by challenging market environment in Europe and unfavorable currency rate changes. With that said, we did see performance setting over the second half of fiscal 2023 and are also beginning to see the impact of cost reduction actions implemented recently as margins and adjusted EBITDA improved in all of the regions in which we operate. We are also initiating a more significant cost reduction effort in Europe, which has been the most severely challenged region for SGKs. These actions include selective price increases and the closing of several sites thus reducing our cost structure in Europe due to the impact of the current war between Russia and Ukraine. Looking ahead to next year, we are excited about the long-term opportunity for all of our businesses, but especially for our industrial technology segment. We believe it can drive us to another year of growth in sales and adjusted EBITDA. We met our targets for the year and we are well positioned for a solid start in fiscal 24 with good backlogs in that business in particular. However, As I have advised on prior calls, there is a significant amount of project-related work in our industrial technology segment, specifically in energy solutions, and warehouse automation. As these businesses continue to scale up and account for a greater portion of our consolidated sales, it becomes more difficult to project timing of our growth, particularly on a quarterly basis. With this in mind, we will not provide specific fiscal 24 earnings guidance at this time, but I can say that we expect our 2024 results to exceed fiscal 2023. Note that we anticipate providing updated guidance as we have more clarity on the timing of orders as they come through. As for our capital allocation plans, we anticipate fiscal 2024 operating cash flow generation to be strong. Continued debt reduction remains a long-term focus And as I mentioned earlier, we plan to explore acquisitions to support growth, particularly in our industrial technology segment. In conclusion, we look forward to delivering another good year in 2024 as we continue the transformation of our industrial technology segment into a more significant contributor to our overall results. Now let me turn it over to Steve, who will discuss the financial results for the quarter and the fiscal year in greater detail.