Matthews International Corporation

Greetings and welcome to the Matthews International fourth quarter and year-end fiscal 2024 financial results. This time all participants will be in listen-only mode. A question and answer session will follow the formal presentation. If anyone today should require operator assistance, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Steve Nicola, Chief Financial Officer. Steve, you may begin.

Steve Nicola Thank you, Rob. Good morning. I'm Steve Nicola, Chief Financial Officer of Matthews. And with me today is Joe Bartolese, our company's President and Chief Executive Officer. Before we start, I would like to remind you that our earnings release was posted on the company's 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 under presentations. 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 public 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.

Thank you, Steve. Good morning. Fiscal 2024 was a challenging year for several of our business units, driven by economic conditions and legal events outside of our control. With that said, we were quite pleased with the performance of our larger businesses, Memorialization and SGK, that continued to demonstrate the company's resilience as well as our employees' commitment. Our industrial technology segment continued to experience slow shipments and installations for our energy storage products, in addition to soft demand for warehouse solutions, though we do expect the market environment for warehouse solutions to improve in 2025. Consolidated sales and adjusted EBITDA came in as expected, but lower on a year-over-year basis. Overall, we reported $447 million in in consolidated sales in the fiscal 2024 fourth quarter compared to $480 million in the fourth quarter of fiscal 2023. Adjusted EBITDA for the fourth quarter of 2024 was $58 million, and in line with our expectations for the full year, we reported $1.8 billion in consolidated sales and met our revised guidance target of $205 million of adjusted EBITDA. But before performing, excuse me, before providing a more detailed discussion of our business performance in the quarter, let me touch on several of our key strategic priorities as we start fiscal 2024. At SGK, our team has been contending with an extended period of softness in the European brand market in addition to regional regulatory changes that impacted comparability in the business. I'm pleased to see the steady improvement in the business, which has now stabilized and in the fourth quarter resulted in SGK reporting a third consecutive quarter of higher sequential sales and good margins. A steady diet of cost control, price improvements, and growth in the APAC region have proven to be the cure. Additionally, Transitioning to an e-commerce digital marketing platform not only set us apart from our market peers, but also led to an increase in revenues and organic business opportunities that position us well for 2025 and beyond. Memorialization has been the bedrock of our company and continues to outperform, despite the normalization of casketed desks post-COVID. The business has benefited from pricing actions and several small tuck-in acquisitions while delivering on cremation and mausoleum-related products that we believe exemplifies the diversity of this segment. Cost control measures taken during the fiscal year also contributed to an improvement in operating margins. For the fiscal year, the business reported $163 million in adjusted EBITDA compared to $146 million for the fiscal year ending 2020 at the peak of the pandemic. Now, let's move on to industrial technologies. Beginning with the product identification business, which continued to perform well, this business grew in the fourth quarter, benefiting from pricing actions taken earlier in the year. Given our current product mix, our sales in North America were quite strong, driven by a strong construction market, a market where we have highly competitive offerings. We came into the year fiercely determined to make inroads in bringing our new printed product, Axiom, to market. I'm pleased with the progress that was made here, and we are now preparing to launch the product in the latter half of fiscal 2025. Beta testing of the product has gone better than expected, and we look forward to sharing more details with you as we get closer to the product launch. In addition to the Axiom product, we also launched a new line of lasers in the second half of the year and now have orders coming in and shipping has commenced. As discussed on earlier calls, our warehouse automation business faced headwinds during the year as demand fell due to customer uncertainty about the economy and higher interest rates. However, over the last two quarters of the year, market sentiment began to shift and quoting activity picked up in volume and in size. Recently, there has been related news that some of the larger, well-known distribution networks were starting to invest again, supporting our thesis of a return to a higher activity level for the automation market. We also won orders from several new accounts in Europe, justifying our decision to expand our presence in that region. As a result, our outlook for fiscal 2025 is cautiously optimistic, as we expect the demand to recover Excuse me, as we expect the demand recovery to have a slow start, resulting in meaningful revenue impact sometime in the latter part of fiscal 25 and into 26. Finally, let's talk about the energy solutions business, where most of the attention has been directed over the last few quarters. Most of you on this call know and are aware of Tesla's complaint against Matthews. Filed in June of this year, the federal judge in that proceeding has ordered that the proper jurisdiction for the claims begins in arbitration, as required by the agreement between the parties. As I've said before, Tesla's claims are meritless and have been filed in a public forum for the sole purpose of bringing pressure on us to relinquish our technology. Ironically, their claim, in our opinion, validates the relevance and importance of our energy storage business due to the value they have ascribed to our solutions. a value that has never been recognized by the market when assessing our consolidated valuation. More industry players are now aware of our proprietary engineered solutions and the significant cost reduction benefits that can be derived by implementing them. Since the claim was filed, we have taken cautious steps to offset any impact to our bottom line and as a result are now better positioned both financially and operationally to lead the ongoing transition to electric vehicles once this matter is resolved. We have long been developing advanced calendaring solutions for next-gen equipment for both the lithium-ion battery space as well as the hydrogen fuel cell space. As evidence of our continued innovation, we recently received a U.S. patent directed to systems for manufacturing a dry battery electrode for energy storage devices using our innovative calendaring technology. The newly issued patent stems from a patent application that was filed in early 2019 and becomes a part of the significant intellectual property we have developed in this space. On a year over year basis, Energy business revenues were significantly down in the fourth quarter, reflecting the impact of slower than expected customer deliveries, which continue, but not as originally anticipated. We expect deliveries to be substantially completed in fiscal 2025. Just a quick word in our previously announced cost reduction program. It is now underway, and as a result, we took some charges in the quarter, but we are overall quite satisfied with the outcome so far. We have exited less profitable operations and begun the process of selling the related assets, which we expect to go on throughout this year. Moving on to the balance sheet. In an ongoing effort to provide certainty around our financing, earlier in the year, we renewed and extended our revolving credit facility through 2029. Recently, we also refinanced our senior notes that were due to mature in December of next year. As part of our new senior notes, We structured in a one-year call option that provides us significant flexibility to lower our cost of capital in the event that interest rates continue to decrease and provides us flexibility to achieve our strategic goals. Also, as part of our ongoing focus on debt reduction, and despite the elevated levels of working capital related to our energy solutions business, we reduced our debt by over $50 million during the fourth quarter. We enter the new fiscal year focused on continuing to identify ways to create value throughout all of our business segments, including accretive tuck-in acquisitions and non-core divestitures that we believe will drive stronger financial performance and cash generation. We expect another solid year of results in 2025 from our memorialization business and continued growth by the SGK segment. We also expect our product identification business benefit from the Axion launch, as well as the full year results from the new laser product that was launched earlier this year. And as I mentioned earlier, we expect a strong recovery in our warehouse automation solutions business as the market picks up. Consequently, we are projecting adjusted EBITDA for fiscal 2025 to be in the range of $205 to $215 million. Finally, In light of the long-term opportunities available to us in the industrial technology segment, we recently engaged J.P. Morgan to support us on a review of potential strategic alternatives. I will now turn the call over to Steve for more insight on our financial results.