Matthews International Corporation

Hello and welcome everyone. Joining today's Matthews International fourth quarter and year-end fiscal 2025 financial results. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star and one on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Chief Financial Officer Steve Nicola. Please go ahead.

Thank you, Nikki, and 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, and Dan Stopar, our incoming Chief Financial Officer, beginning December 1. 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 Investors section last night. The presentation for our call can also be accessed in the Investors 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. Thanks for joining us today to discuss the financial results for Matthew's fiscal 2025 fourth quarter and 2025 year end. Before sharing our solid results for the fourth quarter, I want to take a step back on our strategic progress. Earlier this year, we laid out several objectives. Simplify our corporate structure, expand our work in higher growth and higher margin businesses, and reduce our costs. I am proud to say that we have taken decisive actions throughout the year to deliver against each of those goals. I would like to spend a few minutes elaborating on our progress across each of these buckets. The divestiture of SGK and warehouse automation at compelling valuations have clearly simplified our story. In selling SGK, we retained a 40% stake in the new company, Propelis, that is outperforming expectations. Thus, we expect to reap a significant benefit when we exit this business, which is likely over the next 18 to 24 months. From a commercial perspective, the market response to Propelis has been very favorable. Propelis is now operating at an EBITDA run rate significantly higher than the $100 million that was assumed at the time the deal was closed. After a period of consolidation post-COVID, CPGs are realizing the need to innovate in order to strengthen their brands. Thus, the Propeller's core packaging business is having a strong performance. Plus, given our new scale, we are seeing opportunities on the marketing side of the business that neither business had the scale to deliver on before the transaction. Note that over $50 million of synergies are yet to be executed with a significant portion of those synergies to be delivered next year. We expect this to be a highly favorable transaction. Once we exit, we will have significantly delivered our business, putting us in a position to further increase shareholder value. Building on this, last week we announced an agreement to sell our warehouse automation unit to Duravant LLC, a global leader in engineered equipment and automation solutions. Under the deal terms, Matthews will receive $230 million, comprised of $223 million in cash consideration, plus the assumption of certain liabilities. After taxes, fees, and payments of other liabilities, we expect that $160 million will be applied to debt reduction, significantly reducing our total debt. We believe this to be a highly attractive transaction as well that enables us to further reduce our debt position and strengthen our balance sheet as we work towards our long-term target of two and a half times, while enhancing our ability to pursue additional strategic initiatives. The value of our warehouse automation business was highly underappreciated by the market, but this transaction reflects its true value. At over three times revenue and 15 times adjusted EBITDA, This transaction was very accretive. Assuming that HSR approval is secured within the customary 30-day period, we expect the transaction to close before the end of December. To further simplify our operating structure, we also expect to complete a few smaller transactions, including the sale of our sour acid packaging and Cellifex GmbH in the near term. We continue to actively evaluate other strategic portfolio opportunities assisted by J.P. Morgan, and we will update you accordingly. As I'll discuss in more detail shortly, across our business segments, we have made important growth investments to better position the company for long-term success. The Dodge acquisition is delivering even better than expected results in memorialization, and in October, we acquired substantially all the assets of Keystone Memorials. a wholesale manufacturer of granite materials in Georgia. This highly strategic investment provides equipment, 22 acres of property, and 30,000 square foot production facility in Elberton, Georgia, that will enable us to produce personal mausoleums, a growing segment of the market. In the industrial technology segment, we launched our new printhead, Axion, in October, and I'm pleased to report the initial response from the market has been overwhelmingly positive. In addition, we have continued advancing efficiency actions, resulting in a reduction of full-year corporate costs on a year-over-year basis of $8.5 million. In addition, we reduced our debt by $66 million. Finally, from a governance perspective, we have put in place meaningful adjustments to enhance accountability. We declassified our board and removed supermajority voting requirements. And on Wednesday, we announced the appointment of Michael Nauman as Matthew's chairman of the board. Michael succeeds Alvaro Garcia-Tunan, who will retire as chairman and from the board when his term expires at our annual meeting. Michael's extensive technical expertise, M&A experience, and leadership come at a transformative time for Matthews as we focus on long-term value creation for our shareholders. We look forward to the contributions that Michael will bring to the board as chairman. Turning to our fourth quarter performance, we're very pleased with the company's results. We had a strong finish to the year in a challenging economic environment driven by improved year-over-year performance in our memorialization and warehouse automation business units. Additionally, we saw the benefits of our focus on reducing corporate and other non-operating costs, which added to our strong operating results. From an EBITDA and adjusted earnings per share perspective, our results were higher for the quarter than prior year when you exclude the impact of the SDK divestiture, a strong performance. Let's move on to the specific business units, beginning with memorialization, which reported higher revenues and adjusted EBITDA on a year-over-year basis. As we reported in May, the Dodge acquisition contributed significantly to our performance in the fourth quarter. We're very pleased with the progress they are making on the integration process as synergies are being captured ahead of plan. Additionally, we are preparing to initiate cross-selling activities and expect this acquisition to be a strong contributor to revenues and EBITDA in fiscal 2026. As for industrial technologies, Revenues were lower year over year, reflective of our ongoing challenges in the engineering business. In warehouse automation, we capitalized on the market recovery underway and strong order rates to drive strong revenues and adjusted EBITDA in Q4. This strong performance is reflected in the robust market interest and valuation we received for this business. With respect to our product identification business, Building on my earlier comments about the launch of Axiom, we also received GS1 certification as the only jetting unit able to meet 2D code quality standards, which can be read at speeds we believe that no other competitor has achieved. This is yet another key differentiator for this novel technology. GS1 certification is the global standard for adoption of the 2D codes, which are beginning to be required across the world. In the current environment, Tariffs have impacted all of our businesses, and for the most part, we have been successful in mitigating these costs by passing along higher prices. This remains a volatile topic, as you all are aware, but the team has so far done excellent work in managing in this difficult environment. Finally, moving on to the engineering business segment. Let me first provide an update regarding our proprietary dry battery electrode technology. For almost two years, We have been in a prolonged dispute with Tesla addressing their false ownership claims arising from our proprietary advanced rotary processing and calendaring offerings, frequently referred to as the all-in-one solution for the dry battery electrodes. We have already successfully prevailed in numerous rulings against Tesla in recent years. Notably, however, I am at a slight disadvantage speaking in any form about the details of our dispute as I cannot further explain components of the litigation given certain matters have been or are being addressed through confidential arbitration. That said, Tesla's vigorous efforts to claim ownership rights in our solutions, solutions that we have been working on and refining with our German engineering team for over two decades, further confirm our position that our proprietary technology is highly valuable and sought after. Specifically, many partners continue to show keen interest in our DBE offerings. Consistent with prior rulings, I remain confident we will maintain our ownership rights in our proprietary DBE technology. Indeed, certain rulings have already reinforced matthew's long-standing leadership in the design development and manufacturing of continuous process machinery for battery electrode production including our proprietary dry battery electrode solution with respect to business activity for the engineering business during the quarter we received an order for a production scale for a U.S.-based solid-state battery manufacturer, which we hope will be one of many delivered as this novel technology comes to market. DBE is considered the best solution for solid-state batteries given the lack of solvents in the production process. We expect as more companies come to market with solid-state solutions, interest in our proprietary technology will continue to grow. Also in December, we will engage with domestic energy solutions provided to prove our equipment's efficacy for a $50 million U.S.-based opportunity for a battery separated line, another product in our energy storage portfolio. We expect this opportunity will convert to an order in early fiscal 2026 as the customer works towards securing supply agreements. Our pipeline of opportunities remain steady with quotes in excess of 150 million, and we expect to announce more orders in 2026. Looking ahead with regards to the energy business, we are exploring multiple partnerships with several industry participants. Our intent is to partner with others who can help us expand adoption of this technology around the globe. We are open to partnering directly on projects as well as looking for direct investments into the business. This will not be an immediate event, but has been one of the focuses of our strategic alternatives efforts. Finally, concluding with a few comments, looking forward to 2026. We believe a full year contribution from the Dodge acquisition will enable memorialization to grow in fiscal 2026. Additional cost reduction actions at the engineering business are planned for next year to mitigate any further decline in the business as we work towards converting several opportunities into orders. Based on these factors, and inclusive of our 40% interest in propellers, we expect our justity but their guidance to be at least $180 million for fiscal 2026. Recognize that we will have multiple transition services agreements in place from various divestitures, which will limit our ability to take more significant action to reduce our overhead. But we are working on and expect corporate costs to be materially lower after the expiration of those agreements. Finally, Our evaluation of strategic alternatives is continuing. However, we will be prudent in making decisions focused on achieving appropriate value for our shareholders. Like we have demonstrated by the sale of our warehouse and automation business and the merger of SGK, we know what the true values of our businesses are, and we will be patient in our process. Now I'll turn it over to Steve for a discussion.