• Matthews International Reports Results for Fiscal 2023 First Quarter

    Source: Nasdaq GlobeNewswire / 26 Jan 2023 16:15:00   America/New_York

    Financial Highlights:

    • Sales increased $10.6 million from last year; $27.6 million on a constant currency basis
    • Industrial Technologies sales 47% higher than a year ago
    • Company reaffirms guidance
    • Webcast: Friday, January 27, 2023, 9:00 a.m., (201) 689-8471

    PITTSBURGH, Jan. 26, 2023 (GLOBE NEWSWIRE) -- Matthews International Corporation (NASDAQ GSM: MATW) today announced financial results for its first quarter of fiscal 2023.

    In discussing the results for the Company’s fiscal 2023 first quarter, Joseph C. Bartolacci, President and Chief Executive Officer, stated:

    “We had a strong start to fiscal 2023. Order rates in our Industrial Technologies segment have grown significantly. Total orders for the segment were almost $270 million for the quarter, including the recently announced orders received for our energy storage solutions business.

    “On a consolidated basis for the three months ended December 31, 2022, we reported another consecutive quarter of year-over-year sales growth, primarily resulting from a 47% increase in sales for our Industrial Technologies segment.

    “The continued strength in orders for our energy storage solutions business reaffirms our commitment to the energy space. Our goal is to be the premier, global supplier of highly engineered, clean energy equipment with industry-leading customers across renewable energy services, transportation, and infrastructure. We are confident that the global and growing shift to electrification, coupled with our recent acquisitions, will continue to drive growth for our Company.

    “Memorialization sales were relatively steady for the current quarter as the segment reported only a modest decline despite lower death rates compared to a year ago. Consistent with last quarter, U.S. death rates have substantially normalized from higher pandemic levels, impacting unit volumes for caskets and bronze memorials. However, these impacts were largely mitigated by improved pricing and higher granite memorial products and U.S. cremation equipment sales.

    “For our SGK Brand Solutions segment, currency rate changes compared to a year ago, particularly the Euro and British Pound, represented over half of the reported decline in sales, while continued challenges in Europe also negatively impacted sales and profitability. However, we expect the cost reduction actions initiated last quarter will begin to produce improved margins.”

    First Quarter Fiscal 2023 Consolidated Results (Unaudited)

    ($ in millions, except per share data)Q1 FY2023 Q1 FY2022 Change % Change
    Sales$449.2 $438.6  $10.6  2.4%
    Net income (loss) attributable to Matthews$3.7 $(19.8) $23.5  118.7%
    Diluted earnings (loss) per share$0.12 $(0.62) $0.74  119.4%
    Non-GAAP adjusted net income$16.4 $23.6  $(7.2) (30.5)%
    Non-GAAP adjusted EPS$0.53 $0.74  $(0.21) (28.4)%
    Adjusted EBITDA$49.3 $53.3  $(4.0) (7.5)%
    Note: See the attached tables for additional important disclosures regarding Matthews’ use of non-GAAP measures as well as reconciliations of non-GAAP measures to corresponding GAAP measures. Organic sales represent changes in sales excluding the impact of acquisitions, divestitures, and changes in foreign currency exchange rates.

    Consolidated sales for the quarter ended December 31, 2022 were $449.2 million, compared to $438.6 million for the same quarter a year ago, representing an increase of $10.6 million, or 2.4%. On a constant currency basis, consolidated sales increased $27.7 million, or 6.3%, from a year ago. Changes in foreign currency exchange rates were estimated to have an unfavorable impact of $17.0 million on fiscal 2023 first quarter sales compared to the prior year.

    Net income attributable to the Company for the quarter ended December 31, 2022 was $3.7 million, or $0.12 per share, compared to loss of $19.8 million, or $0.62 per share in the prior year. The first quarter last year included a charge in connection with the termination and settlement of the Company’s principal U.S. pension plan. On a non-GAAP adjusted basis, earnings for the fiscal 2023 first quarter were $0.53 per share, compared to $0.74 per share a year ago, primarily reflecting lower adjusted EBITDA (net income before interest expense, income taxes, depreciation and amortization, and other adjustments) and higher interest expense. Adjusted EBITDA for the fiscal 2023 first quarter was $49.3 million. On a constant currency basis, adjusted EBITDA was $50.9 million for the current quarter, compared to $53.3 million a year ago, primarily reflecting lower adjusted EBITDA for the Memorialization and SGK Brand Solutions segments offset partially by growth in the Industrial Technologies segment.

    Outlook

    Mr. Bartolacci further stated: “Based on our orders received in the first quarter and continued robust activity in all of our Industrial Technologies products and services, we expect to report another strong year in this segment. Timing of new projects will influence our results as deliveries for portions of the orders will extend up to 18 months. We expect Memorialization operating results to remain relatively steady compared to last year, primarily reflecting the level of our cremation-related products sales and expected recovery in the segment’s margins. Lastly, for our SGK Brand Solutions segment, year-over-year currency rate changes are expected to present a challenge for the near term. However, our cost reduction actions should improve margins in this business.

    “At the present time, we are maintaining our previously reported guidance for fiscal 2023 (adjusted EBITDA range of $215 million to $235 million). Importantly, as we further assess expected timing of deliveries for the recent energy storage solutions orders, our confidence level within this range should improve. We continue, however, to express caution as global economic conditions remain uncertain.

    “Lastly, as we anticipated, our debt levels have recently increased primarily as a result of investments in our recent acquisitions and the energy storage solutions business. Based on the expected performance and related cash flows of this business, we expect these levels to decline as fiscal 2023 progresses.”

    Webcast

    The Company will host a conference call and webcast on Friday, January 27, 2023 at 9:00 a.m. Eastern Time to review its financial and operating results and discuss its corporate strategies and outlook. A question-and-answer session will follow. The conference call can be accessed by calling (201) 689-8471. The audio webcast can be monitored at www.matw.com. As soon as available after the call, a transcript of the call will be posted in the Investor Relations section of the Company’s website at www.matw.com.

    About Matthews International Corporation

    Matthews International Corporation is a global provider of memorialization products, industrial technologies, and brand solutions. The Memorialization segment is a leading provider of memorialization products, including memorials, caskets, cremation-related products, and cremation and incineration equipment, primarily to cemetery and funeral home customers that help families move from grief to remembrance. The Industrial Technologies segment designs, manufactures, services and distributes high-tech custom energy storage solutions, product identification, and warehouse automation technologies and solutions. The SGK Brand Solutions segment is a leading provider of packaging solutions and brand experiences, helping companies simplify their marketing, amplify their brands and provide value. The Company has approximately 12,000 employees in more than 30 countries on six continents that are committed to delivering the highest quality products and services.

    Forward-looking Information

    Any forward-looking statements contained in this release are included pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties that may cause the Company’s actual results in future periods to be materially different from management’s expectations. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct. Factors that could cause the Company's results to differ materially from the results discussed in such forward-looking statements principally include changes in domestic or international economic conditions, changes in foreign currency exchange rates, changes in interest rates, changes in the cost of materials used in the manufacture of the Company's products, changes in mortality and cremation rates, changes in product demand or pricing as a result of consolidation in the industries in which the Company operates, or other factors such as supply chain disruptions, labor shortages or labor cost increases, changes in product demand or pricing as a result of domestic or international competitive pressures, ability to achieve cost-reduction objectives, unknown risks in connection with the Company's acquisitions, cybersecurity concerns, effectiveness of the Company's internal controls, compliance with domestic and foreign laws and regulations, technological factors beyond the Company's control, impact of pandemics or similar outbreaks, or other disruptions to our industries, customers, or supply chains, the impact of global conflicts, such as the current war between Russia and Ukraine, and other factors described in the Company’s Annual Report on Form 10-K and other periodic filings with the U.S. Securities and Exchange Commission.

     
    CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
    (In thousands, except per share data)
     
     Three Months Ended
    December 31,    		  
      2022   2021  % Change
    Sales$449,240  $438,579  2.4%
    Cost of sales (310,310)  (306,942) 1.1%
    Gross profit 138,930   131,637  5.5%
    Gross margin 30.9%  30.0%  
          
    Selling and administrative expenses (111,360)  (99,312) 12.1%
    Amortization of intangible assets (10,342)  (21,546) (52.0)%
    Operating profit 17,228   10,779  59.8%
    Operating margin 3.8%  2.5%  
          
    Interest and other deductions, net (12,269)  (37,217) (67.0)%
    Income (loss) before income taxes 4,959   (26,438) 118.8%
    Income taxes (1,312)  6,628  119.8%
    Net income (loss) 3,647   (19,810) 118.4%
    Non-controlling interests 56   7  NM 
    Net income (loss) attributable to Matthews$3,703  $(19,803) 118.7%
          
    Earnings (loss) per share -- diluted$0.12  $(0.62) 119.4%
          
    Earnings per share -- non-GAAP (1)$0.53  $0.74  (28.4)%
          
    Dividends declared per share$0.23  $0.22  4.5%
          
    Diluted Shares  30,953   31,719   
    (1) See reconciliation of non-GAAP financial information provided in tables at the end of this release
    NM: Not meaningful


     
    SEGMENT INFORMATION (Unaudited)
    (In thousands)
     
     Three Months Ended
    December 31,
      2022   2021 
    Sales:   
    Memorialization$206,502  $210,706 
    Industrial Technologies 109,143   74,331 
    SGK Brand Solutions 133,595   153,542 
     $449,240  $438,579 


    Adjusted EBITDA:   
    Memorialization$39,137  $43,370 
    Industrial Technologies 12,202   7,183 
    SGK Brand Solutions 12,232   15,414 
    Corporate and Non-Operating (14,280)  (12,634)
    Total Adjusted EBITDA (1) $49,291  $53,333 
        
    (1) See reconciliation of non-GAAP financial information provided in tables at the end of this release


     
    CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION (Unaudited)
    (In thousands)
     
     December 31, 2022September 30, 2022
    ASSETS   
    Cash and cash equivalents$42,718  $69,016 
    Accounts receivable, net 221,613   221,015 
    Inventories, net 245,565   225,440 
    Other current assets 123,348   113,145 
    Total current assets 633,244   628,616 
    Property, plant and equipment, net 264,684   256,065 
    Goodwill 692,015   675,421 
    Other intangible assets, net 193,756   202,154 
    Other long-term assets 119,243   120,515 
    Total assets$1,902,942  $1,882,771 
        
    LIABILITIES   
    Long-term debt, current maturities$2,977  $3,277 
    Other current liabilities 363,767   408,098 
    Total current liabilities 366,744   411,375 
    Long-term debt 834,127   795,291 
    Other long-term liabilities 197,154   189,029 
    Total liabilities 1,398,025   1,395,695 
        
    SHAREHOLDERS' EQUITY   
    Total shareholders' equity 504,917   487,076 
    Total liabilities and shareholders' equity$1,902,942  $1,882,771 


     
    CONDENSED CONSOLIDATED CASH FLOWS INFORMATION (Unaudited)
    (In thousands)
     
     Three Months Ended December 31,
      2022   2021 
    Cash flows from operating activities:   
    Net income (loss)$3,647  $(19,810)
    Adjustments to reconcile net income (loss) to net cash flows from operating activities:  
    Depreciation and amortization 23,729   33,501 
    Changes in working capital items         (43,152)  (40,816)
    Other operating activities         (20,448)  (31)
    Net cash used in operating activities         (36,224)  (27,156)
        
    Cash flows from investing activities:   
    Capital expenditures (12,398)  (12,640)
    Acquisitions, net of cash acquired (1,759)  — 
    Other investing activities 4   171 
    Net cash used in investing activities (14,153)  (12,469)
        
    Cash flows from financing activities:   
    Net payments from long-term debt 32,722   72,345 
    Purchases of treasury stock (2,451)  (2,435)
    Dividends (7,003)  (6,824)
    Other financing activities (946)  (725)
    Net cash provided by financing activities 22,322   62,361 
        
    Effect of exchange rate changes on cash 1,757   (928)
        
    Net change in cash, cash equivalents and restricted cash$(26,298) $21,808 
            

    Reconciliations of Non-GAAP Financial Measures

    Included in this report are measures of financial performance that are not defined by GAAP, including, without limitation, adjusted EBITDA, adjusted net income and EPS, constant currency sales, constant currency adjusted EBITDA, net debt and net debt leverage ratio. The Company defines net debt leverage ratio as outstanding debt (net of cash) relative to adjusted EBITDA. The Company uses non-GAAP financial measures to assist in comparing its performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect the Company’s core operations including acquisition costs, ERP integration costs, strategic initiative and other charges (which includes non-recurring charges related to operational initiatives and exit activities), stock-based compensation and the non-service portion of pension and postretirement expense. Constant currency sales and constant currency adjusted EBITDA remove the impact of changes due to foreign exchange translation rates. To calculate sales and adjusted EBITDA on a constant currency basis, amounts for periods in the current fiscal year are translated into U.S. dollars using exchange rates applicable to the comparable periods of the prior fiscal year. Management believes that presenting non-GAAP financial measures is useful to investors because it (i) provides investors with meaningful supplemental information regarding financial performance by excluding certain items that management believes do not directly reflect the Company's core operations, (ii) permits investors to view performance using the same tools that management uses to budget, forecast, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating the Company’s results. The Company's calculations of its non-GAAP financial measures, however, may not be comparable to similarly titled measures reported by other companies. The Company believes that the presentation of these non-GAAP financial measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provided herein, provide investors with an additional understanding of the factors and trends affecting the Company’s business that could not be obtained absent these disclosures.

     
    ADJUSTED EBITDA RECONCILIATION (Unaudited)
    (In thousands)
     
     Three Months Ended
    December 31,
      2022   2021 
    Net income (loss)$3,647  $(19,810)
    Income tax provision (benefit) 1,312   (6,628)
    Income (loss) before income taxes 4,959   (26,438)
    Net loss attributable to noncontrolling interests 56   7 
    Interest expense 10,215   6,507 
    Depreciation and amortization * 23,729   33,501 
    RPA financing fees (1) 456   — 
    Acquisition costs (2)** 1,285   — 
    Strategic initiatives and other charges (3)** 1,760   3,823 
    Non-recurring / incremental coronavirus disease 2019 ("COVID-19") costs (4)*** —   690 
    Exchange losses related to highly inflationary accounting (5) 1,088   — 
    Defined benefit plan termination related items (6) 21   426 
    Stock-based compensation 4,334   3,709 
    Non-service pension and postretirement expense (7) 1,388   31,108 
    Total Adjusted EBITDA$49,291  $53,333 
    Adjusted EBITDA margin 11.0%  12.2%
        
    (1) Represents fees for receivables sold under the Company's RPA agreement.
    (2) Includes certain non-recurring costs associated with recent acquisition activities.
    (3) Includes certain non-recurring costs associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels, costs associated with global ERP system integration efforts, and asset write-downs associated with certain operations in Russia, net of recoveries.
    (4) Includes certain non-recurring direct incremental costs (such as costs for purchases of computer peripherals and devices to facilitate working-from-home, additional personal protective equipment and cleaning supplies and services, etc.) incurred in response to COVID-19. This amount does not include the impact of any lost sales or underutilization due to COVID-19.
    (5) Represents exchange losses associated with highly inflationary accounting related to the Company's Turkish subsidiaries.
    (6) Represents items associated with the termination of the Company's DB Plan, supplemental retirement plan and the defined benefit portion of the officers retirement restoration plan.
    (7) Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains and losses, curtailment gains and losses, and settlement gains and losses. These benefit cost components are excluded from adjusted EBITDA since they are primarily influenced by external market conditions that impact investment returns and interest (discount) rates. Curtailment gains and losses and settlement gains and losses are excluded from adjusted EBITDA since they generally result from certain non-recurring events, such as plan amendments to modify future benefits or settlements of plan obligations. The service cost and prior service cost components of pension and postretirement expense are included in the calculation of adjusted EBITDA, since they are considered to be a better reflection of the ongoing service-related costs of providing these benefits. Please note that GAAP pension and postretirement expense or the adjustment above are not necessarily indicative of the current or future cash flow requirements related to these employee benefit plans.

    * Depreciation and amortization was $5,574 and $5,810 for the Memorialization segment, $5,853 and $2,653 for the Industrial Technologies segment, $11,060 and $23,725 for the SGK Brand Solutions segment, and $1,242 and $1,313 for Corporate and Non-Operating, for the three months ended December 31, 2022 and 2021, respectively.

    ** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $378 and $671 for the Memorialization segment, $937 and $32 for the Industrial Technologies segment, $521 and $1,229 for the SGK Brand Solutions segment, and $1,209 and $1,891 for Corporate and Non-Operating, for the three months ended December 31, 2022 and 2021, respectively.

    *** Non-recurring/incremental COVID-19 costs were $464 for the Memorialization segment, $4 for the Industrial Technologies segment, $220 for the SGK Brand Solutions segment, and $2 for Corporate and Non-Operating, for the three months ended December 31, 2021.

     
    ADJUSTED NET INCOME AND EPS RECONCILIATION (Unaudited)
    (In thousands, except per share data)
     
     Three Months Ended
    December 31,
      2022  2021 
      per share  per share
    Net income (loss) attributable to Matthews$3,703$0.12 $(19,803)$(0.62)
    Acquisition related items (1) 1,062 0.03  —  — 
    Strategic initiatives and other charges (2) 1,771 0.06  3,009  0.08 
    Non-recurring / incremental COVID-19 costs (3) — —  536  0.02 
    Exchange losses related to highly inflationary accounting (4) 1,088 0.04  —  — 
    Defined benefit plan termination related items (5) 16 —  319  0.01 
    Non-service pension and postretirement expense (6) 1,041 0.03  23,331  0.74 
    Amortization 7,757 0.25  16,160  0.51 
    Adjusted net income$16,438$0.53 $23,552 $0.74 
          
    Note: Adjustments to net income for non-GAAP reconciling items were calculated using an income tax rate of 22.1% for the three months ended December 31, 2022, and 24.7% for the three months ended December 31, 2021.
    (1) Includes certain non-recurring costs associated with recent acquisition activities.
    (2) Includes certain non-recurring costs associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels, costs associated with global ERP system integration efforts, and asset write-downs associated with certain operations in Russia, net of recoveries.
    (3) Includes certain non-recurring direct incremental costs (such as costs for purchases of computer peripherals and devices to facilitate working-from-home, additional personal protective equipment and cleaning supplies and services, etc.) incurred in response to COVID-19. This amount does not include the impact of any lost sales or underutilization due to COVID-19.
    (4) Represents exchange losses associated with highly inflationary accounting related to the Company's Turkish subsidiaries.
    (5) Represents items associated with the termination of the Company's DB Plan, supplemental retirement plan and the defined benefit portion of the officers retirement restoration plan.
    (6) Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains and losses, curtailment gains and losses, and settlement gains and losses. These benefit cost components are excluded from adjusted EBITDA since they are primarily influenced by external market conditions that impact investment returns and interest (discount) rates. Curtailment gains and losses and settlement gains and losses are excluded from adjusted EBITDA since they generally result from certain non-recurring events, such as plan amendments to modify future benefits or settlements of plan obligations. The service cost and prior service cost components of pension and postretirement expense are included in the calculation of adjusted EBITDA, since they are considered to be a better reflection of the ongoing service-related costs of providing these benefits. Please note that GAAP pension and postretirement expense or the adjustment above are not necessarily indicative of the current or future cash flow requirements related to these employee benefit plans.


     
    CONSTANT CURRENCY SALES AND ADJUSTED EBITDA RECONCILIATION (Unaudited)
    (In thousands)
     
     Memorialization Industrial
    Technologies    		 SGK Brand
    Solutions    		 Corporate and
    Non-Operating    		 Consolidated
    Reported sales for the quarter ended December 31, 2022$206,502  $109,143 $133,595 $—  $449,240
    Changes in foreign exchange translation rates 1,481   4,821  10,729  —   17,031
    Constant currency sales for the quarter ended December 31, 2022$207,983  $113,964 $144,324 $—  $466,271


    Reported adjusted EBITDA for the quarter ended
    December 31, 2022    		$39,137  $12,202 $12,232 $(14,280) $49,291
    Changes in foreign exchange translation rates (138)  1,111  983  (323)  1,633
    Constant currency adjusted EBITDA for the quarter ended December 31, 2022$38,999  $13,313 $13,215 $(14,603) $50,924


     
    NET DEBT AND NET DEBT LEVERAGE RATIO RECONCILIATION (Unaudited)
    (Dollars in thousands)
     
     December 31, 2022  September 30, 2022
         
    Long-term debt, current maturities$2,977   $3,277 
    Long-term debt 834,127    795,291 
    Total debt 837,104    798,568 
         
    Less: Cash and cash equivalents (42,718)   (69,016)
         
    Net Debt$794,386   $729,552 
         
    Adjusted EBITDA$206,366   $210,408 
         
    Net Debt Leverage Ratio 3.8    3.5 


    Matthews International Corporation
    Corporate Office
    Two NorthShore Center
    Pittsburgh, PA  15212-5851
    Phone: (412) 442-8200
     Contact:Steven F. Nicola
    Chief Financial Officer
    and Secretary
    		William D. Wilson
    Senior Director,
    Corporate Development

     


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