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MATW Matthews International

Participants
Bill Wilson IR
Joe Bartolacci CEO
Steve Nicola CFO
Daniel Moore CJS Securities
Liam Burke B. Riley
Austin Nelson AIG
Call transcript
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Operator

Greetings, and welcome to the Matthews International Corporation Second Quarter Fiscal 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bill Wilson. Thank you, Bill.

You may begin.

Bill Wilson

Paul. you, Thank and Fiscal everyone, the International Matthews Good XXXX welcome Earnings Quarter Year Conference Second morning, to Call. This is Corporate of Bill Wilson, Senior Director Development. Officer; are and Chief today Bartolacci, Officer. and Executive Financial us our Steve With Nicola, Joe Chief President

in remind the for Before earnings that also our website, in call release like last website. section accessed our our the on can you Investors we the posted night. would of start, www.matw.com, I Investors to section was The be presentation

statements in made company's forward-looking Factors with XX-K Form with company's this Safe As provisions discussed being any periodic a cause other Private results and XXXX. connection discussion are from the those Annual Act today pursuant Harbor Report the SEC. reminder, differ that the filings could of the are on to to in Securities set of the Litigation forth

discussing with materials will our you metrics In our included connection In disclosures be Steve. presentation statements read the in information, the to today's website. reconciliation disclaimer on please encourage read consider tables call and addition, non-GAAP I'll carefully as turn and non-GAAP now any you over metrics. to And financial located financial we forward-looking these and

Steve Nicola

Slide Bill. X. Thank turn Please Good you, morning. to

income per $XXX.X net and company net a loss the for for As or quarter sales a to GAAP and to share year-to-date company new share a net or million, net XX, loss a consolidated $XX.X million, on million, the XXXX and ended $XX.X On of million, our GAAP of a or Key of million, compared company, of and sales release million per income represented to of March XXXX basis financial an year. the last same share reported the million consolidated GAAP provided the March quarter quarter in basis of yesterday, per or per $XXX.X GAAP increase year. the sales included, the $XXX.X of a $X.XX sales reported quarterly on last earnings XX, $XXX.X fiscal consolidated year. $XXX.X million of of million last highlights $X sales second share XX.X% of of as $X.XX $X.X record quarter million, basis, first, compared same the $X.XX $XX.X compared XXXX company's for for or $X.XX

Second, consolidated $XX.X $XX.X ended was million XX, year-over-year million year, a adjusted for EBITDA representing the quarter compared to XXXX, of last increase March XX%.

growth. share strong was continued second per flow earnings generation adjusted challenging for XXXX share second $X.XX cash per compared quarter, Third, representing XXXX Fourth, $X.XX XX% with fiscal company emphasize fiscal as the in environment. again this quarter for to the we reported cash the operating

XXXX, to for last result, X ended company million of generated $XX.X cash operations $XX March the from the flow million a months compared year. As XX,

Lastly, company reduced and during the debt again the its ratio. leverage outstanding quarter, recent

During the net a million. by net current quarter, of our million. On the company $XX.X basis, declined $XX lowered its debt outstanding cash debt

remainder March and, all XXXX expect by outstanding ongoing commercial second XX, fiscal at company we remained in year. our XXXX, COVID-XX, of pandemic net varying reduced With to XXXX and the quarter. to Since a calendar XXXX of year September as experience into These respect declined leverage $XXX.X to X.X X.X during level our XX, a continued continued XXXX, impacts compared XX, difficult its segments result, March at As impacts has project; impacts million. some the X.X the to debt ago. to ratio the has

intangible year share acceleration the cost a $X.XX impact net company per a and the the last or compared basis, GAAP ago fiscal were expense a per second on quarter million, share $X.XX On per loss share related of ended COVID-XX The last GAAP basis, $X.XX to $X.XX with the of goodwill per or year share earnings ago. share XX, loss included per for a Solutions $X.XX per Consolidated million, in per was As to non-GAAP months on per our primarily expense quarter $X.XX of the I year. per amortization a earlier, $XX.X reported compared of $XX.X $X.XX in to or costs. Brand second of to for quarter current initiatives share charges intangible the certain $X.XX share basis of XXXX segment share per million, Intangible amortization or the for for noted million, both included $XX.X earnings Earnings ago. amortization fiscal adjusted and a compared X quarters $XX.X share $X.XX charge March reduction a intangible compared connection the a XXXX the year from for was share. assets amortization, XXXX year. SGK

income increases XX, earnings March were to year The expense. ended non-GAAP net Our the depreciation expense, and months for increase before for interest compared an primarily $X.XX was XX%. lower and of second fiscal adjusted higher share million million Adjusted other XXXX and a reflected ago, XXXX represents X which EBITDA to amortization representing income the ago. quarter interest $XX.X $X.XX $XX.X taxes, per share adjustments, EBITDA, a per compared year

March X a Please EBITDA compared from lower reflected segment, XX, improvements sales, travel-related share a was particularly quarter Investment savings months the for ago. consolidated impacts of March of increase cost primarily was For realized million XXXX, $X.X adjusted loss reconciliations earnings adjusted the ago, addition the expenses. the the reduction EBITDA per in the program million and ended X compared for in same release. of year an $XX.X company's non-GAAP higher our of adjusted year million to months to earnings to XX, XXXX, representing and see in a The XX%. $XXX,XXX ended income $XXX.X memorialization the

$XX.X of benefit respectively, the initial million $X.X For deductions Investment March of income income to million, periods for Investment the periods reflected X primarily impacts COVID-XX. XX Other of ago. million months primarily ago compared XXXX, to for million, pension lower a company's current debt investment XXXX for last million, for market include the $X.X $X.X pretax quarter costs. to and and same the trust the the March year the reflects year. March year million and income and investments represented XX, $X X year. non-service reflecting same levels $X.X income net ended Other expense year post-retirement the and deductions months million respectively and income $XXX,XXX value respectively, the XX, respectively, million, compared and reductions was XX, XXXX, compared income ago, at $X.X and a million average held plans. to the ended changes ended $X.X the in and for quarter were $XX X months Interest March a of for certain of in portion

a fees million losses For the of certain consolidated X million compared to year. of respectively, principally and and gains versus the benefit ago. deductions taxes XX, quarter $XXX,XXX were $X.X Consolidated the cash on were and March reflected ended foreign-denominated compared compared to the of million million debt to the an March months respectively, $X.X income taxes and and the year-over-year same the XXXX impact $X.X $X.X The income $XX.X the months expense $X of XXXX, a also benefit year-to-date Other for periods for from current income non-service of pretax mainly for an periods, last $XX.X XX, portion losses, year. last a year changes inter-company current pretax goodwill income ended banking-related balances. X was currency year. include the The periods company's million, pension company's million, for the cost charge of million post-retirement expense and and last resulting

sales XXXX closure included of turn tax included operating foreign to second several million to quarter were from X begin for a the XXXX $XXX.X segment Memorialization fiscal the results. review fiscal while discrete related fiscal of ago. tax primarily audits. to year Additionally, XXXX benefits million Slide to tax expenses our $XXX.X a discrete compared losses, Please segment

XXXX, increased to ago. caskets sales the a months were year-to-date compared the sales $XXX.X of to of and rates. increases million quarter the due resulted on memorialization $XXX.X For March X death XX, from mainly pandemic million segment year The impact ended

expenses, and offset which increased - an to to significantly quarter, The $XXX expense. by the ago. was were and XXXX equipment, to quarter year-to-date of sales for of products is in direct acquisition EBITDA adjusted year on also compared Changes the for primarily $XX.X higher quarter had Please increases currency on $XXX.X year-over-year quarter to X. products $XX.X addition, recent segment's the impacts was million respectively, for of during $XX.X business compared sales, rates initiatives a ended March EBITDA to million cemetery $X.X expected sales turn remainder material Solutions productivity Slide and million quarter. current ago. million current the travel-related an for second of to increased. $XX.X segment lumber impact costs year. the foreign Memorialization completed performance-based also year. the exchange segment benefits cemetery of SGK unfavorable cremation ago. The small - favorable In XXXX memorial XX, memorialization-adjusted lower last during the a materials million the million, Year-to-date, the Brand $X.X have compared fiscal higher Sales year reflected and company a mausoleums compensation a and bronze, year steel Costs main rose and year million partially for the million compared

Changes sales fiscal product to primarily with million exchange of last segment from increased decline our million these EBITDA identification by to segment $XXX,XXX as million higher efforts. the compared For sales. million realized for warehouse result Please working X. was and $X.X current our ended X. million fiscal expense reduction products to XXXX year-over-year respectively, sales which segment second turn for sales significant for attributable year. much Industrial months last million in year-to-date same quarter last orders $XX.X periods favorable XXXX product last segment Technology XX, lower offset and the during continued ago. fiscal for Slide in sales on $XXX.X EBITDA quarter million, $XX.X merchandising compared cost EBITDA rates lower Cash of ended the for respectively, impact XX, Industrial decreases impacts Brand million million due months quarter attributable recently. $XX.X also costs, and X currency were million retail-based Year-to-date, to million and of a for declines offset XXXX, energy year. product million a partially for compared segment's was the year $X.X of increased operating The impact March the Incoming The adjusted million capital EBITDA productivity sales the in and year. The million savings EBITDA an for the a to travel-related benefits the recent sales, SGK offset to quarter the primarily current and reflected adjusted unfavorable $X.X on for the recent from the to year-to-date expenses. lower lower Fiscal March $XX.X continued the and development reflected million resulted and of impacts with million had partially product year initiatives of was year-to-date Technologies year. product Solutions quarter year-to-date XXXX, to the engineered solutions to year last in other with higher reduction segment's the orders the sales year activities from the operating year. $X.X compared first and quarter year. ago, adjusted to primarily primarily Sales XXXX, Adjusted management a Saueressig were for compared was and performance-based $XX segment's the impact ago. automation cost travel-related $XX.X sales segment compared which initiatives Please purpose-built subsidiary. Despite The to primarily The COVID-XX. currency segment's build the and to increase was increase lower reported turn the adjusted decreases compared warehouse a quarter sales, expenses. were reflected company's were segment $XX.X storage sales, year $XX sales The Higher last ago. of results changes $X.X compared The the current segment's the $XXX.X flow compared by compensation million year-to-date business identification in in a declines. $XX.X with increase automation the was of favorable of X million from Changes pandemic. to compared $XX.X $XX.X Slide year of the identification $XX.X million, had were foreign was ago. engineered rates segment lower The primarily compared

strong $XXX.X flow, outstanding outstanding this by debt million. of result quarter reduced its company the In The our facility was a cash less $XX.X XX the at during in net leverage with XX, last As represents debt, the by million. outstanding company million debt Outstanding on which its credit further XXXX, second debt $XXX.X million. domestic $XXX.X debt. cash, reduced is months, at covenant net based debt ratio the March

at to March net X.X compared XX, XXXX. Approximately Our XXXX. ratio XX, September to were X.X million X.X at declined at at March and XXXX debt XX, XX, March shares XX.X outstanding leverage XXXX

debt share as of company on reduction. repurchase During XXX,XXX approximately the quarter, under remained authorization the remaining the primarily current only shares program. recent The its purchased shares [has] under focused we program company X,XXX

this a per is share May of will dividend declared to the of and dividend financial our review, May comment now concludes company's common the operations. $X.XXX record company's XXXX. stock. Finally, Joe This week the XX, on Board stockholders XXXX, The payable on XX,

Joe Bartolacci

with the Again, of again, our deliver while in better businesses Good brand, Products driven Solutions balance perspective, this were, continued challenged. very year businesses from our Environmental prior very to delivered overall prior are our From memorialization and business, quarters, Consistent where an Steve. morning. reported with steady our businesses the Home for Funeral you, results. segment of we sales results, performance except our retail-based results. Thank our strong quarter, exceptional business by pleased each

begin we North third seeing in as are importantly, we that we our More pandemic to begin quarter, believe subside that America.

difficult. product of April the As that start are we segment Funeral sales pandemic, will in the Home this results have now below comparable lapped make tracking and prior in year,

be been seeing confidence at businesses Cemetery orders higher projects, as with as However, product Warehouse second very recently. give we products strong. ramp together automation that cremation and saw we balance are rates intake hoped, orders, we additive. in orders to identification consumables. continued other increasing the related be our should have order business have year. strong up Several equipment incineration new the And ended the in us of very orders quarter, we

energy by to It's we had order tobacco significant as overall more take Finally, what story, business being our only of note, opportunity order is for results. to our In us changes. European storage in the Saueressig occurring have years which to will to business orders as had will expected, are regulatory in important to our of the we hold brand strong make driven intake partners, started begins return of our subsidiary, business numerous industry significant hope be the and business very hope as have we come. however, discussions this a with half intake we that extensive contributor a

bipolar rotary supporting Although lithium-based beginning focused processing and energy on hydrogen to principally application of critical know-how component of has business fuel products, batteries. our stacks, extend plates cell to are our storage we a

talk hope innovation this is quarters more early, the to Although about we in come. to it

we've you improved businesses tell, throughout the can quarter last created for market this period, and been during of the and this pandemic. during busy As our has position Many opportunities have growth. very

of year All and balance the beyond. bodes fiscal this our well for of

solutions. brand that of As the portion noted is of to be continues our SGK challenged the retail business portion one above,

to retailers accounts are of has retail prepare Our back-to-school will packaging pandemic. stable relatively are during seasons, that this be our remained Nevertheless, expectations returns and the we and to quarter, capitalize on business for normal well-positioned in that, hopefully investment and America gained opportunity. return, new marketing more normal, North core as more will and Christmas as again what

As cash operating us to the and good again continued reduce allowed have quarter. performance you seen, have gross management this strong our debt

better our over to the And will debt of work. us our culture reduced Xx $XXX forward. we to company, believe a approach cash months, other we by embedded We have organization that make capital we XX coverage, a into During target strong that put look opportunities going soon we for last gross have million. conversion will of debt as the

of of arise as Regarding XXXX, can the are balance control which our impact cautious remain our still optimistic our but outside results. events about situation, can we

should by year. tell least businesses million. of has very $XXX given the EBITDA our are our performance can orders a that my comments, you each the order Therefore, be to deliver As our expect earlier we and date our confident strong of to year results intake, we strength full at that

thank questions for up it open let's you. Now,

Operator

first Daniel [Operator comes Our Instructions] question Moore Securities. CJS from with

Daniel Moore

we back if meaningful of peak Start pushed that able this 'XX? with you season, likely any or holiday be revenue see is calendar your curious benefit to expect do shipping Just into warehouse to year's get out get should automation. facilities? customers' to ahead When to

Joe Bartolacci

to dollar of I up get think year, We're opened next of don't to a but haven't is out like expect Canada matter fact borders. both. X we the the results compared their it's expecting strong combination last The places months. last every during

we'd months, bodes expect during we're We going well, us foreign not what this our to, trying But year. understand orders, goes for and well significant helps a go mean, have yet. get able of issue the into to be forward. XXXX forecasting. us, to we us Dan. we that It like installations and for it they're deliver to to capacity well, into for as should there's to I next out several build fiscal Frankly, that the quantity get get some to as that

Daniel Moore

and I industrial fair in higher-margin increased you general a sales, of optimism ID but product in And already, pickup commented we're to the bit hearing ask, was the front. then, going it on

there? color additional any provide just can you if maybe So

Joe Bartolacci

in largest of is identification helpful very indicative well printers to of economy the not a business, the bodes and is reflective seeing, but on very, PID, see. that [inks], good at same actual bottom product saw line, [ink]. economy. part are sell, ramping also That our consumable our product, the product what's and intake the is going we solutions the of which up, we the general are pretty We Sure. of that we that identification rate

capital might expect, of add you're to capital That's you ramped As get release people first, seeing expenditures. and up begin a additional more product consumables then and expenditure.

also the to them year We beyond. and be for contributory that during to year a balance this of better expect

Daniel Moore

remind the then, And momentum you obviously energy with on just in how us arena? competing and building. that maybe storage seeing who Can evolving you're market's update us

Joe Bartolacci

evolving rapidly. is very, very market very, the So

in expect an of these that's NDA, unique is somewhat mean, is with and dealing Our NDA the with. unique tell evaluate market a begins I got the they've not lithium machine. we to solution would remain you go today. we I through position their there. a or a start determine whether lab of that testing opportunities A that we're we process formulation call don't machine lab viable in would lot our an and a mix you The only potential to of to But machine which head for from years customers what clients have solution. out really

machines, sold for ongoing we've on quite quite signed of production few a and what have was call We produced being lab our a we top few that machines. revenue NDAs

us, see we're to going pretty some confident position we're better, change will start So only And that get forward. our going think. to I for significant

Daniel Moore

Last me, memorialization. one for

what sizing are experienced for Just expectations kind the correctly. in quarter products of sure Just to funeral it we can home relative March? about make want you volumes you for to talk your

Joe Bartolacci

Yes. comes probably some Dan, SGK. or warehouse know, unknown. But got biggest caskets, contracts in That X-day backlog. comes or I ability energy PID forecasting a of it it's or large to to We've have when lot mean, it when a visibility. as the is you almost we

visibility. you it's of have like So lot a not

at significant point a know those rate we've don't back in We predictions But reductions, that's this are best a guess. I are for reductions more Our to time precipitous that expect sure. fall-off. now, We historically. right seen but normal don't

up we for rates be is last of see And cemetery our trailing a from shortfall. we tell It it my less, seeing, we much expect, at commentary, the did have also last from make from Our we're could of increase the said the We're anticipating when the lot hopefully more, but one what that $XXX I million anticipates Dan, that. death decline. heard in to not enough pandemic. be could XX occurred orders a you that elsewhere XX least, guidance, looking thing as you. forward, over a months, products can months as throughout in decline

We are now. that right seeing increase

Operator

Our next question comes from Liam Burke with Riley. B.

Liam Burke

that deferred sometime clear sales it, marker pretty will a your it's in with, or Could us and margin sense year. to mean, product this start give as trade-off memorialization I you the call sales casket Joe, the pickup cremation? normalizing

Joe Bartolacci

I make Well, let sure understand. me

derived the question? pandemic? margin You're differential memorialization incremental from sales between asking the Is is the me what the that

Liam Burke

very No. volumes That's What nice is margins caskets. the I EBITDA in was driven higher second suggesting generated quarter. of by you've

Now, sales, normalize, a starting to casket seeing begin sales as pickup in you're and the side. cremation product deferred to systems those we're cemetery on revenue build

So, the that trade-off margin mix I product mean, shifts? as generally, just

Joe Bartolacci

with Yes. at funeral X side our structure. so the businesses; cost the on nice The is fixed on businesses, the running take we're fixed cost interesting we margins of through the the of business, that values P&L when home thing, that had Liam, incremental because heavy a we that, look

so so should be going sell cremation to stone; through cemetery percentages of aware, our occur dollars to much I with fairly will, talking price same we that to margins. to seeing business. margin Commodities on you're a going going even the cemetery bronze are than More similar. are, better our might have expect, about. going as will you coming hit marker mean, commodities stone We margin on a you that but, generally, we the and to going volumes suggest higher not be to are us, forward, just day, products Liam, the the because, same a casket's though. everybody's but see for higher than going end equipment in are dynamics at I'm

So than we're different no else. anybody

Liam Burke

sales as product looking less much recently. Or a reporting in at Is backlog good sales, X you're as there? look than I numbers about? timeframe at cemetery coming the X-year if that originally you are you the years still that talked And deferred

Joe Bartolacci

the have good better a to would because set it's get that been seeing is before of reflected that pretty that are ramp cemetery-related our of but incremental period for hope a it us estimate to business summers, all an can than not million some if going of $XX times of would could Generally, associated quarter P&L. get it, or there. large in has that, part tell Memorial in X markers I I We're will revenue will but of Day, I with that set. we So products. all deferred, years, of be a be our in better revenue that the expect, this up winter total sets not in, be because within you general, now. all, worth starting but most,

Liam Burke

And on just one more SGK.

that or said the CPG, business, You the consumer is packaging stable.

do of You're the that into any us expect of half adding contribution you're expecting private if you year? looking a growth brands? And now out sense business accounts. give second A, of, you the Could from

Joe Bartolacci

that's X-part So question. a

things pandemic. lot COVID-related across mean, products as sanitation revenue innovation world. of amount the nature you The of they They've the a and has gone protection out to fair that, generated of for first during retail part a that have to us is of around I and let's see and seeing the today shelves, CPG happens we're the understand what through what CPGs side, on do. what to wait of look

a still business. retail to I'm As up, downtrodden business, I environment, we we into of where hope helping to have that expect also our that work the changing supplier's the started slow names up what private well be And label seen get on pick got say our line. If some them business be Packaging's accounts, get you display to on of is new CPGs a in Right label new the to as well. Their private about a I be talking ramping recognize different shelf. with to all to focus many see retail, in-store a been the retail. to product accounts out not the they in have It's onto is label, the part they've our on is as XX out to they done when all the initiatives. won shelf. that. going for But really, in have supply whole package. would are But has the new larger now, as got said biggest if just months, keeping to they're we Difficult come product issue significant last In trying roll line. their private chain. us started phone,

additive. it expect So we to be

Operator

next Nelson Our Austin question comes from with AIG.

Austin Nelson

had just I a capital relatively question. structure simple

have, Are you considering to a options looking would down paid where be pre-payable of debt to continue past XX for a fully there? to you over seem the pay this And on You've down prefer since to relatively you coupon structure? point, the lot you that year. months. you towards sit high And at cap steps down debt, have of the end

Steve Nicola

correct? say coupon, the so high you're yes, bonds, you Austin, So when our referencing

Austin Nelson

everything Yes, is the bond callable. right? is revolver, the on else I mean,

Steve Nicola

Understood. Yes.

bond terms of in same pre-payable that, anytime to of debt. But do attention we're We today. debt something rate the on as equation the par it the short that at question time, are looking structure to bonds It's trading but balanced certainly the a soon. have It does I portion rate, it's soon. where carry our some a includes now, is, also certainly with answer at permit. to But rate interest it call includes do right permanent sheet, our know higher balancing risk, interest a to not not rate, only But an that your right but that pay to well. is. it's balance debt the we're So that not looking debt. calling we us, form above of it now, is lower continue

Operator

There are to time. to further questions over for this at like back Wilson comments. no Bill I closing floor would turn the

Bill Wilson

Matthews. your Paul, today for us joining you and you, interest Thank and in thank

me contact or the For company results, our your the additional of day. information visit rest and Enjoy website. about financial please our

Operator

This concludes today's conference.

participation. time. wonderful may your a disconnect lines your Thank at this day. you for You Have