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MATW Matthews International

Participants
Bill Wilson Senior Director of Finance, Corporate Development
Steve Nicola Chief Financial Officer
Joe Bartolacci President & Chief Executive Officer
Daniel Moore CJS Securities
Liam Burke B. Riley
David Niewood Phoenix
Scott Blumenthal Emerald Advisers
Chris McGinnis Sidoti & Company
Call transcript
Operator

Greetings, and welcome to the Matthews International Corporation's Third Quarter Fiscal 2021 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. I would now like to turn the conference over to your host, Bill Wilson, Senior Director of Finance, Corporate Development. Please go ahead.

Bill Wilson

Hi, thank you Brock, and good morning, everyone and welcome to the Matthews International third quarter fiscal year 2021 earnings conference call. This is Bill Wilson, Senior Director of Corporate Development. With us today are Joe Bartolacci President and Chief Executive Officer; and Steve Nicola, our Chief Financial Officer.

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

As a reminder, any forward-looking statements in connection with this discussion are being made pursuant to the safe harbor provisions of the Private Securities Litigation 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. And now, I will turn the call over to Steve.

Steve Nicola

Thank you Bill. Good morning. I'll start with slide 4.

As provided in our earnings release yesterday, the company reported consolidated sales of $428.4 million and net income on a GAAP basis of $3.4 million or $0.10 per share for the quarter ended June 30, 2021, compared to sales of $359.4 million and net income on a GAAP basis of $2.3 million or $0.07 per share last year. On a year-to-date basis, the company reported consolidated sales of $1.23 billion and net income on a GAAP basis of $6.6 million or $0.21 per share as of June 30, 2021, compared to sales of $1.1 billion and a GAAP net loss of $94.6 million or $3.04 per share last year. The GAAP net loss a year ago primarily reflected the impact of a goodwill write-down. The key financial highlights for the fiscal 2021 third quarter included, first the company's consolidated sales of $428.4 million established another new quarterly record for the company and represented an increase of $69 million or 19.2% compared to a year ago.

Second, consolidated adjusted EBITDA for the quarter ended June 30, 2021 was $60.0 million compared to $49.4 million last year, representing a year-over-year increase of 21.5%.

Third, adjusted earnings per share for the fiscal 2021 third quarter was $0.91 per share compared with $0.80 for the fiscal 2020 third quarter, representing growth of approximately 14%.

Lastly, during the recent quarter, the company again reduced its net debt leverage ratio. At June 30, 2021 our net debt leverage ratio measured based on net debt relative to the last 12 months adjusted EBITDA declined to 3.1 from 3.2 at March 31, 2021 and 3.9 at September 30 2020.

As I noted earlier on a GAAP basis, the company reported earnings per share of $0.10 for the current quarter compared to $0.07 per share last year. Earnings per share on a GAAP basis for both quarters included the impact of intangible amortization, primarily from the acceleration of the amortization of certain intangible assets in the SGK Brand Solutions segment and charges in connection with our cost reduction initiatives and COVID-19 related costs. Consolidated intangible amortization expense was $23 million or $0.53 per share for the fiscal 2021 third quarter, compared to $17.8 million or $0.43 per share a year ago. Intangible amortization expense for the nine months ended June 30, 2021 was $61.2 million or $1.41 per share compared to $53.6 million or $1.29 per share last year. On a non-GAAP adjusted basis, earnings for the fiscal 2021 third quarter were $0.91 per share, compared to $0.80 per share a year ago. Non-GAAP earnings for the nine months ended June 30, 2021 were $2.48 per share compared to $1.90 per share a year ago. The increases primarily reflected higher adjusted EBITDA and lower interest expense. Adjusted EBITDA, which represents net income before interest expense, income taxes, depreciation and amortization and other adjustments was $60 million for the fiscal 2021 third quarter, compared to $49.4 million a year ago, representing an increase of 21.5%.

For the nine months ended June 30 2021, adjusted EBITDA was $175.7 million compared to $139.0 million a year ago, representing an increase of 26.4%. The improvements primarily reflected the impacts of higher consolidated sales in addition to realized savings from the company's cost reduction programs. These increases were partially offset by higher material and labor costs. Please see the reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share in our earnings release. Investment income for the three months ended June 30, 2021 was $959,000 compared to $1.3 million for the same quarter a year ago.

For the nine months ended June 30, 2021, investment income was $3 million compared to $1.4 million last year. Prior year investment income through June 30th reflected some of the initial market impacts of COVID-19. Investment income primarily reflects the changes in the value of investments held in trust for certain of the company's benefit plans. Interest expense for the quarter and nine months ended June 30, 2021 declined to $6.7 million and $21.7 million, respectively, compared to $8.1 million and $26.9 million respectively for the same periods a year ago primarily reflecting lower average debt levels and lower interest rates for the current year. Other income and deductions net for the quarter and nine months ended June 30, 2021 represented reductions to pre-tax income of $2.4 million and $6.8 million, respectively compared to $2.8 million and $7.4 million, respectively for the same periods a year ago. Other income and deductions include the non-service portion of pension and post-retirement costs.

For the current quarter and year-to-date periods, the non-service portion of pension and post-retirement cost was $1.9 million and $5.7 million, respectively compared to $2.2 million and $6.7 million, respectively for the same periods last year. Other income and deductions also include, banking related fees and the impact of currency gains and losses on certain intercompany debt and foreign denominated cash balances. The company's consolidated income taxes for the three months ended June 30, 2021 represented a benefit of $2.3 million compared to a benefit of $6.2 million a year ago. Consolidated income taxes for the nine months ended June 30, 2021 were an expense of $2.6 million compared to a benefit of $22.7 million last year. The year-over-year changes principally reflected the company's pre-tax income for the current periods versus the year-to-date pre-tax losses resulting mainly from the goodwill charge last year.

Additionally, fiscal 2021 included discrete tax expenses primarily related to foreign losses while fiscal 2020 included discrete tax benefits from the closure of certain tax audits. Please turn to Slide five, to begin a review of our segment results. Memorialization segment sales for the fiscal 2021 third quarter were $184.3 million compared to $162.1 million, a year ago representing an increase of $22.2 million or 13.7%. The increase was primarily attributable to higher sales of cemetery memorial products and cremation equipment and improved price realization.

Third quarter casket unit volume, was lower than a year ago as expected resulting from the decrease in US deaths reflecting the declining impact of COVID.

For the nine months ended June 30 2021, memorialization segment sales were $573.1 million compared to $478.3 million a year ago. The year-to-date increase resulted mainly from increased sales of caskets, cemetery memorial products and cremation equipment. The company also completed an acquisition of a small cemetery products business during the fiscal 2021 second quarter. Changes in foreign currency exchange rates had favorable impacts of $1.7 million and $4 million, respectively on current quarter and year-to-date sales compared to a year ago. Memorialization segment adjusted EBITDA for the fiscal 2021 third quarter, was $36.4 million compared to $37.7 million a year ago. The favorable effect of higher sales was offset by the unfavorable impacts of: higher commodity costs mainly steel, lumber and bronze; lower margin projects in our UK cremation and incineration equipment business; and increased labor and freight costs during the current quarter. Year to date memorialization adjusted EBITDA was $132.1 million, for the current year compared to $103 million last year. The increase primarily reflected the benefits of higher sales and productivity initiatives offset partially by higher material costs lower margin UK projects and increased labor and freight costs. Costs for the segment's primary direct materials continued to increase during the recent quarter, which is expected to have an unfavorable impact into next fiscal year. Please turn to Slide 6. Sales for the SGK Brand Solutions segment were $199.7 million for the quarter ended June 30 2021 compared to $165.8 million a year ago representing an increase of $33.9 million or 20.5%. The increase primarily reflected higher sales for the segment's engineered products business principally energy solutions and an increase in the segment's core brand sales particularly in the Europe and Asia Pacific markets.

In addition, the segment reported modestly higher revenues in its retail-based businesses, which we believe are indicative of a recovery in these markets.

As you will recall the segment's retail-based businesses, have been significantly impacted by COVID-19.

For the first nine months of fiscal 2021 the segment sales were $538.9 million compared to $513.5 million last year. Changes in foreign currency rates had favorable impacts of $10.6 million and $21 million, respectively on the segment sales compared with the same quarter and year-to-date periods last year. Fiscal 2021 third quarter adjusted EBITDA for the SGK Brand Solutions segment was $33.3 million compared to $20.8 million a year ago. The increase primarily reflected the impact of higher sales and realized savings from the segment's recent cost structure initiatives. The segment's year-to-date adjusted EBITDA was $75.4 million, for the current fiscal year compared to $61.8 million last year. Please turn to Slide 7. Sales for the Industrial Technologies segment were $44.3 million for the quarter ended June 30 2021 compared to $31.5 million a year ago representing an increase of $12.8 million or 41%. Year to date the segment sales were $120.2 million for fiscal 2021 compared to $107.3 million last year representing an increase of $12.9 million or 12.1%. The segment sales increases for the quarter and year-to-date periods resulted from higher sales for both the warehouse automation and product identification businesses.

Additionally, incoming orders for these businesses continued to be strong. Changes in currency rates had favorable impacts of $938,000 and $2.4 million, respectively on the segment's quarter and year-to-date sales compared with last year. Adjusted EBITDA for the Industrial Technologies segment for the fiscal 2021 third quarter, was $5.7 million compared with $4.7 million a year ago. The increase primarily reflected the impact of higher sales for the quarter, which was partially offset by an unfavorable change in sales mix lower margin warehouse sales, higher labor costs and an increase in product development costs. The segment's year-to-date adjusted EBITDA was $15.2 million, which was relatively consistent with a year ago. Please turn to Slide 8. Cash flow from operating activities for the nine months ended June 30 2021 was $106.9 million compared to $123.6 million last year. Operating cash flow for the current quarter was impacted by several factors including a discretionary cash contribution of $15 million to the company's pension plan, an increase in accounts receivable primarily reflecting the company's record third quarter sales, and an increase in inventories due to higher commodity costs.

In addition the company made a payment of $8.4 million during the recent quarter related to FICA taxes deferred from calendar 2020 under federal COVID-19 relief regulations. Outstanding debt was $792.5 million at June 30, 2021 with net debt which represents outstanding debt less cash at $746.3 million. The leverage ratio covenant in our domestic credit facility is based on net debt.

During the current quarter our net debt leverage ratio declined to 3.1 at June 30, 2021 compared to 3.2 at March 31, 2021 and 3.9 at September 30, 2020. Approximately 31.6 million shares were outstanding at June 30 2021.

During the recent quarter, the company purchased approximately 46,000 shares under its share repurchase program. At June, 30 2021 the company had remaining authorization of approximately 325,000 shares under the program.

As a result, the Board this week approved an authorization of 2.5 million additional shares for the program.

Finally, the Board this week declared a dividend of $0.215 per share on the company's common stock. The dividend is payable August 23, 2021 to stockholders of record August 9, 2021. This concludes the financial review and Joe will now comment on our operations.

Joe Bartolacci

Thank you, Steve. Good morning.

As you might expect, we are very pleased with our record-setting results for the quarter. Each of our segments delivered revenue growth during the quarter and our consolidated adjusted EBITDA grew significantly as well.

Our Memorialization segment continued to deliver strong results except this quarter, as expected, the performance was provided by our Cemetery Products business while our Funeral Home Products business began to see the normalization of the death rate resulting from the vaccine implementation in North America.

Our current order rates in our Cemetery Products business continue to be strong and we expect at least another strong quarter to come. Similarly, our SGK brand business saw good revenue growth during the quarter driven by the Europe region and our Energy Storage business. Equally important, however, was that the profitability of the business returned to normal as we realized the benefits of our cost reduction initiatives and the higher revenue. In our Industrial Technologies segment, higher revenues and EBITDA contributed to our great quarter and reflect the very strong backlogs in this segment, which bodes well for a very strong fourth quarter and beyond. I'm proud of our team and the results we have generated in what still remains a challenging environment in many parts of the world in which we operate. Much of this achievement comes from the environments where we are still in less than optimum operating conditions. Despite these challenges, our teams around the world continued to win new business while satisfying the needs of our existing clients. In our Energy Storage business, as we noted in the past, we continue to be very optimistic about our opportunities. In fiscal 2019, our revenues were approximately $20 million.

We are now projecting revenues for this fiscal year of about $50 million and we continue to build our backlog for what we hope will be another significant growth year for this business.

As I noted last call, our Energy Storage business has opportunities beyond lithium and we hope to soon to be able to speak more about the opportunities we see in the hydrogen fuel cells. All-in-all, our businesses continue to operate in strong markets and our success in navigating the pandemic has been beneficial to the businesses in more than one way. In our Funeral Home Products business, high client satisfaction reflects our strong performance during the pandemic. In our Brand business, the crisis allowed us to adapt to new working models that will continue to reduce our operating costs going forward.

While in our Industrial Technologies segment our warehouse automation businesses gained market share as more and more clients realize that e-commerce is a necessary solution to future success.

As we look forward, although our results are exceptional, not all of our businesses are performing at a normalized rate. In much of the world, particularly in the APAC region, we continue to see significant challenges from the pandemic as many economies remain behind the United States in their ability to vaccinate their citizens.

As a result, we continue to operate at a lower efficiency which is impacting our operating performance. Also, although we see continuing strong revenue trends that give us assurance to finishing off the year strong, we like other companies are feeling the impact of inflationary pressures, particularly in our raw materials and components. These pressures will impact our margins at least in the near term.

We expect those margins those pressures to ease but not soon. In the meantime, we are continuing to take cost and price actions where possible to mitigate these pressures.

Although we will work diligently, we do not expect to offset the full impact of the inflationary pressures.

Regarding our operating cash flow performance, the third quarter results were impacted by some unusual payments in the timing of collections. Despite that given our operating performance our net debt leverage ratio is fast approaching our target of less than 3. I am also happy to report that our cash flow forecast indicates that we should reduce our net debt this coming quarter by over $40 million, bringing our total debt reduction since January 1st, 2020 when our stock was at $37 to over $200 million. There is no better evidence of the quality of our businesses than our demonstrated ability to generate cash and I assure you that our businesses are better positioned today than it was on January 1st of 2020.

Our conviction in our swift improvement in our debt leverage ratio gives us great flexibility to continue to invest in the business or aggressively buy back our shares at these very low prices. In support of that the Board has authorized a buyback of an additional 2.5 million shares based on our desire to return value to our shareholders.

Finally, as you may have noted, we are optimistic about our situation for the balance of the year, but we remain cautious as evidenced -- excuse me, as events outside of our control can still arise which can impact our results. Therefore, given our performance to-date and the strength of our order intake, we are raising our target and expectations and we now believe that we will deliver at least $225 million of adjusted EBITDA for fiscal 2021.

Now, let's open it up for questions.

Operator

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question today is from Daniel Moore of CJS Securities. Please proceed with your question.

Daniel Moore

Thank you. Good morning, Joe. Good morning, Steve. Thanks for taking questions.

Joe Bartolacci

Good morning.

Steve Nicola

Good morning, Daniel.

Daniel Moore

Start with warehouse automation. Are you now largely back in your customers facilities? And should we expect kind of similar revenue in Q4 versus Q3? Just trying to see how much more business we can squeeze in before you get kicked out for the holidays.

Joe Bartolacci

So we are not back in all of our facilities and it has less to do with the pandemic than with our customers' ability to get hardware into their facilities. They're feeling the delays that conveyor systems and parts and components are causing on their warehouses. Despite that though, the revenues that we saw this quarter should be stronger next quarter and our forecast reflects what we're seeing.

We also expect to leave the year with very, very strong backlogs given what the trends are at this point Dan.

Daniel Moore

Helpful. Energy storage closing in on $50 million of revenue I believe you said. What's the potential size of the opportunity over the next three years to five years? And maybe a little more detail around the hydrogen fuel cell that you're positioning and where you hope to be.

Joe Bartolacci

So as it relates to what we project for next year we're expecting another significant increase year-over-year based on our backlogs.

We have strong backlogs and we don't even have all the orders we expect in-house yet.

So we're feeling pretty comfortable next year we're going to see another significant increase. How big that could be is really not determined by us.

We have the orders in house, but we are a component to an overall facility and the timing of those deliveries will reflect when we can recognize revenues. When it comes to hydrogen again we are in the rotary processing business. We take material and process it through large cylinders that weigh tons and tons that are hyper pressurized, hyper controlled and precision milled and manufactured and driven by sophisticated PLCs. This is a very, very complex business, but we think we can expand our footprint and our knowledge base into the fuel cell side of business. We made a small acquisition earlier in the year.

You saw that. They bring know-how to the business. We bring our capability from the engineering side to manufacture production rate equipment. And our expectation unlike in the lithium business is not only to provide equipment to our customers that may want it. We intend to deliver fuel cells if we can as our own product.

Daniel Moore

Helpful. Maybe one more if I could. A lot of comments and just trying to triangulate them all, sort of, beyond let's say the next quarter.

You said you expect positive momentum across some of the businesses to mitigate some of the unfavorable impacts of lower caskets and margins.

So overall should we think about EBITDA being maybe net slightly lower for a few quarters on a year-over-year basis? Do you think you can offset it and grow a little bit? Just any -- just how we should be interpreting those would be greatly helpful.

Joe Bartolacci

So – I mean, clearly we like all the other companies in the world are feeling the inflationary pressures. Many of which we're starting to see them subside but many have not started to subside.

Given how they flow through our inventories it could take a quarter or two or three while we go through that. We're not prepared today to tell you how that's going to impact us because we do have strength in a lot of our other businesses. But more importantly given where our net leverage ratio has gotten to we now have flexibility that we can do a lot of different things. There's a few acquisitions out there we'd like to talk about. There are other opportunities to continue to improve our business and invest. Or as I said at these prices we intend to be aggressive with our share buyback program.

So a lot of different pieces of the puzzle at this point that will allow us to deliver value to the shareholder.

Daniel Moore

All right.

You stole my last one as well.

So I'll jump back in queue with any follow-ups. Thanks.

Operator

The next question is from Liam Burke of B. Riley. Please proceed with your question.

Liam Burke

Thank you. Good morning, Joe. Good morning, Steve.

Joe Bartolacci

Good morning, Liam.

Steve Nicola

Good morning, Liam.

Liam Burke

Joe, you had a nice contribution from cremation and incineration. Was that the major driver of the revenue growth out of memorialization? And what do the backlog numbers look like with the deliveries in the third quarter?

Joe Bartolacci

We had -- you're right. We got modest growth. It's nice growth for that business in and of itself, but the value that was being delivered was out of our cemetery products side of the business.

We also saw a pretty good mix of products coming through on our funeral home products side.

So as a result the real drivers were first cemetery products; secondary mix on the funeral home products; and third our cremation business.

Liam Burke

And the backlog on the cremation systems is that still strong?

Joe Bartolacci

We're out 15 months -- 16 months.

Liam Burke

Okay. Great. Thank you. And then I'm looking at retail. Are you anticipating -- in-store display. Are you anticipating any kind of step-up, sort of, modestly higher year-over-year revenue? Would you expect that revenue growth to accelerate going into the holiday season or the back-to-school season?

Joe Bartolacci

Interestingly enough Liam I would say that we would have hoped to but we're seeing reasonable, but not what I would call normalized spending in retail just yet. We're not disappointed with how our businesses are operating. They are better than they have been, but not at what I would expect a normal Christmas season and back-to-school season to be for in-store displays. That's pretty much the story with all of our retail side of the business whether it be private label packaging point of sale display work, marketing branding things of that nature that are more retail in nature. They're still behind which further buttresses the strength that we had out of SGK given the performance we have in what we call our core business which is packaging for CPGs.

Liam Burke

Okay. Super. And just one more quick one.

You mentioned higher development costs in industrial. Is that the printer development cost?

Joe Bartolacci

Yes, it is Liam. That is our printhead that is now out in beta testing at several sites. Suffice it to say, that we're extremely satisfied with its performance confirming its value proposition that we've all talked about for a long time.

We are in the midst of moving that production from more of a university setting to a professional silicon chip fabrication lab. That process will take a bit of time and a little bit of expense as we go through that process, but we've kind of confirmed the size we've confirmed the value proposition. It's now to get it to production.

Liam Burke

Great. Thank you, Joe.

Joe Bartolacci

Yes.

Operator

The next question is from David Niewood of Phoenix. Please proceed with your question. Sir, your line is open.

David Niewood

Hi.

Sorry, I was on mute. Hi, Steve. Hi, Joe, and hi, Bill.

Joe Bartolacci

Good morning.

David Niewood

Since your last quarterly conference call there's been a lot of industry press as it relates to your energy storage business. And a lot of the industry press indicates that you are very much connected to what's known as the 4680 cylindrical lithium ion dry electrode battery process. And since in that news flow, it seems that there are several additional large battery companies that are evaluating the 4680. My question is, do you know of any 4680 processes or future players who are not doing this dry battery electrode? And if they are doing it as dry battery electrode, is it reasonable to assume that you're speaking to all of them? That's my first question. And then I have a follow-up.

Joe Bartolacci

Okay.

So your first question David, interestingly enough, we've talked about this in the past.

We are a cylindrical rotary processing equipment manufacturers with specialty knowledge in dry cell lithium processing with some patents around it and other IP that we've done. We've had years of experience in this space.

We also operate in what I would call the wet cell process, but to a lower extent.

We are -- our unique selling proposition into the wet cell process is not necessarily unique, unlike in our dry cell world where we are unique. But at the same time, the people we're being contacted by are both wet and dry cell. And suffice it to say that at least when it comes to the Western European world, we are talking to just about everybody.

David Niewood

Okay. Without naming names or customers, the commercialization of the 4680 cell -- dry cell lithium ion battery, there is a large player out there who says that they are not quite there yet, but are very close, and it has to do with the cylindrical performance of those large cylinders. In your mind, how solvable is that final hurdle to commercialization?

Joe Bartolacci

Look, at this point David, we're not in a position to speak to it, because there's a lot of components that are associated with not necessarily just our processes, but also the formulation of the lithium mix and the feeding of that mix through our process.

So I can't tell you -- what we control is solvable. I can't tell you with respect to everything else.

David Niewood

I appreciate that and understand that I got in the weeds for these questions, but I appreciate the answers very much and I wish you guys continued success.

Joe Bartolacci

Thank you.

Operator

The next question is from Scott Blumenthal of Emerald Advisers. Please proceed with your question.

Scott Blumenthal

Good morning, Joe, Steve. Bill.

Joe Bartolacci

Good morning, Scott.

Steve Nicola

Good morning, Scott.

Scott Blumenthal

Joe, there's a natural ratio between cremation caskets and memorialization. And over the past year memorialization lagged.

So I know in your comments you told -- you said that you thought you might be caught up by maybe by the end of the year here. But it would seem to me that essentially a year of depressed memorialization sales, you're going to catch up in maybe a quarter or 1.5 quarters or two quarters. Do you really think that by the end of the year here memorialization caught up?

Joe Bartolacci

No. My comments Scott were we have strong backlogs and we expect at least another strong quarter.

So it's difficult tell. I would tell you there is a normal ramp to memorialize, and then there'll be a tapering off of volumes. I expect that to go through much of 2023 -- 2022, excuse me, but how much we get done and so forth.

Our current forecast reflects what our expectations are today. Could it be more, could it be less? Sure.

We have strong backlogs at this point.

Scott Blumenthal

Understood.

So you were just providing us with what you think is going to happen for the rest of the year and not making any commentary on next year.

Joe Bartolacci

Absolutely not.

Scott Blumenthal

Okay. I really appreciate that.

Okay. Also can you talk then maybe about incineration and cremation equipment, which would seem to me that that would be something that would be demand would be strong for worldwide considering what we've seen happening in certain places. I know you've had some business wins outside of the US and Europe.

So have you been able to kind of expand the cremation incineration opportunity? And what do you believe that the total TAM is there?

Joe Bartolacci

The market continues to grow as you might expect.

We are the leading provider of human cremation equipment in the world. We sell more equipment than anybody else by a long shot.

As a result, our reach gets broader and broader. But I will tell you that outside of the United States most of the sales are made to municipalities. And as those municipalities have been constrained by what's going on with COVID in and of itself, you would expect those things to come over time.

Our backlog includes a lot of product in Latin and South America, Australia, and we have a lot of backlog in Europe eastern and western as well. We're pretty comfortable that this is what we expect it to be, a strong long-term consistent player that continues to deliver value to the business.

Scott Blumenthal

Okay. I know that you haven't given backlog numbers historically. Can you give us an idea maybe Joe kind of the flip side of that as to where you stand maybe with book-to-bill this last quarter or maybe over the last couple of quarters?

Joe Bartolacci

For which business?

Scott Blumenthal

For incineration and cremation equipment.

Joe Bartolacci

As I said earlier, we've got backlog that is almost 15, 16 months. The issue is generally not whether we've got product to sell. It's more a question of whether a client is ready to accept the product. These are pieces of equipment that go into other facilities. There's construction, there's permitting and everything else associated with that.

Scott Blumenthal

Sure. Sure. And can I safely assume then Joe that backlog has expanded this past quarter?

Joe Bartolacci

Well, it's expanded over the course of the whole period modestly. But yes, the answer is yes.

Scott Blumenthal

Okay.

Joe Bartolacci

I think one of the areas, I think that has come to fruition during this pandemic has been the deferred maintenance that a lot of these facilities have had.

As long as it was operating they never really kind of did what they should be doing. Those challenges came about throughout the pandemic as much of their equipment was unable to operate the way they would like. We think there's a good service function to come out for the next period of time.

Scott Blumenthal

Super. That's great to know.

Now if I might ask one about packaging. We've seen kind of inflation.

You're seeing it in raw material.

Of course, consumers are seeing that in the grocery store. We've seen inflation impact encouraging the CP, the consumer product packaging companies to maybe kind of change downsize some of the packages.

You've seen instead of increasing prices on some of the products maybe downsizing the size of the package and charging the same price. Are you seeing these trends and are they accelerating? And I would suspect if so, that's got to be pretty busy there.

Joe Bartolacci

That's part of the reason what you're seeing coming through in our numbers, Scott. Packaging, we do not have huge inflationary pressures in our packaging business. It's principally a service.

We have some wage pressures, but not material pressures. But the volumes that we're seeing are very high at this time.

We also picked up some new business during the pandemic given how our performance has been. Generally, we're very pleased where that is and the business was going to go through this cycle as you're right, a lot of these CPGs look to repackage into smaller sizes and new and improved or whatever it may be.

Scott Blumenthal

Great. Right. And maybe a last one if I may. The market opportunity for the printhead that's not just a new sale but also a replacement opportunity as well?

Joe Bartolacci

No question. There is an anticipated life based on the number of prints that are consumed by the printer -- or produced by the printer and then there's a replaceable printhead unlike what has historically been out there repair and maintenance service.

Scott Blumenthal

So, then we can safely assume that any existing Matthews installed printer is a candidate for an upgrade.

Joe Bartolacci

Every printer in our competitive space is a potential upgrade opportunity for us. We consider this a huge market opportunity. Not going to be realized today or tomorrow. This is a technology swing. And we've talked about this for a while. But the opportunity is to take what we consider a great performing small business in our portfolio and make it a significant contributor to our overall portfolio over time.

Scott Blumenthal

Got it. Thank you.

Joe Bartolacci

Okay. Thank you.

Operator

The next question is from Chris McGinnis of Sidoti & Company. Please proceed with your question.

Chris McGinnis

Yeah. Good morning. Thanks for taking my question.

Joe Bartolacci

Good morning, Chris.

Chris McGinnis

Can you just -- for us it seems like there may be a little bit of a change in the cemetery markets or just around memorialization. Have you seen that? Is that maybe changing as people coming out of the pandemic are recognizing and celebrating life a little bit differently? Have you seen anything change? Thanks.

Joe Bartolacci

We have not seen much of a significant change.

In fact, if you look some of the larger competitors -- supply -- customers of ours have reported very significant preneed sales of cemetery properties.

So in our world, we're seeing revenue flows consistent with what we might expect to be memorialized from the recent death rate.

Chris McGinnis

Yeah.

Okay. Thanks. And then just one other question, just around the EV and the demand that you're seeing and thinking about. Can you just talk about any capital needs to support that demand?

Joe Bartolacci

I would say that the capital needs are light. There may be some acquisition candidates we'll need to pull into the fray. But at the end of the day, it is not a big CapEx function. It's not to say that we're not going to spend money.

We are going to absolutely spend money. But not to the degree that you might expect to grow to a $100 million business in the near term.

Chris McGinnis

Great. Thanks for taking questions and good luck in Q4.

Joe Bartolacci

Thank you.

Steve Nicola

Thank you.

Operator

There are no additional questions at this time. I'd like to turn the call back to Bill Wilson for closing remarks.

Bill Wilson

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

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

Operator

This concludes today's conference.

You may disconnect your lines at this time. Thank you for your participation.