Executive Summary

Q1 FY25 results were seasonally soft and broadly in line with internal expectations: sales $401.8M, GAAP diluted EPS $(0.11), adjusted EPS $0.14, and adjusted EBITDA $40.0M as Industrial Technologies remained pressured; macro and litigation costs weighed on GAAP results .
Management maintained FY25 adjusted EBITDA outlook of $205–$215M (consolidated, assuming SGK remains within results for the year), citing resilience in Memorialization/SGK and cost actions offsetting Industrial Technologies pressure .
A key catalyst: an arbitrator affirmed MATW’s rights to market and sell its Dry Battery Electrode (DBE) solutions to customers beyond Tesla, enabling MATW to immediately re‑engage the market; management expects multi‑customer adoption over time, with near‑term benefits more focused on customer announcements and pipeline rebuilding .
Portfolio simplification continues: the announced SGK sale (expected close mid‑2025) provides $350M upfront consideration, including $250M cash to reduce debt; MATW retains a 40% stake in the new entity, and expects leverage to decline below 3x post close .
Liquidity and leverage: net debt rose to $775.7M and net leverage to 3.9x in Q1 (seasonal outflows, litigation and restructuring), with management reiterating leverage should decline over FY25 and materially with SGK proceeds .

What Went Well and What Went Wrong

What Went Well

Arbitration ruling unlocks DBE commercialization: “confirmed our right to continue marketing, offering and selling [DBE] technology to others,” allowing MATW to resume vigorous promotion and sales efforts beyond a single customer .
Memorialization and SGK stable: Memorialization adjusted EBITDA essentially flat YoY ($36.6M vs $36.7M) despite lower volumes, aided by price/mix and cost savings; SGK sales grew modestly YoY with stable EBITDA amid improving U.S./APAC and private label trends .
Cost program on track: Management reiterated at least $50M savings target and expects $25–$30M run‑rate by year‑end FY25, with additional ~$15M corporate reduction potential post‑SGK transition .

What Went Wrong

Industrial Technologies pressure: Sales fell to $80.5M (from $111.4M) and adjusted EBITDA to $1.8M (from $9.6M), driven by lower engineering (energy) revenue and soft warehouse automation; litigation impacts and project delays persisted .
Elevated non‑operating headwinds: Legal costs tied to Tesla dispute were $6.9M in Q1 (included within “strategic initiatives and other items”), contributing to weaker GAAP earnings and non‑GAAP adjustments; U.S. healthcare costs were ~$1.6M higher YoY in the quarter .
Leverage ticked up: Net debt rose $40M QoQ to $775.7M; net leverage increased to 3.9x from 3.6x at 9/30/24, reflecting seasonal outflows, litigation spend, and upfront restructuring costs .

Financial Results

Quarterly performance (oldest → newest):

Metric	Q3 FY2024	Q4 FY2024	Q1 FY2025
Revenue ($M)	$427.8	$446.7	$401.8
GAAP Diluted EPS ($)	$0.06	$(2.21)	$(0.11)
Adjusted EPS ($)	$0.56	$0.55	$0.14
Gross Margin (%)	30.8%	26.3%	31.3%
Operating Margin (%)	1.6%	(11.1)%	1.4%
Adjusted EBITDA ($M)	$44.7	$58.1	$40.0
Adjusted EBITDA Margin (%)	10.5%	13.0%	10.0%

Segment breakdown (Q1 FY2025 vs Q1 FY2024):

Segment	Sales Q1 FY2024 ($M)	Sales Q1 FY2025 ($M)	Adj EBITDA Q1 FY2024 ($M)	Adj EBITDA Q1 FY2025 ($M)
Memorialization	$208.1	$190.5	$36.7	$36.6
Industrial Technologies	$111.4	$80.5	$9.6	$1.8
SGK Brand Solutions	$130.5	$130.8	$12.9	$12.3
Corporate & Non‑Op (Adj EBITDA)	$(13.7)	$(10.7)

Balance sheet and cash flow KPIs:

KPI	Q4 FY2024	Q1 FY2025
Total Debt ($M)	$776.5	$809.2
Cash & Equivalents ($M)	$40.8	$33.5
Net Debt ($M)	$735.7	$775.7
Net Debt Leverage (x)	3.6	3.9
Operating Cash Flow (quarter, $M)	$35.9 (Q4)	$(25.0) (Q1)
Dividends Declared per Share ($)	$0.24 (Q4)	$0.25 (payable 2/24/25)

Non‑GAAP adjustments and items of note (Q1 FY2025): Tesla‑related legal costs of $6.9M included in “strategic initiatives and other items”; amortization $6.5M included in adjusted EPS bridge; net gains on asset sales $8.7M reduced other charges; Turkish hyperinflation losses $0.2M also adjusted .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA (consolidated)	FY2025	$205–$215M (Nov 2024)	$205–$215M (maintained; assumes SGK within FY25 results)	Maintained
Cost Reduction Savings	Run‑rate	Up to $50M (initiated in FY24)	At least $50M; $25–$30M run‑rate by FY25 year‑end	Reaffirmed; execution timeline clarified
SGK Brand Solutions Transaction	Close timing & proceeds	N/A	Mid‑2025 close expected; $350M upfront + 40% stake; ~$250M cash to debt reduction	New
Leverage Trajectory	FY2025	N/A	Net leverage expected to decline over FY25; <3x post‑SGK close	New
Dividend	Ongoing	$0.24/quarter (Q4 FY24)	$0.25/quarter declared Jan 29, 2025	Raised

No explicit revenue, margin, OpEx, OI&E, or tax‑rate guidance was provided for FY2025 in Q1 materials .

Earnings Call Themes & Trends

Topic	Q3 FY2024 (two quarters ago)	Q4 FY2024 (prior quarter)	Q1 FY2025 (current)	Trend
DBE/energy business & Tesla	Delays; confidence in IP; pursuing DOE fuel cell work	Backlog ~$100M into FY25; legal dispute moving to arbitration; patent granted	Arbitrator affirmed rights to sell DBE broadly; plan to re‑ramp multi‑customer pipeline; ramp gradual	Improving clarity; commercialization pathway unlocked
Cost reductions	Announced up to $50M program	Charges taken; cadence $25–$30M by FY25, remainder by FY26; ~$40M cost to achieve (majority cash)	On track; reiterate cadence; potential additional ~$15M corporate post‑SGK	Executing; incremental corporate leverage
Warehouse automation	Market softness; quoting beginning to improve	Continued softness with early green shoots	Quote activity and order intake better YoY; expect stronger year (lumpiness remains)	Stabilizing to improving
Product Identification	Steady; new lasers launching; printhead roadmap	Laser launch; “Acxiom” printhead targeted for 2H FY25	Ramp in production; first 2D code project; modest FY25 revenue, bigger FY26	Building product cycle
SGK	Stabilizing; APAC/price improvements	Third consecutive qtr growth; FY24 EBITDA +	Sale announced; mid‑2025 close; retain 40% stake; synergy value highlighted	Transformational portfolio action
Capital structure	Debt reduction focus; refi planned	Senior notes refinanced (8.625%); 1‑year call added	SGK proceeds to revolver; evaluate bond call post 1‑year no‑call	De‑levering plan intact

Management Commentary

“An arbitrator… confirmed our right to continue marketing, offering and selling [DBE] technology to others… we now intend to resume vigorously promoting our DBE solutions.” — CEO Joe Bartolacci .
“We are maintaining our guidance for adjusted EBITDA in the range of $205 million to $215 million.” — CEO .
“Net leverage will improve from about 3.9 today pre‑transaction to less than 3 post transaction… [we’ll] apply [SGK] proceeds to debt reduction and evaluate refinancing the 8.625% notes when callable.” — CEO/CFO .
“Industrial Technologies… significantly lower sales, primarily reflecting the slowdown in Tesla project work and the impact of the litigation on work with other customers.” — CFO Steve Nicola .
“We expect to be at a run rate of $25–$30 million by the end of this year and the rest achieved by the end of next fiscal year.” — CFO on cost savings cadence .

Q&A Highlights

DBE momentum post‑ruling: Ramp expected to start slowly given automotive development cycles but broaden across multiple customers; MATW believes it’s the only provider of proprietary DBE equipment today .
Memorialization drivers: Granite sales normalized after prior‑year backlog reduction; exit of unprofitable European cremation operations contributed to YoY sales decline but aided profitability .
Segment dynamics: Majority of Industrial Technologies YoY sales decline was energy; warehouse automation was a modest portion and is seeing improved order flow .
Capital allocation: SGK cash proceeds targeted to revolver; 8.625% bonds have a one‑year no‑call expiring late Sep 2025; management will analyze calling/refinancing at that time; long‑term leverage target ≤3x .
Cost savings timing: $25–$30M run‑rate by FY25 year‑end; remaining to FY26; incremental ~$15M corporate reduction possible post‑SGK .

Estimates Context

We attempted to retrieve S&P Global consensus for Q1 FY2025 revenue, EPS, and EBITDA, but the request limit was exceeded at the time of analysis; therefore, consensus estimates were unavailable for comparison. We will update vs‑consensus comparisons when S&P Global data access is restored (unavailable at time of writing).
Without consensus, we cannot designate beats/misses vs Wall Street for Q1 FY25. Internally, management characterized results as “generally in line with our expectations,” and maintained the FY25 adjusted EBITDA outlook .

Key Takeaways for Investors

The arbitration ruling is a material positive catalyst, removing a key overhang and enabling MATW to pursue multi‑customer DBE commercialization; near‑term revenue impact may be limited by customer development cycles, but it improves medium‑term visibility and optionality .
FY25 outlook unchanged despite Industrial Technologies headwinds; Memorialization and SGK continue to anchor earnings, with cost actions mitigating softness in energy/warehouse automation and higher non‑operating costs .
De‑levering path is credible: seasonal Q1 leverage uptick (3.9x) should reverse through the year, with a step‑down below 3x expected post SGK close and potential bond refinancing thereafter .
Cost‑reduction execution is a critical swing factor for FY25–FY26 margins and cash flow; watch for $25–$30M run‑rate by FY25 year‑end and incremental ~$15M corporate savings post‑SGK .
Warehouse automation and product ID show early signs of improvement/new product cycle (laser/printhead, 2D codes), suggesting a better setup into FY26 as macro/logistics capex normalizes .
Divestiture strategy plus retained upside (40% SGK stake) positions MATW for a more focused, higher‑growth, higher‑margin profile over time—potential re‑rating lever contingent on DBE execution and leverage reduction .
Trading lens: Near‑term stock moves likely driven by DBE news flow (new customer announcements), SGK close milestones, and evidence of cost‑savings drop‑through; risks include DBE commercialization timing, litigation costs, and macro softness in automation .

Notes: All figures are company‑reported unless otherwise noted. Sales, EPS, margins, adjusted EBITDA, segment data, cash flow, leverage, and guidance are drawn from the Q1 FY25 8‑K/press release and earnings call materials – – –. DBE arbitration update and dividend release are from press releases dated Feb 6, 2025 and Jan 29, 2025, respectively – . Prior‑quarter trend references reflect Q4 FY24 and Q3 FY24 press releases and call transcripts – – – –.

MATTHEWS INTERNATIONAL CORP (MATW)·Q1 2025 Earnings Summary