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MATTHEWS INTERNATIONAL CORP (MATW)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 sales were $427.6M and non-GAAP adjusted EPS was $0.34; GAAP diluted EPS was -$0.29 due to higher interest expense and an unfavorable German tax impact .
  • Results were below S&P Global consensus on revenue ($427.6M vs $435.6M*) and EPS ($0.34 vs $0.38*), while adjusted EBITDA of $51.4M was roughly in line and supported by cost reductions . Values retrieved from S&P Global.*
  • Management lowered FY2025 adjusted EBITDA guidance to at least $190M on a pro forma basis to reflect the SGK sale (vs prior “at least $205M”), and expects reporting of SGK equity method results on a one-quarter lag .
  • SGK transaction closed May 1 with $250M cash, $50M preferred equity, retention of $50M receivables, and a 40% stake; proceeds will primarily reduce debt and may fund share repurchases given current valuation .
  • Key catalysts: $100M+ in new DBE equipment quotes since mid-February, warehouse automation record orders and backlog recovery, and ongoing cost actions tracking >$50M savings .

What Went Well and What Went Wrong

What Went Well

  • SGK Brand Solutions delivered its best sales quarter since FY22 Q4, with higher U.S. and APAC brand sales and improved pricing; adjusted EBITDA modestly increased y/y .
  • Cost reduction programs progressed well and supported better-than-anticipated adjusted EBITDA; management now expects savings to exceed the initial $50M target .
  • Energy Solutions commercial traction resumed: “quotes in excess of $100 million” since reopening DBE marketing in mid-February across South Korea, Europe, and North America, including mass-production “mother equipment” demand .

What Went Wrong

  • Industrial Technologies revenue fell sharply ($80.8M vs $116.1M y/y) on lower energy engineering sales and soft warehouse automation; segment adjusted EBITDA declined to $6.0M .
  • Memorialization volumes fell (caskets, bronze, granite, cremation equipment) due to lower U.S. casketed deaths and the prior closure of a U.K. cremation facility; segment adjusted EBITDA eased to $45.0M .
  • Operating cash flow dropped to $6.3M in Q2 (YTD -$18.7M) given SGK transaction costs, contested proxy, restructuring, and litigation payments; net debt leverage rose to 4.0x .

Financial Results

MetricQ4 FY2024Q1 FY2025Q2 FY2025
Sales ($USD Millions)$446.7 $401.8 $427.6
GAAP Diluted EPS ($)($2.21) ($0.11) ($0.29)
Adjusted EPS ($)$0.55 $0.14 $0.34
Gross Margin (%)26.3% 31.3% 33.7%
Adjusted EBITDA ($USD Millions)$58.1 $40.0 $51.4
Adjusted EBITDA Margin (%)13.0% 10.0% 12.0%

Segment performance (sales, adjusted EBITDA):

SegmentQ2 FY2024 Sales ($MM)Q2 FY2025 Sales ($MM)Q2 FY2024 Adj. EBITDA ($MM)Q2 FY2025 Adj. EBITDA ($MM)
Memorialization$222.2 $205.6 $46.6 $45.0
Industrial Technologies$116.1 $80.8 $10.0 $6.0
SGK Brand Solutions$132.9 $141.2 $15.4 $15.6
Total$471.2 $427.6 $56.8 $51.4

KPIs and cash/leverage:

KPIQ2 FY2025
DBE equipment quotes since mid-February>$100M
Energy Solutions backlog~$70M
Operating cash flow (Q2)$6.3M
Operating cash flow (YTD)($18.7)M
Net Debt$781.9M
Net Debt Leverage (TTM Adj. EBITDA)4.0x
Shares repurchased in Q2~5,900 shares
Quarterly dividend declared$0.25 (payable 5/26/25)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA (pro forma)FY2025At least $205M (including full-year SGK) At least $190M (pro forma for SGK with 5 months equity-method) Lowered (pro forma)
Reporting convention (SGK equity)FY2025N/AEquity method reported on one-quarter lag New disclosure
Net leverage trajectoryFY2025Expect improvement with debt reduction Net leverage ratio expected to decline post-SGK proceeds Maintained/clarified
DividendQ2 FY2025$0.25/share per prior declaration (Nov 2024) $0.25/share declared for May 26, 2025 Maintained
Share repurchase authorizationFY2025Modest authorization Considering expansion post-SGK close Potentially raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2024, Q1 FY2025)Current Period (Q2 FY2025)Trend
DBE/Tesla dispute & commercializationBacklog ~$100M, cautious marketing; arbitration expected to clarify rights Rights clarified; >$100M quotes since mid-Feb; mass-production “mother equipment”; retrofit solutions; thicker electrodes for grid storage Improving demand post-clarity
Warehouse automationSoft market; improving quoting; FY2025 recovery expected Record orders; backlog at healthy levels; Teradyne/MiR robotics partnership Turning positive
SGK transactionAnnounced sale; leverage expected <3x post-close Closed May 1; $250M cash + $50M preferred + 40% stake; >$50M synergies; one-quarter reporting lag Deleveraging catalyst realized
Cost reductionsProgram launched; cadence $25–30M by YE FY2025; total ~$50M On track to exceed $50M; $20M in FY2025, $30M in FY2026 Execution sustained
MemorializationNormalization of casketed deaths; granite backlog work-down Lower volumes; pricing offsets; U.K. cremation closure impact Stable-to-soft volumes; margin managed
Tariffs/macroN/AActions mitigate contemplated tariffs; minimal FY2025 impact Neutral

Management Commentary

  • “Adjusted EBITDA for the quarter was ahead of our expectations primarily reflecting the realization of benefits from recent cost reduction actions and improved price realization in several of our businesses.” — CEO Joe Bartolacci .
  • “From the time that we reopened our doors for business in mid-February… we have reengaged with multiple battery manufacturers and auto OEMs and have issued quotes in excess of $100 million.” — CEO Joe Bartolacci .
  • “Based on an SGK transaction closing in early May… our pro forma consolidated adjusted EBITDA projection for fiscal 2025 has been updated to at least $190 million.” — CFO Steve Nicola .
  • “We entered into an agreement with Teradyne… to market autonomous robotic solutions… controlled by our warehouse execution software.” — CEO Joe Bartolacci .

Q&A Highlights

  • Energy Solutions demand: Quotes >$100M are “dramatically higher” than last year; strongest interest in South Korea, plus Europe and North America; applicability spans EV and grid storage .
  • Cost savings cadence: ~$20M in FY2025 and ~$30M in FY2026 from the $50M program .
  • Turnkey DBE lines & retrofit: Production-level demo equipment targeted for Sept/Oct to accelerate customer spec finalization; retrofit can triple electrode capacity in existing space vs wet process .
  • SGK accounting and buybacks: Equity-method on a one-quarter lag with pro forma disclosures; considering expanded repurchase authorization post-close .
  • Memorialization trajectory: Continued normalization of casketed deaths; granite backlog impact complicates y/y comps but headwind should abate .

Estimates Context

MetricConsensus (Q2 FY2025)ActualSurprise
Revenue ($USD)$435.6M*$427.6M ($8.0M)
Primary EPS ($)$0.38*$0.34 (non-GAAP adjusted EPS) ($0.04)
EBITDA ($USD)$49.9M*$51.4M (adjusted) +$1.5M

Values retrieved from S&P Global.* Coverage remains thin (# of estimates: EPS=2, Revenue=2*), increasing sensitivity to individual analyst assumptions.

Key Takeaways for Investors

  • The quarter missed on revenue and EPS versus consensus, driven by energy engineering softness and Memorialization volume declines; margin resilience from cost actions limited downside .
  • Post-arbitration clarity is catalyzing DBE demand, with >$100M in quotes and plans for production-level demo equipment; watch for conversion of quotes to orders and backlog growth through H2/FY2026 .
  • SGK close is a deleveraging event with potential buyback acceleration; expect leverage to trend down and equity-method earnings on a one-quarter lag, with >$50M synergy plan .
  • Warehouse automation appears to be inflecting (record orders, healthy backlog) aided by a robotics partnership (Teradyne/MiR); this segment could drive H2 improvement .
  • Cost program remains a central offset to topline pressure; $20M savings in FY2025 and $30M in FY2026 support EBITDA trajectory and multiple rerating potential .
  • Risks: Litigation costs and interest expense, macro/tariff uncertainty (mitigated actions in place), and continued normalization in death rates impacting Memorialization .
  • Near-term trading: Stock likely sensitive to DBE order announcements, SGK debt reduction/buyback deployment, and evidence of warehouse automation recovery.