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MATTHEWS INTERNATIONAL CORP (MATW)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 revenue of $349.4M and GAAP EPS of $0.49 benefited from a $57.1M gain on the SGK divestiture; non-GAAP adjusted EPS was $0.28, and adjusted EBITDA held essentially flat YoY at $44.6M .
  • Revenue and adjusted EPS exceeded S&P Global consensus, while EBITDA (S&P definition) fell short; the company maintained FY2025 adjusted EBITDA guidance of at least $190M including its 40% share of Propelis .
  • Industrial Technologies showed margin improvement on cost actions despite lower engineering sales due to Tesla-related impacts; Memorialization improved margins aided by Dodge acquisition and price realization .
  • Debt was reduced by $120M in Q3, net debt leverage improved to 3.5x, and the Board declared a $0.25 dividend payable Aug 25, 2025 .
  • Strategic alternatives review is progressing; Propelis synergy estimates have increased to ~$60M, with company expecting further debt reduction in Q4 .

What Went Well and What Went Wrong

  • What Went Well

    • “Memorialization and Industrial Technologies segments each reported higher adjusted EBITDA compared to a year ago” as cost actions took hold; Memorialization margins improved with Dodge integration and price realization .
    • Quotes pipeline rebounded post-arbitration: “outstanding quotes are now over $150 million and continuing to grow,” with conversions expected to accelerate by year-end .
    • Net debt leverage improved to 3.5x on $120M debt reduction; company expects further reduction in Q4; dividend declared at $0.25/share .

  • What Went Wrong

    • Industrial engineering sales declined due to “unfavorable consequences of the ongoing Tesla dispute,” impacting customer willingness and order rates .
    • Adjusted EPS fell YoY to $0.28 from $0.56, driven by higher interest expense (new bonds) and lack of prior-year discrete tax benefits .
    • Operating cash flow was negative YTD (-$33.9M), reflecting SGK transaction costs, contested proxy/legal expenses, Tesla working capital drag, and restructuring .

Financial Results

Consolidated performance vs prior periods (oldest → newest)

MetricQ3 FY2024Q1 FY2025Q2 FY2025Q3 FY2025
Revenue ($USD Millions)$427.8 $401.8 $427.6 $349.4
GAAP Diluted EPS ($)$0.06 $(0.11) $(0.29) $0.49
Adjusted EPS ($)$0.56 $0.14 $0.34 $0.28
Gross Margin (%)30.8% 31.3% 33.7% 34.9%
Operating Margin (%)1.6% 1.4% 1.4% 21.5%
Adjusted EBITDA ($USD Millions)$44.7 $40.0 $51.4 $44.6
Adjusted EBITDA Margin (%)10.5% 10.0% 12.0% 12.8%

Consensus vs actual (Q3 FY2025)

MetricQ3 FY2025 Consensus*Q3 FY2025 Actual
Revenue ($USD Millions)321.95*349.38
Primary EPS ($)0.215*0.28 (Adjusted EPS)
EBITDA ($USD Millions)40.30* (S&P EBITDA)44.55 (Company Adjusted EBITDA)

*Values retrieved from S&P Global. Note: S&P “EBITDA” may not be directly comparable to company “Adjusted EBITDA”.

Segment sales and profitability (Q3)

SegmentQ3 FY2024 Sales ($MM)Q3 FY2025 Sales ($MM)YoY ΔQ3 FY2024 Adj EBITDA ($MM)Q3 FY2025 Adj EBITDA ($MM)Q3 FY2025 Adj EBITDA Margin (%)
Memorialization$202.66 $203.73 +$1.06$38.74 $42.80 21.0%
Industrial Technologies$91.73 $87.90 -$3.83$4.20 $9.05 10.3%
Brand Solutions$133.44 $57.75 -$75.69$16.05 $5.00 8.7%

Key KPIs and balance sheet

KPIQ3 FY2025
Net Debt ($USD Millions)$682.1
Net Debt Leverage (TTM Adjusted EBITDA)3.5x
Total Debt ($USD Millions)$702.5
Operating Cash Flow YTD ($USD Millions)$(33.9)
Debt Reduction in Quarter ($USD Millions)$120
Dividend Declared per Share ($)$0.25 (payable 8/25/25)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA (consolidated, incl. 40% of Propelis for May–Sep)FY2025≥ $190M (updated in Q2 from initial $205M due to SGK pro forma) ≥ $190M Maintained
Quarterly DividendQ3 FY2025$0.24 in Q3 FY2024 $0.25 declared; payable 8/25/25 Raised YoY
Debt TrajectoryQ4 FY2025Expected significant reduction post SGK closing (Q2 context) “Expect further debt reduction in fiscal Q4” Maintained trajectory

Earnings Call Themes & Trends

TopicQ1 FY2025 (Feb)Q2 FY2025 (Apr/May)Q3 FY2025 (Aug)Trend
Strategic alternativesOngoing evaluation Ongoing; SGK closing planned early May “Progressing well,” alternatives identified; update expected in coming months Advancing
SGK/Propelis transactionAnnounced; synergies >$50M anticipated Close in early May; pro forma FY25 adj EBITDA ≥$190M Closed May 1; synergy est. increased to ~$60M; 40% share recognized on one-quarter lag Positive
Industrial engineering & Tesla disputeSignificant headwinds; litigation costs elevated Quotes exceeded $100M since Feb; cost reductions on track Quotes >$150M; margin improvement; Tesla dispute still pressuring sales Recovering demand, legal overhang persists
Warehouse automationPositioning for recovery; AI-driven automation highlighted Order rates improving Higher sales; backlog strengthening; seasonal ramp for peak season Improving
Product ID/printhead (Axian/Axiom)Business stable Continued innovation New printhead “Axion/Axiom” launching fall; synergy with automation workflows Building
Memorialization volumes/pricingLower US deaths; granite backlog normalization Lower unit volumes offset by price realization Dodge acquisition accretive; margins improved via price/productivity Margin resilience
Tariffs/macroTariffs flagged as risk Tariffs considered in outlook Tariffs impacting material costs; largely passed through via pricing Managed

Management Commentary

  • CEO: “We realized a gain on the divestiture of the SGK business… Memorialization and Industrial Technologies segments each reported higher adjusted EBITDA… Non-GAAP adjusted earnings per share was $0.28 for the current quarter.”
  • On Tesla dispute: “The decrease mainly resulted from lower engineering sales… unfavorable consequences of the ongoing Tesla dispute… since the favorable ruling in February 2025, outstanding quotes are now over $150 million and continuing to grow.”
  • On Dodge acquisition: “We expect this acquisition to be nicely accretive to earnings… already begun to realize synergies from integration.”
  • On debt and guidance: “We reduced consolidated outstanding debt by $120 million… we are maintaining our previous earnings guidance of adjusted EBITDA of at least $190 million.”
  • On Axion/Axiom: “We expect our new printhead chip product, Axion, to launch this fall… ~30% lower total cost of ownership… positioned for Sunrise 2027 two‑D barcodes.”

Q&A Highlights

  • Dodge contribution: ~$6M sales in Q3, ~$1M EBITDA; similar run-rate expected in Q4 .
  • Industrial comps: energy/engineering down YoY; warehouse automation offsetting declines; foreign exchange favorable $2.9M to segment sales .
  • Printhead-automation synergy: barcode printing aligns with conveyor/robot workflows in automated warehouses; strategy to embed software in partner ecosystems (e.g., Teradyne) rather than large acquisitions while deleveraging .
  • Energy storage orders: first production-line order landed for a solid-state player; working on ~$50M separator coating line (2x speed of competitors), potential order in 60–90 days; Tesla backlog deliveries minimal amid slowed demand .
  • Portfolio moves: Rotogravure/European packaging sale targeted by Sept 30 with >$30M net cash; Propelis reporting on one-quarter lag included in FY25 guidance .

Estimates Context

  • Q3 FY2025 beats/misses: Revenue beat ($349.4M vs $321.95M consensus); Primary EPS beat ($0.28 vs $0.215 consensus); EBITDA (S&P definition) below consensus (company reports adjusted EBITDA $44.6M vs S&P EBITDA consensus $40.3M)* .
  • Implications: Street likely to raise revenue/EPS near term given resilience in Memorialization and cost reductions; EBITDA definitions differ—expect analysts to reconcile to the company’s adjusted EBITDA and factor Propelis contribution on lag .
    *Values retrieved from S&P Global.

Key Takeaways for Investors

  • SGK divestiture and Dodge acquisition reshaped mix and improved margins; Memorialization is proving a stable cash generator with accretive M&A and pricing power .
  • Industrial Technologies margin recovery (10.3% vs 4.6% YoY) reflects effective cost actions; warehouse automation momentum and quotes >$150M in energy storage underpin medium-term growth .
  • Legal overhang from Tesla continues to suppress engineering sales and drive costs, but February arbitration strengthened MATW’s IP position; watch court attempt to vacate ruling for near-term headline risk .
  • Balance sheet healing underway: $120M quarterly debt reduction, net leverage 3.5x, targeted further reduction in Q4; potential proceeds from European packaging sale provide optionality .
  • FY2025 guidance maintained (≥$190M adj EBITDA including 40% of Propelis for May–Sep) despite mix shift; any acceleration in quotes-to-orders conversion in energy storage could be an upside catalyst .
  • Dividend sustained and modestly lifted YoY ($0.25 vs $0.24), signaling confidence in cash generation amid portfolio transition .
  • Near-term trading lens: Positive narrative on margins, debt paydown, and guidance stability vs legal noise; monitor order conversion in energy storage, warehouse backlog quality, and strategic alternatives update as stock catalysts .