Q4 2021 Matthews International Corp Earnings Call
Greetings welcome to Matthews International Corporation fourth quarter and year end fiscal 2021 financial results.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.
Please note this conference is being recorded.
At this time I'll turn the conference over to Bill Wilson Senior director of Finance and corporate development.
You may now begin.
Thank you Rob.
Good morning, everyone and welcome to the Matthews International fourth quarter and fiscal year end 2021 earnings Conference call. This is bill Wilson senior director of corporate development.
With us today are Joe Burton, <unk>, President and Chief Executive Officer, Steve Nicola Chief Financial Officer.
Before we start I would like to remind you that our earnings release was posted on our website www dot MH EW dot com and the.
Investors section last night.
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 Reform 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'll turn the call over to Steve. Thank.
Thank you Bill and good morning.
We're gonna start with slide four.
It starts a reviewed today some of the key financial highlights from the fiscal 2021 fourth quarter included first our consolidated sales of $438 $8 million for the current quarter.
Tablets, another new quarterly record for the company and represented an increase of $39.7 million or nine 9% compared to a year ago.
Each of our business segments reported sales growth for the fiscal 2021 fourth quarter.
Second during the recent quarter the company generated operating cash flow of $56 million and further strengthen the balance sheet through additional outstanding debt reduction of $28 $8 million.
Since the first quarter of the pandemic March 2020, the company has reduced its outstanding debt by over $200 million.
Lastly, regarding our balance sheet. The company is in the process of terminating and settling its principal domestic defined benefit retirement plans.
During the current fiscal year, our pension accrual declined from $149 $8 million at September 32020.
To $84 $8 million at September 32021, representing a reduction of $65 million in this liability as we continue this process in fiscal 2022, we expect a further significant reduction in this liability by December 31.
2021.
For the year ended September 32021, some of the key financial highlights included.
First our consolidated sales were $1.67 billion, representing an increase of $172 $7 million or 11, 5% growth over fiscal 2020.
Second the company reported adjusted EBITDA of $227 $8 million, representing growth of $24 $7 million or 12, 1% over last year.
Third.
Our cash flow from operations was $162 $8 million, representing another year of strong cash flow generation.
And fourth as a result of the continued strong cash flow the company reduced outstanding debt by $78 million since September 30 last year or $78 $7 million on a net debt basis.
Next moving to our fourth quarter and fiscal year results. The company reported consolidated sales of $438 $8 million for the quarter ended September 32021, and on a GAAP basis reported a net loss of $3 $7 million of <unk> 12 per share for the same quarter last year. The company report.
Net sales of $399 $1 million and net income on a GAAP basis of $7 $4 million or 24 per share.
GAAP earnings for the current quarter included tax charges in connection with the termination of certain of the company's retirement plans.
For the fiscal year ended September 32021, the company reported consolidated sales of $1 $67 billion and net income on a GAAP basis of $2 $9 million or <unk> <unk> per share compared to sales of $1 $5 billion and a GAAP net loss of $87 $2 million.
Or 2.79.
Per share last year, the GAAP net loss a year ago, primarily reflected the impact of a goodwill write down and the SDK brand solutions segment.
Earnings per share on a GAAP basis for both years included the impact of intangible amortization, primarily from the acceleration of the amortization of certain intangible assets and the S. G. K brand solutions segment and charges in connection with our cost reduction initiatives and COVID-19 related costs.
Solidago intangible amortization expense was $23 million or <unk> 57 per share for the fiscal 2021 fourth quarter compared to $17 $9 million or <unk> 43 per share a year ago.
Intangible amortization expense for the fiscal year ended September 32021 was 184 or I'm, sorry, it was $84 $2 million or $1 98 per share compared to $71.5 million or $1 72 per share last year.
On a non-GAAP adjusted basis, adjusted EBITDA, which represents net income before interest expense income taxes, depreciation and amortization and other adjustments for the fiscal year ended September 32021 was $227 $8 million compared to $203 $1 million last year.
In addition, adjusted earnings per share were $3 28 for fiscal 2021 compared to $3.01 last year. These improvements primarily reflected the impacts of higher consolidated sales. In addition to realize savings from the company's cost reduction programs. These increases were.
Partially offset by higher material and labor costs.
For the current quarter, adjusted EBITDA was $52 million compared to $64 $1 million last year earnings per share on a non-GAAP adjusted basis was 80 for the current quarter compared to $1 11, a year ago.
Higher material labor and shipping costs, particularly in the Memorial Ization segment segment were the significant factors in the year over year decline in adjusted EBITDA.
Please see the reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share in our earnings release.
Investment income for the quarter ended September 32021 was a loss of $359000 compared to income of $520000 for the same quarter a year ago.
For the year ended September 32021 investment income was $2 $6 million compared to $2 million last year investment income primarily reflects the changes in value of investments held in trust for certain of the company's benefit plans.
Interest expense for the fiscal 2021 fourth quarter was $7 million compared to $7 $9 million a year ago for the fiscal year ended September 32021 interest expense was $28 7 million compared to $34 $9 million last year.
The declines reflected lower average debt levels and lower interest rates for the current year.
Other income and deductions net for the quarter ended September 32021 represented a reduction to pre tax income of $3000 compared to $1 $8 million a year ago. The significant change primarily reflected a reduction in non service pension costs as a result of the pending retirement plan terminations.
Yeah.
For the year ended September 32021, other income and deductions net represented a reduction to pre tax income of $6 8 million compared to $9 2 million for fiscal 2020.
Other income and deductions include the non service portion of pension and post retirement costs as well as banking related fees and the impact of currency revaluation gains and losses on foreign denominated cash and debt balances.
The company's consolidated income tax expense for the quarter ended September 32021 was $3 7 million compared to $4 million a year ago income taxes for the current quarter included additional tax charges in connection with certain of the pending retirement plan terminations.
Consolidated income tax expense for the year ended September 32021 was $6 4 million compared to a benefit of $18 $7 million last year. The fiscal 2020 benefit resulted mainly from the goodwill write down last year.
Please turn to slide five to begin a review of our segment results.
Memorial <unk> segment sales for the fiscal 2021, and fourth quarter were $195 9 million.
Compared to $177 $7 million, a year ago, representing an increase of $18 million or 10, 3%.
The increase was primarily attributable to higher unit sales of caskets, and cremation equipment and improved price realization higher unit casket sales for the current quarter, primarily reflected COVID-19 related deaths.
For the year ended September 32021 sales for the Memorial <unk> segment were one $769 million compared.
Compared to $656 million a year ago the.
The 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.
Memorial <unk> segment adjusted EBITDA for the fiscal 2021 fourth quarter was $33 6 million compared to $43 $3 million a year ago. The.
The favorable effect of higher sales was offset by the significant unfavorable impacts of higher commodity costs, mainly steel lumbar and bronze compared to a year ago as well as increased labor and freight costs. These cost increases are also expected to have an unfavorable impact on the segment's adjusted EBITDA for.
Fiscal 2022.
For the year Memorial <unk>, adjusted EBITDA was $165 7 million for fiscal 2021 compared to $146 $3 million last year.
The increase primarily reflected the benefits of higher sales and productivity initiatives.
Offset partially by higher material costs, lower margin U K projects and increased labor and freight costs.
Please turn to slide six.
Sales for the SDK brand solutions segment were $188 million for the quarter ended September 32021, compared to $179 $6 million a year ago, representing an increase of four 7%.
The increase primarily reflected higher sales for this segments engineered product business, principally energy solutions for the electric vehicle market.
In addition, the segments retail base sales were higher than a year ago, reflecting continued recovery in these markets as you will recall the segments retail based businesses were significantly impacted by COVID-19.
For the year ended September 32021, the segment sales were $726 9 million compared.
Compared to $693 $1 million last year, representing an increase of four 9%.
Higher sales of engineered products were partially offset by lower retail base sales earlier in the fiscal year changes in foreign currency rates had had favorable impacts of $2 $2 million and $23 $3 million, respectively on the segments current quarter and fiscal year sales compare.
With the same periods last year.
Fiscal 2021 fourth quarter adjusted EBITDA for the SDK brand solutions segment was $24 2 million compared to $28 $8 million a year ago. The decline primarily reflected the impact of an unfavorable change in product mix from a year ago and higher performance based compensation expense.
Offset partially by realized savings from the segment's recent cost reduction initiatives.
The segment's adjusted EBITDA for the year was $99 $7 million compared to $96 million last year, representing an increase of $9 million or 10% higher sales and realized savings from the segment's recent cost reduction initiatives were the primary factors in this improvement.
Please turn to slide seven.
Sales for the industrial technologies segment were $54 $9 million for the fiscal 2021 fourth quarter compared to $41 9 million a year ago, representing an increase of $13 million or 31, 1%.
For the year, the segment's fiscal 2021 sales were $175 $1 million.
Compared to $149 $2 million last year, representing an increase of $25 9 million or 17, 4%.
The segment's sales increases for the quarter and fiscal year resulted from higher sales for both the warehouse automation and product identification businesses.
Incoming orders for these businesses continued to be strong through the fourth quarter, particularly for warehouse automation.
Adjusted EBITDA for the industrial technology segment for the fiscal 2021 fourth quarter was $11 4 million compared.
Compared with $7 5 million a year ago.
The increase primarily reflected the impact of higher sales for the quarter, which was partially offset by higher labor costs increased travel costs and an increase in product development costs.
For the year the segment's adjusted EBITDA was $26 7 million for fiscal 2021, compared to 28 $22 $8 million last year.
Please turn to slide eight.
Cash flow from operating activities for the fiscal 2021 fourth quarter was $56 million compared to $56 $8 million a year ago for.
For the year ended September 32021 cash flow from operating activities was $162 8 million compared.
Compared to eight $184 million last year.
As a result of the company's continued strong operating cash flow the company further reduced outstanding debt by $28 $8 million during the fiscal 2021 fourth quarter.
And $78 million for the current fiscal year.
Net debt, which represents outstanding debt less cash was reduced by $31 $7 million during the fiscal 2021 fourth quarter and $78 7 million for the year.
Again since the initial quarter of the pandemic March 2020, the company has reduced outstanding debt by over $200 million.
Outstanding debt was $763 7 million at September 32021, and net debt was $714 5 million.
The leverage ratio covenant in our domestic credit facility is based on net debt during.
During the current fiscal year, we reduced our net debt leverage ratio from three nine at September 32020 to $3. One at September 32021.
In addition, we are in the process of terminating and settling our principal domestic defined benefit retirement plans during the fiscal year 2021, our pension liability significantly declined from $149 8 million a year ago to $84 $8 million at September 32021.
<unk>.
As we settle the principal U S plan obligations in the fiscal 2022 first quarter, we expect another significant decline in this liability balance by December 31 2021.
Approximately 31 5 million shares were outstanding at September 32021.
During the recent quarter the company purchased approximately 166000 shares under its share repurchase program.
For the year the company purchased approximately 380000 shares at.
At September 32021, the company had remaining authorization of approximately $2 million 659000 shares under the program.
And finally the board this week increase the company's quarterly dividend to <unk> 22 per share on the Companys common stock. This.
This represents our 28th consecutive annual dividend increase since becoming a publicly traded company.
The dividend is payable December 13, 2021 to stockholders of record November 29 2021.
This concludes the financial review and Joe will now comment on our company's operations.
Thank you Steve good morning.
Again this quarter, we performed very well on many levels each of our segments reported higher sales for the quarter, allowing us to report record sales for the quarter and the full year.
During the quarter, we continued to see strong demand in our Memorialization segment, driven by the impact of the Panther.
Amy.
We also saw strong performance in SDK as our European business and saw the benefits of recent cost restructuring initiatives increased energy storage revenues and general volume increases versus prior years, but what we're most pleased with is the performance of our industrial technologies business, which saw an almost 30%.
Increase in revenues, thanks to very strong performance in our warehouse automation business and improved performance in our product identification business.
From an EBITDA perspective, we saw the impact of the inflationary pressures and supply chain challenges throughout our business.
That pressure was particularly felt by our Memorialization segment, where despite strong revenues, our EBITDA was lower due to higher commodity transportation and labor costs.
Similarly, although SDK brand solutions reported higher year over year sales for the quarter.
Changes in our product mix resulted in lower margin projects, providing a more significant part of the revenue increase.
Again, I want however, I want to call out for you the performance of our industrial technologies business, which generated a 50% increase in EBITDA on a year over year basis.
All in all we are very satisfied with our performance for the quarter for the full year and throughout the pandemic.
We've accomplished a lot during the pandemic, let me give you some idea.
As stated above we had record sales for fiscal 'twenty one.
We reported record operating cash flow, having generated $343 million over the past two years.
We had market share gains in many of our businesses, we significantly reduced our debt by over $200 million since the start of the pandemic.
We exited our pension plan, thus further derisking our balance sheet significantly.
We executed on a very aggressive cost restructuring plan and implemented our global services platform.
And most excitingly, we executed on two of the most important strategic initiatives that we have been working on for awhile, and which should benefit us for years to come.
The ramp of our energy storage business.
And the launch of our new product in our industrial technologies segment.
Each of these accomplishments individually would have been significant on their own.
But to accomplish them during a pandemic is truly remarkable.
Want to thank our colleagues around the world for their efforts in helping to achieve these exceptional results.
Now, let's talk about our individual segments.
And our memorial <unk> segment, we delivered strong full year results cemetery products funeral home products and environmental solutions, all reported higher revenue than prior year.
Our backlog and our current order rates in our cemetery products and our environmental solutions businesses continued to be very strong.
And at least at this time, our funeral home products revenues remained strong.
Therefore, we expect another strong year from this business going into 'twenty two.
Unfortunately throughout this the memorial <unk> segment, we are feeling the impact of inclusive inflationary pressures.
No.
That impacted our business, particularly hard in the fourth quarter and will impact our operating results in 'twenty two.
When compared to pre pandemic levels, we are expecting over $50 million of inflationary pressures during 'twenty two in this segment.
We are taking actions to mitigate these increases including raising prices now and in the coming quarters, but we still expect to be impacted negatively.
Similarly, our Brent SDK brand solutions business saw good revenue growth for the quarter and for the full year driven by growth in our energy storage business.
The traditional packaging and brand business.
Brand experience business has gained new accounts, which together with what we hope will be a normalization of the retail sector bodes well for another good year in 'twenty two.
In our energy storage business currently reported as part of the SDK.
Our deliveries finished pretty much as planned with revenues of over $50 million for 2021.
We are projecting around $100 million in revenue for 'twenty, two and currently have more than that in our backlog.
Activity in this business in both the lithium ion battery Calendaring solution and the hydrogen fuel cell solution is very high.
We are continuing to receive inquiries from marquee automotive nameplates each day and in addition to our largest customer we are proud to add is our newest client self force group G. M. B H, a European battery joint venture, which includes Porsche amongst other notable partners.
In our industrial technologies segment for the year higher revenues and EBITDA was largely driven by our warehouse automation business, which also saw a strong quarter.
We are also we have almost a full year of orders in this business, which continues to grow and reflects the widely recognized value of our software solutions.
Our new account wins in this business broadens our portfolio to include some of the best known brands in E Commerce.
The overall industrial technologies business is expected to have another strong year in 'twenty two as orders for product identification equipment earnings have normalized. Moreover, as mentioned above we have launched our new product shortly after the quarter ended.
Although we do not expect significant revenues this year, we're making good progress towards establishing manufacturing processes for significantly more volume, which we expect to see next year.
Our confidence in this new product that was confirmed during the beta testing and by the fact that the beta test customers were the first customers to acquire the new product.
In an effort to better align these segments.
Beginning in the first quarter of 'twenty to.
Our energy storage and services business will be included in the results of industrial technologies.
Together with other fast growing opportunities in this segment energy storage will be get better visibility and hopefully greater respect for its true value.
Next year. This segment is expected to have upwards of $350 million of revenue and about $60 million of EBITDA.
Only three years ago.
These businesses reported materially less revenue and EBITDA.
That's tremendous growth there.
The growth in this newly defined segment is expected to mitigate the impact of inflationary pressures elsewhere and has the most undervalued portion of our business.
I am proud of our team and the results we have generated and what is what is and will remain a challenging environment in many parts of the world.
As we look forward there is still a great deal of uncertainty.
The ongoing impact of the pandemic is yet to be determined inflationary pressures continue to increase.
Our expectation is that retail traffic will normalize we are uncertain of when and to what extent.
The timing of several significant deliveries in our energy storage business are still in flux.
All of these factors and more make predicting our performance next year a challenge.
Our current estimates are that we will continue to grow our revenue next year, but we are expecting a modest decline in our EBITDA given the inflationary pressures we are feeling.
Importantly.
Given our successful efforts in debt reduction, we intend to remain focused on debt reduction, but we are also prepared to begin to make key investments in our portfolio through internal investment and acquisition.
Each of our businesses are considering opportunities to further the strategic positioning of the business.
Finally as noted throughout my comments each of our businesses ended the second year with the pandemic significantly better than before.
All segments have significant orders in house and each of our segments has added new customers throughout the pandemic.
In sum.
We have materially improved our business and we have grown we have growth opportunities in each of our segments.
As a result, we are better company today than at any time in our long history.
I look forward to discussing with the value we see in all of our businesses now lets open up the discussion.
Okay.
At this time, we'll be conducting a question and answer session.
Sorry to ask a question. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
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Thank you and our first question coming from the line of Daniel Moore with CJS Securities. Please proceed with your question.
Jeff Steve Good morning, Thanks for the color and taking the questions.
Good morning, Ann start so maybe to start I wanted to make sure I heard correctly in the last in the last few comments energy storage $50 million of revenue going to over $100 million are very consistent.
And great progress and then you throw out a number of energy storage and surfaces, I think $350 million and $60 million in EBITDA. So what was the timeframe and just.
Maybe level set that.
Second part of your dividend.
I am sorry, if I wasn't clear so what we what we're saying is we intend to move the reporting of our energy storage business and surfaces to industrial technologies together next year, though that entire segments should have $350 million of revenue.
$60 million of EBITDA plus or minus.
And this this will represent our growth businesses and as evidenced what I also said earlier. It was just three years ago. These businesses reported materially less revenue and EBITDA and we expect that kind of continued exposure on the topline and bottomline for the years to come.
We positioned some of the fastest growing businesses in one segment.
Makes perfect sense. Okay. Thank you I apologize and then maybe talk about the cadence of revenue growth as well as probably even more critically margins starting with.
Q1, and an H one.
I assume you feel additional margin pressure, reflecting the timing of price increases to match all of that inflation in the early part of the year as well as the tough comp and memorials.
So you know should we think about EBITDA being down more than each one versus H two Steve any comments there would be helpful.
So Dan let me speak to the year because.
You put your finger on it with respect to adjusted EBITDA.
Next year and that specifically relates for.
For the most part to the commodity cost challenges, we're seeing particularly in memorial <unk>.
Steel lumber copper copper being the main constituent.
And brands, so that's going to that's going to impact us.
Throughout the year not just the first quarter.
Just primarily because of the comparable from a year ago.
When those prices were lower.
But again as we as we start to exit the year, because we saw the impact here in this start in this will not start in this fourth quarter. It actually started before this fourth quarter, but you see the impact of the impact of it this fourth quarter.
Could actually start to see the comparability of those costs.
The comparability challenge start to wane in the fourth quarter and depending on your view on happy on what your view of these commodities are going forward and and the cyclicality of them hopefully and as we see those start to decline.
And at least at a minimum.
Ceases to become a comparability challenge as we exit 'twenty, two and may become somewhat of a tailwind if we see those commodities revert back to their traditional prices. The only color I'll add to that Dan is is timing of pricing you know how that works.
But we generally have raised our prices in our funeral home products business.
<unk>.
On the first of October so the impact we saw from commodities in that part of the business will be somewhat mitigated by the price increase we did not get a sufficient price increase to cover all our costs, we are analyzing whether or not we will.
Intend to when we expect to raise prices earlier than that next year. If these commodity prices remain where they are.
In our Memorialization segment, when it relates to cemetery products and others are at the time.
<unk> of their price increases starting generally after the first of the year.
Got it and I realize we're in a very fluid environment.
But I have to take a stab at it any comments in terms of the degree of magnitude of kind of a modest decline maybe relative to where current consensus expectations are Steve.
Are we in the right ballpark.
And if you don't want to go further I understand.
Yes, we haven't quantified that Dan so I, probably shouldnt I, probably shouldnt comment beyond that but but I think that the term Joe used was modest right. So I think that's a fair assessment, yes, it's difficult to kind of put a full picture out right now because we don't know as I said earlier for example funeral home products are continuing to operate.
The higher than expected rates.
At this time, so that might mitigate some of that as well how long that goes will be questionable all of those things are still fluid and we just don't know yet and the reason for the assessment as modest as we do have growth in our other businesses that are generating margins, we have our cost reduction.
Initiatives that certainly continue.
To favorably impact the cost line. So those are the things that are working to mitigate.
Up to a meaningful degree right.
Impact of commodity costs.
Okay, perfect I'll jump back in queue with any follow ups. Thank you.
Thank you. Our next question is from the line of Chris Mcginnis with Sidoti <unk> Company. Please proceed with your questions.
Hi, good morning, Thanks for taking my questions and nice quarter.
I guess, just maybe starting with the.
Is it the sell force announcement that you mentioned.
In your in your prepared remarks can you just talk about a little bit about that dynamic how long you've been working with them and.
Just what you're providing there thanks.
So.
We provide the same type of Calendaring solution that we provided for the industry for a while now with our largest customers and others.
We've worked with self force and we're working with many others at this point in time through.
Rfps.
RF queues.
For the last 12 to 18 months has been a significant ramp.
And I would as I said in my in my comments, there are a lot of marquee nameplates.
That you would all recognize that we're not at Liberty to talk about at this point in time, but this is not a.
These are not fly by night operations. These are the players in the hydrogen fuel cell business and the players in the lithium ion battery.
Segment for the automotive sector right now.
Great No I appreciate that.
And then just to touch on some other parts of the business just with retail.
S. G. K can you just talk about maybe where you are versus pre pandemic levels and just kind of the expectation of how that continues to.
The trend.
Is it seems like the economy stabilize a little bit more.
I think Chris a fair way to look at it as our revenues are probably down 30% to 35%.
From pre pandemic levels.
And.
This is a people based business so youre still have some fixed costs associated.
Don't want your business walking away I would tell you that our profitability is off more than that.
So we would expect in our forecast would say that over the course of the year gradually we will get to more of a normalized rate.
Where there is conversations going on.
There is a lot of wait and see going on with what happens with both.
The ongoing pandemic impact as well as what the new retail environment is fact is that retail has been underinvested for the last two plus years.
And we expect that that will be a significant uptick for us when that occurs.
Great. Thanks for taking my questions ill jump back in queue.
As a reminder to ask a question today you May press star one from your telephone keypad.
Our next question is coming from the line of Liam Burke with B. Riley. Please proceed with your question.
Thank you and good morning, Joe Good morning, Steve.
Hi, Liam.
On the <unk>.
Memorial Ovation product front.
We saw the deferred sales are we still see.
Thanks.
You had laid out as the.
Great.
Thanks.
Covid are starting to reverse itself.
Theres no question, Liam that our our order rates backlog, whatever you want to call it.
On our cemetery product side are significantly higher than normal.
Yes.
And one part of the business, we've got a year's worth of orders in house, and having difficulties, both getting product in and getting it out the door. So that tells you that not only are we having deferred memorial station. We are still trying to catch up with what is that need.
So the orders are in place. So we were expecting a strong year in that part of our business as we move forward.
Lee in that segment, there has been probably some underinvestment in facilities. When you talk about miles Williams and other kinds of.
Capital type of investments, we're expecting to see that to come back over the last couple of years things have been a little slower.
As you might expect that'll.
And that will continue to come back as well.
Great.
Okay next question will be coming from the line of Bruce Geller with Gallo Ventures. Please proceed with your questions.
Hey, good morning, gentlemen.
Good morning, Bruce.
That was an interesting commentary with respect to now combining energy solutions with the industrial technologies Division.
I applaud your move to do that and I also congratulate you on the incredible success you've had in those businesses.
Thank you.
As you alluded to.
There is.
Potentially a lot of value in that division, which may not be properly reflected in Matthew stock price I'm curious if you continue to feel that way.
Over time and these businesses continue to grow.
At the kind of rate that they are.
Is it is it feasible to potentially spin that business off in order to properly.
Had that value recognized by the market.
Look Chris. Thank you that is clearly my intent is to try to focus people.
<unk> on the value that is embedded in just this business, but I frankly in all three of those businesses all three of those businesses from energy to our warehouse business to a product densification business with its new product and the opportunities presented there are significantly undervalued relative to the markets. They serve.
All of the all options are all on the table as we look forward, our hope and our expectation is the market will begin.
Two.
Two.
Start to realize those values as the numbers start to reflect it putting $350 million and 60 million of EBITDA from a place that was almost.
Half of that just a couple of years ago or whenever it may have been starts to show that and as they continue to land more accounts and we get more legs under ourselves. If we're not seeing the price will have to do what we have to do to kind of realize that value.
Terrific.
My next question relates to.
Earnings per share you alluded to a modest decline in EBITDA in the current year. However.
However, with that declining your interest expense is going down you've also reduced the share count and it sounds like you may continue to do that.
Is it possible that.
The adjusted earnings per share in the current year.
Maybe better than down modestly is it possible to see those flat see the earnings EPS flat on the year or even up.
Yes, I mean, let's put it this way I think it's going to be.
A comparable is going to be easily seen the issue is going to be taxes.
And.
What happens with taxes throughout the year, both in terms of our internal structuring as well as external what happens at the federal level. So it's hard to tell that answer today.
But.
I would expect it to be.
Yes, Bruce we've had the benefit over the last couple of years as you've probably seen of.
Some really good.
Taxes, some good tax planning.
And some benefits in credits.
Over the last couple of years, particularly with some international planning so.
Those things run their course so.
That's part of that's part of what chose referencing in terms of that uncertainty going into next year.
Fair enough My final question relates to free cash flow generation.
It's been very strong past few years averaging.
Close to $4 a share in free cash flow over the past few years is there any reason to believe that that will differ materially.
The current year.
No.
Terrific. Thank you very much gentlemen.
Thank you Bryce.
Our next question comes from the line of Chris Mcginnis with Sidoti and company. Please proceed with your question.
Yes, thanks for taking my questions again, I guess, just two quick modeling question.
Just around one amortization expectation for maybe next year and then second just around with the change in the pension and does that do anything on the income statement or any other impacts throughout the.
Yes.
Thanks.
Yes.
Youre welcome Chris Yes on the intangible amortization, if youll recall.
A couple of years ago.
We accelerated some of the intangible amortization on some of the intangible assets in the <unk> brand solutions segment, some of those should actually become fully amortized.
As we proceed through fiscal 2022, so I expect that number to decline.
And then.
Your second question remind me again.
Just on the change in the pension.
As I had mentioned, yes, yes with respect to the pension.
Theres a service cost component with respect to the pension that should also be declining.
As we wind as we finally settled.
These plants.
Great. Thank you, Matt Thanks, very much I appreciate it and good luck in Q3 or Q1, sorry.
Youre welcome.
Our next question is from the line of David <unk> with Security to fund. Please proceed with your questions.
Hi, guys can you hear me.
Yes, we can David.
How're you doing.
Echo Bruce's remarks, I think the reporting of the divisions and how Youre structuring is great.
The extra granularity.
Along the numbers my sense is that even a 100 million and I understand that it can be.
The timing of shipments can be.
Difficult to predict is still just the tip of the iceberg can I ask the question like this and hope you can maybe give it some context, if the customers that you're working with today and that have committed to orders.
At capacity.
I E. What they've ordered in terms of their existing battery plants.
What do they do reach capacity is there are a number associated with that that you could say as potential just for existing plants.
Well, I mean, I'm not gigawatt or otherwise.
Well were probably not privy to as much what their plans for the existing players, but I can give you a kind of a market.
Level kind of assessment.
Our typical production line for these for this process.
Generate somewhere between 25 and 50 Gigawatts of power.
The amount of electrical power necessary to electrify the global fleet is measured terawatts.
So just do the math.
It's multiple terawatts. So I mean, the number of pieces of equipment necessary to electrify the world will be measured a lot bigger than my current revenue today, we don't expect it will be the only solution in the market.
But right now we are the focus of that effort.
Yes.
And indulge me, one more and I'll stop there and also feel free to not answer.
Everything that you're involved with.
That is new in the battery business is that related to dry battery electrode.
The incremental new sales.
That's a very good question because the fact of the matter is no.
There are some.
I would tell you those were.
We're playing in both fields, both in the dry cell and in the wet sell obviously, our proprietary knowhow on the dry cell is far more.
Cutting edge and far more valuable, but not all players are at that level. Yet we expect all of them will be overtime. So there's theoretically multiple levels of investment that will be needed over the years.
That's excellent. Thank you very much thanks for indulging my questions.
No problem. Thank you David.
Thank you we have reached the end of the question answer session I'll now turn the call over to Bill Wilson for closing remarks.
Thank you Rob and thank you for joining us today and thank you for your interest in that <unk>.
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