Q1 2022 Matthews International Corp Earnings Call
Greetings.
Speaker 1: and welcome to Map Use International Corporation First Water Fiscal 2022 Financial Results Conference call.
And welcome to Matthews International Corporation first quarter fiscal 2022 financial results conference call.
At this time, all participants are in listen only mode.
A question and answer session will follow the formal presentation.
Speaker 1: Question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this call is being recorded.
If anyone should require operator assistance during the conference.
Please press star zero on your telephone keypad.
As a reminder, this call is being recorded.
I would now like to turn the conference or what you.
Your host Steve Nicola.
CFO .
Please go ahead.
Thank you Robert Good morning, and welcome to our call I'm, Steve Nicola the company's CFO and with me today is Joe BARDA Lacy, President and Chief Executive Officer.
Speaker 2: Thank you, Emmett. Good morning and welcome to our call. I'm Steve Nicola, the company CFO , and with me today is Joe Bartolasi, President and Chief Executive Officer.
Before we start I would like to remind you that our earnings release was posted last night on our website www Dot M. A T. W. Dot com in the investors section the presentation for our call can also be accessed in the investors section of the website.
Speaker 2: Before we start, I would like to remind you that our earnings release was posted last night on our website, www.matw.com in the Investors section.
Speaker 2: The presentation for our call can also be accessed in the Investor section of the website.
In addition, beginning this quarter the company is reporting its surfaces and engineered products businesses in the industrial technology segment.
Speaker 2: In addition, beginning this quarter, the company is reporting if surfaces and engineered products businesses in the industrial technology segment.
Speaker 2: It was previously reported in the SGK brand solutions thing.
It was previously reported in the S. G K brand solutions segment. This.
This new segment reporting was filed via form 8-K with the SEC in December .
Speaker 2: This new segment reporting was filed via Form 8K with the SEC in December . Prior period amounts have been adjusted.
Higher period amounts have been adjusted for comparability.
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 companys 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.
Speaker 2: As a reminder, any forward-looking statements in connection with this discussion are being made pursuant to the safe harbor provisions of the Private Security's litigation reform act of 1995. Factors that could cause the company's results that differ from those discussed today are set forth in the company's annual report on Form 10K and other periodic filings with the SEC.
Sir.
Speaker 2: 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 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.
Speaker 2: 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. Now please...
Now please turn to slide four.
To start the financial review today here are some of the key highlights from the fiscal 2022 first quarter.
Speaker 2: It starts the financial review today. Here are some of the key highlights from the fiscal 2022 first quarter.
First our consolidated sales were $438 $6 million for the current quarter compared to $386 $7 million a year ago, representing an increase of $51 9 million or 13, 4%.
Speaker 2: First, our consolidated sales were $438.6 million for the current quarter compared to $386.7 million a year ago representing an increase of $51.9 million or 13.4%.
Each of our business segments reported sales growth for the fiscal 2020 to first quarter.
Speaker 2: Each of our business segments reported sales growth for the fiscal 2022 first quarter.
Second the company's industrial technology segment, which includes the energy solutions warehouse automation and product identification businesses reported sales of $74 $3 million for the fiscal 2022 first quarter compared to $53 $4 million last year, representing an.
Speaker 2: Second, the company's industrial technology segment, which includes the energy solutions, warehouse automation and product identification businesses, reported sales of $74.3 million for the fiscal 2022 first quarter, compared to $53.4 million last year, representing an increase of $20.9 million, or almost 40%.
<unk> of $29 million or almost.
40%.
Adjusted EBITDA for this segment more than doubled to $7 $2 million compared to $3 million last year.
Speaker 2: Adjusted even though for this segment more than doubled to $7.2 million compared to $3 million last.
These increases were mainly driven by continued growth in our energy solutions business and higher warehouse automation sales.
Speaker 2: These increases were mainly driven by continued growth in our energy solutions business in higher warehouse automation sales.
Speaker 2: Third, with respect to consolidated adjusted EBITDA.
Third with respect to consolidated adjusted EBITDA.
The benefit of higher consolidated sales was significantly mitigated by the unfavorable impacts of increased material costs as well as increased labor and freight costs.
Speaker 2: The benefit of higher consolidated sales was significantly mitigated by the unfavorable impacts of increased material costs, as well as increased labor and freight costs.
Fourth the company completed the terminations and termination and settlement of its principal U S defined benefit plan.
Speaker 2: Fourth, the company completed the termination and settlement of its principal U.S. defined benefit plan.
This was a significant factor in our reported GAAP net loss of 62 cents for the quarter, but resulted in a reduction in the company's accrued pension liabilities of over $50 million from September 32021.
Speaker 2: This was a significant factor in the reported gap net loss of 62 cents for the quarter, but resulted in a reduction in the company's accrued pension liabilities of over $50 million from September 30, 2021.
Fifth the company reported an increase in adjusted earnings per share to 74 cents for the current quarter compared to 68 for the same quarter a year ago.
Speaker 2: Fifth, the company reported an increase in adjusted earnings per share to 74 cents for the current quarter compared to 68 cents for the same quarter a year ago.
Next the summary of our consolidated financial results for the quarter ended December 31, 2021 is as follows.
Speaker 2: Next, the summary of our consolidated financial results for the quarter ended December 31, 2021 is as follows.
As I noted the company's consolidated sales were $438.6 million for the quarter ended December 31, 2021, compared to $386 $7 million a year ago, representing an increase of $51 $9 million of 13, 4% each of our business segments.
Speaker 2: As I noted, the company's consolidated sales were $438.6 million for the quarter ended December 31, 2021, compared to $386.7 million a year ago, representing an increase of $51.9 million, or 13.4%. Each of our business segments reported higher sales.
Reported higher sales.
Speaker 2: On a gap basis, the company reported a net loss of $19.8 million or $62 cents per share compared to a net loss of $1.8 million or $6 cents per share for the same quarter last year.
On a GAAP basis, the company reported a net loss of $19 8 million or <unk> 62 per share compared to a net loss of $1 8 million or <unk> <unk> per share for the same quarter last year.
GAAP earnings for the current quarter included non service pension costs of $31 $1 million, which is mainly related to the settlement of the company's principal pension plan.
Speaker 2: Gap earnings for the current quarter included non-service pension cost of $31.1 million, which is mainly related to the settlement of the company's principal pension plan.
In addition, the reported net loss on a GAAP basis for both years included the impact of intangible amortization expense, primarily from the acceleration of the amortization of certain intangible assets and the S. G K brand solutions segment.
Speaker 2: In addition, the reported net loss on a gap basis for both years included the impact of intangible amortization.
Speaker 2: Primarily from the acceleration of the amortization of certain intangible assets in the SGK brand solution segment.
Consolidated intangible amortization expense was $21 $5 million or <unk> 51 per share for the fiscal 2022 first quarter compared to $15 $2 million or <unk> 36 per share a year ago.
Speaker 2: Consolidated intangible amortization expense was $21.5 million, or $0.51 per share, for the fiscal 2022 first quarter, compared to $15.2 million, or $0.36 per share, a year ago.
Both periods also included charges in connection with our cost reduction initiatives and COVID-19 related costs.
Speaker 2: Both periods also included charges in connection with our cost reduction initiatives and COVID-19 related costs.
On a non-GAAP adjusted basis, adjusted EBITDA, which represents net income before interest expense income taxes, depreciation amortization and other adjustments.
Speaker 2: On a non-GAAP-adjusted basis, adjusted EBITDA, which represents net income before interest expense, income taxes, depreciation, amortization, and other adjustments,
Speaker 2: For the fiscal 2021 quarter, was $53.3 million compared to $54.8 million last year. The benefit of the company's consolidated sales growth was offset for the quarter primarily by higher material costs and increased labor and freight costs.
For the fiscal 2022 first quarter was $53 $3 million compared to $54 $8 million last year.
The benefit of the company's consolidated sales growth was offset for the quarter, primarily by higher material costs and increased labor and freight costs.
In addition, the current quarter was impacted by unfavorable sales mix and the S. G K brand solutions segment.
Speaker 2: In addition, the current quarter was impacted by unfavorable sales mix in the SGK brand solutions segment.
Although adjusted EBITDA was slightly lower adjusted earnings per share increased to 74 cents for the current quarter compared to 68 cents last year lower interest expense and income taxes contributed to the increase in adjusted earnings per share from a year ago.
Speaker 2: Although adjusted EBITDA was slightly lower, adjusted earnings per share increased to $0.74 for the current quarter compared to $0.68 last year. Lower interest expense and income taxes contributed to the increase in adjusted earnings per share from a year ago.
Please see the reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share and our earnings release.
Speaker 2: Please see the reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share in our earnings release.
Investment income for the quarter ended December 31, 2021 was $1 million compared to $1 1 million for the same quarter a year ago invest.
Speaker 2: Investment income for the quarter ended December 31, 2021 was $1 million compared to $1.1 million for the same quarter a year ago. Investment income primarily reflects the changes in the value of investments held in trust for certain of the company's benefits.
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 fiscal 2022 first quarter was $6 5 million compared.
Speaker 2: Interest expense for the fiscal 2022 first quarter was $6.5 million compared to $7.7 million a year ago. The decline reflected lower average debt levels and lower interest rates for the current year.
Compared to $7 $7 million, a year ago, the decline reflected lower average debt levels and lower interest rates for the current year.
Other income and deductions net for the quarter ended December 31, 2021 represented a reduction to pre tax income of $31 $7 million.
Speaker 2: Other income and deductions net for the quarter ended December 31, 2021, represented a reduction to pre-tax income of $31.7 million compared to $1.7 million a year ago. The significant change primarily reflected an increase in non-service pension costs as a result of the settlement of the company's principal pension plan.
Compared to $1 $7 million a year ago. The significant change primarily reflected an increase of non service pension costs. As a result of the settlement of the company's principal pension plan.
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.
Speaker 2: 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.
Speaker 2: The company's consolidated income taxes for the quarter ended December 31, 2021 were a benefit of $6.6 million compared to expense of $4 million a year ago.
The company's consolidated income taxes for the quarter ended December 31, 2021 were a benefit of $6 6 million compared to expense of $4 million a year ago.
Speaker 2: Income taxes for the current quarter primarily reflected the benefit of the pre-tax consolidated loss. The prior year primarily reflected additional tax charges in connection with items discreet to the first quarter last year.
Income taxes for the current quarter, primarily reflected the benefit of the pretax consolidated loss. The prior year, primarily reflected additional tax charges in connection with items discrete to the first quarter last year.
Please turn to slide five to begin a review of our segment results.
Speaker 2: Please turn to slide five to begin a review of our segment results.
Sales for the industrial technology segment were $74 $3 million for the fiscal 2022 first quarter compared to $53 $4 million, a year ago, representing an increase of $29 million or 39% the.
Speaker 2: Sales for the industrial technology segment were $74.3 million for the fiscal 2022 first quarter, compared to $53.4 million a year ago, representing an increase of $20.9 million, or 39 percent. The growth resulted from higher sales for both the energy solutions and warehouse automation businesses.
The growth resulted from higher sales for both the energy solutions with warehouse automation businesses.
Speaker 2: In addition, product identification sales improved from the floor.
In addition product identification sales improved for the quarter.
Backlogs and incoming order rates for these businesses continued to be strong through the fiscal 2020 to first quarter.
Speaker 2: Backlogs and incoming order rates for these businesses continue to be strong through the fiscal 2022 first quarter.
Adjusted EBITDA for the industrial technology segment more than doubled to $7 $2 million for the fiscal 2022 first quarter compared with $3 million a year ago. The increase primarily reflected the impact of higher sales for the current quarter, which was partially offset by higher labor costs.
Speaker 2: Adjusted EBITDA for the industrial technology segment more than doubled to $7.2 million for the fiscal 2022 first quarter compared with $3 million a year ago. The increase primarily reflected the impact of higher sales for the current quarter, which was partially offset by higher labor costs.
Please turn to slide six.
Speaker 2: Memorialization segment sales for the fiscal 2022 first quarter were $210.7 million compared to $183.3 million a year ago, representing an increase of $27.4 million or 15%.
Memorial <unk> segment sales for the fiscal 2022 first quarter were $210 7 million compared to $183 $3 million, a year ago, representing an increase of $27 $4 million or 15%.
The increase was primarily attributable to higher unit sales of Caskets Cemetery memorial products and cremation equipment.
Speaker 2: The increase was primarily attributable to higher unit sales of caskets, cemetery memorial products, and cremation equipment.
Speaker 2: Prior unit sales for the current quarter primarily reflected COVID-related deaths.
Higher unit sales for the current quarter, primarily reflected COVID-19 related deaths. In addition improved price realization.
Speaker 2: In addition, improved price realization contributed to the segment sales for the current quarter.
Contributed to the segment sales for the current quarter.
The company also completed an acquisition of a small cemetery products business during the fiscal 2021 second quarter.
Speaker 2: The company also completed an acquisition of a small cemetery products business during the fiscal 2021 second quarter.
Memorialized Asian segment adjusted EBITDA for the fiscal 2022 first quarter was $43 4 million compared to $44 $1 million a year ago.
Speaker 2: Memorialization segment adjusted EBITDA for the fiscal 2022 first quarter was $43.4 million compared to $44.1 million a year ago.
The favorable effect of higher sales was offset by the significant unfavorable impacts of higher material costs, mainly steel lumber in Bronx, compared to a year ago as well as increased labor and freight costs.
Speaker 2: The favorable effect of higher sales was offset by the significant unfavorable impacts of higher material costs, mainly steel, lumber, and bronze, compared to a year ago, as well as increased labor and freight costs.
Please turn to slide seven.
Sales for the S. G. K brand solutions segment were $153 $5 million for the quarter ended December 31, 2021, compared to $150 million a year ago, representing an increase of two 4% the.
Speaker 2: Sales for the SGK brand solution segment were $153.5 million for the quarter ended December 31, 2021, compared to $150 million a year ago, representing an increase of 2.4%.
The increase primarily reflected higher sales from the segment's core brand packaging business and an increase in retail based sales with segments retail based sales for the quarter reflect continued recovery in these markets as you will recall the segments retail based businesses were significantly impacted by the pandemic.
Speaker 2: The increase primarily reflected higher sales for the segment's core brand packaging business and an increase in retail-based sales. The segment's retail-based sales for the quarter reflect continued recovery in these markets. As you will recall, the segment's retail-based businesses were significantly impacted by the pandemic.
Changes in foreign currency rates had an unfavorable impact of $2 $4 million on the segment's current quarter sales compared with the same quarter last year.
Speaker 2: Changes in foreign currency rates had an unfavorable impact of $2.4 million on the segment's current quarter sales compared with the same quarter last year.
Fiscal 2022 first quarter adjusted EBITDA for the SDK brand solutions segment was $15 4 million compared to $21 $8 million a year ago. The decline primarily reflected the impact of an unfavorable change in sales mix from a year ago and higher material costs the segment sale.
Speaker 2: Fiscal 2022 first quarter adjusted EBITDA for the SGK brand solutions segment was $15.4 million compared to $21.8 million a year ago. The decline primarily reflected the impact of an unfavorable change in sales mix from a year ago and higher material costs.
Speaker 2: The segment sales mix for the current quarter reflected a reduction in higher-margin photography-related sales, which were offset by increased core brand packaging and merchandising.
Mix for the current quarter reflected a reduction in higher margin photography related sales, which were offset by increased core brand packaging and merchandising sales.
In addition production inefficiencies related to remote work environments impacted operating margins for the quarter.
Speaker 2: In addition, production inefficiencies related to remote work environments impacted operating margins for the Corps.
Speaker 2: Travel and entertainment costs also increased during the quarter, reflecting some recovery in business travel.
Travel and entertainment costs also increased during the quarter, reflecting some recovery in business travel.
Please turn to slide eight.
Cash flow used in operating activities for the fiscal 2022 first quarter was $27 2 million compared to cash flow provided by operating activities of $35 $3 million a year ago.
Speaker 2: Cash flow used in operating activities for the fiscal 2022 first quarter was $27.2 million compared to cash flow provided by operating activities of $35.3 million a year ago.
Speaker 2: The year-over-year change primarily reflected the company's pension contribution during the current quarter in connection with planned termination. In addition, the current quarter reflected an increase in performance-based compensation payments.
The year over year change, primarily reflected the company's pension contribution during the current quarter in connection with planned termination.
In addition, the current quarter reflected an increase in performance based compensation payments.
Inventories were also higher than a year ago, reflecting in part the impact of recent commodity cost increases.
Speaker 2: Inventories were also higher than a year ago, reflecting in part the impact of recent commodity cost increases.
Outstanding debt was $836 $1 million at December 31, 2021.
Speaker 2: Outstanding debt was $836.1 million at December 31, 2021, compared to $763.7 million at September 30, 2021.
Compared to $763 7 million at September 32021.
Speaker 2: Net debt at December 31, 2021 was $765.1 million compared to $714.5 million at September 30, 2021.
Net debt at December 31, 2021 was $765 1 million compared to $714 5 million at September 32021.
The leverage ratio covenant in our domestic credit facility is based on net debt the.
Speaker 2: The leverage ratio covenant in our domestic credit facility is based on net debt.
Speaker 2: The increase primarily reflected the impacts of the pension funding and working capital changes I just mentioned.
The increase primarily reflected the impacts of the pension funding and working capital changes I just mentioned.
Speaker 2: Our leverage ratio was 3.4 at December 31, 2021.
Our leverage ratio was 3.4 at December 31, 2021.
In addition, as a result of the termination and related funding of our pension plan. The companys accrued pension liabilities declined $51 million during the current quarter from $85 million at September 32000, $21 million to $34 million at December 31, 2021. This line.
Speaker 2: In addition, as a result of the termination of related funding of our pension plan, the company's accrued pension liabilities declined $51 million during the current quarter, from $85 million at September 30, 2021, to $34 million at December 31, 2021. This liability was $149.8 million at September 30, 2020.
Ability was $149 8 million at September 32020.
Approximately 31 6 million shares were outstanding at December 31, 2021.
Speaker 2: Approximately 31.6 million shares were outstanding at the December 31, 2020.
Speaker 2: During the recent quarter, the company purchased approximately 63,000 shares under its share repurchase program. At December 31, 2021, the company had remaining authorization of approximately 2.6 million shares under the program.
During the recent quarter the company purchased approximately 63000 shares under its share repurchase program at December 31, 2021. The company had remaining authorization of approximately $2 6 million shares under the program.
Finally, the board yesterday declared a quarterly dividend of 22 per share on the company's common stock.
Speaker 2: Finally, the board yesterday declared a quarterly dividend of $0.22 per share on the company's common stock. The dividend is payable February 21, 2022 to stockholders of record February 7, 2022.
The dividend is payable February 21, 2022 to stockholders of record February seven 2022.
This concludes the financial review and Joe will now comment on our company's operations.
Speaker 2: This concludes the financial review, and Joe will now comment on our company's operations. Thank you, Steve.
Thank you Steve.
Good morning.
We started off the year very well each of our segments delivered strong revenue growth during the quarter, which helped offset the inflationary pressures that we felt on the bottom line.
Speaker 3: We started off the year very well. Each of our segments delivered strong revenue growth during the quarter, which helped offset the inflationary pressures that we felt on the bottom line.
I want to highlight the particularly strong performance in our newly cast industrial technologies segment, and our Memorialization segment, where the business has delivered double digit top line growth.
Speaker 3: I want to highlight the particularly strong performance in our newly cast industrial technology segment and our memorialization segment where the businesses delivered double-digit top-line growth.
This was a record first quarter revenue performance for the company. Despite the many challenges of the current operating environment.
Speaker 3: This was a record first quarter revenue performance for the company, despite the many challenges of the current operating environment.
Speaker 3: During the quarter, we saw very good top line and bottom line performance in our newly cashed industrial technology segment, thanks to the continued strong performance of our warehouse automation business and the growth of our energy storage business.
During the quarter, we saw very good topline and Bottomline performance in our newly cash industrial technologies segment. Thanks to the continued strong performance of our warehouse automation business and the growth of our energy storage business.
This segment grew topline, 39% and EBITDA more than doubled reflecting the fast growing markets that we serve.
Speaker 3: This segment grew top line 39% and even the more than double reflecting the fast growing markets that we serve.
Speaker 3: Remember, starting this quarter, we have included our energy storage and our surfaces business in this segment. Prior periods have been adjusted to allow for comparability.
I remember starting this quarter, we have included our energy storage in our surfaces business. In this segment prior periods have been adjusted to allow for comparability.
<expletive> .
Together with our product identification business. These businesses represent the fastest growing parts of our company and we expect to begin to demonstrate that growth. This year as we work to deliver exceptionally high backlogs of over $200 million.
Speaker 3: Together with our product identification business, these businesses represent the fastest growing parts of our company, and we expect to begin to demonstrate that growth this year, as we work to deliver exceptionally high backlogs of over $200 million in the combined industrial technology segments of which the backlog of our energy stores business represents over $100 million.
And the combined industrial technology segments of which the backlog of our energy storage business represents over $100 million.
In fact this segment but.
Speaker 3: In fact, this segment, we expect this segment to have revenues of well over $300 million in adjusted EBITDA margins of over 15%, which will help us mitigate the impact of inflation and airy pressures elsewhere in the company.
We expect this segment to have revenues of well over $300 million and adjusted EBITDA margins of over 15%, which will help us mitigate the impact of inflation Larry pressures elsewhere in the company.
It is important to note that this performance is without what we believe will be yet another leg to this growth story or new product in the product identification business, which is expected to add revenues next calendar year.
Speaker 3: It is important note that this performance is without what we believe will be yet another link to this growth story, our new product and the product identification business, which is expected to have revenues next calendar year.
In our energy storage business, we continue to have great interest in our proprietary solution for drive cell lithium ion batteries.
Speaker 3: In our Energy Stories business, we continue to have great interest in our proprietary solution for dry cell lithium ion battery.
Although we only delivered $20 million of revenue during the quarter for our energy storage business, which was a significant increase from last year.
Speaker 3: Although we only delivered $20 million a revenue during the quarter for our energy stores business, which was a significant increase from last year.
Speaker 3: We are still on track to deliver over $100 million for fiscal 22. In fact, during the quarter, our solution has proven its ability to produce, try lithium battery electrode material at high rates of speed, a critical step in the development of our opportunity in this business.
We are still on track to deliver over $100 million from fiscal 'twenty to in fact during the quarter. Our solution has proven its ability to produce dry lithium battery electrode material at high rates of speed.
Critical step in the development of our opportunity in this business.
Also during the quarter we.
Speaker 3: Also, during the quarter, we continue to see strong demand and all the businesses wake up our memorialization segment driven by the impact of the pandemic.
We continue to see strong demand in all the businesses will make up our memorialization segment, driven by the impact of the pandemic.
But also we have previously warned inflationary pressures depressed the profitability of our funeral home products business, which reported a decline in profitability. Despite higher revenues, while exceptional performance in our cemetery products business helped this segment delivered relatively flat year over year EBITDA performance.
Speaker 3: But also we have previously warned inflationary pressures to press the profitability of our funeral home products business, which reported a decline in profitability despite higher revenues while exceptional performance in our cemetery products business helped this segment deliver relatively flat year over year EBITDA performance.
Our backlog in our cemetery products and our environmental solutions business remains at historically high elevated levels.
Speaker 3: Our backlog and our cemetery products and our environmental solutions business remains at historically high elevated levels.
Speaker 3: Impricing actions to help you address the commodity cost inflation and all of the memorialization businesses should help us achieve another
And pricing actions to help address the commodity cost inflation in all of the memorial <unk> businesses should help us achieve another strong year for this segment.
N S. G K the team successfully replace an anticipated decline in volume from a very profitable come but COVID-19 related inefficiencies European slowness in our revenue mix resulted in a challenging EBITDA performance.
Speaker 3: In SGK, the team successfully replaced an anticipated decline in volume from a very profitable come, but COVID related inefficiencies, European slowness, and a revenue mix resulted in a challenging EBITDA performance.
The business is expecting to deliver a solid year going forward as revenues from newly acquired accounts begin to ramp up and have returned to normal levels in the European markets contributed to the overall performance.
Speaker 3: The business is expecting to deliver a solid year going forward as revenues from newly acquired accounts begin to ramp up and return to normal levels in the European markets, contribute to the overall performance.
Speaker 3: All in all, we are very satisfied with the performance for the quarter and confident in our ability to continue to deliver solid results.
All in all we are very satisfied with the performance for the quarter and confident in our ability to continue to deliver solid results.
Speaker 3: During the quarter, we realized the termination of our principal U.S. defined benefit pension plan and distributed the funds to the participants. Thus sending any further lives.
During the quarter, we realized the termination of our principal U S defined benefit pension plan and distributed the funds to the participants thus ending any further liability to the company.
Speaker 3: At one point, not long ago, our outstanding pension liabilities was $150 million.
At one point not long ago, our outstanding pension liability was $150 million.
In order to effectuate his final closure of the plan, we are required to make a $35 million contribution to the plan this quarter because of this contribution our net debt increased by more than normal for the first quarter. However, we remain focused on reducing our debt over the balance of the year.
Speaker 3: In order to effectuate this final closure of the plan, we are required to make a $35 million contribution to the plan this quarter. Because of this contribution, our net debt increased by more than normal for the first quarter. However, we remain focused on reducing our debt over the balance of the year.
As we look to the balance of the year. There is still a great deal of uncertainty.
Speaker 3: As we look to the balance of the year, there is still a great deal of uncertain...
Speaker 3: The ongoing impact of the pandemic is yet to be determined. What death rate we can anticipate for the balance of the year is unclear. Inflationary pressures do not appear to be subsiding. Our expectation is that retail traffic will continue to normalize, but we are uncertain of when and to what extent.
Ongoing impact of the pandemic has yet to be determined what.
What death rate, we can anticipate for the balance of the year is unclear infill.
Inflationary pressures do not appear to be subsiding.
Our expectation is that retail traffic will continue to normalize.
And uncertain of when and to what extent.
The timing of several significant deliver.
Speaker 3: And timing is several significant deliveries in our energy storage business are subject to customer readiness for delivery.
Deliveries in our energy storage business are subject to customer readiness for delivery.
All of these factors and more make predicting our performance for the balance of your difficult.
Speaker 3: All of these factors and more make predicting our performance with a balance of the year difficult.
Despite these challenges however, our current estimates have improved thanks to our strong backlog and pricing actions taken in our businesses as.
Speaker 3: Despite these challenges, however, our current estimates have improved thanks to our strong backlogs and pricing actions taken in our business.
As a result, we believe that we can deliver at least $220 million of EBITDA on a full year basis.
Speaker 3: As a result, we believe that we can deliver at least 220 million dollars of e-rethal in a full-year basis. We also expect our free cash flow for the year to remain relatively consistent with prior year.
We also expect our free cash flow for the year to remain relatively consistent with prior year.
Speaker 3: Although our hope is that we will over deliver, we remain cautious at this time. Now let's open it up for questions.
Although our hope is that we will over deliver we remain cautious at this time now let's open it up for questions.
Okay.
Thank you.
At this time.
Speaker 1: At this time, we will be conducting a question and answer session.
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One moment, please while we poll for questions.
Yeah.
Yeah.
The first question comes from Daniel Moore with CJS Securities. Please go ahead.
Speaker 1: The first question comes from Daniel Moore with CJS Securities. Please go ahead.
Good morning, Joe Good morning, Steve Thanks for taking the questions and the color I appreciate it.
Speaker 4: Morning, Joe. Morning, Steve. Thanks for taking the questions and the color. Appreciate it.
Speaker 4: Good morning, Dan. Start with memorialization. I'm sure we'll talk a lot about the industrials as well, but what was the contribution of the Tuck-In Cemetery Products acquisition? Was that meaningful at all?
Good morning, Dan.
Start with memorial Ovation I'm sure, we'll talk a lot about the industrials as well, but what was the contribution of the tuck in cemetery products acquisition was that meaningful at all.
No. It was modest it was not a significant contributor was it was a tuck in not in California that added maybe six seven and $800000 on a year over year basis on a full year. That's fine. Okay, and then maybe talk about pricing versus volume growth both for caskets, our funeral home products as well as memorials on year.
Speaker 4: not it was modest it was not a significant contributor is it was a takia not in california that added maybe six out eight hundred thousand dollars on a year over your basis on a full year okay and then maybe talk about pricing versus volume growth both you know for caskets or funeral home products as well as memorials
Over year basis.
Speaker 3: Well, without getting into great detail, Dan, let's put it this way. We raised prices in all of our segments, the prices that we raised in our funeral home products.
Well without getting into great detail, Dan, let's put it this way we've raised prices in all of our segments. The prices that we raised in our funeral home products as of October 1st were insufficient to cover our commodity costs recent pricing actions taking effect here in February should help further mitigate that it's a large part of.
Speaker 3: As of October 1, we're insufficient to cover our commodity costs. Recent pricing action taking effect here in February should help further mitigate that. It's a large part of our upward guidance or upward estimation for the balance of the year. So suffice it to say that when it comes to the cemetery products, we've covered our commodity costs. Recent action in the funeral home products allows us to be assured that we got most of that back going forward.
Our upward guidance or upward estimation for the balance of the year. So.
Suffice it to say that when it comes to the cemetery products.
We've covered our commodity cost recent action in the funeral home products allows us to be assured that we got most of that back going forward.
Got it would it would be fair to say that it's more than 50, 50 volume price or the other way around.
Speaker 4: Got it. It would be fair to say that it's more than 50-50 volume price or the other way around it.
Speaker 3: I think it's a fair comment. Rather than comment. Okay, fine. Volume is up as well as price.
I figured out a fair comment okay fine.
Volume volume ends up as well, yeah volume was up as well as price got it.
Speaker 4: Got it. And then you mentioned backlogs remain strong. Obviously, it's only a sample size of a few weeks. But have death rates started to normalize or revert to the mean?
And then you mentioned backlogs remained strong.
It's only a sample size of a few weeks, but have death rates started to normalize or revert to the mean.
Speaker 4: You know, since the end of the quarter, or do we expect volumes to remain pretty elevated in the memorial side for next quarter?
Since the end of the quarter or do we expect our.
Volumes to remain pretty elevated.
Memorial side for next quarter.
Speaker 3: From that perspective, Dan, as you know, the business quite well, the funeral products business is an at-need sale. So we are still seeing higher volumes than we would have anticipated early in our budgeting process.
From that perspective, Dan.
As you know the business quite well.
Funeral home products business is an at need sales. So we are still seeing higher volumes than we would've anticipated early in our budgeting process.
Speaker 3: that we believe will start to subside. As at this point in time, we're still relatively elevated, but we'll see, we expect based on all the published information that we'll start to see a decline in those volumes.
That we believe will start to subside as at this point in time, we're still relatively elevated but we will see we expect based on all the published information that we'll start to see a decline in those volumes beginning latter part of March if not into April the latest.
Speaker 3: beginning latter part of March, if not into April the latest, but
Uh huh.
Speaker 3: That does not tell us what we think is going to happen with cemetery, which typically occurs several months afterwards. So much of what has occurred over the last 60, 90 days has yet to be memorialized in a cemetery, particularly with the cold weather in the north. As we're seeing it right now, cemeteries are not setting markers or stones. So we expect that to continue well into the...
That does not.
Tell us what we think is going to happen with cemetery, which typically occurs.
Several months afterwards, so much of what has occurred over the last 60 to 90 days has yet to be memorialized in cemetery, particularly with the cold weather in the north.
Seeing it right now cemeteries are not setting markers or stones. So we expect that to continue well into the summer.
Perfect. Okay, and then one or two on energy storage and I'll I'll turn it over but you mentioned the number what was the revenue contribution in the quarter I missed it I'm sorry.
Speaker 4: And then one or two on energy storage, and I'll turn it over. But you mentioned the number. What was the revenue contribution in the quarter? I missed it. I'm sorry.
Speaker 3: only 20 million dollars but we have over a hundred million dollars back
Only $20 million, but we have over $100 million of backlog exactly perfect. Okay.
Speaker 4: Exactly. Perfect. Okay. And then can you update us on maybe talk about, you know, or if not specificity orders or that you've booked or dialogue.
And then can you update us on maybe talk about.
You know or if not specificity orders.
Or that you booked or dialogues that you're having with you know.
Speaker 4: that you're having with you know EV electric vehicle OEMs beyond the first flagship customer you know kind of looking out beyond this year just trying to get a better sense of health that your dating traction. Thank you.
E V E electric vehicle Oems beyond the first flagship customer.
You kind of looking out beyond this year, just trying to get a better sense of how thick.
Gaining traction thank you.
Sure Dan I mean, the reality is we are in discussions with just about every major European.
Speaker 3: short-done. I mean, the reality is we are in discussions with just about every major European auto manufacturer or parts manufacturer associated with that. They're at varying degrees of
Auto manufacturer or parts manufacturer associated with that.
There are varying degrees of.
Of development, we hope that we announced last quarter I believe it was last one the one before that that we landed salesforce, which is a porsche that when we can speak openly about that will hopefully be delivered over the course of the year recognize however that in all of these cases, we're not in a sales function.
Speaker 3: of development. We hope that we announced last quarter, I believe it was last for the one before that, that we landed self-force, which is a Porsche. That one we can speak openly about. That will hopefully be delivered over the course of the year. Recognize, however, that in all these cases, we're not in a sales function. We are the solution.
We are the solution once they choose to go through a drive cell batteries.
Speaker 3: once they choose to go through a dry cell of batteries decision. So the timing of some of these delivers are dependent on facilities that have to be built yet.
Batteries decision. So the timing of some of these deliveries are dependent on facilities have to be built yet.
And it also has to be there they are dependent on the formulations that theyre going to use for their drive sales. So.
Speaker 3: And it also has to be, they're dependent on the formulations that they're going to use for their dry.
We are active as to say the least we're also active quite frankly on on the fuel cell side. The hydrogen fuel cell side. There is a lot of activity on that side of it as well that's beginning to ramp up won't necessarily be meaningfully impactful. This year, we expect that to be more meaningful next year.
Speaker 3: We are active, to say the least. We're also active, quite frankly, on the fuel cell side, the hydrogen fuel cell side. There is a lot of activity on that side of it as well that's beginning to ramp up. Won't necessarily be meaningfully impactful this year. We expect that to be more meaningful next year.
Alright, very good I'll jump back with any follow ups. Thanks.
Thank you.
Speaker 1: Thank you. The next question is from Liam Burke with B. Riley Securities. Please go ahead. Good morning, Judge.
Next question is from Liam Burke with B Riley Securities.
Please go ahead.
Good morning, Joe Good morning, Steve.
Good morning Liana.
Yeah.
Sure.
Joe on the warehouse management software there was a tremendous amount of backlog built up for Covid related reasons in your tax didn't have access to the facilities.
Speaker 5: Joe, on the warehouse management software, there was a tremendous amount of backlog built up for COVID related reasons and your tech didn't have access to the facility.
How much of the backlog now is related to that and how much of that is just order growth.
Speaker 5: How much of the backlog now is related to that and how much of that is just order growth?
Both and I would tell you that we are sitting on very very high backlogs relative to that size of that business.
Speaker 3: Both. I would tell you that we are sitting on very, very high back laws relative to that size, that business. We have, we have a full year and we haven't even started the sales function. Typically this,
We have a full year and we haven't even started the sales function typically this.
Speaker 3: This business starts to get active on the sales front after the holiday season. As you know, we just entered the January , we just finished up here on the January month almost. So we will continue to have sales order in takes, but our backlog is consistent with both an increase in sales and delays from prior period to
This business starts to get active on the sales front after the holiday season as you know we just entered the January we just finished up here on the January month, almost so we will continue to have sales order intake, but our backlog is consistent with both an increase in sales and delays from prior period deliveries.
Okay great.
Speaker 5: And on memorialization products, during COVID-19,
And on memorial attention products you.
During Covid you had.
Speaker 5: obviously minimal visitations, which deferred a lot of these sales.
Minimal hesitations, which deferred a lot of these sales.
Speaker 5: How much has the variance create a situation where you're seeing more deferrals or is that story a normalize? I understand that this quarter is seasonally low for the business.
How much has.
The variance created a situation where youre seeing more deferrals or is that starting to normalize I understanding the first quarter is seasonally low for.
For the business.
Difficult for us to do.
Speaker 3: Difficult for us to tell, Liam, when we talk about that, but what we can tell you is that the most recent omnichron spike that occurred for the last 60 to 90 days, whatever it may be, we don't believe most of that has been memorialized.
Liam when we talk about that but what we can tell you is that the most recent omni kron spike that occurred for the last 60 to 90 days or whenever it may be we don't believe most of that has been memorialized yet.
Speaker 3: Given weather, giving, from the timing, we expect that's what's going to flow through the latter part of the year. And we still think there's opportunity beyond that. We picked up market share both in the stone side as well as on the more moral side. We have seen during, throughout the crisis, a delayed investment in mausoleum construction that has picked up as well. We're still projecting at this point in time a strong overall delivery in our memorialization.
Given whether given the timing we expect that's what's going to flow through the latter part of the.
The year.
And we still think there's opportunity beyond that we picked up market share both on the stone side as well as on the more moral side, we have seen during.
During throughout the crisis, a delayed investment in Mazda Liam construction that has picked up as well we're still projecting at this point in time a strong.
Overall delivery.
In our Memorialization segment.
Speaker 6: Great. Thank you.
Great.
Thank you Joe.
Thank you.
The next question is from David Knight Wood with the curator fund.
Speaker 1: The next question is from David Nywood with the Curator Fund.
Please go ahead.
Hey, guys.
Speaker 7: Hey guys, at a recent investor conference presentation you made, I believe you said that you are working primarily on the energy storage side with Western OEMs and manufacturers and not Asians, partly for IT protection reasons.
At a recent Investor Conference presentation, you made.
I believe you said that you are working primarily on the energy storage side.
Eastern Oems and manufacturers.
Not Asians.
And there's more IP protection reasons.
Speaker 7: as well as other things. I think you also indicated that you are well-protected and the only one with dry cell technology out there said that if anyone else was doing a cylindrical dry cell, you believe they would be in violation of your patent.
The only couple of things.
I think you also indicated net are well protected.
The only one with price on technology out there and if anyone else was doing a ninja.
Integral dry well.
We would be in violation.
Portfolio.
Speaker 7: My understanding is that dry sal, dry sal, primary application is for $46.
My understanding.
Price now.
Fine jewelry.
46 <unk> batteries.
Speaker 7: A-B-Vadres, a couple of Asian manufacturers.
Coupled with Asian manufacturers.
Speaker 7: have announced that they are attempting to commercialize 368. The question is, if they are, is it fair to assume that they are using WIT cell technology? Where is their potential if they may be in violation of your patterns? I'll ask the question. So.
And we announced a new.
Commercialized munitions.
The question is.
If they are is it fair to assume that they are using with cell technology, where is there potential that they may be in violation.
Your patents.
Good question Joe.
Speaker 3: haha thank you thanks day of uh... you know what would work your were getting pretty deeply into the woods and be glad to get your far as i can so forty six eighty is nothing more than the mention of size of the actual battery cell whether it's wet cell or dry cell it doesn't matter it's a forty six by eighty set uh... millimeter
Thanks, Dave.
Where we're getting pretty deeply into the woods and be glad to get you as far as I can so 46 80 is nothing more than dimensional size of the actual battery cell, whether its wet sell or dry sell it doesn't matter, it's a $46 80.
A millimeter.
Battery cell so the.
Speaker 3: battery cell so the I'm not we are not in the business of producing the actual battery but for what I know That is the preferred size of the battery cell that all the auto folks are moving towards now having said that We don't believe there's anybody in the marketplace today that is producing a dry cell electrode battery At this time for market for market purpose
We are not in the business of producing the actual battery, but from what I know that as the preferred size of the battery cell that all of the auto folks are moving towards now having said that we don't believe there's anybody in the marketplace today that is.
Producing a dry cell electrode battery.
At this time.
For market for market purposes.
Speaker 3: We are obviously very comfortable that we are a leader in that space. When it comes to our IP protection, let me clarify exactly where we are. We have filed patent applications around the world that are publicly available for just about anybody to see. Those patent applications largely relate to the dry cell technology that we've been speaking about, and while those patents are being prosecuted, we have taken the position and we have a freedom to operate.
We are obviously.
Very comfortable that we are a leader in that space. When it comes to our IP protection, Let me clarify exactly where we are we have filed patent applications around the world that are publicly available for just about anybody to see those patent applications largely related to the dry cell technology that we've been speaking about and.
Until those while those patents are being prosecuted we have taken the position that we have a freedom to operate more importantly.
We know that we have been working in this space longer than many event not everybody in the world. We've started these projects years ago through the development and some research and development we've done in our German businesses. So we think our head start in this space is significant.
Speaker 3: We know that we have been working in this space longer than many of it, not everybody in the world. We've started these projects years ago through the development, some research and development we've done in our German businesses. We think our heads start in this space is significant and then how the patents get prosecuted and ultimately be issued, we will tell.
And then how the patents get prosecuted and ultimately be issued.
We will tell.
Thanks, a lot and I appreciate the color on the <unk> question.
Speaker 7: Excellent. I appreciate the code on the deep and weird questions. Thank you very much.
Thank you very much.
Thank you. The next question is from Chris Mcginnis with Sidoti and company. Please go ahead.
Speaker 1: Okay, thank you. The next question is from Chris McGinnis with Sidoti and Company. Please go ahead.
Good morning, Thanks for taking my questions and nice quarter.
Speaker 8: Thank you for taking my questions. A nice quarter. Good morning. The final breath.
Good morning, Andrew.
I'm sorry.
Speaker 8: Just to follow up on energy, you talked about the hydrogen fuel side. I thought that was a few years out. So can you just, I guess, explain the difference between the two and the timing that you think it sounds like hydrogen may be revenue producing
Just a follow up on energy you talked about the hydrogen fuel side I thought that was a few years out. So can you just I guess explain the difference between the two and the timing that you think it sounds like hydrogen maybe.
Revenue producing next year is that correct.
Well it is revenue producing at this point in time, albeit at a much lower level than our batteries, we have about $1 million of revenue that we're expecting this fiscal year as we do development projects for a lot of Oems.
Speaker 3: Well, it's revenue producing at this point in time, albeit at a much lower level than our battery cells. We have about a million dollars of revenue that we're expecting this fiscal year as we do development projects for a lot of OEM.
Speaker 3: But it's a similar rotary processing.
But the Sim, it's a similar rotary processing technology that we have experienced with that ends up in bossing.
Speaker 3: technology that we have experience with that ends up embossing the bipolar plate, which is the key component, one of the key components to a hydrogen fuel cell stack. We're working with the same OEMs that we work with on the other side. All of them are exploring, in some form or fashion, hydrogen as well as lithium as a alternative solution for green energy. As we understand it, and let me clarify, we are not.
The the bipolar plate, which is the key component one of the key components to hydrogen fuel cell snack, we're working with the same Oems that we work with on the other side all of them are exploring in some former fashion hydrogen as well as lithium.
Alternative solution for Green energy.
As we understand it.
Let me clarify we are not the OEM. So I don't know what their intent is but as we understand that hydrogen will have a different application.
Speaker 3: the OM, so I don't know what their intent is, but as we understand it, hydrogen will have a different application, maybe over-the-road trucking or local delivery trucks.
Maybe over the road trucking or local delivery trucks versus a battery, which is more of the passenger side, but I'll give you that with a caveat and let you kind of explore beyond that.
Speaker 3: Versus a battery which is more the passenger side, but I give you that with a caveat and let you kind of explore beyond
I appreciate that thank you.
Speaker 8: I appreciate that. Thank you. And then just a couple more questions. Just on the moralization and the margin profile, how, it sounds like your pricing's catching up. Does that mean that the margin profile there should go revert back to historical averages? Or how long do you think it takes to get the...
And then just a couple more questions just on memorial ovation and the margin profile.
It sounds like your pricing catching up does that mean that the margin profile there should revert back to kind of historical averages or how long do you think that it takes to get there.
Speaker 3: We expect that to be closer to historical averages this quarter. The one we're in.
We would expect that to be closer to historical averages this quarter.
Now the one we're in excuse me.
Right.
Speaker 8: Right, that's right. Exactly, that's what I'm saying. And then there's some more questions just around SGK. Any changes in that market that make you think that historical margin there is still achievable?
Thank you.
And then a similar question just around SDK any any.
And that market and I think they.
What makes you think that the historical.
Margin there is still achievable. Yes. We are we are seeing some life and increase like we saw this quarter, we're starting to see more life maybe into the spring early summer on the in store side of the business, whether it be private label packaging and or the in store display work.
Speaker 3: Yeah, we are seeing some life, increased life. We saw it this quarter, we're starting to see more life, maybe into the spring, early summer, on the in-store side of the business, whether it be private label packaging and or the in-store display work. We are expecting that to pick up nicely over the balance of the year, which will help offset a lot of what we've seen from a struggle in the last couple of years.
We are expecting that to pick up nicely over the balance of the year, which will help us help offset a lot of what we've seen from a struggle.
Last couple of years.
Great.
Speaker 8: And then just, you know, I understand the edge of the pension payment, this program or this quarter. Just on share of purchase, do you still expect now that maybe you're past that, that share of purchase becomes more of a use of cash going forward? Just your thoughts are on that given the size of the authorization.
And then just I understand the added the pension payment this program or this quarter just on share repurchase.
Do you still expect now than maybe you have in your past that.
That share repurchase becomes a more of a use of cash going forward just your thoughts around that.
Given the size of the authorization.
Chris Yes.
Speaker 2: Chris, yes, I think it does. I think it does become a part. We still plan to prioritize debt repayment during the year, during the balance of the year.
It does I think it does become a part we still plan to prioritize debt repayment during the year during the balance of the year, but I do think that share repurchases certainly becomes more.
Speaker 2: But I do think that chair repurchases certainly becomes more a bigger part of that capital allocation.
A bigger part of our capital allocation clearly.
Speaker 3: Clearly, Chris, at what we believe is a 12% free cash flow yield, our stocks are a pretty good investment for us to make.
Nearly Chris.
What we believe is a 4% 12% free cash flow yield.
Stocks are pretty good investment for us to make it.
Speaker 3: At a minimum, I think you'll find us out there supporting our price if we think it gets unreasonable out there.
At a minimum I think youll find us out there supporting our price if we think it's unreasonable out there and I think today is unreasonable.
Speaker 8: Great, I really appreciate the time and good luck in Q3.
Great I really appreciate the time and good luck in Q3.
Thank you.
Thank you.
Speaker 1: Thank you. The next question is from Justin Bergner with Gabelli Funds LLC. Please go ahead. Good morning, Steve.
The next question is from Justin Bergner with Gabelli funds LLC. Please go ahead.
Good morning, Steve Good morning, Joe.
Good morning, good morning, Justin.
A nice first quarter I just wanted to ask about the $220 million plus EBITDA Guide clearly you didn't quantify the guide before but you suggested that the 220 plus number wasn't improvement should I infer from your comments that most or all of that improvement in your outlook.
Speaker 9: uh... nice uh... first quarter i'd just want to ask about the two hundred twenty million plus you get that guide clearly didn't quantify the guide for but you suggested that the two twenty plus
Speaker 9: Should I infer from your comments that most or all that improvement in your outlook is coming?
Coming from better performance in the morning realization segment and sort of an unchanged view on S. G. K in industrial technologies or is that stuff. So I would.
Speaker 9: more utilization segment and sort of an unchanged view on SGK and industrial technology.
Speaker 3: So I would I would tell you just in that it's it's it's too too full I would tell you the large part of it can be better pricing on the memorialization side which gives us comfort That we're gonna get there, but I would also tell you we built back log in some of the most profitable businesses that we have including memorialization You know when we gave what I we want to be called a guidance here in November if you recall we had not really entered the on the sort of said Krun.
I'd tell you just in that it's it's too twofold.
I would tell you the large part of it is can be better pricing on the memorialization side, which gives us comfort that we're going to get there, but I would also tell you. We've built backlog in some of the most profitable businesses that we have including memorial position.
When we gave.
We wanted to call it guidance here in November if you recall, we had not really entered the omnicom.
The prices that were faced or to the extent that we face. It we have seen significantly higher than anticipated the desk during that period.
Speaker 3: crisis that we're faced or to the extent that we face it. We've seen significantly higher than anticipated deaths during that period and we think that'll flow through and that's what's improved our guys.
And we think that will flow through and that's what's improved our guidance as well.
Great. Thanks for that color Mike.
Speaker 9: Great, thanks for that color. My second question relates to your comment about improving the speed for the dry lithium battery.
My second question relates to your comment about improving.
<unk>.
Speed for the dry lithium battery electrodes in your prepared remarks.
Maybe just for the benefit of the listeners could you.
Maybe provide a little more detail on what you've accomplished there in terms of production.
So, yes without getting into very much the specifics frankly, what we are the key for this whole industry is really getting into production level equipment equipment that can it's one thing to be able to produce dry lithium electrode material in a laboratory that you can produce one or two or three batter.
Speaker 3: So, yeah, without getting into this very much the specifics, frankly, what we are, you know, the key for this whole industry is really getting into production level equipment, equipment that can, it's one thing to be able to produce dry lithium electrode material in a laboratory that you can produce one or two or three batteries to test. It's another thing to get it into production right.
He is the test it's another thing to get it into production rates.
Speaker 3: We suffice it to say that we are now at production rates with our equipment, and which means we've proven that it is a functional piece of equipment that can help produce dry solar them for the industry going forward. We're a lot more confident today than we have been before, and I think that confidence will be demonstrated as more and more OEM start to realize that we are that solution that they can go to.
Suffice it to say that we are now at production rates with our with our equipment.
Which means we've proven that it is a functional piece of equipment that can help produce dry cell lithium for the industry going forward.
We're a lot more confident today than we have been before.
And I think that confidence will be demonstrated as more and more Oems start to realize that we are that solution that they can go to.
Got it. Thank you and then lastly, with the 10% EBITDA margin industrial technologies in the first quarter.
Speaker 9: got it thank you uh... and then lastly with the ten percent even dot margin industrial technologies in the first quarter and served the guide for more of a mid
And sort of the guide for more of a mid teens type margin what are the drivers of that improved margin in industrial technologies as the year progresses to get to that 6% average stores.
Speaker 3: So, we knew that by deduction here, we had $20 million worth of energy storage business that was delivered during the quarter, and I said we're going to deliver around $100 million. We have $80 million yet to be delivered over the next couple of quarters, which right now is producing at pretty good margins in that range that we spoke about.
So.
We knew that by deduction here, we had 20% $20 million worth of.
Energy storage business that was delivered during the quarter and I said, we're going to deliver around $100 million.
We have $80 million yet to be delivered over the next couple of quarters, which right now is producing it pretty good.
Margins in that range that we spoke about secondly.
What we are seeing in the order rate of our warehouse automation business is fairly significant software related business. We have some modest hardware related sales in that business.
Speaker 3: What we are seeing in the order rate of our warehouse automation business is fairly significant software related business We have some modest hardware related sales in that business a much we are much more driven by the by the software But sometimes in any given quarter we may have more than anticipated hardware related sales which come in a lower Margin software generates a better margin for us as you might expect and we have more software So software sales coming through the balance of the year rate
More driven by the by the software, but sometimes in any given quarter. We may have more than anticipated hardware related sales, which come in at a lower margin software generates a better margin for us as you might expect and we have more software software sales coming through the balance of the year.
Great. Thank you.
It takes care of my questions I appreciate it.
Yeah.
Thank you. The next question comes from Scott Blumenthal with Emerald advisors.
Speaker 10: Thank you. The next question comes from Scott Blumenthal with Emerald Advisors. Please go ahead.
Please go ahead.
Good morning, Joe and Steve.
Good morning, Good morning, Scott.
Hey, I wanted to I wanted to kind of step back here because there are a couple of things that you guys mentioned that.
Speaker 11: Hey, I want to kind of...
Speaker 11: Step back here because there are a couple of things that you guys mentioned that
Speaker 11: I was trying to do a few things at the same time. Joe, did you mention that we're not going to see meaningful revenues from the new identification, new marching system until next year?
Yeah, I was trying to do a few things at the same time, Joe did you mentioned that we're not going to see meaningful revenues from the new identification new marching system until next year.
Speaker 3: Or am I mistaken? That is correct. That is correct. What we've done, Scott, is over the course of the year, we've had product in beta testing that has been very successful. And we are now taking, much like the lithium ion battery business, we're taking it out of the laboratory and sending it to a silicon fab chip manufacturer who will do this more professionally to produce the kind of scale necessary to produce mass quantities.
Yeah I missed that.
That is correct that is correct we are what we've done.
Got us over the course of the year.
We've had product in beta testing that has been very successful and we are now taking.
Much like the lithium ion battery business, we're taking it out of the laboratory and sending it to a silicon fab chip manufacturer to we'll do this more professionally to produce the kind of scale necessary to produce mass quantities of silicon chips. Those that is expected to take the better part of this fiscal and calendar year. So we.
Speaker 3: Those, that is expected to take the better part of this fiscal and calendar year. So we expect to be in market with quantities. It doesn't mean we're not selling it today. We're getting very, very, very modest. It's just hand-built machines.
Expect to be in market with quantities. It doesn't mean, we're not selling it today, we're getting very very very modest at just hand built machines at this point.
Okay, and the margins Joe on that.
Speaker 11: Okay, and the margins, Joe, on that, that you expect.
You expect.
Yes.
Compared to the.
Speaker 11: compared to the current generation of marching systems. I suppose they would be much better, right?
The current generation of marching system.
I suppose that they would be much better right.
Well, there's two aspects to the product because some first off obviously, we expect the proprietary nature of the solution to bring better margins on the equipment itself, but this is a little bit of the razor and razorblade type of industry as many of you know.
Speaker 3: Well, there's two aspects to the product. So first off, obviously we expect the proprietary nature of the solution to bring better margins on the equipment itself. But this is a little bit of the razor and a razor blade type of industry, as many of you know, there is a proprietary ink delivery system that is part of the new product, which requires you to buy our ink. Ink is a very profitable part of our business. Once we get the scale and get the volumes, the delivery of ink will drive the margins where we want
There is a proprietary ink delivery system that is part of the new product, which requires you to buy our ink Inc. Is a very profitable part of our business. So once we get to scale and get the volumes the delivery of ink will drive the margins, where we want it to be.
Okay Super and can you kind of characterize or frame the market opportunity there for us.
Speaker 11: Okay, super, can you kind of characterize or frame the market opportunity there for us?
We've talked about publicly in the past the market is about a 161 $7 billion market. We play a very very very small part of that market today our product is.
Speaker 3: We've talked about it publicly in the past. The market is about a $1.61 billion market. We play a very, very, very small part of that market today. Our product is a, that is currently in market is very specific to a heavy industrial setting, more for the lumber and the gypsum board and construction related products. It's rugged, it operates very well. It is hard to displace and very profitable for us.
<unk> is currently in market is very specific to a heavy industrial setting more for lumber in the gypsum board and manufacturing construction related products. Its rugged it operates very well it is hard to displace.
And very profitable for us.
Speaker 3: The new product will operate. We have a product currently that operates in what's called the fast-moving consumer goods, things that work like the bottoms of a can of a beer or food products or fast-moving consumer goods coming down the lines at high rates of speed. Our product, albeit qualitatively competitive,
The new product will operate we have a product currently operates in what's called the fast moving consumer goods things like the bottoms of academy beer or food products or fast moving consumer goods coming down lines at high rates of speed or product, albeit qualitatively competitive.
Speaker 3: We do not have the service team that's necessary on a global basis to be able to confront them. So the team has confronted that market with a much easier self-maintain product. So if you take a look at the $1.61 billion market we referred to earlier, about a third of its product, about a third of its ink, and about a third of it is repair and maintenance.
We do not have the service team that's necessary on a global basis to be able to confront them. So the team has confronted that market with a much easier self maintained product. So if you take a look at the 161 $7 billion market. We referred to earlier about a third of it is product about a third of it is ink in a bottle.
Third of it is repair and maintenance, we've attacked that one third or roughly $5 million to $600 million worth of revenue with a disposable front end printed that will make it easier for operators to do the maintenance without us having to build and repair and maintenance team around the world We think.
Speaker 3: We've attacked that one third or roughly five to six hundred million dollars worth of revenue with a disposable front end printhead that'll make it easier for operators to do the maintenance without us having to build a repair maintenance team around the world. We think our market share could be significant over time. It's going to take some time to get some credibility in the market having to not have a service team around the world to be able to do that for them. But we believe once it catches hold, it could be significant.
Our market share could be significant over time, it's going to take some time to get some credibility in the market having to not have a service team around the world to be able to do that for them, but we believe once it catches hold it could be significant.
Okay. That's great color. Thank you I appreciate that so this is going to broaden the market for that product and also enable you to serve SCR equipment using fewer people.
Speaker 11: Okay, that's great color. Thank you. I appreciate that. So this is going to broaden the market for that product and also enable you to service your equipment using fewer people.
That's the game.
Got it okay. Thank you Steve can you maybe.
Speaker 11: got it. Okay, thank you. Steve, can you maybe answer a couple of questions about the, what happens next with regard to the pension? I know that you booked the liability, you guys settled and terminated. What happens next? Do you find an insurance company then to administer it? Or is there anything less to do here?
I'll answer a couple of questions about the Uh huh.
Happens next with regard to the pension.
No that you booked a liability you guys settled and terminated what happens next do you find an insurance company then to administer it or.
Is there anything left to do here.
There's one small piece Scott.
Speaker 2: There's one small piece that's left to take place and that'll happen in October .
Left to take place and that will happen in October .
Speaker 2: There's a portion of our plans that is still left to be liquidated.
There's a portion of our plans that is still left to be liquidated, but the heavy lifting the main U S pension plan that youre, referring to we've already we've already completed those settlement activities.
Speaker 2: but the heavy lifting the main US pension plan you're referring to uh... we've already we've already completed those settlement activities uh... we have we have offered employees the choice between lump sum and a new adizations
We had offered employees the choice between lump sum and annuity <unk>.
Speaker 2: The lump-sum payments have been made, and the annuitization purchases have already been made as well. So those are all completed. That was really what took the funding, if you will.
Lump sum payments have been made and the annuity is Asian purchases have already been made as well. So those are all completed that was that was really what took the.
Funding if you will.
Speaker 2: We completed the funding for that in the first quarter. So where we sit today.
We completed the funding for that in the first quarter, so where we sit today with approximately $34 million in liabilities.
Speaker 2: with approximately $34 million in liabilities.
Speaker 2: The U.S. main plan, that's already out of that number. There's one supplemental plan in the U.S. that will be settled in October of next year. And then we will be left with one overseas plan that'll be permanent. 10 million dollars.
The U S main plan, that's already out of that number there's one supplemental plan in the U S that will be.
Settled in October of next year, and then we will be left with one overseas plan that'll be permanent.
$10 million $10 million.
And accrued liabilities.
Speaker 3: and accrued liability. Yeah, Scott, I think the most underappreciated part of this whole process over the last, in this entire COVID pandemic, is together with that $150 million liability we took off our books, we've had $200 million plus of revolver. We've improved our balance sheet by $350 million during this time.
Scott I think the most underappreciated part of this whole process over the last.
This entire Covid pandemic is together with $150 million of liability that we took off our books, we had $200 million plus revolver.
We've improved our balance sheet by $350 million during this time period.
Speaker 3: This is bringing closure on a significant liability hang that's been on our books for quite a while.
This is bringing closure on a significant liability hang that's been on our books for quite a while.
For us, it's a big item.
Many of US have noted Joe and we really really do appreciate all of the work that you guys have done there.
Speaker 3: Many of us have noted, Joe, and we really, really do appreciate all of the work that you guys have done there. So, maybe we can... Noting it and driving to stock prices is another discussion, Scott.
So maybe we can owning it and drive it known and get in driving the stock price is another discussion Scott.
Hopefully we've informed a few other people here in the last couple of minutes.
Speaker 11: Well, hopefully we've informed a few other people here in the last couple of minutes. At least pay attention to that. Steve, do you guys have, have you changed or, you know, what's the leverage target at this point where, I know that, you know, we've come down.
Please pay attention to that Steve do.
Do you guys have.
Have you changed or what's the leverage target at this point, where I know that we've come down.
Turning a half or so.
Speaker 11: turn and a half or so over the last six to eight quarters here. Ultimately, what's the target here where we're going to be comfortable, where you may then pivot to more of the share repurchase that you referred to?
In the last six.
Six to eight quarters here.
Intimately, what's the target here, where we're going to be comfortable where you may then pivot to more of the share repurchase that you.
Referred to earlier.
Scott Yes.
Speaker 2: Scott, yes, our emphasis still this year is going to be on de-levering. We exited the quarter at a net leverage ratio of 3.4, which is up from the 3.1 at the end of September . So our emphasis is still going to be to drive that down closer to 3 again by the end of this fiscal year.
Our emphasis still this year is going to be on Delevering, we exited the quarter at a net net leverage ratio of three <unk> four which is up from the three one at the end of September .
So our emphasis is still going to be to drive that down closer to three again by the end of this fiscal year, but having said that we do plan. We do think at these levels. We feel we can be more flexible and more active in the repurchase program. This year.
Speaker 2: But having said that, we do plan, we do think at these levels, we feel we can be more flexible and more active in the repurchase program this year.
Okay.
Speaker 11: Okay. That's fair enough Steve. And I guess my last one here, if I might, you mentioned a little bit of a currency headwind, I believe, during the quarter. And I'm wondering what your thoughts are for the year here to expect that to turn around or...
That's fair.
Fair enough, Steve and I guess my last one here if I might you mentioned a little bit of a currency headwind I believe during the quarter.
And I'm wondering what your thoughts are.
For the year here do you expect that to turn around or.
Hi, how are you looking at that.
Alright, Scott it in total for the company on revenues it.
Speaker 2: rights got it in in total for the company on revenues uh... it was about a four million dollar headwind compared to a year ago uh... i think the outlook for the year it's it's it's hard to say uh... you might you might have a better feel on on on currency movements uh... but
It was about a $4 million headwind compared to a year ago.
I think the outlook for the year, it's hard to say.
You might you might have a better feel on currency movements, but.
Keeping in mind that our principal currencies.
Outside the U S dollar would be the euro and the British pound.
I really think with interest rate movements in the U S and how the economy, how the economy react for.
For the rest of the year is going to drive that so.
I really I really couldnt say beyond that.
Okay, Steve Fair enough. Thank you great quarter.
Thanks Scott.
Yes.
Thank you. The next question comes from Daniel Moore with CJS Securities. Please go ahead.
Speaker 1: Thank you. The next question comes from Daniel Moore with CJS Securities. Please go ahead.
Thank you again, just really housekeeping stuff.
Speaker 4: Thank you again. Just really housekeeping stuff, and maybe this is self-evident, but what's the quarterly run rate for pre-tax pension expense going forward? Is it next to nil? Still meaningful just in terms of the adjustment?
And maybe this is self evident, but what's the quarterly run rate for you.
Pre tax pension expense going forward is it the next day mill still meaningful just in terms of the adjustments.
It should be it should be.
Speaker 4: uh... it should be very it should be uh... uh... next to no relatively speaking than it should be insignificant uh... certainly certainly less than certainly less than a million dollars for the rest of the per quarter for the rest of the year going forward great and same for amortization there's a couple different numbers and it uh... with you i think you mentioned twenty one point five is that sort of a good runner-up or is this one times in there with the good runner-up parameterization going forward
Next to nil relatively speaking Dan it should be.
Insignificant certainly certainly less than certainly less than a $1 million for the rest for per quarter for the rest of the year going forward, great and same for amortization. There was a couple of different numbers in it.
I think he mentioned 21 five is that sort of a good run rate or is there. Some one times in there what's the good run rate for amortization going forward.
In the near term that that that's still going to be the run rate, although as we as we get closer to the end of the year and into next year, you should start to see that decline as we fully amortized some of the accelerated.
Speaker 2: In the near term, that's still going to be the run rate, although as we get closer to the end of the year and in the next year, you should start to see that decline as we fully amortize some of the accelerated amortization.
Amortization.
Got it okay I'll jump back.
Speaker 4: Got it. Okay. I'll jump back. That's it for me. Thanks again.
That's it for me thanks again.
Okay.
Thank you.
Ladies and gentlemen, we have reached the end of question and answer session and I would like to turn the call back to Steve Nicola CFO for closing remarks over to you. So thank you.
Speaker 1: Ladies and gentlemen, we have reached the end of question and answer session and I would like to turn the call back to Steve Nicola, CFO for closing remarks. Over to you, sir.
Thank you and thank you to everyone for joining us today and your interest in Mathews.
Speaker 2: Emmett, thank you and thank you to everyone for joining us today and your interest in Matthews. As a reminder, please visit our website for additional information about the company and our quarter's financial results. Enjoy the rest of your day.
As a reminder, please visit our website for additional information about the company and our quarter's financial results enjoy the rest of your day.
Thank you.
Speaker 1: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Concludes today's conference.
May disconnect your lines at this time.
Thank you for your participation.
Okay.
Okay.
Okay.
Hi, Matt are you still there.
Okay.