Q1 2024 Matthews International Corp Earnings Call

Operator: Good morning. Welcome to Matthews International's first quarter fiscal 2024 financial results conference call. At this time, all participants are in a listen only mode.

Good morning, welcome to Matthews International's first quarter fiscal 2024 financial results Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star Zero and you kind of some key.

Operator: A 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. Please note this conference is being recorded. I will now turn the conference over to Bill Wilson, Senior Director of Corporate Development. Thank you.

Pat.

Please note. This conference is being recorded I will now turn the conference over get they'll Wilson senior director of corporate development. Thank you you may begin.

William D. Wilson: Thank you, Sherry. And good morning, everyone. Welcome to the Matthews International first quarter and fiscal year 2024 conference call. This is Bill Wilson, Senior Director of Corporate Development. With me today are Joe Bartolacci, President and Chief Executive Officer, and Steven Nicola, our Chief Financial Officer. Before we start, I would like to remind you that our earnings release was posted on our website, www.matw.com, in the investor section last night. The presentation for our call can also be accessed in the Investors section of the website. Any forward-looking statements made in connection with this discussion are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Great. Thank you Sherry.

Good morning, everyone and welcome to the Matthews International first quarter fiscal year 2024 Conference call. This is Bill Wilson Senior director of corporate development with me today are Joe Burton Lacy, President and Chief Executive Officer, and Steve Nicola Our Chief Financial Officer.

Before we start I would like to remind you that our earnings release was posted on our website www Dot M. A T. W. Dot com in the investors section last night.

Presentation for our call can also be accessed in the investors investors section of the website.

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 stocks.

William D. Wilson: 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 we 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. Now, I'll turn the call over to Joe.

Factors that could cause the companys results to differ from those discussed today are set forth in the Companys annual report on Form 10-K, and other periodic filings with the FCC.

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.

Now I will turn the call over to Jeff.

Joseph C. Bartolacci: Thank you, Bill. Good morning. Despite the EBITDA shortfall versus the prior year, we are pleased with our fiscal 24 first quarter results. All of our businesses exceeded our internal expectations except energy, which saw delays in our projected deliveries for our largest customer, which are outside of our control. Overall, we reported a modest increase in consolidated sales to $450 million this quarter from $449 million in the first quarter of fiscal 23. As we cautioned last quarter, however, customer readiness to accept our equipment throughout the year will be, and in this quarter clearly was. The primary factor behind the performance of the energy business as delays have impacted the timing of anticipated revenues for our fiscal 24 first quarter. Even with the timing of the energy sales, sales for the industrial segment increased compared to the first quarter of last year, and together with Olberg and the rest of our industrial technology segment, we have almost $260 million of backlog expected to be substantially delivered this fiscal year. Memorialization sales also increased compared to last year, and SGK sales were modestly down, largely due to lower retail-based sales and continued weakness in the European brand market. For our industrial segment, we continue to receive significant inbound interest for our unique energy solutions from almost all of the major global OEMs and battery manufacturers. The benefits of our solutions remain clear.

Thank you Bill good morning.

Despite the EBITDA shortfall versus prior year, we are pleased with our fiscal 'twenty four first quarter results.

All of our business has exceeded our internal expectations, except energy, which saw delays in our projected deliveries for our largest customer which are outside of our control.

Overall, we reported a modest increase in consolidated sales to $450 million this quarter from $449 million in the first quarter of fiscal 'twenty three.

We cautioned last quarter, however, customer readiness to accept our equipment throughout the year. It will be in in this quarter clearly was the primary factor behind the performance of the energy business as delays have impacted the timing of anticipated revenues for our fiscal 'twenty for first quarter.

Even with the timing of the energy sales sales for the industrial industrial segment increase compared to the first quarter of last year and together with Odebrecht and the rest of our industrial technology segment, we have almost $260 million of backlog are expected to be substantially delivered this fiscal year.

Amortization sales also increased compared to last year and that's G. K sales were modestly down largely due to lower retail based sales and continued weakness in the European brand market.

For our industrial segment, we continue to receive significant inbound interest for our unique energy solutions from almost all of the major global Oems and battery manufacturers.

The benefits of our solutions remain clear.

Joseph C. Bartolacci: By leaning on our industry-leading expertise, we have developed processes that reduce customer costs of production by lowering capital investment, labor costs, and energy consumption while greatly reducing any environmental concerns. As a result, we continue to see an influx of inquiries from potential customers who are still several years behind our largest customer base. We believe that the breadth of these inquiries reflects a continued vibrancy in the EV space and expect to announce developments on orders throughout the course of the year. Regarding other energy solutions news, I'm happy to announce that we have landed our first significant order for the production of hydrogen fuel cell equipment and are in discussions with a major US OEM on joint development work relating to hydrogen fuel cells. In addition, in collaboration with a well-known OEM, we have applied for federal funding for the joint development of a hydrogen fuel cell production facility here in the U.S. that we will own. Interest in hydrogen fuel cell production is growing, especially with heightened levels of government support in Europe and in the U.S.

By leaning on our industry, leading expertise we have developed processes that produce that skewed that reduce customer costs, our production by lowering capital investment labor costs and energy consumption, while greatly reducing any environmental concerns.

As a result, we continue to see an influx of inquiries from potential customers are still several years behind our largest customer.

We believe that the breadth of these inquiries reflects a continued vibrancy in the EV space and expect to announce developments on orders throughout the course of the year.

Regarding other energy solutions news I'm happy to announce that we landed our first significant order for the production of hydrogen fuel cell equipment and are in discussions with a major U S. OEM on joint development work relating to hydrogen fuel cells. In addition in collaboration with a well known OEM, we've applied for federal funding for the joint development of a <unk>.

Hydrogen fuel cell production facility here in the U S that we will own.

Interest in hydrogen fuel cell production is growing, especially with heightened levels of government support in Europe and in the U S.

Joseph C. Bartolacci: In light of these activities and discussions, coupled with the fact that we are still working through approximately half of the $200 million in orders we announced last year, we currently believe that energy solutions revenue will be higher in fiscal 2024 than in the previous year. Our product identification and surfaces business experienced good volume and pricing growth during the first quarter. We anticipate this is a trend that will continue. We continue to make good progress on our new print engine product, which remains on track to be launched around the end of the calendar year. We will provide an update on the launch timeline later this summer.

In light of these activities and discussions coupled with the fact that we are still working through approximately half of the $200 million in orders, we announced last year. We currently believe that the energy solutions revenue will be higher in fiscal 'twenty 'twenty four than in the previous years.

With respect to our other industrial technology businesses are.

Our product Densification and surfaces business experienced good volume and pricing growth during the first quarter.

We anticipate this is a trend that will continue we continue to make good progress on our new print engine product, which remains on track to be launched around the end of the calendar year, we will provide an update on the launch timeline. This summer.

Joseph C. Bartolacci: As for warehouse automation, sales in the first quarter were lower on a year-over-year basis, consistent with what the overall market is seeing, but we believe this will recover in the second half of the year. Note that this business is typically slower in our first fiscal quarter due to the holiday shopping season. With that said, we did see a softening in the market during the quarter, but continue to anticipate a solid year based on our existing backlog and mix. Our memorialization business performed modestly better than expected in the quarter, reporting $208 million in sales despite a decline in casket sales, which returned to normalized levels. The business has benefited from the contribution of our recent acquisition, Eagle Granite.

As for warehouse automation sales in the first quarter were lower on a year over year basis, consistent consistent with what the overall market is seeing but we believe this will recover in the second half of the year note that this business is typically slower than our first fiscal quarter due to the holiday shopping season with.

With that said, we did see a softening in the market during the quarter, but continuing to anticipate a solid year based on our existing backlog and mix.

Our memorialization business performed modestly better than expected in the quarter reporting $208 million in sales. Despite a decline in casket sales, which returned to normalized levels.

The business benefited from the contribution of our recent acquisition equal granted.

Joseph C. Bartolacci: As we look to the balance of the year, we are currently seeing higher than normal volumes in the past few weeks, so we are expecting this business to continue to perform well. Our memorialization business continues to outperform pre-COVID operating results, reflecting improvements that were made to the business over the last few years that have led to higher sales and higher performance overall. As a testament to these improvements, we continue to win new accounts in our memorialization segment, a reflection of the quality of our products and services. As I said before, we expect another solid year of results from memorialization.

As we look through the balance of the year. We are currently seeing higher than normal volumes for the past few weeks. So we are expecting this business to continue to perform well.

Our Memorialization business continues to outperform pre COVID-19 operating results, reflecting the improvements that were made.

The business over the last few years have led to higher sales and higher performance overall.

As a testament to these improvements we continue to win new accounts and I'm, a moralization section segment.

Flexion of the quality of our products and services as I said before we expect another solid year of results for memorials Asia.

Joseph C. Bartolacci: As for SGK, the segment reported operating results in the first quarter, despite reporting solid operating results in the first quarter despite reporting slightly lower sales compared to the corresponding period in fiscal 23, thanks to pricing and cost actions taken over the past 12 months. U.S. and Asia-Pacific brand sales were relatively stable, and the lower retail-based sales were primarily due to timing of projects, pushed into the latter quarter, but we still continue to see a see-saw within the European brand market. Our team at SGK should be commended for their work and commitment during this challenging period as we won significant new business from several global brands that are just beginning to be transitioned. The team is also beginning to see the benefits of the strategy to extend our marketing execution service to e-commerce digital marketing services that we expect will reach over $40 million in sales this year. This platform places SGK ahead of significant competitors in the space and is a key differentiator as we continue to win new work from our competitors. We believe that this strategy will drive future market share growth in the enormous market for digital marketing.

As far as U K the segment reported operating results in the first quarter.

Despite reporting.

Ported solid operating results in the first quarter, despite reporting slightly lower sales compared to the corresponding period in fiscal 'twenty three thanks to pricing and cost actions taken over the past 12 months.

U S and Asia Pacific brand sales were relatively stable and the lower retail based sales was primarily due to timing of projects pushed into later quarters, but we still continue to see softness in the European brand market. Our team at SDK should be commended for their work and commitment during this challenging period as we won significant new biz.

From several global brands that are just beginning to be transitioned. The team is also beginning to see the benefits of the strategy to extend our marketing execution services.

G E Commerce digital marketing services that we expect will reach over $40 million in sales. This year. This platform places SDK ahead of significant competitors in the space and is a key differentiator as we continue to win new work from our competitors.

We believe that this strategy will drive future market share growth in the enormous market for digital marketing, we expect this business to deliver a good year, particularly particularly as our customers are beginning to realize the need to reinvest in their brands.

Joseph C. Bartolacci: We expect this business to deliver a good year, particularly as our customers are beginning to realize the need to reinvest in their brands. Finally, Steve will provide greater detail on this, but I'm happy to announce that we have renewed our evolving credit facility and extended it to 2029 with no major changes in pricing and terms and conditions. Having the comfort of access to capital and a supportive bank group during this extended period of uncertainty in the global economy is essential.

Finally, Steve will provide greater detail on this but I'm happy to announce that we renewed our revolving credit facility and extended into 2029 with no major changes in pricing and terms and conditions.

Having the comfort of access to capital and a supportive bank group. During this extended period of uncertainty in the global economy is essential.

Joseph C. Bartolacci: Our leverage target is scheduled to be, excuse me, our leverage target is to approach three by the end of the year. As we progress through 2024, we anticipate a reduction in working capital in the latter half of the fiscal year as we convert to cash from the orders we received last year. Due to the timing of deliveries, we should see stronger cashflow trends in the latter portion of the fiscal year and into the next. We are still currently projecting continued consolidated sales growth and EBITDA for the full year, despite the current delays in energy. As discussed above, interest in our fast-growing business remains strong, with over $100 million in backlog at the end of the first quarter. I caution, however, given the increased level of larger long-term projects, the timing of order deliveries remains a wild card.

Our leverage target is scheduled to be a problem.

Excuse me our leverage target is to approach three by the end of the year.

As we progress through 2024, we anticipate a reduction in working capital in the latter half of the fiscal year as we convert to cash from the orders we received last year due.

Due to the timing of deliveries, we should see stronger cash flow trends in the latter portion of the fiscal year and into the next.

We are still currently projecting continued consolidated sales growth and EBITDA for the full year. Despite the current delays and energy.

As discussed above and the interest in our fast growing business remains strong with over $100 million in backlog at the end of the first quarter.

I caution however, given the increased level of larger long term projects the timing of orders and deliveries remains a wildcard we continue to expect our fiscal 'twenty four results to exceed the prior year by being more specific on growth levels. It's difficult to provide at this time I'll now turn it over to Steve for more insight on our financial results.

Steven F. Nicola: We continue to expect our fiscal 24 results to exceed the prior year, but being more specific on growth levels is difficult to provide at this time. I'll now turn it over to Steve for more insight into our financial results. Steve?

Steve Thank.

Thank you Joe and good morning.

Consolidated sales for the fiscal 2020 for first quarter were $450 million compared to $449 $2 million a year ago. They.

Steven F. Nicola: Thank you, Joe, and good morning. Consolidated sales for the fiscal 2024 first quarter were $450 million, compared to $449.2 million a year ago. The increase primarily reflected higher sales for the industrial technologies and memorialization sectors. The industrial technology segment reported a sales increase of $2.2 million compared to a year ago, primarily reflecting higher engineering, product identification, and surface. Memorialization sales were $208.1 million for the current quarter, compared with $206.5 million a year ago, primarily reflecting higher granite sales and the acquisition of Eagle Granite last fiscal year. Sales for the SGK brand solution segment were $3.1 million lower than a year ago, primarily reflecting lower retail-based sales and continued softness in the European brand market.

The increase primarily reflected higher sales for the industrial technologies and memorialize Asian segments.

The industrial technology segment reported a sales increase of $2 $2 million compared to a year ago, primarily reflecting higher engineering products identification and surfaces sales.

Memorial <unk> sales were $208 $1 million for the current quarter compared with $206 $5 million, a year ago, primarily reflecting higher granted sales and the acquisition of Eagle granted last fiscal year.

Sales for the SDK brand solutions segment were $3 $1 million lower than a year ago, primarily reflecting lower retail base sales and continued softness in the European brand markets.

On a consolidated basis changes in currency rates had a favorable impact of $5 $1 million on current quarter sales compared to a year ago.

On a GAAP basis net loss attributable to the company for the quarter ended December 31, 2023 was $2 $3 million or <unk> <unk> per share compared to income of $3 $7 million or <unk> 12 per share in the prior period.

Steven F. Nicola: On a consolidated basis, changes in currency rates had a favorable impact of $5.1 million on current quarter sales compared to a year ago. On a GAAP basis, net loss attributable to the company for the quarter ended December 31, 2023 was $2.3 million, or $0.07 per share, compared to income of $3.7 million, or $0.12 per share in the prior period. On a non-gap-adjusted basis, earnings for the fiscal 2024 first quarter were $0.37 per share compared to $0.53 per share a year ago.

On a non-GAAP adjusted basis earnings for the fiscal 2020 for first quarter were <unk> 37 per share compared to 53 per share a year ago. The decrease was primarily attributable to lower consolidated adjusted EBITDA and higher interest expense for the current quarter compared to a year.

Go.

Consolidated adjusted EBITDA, which represents net income before interest expense income taxes, depreciation and amortization and other adjustments for the fiscal 2020 for first quarter was $45 5 million compared to $49 $3 million a year ago.

Steven F. Nicola: The decrease was primarily attributable to lower consolidated adjusted EBITDA and higher interest expense for the current quarter compared to a year ago. Consolidated adjusted EBITDA, which represents net income before interest expense, income taxes, depreciation, and amortization, and other adjustments, for the fiscal 2024 first quarter was $45.5 million compared to $49.3 million a year ago. The decrease reflected lower adjusted EBITDA for the industrial technologies and memorialization segments offset partially by an increase in adjusted EBITDA for the SGK brand solution segment and lower corporate and other non-operating costs. Changes in currency rates had a favorable impact of $354,000 on current quarter consolidated adjusted EBITDA compared to a year ago. Please see the reconciliations of Adjusted EBITDA and Non-Gap Adjusted Earnings per Share provided in our earnings reports. Please turn to slide 8 to begin a review of our segment. Sales for the industrial technology segment for the fiscal 2024 first quarter were $111.4 million compared to $109.1 million a year ago. The engineering business reported higher sales for the current quarter compared to a year ago, primarily reflecting further growth in the energy storage solutions business.

The decrease reflected lower adjusted EBITDA for the industrial technologies, and memorialize Asian segments, offset partially by an increase in adjusted EBITDA for the SDK brand solutions segment, and lower corporate and other nonoperating costs.

Changes in currency rates had a favorable impact of $354000 on current quarter consolidated adjusted EBITDA compared to a year ago.

Please see the reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share are provided in our earnings release.

Please turn to slide eight to begin a review of our segment results.

Sales for the industrial technology segment for the fiscal 2020 for first quarter.

We're $111 $4 million compared to $109 $1 million a year ago.

The engineering business reported higher sales for the current quarter compared to a year ago, primarily reflecting further growth in the energy storage solutions business.

The product identification and surfaces businesses also reported higher sales for the current quarter compared to last year.

Sales for the segments warehouse automation business declined from a year ago, primarily reflecting the lower order rates, we indicated in our previous call and the normal seasonality of this business.

Sales for the automotive equipment business that was acquired as part of the old brick R. N. S acquisition also decline as we continue to wind down this small business.

Changes in currency rates had a favorable impact of $3 $7 million on the segment's current quarter sales compared to a year ago.

Adjusted EBITDA for the industrial technology segment for the current quarter was $9 6 million compared to $12 $2 million a year ago. The decrease primarily reflected lower margins for the engineering business compared to a year ago, which is influenced by the stage and timing of the projects.

Steven F. Nicola: The product identification and surfaces businesses also reported higher sales for the current quarter compared to last year. However, sales for the Segments Warehouse automation business declined from a year ago, primarily reflecting the lower order rates we indicated in our previous call and the normal seasonality of this business. Sales for the automotive equipment business that was acquired as part of the Olbrich R&S acquisition have also declined as we continue to wind down this small business.

The impact of lower warehouse and automation sales and a small divestiture. The declines were partially offset by higher sales and improved pricing for the product identification and surfaces businesses and favorable currency rate changes.

Steven F. Nicola: Changes in currency rates had a favorable impact of $3.7 million on the segment's current quarter sales compared to a year ago. Adjusted EBITDA for the industrial technology segment for the current quarter was $9.6 million compared to $12.2 million a year ago. The decrease primarily reflected lower margins for the engineering business compared to a year ago, which is influenced by the stage and timing of the project.

Changes in currency exchange rates had a favorable impact of $405000 on the segment's current quarter adjusted EBITDA compared to a year ago.

Please turn to slide nine.

Sales for the Memorial Ovation segment for the fiscal 2020 for first quarter were $208 $1 million compared to $206 5 million for the same quarter a year ago.

The increase primarily reflected higher granite memorial sales and the acquisition of Eagle granite, partially offset by lower unit sales of caskets changes in foreign currency rates had a favorable impact of $381000 on current quarter sales compared to a year ago.

Steven F. Nicola: The Impact of Lower Warehouse and Automation Sales and a Small Diversion. The declines were partially offset by higher sales and improved pricing for the product identification and services businesses and favorable currency rate changes. Please turn to slide nine for changes in the currency exchange rate at a favorable impact of $405,000 on the segment's current quarter adjusted EBITDA compared to a year ago. Sales for the memorialization segment for the fiscal 2024 first quarter were $208.1 million compared to $206.5 million for the same quarter a year ago. The increase primarily reflected higher granite memorial sales and the acquisition of Eagle Granite, partially offset by lower unit sales of cast iron.

Memorial <unk> adjusted EBITDA for the current quarter was $36 $7 million compared to $39 1 million for the same quarter last year.

The decrease primarily resulted from the impact of the decline in casket sales, which was partially offset by the increase in granite memorial sales the acquisition of Eagle granted and improved net pricing changes.

<unk> and labor costs were higher for the quarter, but were offset by the benefits of cost savings initiatives.

Please turn to slide 10.

The SDK brand solutions segment reported sales of $135 million for the quarter ended December 31, 2023, compared to $133 $6 million a year ago. The.

Steven F. Nicola: Changes in foreign currency rates had a favorable impact of $381,000 on current quarter sales compared to a year ago. Memorialization adjusted EBITDA for the current quarter was $36.7 million compared to $39.1 million for the same quarter last year. The decrease primarily resulted from the impact of the decline in casket sales, which was partially offset by the increase in granite memorial sales, the acquisition of Eagle Granite, and improved net pricing changes. Material and labor costs were higher for the quarter, but were offset by the benefits of cost savings initially. Please turn to slide 10. The SGK Brand Solutions segment reported sales of $130.5 million for the quarter ended December 31, 2023, compared to $133.6 million a The decrease primarily reflected a decline in retail-based sales, primarily reflecting timing, and lower sales in the segment's European brand markets on a constant currency basis.

The decrease primarily reflected a decline in retail based sales, primarily reflecting timing and lower sales in the segment's European brand markets on a constant currency basis. The declines were offset partially by improved pricing a small acquisition in December 2022, and the impact of favorable currency.

<unk> currency.

Currency rate changes had a favorable impact of $969000 on current quarter sales compared to a year ago.

Adjusted EBITDA for the SDK brand solutions segment was $12 $9 million for the current quarter compared to $12 $2 million a year ago.

The increase primarily reflected the benefits of improved pricing and the segment's recent cost reduction actions offset partially by the impact of lower sales.

<unk> in currency rates had an unfavorable impact of $142000 on adjusted EBITDA compared to a year ago.

Please turn to slide 11.

Cash used in operating activities for the quarter ended December 31, 2023 was $27 3 million compared to $36 $2 million a year ago.

Operating cash flow for the prior quarter included payments of $24 $2 million in connection with the termination and settlement of the company's supplemental retirement plan.

Steven F. Nicola: The declines were offset partially by improved pricing, a small acquisition in December 2022, and the impact of favorable currency changes. Currency rate changes had a favorable impact of $969,000 on current quarter sales compared to a year ago. Adjusted EBITDA for the SGK brand solution segment was $12.9 million for the current quarter compared to $12.2 million a year ago. The increase primarily reflected the benefits of improved pricing and the segment's recent cost reduction actions, offset partially by the impact of lower sales. Changes in currency rates had an unfavorable impact of $142,000 on adjusted EBITDA compared to a year ago.

Current year operating cash utilization, primarily reflected higher working capital our first fiscal quarter is seasonally slower from an operating cash flow perspective, primarily due to year end related payments such as performance based compensation and the seasonality of earnings.

Outstanding debt was $862 million at December 31, 2023, compared to $790 million at September 32023.

At December 31, 2023 of the company's leverage ratio based on net debt, which represents outstanding debt less cash and trailing 12 months adjusted EBITDA was $3 seven one compared to 331 at September 32023, the increase primarily reflected the first quarter operating cash.

Steven F. Nicola: Please turn to slide 11. Cash used in operating activities for the quarter ended December 31, 2023, was $27.3 million compared to $36.2 million a year earlier. Operating cash flow for the prior quarter included payments of $24.2 million in connection with the termination and settlement of the company's supplemental retirement plan. Current Year Operating Cash Utilization Primarily Reflected Higher Working Capital. Our first fiscal quarter is seasonally slower from an operating cash flow perspective, primarily due to year-end related payments, such as performance-based compensation, and the seasonality of earnings. Out of cash, the company's leverage ratio, based on net debt, which represents outstanding debt less cash, and trailing 12 months adjusted EBITDA, was 3.71, compared to 3.31 at September 30, 2023. The increase primarily reflected the first quarter operating cash utilization I just referenced. As of December 31, 2022, our leverage ratio was 3.85.

Utilization I just referenced.

At December 31, 2022, our leverage ratio was $3 85.

Additionally earlier this week, we renewed our $750 million domestic revolving credit facility under generally the same pricing terms and conditions as the previous facility the.

The term of the renewed facility is five years subject to the terms and conditions of this facility. We had strong interest in the current renewal process with total commitments from participating banks exceeding $1 $1 billion.

For the fiscal 2024 first quarter. The company purchased approximately 466000 shares under the stock repurchase program at an average cost of $36 88 per share.

A majority of the purchases were in connection with withholding tax obligations on equity compensation since equity compensation is generally awarded annually in November a substantial portion of investing activity occurs in our fiscal first quarter each year.

Approximately $30 7 million shares were outstanding at the end of the fiscal 2020 for first quarter.

Finally, the board last week declared a dividend of <unk> 24 per share on the company's common stock.

The dividend is payable February 19th 2024 to stockholders of record February 5th 2024.

This concludes the financial review and we will now open the call for any questions.

Gary.

Thank you if you'd like to ask a question. Please press star one on your telephone keypad.

Steven F. Nicola: Additionally, earlier this week, we renewed our $750 million domestic revolving credit facility under generally the same terms and conditions as the previous facility. The term of the renewed facility is five years, subject to the terms and conditions of this facility. We had strong interest in the current renewal process, with total commitments from participating banks exceeding $1.1 billion. For the fiscal 2024 first quarter, the company purchased approximately 466,000 shares under the stock repurchase program at an average cost of $36.88 per share. A majority of the purchases were in connection with withholding tax obligations on equity compensation. Since equity compensation is generally awarded annually in November, a substantial portion of vesting activity occurs in our fiscal first quarter. Approximately 30.7 million shares were outstanding at the end of our fiscal 2024 first quarter. Finally, the board last week declared a dividend of $0.24 per share on the company's common stock.

Tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star T is.

Our first question is from Dan Moore with CJS Securities. Please proceed.

Thank you good morning, Joe Good morning, Steve.

Good morning, good morning.

We'll start with the energy storage IV, clearly timing our visibility around the timing of order intake.

It's still difficult in current environment stuff completely.

Completely understandably, having said that maybe just talk a little bit more about discussions youre, having not only with your large client, but with other potential customers and when would you need to see a pickup in orders in order to generate the positive growth that you expect year over year not only in energy storage, but also an overall.

Kind of revenue and EBITDA.

Lot of questions in that one.

Let me try to parse it so first off we continue to discuss with just about everybody I mean, it's a very hot topic.

Operator: The dividend is payable February 19, 2024 to stockholders of record February 5, 2020. This concludes the financial review, and we will now open the call for any questions. Sherry. Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Throughout the industry.

Our discussions are complex as you might expect you need to understand in this we've tried to kind of say this to folks what we what we provide is a very complex piece of solution to the puzzle.

Dan Moore: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question is from Dan Moore with CJS Securities. Please. Thank you. Good morning, Joe. Good morning, Steve. Good morning, Dan. Good morning.

There is a lot of work in the front end and on the back end that we don't participate in a lot of that work revolves around the chemistries that are always about the technical specifications. The processes. They intend to use we are a critical I mean utterly critical part of that process, but we don't control the balance of that.

Joseph C. Bartolacci: We'll start with energy storage. Obviously, clearly, you know, timing or visibility around the timing of order intake is still difficult in current environments. Having said that, maybe just talk a little bit more about the discussions you're having, not only with your large client but with other potential customers. And when would you need to see a pickup in orders in order to generate the positive growth that you're seeing? There are a lot of questions in that one. Let me try to parse it.

Puzzle, it's up to their customers so our discussions continue.

As they kind of develop their specification, we often times will be modifying our solution or customizing is a better way to put our solution to their needs.

And that takes time.

And they're our largest customer has the benefit of years of work in this others are trying to catch up.

As it relates to the balance of the year.

Joseph C. Bartolacci: So first off, we continue to discuss it with just about everybody. I mean, it's a very hot topic throughout the industry. Our discussions are complex, as you might expect. You need to understand, and we've tried to kind of say this to folks, what we provide is a very complex piece of the solution to the puzzle. There is a lot of work on the front end and on the back end that we don't participate in. A lot of that work revolves around chemistry. It revolves around the technical specifications, the processes they intend to use. We are a critical, I mean, utterly critical part of that process. But we don't control the balance of that puzzle.

Whether it be orders from our existing customers or whether it is a.

New customers.

It is hard to tell we have a balance of at least $100 million of the balance of the year, we recognize some $30 million or so in this quarter I think we recognize if I recall correctly about $150 million last year.

It's not a long putt to to be able to exceed that number throughout the course of the year as we kind of go through this now we have been pretty clear that the timing of some of these revenue recognitions are things that are outside of our control, giving given the readiness of customers to be able to accept product. So.

Joseph C. Bartolacci: It's up to our customers. So our discussions continue as they develop their specifications. We oftentimes will be modifying our solution, or customizing it is a better way to put our solution to their needs.

I would tell you that right now we're confident and we think we can get there.

Very helpful. Maybe switching gears memorial location, just housekeeping remind me with that that equal granted that contribution was in and just your expectations for <unk>.

Joseph C. Bartolacci: And that takes time. And our largest customer has the benefit of years of work in this. Others are trying to catch up. As it relates to the balance of the year, whether it be orders from our existing customers or whether it is new customers, it's hard to tell.

<unk> growth you know ballpark terms as we look at you know first caskets than memorials and cremation equipment.

Throughout the balance of the year.

Joseph C. Bartolacci: We have a balance of at least $100 million for the balance of the year. We've recognized some $30 million or so in this quarter. I think we recognized, if I recall correctly, about $150 million last year. It's not a long shot to be able to exceed that number throughout the course of the year as we go through this.

Okay. So I would tell you as we look at the various businesses as we said earlier that we're back to a more normalized.

Throughout the work the industry. However, we are seeing really really.

Elevated levels of mortality rate now our casket sales for the month of January are strong.

Joseph C. Bartolacci: Now, we have been pretty clear that the timing of some of these revenue recognitions is things that are outside of our control, given the readiness of customers to be able to accept the product. I would tell you that right now, we're confident, and we think we can get there. Very helpful.

That is probably indicative of some of the pulmonary illnesses that are floating around.

Country and so we expect that over the next 60 days 90 days to be where our Memorialization business will trend on the funeral home side that as you know translates ultimately too.

Joseph C. Bartolacci: Maybe switching gears, memorialization, just housekeeping, remind me what the Eagle Granite contribution was and just your expectations for growth, you know, ballpark terms as we look at, you know, first caskets, then memorials, and cremations throughout the balance. Okay, so I would tell you as we look at the various businesses, as we said earlier, we're back to a more normalized death rate throughout the industry. However, we are seeing really elevated levels of mortality right now, and our cascaded sales for the month of January are strong. That is probably indicative of some of the pulmonary illnesses that are floating around in the country.

And to do more cemetery product sales.

So as we kind of go through the year, we're expecting some modest growth may be relatively flat to modest growth in the overall memorials Asian segment, but as I said earlier Dan.

Recognize that this business is materially higher at that reset level than it was pre COVID-19.

Very helpful. One more and memorial day, and I'll jump back with any follow ups, but the margin ticked lower you you said no the business exceeded.

Your internal expectations.

Joseph C. Bartolacci: So we expect that over the next 60 days, 90 days to be where our memorialization business will trend in the funeral home. That, as you know, ultimately translates into more cemetery product sales. So as we kind of go through the year, we're expecting some modest growth, maybe relatively flat to modest growth in the overall memorialization segment. But as I said earlier, Dan, recognize that this business is materially higher at that reset level than it was pre-COVID. Very helpful.

Although overall margins ticked up a little bit lower if if cremation continues to grow and memorials are steady or grow modestly.

Is are those incrementals in those businesses enough to offset potential decrementals in caskets I know this is a.

We're seeing an uptick here in mortality this quarter, but overall the trend has been lower in caskets. So you know can you hold the line in other words can you get back to 18% to 20% margin in that business, even if caskets ticked lower by one or two per cent.

Joseph C. Bartolacci: One more memorialization, and I'll jump back. I'll tell you a follow-up. The margin ticked lower.

Talk about that algo that if you're a little with a little bit and that's it. Thanks.

Joseph C. Bartolacci: You said, you know, the business exceeded your internal expectations, although the overall margins ticked a little bit lower. If cremation continues to grow and memorials are steady or grow modestly, are those incrementals in those businesses enough to offset potential decrements in caskets? I know we're seeing an uptick here in mortality this quarter, but overall, the trend has been lower in caskets. So, you know, can you hold the

Sure Dan.

Steve I'll speak to the first part of that question and I'll, let Joe jump in but specifically with respect to the quarter.

We saw the decline in casket unit volumes as we mentioned so that was our expectation going into the quarter. We did have a stronger quarter from our granite memorial sales perspective, so on a like for like margin. That's what created some of the margin degradation.

Steven F. Nicola: In other words, can you get back to 18-20% margin in that business, even if caskets, you know, tick down by one or two percent? to talk about that algo, with a little bit, and that's. Sure, Dan. This is Steve.

<unk> is just the lower casket offset by a lot by the higher Grant Memorial sale.

But with respect to the margins as we go throughout the year as we get into this if the stronger seasonal months, whether it's the winter months for caskets.

Steven F. Nicola: I'll speak to the first part of that question, and I'll let Joe jump in. But specifically with respect to the quarter, we saw a decline in casket unit volumes, as we mentioned. So that was our expectation going into the quarter.

Spring summer months for memorials, we do expect those margins to get better.

Okay, Great I'll jump back with follow ups. Thank you.

Our next question is from Liam Burke with B Riley. Please proceed.

Steven F. Nicola: We did have a stronger quarter from a granite memorial sales perspective. So on a like-for-like margin, that's what created some of the margin degradation, is just the lower casket offset by the higher granite memorial sales. But with respect to the margins as we go throughout the year, as we get into the stronger seasonal months, whether it's the winter months for caskets and the spring and summer months for memorials, we do expect those margins to get bigger. Okay, I will jump back and then follow up.

Yes, Thank you and good morning, Joe Good morning, Steve.

Good morning.

Joe could you give us some sense on how the prop.

Profit initiatives and Odebrecht are progressing I mean, it was essentially a breakeven business.

Got a little more flexibility in terms of costs now how is that progressing in terms of profit contribution.

We expect the beam are nicely contributory this year as we continued on the cost I mean, as we said in the past we are locked into.

Liam Burke: Our next question is from Liam Burke with B. Reilly. Please proceed. Yes, thank you. Good morning, Joe. Good morning, Steve. Hi, Liam.

Union contracts that prevented us from being able to take action until early late latter part of the summer early part of this quarter.

Liam Burke: Good morning. Joe, could you give us some sense of how the profit initiatives at OBRICT are progressing? I mean, it was essentially a break-even business.

So those actions are in place and we expect to be a nice contribution to the full year, which will help us achieve our results.

Great and either I guess, Steve mentioned.

Joseph C. Bartolacci: You've got a little more flexibility in terms of costs now. How's that progressing in terms of profit contributions? We expect to be nice and contributive this year as we continue down the cost. I mean, as we said in the past, we are locked into union contracts that prevented us from being able to take action until the late, late latter part of the summer, early part of this quarter.

That youre on memorials Asian, Youre, attracting new accounts is that all products are caskets or.

Bronze and granite memorials.

I would say that we are winning accounts across the portfolio as we as we move forward.

Some of the gains that we had throughout COVID-19 on the funeral side, we've retained and picked up others. We picked up cemetery products as well. So yes. The answer to your question is it is a broad mix of market share growth.

Joseph C. Bartolacci: So those actions are in place, and we expect to make a nice contribution to the full year, which will help us achieve our results. Great. And either way, I guess Steve mentioned that you're in the memorialization business, and you're attracting new accounts. Is that all products or caskets or, you know, bronze and granite memorials?

And on the cremation side I know the business has gotten sort of lumpy because of the systems projects, but how is that shaping up.

Based on the end of the quarter, how is it shaping up for the rest of the year.

Joseph C. Bartolacci: I would say that we are winning accounts across the portfolio as we move forward. Some of the gains that we had throughout COVID on the funeral home side, we retained and picked up others. We picked up cemetery products as well. So, the answer to the question is that it is a broad mix of market share growth.

Well, where we're looking at hopefully a good year in that business as well we're in the midst of another contract opportunity in the UK that we hope to win of significance. So as that starts to ramp up we should be able to give you an update on that over the course of the next quarter, but we're expecting solid results out of cremation over the course of the year.

Joseph C. Bartolacci: And on the cremation side, I know the business has gotten sort of lumpy because of the systems projects, but how is that shaping up based on the end of the quarter? How is it shaping up for the rest of the year? Well, we're looking at, hopefully, a good year in that business as well. We're in the midst of another contract opportunity in the UK that we hope to win of significance.

Great. Thanks, Joe.

Yes.

Yeah.

We have reached the end of our question and answer session I would like to turn the conference back over to Daryl for closing comments.

Thank you Sherry and thank you everyone for joining us today and your interest in Matthews forgive.

Information about the company and our financial results. Please contact me or visit our website enjoy the rest of your day.

Joseph C. Bartolacci: So as that starts to ramp up, we should be able to give you an update on that over the course of the next quarter. But we're expecting solid results out of cremation. Thanks, Joe. Yep. We have reached the end of our question and answer session. I would like to turn the conference back over to Bill for closing. All right. Thank you, Sherry. And thank you everyone for joining us today and for your interest in Matthews. For additional information about the company and our financial results, please contact me or visit our website.

Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

[music].

William D. Wilson: Enjoy the rest of your day. Thank you. Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation. 5, Andrew Jackson by 4, Felton Cooper by 21, Larry Chapman by 37, Amanda Laverne by 52, ?? ?? ?? ?? ??