Q4 2024 Matthews International Corp Earnings Call
Greetings and welcome to the Matthews International fourth quarter and year end fiscal 2024 financial results.
This time, all participants will be in listen only mode.
A question and answer session will follow the formal presentation.
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Speaker Change: It's now my pleasure to introduce Steve Nicola Chief Financial Officer, Steve You May begin.
Speaker Change: Thank you Rob Good morning, I'm, Steve Nicola Chief Financial Officer of Matthews, and with me today is Joe BARDA Lacy, our company's President and Chief Executive Officer.
Speaker Change: Before we start I would like to remind you that our earnings release was posted on the company's website.
Www Dot M. A T W. Dot com in the investors section last night the presentation for our call can also be accessed in the investors section of the website under presentations.
Speaker Change: Any forward looking statements in connection with this discussion are being made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 factors that could cause the company's results to differ from those discussed today are set forth in the company's annual report on Form 10-K.
Speaker Change: And other public filings with the SEC in.
Speaker Change: In addition, we will be discussing non-GAAP financial metrics and encourage you to read our disclosures and reconciliation filiation tables carefully as you consider these metrics in.
Speaker Change: 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 Joe.
Joe: Thank you Steve good morning.
Joe: Fiscal 'twenty 'twenty four it was a challenging year for several of our businesses business units driven by economic conditions and legal events outside of our control.
Joe: With that said, we were white quite pleased with the performance of our larger businesses Memorialization and that's G. K that continue to demonstrate the company's resilience as well as our employees' commitment.
Joe: Our industrial technology segment continued to experience slow shipments and installations for energy storage products. In addition to soft demand for warehouse solutions, though we do expect the market environment for warehouse solutions to improve in 2025.
Joe: Consolidated sales and adjusted EBITDA came in as expected, but lower on a year over year basis. Overall, we reported $447 million in consolidated sales in the fiscal 'twenty 'twenty four fourth quarter compared to $480 million in the fourth quarter of fiscal 2023.
Joe: Adjusted EBITDA for the fourth quarter of 2024 was $58 million and in line with our expectations.
Joe: For the full year, we reported $1 $8 billion in consolidated sales and met our revised guidance target of $205 million of adjusted EBITDA.
Joe: Well before performing excuse me before providing a more detailed discussion of our business performance in the quarter, Let me touch on several of our key strategic priorities as we started fiscal 2024.
That's G K our team has been contending with an extended period of softness and a European brand market. In addition to regional regulatory changes that impacted comparability in the business I'm pleased to see the steady improvement in the business, which has now stabilized and in the fourth quarter resulted an SDK reporting its third consecutive quarter.
Joe: Higher sequential sales and good margins.
He died of cost control price improvements and growth in the APAC region have proven to be the cure. Additionally tradition transitioning to an e-commerce digital marketing platform not only set us apart from our market peers, but also led to an increase in revenues and organic business opportunities that position us well for 2020.
Joe: Five and beyond.
Memorial Day, she has been the bedrock of our company and continues to outperform despite the normalization of casket death post COVID-19.
Joe: The business has benefited from pricing actions and several small tuck in acquisitions, while delivering on cremation and bosley and related products that we believe exemplifies the diversity of this segment.
Joe: Cost control measures taken during the fiscal year also contributed to an improvement in operating margins for the fiscal year, the business reported a $163 million and adjusted EBITDA compared to $146 million for the fiscal year ending 2020 at the peak of the pandemic.
Joe: Now, let's move on to industrial technologies.
Joe: Beginning with the product identification business, which continued to perform well. This business grew in the fourth quarter benefiting from pricing actions taken earlier in the year given our current product mix. Our sales in North America were quite strong driven by a strong construction market a market, where we have highly competitive offerings.
Joe: We came into the year fiercely determined to make inroads in bringing our new printed product axiom to market I'm pleased with the progress that we've made here and we are now preparing to launch the product in the latter half of fiscal 2020 five.
Joe: Testing of the product has gone better than expected and we look forward to sharing more details with you as we get closer to the product launch.
Joe: In addition to the axiom product. We also launched a new line of lasers in the second half of the year and now have orders coming in and shipping has commenced.
Joe: As discussed on earlier calls our warehouse automation business faced headwinds during the year as demand fell due to customer uncertainty about the economy and higher interest rates.
Joe: However over the last two quarters of the year market sentiment began to shift and quoting activity picked up in volume and in size.
Joe: Recently, there has been related news that some of the larger well known distribution networks, we're starting to invest again supporting our thesis of returned to a higher activity level for the automation market.
Joe: We also won orders from several new accounts in Europe justifying our decision to expand our presence in that region. As a result, our outlook for fiscal 'twenty to 'twenty to 'twenty five as cautiously optimistic as we expect the demand to recover whereas.
Joe: Whereas we expect the demand recovery to have a slow start resulting in meaningful revenue impact sometime in later in the latter part of fiscal 'twenty five and into 'twenty six.
Joe: Finally.
Joe: Let's talk about the energy solutions business, where are we most of the attention has been directed over the last few quarters.
Joe: [noise].
Joe: Most of you know this call and the most of you on this call know.
Joe: And they are aware of NASA, that's usually tesla's complaint against Matthews.
Joe: Filed in June of this year the federal judge in that proceeding has ordered that the proper jurisdiction for the claims begins in arbitration.
Joe: Required by the agreement between the parties.
Speaker Change: As I've said before Tesla's claims are meritless and have been filed in the public forum for the sole purpose of bringing pressure on us to relinquish our technology.
Speaker Change: Ironically, they're claim in our opinion validates the relevance and importance of our energy storage business due to the value. They are ascribed to our solutions a value that is never been recognized by the market when assessing our consolidated evaluation.
Speaker Change: More industry players are now aware of our proprietary engineered solutions and significant cost reduction benefits that can be derived by implementing them.
Speaker Change: Since the claim was filed we have taken cautious steps to offset and then any impact to our bottom line and as a result are now better positioned both financially and operationally to lead the ongoing transition to electric vehicles. Once this matter is resolved.
We have long been developing advanced calories Calendaring solutions for Nexgen equipment for both the lithium ion battery space as well as the hydrogen fuel cell space.
Speaker Change: As evidence of our continued innovation, we recently received a U S patent directed to system for manufacturing it dry battery electrode for energy storage devices, using our innovative calendaring technology.
Speaker Change: The newly issued patent stemmed from a patent application that was filed in early 2019 and becomes a part of this significant intellectual property. We have developed in this space.
Speaker Change: On a year over year basis energy business, where revenues were significantly down in the fourth quarter, reflecting the impact of slower than expected customer deliveries, which continue but not as originally anticipated.
We expect deliveries to be substantially competed completed in fiscal 2025.
Speaker Change: Just a quick word in our previously announced cost reduction program.
Speaker Change: It is now underway and as a result, we took some charges in the quarter, but we are overall quite satisfied with the outcome. So far we.
Speaker Change: We have exited less profitable operations and began the process of selling the related assets, which we expect to go on throughout this year.
Speaker Change: Moving onto the balance sheet.
Speaker Change: In an ongoing effort to provide certainty around our financing earlier in the year, we renewed and extended our revolving credit facility through 2029.
Speaker Change: Recently, we also refinanced our senior notes that were due to mature in December of next year.
As part of our new senior notes, we structured it in a one year call option that provides us significant flexibility to lower our cost of capital in the event that interest rates continue to decrease and provides us flexibility to achieve our strategic goals.
Speaker Change: Also as part of our ongoing focus on debt reduction and despite the elevated levels of working capital related to our energy solutions business, we reduced our debt by over $50 million during the fourth quarter.
Speaker Change: We entered the new fiscal year, we're focused on continuing to identify ways to create value throughout all of our business segments, including accretive tuck in acquisitions and non core divestitures that we believe will drive stronger financial performance and cash generation.
Speaker Change: We expect another solid year of results in 2025 from our memorials nation business and continued growth by the best U K segment.
Speaker Change: We also expect our product identification business benefit from the axion launch as well as our full year results from the new laser product that was launched earlier this year and as I mentioned earlier, we expect a strong recovery in our warehouse automation solutions business as the market picks up consequently.
Speaker Change: We're projecting adjusted EBITDA for fiscal 2025 to be in the range of $205 million to $215 million.
Speaker Change: Finally in light of the long term opportunities available to us in the industrial technology segment. We recently engaged J P. Morgan to support us on our review of potential strategic alternatives.
Speaker Change: I will now turn the call over to Steve for more insight on our financial results.
Steve Nicola: Thank you Joe for the financial review, let's begin with slide seven.
Steve Nicola: For the fiscal 2020 for fourth quarter. The company reported a net loss of $68 $2 million or $2 21 per share compared to net income of $17 $7 million or 56 cents per share a year ago.
Steve Nicola: The loss for the current quarter resulted from charges in connection with the company's previously announced cost reduction program, a goodwill impairment charge and other asset write downs, primarily related to our European businesses.
Steve Nicola: On a non-GAAP adjusted basis, which excludes the impacts of these charges net income attributable to the company for the current quarter was $16 $6 million or <unk> 55 per share compared to $33 million or 96 per share last year.
Steve Nicola: The decline primarily reflected the impacts of lower consolidated adjusted EBITDA and higher interest expense for the current quarter.
Steve Nicola: Consolidated sales for the fiscal 2020 for fourth quarter were 4400, $46 $7 million compared to $482 million a year ago. The decline primarily reflected lower sales for the industrial technology segment, mainly reflecting lower engineering sales. Additionally sales.
Steve Nicola: For the Memorial <unk> segment declined modestly for the current quarter compared to a year ago, primarily due to lower unit volumes principally related to a decrease in U S. Casted deaths. These.
Steve Nicola: These declines were partially offset by higher sales for the SDK brand solutions segment, which is continuing to benefit from more stable market conditions.
Steve Nicola: Consolidated adjusted EBITDA for the fiscal 2020 for fourth quarter was $58 $1 million compared to $61 $9 million a year ago.
The decrease primarily reflected a decline in the industrial technologies segment.
Steve Nicola: Adjusted EBITDA for the Memorialization segment was higher than a year ago and the S. T. K brand solutions segment was relatively unchanged. In addition, corporate and other non operating costs were lower than a year ago, primarily reflecting the company's cost reduction efforts as we continue to leverage the benefits of our global business services platform.
Steve Nicola: Please see the reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share provided in our earnings release.
Please move to slide eight to review our segment results.
Steve Nicola: Sales for the Memorial <unk> segment for the fiscal 2020 for fourth quarter were $196 $8 million compared to $204 $9 million for the same quarter a year ago.
Steve Nicola: Sales volumes for cemetery memorials, caskets, and cremation equipment were lower for the quarter compared to last year as U S casted deaths declined.
Steve Nicola: These declines were partially offset by the favorable impact of improved price realization and higher mozley themselves recent.
Steve Nicola: <unk> also contributed to the segment sales for the current quarter.
Steve Nicola: Memorial <unk> segment adjusted EBITDA for the current quarter was $45 million compared to $36 $9 million for the same quarter last year. The increase primarily resulted from improved pricing and benefits from cost savings initiatives. These increases were partially offset by the impact of lower sales volumes.
Steve Nicola: And increased labor and material costs.
Steve Nicola: Please move to slide nine.
Steve Nicola: Sales for the SDK brand solutions segment were $135 $9 million for the quarter ended September 32024, compared to $134 $7 million, a year ago, representing an increase of $1.2 million.
Steve Nicola: The increase primarily reflected higher sales for the merchandising and private label businesses growth in the segment's Asia Pacific Pacific market and improved price realization to mitigate inflationary cost increases.
Steve Nicola: Adjusted EBITDA for the SDK brand solutions segment was $17 $3 million for the current quarter, which was relatively consistent with the segment's adjusted EBITDA of $17 $5 million a year ago.
Steve Nicola: The benefits of higher sales and the segment's cost reduction actions were offset by higher labor related costs and performance based compensation.
Steve Nicola: Segment year to date, adjusted EBITDA increased to $61.6 million for fiscal 2024 compared to $57 $1 million last year, primarily reflecting the benefits of the cost reduction actions, resulting in year over year margin improvement.
Steve Nicola: Please move to slide 10.
Sales for the industrial technology segment for the fiscal 2020 for fourth quarter were $113 $9 million compared to $146 million a year ago. The decrease primarily resulted from lower sales for the segments engineering business, which consistent with prior quarters. This year has been significantly.
Steve Nicola: Impacted by customer delays in shipments and installations these delays or timing in nature as we expect the shipments and installations to occur in fiscal 2025. Additionally.
Steve Nicola: Additionally, operating results for our warehouse automation business has been unfavorably impacted by the continued slow conditions in the U S warehouse industry.
However, as reported last quarter, we continue to see signs of improvement based on recent quoting and order rates, which is expected to support recovery in this business next year.
Recent divestitures also contributed to the reported sales decrease for the quarter for this segment.
Adjusted EBITDA for the industrial technology segment for the current quarter was $15 9 million compared to $23 $5 million a year ago.
Steve Nicola: The decrease primarily reflected the impacts of the sales declines in the engineering and warehouse automation businesses. The declines were partially offset by lower performance based compensation and the benefits of operational savings initiatives.
Steve Nicola: Please move to slide 11.
Steve Nicola: Cash flow from operating activities for the quarter ended September 32024 was $35 $9 million compared to $2 $6 million a year ago. The.
The increase from a year ago, primarily reflected the cash flow benefit of working capital reductions for the year ended September 32024 cash flow from operations was $79 $3 million, which was relatively consistent with operating cash flow of $79 $5 million last year.
Steve Nicola: Outstanding debt was $776 million at September 32024, compared to $830 million at the end of last quarter, representing a reduction of $53 $8 million during the fiscal 2020 for fourth quarter.
Steve Nicola: The company's net debt, which represents outstanding debt less cash was $736 million at September 32024, compared to 787 million at June 32024, representing a reduction of $51.8 million during the fiscal 2020 for fourth quarter.
Steve Nicola: Since the beginning of calendar 2024, the company has reduced its outstanding debt and net debt balances by $86 million and $89 million respectively.
Steve Nicola: During the fiscal 2020 for fourth quarter the companies the company reduced its net debt leverage ratio from 3.8 at June 32024 to 3.6 at September 32020 for.
Steve Nicola: This leverage ratio is based on net debt and trailing 12 months adjusted EBITDA.
Steve Nicola: In addition in September 2024, we completed the refinancing of the outstanding Senior notes, which were due December one 2025.
Steve Nicola: Due to current interest rates and the ongoing strategic review of our business portfolio, we opted for shorter term bond three.
Steve Nicola: Three year maturity with an ability to call in one year.
Steve Nicola: For the fiscal 2020 for fourth quarter. The company purchased only approximately 2000 shares under its stock repurchase program, which were solely in connection with withholding tax obligations on equity compensation vesting.
Steve Nicola: As evidenced by our debt reduction during this quarter, we remain primarily focused on debt reduction.
Steve Nicola: Approximately 36 million shares were outstanding at September 32024.
Steve Nicola: As I noted in the beginning of my remarks, we have initiated debt reduction programs. This quarter that span several of our business units I'm sorry as noted in the beginning of my remarks, we have initiated cost reduction programs. This quarter that span several of our business units and corporate functions. These programs are expected to result.
Steve Nicola: All in annual cost savings up to $50 million with the most significant portions from our engineering and tolling operations in Europe, and also targeting our general and administrative costs.
Steve Nicola: Finally, the board this week declared a quarterly dividend of <unk> 25 per share on the company's common stock.
This represents the 30 <unk> consecutive annual dividend increase since becoming a publicly traded company. The dividend is payable December 16, 2024 to stockholders of record December two 2024.
Steve Nicola: This concludes the financial review and we will now open the call for any questions.
Thank you well now be conducting a question and answer session.
Steve Nicola: If you'd like to ask a question today. Please press star one from your telephone keypad.
Steve Nicola: Asian tone will indicate your line is in the question queue.
Speaker Change: Let me press star two if he like to withdraw your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment. Please can we poll for questions. Thank you.
Speaker Change: Thank you and our first question is from the line of Daniel Moore with CJS Securities. Please proceed with your questions.
Speaker Change: Thank you good morning, Joe Good morning, Steve Thanks for taking the questions good morning, Dan.
Speaker Change: Let's start with energy storage, maybe just refresh on what.
Speaker Change: The level of backlog.
Speaker Change: Entering fiscal 'twenty five and.
Speaker Change: Maybe just talk to the.
Speaker Change: The cadence of the opportunity set over the next several quarters, both with your large customer in some of the emerging customers.
Speaker Change: Now assuming most of that backlog ships when do we need to start to put more orders in backlog to return.
Speaker Change: To grow say, maybe fiscal 'twenty and beyond.
Speaker Change: Yeah, Dan or our backlog is about $100 million little less than that that will mostly be delivered over the course of the next 12 months as it relates to other opportunities as you might expect we are being cautious with some of that at this point in time, there's no lack of interest I can assure.
Speaker Change: You have that but given where you stand with your with the dispute we are in the midst of evaluating what we can and cannot do at this time.
Speaker Change: It makes perfect sense and then just to the guide more generally maybe just talk about what's embedded for industrial technology.
Speaker Change: Were you just described I think the energy storage well in terms of warehouse automation do you expect orders to improve.
Speaker Change: And in terms of.
Speaker Change: Axiom whats implied there in terms of revenue or maybe the back half of fiscal 'twenty Guide.
Speaker Change: So, let's let's be let's be clear as we can as you all know when we talked about the.
Speaker Change: Warehouse automation business.
Speaker Change: It is a business that in our initial first quarter is generally low I mean, we are out of warehouses during that time period. It's Christmas season. So we are expecting a slower a slower.
Speaker Change: First quarter of 2025, however, quoting activity that we're seeing right now bodes for a stronger year.
Speaker Change: In 2025 and beyond given the size and the volume activity that we're seeing we.
Speaker Change: We saw growth in our product identification business. This year, we will continue to see growth next year as I said on the in my comments with regard to the launch of our axiom product I do not expect it to be a skyrocketing launch, but customer acceptance is going to be the greatest rocky big.
Steve Nicola: Greatest acknowledgment of what we think the future of that product will be our beta testing has gone exceedingly well and we're seeing are a confirmation of all the value propositions. We expect out of that I think it's going to be a significant contributor to us going forward more importantly, I would say Dan the opportunities that are available.
To us because of that technology beyond what we do today, whether it be in the form of licensing or whether it be in the form of advancements we want to carry forward are significant so when we speak of opportunities in our industrial technology segments or product densification of warehouses, including our energy business are keys to what we see the future of the bill.
Steve Nicola: To be.
Speaker Change: Excellent and then I'm sure you're a little bit limited, but one of the more interesting comments in the press release, you know exploring strategies with respect to the portfolio.
Speaker Change: Can you elaborate on what options you are contemplating you know what.
Speaker Change: Sort of might be on or off the table.
Speaker Change: From a strategic high level perspective.
Speaker Change: Sure Dan as you might expect we're not going to talk too much about that process until it's concluded however.
Speaker Change: We've been pretty clear as we start to see some of our smaller businesses have access to greater opportunities for growth and I'm speaking about the three businesses in our industrial technology segment, we would evaluate our portfolio. We are now at that point, where we see that opportunity given what we're seeing in our <unk>.
Our energy business, which has significant opportunities our industrial our warehouse automation business with add ons that we can make through acquisitions in that space and the launch of axiom and our new product in the laser space. We see those now beginning to see the opportunity that we had always hoped for so we're evaluating the whole portfolio looking for work.
Speaker Change: He is the best way to maximize shareholder value I'm not going to speak about any part of it but it's consistent with what we've said publicly for a while.
Speaker Change: Understood and I'll jump back with any follow ups. Thank you. Thanks, Joe.
Speaker Change: Our next question is from the line of Liam Burke with B Riley Securities. Please proceed with your questions. Yes. Thank you good morning, Joe Good morning, Steve.
Speaker Change: Hi, Liam.
Speaker Change: Joe could you give us a little more detail on the memorial ovation side, both on the memorial ovation products understanding traditional burials a DAU, so caskets naturally should be down.
Speaker Change: But memorialize Asian products both bronze.
Speaker Change: And granted getting any lift from increased cremations and what does that business look like this quarter.
Speaker Change: But I would tell you Liam that that's what I said in my comments with respect to the diversity of the portfolio I think that's probably the most misunderstood parts of that business. It's not just a casket and a memorial market, we sell whether it be cremation related products, which now over $120 million at this point in time.
Speaker Change: Or whether I actually said, Steve just corrected me, it's $140 million excuse me.
Speaker Change: And whether or not it be Muslim constructions that are are going quite strong and quite well for us right now the diversity of the portfolio is what's giving me the opportunity secondly, we continue to see opportunities for tuck ins in that business.
Speaker Change: Business to continue to grow it at very favorable return on investment kind of investments that we can make so I would tell you that what we're seeing is the growth of our cremation business just related to all the memorial authorization segment, whether it be brands, whether it be stone, whether it be our installations and our Muslim busy.
Speaker Change: This or whether it be other related products.
Speaker Change: We don't view this as a business that is materially declining of any sort.
Speaker Change: Okay, I mean, you're you're generating nice EBITA margins, there I mean high teens ticked over it over the Twenty's. This quarter is there a point where there is crossover would actually allow you to show some organic growth outside of acquisitions.
Yeah, I would say so.
Speaker Change: Tell you, mostly that's going to be driven by price, but absolutely I mean, we're seeing that in our cremation, we're seeing organic growth in our cremation at this point in time as as the public starts to acknowledge the need for memorials nation have cremated remains we think that 140 continues to grow and could see show ultimately show a small modest top.
Speaker Change: Align growth coupled with our price increases throughout so we think this is a great business I think the other thing you didn't touch on I would tell you is the cash flow generated from this this business. This business. This year generated wonderful cash flow as we focused on.
Speaker Change: Receivable collection, and just converting our inventory management so.
Speaker Change: When we look at our business is generating 160 plus million of EBITDA with a capex that is about $20 million. This is a business that generates excess exceptional cash flow.
Speaker Change: Great. Thank you Joe.
Speaker Change: Yep.
Speaker Change: Our next questions are from the line of Justin Bergner with Gabelli funds. Please proceed with your question.
Speaker Change: Good morning, Joe Good morning, Steve.
Good morning.
Speaker Change: A couple of questions here. So on the strategic review was there a trigger for why you're getting this underway now and is this more focused on the industrial technology businesses or in some of the legacy businesses.
Speaker Change: Yeah, Justin we're not going to comment about what business is it may be a you know what what triggered it now frankly is the exceptional opportunities in front of us in terms of what are now coming to fruition and industrial tech right, whether it be the energy business, which I received great confirmation through the dispute that we're having right now.
Speaker Change: Customers around the world are contacting us at this point to kind of get access to that opportunity as I said were cautious with respect to what we do today until this is this dispute is resolved but significant opportunities there.
Speaker Change: When we look at the finally getting to the launch of our axiom product with a clear pathway to getting there we see that as an opportunity to continue to grow the business and our fast and now more fast way than we have been historically and warehouse are we see a significant opportunity to add tuck ins to expand our portfolio.
Speaker Change: We have a very very very unique opportunity in that business that is misunderstood or undervalued by the market. So we are looking at the portfolio consistently as we have discussed that when we saw these smaller business to start to achieve a pathway to growth of significance, we would evaluate the portfolio.
Speaker Change: Got it. Thank you on the 50 million of savings, what's the cadence for the realization of those savings over the course of the current fiscal year and into 2026 fiscal year and wont be the total cash costs required to generate the $50 million of savings.
Speaker Change: Okay, Yeah, so Justin with respect to the savings, we're expecting to realize somewhere in the $25 million to $30 million of that to get to that run rate by the end of this year and then are there with the remainder to get to the run rate by the end of next fiscal year, so that that would be the cadence.
Speaker Change: And obviously that timing is just based on our ability to affect some of the some of the change and with respect to the cost of that.
Speaker Change: If I, if if if I exclude it.
Speaker Change: Yeah, if I exclude the goodwill impairment and just some of the recent asset write downs. The total cost to achieve that are somewhere in the $40 million range $30 million to $40 million range and about 75% of that is cash 25% a.
Speaker Change: Noncash one thing I'd add to that Justin is the cost that we've occurred accrued at this point in time do not include the anticipated inflow of cash from the sale of related assets, which will materially reduce the cost to achieve.
Speaker Change: Gotcha Alright.
Speaker Change: And then lastly, you mentioned a new patent on the energy storage side. It came at me a bit fast could you just clarify sort of what that is and what it allows for the business.
Speaker Change: Okay.
Could you repeat that question very quickly for me.
Speaker Change: Sorry, Yes, I think in your prepared remarks, you indicated a new pattern in the energy storage business.
Speaker Change: And just could you review what that is and how it amplifies.
The opportunity sure I mean.
Speaker Change: It's what we've said all along.
Speaker Change: Justin we have been working on this in the dry battery electrode space for better than a decade.
Speaker Change: This has been the pattern is a critical piece of equipment process in the whole production of dry battery electrode filed in early 2019 before we had done any work for any of you can be or battery manufacturers at that time.
Speaker Change: So it is evidence of our long standing experience in specialty Calendaring.
Speaker Change: And frankly, a great asset to the portfolio.
Great. Thanks, so much.
Our next question is from the line of Colin Rusch with Oppenheimer. Please proceed with your questions.
Thanks, so much guys.
Speaker Change: Given.
Speaker Change: The election results and some of the activity that we're seeing in the battery space around folks kind of Derisked our supply chain.
Speaker Change: And move into non China geographies can you characterize a little bit of where you're at with the non telco customers in terms of conversations attorney press.
Speaker Change: Pressure it takes our timeframes on the trial I tried process into higher cost regions, where you guys can provide a great job.
Speaker Change: Yeah, well, let's let's let there's a lot in that question, Justin let's see if I can parse it out first off I mean with regard to the geopolitics of the current administration I think part of the part of the issue that is most misunderstood about that our business is that we are probably the only western World company able to do what we're doing right now.
And that has put us in a unique position.
Speaker Change: To be able to service the western World markets.
Speaker Change: Others may not the.
Speaker Change: The other questions as it relates to other customers as I said, we are being quite cautious with respect to our speaking in pushing anything with our other customers given the current dispute we hope to have more clarity on that dispute in early January that will allow us to be more Frank about our conversations and where we stand with that Oh.
Speaker Change: I'm trying to piece out the other rest of that question I can't remember what else you said.
Speaker Change: Sorry, I shouldn't.
That gets after it no I appreciate it and then the other question for me is just really around the product identification and the new products. There you know can you give us a sense of early returns on that now that you're you're shipping a few things to get a sense of and the cadence of the uptake on on those new products as you get into 2025.
Look as I mean, when it comes to the the the laser product. We just put into market. It has margins that are consistent with the overall portfolio, which would be margins I would say in the high teens, which was exactly where we expected it to be we expect the margin in our axiom product to continue to.
Speaker Change: This is a unique proposition.
Speaker Change: With the opportunity to reduce total cost of ownership for our customers by up to 30% during the lifetime of the product we expect to capture some of that benefit so oh as we get market share and as it gets acceptance. We think this will be a significant contributor to our bottom line.
Speaker Change: That's helpful, but I'm curious about the cadence of uptake right. So the Oh with yourself.
Speaker Change: Yes.
Speaker Change: I understand that.
Speaker Change: I don't expect significant dollars next year, but I think it's going to be as I said more about customer adoption.
As you might expect a large soda bottling company is not going to convert to a new technology overnight, but as they adopt and accepted I'd be able to speak more clearly about that we think it'll be a bigger contributor in 'twenty. Six then it will be in 'twenty five.
Speaker Change: And then there are other other uses so let's call it that for the product, we're starting to see activity in that or things beyond what we do with licensing with others. So there. There's there's a great opportunity there that we'll talk more about as we start to get closer to lunch.
Speaker Change: Excellent thanks, guys.
Speaker Change: Okay.
Thank you the next questions come from the line of Daniel Moore with CJS Securities. Please proceed with your question.
Speaker Change: Thanks again appreciate it.
Speaker Change: Well I think one of the interesting things that maybe gets less attention S. T. K turning positive it's pretty significant maybe just talk to your confidence.
The ability of that top.
Speaker Change: Top line growth, what's driving it what's changed in your end markets and what kind of outlook for 'twenty five 'twenty six.
Speaker Change: Yeah, I mean, that's a great question, Dan and you know we've talked about it pretty extensively.
Speaker Change: And that operates in the consumer goods business in Europe, we still continue to struggle in that parts of the world, but we are seeing however is as we said our digital ecommerce solutions continue to grow, particularly in North America and in the APAC region are our unique position and in particularly the APAC region, where there is the.
Speaker Change: Competition is is less present.
Speaker Change: Given us opportunities there that are going to allow us to continue to grow but I would tell you. The most important thing that has allowed us to.
Speaker Change: To kind of achieve these results is the fact that you know as as we kind of move forward are unique opportunities and our service to our customers has allowed us to raise prices in an industry that has not been known for that for the last decade, we've been lowering prices year after year after year until we significantly pushed back to cover that.
Speaker Change: Cost of arm are.
Speaker Change: Our inflationary impact those inflationary.
Speaker Change: Price increases allowed us at least to maintain where we are and not <unk>.
Speaker Change: Worry about when we add a new account or when we add a new project when we add new markets those actually drop to the bottom line. So we see that finally, turning the tide to where our inflationary price increases gives us stability and new wins actually come to the bottom line I think that's a pathway forward for that business.
Really helpful.
Speaker Change: Any more you know Steve any more quantification you can give us just in terms of where even rank ordering the buckets of cost savings for that 50 million you know across business lines as well as you know what's been sort of corporate G&A.
Speaker Change: So I would I would say this dan.
Speaker Change: The predominant number more than half of the savings are expected to come from our European operations.
Speaker Change: And then the rest of.
Speaker Change: The balance will be over.
Speaker Change: I'd say multiple businesses the remaining businesses, but a good portion coming from our G&A line.
Speaker Change: Yeah.
Speaker Change: Got it and last one for me you know projecting higher operating cash flow next year. I think you said can you quantify that and we are.
And any any quantification.
Speaker Change: And what are we thinking about in terms of Capex for 'twenty.
So I'll start with the Capex that there are expected Capex range next year is going to be in the $50 million to $60 million range on a consolidated basis, that's our current projection.
Speaker Change: And it'll be a little bit difficult to quantify the pick the cash flow is just simply because.
Speaker Change: The working capital component of the cash flow and that's going to be dependent on some of the timing of of of the energy.
Speaker Change: Deliveries and shipments but still.
Speaker Change: Should be favorable.
Speaker Change: Understood. Thanks again.
Speaker Change: You're welcome thank.
Thank you there are no additional questions, Steve I turn the floor back to you for closing remarks.
Thank you Rob well, we appreciate everyone's participation in our call. This morning have a good day and a great weekend.
Speaker Change: This will conclude today's conference you may disconnect your lines at this time and we thank you for your participation.