Matthews International anticipates at least $190M adjusted EBITDA for 2025 while advancing automation and product launches

Earnings Call Insights: Matthews International Corporation (MATW) Q3 2025

Management View

• CEO Joseph C. Bartolacci reported that the company saw initial benefits from its value creation plan, emphasizing a gain from the divestiture of SGK (now Propelis Group), consolidated savings from a cost reduction program, lower corporate and nonoperating costs, and improved EBITDA performance year-over-year by the Memorialization and Industrial Technologies segments.
• Bartolacci stated, “Consolidated sales were $349 million in the third quarter of fiscal 2025 compared to $428 million in the third quarter of fiscal '24. The lower revenue result was primarily attributable to the divestiture of SGK in May of this year.”
• Bartolacci highlighted that Propelis is projecting initial annual adjusted EBITDA of about $100 million and identified $60 million of total targeted synergies, with a run rate of $10 million by year-end and $40 million by the end of calendar '26. He noted, “All in all, we expect this transaction to create significant value as we exit in the future.”
• The Memorialization segment reported a modest revenue increase and strong margins, with the Dodge acquisition already accretive. Bartolacci said, “It is already accretive, and we expect to eventually add around $12 million of annual EBITDA from this transaction as we integrate the business into our system.”
• The Industrial Technologies segment experienced lower revenues due to engineering and the Tesla dispute, but warehouse automation business saw a significant increase in backlog. Bartolacci noted, “Order rates and order size are picking up, including continuing orders from Lands' End and other leading retailers resulting in a significant increase in backlog.”
• Bartolacci discussed innovation in the Product Identification business, announcing the upcoming launch of Axiom, a new printhead chip product, with a targeted addressable market of approximately $2 billion.
• Bartolacci addressed ongoing legal matters with Tesla, indicating the company’s intellectual property was upheld in arbitration, and highlighted a pipeline of over $150 million in quotes for battery solutions.
• CFO Steven F. Nicola stated, “For the fiscal 2025 third quarter, the company reported net income of $15.4 million or $0.49 per share compared to net income of $1.8 million or $0.06 per share a year ago. The increase primarily reflected a gain on the divestiture of the SGK business.”

Outlook

• Nicola confirmed, “We are maintaining our previous earnings guidance of adjusted EBITDA of at least $190 million for fiscal 2025, which includes our estimated 40% share of Propelis adjusted EBITDA from May 1, 2025, through September 30, 2025.”
• Management expects continued debt reduction through the potential sale of European packaging assets, and further simplification of the corporate structure.
• Guidance language remains unchanged from the prior quarter, with the adjusted EBITDA projection maintained despite the SGK divestiture.

Financial Results

• Sales for the quarter were $349 million, down from $428 million a year ago due to the SGK divestiture.
• Pro forma consolidated adjusted EBITDA, including Propelis, was $51.3 million for the quarter compared to $44.7 million a year ago.
• Memorialization segment sales reached $203.7 million, with adjusted EBITDA of $42.8 million, driven by cost savings initiatives and the Dodge acquisition.
• Industrial Technologies sales were $87.9 million, with adjusted EBITDA of $9 million, reflecting benefits from cost reductions and increased warehouse automation revenue.
• Cash flow used in operating activities was $15.2 million, attributed to SGK transaction and restructuring costs, with debt reduced by $120 million to $702 million at quarter end.
• The company purchased 386,000 shares under its stock repurchase program at an average cost of $19.96 per share.

Q&A

• Peter Lucas, CJS Securities: Asked about Dodge Company’s EBITDA contribution. Nicola responded, “For this quarter, the EBITDA contribution was approximately $1 million on the $6 million sales number.”
• Lucas inquired about industrial side segment details. Nicola stated that energy business sales and total engineering business were down, mitigated by improvements in warehouse automation.
• Colin William Rusch, Oppenheimer: Asked about synergies between the new printhead business and warehouse automation. Bartolacci explained the connection and anticipated future updates as the rollout continues.
• Rusch questioned automation business growth strategies. Bartolacci emphasized focus on debt reduction and embedding software in autonomous warehouse solutions, highlighting a partnership with Teradyne.
• Liam Dalton Burke, B. Riley Securities: Asked about Tesla’s urgency in DBE development and recent orders. Bartolacci described ongoing global interest in dry battery electrode technology and confirmed a production order from a solid-state player.
• Justin Laurence Bergner, Gabelli Funds: Sought clarification on asset sales. Bartolacci and Nicola clarified timing and size of the European packaging (rotogravure) sale; Nicola confirmed it has a $50-$60 million annual revenue run rate and is currently breakeven.
• Bergner asked about debt reduction, transaction costs, and dividend policy, with Nicola providing breakdowns and confirming guidance treatment for Propelis.

Sentiment Analysis

• Analysts focused on clarification of asset divestitures, EBITDA guidance, automation strategies, and legal matters, with a tone that was neutral to slightly positive, seeking specifics on execution and financial clarity.
• Management maintained a confident and steady tone in both prepared remarks and Q&A, emphasizing progress on value creation, cost reductions, and innovation. Bartolacci’s language repeatedly referenced expectation for continued improvement and confidence in long-term prospects.
• Compared to the previous quarter, both analysts and management sustained a constructive dialogue, with less uncertainty around strategic moves and divestitures in this call.

Quarter-over-Quarter Comparison

• Guidance on adjusted EBITDA remained steady at at least $190 million, now incorporating the Propelis contribution post-SGK divestiture.
• Strategic focus shifted from executing the SGK transaction to integrating the Dodge acquisition, managing the Propelis relationship, and advancing automation and product launches.
• Key segment metrics showed Memorialization rebounding and Industrial Technologies margins improving, while prior quarter noted more pronounced sales declines and transition activity.
• Analysts’ questions this quarter centered more on cash flow, debt reduction, and operational execution following recent transactions, compared to prior focus on closing and structuring the SGK deal.
• Management’s confidence appeared unchanged, if not slightly improved, with strong emphasis on the value creation plan’s ongoing results.

Risks and Concerns

• Tariffs were cited as a risk for the Memorialization segment, but management stated, “We have generally been able to pass along these higher costs and do not expect significant impact to our results for the remainder of the year.”
• Ongoing legal disputes with Tesla were discussed, with management underscoring confidence in their intellectual property position and downplaying the likelihood of adverse legal outcomes.
• Cash flow pressures from transaction and restructuring costs, as well as legal expenses related to the Tesla dispute, were acknowledged as impacting operating cash flow.
• Analysts probed asset sale timing, EBITDA treatment, and the execution of cost reductions as areas of concern.

Final Takeaway

Matthews International enters the fourth quarter with a sharpened focus on value creation through portfolio simplification, cost reductions, and investments in automation and product innovation. With guidance for at least $190 million in adjusted EBITDA reaffirmed, ongoing integration of recent acquisitions, and a robust pipeline in automation and energy storage, management’s comments signal confidence in the company’s ability to generate sustainable growth and drive shareholder value as it completes its strategic transformation.

Read the full Earnings Call Transcript

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