Matthews International Q2 Earnings Call Highlights

Key Points

• Early redemption of $300 million senior secured notes cut total long-term debt to $579 million (down from $822 million a year ago) and should lower annual interest expense by about $10 million, despite a one-time $16.3 million extinguishment charge.
• Memorialization remains the company’s growth engine, delivering its fourth consecutive quarter of year‑over‑year EBITDA growth with sales up to $215.3 million and the Dodge acquisition adding roughly $10–11 million in quarterly sales and ahead of EBITDA targets.
• Industrial Technologies is pressured now but a meaningful recovery is expected next year—the segment posted weaker results after divestitures, yet management cited Axian production starts, a $25 million converting-line win, ~$75 million of pipeline opportunities, and reaffirmed full‑year fiscal 2026 adjusted EBITDA guidance of at least $180 million (inclusive of Propelis).

Matthews International NASDAQ: MATW executives emphasized balance sheet progress and steady performance in Memorialization while outlining efforts to rebuild momentum in Industrial Technologies during the company’s fiscal 2026 second-quarter earnings call.

Debt redemption reshapes the balance sheet

President and CEO Joe Bartolacci said the company completed the early redemption of $300 million of senior secured notes in January, calling it “a significant structural repair of a balance sheet.” He reported total long-term debt of $579 million, down from $822 million one year ago, with net debt of approximately $543 million.

The move is expected to reduce annual interest expense by about $10 million. Matthews recorded a $16.3 million debt extinguishment charge in the second quarter, which Bartolacci said included $3.4 million of non-cash items and should be viewed as a one-time cost tied to improving the company’s cost of capital.

CFO and Treasurer Daniel Stopar added that net debt decreased by $135 million since the end of fiscal 2025, driven mainly by $243 million in divestiture proceeds from the Warehouse Automation business and European packaging and tooling businesses during the first quarter, partially offset by cash used in operations and fees to redeem the notes.

Second-quarter results reflect divestitures and portfolio changes

Stopar said Matthews posted a net loss of $21.8 million, or $0.69 per share, compared with a net loss of $8.9 million, or $0.29 per share, a year ago. He attributed the change primarily to the loss on the debt redemption, higher strategic initiative costs, and lower operating performance in Industrial Technologies, partially offset by lower acquisition and divestiture costs, reduced net interest and other deductions, and higher income tax benefits.

Revenue fell sharply year over year as prior divestitures rolled through comparisons. Consolidated sales were $259 million versus $428 million in the prior-year quarter. Stopar said divestitures accounted for about $166 million of the current-quarter decline, partially offset by an $11 million contribution from the acquisition of The Dodge Company.

Adjusted EBITDA for the quarter was $44.7 million, down from $51.4 million a year ago, reflecting weaker engineering performance in Industrial Technologies and a smaller contribution from Matthews’ ongoing interest in Propelis compared with SGK results included in the prior-year period. On a non-GAAP adjusted basis, Stopar said net income attributable to the company was $11.6 million, or $0.37 per share, compared with $10.5 million, or $0.34 per share, driven mainly by lower interest expense and higher other non-operating income.

Memorialization delivers growth; Dodge integration continues

Management highlighted Memorialization as the company’s strongest performer. Bartolacci said Memorialization delivered its fourth consecutive quarter of year-over-year EBITDA growth, and described it as “the engine that drives this company.”

In the quarter, Memorialization sales rose to $215.3 million from $205.6 million, while adjusted EBITDA increased to $48.8 million from $45.0 million. Stopar said the Dodge acquisition contributed about $11 million in sales, and that the adjusted EBITDA increase was “primarily contributed” by Dodge.

Stopar noted volume declines in caskets and cemetery memorials tied to “lower estimated U.S. casketed death rates,” along with lower cremation equipment and mausoleum sales. Those pressures were partially offset by inflationary price increases. He said price realization and cost savings initiatives helped results, though the company faced higher labor and material costs.

Bartolacci said Dodge is contributing roughly $10 million in sales per quarter and is ahead of EBITDA targets, adding that Matthews is now realizing the cost and commercial synergies it expected. He also said that after asset monetization and working capital actions, Matthews expects the adjusted purchase price of Dodge to be under $50 million with EBITDA contributions exceeding $12 million.

On the call’s Q&A, Bartolacci said management expects Memorialization volumes to be “stable to modestly down” for the balance of the fiscal year, while pointing to cross-selling initiatives between Dodge and legacy Matthews customers. He also said the company is factoring a “modest” tariff-related headwind into its forecast and that this expected impact is higher than what Matthews anticipated a quarter earlier.

Industrial Technologies remains challenged, but management points to pipeline

Industrial Technologies posted second-quarter sales of $43.4 million, down from $80.8 million, primarily reflecting the divestitures of the tooling business and Warehouse Automation. The segment reported an adjusted EBITDA loss of $3.3 million compared with a $6.0 million profit in the prior-year quarter.

Bartolacci said the remaining Industrial Technologies portfolio is focused on “high-value product identification and engineered solutions.” In product identification, he said Matthews shipped its first production units of Axian to paying customers after previously pausing deliveries to address “minor issues” found during beta testing. He said commercial interest remains strong, citing “higher quality marks using significantly less solvent” and lower maintenance costs, and reiterated that Axian “will not be a material contributor” to revenue this year due to the earlier delays, but is expected to contribute more meaningfully next year. He also said the company is pursuing strategic partnerships, including white label opportunities, and hopes to share updates before fiscal year-end.

In engineering and energy solutions, Bartolacci described the quarter as “again challenging as expected,” but said the company was recently awarded a $25 million converting line order for delivery in the U.S. He also cited $75 million of additional orders the company is “confidently” working on and said management expects “a material change in this business next year.” He added that Matthews is working on multiple partnership agreements using its DBE technology and hopes to announce them before the end of the fiscal year, including discussions with global ultracapacitor manufacturers.

Propelis update, arbitration decision, and reaffirmed guidance

Matthews continues to account for its 40% equity interest in Propelis on a one-quarter reporting lag. Stopar said the quarter ended March 31, 2026 includes Matthews’ share of Propelis results for October through December 2025. For the quarter, Brand Solutions reported no revenue due to divestitures, while adjusted EBITDA was $9.6 million, mainly reflecting Matthews’ Propelis interest.

Bartolacci said the Propelis team stood up its own SAP instance during the quarter and expects to begin migrating SGS locations over the next six to nine months, with results expected to begin showing in Matthews’ fourth quarter. He reiterated expectations that the SAP work will unlock more than $25 million of over $60 million in identified synergies. Bartolacci also said Matthews expects a partial redemption of its preferred interest in the coming quarter and continues to target an exit from the investment within 12 to 18 months. During Q&A, Stopar said Propelis is typically seasonally weakest in the fourth calendar quarter, which was the period included in Matthews’ fiscal second-quarter results.

On DBE, Bartolacci said an arbitrator issued an interim decision on Feb. 13 that “favorably affirmed our ownership of, and rights in our DBE technology” and denied Tesla’s request for broad injunctive relief. He said a narrow injunction on certain components has had no material impact because Matthews already has alternative components, and that the ruling has helped remove an overhang in customer discussions.

Looking ahead, Bartolacci reaffirmed full-year fiscal 2026 adjusted EBITDA guidance of at least $180 million, inclusive of Matthews’ 40% Propelis interest. He said reaching that target depends on a stronger second half, supported by Memorialization performance, conversion of Industrial Technologies’ pipeline, and Propelis execution, while noting potential risks from engineering order timing, tariffs, Propelis synergies timing, and geopolitical challenges.

Stopar also reviewed cash flow and capital returns. Operating cash flow for the first six months was an outflow of $67.4 million, which management attributed to divestiture-related disbursements, litigation and proxy defense spending, and seasonal dynamics including bonus payments. The board declared a quarterly dividend of $0.255 per share payable May 25, 2026, to shareholders of record May 11, 2026. Matthews also repurchased 22,953 shares at an average cost of $26.33 per share, which Stopar said was solely related to withholding tax obligations for vested equity compensation.

About Matthews International NASDAQ: MATW

Matthews International Corporation NASDAQ: MATW is a diversified industrial company headquartered in Pittsburgh, Pennsylvania. The company operates through two primary business segments—Brand Solutions and Memorialization—offering a broad range of products and services designed to meet the needs of industrial manufacturers, brand marketers and the funeral industry worldwide.

In its Brand Solutions segment, Matthews International provides engraving and digital printing systems, automated finishing equipment, thermal management products and electronics assembly solutions.

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