Matthews International Corp: Form 10-Q for the period ended Mar 31, 2025

Sales for the six months ended March 31, 2025 were $829.5 million, compared to $921.2 million for the six months ended March 31, 2024. The decrease in fiscal 2025 sales reflected lower sales in the Industrial Technologies and Memorialization segments, and increased sales in the SGK Brand Solutions segment. On a consolidated basis, changes in foreign currency exchange rates were estimated to have an unfavorable impact of $5.7 million on fiscal 2025 sales compared to the prior year.

Memorialization segment sales for the first six months of fiscal 2025 were $396.1 million, compared to $430.2 million for the first six months of fiscal 2024. The sales decrease principally reflected lower unit sales of caskets, bronze and granite memorial products, and cremation equipment, primarily reflecting a decline in U.S. death rates. These declines were partially offset by improved price realization. Industrial Technologies segment sales were $161.4 million for the first six months of fiscal 2025, compared to $227.5 million for the first six months of fiscal 2024. The decrease in sales reflected lower sales of purpose-built engineered products (primarily energy storage solutions for the electric vehicle market and coating and converting equipment) and reduced sales of warehouse automation solutions. The decrease also reflected lower sales of R+S automotive engineering solutions, as the Company has discontinued these product offerings. Fiscal 2025 sales for the Industrial Technologies segment were impacted by slower market conditions for the warehouse automation business, and customer delays impacting the timing of projects within the energy storage business. Changes in foreign currency exchange rates had an unfavorable impact of $1.9 million on the segment's sales compared to the prior year. In the SGK Brand Solutions segment, sales for the first six months of fiscal 2025 were $272.0 million, compared to $263.5 million for the first six months of fiscal 2024. The increase in sales reflected higher brand sales in the Asia-Pacific region, improved retail-based sales, increased private-label brand sales, and improved price realization to mitigate inflationary cost increases. These increases were partially offset by lower brand sales in Europe, lower sales of cylinder (packaging) products in Europe, and the impact of unfavorable changes in foreign exchange rates. Changes in foreign currency exchange rates had an unfavorable impact of $3.2 million on the segment's sales compared to the prior year.

Gross profit for the six months ended March 31, 2025 was $269.8 million, compared to $280.5 million for the same period a year ago. Consolidated gross profit as a percent of sales was 32.5% and 30.5% for the first six months of fiscal 2025 and fiscal 2024, respectively. The decrease in gross profit reflected the impact of lower sales, higher material and labor costs, and lower margins on engineered products. These decreases were partially offset by the impact of improved price realization, and benefits from the realization of productivity improvements and other cost-reduction initiatives. Gross profit also included acquisition integration costs and other charges primarily in connection with cost-reduction initiatives totaling $338,000 and $5.9 million for the six months ended March 31, 2025 and 2024, respectively.

Selling and administrative expenses for the six months ended March 31, 2025 were $245.3 million, compared to $231.0 million for the first six months of fiscal 2024. Consolidated selling and administrative expenses, as a percent of sales, were 29.6% for the six months ended March 31, 2025, compared to 25.1% for the same period last year. Selling and administrative expenses in fiscal 2025 reflected higher compensation costs, offset by benefits from ongoing cost-reduction initiatives. Fiscal 2025 selling and administrative expenses included $11.5 million of expenses related to the pending divestiture of the Company's interest in the SGK Brand Solutions business (See Acquisitions and Divestitures below), $4.9 million of costs related to the Company's 2025 contested proxy, $8.7 million of net gains on the sales of certain significant property and other assets, and a $2.1 million loss on a small divestiture in the Industrial Technologies segment. Selling and administrative expenses included legal costs related to an ongoing dispute in the Company's energy storage business totaling $8.6 million in fiscal 2025 and $5.0 million in fiscal 2024 (see Legal Matter below). Selling and administrative expenses also included acquisition integration and related systems-integration costs, and other charges primarily in connection with certain commercial, operational and cost-reduction initiatives totaling $7.1 million in fiscal 2025, compared to $5.8 million in fiscal 2024. Intangible amortization for the six months ended March 31, 2025 was $12.9 million, compared to $18.8 million for the six months ended March 31, 2024. The fiscal 2025 decrease in intangible amortization primarily reflected certain intangible assets within the SGK Brand Solutions segment reaching the end of their amortizable lives.

Adjusted EBITDA was $91.4 million for the six months ended March 31, 2025 and $102.3 million for the six months ended March 31, 2024. Memorialization segment adjusted EBITDA was $81.7 million for the first six months of fiscal 2025 compared to $83.3 million for the first six months of fiscal 2024. The decrease in segment adjusted EBITDA reflected the impact of lower unit sales, and higher material and labor costs. These decreases were partially offset by the impact of improved price realization, benefits from productivity initiatives, and the favorable impact of a recent divestiture, which generated operating losses in the prior year. Adjusted EBITDA for the Industrial Technologies segment was $7.9 million for the six months ended March 31, 2025 compared to $19.7 million for the six months ended March 31, 2024. The decrease in segment adjusted EBITDA primarily reflected the impact of lower sales and margins on engineered products, and decreased sales of warehouse automation solutions. These decreases were partially offset by benefits from cost-reduction initiatives and lower performance-based compensation compared to fiscal 2024. Adjusted EBITDA for the SGK Brand Solutions segment was $27.9 million for the first six months of fiscal 2025 compared to $28.3 million for the same period a year ago. The decrease in

There have been no material changes in the Company’s market risk during the three and six months ended March 31, 2025. For additional information, see Item 7A - "Quantitative and Qualitative Disclosures About Market Risk" in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

The Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are designed to provide reasonable assurance that information required to be disclosed in our reports filed under that Act (the "Exchange Act"), such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission. These disclosure controls and procedures also are designed to provide reasonable assurance that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Management, under the supervision and with the participation of our Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures in effect as of March 31, 2025. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2025, the Company's disclosure controls and procedures were effective to provide reasonable assurance that material information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, and that such information is recorded, summarized and properly reported within the appropriate time period, relating to the Company and its consolidated subsidiaries, required to be included in the Exchange Act reports, including this Quarterly Report on Form 10-Q.

There have been no changes in the Company's internal controls over financial reporting that occurred during the fiscal quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, except for the updated risk factor provided below. The risk factors disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, in addition to the other information set forth in this report, including the updated risk factor below, could adversely affect the Company's operating performance and financial condition. Additional risks not currently known or deemed immaterial may also result in adverse effects on the Company.

Changes to U.S. trade policy, including new or increased tariffs and changing import/export regulations, could have a material adverse effect on the Company's operating results. Changes in U.S. or international social, political, regulatory or economic conditions or in laws and policies governing foreign trade, and any potential negative sentiment toward the U.S. as a result of such changes, could materially and adversely affect the Company's business. The U.S. has instituted certain changes, and has proposed additional changes, in trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the U.S., and other government regulations affecting trade between the U.S. and other countries (such as the European Union, China, Canada and Mexico) where the Company conducts its business. For example, on April 2, 2025, the U.S. government announced a 10% tariff on product imports from almost all countries and individualized higher tariffs on certain other countries. While several tariff announcements have been followed by announcements of limited exemptions and temporary pauses, global trade disruption, significant introductions of trade barriers and bilateral trade frictions, together with any future downturns in the global economy resulting therefrom, could further materially and adversely affect the Company's financial performance.

Part II - Other Information, Continued

As a result of policy changes and government proposals, there may be greater restrictions and economic deterrents on international trade. New tariffs and other changes in U.S. trade policy have triggered retaliatory actions by affected countries and may trigger additional retaliatory actions in the future, and foreign governments have instituted or are considering imposing trade sanctions on U.S. goods. Such changes have the potential to adversely impact the U.S. economy, the industries in which the Company operates, and the global demand for its products, and as a result, could have a negative impact on its business, financial condition and results of operations.