Matthews International Cuts Debt, Divests Units to Fuel Shareholder Returns

Date of Call: Feb 4, 2026

Financials Results

• Revenue: $285 million, down from $402 million a year ago
• EPS: $1.39 per share, compared to a net loss of $0.11 a share a year ago

Guidance:

• Adjusted EBITDA guidance for fiscal 2026 is at least $180 million, inclusive of the 40% interest in Propelis.
• Expect full year contribution from the Dodge acquisition, enabling memorialization growth.
• Additional cost reduction actions planned in Industrial Technologies to mitigate declines.
• Cautious on timing of orders in the energy business; demand in North America and Europe has slowed.

Business Commentary:

Strategic Asset Sales and Financial Improvement:

• Matthews International achieved a leverage ratio below 3x by reducing net debt to roughly $500 million, down from over $300 million in unfunded pension liabilities a few years ago.
• This improvement was driven by the sale of the warehouse automation business for $225 million and the European Packaging and Surfaces business for $41 million.

Dividend and Shareholder Returns:

• The company declared a quarterly dividend of $0.255 per share, with the dividend payable on February 23, 2026.
• This action aligns with the company's focus on accelerating returns to shareholders following significant debt reduction and strategic divestitures.

Energy Solutions and Market Outlook:

• The company's Energy Solutions business faced a challenging quarter, reflecting a 14% year-over-year revenue decline.
• Near-term expectations have decreased due to slower demand in North America and Europe, but long-term prospects are viewed positively due to global interest in next-generation battery chemistries.

Memorialization Segment Performance:

• The Memorialization segment reported a 7% year-over-year sales increase, driven by inflationary pricing and higher casket volumes.
• This growth was supported by the integration of the Dodge acquisition and cost synergies captured ahead of schedule.

Product Innovation and Market Expansion:

• The launch of the Axian printhead chip product received strong market interest, with over $3 billion in expanded total available market.
• This innovation is expected to be a clear entry point into the CPG space, broadening visibility and accelerating adoption.

Sentiment Analysis:

Overall Tone: Positive

• Management highlights successful execution of a strategic pivot, achieving a leverage ratio below 3x, and the sale of underperforming assets. They express confidence in the accretive nature of recent transactions (e.g., warehouse automation sale at 15x EBITDA) and in the strong market reception for new products like Axian. Forward guidance is provided with optimism, and the tone is focused on future growth and shareholder returns.

Q&A:

• Question from Colin Rusch (Oppenheimer & Co. Inc.): Can you talk about the breadth and depth of potential customers for ultracapacitors and batteries domestically and in Asia? Also, about tuck-in acquisitions in the DBE ecosystem.
  Response: Conversations are ongoing with OEMs and battery manufacturers in North America and Europe; interest is growing due to tariffs and domestic manufacturing. Acquisitions are not the focus; instead, joint development partnerships and strategic investments are pursued.

• Question from Colin Rusch (Oppenheimer & Co. Inc.): Are there other things contemplated to optimize the capital structure beyond the current position?
  Response: The 'cash and waiting' event from Propelis (potential preferred equity repayment and exit) may lead to future capital structure discussions, but no immediate plans were indicated.

• Question from Dan Moore (CJS Securities, Inc.): What are expectations for the memorialization market in calendar 2026, and what is early visibility for Q2?
  Response: January was slow, but February/March are expected to pick up. The Dodge acquisition is expected to contribute to growth, with death rates projected to rise 1.5-2% and cremation rates growing at a declining rate.

• Question from Dan Moore (CJS Securities, Inc.): What is the opportunity set for further inorganic growth in memorialization?
  Response: Opportunities exist to add product lines or expand into new markets, leveraging the existing sales force. No immediate deals are on the horizon, but the structure is attractive for accretive transactions.

• Question from Dan Moore (CJS Securities, Inc.): What is the expected cadence and size of orders in energy storage, and what is the revenue projection for fiscal 2026?
  Response: Orders are expected to pick up in H2, with a $50 million opportunity pending, plus smaller orders. Revenue projection for energy storage in fiscal 2026 is $30-35 million.

• Question from Dan Moore (CJS Securities, Inc.): What are expectations for CapEx and free cash flow in fiscal 2026?
  Response: CapEx is expected to be around $25 million. Working capital benefits of $5-10 million are anticipated, leading to cash generation in the last three quarters after interest and dividends.

• Question from Liam Burke (B. Riley Securities, Inc.): Is quote activity increasing post-Tesla overhang, and is it concentrated on larger systems?
  Response: Activity is not concentrated on larger systems but involves customers capable of placing large orders, with the $50 million item being the largest in the portfolio.

• Question from Liam Burke (B. Riley Securities, Inc.): Have you been able to pass through copper price increases to bronze pricing?
  Response: Price increases have been implemented to offset rising copper costs, though costs sometimes move faster than the increases.

• Question from Liam Burke (B. Riley Securities, Inc.): What is the status of the cremation business?
  Response: After restructuring and shutting a West Coast facility, the business is concentrated in Florida. It is expected to have a strong year, with new products and services driving opportunities.

• Question from Justin Bergner (Gabelli Funds, LLC): Can you provide an estimate for Propelis EBITDA this quarter?
  Response: Propelis EBITDA is expected to be lower than last quarter as it is seasonally their lightest quarter.

• Question from Justin Bergner (Gabelli Funds, LLC): Has the tax liability on the warehouse automation sale been paid?
  Response: No, the tax liability will be paid via normal quarterly payments over the remainder of the year.

• Question from Justin Bergner (Gabelli Funds, LLC): What was the sales impact of the European packaging and tooling divestitures?
  Response: The divestitures closed December 1, 2025. Packaging impacted SGK/Brand Solutions by ~$60 million and Industrial Technologies by ~$40 million; some sales for those months were excluded from Q1.

• Question from Justin Bergner (Gabelli Funds, LLC): What remains active in the EV pipeline for energy storage?
  Response: All opportunities in the ~$100 million pipeline are related to EVs, including battery separator and calendar lines.

• Question from Justin Bergner (Gabelli Funds, LLC): How long was the Axian chip shipment delayed due to electrical security refinements?
  Response: The delay was approximately 30-45 days due to a minor production tweak.

Contradiction Point 1

Status and Outlook for Cremation Equipment Business

Contradiction on business performance and operational focus.

What is the current status of the cremation equipment business? - Liam Burke (B. Riley Securities, Inc.)

2026Q1: After restructuring... the business is concentrated in Florida... There is strong interest in new products and services, which is a key differentiator. - Joseph Bartolacci(CEO)

How is the cremation segment in Memorialization performing? - Liam Burke (B. Riley Securities)

20251121-2025 Q4: The business is performing fine... operations are running at a good rate. - Joseph Bartolacci(CEO)

Contradiction Point 2

Timeline for $50M U.S. Battery Separator Line Opportunity

Contradiction on when a major order opportunity is expected to convert.

What is the expected order cadence and potential opportunity size for the Energy Storage business, and what is the revenue projection for fiscal 2026? - Dan Moore (CJS Securities, Inc.)

2026Q1: The $50M U.S. opportunity has passed technical tests, with a decision expected later this year. - Joseph Bartolacci(CEO)

What are the opportunities for solid-state and ultracapacitors in addressing data center power needs? - Colin Rusch (Oppenheimer)

20251121-2025 Q4: A specific $50 million order opportunity... is expected to convert to an order in early fiscal 2026. - Joseph Bartolacci(CEO)

Contradiction Point 3

Characterization of Energy Storage Business Performance

Contradiction on whether recent performance has been strong or marked by declines.

What is the potential customer base for ultracapacitors and batteries domestically and in Asia (excluding China)? Are there tuck-in acquisition opportunities for technologies augmenting the DBE business? - Colin Rusch (Oppenheimer & Co. Inc.)

2026Q1: Demand for DBE is increasing due to tariffs on Chinese products, positioning the company well for the future, though the near-term market is challenging. - Joseph Bartolacci(CEO)

What was energy storage-related revenue for the quarter and in fiscal Q3 last year? - Peter Lucas (CJS Securities)

2025Q3: Sales in the energy business... were down from a year ago, related to ongoing issues as previously discussed. These reductions were partially mitigated by nice improvements in the warehouse automation business. - Steven F. Nicola(CFO)

Contradiction Point 4

Maturity and Readiness of DBE Technology for Production

Contradiction on whether the technology is ready for production or still in development/testing.

What are the expectations for the memorialization market and Energy Storage business in fiscal 2026, including puts and takes, early Q2 trends, inorganic growth opportunities, order cadence, potential opportunity size, revenue projections, and CapEx and free cash flow outlook? - Dan Moore (CJS Securities, Inc.)

2026Q1: The $50M U.S. opportunity has passed technical tests, with a decision expected later this year. Several smaller orders (~$50M pipeline) are also in the works. The ramp will depend on customer gigafactory scaling. - Joseph Bartolacci(CEO)

What is the maturity of the battery customer testing process and the potential for turnkey lines in North America? - Colin Rusch (Oppenheimer)

2025Q2: The majority of the $100+ million in quotes is for **mass production lines**, indicating customers are **well beyond the testing phase** and into developing specs. The company expects to have a **production-level machine (including material handling) operational by September or October 2025**, allowing customers to test materials at production rates. - Joseph Bartolacci(CEO)

Contradiction Point 5

Expected Revenue Contribution from Energy Storage Business

Contradiction on the projected revenue scale for the upcoming fiscal year.

What are the expectations for the memorialization market and Energy Storage business in 2026, including key drivers, early Q2 trends, inorganic growth opportunities, order cadence, potential opportunity size, revenue projections, and CapEx/free cash flow outlook? - Dan Moore (CJS Securities, Inc.)

2026Q1: Fiscal 2026 revenue projection is $30-35M. - Daniel Stopar(CFO)

How much of the $50 million cost reduction is reflected in fiscal 2025 guidance, and what remains for fiscal 2026? - Daniel Moore (CJS Securities)

2025Q2: The savings are estimated to be **about $20 million in fiscal 2025 and roughly $30 million in fiscal 2026**. - Steven Nicola(CFO)