Diversified solutions provider Matthews International (NASDAQ:MATW) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 9.3% year on year to $427.6 million. Its non-GAAP profit of $0.34 per share was 10.5% below analysts’ consensus estimates.
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Matthews (MATW) Q1 CY2025 Highlights:
- Revenue: $427.6 million vs analyst estimates of $435.6 million (9.3% year-on-year decline, 1.8% miss)
- Adjusted EPS: $0.34 vs analyst expectations of $0.38 (10.5% miss)
- Adjusted EBITDA: $51.4 million vs analyst estimates of $49.9 million (12% margin, 3% beat)
- EBITDA guidance for the full year is $190 million at the midpoint, below analyst estimates of $205.6 million
- Operating Margin: 0.8%, down from 4.7% in the same quarter last year
- Free Cash Flow was -$2.41 million, down from $47.15 million in the same quarter last year
- Market Capitalization: $658 million
StockStory’s Take
Matthews’ first quarter results reflected notable declines in key segments, with management attributing performance to continued softness in Energy Solutions and lower volumes in the Memorialization business. CEO Joe Bartolacci highlighted extended lead times and cautious customer activity in battery equipment sales, noting that the company only recently resumed full commercial engagement after resolving a patent dispute. He also pointed to normalization in post-pandemic death rates and the impact of facility closures as primary factors weighing on memorialization sales.
Key Insights from Management’s Remarks
Matthews’ leadership provided updates on commercial momentum, operational shifts, and ongoing divestiture activity, each shaping the company’s current results. Management cited prolonged sales cycles and external market factors as reasons for the revenue shortfall relative to analyst expectations.
- Energy Solutions patent clarity: Matthews recently secured the rights to commercialize its dry battery electrode (DBE) technology, allowing renewed engagement with battery manufacturers and auto OEMs. Management reported over $100 million in active DBE equipment quotes since mid-February, with demand from North America, Europe, and South Korea.
- SGK Brand Solutions divestiture: The company completed regulatory steps to divest its SGK Brand Solutions segment, expecting $350 million in upfront consideration and a 40% equity stake in the new combined entity. Proceeds will primarily reduce debt, with some allocated for share repurchases.
- Warehouse automation partnerships: Matthews entered a partnership with Teradyne to integrate autonomous robotic solutions with its warehouse execution software, aiming to improve cost and efficiency for logistics customers. Management sees this as a unique market differentiator as warehouse automation demand recovers.
- Cost reduction initiatives: The company remains on track with a $50 million cost reduction program, focused on engineering and corporate overhead, with $20 million in savings targeted this year and $30 million next year.
- Memorialization segment normalization: Lower casketed deaths and the closure of a UK cremation facility led to weaker bronze and granite sales. Management described these as a return to pre-pandemic norms, partially offset by improved pricing.
Drivers of Future Performance
Looking ahead, Matthews’ outlook is shaped by divestiture proceeds, new commercial partnerships, and the pace of recovery in its core markets. Decisions on capital allocation and customer adoption of new technologies will be central to performance.
- SGK transaction proceeds: The completion of the SGK sale will significantly reduce net debt and provide liquidity for potential share repurchases, impacting financial flexibility.
- Energy Solutions sales pipeline: Management expects long sales cycles for battery production equipment, with retrofit solutions targeting both new and existing gigafactories. Broader adoption will depend on customer investment timing and technology validation.
- Warehouse automation recovery: The company anticipates order intake improvements to translate into higher sales in the second half of the year, contingent on customer project execution and ongoing partnerships in robotics.
Top Analyst Questions
- Daniel Moore (CJS Securities): Asked about the scale and geographic distribution of the $100 million in recent DBE quotes. Management emphasized the majority are new, driven by pent-up demand in South Korea and North America for both EV and grid storage applications.
- Colin Rusch (Oppenheimer): Inquired about the maturity of battery customers’ testing and Matthews’ ability to offer turnkey production lines. CEO Joe Bartolacci noted that most quotes are for mass production, with a demonstration system expected by fall to accelerate customer adoption.
- Colin Rusch (Oppenheimer): Sought clarification on warehouse automation strategy given labor market trends. Management highlighted new partnerships, including Teradyne, and the company’s unique software-led position to integrate robotics without reliance on heavy equipment.
- Justin Bergner (Gabelli Funds): Asked for details on cost savings and their link to the SGK divestiture. CFO Steven Nicola clarified that cost reductions are primarily tied to energy and corporate functions, separate from SGK actions.
- Justin Bergner (Gabelli Funds): Probed the retrofit opportunity for DBE equipment. Management explained that retrofits use the same technology as new installations, enabling existing battery factories to improve efficiency without major plant overhauls.
Catalysts in Upcoming Quarters
Over the coming quarters, the StockStory team will be monitoring (1) the closing and integration of the SGK Brand Solutions transaction and how proceeds are deployed, (2) conversion of the robust DBE equipment pipeline into signed contracts, and (3) the pace of warehouse automation order recovery translating to revenue growth. Additional drivers include the realization of cost savings programs and stabilization in memorialization demand.
Matthews currently trades at a forward EV-to-EBITDA ratio of 5.7×. In the wake of earnings, is it a buy or sell? The answer lies in our free research report.
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