Matthews International Q3 Earnings Call Highlights

• MarketBeat ‘Stock of the Week’: Driven Brands has road to recovery

Matthews International (NASDAQ:MATW) reported a fiscal 2026 third-quarter net loss of $23.7 million, or $0.75 per share, compared with net income of $15.4 million, or $0.49 per share, in the prior-year quarter, as delays in engineering orders, higher input costs and slower-than-expected synergy capture at Propelis weighed on results.

Chief Executive Officer Joe Bartolacci described the period as a difficult quarter, saying all four risks the company had previously identified—engineering order timing, tariffs, Propelis synergies and geopolitical economic effects—affected results negatively. The company reduced its fiscal 2026 adjusted EBITDA guidance to a range of $158 million to $162 million, including its estimated 40% share of Propelis adjusted EBITDA.

Consolidated sales declined to $246 million from $349 million a year earlier, largely reflecting divestitures of the SGK business, European packaging and tooling operations, and warehouse automation operations. Those divestitures reduced current-quarter sales by about $85 million, according to Chief Financial Officer Daniel Stopar.

Consolidated adjusted EBITDA was $35 million, down from $44.6 million a year earlier. On an adjusted basis, Matthews reported net income of $1.9 million, or $0.06 per share, compared with $9.2 million, or $0.28 per share, in the prior-year period.

Engineering business faces order delays and restructuring

Industrial Technologies sales fell to $38 million from $87.9 million a year ago, primarily because of the December 2025 divestiture of tooling and warehouse automation businesses. Segment adjusted EBITDA was a loss of $5.4 million, compared with a $9 million profit a year earlier, reflecting lower engineering sales and the warehouse automation divestiture.

Bartolacci said the company’s energy-storage operations continued to face delays caused by battery-production overcapacity across the industry. He also said the company won one anticipated coating-and-converting order at OLBRICH, but the customer modified the project scope shortly after the early-June award, limiting revenue recognition this fiscal year. Matthews was also notified in June that it had lost two expected orders, while other prospective orders are now expected in September.

In response, the company has initiated actions intended to reduce the annual cost base of its European engineering operations by $10 million. Bartolacci said the impact will not be immediate because of German labor regulations and union negotiation rights. Matthews is also evaluating strategic alternatives for the business through the fourth quarter.

Stopar said engineering operations accounted for $14 million of Industrial Technologies revenue in the quarter, while product identification contributed approximately $24 million. Product identification sales increased about 5% year over year.

Matthews is commissioning a mass-production machine for its dry battery electrode, or DBE, technology, with customer testing scheduled to begin in October. Bartolacci said interest from automotive original equipment manufacturers and battery suppliers has grown, and the company has received what he characterized as soft commitments from several customers to move forward in 2027 if mass-production scalability is demonstrated.

The company is also qualifying DBE electrode products for potential ultracapacitor partners, though Bartolacci said the work remains at an early stage and Matthews is not setting a timeline for a partnership announcement. He said the liability phase of its arbitration with Tesla has been completed, with the outcome affirming what he called the limited scope of Tesla’s claims. Remaining phases include Tesla’s damages claim and Matthews’ counterclaims.

Memorialization sales rise, but costs pressure margins

Memorialization sales increased 2.1% to $208.1 million in the third quarter from $203.7 million a year earlier. The Dodge acquisition contributed approximately $4.4 million in sales. Adjusted EBITDA declined modestly to $42.2 million from $42.8 million, as higher labor, material and other input costs and lower volumes offset price realization, cost savings and Dodge’s contribution.

Bartolacci said the segment faced lower casket and cemetery memorial volumes because estimated U.S. casketed death rates remained weak. He cited published data showing the overall U.S. death rate fell about 4.6% last year to its lowest recorded level on a per-capita basis.

Input costs also continued to rise. Bartolacci said copper prices had increased from $4.50 per pound to $6.60 per pound, steel prices were up 21% year over year, and fuel costs exceeded the company’s prior expectations. While Matthews has raised prices and expects to take further actions later in the calendar year, he said fixed contracts and the pace of commodity increases have limited the company’s ability to fully recover costs.

The company continues to target approximately $175 million in full-year adjusted EBITDA for Memorialization, which would represent a record for the segment. Management expects seasonally stronger cemetery and bronze demand in the fourth quarter to help mitigate input-cost pressures.

Propelis timing and product-identification initiatives

Matthews said delays in realizing expected Propelis synergies created an estimated $5 million shortfall versus its full-year forecast. The delay resulted from an SAP implementation project that has taken longer than expected, though management said the expected total synergies remain unchanged.

The company still expects Propelis to exit calendar 2026 at an annualized EBITDA run rate of approximately $130 million. Matthews expects to begin marketing the investment for sale within the next 12 months once that target is reached, with the eventual sale expected to generate cash for debt reduction.

In product identification, Bartolacci said commercial placements of the company’s Axion printhead product are continuing and beta customers are converting to paying customers. Matthews also announced a strategic partnership with Linx Printing Technologies to broaden access to each company’s product portfolios in key markets, including consumer packaged goods customers in the United Kingdom and France.

Debt reduction and leadership transition

Cash used in operating activities during the first nine months of fiscal 2026 was $69.5 million, compared with $33.9 million a year earlier. Outstanding debt stood at $567 million at June 30, while net debt was $530 million. Gross debt declined by $144 million since the end of fiscal 2025, supported by divestiture proceeds and a $28 million redemption of a portion of Matthews’ preferred ownership in Propelis.

The company also received $25 million in preferred-equity returns from Propelis during the quarter, which it used primarily to reduce debt. Matthews declared a quarterly dividend of $0.255 per share, payable Aug. 24 to shareholders of record on Aug. 10.

Bartolacci reiterated that he intends to retire once a successor is hired. He said the board has begun the search process and that he will remain engaged in his role until a replacement is identified.

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.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

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