MATW - Earnings call transcript Q2 2020 | Matthews International Corporation

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Operator

Greetings, and welcome to the Matthews International Corporation Second Quarter Fiscal Year 2020 Financial Results Call. [Operator Instructions].

It is now my pleasure to introduce your host, Mr. Bill Wilson, Senior Director of Corporate Development. Thank you, sir.

begin. may You

William Wilson

are Good International Michelle. Bill and to Nicola, us welcome Senior Executive and Thank and Officer; Quarter morning, XXXX Matthews Steve today With Development. Second of Financial is Bartolacci, Earnings the President Director Chief Officer. you, Chief Corporate everyone, Joe Call. Wilson, This

our posted be last would www.matw.com, in website, in I start, you night. we section website. our presentation to remind of also that Investors on section call our the Investors Before like earnings accessed The for release can was the the

reminder, to Form the As XXXX. Private of this the from XX-K with are today SEC. differ on Securities made in forward-looking safe a are to filings results Act Reform Factors any those company's and with discussed that statements in pursuant annual forth the periodic report Litigation set discussion could connection harbor cause other the of provisions company's being the

you In the website. addition, located included our with presentation information, be financial today's reconciliation discussing forward-looking disclosures In non-GAAP we read the our and please are will financial in materials carefully and you statements on metrics. consider to any that and connection these read non-GAAP tables as disclaimer encourage metrics

to And I'll Steve. the now call turn over

Steven Nicola

Thank start you, Bill. with Good morning. Please Slide X.

XXXX million $XXX ago. fiscal to XXXX Year-to-date reported For consolidated were to year a million sales year. second compared company fiscal quarter, the compared consolidated the million of $XXX $XXX million last $XXX sales

segment. for segment in consistent the the Technologies last the by sales ago compared Brand same year XXXX relatively higher Solutions to offset both reflected sales for For and segment were Fiscal the the Industrial year-to-date year. quarter with fiscal sales periods, lower periods Memorialization XXXX SGK a

of of difficult impacts All second segments although quantify. quarter, experienced during these the to are level commercial impact COVID-XX some from our

or loss for share basis, on company quarter year. The a income $X.XX the per quarter $X.XX On current goodwill loss last basis write-down per from primarily per of resulted a GAAP $XX.X share. of reported current a $X.XX a million to GAAP share the compared of

In addition, ago. second $X.X or included quarter our intangible or program. million associated current per $X.XX $XX.X year with costs which a quarter the primarily expense to of amortization $XX.X of million to asset also $X.XX per reduction noncash related per or share fiscal The for share $X.XX XXXX initiatives, compared cost was strategic share most million

primarily The last second included initiatives. related acquisitions, quarter or costs implementation cost $X.X ERP share $X.XX of year million and reduction per to

reported GAAP X of For year. the company a XX, share of per loss $X.XX $X.XX the compared per to months XXXX, income last ended March share

were XX, significantly the third, consolidated last income in earnings $X.XX a decline adjusted XXXX. year included On quarter a to reflecting per income quarter earnings in year. million to in of XXXX for investments market income $X.XX ago; by X Year-to-date of $X.XX benefit quarter factors: of March second Investment The which impacted a certain company's share as non-GAAP for primarily investment ago for compared of benefits year. current compared million fiscal year sales. the March were to compared significant $X.X were the compared basis, the an $X.X XXXX, to decline held discrete reflected the reflects for a primarily share per And ago. current first, quarter a $X.XX the current of tax loss plans compared second, last the operating performance reduction in to downturn investment trust the year adjusted lower

charge flows, segment. the goodwill. assessment on of COVID-XX the goodwill earnings segment's SGK $XX.X represented and estimated a performance on their COVID-XX an of triggering the to write-down, value the Brand our impacts million the cash future units the of event to of the reduce Based company Solutions potential reporting goodwill recorded a for respect impairment of the for within With analysis

for expense million ago, the reflecting a $XX.X compared a current to same lower last $X.X to year was average rates average the quarter quarter million second XXXX decline relative fiscal year. Interest for in quarter interest the debt and

months ended March XXXX, X $XX.X compared was year. million expense million last $XX.X the For XX, interest to

million XX, a XX, Other last $X.X income million the in net for same X compared $X.X quarter pretax decrease ended months for compared year. income net and $X deductions in to quarter represented of and million income deductions Other pretax ended XXXX, year. March March represented a decrease XXXX, income last the of million to the $X.X for

and costs. the non-service of include portion post-retirement deductions and income pension Other

For post-retirement XX, million compared year. pension non-service to last $XXX,XXX $X.X XXXX, the the ended portion and of quarter March cost was

pension the X million of and For $X.X year. post-retirement $X.X million March portion compared non-service XXXX, costs was XX, to the months last ended

income compared company's pretax for the X March year. last primarily the income $XXX,XXX result the the benefit X $XXX,XXX on a an for were benefit quarter. March quarter year a a reported fiscal period of taxes for million benefit current tax second benefit expense of income months the income GAAP to significant of XX, Consolidated Consolidated company a in taxes XXXX, same XXXX, of that reflected XX, last a last tax pretax quarter benefit basis. overall ended as for of same The year. $XX.X despite to The quarter the to compared benefits tax months were $XX.X loss discrete the million an ended for

X results. to Please of review a Slide our begin segment to turn

the geographic million Asia sales SGK U.S., compared Europe Brand the segment's $XXX and segment, reflected for The quarter including a were the $XXX Pacific. the For to current million sales markets lower ago. primarily principal year Solutions in decline

last quantify. for the engineered impact surfaces regions commercial from by year. is and All offset year. level some products difficult of sales of the compared reported cylinder COVID-XX, it same addition, These quarter solutions same partially decreased although higher were merchandising In from sales to declines last quarter to

segment last were Brand million to $XXX the For SGK million $XXX Solutions XX, X XXXX, ended the sales months March compared for year.

had were quarter last quarter, sales the reported recent year-to-date in impacts brand of by previously fiscal In foreign an first in on client ago a unfavorable second with Changes occurred quarter of million rates segment's sales currency of $X.X year-to-date unfavorably and significant compared year which basis. to a addition the $X.X year. loss quarter account the a affected million on the U.S. same the the segment's impact the exchange

segment product second for for segment the $XX SGK EBITDA ago. XXXX, with The Fiscal sales, product primarily unfavorable $XX.X adjusted margins. declines shift SGK and have million compared quarter XXXX lower an X impact pricing. for XX, the to year in The mix million million partly and quarter which Brand $XX.X generally was reflected the year-to-date unfavorable reflected EBITDA lower year Brand to mix million compared months of shift ago. Adjusted was ended a $XX.X March the Solutions incremental sales a Solutions combined higher tobacco-related

impact account period In the the brand addition, had the unfavorable which margin of year-to-date the client current reflected higher for also incremental margins. loss, adjusted EBITDA

Our structure cost recent initiatives partly declines. these mitigated

Memorialization the turn of sales segment which second sales million, XXXX, with for Please $XXX quarter segment was Memorialization months year. the the fiscal consistent X. were to first fiscal relatively current Similarly, last X Slide of for unit and $XXX $XXX sales for million improved year. impact memorial memorial volumes lower realization and products. compared sales caskets by were the equipment for to million products Higher caskets cremation and offset were last price quarter

currency particularly product Changes with year-to-date impact $XXX,XXX the a of last an unfavorable rates foreign approximately were basis. compared of in the $XXX,XXX on year sales the international lower, memorial For the sales segment same on market. quarter Italian in quarter, COVID-XX had exchange impact recent the and reflecting

fiscal XXXX for million EBITDA adjusted $XX.X compared second the segment million $XX to Memorialization ago. quarter year was a

XXXX, of of was last higher the adjusted higher was period by results and offset revenues months relatively from For million, $XX.X fiscal primarily the costs. year. EBITDA Memorialization and the productivity benefits X freight materials first year's segment current unchanged same reflected The initiatives which

$XX.X Please second turn the Industrial year compared $XX.X X. XXXX a Slide million were ago. for sales million to fiscal Technologies to quarter

For in warehouse solid. product a the automation in months primarily decline fiscal March by of million project ago. X sales from systems to $XX.X remain year backlog this sales business customers Higher lower partially million The offset for identification systems. sales as XX, were XXXX XXXX, continues Industrial automation Technologies to delays ended warehouse compared $XX.X by resulted were

operation an the same with during due currency in recent In foreign rates year the to Changes basis. sales quarter small last unfavorable in impacted impact had of on addition, $XXX,XXX compared China segment year-to-date was segment's quarter $XXX,XXX exchange COVID-XX. the and the on a

Industrial the segment's current The for lower Adjusted year compared was increase for the development the for $XX.X EBITDA Technologies million to $X.X EBITDA adjusted million product adjusted EBITDA and in year. $X.X with Year-to-date, was year costs. sales compared the current reflected million quarter segment's the $X.X million primarily last ago. increase segment a the

compared year first XXXX for payable. fiscal activities accounts significant year million operating from Cash to was was $XX.X Please capital ago. Cash ago. compared turn XXXX The and favorable a of million $XX.X our particularly increase from accounts last X receivable changes Slide to second X. fiscal activities the primarily year operating months in a quarter reflected from million $XX for the $XX.X flow million flow working to the

quarter, As a reduced less on debt, net result ratio of $XX facility represents debt second net The quarter its domestic flow the credit during debt outstanding leverage the operating is covenant consolidated fiscal XXXX our during by in company the XXXX cash million. fiscal the cash. second company's strong based which

million at XX, XXXX, Our December debt March declined at outstanding $XXX to XX, XXXX. slightly from million level $XXX

December $XX our March However, from $XX consolidated million XX, XXXX, position million to XX, at cash increased XXXX. at

to focus economic flow fiscal the of reduction. current to conditions, a debt intends higher to XXXX company in cash to maintain we chose continue cash level near The on term. Due

in the facility borrowings the reported, $XXX $XXX securitization $XXX facility of revolving March to XXXX. X-year April economic to revolving the was generally to credit The facility for in rate to the facility has size scheduled XXXX. of place prior December facility receivable term. in reduced terms put prior we company year The conditions. net million previous credit offering process provides company's global maturity was a our bond company's of the from The a revolving and reflects as XXXX. current the provides and approximately covenant mature million renewed the in facility previous renewed of ratio The maintains in previously of light for as and accounts in domestic renewing facility As this credit facility timing same million renewal leverage increase interest X renewed this routine facility up temporary the this structure and previous

outstanding were shares March million XX.X XX, Approximately XXXX. at

the quarter, in company shares, with purchased required the Year-to-date, equity During under its share connection the withholding repurchase to program. has related compensation. company only significant XX,XXX recent shares portion obligations fulfilling of which approximately a purchased XX,XXX only tax

for fiscal the year, for as of the With and impacts respect is the this of of its industries. a outlook guidance result to XXXX uncertainty fiscal the company's extent markets remainder of earnings and company our withdrawing COVID-XX its on the

our has Joe As indicated of degrees, earnings environment business our change. COVID-XX the impacted in varying and segments to continues release, to each

we Cash third fiscal good our XXXX capital management operating However, strong cash a challenging fiscal completed quarter second with working priority availability liquidity in flow, and high conditions. resulting into in going is the quarter. and capital these

climate collectibility example, accounts closely receivable be concern economic accounts. to and intend our we monitor recognize a may For in this

In debt to reduction. addition, we will continue emphasize

on record Finally, the stock. stockholders of $X.XX share May of a to XXXX. The week XX, the payable XXXX, X, dividend Board is dividend company's last common declared May per

operations. the on our and comment now company's review, financial concludes Joe will This

Joseph Bartolacci

Thank Good you, Steve. morning.

commitment from our for weeks, of down from because, stress enough work our brand cannot were production effort employees of centers footprint, production began resulted than significance warning from their around more challenges. few to due begin allow This off, prevented a to to geographic of work, began our dealing last have quarter, our response of impact workforce to today our the support uncertain we quick being significant feel we possible First all XX,XXX resolve to companies, the global other our this back-office by effort and with work was challenging were in in over operating. able world half for our in That a to brand during past keep has made great were to we I the significant global to investment stay-at-home orders. like to the find our business which time our way responded vast allowed locations our us Like make for of and and governmental Because preparations, employees -- I'd in returning our major them unprecedented of business forced a global with home matter They Chinese many early the these to to forced January. coronavirus home. business. all for times. operations of Most thank ERP. years shut in to in

delivered relative a calamity have they to as our teams I to that allowed Similarly, personal an businesses Because the good York endless X to are family, the worked in the Memorialization late feel our the to us new that our Home a funeral latter to to week, protected deal on March Automation during of in that the not basis Products led only through continue Industrial assist to responding. of operate am as the with Moreover, warning New our make employees, effort, early Funeral and we see prepare hours, days quarter, performance. of occurred. to our environment. has began part industry today quarter, virus region, business the by City accommodations this we essential Pontone teams in how proud the region impact their but from

the performance, When solid one. the each you within delivered segment, consider businesses business individual major except EBITDA

million. well businesses while efforts our over responded debt our cash on allowed cost $XX by net Our we to to our reduce containment us conversion, which focus efforts

hard cash efforts might their were work as well. clients this was As and expect, our vendors you own because focusing

are forward, day, pandemic all this our confident ability forecast Looking to we Throughout is and to remain our this resilient in our positions substantially but open. strong cloudy, markets. businesses of of

rate segment a prevented orders in for higher division, to markers. order while Cemetery Looking at national continues families Home the our orders Products is stay-at-home division to performance, our seeing Funeral from cemetery as our low have our current visiting see Products temporarily place Memorialization volumes

rate experience would expect this end orders graves by we unmarked come Our starting will of those that suggest ease, order the lockdown quarter. more pressures for and as normalized a

around Similarly, equipment new challenging our as need better-performing business seen maintenance Solutions the realize for orders and the cremation for during equipment providers world Environmental has and times. both more services these increased

the leading Although expect these of for provider longer in be future. world, equipment our orders have business cremation lead as strong times, to foreseeable the the we

work-from-home world our As to brand to transitioned to arrangements discussed adapt above, around offerings. product to their successfully continue customers business has allow our the

to our While an the continue results industries. clients this and segment, impact parts we COVID-XX on see operating of who pharmaceutical from focused stable CPG in food, in had especially has largest relatively goods are the those work household

are the unique respond world. these clients changing adjust the demand packaging-related product to their services their to of providers our As around the in lines of consumer times, we

to time Our required all-out stores. private brand volumes on There's business their during unprecedented label to adjusting as slowed focus shelves retailers this due little through period has to see the their effort by offerings they keep for retailers stocked. their just product

conditions private expect consumer to as changing to demands. label retailers respond improve grow We significantly when our business also

Even admirably. our -- Merchandising in-store which responded business, displays, delivers has store

retail workforce while to to stores recently As you but have their started for revenues with help might shields lower, to wait their lost nimble have expect, begun they trend which revenue we the face produce mitigate will reopen.

we opportunity, continued recently. we our equipment which to work Brand Also business, announced significant energy in on storage our have

the Although beginning latter year, delivery future we discussions already calendar of in is this part orders. expected for are

our challenged Unfortunately, quarter seen business the a the and has decline slowness during was one in in European tobacco surfaces business. tooling business orders. orders that was This

those like generally nonwoven like the Surfaces business engineered and tooling things is gowns protective equipment tissues and tooling considered medical the masks. of used materials Our large in like That production industry capital used produces face goods. in

orders months. expect the current the we business coming Given see to environment, this strong in

demand result as and our expecting online, we is this increased expect segment, months, we as surprisingly, the Automation people a more few for for the Technologies need finish are year and seeing Industrial business solutions -- we Warehouse continue our of to to our Interest the to events not strong Regarding our last expect solutions business has strong. of only and grow. shop

this prior that expecting our our because year despite innovations a challenges also to account and our after Product business, a are we strong the year, year face. complete of part new Technologies of very of half we In the wins segment, first ahead Identification Industrial of

have but been have progress this we We new spending stopped on during also R&D slowed this we period. Unfortunately, developing. which product on product saw the not our

continues our eventual strong made to date progress team the continues to This strategy. execute However, to a us success. of on assure

healthy. our All company all, remains in

Continued cash the should focus we during debt this on our us reduce generation year. balance further cost the containment allow and year, as committed earlier to of had

this company believe While be not we may that to time, be guidance able we not year expectations impacted our at our the by full clear will severely do give of pandemic.

we challenge business might benefits as a however, about, our of as focus be our and with The remain confident that to uncertain we efforts, expect, estate renewed real including cautious telecommuting. that thing result much you though, are one this expect As cost the there of to come of continuity the cost is about. we structure a on out on emphasis strong is

As we periods lessons improvement for begin further the learned will planning from which this crisis come. exposed for opportunities to our benefit have XXXX,

it open for up let's questions. Now

Operator

[Operator Instructions].

question first Our Daniel the Moore of comes from Securities. line CJS with

Daniel Moore

I opportunities the as interesting of potential Is a as cost with, elaborate it finished pandemic workflow result? at just wanted that Joe. about on real about particularly pull to It's to on string have well might the as stage about savings in this the that as possible think SGK. changes come result come a you that to monetization estate in

Joseph Bartolacci

deliver us the we that fact well matter X,XXX the that production scattered are are we so productivity what Dan, few begin get We're whether but properly that around we a operating the the sitting the difficult across three, mean us is I need home. folks quarters or are, one two, to from but That to one $XXX can you be to or have in at not as efficiency; trying of taught question and to location. I the world little But to in over the we help place produce still systems quantify through. has things: -- this a they don't people today side-by-side; that point. need go I in folks you whether ideas or facilities not largely tight segment. have tell it's quarters these in through for Those is in manage the all sitting million

But look total potential real services necessarily as for markets I frankly, world as around because we estate that to house much more actually open significant. Our unsure. able places the is on How to facility don't spend office it need dollar up is us does is forward of do, I to what need people. an X,XXX provide

be So quantify, but made -- this to we've technology group that team virtual production in standpoint, and, us strategic it's in a ERP our a little going forward. a the some think at we very investment very, in can technology and we investments on basis what has look to a strong early from other allowed frankly,

Daniel Moore

Do with modest productivity at normally term, helpful. least just that levels can the impact expect some in you of term? the or short very potential have you -- Very your on in keep maybe elaborate very would you And you up productivity short there. the

Joseph Bartolacci

to are, challenging frankly, deliver continue from largest these ability I'd to our times. some accounts share we quite who Dan, in thrilled that love received in our e-mails the you with of to

mean I would to commentary -- are brands hear. Our all know from the you wonderful

need our would are suggest that for orders confident them see world now, in as on good the would And it. around of are our heard rates. tell we Our clients to them That right and you I continuing team that coming about has to they ability frankly, them. time deliver at

ability that. So we do in our see to decline no

Daniel Moore

does if that if in staples, shifts world? Solutions Very purchasing, for how more online groceries, translate that of Brand becomes trend more that the the shift nature, offerings things good. And consumer to permanent

Joseph Bartolacci

as I is, at prognosticators. -- this our mean we people evolution fact, we go shift all continuing the I end shelf, there And doesn't what we is to you're It am is are you on accelerate. change not structural matter the the that back packaged to product finding fact of foods, that see reverting of -- think be that to The package in So a operators, the look, in back e-commerce. day, might, the of might packaged products. the

it's not would tell Dan. So shelf execute large a Web. we that we're but the our -- on control on do what hard or in to don't portion brands, of marketing the they of you we budgets I do tell,

Daniel Moore

cost I'll debt it. in -- for containment see pay-down more the CapEx top internal et significantly capital then sneak would want just now. and, out. know terms debt and generally, allocation priorities, -- would leverage deploy I given investments, helpful. right little Very And before a more one of to stability you the the probably or of to year, in jump But the remainder in Got capital more markets of mode to have What one decline you in M&A, cetera? is ratio via bit

Joseph Bartolacci

tell decline now, right would significant So Dan, we you would curtail that we're not I seeing the capital investments.

decisions is on Our significant back more than capital prudent need. it cut to is

rate. would make curtailed you We things continuing to than are tell gravure rate recently But we're because facility have normally on our to a opened in there's but that continues gravure We're Germany significant We building for at service capital maybe opportunity. our doing be spending a cylinders. the like R&D at product we that market handle energy would time, able development slower storage that a new appropriate Indonesia new we new facility I to think investments a in this had. to a more

we're look in for at do we're the start we be are that have dramatic us very prudent our XXXX. Because the expected, this have we're being of we that seeing not to for to focus might leverage capital point going at year. debt we we nice appropriate on point down constraints investments. our balance a time. would So might forward expected what capital, could capital as making continue And paying we you earlier, We to think said in this our as -- drops with but

Operator

with of next comes Riley Our from Burke B. Liam line question the FBR.

Liam Burke

you you you out progress sense initiatives is? us a SGK, are you could cost-saving the what laid that's could going You give getting year? give us benefit mentioned of terms of the but of where Joe, this in some you're of that timing sense how that the earlier and or your on a

Joseph Bartolacci

we trying demand the been focused in our has as match match at contemplate Well, on we able this tell effort with also still stages that initiatives did to to our frankly, Liam, you that not volumes. are would with of again. there much up look -- to the early our staffing as you that ability we'll cost be on time significant normalizes have would long and tell I pick this at telecommute, 'XX, thing that starting again. should as in I to

still structure. believe to cost opportunity continue to we So reduce our there's

Liam Burke

Okay. SGK, variable very the quarter. was see sales variability in that were the That been And and Or the sales depending same goes, lack Were you tobacco down. on in so with front coronavirus-related? business business? comes tobacco just it's of that typical

Joseph Bartolacci

little at tobacco tell others. comments. from for matter there from very working can't is are bigger what not. than my And some us as the We're home are of I difficult tell. in -- clients volume The down. some guidance said opportunity, and getting the tell I but is or fact better whether is it's Liam, are I you are of our those to The home, working you would at clients folks our also better

mentioned and that in this that China. masks we business, We think in out of gowns non-woven the work do Surfaces that Our equipment as come will I we things, the and some types like that know go has down is good business on And tailwinds forward. of we materials placed of being materially.

and to we even equipment not capital of pieces there's We're have large be world, providers we in great around the few those of America. that placed, think tooling North the believe, America -- will started one equipment so the of We opportunity. see South of

Liam Burke

then, any in materials for Steve, And anticipate benefits year? the costs Memorialization do Great. you the of rest lower from

Steven Nicola

production I through that's given purchase the year benefit. next given a of balance of inventory current our the For benefit, would the systems, turn that, year, the year say a not cycle -- likely Liam,

Operator

no questions Thank the this further to closing over you. time. Wilson Mr. remarks. are back like turn call any I'd to There for at

William Wilson

joining Michelle. Thank interest Matthews. you Okay. Thank for thank for you you, in today, us your and

about information Stay results, company website. you. and of day. your please Thank our additional financial rest our and visit the safe, enjoy For the

Operator

Thank you. teleconference. This concludes today's

and lines have your at a wonderful disconnect Thank you participation, may time. day. this your You for

Matthews International (MATW) 8 May 202020 Q2 Earnings call transcript