Item 5. Market for Registrant’s Common Equity
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information:
The authorized common stock of the Company consists of 70,000,000 shares of Class A Common Stock, $1.00 par value. At September 30, 2024, 30,602,492 shares were outstanding. The Company's Class A Common Stock is traded on the Nasdaq Global Select Market under the symbol "MATW".
The Company has a stock repurchase program. The buy-back program is designed to increase shareholder value, enlarge the Company's holdings of its common stock, and add to earnings per share. Repurchased shares may be retained in treasury, utilized for acquisitions, or reissued to employees or other purchasers, subject to the restrictions set forth in the Company's Restated Articles of Incorporation. Under the current authorization, 611,321 shares remain available for repurchase as of September 30, 2024. All purchases of the Company's Class A Common Stock during fiscal 2024 were part of this repurchase program.
The following table shows the monthly stock repurchase activity for the fourth quarter of fiscal 2024:
Period Total number of shares purchased Weighted-average price paid per share Total number of shares purchased as part of a publicly announced plan Maximum number of shares that may yet be purchased under the plan
July 2024
— $ — — 613,365
August 2024
350 28.45 350 613,015
September 2024
1,694 23.38 1,694 611,321
Total 2,044 $ 24.25 2,044
Holders:
Based on records available to the Company, the number of record holders of the Company's Class A Common Stock was 454 at October 31, 2024.
Securities Authorized for Issuance Under Equity Compensation Plans:
See Equity Compensation Plans in Item 12 "Security Ownership of Certain Beneficial Owners and Management."
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS, (continued)
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN *
AMONG MATTHEWS INTERNATIONAL CORPORATION,
S&P 500 INDEX AND RUSSELL 2000 VALUE INDEX
This graph compares the return on Matthews’ Class A Common Stock with that of the Standard & Poor’s 500 Index and Russell 2000 Value Index for the period from October 1, 2019 through September 30, 2024. The graph assumes that on October 1, 2019, $100 was invested in each of the Company’s Class A Common Stock , Standard & Poor’s 500 Index and Russell 2000 Value Index. The graph measures total stockholder return, which takes into account both changes in stock price and dividends. It assumes that dividends paid are invested in like securities.
The following graph compares the total return on the Company’s Class A Common Stock with that of the Standard & Poor’s 500 Index and the Russell 2000 Value Index. The results are not necessarily indicative of future performance.
* Total return assumes dividend reinvestment
ITEM 6. [Reserved].
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the consolidated financial statements of Matthews and related notes thereto. In addition, see "Cautionary Statement Regarding Forward-Looking Information" included in Part I of this Annual Report on Form 10-K.
RESULTS OF OPERATIONS:
The Company manages its businesses under three segments: Memorialization, Industrial Technologies and SGK Brand Solutions. The Memorialization segment consists primarily of bronze and granite memorials and other memorialization products, caskets, cremation-related products, and cremation and incineration equipment primarily for the cemetery and funeral home industries. The Industrial Technologies segment includes the design, manufacturing, service and sales of high-tech custom energy storage solutions; product identification and warehouse automation technologies and solutions, including order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products; and coating and converting lines for the packaging, pharma, foil, décor and tissue industries. The SGK Brand Solutions segment consists of brand management, pre-media services, printing plates and cylinders, imaging services, digital asset management, merchandising display systems, and marketing and design services primarily for the consumer goods and retail industries.
The Company's primary measure of segment profitability is adjusted earnings before interest, income taxes, depreciation and amortization ("adjusted EBITDA"). Adjusted EBITDA is defined by the Company as earnings before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of its operating results. These items include stock-based compensation, the non-service portion of pension and postretirement expense, acquisition and divestiture costs, enterprise resource planning ("ERP") integration costs, and strategic initiatives and other charges. This presentation is consistent with how the Company's chief operating decision maker (the “CODM”) evaluates the results of operations and makes strategic decisions about the business. For these reasons, the Company believes that adjusted EBITDA represents the most relevant measure of segment profit and loss.
In addition, the CODM manages and evaluates the operating performance of the segments, as described above, on a pre-corporate cost allocation basis. Accordingly, for segment reporting purposes, the Company does not allocate corporate costs to its reportable segments. Corporate costs include management and administrative support to the Company, which consists of certain aspects of the Company’s executive management, legal, compliance, human resources, information technology (including operational support) and finance departments. These costs are included within "Corporate and Non-Operating" in the following table to reconcile to consolidated adjusted EBITDA and are not considered a separate reportable segment. Management does not allocate non-operating items such as investment income, other income (deductions), net and noncontrolling interest to the segments.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)
The following table sets forth sales and adjusted EBITDA for the Company's Memorialization, Industrial Technologies and SGK Brand Solutions segments for each of the last three fiscal years. Refer to Note 21, "Segment Information" in Item 8 - "Financial Statements and Supplemental Data" for the Company's financial information by segment.
Years Ended September 30,
2024 2023 2022
(Dollar amounts in thousands)
Sales to external customers:
Memorialization $ 829,731 $ 842,997 $ 840,124
Industrial Technologies 433,156 505,751 335,523
SGK Brand Solutions 532,850 532,148 586,756
Consolidated Sales $ 1,795,737 $ 1,880,896 $ 1,762,403
Adjusted EBITDA:
Memorialization $ 162,586 $ 163,986 $ 151,849
Industrial Technologies 39,716 66,278 56,762
SGK Brand Solutions 61,620 57,128 60,120
Corporate and Non-Operating (58,765) (61,583) (58,323)
Total Adjusted EBITDA (1)
$ 205,157 $ 225,809 $ 210,408
(1) Total Adjusted EBITDA is a non-GAAP financial measure. See the "Non-GAAP Financial Measures" section below.
Comparison of Fiscal 2024 and Fiscal 2023:
Sales for the year ended September 30, 2024 were $1.80 billion, compared to $1.88 billion for the year ended September 30, 2023. The decrease in fiscal 2024 sales primarily reflected lower sales in the Industrial Technologies and Memorialization segments. Memorialization segment sales for fiscal 2024 were $829.7 million, compared to $843.0 million for fiscal 2023. The sales decrease reflected lower unit sales of caskets, cemetery memorial products, and cremation equipment, predominantly resulting from a return to more normalized death rates following the COVID-19 pandemic. These declines were partially offset by improved price realization, benefits from recent acquisitions (see Acquisitions and Divestitures below), and higher mausoleum sales. Industrial Technologies segment sales for fiscal 2024 were $433.2 million, compared to $505.8 million for fiscal 2023. The decrease in sales reflected lower sales of purpose-built engineered products (primarily energy storage solutions for the electric vehicle market) and reduced sales of warehouse automation solutions. The decrease also reflected lower sales of the recently acquired automotive solutions business (R+S Automotive GmbH), as the Company discontinues these product offerings, and the sales impact of a fiscal 2023 divestiture (see Acquisitions and Divestitures below). Fiscal 2024 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 a favorable impact of $4.1 million on the segment's sales compared to the prior year. In the SGK Brand Solutions segment, sales for fiscal 2024 were $532.9 million, compared to $532.1 million for fiscal 2023. The increase in sales reflected higher sales of cylinder (packaging) products in Europe, higher brand sales in the Asia-Pacific region, increased private-label brand sales, and improved price realization to mitigate inflationary cost increases. These increases were partially offset by lower retail-based sales, lower brand sales in Europe, and the impact of unfavorable changes in foreign exchange rates. Changes in foreign currency exchange rates had an unfavorable impact of $3.1 million on the segment's sales compared to the prior year.
Gross profit for the year ended September 30, 2024 was $529.7 million, compared to $577.7 million for fiscal 2023. Consolidated gross profit as a percent of sales was 29.5% and 30.7% in fiscal 2024 and fiscal 2023, respectively. The decrease in gross profit reflected the impact of lower sales, lower margins on engineered products and cremation equipment, and higher material and labor costs. These decreases were partially offset by improved margins on warehouse automation solutions, product identification sales, and cylinder (packaging) products, 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 $39.2 million and $12.2 million in fiscal 2024 and 2023, respectively.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)
Selling and administrative expenses for the year ended September 30, 2024 were $488.3 million, compared to $447.5 million for fiscal 2023. Consolidated selling and administrative expenses, as a percent of sales, were 27.2% for fiscal 2024, compared to 23.8% in fiscal 2023. Selling and administrative expenses in fiscal 2024 reflected higher compensation costs and additional expenses from recently completed acquisitions, partially offset by benefits from ongoing cost-reduction initiatives and lower travel and entertainment ("T&E") costs. Fiscal 2024 selling and administrative expenses included a non-cash impairment charge of $13.7 million for the write-down of certain net assets held-for-sale within the Memorialization segment. Refer to Note 24, "Asset Write-downs" in Item 8 - "Financial Statements and Supplementary Data" for further details. Fiscal 2024 selling and administrative expenses included $12.4 million of legal costs related to an ongoing dispute in the Company's energy storage business (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 $24.5 million in fiscal 2024, compared to $12.5 million in fiscal 2023. Intangible amortization for the year ended September 30, 2024 was $37.0 million, compared to $42.1 million for fiscal 2023. In the fiscal 2024 fourth quarter, the Company recorded a goodwill write-down of $16.7 million related to the Surfaces and Engineering reporting unit within the Industrial Technologies segment. Refer to Note 23, "Goodwill and Other Intangible Assets" in Item 8 - "Financial Statements and Supplementary Data" for further details.
Adjusted EBITDA for fiscal 2024 was $205.2 million, compared to $225.8 million for fiscal 2023. Memorialization segment adjusted EBITDA for fiscal 2024 was $162.6 million, compared to $164.0 million for fiscal 2023. The decrease in segment adjusted EBITDA reflected the impact of lower unit sales, higher material and labor costs, and lower margins on cremation equipment. These decreases were partially offset by the impact of improved price realization, benefits from productivity initiatives, lower distribution costs, and lower performance-based compensation compared to fiscal 2023. Adjusted EBITDA for the Industrial Technologies segment for fiscal 2024 was $39.7 million, compared to $66.3 million in fiscal 2023. The decrease in segment adjusted EBITDA primarily reflected the impact of lower sales, higher labor costs, lower margins on engineered products, and the impact of a fiscal 2023 divestiture. These decreases were partially offset by improved margins on warehouse automation solutions and product identification sales, benefits from cost-reduction initiatives, lower T&E costs, and lower performance-based compensation compared to fiscal 2023. Adjusted EBITDA for the SGK Brand Solutions segment for fiscal 2024 was $61.6 million, compared to $57.1 million for fiscal 2023. The increase in segment adjusted EBITDA primarily reflected the impact of improved price realization, benefits from cost-reduction initiatives and improved margins on cylinder (packaging) products, partially offset by the impact of higher labor costs and higher performance-based compensation compared to fiscal 2023.
Interest expense for fiscal 2024 was $50.5 million, compared to $44.6 million in fiscal 2023. The increase in interest expense reflected higher average interest rates and an increase in average borrowing levels in the current fiscal year. Other income (deductions), net for the year ended September 30, 2024 represented a decrease in pre-tax income of $6.8 million, compared to a decrease in pre-tax income of $2.6 million in fiscal 2023. Other income (deductions), net includes the non-service components of pension and postretirement expense, which totaled $439,000 and $1.6 million in fiscal years 2024 and 2023, respectively. Fiscal 2023 non-service pension expense included a $1.3 million non-cash charge resulting from the settlement of the Company's supplemental retirement plan ("SERP") and defined benefit portion of the officers retirement restoration plan ("ORRP") obligations. Refer to Note 16, "Pension and Other Postretirement Plans" in Item 8 - "Financial Statements and Supplementary Data" for further details. Other income (deductions), net also includes investment income, banking-related fees and the impact of currency gains and losses on certain intercompany debt and foreign denominated cash balances. Other income (deductions), net included currency losses associated with highly inflationary accounting for the Company's subsidiaries in Turkey totaling $1.0 million and $1.4 million in fiscal years 2024 and 2023, respectively (see Note 2, "Summary of Significant Accounting Policies" in Item 8 - "Financial Statements and Supplementary Data" for further details). Fiscal 2024 other income (deductions), net included a non-cash impairment charge of $3.1 million for the write-down of a cost-method investment (see Note 8, "Investments" in Item 8 - "Financial Statements and Supplementary Data" for further details).
The Company's consolidated income taxes for the year ended September 30, 2024 were a benefit of $10.0 million, compared to an expense of $1.8 million for fiscal 2023. The difference between the Company's consolidated income taxes for fiscal 2024 compared to fiscal 2023 partially resulted from the Company's fiscal 2024 pre-tax consolidated loss position compared to pre-tax consolidated income for fiscal 2023. The fiscal 2024 tax rate included charges related to changes in the realizability of foreign deferred tax assets. These changes included both current year foreign net operating losses requiring a full valuation allowance as well as other changes in realizability of certain foreign net operating losses from prior years. The fiscal 2024 consolidated loss before income taxes also reflected a goodwill write-down and write-down of certain net assets held-for-sale that were non-deductible for tax purposes. Additionally, the fiscal 2024 tax rate benefited from research and development and foreign tax credits. The fiscal 2023 effective tax rate benefited from research and development and foreign tax credits, and changes in realizability of foreign deferred tax assets due to the utilization of foreign tax net operating losses with a valuation allowance. The fiscal 2023 effective tax rate was negatively impacted by share-based compensation.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)
Net losses attributable to noncontrolling interests were $155,000 in fiscal 2023, reflecting losses in less than wholly-owned businesses.
Legal Matter
Refer to Note 19, "Commitments and Contingent Liabilities" in Item 8 - "Financial Statements and Supplementary Data," for details related to an ongoing dispute with Tesla.
Comparison of Fiscal 2023 and Fiscal 2022:
For a comparison of the Company's results of operations for the fiscal years ended September 30, 2023 and September 30, 2022, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation" of the Company's annual report on Form 10-K for the fiscal year ended September 30, 2023 filed with the SEC on November 17, 2023.
NON-GAAP FINANCIAL MEASURES:
Included in this report are measures of financial performance that are not defined by GAAP. The Company uses non-GAAP financial measures to assist in comparing its performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect the Company’s core operations including acquisition and divestiture costs, ERP integration costs, strategic initiative and other charges (which includes non-recurring charges related to certain commercial and operational initiatives and exit activities), stock-based compensation and the non-service portion of pension and postretirement expense. Management believes that presenting non-GAAP financial measures is useful to investors because it (i) provides investors with meaningful supplemental information regarding financial performance by excluding certain items that management believes do not directly reflect the Company's core operations, (ii) permits investors to view performance using the same tools that management uses to budget, forecast, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating the Company’s results. The Company believes that the presentation of these non-GAAP financial measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provided herein, provides investors with an additional understanding of the factors and trends affecting the Company’s business that could not be obtained absent these disclosures.
The Company believes that adjusted EBITDA provides relevant and useful information, which is used by the Company’s management in assessing the performance of its business. Adjusted EBITDA is defined by the Company as earnings before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of its operating results. These items include stock-based compensation, the non-service portion of pension and postretirement expense, acquisition and divestiture costs, ERP integration costs, and strategic initiatives and other charges. Adjusted EBITDA provides the Company with an understanding of earnings before the impact of investing and financing charges and income taxes, and the effects of certain acquisition and divestiture costs, and ERP integration costs, and items that do not reflect the ordinary earnings of the Company’s operations. This measure may be useful to an investor in evaluating operating performance. It is also useful as a financial measure for lenders and is used by the Company’s management to measure business performance. Adjusted EBITDA is not a measure of the Company's financial performance under GAAP and should not be considered as an alternative to net income or other performance measures derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of the Company's liquidity. The Company's definition of adjusted EBITDA may not be comparable to similarly titled measures used by other companies.
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