MATTHEWS INTERNATIONAL CORP 10-Q

Item 1. Financial Statements MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollar amounts in thousands) December 31, 2024 September 30, 2024 ASSETS Current assets: Cash and cash equivalents $ 33,513 $ 40,816 Accounts receivable, net 199,303 205,984 Inventories, net 241,585 237,888 Contract assets 88,617 92,969 Other current assets 60,181 54,886 Total current assets 623,199 632,543 Investments 22,615 23,076 Property, plant and equipment, net 264,895 279,499 Operating lease right-of-use assets 62,063 60,499 Deferred income taxes 6,120 6,548 Goodwill 685,967 697,123 Other intangible assets, net 116,878 126,026 Other assets 9,982 9,576 Total assets $ 1,791,719 $ 1,834,890 LIABILITIES Current liabilities: Long-term debt, current maturities $ 7,260 $ 6,853 Current portion of operating lease liabilities 22,365 22,617 Trade accounts payable 101,927 108,362 Accrued rebates 23,422 23,766 Accrued compensation 59,663 88,781 Accrued income taxes 7,872 7,522 Contract liabilities 28,388 28,723 Other current liabilities 144,684 148,151 Total current liabilities 395,581 434,775 Long-term debt 801,951 769,614 Operating lease liabilities 41,824 40,073 Deferred income taxes 46,674 45,688 Other liabilities 92,233 107,534 Total liabilities 1,378,263 1,397,684 SHAREHOLDERS' EQUITY Shareholders' equity-Matthews: Common stock $ 36,334 $ 36,334 Additional paid-in capital 144,588 159,497 Retained earnings 611,358 623,063 Accumulated other comprehensive loss ( 181,491 ) ( 168,742 ) Treasury stock, at cost ( 197,381 ) ( 212,994 ) Total shareholders' equity-Matthews 413,408 437,158 Noncontrolling interests 48 48 Total shareholders' equity 413,456 437,206 Total liabilities and shareholders' equity $ 1,791,719 $ 1,834,890 The accompanying notes are an integral part of these consolidated financial statements. 2 MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollar amounts in thousands, except per share data) Three Months Ended December 31, 2024 2023 Sales $ 401,842 $ 449,986 Cost of sales ( 276,150 ) ( 317,633 ) Gross profit 125,692 132,353 Selling expense ( 34,857 ) ( 34,444 ) Administrative expense ( 76,553 ) ( 78,687 ) Intangible amortization ( 8,608 ) ( 9,795 ) Operating profit 5,674 9,427 Interest expense ( 15,682 ) ( 11,576 ) Other income (deductions), net 4,178 ( 880 ) Loss before income taxes ( 5,830 ) ( 3,029 ) Income tax benefit 2,358 726 Net loss ( 3,472 ) ( 2,303 ) Net loss attributable to noncontrolling interests — — Net loss attributable to Matthews shareholders $ ( 3,472 ) $ ( 2,303 ) Loss per share attributable to Matthews shareholders: Basic $ ( 0.11 ) $ ( 0.07 ) Diluted $ ( 0.11 ) $ ( 0.07 ) The accompanying notes are an integral part of these consolidated financial statements. 3 MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (Dollar amounts in thousands) Three Months Ended December 31, Matthews Noncontrolling Interest Total 2024 2023 2024 2023 2024 2023 Net loss: $ ( 3,472 ) $ ( 2,303 ) $ — $ — $ ( 3,472 ) $ ( 2,303 ) Other Comprehensive Income ("OCI"), net of tax: Foreign currency translation adjustment ( 14,611 ) 11,685 — 22 ( 14,611 ) 11,707 Pension plans and other postretirement benefits ( 353 ) ( 80 ) — — ( 353 ) ( 80 ) Unrecognized gain (loss) on cash flow hedges: Net change from periodic revaluation 2,565 ( 4,389 ) — — 2,565 ( 4,389 ) Net amount reclassified to earnings ( 350 ) ( 492 ) — — ( 350 ) ( 492 ) Net change in unrecognized loss on cash flow hedges 2,215 ( 4,881 ) — — 2,215 ( 4,881 ) OCI, net of tax ( 12,749 ) 6,724 — 22 ( 12,749 ) 6,746 Comprehensive (loss) income $ ( 16,221 ) $ 4,421 $ — $ 22 $ ( 16,221 ) $ 4,443 The accompanying notes are an integral part of these consolidated financial statements. 4 MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY for the three months ended December 31, 2024 and 2023 (Unaudited) (Dollar amounts in thousands, except per share data) Shareholders' Equity Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Treasury Stock Non- controlling Interests Total Balance, September 30, 2024 $ 36,334 $ 159,497 $ 623,063 $ ( 168,742 ) $ ( 212,994 ) $ 48 $ 437,206 Net loss — — ( 3,472 ) — — — ( 3,472 ) Minimum pension liability — — — ( 353 ) — — ( 353 ) Translation adjustment — — — ( 14,611 ) — — ( 14,611 ) Fair value of cash flow hedges — — — 2,215 — — 2,215 Total comprehensive loss ( 16,221 ) Stock-based compensation — 4,979 — — — — 4,979 Purchase of 171,101 shares of treasury stock — — — — ( 4,275 ) — ( 4,275 ) Issuance of 537,295 shares of treasury stock — ( 19,888 ) — — 19,888 — — Dividends — — ( 8,233 ) — — — ( 8,233 ) Balance, December 31, 2024 $ 36,334 $ 144,588 $ 611,358 $ ( 181,491 ) $ ( 197,381 ) $ 48 $ 413,456 Shareholders' Equity Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Treasury Stock Non- controlling Interests Total Balance, September 30, 2023 $ 36,334 $ 168,211 $ 714,727 $ ( 174,404 ) $ ( 219,200 ) $ ( 387 ) $ 525,281 Net loss — — ( 2,303 ) — — — ( 2,303 ) Minimum pension liability — — — ( 80 ) — — ( 80 ) Translation adjustment — — — 11,685 — 22 11,707 Fair value of cash flow hedges — — — ( 4,881 ) — — ( 4,881 ) Total comprehensive income 4,443 Stock-based compensation — 4,651 — — — — 4,651 Purchase of 465,953 shares of treasury stock — — — — ( 17,185 ) — ( 17,185 ) Issuance of 678,750 shares of treasury stock — ( 25,356 ) — — 25,356 — — Dividends — — ( 8,381 ) — — — ( 8,381 ) Transactions with non-controlling interest — ( 412 ) — — — 412 — Balance, December 31, 2023 $ 36,334 $ 147,094 $ 704,043 $ ( 167,680 ) $ ( 211,029 ) $ 47 $ 508,809 The accompanying notes are an integral part of these consolidated financial statements. 5 MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollar amounts in thousands) Three Months Ended December 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 3,472 ) $ ( 2,303 ) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation and amortization 22,504 23,523 Stock-based compensation expense 4,979 4,651 Deferred tax benefit — ( 1 ) Gain on sale of assets, net ( 9,572 ) ( 87 ) Changes in working capital items ( 39,170 ) ( 51,640 ) Decrease in other assets 6,996 5,888 Decrease in other liabilities ( 8,814 ) ( 4,068 ) Other operating activities, net 1,540 ( 3,229 ) Net cash used in operating activities ( 25,009 ) ( 27,266 ) Cash flows from investing activities: Capital expenditures ( 9,532 ) ( 14,073 ) Acquisitions, net of cash acquired ( 2,218 ) — Proceeds from sale of assets 13,249 124 Other investing activities, net ( 63 ) ( 237 ) Net cash provided by (used in) investing activities 1,436 ( 14,186 ) Cash flows from financing activities: Proceeds from long-term debt 250,996 274,275 Payments on long-term debt ( 219,047 ) ( 211,696 ) Purchases of treasury stock ( 4,275 ) ( 17,185 ) Dividends ( 9,237 ) ( 9,280 ) Net cash provided by financing activities 18,437 36,114 Effect of exchange rate changes on cash ( 2,167 ) 1,158 Net change in cash and cash equivalents ( 7,303 ) ( 4,180 ) Cash and cash equivalents at beginning of year 40,816 42,101 Cash and cash equivalents at end of period $ 33,513 $ 37,921 The accompanying notes are an integral part of these consolidated financial statements. 6 MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) December 31, 2024 (Dollar amounts in thousands, except per share data) Note 1. Nature of Operations Matthews International Corporation ("Matthews" or the "Company"), founded in 1850 and incorporated in Pennsylvania in 1902, is a global provider of memorialization products, industrial technologies and brand solutions. The Company manages its businesses under three segments: Memorialization, Industrial Technologies and SGK Brand Solutions. Memorialization products consist 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. Industrial Technologies 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. SGK Brand Solutions 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. See Note 17, "Subsequent Event" for a description of proposed transactions with respect to the SGK Brand Solutions business. The Company has facilities in North America, Europe, Asia, Australia, and Central and South America. Note 2. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information for commercial and industrial companies and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three months ended December 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2025. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024. The consolidated financial statements include all domestic and foreign subsidiaries in which the Company maintains an ownership interest and has operating control and any variable interest entities for which the Company is the primary beneficiary. Investments in certain companies over which the Company exerts significant influence, but does not control the financial and operating decisions, are accounted for as equity method investments. Investments in certain companies over which the Company does not exert significant influence are accounted for as cost method investments. All intercompany accounts and transactions have been eliminated. The Company applies highly inflationary accounting for subsidiaries when the cumulative inflation rate for a three-year period meets or exceeds 100 percent. Effective April 1, 2022, the Company has applied highly inflationary accounting to its Turkish subsidiaries. Under highly inflationary accounting, the financial statements of these subsidiaries are remeasured into the Company's reporting currency (U.S. dollar) and exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in current earnings, rather than accumulated other comprehensive loss on the Consolidated Balance Sheets , until such time as the applicable economy is no longer considered highly inflationary. As of December 31, 2024 and September 30, 2024, the Company had net monetary assets related to its Turkish subsidiaries of $ 5,621 and $ 5,327 , respectively. Exchange losses related to highly inflationary accounting totaled $ 191 and $ 320 for the three months ended December 31, 2024 and December 31, 2023, respectively. Such amounts were included in the Consolidated Statements of Income within other income (deductions), net. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 2. Basis of Presentation (continued) New Accounting Pronouncements: Issued In November 2024, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) which improves financial reporting by requiring disclosure of specified information about certain costs and expenses on an annual and interim basis for all public entities, including enhanced disaggregation disclosures. The ASU is effective for annual periods for the Company beginning in fiscal year 2028, and interim periods beginning in fiscal year 2029. The Company is in the process of assessing the impact this ASU will have on its consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) which enhances the transparency and decision usefulness of income tax disclosures including rate reconciliations and income taxes paid among other tax disclosures. The ASU is effective for annual periods for the Company beginning in fiscal year 2026. The Company is in the process of assessing the impact this ASU will have on its consolidated financial statements. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) which improves financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities, including enhanced disclosures about significant segment expenses. The amendments in this ASU do not affect the recognition, measurement, or financial statement presentation of expenses, but will require increased disclosures in annual and interim financial statements. The ASU is effective for annual periods for the Company beginning in fiscal year 2025, and interim periods beginning in fiscal year 2026. The Company is in the process of assessing the impact this ASU will have on its consolidated financial statements. In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements. The amendments in this update affect the presentation and disclosure of a variety of topics in the Accounting Standards Codification, and align them with the Securities and Exchange Commission ("SEC") regulations. The effective date of the amendments of this ASU will be determined for each individual disclosure based on the effective date of the SEC’s removal of the related disclosure from Regulation S-X or Regulation S-K. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, then this ASU will not become effective. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements. Note 3. Revenue Recognition The Company disaggregates revenue from contracts with customers by geography, as it believes geographic regions best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Disaggregated sales by segment and region for the three months ended December 31, 2024 and 2023 were as follows: Memorialization Industrial Technologies SGK Brand Solutions Consolidated Three Months Ended December 31, Three Months Ended December 31, Three Months Ended December 31, Three Months Ended December 31, 2024 2023 2024 2023 2024 2023 2024 2023 North America $ 181,389 $ 197,165 $ 31,452 $ 33,139 $ 61,802 $ 62,720 $ 274,643 $ 293,024 Central and South America — — — — 1,122 1,254 1,122 1,254 Europe 5,866 7,971 47,669 76,776 49,487 50,132 103,022 134,879 Australia 3,231 2,935 — — 2,367 2,171 5,598 5,106 Asia — — 1,412 1,459 16,045 14,264 17,457 15,723 Total Sales $ 190,486 $ 208,071 $ 80,533 $ 111,374 $ 130,823 $ 130,541 $ 401,842 $ 449,986 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 3. Revenue Recognition (continued) Revenue from products or services provided to customers over time accounted for approximately 12 % and 19 % of revenue for the three months ended December 31, 2024 and 2023, respectively. As of December 31, 2024 and September 30, 2024, the Company had net contract assets for projects recognized using the over time method totaling $ 60,229 and $ 64,246 , respectively, which primarily represent unbilled revenues, net of deferred revenues related to customer deposits and progress billings. Net contract assets at December 31, 2024 and September 30, 2024 predominantly related to ongoing projects with the Company's largest energy storage customer. Note 4. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level fair value hierarchy is used to prioritize the inputs used in valuations, as defined below: Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability. The fair values of the Company's assets and liabilities measured on a recurring basis are categorized as follows: December 31, 2024 September 30, 2024 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Derivatives (1) $ — $ 1,475 $ — $ 1,475 $ — $ — $ — $ — Equity and fixed income mutual funds — 843 — 843 — 839 — 839 Life insurance policies — 5,385 — 5,385 — 5,493 — 5,493 Total assets at fair value $ — $ 7,703 $ — $ 7,703 $ — $ 6,332 $ — $ 6,332 Liabilities: Derivatives (1) (2) $ — $ 55,358 $ — $ 55,358 $ — $ 69,573 $ — $ 69,573 Total liabilities at fair value $ — $ 55,358 $ — $ 55,358 $ — $ 69,573 $ — $ 69,573 (1) Interest rate swaps and cross currency swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy. (2) Derivative amounts at December 31, 2024 and September 30, 2024 reflect $ 58,432 of partial advance payments received from the counterparties to certain cross-currency swaps. See Note 8, "Derivatives and Hedging Activities" for further details. The carrying values for other financial assets and liabilities approximated fair value at December 31, 2024 and September 30, 2024. Note 5. Inventories Inventories consisted of the following: December 31, 2024 September 30, 2024 Raw materials $ 62,048 $ 61,333 Work in process 102,179 96,488 Finished goods 77,358 80,067 $ 241,585 $ 237,888 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 6. Investments Non-current investments consisted of the following: December 31, 2024 September 30, 2024 Equity and fixed income mutual funds $ 843 $ 839 Life insurance policies 5,385 5,493 Equity-method investments — 349 Other (primarily cost-method) investments 16,387 16,395 $ 22,615 $ 23,076 During the first quarter of fiscal 2025, the Company completed the disposal of its investment in Liquid X Printed Metals Inc. (“Liquid X”), a private company specializing in ink technologies. The Company's investment in Liquid X was previously written-down in fiscal 2024, and had a net carrying value of zero at the time of the disposal transaction. One of the Company's Executive Officers and member of Matthews' Board of Directors serves as President and CEO of Liquid X. Note 7. Debt and Financing Arrangements Long-term debt at December 31, 2024 and September 30, 2024 consisted of the following: December 31, 2024 September 30, 2024 Revolving credit facilities $ 484,083 $ 444,011 2027 Senior Secured Notes 294,799 294,751 Other borrowings 7,869 15,602 Finance lease obligations 22,460 22,103 Total debt 809,211 776,467 Less current maturities ( 7,260 ) ( 6,853 ) Long-term debt $ 801,951 $ 769,614 The Company has a domestic credit facility with a syndicate of financial institutions that was amended and restated in September 2024. The amended and restated loan agreement includes a $ 750,000 senior secured revolving credit facility, which matures in January 2029, subject to the terms and conditions of the amended facility. The obligations under the domestic credit facility are secured by a first priority lien on substantially all of the assets of the Company and certain of its domestic subsidiaries. A portion of the revolving credit facility (not to exceed $ 350,000 ) can be drawn in foreign currencies. Borrowings under the revolving credit facility bear interest at the Secured Overnight Financing Rate ("SOFR"), plus a 0.10 % per annum rate spread adjustment, plus a factor ranging from 1.00 % to 2.00 % ( 1.50 % at December 31, 2024) based on the Company's leverage ratio. The leverage ratio is defined as total indebtedness divided by EBITDA (earnings before interest, income taxes, depreciation and amortization) as defined within the domestic credit facility agreement. The Company is required to pay an annual commitment fee ranging from 0.15 % to 0.30 % (based on the Company's leverage ratio) of the unused portion of the revolving credit facility. The Company incurred debt issuance costs in connection with the amended and restated agreement. Unamortized costs were $ 4,713 and $ 4,961 at December 31, 2024 and September 30, 2024, respectively. The domestic credit facility requires the Company to maintain certain leverage and interest coverage ratios. A portion of the facility (not to exceed $ 75,000 ) is available for the issuance of trade and standby letters of credit. Outstanding U.S. dollar denominated borrowings on the revolving credit facility at December 31, 2024 and September 30, 2024 were $ 480,969 and $ 410,527 , respectively. There were no outstanding Euro denominated borrowings on the revolving credit facility at December 31, 2024. Outstanding Euro denominated borrowings on the revolving credit facility at September 30, 2024 were € 30.0 million ($ 33,485 ). The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at December 31, 2024 and 2023 was 5.17 % and 5.32 %, respectively. 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 7. Debt and Financing Arrangements (continued) The Company has $ 300,000 aggregate principal amount of 8.625 % senior secured second lien notes due October 1, 2027 (the "2027 Senior Secured Notes"). The 2027 Senior Secured Notes bear interest at a rate of 8.625 % per annum with interest payable semi-annually in arrears on April 1 and October 1 of each year beginning on April 1, 2025. The Company's obligations under the 2027 Senior Secured Notes are secured by a second priority lien on substantially all of the assets of the Company and certain of its domestic subsidiaries. The Company is subject to certain covenants and other restrictions in connection with the 2027 Senior Secured Notes. The Company incurred direct financing fees and costs in connection with 2027 Senior Secured Notes. Unamortized costs related to the Company’s notes were $ 5,201 and $ 5,249 at December 31, 2024 and September 30, 2024, respectively. The Company and certain of its domestic subsidiaries sell, on a continuous basis without recourse, their trade receivables to Matthews Receivables Funding Corporation, LLC (“Matthews RFC”), a wholly-owned bankruptcy-remote subsidiary of the Company. Matthews RFC has a receivables purchase agreement (“RPA”) to sell up to $ 125,000 of receivables to certain purchasers (the “Purchasers”) on a recurring basis in exchange for cash (referred to as “capital” within the RPA) equal to the gross receivables transferred. The parties intend that the transfers of receivables to the Purchasers constitute purchases and sales of receivables. Matthews RFC has guaranteed to each Purchaser the prompt payment of sold receivables, and has granted a security interest in its assets for the benefit of the Purchasers. Under the RPA, each Purchaser’s share of capital accrues yield at a floating rate plus an applicable margin. The Company is the master servicer under the RPA, and is responsible for administering and collecting receivables. The RPA matures in March 2026. The proceeds of the RPA are classified as operating activities in the Company’s Consolidated Statements of Cash Flows. Cash received from collections of sold receivables may be used to fund additional purchases of receivables on a revolving basis, or to reduce all or any portion of the outstanding capital of the Purchasers. The fair value of the sold receivables approximated book value due to their credit quality and short-term nature, and as a result, no gain or loss on sale of receivables was recorded. As of December 31, 2024 and September 30, 2024, the amount sold to the Purchasers was $ 100,700 and $ 96,300 , respectively, which was derecognized from the Consolidated Balance Sheets. As collateral against sold receivables, Matthews RFC maintains a certain level of unsold receivables, which was $ 66,272 and $ 58,183 as of December 31, 2024 and September 30, 2024, respectively. The following table sets forth a summary of receivables sold as part of the RPA: Three Months Ended December 31, 2024 Three Months Ended December 31, 2023 Gross receivables sold $ 89,486 $ 92,809 Cash collections reinvested ( 85,086 ) ( 92,709 ) Net cash proceeds received $ 4,400 $ 100 The Company, through its U.K. subsidiary, participates in a non-recourse factoring arrangement. In connection with this arrangement, the Company periodically sells trade receivables to a third-party purchaser in exchange for cash. These transfers of financial assets are recorded at the time the Company surrenders control of the assets. As these transfers qualify as true sales under the applicable accounting guidance, the receivables are de-recognized from the Company's Consolidated Balance Sheets upon transfer. The principal amount of receivables sold under this arrangement was $ 21,449 and $ 17,118 during the three months ended December 31, 2024 and 2023, respectively. The discounts on the trade receivables sold are included within administrative expense in the Consolidated Statements of Income. The proceeds from the sale of receivables are classified as operating activities in the Company's Consolidated Statements of Cash Flows. As of December 31, 2024 and September 30, 2024, the amount of factored receivables that remained outstanding was $ 17,126 and $ 15,665 , respectively. 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 7. Debt and Financing Arrangements (continued) The Company facilitates a voluntary supply chain finance program (the "Program") to provide certain suppliers with the opportunity to sell receivables due from the Company to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. The Company is not a party to the agreements between the suppliers and the financial institutions and has no economic interest in a supplier's decision to sell a receivable. The range of payment terms negotiated with a supplier is consistent, irrespective of whether a supplier participates in the Program. All outstanding payments owed under the Program are recorded within trade accounts payable in the Consolidated Balance Sheets. The Company accounts for all payments made under the Program as a reduction to operating cash flows in changes in working capital within the Consolidated Statements of Cash Flows. The amounts owed to a participating financial institution under the Program and included in trade accounts payable were $ 3,012 and $ 3,014 at December 31, 2024 and September 30, 2024, respectively. The Company, through certain of its European subsidiaries, has a credit facility with a European bank, which is guaranteed by Matthews. The maximum amount of borrowing available under this facility is € 8.0 million ($ 8,310 ). The facility also provides € 18.5 million ($ 19,218 ) for bank guarantees. This facility has no stated maturity date and is available until terminated. Outstanding borrowings under the credit facility totaled € 3.0 million ($ 3,114 ) at December 31, 2024. There were no outstanding borrowings under the credit facility at September 30, 2024. The weighted-average interest rate on outstanding borrowings under this facility was 5.10 % and 6.11 % at December 31, 2024 and 2023, respectively. Other borrowings totaled $ 7,869 and $ 15,602 at December 31, 2024 and September 30, 2024, respectively. The weighted-average interest rate on all other borrowings was 2.33 % and 4.20 % at December 31, 2024 and 2023, respectively. As of December 31, 2024 and September 30, 2024, the fair value of the Company's long-term debt, including current maturities, which is classified as Level 2 in the fair value hierarchy, approximated the carrying value included in the Consolidated Balance Sheets. The Company was in compliance with all of its debt covenants as of December 31, 2024. Note 8. Derivatives and Hedging Activities The Company operates internationally and utilizes certain derivative financial instruments to manage its foreign currency, debt and interest rate exposures. At December 31, 2024 and September 30, 2024, derivative instruments were reflected on a gross-basis in the consolidated balance sheets as follows: Derivatives: December 31, 2024 September 30, 2024 Interest Rate Swaps Cross-Currency Swaps Interest Rate Swaps Cross-Currency Swaps Current assets: Other current assets $ 454 $ — $ — $ — Long-term assets: Other assets 1,021 — — — Current liabilities: Other current liabilities ( 133 ) ( 15,931 ) ( 863 ) ( 18,042 ) Long-term liabilities: Other liabilities ( 210 ) ( 39,084 ) ( 1,743 ) ( 48,925 ) Total derivatives (1) $ 1,132 $ ( 55,015 ) $ ( 2,606 ) $ ( 66,967 ) (1) Cross-currency swap amounts at December 31, 2024 and September 30, 2024 reflect $ 58,432 of partial advanced payments received from the counterparties to certain swap contracts (see below). The following table presents information related to interest rate swaps entered into by the Company and designated as cash flow hedges: December 31, 2024 September 30, 2024 Notional amount $ 175,000 $ 175,000 Weighted-average maturity period (years) 2.9 3.2 Weighted-average received rate 4.33 % 4.85 % Weighted-average pay rate 3.83 % 3.83 % 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 8. Derivatives and Hedging Activities (continued) The Company enters into interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate. The interest rate swaps have been designated as cash flow hedges of future variable interest payments which are considered probable of occurring. Based on the Company's assessment, all of the critical terms of each of the hedges matched the underlying terms of the hedged debt and related forecasted interest payments, and as such, these hedges were considered highly effective. The fair value of the interest rate swaps reflected a net unrealized gain of $ 1,132 ($ 844 after tax) at December 31, 2024 and a net unrealized loss of $ 2,606 ($ 1,948 after tax) at September 30, 2024, that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI"). Unrecognized gains of $ 3,076 ($ 2,297 after tax) and $ 3,848 ($ 2,874 after tax) related to previously terminated London Interbank Offered Rate ("LIBOR") based swaps were also included in AOCI as of December 31, 2024 and September 30, 2024, respectively. Assuming market rates remain constant with the rates at December 31, 2024, a gain (net of tax) of approximately $ 1,566 included in AOCI is expected to be recognized in earnings over the next twelve months. The Company utilizes certain cross currency swaps as net investment hedges of foreign operations and assesses effectiveness for these contracts based on changes in fair value attributable to changes in spot prices. The following table presents information related to cross currency swaps entered into by the Company and designated as net investment hedges: Notional Amount Unrealized Gains (Losses) Recognized in AOCI Swap Currencies Maturity Date December 31, 2024 September 30, 2024 December 31, 2024 September 30, 2024 USD/EUR September 2027 $ 81,392 $ 81,392 $ ( 1,423 ) $ ( 5,440 ) USD/SEK June 2025 20,000 20,000 1,110 ( 468 ) USD/SGD August 2026 20,000 20,000 988 ( 441 ) USD/EUR August 2026 25,000 25,000 1,879 ( 30 ) $ 146,392 $ 146,392 $ 2,554 (1) $ ( 6,379 ) (1) (1) Total unrealized gains (losses) are presented net of tax of $ 863 and $ 2,156 as of December 31, 2024 and September 30, 2024, respectively. In connection with certain of these cross currency swaps, the Company received cash from the counterparties, representing partial advance payments of amounts due under the U.S. dollar leg of the swaps. Such amounts totaled $ 58,432 , of which $ 17,416 and $ 41,016 were included in other current liabilities and other liabilities, respectively, on the Consolidated Balance Sheets at December 31, 2024 and September 30, 2024. The Company previously used certain foreign currency debt instruments as net investment hedges of foreign operations with a notional amount of € 30.0 million ($ 33,485 ) as of September 30, 2024. Currency losses of $ 3,820 (net of income taxes of $ 1,113 ), which represent effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at September 30, 2024. Refer to Note 11, "Accumulated Other Comprehensive Income" for further details regarding amounts recorded in AOCI and the Consolidated Statements of Income (Loss) related to derivatives. 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 9. Share-Based Payments The Company maintains an equity incentive plan (as amended and restated, the "2017 Equity Incentive Plan") that provides for grants of stock options, restricted shares, restricted share units ("RSUs"), stock-based performance units and certain other types of stock-based awards. Under the 2017 Equity Incentive Plan, which has a ten-year term from the date the Company's Board of Directors approved of the amendment and restatement of the 2017 Equity Incentive Plan, the maximum number of shares available for grants or awards is an aggregate of 3,450,000 (subject to adjustment upon certain events such as stock dividends or stock splits), following the amendment and restatement of the 2017 Equity Incentive Plan at the Company's 2022 Annual Shareholder Meeting. In November 2024, the Board of Directors approved the Second Amended and Restated 2017 Equity Incentive Plan (the "Second Amended 2017 Plan"), which increases the maximum number of shares available for grants or awards to an aggregate of 4,950,000 . The Second Amended 2017 Plan is subject to shareholder approval at the February 2025 Annual Shareholder Meeting. At December 31, 2024, 1,720,138 shares have been issued under the 2017 Equity Incentive Plan. 1,459,643 time-based RSUs, 1,874,354 performance-based RSUs, and 75,000 stock options have been granted under the 2017 Equity Incentive Plan. 1,685,714 of these share-based awards are outstanding as of December 31, 2024. The 2017 Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors. The number of shares issued under performance-based RSUs may be up to 200 % of the number of performance-based RSUs, based on the satisfaction of specific criteria established by the plan administrator. For the three-month periods ended December 31, 2024 and 2023, stock-based compensation cost totaled $ 4,979 and $ 4,651 , respectively. The associated future income tax benefit recognized for stock-based compensation was $ 818 and $ 684 for the three-month periods ended December 31, 2024 and 2023, respectively. With respect to the grants of RSUs, awards generally vest on the third anniversary of the grant date. The number of units that vest depend on certain time and performance thresholds. Such performance thresholds include adjusted earnings per share, return on invested capital, appreciation in the market value of the Company's Class A Common Stock, or other targets established by the Compensation Committee of the Board of Directors. Approximately 40 % of the outstanding share units vest based on time, while the remaining vest based on pre-defined performance thresholds. The Company issues common stock from treasury shares once the units become vested. The transactions for RSUs for the three months ended December 31, 2024 were as follows: RSUs Weighted- average Grant-date Fair Value Non-vested at September 30, 2024 1,707,349 $ 33.59 Granted 520,900 25.52 Contingent grant * 145,800 25.45 Vested ( 423,295 ) 37.69 Expired or forfeited ( 119,240 ) 38.00 Non-vested at December 31, 2024 1,831,514 $ 27.38 * In connection with its annual grant of equity awards, the Compensation Committee of the Board of Directors granted the President and Chief Executive Officer an award contingent upon the approval by the Company's shareholders of the Second Amended 2017 Plan. Such award consists of (i) time-based restricted stock units, which may settle into a maximum of 58,320 shares of Common Stock, subject to continued service to the Company through November 18, 2027, (ii) performance units, which may settle into a maximum of 43,740 shares of Common Stock at target levels, upon the Company achieving certain metrics based on return on invested capital (“ROIC”); and (iii) performance units, which may settle into a maximum of 43,740 shares of Common Stock at target levels upon stock price appreciation for the Common Stock. As of December 31, 2024, the total unrecognized compensation cost related to all unvested stock-based awards was $ 30,002 and is expected to be recognized over a weighted average period of 2.3 years. The fair value of certain stock-based awards that are subject to performance conditions are estimated on the date of grant using a binomial lattice valuation model. The following table indicates the assumptions used in estimating the fair value of certain stock-based awards granted during the three-month period ended December 31, 2024. 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 9. Share-Based Payments (continued) Three Months Ended December 31, 2024 Expected volatility 31.8 % Dividend yield 3.4 % Average risk-free interest rate 4.2 % Average expected term (years) 3.0 The risk-free interest rate is based on United States Treasury yields at the date of grant. The dividend yield is based on the most recent dividend payment and average stock price over the 12 months prior to the grant date. Expected volatilities are based on the historical volatility of the Company's stock price. The expected term for grants in the three months ended December 31, 2024 represents an estimate of the average period of time for RSUs to vest. The Company maintains the Amended and Restated 2019 Director Fee Plan, the Amended and Restated 2014 Director Fee Plan and the 1994 Director Fee Plan (collectively, the "Director Fee Plans"). There will be no further fees or share-based awards granted under the Amended and Restated 2014 Director Fee Plan and the 1994 Director Fee Plan. Under the Amended and Restated 2019 Director Fee Plan, non-employee directors (except for the Chairman of the Board) each receive, as an annual retainer fee for fiscal 2025, either cash or shares of the Company's Class A Common Stock with a value equal to $ 90 . The annual retainer fee for fiscal 2025 paid to the non-employee Chairman of the Board is $ 210 . Where the annual retainer fee is provided in shares, each director may elect to be paid these shares on a current basis or have such shares credited to a deferred stock account as phantom stock, with such shares to be paid to the director subsequent to leaving the Board. The total number of shares of stock that have been authorized to be issued under the Amended and Restated 2019 Director Fee Plan or credited to a deferred stock compensation account for subsequent issuance is 300,000 shares of Class A Common Stock (subject to adjustment upon certain events such as stock dividends or stock splits), following the amendment and restatement of the 2019 Director Fee Plan at the Company's 2023 Annual Shareholder Meeting. The value of deferred shares is recorded in other liabilities. A total of 51,527 shares and share units had been deferred under the Director Fee Plans as of December 31, 2024. Additionally, non-employee directors each receive an annual stock-based grant (non-statutory stock options, stock appreciation rights and/or restricted shares or units) with a value of $ 140 for fiscal 2025. As of December 31, 2024, 377,460 restricted shares and RSUs have been granted under the Director Fee Plans, 204,231 of which were issued under the 2019 Director Fee Plan. 71,549 RSUs are unvested at December 31, 2024 under the Director Fee Plans. Note 10. Earnings Per Share Attributable to Matthews' Shareholders The information used to compute loss per share attributable to Matthews' common shareholders was as follows: Three Months Ended December 31, 2024 2023 Net loss attributable to Matthews shareholders $ ( 3,472 ) $ ( 2,303 ) Weighted-average shares outstanding (in thousands): Basic shares 31,110 30,915 Effect of dilutive securities — — Diluted shares 31,110 30,915 Dividends declared per common share $ 0.25 $ 0.24 During periods in which the Company incurs a net loss, diluted weighted-average shares outstanding are equal to basic weighted-average shares outstanding because the effect of all equity awards is anti-dilutive. 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 11. Accumulated Other Comprehensive Income The changes in AOCI by component, net of tax, for the three-month periods ended December 31, 2024 and 2023 were as follows: Post-retirement benefit plans Currency translation adjustment Cash Flow Hedges Total Attributable to Matthews: Balance, September 30, 2024 $ 4,955 $ ( 174,623 ) $ 926 $ ( 168,742 ) OCI before reclassification ( 181 ) ( 21,187 ) 2,565 ( 18,803 ) Amounts reclassified from AOCI ( 172 ) (a) 6,576 ( 350 ) (b) 6,054 Net current-period OCI ( 353 ) ( 14,611 ) 2,215 ( 12,749 ) Balance, December 31, 2024 $ 4,602 $ ( 189,234 ) $ 3,141 $ ( 181,491 ) Attributable to noncontrolling interest: Balance, September 30, 2024 $ — $ 289 $ — $ 289 OCI before reclassification — — — — Net current-period OCI — — — — Balance, December 31, 2024 $ — $ 289 $ — $ 289 Post-retirement benefit plans Currency translation adjustment Cash Flow Hedges Total Attributable to Matthews: Balance, September 30, 2023 $ 6,760 $ ( 190,196 ) $ 9,032 $ ( 174,404 ) OCI before reclassification 131 11,881 ( 4,389 ) 7,623 Amounts reclassified from AOCI ( 211 ) (a) ( 196 ) ( 492 ) (b) ( 899 ) Net current-period OCI ( 80 ) 11,685 ( 4,881 ) 6,724 Balance, December 31, 2023 $ 6,680 $ ( 178,511 ) $ 4,151 $ ( 167,680 ) Attributable to noncontrolling interest: Balance, September 30, 2023 $ — $ 266 $ — $ 266 OCI before reclassification — 22 — 22 Net current-period OCI — 22 — 22 Balance, December 31, 2023 $ — $ 288 $ — $ 288 (a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans. (b) Amounts were included in interest expense in the periods the hedged item affected earnings (see Note 8). 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 11. Accumulated Other Comprehensive Income (continued) Reclassifications out of AOCI for the three-month periods ended December 31, 2024 and 2023 were as follows: Amount reclassified from AOCI Details about AOCI Components Three Months Ended December 31, 2024 Three Months Ended December 31, 2023 Affected line item in the Financial Statements Postretirement benefit plans Prior service credit (a) $ 91 $ 91 Actuarial losses 139 191 Other income (deductions), net 230 282 Income before income tax (b) ( 58 ) ( 71 ) Income taxes $ 172 $ 211 Net income Derivatives Cash flow hedges $ 468 $ 659 Interest expense Net investment hedges 354 259 Interest expense 822 918 Income before income tax (b) ( 204 ) ( 230 ) Income taxes $ 618 $ 688 Net income Other Divestitures $ ( 6,844 ) $ — Other current liabilities (c) (a) Prior service cost amounts are included in the computation of pension and other postretirement benefit expense, which is reported in cost of goods sold and selling and administrative expenses. (b) For pre-tax items, positive amounts represent income and negative amounts represent expense. (c) Reflects the release of a reserve that was established for currency translation amounts related to certain net assets classified as held-for-sale as of September 30, 2024. See Note 14, "Acquisitions and Divestitures." Note 12. Income Taxes Income tax provisions for the Company's interim periods are based on the effective income tax rate expected to be applicable for the full year. The Company's consolidated income taxes for the first three months of fiscal 2025 represented a benefit of $ 2,358 , compared to a benefit of $ 726 for the first three months of fiscal 2024. The difference between the Company’s consolidated income taxes for the first three months of fiscal 2025 compared to the same period for fiscal 2024 resulted from an increase in consolidated pre-tax loss in fiscal 2025 compared to fiscal 2024, as well as a discrete net tax benefit related to adjustments in tax reserves resulting from the progression of foreign tax audits . The Company’s fiscal 2025 three month effective tax rate varied from the U.S. statutory tax rate of 21.0% primarily due to state taxes, tax credits, non-tax benefited foreign losses, and other net discrete tax benefits. The Company’s fiscal 2024 three month effective tax rate varied from the U.S. statutory tax rate of 21.0% primarily due to state taxes, foreign statutory rate differentials, tax credits, and a net discrete tax benefit. The Company had unrecognized tax benefits (excluding penalties and interest) of $ 1,941 and $ 4,506 on December 31, 2024 and September 30, 2024, respectively, which would impact the annual effective rate at December 31, 2024 and September 30, 2024, respectively. It is reasonably possible that the amount of unrecognized tax benefits could decrease by approximately $ 281 in the next 12 months primarily due to the completion of audits and the expiration of the statute of limitations. The Company classifies interest and penalties on tax uncertainties as a component of the provision for income taxes. Total penalties and interest accrued were $ 229 and $ 588 at December 31, 2024 and September 30, 2024, respectively. These accruals may potentially be applicable in the event of an unfavorable outcome of uncertain tax positions. 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 12. Income Taxes (continued) The Company is currently under examination in several tax jurisdictions and remains subject to examination until the statute of limitations expires for those tax jurisdictions. As of December 31, 2024, the tax years that remain subject to examination by major jurisdictions generally are: United States – Federal 2019, 2022 and forward United States – State 2020 and forward Canada 2020 and forward Germany 2019 and forward United Kingdom 2023 and forward Singapore 2020 and forward Australia 2020 and forward Note 13. Segment Information 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. See Note 17, "Subsequent Event" for a description of proposed transactions with respect to the SGK Brand Solutions business. 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") system 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. 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 13. Segment Information (continued) The following table sets forth information about the Company's segments, including a reconciliation of adjusted EBITDA to net income. Three Months Ended December 31, 2024 2023 Sales: Memorialization $ 190,486 $ 208,071 Industrial Technologies 80,533 111,374 SGK Brand Solutions 130,823 130,541 Consolidated Sales $ 401,842 $ 449,986 Adjusted EBITDA: Memorialization $ 36,612 $ 36,700 Industrial Technologies 1,832 9,622 SGK Brand Solutions 12,292 12,893 Corporate and Non-Operating ( 10,713 ) ( 13,733 ) Total Adjusted EBITDA $ 40,023 $ 45,482 Acquisition and divestiture related items (1)** ( 577 ) ( 1,237 ) Strategic initiatives and other items (2)**† ( 615 ) ( 5,920 ) Highly inflationary accounting losses (primarily non-cash) (3) ( 191 ) ( 320 ) Stock-based compensation ( 4,979 ) ( 4,651 ) Non-service pension and postretirement expense (4) ( 133 ) ( 109 ) Depreciation and amortization * ( 22,504 ) ( 23,523 ) Interest expense, including RPA and factoring financing fees (5) ( 16,854 ) ( 12,751 ) Loss before income taxes ( 5,830 ) ( 3,029 ) Income tax benefit 2,358 726 Net loss $ ( 3,472 ) $ ( 2,303 ) (1) Includes certain non-recurring items associated with recent acquisition and divestiture activities. (2) Includes certain non-recurring costs associated with commercial, operational and cost-reduction initiatives, and costs associated with global ERP system integration efforts. Also includes legal costs related to an ongoing dispute with Tesla, Inc. ("Tesla"), which totaled $ 6,867 and $ 2,370 for the three months ended December 31, 2024 and 2023, respectively (see Note 16, "Legal Matter"). Fiscal 2025 includes $ 8,702 of net gains on the sales of certain significant property and other assets. Fiscal 2025 also includes loss recoveries totaling $ 1,170 which were related to a previously disclosed theft of funds by a former employee initially identified in fiscal 2015. (3) Represents exchange losses associated with highly inflationary accounting related to the Company's Turkish subsidiaries (see Note 2, "Basis of Presentation"). (4) Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains and losses, curtailment gains and losses, and settlement gains and losses. These benefit cost components are excluded from adjusted EBITDA since they are primarily influenced by external market conditions that impact investment returns and interest (discount) rates. Curtailment gains and losses and settlement gains and losses are excluded from adjusted EBITDA since they generally result from certain non-recurring events, such as plan amendments to modify future benefits or settlements of plan obligations. The service cost and prior service cost components of pension and postretirement expense are included in the calculation of adjusted EBITDA, since they are considered to be a better reflection of the ongoing service-related costs of providing these benefits. Please note that GAAP pension and postretirement expense or the adjustment above are not necessarily indicative of the current or future cash flow requirements related to these employee benefit plans. (5) Includes fees for receivables sold under the RPA and factoring arrangements totaling $ 1,172 and $ 1,175 for the three months ended December 31, 2024 and 2023, respectively. * Depreciation and amortization was $ 7,202 and $ 6,413 for the Memorialization segment, $ 5,674 and $ 6,377 for the Industrial Technologies segment, $ 8,860 and $ 9,572 for the SGK Brand Solutions segment, and $ 768 and $ 1,161 for Corporate and Non-Operating, for the three months ended December 31, 2024 and December 31, 2023, respectively. ** Acquisition costs, ERP system integration costs, and strategic initiatives and other items were $ 1,303 and $ 60 for the Memorialization segment, $ 4,119 and $ 5,367 for the Industrial Technologies segment, $ 714 and $ 863 for the SGK Brand Solutions segment, and income of $ 4,944 and charges of $ 867 for Corporate and Non-Operating, for the three months ended December 31, 2024 and December 31, 2023, respectively. 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 13. Segment Information (continued) † Strategic initiatives and other items includes charges for exit and disposal activities (including severance and other employee terminations) totaling $ 313 and $ 1,961 for the three months ended December 31, 2024 and 2023, respectively. Fiscal 2025 amounts totaling charges of $ 601 and income of $ 288 for the three months ended December 31, 2024 were presented in cost of sales and administrative expense, respectively. Fiscal 2024 amounts totaling charges of $ 1,902 , income of $ 256 and charges of $ 315 for the three months ended December 31, 2023 were presented in cost of sales, selling expense, and administrative expense, respectively. Accrued severance and other termination benefits totaled $ 23,637 and $ 42,245 as of December 31, 2024 and September 30, 2024, respectively. Note 14. Acquisitions and Divestitures Fiscal 2025: In October 2024, the Company completed a small acquisition within the Memorialization segment for a purchase price of $ 2,218 . The preliminary purchase price allocation was not finalized as of December 31, 2024 and remains subject to change as the Company obtains additional information related to working capital. During the first quarter of fiscal 2025, the Company completed a small divestiture within the Memorialization segment. The net assets for this business were fully written-down in fiscal 2024 in anticipation of the disposal transaction. Fiscal 2024: In January 2024, the Company completed a small acquisition within the Memorialization segment for a purchase price of $ 5,825 (net of holdbacks and other adjustments, including working capital). The Company finalized the allocation of the purchase price in the fourth quarter of fiscal 2024, resulting in no significant adjustments. Note 15. Goodwill and Other Intangible Assets A summary of the carrying amount of goodwill attributable to each segment as well as the changes in such amounts are as follows: Memorialization Industrial Technologies SGK Brand Solutions Consolidated Net goodwill at September 30, 2024 $ 373,144 $ 99,545 $ 224,434 $ 697,123 Additions during period 2,767 — — 2,767 Translation and other adjustments ( 2,744 ) ( 895 ) ( 10,284 ) ( 13,923 ) Net goodwill at December 31, 2024 $ 373,167 $ 98,650 $ 214,150 $ 685,967 The net goodwill balances at December 31, 2024 and September 30, 2024 included $ 277,913 of accumulated impairment losses. Accumulated impairment losses at December 31, 2024 and September 30, 2024 were $ 5,000 , $ 40,673 and $ 232,240 for the Memorialization, Industrial Technologies and SGK Brand Solutions segments, respectively. The Company performed its annual impairment review of goodwill and indefinite-lived intangible assets in the second quarter of fiscal 2024 (January 1, 2024) and determined that the estimated fair values for all goodwill reporting units exceeded their carrying values, and, therefore, no impairment charges were necessary at such time. The results of this review indicated that the estimated fair value of the Company's SGK Brand Solutions reporting unit exceeded the carrying value (expressed as a percentage of carrying value) by approximately 7 %. The fair value for the reporting unit was determined using level 3 inputs (including estimates of revenue growth, EBITDA contribution and the discount rates) and a combination of the income approach using the estimated discounted cash flows and a market-based valuation methodology. If current projections are not achieved or specific valuation factors outside the Company's control (such as discount rates and continued economic and industry challenges) significantly change, additional goodwill write-downs may be necessary in future periods. 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 15. Goodwill and Other Intangible Assets (continued) The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of December 31, 2024 and September 30, 2024, respectively. Carrying Amount Accumulated Amortization Net December 31, 2024 Indefinite-lived trade names $ 30,540 $ — $ 30,540 Definite-lived trade names 151,104 ( 128,854 ) 22,250 Customer relationships 375,040 ( 313,665 ) 61,375 Copyrights/patents/other 18,725 ( 16,012 ) 2,713 $ 575,409 $ ( 458,531 ) $ 116,878 September 30, 2024 : Indefinite-lived trade names $ 30,540 $ — $ 30,540 Definite-lived trade names 151,598 ( 127,829 ) 23,769 Customer relationships 380,387 ( 311,621 ) 68,766 Copyrights/patents/other 19,166 ( 16,215 ) 2,951 $ 581,691 $ ( 455,665 ) $ 126,026 The net change in intangible assets during the three months ended December 31, 2024 primarily included the impact of foreign currency fluctuations during the period and additional amortization. Amortization expense on intangible assets was $ 8,608 and $ 9,795 for the three-month periods ended December 31, 2024 and 2023, respectively. Amortization expense is estimated to be $ 21,031 for the remainder of fiscal 2025, $ 14,171 in 2026, $ 13,068 in 2027, $ 10,995 in 2028 and $ 9,143 in 2029. Note 16. Legal Matter On October 7, 2024, the United States District Court for the Northern District of California granted the Company’s motion to compel arbitration in response to a complaint filed by Tesla on June 14, 2024 against the Company in the Northern District of California, Civil Action No. 5:24-cv-03615 (N.D. Cal.), which alleged trade secret misappropriation under the Defend Trade Secrets Act (the "DTSA") and California's Uniform Trade Secrets Act (the "CUTSA"), breach of contract and unfair business practices. Given the Court’s favorable ruling, the matter filed by Tesla has been effectively stayed pending arbitration, which Tesla has initiated. The Company maintains the claims vaguely stated in the complaint are without merit and intends to vigorously defend itself against the allegations in the arbitration. In light of the substantial harm caused to the Company by Tesla's actions, the Company is now pursuing counterclaims against Tesla in that arbitration. On February 5, 2025, an arbitrator issued a decision on an arbitration demand filed by Matthews against Tesla in January 2024 seeking a declaratory ruling on certain contractual rights to Dry Battery Electrode (“DBE”) technology, know-how, and intellectual property under the terms and conditions of the agreement between Tesla and Matthews. This ruling acknowledged Matthews’ extensive background in advanced DBE manufacturing technology and affirmed that the Company has the right to sell its solutions to customers other than Tesla. The interim award issued by the arbitrator is subject to confirmation and a limited right of appeal. 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued (Dollar amounts in thousands, except per share data) Note 17. Subsequent Events On January 7, 2025, subsequent to the date of the balance sheet, the Company entered into a definitive contribution agreement (the "Contribution Agreement") under which it will sell its interest in the SGK Brand Solutions business to a newly formed entity created by affiliates of Southern Graphics, Inc., which will combine the SGK Brand Solutions business with the Southern Graphics, Inc. business. Under the terms of the Contribution Agreement, at the closing of the proposed transactions, the Company will receive $ 250,000 in cash and $ 50,000 of preferred equity in the new entity. In addition, at the closing of the proposed transactions, the Company will receive a 40 % interest in the common equity of the new entity. Trade receivables under the Company's RPA will not be contributed to the new entity. The Company will also retain its European cylinders (packaging) business and other related investments following the closing of the proposed transactions. The proposed transactions are expected to be completed later this fiscal year, subject to customary closing conditions, including regulatory approvals. The foregoing summary of the Contribution Agreement and the transactions contemplated thereby is incomplete and is qualified in its entirety to the complete text of the Contribution Agreement, which was filed as Exhibit 2.1 to that Current Report on Form 8-K with the SEC on January 8, 2025. In January 2025, subsequent to the balance sheet date, the Company entered into an agreement for the acquisition of a Memorialization business for a purchase price of $ 57 million in cash. The purchase price is subject to customary post-closing adjustments. The acquisition, which is subject to certain closing conditions, is expected to be completed mid-2025. 22 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations CAUTIONARY STATEMENTS REGARDING FORWARD LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES: The following discussion should be read in conjunction with the consolidated financial statements of Matthews International Corporation ("Matthews" or the "Company") and related notes thereto included in this Quarterly Report on Form 10-Q and the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024. Any forward-looking statements contained herein are included pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding the expectations, hopes, beliefs, intentions or strategies of the Company regarding the future, including statements regarding the anticipated timing and benefits of the proposed joint venture transaction, and may be identified by the use of words such as “expects,” “believes,” “intends,” “projects,” “anticipates,” “estimates,” “plans,” “seeks,” “forecasts,” “predicts,” “objective,” “targets,” “potential,” “outlook,” “may,” “will,” “could” or the negative of these terms, other comparable terminology and variations thereof. Such forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to be materially different from management's expectations, and no assurance can be given that such expectations will prove correct. Factors that could cause the Company's results to differ materially from the results discussed in such forward-looking statements principally include the possibility that the terms of the final award to be issued by the Arbitrator in the Tesla, Inc. ("Tesla") dispute may differ from the terms of the interim award issued by the Arbitrator and may be challenged, our ability to satisfy the conditions precedent to the consummation of the proposed joint venture transaction on the expected timeline or at all, our ability to achieve the anticipated benefits of the proposed joint venture transaction, uncertainties regarding future actions that may be taken by Barington in furtherance of its intention to nominate director candidates for election at the Company’s 2025 Annual Meeting, potential operational disruption caused by Barington’s actions that may make it more difficult to maintain relationships with customers, employees or partners, changes in domestic or international economic conditions, changes in foreign currency exchange rates, changes in interest rates, changes in the cost of materials used in the manufacture of the Company's products, including changes in costs due to adjustments to tariffs, any impairment of goodwill or intangible assets, environmental liability and limitations on the Company’s operations due to environmental laws and regulations, disruptions to certain services, such as telecommunications, network server maintenance, cloud computing or transaction processing services, provided to the Company by third-parties, changes in mortality and cremation rates, changes in product demand or pricing as a result of consolidation in the industries in which the Company operates, or other factors such as supply chain disruptions, labor shortages or labor cost increases, changes in product demand or pricing as a result of domestic or international competitive pressures, ability to achieve cost-reduction objectives, unknown risks in connection with the Company's acquisitions, divestitures and business combinations, cybersecurity concerns and costs arising with management of cybersecurity threats, effectiveness of the Company's internal controls, compliance with domestic and foreign laws and regulations, technological factors beyond the Company's control, impact of pandemics or similar outbreaks, or other disruptions to our industries, customers, or supply chains, the impact of global conflicts, such as the current war between Russia and Ukraine, the Company's plans and expectations with respect to its exploration, and contemplated execution, of various strategies with respect to its portfolio of businesses, the Company's plans and expectations with respect to its Board, and other factors described in Item 1A - "Risk Factors" in this Form 10-Q and Item 1A - "Risk Factors" in the Company's Form 10-K for the fiscal year ended September 30, 2024. In addition, although the Company does not currently have any customers that would be considered individually significant to consolidated sales, changes in the distribution of the Company's products or the potential loss of one or more of the Company's larger customers are also considered risk factors. Matthews cautions that the foregoing list of important factors is not all inclusive. Readers are also cautioned not to place undue reliance on any forward looking statements, which reflect management's analysis only as of the date of this report, even if subsequently made available by Matthews on its website or otherwise. Matthews does not undertake to update any forward looking statement, whether written or oral, that may be made from time to time by or on behalf of Matthews to reflect events or circumstances occurring after the date of this report unless required by law. Included in this report are measures of financial performance that are not defined by generally accepted accounting principles in the United States ("GAAP"). These non-GAAP financial measures assist management in comparing the Company's 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. For additional information and reconciliations from the consolidated financial statements see "Non-GAAP Financial Measures" below. 23 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued 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. Refer to Note 17, "Subsequent Event" in Item 1 - "Financial Statements" for a description of proposed transactions with respect to the SGK Brand Solutions business. 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") system 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. The following table sets forth the sales and adjusted EBITDA for the Company's three reporting segments for the three-month periods ended December 31, 2024 and 2023. Refer to Note 13, "Segment Information" in Item 1 - "Financial Statements" for the Company's financial information by segment. Three Months Ended December 31, 2024 2023 Sales: (Dollar amounts in thousands) Memorialization $ 190,486 $ 208,071 Industrial Technologies 80,533 111,374 SGK Brand Solutions 130,823 130,541 Consolidated Sales $ 401,842 $ 449,986 Adjusted EBITDA: Memorialization $ 36,612 $ 36,700 Industrial Technologies 1,832 9,622 SGK Brand Solutions 12,292 12,893 Corporate and Non-Operating (10,713) (13,733) Total Adjusted EBITDA (1) $ 40,023 $ 45,482 (1) Total Adjusted EBITDA is a non-GAAP financial measure. See the "Non-GAAP Financial Measures" section below. 24