Greetings, and welcome to Matthews International Third Quarter Fiscal 2024 Financial Results Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Bill Wilson, Senior Director, Corporate Development. Thank you. Mr. Wilson, you may begin.

Thank you Ranchu, and good morning, everyone. And welcome to the Matthews International Third Quarter Fiscal Year 2024 Conference Call. This is Bill Wilson, Senior Director of Corporate Development. With me today are Joe Bartolacci, President and Chief Executive Officer; and Steve Nicola, our Chief Financial Officer. Before we start, I’d like to remind you that our earnings release was posted on our website, www.matw.com, in the Investors section last night. The presentation for our call can also be accessed in the Investors section of the website under Presentations. Any forward-looking statements in connection with this discussion are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Factors that could cause the company's results to differ from those discussed today are set forth in the company's Annual Report on Form 10-K and other public filings with the SEC. In addition, we will be discussing non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables carefully as you consider these metrics. In connection with any forward-looking statements and non-GAAP financial information, please read the disclaimer included in today's presentation materials located on our website. And now I'll turn the call over to Joe.

Thank you Bill. Good morning. Despite encountering challenges in our Industrial Technologies segment, we were pleased with the results of the remainder of our businesses. Consolidated sales and adjusted EBITDA declined on a year-over-year basis primarily due to ongoing customer delays of shipments and installations for our energy storage products. Also, slow market conditions in the warehouse automation business continued during the quarter and represented a smaller part of the overall decline in our Industrial Technologies segment. Our Memorialization segment reported another solid quarter on a year-over-year basis especially when you consider that the US casketed deaths declined mid-single digits during the quarter. Although memorial and casket volumes were down, improved pricing and mausoleum sales offset much of the decline. Also, a small acquisition completed earlier in fiscal '24 contributed favorably to the segment's results. Although it is early, we saw improved volumes and good product mix through the month of July, which should allow the business to finish the year strong. As stated in the past, this segment has normalized post-COVID at a performance which is significantly higher than pre-COVID. SGK continued to demonstrate stable top-line growth with another good quarterly performance, benefiting from continued improvements in the pricing environment and cost reduction actions. SGK's growth also drew from a more buoyant private label market and increased activity in the European packaging market, a welcome sign which we hope will continue. SGK has won several significant new accounts over the last several quarters, driven by greater market differentiation through automation and technological solutions, which have begun to implement -- which we have begun to implement and which are being well-received by our clients. Assuming market conditions remain consistent, this position is positioned for continued improvement in fiscal 2025. Additionally, our e-commerce digital initiative continues to deliver positive results, and…

Thank you, Joe. Good morning. Let's begin with Slide 7. For the fiscal 2024 third quarter, net income attributable to the company was $1.8 million or $0.06 per share compared to $8.7 million or $0.28 per share a year ago. On a non-GAAP adjusted basis, earnings for the current quarter were $0.56 per share compared to $0.74 per share last year. The impacts of lower consolidated adjusted EBITDA and higher interest expense were partially offset by income tax benefits for the current quarter. Consolidated sales for the fiscal 2024 third quarter were $427.8 million compared to $471.9 million a year ago. Our largest businesses, Memorialization and SGK Brand Solutions continued to perform relatively well for the quarter as the consolidated sales decrease primarily reflected a decline for the Industrial Technologies segment. Sales for the SGK Brand Solutions segment were modestly higher than a year ago, primarily reflecting increased sales for the European packaging business and in the private label market. Sales for the Memorialization segment for the current quarter remained relatively steady compared to a year ago reporting only a modest decline despite lower unit volumes related to a decrease in US casketed deaths. The decline for the Industrial Technologies segment primarily reflected lower sales for its engineering and warehouse automation businesses. Consolidated adjusted EBITDA for the fiscal 2024 third quarter was $44.7 million compared to $56.2 million a year ago. The decrease mainly resulted from a decline in the Industrial Technologies segment, primarily related to its engineering and warehouse automation businesses. Adjusted EBITDA for the Memorialization and SGK Brand Solutions segments were only modestly lower for the quarter, which were substantially offset by lower corporate and non-operating costs. Please see the reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share provided in our earnings release. And please move…

Thank you. We will now be conducting a question-and-answer session. [Operator instructions] The first question comes from the line of Daniel Moore with CJS Securities. Please go ahead.

Thank you. Good morning Joe. Good morning Steve. Thanks for taking my questions.

Good morning Dan.

Start with the guide and then kind of maybe switch gears to energy storage. The revised guidance for fiscal '24 in terms of the implication for Q4, how much energy storage revenue is in there and just talk about your confidence and any risk that maybe some of that additional revenue or shipments might slip into fiscal '25?

So, I mean let me kind of parse that out for you, Dan. We expect to carry over somewhere of about $60 million to $70 million worth of backlog in the energy business into 2025. Our current expectation is we should have about $30 million or so of billings in the month -- in the quarter that we are approaching right on the fourth quarter. So our expectations and we have had a pretty good discussion in terms of that with our customer and right now, that is the current plans that will ship through late February of next year with some trailing orders to be delivered thereafter.

That's helpful. And then I think you said in the prepared remarks you expect energy storage orders to pick up in Q4 and into fiscal 2025. I don't know if that was orders was for --.

It was revenue recognition. Warehouse and product identification is what we are seeing things start to pick up again.

Got it. That is really helpful. Sticking there on the DBE front you talked about plans to build battery production capability in-house and I think you said spending an incremental $40 million over the next 12 plus months. Are those plans still on track? And what would that look like from a capacity perspective once that build-out is complete?

So let me explain exactly what that is. First off the number is materially lower as a result of some of the cost structures initiatives that we've initiated. We are freeing up a fair amount of real estate to be able to house it, so the capital cost will come down materially. Secondly, we are not building production capability as much as we are building a production line. That production line, it will allow an accelerated adoption of the DBE solution by some of the largest customers in the world. So, we are moving away from selling a lab machine and then a small prototype machine, and then finally waiting for an order. This is the process of standardizing the production line to a methodology that is consistent and we can sell repeatedly. That will benefit time-line for adoption significantly with some of the largest customers as they try to go up from where they are today. But more importantly, it should improve our cost structure as we standardize around a definitive solution.

Really helpful. One more on energy storage, and then I will ask one more and jump back in queue. I know you are too early to get into fiscal '25 guidance but given kind of where we are in terms of orders right now, do we think about '25, as being a growth year in that business? Or could that inflection maybe push out to fiscal 2026?

I would tell you that 2025 is going to be a good year, not a -- right now, things can change so dramatically so quickly, Dan. But I would not expect a significant growth year I would expect a good year in that business. The cost structure initiatives we are taking over there will make the overall engineering solution better. We are taking out a significant amount of costs over there. But more importantly, I'm hoping 2025 to be -- once we get past the litigation, to be more of an announcement year where we can speak more freely about what we are doing.

That is really helpful. Last for me. You mentioned green shoots or maybe my word not yours, on warehouse automation, maybe all the quoting rates any additional color you can give there around what you are seeing and hearing from customers and when we might see a little bit of return in that business. Thanks again.

I'm hoping to have -- I mean, unfortunately, some -- we're working with some of the largest players in the industry Dan, when it comes to e-commerce and store fulfillment. And the names, unfortunately, are not allowing us to use their names, but I can tell you they are national brands in every sense. Those orders are in pipeline right now. I’d say, that they are in final negotiations, fairly significant orders, but interests are -- it has increased significantly around finally moving forward. Unfortunately, as you know, this is a cyclical business when it comes to the year. Generally, we are out of warehouses in the first quarter, so don't expect a big first quarter as much as you start to see those revenues into the second and third quarter of next year.

Understood all. I’ll jump back if any follow-up. Thanks Joe.

Thank you. Next question comes from the line of Justin Bergner with Gabelli Funds. Please go ahead.

Good morning Joe. Good morning Steve.

Hi, Justin.

A few questions here. Just to make sure the onetime cost to achieve the savings and the $50 million cost out plan of $40 million, those are all cash?

No, not all.

No, the majority of them are cash, Justin. But there is a component of it that would be asset write-off related.

Okay. Any quantification of the cash portion?

No, I don't have those numbers with me.

We can get that for you, Justin.

All right. And then depending upon how the situation resolves itself with Tesla, I mean, could you see yourselves downsizing that cost takeout program not just centered around Europe?

Let's put it this way. As it relates to OLBRICH itself, now as it relates to the rest of our engineering business over there perhaps. I mean, the reality is that we're positioning it for growth over there so the cost that we are taking out were anticipated when we acquired OLBRICH. If you recall, OLBRICH was a business we paid EUR45 million for that -- what is coming out of bankruptcy for all practical purposes, and it has not been a contributor. In fact, it is been a net loser for the last 18 months as we've gone through this. We are positioning that business to be a mid-teens operating EBITDA business over there, as well as leaving us the capacity and the engineering skills to grow our engineering -- our energy business.

Okay. Got it. But that mid-teens would be on a meaningfully lower revenue base, I assume if you're taking that much cost out?

We are expecting that revenue base to be upwards of $80 million. No, this is -- by the way, Justin, that is just for OLBRICH, not the energy business as a whole.

Got you. All right. And then if the Tesla situation is resolved, I mean, you wouldn't rule out new orders coming in as we look into fiscal year '25 from that customer as well, right?

I mean, look, we will take orders from anybody. We are taking orders, as I said earlier, from others. We are not at liberty right now to kind of speak more freely about that but we continue to take orders and interest levels are very high. As I said in my statement, this is a -- we've been saying it for a while. This is a solution that is tremendously valuable. It takes billions of dollars out of the process. What you are seeing is the reaction to that.

Got you. Totally understand, and all the best working your way through that lawsuit. Maybe lastly, in terms of noncore businesses, with your leverage and your refinancing, how are you thinking about some businesses that may be non-core within the portfolio within the next 12 to 24 months?

I mean, we’re always looking at those. I would tell you that given where our debt position is and where we think that our Industrial Technologies business is going, we are now approaching that point where we think it's time to consider it more wholesomely, so we're considering everything right now.

Okay. And then lastly, just on the share repurchases, not a large quantity purchased in the quarter. Is it safe to say that those shares were purchased before you saw the Tesla situation coming to ahead? Or just any perspective on why you would deploy that capital in that way?

We did not buy a lot -- but it was also well before the situation with Tesla's -- the lawsuit. So that is not something that going into this environment we would be buying in today.

Thank you. Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the floor over to Bill Wilson for closing comments.

Very good. Thank you, and thank you everyone, for joining us today and your interest in Matthews. We would encourage you for additional information about the company and our financial results. Please visit our website or contact me. Enjoy the rest of your day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.