Good day, everyone, and welcome to today's Matthews International Third Quarter Fiscal 2025 Financial Results. [Operator Instructions] Please note, this call may be recorded. [Operator Instructions] It is now my pleasure to turn the conference over to CFO, Steve Nicola. Please go ahead.

All right. Thank you, Stephanie, and good morning. I'm Steve Nicola, Chief Financial Officer of Matthews. And with me today is Joe Bartolacci, our company's President and Chief Executive Officer; and Dan Stopar, our Senior Vice President, Operations Controller and Head of Global Business Services. Before we start, I would like to remind you that our earnings release was posted on the company's website, www.matw.com, in the Investors section. The presentation for our call can also be accessed in the Investors section of the website under Presentations. Any forward-looking information -- 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 information 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. Now I will turn the call over to Joe.

Thank you, Steve. Good morning, everyone, and thanks for joining us to discuss the financial results for the fiscal 2025 third quarter. We're pleased with our results this quarter, which saw initial benefits from our value creation plan that was implemented late last year, including a gain from the divestiture of SGK, now known as Propelis Group, of which we own 40%, consolidated savings from a cost reduction program initiated last year, lower corporate and nonoperating costs and improved EBITDA performance year-over-year by our Memorialization and our Industrial Technologies business segment. Consolidated sales were $349 million in the third quarter of fiscal 2025 compared to $428 million in the third quarter of fiscal '24. The lower revenue result was primarily attributable to the divestiture of SGK in May of this year. Thus, current results only include 1 full month of SGK, excluding adjusted EBITDA of the divested SGK business from both the current and prior year quarter results and a year-over-year increase of 37%. Steve will provide greater detail on Propelis, but let me say that the merger of SGS and SGK is moving along smoothly and as expected. As we detailed in our last earnings call, Propelis has come out of the gate projecting initial annual adjusted EBITDA of about $100 million and has just initiated the process of synergy capture. In fact, the management team expects to be at a run rate of synergies of $10 million by year-end and a $40 million run rate of synergies by the end of calendar '26. Moreover, the team has identified $60 million of total targeted synergies higher than originally expected. All in all, we expect this transaction to create significant value as we exit in the future. Early market feedback on the deal has been positive and confirmed by the…

Thank you, Joe. Before starting the financial review, let's discuss the financial reporting with respect to SGK. As you're aware, the divestiture of SGK closed on May 1, 2025, and as such, our consolidated financial information reflects the financial results of the SGK business through the closing date. As part of this transaction, the company received a 40% ownership interest in the newly formed entity, Propelis Group. Please note that as a result of the integration process of Propelis and transition to its own stand-alone reporting systems, our 40% portion of the financial results of Propelis will be reported on a 1-quarter lag. As a result, except as otherwise noted, the consolidated financial information presented in the earnings release yesterday and discussed today does not include our 40% interest in the financial results of Propelis for the 2 months ended June 30, 2025. Similarly, our quarterly report on Form 10-Q will not reflect the results of Propelis. Now let's begin the financial review with Slide 7. For the fiscal 2025 third quarter, the company reported net income of $15.4 million or $0.49 per share compared to net income of $1.8 million or $0.06 per share a year ago. The increase primarily reflected a gain on the divestiture of the SGK business, which was partially offset by higher income taxes and interest expense. The increase in income tax expense primarily reflected the impact of favorable tax benefits discrete to last year that did not repeat in the current year. Consolidated sales for the fiscal 2025 third quarter were $349 million compared to $428 million a year ago. The decrease primarily reflected the divestiture of SGK on May 1, 2025. The consolidated sales impact of the SGK divestiture was $80.2 million for the current quarter. Sales for the Industrial Technologies segment were…

[Operator Instructions] And our first question will come from Dan Moore with CJS Securities.

It's Pete Lucas for Dan. Starting with the Dodge Company, I think you had said sales of $6 million and a goal of $12 million EBITDA. What was the EBITDA contribution this quarter? And what are you looking for in terms of sales and EBITDA in Q4?

Okay, Peter. So with respect to the Dodge Company acquisition, so for this quarter, the EBITDA contribution was approximately $1 million on the $6 million sales number. If you recall, when we announced the acquisition, we had talked about the current run rate for the Dodge Company being in the $6 million range. So it was pretty much consistent with that estimate. And right now, similar run rate into the fourth quarter.

Helpful. And then on the industrial side, performed well. Revenue is still down a bit, but closer to flat year-over-year. What was energy storage-related revenue for the quarter? And what was it in fiscal Q3 last year? Same question for warehouse automation. Really just trying to see where did you see declines? And what are the key areas where you can offset those declines with growth?

So Peter, yes, so without providing the numbers, our sales in the energy business and the total engineering business were down from a year ago. And as I mentioned earlier, it's related to the ongoing issues that we've had that Joe discussed before as well as what we talked about in the press release. So -- but those reductions were mitigated by nice improvement in our -- partially mitigated, I should say, by nice improvements in our warehouse automation business.

Our next question will come from Colin Rusch with Oppenheimer.

The new printhead business and the warehouse automation business. It seems like both are really focused on velocity of goods through warehouses and production facilities. I just want to understand how much synergy you guys see over the next, call it, 3 to 5 years.

Colin, hold on just a second. We just -- I don't think we caught the early part of that call -- early part of that question.

Yes. Can we -- just want to hear what sort of synergies you guys are seeing between the new printhead business and the warehouse automation business. It seems like both are focused on improved velocity and accuracy through both warehouses and manufacturing. I just want to understand how much you guys see those 2 supporting each other over the next 3 to 5 years or so.

Okay. Joe, are you connected?

There I am. I thought I understood the question. And so let me kind of phrase it this way. At the end of the day, when you walk into an automated warehouse, aside from the fact that robotics will become more and more a part of an autonomous warehouse, product has still moved and will continue to be moved through conveyors for a long period of time. Those conveyors read barcodes as they move that along the process. So we think the connection between the warehouse -- automated warehouses and our new printhead where we currently don't operate in warehouses today is significant. So it's a great question, and we look forward to talking more about that as we start to roll it out.

And then the second question is really around potential incremental acquisitions. Obviously, you guys have a long history of tuck-ins that are pretty effective. But given kind of the early days of automation and the push towards faster delivery times and e-commerce still being relatively nascent despite the concept being around for a fair amount of time, there is a lot of technology that's been developed in kind of early stage. I'm just curious about how you guys are approaching some augmentation for that automation business and opportunities for you guys to accelerate some of the growth there?

Another good question. So one of the things that we're really focused on, obviously, we're laser-focused on getting our debt positions reduced. So that will be our primary focus. However, there are other ways to participate in the start-up situations. And one of the most particular ones that we're interested in is embedding our software into driving the automated warehouse and the autonomous robots that are associated with that. Last quarter, we announced a partnership with the Teradyne folks embedding our software into managing the robots. We have several other start-up kind of situations like that, where our software is being embedded into the hardware to be able to drive that. So although we may not be looking necessarily for any significant investment in acquisitions in these start-up spaces, we are playing in a different way because at the end of the day, software drives a robot.

We'll take our next question from Liam Burke with B. Riley Securities.

Joe, obviously, Tesla is still very anxious to -- the battery -- dry battery electrode is still an important part of their overall strategy. But are you sensing any change in urgency to develop this rival DBE platform to the existing battery processing?

We are seeing, obviously, there are participants around the world that are trying to develop solutions and no one has yet to develop a competitive solution as of yet. So right now, I would say there is a drive by many in the industry to reduce their costs. There are improvements in the wet process that are going on as well. Ultimately, we believe, and I think some of the largest players believe that dry is the next stage of further cost reductions. So I think although the market has slowed, I would say, for EV and demand, the desire to continue to lower the cost hasn't changed, Liam. So we think this is still an opportunity for years to come.

Super. And I'm sure I heard this right, but you said you did land a production size systems order on the DBE process.

We landed a smaller one for a solid-state player. Yes, we have. And we also are in the midst of proving out our coating line system, which is another piece of equipment that is highly specialized into what's called battery separator coatings that goes between the anode and cathodes. Our machine operates at twice the speed of current competitors. So as we demonstrate that in the marketplace, we think more and more will come our way.

Okay. And then just very quickly, on the legacy product identification business, is it just a quarterly lag? Or is there anything else going on there?

We had a pretty good quarter in product identification. I wouldn't say that there was anything significant there. We're ramping up as we speak with the launch of our [ Axiom ] product. So we'll have some costs associated with that as we move into next quarter. But product identification continues to move forward. And I would say that we've had some challenges, frankly, as tariffs have forced us to source elsewhere as well as some supplier issues that have slowed us down with the launch of other solutions that we put out in the marketplace. But I think that's just a temporary little glitch that we move forward. The product identification business is well positioned to have a pretty strong year.

We'll take our next question from Justin Bergner with Gabelli Funds.

Nice quarter. I had a few clarification questions. To start, has the rotogravure sale closed?

It has not, Justin. We expect that to close before September 30. We have -- that is in the works as we speak. That should generate a little over $30 million of net cash and closer to $40-some million of consideration.

Okay. And what's the delta between the net cash and the consideration?

There are some long-term liabilities that they will assume like pensions, and we're going to have to carry a bit of a note on one of the pieces of the business we're selling of about $5 million.

All right. And then the European packaging sale that's contemplated, what are the metric -- can you provide any metrics around how large that business is?

Steve, can you give us that one?

Yes, Justin, that's about a $50 million, $60 million annual revenue run rate. And today, that EBITDA is relatively -- the last 12 months has been relatively breakeven operation.

Okay. That's helpful. But I assume you're still hoping to net something positive there.

Well, that is the business we're selling, Justin, just so you know. I mean the European packaging business is the rotogravure business.

Okay. Got you. Got you. I was just confused.

I want to make sure I can tell by your question, you had a little confusion there.

Okay. That's helpful. And then just on the debt bridge, what were the -- could you just provide any indication? I see the $228 million sale proceeds. Just what was the leakage on the transaction costs and, I guess, had derivative settlements?

Sure. So yes, let me walk through that. So the $228 million is primarily driven by cash that was embedded in subsidiaries, call it, trapped cash embedded in subsidiaries that went with the business, in addition, by the way, to some pension obligations that were assumed by the business. So that's the reason -- the primary reason for the number of $228 million versus the $250 million. The currency hedge amount is in the $35 million to $40 million range. And then the Dodge Company acquisition price was close to $60 million.

Okay. And then there was a small delta for transaction costs.

Yes, there are. And then -- yes, there are. And that's ultimately what gets you to the $120 million of debt reduction -- gross debt reduction for the quarter.

Okay. That's very helpful. Just to clarify and make sure. So when you reiterate your $190 million of adjusted EBITDA, that includes not the lagged Propelis, but your estimated number for these 2 months for the quarter just finished and then for the September quarter for your equity income portion?

That is correct.

Okay. Got you. And then just bigger picture. With respect to Tesla, has there been anything new in the legal front in the last couple of months? Or what the action we were referring to was in the spring?

No, no. I mean it was this spring, they did file 2 additional suits, one seeking to overturn the ruling that we received, Justin, which is quite interesting since the contract that they provided to us required arbitration. They just don't like the outcome. So that is one that they filed for those of you that are following that. And secondly, they're looking to try to reverse a patent that we have. Again, a very, very, very long shot effort, but it gives further evidence of the value of what we have.

Okay. But those initiatives were not in the last couple of weeks. Those were kind of...

No, no, no. Yes, yes.

Okay. Got you. And then just a bigger picture, the $150 million of interest in your energy storage business, what type of time frame could these convert around? And are you still delivering some backlog to Tesla for your energy storage business as we speak?

We're delivering some, but not a lot. For the most part, that has slowed. Their demand is slowed and they have slowed with that. With regard to the backlog, the order that we received for the solid-state manufacturer, we would expect that to be starting to realize here in the coming weeks, months at the most. We have a fairly significant order we're working on here in North America for the battery coating line. That is closer to $50 million, and that is looking to somewhere in the next 60 to 90 days at most. We're improving now at this point in time.

Next 60 to 90 days when you'd recognize it as an order?

No, and we will have received the order. Right now, that order is -- we are still in the testing phases. The processes for these as many of these companies that we're dealing with haven't produced anything yet. So this one in particular has a fairly significant support by the U.S. government. So they have the funding and they're proving out their processes. We are a critical part of that process. And as they test our equipment and test our solution, that's when we expect to have that order.

This does conclude our Q&A session today. I'd like to now turn the conference over to Steve Nicola for closing remarks.

Thank you, Stephanie, and thanks to everyone on the call, and we look forward to our fourth quarter earnings release and conference call in November 2025. Thank you again, and have a great day.

Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect.