Matthews: Memorialization sales rise, adjusted EBITDA drops for the year

November 29, 2022/Finance/

Matthews International, parent company of Matthews Cremation and Aurora Casket, announced their Fiscal Year 4th Quarter and Year End 2022 results last week. President and CEO Joseph C. Bartolacci said this in the opening statements of the report, “I am pleased with our operating results for the fourth quarter and fiscal year ended September 30, 2022. . . . consolidated sales for the current quarter were $457.1 million, compared to $438.8 million last year. . . .This growth primarily reflected higher sales for our Industrial Technologies and Memorialization segments.”

You can see the 4Q22 and FY22 report here.

Bartolacci continued in speaking about the company’s Memorialization segment, “The Memorialization segment again delivered a quarter of year-over-year sales growth. Despite a decline in COVID-related deaths, sales volumes for cemetery products and U.S. cremation-related
products for the current quarter were higher than a year ago. Additionally, recent pricing actions taken to mitigate commodity and other inflation cost pressures contributed to the segment’s sales increase.”

For the company’s 4th Quarter (July thru September), revenue of the Memorialization segment jumped 5.25% to $206.2 million from 2021’s 4th Quarter of $195.9 million. And for the year Memorialization revenue increased 9.24% to $840.1 million as compared to Fiscal Year 2021 total Memorialization segment revenue of $769.0 million.

However, as with many companies, it appears that revenues were not increased fast enough to keep up with the pace of inflationary expenses. Because when it came down to Adjusted EBITDA of the Memorialization segment, even with that approximately $70 million in additional revenues for FY2022, the Adjusted EBITDA of the Memorialization segment dropped almost $14 million . . .from $165.6 million in FY2021 to a little over $151.8 million in FY2022 — that’s a decrease of 8.4%.

It is interesting to note that the three segments of Matthews International – Memorialization, Industrial Technologies, and SGK Brand Solutions – totaled $1.762 billion in revenue for FY2022. Of that total revenue, $840.1 million of it came from the Memorialization segment. . . that’s about 47.4% of total revenue and a higher percentage than the 46.0% number for FY2021.

Here’s a couple of comments that CEO Bartolacci had during the Earnings Call Presentation which you can see here:

Q. On price increases to offset margin loss?

A. “So you’re going to see margin percentage improvement as we’ve recovered some of what we did not recover in pricing last year. That’s why my commentary with respect to we expect pricing to remain throughout the year as we pick up the cost that we’ve been absorbing. So that will improve margin. But one of the things that we have not done in the industry as a whole has not really done is passed on cost plus margins.

So we’re going to get better on the margins and what we’re going to see significant improvement is going to be our cremation Environmental Solutions business, where we’ve had more challenges than we’ve had elsewhere. So I would expect that as our casketed revenues drop, our cemetery revenues should will climb, but more importantly, the profitability of our environmental solutions will get better, making our overall performance in that entire division relatively flat to modestly down.”

Q. Expectations as we look to Fiscal Year 2023?

A. “When we look at our Memorialization segment, as we said in my comments — as I said in my comments, normalization has occurred from a death rate standpoint. We’ve seen that in some of our third quarter and back and clearly in our fourth quarter. So we’re expecting a modest reduction in our EBITDA business — for that business as we look into next year, with some of that reduction going to be currency impacted, but not a lot.”

Related — Seeking Alpha article on Matthews International – dated November 22, 2022

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