On June 27, Matthews International reported non-GAAP adjusted earnings per share of 74 cents for the third quarter compared to 58 cents in the year-ago period, according to a news release.
“We continued to deliver on our strategies in the fiscal 2023 third quarter as the company generated strong growth in consolidated sales and adjusted EBITDA (net income before interest expense, income taxes, depreciation and amortization, and other adjustments) for the fiscal 2023 third quarter compared to a year ago,” said Joseph C. Bartolacci, president and CEO.
Commenting on the Memorialization Segment, he said it, “reported higher sales and adjusted EBITDA for the current quarter compared to a year ago. The segment continues to perform well post-pandemic reflecting good market share performance, price realization, and cremation-related products sales. The strength of our brands, strong customer service, continued innovation in our production processes, and the growing level of our cremation-related products sales remain significant elements in the ongoing success of this segment.”
Looking ahead, he said, “With respect to the remainder of fiscal 2023, we are still expecting full year results to be within our original guidance range of $215 million to $235 million, as we are currently projecting adjusted EBITDA of at least $220 million for the fiscal year.”
Consolidated sales for the quarter ended June 30, 2023, were $471.9 million, compared to $421.7 million for the same quarter a year ago, representing an increase of $50.2 million, or 11.9%. On a constant currency basis, consolidated sales increased $51.9 million, or 12.3%, from a year ago. Changes in foreign currency exchange rates were estimated to have an unfavorable impact of $1.7 million on fiscal 2023 third quarter sales compared to the prior year.
Memorialization sales increased for the current quarter compared to a year ago primarily reflecting improved pricing, higher sales of U.S. cremation equipment, and the impact of the acquisition of Eagle Granite, which more than offset lower unit sales for caskets and memorials resulting from the decline in COVID-related deaths, the company stated.
The increase in adjusted earnings per share was primarily attributable to an increase in consolidated adjusted EBITDA for the current quarter, partially offset by higher interest expense compared to a year ago. Adjusted EBITDA for the fiscal 2023 third quarter was $56.2 million, compared to $46 million a year ago, reflecting higher adjusted EBITDA in all of the company’s segments.
Executives Offer Additional Remarks on Conference Call
On a conference call with stock analysts, Bartolacci noted that the Memorialization Segment has held on to a larger portion of market share.
“In the Memorialization business, we continued to outperform pre-pandemic results driven by the significant effort made by the team,” he said. “We have retained much of the market share gains that we have made during COVID and improved our operating efficiencies. Thus, we have reset this business to a higher performance level than before the pandemic,” he said.
He added, “As a result of those efforts and the recent acquisition of Eagle Granite, operating results in the Memorialization Segment grew by almost 3% in the fiscal 2023 third quarter and by 29% when compared to the corresponding period before the pandemic began.”
Steven Nicola, the company’s chief financial officer, noted sales for the Memorialization Segment for the fiscal 2023 third quarter were $208.7 million compared to $203.2 million for the same quarter a year ago. “The increase primarily reflected the benefits of improved pricing, higher sales of U.S. cremation equipment and the acquisition of Eagle Granite Company, which were partially offset by lower unit sales of caskets and memorials reflecting lower COVID-related deaths,” he said.
He added, “Memorialization segment adjusted EBITDA for the current quarter was $39.9 million compared to $32.1 million for the third fiscal quarter last year. The increase primarily resulted from higher sales, improved pricing and benefits from operational cost-saving initiatives. These increases were partially offset by the impact of lower casket and memorial sales volumes and increased materials, labor and other inflation-related costs.”
Stock analysts were pleased to see that EBIDTA memorialization margins have gone back up above 20% for the past two quarters. They wondered where they would be moving forward.
Bartolacci responded, “Top line is difficult to project. I mean, death rates are something that, obviously, we don’t have control of. But I would tell you that it’s a modest grower for us. We’re not expecting multiple double-digit growth in the Memorialization segment.” He continued, “From a margin standpoint, I would say that we were pretty close to stable at this point in time. You’re going to have quarters where you’re going to be up and down a little bit. But at the end of the day, we have stabilized at around that — our historic rates. We think that’s where we should be.”
Another stock analyst asked if the market share gains in the Memorialization Segment came from caskets, memorialization products or across the board.
“I would tell you that we picked up market share in just about every one of the businesses that we operate in North America, but they’re small,” Bartolacci said. “These are incremental. But as you know, that incremental drop-through is positive.”
He added that Wall Street may be missing the big story. “I mean if you look at where our business was just three years ago, it’s materially higher at this point in time,” he said. “This is a different business than it was just three years ago.”
Read the company’s full news release on its quarterly results for more information.