10-K: Matthews International Navigates Portfolio Shift, Reports Mixed FY25 Results

Matthews International reports a net loss of $24.5 million for fiscal year 2025, driven by strategic divestitures and legal costs, while advancing its portfolio review and energy storage solutions.

Summary

• Matthews International Corporation reported a net loss of $24.5 million for the fiscal year ended September 30, 2025, an improvement from the $59.7 million net loss in fiscal year 2024, but a decline from the $39.1 million net income in fiscal year 2023.
• Consolidated sales decreased to $1.498 billion in fiscal year 2025 from $1.796 billion in fiscal year 2024, primarily due to the divestiture of the SGK Business.
• The company contributed the vast majority of its Brand Solutions segment (SGK Business) to a newly-formed entity, Propelis, on May 1, 2025, in exchange for a 40% ownership interest in Propelis, a $50.0 million preferred equity investment, and $228.0 million in cash proceeds, resulting in a pre-tax gain of $55.1 million.
• The Memorialization segment's sales decreased to $809.5 million in fiscal year 2025 from $829.7 million in fiscal year 2024, mainly due to lower unit sales of caskets, bronze and granite memorial products, and cremation equipment, reflecting a decline in U.S. death rates.
• The Industrial Technologies segment's sales decreased to $342.2 million in fiscal year 2025 from $433.2 million in fiscal year 2024, driven by lower sales of purpose-built engineered products (energy storage solutions and coating/converting equipment) and reduced product identification sales, alongside the discontinuation of R+S automotive engineering solutions.
• Consolidated Adjusted EBITDA decreased to $187.5 million in fiscal year 2025 from $205.2 million in fiscal year 2024.
• The company is involved in ongoing legal disputes with Tesla, Inc. regarding alleged trade secret misappropriation and patent claims, incurring legal costs of $22.2 million in fiscal year 2025.
• The Board of Directors launched a comprehensive review of strategic alternatives for the company's entire portfolio of businesses in November 2024.
• A proposed transaction for the sale of the Warehouse Automation business to Duravant LLC for $230.0 million is expected to be completed in fiscal year 2026.

Sentiment

Score: 4

Explanation: While the company is actively pursuing strategic portfolio optimization through divestitures and acquisitions, the financial results for FY2025 show a significant decline in consolidated sales and adjusted EBITDA, a net loss, and negative operating cash flow. High legal costs and project delays in key growth areas like energy storage are concerning. The positive impact of the SGK divestiture gain is offset by underlying operational challenges.

Positives

• Net loss improved significantly to $24.5 million in fiscal year 2025 from a $59.7 million net loss in fiscal year 2024.
• Realized a substantial pre-tax gain of $55.1 million from the divestiture of the SGK Business.
• Memorialization segment adjusted EBITDA increased to $169.5 million in fiscal year 2025 from $162.6 million in fiscal year 2024, driven by improved price realization and productivity initiatives.
• Consolidated sales experienced a favorable impact of $2.3 million from foreign currency exchange rates in fiscal year 2025.
• Improved sales of warehouse automation solutions partially offset declines in other areas of the Industrial Technologies segment.
• Benefits from ongoing cost-reduction initiatives contributed to lower selling and administrative expenses.
• Intangible amortization decreased due to certain intangible assets reaching the end of their amortizable lives and the SGK divestiture.
• U.S. District Court compelled Tesla's trade secret misappropriation and patent claims to confidential arbitration, staying the matters.
• The company maintained effective internal control over financial reporting as of September 30, 2025.
• The Board of Directors approved the continuation of the stock repurchase program and increased the authorization for stock repurchases by an additional 5,000,000 shares in November 2025.

Negatives

• Consolidated sales decreased by $298.0 million from fiscal year 2024 to fiscal year 2025.
• Reported a net loss of $24.5 million in fiscal year 2025, a significant decline from the net income of $39.1 million in fiscal year 2023.
• Industrial Technologies segment sales decreased by $90.9 million, and its adjusted EBITDA declined to $27.9 million from $39.7 million, primarily due to lower sales of engineered products.
• Memorialization segment sales decreased by $20.2 million, attributed to lower unit sales of caskets, bronze and granite memorial products, and cremation equipment, reflecting a decline in U.S. death rates.
• Brand Solutions segment sales decreased by $186.9 million, largely due to the divestiture of the SGK Business.
• Consolidated Adjusted EBITDA decreased by $17.7 million year-over-year.
• Gross profit decreased by $22.1 million, impacted by lower sales, higher material and labor costs, and a $5.6 million loss on the sale of certain property and other assets.
• Selling and administrative expenses as a percentage of sales increased to 31.2% in fiscal year 2025 from 27.2% in fiscal year 2024.
• Incurred significant legal costs of $22.2 million in fiscal year 2025 related to the ongoing dispute with Tesla.
• Recognized an $8.0 million expense related to the settlement of a contractual licensing matter within the Memorialization segment.
• Interest expense increased to $62.9 million in fiscal year 2025 from $50.5 million in fiscal year 2024, reflecting higher average interest rates.
• The company recorded an income tax provision of $40.7 million in fiscal year 2025, compared to a benefit of $10.0 million in fiscal year 2024, partly due to its pre-tax income position and charges related to foreign deferred tax assets.
• Net cash used in operating activities was $23.6 million in fiscal year 2025, a substantial decrease from the $79.3 million provided in fiscal year 2024.
• Customer delays impacted the timing of projects within the energy storage business, leading to invoicing delays.
• A goodwill write-down of $16.7 million was recorded in fiscal year 2024 related to the Surfaces and Engineering reporting unit (Olbrich GmbH business).
• Asset write-downs of $7.9 million were recognized within the Brand Solutions segment in fiscal year 2025.

Risks

• International sales and operations expose the company to significant risks, including currency exchange rate fluctuations, global political and economic instability, international terrorism, export controls, non-compliance with anti-bribery legislation (FCPA), changes in legal and regulatory requirements, policy changes by governments, changes in tax laws, quotas, tariffs, difficulties in intellectual property protection, restrictions on technology export/import, non-compliance with foreign data protection laws (GDPR), non-compliance with sustainability-related reporting (CSRD), inadvertent transfers of export-controlled information, transportation issues (piracy), competition from foreign businesses, and challenges managing a global workforce.
• Changes in foreign currency exchange rates could have an adverse effect on revenue, cash flows, and financial results.
• Interest rate fluctuations could increase financing costs and reduce the ability to obtain additional indebtedness or debt refinancing.
• Increased prices for raw materials or shortages could adversely affect results of operations and cash flows, with limited ability to immediately increase product prices.
• Changes to U.S. trade policy, including new or increased tariffs and changing import/export regulations, could have a material adverse effect on operating results and trigger retaliatory actions.
• The significant amount of goodwill and intangible assets on the balance sheet creates a risk of impairment, which could negatively impact consolidated results of operations and total assets.
• Changes in mortality and cremation rates could have a material adverse effect on cash flows and revenues, as increased life expectancy and growing cremation rates may adversely affect sales of traditional memorialization products.
• The company is subject to competitive pressures, including with respect to product demand and pricing, and faces increased competition from offshore manufactured products.
• The loss of any of the company's large customers, despite no single individually significant customer, could have a material adverse effect on cash flows and results of operations.
• Additional global supply chain risks and risks of interruption of requisite logistics and transportation services exist, including reliance on limited suppliers and vendors for certain components, materials, and services.
• Pandemics or similar outbreaks may cause unfavorable economic or market conditions, impacting demand patterns, access to capital, and disrupting global supply chains and manufacturing operations.
• Global conflicts, such as the war in Ukraine, may impact the company's business and markets through adverse macroeconomic conditions, disruptions to technology infrastructure (cyberattack), changes in international trade policies, supply chain disruptions, foreign currency fluctuations, and capital market volatility.
• Risks are associated with acquisitions, divestitures, and business combinations, including the ability to identify or successfully complete transactions, effectively integrate acquired businesses, or manage the remaining or combined business, and the potential for undisclosed liabilities.
• The investment in Propelis (40% ownership) may fail to perform as expected due to competition, global customer requirements, demand fluctuations, product concentration, and specific joint venture risks such as diverted managerial attention, transfer restrictions on equity interests, changes in the joint venture partner's ownership or management, failure of the partner to satisfy contractual obligations, conflicts of interest with the partner, and potential harm to the company's reputation from partner actions.
• Inability to adequately protect the company's intellectual property could materially and adversely affect business, financial condition, or results of operations.
• Intellectual property infringement assertions by third parties, including the ongoing lawsuits with Tesla, Inc., could result in significant costs, litigation, diversion of technical and management personnel, damages, redesigns, or unfavorable royalty/license agreements.
• The company is subject to environmental laws and regulations, as well as environmental remediation and compliance, which may lead to significant unforeseen expenses.
• The equity income reported from Propelis is on a three-month lag basis, impacting the quarterly and fiscal year timing of when Propelis' results and synergies are reflected in the company's financial statements.
• Reliance on third parties and their systems for a variety of services, including significant information technology services, poses a risk of business disruption if these third parties fail to provide adequate services.
• Failure to keep pace with technological changes, some of which are beyond the company's control, may prevent the company from maintaining its competitive position.
• Changing laws and regulations relating to privacy, information security, and data protection (e.g., GDPR, CCPA) could increase costs, and non-compliance could result in significant business disruptions, litigation, or enforcement actions.
• Future tax law changes and/or interpretation of existing tax laws may adversely affect the effective income tax rate and require adjustments to tax estimates.
• Operating in a regulated environment requires compliance with various domestic and foreign laws and regulations; non-compliance could subject the company to sanctions and materially adversely affect its business.
• Actions of activist shareholders could negatively affect the business by disrupting operations, being costly and time-consuming, diverting management attention, causing loss of business opportunities, making it difficult to attract and retain personnel, potentially causing defaults under credit facilities, harming reputation, or advocating for a breakup of the company.
• The market price for the company's common stock has experienced and is likely to continue to experience significant price and volume volatility, which may impair the ability to finance strategic transactions with stock and otherwise harm the business.
• Provisions of the company's charter documents or Pennsylvania law could discourage, delay, or prevent the company from being acquired, even if beneficial to shareholders, and could make it more difficult to change management.
• General economic conditions, including economic decline or other circumstances that result in reductions in customer spending, could negatively impact sales volume and revenues.
• Labor shortages, turnover, and labor cost increases could adversely affect the company's results of operations.
• Security breach incidents and breakdowns of information technologies, or failure to comply with laws governing data privacy and data protection, could disrupt operations, subject the company to legal claims, and impact financial results.

Future Outlook

Capital spending for fiscal year 2026 is estimated to be in the range of approximately $30 million to $40 million, which the company expects to fund through operating cash. The Board of Directors' comprehensive review of strategic alternatives for the entire portfolio of businesses is ongoing. The proposed sale of the Warehouse Automation business is expected to be completed in fiscal year 2026, subject to customary closing conditions. Further cost reduction actions are planned for fiscal year 2026. Sales growth in the Industrial Technologies segment is anticipated to be influenced by economic/industrial market conditions, new product development, electric vehicle (EV) and e-commerce trends, and the timing of work with the largest energy storage customer, which may be impacted by continuing disputes. Memorialization segment sales growth is expected to be influenced by North America death rates and the increasing trend toward cremation. The performance of the investment in Propelis will depend on global economic conditions, brand innovation, client marketing spending, government regulation, currency fluctuations, and the ability to achieve synergy benefits from the joint venture. The company has no near-term intention to utilize its At-The-Market (ATM) equity offering program.

Management Comments

• "The Company's culture of Inspired Possibilities empowers global teams to think creatively to inspire change that favorably impacts outcomes for the Company's customers, clients, and one another."
• "Matthews human resource strategies align with the business strategies to enable and optimize internal talent to achieve business and financial performance."
• "Matthews views diversity and inclusion (D&I) as a priority to be valued and promoted in every aspect of its business."
• "Matthews understands the highly competitive market for talent and believes that to attract and retain top talent, it must offer a comprehensive total rewards package."
• "Matthews believes that investing in its people leads to greater success."
• "The Company's future success depends upon tomorrows leaders."
• "Matthews is a constantly evolving multi-national company, leveraging new ways of working to improve its quality, service and delivery systems to better help customers and clients succeed."
• "The Company's leadership team is committed to integrating Environmental, Health, and Safety ('EHS') principles into the Company's business strategy and operations, as it is one of the Company's core values."
• "Management does not expect that the results of any of these ordinary course legal proceedings, as presently positioned, will have a material adverse effect on Matthews' financial condition, results of operations or cash flows."
• "The Company maintains the claims vaguely stated in the complaint are without merit and continues to vigorously defend itself against the allegations in confidential arbitration." (Regarding Tesla's June 2024 complaint)
• "The Company maintains the claims are without merit and intends to vigorously defend itself against the allegations in the confidential arbitration." (Regarding Tesla's February 2025 complaint)
• "In light of the substantial harm caused to the Company by Tesla's actions, the Company is now pursuing counterclaims against Tesla."
• "The Company denies fault or wrongdoing in the matter arising from this licensing dispute." (Regarding the $8.0 million settlement)
• "The Board is dedicated to driving long-term value creation, and the strategic alternatives process is a reflection of that commitment." (Regarding strategic review)
• "The Company has no near-term intention to utilize the ATM Program."

Industry Context

The Memorialization segment operates in an industry influenced by U.S. death rates and the increasing trend toward cremation, with the company serving both traditional burial and growing cremation markets. The Industrial Technologies segment's energy storage solutions business is benefiting from the demand for lithium-ion batteries in electric vehicles (EVs), with dry electrode technology positioned as a more cost-effective and sustainable production method. The Brand Solutions segment's strategic divestiture of the SGK Business and the formation of Propelis reflect a significant realignment within the global brand solutions market, with Propelis established as a leading global provider.

Comparison to Industry Standards

• The Memorialization segment and its three largest global competitors account for a substantial portion of the United States and European cremation equipment market, indicating a strong competitive position in this niche.
• The Industrial Technologies segment believes it offers one of the broadest lines of products for high-tech custom energy storage solutions, product identification, and warehouse automation applications, suggesting a competitive advantage in product breadth.

Management Changes

Corporate Governance

Legal Proceedings

• On June 14, 2024, Tesla, Inc. filed a complaint against the company alleging trade secret misappropriation under the Defend Trade Secrets Act (DTSA) and the California Uniform Trade Secrets Act (CUTSA), breach of contract, and unfair business practices related to dry battery electrode solutions. The U.S. District Court compelled this matter to confidential arbitration on October 7, 2024.
• On February 13, 2025, Tesla, Inc. filed an additional complaint against the company alleging claims related to correction of inventorship, breach of contract, promissory estoppel, and quasi-contract/restitution arising from and/or related to various U.S. patents, including U.S. Patent No. 12,136,727. This case was also compelled to confidential arbitration.
• On September 8, 2025, Tesla, Inc. initiated a new confidential arbitration demand alleging claims for breach of express warranty, declaratory relief, and breach of contract, seeking declaratory relief and actual damages, plus interest and costs.
• The company maintains that Tesla's claims are without merit, is vigorously defending itself against the allegations in confidential arbitration, and is pursuing counterclaims against Tesla.
• Legal costs related to the ongoing dispute with Tesla totaled $22.2 million in fiscal year 2025 and $12.4 million in fiscal year 2024.
• In October 2025, the company finalized a confidential settlement agreement resolving claims of alleged copyright infringement arising from a legacy licensing arrangement within the Memorialization segment. The settlement amount of $8.0 million was accrued and recognized as an administrative expense for the period ended September 30, 2025. The company denies fault or wrongdoing in this matter.

Related Party Transactions

• Following the divestiture of the SGK Business on May 1, 2025, the company holds a 40% ownership interest in Propelis Group, a newly-formed entity.
• The company provides certain administrative services to Propelis under a Transitional Services Agreement (TSA), including ERP system access, IT support, tax, treasury, accounting, and transactional processing.
• Administrative support fees of $4.1 million were recognized from Propelis in fiscal year 2025, included as a component of administrative expense.
• As of September 30, 2025, amounts due to Matthews from Propelis totaled $3.971 million, reflecting outstanding administrative fees and net transactional amounts.
• The company holds a $50.0 million preferred equity investment in Propelis, which accrues paid-in-kind interest at a rate of 10% per annum. $2.1 million of this interest income was recognized in fiscal year 2025.

Stakeholder Impact

• Shareholders are impacted by the net loss, declining sales, and negative operating cash flow, as well as the strategic portfolio review and ongoing legal disputes with Tesla, which introduce uncertainty and potential for stock price volatility. The stock repurchase program and ATM program could influence share value and dilution.
• Employees are affected by restructuring programs focused on cost reduction, which include severance and employee termination benefits. Changes in key management roles, such as the CFO retirement and new appointments, are also relevant. The company emphasizes diversity, inclusion, talent acquisition, total rewards, talent management, and succession planning.
• Customers in the energy storage business are experiencing project and invoicing delays. Customers of the divested SGK Business are now served by Propelis, in which Matthews holds a 40% interest.
• Suppliers face supply chain risks related to lead times, volume constraints, and increasing costs. The company's voluntary supply chain finance program offers certain suppliers the opportunity to sell receivables to financial institutions.
• Creditors are impacted by the company's debt levels, interest rate exposures, and compliance with debt covenants, particularly with the domestic credit facility and senior secured notes.

Next Steps

• Completion of the proposed sale of the Warehouse Automation business to Duravant LLC in fiscal year 2026, subject to customary closing conditions.
• Implementation of further cost reduction actions planned for fiscal year 2026.
• Continuation of the comprehensive review of strategic alternatives for the company's entire portfolio of businesses.
• Daniel E. Stopar will transition into the Chief Financial Officer and Treasurer role effective December 1, 2025.
• Shareholder approval for the Second Amended and Restated 2019 Director Fee Plan at the 2026 Annual Meeting of Shareholders.
• Ongoing confidential arbitration proceedings for the legal disputes with Tesla, Inc.

Key Dates

Recommendation

Matthews International is undergoing a significant strategic transformation, including major divestitures and a comprehensive portfolio review. While the divestiture of the SGK Business generated a substantial gain and the Memorialization segment showed improved EBITDA, the overall financial performance for FY2025 was weak, marked by a net loss, declining consolidated sales, and negative operating cash flow. The Industrial Technologies segment, a key growth area, experienced significant sales and EBITDA declines, compounded by customer delays and costly legal disputes with Tesla. The proposed sale of the Warehouse Automation business could provide capital, but the overall strategic direction and the resolution of legal challenges remain uncertain. Given the mixed financial results, ongoing strategic shifts, and significant legal and operational risks, a "Hold" recommendation is appropriate as investors await clearer signs of successful execution of the portfolio strategy and resolution of key disputes.

Keywords

Matthews International, MATW, 10-K, Annual Report, Memorialization, Industrial Technologies, Brand Solutions, Cremation, Caskets, Energy Storage, Electric Vehicles, EV, Product Identification, Warehouse Automation, Propelis Group, Divestiture, Acquisition, Tesla Lawsuit, Intellectual Property, Financial Performance, Adjusted EBITDA, Net Loss, Strategic Review, Capital Expenditures, Stock Repurchase, Corporate Governance, Risk Management, Supply Chain, Cybersecurity