Matthews International Fiscal Q3 2026 Earnings: Industrial Technologies Weighs on Profit

Matthews International (NASDAQ: MATW) reported fiscal Q3 2026 revenue of $246.0 million, down 29.6% year over year, while diluted GAAP EPS fell to a loss of $0.75 from earnings of $0.49 in the prior-year quarter. For the quarter ended June 30, 2026, adjusted EBITDA declined to $35.0 million as weakness in Industrial Technologies and pressure on Memorialization profitability outweighed lower corporate costs and the Propelis contribution.

Core financial results

The revenue comparison was significantly affected by portfolio changes, including the divestiture of SGK and the fiscal first-quarter sale of the warehouse automation business. However, the remaining operations also faced energy-storage project delays, lower memorialization volumes and rising input costs.

Gross margin increased by 0.9 percentage points, but selling and administrative expenses remained nearly flat at $99.1 million despite the smaller revenue base. The operating result also faced a difficult comparison with the prior-year quarter, which included a $57.1 million net divestiture gain, versus only $0.2 million in the latest quarter.

The gap between the GAAP loss and adjusted earnings reflected several excluded items. These included $15.3 million of strategic initiatives and other items, with $7.8 million of Tesla-related litigation costs and $6.7 million of exit and disposal charges included within that category.

Business and segment performance

Memorialization remained the largest business and recorded modest sales growth, primarily because of the Dodge Company acquisition. Industrial Technologies was the main source of operating pressure, while Brand Solutions revenue was no longer consolidated following the SGK transaction.

Memorialization

Sales increased about 2.1%, with the Dodge acquisition more than offsetting continued weakness in casket and cemetery memorial volumes. Management attributed the volume pressure to lower estimated U.S. casketed deaths. Higher input costs also exceeded the benefit from inflationary pricing, leaving segment adjusted EBITDA slightly below the prior-year level despite acquisition synergies.

Industrial Technologies

Industrial Technologies sales fell about 56.8%, partly because Matthews sold its warehouse automation business during fiscal Q1 2026. The remaining engineering operations were affected by energy-storage project delays and the continuing Tesla dispute, resulting in a $5.4 million adjusted EBITDA loss compared with a $9.0 million profit a year earlier.

Product Identification sales grew 5%, but that improvement was insufficient to offset the broader segment decline. Matthews also won a significant coating and converting order, although management said it had not yet contributed meaningfully to the quarter’s results.

The company began restructuring its European engineering operations. Matthews expects approximately $10 million of total restructuring costs, of which about $5 million affected fiscal Q3, and is targeting $10 million in annualized savings.

Portfolio changes lifted the adjusted margin, but Industrial Technologies weakened earnings

Adjusted EBITDA declined in absolute dollars, yet adjusted EBITDA margin increased from 12.8% to 14.2%. Portfolio and accounting changes are important when interpreting that divergence: Propelis sales are not included in consolidated revenue, while Matthews’ share of Propelis adjusted EBITDA contributed approximately $10.0 million to consolidated adjusted EBITDA.

Propelis is also reported on a one-quarter lag. Matthews’ fiscal Q3 results included its share of Propelis results for January through March 2026. Based on preliminary, unaudited estimates for the quarter ended June 30, Matthews said its 40% share of Propelis adjusted EBITDA would have been $12.7 million, compared with the roughly $10.0 million recognized in the reported quarter.

At the same time, Industrial Technologies moved from a segment profit to a loss, a negative adjusted EBITDA swing of roughly $14.5 million. That deterioration helps explain why the higher consolidated margin did not translate into higher adjusted earnings.

Cash flow and balance sheet

Matthews did not provide quarterly operating cash flow, but cash used in operating activities for the first nine months of fiscal 2026 increased to $69.5 million from $33.9 million a year earlier. Investing cash flow was positive because the company received $243.6 million of divestiture proceeds during the nine-month period.

The company also received $25 million in fiscal Q3 from Propelis’ redemption of part of its shareholders’ preferred equity interests and used the proceeds primarily to reduce debt. The main balance-sheet and cash-flow figures below are year-to-date or period-end measures rather than quarterly results.

Debt declined by approximately $12 million during the quarter and $144 million during fiscal 2026 through June 30. Although divestiture and Propelis proceeds supported deleveraging, the increased operating cash outflow remains an important counterpoint to the balance-sheet improvement.

Fiscal 2026 guidance

Matthews reduced its fiscal 2026 adjusted EBITDA outlook because of energy-storage delays, pressure on Memorialization volumes and costs, and slower-than-expected realization of Propelis synergies. Management estimated that the timing of Propelis synergies created a $5 million shortfall against its full-year forecast.

The updated outlook includes Matthews’ estimated 40% share of Propelis adjusted EBITDA. The numerical range for the previous outlook was not included in the supplied release.

Energy-storage delays are expected to continue through the rest of the fiscal year. Consequently, the timing of contributions from the new coating and converting order, execution of engineering cost reductions and the pace of Propelis synergy realization will influence whether Matthews reaches the revised range.

Risks investors need to watch

• Energy-storage delays: Continued project delays could keep Industrial Technologies revenue and adjusted EBITDA under pressure for the remainder of fiscal 2026.
• Memorialization volume and cost pressure: Lower casketed deaths and cemetery memorial demand, combined with input-cost inflation that pricing has only partially offset, could continue to constrain segment profitability.
• Restructuring execution: The engineering restructuring requires approximately $10 million of costs before the targeted $10 million of annual savings is fully realized.
• Tesla-related dispute costs: Quarterly litigation costs increased to $7.8 million from $5.8 million a year earlier, adding to the gap between GAAP and adjusted results.
• Cash conversion and Propelis timing: Nine-month operating cash use increased, while Propelis earnings are reported with a lag and its synergy benefits are taking longer than management previously expected.

Summary

Matthews International’s fiscal Q3 results reflected both major portfolio changes and weaker operating performance in its remaining businesses. The Dodge acquisition supported Memorialization sales, but volume and input-cost pressure limited profit, while Industrial Technologies moved to a loss amid divestitures, energy-storage delays and restructuring charges. Debt reduction and a higher adjusted EBITDA margin provided some balance, but weaker adjusted earnings, negative year-to-date operating cash flow and reduced fiscal 2026 guidance leave execution of engineering cost cuts and Propelis synergies as the main issues to monitor.