Matthews International Corp Q1 FY2022 Earnings Call

Greetings and welcome to Matthews International Corporation First Quarter Fiscal 2022 Financial Results Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this call is being recorded. I’d now like to turn the conference over to your host Steve Nicola, CFO. Please go ahead.

Thank you, Ahmed. Good morning and welcome to our call. I’m Steve Nicola, the company’s CFO and with me today is Joe Bartolacci, President and Chief Executive Officer. Before we start, I would like to remind you that our earnings release was posted last night on our website, www.matw.com, in the Investors section. The presentation for our call can also be accessed in the Investors section of the website. In addition, beginning this quarter the company is reporting its surfaces and engineered products businesses in the industrial technology segment. It was previously reported in the SGK brand solution segment. This new segment reporting was filed via Form 8-K with the SEC in December. Prior year period amounts have been adjusted for comparability. As a reminder, 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 periodic filings with the SEC. In addition, we will be discussing non-GAAP financial 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, please turn to Slide 4. To start the financial review today, here are some of the key highlights from the fiscal 2022 first quarter. First, our consolidated sales were $438.6 million for the current quarter, compared to $386.7 million a year ago, representing an increase of $51.9 million or 13.4%. Each of our business segments reported sales growth for the fiscal 2022 first quarter. Second, the company's Industrial Technology segment, which includes the energy solutions, warehouse automation and product identification businesses, reported sales of $74.3 million for the fiscal 2022 first quarter compared to $53.4 million last year, representing an increase of $20.9 million or almost 40%. Adjusted EBITDA for this segment more than doubled to $7.2 million compared to $3 million last year. These increases were mainly driven by continued growth in our energy solutions business and higher warehouse automation sales. Third, with respect to consolidated adjusted EBITDA, the benefit of higher consolidated sales was significantly mitigated by the unfavorable impacts of increased material costs, as well as increased labor and freight costs. Fourth, the company completed the termination and settlement of its principal U.S. defined benefit plan. This was a significant factor in the reported GAAP net loss of $0.62 for the quarter, but resulted in a reduction in the company's accrued pension liabilities of over $50 million from September 30, 2021. Fifth, the company reported an increase in adjusted earnings per share to $0.74 for the current quarter, compared to $0.68 for the same quarter a year ago. Next, the summary of our consolidated financial results for the quarter ended December 31, 2021 is as follows. As I noted, the company's consolidated sales were $438.6 million for the quarter ended December 31, 2021, compared to $386.7 million a year ago, representing an increase of $51.9 million or 13.4%. Each of our business segments reported higher sales. On a GAAP basis, the company reported a net loss of $19.8 million or $0.62 per share, compared to a net loss of $1.8 million or $0.06 per share for the same quarter last year. GAAP earnings for the current quarter included non-service pension costs of $31.1 million, which is mainly related to the settlement of the company's principal pension plan. In addition, the reported net loss on a GAAP basis for both years included the impact of intangible amortization expense, primarily from the acceleration of the amortization of certain intangible assets in the SGK brand solutions segment. Consolidated intangible amortization expense was $21.5 million or $0.51 per share for the fiscal 2022 first quarter, compared to $15.2 million or $0.36 per share a year ago. Both periods also included charges in connection with our cost reduction initiatives and COVID-19 related costs. On a non-GAAP adjusted basis, adjusted EBITDA, which represents net income before interest expense, income taxes, depreciation, amortization and other adjustments for the fiscal 2022 first quarter was $53.3 million, compared to $54.8 million last year. The benefit of the company's consolidated sales growth was offset for the quarter primarily by higher material costs and increased labor and freight costs. In addition, the current quarter was impacted by unfavorable sales mix in the SGK brand solutions segment. Although adjusted EBITDA was slightly lower, adjusted earnings per share increased to $0.74 for the current quarter compared to $0.68 last year. Lower interest expense and income taxes contributed to the increase in adjusted earnings per share from a year ago. Please see the reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share in our earnings release. Investment income for the quarter ended December 31, 2021 was $1 million compared to $1.1 million for the same quarter a year ago. Investment income primarily reflects the changes in the value of investments held in trust for certain of the company's benefit plans. Interest expense for the fiscal 2022 first quarter was $6.5 billion compared to $7.7 million a year ago. The decline reflected lower average debt levels and lower interest rates for the current year. Other income and deductions net for the quarter ended December 31, 2021, represented a reduction to pre-tax income of $31.7 million, compared to $1.7 million a year ago. The significant change primarily reflected an increase in non-service pension costs as a result of the settlement of the company's principal pension plan. Other income and deductions include the non-service portion of pension and post-retirement costs, as well as banking-related fees and the impact of currency revaluation gains and losses on foreign denominated cash and debt balances. The company's consolidated income taxes for the quarter ended December 31, 2021 were a benefit of $6.6 million compared to an expense of $4 million a year ago. Income taxes for the current quarter primarily reflected the benefit of the pre-tax consolidated loss. The prior year primarily reflected additional tax charges in connection with items discrete to the first quarter last year. Please turn to Slide five to begin a review of our segment results. Sales for the Industrial Technology segment were $74.3 million for the fiscal 2022 first quarter, compared to $53.4 million a year ago, representing an increase of $20.9 million or 39%. The growth resulted from higher sales for both the energy solutions and warehouse automation businesses. In addition, product identification sales improved for the quarter. Backlogs and incoming order rates for these businesses continued to be strong through the fiscal 2022 first quarter. Adjusted EBITDA for the Industrial Technology segment more than doubled to $7.2 million for the fiscal 2022 first quarter, compared with $3 million a year ago. The increase primarily reflected the impact of higher sales for the current quarter, which was partially offset by higher labor costs. Please turn to Slide six. Memorialization segment sales for the fiscal 2022 first quarter were $210.7 million, compared to $183.3 million a year ago, representing an increase of $27.4 million or 15%. The increase was primarily attributable to higher unit sales of caskets, cemetery memorial products and cremation equipment. Our unit sales for the current quarter primarily reflected COVID-related deaths. In addition, improved price realization contributed to the segment sales for the current quarter. The company also completed an acquisition of a small cemetery products business during the fiscal 2021 second quarter. Memorialization segment adjusted EBITDA for the fiscal 2022 first quarter was $43.4 million, compared to $44.1 million a year ago. The favorable effect of higher sales was offset by the significant unfavorable impacts of higher material costs, mainly steel, lumber and bronze compared to a year ago, as well as increased labor and freight costs. Please turn to Slide seven. Sales for the SGK brand solution segment were $153.5 million for the quarter ended December 31, 2021, compared to $150 million a year ago, representing an increase of 2.4%. The increase primarily reflected higher sales for the segment's core brand packaging business and an increase in retail-based sales. The segment's retail base sales for the quarter reflect continued recovery in these markets. As you will recall, the segment's retail-based businesses were significantly impacted by the pandemic. Changes in foreign currency rates had an unfavorable impact of $2.4 million on the segment's current quarter sales, compared with the same quarter last year. Fiscal 2022 first quarter adjusted EBITDA for the SGK brand solution segment was $15.4 million compared to $21.8 million a year ago. The decline primarily reflected the impact of an unfavorable change in sales mix from a year ago and higher material costs. The segment sales mix for the current quarter reflected a reduction in higher margin photography-related sales, which were offset by increased core brand packaging and merchandising sales. In addition, production and efficiencies related to remote work environments impacted operating margins for the quarter. Travel and entertainment costs also increased during the quarter reflecting some recovery in business travel. Please turn to Slide eight. Cash flow used in operating activities for the fiscal 2022 first quarter was $27.2 million compared to cash flow provided by operating activities of $35.3 million a year ago. The year-over-year change primarily reflected the company's pension contribution during the current quarter in connection with plant termination. In addition, the current quarter reflected an increase in performance-based compensation payments. Inventories were also higher than a year ago reflecting in part, the impact of recent commodity cost increases. Outstanding debt was $836.1 million at December 31, 2021, compared to $763.7 million at September 30, 2021. Net debt at December 31, 2021, was $765.1 million, compared to $714.5 million at September 30, 2021. The leverage ratio covenant in our domestic credit facility is based on net debt. The increase primarily reflected the impacts of the pension funding and working capital changes I just mentioned. Our leverage ratio was 3.4 at December 31, 2021. In addition, as a result of the termination related funding of our pension plan, the company's accrued pension liabilities declined $51 million during the current quarter from $85 million at September 30, 2021 to $34 million at December 31, 2021. This liability was $149.8 million at September 30, 2020. Approximately 31.6 million shares were outstanding at December 31, 2021. During the recent quarter, the company purchased approximately 63,000 shares under its share repurchase program. At December 31, 2021, the company had remaining authorization of approximately 2.6 million shares under the program. Finally, the Board yesterday declared a quarterly dividend of $0.22 per share on the company's common stock. The dividend is payable February 21, 2022, to stockholders of record February 7, 2022. This concludes the financial review and Joe will now comment on our company's operations.

Thank you, Steve. Good morning. We started off the year very well. Each of our segments delivered strong revenue growth during the quarter, which helped offset the inflationary pressures that we felt on the bottom line. I want to highlight the particularly strong performance in our newly cast Industrial Technology segment and our memorialization segment where the business has delivered double-digit top line growth. This was a record first quarter revenue performance for the company despite the many challenges of the current operating environment. During the quarter, we saw very good top-line and bottom-line performance in our newly cash industrials technology segment thanks to the continued strong performance of our warehouse automation business and the growth of our energy storage business. This segment grew top-line 39% and EBITDA more than doubled, reflecting the fast-growing markets that we serve. Remember, starting this quarter, we have included our energy storage and our surfaces business in this segment, prior periods have been adjusted to allow for comparability. Together with our product identification business, these businesses represent the fastest growing parts of our company. And we expect to begin to demonstrate that growth this year, as we work to deliver exceptionally high backlogs of over $200 million in the combined Industrial Technology segments, of which the backlog of our energy storage business represents over $100 million. In fact, we expect this segment to have revenues of well over $300 million in adjusted EBITDA margins of over 15%, which will help us mitigate the impact of inflationary pressures elsewhere in the company. It is important to note that this performance is without what we believe will be yet another leg to this growth story, our new product in the product identification business, which is expected to add revenues next calendar year. In our energy storage business, we continue to have great interest in our proprietary solution for dry cell lithium ion batteries. Although we only delivered $20 million of revenue during the quarter for our energy storage business, which was a significant increase from last year, we are still on track to deliver over $100 million for fiscal '22. In fact, during the quarter, our solution has proven its ability to produce dry lithium battery electrode material at high rates of speed, a critical step in the development of opportunity in this business. Also during the quarter, we continue to see strong demand in all the businesses that make up our memorialization segment driven by the impact of the pandemic. But also, we have previously warned that inflationary pressures depressed the profitability of our funeral home products business, which reported a decline in profitability despite higher revenues while exceptional performance in our cemetery products business helped this segment deliver relatively flat year-over-year EBITDA performance. Our backlog in our cemetery products and our environmental solutions business remains at historically high elevated levels and pricing actions to help address the commodity cost inflation in all of the memorialization businesses should help us achieve another strong year for this segment. In SGK, the team successfully replaced an anticipated decline in volume from a very profitable account, but COVID-related inefficiencies, European slowness and a revenue mix resulted in a challenging EBITDA performance. The business is expecting to deliver a solid year going forward as revenues from newly acquired accounts begin to ramp up and return to normal levels in the European markets contribute to the overall performance. All in all, we are very satisfied with the performance for the quarter and confident in our ability to continue to deliver solid results. During the quarter, we realized the termination of our principal U.S. defined benefit pension plan and distributed the funds to the participants, thus ending any further liability to the company. At one point not long ago, our outstanding pension liabilities were $150 million. In order to effectuate this final closure of the plan, we are required to make a $35 million contribution to the plan this quarter. Because of this contribution, our net debt increased by more than normal for the first quarter. However, we remain focused on reducing our debt over the balance of the year. As we look to the balance of the year, there is still a great deal of uncertainty. The ongoing impact of the pandemic has yet to be determined. What death rate we can anticipate for the balance of the year is unclear. Inflationary pressures do not appear to be subsiding. Our expectation is that retail traffic will continue to normalize, but we're uncertain of when and to what extent. The timing of several significant deliveries in our energy storage business are subject to customer readiness for delivery. All of these factors and more make predicting our performance for the balance of year difficult. Despite these challenges, however, our current estimates have improved thanks to our strong backlogs and pricing actions taken in our businesses. As a result, we believe that we can deliver at least $220 million of EBITDA on a full year basis. We also expect our free cash flow for the year to remain relatively consistent with prior years. Although our hope is that we will over deliver, we remain cautious at this time. Now let's open it up for questions.

Thank you. At this time, we will be conducting a question-and-answer session. The first question comes from Daniel Moore with CJS Securities.

To start with memorialization. I'm sure we'll talk a lot about the industrials as well. But what was the contribution of the tuck-in cemetery products acquisition, was that meaningful at all?

No, it was modest. It was not a significant contributor. It was a tuck-in not in California that added maybe $600,000, $700,000, $800,000 on a year-over-year basis on a full year.

Okay. And then maybe talk about pricing versus volume growth. Both for caskets or funeral home products as well as memorials on a year-over-year basis?

Well, without getting into great detail, Dan, let's put it this way. We've raised prices in all of our segments, the prices that we raised in our funeral home products, as of October 1st were insufficient to cover commodity costs, recent pricing actions taking effect here in February should help further mitigate that it's a large part of our upward guidance or upward estimation for the balance of the year. So suffice it to say that when it comes to the cemetery products, we've covered our commodity costs, recent actions in the funeral home products allow us to be assured that we got most of that back going forward.

Got it. It would be fair to say that it's more than 50:50 volume price or the other way around?

I think it’s a fair comment.

Okay, fine.

Volume is up as well. Yeah, volume is up as well as price.

Got it. And then, you mentioned backlogs remained strong. Obviously, it's only a sample size of a few weeks, but have death rates started to normalize or revert to the mean, since the end of the quarter, or do we expect volumes to remain pretty elevated in the memorial side for next quarter or so?

Yes. From that perspective, Dan, as you know, the business quite well, the funeral home products business is an at-need sale. So we are still seeing higher volumes than we would have anticipated early in our budgeting process that we believe will start to subside as at this point in time, we're still relatively elevated. But we expect based on all the published information that will start to see a decline in those volumes, beginning the latter part of March, if not into April at the latest. But that does not tell us what we think is going to happen with the cemetery, which typically occurs several months afterward. So much of what has occurred over the last 60 to 90 days has yet to be memorialized in a cemetery, particularly with the cold weather in the north. As we're seeing it right now, cemeteries are not setting markers or stones. So we expect that to continue well into the summer.

Perfect, okay. And then, one or two on energy storage and I'll turn it over but you mentioned the number what was the revenue contribution in the quarter? I missed it. I'm sorry.

Only $20 million, but we have over $100 million of backlog.

Exactly. Perfect. Okay. And then, can you update us on maybe talk about, or if not specificity orders, or you booked or dialogues that you're having with EV, electric vehicle OEMs beyond the first flagship customer, you kind of looking out beyond this year just trying to get a better sense of how you're gaining traction. Thank you.

Sure, Dan. I mean, the reality is we are in discussions with just about every major European auto manufacturer or parts manufacturer associated with that. They're at varying degrees of development, we hope or that we announced last quarter, I believe it was last or the one before that we landed Salesforce, which is a portion, that one we can speak openly about, that will hopefully be delivered over the course of the year. Recognize, however, that in all these cases, we're not in a sales function, we are the solution once they choose to go through a dry cell batteries decision. So the timing of some of these deliveries are dependent on facilities that have to be built yet. And it also has to be they're dependent on the formulations that they're going to use for their dry cell. So we are active, as to say the least, we're also active, quite frankly, on the fuel cell side, the hydrogen fuel cell side, there's a lot of activity on that side as well, that's beginning to ramp up and won't necessarily be meaningfully impactful this year. We expect that to be more meaningful next year.

Thank you. The next question is from Liam Burke with B. Riley Securities.

Joe, on the warehouse management software, there was a tremendous amount of backlog built up for COVID-related reasons and you texted and have access to the facilities. How much of the backlog now is related to that and how much of that is just order growth?

We are currently experiencing very high backlogs in relation to the size of our business. We have a full year ahead and haven't yet initiated the sales efforts. Typically, sales activity for this business picks up post-holiday season. As of now, we are just finishing up January. We will continue to see orders coming in, but our backlog reflects both an increase in sales and delays from previous deliveries.

Okay, great. And on memorialization products, during COVID, you had obviously minimal visitations which differed a lot of these sales. How much has the variance created a situation where you're seeing more deferrals? Or is that starting to normalize? Understanding that this quarter is seasonally low for the business?

It's difficult for us to provide a precise answer, but we can share that we don't believe the most recent Omicron spike from the last 60 to 90 days has been fully accounted for yet. Based on the timing, we expect this will impact the latter part of the year. We remain optimistic about opportunities beyond that, having gained market share in both the stone and memorial sectors. Throughout the crisis, we observed a delay in mausoleum construction investments, but that is picking up now. At this time, we are still projecting strong overall performance in the memorialization segment.

Thank you. The next question is from David Niewood with the Curator Fund.

At a recent investor conference presentation you made, I believe you said that you are working primarily on the energy storage side with Western OEMs manufacturers and non-Asians partly for IP protection reasons, as well as other things. I think you also indicated that you are well protected, and the only one with dry cell technology out there that if anyone else was doing a cylindrical dry cell, we believe it would be in violation of your patent portfolio. My understanding is that dry cell primary application is with 46 ab batteries. A couple of Asian manufacturers have announced that they are attempting to commercialize 46 ab. The question is, if they are in the spirit of assuming that they are using with the cell technology, where is their potential, and they may be in violation of your patents?

Thanks, Dave. I appreciate your patience as I provide some clarity. The term 46 ab refers to the size of the battery cell, specifically a 46 by 80-millimeter cell, regardless of whether it's a wet or dry cell. We do not manufacture the battery itself, but this size seems to be the target for many automakers. Currently, we don't believe any company is producing a dry cell electrode battery. We are confident in our position as a leader in that area. Regarding our intellectual property, we have submitted patent applications worldwide that are accessible to the public, primarily focused on the dry cell technology we have discussed. While these patents are being processed, we maintain that we have the freedom to operate. Importantly, we have been working in this sector longer than most others, with projects initiated years ago through our R&D efforts in Germany. This gives us a significant advantage. We will keep you updated on how the patent process unfolds and the eventual outcomes.

Thank you. The next question is from Chris McGinnis with Sidoti & Company.

Good morning. Thank you for taking the questions. A nice quarter. Good morning. Just a follow up on energy. You talked about the hydrogen fuel side. I thought that was a few years out. So can you just I guess explain the difference between the two and the timing. Do you think it sounds like hydrogen may be revenue producing next year? Is that correct?

Well, it's revenue producing at this point in time, will be at a much lower level than our battery. So we have about a million dollars of revenue that we're expecting this fiscal year, as we do development projects for a lot of OEMs. But it's a similar rotary processing technology that we have experience with that ends up in boosting the bipolar plate, which is the key component, one of the key components of the hydrogen fuel cell stack. We're working with a lot of the same OEMs that we would work with on the other side, all of them are exploring hydrogen as well as lithium as an alternative solution for green energy. As we understand it, and let me clarify, we are not the OEM, so I don't know what their intent is. But as we understand hydrogen will have a different application, maybe over the road trucking or local delivery trucks, versus a battery, which is more for the passenger side. But I'll give you that with a caveat and let you kind of explore beyond that.

Thank you. The next question comes from Scott Blumenthal with Emerald Advisers.

Hey, I want to kind of step back here, because there are a couple of things that you guys mentioned that. I was trying to do a few things at the same time. Joe, did you mention that we're not going to see meaningful revenues from the new identification new marking system? Until next year? Or am I mistaken?

That is correct. What we've done. Scott is, over the course of the year, we have had product in beta testing that has been very successful. And we are now taking, much like the lithium-ion battery business, we're taking it out of the laboratory and sending it to a silicon fab chip manufacturer to do this more professionally, to produce the kind of scale necessary to produce mass quantities of silicon chips. That is expected to take the better part of this fiscal and calendar year. So we expect to be in market with quantities. It doesn't mean we're not selling it today. We're getting very, very, very modest with just hand-built machines at this point.

Okay and the margins, Joe, on that, that you expect compared to the current generation of marketing systems, I suppose, though, they would be much better, right?

Well, there's two aspects to the product. So first off, obviously, we expect the proprietary nature of the solution to bring better margins on the equipment itself. But this is a little bit of the razor and a razor blade type of industry as many of you know. There is a proprietary ink delivery system that is part of the new product, which requires you to buy our ink, ink is a very profitable part of our business. So once we get to scale and get the volumes, the delivery of ink will drive the margins where we want it to be.

Okay, super. And can you kind of characterize or frame the market opportunity there for us?

We've previously discussed this publicly; the market is valued at around $1.6 billion to $1.7 billion, and we occupy a very small segment of it. Currently, our product is tailored for heavy industrial applications, particularly in the lumber, gypsum board, and construction-related manufacturing sectors. It is robust, operates efficiently, is difficult to replace, and is highly profitable for us. We also have a product that functions in the fast-moving consumer goods sector, which includes items like the bottoms of beer cans or food products moving rapidly along production lines. Although our product is competitive in quality, we lack the global service team needed to adequately address that market. Our team has approached that space with a more user-friendly self-maintenance product. Looking at the previously mentioned $1.6 billion to $1.7 billion market, roughly a third consists of products, another third of ink, and the remaining third is for repair and maintenance. We are targeting that third, which amounts to about $500 million to $600 million in revenue, through a disposable front-end printer designed to simplify maintenance for operators, eliminating the need for us to establish a global repair and maintenance team. We believe that our market share could grow significantly over time, but it will take a while to build credibility, especially without an extensive service team. However, once we gain traction, the potential could be substantial.

Great. That’s great color. Thank you. I appreciate that. So this is going to broaden the market for that product. And also enable you to service your equipment using fewer people.

There's one small piece, Scott that's left to take place and that'll happen in October. There's a portion of our plans that is still left to be liquidated. But the heavy lifting the main U.S. pension plan that you're referring to, we've already completed those settlement activities. We had offered employees the choice between lump sum and annuitizations; the lump sum payments have been made. And the annuitization purchases have already been made as well. So those are all completed. That was really what took the funding, if you will. We completed the funding for that in the first quarter. So where we sit today, with approximately $34 million in liabilities. The U.S. main plan that's already out of that number, there's one supplemental plan in the U.S. that will be settled in October of next year. And then, we will be left with one overseas plan that will be permanent, $10 million in accrued liability.

Yes, Scott. I believe that one of the most overlooked aspects of this entire COVID pandemic process is that, alongside the $150 million liability we removed from our accounts, we also had over $200 million in revolver. We've strengthened our balance sheet by $350 million during this period. This marks the conclusion of a significant liability burden that has been on our books for quite some time. It's an important achievement for us.

Many of us have noted Joe, and we really, really do appreciate all the work that you guys have done there. So maybe we can –

Our focus this year remains on delivering results. We finished the quarter with a net leverage ratio of 3.4, up from 3.1 at the end of September. We aim to reduce that closer to three by the end of this fiscal year. However, we believe that at these levels, we can be more flexible and active in our repurchase program this year.

Okay. That's fair enough, Steve. And I guess my last one here, if I might, you mentioned a little bit of a currency headwind, I believe during the quarter. And I'm wondering what your thoughts are for the year here. Do you expect it to turn around? Or how are you looking at that?

Right. Scott, in total for the company on revenues, it was about a $4 million headwind compared to a year ago. I think the outlook for the year it's hard to say you might have a better feel on currency movements. But keeping in mind that our principal currencies outside the U.S. dollar would be the Euro and the British pound. I really think with interest rate movements in the U.S. and how the economy reacts for the rest of the year is going to drive that so. I really couldn't say beyond that.

Thank you. The next question comes from Daniel Moore with CJS Securities.

Thank you, again. Just really housekeeping stuff. And maybe this is self-evident. But what's the quarterly run rate for pretax pension expense going forward? Is it next to nil? Still meaningful just in terms of the adjustments?

It should be next to nil, relatively speaking, Dan. It should be insignificant. Certainly less than a million dollars per quarter for the rest of the year.

Going forward, great. And same for amortization, there's a couple different numbers. And I think you mentioned $21.5 million. Is it sort of a good run rate? Or is there some one times in there with the good run rate for amortization going forward?

In the near term that's still going to be the run rate, although as we get closer to the end of the year, and in the next year, you should start to see that decline as we've fully amortized some of the accelerated amortization.

Thank you, ladies and gentlemen, we have reached the end of question-and-answer session. And I would like to turn the call back to Steve Nicola, CFO for closing remarks. Over to you, sir. Thank you.

Ahmed, thank you. And thank you to everyone for joining us today and your interest in Matthews. As a reminder, please visit our website for additional information about the company and our quarters, financial results. Enjoy the rest of your day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.