MATW - NASDAQ

Good day, everyone, and welcome to today's Matthews International Third Quarter Fiscal 2025 Financial Results. [Operator Instructions] Please note, this call may be recorded. [Operator Instructions] It is now my pleasure to turn the conference over to CFO, Steve Nicola. Please go ahead.

All right. Thank you, Stephanie, and good morning. I'm Steve Nicola, Chief Financial Officer of Matthews. And with me today is Joe Bartolacci, our company's President and Chief Executive Officer; and Dan Stopar, our Senior Vice President, Operations Controller and Head of Global Business Services. Before we start, I would like to remind you that our earnings release was posted on the company's website, www.matw.com, in the Investors section. The presentation for our call can also be accessed in the Investors section of the website under Presentations. Any forward-looking information -- 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 public filings with the SEC. In addition, we will be discussing non-GAAP financial information 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 I will turn the call over to Joe.

Thank you, Steve. Good morning, everyone, and thanks for joining us to discuss the financial results for the fiscal 2025 third quarter. We're pleased with our results this quarter, which saw initial benefits from our value creation plan that was implemented late last year, including a gain from the divestiture of SGK, now known as Propelis Group, of which we own 40%, consolidated savings from a cost reduction program initiated last year, lower corporate and nonoperating costs and improved EBITDA performance year-over-year by our Memorialization and our Industrial Technologies business segment. Consolidated sales were $349 million in the third quarter of fiscal 2025 compared to $428 million in the third quarter of fiscal '24. The lower revenue result was primarily attributable to the divestiture of SGK in May of this year. Thus, current results only include 1 full month of SGK, excluding adjusted EBITDA of the divested SGK business from both the current and prior year quarter results and a year-over-year increase of 37%. Steve will provide greater detail on Propelis, but let me say that the merger of SGS and SGK is moving along smoothly and as expected. As we detailed in our last earnings call, Propelis has come out of the gate projecting initial annual adjusted EBITDA of about $100 million and has just initiated the process of synergy capture. In fact, the management team expects to be at a run rate of synergies of $10 million by year-end and a $40 million run rate of synergies by the end of calendar '26. Moreover, the team has identified $60 million of total targeted synergies higher than originally expected. All in all, we expect this transaction to create significant value as we exit in the future. Early market feedback on the deal has been positive and confirmed by the addition of new business that neither of the 2 predecessor companies had before the merger. We'll continue to share progress on Propelis' performance with you each quarter. As I mentioned earlier, since the third quarter of last year and as demonstrated by the divestiture of SGK, in addition to an ongoing strategic alternatives review, we have implemented a value creation plan geared towards simplifying the company's corporate structure, reducing costs and expanding our work in higher growth and higher-margin businesses. Although we are seeing the early results of those efforts in our reduced corporate costs, there is more to come as our transition services agreement with Propelis is expected to occur by the end -- excuse me, although -- let me start that from the beginning. Although we are seeing the early results of these efforts in our reduced corporate costs, there is more to come as our transition service agreement with Propelis is expected to come to an end in the fiscal '26 calendar year. In addition, we expect to close on the sale of the remaining SGK German assets, which will further simplify our structure. These actions will further reduce our overall debt levels and help drive the continued growth of our Industrial Technologies business segment, anchored by the financial strength and consistency of our Memorialization segment. With respect to the strategic alternatives review, we're pleased with its progress, and I can say that several opportunities have been identified and presented to the Board for consideration. We expect to complete the process and announce our conclusions about the time earnings are released in November. We will provide updates as we proceed. Memorialization is the bedrock of our portfolio and maintains leading positions across all of its markets. This segment's financial stability enables continued and consistent investment in innovation across the portfolio. Memorialization reported a modest revenue increase and strong margin results in the third quarter of fiscal '25, driven by the Dodge acquisition, which closed in early May and the divestiture of our European cremation business last year. Inflationary pricing benefited the third quarter, offsetting a modest decline in volumes. Note that the volume declines primarily relating to our granite business continued to be largely due to the release of buildup in COVID-related backlog in fiscal 2024, leading to a negative comparison of about $3 million on a year-over-year basis. We are expecting the segment to return to a normal cadence in revenue and pricing for the remainder of the year. Regarding tariffs, we believe Memorialization may be the most susceptible. Although the team has done a great job of finding sourcing alternatives for impacted products, the tariffs are also impacting the cost of materials which are produced domestically as suppliers are price adjusting to reflect the higher competitive pricing resulting from tariffs. We have generally been able to pass along these higher costs and do not expect significant impact to our results for the remainder of the year. With respect to the Dodge acquisition, the deal closed in May, and we're excited about its long-term prospects and fit within our portfolio of Memorialization products. The addition of the #1 supplier of fluids and other products used by funeral directors was a logical extension of our portfolio, which comes along once in a generation and offers both cost synergies and revenue synergies as we extend the combined product offering to more clients. The transition has been smooth so far with synergy being quickly captured and our expectations for EBITDA improvement are high. It is already accretive, and we expect to eventually add around $12 million of annual EBITDA from this transaction as we integrate the business into our system. When you consider that we paid $57 million for the business, you can understand how accretive it will be. Our Industrial Technologies segment reported lower revenues in the third quarter, primarily due to engineering and the impact of our dispute with Tesla, which I'll discuss shortly. However, other business units in this segment were up year-over-year. We are quite pleased with the performance of our warehouse automation business as we saw a continuation of positive order trends for warehouse automation solutions driven by an improvement in market dynamics. Order rates and order size are picking up, including continuing orders from Lands' End and other leading retailers resulting in a significant increase in backlog. Order activity is typically high at this time of year as companies prepare for peak season in the October to December holiday period. However, we believe that we will enter fiscal '26 with very strong backlogs. Late last year, we spoke of signs of a recovery in the warehouse business. After a period of softness highlighted by supply chain recalibrations and lower capital investment, the recovery is being driven by renewed interest in AI-driven automation, predictive analytics and autonomous robots. Big box retailers are reinvesting in their warehouse infrastructure, and this is reflected in positive growth forecast for global e- commerce growth. Interactive Analytics projects U.S. e-commerce to grow by 10% in 2025 from $1.4 trillion in 2024 and further continue to grow to $2.5 trillion by 2030. Continued mobile adoption, supply chain innovations and AI-driven user experience are seen as the core growth levers. Moreover, recent changes in tax law allowing for accelerated depreciation of capital investments will further drive automation investments across the value chain. We are well positioned to take advantage of these opportunities. Investing in innovation has been an essential part of our value creation plan, and we're pleased to see the progress being made at our product identification business, the company's oldest business. We expect our new printhead chip product, [ Axiom ], to launch this fall, focusing on the U.S. and EMEA markets. [ Axiom ] incorporates a patented silicon-based print engine using disposable printhead technology and offers an approximately 30% lower total cost of ownership for the customer as well as other environmental benefits. We have identified a total addressable market of approximately $2 billion built on fast-moving consumer goods in which [ Axiom ] is ideally suited to participate. [ Axiom ] is perfectly placed to benefit from global implementation of the Sunrise 2027 initiative, a measure aimed at transitioning traditional 1D barcodes to more advanced 2D barcodes by the end of 2027. This shift is driven by the need to support supply chains that are becoming increasingly more complex and demanding and will enable higher levels of traceability, data capacity and improved customer engagement. The standard barcode has about 20 characters of information, whereas the 2D barcodes can hold thousands of characters, allowing manufacturers to include detailed product data such as expiration dates, batch numbers and other crucial and essential information used for traceability and compliance. [ Axion's ] competitive advantage is its ability to print regular barcodes and 2D barcodes at production speeds. An even greater advantage is that the existing open flow systems that are used today tend to result in ink drying and nozzles clogging, thereby requiring lines to be shut down for repair and maintenance. But with [ Axiom ] its printhead is disposable. Rather than shutting down lines, all that needs to be done is replacing the printhead in minutes. Additionally, the product has embedded technology that requires the use of Matthews ink, which offers an attractive margin opportunity for us. Both of these features of [ Axiom ] create high-margin recurring revenue streams as more product is rolled out. We'll continue to share updates on our progress as we approach the launch date. Let's now move on to engineering, the final piece of our Industrial Technologies business. Over the last 1.5 years, our expertise in leveraging our market-leading calendering process to produce dry battery electrodes or DBE, has been challenged by Tesla. As we have discussed before, we have built an extensive and highly valuable portfolio of intellectual property and know-how related to the DBE offering. In February, we received a positive ruling from an arbitrator that reaffirmed our proven history in the space and provided absolute clarity regarding our right to sell DBE solutions. We have established our right that is no longer subject to dispute. Tesla recently filed a motion in the U.S. District Court for the Northern District of California seeking to vacate the favorable ruling obtained by Matthews in the confidential arbitration. Here's what you should know. The recent filing is further evidence of the value of the technology and strength of the order that we received in February. The likelihood of a judge overturning the order of an arbitrator in a proceeding mandated by Tesla's own contract is highly unlikely. Why is Tesla looking to overturn the order? Because it clearly states that the core proprietary intellectual property is owned by Matthews and is rooted in its advanced rotary processing and calendaring technology. Matthews has been developing a next-generation rotary processing and calendaring equipment for over 2 decades. The company is widely recognized as a leader in calendaring technology. As early as 2007, Matthews made strategic investments in this technology to support its packaging business. Recognizing the unique capabilities of its calendaring systems, Matthews later continued to innovate and diversify its applications to explore alternative uses, including DBE. Our well-established reputation in advanced rotary processing and calendaring has attracted interest from global battery manufacturers, EV manufacturers, emerging solid-state battery players and technology leaders seeking innovative solutions for DBE. The continued stream of baseless lawsuits filed by Tesla only serves to underscore the strength and the value of Matthews' proprietary technology. Market interest in our solutions continue to grow as we have an increasing number of opportunities, highlighted by several in the United States -- U.S. -- in the U.S. driven by the localization of supply chains and the production of battery components. Our pipeline now consists of over $150 million in quotes with one recently converted to our first production line order for a leading player in solid-state battery production. We are also -- we also are working on a significant order for a U.S. customer for a battery separator coating line, a significant part of our overall energy business. The coating line operates at up to 2x the speed of competitive lines, further increasing productivity in the highly competitive battery space. We recognize the fact that others are trying to enter the DBE calendering market, but Matthews possesses both the leading technology and the fastest lines, and we own patents on some of the most important parts of the technology that facilitates productivity. We will continue to focus on innovation and maintaining our competitive advantage in this important market. As for our balance sheet, our debt position decreased during the quarter as we applied proceeds from the SGK transaction to our revolver. We expect our debt position to decrease further by 2025. As we look to our full year results, when we consider our 40% interest in Propelis, we expect our adjusted EBITDA guidance to remain unchanged and to be at least $190 million. Again, note that we will have lost 60% of the remaining 5 months of SGK earnings. Now I'll turn it over to Steve for a discussion on the quarter's financial results.

Thank you, Joe. Before starting the financial review, let's discuss the financial reporting with respect to SGK. As you're aware, the divestiture of SGK closed on May 1, 2025, and as such, our consolidated financial information reflects the financial results of the SGK business through the closing date. As part of this transaction, the company received a 40% ownership interest in the newly formed entity, Propelis Group. Please note that as a result of the integration process of Propelis and transition to its own stand-alone reporting systems, our 40% portion of the financial results of Propelis will be reported on a 1-quarter lag. As a result, except as otherwise noted, the consolidated financial information presented in the earnings release yesterday and discussed today does not include our 40% interest in the financial results of Propelis for the 2 months ended June 30, 2025. Similarly, our quarterly report on Form 10-Q will not reflect the results of Propelis. Now let's begin the financial review with Slide 7. For the fiscal 2025 third quarter, the company reported net income of $15.4 million or $0.49 per share compared to net income of $1.8 million or $0.06 per share a year ago. The increase primarily reflected a gain on the divestiture of the SGK business, which was partially offset by higher income taxes and interest expense. The increase in income tax expense primarily reflected the impact of favorable tax benefits discrete to last year that did not repeat in the current year. Consolidated sales for the fiscal 2025 third quarter were $349 million compared to $428 million a year ago. The decrease primarily reflected the divestiture of SGK on May 1, 2025. The consolidated sales impact of the SGK divestiture was $80.2 million for the current quarter. Sales for the Industrial Technologies segment were lower for the quarter, offset partially by higher sales for the Memorialization segment. SGK also reported sales growth for the current quarter prior to its divestiture. Consolidated adjusted EBITDA for the fiscal 2025 third quarter was $44.6 million compared to $44.7 million a year ago. Despite the divestiture of SGK, consolidated adjusted EBITDA remained relatively steady year-over-year as a result of increases in the Industrial Technologies and Memorialization segment and lower corporate and other nonoperating costs. On a non-GAAP adjusted basis, net income attributable to the company for the current quarter was $9.2 million or $0.28 per share compared to $17.3 million or $0.56 per share last year. The decline primarily reflected the impact of higher interest expense and income taxes for the current quarter as adjusted EBITDA was relatively consistent. With respect to Propelis, based on preliminary financial projections that they provided to us, their current estimate of adjusted EBITDA for May and June 2025 was $16.8 million. Please note that these projections are unaudited and subject to review and, as a result, may change. Our 40% portion of this amount would be $6.7 million. Accordingly, with the addition of our 40% interest in Propelis, the company's pro forma consolidated adjusted EBITDA for the fiscal 2025 third quarter would be $51.3 million compared to $44.7 million a year ago, representing an increase of 14.8% (sic) [ 14.6% ]. Please see the reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share provided in our earnings release. Please move to Slide 8 to review our segment results. Sales for the Memorialization segment for the fiscal 2025 third quarter were $203.7 million compared to $202.7 million for the same quarter a year ago. Acquisitions, primarily The Dodge Company, contributed sales of approximately $6 million to the current quarter, which were offset partially by the disposition of the European cremation equipment business. Sales volumes for cemetery memorials and caskets declined for the quarter compared to last year, primarily resulting from lower U.S. casketed deaths, offset partially by inflationary price realization and higher mausoleum sales. Additionally, granite memorial sales a year ago had the favorable impact from working down backlog that accumulated during the pandemic. Cremation equipment sales also declined from a year ago. Memorialization segment adjusted EBITDA for the current quarter was $42.8 million compared to $38.7 million for the same quarter last year. The increase primarily resulted from the benefits of cost savings initiatives and price realization, offset partially by the impact of lower sales volumes and higher material costs. Acquisitions and the disposition of the unprofitable European cremation equipment business also contributed to the increase in segment's adjusted EBITDA. Please move to Slide 9. Sales for the Industrial Technologies segment for the fiscal 2025 third quarter were $87.9 million compared to $91.7 million a year ago. The decline mainly resulted from lower sales for the segment's engineering business, offset partially by higher sales for the warehouse automation business. Lower engineering sales reflected declines for both the energy and coating and converting businesses. Order rates for warehouse automation improved during the quarter, reflecting continued recovery in this market. Sales for the Product Identification business were relatively unchanged compared to the same quarter a year ago. In addition, the shutdown of the R+S Automotive business, which was part of the OLBRICH acquisition in 2022, contributed to the segment's year-over-year sales decline. Changes in foreign currency rates had a favorable impact of $2.9 million on the segment's current quarter sales compared to a year ago. Adjusted EBITDA for the Industrial Technologies segment for the current quarter was $9 million compared to $4.2 million for the same quarter a year ago. The increase primarily reflected the benefits from the segment's cost reduction actions, which were initiated in our fiscal 2024 fourth quarter. Additionally, the segment's adjusted EBITDA benefited from higher warehouse automation sales. Please move to Slide 10. Sales for the Brand Solutions segment were $57.7 million for the quarter ended June 30, 2025, compared to $133.4 million a year ago. The decrease resulted from the divestiture of the SGK business, which excluded the European packaging business on May 1, 2025. The consolidated sales impact of the SGK divestiture was $80.2 million for the current quarter. Prior to the divestiture, sales were higher than a year ago, principally reflecting a combination of organic growth and favorable currency impacts. Adjusted EBITDA for the SGK Brand Solutions segment was $5 million for the current quarter compared to $16.1 million a year ago. Excluding the impact of the divestiture, adjusted EBITDA was relatively consistent with last year. Please move to Slide 11. Cash flow used in operating activities for the fiscal 2025 third quarter was $15.2 million compared to cash provided by operating activities of $13.5 million a year ago. Costs in connection with the SGK transaction and our restructuring actions were significant factors in the change from a year ago. Additionally, legal costs and working capital impacts from the ongoing dispute with Tesla unfavorably impacted operating cash flow. Year-to-date, cash used in operating activities was $33.9 million for the current year compared with cash provided by operating activities of $43.3 million last year. Outstanding debt was $702 million at June 30, 2025, representing a reduction of $120 million during the current quarter. The reduction reflected net proceeds from the SGK divestiture, offset partially by the acquisition of The Dodge Company, settlement of currency hedges in connection with SGK-related assets and transaction-related costs. Based on our current operating cash flow projections and the potential sale of our European packaging business, we expect further debt reduction in the fiscal 2025 fourth quarter. For the fiscal 2025 third quarter, the company purchased approximately 386,000 shares under its stock repurchase program at an average cost of $19.96 per share. Year-to-date repurchases totaled approximately 562,000 shares. As I referenced earlier, we initiated cost reduction programs in the fourth quarter last year that spanned several of our business units and corporate functions. We initially projected annual consolidated savings from these programs to be up to $50 million. We are currently on track to exceed this projection. The most significant portions of the savings are targeted from our engineering and tooling operations in Europe and our general and administrative costs. As I noted earlier, we have begun to realize these savings as indicated through the improved adjusted EBITDA margins for our Industrial Technologies segment and lower corporate and other nonoperating costs. Current quarter adjusted EBITDA margin for the Industrial Technologies segment was 10.3% compared to 4.6% a year ago, and our corporate and other nonoperating costs declined 13.6%. Lastly, based on our results through June 30, 2025, and our fourth quarter projections, we are maintaining our previous earnings guidance of adjusted EBITDA of at least $190 million for fiscal 2025, which includes our estimated 40% share of Propelis adjusted EBITDA from May 1, 2025, through September 30, 2025. Please note that this projection maintains our original guidance as provided in November 2024, adjusted only for the SGK divestiture and 40% interest in Propelis. Finally, the Board declared last week a quarterly dividend of $0.25 per share on the company's common stock. The dividend is payable August 25, 2025 to stockholders of record August 11, 2025. This concludes the financial review, and we will now open the call to any questions. Stephanie?

[Operator Instructions] And our first question will come from Dan Moore with CJS Securities.

It's Pete Lucas for Dan. Starting with the Dodge Company, I think you had said sales of $6 million and a goal of $12 million EBITDA. What was the EBITDA contribution this quarter? And what are you looking for in terms of sales and EBITDA in Q4?

Okay, Peter. So with respect to the Dodge Company acquisition, so for this quarter, the EBITDA contribution was approximately $1 million on the $6 million sales number. If you recall, when we announced the acquisition, we had talked about the current run rate for the Dodge Company being in the $6 million range. So it was pretty much consistent with that estimate. And right now, similar run rate into the fourth quarter.

Helpful. And then on the industrial side, performed well. Revenue is still down a bit, but closer to flat year-over-year. What was energy storage-related revenue for the quarter? And what was it in fiscal Q3 last year? Same question for warehouse automation. Really just trying to see where did you see declines? And what are the key areas where you can offset those declines with growth?

So Peter, yes, so without providing the numbers, our sales in the energy business and the total engineering business were down from a year ago. And as I mentioned earlier, it's related to the ongoing issues that we've had that Joe discussed before as well as what we talked about in the press release. So -- but those reductions were mitigated by nice improvement in our -- partially mitigated, I should say, by nice improvements in our warehouse automation business.

Our next question will come from Colin Rusch with Oppenheimer.

The new printhead business and the warehouse automation business. It seems like both are really focused on velocity of goods through warehouses and production facilities. I just want to understand how much synergy you guys see over the next, call it, 3 to 5 years.

Colin, hold on just a second. We just -- I don't think we caught the early part of that call -- early part of that question.

Yes. Can we -- just want to hear what sort of synergies you guys are seeing between the new printhead business and the warehouse automation business. It seems like both are focused on improved velocity and accuracy through both warehouses and manufacturing. I just want to understand how much you guys see those 2 supporting each other over the next 3 to 5 years or so.

Okay. Joe, are you connected?

There I am. I thought I understood the question. And so let me kind of phrase it this way. At the end of the day, when you walk into an automated warehouse, aside from the fact that robotics will become more and more a part of an autonomous warehouse, product has still moved and will continue to be moved through conveyors for a long period of time. Those conveyors read barcodes as they move that along the process. So we think the connection between the warehouse -- automated warehouses and our new printhead where we currently don't operate in warehouses today is significant. So it's a great question, and we look forward to talking more about that as we start to roll it out.

And then the second question is really around potential incremental acquisitions. Obviously, you guys have a long history of tuck-ins that are pretty effective. But given kind of the early days of automation and the push towards faster delivery times and e-commerce still being relatively nascent despite the concept being around for a fair amount of time, there is a lot of technology that's been developed in kind of early stage. I'm just curious about how you guys are approaching some augmentation for that automation business and opportunities for you guys to accelerate some of the growth there?

Another good question. So one of the things that we're really focused on, obviously, we're laser-focused on getting our debt positions reduced. So that will be our primary focus. However, there are other ways to participate in the start-up situations. And one of the most particular ones that we're interested in is embedding our software into driving the automated warehouse and the autonomous robots that are associated with that. Last quarter, we announced a partnership with the Teradyne folks embedding our software into managing the robots. We have several other start-up kind of situations like that, where our software is being embedded into the hardware to be able to drive that. So although we may not be looking necessarily for any significant investment in acquisitions in these start-up spaces, we are playing in a different way because at the end of the day, software drives a robot.

We'll take our next question from Liam Burke with B. Riley Securities.

Joe, obviously, Tesla is still very anxious to -- the battery -- dry battery electrode is still an important part of their overall strategy. But are you sensing any change in urgency to develop this rival DBE platform to the existing battery processing?

We are seeing, obviously, there are participants around the world that are trying to develop solutions and no one has yet to develop a competitive solution as of yet. So right now, I would say there is a drive by many in the industry to reduce their costs. There are improvements in the wet process that are going on as well. Ultimately, we believe, and I think some of the largest players believe that dry is the next stage of further cost reductions. So I think although the market has slowed, I would say, for EV and demand, the desire to continue to lower the cost hasn't changed, Liam. So we think this is still an opportunity for years to come.

Super. And I'm sure I heard this right, but you said you did land a production size systems order on the DBE process.

We landed a smaller one for a solid-state player. Yes, we have. And we also are in the midst of proving out our coating line system, which is another piece of equipment that is highly specialized into what's called battery separator coatings that goes between the anode and cathodes. Our machine operates at twice the speed of current competitors. So as we demonstrate that in the marketplace, we think more and more will come our way.

Okay. And then just very quickly, on the legacy product identification business, is it just a quarterly lag? Or is there anything else going on there?

We had a pretty good quarter in product identification. I wouldn't say that there was anything significant there. We're ramping up as we speak with the launch of our [ Axiom ] product. So we'll have some costs associated with that as we move into next quarter. But product identification continues to move forward. And I would say that we've had some challenges, frankly, as tariffs have forced us to source elsewhere as well as some supplier issues that have slowed us down with the launch of other solutions that we put out in the marketplace. But I think that's just a temporary little glitch that we move forward. The product identification business is well positioned to have a pretty strong year.

We'll take our next question from Justin Bergner with Gabelli Funds.

Nice quarter. I had a few clarification questions. To start, has the rotogravure sale closed?

It has not, Justin. We expect that to close before September 30. We have -- that is in the works as we speak. That should generate a little over $30 million of net cash and closer to $40-some million of consideration.

Okay. And what's the delta between the net cash and the consideration?

There are some long-term liabilities that they will assume like pensions, and we're going to have to carry a bit of a note on one of the pieces of the business we're selling of about $5 million.

All right. And then the European packaging sale that's contemplated, what are the metric -- can you provide any metrics around how large that business is?

Steve, can you give us that one?

Yes, Justin, that's about a $50 million, $60 million annual revenue run rate. And today, that EBITDA is relatively -- the last 12 months has been relatively breakeven operation.

Okay. That's helpful. But I assume you're still hoping to net something positive there.

Well, that is the business we're selling, Justin, just so you know. I mean the European packaging business is the rotogravure business.

Okay. Got you. Got you. I was just confused.

I want to make sure I can tell by your question, you had a little confusion there.

Okay. That's helpful. And then just on the debt bridge, what were the -- could you just provide any indication? I see the $228 million sale proceeds. Just what was the leakage on the transaction costs and, I guess, had derivative settlements?

Sure. So yes, let me walk through that. So the $228 million is primarily driven by cash that was embedded in subsidiaries, call it, trapped cash embedded in subsidiaries that went with the business, in addition, by the way, to some pension obligations that were assumed by the business. So that's the reason -- the primary reason for the number of $228 million versus the $250 million. The currency hedge amount is in the $35 million to $40 million range. And then the Dodge Company acquisition price was close to $60 million.

Okay. And then there was a small delta for transaction costs.

Yes, there are. And then -- yes, there are. And that's ultimately what gets you to the $120 million of debt reduction -- gross debt reduction for the quarter.

Okay. That's very helpful. Just to clarify and make sure. So when you reiterate your $190 million of adjusted EBITDA, that includes not the lagged Propelis, but your estimated number for these 2 months for the quarter just finished and then for the September quarter for your equity income portion?

That is correct.

Okay. Got you. And then just bigger picture. With respect to Tesla, has there been anything new in the legal front in the last couple of months? Or what the action we were referring to was in the spring?

No, no. I mean it was this spring, they did file 2 additional suits, one seeking to overturn the ruling that we received, Justin, which is quite interesting since the contract that they provided to us required arbitration. They just don't like the outcome. So that is one that they filed for those of you that are following that. And secondly, they're looking to try to reverse a patent that we have. Again, a very, very, very long shot effort, but it gives further evidence of the value of what we have.

Okay. But those initiatives were not in the last couple of weeks. Those were kind of...

No, no, no. Yes, yes.

Okay. Got you. And then just a bigger picture, the $150 million of interest in your energy storage business, what type of time frame could these convert around? And are you still delivering some backlog to Tesla for your energy storage business as we speak?

We're delivering some, but not a lot. For the most part, that has slowed. Their demand is slowed and they have slowed with that. With regard to the backlog, the order that we received for the solid-state manufacturer, we would expect that to be starting to realize here in the coming weeks, months at the most. We have a fairly significant order we're working on here in North America for the battery coating line. That is closer to $50 million, and that is looking to somewhere in the next 60 to 90 days at most. We're improving now at this point in time.

Next 60 to 90 days when you'd recognize it as an order?

No, and we will have received the order. Right now, that order is -- we are still in the testing phases. The processes for these as many of these companies that we're dealing with haven't produced anything yet. So this one in particular has a fairly significant support by the U.S. government. So they have the funding and they're proving out their processes. We are a critical part of that process. And as they test our equipment and test our solution, that's when we expect to have that order.

This does conclude our Q&A session today. I'd like to now turn the conference over to Steve Nicola for closing remarks.

Thank you, Stephanie, and thanks to everyone on the call, and we look forward to our fourth quarter earnings release and conference call in November 2025. Thank you again, and have a great day.