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Presentation

Operator: Hello, and welcome, everyone, joining today’s Matthews International Second Quarter Fiscal 2026 Financial Results.[Operator Instructions] Please note, this call is being recorded. [Operator Instructions] It is now my pleasure to turn the meeting over to Daniel Stopar, Chief Financial Officer and Treasurer. Please go ahead.

Daniel Stopar: Good morning. I’m Dan Stopar , Chief Financial Officer of Matthews. And with me today is Joe Bartolacci , our company’s President and Chief Executive Officer. Before we start, I’d like to remind you that our earnings release was posted on the Investors section of the company’s website, www.matw.com last night. The presentation for our call can also be accessed in the Investors section of the website under Presentations. 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 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.

Joseph Bartolacci: Good morning, and thank you for joining us to discuss Matthews fiscal 2026 second quarter results. On our last earnings call, we said that we were focused on execution, and we did just that in the second quarter. The redemption of our high-cost notes is complete. Our balance sheet is significantly improved. Interest expense is down materially. And for the first time in several years, we are entering the second half of our fiscal year with greater clarity and flexibility in our outlook. Our Memorialization business continues to set the pace, delivering its fourth consecutive quarter of year-over-year EBITDA growth. And while our Industrial Technologies segment remains challenged, we are actively working to convert a substantial order pipeline that has grown since last quarter.

Let’s start with our balance sheet. In January, we completed the early redemption of our $300 million of senior secured notes. This was not simply a refinancing exercise. This was a significant structural repair of a balance sheet that now looks fundamentally different than it did just 18 months ago. Our total long-term debt is now $579 million, down from $822 million 1 year ago, a reduction of over $240 million. Net debt stands at approximately $543 million today. And the interest expense savings from retiring those high-cost notes are now flowing through, reducing annual interest expense by approximately $10 million and materially improving our cash profile dollar for dollar. The debt extinguishment charge of $16.3 million recorded in Q2 included noncash items of $3.4 million and is a onetime cost and should be read for exactly what it is, the price of materially improving our cost of capital and a trade that we are very comfortable with.

Turning to [ Propelis ]. Our 40% equity interest continues to represent what we believe is one of the most compelling unrecognized value drivers in our portfolio. The Propelis team is making great progress on their SAP migration, the single most important operational milestone that will unlock the next layer of significant synergies. As we shared last quarter, this migration is expected to unlock over $25 million of the more than $60 million in total identified synergies. The Propelis team has successfully stood up their own instance of SAP during the quarter, and we will begin the migration of SGS locations onto SAP over the next 6 to 9 months. We expect to begin to see the results of these actions in our fourth quarter. Also, as further evidence of the performance of Propelis, we expect to receive a partial redemption of our preferred interest in the coming quarter.

Propelis is continuing to perform well above the $100 million EBITDA run rate that was assumed when we structured the transaction. As they move through 2026 and execute on their synergies, their EBITDA run rate is expected to be around $130 million going into 2027. We continue to expect an exit from this investment within the next 12 to 18 months. Every quarter that Propelis continues to grow EBITDA and capture synergies, increases the value we expect to realize upon exit. With regard to our second quarter results, total revenues were $259 million compared to $428 million a year ago. As we have consistently communicated, year-over-year revenue comparisons will continue to reflect the deliberate portfolio reshaping we executed in fiscal 2025 and early fiscal ’26.

The divestitures of SGK, warehouse automation and [ Sourcing ] account for the majority of the reduction. Adjusted EBITDA for the fiscal 2026 second quarter was $45 million compared to $51 million in the prior year second quarter. A solid result when you consider that the prior year second quarter included a full quarter of SGK results, while this quarter contains only our 40% interest in Propelis . Stripping out the businesses we have deliberately exited, the continuing portfolio is performing as we projected, Memorialization delivering, the balance sheet improving and Industrial Technologies remaining the variable we are actively working to improve. That is what we laid out at the start of this fiscal year. Dan will walk you through our cash flow in detail, but I want to briefly note that our first half operating cash outflow reflects a cluster of discrete items, a legacy settlement payment, transaction-related fees from our recent divestitures and annual recurring payments concentrated in our first quarter that do not represent the underlying cash generation capacity of our continuing businesses.

We expect both Q3 and Q4 to generate positive operating cash flow. Turning to our businesses. The Memorialization business continues to be the engine that drives this company. Our Cornerstone segment reported sales of $215 million for the second quarter, an almost 5% increase over the prior year and adjusted EBITDA of $49 million, up 8% year-over-year. For the first half of fiscal 2026, sales grew to $419 million and adjusted EBITDA grew to $88 million. This segment continues to perform well. The Dodge acquisition continues to contribute meaningfully, adding approximately $10 million in sales per quarter and is ahead of our EBITDA targets. Our team has done an excellent job integrating Dodge, and we are now realizing the cost and commercial synergies we expected when the deal was first identified.

After accounting for asset monetization and working capital actions, we expect the adjusted purchase price of Dodge to be under $50 million with EBITDA contributions exceeding $12 million. This will stand as another highly accretive acquisition for our shareholders. We are also seeing continued strength in mausoleum construction orders through our Gibraltar Mausoleum business, which not only generates good margins directly, but pulls through demand for bronze letterering, bases and other memorialization products. Pricing realization remains solid in the business, and we continue to benefit from productivity improvements across the segment. We believe there are more M&A opportunities in the memorialization space that look like Dodge, highly accretive, strategic, defensible market positions.

Our relationships in this industry are deep and long-standing, and we are positioned well to move when the time is right. With regard to the tariff environment and its impact on our businesses, the situation remains fluid, as you are aware, and we will continue to manage this proactively as we have over the past several years. Moving on to Industrial Technologies. Revenue were $43 million for the quarter compared to $81 million a year ago. The year-over-year decline reflects the divestitures of the warehouse automation and tooling businesses completed in 2025. What remains is a focused technology-driven portfolio of high-value product identification and engineered solutions, and we continue to see significant opportunities in both businesses.

Let me start with the product Identification. We can report that we shipped our first production units to paying customers, several of whom were beta customers that saw the tremendous value of the technology. As noted last quarter, we had stopped deliveries as we corrected certain minor issues noted during beta testing, but now those issues have been resolved. The commercial response to Acxiom remains strong. The value propositions that we hope to deliver are proving true. Higher quality marks using significantly less solvent while reducing the cost of maintenance are driving strong interest in our new product. As we noted last quarter, we have expanded our total addressable market estimate to about $3 billion as we have validated interest from customers currently using high-quality but more expensive solutions.

We continue to actively pursue and engage in strategic partnership discussions, including white label opportunities with leading industry participants to accelerate adoption and market reach. These opportunities will speed up adoption and give us access to markets that we would not develop for a while. We hope to have news to share on these discussions before the fiscal ’26 year-end. With that said, let me reiterate that Action will not be a material contributor to the top line this year given last quarter’s delays, but we expect to see a more meaningful contribution from the product line next year. Moving now to our Engineering and Energy Solutions business. The second quarter was again challenging as expected. However, let me walk you through our pipeline.

We were recently awarded a $25 million order for converting line to be delivered to the United States. Together with $75 million of orders that we continue to confidently work on, we expect a material change in this business next year. In addition to those orders, we are working on multiple partnership agreements that utilize our highly proprietary DBE technology. We hope to announce those partnerships for the end of our fiscal year as well. Included in those partnerships are discussions with global ultracapacitor manufacturers looking to move their production to DVE technology. Ultracapacitors, an essential element of energy delivery to the data storage industry are yet another energy storage solution that will benefit from DBE. On the DBE front, we received an important legal development in the second quarter.

On February 13, an arbitrator issued an interim decision that favorably affirmed our ownership of and rights in our DBE technology and denied Tesla’s request for broad injunctive relief. Tesla’s attempt to prevent us from selling our own proprietary technology was rejected again. The very narrow injunction on certain components has had no material impact on our technology as we already have alternative components. This is a meaningful win for our IP position and for the long-term value of our Energy Solutions business. Practically speaking, the ruling removes a key overhang that we believe has caused several sophisticated [ counterparties ] to delay deepening their engagement with us. Moreover, this ruling meaningfully mitigates any material liability.

Our near-term expectations from the DBE market remain measured, but the long-term thesis is intact and is actually strengthening. Many industry participants continue to affirm that DBE is a critical enabling technology for next-generation chemistries, including solid state. We expect to take additional cost reduction actions within the engineering business in the second half to protect cash while we wait for the market to absorb our pipeline. With regard to our full year outlook, we set guidance of at least $180 million in adjusted EBITDA for fiscal 2026, inclusive of our 40% interest in Propelis. Achieving the full year target requires a stronger second half, driven primarily by Memorialization continuing its current trajectory, Industrial Technologies converting its pipeline and Propelis continuous operational execution.

We continue to believe this is achievable. Memorialization is operating an annualized run rate well above $175 million in adjusted EBITDA on its own. Propelis’ contribution provides meaningful incremental EBITDA in our Brand Solutions segment and the recent win in engineering gives us confidence in our engineering forecast, but several things may impact that forecast. The pace and timing of engineering orders, the outcome of current tariff discussions at the federal level, the timing of synergies at Propelis us and the economic impact of geopolitical challenges, all can have an impact on our full year results. With that said, we are working hard on things that we can control to deliver those results. The pipeline is real. The synergies are clearly identified and tariffs can come and go.

With these factors in mind, we are reaffirming our full year adjusted EBITDA guidance of $180 million. Finally, our strategic alternative review continues. As I’ve noted above, we have multiple potential partnerships and arrangements currently in discussion. The Board is actively engaged and our focus remains on delivering on the full value of our intellectual property, particularly in Energy Solutions and AI through partnerships, licensing or other structures that do not require us to sell our businesses at a discount to their intrinsic value. Now I’ll turn it over to Dan for a deeper dive on our financial performance.

Daniel Stopar: Thank you, Joe. Before starting the financial review, I want to give a reminder on the financial reporting with respect to the SGK business. As you are aware, the divestiture of this business closed on May 1, 2025. The fiscal 2025 consolidated financial information presented in this release reflects the financial results of the SGK business through the closing date. As a result of the integration process of Propelis and transition to its stand-alone reporting systems, our 40% portion of the financial results of Propelis is reported on a 1-quarter lag. Consequently, for the 3 months ended March 31, 2026, the company’s portion of earnings or losses for its equity method investment in Propelis includes the months from October 2025 through December 2025.

And similarly, for the 6 months ended March 31, 2026, the company’s portion of the earnings or losses for its equity method investment in Propelis includes the months from July 2025 through December 2025. Now let’s begin the financial review with Slide 7. For the fiscal 2026 second quarter, the company reported a net loss of $21.8 million or $0.69 per share compared to a net loss of $8.9 million or $0.29 per share a year ago. The change primarily reflected a loss recorded this year on the redemption of $300 million of senior secured notes, higher strategic initiative costs and lower operating performance in the Industrial Technologies segment, which was partially offset by lower acquisition and divestiture costs, reduced net interest and other deductions and higher income tax benefits.

Consolidated sales for fiscal 2026 second quarter were $259 million compared to $428 million a year ago. The decrease primarily reflected the divestitures of the SGK business on May 1, 2025, the European packaging and tooling businesses on December 1, 2025, and the warehouse automation business on December 31, 2025. The consolidated sales impact of these divestitures was approximately $166 million for the current quarter and was partially offset by an $11 million contribution from the acquisition of the Dodge Company. Sales for the Industrial Technologies and Brand Solutions segments were lower for the quarter, offset partially by higher sales for the Memorialization segment. Consolidated adjusted EBITDA for the fiscal 2026 second quarter was $44.7 million compared to $51.4 million a year ago.

The decline reflected lower operating performance by the Engineering business within the Industrial Technologies segment. In addition, our 40% share of Propelis’ adjusted EBITDA included in our results for the quarter was lower than the amount of adjusted EBITDA that we reported for SGK Brand Solutions segment last year. The Memorialization segment reported higher adjusted EBITDA for the quarter, while corporate and other nonoperating costs were lower in the current year. On a non-GAAP adjusted basis, net income attributable to the company for the current quarter was $11.6 million or $0.37 per share compared to $10.5 million or $0.34 per share last year. The increase primarily reflected the impact of lower interest expense and higher other nonoperating income, which more than offset lower operating profits.

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 second quarter of fiscal 2026 were $215.3 million compared to $205.6 million for the same quarter a year ago. The Dodge acquisition contributed sales of approximately $11 million to the quarter. Sales volumes for caskets and cemetery memorials declined in the quarter due to lower estimated U.S. casketed death rates. Sales of cremation equipment and mausoleums were also lower in the current quarter. These volume declines were partially offset by the impact of inflationary price increases. Memorialization segment adjusted EBITDA for the current quarter was $48.8 million compared to $45 million for the same quarter last year.

The increase was primarily contributed by the Dodge acquisition. Benefits from inflationary price realization and cost savings initiatives were partially offset by the impact of lower sales volume, combined with higher labor and material costs. Please move to Slide 9. Sales for the Industrial Technologies segment for the second quarter of fiscal 2026 were $43.4 million compared to $80.8 million a year ago. The decrease primarily reflected the divestiture of the segment’s tooling business on December 1, 2025, and warehouse automation business on December 31, 2025. The segment’s engineering business also reported a decline in sales compared to last year, which was offset partially by higher sales for the Product Identification business. Changes in foreign currency rates had a favorable impact of $3.1 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 a loss of $3.3 million compared to a profit of $6 million for the same quarter a year ago. The decrease primarily resulted from the impact of the warehouse automation divestiture and lower engineering sales, offset partially by the segment’s cost reduction actions in its engineering business and impact of lower compensation expense. Please move to Slide 10. With the divestiture of the European packaging operations on December 1, 2025, combined with the divestiture of the SGK business on May 1, 2025, the Brand Solutions segment did not have reportable revenue for the quarter ended March 31, 2026. And a year ago, the divested entities reported sales of $141.2 million.

Adjusted EBITDA for the Brand Solutions segment was $9.6 million for the current quarter compared to $15.6 million a year ago. The current quarter mainly reflects the company’s 40% interest in Propelis. To reiterate our earlier comments about Propelis, our 40% portion of the financial results of Propelis is reported on a 1-quarter lag. As a result, the consolidated financial information for the quarter ended March 31, 2026, includes our 40% interest in the financial results of Propelis for the months of October through December of 2025. Please move to Slide 11. Cash flow used in operating activities for the 6 months ended March 31, 2026, was $67.4 million compared to $18.7 million a year ago. During the period, the company made significant disbursements in connection with divestitures, including income taxes, transaction fees and repayments of securitized receivables.

Expenditures for litigation and proxy defense also consumed significant cash in the period. Additionally, our first half of the fiscal year is typically slower than the second half, generally reflecting a net operating cash outflow due primarily to seasonally lower earnings and the payment of year-end bonus accruals and other annual payment items. Outstanding debt at March 31, 2026, was $579 million and net debt, which represents debt less cash, was $543 million. The net debt decreased by $135 million since the end of fiscal 2025, driven by the receipt of $243 million of cash proceeds from the divestitures of the warehouse automation business and the European packaging and tooling businesses during the first quarter. These cash inflows were partially offset by cash used in operations and the payment of fees to redeem the $300 million senior secured notes.

During the second quarter of fiscal 2026, the company purchased 22,953 shares under its stock repurchase program at an average cost of $26.33 per share. These repurchases were solely related to the withholding tax obligations for vested equity compensation. And finally, the Board declared this week a quarterly dividend of $0.255 per share on the company’s common stock. The dividend is payable on May 25, 2026, to stockholders of record at May 11, 2026. This concludes the financial review, and we will now open the call for any questions.

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Operator: [Operator Instructions] I will take our first question from Daniel Moore with CJS Securities.

Dan Moore: Let’s start with memorialization. — outlook, modest sales growth for the remainder of the year. I think Dodge has maybe half a quarter left. So just kind of looking at the — your expectations for organic growth looking out beyond the next quarter or so with the revised mix, including Dodge. And then from an inorganic perspective, are you seeing more inbound inquiries from competitors or other players in that arena since the acquisition?

Joseph Bartolacci: So let me kind of parse that question out, Dan. You have a couple of questions in there. First off, with regard to our forecast looking for the balance of the year, I would tell our volume to be stable to modestly down. If you listen to some of our customers’ earnings calls, you will recognize that Cascade has had a pretty low period this past quarter. We performed better than that because of some things that we’ve done internally, both the addition of Dodge and pricing and frankly, some better execution in other markets that we serve. As we move forward through the balance of the year, we are in the midst of doing some cross-selling activities trying to get both Dodge customers to become our customers on the Cascade and Bronze side and our customers become Dodge customers as well. That — those efforts are baked into our forecast looking forward. Hopefully, they will be successful, but that’s part of the synergy expectations we’re going again.

Dan Moore: Very helpful. And on the M&A front, just wondering if you’re seeing more inbounds. I know Dodge is sort of a new platform.

Joseph Bartolacci: That’s what I didn’t understand your question.

Dan Moore: Okay. I apologize…

Joseph Bartolacci: All right. Yes. I mean, obviously, we are always in the market, and there’s always a few things that are floating around. I wouldn’t say there’s a lot of inbounds, but there are opportunities out there. We’ll pick timing based on when it’s right for us as well as when others are ready to sell. There still are small opportunities like that. As I said in my portion of the call, I mean these are highly accretive over a wonderful base that we have. So we expect to be able to pull those off. I just can’t pick the timing of them all the time.

Dan Moore: Understood. Propelis, it sounds like just maybe a little bit more under the hood. Are we at the front end of the IT and SAP implementation? Is that sort of just talk about progress and when we’ll have a better sense for execution.

Joseph Bartolacci: No, no problem. I would tell you that — I mean we are at the middle. And the biggest part of that middle was standing up their own instance of SAP. So as all of the SGK team has separated from our — we’re still supporting, but they’ve separated onto their own instance of SAP. That is a massive lift, and that is the key to bringing on the other system, the other parts of the company, in particular, SGS. One thing I would stress, and this is — I know some of the team may be on the call, so I don’t want to kind of make it sound too simple. The big lift was getting them off on their own. We’ve already implemented all of these changes that are necessary to make SAP adaptable to a brand-related business like SGK when we bought SGK.

So it’s not a novel ERP implementation. Yes, there are some flows that are going to be different. Yes, there are some key strokes are going to be different. But at the end of the day, SGS is moving on to a platform that is already fully baked and ready to go for a brand-related system. So we’re very confident on their ability to execute going forward. So at this point in time, they will start that migration in about 90 days, and they will go location by location like we did in 2014 successfully. I would hope that would go even easier than it did for us early on because we will populate — the SGK team will populate the SGS team with people that know how the systems already work for their business.

Dan Moore: No, that’s really helpful color. One more, and I’ll jump back in the queue. Just in terms of the announcement in February regarding the arbitration with Tesla. Just what are the next steps, Tesla’s next moves? Obviously, that’s a conjecture. But just — and more importantly, are there examples or details regarding engagement with new potential customers since that ruling in February?

Joseph Bartolacci: So look, I’m not in the minds of our friends in California and nor do I want to be. But I can tell you, it’s given a lot of clarity, both to us and to the customers that we’ve been trying to work with for a while. Those efforts will continue. And I will tell you, they have opened more doors in the last 60 days or so. We have expanded our geographies to include Japan. We’ve gone deeper with our European potential customers and partners over there. And we’ve had some U.S.-based companies reach out to us that have not been very specific in the past. This clarity that comes out of this ruling has been the hindrance to us for a long, long, long time. I can’t tell you what’s next. I can tell you that we are emboldened by it.

Operator: Our next question comes from Colin Rusch with Oppenheimer.

Colin Rusch: Could you talk about the breadth and depth of the supercapacitor, ultracapacitor customers on this? Obviously, the need for voltage buffering at the data center is enormous. And just curious about how quickly that opportunity could come and how many folks might participate in it.

Joseph Bartolacci: We have the 3 largest producers of ultracapacitors at our doorstep today. As Colin, you’re the one person on the phone that actually knows this. This is how we got into DBE in 2015. We converted some activated carbon for Maxwell using our technology back in about 2015. And so we are well, well, well down the path of being able to do this. When we talk about partnerships, there are multiple forms of partnership with the 3 largest producers of ultracapacitors that we’re dealing with, both in terms of joint investment to produce the electrode used for an ultracapacitor as well as to provide the electrode to them. We have a piece of equipment in Germany right now that is being commissioned as we speak. You saw the beginnings of that, I believe, Colin, a few months or years ago.

That piece of production level equipment is ready here shortly. and we are lining them up to be able to produce test results at production rates of speed, something we did not have the capacity to do before. So the opportunity in the ultracapacitor side is significant, and it’s something we’ve already done, don’t need to kind of learn too much from it.

Colin Rusch: Excellent. And then we’re seeing a lot of activity around reshoring of supply chains, particularly as we look at the drone market or to scale and some of the requirements from the U.S. military to have fully integrated supply chains in North America to support military demand. I’m just curious about how active conversations are for you guys around the potential to support some of the battery manufacturing that’s going to have to happen in the U.S. to support a lot of those applications.

Joseph Bartolacci: You couldn’t have teed it up better for me, Colin. The fact of the matter is we’re operating in several different forms with respect to that. You’ve heard us speak about a relatively large order for North America battery separators. That order, we expect — that’s one of the big orders we expect here over the course of the next 3 months, 4 months or so. That is going specifically into the United States for that purpose of bringing it onshore. We’re having significant discussions with solid-state manufacturers who particularly use — have already used our equipment to produce the batteries necessary for solid state, which is a military application. But the important thing in all this is it’s not limited to our battery business.

It’s not limited only to energy. We’ve talked about our — and I don’t want to get too far ahead of my skis here, but we’ve talked about our 3D printing capabilities in our Memorialization segment. That business produces 3D printed molds at highly rapid speeds, have great application to the military when it comes to spare parts and to other CA-related products that are used by the military today. We think we have some legs in front of us that we can run with on a couple of fronts in our industry, not just the battery side.

Operator: [Operator Instructions] We will move next with Justin Bergner with Gabelli Funds.

Justin Bergner: Nice quarter, particularly on the Morialization side.

Daniel Stopar: Thanks Justin , good morning.

Justin Bergner: I had a few questions, just some clarifying. So I think you said, Dan, that you got $11 million of revenue from Dodge, but you lost $176 million from the divestitures. Did I have those numbers correct?

Daniel Stopar: $166 million from the divestitures, yes.

Justin Bergner: Okay. And then the Propelis JV, you said it’s already doing $100 million plus EBITDA run rate, but the 40% figures of $9.5 million and $9.9 million are slightly below that. So is that just seasonality being a little bit weaker first half versus the second half?

Daniel Stopar: Yes, Justin, that’s exactly right. Their slowest quarter is typically the fourth calendar quarter. And so that would be the quarter that we would have reported in this fiscal quarter for Matthews.

Justin Bergner: Got you. All right. That makes sense. And then the 9.9% is the estimate for the current quarter, which I guess kind of aligns on an annualized basis, gross up —

Daniel Stopar: Correct…

Justin Bergner: to $100 million. Okay. Got you. On memorialization, did it actually perform better than you expected in the quarter or about in line? And is there any element of price cost timing from the inflation in your average cost method of inventory that might have temporarily boosted EBITDA in the March quarter at the expense of future quarters?

Joseph Bartolacci: I would tell you, Justin, that the quarter actually performed better at an execution level, worse at a revenue level. If you listen to one of our customers yesterday report, they reported a 4.5% decline in casketed deaths. We are well below that. Our volumes and Memorial — and our volumes in the casket business are well below that number. So we’ve overperformed that level, but we were not anticipating that. Largely that had to do with an early flu season. We had strong results in our November and December period that we did not carry forward. So volumes were modestly lower than we would have expected. Price is consistent with what we had expected and — but execution was even better.

Justin Bergner: Okay. And what is — when you say execution was better, just help me understand some of the KPIs or…

Joseph Bartolacci: I mean I would tell you, yes, I mean, it’s hard to kind of get into that level detail, be glad to take it with you. But essentially, in the factories, they’re running hot, let’s put it that way. They’re running well. Our yields, our consistencies really are performing at levels that we are admirable, and that helped this quarter tremendously. There are some things that are going on that are somewhat out of control. You’ve heard about tariffs coming and going and things that are kind of difficult for us to kind of anticipate and deal with. Those things flow through our forecast today as if they would be implemented. So we’re cautious looking forward on that part of the business for the things we don’t control. The things we do control, we’re pretty — we have it under our belt.

Justin Bergner: Okay. So you’re actually factoring in some incremental headwind for the rest of the year on the tariff side for realization?

Joseph Bartolacci: Modest, yes. Yes, yes.

Justin Bergner: And is that — that’s new or that’s tied to the Section 232 change?

Joseph Bartolacci: I mean let’s put it this way. I mean we don’t want to get into that specifically. We’ve implemented some expectation on 232. But at the end of the day, whether that gets worse or gets better, it’s something we don’t control. There’s an expectation in our forecast for some impact of that.

Justin Bergner: And that expectation is a little bit more of a headwind than maybe you thought a quarter ago entering perhaps the first quarter Okay. Got you. Just to make sure I understand the cash costs that are mostly onetime. So you have the debt redemption, you have the transactions, you have the legal and proxy costs. Are there any other major buckets of cash costs? And are you paying a material amount for this ongoing strategic review? Or is that more conditional upon stuff that might materialize from that strategic review?

Daniel Stopar: Yes. Justin, the items that hit in the quarter were payments on — kind of pursuant to the closure of the warehouse sale. If you remember, we received $225 million right at the end of last quarter. We closed that deal on the 31st. We had tax payments this quarter. We had deal fees that had to be paid. We also had to settle out on securitized receivables.

Justin Bergner: Okay. What are securitized receivables as of now? Or I mean, I assume we’ll be in the queue, but if you’re able to share it now.

Daniel Stopar: Yes, we’re about $55 million.

Justin Bergner: Okay. And then ongoing cash costs associated with this ongoing strategic review? Or are they more conditional cash costs based on?

Joseph Bartolacci: No, there’s no ongoing costs associated with that. I mean that’s mostly done internal. To the extent we need external advice, it’s going to be around legal more than anything else. I mean, where there’s no — these are things we’re handling ourselves for the most part.

Justin Bergner: Okay and thank you, for taking all my questions guys.

Daniel Stopar: Thank you, Justin.

Operator: [Operator Instructions] And we show no further questions in queue at this time. This will conclude our Q&A session as well as our conference call. Thank you for your participation, and you may disconnect at any time.

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