Mativ (MATV) 8 Aug 242024 Q2 Earnings call transcript

Welcome to Mativ Second Quarter 2024 Earnings Conference Call.

On the call today from Mavis are Julie Schertell, Chief Executive Officer; Greg Weitzel, Chief Financial Officer; and Chris Kuepper, Director, Investor Relations.

Today's call is being recorded and will be available for replay later this afternoon. [Operator Instructions]

It is now my pleasure to turn the call over to Mr. Kuepper. Chris begin. may you Sir,

morning, everyone, Mativ joining for you and Quarter XXXX thank Second for Earnings us Good Call.

results include Before our Form we included statements. these call comments filings, reasons our and shown our you remind materially in Actual comments XX-Q. forward-looking detail for begin, I'd XX-K in annual on like today's report quarterly to Form may report from differ SEC in that including conference on

of are financial appendix to relate these to discussed and Unless to period Reconciliations this and financial Some are are of the metric prior financial operational release. measures call closest in non-GAAP continuing measures measures earnings GAAP stated operations. the otherwise, year the comparisons measures. during included the

website The earnings release issued yesterday our ir.mativ.com. at afternoon on is available

With Julie. the that, to call over turn I'll

everyone, Thanks, thank Chris. joining you our morning, and Good call. for

of pleased adjusted report generated second quarter strong year-over-year. of I'm volume being and up up previous EBITDA XX% quarter improvement EBITDA million, QX showed We the that well as XX% from consecutive $XX to growth. the which was results as adjusted

points margin basis up XXX XXX and adjusted EBITDA points Additionally, basis was sequentially year-over-year.

in as came came as input between and selling improvements ahead costs strong due expected. of price a Results to that than in spread earlier operational well expectations

points our margin driver segment $XX basis biggest and improvement While over both segments year-over-year. performed well, quarter, of this EBITDA XXX SAS over delivering was the million incremental of

adjusted ability our spread. EBITDA cost selling On a to versus net was quarter's favorable and primary consolidated a price performance this the team's of maintain pricing basis, commercial driver discipline their input

years, impact inflation to our of extraordinary of challenges an driving the inflation. X pricing recent commercial past material excellent Throughout period done the most supply the job and of team offset has over

factor cost in historically success some experienced input be While primary input our teams. been net positive we performance on selling a for has and price key versus and to metric QX, maintaining continues spread costs a deflation

and last continue with year minimize to pricing to decisions. implemented ensure leakage value our we new We tools also drive

XX% sales which mainly most up to quarter most therefore, growth. this and than we volume is in QX, almost year the segment, up recovery more our last presented opportunity were greater where pressure this year. also consolidated Sequentially, the due felt SAS gains were volume X% which, pronounced in after being Volume

Across and and highest both release with up segments, the our growth volume were categories X%. up up filtration, year-over-year X%; liners, tapes XX%; labels,

know instability volume there While is to building that number with market. be improving, them cautious inventory of of In we the our general headwinds. the to continue discussions about remain customers, a due

modest with cost of tempered. improvement, seen demand priority of leads is to and top ours: remains have it This contraction another consistent management. the aggressive we PMI While the global continuing metric

transform Our our making focused to these variable we're teams of relentless a seeing entity. into and are more pursuit Mativ flexible on operational in We've in and results our agile more performance. their costs cost

the These QX we are in this with of been the expected Additionally, savings million organization we and actions restructured have seeing executed, benefits. $XX year.

ago to optimized In time $XX years our today majority manufacturing of commitment. the XX plants XX manufacturing manufacturing from these efforts, at merger the the we've addition to synergy plants of implemented our and X million footprint original

functions We've markets, responsive to commercial and making align and structured us customer customers to teams our and our more centric. operational

harmonized and for systems decision-making. our faster integrated we've And our technology better,

levels a and increase. have continued customer satisfaction As our operational result, to efficiency

have our We've continuing examples. improved that Let quality always stop of evidenced We've $XX and increased in driven year-over-year manufacturing this efficiencies with done by us inventory known customers operating and grow costs at high but the for by invest levels performance. been to time, by Year-to-date, by reducing the products, quality same our levels and over we improved XX%, me we've our our quality doesn't give you service a already to few and as from X%. million improved performance in QX. while over

our value. for that are supply flexible purpose-built chain provide ideal quick Our and changeovers a customers assets

these As as from the our is as you and marketplace. that can in well means see team in execution examples, focused our plants on

a activities. demand-generation minutes So spend updating you let on few me our

nicely improvement mentioned while past earlier, volume is and grow I X in in slowdown stabilize us the destocking to opportunity to year we the marketplace. expected As sequential prior providing also QX, significant has after XXXX. over expect grown the and And for ample quarters demand execute versus significant versus

we with and a the XX% largest filtration health and flexible customer co-development This long-term you in chain QX, products. by in our improvement give examples. supply of customers. continuous more increase Let care is volume agreements and new our me potential some with to finalized of film, by quality, few categories than In the driven reliable

we Secondly, new customers' launch products to that performance and our footprint. environment continued improve

automotive launched for technology solutions tape alignment customer This filtration and companies ICE wire also water our new provide quarter, platforms. high-efficiency we've a largest and the filtration to their product of a water global in largest new commitment one with EV from earned

Lastly, netting our new we in as automotive recently new also investments provide technology for as business. Filtration tape our to well a business, approved capacity

Together, up these to up expected investments start XXXX. will the in enable and are to $XX additional million late revenue of

in capacity online past, the in incremental Mexico. exceeded and our assets mentioned these has as of volume Mexico forecast row. recent the a in our in come Filtration expected, our the have investments business release the second liner month In in in for Both and I've Germany business

detailed of provide turn I'll Greg for it to closing a our I'll then and thoughts some over financial forward. discussion that, performance on path more our With

to well $XXX volume for and selling prior almost year X% and as input cost the with deflation Julie, were million Consolidated due prices the to down X% net Thanks, as up currency. good morning, in sales compared $XXX million unfavorable everyone. quarter

a saw sequential basis. While sales year-over-year on X% almost were flat on step-up a roughly we basis,

volumes costs SG&A which expense. combined was input EBITDA million offset improved mix continuing XX% of the up a price was higher and sequentially. favorable million unfavorable million Adjusted and selling million, up year by impact, cost, and lower operations XX% manufacturing partially and more $X $XX.X from net $XX of prior in contribution from $XX.X $X distribution than Favorable million versus represented

basis points Adjusted increased year-over-year. sequentially margin of EBITDA basis XXX points and XXX

Turning to input Net million category by & The versus of our up sequentially decrease XXXX. lower $XXX selling our lower offset volumes were down volumes due and in Materials Filtration QX each X% of reflected partially in segments. our X% films year-over-year higher sales filtration of segment to and our advanced in categories. deflation, price cost Advanced

filtration, million $XX sequentially. input expenses up higher volumes partially and XXX versus of effects net cost price selling of sequentially and SG&A year-over-year, down films basis up reflecting EBITDA in manufacturing EBITDA higher by FAM improved adjusted and lower XX% adjusted and FAM our points offset advanced of the X% was efficiencies. XX.X% in margin positive volumes was

Sustainable our cost volumes increase Adhesive The partially net by deflation. across & In X% of reflected sales Solutions offset $XXX and were of all selling up year-over-year million from last to higher our end segment, X% sequentially. up lower year markets, input due prices

partially basis higher performance selling million, unfavorable strong and XX% mix SAS price by XXX The versus was versus SG&A cost increased generated $XX performance, volumes and sequentially. points reflected prior year-over-year XX% performance Adjusted EBITDA up up which costs, the favorable offset year sequentially. and adjusted of net margin improved year-over-year points distribution XXX and higher expense. input EBITDA basis

in corporate expense Turning corporate line to of a prior was year. the few $XX adjusted million Unallocated with EBITDA of around items. the

$XX be unallocated full the expect we reminder, to a for As around million year.

of Interest floating primarily to in revolver higher XX% coupled debt XXXX. interest from increased rates due the our $XX with year, expense million rate a prior higher balance on

between XX% XXXX of account, matures into hedges at fixed our approximately XXXX. taking and a and rate When staggered debt a basis is on

With on the senior notes, October of at X, XXXX. our said, upcoming of which one starting is proactively be unsecured priorities will that par redeemable addressing our maturity XXXX

evaluating strategies debt to given in notes capital current currently are market structure We those refinance markets conditions. capital the

on refinancing premature and to capital. is our capital stability it's process optimizing of and focused the overall provide cost balancing structure While underway specifics, is

Other expenses compared on due period, losses million million decreased of $X.X to exchange. year the foreign largely with prior $X.X

XX% yield tax tax tax XX%. an quarter. in if was the of effective was which, onetime rate high rate excluded, This Our unusually adjustments, would driven by rate tax

For modeling a rate suggest normalized XX%. using purposes, tax however, we of

debt $XXX liquidity At was the $X was of billion million. the quarter, net end and available

our the from in lower to prior as agreement, X.Xx balance the quarter due ratio, leverage in end a of down credit at quarter. the net Our was revolver X.Xx, mainly defined

realize We will flow quarterly EBITDA continue and a to improving on cash year-over-year basis. prioritize debt with pay-down free

We did shares repurchase during any not the quarter.

repurchase flow debt. Our of to intent continues offset paying be down shares dilution, to to priority opportunistically remains the and on cash

back of half the XXXX. outlook to Turning our for

cost be approximately for should QX roughly with normal QX seasonality. outages. year-end expense expect QX a roughly versus annual to exceeded in subject forecast, greater selling price except additional $X operational with sales our our benefit to has net in levels, and and QX with than in earlier million realized net We site now associated line With come of improvements input line expectations

adjusted EBITDA on And QX significant remainder will reflect and a represent for to step-ups year-over-year XXXX. normal EBITDA as mentioned basis of previously, expected both is seasonality. the sales

for For expenditures of million. year $XX full are planning now XXXX capital we modeling purposes, approximately

full We expense to be $XXX expense year $XX our and expect million. million around depreciation amortization interest our XXXX be to around and

you Julie, said, I'll for hand closing back over it that to remarks. With

quality, this we're share improved, Greg. has take service, those and elements that focused are What and gains. Thanks, products call new you on still from is control: headwinds can away should demand there while cost, we

the past creating the more X demonstrated quarter This agile of over improved leverage years, a actions and our impact operating company.

the I efforts the well will quarter into recent results some to wins serve future. this also highlight of team's concrete examples that provided our of the us of

opportunities I'm morning, questions. us encouraged the open Thank that you and please performance excited ahead. for joining line the by about lie and our for this

[Operator Daniel the Sidoti. Harriman Thank from you much, with question have Julie. We first Instructions] very

I details. to Julie, you Thanks just in that mentioned know for if chance but best so quarterly be back you EBITDA. on your touched much QX, bit, million a at that QX Greg may little look $XX the approach this

You close in QX. to obviously really that got

deeper half So and your you bit expectations a related of second year? provide the the in could to profitability little some more for go details

you to exceed to outages we exception QX, annual be that but is of mentioned, would expectations, what in similar the QX QX our QX QX, some remains message with our which in tell Greg that would I which one sense expect be from same of I to did QX. Sure. moved quarter. the QX strongest the expect

timing shift. of a little So a was bit there

and QX by price quarter. shipments exceedance really was some this that as on upside The as really well timing advantage some strong in consumer were input driven

the So of moved timing. have pleased exactly some bank, more bit to combination we've communicated just past. in shape just two be The QX. the I'm the will combined towards the but as of little in it that's a

a From you're think payback period? one these should and perspective quick then generation demand that about just Okay. like Great. we terms And that investments in more how a for one of me. making,

Sure.

we've we So investments there's bias growth towards a our those growth a number standpoint of and about talked from platform.

market some have So that's where liners specialty our the and and strongest right release in win greatest we the areas conditions. to of filtration, tapes

two the It's one assets. meltblown The talked we've about to line past, fiber is a meltblown other first fine a line sister in X Germany. in the

supports it's liner known about up quarter. in So And most second talked we've It this in the release X% Mexico. growth, that the recent technology. which our coater filtration in one was the is past

about release of nicely QX assets longer well. America. XX%. really to term up and up Mexico qualifying in It was grow customers. is has been started as Both expansion us for up. these into liners geographic and North And about have We're America asset X% The South continues

million our Combined, long-term those built continued represent and of about in $XX growth which revenue two outlook. into is categories, investments these the

adhesive recent a important which The and creates compounds, a the call, an also It Italy. this volatile first environment automotive for abrasion technology. different It higher sound technology at is for eliminating is in investments It's efforts greater extremely our cars. on two is temperature ESG that I work tape investment solvent-based replaces mentioned most for performance, insulation the critical and supports in industry. which by electric resistance dampening organic one

it within pretty normal It it's after technology and about a then pretty we'll X-year to payback. The has project pace And about a a for new at X low that cost, years business. million. $X which is fill startup, expect under that is qualify

investment fourth expansion same was The in of similar China in of media. we the And XXXX. that a investment and made mentioned asset Naltex our technology filtration this I following is

as our in are in water So well. demand increased installed starts base. again, XXXX is sister X payback to that about driven filtration complementary a assets It years. similar by reverse period, demand. up osmosis This Has late current

really I'm to these growth pleased have of investments. kind

this set the they future. think us well I for up extremely the teams And well. do

commercial excellence. we We have have strong strong engineering,

investments. for the our And prior We for and most customer to our these capital momentum have and recent fit provide fairly teams plans continued those businesses commitment are internally. They they engagement small. and making investments into

strong in investments So recent two. paybacks, the minimal fairly most

and of were two Those in America performing much expansion are first plan, and and The North started in particularly liners. up release well larger. have the actually ahead

Does Dan? help, that

Yes. That's perfect.

next with The (sic) [ CJSW Jon Securities question CJS is ]. Tanwanteng from Securities

Jon. or any recent This remarks. more in some hesitation for is on on weakness the some Was for and just given Justin prepared uncertainty? seeing area, higher Are market you customers color consternation from hoping

part of mean, I caution North much customers, caution And around customers. that now our seeing in right last a challenges. we're America I'd was destocking building greater some caution see Europe. have in the of we we which created than the from definitely we from say challenge year see strength inventory, our too

basically of in improvement health end and markets, growth flat that was liners, quarter year-over-year our filtration, tapes sequential Second care. release also and and led all volume almost was by

We are liners well that as the talked I opportunity to continuing, some in of films. tapes about, would and automotive in those I future and the optical our is provide as just greatest for filtration, say release as invest that markets

just Our areas those of some be surprising softest and like sublimation given to our paper that's and of are dye going performance subcategories, markets. the in historical categories not

to good the know manage is we how really business. think news I that there that

upside in We crafting, we even grow share that have different tools, paper premium continue the teacher in than markets. leading and greater into paper channels, organizational traditional and tools, in have journals to the space potential

then cash I could. your And you if year? one Can any expectations about there's for more, changes flow if talk helpful. to the just That's

significant $XX million of for the no really flow a free No, quarter quarter changes. cash And was good this flow for very about cash quarter. with

As as full far no significant the year, really changes.

little a more. is bit capital Our

end-loaded. Our little more than CapEx end-loaded front a is back

see we'll So some. pick up that

liabilities not benefit and have that also payable QX QX did accounts a accrued in in We from continue would QX. and

to months, to and So QX. QX be positive extent flow the I free cash as expect QX same but not

no have currently We further questions.

So remarks. I Julie to for closing hand back

We Yes. Hope call forward morning. have day. our look quarter a with on to Thank and you in for earnings joining connecting November. this you wonderful throughout the us all next you

today's call. Thank again, all concludes Thank you This Julie. you for joining.

disconnect your now may You lines.