Mativ (MATV) 7 Nov 242024 Q3 Earnings call transcript

Welcome to the Mativ Third Quarter 2024 Earnings Conference Call.

On the call today from Mativ 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's joining for you and Quarter XXXX thank Third for Earnings us Good Call.

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

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

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

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

of Chris. XXXX. joining for outline share third thank the quarter Good results opportunity of an remaining drive outlook and our on provide call. number we've and morning, you, to Thanks, appreciate the continued improved our initiatives quarter you with performance undertaken to everyone, We a

provide Sales improvements were in our impacted most one construction end ongoing organically as productivity color up our categories well year-over-year lower this lower more product I'll in by partially on challenges in were of offset of the in film, reported basis. a film which essentially automotive and on demand flat a X% was in Volume moment. by and plants. markets, as largest

XX% adjusted margin points drivers filtration showed pleased overall volume report Mativ, were the and basis that manufacturing a I'm and year-over-year. segment QX from well results EBITDA up adjusted improvement, increased costs. total as meaningful as to XXX SAS Primary in bottom lower perspective, line our up EBITDA For year-over-year

which label, points. strong, EBITDA print first, care and and and increased volume Mexico. QX, of and margin SAS, continued adjusted almost me liners Within commercial very asset see America followed XXX in delivered SAS we release by basis up North And growth our XX% solid in on particularly health touch Let up enter in as liners. release qualify ramp newest we we as was

performance film. results was quarter solid and advanced the in FAM mixed results in challenging filtration Overall in with

Let me of part doing we our on improve bit and going more color film a provide this are business performance forward. to what

in First, category, HVAC in air up our filtration used were control. X% air in growth by almost led pollution filtration revenues and

largest in end of very up Our have in and a over pipeline market continues XXXX. was healthy which opportunities and products is to filtration transportation, X%, new

we healthier XX% automotive fleet the As markets the mainly reminder, media in These remain goes and by than filtration, are aftermarket driven about market. overall heavy-duty transportation a of much our vehicles. into

of Now part turning advanced segment. FAM to is our film, which

to the that applied As protection a category part new is paint time of reminder, film or this purchase following. cars, immediately is typically of at largest the

which Another automotive large XX% categories and the both exterior which markets, interior our used of of construction the part by and sales. and These is optical film, of buildings. heavily on influenced which are remain about is film impact office soft, often

is up with makes performance, costly less where high films lower from increased about which film, X/X protection and our historically Asia with a competition paint Additionally, margins, of products. are seeing revenue, we category

margins in at QX sell lastly, plant, inventory. And we largest our films we through underperformed impacting high-cost as QX and

in generation on over operational have effort quick results improve diversity demand aggressive actions to tiger the is and markets evolving and rapidly of platforms. next development, XX team applications a we've centered the develop around X and assembled performance focused new months. Given that the we This to

and wound advanced and interlayer films, strength development. smart applications optical technology glass in in in materials First, care, markets, accelerating such our our play particularly advanced presence These targeted and applications. to medical as

partnership Miru company increased innovative recently energy and with reach market our aesthetics. this autos smart industry new buildings. One products and performance products technology showcased extending to for International and who glass samples example control of the interest reduced at key leaders today's to and improved feedback recently Glasstec ability temperature this state-of-the-art footprint and in strong feature the and expressed the positive trade develop efficiency, announced is provide solutions. versus received show We very improved we These carbon partnership from

Turning to medical films.

growth X new XXXX that U.K. a in years. in and incremental in and of provides of capacity invested the health have line applications, improved $XX million care giving QX revenue start over the us up for We next medical in will our quality over films opportunities

capability sourcing their Unique X solution customers and complexity, suppliers. customers' procure through not unique the providing provide a film for are steps, most film a the or product supply base solution, application. One chain Today, The we Mativ, converted fully Mativ can platform and solution, second coated only and holistic times. product lead improving supply all our and to is to for customers but chain this reducing more X cost quality

aggressive as reduction is our manufacturing well platform third as cost products. sites new develop we The how in

For from instance, mid-tier and of cost-efficient product we're Asia. a raw resins materials and to qualifications focused on battle more introducing accelerating increased imports

core we in the sustainable, tiger team a lastly, driving on part our productivity, and improved site focused quality of operational And largest have film performance.

months. prior next our effort on X% we and in confident the effort has than to of organic to exceeded sales of above-market advanced health approach year I'm The care. films this improved similar is XXXX expectations. of performance successfully effort this in improve turnaround film health of the are care we that versus improve over profitability the will similar course results over significantly advanced Based outcome, in growth results year-to-date The the took the more XX and course

we turn and U.K. for film the talked I medical of categories touched in to investment We've capacity. now previously about are release and specialty in our additional on to some making investing expand new liners, I'll where investments are the just we the tapes capacity. high-growth our filtration,

Polyflex Canada. facility our tape We and support an investment athletic category line our new improved to a tapes also in recently with specialty in in

in and and upside growth. opportunities category We future significant have capacity from are this to customers key commitments for close

million We of almost expect to early expected utilized volume of the incremental start year realized over once XX% support the with end in $XX revenue up in and and fully X be year the line to in by X. XXXX

Combined, in the and throughout XXXX provide expected over XXXX announced are in growth incremental X to we've that the next million to years. investments revenues of $XXX X

well Additionally, our to sustained executing are commercial teams growth. sales drive

we've a over control examples. Here of are customers. with million in gains pollution a just share few FAM, realized and number HVAC air In $XX

and million We large add for key to also $XX to pipeline our development with in new negotiated agreements over mid-XXXX begin customers. that continue will customer product

We about generation a leader, we this run he from our his Ryan strong. which earlier and is is doing momentum demand on we hired what wanted Elwart, new and segment that opportunities. team our exactly talked SAS, driving are commercial In year, new efforts to them, excellence and this SAS focusing

commitment this, a new long-term one release the North recently we goods evidence with As signed of of consumer for largest in liners America. companies

we million additional previously major another packaging, digital million and our commitments over about starting you in print have $XX that happy XXXX. worth paper $X win totaling a in in midyear annually, we opportunities, secured category told to I'm In share and

of solution paper product. partially And packaging and are care care, year. launch bio-based for sector in sterilizable This is the next new we health reinforced will a first health a in medical launching half and the

have driving sales very in place the pleased pipeline it. the we and that I'm with team with

company, as on always Finally, costs focused manufacturing a optimizing and we our our are reducing assets.

operating of an our the sites recent added a the and week, now With sale warehouses this And footprint effect over most we this our this from XX%. we the and which divesting on XX complexity past and nonstrategic to on accretive XX by list, that, quarter, portfolio sites During streamlined immediate facility closed small, have in is will category. the our our Netherlands, high-cost our since further to have we merger, margin to a in expected reduced reduce Massachusetts. outside plant of by exiting

Taken together, to normalized our experience the improve have continue as and these demand actions and especially improve to our returns levels. margins, customer more reduce costs, will

complexity further opportunities and unlock to reduce warehousing value. will incremental evaluate We manufacturing and our portfolio continue footprint our to and for

With that, Greg more over our financial for discussion performance. to I'll a of turn it detailed

everyone. and good Julie, Thanks, morning,

million were an $XXX.X basis year. Consolidated were X.X% on organic essentially the compared was up million net prior year-over-year sales Sales favorable. flat quarter prices were from selling continuing currency to operations and $XXX.X the in while versus for year, prior

was operations continuing from from $XX.X the prior million, EBITDA up in million $XX.X Adjusted XX% year.

contribution SG&A was million Improved impact, represented distribution and a of by mix. costs $X expenses from combined and manufacturing favorable lower lower partially million $X offset which

XXX EBITDA basis year-over-year. points increased margin Adjusted

XXXX. Turning sales QX Materials segment Advanced in to $XXX versus down of Net our our were Filtration X% of & of million each segments.

well as offset segment. than As we as that volumes in reported in prices our volumes categories selling more mentioned, films filtration in advanced category Julie our by lower lower the higher were

films year-over-year, was prices our of FAM reflecting improved pressures and lower manufacturing in the effects high-margin We X% in filtration adjusted million of EBITDA segment. efficiencies. volumes expenses advanced lower with in lower volumes category categories, these partially the and offset $XX SG&A higher selling almost down our

on growth segment, more of on than an and Organic last and Sustainable X% our basis. reflect $XXX up our year up Solutions X% & all selling as-reported markets higher than Adhesive were In of prices. across higher sales net from volumes the more an million basis end organic

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

expense of year. versus than few a to million of the was Turning corporate $XX items. more EBITDA corporate Unallocated around adjusted the down prior X%

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

to a taking Interest a the into prior our XXXX rate primarily a of and on at rate coupled current on period. revolver debt debt matures is expense X% hedges from account, rates higher approximately higher year million fixed When and in XXXX. interest between basis XXXX, XX% the with increased due floating our balance staggered $XX of in

what advantage volatile reach the then prevailing interest essentially with that bond we X. the were able on a priced rate take went $XXX to X% more a end offering subsequent We rates that and a environment. million in October Mativ, for allowed at In market settled to of certainty the premiums late become has us to risk providing outcome of market favorable quarter and September, to

off proceeds offering pay portion as We the B. the to million well million in due used that the bond Loan our outstanding $XXX of was Term $XX from XXXX as our bond

expect $XX year. changes, be our annual these to we interest With expense go-forward million per

Other million period, foreign on losses prior Julie exchange. $XX.X largely asset-related in million due year outlined facility expense connection well X compared with the to as charges with rationalizations the other increased as of $XX.X earlier

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

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

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

ratio, agreement, as defined credit flat Our sequentially QX. net X.Xx, was with our leverage in

priority #X and flow is is deleveraging continues cash our for X.X to Our reduction, to and X.Xx. range leverage target debt utilization and be

during did quarter. shares We the repurchase not any

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

change seasonality. Turning by We QX mix, last what timing and XXXX. be product Therefore, versus see outlook to sales do EBITDA QX we XXXX. seen expect adjusted down to subject downtime from in the digits demand have versus digits up our also categories low we and last driven normal double versus QX for maintenance season to QX to outages are number extended over be year-end of holiday a QX. of And recognize a our This not we evidence year. of in timing incentives, year is mid-single of

our on on in during year fiscal next expectations detail more provide will call February. our the earnings We

year depreciation of our purposes, we be the we For modeling expense and million. and full million, XXXX planning capital down previously $XX for to communicated amortization are $XX around approximately $XXX million, now from expenditures expect

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

share specialty products business This should medical and you opportunities. provided new that where have we actions of tapes is in in growth the new and are What and when and is offset expected, upside demand today away taking and from films, examples the partnerships result in while liners, we earlier categories optical capture Greg. focused resources improve. impact, incremental investments you, key of take and release markets programs, than includes with value that to pace slower Thank grow this call filtration,

out and costs lastly, outlined within cost this We our consolidating And continue which advanced driving demonstrated plan aggressively we've and business warehouses our manufacturing of plants. divesting success to care. lines with an million and are we year. including turnaround for streamline underperforming operations, nonoperating simplify noncore category, over mirrors health And assets, reductions our films, $XX

are these and I do, from our actions things in right in making our these making and the Board the appreciate teams to from them of support All decisions happen.

highlight. last to One item

of environment, maintaining caring be will look culture sharing you XXXX publishing We over our report strong being responsible ESG with our to to of the commitment forward this governance continued We a the having corporate course and diverse and stewards practices. month.

for the line please Thank open you us joining morning, questions. and this for

have [Operator Harriman Daniel question Instructions] with first & our from We Sidoti Company.

that. more a maybe with quick But maybe provided start the started what I'll just just a wondering information most us two afterwards. generation to in about when on you're Julie, I know I'll information tiger and within off initiative. the get I'm and team little demand ones, provide ideas then bit queue lot you about process if back of But that you could excited

the year-over-year, expectations Or disconnect, is up mostly to increase the on something is made then guide, there in in films? poor QX performance for that just of there? the revenue and else And that EBITDA in decrease for look

Dan. Thanks,

Let me a this really From team question your started start with standpoint, tiger quarter. on films. first it

versus this it's down XX% very had that and a is category So year high margins. last historically has about films year,

And it headwinds how just largest performance poor issues: in markets of the a is third impact in So battle line. Asia with one from primary performance on and America. we our disproportionate plants automotive has North increased second the around focused is team lower really alternatives; of bottom and is operational our three the construction; the competition in tiger weak

And We good our looks as the Mativ. performance how well. to for address in backwards, We is my all issue to the know That's us like. work way straightforward within the I plant. low operate walls most know own what of four

in we strong best very supply and that quality our that speed products a can productivity facility practices China in these better the to and makes in chain share so to have improvements We performance and in drive customers. overall

is second accelerated has performance from the that competition one increased lower lower a cost, Asia The with alternative.

hard have mid-tier working and alternative. developed we are very a So

I think differences the that there are showcasing the mid-tier differences because ensure clear us solution have between the for a to premium even take that and more customers important our that clear to product opportunity is to into solution we than are need performance consideration.

different that One there's two that I'll Mativ you It but couple The I am them excited most this there, I'm in about, the the second our times, X where of talk customers opportunity one converted suppliers, to provide unique potential very and our really to and one that of place X about, is and PSA can solution. customers, services we about where most excited a is and a base of topcoat, I've to those are mentioned capabilities a are the film, all buying position from product. we the

has process. chain are customers qualification on happen. that the to So will we've really that opportunity, us of and there's very capabilities a It it's us a that can fair this big engaged a got change some idea that customers with supply take for big our in time because space. and amount interested But

most in one is one, the couple qualifications this a And it's films up our in investment second addressable weak markets we films are And into markets. kind construction. automotive then combat And just business. excited about, XX% U.K. start automotive I'm and impacted other the as aggressively of our of start the battle in an how in the a our markets is and reminder, to and medical expanding films with we construction continue and that last ways. One by will are this, about And the is XXXX. capabilities optical of in that

early we And And announced product partnership on called And and it manufacturer with the that footprint launch that and company increase very EV in have a glass provides technology capabilities a Miru. first as aesthetics. that working carbon to a reduces energy we're it recently we large customer improves expect our XXXX. efficiency,

take lot require value technical, but These So opportunities. a going again, of to qualification, big some it's highly are time.

markets important by while But Paint just provide to weak opportunity to return in protection will more interim, the still because film I they have before this we markets opportunity like in our end-use extending the is we really have in the category are applications the described. return. And us. resilience they

health team confident in the turnaround the are I'm tiger It's our in mentioned call, that we results in used place. also as expectations. very the care, the approach effort I and health to have exceeding effort on in what and very similar we care a in

outs I report team's make had continued progress. to continuing already forward performance. So look and milestone great They've me, to to they're key the

the down And this Daniel, is you decreased do segment, the expectations and strong That's EBITDA. then, we're the with is business the Greg. right, question quarter for the on but to second films largest. the expecting sales, fourth one QX, your EBITDA. had driven in are for sales year-over-year And primarily take which although I'll weighing the of increased SAS definitely the year-over-year

some pockets In to that, of and and addition we're timing, pricing gain input volume is price there maintain that to are volume. on working FAM to within there some

a impacting the a program then and mentioned that year-over-year, the item. through is we On comping. is last incentive cost really did standpoint, timing accrual flowing side, overhead the of And the talked we holidays have earlier year last I we're to that lesser P&L. though, about lower much extent, really a outage From comp finally, that the to reduction the the

Securities. is with question from next CJS The Tanwanteng Jon

the Are detail again? holidays? should back talk we the it. everything. But your ready and early to I wondering 'XX, about up enter could to exiting QX think what too it How you customers takes velocity was the Is I inputs shutdowns you are and QX they as tell? into all telling the if going you about on appreciate and puts the and the pick

Thanks I yet I the and Yes. manufacturing fell this materials question, directly industries healthy. COVID. sluggish, Jon. remains again not contracting, that. obviously demand month. the hit correlated would point around all The us. for think tell means we're They're you, lowest are that are And PMI to And and and it that seeing believe recovery I since still we

changing seeing a almost quickly in we a in seems sluggish term. positive of the that spring false the profile returned to near a very not like got We're demand indicators environment. It

DIY, rebound demand. home, of level to see in So rates start expect a remodeling interest this until to we greater we experience lower auto, more decrease and degree, to

customer in They're their primarily willingness last remain same would From tell They that's challenges supply again, fairly they're build meaningful filtration. over standpoint, had spot. a given pockets driven seeing conservative resilient, of strength, I the filtration filtration There's of particularly transportation couple the that in air past you, not inventory indicators. But chain to by years. we and the remains aftermarket.

We've We've I'm from new big need commitments them next in really new and America in to that hit. release opportunities opportunities North tape may they come just couple we that that of aggressive then got we our in the And not year. to will segment. care and our business, XXXX. health our will and got commitments leading business geography pipeline got launch the late That growth in about we've hit excited customers a mid SAS in in liners all have but particularly agreements

put that we're place, the would excited efforts not but the with suggest demand So have and seeing. I'm environment pipeline. thrilled teams I in healthy there's excited all about about a the I'm

business how affect enough. a environment anything you're if in like your or on and aggressive the Okay. perhaps tariff And planning? any potential or for less level tax a for your Fair thoughts more might planning that that strategic more environment

to do standpoint, administration, Yes. cost home little talking what site tariff about new early I side. XX% I us. low of have our if from think sourced think region. that a speculate pretty could I we on for a too About a is exposure mean spend you're From it's the potential

in. spot a really So that's be good to

of about, be sold is U.S. North I tariffs the film films the in just lower seeing from an expect are where into we for acceleration products, an particularly likely products, that could coming advantage Chinese-made incremental cost, lower we on America talked into scenario, goods Europe that the performance If and Asia. business us, most

So us there. there advantage would potentially for be

on just year lastly, think Okay. the so. or debt then Great. And the progress can update and an in do you against coming much how make the leverage just you

Sure. that, I'll take Jon.

the time making hit the be same, to Our the X.X prolonged probably that, and toward still kind XXXX be market we'd frame, of over of we recovery, XXXX. that that expect target course Based still the X.Xx. in more on remains progress would but to it the

We Daniel Sidoti Company. follow-up from question & with a Harriman have

Just okay. quick that's ones me, two more if for

forward the First, little on rationale more are the can optimize two And the you expand Maybe you with CapEx bit the a your in closures? potential facility bit a detail on just the as impact spend, recent and reduction little expectations then for upon the cash more year? the closures for footprint? most for what there moving flow

Sure. Thanks, Dan.

dye So quarter, was that for sublimation produced first the site sold, this Netherlands a we that paper we the products. in one divestitures the which announced

with business. business. buyer we So nonstrategic, was of exited EBITDA for will in invest of who of to that hands sale breakeven in the business that have and has better a the us the be plans the type It site,

well, it business, too. and site in We our it as We divested paper exited supported Massachusetts. also a

you and next divestitures revenue next of impact that tell and and would growth about accelerate non-accretive areas prune reduce by our to that capabilities have both complexity, to our that revenue million year win I we'll efforts year. EBITDA to nonstrategic, see in in the less sites sales focusing $X those, we of and about the where support in more impact The $XX unique categories is EBITDA marketplace. strategy see combined, million in those we'll

second I'll cash flow. the and the on Dan, take CapEx Yes. question, your

then year, from of and IT plan that in on the why markets been seeing, the is also some and dropped capital that spend. and for sustaining we big year, based capital million a a to revisit discretionary deferral this we've primarily maintenance $XX suppressed capital the we yes, So continue million $XX reduction reason to

cash based It as quarter from QX spend expect relatively but flow As results for still the positive that's was QX. QX that than a cash CapEx strong flow, in on be flow in for QX that we should lower cash would lower territory far previous estimates.

questions. We currently further have no

to hand Schertell Julie to So I'll back Ms. conclude.

We joining us forward for you you on with QX wonderful February. our quarter Thank to call this look call. the and throughout our earnings connecting a morning Sure. next XXXX day. Have earnings on in

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

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