• Consolidated Net Sales: USD 498.5 million, compared to USD 498.2 million in the prior year.
• Organic Sales Growth: Up 1.4% year over year.
• Adjusted EBITDA: USD 60.8 million, up 10% from USD 55.4 million in the prior year.
• Adjusted EBITDA Margin: Increased 110 basis points year over year.
• Filtration and Advanced Materials Segment Sales: USD 190 million, down 3% versus Q3 of 2023.
• Sustainable and Adhesive Solutions Segment Sales: USD 309 million, up more than 4% on an organic basis.
• SAS Adjusted EBITDA: USD 41 million, up almost 20% year over year.
• Interest Expense: USD 18 million, increased 9% from the prior year.
• Net Debt: USD 981 million.
• Available Liquidity: USD 463 million.
• Net Leverage Ratio: 4.1 times, sequentially flat with Q2.
• Q4 2024 Sales Outlook: Expected to be up mid single digits versus last year.
• Q4 2024 Adjusted EBITDA Outlook: Expected to be down low double digits versus last year.
• 2024 Full Year Capital Expenditures: Approximately USD 50 million, down from previously communicated USD 60 million.
• Depreciation and Amortization Expense: Expected to be around USD 100 million.

• Warning! GuruFocus has detected 6 Warning Signs with MATV.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Mativ Holdings Inc (NYSE:MATV) reported a 10% increase in adjusted EBITDA from continuing operations, reaching USD 60.8 million compared to the prior year.
• The company has successfully implemented a turnaround effort in its healthcare segment, achieving above-market organic sales growth of over 5% and improved profitability.
• Investments in growth areas such as filtration, specialty tapes, and release liners are expected to provide incremental revenue of over $115 million in the next 3 to 4 years.
• Mativ Holdings Inc (NYSE:MATV) has streamlined its operations by reducing its footprint from 48 sites to 35, which is expected to improve margins and reduce costs.
• The company has secured new customer agreements and commitments, including a long-term commitment for release liners with a major consumer goods company in North America.

Negative Points

• Net sales in the filtration and advanced materials segment were down 3% compared to Q3 2023, primarily due to lower volumes in the advanced films category.
• The advanced films category is facing challenges due to weak markets in automotive and construction, increased competition from Asia, and poor operational performance in a major North American plant.
• Interest expense increased by 9% from the prior year, driven by higher interest rates on floating rate debt and a higher revolver balance.
• The company expects Q4 adjusted EBITDA to be down in low double digits versus last year due to timing of incentives, product mix, and extended downtime over the holiday season.
• Demand recovery remains sluggish, with no significant indicators of improvement in the near term, impacting overall sales growth.

Q & A Highlights

Q: Can you provide more information about the Tiger team initiative and the Q4 guidance, particularly regarding the revenue increase and EBITDA decrease? A: Julie Schertell, President and CEO, explained that the Tiger team initiative started this quarter to address the 10% decline in the films category, which has historically high margins. The team focuses on weak markets, increased competition from Asia, and poor operational performance in North America. They are working on a mid-tier alternative to combat competition and expanding into medical films and optical films. Greg Weitzel, CFO, added that the Q4 guidance reflects strong sales in the SAS segment, but films weigh down EBITDA. Other factors include price input timing, overhead reduction, and holiday timing.

Q: What are your customers indicating about demand as you enter 2025? A: Julie Schertell noted that demand recovery remains sluggish, with the PMI at its lowest since COVID, indicating contraction in manufacturing and materials industries. Customers are conservative in building inventory, and while there are pockets of strength in filtration, overall demand remains slow. However, there are aggressive growth opportunities in release liners, healthcare, and tapes, with new commitments expected to launch in 2025.

Q: How might a more aggressive tariff environment or tax changes affect your business? A: Julie Schertell mentioned that Mativ Holdings has low exposure to tariffs, with 88% of spend sourced regionally. Potential tariffs on Chinese goods could benefit their films business by reducing competition from lower-cost Asian products.

Q: What progress do you expect to make on leverage and debt reduction in the coming year? A: Greg Weitzel stated that the target leverage range remains 2.5 to 3.5 times, with progress expected over 2025, aiming to achieve this by 2026.

Q: Can you expand on the recent facility closures and the impact of reduced CapEx on cash flow? A: Julie Schertell explained that the closures in the Netherlands and Massachusetts were part of a strategy to reduce complexity and focus on strategic areas. The closures will result in $50 million less revenue but $1 million more EBITDA next year. Greg Weitzel added that CapEx was reduced from $60 million to $50 million due to market conditions, with Q4 cash flow expected to remain positive but lower than Q3.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.