Mativ Holdings, Inc. ("Mativ" or the "Company") (NYSE: MATV) reported earnings results for the three months ended September 30, 2024. On November 30, 2023, Mativ Holdings, Inc. (“Mativ” or the “Company”) completed the sale of its Engineered Papers business. Financial results for continuing operations exclude Engineered Papers in all periods.

Adjusted measures are reconciled to GAAP at the end of this release. Financial comparisons are versus the prior year period unless stated otherwise. Figures may not sum to total due to rounding. "Comparable" non-GAAP measures used to compare current period Mativ results reflect prior period results revised to align with our new segment reporting structure. The Company previously also filed a separate Form 8-K on May 8, 2024, which includes comparable financial statements for all fiscal quarters of 2023 revised to align with the new segment reporting structure.

Mativ Third Quarter 2024 Highlights (Continuing Operations)

• Sales of $498.5 million increased 0.1% year over year, and 1.4% on an organic basis

• GAAP loss was $20.8 million in Q3 2024, an improvement of $443.5 million compared to $464.3 million in the prior year (which included a $401.0 million goodwill impairment charge), GAAP EPS was $(0.38); both included organizational realignment, impairment, divestiture and purchase accounting expenses

• Adjusted income was $11.0 million, Adjusted EPS was $0.21, and Adjusted EBITDA was $60.8 million (see non-GAAP reconciliations)

• Adjusted EBITDA was up 10% versus the prior year, primarily driven by improved manufacturing performance, lower SG&A and distribution expenses, partially offset by lower volumes in advanced films, and less favorable mix

• GAAP operating profit margin improved materially compared to the prior year (which included a $401.0 million goodwill impairment charge) and adjusted EBITDA margin increased 110 basis points

Management Commentary

Chief Executive Officer Julie Schertell commented, "We saw meaningful increases in volume and profitability in Filtration and our overall SAS segment during the third quarter, with SAS segment adjusted EBITDA increasing almost 20% year over year. This was somewhat offset by results in Advanced Films, which were impacted by automotive and construction end markets. As such, we have launched a turnaround effort specific to Advanced Films focused on demand generation, operational performance and increased customer and end market diversification. This turnaround effort will be similar to the approach we used for Healthcare throughout 2023, which year-to-date, resulted in above-market sales growth of more than 5% and materially improved profitability versus the same period in 2023.

Given the prevailing macro-economic conditions and the slow pace of demand recovery, we continue to prioritize those things that we can control and execute on actions to mitigate external market factors, such as the $20 million reduction in non-operating cost announced earlier this year. Additionally, we are increasing capacity in our growth categories of filtration, specialty tapes, release liners and medical films, while at the same time reducing cost and optimizing our supply chain by reducing our plant footprint from 48 sites at the time of the merger to 35 sites today and our warehousing footprint by more than 25%. These actions reduce cost and complexity, and support sustained margin improvements as demand returns.”

Mativ Third Quarter 2024 Financial Results (Continuing Operations)

Note: The Financial Results below reflect consolidated Mativ results presented in our revised segment reporting structure in the current and prior year period. See the supplemental tables titled Business Segment Reporting From Continuing Operations for additional information regarding the revised segment reporting structure.

Filtration & Advanced Materials (FAM) segment sales, comprised primarily of filtration media and components, advanced films, coating and converting solutions, and extruded mesh products, were $189.6 million, down 3.2% versus the prior year period, as higher volumes in filtration & netting were more than offset by lower volumes in advanced films along with lower selling prices.

GAAP Operating Profit in 2024 included $0.8 million of restructuring and impairment expenses primarily related to organizational realignment and footprint rationalization. Adjusted EBITDA (see non-GAAP reconciliations) decreased 7% versus prior year as higher volumes in filtration & netting, lower selling and general expenses, and improved manufacturing efficiencies were more than offset by lower volumes in advanced films, and lower selling prices.

Sustainable & Adhesive Solutions (SAS) segment sales, comprised primarily of tapes, labels, liners, specialty paper, packaging and healthcare solutions, of $308.9 million were up 2.1%, and 4.4% on an organic basis, versus the prior year period, as higher volumes across all end-markets and higher selling prices were partially offset by sales associated with closed and divested plants.

GAAP Operating Profit in 2024 included $10.5 million in restructuring, restructuring related, and impairment expenses primarily related to organizational realignment and footprint rationalization and included $401 million in goodwill impairment in 2023. Adjusted EBITDA (see non-GAAP reconciliations) increased $6.8 million (or almost 20%) compared to the prior year period, driven by favorable manufacturing and distribution costs, favorable relative net selling price versus input cost performance, and higher volumes were partially offset by unfavorable mix and higher SG&A expenses. Adjusted EBITDA margin of 13.3% increased 200 basis points versus the prior year.

Adjusted unallocated expenses (EBITDA) (see non-GAAP reconciliations) were in line with prior year. GAAP operating expenses in 2024 included $1.5 million in organizational realignment and integration costs, and $0.4 million of EP divestiture expenses.

Interest expense was $18.3 million versus $16.8 million in the prior year period. The increase was primarily due to higher average interest rates and higher average balances on the floating portion of our outstanding debt in 2024.

Other expense, net was $12.7 million increased $12.4 million compared with the prior year $0.3 million primarily driven by foreign currency losses and other asset related charges.

Tax rate was 13.3% for the three months ended September 30, 2024. The lower tax rate was driven by impact of one-time tax adjustments. Excluding the impact of these one-time tax adjustments, the Company's tax rate was 21.1%.

Non-GAAP Adjustments reflect items included in GAAP operating profit, income, and EPS, but excluded from adjusted results (see non-GAAP reconciliation tables for additional details). The most significant adjustments to the third quarter 2024 results were as follows:

• $0.22 per share of purchase accounting expenses (purchase accounting expenses reflect primarily ongoing non-cash intangible asset amortizations associated with mergers and acquisitions)
• $0.20 per share of restructuring, restructuring related, impairment, and other expenses

Cash Flow & Debt

Year-to-date 2024 cash provided by operating activities was $70.7 million. Capital spending and software costs totaled $35.6 million. Working capital was a $0.8 million source of cash due to an increase in accounts payable and other current liabilities, partially offset by an increase in accounts receivable and an increase in inventories.

Total debt was $1,143.4 million as of September 30, 2024 and total cash was $162.2 million resulting in net debt of $981.2 million. Total liquidity was approximately $463 million, consisting of $162 million of cash and $301 million of revolver availability. The Company's debt matures on a staggered basis between 2027 and 2029. The Company redeemed the 2026 senior unsecured notes on October 7, 2024 and issued $400 million senior unsecured notes due October 1, 2029.

Dividend & Share Repurchases

On November 6, 2024 the Company announced its next quarterly cash dividend of $0.10 per share payable on December 20, 2024 to stockholders of record as of November 29, 2024.

During the third quarter, the company did not repurchase shares. The Company intends to repurchase shares periodically and opportunistically to offset dilution due to stock compensation.