Magnera Corporation

Thank you, operator, and thank you, everyone, for joining Magnera's fourth fiscal quarter 2025 earnings call. Joining me, I have Magnera's chief executive officer, Kurt Bagley, and chief financial officer, Jim Till. Following our prepared remarks, we will have a question and answer session. To allow everyone the opportunity to participate, we ask that you limit yourself to one question with a brief follow-up, then fall back into the queue for any additional questions. A few things to note before handing over the call. On our website at magnera.com, you can find today's press release and earnings call presentation under investor relations. You can also go directly to ir.magnera.com to review the investor presentations from our recent conference attendance. As referenced on slide two, during the call, we will be discussing certain non-GAAP financial measures. These measures are reconciled to the most directly comparable GAAP financial measures in our earnings press release and in the appendix of the presentation available on our website. Additionally, a reminder that we will make certain forward-looking statements. These statements are made based upon management's expectations and beliefs concerning future events impacting the company and therefore are subject to risks and uncertainties. Actual results or outcomes may differ materially from those expressed or implied in our forward-looking statements. Some factors that could cause the results or outcomes to differ are in the company's latest SEC filings and our news releases. These statements speak only as of today, and we undertake no obligation to update them. I will now turn the call over to Magnera's CEO, Kurt Bagley. Thank you, Robert.

Good morning, and thank you for joining our call. I am pleased to present our fourth quarter results and discuss the significant progress achieved as we mark our first anniversary as Magnera. During this update, I would like to emphasize three key takeaways. First, our strategy to establish ourselves as a leader in advanced specialty materials is yielding positive results. Our global stature as an innovative organization with substantial scale and strategic geographic presence has enabled us to consistently succeed in the current bid cycle with top-tier customers. We've been able to gain share in markets and product segments of our choosing. Second, the macroeconomic conditions across our operating regions remain challenging, with a cautious outlook as we begin fiscal year 2026. Third, our focus remains on controllable factors. We have made measurable improvements in our synergy run rate performance and have already demonstrated substantial advancement with Project Core introduced last quarter. The Magnera team delivered robust results to close the fiscal year. achieving $839 million in sales and adjusted EBITDA of $90 million for the quarter. For the full year, revenues reached $3.2 billion with an adjusted EBITDA standing at $362 million. We generated $126 million of free cash flow representing a yield exceeding 30%. I wish to express my gratitude to our teams who have collaborated effectively, stabilized our organization, developed optimization plans, and taken decisive actions positioning us for continued success. These financial outcomes were underpinned by several notable successes with our customers. In a subdued personal care market, we experienced ongoing product mix enhancements as consumers increasingly opted for premium softness and comfort. Our adult and continence products experienced mid-single-digit growth through increased adoption rates and our customers increasingly seeking innovative features similar to those found in baby care items. Within consumer solutions, increased demand for wipes and infrastructure contributed to our segments portfolio increasing from 51% to 53% of our total revenue. Our consumer solutions portfolio utilization is tracking nicely with growth projects and targeted asset upgrades. Sales of infection prevention wipes rose 10% year over year with balanced growth from both branded and private label customers. Demand for convenient surface cleaning and disinfecting remains strong across households and institutional use. Our strong positioning in cable wrap and specialty solutions has benefited from ongoing electrification and infrastructure growth worldwide. In response to growing sustainability requirements, We have provided advanced material solutions for wipes, tea and coffee filtration, and compostable offerings for in-home and away-from-home usage. Looking forward to 2026, we anticipate an earnings improvement of approximately 9% driven by synergy realization, project core initiatives, and further advances in product mix and innovation. The company has successfully completed its stabilization phase following our formation and maintained uninterrupted delivery of premium products to our customers over the past year. Now, entering the optimization phase of our transformation, we are cultivating an innovative culture aligned with our commitments to our customers. Our commercial teams have been integrated to ensure consistent service. Operational metrics and processes are being standardized, and efficiency initiatives are underway throughout the organization. We continue to be action-oriented with our purpose, promise, and beliefs, providing our guiding compass. At this point, I will conclude my opening remarks and invite Jim to provide a detailed overview of our financial performance.

Thank you, Kurt, and good morning, everyone. Before we dive into our results, I want to remind everyone that when we compare our performance to the prior quarter, all the prior period figures are adjusted on a cost and currency basis to eliminate the impact of exchange rate fluctuations. Additionally, last year's results incorporate the full impact of the merger. For those interested in the details, the reconciliations between our adjusted and reported results are included in the appendix of today's presentation. Now, turning to our financial results on slide nine. We delivered performance that aligns with the expectations that we shared during the previous quarterly call. Volumes and earnings came in as anticipated, while cash flows exceeded our projections, reflecting the strong execution and discipline of our global teams. Our teams have done an exceptional job advancing synergy realization since the merger, implementing new robust cost reduction initiatives, and optimizing our product mix capacity and allocations across the portfolio. During the quarter, these efforts helped offset softer baby demand in South America, as well as general market softness in Europe. Despite the external challenges, adjusted EBITDA remained essentially flat for the quarter. Looking at the full year results, fiscal 2025 was a year of disciplined execution, strategic progress, and solid cash generation. Our teams delivered strong operational performance, advanced merger synergies, and maintained financial discipline. Free cash flow for the year exceeded the high end of our originally provided guidance range, reflecting an intense focus on CapEx and prudent working capital improvements. This strong cash generation is a testament to the dedication of our operational focus of our teams worldwide. Since the merger, we've generated $126 million of free cash flow, representing a free cash flow yield of more than 30% relative to our year-end market capitalization. This performance has allowed us to strengthen our balance sheet and reduce our debt leverage to 3.8 times at the end of the fourth quarter. We concluded the year with approximately $600 million of available liquidity, providing a solid financial foundation to support strategic investments, pursue growth opportunities, and maintain flexibility in a dynamic market environment. Moving forward, we'll continue to prioritize strengthening the balance sheet and maintaining operational agility. Moving on to my fourth quarter segment reviews, starting with the rest of the world in slide 10, revenues declined 3% for the quarter as stronger performance in the select consumer solutions categories was offset by the pass-through of lower raw material costs and weaker consumption levels in Europe. Adjusted EBITDA for the segment increased $4 million, reflecting operational efficiencies, rigorous cost reduction programs, and continued synergy benefits from the integration. These improvements underscore our resilience of our business model and effectiveness of our disciplined global operations. Turning to Americas on slide 11, revenues were down 9% for the quarter as a result of the pass-through of lower raw material costs and competitive pressures from imports in South America. For the full year, headwinds were partially offset by stronger demand in infrastructure and wipes and markets, which helped stabilize our overall annual results. Adjusted EBITDA in the Americas segment declined $5 million for the quarter, largely reflecting the volume and product mix challenges in South America. Despite the decline, we are confident that our ongoing improvement initiatives and synergy realization will support margin recovery in the coming quarters as operational excellence remains a central focus. Looking ahead to fiscal 2026, our guidance assumptions are shown on slide 12. At the $395 million midpoint, we are expecting EBITDA growth of approximately 9% year over year. This growth reflects continued synergy realization and ongoing benefits from Project Core, including cost reductions and capacity rationalizations. In terms of the free cash flow, we expect a range of $90 to $110 million, including $80 million of capital investments, which includes $10 million from IT conversion-related CapEx. This guidance reflects a prudent assessment of the near-term environment and a disciplined execution of our operational and financial strategies. This concludes my financial review, and I'll now turn it back over to Kurt.