Mativ Holdings, Inc.

Welcome to Mative's second quarter earnings conference call. Hosting the call today from Mative is Julie Schertel, Chief Executive Officer. She's joined by Andrew Wamser, Chief Financial Officer, and Mark Cheknau, Director of Investor Relations. Today's call is being recorded and will be available for a replay later this afternoon. At this time, all participants have been placed in a listen only, and the floor will be open for your questions following the presentation. If you'd like to ask a question at that time, please press star followed by one on your telephone keypad. If at any point your question has been answered, you may remove your question by pressing star two. If you require operative assistance, please press star followed by zero. We ask that you please pick up your handset to allow optimal sound quality. It is now my pleasure to turn the floor over to Mr. Chekhanel. Sir, you may now begin.

Thank you. Good morning. I am Mark Chekhanel, Director of Investor Relations at Mattis. Thank you for joining us to discuss our second quarter 2022 earnings results. Before we begin, I'd like to remind you that the comments included in today's call include forward-looking statements. Actual results may differ materially from the results suggested by these comments for a number of reasons, which are discussed in more detail in our Securities and Exchange Commission filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. Some financial measures discussed during this call are non-GAAP financial measures. Reconciliations of these measures to the closest GAAP measures are included in the appendix of this presentation and the earnings release. Unless they did otherwise, financial and operational metric comparisons are to the prior year period and relate to continuing operations. The earnings release is available on our website, ir.madiv.com, as are the slides for today's presentation. You can download the slides and or click through these slides at your own pace during the call using the webcast interface. To clarify some nuances of how MATA results were reported and how we will be discussing them, we would first remind everyone that the SWM and NENA merger closed on July 6, 2022, after the second quarter ended. Thus, we will be discussing second quarter results for the legacy companies separately. Given the legal and accounting structure of the transaction, MATA results include only the legacy SWM business. The NENA results we will discuss are not included in the MATA results for the second quarter. Beginning in the third quarter of 2022, results for both businesses will be reported together as MATIV results with the previously disclosed reporting structure, which Andy will review shortly. Please follow up with us for any further needed clarifications as we want to make sure you understand our business trends, financial results, and reporting processes. With that, I'll turn the call over to Julie.

Thanks, Mark. We appreciate everyone joining the call today for MATIV's first earnings call as we have a strong transition from separate legacy companies to a more powerful, emerged enterprise. There's a lot to discuss, and I'm eager to share color on our positive second quarter results, our profit outlook, and some important capital allocation topics. I'll lead off by highlighting that both legacy companies delivered solid second quarter results. Pricing and inflationary costs remain key themes, and actions across both companies have offset input cost pressures and demand remains robust across our portfolio. Bottom line, the second quarter and year-to-date results track with each company's previous full-year guidance, and we enter the second half of 2022 with good momentum on many fronts. I want to take a moment to commend our global teams for great execution on the base business, operating safely and delivering outstanding product quality and service to our customers while still facilitating the close of the merger and integration planning. This transformational merger between SWM and NENA closed in early July, and man of employees are full of optimism about our future. Our organizations have come together with ambition and energy to deliver on the incredible potential of this merger, and I'm encouraged by our progress, cultural fit, and early-stage integration plans. We know integration can be a long and complicated process, and we have set up a transformation office dedicated to planning, tracking, and coordinating across all functions to ensure open communication and alignment as we move forward to deliver the expected synergies of this transaction. That said, rest assured that we have not and will not lose focus on delivering in the near term with continued excellence in our day-to-day execution. We will elaborate shortly, but I'd also highlight that we are already capturing some early synergy value with more on the way as the year progresses. As we have consistently communicated, our $65 million synergy plan is well vetted, and as I like to say, bankable. I want to reiterate a few points about our plan. First, we expect our run rate synergies to exceed half of the total plan by the end of year one. so we will have executed on over $30 million in the first 12 months. Second, these are all cost synergies, about half from SG&A and organizational spend, and the other half from procurement and supply chain-related opportunities. The synergy plan does not require asset or facility footprint rationalization to achieve the $65 million. Third, though longer term, we see top-line growth synergy opportunities that would be incremental, to that $65 million. Beyond the exciting potential for longer-term value creation of the merger, I am also pleased to share our near-term outlook. In the second half of 2022, we project adjusted EBITDA in a range of $210 to $230 million. This is consistent with previously issued annual guidance of SWM and NENA, plus some early-stage synergies. Although the external environment continues to present challenges and uncertainties, our combined portfolio positions us with greater diversification and resilience for a variety of economic backdrops. Given our strong order books, customer campaigns, and current cost structure, we are confident we can execute against these plans. Pivoting to some capital allocation topics, We have announced our first quarterly cash dividend, which annualizes to $1.60 per share, or approximately $88 million annually. This dividend cash outlay is consistent with both companies' previous total payouts and provides investors with a compelling and reliable return of capital. With respect to leverage, Andy will elaborate further, but I want to assure investors that delevering is a key priority. I'd like to now provide some high-level commentary on quarterly results. Legacy SWM delivered a solid quarter with strong demand and improved operations, particularly within the advanced materials segment. Consolidated sales increased 13%, with adjusted EBITDA up slightly year over year and up 5% sequentially. This profit growth came despite continued inflationary pressures, as revenue growth from pricing actions and volume gains covered input cost pressures on a company-wide basis. Within AMS, sales were up 14%, with double-digit organic growth at 11%. The portfolio delivered outstanding overall growth on top of a very strong quarter last year through a combination of pricing and volume. Transportation sales grew the fastest, anchored by rapid growth in paint protection films. Demand remains very strong, and we are seeing slight improvements in availability, especially compared to last year's second quarter, when TPU resin shortages first emerged. Plus, we have qualified an additional global supplier to help us meet demand. We delivered strong performance in filtration as well, particularly in water and industrial process filtration categories. Construction sales grew nicely, as did industrial products. Price increases were effective, and our teams delivered for our customers. In these times, while pricing conversations are never easy, security of supply and reliability are paramount and emerging as customers' top priority, and we executed well on both fronts during this quarter. In engineered papers, volumes were robust, driving 10% sales growth. The portfolio delivered across the board with the fastest growth coming from reduced-risk products. Overall, we were pleased with sales. However, energy costs have been escalating and hit our paper business in a significant way. While our pricing actions and negotiated volume increases covered higher material costs, the spike in energy impacted margins for the quarter. Looking forward, we expect further pricing actions, as well as some contract resets to provide increased inflationary offsets in the second half of the year. While price recovery lags with these contracts, ultimately they do catch up and result in improved margin performance. On the legacy NENA side, results clearly demonstrated excellent price cost recovery. with sales and adjusted EBITDA each up 14%. While price increases began to exceed input costs during the first quarter, as expected, we gained a lot of ground in the second quarter and are well on our way to achieving our $25 million price cost improvement target previously communicated for NENA. We are pleased to say that our price increases have been affected and accepted by the market. and our demand remains strong. Our outstanding service during this unusual supply chain environment has proven to our customers that they can rely on us, especially in times of uncertainty. Within our segment, sales growth was led by fine paper and packaging, up 21% in the quarter. All three categories, packaging, consumer products, and commercial print, saw double-digit growth. with segment volume and pricing each contributing to strong sales performance. Technical products also had double-digit growth. The release liner business continued to outperform, as well as strong gains in water filtration and industrials. Importantly, profit margins in both of NENA's operating segments increased meaningfully year over year. Our growth platforms are continuing to perform well, delivering strong volume, well-executed pricing action, and improved margins. We are also on track with previously announced capacity expansion in both our filtration and release liner businesses. These organic investment projects unlock needed capacity to continue to grow at expected rates. In summary, both companies performed well and delivered as expected in Q2. Pricing and volume remain strong, and we continue to improve margins and deliver quality to our customers. There's good momentum in our business. We're taking action on planned synergies from the merger, and we are on path to our previously announced guidance, plus some early-stage synergies. Now I'll turn it over to Andy to discuss Q2 results in more detail, as well as provide updates on other key financial topics.