Mativ Holdings, Inc.

2023 earnings conference call. On the call today from Mativ is Julie Shurtle, Chief Executive Officer, Greg Weitzel, Chief Financial Officer and Chris Cooper, Director of Investor Relations. Today's call is being recorded and will be available for replay later this afternoon. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your touch tone phone. If you need to remove yourself from the queue, please press star two. If you should require operator assistance, please press star zero. We ask that you pick up your handset to allow optimal sound quality. It is now my pleasure to turn the call over to Mr. Chris Cooper. Please go ahead.

Good morning, everyone, and thank you for joining us on MADF's third quarter 2023 earnings call. Before we begin, I'd like to remind you that comments included in today's conference call include forward-looking statements. Actual results may differ materially from these comments for reasons shown in 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 the earnings release and accompanying presentation slides. Unless stated otherwise, financial and operational metric comparisons are to the prior year period and relate to continuing operations. The earnings release issued yesterday afternoon is available on our website at ir.matib.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. Since the SWM and NENA merger closed on July 6, 2022, the third quarter of 2023 is the first reporting period since the merger that is truly comparable. However, year-to-date gap results for the first half of 2022 will still include legacy SWM, since this was prior to the merger. comparable performance for year-to-date figures to illustrate how our results compare on a like-for-like basis are shown in tables in our earnings release and the appendix of our presentation slides. Finally, with the August announcement about the sale of the engineered papers, results for this business are now being summarized separately as discontinued operations, with all remaining businesses being reported as continuing operations. With that, I'll turn the call over to Julie.

Thanks, Chris, and good morning, everyone. The third quarter marked the start of our second year as MADVs. Our teams have accomplished a lot over the past year, bringing two companies together and establishing one new can-do culture, quickly identifying and realizing synergies that are tracking ahead of our $65 million target. and completing a detailed strategic assessment of our business portfolio. As we assessed our businesses, we analyzed market dynamics coupled with our right to win, looking for the ability to grow and deliver attractive margins and returns on capital. We plan to invest most strongly behind our fastest growing and most profitable categories like filtration and release minors. and drives operational efficiencies and margin improvement across all categories. Following this review, we made the decision to divest our tobacco-related engineered paper business and found a strategic buyer who was able to move quickly with an attractive offer. The transaction is moving forward as planned and on track to close in the fourth quarter. Net proceeds from the sale are expected to be over $575 million and will be used to reduce debt. Now in our second year, we are focused on further augmenting cash flows through both operating savings and capital efficiencies and have a number of activities underway. Our supply chain efforts have been impressive. We've right-sized crew schedules and asset plans to reflect the current demand environment, and reduced costs, and have taken out over $50 million of inventory since the first quarter. We have plans to further improve inventory efficiencies, measured as a percent of sales, targeting at least another 100 basis points. I mentioned in the past that we would be working on footprint optimization as part of the merger. We've recently announced manufacturing footprint consolidation at three of our smaller and less profitable facilities and are in the process of consolidating warehouse and distribution operations as well. These changes will begin in early 2024, and while they have minor upfront costs, they will deliver meaningful ongoing savings. We have aggressive and specific cost reduction programs for manufacturing and SG&A. Some of these began delivering value earlier this year, and some will begin in early 2024. We're carefully managing capital spending, with 2024 spending expected to be below $70 million, down from the past two years. While tightening our belts, we will continue to invest in projects necessary to safely operate and maintain our equipment, as well as those delivering compelling financial returns. Lastly, synergy realization remains a priority and is ahead of plan, with over $25 million of value being delivered in 2023 and another $25 million identified for 2024. These efforts are especially appropriate in today's uncertain economic and geopolitical environment. As a manufacturing company, many of our markets are economically sensitive. The US manufacturing sector, as measured by the manufacturing PMI, contracted in the third quarter as order softness continued. And this was confirmed by volume declines reported by our customers. Turning to third quarter results, sales from continuing operations were about half a billion dollars and reflected lower customer demand due to economic conditions, continued destocking of inventory, as well as seasonal slowdowns in some of our European businesses. Sales were down 5% from Q2 and 10% below prior year. Comparisons versus prior year were impacted more significantly in specialty paper and packaging where industry-wide customer destocking continued this year and compared to a very strong prior year period. Adjusted EBITDA was $55 million for the quarter, similar to Q2, but below prior year levels. Volume continues to be the biggest driver, including impacts of fixed cost absorption at manufacturing sites. And this offset continued benefits from synergy realization and positive price input cost management. I noted many of the activities we have underway to reduce costs. Demand generation is also extremely important in this environment, and we are working closely with customers to grow, share, and explore new opportunities. Some of these efforts include the launch of new pearlized, high-quality packaging papers, where we are the only North American producer capable of making this, a faster dissolving label that improves efficiency for customers, a new mid-tier paint protection film to meet growing market adoption rates, and advancements in optical films, such as those used in ballistic resistant materials. In total, we expect these initiatives can add over $10 million in new revenue over the next 12 months. In addition, we are on track with larger projects to enable added growth in key markets. Release Miners has a strong record of profitable growth. Our new capacity in Mexico recently came online and allows us to continue this growth as we expand our position in North and South America. Air, industrial, and life science filtration are large, fast-growing markets. Our investment in a new melt-blown fine fiber asset to support these markets is on track to come online early in Q2 of next year. As noted in our last call, these two capacity additions represent over $50 million of added revenue. So let me sum up with a few comments. Over the course of the past year, our goal has been and continues to be to reposition MATIPS strategically and financially for a strong future. While the short-term environment is challenging, we know what we need to do, and our teams are focused and executing well. We are addressing the fundamentals by providing customers with innovative new products that meet their needs, managing operations to deliver high-quality products in a safe manner, and driving continuous improvement in productivity and efficiencies in all areas. We are continuing to deliver benefits by managing selling prices to cover input cost inflation and realized merger synergies. We are taking additional actions to reduce costs and increase cash flow, including footprint optimization, spending controls, and working capital and capital spending initiatives. And importantly, we continue to execute against our long-term strategy, investing in attractive markets like filtration and relief liners that will accelerate our growth rate and expand our margins. I'm confident our actions will make MADF stronger in the long run, and I'm excited about our future. I'll talk more about our outlook later in the call, but for now, we'll turn it over to Greg to review third quarter financials.