Mativ Holdings, Inc.

Welcome to MADF's first quarter 2025 earnings conference call. On the call today from MADF are Shruti Singhal, 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 on a listen-only mode, 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 one on your touch tone zone. If you need to remove yourself from the queue, please press the pound key. 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. Sir, you may begin.

Good morning, everyone, and thank you for joining us for MADF's first quarter 2025 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 metrics discussed during this call are non-GAAP financial metrics. Reconciliations of these metrics to the closest gap metrics are included in the appendix of the earnings release. 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 and the accompanying slide deck are available on our website at ir.mattoff.com. With that, I'll turn the call over to Shruti.

Thanks, Chris. Good morning, everyone, and thank you for joining our call. First, given this is my first time speaking with you as MATF CEO, I'll start by saying how excited I am to work with the team and lead our company and our employees. This is an important time for MATF as we work to turn around our business performance, accelerate our pace of execution, and materially reduce our leverage. At MATF, our purpose-built assets deliver bold, unique, and highly specialized solutions to meet our customers' most complex challenges. Our global capabilities paired with our localized supply solutions enable us to partner with and service our customers based on how and where they go to market. These capabilities and our business model allow us to grow our end markets together with our customers and are particularly relevant in the current geopolitical and tariff-exposed environment. We also recognize that MATF is facing challenges right now. Many of these are rooted in a continuously suppressed demand environment. As a member of the MATF Board, I have witnessed firsthand our progressions since the merger in 2022. After the destocking trend over the past few years ended, we expected a solid return to a more normalized demand environment, similar to levels before the pandemic. However, we have realized that an overall demand pickup is simply not materializing with the additional uncertainty posed by the current macroeconomic environment. The team and I have spent the last 60 days digging deep into our global operations and engaging with our talented employees, key customers, and trusted suppliers, as well as many shareholders and other external stakeholders to help inform my perspective. Our conversations made clear that this past year has been incredibly difficult for many of our stakeholders and employees. We are simply not where we need to be operationally to navigate the current demand environment or future challenges. We will not just stand on the sidelines waiting for the demand to come back. We are pivoting to a much higher sense of urgency across our company to act swiftly, comprehensively, and decisively to undertake the necessary changes to grow market share, return to sustainable and profitable growth, and most importantly, restore value to our shareholders. I'm working hand in hand with the management team and many employees throughout the organization to turn around our performance, leveraging my own experience and track record of transforming global organizations. So in line with the board's review of our strategy and support of my recommendations, we have established three near-term priorities to drive improved performance and position matter for value creation as we navigate these challenges. These are driving enhanced commercial execution, sharpening efforts to de-level the balance sheet, and conducting a strategic review of our portfolio. Let me start first with talking about driving enhanced commercial execution. We must make sure that every commercially focused function has the right tools, level of empowerment, and organizational support. This will generate new business, expand market share, and stimulate top line growth. We will achieve this by prioritizing growth initiatives, aligning our incentive structures to reward profitable growth, and de-layering for faster decision-making. From a product perspective, we plan to generate incremental demand and new business. For example, we will move existing products into adjacent applications. We will focus more on cross-selling the full MATF portfolio. And we will make it much easier for our customers to do business with us. As we announced on the last call, Ryan Elbert and his team are leading the commercial operations of both FAM and SAS segments. Ryan has put together a team of highly skilled business leaders and assembled a deep bench of subject matter experts with long track records of successful execution at global companies. This will leverage their successful go-to-market approach across the company and further unlock cross-customer and business opportunities. This cross-company go-to-market strategy has already driven improved outcomes in SaaS. Their strong leadership, commercial discipline, and customer focus have been instrumental in delivering strong SaaS segment results over the past five quarters, including four consecutive quarters of sales growth and five consecutive quarters of EBITDA and margin growth. We have also increased the cadence of our sales pipeline reviews, and we are working to ensure alignment of growth opportunities with our supply chain, track performance versus targets, and share pricing and cross-selling best practices across segments. The next area of focus is sharpening our efforts to de-lever the balance sheet through margin improvement and free cash flow generation. We have announced pricing actions effective as of March, that will positively affect Q2 and the remainder of the year in connection with our commercial efforts. A task force is currently underway comprehensively reviewing our cost and operating structure to further reduce costs, improve margins, and more aggressively pursue our asset optimization efforts. As part of this review, I have asked the team to deliver $10 to $15 million of additional cost reductions to be realized in 2025, which is in addition to the previously announced $20 million year-end 2026 cost reductions. Think of it as 30 to $35 million in cost reduction by year-end 2026, 10 to $15 million of which will be realized in 2025. These cost reductions are comprised of SG&A, operations, and procurement savings. When it comes to cash flow improvement, I'm challenging the team to further reduce capital spending and inventory levels. In this effort, we will further reduce our capital spending to $40 million per year versus the $55 million incurred in 2024. This level of capital spend will be split between maintenance and growth-oriented CapEx and will allow us to continue to invest in those assets and key categories where we see the market demand. We will also reduce our inventory levels by $20 to $30 million in 2025. The heightened discipline on capital expenditures and inventories will drive significant free cash flow expansion, further helping to accelerate debt reduction and de-levering. Last but not the least, along with the board, we will conduct a strategic portfolio review of our assets and business lines. There is a wide range of characteristics on how each product category contributes to Matted's bottom line, competitive position, margin profile, and portfolio diversity. And I want to make sure that we strategically balance that contribution. We will evaluate opportunities to unlock value to strengthen our balance sheet and go-to market positioning. With that, let me turn to the current quarter. Our overall performance in Q1, while mixed, came in as expected. Results reflected the demand patterns we're seeing in the market right now. Sales were essentially flat organically year over year. SAS continued its strong momentum, including volume improvements. largely offset by FAMS results, which were impacted by continued demand softness across automotive and construction end markets. In our SAS segment, the strong momentum that we have seen over the course of fiscal 2024 continued in the first quarter, with sales up almost 6% year over year on an organic basis. Adjusted EBITDA was up more than 3% compared to the prior year, with margin improving slightly as well. We continue to see solid volume improvement in Q1 across many of our SAS categories, with healthcare and release liners up over 20%, driving the largest gain year over year, followed by significant gains in labels and commercial print versus the market. Turning to our FAM segment, our overall performance continues to be mixed, as soft demand in our automotive and construction end markets impacted results across the segment. We saw continued demand headwinds in transportation and water filtration, while there were pockets of growth in our optical, medical, and dental film verticals. Overall FAM results were down versus prior year, driven by lower volumes in automotive, combined with the volume loss of high-margin paint protection films, and the fact that a higher price year-end inventory disproportionately affected the FAMS segment. Let me also provide a few updates on the status of our turnaround efforts underway in our advanced films vertical. In pain protection films, I approved the repurposing of resources to immediately address any commercial capacity and quality issues. Our customers are already feeling the positive impact of these initiatives as we continue to serve their needs. However, we recognize that we must now focus all our efforts in regaining our customers' trust and commitment. Additionally, we are expanding our pain protection film pipeline and are executing a mid-tier film solution in this faster-growing segment. Accelerating our presence in targeted markets such as medical and optical films is another example of growing our share in adjacent specialty markets. And I'm empowering this team to accelerate these efforts. I'm pleased to share that we are seeing a noticeable uptick in demand for these verticals that also carried into Q2. And we are working to unlock capacity to further accelerate growth in the back half of this year. Before turning the call over to Greg, I'll briefly provide some color on tariffs as they relate to our business, which we know is top of mind for many of our stakeholders. Given where tariff policy is currently, we believe MADF is well positioned as majority for products sold in a given region are manufactured in the same region. Less than 7% of our annual sales are currently subject to tariff exposure, which is a testament to our ability to provide localized supply chain options that match the geographies where and how our customers go to market. First, Tariffs to and from China impact about 2% of our sales. Tariffs from Mexico impact about 1% of our sales, while most of our sales from Canada remain exempt under USMCA. Sales from Europe and from the UK to the US comprise another 1.5% and 1% respectively. So in summary, our total sales currently exposed to tariffs with exemptions it's less than 7% of sales. Additionally, we have put together a comprehensive playbook on mitigating the impact of these exposures and identified a number of approaches tailored to each region that include corresponding pricing decisions, tariff pass-throughs, and alternative sourcing strategies. We're also pursuing business and taking share in categories where we are the local supplier and competition is outside the U.S. While we feel that the direct impact of current tariff-related policy and matters is minimal and manageable, we acknowledge that there is a wide range of outcomes when it comes to the indirect impact on demand and commercial activity. As an early indicator, though, we have not seen the heightened level of pre-buying that was expected, and rather, customers are taking a more cautionary stance. A very special thanks to the MATF teams who are planning and reacting, in many cases in real time, to the ever-shifting tariff dynamics. With that, I'll turn it over to Greg for a more detailed discussion of our financial performance.