Mativ(US:MATV)2025-05-07 20:05Q1 2025 Overview and Management Commentary Mativ's Q1 2025 performance was mixed, with the new CEO emphasizing urgent operational improvements and strategic priorities Management Commentary and Strategic Priorities The new CEO outlined three key priorities: enhanced commercial execution, balance sheet de-leveraging, and strategic portfolio review - The new CEO highlighted that the company is not where it needs to be operationally and is pivoting to a much higher sense of urgency to restore shareholder value4 - The company's top priorities are to accelerate execution with a focus on three key areas: - Driving enhanced commercial execution - Sharpening efforts to de-lever the balance sheet - Conducting a strategic review of the portfolio5 - The SAS segment delivered its fifth consecutive quarter of strong year-over-year results, with approximately 6% organic revenue growth, while FAM performance was negatively impacted by higher-priced inventory and slow demand in key markets6 Q1 2025 Financial Highlights Mativ reported a significant GAAP loss of $425.5 million due to goodwill impairment, despite nearly flat organic sales Q1 2025 Key Financial Metrics | Metric | Q1 2025 Value | YoY Change | Key Drivers | | :--- | :--- | :--- | :--- | | Net Sales | $484.8 million | -3.1% | Organic sales were nearly flat (-0.2%) | | GAAP Loss | $(425.5) million | N/A | Includes a $411.9 million non-cash goodwill impairment charge | | GAAP EPS | $(7.82) | N/A | Includes $7.57 per share impact from goodwill impairment | | Adjusted EBITDA | $37.2 million | -19% | Lower SG&A and higher SAS volume were offset by higher costs and lower FAM volume | | Adjusted EPS | $(0.14) | N/A | Down from prior year | Segment and Financial Performance Detailed analysis of FAM and SAS segment performance, highlighting the impact of goodwill impairment and operational challenges Filtration & Advanced Materials (FAM) Segment FAM segment sales decreased by 7.4% with a substantial GAAP operating loss due to goodwill impairment and higher costs FAM Segment Q1 2025 Performance (in millions) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $187.6 | $202.7 | $(15.1) | | GAAP Operating Profit | $(410.0) | $14.6 | $(424.6) | | Adjusted EBITDA | $23.3 | $33.2 | $(9.9) | | Adjusted EBITDA Margin | 12.4% | 16.4% | -400 bps | - The significant GAAP Operating Loss in Q1 2025 was driven by $417.9 million in restructuring and impairment expenses, primarily related to goodwill impairment9 - The 30% decrease in Adjusted EBITDA was caused by lower volume/mix, higher manufacturing and distribution costs, and unfavorable net selling price versus input cost performance, which more than offset lower SG&A expenses9 Sustainable & Adhesive Solutions (SAS) Segment SAS segment achieved 5.7% organic sales growth and improved Adjusted EBITDA, driven by higher volumes and lower SG&A SAS Segment Q1 2025 Performance (in millions) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $297.2 | $297.5 | $(0.3) | | GAAP Operating Profit | $13.0 | $4.2 | $8.8 | | Adjusted EBITDA | $33.3 | $32.3 | $1.0 | | Adjusted EBITDA Margin | 11.2% | 10.9% | +30 bps | - Organic sales grew 5.7% due to higher volume across all product categories, which was offset by sales from closed/divested plants and unfavorable currency translation on a reported basis10 - Adjusted EBITDA increased by over 3%, driven by higher volume and lower SG&A expenses, which were partially offset by higher manufacturing costs and unfavorable price vs input cost performance11 Other Financial Items & Capital Management Interest expense decreased, cash used in operations was $15.9 million, and net debt stood at $1,038.8 million - Interest expense decreased to $17.8 million from $18.3 million in the prior year, due to lower average balances and interest rates13 - Year-to-date cash used in operating activities was $15.9 million, with working capital being a $22.1 million use of cash15 Debt and Liquidity as of March 31, 2025 (in millions) | Metric | Amount | | :--- | :--- | | Total Debt | $1,122.8 | | Cash and Cash Equivalents | $84.0 | | Net Debt | $1,038.8 | | Total Liquidity | ~$407 | - The company announced a quarterly cash dividend of $0.10 per share, with no shares repurchased during the first quarter1718 Consolidated Financial Statements Presents the company's income, balance sheet, and cash flow statements, reflecting the significant Q1 2025 net loss Consolidated Statements of Income (Loss) Q1 2025 net sales decreased to $484.8 million, resulting in a $425.5 million net loss primarily due to goodwill impairment Q1 2025 Consolidated Income Statement Highlights (in millions, except per share) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $484.8 | $500.2 | | Gross profit | $72.6 | $84.0 | | Goodwill impairment expense | $411.9 | $— | | Operating loss | $(430.6) | $(13.8) | | Net loss | $(425.5) | $(28.0) | | Diluted loss per share | $(7.82) | $(0.52) | Consolidated Balance Sheets Total assets decreased to $2,052.3 million due to goodwill impairment, significantly reducing stockholders' equity Balance Sheet Highlights (in millions) | Metric | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $686.2 | $658.1 | | Goodwill | $54.8 | $465.6 | | Total assets | $2,052.3 | $2,447.9 | | Total current liabilities | $288.1 | $274.5 | | Long-term debt | $1,120.1 | $1,086.7 | | Total liabilities | $1,624.1 | $1,589.4 | | Total stockholders' equity | $428.2 | $858.5 | Consolidated Statements of Cash Flow Q1 2025 saw a net cash outflow from operations of $15.9 million, with financing activities providing $24.5 million Q1 2025 Cash Flow Highlights (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operations | $(15.9) | $(13.0) | | Net cash used in investing | $(10.6) | $(21.1) | | Net cash provided by financing | $24.5 | $45.8 | | Cash at end of period | $93.8 | $128.9 | Non-GAAP Reconciliations and Supplemental Data Provides detailed reconciliations of GAAP to non-GAAP financial measures, including segment reporting and organic sales growth Business Segment Reporting & Reconciliations Reconciles GAAP operating loss to adjusted EBITDA, highlighting significant non-GAAP adjustments, primarily from FAM segment impairment Q1 2025 Reconciliation from GAAP Operating Loss to Adjusted EBITDA (in millions) | Metric | FAM | SAS | Unallocated | Consolidated | | :--- | :--- | :--- | :--- | :--- | | GAAP Operating Profit (Loss) | $(410.0) | $13.0 | $(33.6) | $(430.6) | | Adjusted Operating Profit | $16.4 | $20.2 | $(21.4) | $15.2 | | Adjusted EBITDA | $23.3 | $33.3 | $(19.4) | $37.2 | - Total non-GAAP adjustments to operating profit were $445.8 million in Q1 2025, dominated by the $417.9 million in restructuring and impairment expenses within the FAM segment36 Organic Net Sales Growth Reconciliation Consolidated organic sales grew 0.2%, driven by strong SAS segment performance offset by FAM segment decline Q1 2025 Organic Net Sales Growth vs. Q1 2024 | Segment | Reported Growth | Organic Growth | Organic Constant Currency Growth | | :--- | :--- | :--- | :--- | | FAM | -7.4% | -7.4% | -6.4% | | SAS | -0.1% | 5.7% | 6.6% | | Consolidated | -3.1% | 0.2% | 1.2% | Reconciliation of Net Loss to Adjusted Measures Reconciles GAAP net loss and EPS to adjusted figures, showing a $6.0 million adjusted loss and a $29.8 million free cash flow outflow Q1 2025 Reconciliation of GAAP to Adjusted Net Loss and EPS | Metric | GAAP Value | Adjustments | Adjusted Value | | :--- | :--- | :--- | :--- | | Net Loss (millions) | $(425.5) | $419.5 | $(6.0) | | Diluted EPS | $(7.82) | $7.68 | $(0.14) | - The largest adjustments to diluted EPS were for goodwill impairment (+$6.35) and a change of valuation allowance on tax attributes (+$0.88)41 Q1 2025 Free Cash Flow and Net Debt (in millions) | Metric | Value | | :--- | :--- | | Cash used in operating activities | $(15.9) | | Free cash flow | $(29.8) | | Net debt | $1,038.8 |