Mativ(MATV) - 2025 Q1 - Quarterly Report

Part I - Financial Information Financial Statements The company reported a Q1 net loss of $425.5 million, driven by a $411.9 million goodwill impairment charge Condensed Consolidated Statements of Income (Loss) (in millions) | | Three Months Ended March 31, | | :--- | :--- | :--- | | | 2025 | 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) | Condensed Consolidated Balance Sheet Highlights (in millions) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $686.2 | Not Provided | | Goodwill | $54.8 | $465.6 | | Total assets | $2,052.3 | Not Provided | | Total current liabilities | $288.1 | Not Provided | | Long-term debt | $1,120.1 | $1,086.7 | | Total liabilities | $1,624.1 | Not Provided | | Total stockholders' equity | $428.2 | $858.5 | Condensed Consolidated Statements of Cash Flows (in millions) | | Three Months Ended March 31, | | :--- | :--- | :--- | | | 2025 | 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 | Note 1: General Business and Segments The company operates through two segments, FAM and SAS, with the EP business now a discontinued operation - The company has two reportable segments: Filtration & Advanced Materials (FAM) and Sustainable & Adhesive Solutions (SAS)[25] - The Engineered Papers (EP) business, sold in November 2023, is presented as a discontinued operation[24] Note 2: Revenue Recognition Total Q1 2025 net sales were $484.8 million, with the US as the largest market and tapes as the top product Net Sales by Geographic Location (in millions) | Region | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | United States | $275.2 | $268.3 | | Europe | $125.8 | $141.1 | | Asia-Pacific | $47.5 | $53.0 | | Americas (excluding U.S.) | $23.8 | $27.5 | | Other foreign countries | $12.5 | $10.3 | | Total | $484.8 | $500.2 | Net Sales by Product Category | Product Category | Q1 2025 % | Q1 2024 % | | :--- | :--- | :--- | | Filtration & netting | 25% | 26% | | Advanced films | 14% | 15% | | Tapes, labels & liners | 29% | 30% | | Paper & packaging | 16% | 16% | | Healthcare & other | 16% | 13% | - The company utilizes accounts receivable sales agreements to sell certain trade receivables; in Q1 2025, $238.0 million of trade accounts receivable were sold to financial institutions[48][55] Note 6: Goodwill A $411.9 million goodwill impairment was recorded for the FAM segment, with the SAS segment at future risk - A full goodwill impairment charge of $411.9 million was recorded for the FAM segment in Q1 2025, reducing its goodwill balance to zero[66][69] - The impairment test was triggered by a sustained decline in the company's share price[67] - The discount rate for the FAM reporting unit was increased to 14% to reflect higher perceived risk in achieving forecasted cash flows[69] - The fair value of the SAS reporting unit exceeded its carrying value by only 6%, indicating a risk of future impairment; a 100bps increase in the discount rate for SAS would result in an impairment of approximately $15.0 million[71][179] Note 8: Restructuring and Other Impairment Activities Q1 2025 restructuring and impairment expenses totaled $6.3 million, mainly from a realignment initiative Restructuring and Other Impairment Expense (in millions) | Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total restructuring expense | $1.0 | $14.4 | | Other impairment expense (FAM) | $5.3 | $— | | Total | $6.3 | $14.4 | - In January 2024, the company announced an organizational realignment initiative (the 'Plan') to streamline the organization and reduce costs; charges in Q1 2024 related to this plan were $12.7 million[75] Note 9: Debt Total debt increased to $1.123 billion as of March 31, 2025, with the company in covenant compliance Total Debt Summary (in millions) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Revolving facility | $269.1 | $237.0 | | Term loans (A, B, Delayed Draw) | $470.0 | $470.0 | | 8.000% Senior unsecured notes | $400.0 | $400.0 | | Total debt (net of issuance costs) | $1,122.8 | $1,089.3 | - The company was in compliance with all debt covenants as of March 31, 2025, including a net debt to EBITDA ratio not greater than 5.50x and an interest coverage ratio not less than 2.50x[91][92] Note 14: Segment Information The FAM segment's goodwill impairment drove a consolidated operating loss despite SAS segment profitability Segment Results (in millions) | | Three Months Ended March 31, 2025 | | :--- | :--- | :--- | :--- | | | FAM | SAS | Consolidated | | Net Sales | $187.6 | $297.2 | $484.8 | | Operating profit (loss) | $(410.0) | $13.0 | $(430.6) | Segment Operating Profit (Loss) Comparison (in millions) | | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | FAM | $(410.0) | $14.6 | | SAS | $13.0 | $4.2 | | Total Segments | $(397.0) | $18.8 | | Unallocated | $(33.6) | $(32.6) | | Consolidated | $(430.6) | $(13.8) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the Q1 2025 results, focusing on the goodwill impairment's impact and liquidity Results of Operations Consolidated net sales decreased 3.1%, with a large operating loss driven by the FAM goodwill impairment Net Sales by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Filtration & Advanced Materials | $187.6 | $202.7 | $(15.1) | (7.4)% | | Sustainable & Adhesive Solutions | $297.2 | $297.5 | $(0.3) | (0.1)% | | Total | $484.8 | $500.2 | $(15.4) | (3.1)% | - The FAM segment's operating loss was $410.0 million, a $424.6 million decrease from the prior year, primarily due to the $411.9 million goodwill impairment[156] - The SAS segment's operating profit increased by $8.8 million to $13.0 million, driven by higher volume and lower SG&A expenses[157] - The effective tax rate was 5.5% in Q1 2025, down from 7.9% in Q1 2024, primarily due to the non-deductible goodwill impairment and an increased valuation allowance[161] Liquidity and Capital Resources The company maintains sufficient liquidity with $84.0 million in cash and $323.2 million in revolver capacity - As of March 31, 2025, the company had $84.0 million in cash, $9.8 million in restricted cash, and $323.2 million of undrawn revolver capacity[142] - Net leverage was 4.7x at the end of Q1 2025, versus a maximum covenant ratio of 5.50x[142] - The total debt to capital ratio increased to 72.4% at March 31, 2025, from 55.9% at December 31, 2024, largely due to the reduction in equity from the goodwill impairment[175] - A cash dividend of $0.10 per share was announced on May 7, 2025[172] Critical Accounting Policies and Estimates A material change in goodwill estimates led to a $411.9 million impairment for the FAM reporting unit - An interim goodwill impairment test was performed in Q1 2025 due to a sustained decline in the Company's share price[177] - The test resulted in a full non-cash impairment of all goodwill for the FAM reporting unit, amounting to $411.9 million, after increasing the discount rate to 14%[178] - The fair value of the SAS reporting unit was estimated to exceed its carrying value by only 6%, indicating a heightened risk of future impairment charges[179] Quantitative and Qualitative Disclosures About Market Risk Market risk exposure has not materially changed from the 2024 year-end report - There have been no material changes to the company's market risk exposure since the 2024 year-end report[186] Controls and Procedures Disclosure controls and procedures were deemed effective with no material changes to internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[187] - No changes in internal control over financial reporting occurred in Q1 2025 that have materially affected, or are reasonably likely to materially affect, internal controls[189] Part II - Other Information Legal Proceedings Current legal proceedings are not expected to have a material adverse effect on the company's financials - The Company is not currently a party to any legal proceedings that it believes would have a material adverse effect on its financial position[191] Risk Factors No material changes to risk factors were reported since the 2024 Annual Report - No material changes to risk factors were reported since the 2024 Annual Report on Form 10-K[192] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any common stock in Q1 2025, with $22.0 million remaining authorized - The company did not repurchase any shares during Q1 2025[194] - The remaining amount authorized for share repurchases is $22.0 million as of March 31, 2025[194] Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications and agreements Signatures