Mativ expects Q4 adjusted EBITDA to rise at least 10% year-over-year as portfolio review accelerates

Earnings Call Insights: Mativ Holdings, Inc. (MATV) Q3 2025

MANAGEMENT VIEW

* Shruti Singhal, President and CEO, reported "another quarter that exceeded our expectations with overall year-over-year improvement in our top line and bottom line results." She highlighted that "adjusted EBITDA came in 10% higher at the top end of that range, and we doubled free cash flow versus last year on a year-to-date basis." Singhal emphasized that this six-month period is the company's "strongest 6-month period since the merger on both an adjusted EBITDA and free cash flow basis."
* Singhal detailed that SAS Sales were up 5% on an organic basis, marking the sixth consecutive quarter of year-over-year improvement, with notable market share gains in cable tapes, commercial print, and consumer paper. SAS adjusted EBITDA reached $48.3 million, up 17% versus prior year, with a margin of 15.3%.
* FAM segment achieved its first quarter of growth in both sales and adjusted EBITDA since the merger, with sales increasing over 4% from last year. Singhal credited commercial team actions for 20-plus percent growth in HVAC and air pollution control, and almost 10% growth in water filtration.
* Singhal announced the closure of the Wilson, North Carolina facility as part of the ongoing strategic portfolio review, with closure expected to be "accretive to earnings starting in Q1 2026."
* Greg Weitzel, CFO, stated "Consolidated net sales from continuing operations for the quarter were $513 million, up 3% compared to $498 million in the prior year on a reported basis and up $25 million or 5% on an organic basis. Adjusted EBITDA from continuing operations was $66.8 million, up 10% from $60.8 million in the prior year."
* Weitzel added, "Adjusted EPS were $0.39 a share versus $0.21 a share in the prior year period."

OUTLOOK

* Management expects Q4 adjusted EBITDA to increase by at least 10% versus last year, driven by "year-over-year increase in volume, particularly on the SAS side, favorable relative net selling price versus input cost, operational improvements and cost savings."
* Weitzel updated tariff guidance to "less than 6% of our annual sales are currently subject to tariffs," down from 7% previously.
* The company maintains its target to reduce year-end inventory levels by $20 million in 2025 versus 2024 and continues to manage capital expenditures to $40 million for the year.

FINANCIAL RESULTS

* Adjusted EBITDA reached $66.8 million, driven by favorable net selling price versus input costs, higher organic volume, and lower manufacturing costs.
* Free cash flow for Q3 was $66.7 million, $42 million higher year-over-year, and sequentially better by $17 million, making Q3 2025 the company's second highest cash flow quarter since the merger.
* SAS segment net sales were $315 million, up more than $16 million or 5% on an organic basis, with SAS adjusted EBITDA of $48 million, a 17% increase year-over-year.
* FAM segment net sales were $198 million, up 4% year-over-year, with adjusted EBITDA of $37 million.
* Net debt at the end of the quarter was $932 million, a reduction of more than $60 million versus last quarter, with available liquidity at $517 million and net leverage ratio reduced to 4.2x.

Q&A

* Daniel Harriman, Sidoti: Asked about the timeline for full benefit of SAS commercial actions on FAM and updates on the portfolio review. Singhal responded the impact is now materializing, citing "a 4% increase" year-on-year and the first quarter of growth in FAM sales and EBITDA since the merger. On the portfolio review, Singhal said the process is "fully encompassing," with the Wilson facility closure and R&D optimization highlighted.
* Massimiliano Pilato, Stifel: Requested details on volume and pricing within subsegments and costs related to the Wilson facility closure. Singhal listed demand improvements in cable tapes, commercial print, water filtration, and others. Weitzel noted the Wilson closure represents less than 1% of sales, with some recognized non-cash impairment charges and onetime cash costs, but overall accretive to EBITDA and margins.
* Lars Kjellberg, Stifel: Queried on market share gains amid pricing discipline and the margin outlook for 2026. Singhal attributed gains to "delayered for faster decision-making" and cross-selling, supported by operations and supply chain excellence. Weitzel stated the path to a 15% margin would be gradual, with continued improvement expected in 2026 but no specific guidance provided.

SENTIMENT ANALYSIS

* Analyst tone was generally positive, with congratulatory remarks and interest in execution timelines and margin trajectory. Analysts pressed for specifics on subsegment performance, cost outcomes, and portfolio moves.
* Management maintained a confident and upbeat tone in prepared remarks, frequently referencing "strongest period since the merger" and "continued progress," but acknowledged market uncertainties and the gradual nature of margin improvement. During Q&A, management responses were thorough, emphasizing results already achieved and reiterating ongoing priorities.
* Compared to the previous quarter, both analysts and management sustained a positive and forward-focused tone, with management showing increased confidence due to stronger results and visible impacts from strategic initiatives.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for adjusted EBITDA in Q4 shifted from a 5-10% increase to "at least 10%" year-over-year growth, reflecting greater confidence.
* FAM segment returned to growth for the first time since the merger, contrasting with a year-over-year decline in Q2.
* Closure of the Wilson facility marks acceleration in the strategic portfolio review, while the previous quarter only referenced ongoing evaluation.
* Free cash flow and adjusted EBITDA hit multi-quarter highs, building on Q2 momentum.
* Tariff exposure guidance improved to less than 6% of sales, down from 7% in Q2.
* Analyst focus shifted from questions on paint protection and optical films to deeper inquiries about subsegment performance, cost improvement realization, and the impact of commercial initiatives.
* Management tone showed heightened confidence, referencing sustained improvement and strategy execution, compared to a cautious optimism in Q2.

RISKS AND CONCERNS

* Demand environment remains challenging, with tariffs and macroeconomic policy changes cited as ongoing headwinds.
* Distribution expenses were elevated due to cross-sourcing to avoid tariffs, but operational improvements are underway to offset these costs.
* Management acknowledged "overall demand patterns continue to be mixed and challenged in the construction and automotive sectors."
* The company is executing actions to mitigate tariff impacts, optimize footprint, and reduce costs, including facility closures and SKU rationalization.

FINAL TAKEAWAY

Mativ management underscored the effectiveness of its recent strategic decisions, which have driven significant improvements in adjusted EBITDA, free cash flow, and segment performance. The company projects at least 10% adjusted EBITDA growth for Q4 2025, supported by strong commercial execution and portfolio optimization, while maintaining a focus on deleveraging and operational excellence amid ongoing market uncertainties. The closure of the Wilson facility and further progress in the portfolio review are expected to be accretive to earnings and margins in 2026, solidifying the foundation for continued value creation for shareholders.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/matv/earnings/transcripts]

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