Company History and Overview

Mativ Holdings, Inc. is a global leader in specialty materials, solving complex challenges for its customers through innovative solutions that connect, protect, and purify the world. With a diversified portfolio and a focus on high-growth end markets, Mativ has established itself as a premier partner for customers seeking advanced and sustainable materials.

Mativ's origins trace back to 1995 when it was incorporated in Delaware as a wholly-owned subsidiary of Kimberly-Clark Corporation. In the same year, Kimberly-Clark transferred its tobacco-related paper and other paper products businesses conducted in the United States, France, and Canada to the Company. Subsequently, Kimberly-Clark distributed all of the outstanding shares of common stock of the Company to its stockholders, making Mativ an independent public company.

Over the years, the company has strategically diversified its portfolio through a combination of organic innovation and targeted acquisitions, expanding its exposure to adjacent categories such as filtration, specialty films, tapes, and healthcare. This diversification strategy has been crucial in broadening Mativ's market presence and reducing its reliance on any single industry.

On July 6, 2022, Mativ made a transformative move by completing a merger transaction with Neenah, Inc. A wholly-owned subsidiary of Schweitzer-Mauduit International, Inc. (SWM) merged with and into Neenah, with Neenah surviving the merger as a direct and wholly-owned subsidiary of Mativ. Effective as of the closing date of the merger, SWM changed its name to Mativ Holdings, Inc. This combination created a global leader in the specialty materials industry, accelerating growth and innovation while also achieving significant cost synergies.

In a significant strategic shift, Mativ completed the sale of its Engineered Papers business to Evergreen Hill Enterprise Pte. Ltd. on November 30, 2023. This divestiture marked Mativ's exit from tobacco-based product markets, aligning the company's focus more closely with its sustainable growth initiatives. Following this sale, the Engineered Papers business is now presented as a discontinued operation in Mativ's financial reports.

Today, Mativ manufactures globally through its family of business-to-business and consumer product brands. The company targets premium applications across diversified and growing end-markets, from filtration to healthcare to sustainable packaging and more. Mativ's broad portfolio of technologies combines polymers, fibers, and resins to optimize the performance of its customers' products across multiple stages of the value chain. The merged entity has a strong presence across North America, Europe, and Asia-Pacific, with 35 production locations worldwide.

Business Segments and Product Portfolio

Mativ operates through two primary reportable segments: Filtration Advanced Materials (FAM) and Sustainable Adhesive Solutions (SAS).

The FAM segment, which comprised approximately 39% of the company's total revenues in 2024, focuses on manufacturing and selling highly engineered polymer, resin, and fiber-based substrates, nets, films, and other performance materials for demanding end-use applications. Key product categories within FAM include:

1. Filtration netting: Specialty filtration media and components used in transportation applications, water filtration, industrial processes, life science, HVAC, and air pollution control.
2. Extruded mesh products: Used in agriculture and various packaging applications.
3. Advanced films: Including thermoplastic polyurethane films with key attributes such as UV and scratch resistance, durability, and high-performance clarity. These are used in applications like automotive paint protection films, interlayer films and lamination for ballistic resistance, medical films and composites for advanced wound care and consumer products, security glass, high-performance graphic substrates, and emerging smart glass applications.

The SAS segment, which accounted for approximately 61% of the company's total revenues in 2024, leverages a diverse array of production techniques, including precision coating, adhesive application, saturation, and advanced converting, to manufacture specialty products that are highly customized for specific, demanding applications. Key product categories within SAS include:

1. Tapes and labels/liners: Substrates for tapes used in building construction, infrastructure, DIY, athletic, and industrial applications, as well as substrates critical to protection and adhesive separation, including release liners and carriers used in personal care, label, tape, industrial, graphic arts, composites, and medical applications.
2. Paper packaging: Premium printing and other specialty papers and packaging applications used for print collateral, advertising, direct mail, sustainable alternatives, product packaging, graphics, wallpaper, and education, as well as consumer office, stationery, and craft papers.
3. Healthcare and other solutions: Various specialized products for healthcare and other industries.

Both segments serve diverse end markets and customer bases, with no single customer representing more than 10% of consolidated net sales. The products are often highly engineered and customized, requiring extended qualification by customers. The segments are subject to seasonal fluctuations, with generally lower order volumes in the fourth quarter. Mativ competes primarily on product features, innovation, quality, and customer service within its respective markets.

Financial Performance and Operational Highlights

In the fiscal year ended December 31, 2024, Mativ reported total net sales of $1.98 billion, a slight decrease of 2.2% compared to the prior year. This decline was primarily driven by lower volumes, including volumes associated with closed and divested facilities, and lower selling prices. However, the company's Sustainable Adhesive Solutions (SAS) segment delivered strong performance, with net sales increasing by 0.1% year-over-year.

The company's Filtration Advanced Materials (FAM) segment faced some challenges, with net sales decreasing by 5.4% compared to the prior year. This was mainly due to lower volumes and lower selling prices in the advanced films and netting categories, partially offset by stable performance in the filtration business.

Mativ's adjusted EBITDA for the full year 2024 was $185 million, up 21.2% from the previous year. This improvement was driven by the strong performance of the SAS segment, which reported adjusted EBITDA growth of 18.8% year-over-year. The company's net loss for the year was $48.7 million, a significant improvement from the $507.7 million net loss in 2023, which was primarily due to a $401 million goodwill impairment charge in the prior year.

For the fourth quarter of 2024, Mativ reported revenue of $458.6 million, representing a year-over-year growth of 1.4%. Net income for the quarter was $1.5 million, which decreased compared to the prior year primarily due to higher input costs and manufacturing costs, partially offset by higher volume and lower SG&A expenses.

Operational Efficiency and Cost Optimization

In 2024, Mativ implemented a comprehensive organizational realignment initiative, the "Plan," which enabled $20 million in run-rate savings by the end of the year. The company expects an additional $20 million in overhead cost reduction by the end of 2026 through further initiatives under the Plan, including system integrations, restructuring, and transactional efficiencies.

Additionally, Mativ has made significant progress in optimizing its manufacturing footprint, reducing the number of facilities from 48 at the time of the Merger to 35 as of the end of 2024 – a reduction of over 20%. The company has also reduced the number of warehouses by 25%, driving further efficiencies and cost savings.

Sustainable Growth Initiatives and Product Innovation

Sustainability is a key focus for Mativ, and the company has taken several steps to enhance its environmental, social, and governance (ESG) efforts. In 2023, Mativ published its first comprehensive ESG report, highlighting its progress in areas such as environmental sustainability, product stewardship, and social and governance initiatives.

The company's portfolio includes products that make water and air cleaner and safer, reduce energy consumption, and support electrification, as well as items made from natural and sustainable fibers. Mativ has also implemented various initiatives to enhance the sustainability of its manufacturing processes, including recycling waste materials and sourcing wood pulp exclusively from suppliers with FSC and/or PEFC Chain of Custody certification.

Mativ's commitment to innovation is a critical driver of its growth strategy. The company invests in research and development to create and identify innovative materials and technologies that address evolving market demands. This focus on innovation has enabled Mativ to develop unique and specialized capabilities, supporting its position as a trusted partner for customers in various end markets.

Challenges and Risks

While Mativ has made significant progress in optimizing its operations and driving sustainable growth, the company faces several challenges and risks that could impact its future performance.

The company operates in a highly competitive industry, with several established competitors vying for market share. Mativ's ability to maintain its technological advantages and continue to innovate is crucial to staying ahead of the competition.

Fluctuations in raw material costs, particularly for resins, pulp, and energy, can have a significant impact on Mativ's profitability. The company's ability to pass on these cost increases to customers in a timely manner is critical to maintaining its margins.

Mativ's global operations expose it to various risks, including foreign currency exchange rate fluctuations, political and economic instability in certain regions, and supply chain disruptions. The company's ability to effectively manage these risks is essential to its long-term success.

Financials

Mativ's financial performance in 2024 showed mixed results. While total net sales decreased slightly, the company saw improvements in adjusted EBITDA and a significant reduction in net loss compared to the previous year. The Sustainable Adhesive Solutions segment demonstrated strong performance, offsetting challenges faced by the Filtration Advanced Materials segment.

For the full year 2024, Mativ reported:

• Revenue: $1.98 billion
• Net income: -$48.7 million
• Operating cash flow: $94.8 million
• Free cash flow: $39.2 million

The company's performance varies across geographic markets, with sales distributed as follows in 2024:

• United States: 55%
• Europe: 26%
• Asia-Pacific: 11%
• Americas (excluding U.S.): 5%
• Other foreign countries: 3%

Liquidity

As of December 31, 2024, Mativ's liquidity position was as follows:

• Debt/Equity ratio: 1.33
• Cash and cash equivalents: $94.3 million
• Available credit line: $356.4 million under $600 million revolving credit facility
• Current ratio: 2.40
• Quick ratio: 1.10

These metrics indicate that Mativ maintains a relatively strong liquidity position, providing financial flexibility to support its ongoing operations and strategic initiatives.

Outlook and Guidance

Looking ahead to 2025, Mativ expects market demand to remain challenged in the first quarter, which will impact Q1 results. This is due to higher inventory costs from Q4 2024 that will be sold through in Q1 2025, as well as higher input costs.

For the full year 2025, Mativ is focused on driving profit, cash generation, and further margin improvement, including continued aggressive cost reductions and operational excellence improvements. The company has provided the following specific guidance for 2025:

• Adjusted unallocated expenses of around $80 million

• Depreciation, amortization, and stock-based compensation of around $100 million
• Interest expense of around $70 million, plus $8 million in AR securitization fees
• Capital expenditures of around $50 million
• One-time costs of $15-20 million
• Slight increase in net working capital of around $10 million
• FX headwind of $15 million on topline
• Normalized tax rate of 24%
• $10-15 million headwind on input costs, expected to be offset through pricing actions

Industry Trends and Human Capital

Mativ's key end markets, including filtration, healthcare, and sustainable packaging, are expected to grow at a CAGR of 5-8% over the next 5 years. This growth is driven by macro trends such as demand for cleaner air/water, focus on health/wellness, and sustainability initiatives.

As of December 31, 2024, Mativ had approximately 5,100 full-time employees globally, supporting its operations across various markets and regions.

Conclusion

Mativ's transformation into a global leader in specialty materials has positioned the company for continued growth and success. The company's focus on innovation, operational efficiency, and sustainable practices positions it well to capitalize on the growing demand for advanced and eco-friendly materials.

Despite the challenges faced in 2024, Mativ's strong performance in the SAS segment and its ongoing efforts to streamline operations and reduce costs suggest that the company is well-equipped to navigate the current market environment. As Mativ continues to execute on its strategic initiatives, investors will likely keep a close eye on the company's ability to drive profitability, generate robust cash flows, and further strengthen its position in the specialty materials industry.

With a diverse product portfolio, global presence, and alignment with key industry trends, Mativ is poised to leverage its strengths and address challenges in the coming years. The company's commitment to innovation, sustainability, and operational excellence provides a solid foundation for long-term growth and value creation in the dynamic specialty materials market.