Executive Summary / Key Takeaways

• Turnaround Momentum: Mativ Holdings, Inc. (NYSE:MATV) is demonstrating a significant operational turnaround, with Q2 2025 sales up over 8% and adjusted EBITDA up over 80% sequentially, signaling a return to a more normalized performance trajectory for the second half of the year.
• Aggressive Deleveraging & Cash Flow Focus: The company has made debt reduction its top priority, targeting approximately twice the free cash flow in 2025 compared to 2024, supported by $35 million to $40 million in cost reductions by year-end 2026, reduced capital expenditures, and inventory optimization.
• Differentiated Technology & Strategic Growth: Mativ leverages proprietary technology in advanced materials and a "One Mativ" integrated supply chain solution to drive growth in high-value niche markets like filtration, medical films, and smart glass, positioning it for market share gains despite broader macroeconomic headwinds.
• Competitive Agility: Despite facing competition from larger, more commoditized players and lower-cost Asian imports in certain segments, Mativ's localized supply chain, product innovation, and commercial execution are enabling it to gain share and mitigate tariff impacts.
• Outlook for H2 2025: Management anticipates favorable year-over-year adjusted EBITDA and cash flow in Q3 and Q4, driven by volume increases, improved pricing, and realized cost savings, underscoring confidence in the ongoing strategic pivot.

Mativ's Core and the Specialty Materials Landscape

Mativ Holdings, Inc. (NYSE:MATV), established in 1995 as Schweitzer-Mauduit International, Inc., transformed significantly in July 2022 with its name change and the pivotal Neenah merger. This strategic move solidified its position as a global leader in specialty materials, engineering innovative solutions across diverse end-markets. The company operates through two distinct, yet complementary, segments: Filtration & Advanced Materials (FAM) and Sustainable & Adhesive Solutions (SAS).

Mativ's core strength lies in its proprietary technology, which combines polymers, fibers, and resins to optimize product performance across various stages of the value chain. This technological differentiation provides tangible benefits, such as enhanced efficiency in filtration applications, superior performance in advanced films, and robust adhesive solutions. For instance, its high-efficiency filtration media and components are critical for transportation, water purification, and industrial processes, offering performance advantages that differentiate it from more generalized offerings in the market.

The company's "One Mativ" solution further exemplifies its technological and operational edge. This unique capability allows customers to procure not only base film products but also fully coated and converted film products from a single source. This integrated approach improves quality, reduces customer supply chain complexity, and shortens lead times, a significant competitive advantage in an industry where customers often rely on multiple suppliers for these steps.

In the broader specialty materials landscape, Mativ competes with a diverse set of players. Direct competitors like Glatfelter Corporation (GLT) focus on engineered papers and filtration, while International Paper Company (IP) and WestRock Company (WRK) are giants in paper and packaging. Berry Global Group, Inc. (BERY) specializes in plastic and flexible packaging. Mativ's market positioning is that of a specialized innovator, particularly in high-value applications where its advanced materials and integrated solutions provide a distinct edge.

Mativ's emphasis on non-plastic materials and sustainable solutions also provides a competitive advantage, particularly against companies like Berry Global, in an increasingly eco-conscious market. While larger competitors like IP and WRK benefit from scale and cost efficiencies in commoditized segments, Mativ differentiates through innovation, product customization, and strategic adaptability in niche markets. Its global footprint and localized supply chain further enable stronger customer relationships and operational execution, allowing it to pursue business and gain share where competition is external to the U.S.

A History of Transformation and Recent Headwinds

The 2022 merger and subsequent strategic initiatives aimed to streamline Mativ's operations, reducing its manufacturing footprint from 48 sites to 35 and decreasing outside warehouses by over 25%. These actions were designed to enhance efficiency and focus the portfolio. The divestiture of the Engineered Papers (EP) business in November 2023 further pruned nonstrategic assets, aligning the company with higher-growth, higher-margin opportunities.

Despite these proactive measures, Mativ encountered significant challenges. A production quality issue in its paint protection film business in late 2023 led to volume declines and market share loss, particularly impacting the FAM segment. This internal operational stumble, coupled with a continuously suppressed demand environment across key sectors like automotive and construction, created a difficult operating landscape. The Purchasing Managers' Index (PMI) falling to its lowest point since COVID underscored the contraction in manufacturing and materials industries, directly correlating to Mativ's performance.

The Singhal Era: A Pivot Towards Urgency and Value Creation

The first quarter of 2025 marked a new chapter with Shruti Singhal's appointment as CEO. Recognizing the need for decisive action in a persistently challenging macroeconomic environment, Singhal introduced three near-term priorities: driving enhanced commercial execution, sharpening efforts to delever the balance sheet, and conducting a strategic review of the portfolio. This pivot reflects a "much higher sense of urgency" across the company.

Under Singhal's leadership, Mativ has set aggressive financial targets. The company is now targeting $35 million to $40 million in cost reductions by year-end 2026, with a substantial $15 million to $20 million expected to flow through the P&L in 2025. These savings are primarily derived from SG&A, operations, and procurement. Complementing these efforts, annual capital expenditures are being reduced to $40 million, down from $55 million in 2024, and a $20 million to $30 million reduction in year-end 2025 inventory levels is targeted, all without impacting customer service.

Q2 2025: Tangible Evidence of a Turnaround

Mativ's Q2 2025 results provide measurable evidence that the strategic pivot is gaining traction. The company delivered a significant sequential step-up from Q1, with sales increasing over $40 million (up more than 8%) and adjusted EBITDA rising over $30 million (up more than 80%). This performance is more reflective of the P&L shape expected in the latter half of the year.

On a year-over-year basis, Q2 2025 sales were up over 2% organically, and adjusted EBITDA increased 1% over a strong prior-year comparative quarter. This improvement was primarily driven by an $8 million favorable impact from higher volume/mix and lower SG&A costs, partially offsetting $5 million in higher manufacturing and distribution costs and $2 million in unfavorable net selling price versus input costs.

The Sustainable & Adhesive Solutions (SAS) segment continued its strong momentum, marking its fifth consecutive quarter of year-over-year organic sales improvement, up 5%. This growth was fueled by solid sales in tapes and labels, liners, healthcare, and commercial print, with strategic pricing offsetting input cost headwinds. SAS operating profit surged by 59.0% year-over-year to $24.8 million in Q2 2025, driven by lower restructuring expenses and reduced SG&A.

The Filtration & Advanced Materials (FAM) segment, while still facing mixed demand from the automotive and construction sectors, showed strong pockets of growth. HVAC, air pollution control filtration, and optical films demonstrated robust performance. The advanced films business, particularly paint protection film, exhibited sequential improvement, with volumes narrowing the gap to 2024 levels. It is important to note that FAM's six-month operating loss of $387.4 million includes a significant $411.9 million non-cash goodwill impairment charge recorded in Q1 2025, a direct response to a sustained decline in the company's share price. Excluding this, FAM's operating profit would have been $24.5 million for the six months, reflecting a decrease due to higher manufacturing and distribution costs, unfavorable net selling price versus input cost, and lower volume/mix, partially offset by lower SG&A.

Operational Excellence and Technological Edge in Action

Mativ's strategic initiatives extend to operational excellence and leveraging its technological advantages. The "tiger team" approach, successfully deployed in the healthcare segment (which saw above-market organic sales growth of over 5% in 2024 and significantly improved profitability), is now focused on the advanced films vertical. This team is addressing quality issues, expanding into adjacent markets like medical and optical films, and developing a mid-tier paint protection product to counter increased competition from Asia.

Significant R&D and new technological developments are underway. The optical films category, already up over 20% year-over-year, is benefiting from incremental customer commitments for high-performance applications in transportation, military, and construction. Mativ's partnership with Miru company to develop innovative smart glass products for autos and buildings is a prime example of its technological roadmap. These products aim to increase energy efficiency, improve temperature control, and enhance aesthetics, with a large EV manufacturer as the first customer for a projected 2026 launch. This initiative targets efficiencies in energy usage and a reduced carbon footprint, directly addressing evolving market demands.

Further investments include a new medical films line in the U.K., set to start in Q1 2025, which is expected to provide over $15 million in incremental revenue over four years. A new specialty tape line in Canada, starting early 2026, is projected to add over $20 million in incremental revenue over three years. These investments, totaling over $115 million in incremental revenues over the next three to four years, underscore Mativ's commitment to expanding its addressable markets through differentiated technology and strategic partnerships.

Competitive Dynamics and Strategic Positioning

Mativ's competitive standing is shaped by its specialized focus and technological prowess. Against larger, more diversified players like International Paper and WestRock, Mativ's strength lies in its ability to offer highly specialized, performance-oriented materials rather than commoditized products. While IP and WRK benefit from vast scale and integrated supply chains, Mativ differentiates through innovation speed and product customization, particularly in healthcare and filtration. Its "One Mativ" solution, providing a holistic supply chain for film products, is a unique offering that reduces customer complexity and cost, a clear differentiator against competitors who may only offer parts of the solution.

In the paint protection film market, Mativ faces increased competition from lower-cost, lower-performance products from Asia. To counter this, Mativ is not only improving its premium product quality but also developing a mid-tier alternative. This dual strategy aims to capture market share across different price points while emphasizing the superior performance of its premium offerings. The company's localized supply chain also provides a strategic advantage, particularly in a volatile trade environment. With less than 7% of annual sales currently subject to tariffs, Mativ is well-positioned to mitigate direct impacts through alternative sourcing and pricing, and even benefit from tariffs on Chinese-made goods by being a local supplier.

Mativ's commercial teams are actively driving market share gains, securing over $10 million in HVAC and air pollution control customers, and new long-term commitments for release liners with major North American consumer goods companies. The company's ability to cross-sell its diverse portfolio, leveraging the successful go-to-market approach from SAS across FAM, is a key strategic lever for future growth and competitive resilience.

Financial Health and Deleveraging Path

As of June 30, 2025, Mativ reported net debt of $995 million, a reduction of over $40 million from the prior quarter. The net leverage ratio stood at 4.5x, providing a full turn of headroom against the 5.5x covenant. Deleveraging the balance sheet remains the company's "number one priority for cash flow utilization," with a target leverage range of 2.5x to 3.5x now expected by 2026.

The company's commitment to generating significant free cash flow is central to this deleveraging strategy. Mativ expects to deliver approximately twice the free cash flow in full year 2025 compared to 2024, driven by the aforementioned cost reductions, reduced capital expenditures ($40 million for 2025), and a $20 million to $30 million reduction in inventory. These initiatives are designed to materially improve cash flow generation throughout 2025.

Mativ's debt structure is relatively stable, with over 80% of its debt at a fixed rate and maturities staggered between 2027 and 2029. Interest expense for full year 2025 is projected to be around $75 million, plus $9 million in AR facility fees. The company also continues to pay a cash dividend of $0.10 per share, a policy reviewed and affirmed by the board, while share repurchases are on hold until leverage targets are met.

Outlook and Risks

Management's outlook for the second half of 2025 is optimistic, with Q3 and Q4 adjusted EBITDA and cash flow levels expected to compare favorably year-over-year. This anticipated step-up is attributed to increased volume (particularly in SAS), favorable net selling price versus input costs, operational improvements, and realized cost savings. For modeling purposes, full-year 2025 assumptions include $15 million to $20 million in realized cost reductions, $100 million for depreciation, amortization, and stock-based compensation, and a normalized tax rate of 24%.

Despite this positive outlook, Mativ acknowledges ongoing macroeconomic uncertainty and the potential for indirect impacts from tariffs, which could affect sales and operating leverage. While direct tariff exposure is minimal, customer caution and a lack of pre-buying indicate continued demand softness. A key risk factor is the fair value of the SAS reporting unit, which, as of March 1, 2025, exceeded its carrying value by only approximately 6%. Unfavorable changes in general economic conditions, market fluctuations, or further sustained declines in share price could lead to future goodwill impairment charges for SAS.

Conclusion

Mativ Holdings, Inc. is in the midst of a determined strategic reawakening, pivoting with urgency to transform its operational and financial performance. Under new leadership, the company is executing a clear roadmap focused on enhanced commercial execution, aggressive deleveraging, and strategic portfolio optimization. The strong sequential performance in Q2 2025 provides tangible evidence that these initiatives are beginning to yield results, setting the stage for a more robust second half of the year.

Mativ's investment thesis is underpinned by its ability to leverage differentiated technology and an agile, localized supply chain to capture growth in specialized markets, even amidst a challenging macroeconomic backdrop. The commitment to doubling free cash flow in 2025 and achieving target leverage by 2026 demonstrates a clear path to value creation. While macroeconomic headwinds and competitive pressures persist, Mativ's strategic focus on innovation, operational efficiency, and disciplined financial management positions it to unlock significant value for shareholders in the coming years.