Executive Summary / Key Takeaways

• Mativ Holdings, Inc. (NYSE:MATV) is undergoing a significant operational and strategic transformation, pivoting towards enhanced commercial execution, aggressive deleveraging, and a focused portfolio review to drive sustainable and profitable growth.
• The company's Sustainable Adhesive Solutions (SAS) segment is a consistent outperformer, demonstrating six consecutive quarters of year-over-year sales improvement and strong adjusted EBITDA growth, providing a proven go-to-market strategy for broader company application.
• Mativ's Filtration Advanced Materials (FAM) segment is showing early signs of a turnaround, with Q3 2025 marking its first quarter of sales and adjusted EBITDA growth since the merger, driven by strong performance in high-growth niches like water, HVAC, and air pollution control.
• Aggressive cash flow generation and debt reduction are top priorities, with Mativ expecting to double its free cash flow in 2025 compared to 2024, supported by significant cost savings, reduced capital expenditures, and optimized working capital.
• Technological differentiation in engineered materials, coupled with a localized supply chain and strategic R&D, underpins Mativ's competitive advantage in specialized, high-performance applications across diverse end-markets.

Mativ's Core Business and Strategic Transformation

Mativ Holdings, Inc. stands as a global leader in specialty materials, engineering innovative solutions that connect, protect, and purify the world. The company's business model is built on purpose-built assets and global capabilities, complemented by localized supply solutions, enabling it to partner effectively with customers across their diverse go-to-market strategies. This approach is particularly pertinent in the current geopolitical and tariff-exposed environment. Mativ operates through two distinct yet complementary segments: Filtration Advanced Materials (FAM) and Sustainable Adhesive Solutions (SAS).

The FAM segment is dedicated to filtration media and components, advanced films, coating and converting solutions, and extruded mesh products. It directly serves high-growth end markets such as water and air purification, life sciences, industrial processes, transportation, glass and glazing, packaging, agriculture, building and construction, and safety and security. In contrast, the SAS segment focuses on tapes, labels, liners, specialty paper, packaging, and healthcare solutions, reaching customers through both distribution and direct channels in growing and mature markets like building and construction, DIY, product packaging, personal care, and medical device fixation.

Mativ is currently executing a strategic pivot, characterized by a heightened sense of urgency to act swiftly and decisively. This transformation is centered on three near-term priorities: driving enhanced commercial execution, sharpening efforts to delever the balance sheet, and conducting a strategic review of its portfolio. This proactive stance is a direct response to a continuously suppressed demand environment, where an expected return to pre-pandemic levels has not materialized, compounded by macroeconomic uncertainties.

Technological Edge and Innovation Driving Value

Mativ's competitive advantage is deeply rooted in its core technology, which involves intelligently combining polymers, fibers, and resins to optimize the performance of its customers' products across multiple stages of the value chain. This engineering expertise allows Mativ to target premium applications and solve complex challenges. For instance, in the FAM segment, its high-efficiency filtration media and components are critical for transportation, water filtration, industrial processes, life science, HVAC, and air pollution control. These advanced materials provide superior performance in demanding environments, contributing to higher product efficacy and potentially enabling higher pricing power.

The company's advanced films, including paint protection films, optical films for glass and glazing, interlayer films for ballistic resistance, and medical films for advanced wound care, showcase its material science capabilities. The optical films category, for example, has demonstrated robust growth, up over 20% year-over-year, driven by strong customer commitments for high-performance applications in transportation, military, and construction end markets. Furthermore, FAM's HVAC and air pollution control products are directly benefiting from the strong year-over-year growth in the data center market, a trend expected to continue with the expansion of AI data center capacity. This direct linkage to high-growth secular trends underscores the "so what" for investors: Mativ's technological solutions are embedded in critical, evolving industries, providing a foundation for sustained demand.

Mativ is also strategically optimizing its R&D efforts, prioritizing projects that are accretive in the near term and exceed ROI benchmarks. This initiative has successfully lowered overall R&D spend while maintaining the commercial pipeline, ensuring resources are allocated to the most impactful innovations. New smart glass film partnerships are also in development, poised to support longer-term growth in optical films from 2026 onwards. This disciplined approach to innovation, coupled with a focus on high-performance applications, strengthens Mativ's competitive moat and supports its long-term growth strategy.

A History of Strategic Evolution and Operational Transformation

Mativ's journey, from its incorporation in 1995 as Schweitzer-Mauduit International, Inc. to its rebranding and merger with Neenah in July 2022, has been marked by strategic evolution. The merger, which established the current FAM and SAS segments, was a pivotal step in expanding its specialty materials portfolio. Post-merger, Mativ continued to refine its asset base, notably divesting its Engineered Papers (EP) business in November 2023 to shed underperforming and nonstrategic assets. This move was part of a broader effort to streamline its plant footprint, reducing the number of operating sites from 48 at the time of the merger to 34 by Q3 2025.

A significant operational challenge emerged in late 2023 with a quality issue in the paint protection film within the FAM segment, leading to market share loss. Mativ responded with a comprehensive turnaround plan, including investments in visual detection technology and improved process controls, which significantly enhanced quality by mid-2024. The company is actively working to regain customer trust and commitment in this segment, including expanding its pipeline with a new mid-tier film solution. In early October 2025, Mativ announced the strategic decision to close its Wilson, North Carolina facility by the end of Q4 2025, a move expected to be accretive to earnings starting in Q1 2026. This demonstrates a commitment to operational efficiency and portfolio optimization.

Further organizational realignment initiatives, announced in January 2024, aim to streamline complexity, leverage business-critical resources, and reduce overhead costs. Ryan Elwart, previously leading the successful SAS segment, was promoted to oversee commercial activities across both FAM and SAS, tasked with replicating SAS's proven go-to-market strategies and fostering cross-selling opportunities. These historical and ongoing transformations underscore Mativ's agility and commitment to adapting its operational model to market realities.

Competitive Positioning in a Dynamic Market

Mativ operates in a competitive landscape against diversified industrial conglomerates and specialized material providers. Key direct competitors include 3M Company (MMM), Berry Global Group, Inc. (BERY), DuPont de Nemours, Inc. (DD), and Avery Dennison Corporation (AVY). Mativ distinguishes itself through its focus on customized, high-performance engineered solutions and a localized supply chain, which customers value for flexibility and reliability. This approach has enabled Mativ to secure long-term agreements and incremental commitments with existing and new customers.

In comparison to larger, more diversified players like 3M and DuPont, Mativ's scale and R&D depth may be qualitatively smaller. However, Mativ's strength lies in its operational focus and ability to deliver specialized solutions in niche markets. For instance, the SAS segment is actively driving market share gains in cable tapes, commercial print, and consumer paper, while also realizing cross-selling opportunities across its tapes and liners businesses. In the FAM segment, despite broader market challenges, Mativ is regaining business and making meaningful progress in closing the year-over-year comparison gap in films. Its localized supply chain allows it to pursue business and gain share in categories where it is the local supplier, effectively countering competition from outside the U.S.

While direct quantitative comparisons of market share across all niche segments are challenging to ascertain, Mativ's consistent organic growth in SAS and the recent turnaround in FAM suggest effective competitive execution. Indirect competitors, such as companies offering 3D printing or sustainable biomaterials, pose a long-term threat by potentially offering alternative solutions. However, Mativ's ongoing R&D optimization and strategic portfolio review are designed to ensure its offerings remain competitive and aligned with evolving market demands.

Financial Performance: A Turnaround in Progress

Mativ's financial performance in Q3 2025 signals a significant step in its turnaround journey. Consolidated net sales for the three months ended September 30, 2025, increased by 3% to $513.70 million, or 5% on an organic basis, exceeding analyst expectations. Adjusted EBITDA for the quarter rose 10% year-over-year to $66.8 million, reaching the top end of management's guidance. This strong performance contributed to a doubling of free cash flow year-to-date compared to 2024, with Q3 2025 free cash flow at $66.7 million, marking the second-highest quarter since the merger.

The SAS segment continued its robust performance, with net sales increasing 2.1% to $315.40 million (5% organically) and adjusted EBITDA up over 17% to $48.3 million. This resulted in a strong adjusted EBITDA margin of 15.3%, a 200 basis point improvement year-over-year. The FAM segment, while still facing headwinds in certain sectors, showed a significant turnaround, with Q3 2025 sales of $198.30 million increasing 4.6% year-over-year, marking its first quarter of sales and adjusted EBITDA growth since the merger. However, for the nine months ended September 30, 2025, Mativ reported a net loss of $438.20 million, or $8.04 per diluted share, primarily due to a $411.90 million non-cash goodwill impairment charge in the FAM segment during Q1 2025. Excluding this impairment, FAM's operating profit for the nine months was $35.90 million.

From a liquidity standpoint, Mativ reported total debt of $1028.90 million as of September 30, 2025, with $97.10 million in cash and cash equivalents and $517 million in available liquidity. The net leverage ratio stood at 4.2x, well within the maximum covenant ratio of 5.50x and trending towards the target range of 2.5x to 3.5x. The company's debt maturities are staggered between 2027 and 2029, with over 80% at a fixed rate, providing financial stability. The recent amendment to the Receivables Sales Agreement, extending its term and reducing commitment, further optimizes its working capital management.

Outlook and Strategic Initiatives for Future Growth

Mativ's management is confident in its ability to sustain positive momentum, driven by ongoing strategic initiatives. For Q4 2025, adjusted EBITDA is expected to increase by at least 10% year-over-year, fueled by volume growth (particularly in SAS), favorable net selling price versus input costs, operational improvements, and cost savings. While Q4 cash flow is typically lower due to seasonality, it is expected to be similar to the prior year.

The company has set ambitious targets for cost reductions, aiming for $35 million to $40 million in savings by year-end 2026, with $15 million to $20 million expected to be realized and flow through the P&L in 2025. Capital expenditures are being managed tightly at $40 million for 2025, and year-end inventory levels are targeted for a $20 million to $30 million reduction. These efforts are projected to make working capital a $10 million source of cash for the full year 2025, contributing to the expectation of doubling free cash flow compared to 2024. The closure of the Wilson, North Carolina facility is anticipated to be accretive to earnings starting in Q1 2026, further supporting margin improvement.

Management's rationale for this positive outlook is grounded in the belief that their "pivot and turnaround plan is working," and the "heightened sense of urgency and pace of execution" are yielding measurable results. They anticipate fully offsetting an expected $10 million to $15 million headwind in input costs for 2025 through targeted pricing actions. The continued focus on high-growth areas within FAM, such as HVAC and water filtration, and the sustained strength of SAS, are expected to drive future revenue and profitability.

Risks and Challenges

Despite the positive momentum, Mativ faces several pertinent risks. The demand environment remains uncertain, with macroeconomic policies and tariffs constantly changing market dynamics. While Mativ's direct tariff exposure is less than 6% of annual sales, indirect effects can still impact customer order patterns and operational efficiencies. The company's exposure to cyclical industries like construction and automotive, particularly within the FAM segment, can lead to demand fluctuations.

The significant goodwill impairment charge in Q1 2025 highlights the sensitivity of asset valuations to sustained declines in share price and market conditions. There is a risk that unfavorable changes in general economic conditions, market fluctuations, or adverse changes in end-market sectors could impact the fair value of the SAS reporting unit, potentially leading to future impairment charges. While deleveraging is a top priority, the company's decision to continue its dividend payments, despite this focus, could be a point of scrutiny for some investors.

Conclusion

Mativ Holdings, Inc. is in the midst of a profound transformation, strategically repositioning itself for sustainable growth and enhanced shareholder value. The company's core investment thesis is underpinned by its specialized materials expertise, a disciplined operational turnaround, and a clear focus on strengthening its financial foundation. The consistent outperformance of the SAS segment, coupled with the nascent but promising recovery in FAM, demonstrates the effectiveness of management's strategic pivot towards commercial excellence and operational agility.

Mativ's technological differentiators in engineered materials provide a competitive edge in high-growth end-markets, from advanced filtration to medical films and data center components. The aggressive deleveraging initiatives, supported by substantial cost savings, optimized capital allocation, and robust free cash flow generation, are critical steps towards achieving its target leverage range. While macroeconomic uncertainties and competitive pressures persist, Mativ's proactive approach, localized supply chain, and commitment to continuous improvement position it to capitalize on opportunities and navigate challenges, ultimately driving long-term value creation for its shareholders.