Magnera Corp (MAGN) Q3 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Glatfelter's Third Quarter Conference Call. At this time, all participants' lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your host today Ramesh Shettigar. Please go ahead sir.

Thank you, Prince. Good morning and welcome to Glatfelter's 2019 Third Quarter Earnings Conference Call. This is Ramesh Shettigar, Vice President of Investor Relations and Corporate Treasurer. On the call today to present our third quarter results are Dante Parrini, Glatfelter's Chairman and Chief Executive Officer; and Sam Hillard, Senior Vice President and Chief Financial Officer. Before we begin our presentation, I have a few standard reminders. During our call this morning, we will use the term adjusted earnings as well as other non-GAAP financial measures. A reconciliation of these financial measures to our GAAP-based results is included in today's earnings release and in the investor slides. We will also make forward-looking statements today that are subject to risks and uncertainties. Our 2018 Form 10-K filed with the SEC and today's release both of which are available on our website disclose factors that could cause our actual results to differ materially from these forward-looking statements. These statements speak only as of today and we undertake no obligation to update them. I will now turn the call over to Dante.

Thank you, Ramesh. Good morning and thank you for joining us today. And apologies for the raspy voice. In the third quarter, the business delivered solid results continuing the trend of consistent performance, since the divestiture of the specialty papers business. Revenues for the quarter were $233 million, while adjusted EBITDA was $28 million. Adjusted EPS of $0.22 was ahead of expectations driven by a strong quarter for Airlaid materials, excellent progress on overall cost reduction and a favorable tax rate, which more than compensated for softness in Composite Fibers. Airlaid Materials posted another record quarter with sales of $105 million and adjusted EBITDA of $17 million. And while revenue was up over 50% in constant currency, including the benefit of the Steinfurt acquisition, our legacy business again posted double-digit sales growth. Overall, EBITDA margin in Airlaid expanded 80 basis points to just above 16% when compared to the second quarter. With this momentum, we're on track to meet or exceed expectations on legacy volume growth and Steinfurt operating profit for the year. In Composite Fibers, results were negatively impacted by challenging market conditions and the effect on market-related downtime. Shipments for the segment declined 11% in the quarter, while revenues were lower by 4% on a constant currency basis. However, with relentless cost control, we were able to mitigate the EBITDA margin impact to 100 basis points when compared to the second quarter. At the enterprise level, corporate costs this quarter were $4.2 million lower when compared to last year as we made excellent progress toward our cost-reduction initiatives. The ongoing reshaping of our overall cost structure further contributed to improved earnings and cash flow generation for the quarter and enabled us to reduce our net leverage to 2.9 times. At this point, I'll turn the call over to Sam to provide a more in-depth review of our third quarter results. I will then offer some additional commentary as part of my closing remarks before opening the call for your questions. Sam?

Thank you, Dante. Third quarter adjusted income from continuing operations was $9.7 million or $0.22 per share. The approximate $10 million improvement from third quarter of last year was driven by continued strong growth in our Airlaid Materials segment accelerated progress in our cost-reduction initiatives and a favorable tax rate for the quarter. Slide 4 shows a bridge of adjusted earnings per share from the third quarter of last year of $0.00 to this year's third quarter of $0.22. Composite Fibers results reduced earnings by $0.01 as lower shipments increased market downtime and operating costs were not fully offset by favorable input costs and higher selling prices. Airlaid Materials results increased earnings per share by $0.07 driven by solid legacy volume growth and the addition of the Steinfurt acquisition to the portfolio. Corporate costs improved results by $0.05, as we made meaningful progress toward reducing our corporate overhead, following the Specialty Papers divestiture. Net interest expense, improved earnings by $0.02, from lower borrowing costs, through our debt refinancing, earlier in the year. And taxes and other items improved results by $0.09, driven mostly by a significantly lower tax rate. Slide five, shows a summary of third quarter results, for the Composite Fibers segment. Total revenues were 4% lower on a constant currency basis compared to last year, due to a net volume decline of 11%. Metallized product shipments were down 20%, while nonwoven wallcover and composite laminate shipments were down 17% and 10% respectively. Volumes in Food and Beverage as well as Technical Specialties, were essentially flat when compared to the year ago quarter. Although coffee volume growth continued to be strong, it was largely offset by tea shipment declines, as customer demand was subdued across all regions. Overall raw material prices were favorable, primarily driven by wood pulp price reduction, with partial offset from rising abaca prices. Operations were negatively impacted by increased machine downtime of $1.3 million to align inventory levels with lower demand, while labor and general inflation also impacted operating costs by an addition of $1.2 million. The impact of foreign exchange hedging in the third quarter relative to last year was favorable to the P&L, by $800,000. For the fourth quarter, shipments and selling prices are expected to be in line with the third quarter. We also expect the raw material prices to remain flat sequentially, as wood pulp prices continue to trend lower, but are neutralized by higher abaca prices. We plan to take additional market-related downtime. And expect a results in fixed cost absorption plenty of approximately $1 million, as we continue to proactively manage inventory levels. Slide six, shows a summary of third quarter results for the, Airlaid Materials segment. Including Steinfurt, total revenues for the quarter, approached $105 million, a 51% increase on a constant currency basis, while shipments grew 49%. The legacy business excluding Steinfurt also recorded strong volume growth of 16% with revenue up 14% on a constant currency basis. While all product lines experienced growth on a year-over-year basis, the increase was driven by tabletop volume, which more than doubled and shipments of wipes which rose 36%. This quarter concludes the first full year of Steinfurt operations being part of the Glatfelter portfolio. The business posted very impressive results driven by solid operations and synergy realization. The third quarter results underscore this facility's ability to deliver at the upper end of the previously communicated operating profit range of $7 million to $9 million for the full year, in 2019. Selling price declines resulting from contractual pass-through arrangements with customers were more than offset by the underlying raw material, and energy price improvement. Operating profit for this quarter, more than doubled, driven by the Steinfurt acquisition and strong legacy business performance, including our Fort Smith facility. Overall, EBITDA margins expanded 350 basis points, when compared to the third quarter of last year. As our growth investments within this platform have continued to drive margin accretion. For the fourth quarter, we anticipate total shipments to decline between 3% and 5% sequentially, primarily driven by seasonality and tabletop products, relative to the third quarter. But we expect the financial impact of this to be fully offset by operating efficiencies and cost control. Selling prices are expected to decline slightly, but will be offset by raw material price improvements. On a full year basis, we expect growth in our legacy volumes to be at or slightly above the top end of the previously communicated range of 8% to 10%. And for Steinfurt, we remain on track to meet or beat our operating profit target. Slide seven, shows corporate costs and other financial items. For the first nine months of the year, corporate costs declined by $12.5 million, when compared to the same prior year period. And this was driven by headcount rightsizing, reduction in spending across the board, and costs reimbursed during the transition services period. Given the accelerated pace of progress in adjusting our cost structure, we are pleased to report, that we are once again reducing our 2019 full year corporate cost estimate, now expected to be approximately $28 million. We expect fourth quarter corporate costs to increase slightly compared to the third quarter due to the drop-off in transition services reimbursements and timing of certain expenses, and we remain on track to take $14 million to $16 million of cost out by the end of the 2020 relative to 2018 levels. Slide 8 shows our free cash flow. During the third quarter, cash flow was $26 million higher compared to the third quarter of last year driven primarily by increased earnings and low working capital usage. We expect total capital expenditures to be between $23 million and $28 million for 2019 consistent with our prior estimates. Depreciation and amortization expense is also projected to be $52 million for the year. We continue to expect significant improvement in our free cash flow profile going forward as earnings grow and all major capital projects have been completed. We are also now projecting a full year tax rate for 2019 of approximately 34% compared to our previous estimate of 38%. Slide 9 shows some balance sheet and liquidity metrics. We achieved a significant reduction in net leverage finishing the third quarter at 2.9 times and we had available liquidity of $173 million. This was accomplished through improved earnings and strong cash flow generation allowing us to meaningfully reduced net debt relative to earlier in the year. Net debt on September 30 was $295 million and we expect our liquidity and leverage profile to continue improving by year-end 2019 as earnings and cash flow increase. This concludes my prepared remarks. I will now turn the call back to Dante.

Thanks, Sam. As we exit the third quarter after another solid performance, we're acutely focused on delivering a successful completion to the first full year of our business transformation and setting the stage for continued success in 2020. Year-to-date revenues were approximately $700 million, a 14% improvement while adjusted EBITDA was $81 million, a 35% increase over 2018. Overall, a significant improvement on a year-over-year basis. Airlaid Materials is expected to finish the year strongly and we're confident the business will deliver on the growth and profitability targets previously committed to for the full year. Both Fort Smith and Steinfurt have been extremely successful additions to our Airlaid portfolio with a highly accretive track record of new customer acquisitions, production optimization and synergy realization. The teams are doing a great job. In Composite Fibers, we are aggressively working to reduce costs, leverage leading market positions and build upon strong customer relationships in response to the challenges in some of our markets. Concurrently, we're intensifying efforts to improve asset utilization levels in our wallcover facility through the identification and development of new products. In addition, we're strengthening the commercial and innovation teams to bring new perspectives to this part of the Glatfelter portfolio. I believe these initiatives will enable us to better address the near-term business challenges and find creative ways to grow revenues and enhance profitability as we work to make our business more resilient to varying market dynamics and economic cycles. I'll now open the call for your questions.

Thank you. [Operator Instructions] Our first question comes from Mark Wilde from Bank of Montreal. Your line is now open.

Good morning, Dante, Sam.

Good morning, Mark.

Hi, Mark.

Sam, can you help us out just in understanding that 400 bps drop in the tax rate between what you'd guided to and what you're now guiding to?

Yes. Sure. So I would say it's three things. One there's discreet items that are hard to predict the timing of such as federal statute closures which we saw in Q3. The second is a variation in earnings mix by country. As Composite Fibers earnings are primarily in Germany if they're below expectations but Germany is the highest rate that we pay taxes in. And then I would say the third thing is the U.S. tax valuation allowance, which is sensitive to a variety of factors that are hard to predict including things like FX gains driven by currency fluctuations that we saw this quarter as well.

Okay. All right. So that's one. Second one I had that size of the FX hedging gain is that $800,000 that you gave us is that a net of the hedging gain set against the drag from currency movement?

So just to be clear, that number was just for Composite Fibers.

Okay.

And I'm sorry, you're asking...

So you mentioned in the release, a couple of things and you say here currency favorably impacted by $800 million compared to a year ago, reflecting hedging instruments that matured more than offsetting the impact of lower Euro translation rates. So I'm just trying to figure out, if the $800,000 there is a net of the two?

It is. It is net of the two.

And how big is just the hedging gain?

I don't have that number in front of me. Do you, Ramesh? A - Ramesh Shettigar I don't. I'd have to pull it. Mark, we can take that off-line with you if you like afterwards.

Yes. Okay. All right. That's fine. Next one, Dante for you. Can you just talk with us about sort of game plan and time line for kind of fixing both metallized and wallcovering?

Sure. So these are clearly two of the areas that have been most challenged and most volatile over the last several quarters. Metallized and for wallcover, both of these businesses and across all of Composite Fibers actually, Q3 was our toughest comp versus last year. But that notwithstanding. Metallized did have sequential quarter growth of a couple of percent and we had talked about the new customer acquisition and the delayed qualification process. That qualification process was completed in Q3, so we expect full run rate volumes in Q4. So that will have we believe a substantial impact on the overall performance of the metallized business. So this is -- it's a lower margin converting business as you may recall and it's less than 10% of total Composite Fibers revenue. So it is a less material impact on overall profitability, notwithstanding the frustration that we might have experienced over the last few quarters. So, I believe, looking at our footprint, managing our cost, now that we have got this large piece of new business fully qualified and we're shipping to multiple locations, we feel better about the impact of those new volumes on asset utilization and we'll continue to work aggressively on optimizing the footprint and the cost structure, so that we can get reasonable EBITDA and more consistent EBITDA. Want to move to wallcover?

Yes sure.

Sure. So, again this one has a lot of exposure to the former CIS countries. We've talked about that quite extensively. And again, tough comp and the Ukrainian customer base had a pretty weak Q3, as they continue to find ways to cope with the Russian Federation's ban on imported goods from Ukraine that include wallcover. We are intensifying our efforts to develop another product for the Dresden facility. We're continuing to address the cost structure as well. Our new operating model which has now global functions is going to bring more resources and greater focus to commercial excellence and innovation solutions for this particular facility because, we'll have the resources of the entire organization now focused on overall commercial excellence. I do want to comment, that the EBITDA margins for the Dresden facility, which is where we produce all of our wallcover, even with its headwinds still remains above composite fiber average for year-to-date through Q3.

Okay. And then I wonder Sam, can you just talk a little bit about potential Brexit challenges for you? You've got, I think like three facilities in the U.K. So I'm just curious about sort of what the challenges might be and what you're doing to prepare for them?

Yes. Sure. So, similar to what we talked about on the call last quarter, it's not a huge factor for AMB -- for Airlaid materials. There's no facilities there, no material exposure. For Composite Fibers, as you know, we do have the two facilities in the U.K. And we've seen a temporary increase in some raw materials and finished good inventory levels as we start to prepare for that. I think we've also done a good job, developing alternative sources of supply, if we need to. And keep in mind, we've got production for similar assets in Germany and France, if we need to shift production, if there becomes delays or issues with that. But I think, the biggest thing is just having enough planning and foresight with some extra inventory and raw materials on hand because we do expect to have a little bit of delays in U.K. customs as they start to have to process things going in and out of the EU that they previously didn't have to do. So, we've increased our inventory levels a little bit. We'll probably have a little bit more uptick in Q4. But as you know, the timing on this continues to shift and it's difficult to predict.

Okay. All right. And then last one for me right now. Just you had big, big increases in a couple of those categories in Airlaid and I was just trying to get a sense of how big like categories like tabletop are right now? What's behind the increase? And then also whether that Airlaid business has seen any benefit from the Chinese trade dispute? In other words less imports coming in from China?

So Mark, I'll address the import-export topic. As you may recall, the Airlaid Materials don't travel great distances quite as efficiently so they tend to be a bit more regional in their nature. So no material impact from China other than we're seeing some additional inquiries coming from Asia Pac for us to serve out of our European operations. And in terms of the volume growth by segment something like tabletop it's reflecting having Steinfurt and Fort Smith capacity in the mix this year versus last year. And so that was a big factor. And –

And I think Mark you asked, how big it's become as a total piece of the pie?

Yes.

So of the $105 million of revenue we reported for Airlaid for the quarter about $19 million of that was in tabletop and you'll see those figures disclosed in the Q that comes out later today.

Okay. All right. Sounds good. All right. That's helpful. I’ll turn it over.

Thanks.

Your next question comes from Steve Chercover from Davidson. Your line is now open.

Thanks. Good morning, everyone. So I had a number of questions actually on Airlaid. And first of all, can you sustain the growth in the legacy business in the high single digits?

So as you might recall as we talked about 2019 expectations, we had very aggressive goals and we were going to grow substantially above market as we brought Fort Smith's new capacity up to full speed. And this is due to a combination of events that range from great support from sponsoring customers for this particular investment to improving some of the performance features of some of our product offerings and bringing better quality better value to the market. So the combination of having a world-class very efficient new facility strong sponsorship from major customers leveraging the scale and the combined talents of our new Steinfurt colleagues to come up with some performance enhancements on some of our existing and some new products all of those combined for rather significant growth through the course of 2019. Now as you look at our overall utilization rates they've crept up each quarter and so – which is a good thing. And when we announced the Fort Smith facility, opening we said within two to three years, we'd have that facility full and we're tracking to that. So we still expect to grow at or slightly at the high end of the market for 2020. We're not giving annual guidance, but the substantial double-digit growth that you've seen in 2019 is more a manifestation of the things I just outlined not necessarily an indication of what the future is going to bear. Nonetheless, we're very pleased with this business. We see a long runway for growth. We have clearly established a leadership position here. And as we continue to build scale, we're learning more, we're sharing best practices across the platform. We're getting better benefits both on cost and productivity and product performance. And so we're feeling very good about this particular part of the business.

Okay. So you can still expect 8% to 10% growth for 2020. And after that is it fair to assume that you'd be having to contemplate perhaps twinning the Fort Smith line? Because, I guess, if you can maintain those growth rates that will be the third year you should be close to sold out I would think?

Yes. Just to clarify I didn't say 8% to 10% growth for the business again next year. I said, that's going to slow down and we're not prepared to give guidance for 2020. But I would think more around the range of what typical market growth rates are for these businesses and we say most of the segments we serve are growing in the 4% to 5% range. And then, as it pertains to supporting continued growth of our customers in the market, as a leader in this space we're prepared to do that. And so that can come through a range of options that include organic and inorganic growth. Not prepared to speak in any greater specificity today about that other than we like this business. We're asserting ourselves as leaders and we're prepared to continue to invest in it.

Okay. Two more quick ones on Airlaid. First of all, just -- is the price decline is that directly associated with the pass-through of pulp?

Yes. As you know, the current Airlaid portfolio has about 70% raw material pass-through. So, if you see pulp prices drop, then you're going to see revenue drop. And this is also why we called out continued improvement in overall EBITDA margin for the business.

Okay. And what were the Steinfurt synergy targets? And are there still some to come in 2020?

Yes. So, when we announced the acquisition, we said that there are $6 million worth of synergies we are going to attack over a 36-month period. And we said, $2 million of that will come in 2019, and then the other $4 million will come 2020 and 2021. So, we're on track to meet our synergy targets for 2019. And I guess on our next quarterly call, we can talk a little bit more specific about what the expectation for Steinfurt contribution in 2020 might be.

Okay. And then one other change-up question for me, and then I'll pass it back. With respect to your corporate costs, if you were to annualize the Q3 savings, you hit that high end of your $14 million to $16 million target. And I think you also said that corporate expense in 2018 is going to be $28 million, which is the same as your 2020 guide. So, does that mean that any other benefits from the new functional structure will accrue to the operating segments?

Yeah. So, a couple of things. First, I would note that this year's number, Steve does include some cost reimburse from the transition services period, which rolled off in Q3, which is why we're seeing a slight uptick in Q4. So, I don't think it's fair to say that we've fully arrived there. When you back that out or when you look at 2020, we still have some reductions to get to get to our target.

Okay. Thanks for that clarification.

Yeah. Okay.

I just want to thank you.

Okay. Good.

Our next question is from Debbie Jones from Deutsche Bank. Your line is now open.

Hi. Good morning. Thanks for taking my question.

Good morning, Debbie.

I actually have three -- good morning. I have three questions. And the first one your CapEx target for the year. Why the range -- I mean, I realize it's only $5 million, but you've only got two months left in 2019, and you're at the lower end of the range. Should we assume that that moves higher for 2020?

So, I would say, we're $18 million through the third quarter. So when you annualize that, that's $24 million and our range is $23 million to $28 million. So, annualizing that we're within the range. I think it's still a little bit tough to tighten up the range just because you don't always know when the exact cash flows are going to go out. Sometimes you experience issues with suppliers and delays on their end. So, I think this is the range we're comfortable committing to. And on an annualized basis, we're in that range right now. And we're not prepared to talk about 2020 figures just yet.

Okay. Thank you. My second question for Airlaid, you’re obviously looking tremendous growth, but the guidance for Q4 is down 3% to 5%. I wanted to -- sequentially. I just want to understand now that you have a grip on your total business with the acquisition and the ramp-up. What is the seasonality in that business kind of working from Q1 to Q4? Is it not really meaningful or is it typing -- we're going to see a bit of slowdown in Q4? How would you characterize it?

So, I would characterize it on a couple of dimensions. There is some seasonality across different product categories. So, our hygiene business can be a little bit more seasonal at the end of our second quarter. And some of this has to do with the synchronization of the fiscal year end from some of our larger customers. If you look at the addition of Steinfurt's product line to the portfolio with things like tabletop and some additional wipes, tabletop does have some seasonality as you get into the summertime for picnics and things of that nature. So, we will have a little bit of seasonality mid-year for hygiene. And really the first couple of quarters tend to be the busier quarters from a tabletop point of view. But our attempt is to build a portfolio that's more stable and more predictable and has a lot less volatility period-to-period.

Okay. Thanks. That's helpful. Actually, one more on that. Just how much visibility do you have in Airlaid into order patterns of your customers? How close out do they need to put their order in with you and how long till they receive it?

So, we have a sales and operations planning process, like most companies would and our demand forecast typically looks out 18-plus months. And then we have a reconciliation process every month. So we tend to have a reasonably good outlook through the course of a quarter, recognizing that some of our product categories are less subject to short-term changes, versus some that may be serving some of the broader convenience markets for consumers. So I will say we generally have a reasonably good purview for a quarter. And then we tighten things up each turn of the crank with our S&OP process.

Okay. Thanks. And then, last question. I wanted to get your thoughts on your pricing strategy in Composite Fibers at this point, because I don't think you fully recovered what you were attempting to do in 2019. And do you go back out in 2020 and try to do that. I mean, has there been any change in the way you approach your contracts in general for that business?

Yes. Just some high level comments and I'm sure you can appreciate perhaps the lack of transparency, because it's a dynamic and competitive market environment. But clearly, we take a number of factors into consideration that range from overall competitive operating rates, customer demand patterns, the factors of raw material pricing, asset utilization. And so, we are in the process of recalibrating all of those variables with our new commercial and innovation organization to make sure that we find a way to optimize asset utilization for Composite Fibers, given the data that we have and the outlook that we have for these markets. So I feel very confident in our commercial team that will find a way to leverage our leading share positions, our strong relationships with long-term customers, the fact that we've got the largest portfolio of incline wire assets, strong technical know-how and deep fiber capabilities and the leading buyer of abaca in the world and producer. So, I think, we have all the pieces of the puzzle here. And again, we'll give more of an update on our next quarterly call as we think about the outlook for 2020.

And just one thing to add to that Debbie. As you know, we put out a target there last year which we have fallen short of. But a lot of that I think, is safe to say, is driven by the decline in wood pulp price. And the other thing I would say, it's difficult to talk about these things in the aggregate. It's very specific on a product line and even more specific on whether that product line is a product there [ph] of either wood pulp or abaca. So it's been tough in this environment with the declining wood pulp price and -- but it really just depends on which product line and what the content we're talking about is.

Okay. That's very fair. But the abaca outlet is -- outlook, is there anything you can comment on there, because that has been offsetting some of the softer pulp pricing?

Yes. So we continue to work on leveraging our expansive network in the Philippines, Costa Rica and Ecuador, to make sure that we have a variety of qualified fiber traders and farmers in our portfolio. And the team is doing a very good job at adding new suppliers to that. So we're hopeful that that will help to mitigate, at least, level-off pricing. Maybe we see a little bit of relief. But you also may recall that these types of crops are more susceptible to things like typhoon season and can be disruptive if there is another counterparty that may come in and buy a bunch of abaca pulp on a short-term basis for a project outside of our respective industry. We've seen that happen with central banks around the world at times doing new banknotes, or we see some other technical specialties from time to time pop up in that market. But overall, for us, it's about controlling the controllables and leveraging our vast network and knowledge and access to these outlets and making sure that we've got a variety of people qualified, so that we can have the right quality and quantity at the right cost. And that's what the team's focused on.

Okay. Thank you. Thanks for taking my questions and good luck in the quarter.

Thank you. Thanks, Debbie.

We have a follow-up question from Mark Wilde from Bank of Montréal. Your line is now open.

Yes. Sam, I just wanted to get a little clarification. You talked about Composite Fibers having $1 million of downtime in the fourth quarter. Is that incremental to the $1.3 million that you had in the third quarter? Or is that just…

Yeah.

So you basically go from $1.3 million to $2.3 million. Is that right?

That's right.

Okay, all right. That clarifies that. And then just to come back on these businesses that are struggling a little bit. I'm just curious, do you think about the metallized paper business in the same way you think about food and beverage or the non-woven wallcovering? I mean, it seems to me those are all businesses where you're creating a specialized matte of fibers whereas this metallized business is just putting a metal coating on paper that you're buying on the outside.

Yeah. So I think those are all accurate observations. The metallized business is a very different business than the rest of our Composite Fibers business. It's converting business and its margin profile is different and the competitive landscape is different and the profit pools are different. So just like we do with all parts of our business, we consistently go through a review of our portfolio. We identify the short list of highest value creating activities that we can resource and execute with great precision and have good outcomes. And then we look at ways to mitigate some of the smaller areas that might be performing below where we would optimally like to see them. So we've also demonstrated a willingness to prune and reshape a portfolio. We took a very dramatic step last year by taking half of our revenue out. So right now I'm very pleased with the progress that we've made year-to-date. As I stated earlier we've put a slide in the appendix that really illustrates the progress that new Glatfelter is making. That's a far less volatile, most cash generative, more predictable business, focused on engineered materials. And we're going to continue to take all of the necessary steps in the right sequence with the right prioritization and the right resource allocation to make sure that we are aggressive at addressing performance, and at the same time pragmatic about not overloading an organization that's doing a heck of a good job at the moment.

Yeah. Just -- that's a good answer. I think that the more you can do to stabilize the earnings and cash flow out of the business, the more you're going to be rewarded in terms of your evaluation.

Yeah. Couldn't agree more.

Okay. Good luck in the fourth quarter and thank you.

Thanks, Mark.

We have a question from Craig Pieringer from Wells Capital Management. You may ask your question.

Hello. Good morning. I jumped on late, so, I don't know if this was already addressed. But, can you give us an update on any progress regarding your Soteria Battery Innovation Group license? I know that takes a while to get designed into products. But, maybe you're seeing some products come to fruition in the near future?

Hey! Craig, how are you?

Hi.

I would say, no. No meaningful update there. This stuff is very early. It's in start-up mode, no, meaningful revenue to speak of there.

But it is in a design in manner right now. I mean, are you getting any feedback from potential users?

Yes. So -- this is Dante. I can add a few comments there. So -- and for those who are following along, we've made an investment in a company called Dreamweaver several years ago. And we have rights to intellectual property, around next-generation lithium battery -- lithium ion battery separator materials, that can also be used in super capacitors e-bikes and things of that nature. And as you might imagine, what comes with new technologies and start-ups. And early stage development, the winners and losers haven't been sorted out yet. And so, we continue to work on our electrical portfolio, which is in Composite Fibers. We have identified a couple of areas where we think there may be a better fit in a near-term opportunity for us to see some benefits, in the super capacitor space, knowing that car batteries take a very long time to get qualified. And the auto industry can be quite cyclical. So, we're still working on it. And we still think it's a very unique set of intellectual property and technology. And we don't have anything very material to speak to at the moment, but it's still part of the inner workings of our commercial and innovation projects.

Superb, thanks Dante.

Yeah.

There are no further questions. So I'm turning the call over to, Dante Parrini.

Okay. Well thank you everyone for joining our call today. And we look forward to speaking with you again next quarter. Have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.