Good morning, everyone. And welcome to Mativ's Second Quarter Earnings Conference Call. Hosting the call today is Mativ's Julie Schertell, Chief Executive Officer. She is joined by Greg Weitzel, Chief Financial Officer; and Mark Chekanow, Vice President of Investor Relations. Today's call is being recorded and will be available for replay later this afternoon. [Operator Instructions]. It is now my pleasure to turn the floor over to Mr. Chekanow. Sir, you may begin.

Good morning, everyone. And thank you for joining us to discuss Mativ's second quarter 2023 earnings results. Before we begin, I'd like to remind you that the comments included on today's conference call include forward-looking statements. Actual results may differ materially from the results suggested by these comments for a number of reasons, which are discussed in more detail in our Securities and Exchange Commission filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. Some of the financial measures discussed during this call are non-GAAP financial measures. Reconciliations of these measures to the closest GAAP measures are included in the appendix of this presentation and the earnings release. Unless stated otherwise, financial and operational metric comparisons are to the prior-year period and relate to continuing operations. The earnings release is available on our website at ir.mativ.com as are the slides for today's presentation. You can download the slides and/or click through these slides at your own pace during the call using the webcast interface. To remind you of how Mativ results were reported and how we will be discussing them, recall that the SWM and Neenah merger closed on July 6, 2022. Thus, the second quarter reported results reflect the combined company for the full period. However, the prior-year results reflect only the legacy SWM results. On today's call, though, and in our earnings release, we will provide some comments referring to comparable performance to illustrate how our results compare to prior-year periods on a like-for-like basis. These figures are shown in tables in our earnings release and the appendix of this presentation as well as full reconciliations. With that, I'll turn the call over to Julie.

Thanks, Mark. Good morning, everyone. And thank you for joining today's call. Following our transformational announcement last week about our proposed EP divestiture, we're very pleased to report a solid second quarter, consistent with our messaging in our last earnings call. As expected, Q2 results showed very strong sequential EBITDA improvement from the first quarter, with margins increasing substantially from better manufacturing performance, incremental cost reductions and continued pricing discipline. Adjusted EBITDA of over $87 million in the second quarter compared to $66 million in the first quarter. This result was consistent with our message from the first quarter call when we detailed the impact of the French strikes and some inefficiencies at other sites that we were already working to address. The sequential improvement in EBITDA from first quarter showed no lingering effects from the strikes and good progress on improving manufacturing performance, cost reductions and continued synergy realization. Last year's second quarter was a high watermark for sales and EBITDA for the combined companies over the past few years, with EBITDA close to $100 million. And it was the last quarter that was not yet affected by destocking and the macroeconomic slowdown in manufacturing. With that as a backdrop, I'm pleased to report stable year-over-year margins despite volume headwinds. Importantly, this demonstrates that we are delivering on merger synergies, driving incremental cost reductions and remaining disciplined in market pricing. Given the extent of the destocking and overall volume softness, we were pleased with the significant sequential EBITDA improvement in the second quarter and view this as a demonstration of improved execution on the aspects of the business most within our control. Relative to volume, the end markets most impacted by destocking and soft demand are those influenced by building and construction and premium consumer goods. Many end markets…

Thanks, Julie. As Mark mentioned earlier, reported consolidated Mativ results reflect the merged company for the second quarter, but only for legacy SWM in the prior year, thus skewing year-over-year comparisons. So, my comments will focus on current business trends and margins on a comparable basis. Total second quarter sales were $667 million, with organic sales down 8%. Currency effects were immaterial. Price was up 5% across the company versus last year, partially offsetting a 13% decline in volume and mix. This was attributable to customer destocking across the business and softer economic conditions. The best performing category was release liner with a mid-single digit sales gain, and we saw flattish sales in EP and healthcare. As Julie discussed, the most pressure was felt in industrials and packaging and specialty paper with sales declining more than 10%, while filtration and protective solutions also declined. For total adjusted EBITDA, we grew sequentially by 33% versus Q1 of 2023, demonstrating aggressive cost reductions, disciplined pricing and accelerated synergies. On a year-over-year basis, we comped a very strong Q2 of 2022 of $97 million of adjusted EBITDA with our Q2 2023 adjusted EBITDA of $87 million, down 10%. Despite lower volume, we delivered essentially flat year-over-year margin at 13.1%. Approximately $40 million of favorable price more than offset higher input costs for a net benefit of $25 million. Cost reductions partially mitigated the volume decline and associated impacts on the manufacturing fixed cost absorption, but not completely. We were pleased with the continued positive price cost, progress we made on the manufacturing cost and increased energy delivery. Looking at the segments in the second quarter with the same like-for-like comparable view, for ATM, on a sequential basis, adjusted EBITDA grew 7% with margin expanding 150 basis points. Year-over-year, adjusted EBITDA was down 18%…

Thanks, Greg. So to recap, I'll hit a few key takeaways from the quarter, talk briefly about the remainder of this year, and then reiterate some of the highlights of our recent announcement on the proposed sale of engineered papers and the capital allocation rebalancing. The first takeaway on the quarter is that price cost remained strong, and we expect the net benefit to remain intact through the back half of the year. The second takeaway is that we made a lot of progress on operations and execution, like we said we would. First quarter was an anomaly in our view, a bit of a perfect storm of strikes and inefficiencies, but we're on the right track and demonstrating strong progress. Third, from a cost takeout standpoint, synergies are on plan and we've aggressively reduced cost and inventories to align with current demand. we'll continue on this path. Overall, we're encouraged with our progress this quarter, with the expectation for continued improvement in the future. As we think about the remainder of this year, we expect the back half to be similar to Q2 performance, and with some potential upside later in the year as volume stabilizes and synergies accelerate as we exit 2023. Now shifting to the highlights from last week's announcement. The proposed sale of Engineered Papers repositions as both strategically and financially. We were pleased with the headline price of $620 million or about 6.5 times trailing EBITDA. The expected net proceeds of approximately $575 million will be used to pay down approximately 35% of our net debt. And once the transaction closes, our portfolio is immediately leaning more toward our growth categories. As such, we see accelerated top line and EBITDA growth potential. We laid out some high level parameters of post close financial expectations of…

[Operator Instructions]. Our first question comes from Jon Tanwanteng from CJS Securities.

It's Pete Lucas for John. You covered almost everything Jon had in terms of questions. Just I guess in terms of cost reductions and what you had mentioned on the last call, just kind of wondering, you mentioned in the prepared remarks, aggressive cost reductions continuing, just kind of update us on where we stand on those in terms of what inning we're and any major ones still to come?

I'd say cost reductions, we have implemented the majority of what we had communicated. And we had started that even as we were doing our last call. So cost reduction is really focused on reduced staffing, operating labor, maintenance, marketing, and advertising, as well as inventory. So in this type of demand environment, we view it as really significant that we take control of our own destiny as much as possible and drive cost out to maintain margin levels. And then as volume returns, and we're working to drive volume as well, but as the market improves and volume returns, our expectation is that we're even more efficient than we were in the past and that flows through to the bottom line.

You'd mentioned industrial and packaging still under pressure, kind of what's your outlook for that and the main causes of the pressure there that you're seeing?

I think it's a couple of things. Destocking, as much as I believe we're getting past that, it was pretty significant in our packaging and specialty papers business, particularly in the merchant channel. So where there's premium discretionary spending driving demand, we saw a heightened level of destocking. And then, I would tell you in industrials, the greatest impact is in our tapes and abrasives categories where it's very construction related. So I'd say it's a combination of destocking primarily in premium packaging, especially papers, and then softer volume in our industrials business. We had, I'd say, solid revenue in release liners and in healthcare where we have new business, strong contracts that we've renegotiated, particularly in consumer wellness and device fixation, and then I'd say pockets of strength in filtration, particularly in transportation filtration and air, and also in premium films. Some nice pockets of strength in medical and optical.

Our next question comes from Daniel Harriman from Sidoti.

Congrats to the team on a great quarter and strong sequential improvement. Julie, I know you mentioned this in your prepared remarks and also a little bit just now. But from that commentary, it seems that destocking and volume in the second quarter was more of an issue than you may have expected based upon comments in the first quarter call. And then demand obviously was a bit weaker. You obviously still performed well in this environment. So could you maybe just give us a little bit of an insight into what you're hearing from customers through the first six weeks of the third quarter and then maybe how these conversations are impacting your outlook for margins in the back half?

I'd say it's a little bit of mixed signals from customers. And again, where we really felt the heightened level of destocking, and I would tell you we're still feeling it early Q3, is in packaging and specialty papers. And that's primarily in our merchant channel in our packaging business. Our consumer products business is performing quite well in that category. Same thing in industrials, that's where we're feeling the greatest continued destocking and inventory rightsizing. And at some point, Dan, it becomes really hard to separate destocking and soft volume. So internally, we've said, no more discussion about destocking. We have to be taking all the efforts that we can to drive volume ourselves and drive demand. And we've really worked to do that in a number of areas, new products that we've launched across the board. In packaging, we have new mailers we've launched. In filtration, we have new prefilter media that we've launched. In protective solutions, we have a new premium, bulletproof film that we've launched that we're really excited about. So I think innovation continues. And we continue to invest there and drive volume in that regard. Customer programs that we've worked on to drive volume and gain share, we're seeing that in filtration, as well as in our paper segment. And then the cost efforts that I've about, and really ensuring that we're getting cost out to manage our facilities at the lowest cost possible. And we think that's a big value for us. And synergies is helping us drive that. So we continue to deliver on synergies. We had committed to $65 million. We're on pace for that. We had committed to half of that in the first year and we're on pace for that. So all of that to say, I think from a customer standpoint, the feedback is pretty mixed. And our position is we have to drive volume and we have to control our own destiny as much as possible. I think customers are working really hard to understand their demand profile. We work very closely with them. But it's a challenge right now from a visibility standpoint, but we're pleased with where margins ended up for the quarter. Constant with last year, which was a super strong quarter for both companies. And we're pleased with the sequential improvement.

I've made a note not to ask you about destocking ever again. So don't worry about that.

You and everybody else in our building.

My second question. Greg, this may be a little bit more for you, but y'all talked about this last week. And, obviously, leverage is top of mind for the investor base and it's a major focus of the capital allocation strategy moving forward. The sequential EBITDA improvement in this quarter and then positive cash flow and sequential EBITDA improvement back half of the year. Do you anticipate being able to pay down a larger portion this year in addition to the 35% reduction upon close of the EP sale?

I think the EP sale, specifically the 35%, and there is a potential for a little bit beyond that. Overall, you have that debt leverage of 4.2 at the moment, and we expect that to come down by another 0.3 turns with the EP sale.

For 2024, still anticipating the $90 million in free cash flow that you talked about last week?

Yep, that's right.

Thank you very much. There are no further questions on the line. I'd now like to hand back to Julie for any closing remarks.

Thank you for your time today and your interest and we look forward to speaking to you on our next update.

Thanks, everyone. This now concludes today's conference call. You may now disconnect your line. Have a lovely rest of the day and thank you for joining.