Q1 2025 Mativ Holdings Inc Earnings Call
Operator: are customers' most complex challenges. our global capabilities, paired with our localized supply solution. enable us to partner with and service our customers based on how and where they go to market.
Yes.
Our global capabilities paired with a localized supply solutions enable.
Enable us to partner with and service our customers based on how and where they go to market.
Operator: These capabilities and our business model allow us to grow our end markets together with our customers. and are particularly relevant in the current geopolitical and tariff-exposed environment.
These capabilities and our business model allow us to grow our end markets together with our customers.
And are particularly relevant in the current geopolitical and tariff exposed environment.
Operator: We also recognize that Mativ is facing challenges right now. Many of these are rooted in a continuously suppressed demand environment.
We also recognize that matter are is facing challenges right now.
Many of these are rooted in a continuously suppressed demand environment.
Shruti: As a member of the MATIV board, I have witnessed firsthand a progression since the merger in 2022. after the destocking trend over the past two years ended. We expected a solid return to a more normalized demand environment. similar to levels before the pandemic.
As a member of <unk> Board.
I have witnessed firsthand our progression since the merger in 2022.
After the Destocking trend over the past two years ended.
We expected a solid return to a more normalized demand environment.
Similar to levels before the pandemic.
Shruti: However, we have realized that an overall demand pickup is simply not materializing with the additional uncertainty posed by the current macroeconomic environment.
However, we have realized that in overall demand pickup is simply not materializing with the additional uncertainty posed by the current macroeconomic environment.
Shruti: The team and I have spent the last 60 days digging deep into our global operations and engaging with our talented employees. key customers, and trusted suppliers, as well as many shareholders and other external stakeholders to help inform my perspective. Our conversations made clear that this past year has been incredibly difficult for many of our stakeholders and employees.
The team and I have spent the last 60 days digging deep into our global operations and engaging with our talented employees key customers and trusted suppliers as well as many shareholders and other external stakeholders to help inform my perspective.
Our conversations made clear that this past year has been incredibly difficult for many of our stakeholders and employees.
Shruti: We are simply not where we need to be operationally to navigate the current demand environment or future challenges. We will not just stand on the sidelines waiting for the demand to come back. We are pivoting to a much higher sense of urgency across our company to act swiftly, comprehensively, and decisively to undertake the necessary changes to grow market. return to sustainable and profitable growth, and most importantly, restore value to our shareholders.
We are simply not where we need to be operationally to navigate the current demand environment our future challenges.
We will not just stand on the sidelines waiting for the demand to come back.
We are pivoting to a much higher sense of urgency across our company to act swiftly comprehensively.
And decisively to undertake the necessary changes to grow market share return to sustainable and profitable growth and most importantly restore value to our shareholders.
Shruti: I'm working hand-in-hand with the management team and many employees throughout the organization to turn around our performance. leveraging my own experience and track record of transforming global organizations.
I am working hand in hand, with the management team and many employees throughout the organization to turnaround our performance.
Leveraging my own experience and track record of transforming global organizations.
Shruti: So in line with the board's review of our strategy and support of my recommendations, we have established three near-term priorities to drive improved performance and position MATIV for value creation as we navigate these challenges. These are driving enhanced commercial execution. Sharpening Efforts to De-Level the Balance Sheet. and conducting a strategic review of our portfolio.
So in line with the Board's review of our strategy and support of my recommendations. We have established three near term priorities to drive improved performance and position matter for value creation as we navigate these challenges.
These are.
Driving enhanced commercial execution.
Sharpening efforts to Delever the balance sheet.
And conducting a strategic review of our portfolio.
Shruti: Let me start first with talking about driving enhanced commercial execution. We must make sure that every commercially focused function has the right tools, level of empowerment, and organizational support. This will generate new business, expand market share, and stimulate top-line growth. We will achieve this by prioritizing growth initiatives, aligning our incentive structures to reward profitable growth, and de-layering for faster decision-making.
Let me start first with talking about driving enhanced commercial execution.
We must make sure that every commercially focused function has the right tools level of empowerment and organizational support.
This will generate new business expand market share and stimulate topline growth.
We will achieve this by prioritizing growth initiatives aligning our incentive structure to reward profitable growth and delevering for faster decision, making.
Shruti: From a product perspective, we plan to generate incremental demand and new businesses. For example, we will move existing products into a JSON application. We will focus more on cross-selling the full Mativ portfolio. and we will make it much easier for our customers to do business.
From a product perspective.
We plan to generate incremental demand in new business.
For example, we will move existing products into adjacent applications.
We will focus more on cross selling the full <unk> portfolio.
And we will make it much easier for our customers to do business with us.
Okay.
Shruti: As we announced on the last call, Ryan Elbert and his team are leading the commercial operations of both FAM and SAS segment. Ryan has put together a team of highly skilled business leaders and assembled a deep bench of subject matter experts with long track records of successful execution at global companies. This will leverage their successful go-to-market approach across the company and further unlock cross-customer and business opportunities. This cross-company go-to-market strategy has already driven improved outcomes in SAS. their strong leadership. Commercial discipline and customer focus have been instrumental in delivering strong SAS segment results over the past five quarters, including four consecutive quarters of sales growth and five consecutive quarters of EBITDA and margin.
As we announced on the last call, Brian <unk> and his team are leading the commercial operations of both fan and SaaS segments.
Brian has put together a team of highly skilled business leaders and assembled a deep bench of subject matter experts with long track record of successful execution at global companies.
This will leverage their successful go to market approach across the company and further unlock cross customer and business opportunities.
This cross company go to market strategy has already driven improved outcomes in SaaS.
Their strong leadership commercial.
Commercial discipline.
And customer focus have been instrumental in delivering strong SaaS segment results over the past five quarters, including four consecutive quarters of sales growth and five consecutive quarters of EBITDA and margin growth.
Shruti: We have also increased the cadence of our sales pipeline. And we are working to ensure alignment of growth opportunities with our supply chain, track performance versus targets, and share pricing and cross-selling best practices across sectors.
We have also increased the cadence of our sales pipeline reviews, and we are working to ensure alignment of growth opportunities with our supply chain track performance versus targets and share pricing and cross selling best practices across segments.
Shruti: The next area of focus is sharpening our efforts to delever the balance sheet through margin improvement and free cash flow generation. We have announced pricing actions effective as of March that will positively affect Q2 and the remainder of the year in connection with our commercial efforts. A task force is currently underway, comprehensively reviewing our cost and operating structure to further reduce costs. improve margins and more aggressively pursue our asset optimization. As part of this review, I have asked the team to deliver $10 to $15 million of additional cost reductions to be realized in 2025, which is in addition to the previously announced $20 million year-end 2026 cost reduction.
The next area of focus is sharpening our efforts to de lever the balance sheet through margin improvement and free cash flow generation.
We have announced pricing actions effective as of March that will positively affect Q2, and the remainder of the year in connection with our commercial efforts.
A task force is currently underway comprehensively reviewing our cost and operating structure to further reduce costs improve margins and more aggressively pursue our asset optimization efforts.
As part of this review.
I have asked the team to deliver $10 million to $15 million of additional cost reductions to be realized in 2025.
Which is in addition to the previously announced $20 million year end 2026 cost reductions.
Shruti: Think of it as $30 to $35 million in cost reduction by year-end 2026. $10 to $15 million of which will be realized in 2025. These cost reductions are comprised of SG&A, operations, and procurement savings. When it comes to cash flow improvement, I'm challenging the team to further reduce capital spending and inventory levels. In this effort, we will further reduce our capital spending to $40 million per year versus the $55 million incurred in 2024. This level of capital spend will be split between maintenance and growth oriented CapEx and will allow us to continue to invest in those assets and key categories where we see the market.
Think of it as $30 million to $35 million in cost reduction by year end 2026.
10% to $15 million of which will be realized in 2025.
These cost reductions are comprised of SG&A operations and procurement savings.
When it comes to cash flow improvement I'm challenging the team to further reduce capital spending and inventory levels.
In this effort, we will further reduce our capital spending to $40 million per year versus the $55 million incurred in 2024.
This level of capital spend will be split between maintenance and growth oriented capex.
And will allow us to continue to invest in those assets and key categories, where we see the market demand.
Shruti: We will also reduce our inventory levels by $20 to $30 million in 2025. The heightened discipline on capital expenditures and inventories will drive significant free cash flow expansion. for their helping to accelerate debt reduction and de-labour.
Shruti: Last but not the least, along with the board, we will conduct a strategic portfolio review of our assets and business lines. There is a wide range of characteristics on how each product category contributes to Mativ's bottom line, competitive position, margin profile, and portfolio diversity. And I want to make sure that we strategically balance that contribution. We will evaluate opportunities to unlock value to strengthen our balance sheet and go to market.
Shruti: With that, let me turn to the current quarter.
Let me turn to the current quarter.
Gregory Weitzel: Our overall performance in Q1, while mixed, came in as expected. Results reflected the demand patterns we're seeing in the market right now. Sales were essentially flat organically year over year. SAS continued its strong momentum, including volume improvement. largely offset by fans results, which were impacted by continued demand softness across automotive and construction end markets. in our SAS segment. The strong momentum that we have seen over the course of fiscal 2024 continued in the first quarter, with sales up almost 6% year-over-year on an organic basis. Adjusted EBITDA was up more than 3% compared to the prior year, with margin improving slightly as well.
Our overall performance in Q1, while mixed came in as expected.
Results reflected the demand patterns, we're seeing in the market right now.
Sales were essentially flat organically year over year.
<unk> continued its strong momentum including volume improvements.
Largely offset by fans results, which were impacted by continued demand softness across automotive and construction end markets.
In our SaaS segment, the strong momentum that we have seen over the course of fiscal 2024 continued in the first quarter with sales up almost 6% year over year on an organic basis.
Adjusted EBITDA was up more than 3% compared to the prior year with margin improving slightly as well.
Gregory Weitzel: We continue to see solid volume improvement in Q1 across many of our SAS categories. with healthcare and release liners up over 20% driving the largest gain year over year. followed by significant gains in labels and commercial print versus the market.
We continue to see solid volume improvement in Q1 across many of our SaaS categories with healthcare and release liners up over 20% driving the largest gain year over year.
Followed by significant gains in labels and commercial print versus the market.
Gregory Weitzel: Turning to our FAM segment, our overall performance continues to be mixed, as soft demand in our automotive and construction end markets impacted results across the sector. we saw continued demand headwinds in transportation and water filtration. while there were pockets of growth in our optical, medical, and dental film verticals. Overall FAM results were down versus prior year. driven by lower volumes and automotive combined with the volume loss of high margin paint protection film. and the fact that a higher price year-end inventory disproportionately affected the family.
Turning to our <unk> segment, our overall performance continues to be mixed as soft demand in our automotive and construction end markets impacted results across the segment.
We saw continued demand headwinds in transportation and water filtration.
While there were pockets of growth in our optical medical and dental film verticals.
Overall <unk> results were down versus prior year, driven by lower volumes in automotive combined with the volume loss of high margin paint protection films.
And the fact that our higher price yearend inventory disproportionately affected the film segment.
Gregory Weitzel: Let me also provide a few updates on the status of our turnaround efforts underway in our advanced films verdict. In Pain Protection Films, I approve the repurposing of resources to immediately address any commercial capacity and quality. Our customers are already feeling the positive impact of these initiatives as we continue to serve them.
Let me also provide a few updates on the status of our turnaround effort underway in our advanced films vertical.
In paint protection films I approved the Repurposing of resources to immediately address any commercial capacity and quality issues.
Our customers are already feeling the positive impact of these initiatives as we continue to serve their needs.
Gregory Weitzel: However, we recognize that we must now focus all our efforts in regaining our customers' trust and commitment. Additionally, we are expanding our pain protection film pipeline and are executing a mid-tier film solution in this faster growing sector. Accelerating our presence in targeted markets, such as medical and optical films, is another example of growing our share in adjacent specialty markets. and I'm empowering this team to accelerate. I'm pleased to share that we are seeing a noticeable uptick in demand for these verticals that also carry into Q3. And we are working to unlock capacity to further accelerate growth in the back half.
However, we recognize that we must now focus all our efforts and regaining our customers' trust and commitment.
Additionally, we are expanding our paint protection film pipeline and are executing a mid tier film solution in this faster growing segment.
Accelerating our presence in targeted markets such as medical and optical films is another example of growing our share and adjacent specialty markets and empower this team to accelerate these efforts.
I am pleased to share that we are seeing a noticeable uptick in demand for these verticals that also carrying into Q2.
And we are working to unlock capacity to further accelerate growth in the back half of this year.
Gregory Weitzel: Before turning the call over to Greg, I'll briefly provide some color on tariffs as they relate to our business. which we know is top of mind for many of our stakeholders. Given where tariff policy is currently, we believe Mativ is well positioned as maturity for products sold in a given region are manufactured in the same region. Less than 7% of our annual sales are currently subject to tariff which is a testament to our ability to provide localized supply chain options. that match the geographies where and how our customers go to market. First, tariffs to and from China impact about 2% of our...
Before turning the call over to Greg I'll briefly provide some color on tariffs as they relate to our business, which we know is top of mind for many of our stakeholders.
Given where tariff policy is currently we believe <unk> is well positioned as the majority of our products sold in a given region are manufactured in the same region.
Less than 7% of our annual sales are currently subject to tariff exposure.
As a testament to our ability to provide localized supply chain options that match, the geographies, where and how our customers go to market.
First tariffs to and from China impact about 2% of our sales.
Gregory Weitzel: tariffs from Mexico impact about 1% of our... while most of our sales from Canada remain exempt under USMCA. Sales from Europe and from the U.K. to the U.S. comprise another 1.5% and 1% respectively. So in summary, our total sales currently exposed to tariffs with exemptions is less than 7% of sales. Additionally, we have put together a comprehensive playbook on mitigating the impact of these exposures and identified a number of approaches tailored to each region. that include corresponding pricing decisions, tariff pass-throughs, and alternative sourcing strategies. We're also pursuing business and taking share in categories where we are the local supplier and competition is outside the U.S.
Tariffs from Mexico impact about 1% of our sales.
While most of our sales from Canada remain exempt under U S. MCA.
Sales from Europe, and from the U K to the U S comprised another one 5% and 1% respectively.
So in summary, our total sales currently exposed to tariffs with exemptions is less than 7% of sales.
Additionally, we have put together a comprehensive playbook on mitigating the impact of these exposures and identified a number of approaches tailored to each region.
That include corresponding pricing decisions tariff pass throughs and alternative sourcing strategies.
We're also pursuing business and taking share in categories, where we are the local supplier and competition is outside the U S.
Gregory Weitzel: While we feel that the direct impact of current tariff-related policy in Mativ is minimal and manageable, we acknowledge that there is a wide range of outcomes when it comes to the indirect impact on demand and commercial activity. As an early indicator, though, we have not seen the heightened level of pre-buying that was expected, and rather, customers are taking a more cautionary step.
While we feel that the direct impact of current tariff related policy and matter is minimal and manageable.
Acknowledged that there is a wide range of outcomes when it comes to the indirect impact on demand and commercial activity.
As an early indicator, though we have not seen the heightened level of pre buying that was expected and rather our customers are taking a more cautionary stance.
Gregory Weitzel: A very special thanks to the Mativ teams, who are planning and reacting, in many cases in real time, to the ever-shifting tariff dynamics.
A very special thanks to the matter of teams, who are planning and reacting in many cases in real time to the ever shifting tariff dynamics.
Gregory Weitzel: With that, I'll turn it over to Greg for a more detailed discussion of our financial. Thanks, Shruti, and good morning, everyone. Consolidated net sales from continuing operations for the quarter were $485 million, compared to $500 million in the prior year. Sales were down 3% year over year on a reported basis. and essentially flat on an organic basis. after adjusting for sales associated with closed facilities. volume mix, and selling prices were up slightly versus the prior year. while currency was unfavorable. Adjusted EBITDA from continuing operations was $37.2 million. down 19% from 45.8 million in the prior year.
With that I'll turn it over to Greg for a more detailed discussion of our financial performance.
Greg: Thanks, Rudy and good morning, everyone consolidated net sales from continuing operations for the quarter were $485 million compared to $500 million in the prior year.
Greg: Sales were down 3% year over year on a reported basis.
Greg: And essentially flat on an organic basis.
Greg: After adjusting for sales associated with closed facilities.
Greg: Volume mix and selling prices were up slightly versus the prior year.
Greg: While currency was unfavorable.
Greg: Adjusted EBITDA from continuing operations was $37 2 million.
Greg: Down 19% from $45 8 million in the prior year.
Gregory Weitzel: Higher Manufacturing and Distribution Cost. Unfavorable net selling price versus input cost. and Lower Volume and FAM represented a combined $13 million unfavorable impact. which was partially offset by $2 million of higher volume mix in SAS and $3 million of lower SG&A costs.
Greg: Higher manufacturing and distribution costs unfavorable net selling price versus input costs and.
Greg: And lower volume than Fam represented a combined $13 million unfavorable impact.
Greg: Which was partially offset by $2 million of higher volume mix in SaaS and $3 million of lower SG&A costs.
Gregory Weitzel: turning to each of our sites. Net sales in our Filtration and Advanced Materials segment of $188 million were down more than 7% versus Q1 of 2024. The year-over-year decrease reflected lower volumes due to continued customer caution and uncertain macroeconomic environment. and lower selling prices along with unfavorable currency translation. FAM adjusted EBITDA of $23 million was down $10 million year-over-year, reflecting the effects of lower volumes, the sell-through of higher-cost inventory produced in the prior quarter, Unfavorable relative net selling price versus input cost. higher distribution costs in the segment, partially offset by lower SG&A costs.
Greg: Turning to each of our segments net sales in our filtration and advanced materials segment of $188 million were down more than 7% versus Q1 of 2024.
Greg: The year over year decrease reflected lower volumes due to continued customer caution and uncertain macroeconomic environment.
Greg: And lower selling prices along with unfavorable currency translation.
Greg: <unk> adjusted EBITDA of 23 million was down $10 million year over year, reflecting the effects of lower volumes the sell through of higher cost inventory produced in the prior quarter.
Greg: Unfavorable relative net selling price versus input costs.
Greg: Higher distribution costs in the segment, partially offset by lower SG&A costs.
Gregory Weitzel: In our Sustainable and Adhesive Solutions segment, net sales of $297 million were up $16 million, or almost 6% on an organic basis. and essentially flat from last year on a reported basis. Organic growth reflected higher volumes across key categories and higher selling prices across the segment. partially offset by unfavorable currency translation. SAS adjusted EBITDA performance of $33 million, was up more than 3% year-over-year. Adjusted EBITDA. 30 basis points versus the prior year. The year-over-year performance reflected higher volumes across key categories, higher selling price across the segment, and lower SG&A costs. partially offset by higher manufacturing and distribution costs.
Greg: And our sustainable in adhesive solutions segment net sales of $297 million were up $16 million.
Greg: We're almost 6% on an organic basis and essentially flat from last year on a reported basis.
Greg: Organic growth reflected higher volumes across key categories and higher selling prices across the segment par.
Greg: Partially offset by unfavorable currency translation.
Greg: SaaS adjusted EBITDA performance of $33 million was up more than 3% year over year.
Greg: Adjusted EBITDA.
Greg: 30 basis points versus the prior year.
Greg: The year over year performance reflected higher volumes across key categories higher selling price across the segment and lower SG&A costs, partially offset by higher manufacturing and distribution costs and.
Gregory Weitzel: and an unfavorable relative net selling price versus input cost performance. This is SAS's fourth consecutive quarter of sales growth and fifth consecutive quarter of adjusted EBITDA and margin growth.
Greg: And an unfavorable relative net selling price versus input cost performance.
Greg: This SaaS its fourth consecutive quarter of sales growth and fifth consecutive quarter of adjusted EBITDA and margin growth.
Gregory Weitzel: And I, too, am very excited to see the performance Ryan and his team will drive company-wide in the coming months and quarters. Turning to a few of the corporate items, unallocated corporate adjusted EBITDA expense of $19 million was down versus the prior year, primarily driven by lower SG&A expenses. Interest expense of $18 million decreased $0.5 million from the prior year due to lower average balances and lower average interest rates in the current period. When taking hedges into account, over 80% of our debt is at a fixed rate and matures on a staggered basis between 2027 and 2029.
Speaker Change: And I too am very excited to see the performance Ryan and his team will drive companywide in the coming months and quarters.
Speaker Change: Turning to a few of the corporate items unallocated corporate adjusted EBITDA expense of $19 million was down versus the prior year, primarily driven by lower SG&A expenses.
Speaker Change: Interest expense of $18 million decreased <unk> 5 million from the prior year due to lower average balances and lower average interest rates in the current period.
Speaker Change: When taking hedges into account over 80% of our debt is at a fixed rate and matures on a staggered basis between 2027 and 2029.
Gregory Weitzel: Other expense was $2 million in the current period, which compared to other income of $2 million in the prior year period, largely due to losses on foreign exchange. Our tax rate was 5.6% in the quarter. This low tax rate was driven by a change in evaluation allowance. and primarily attributable to the non-deductible goodwill impairment. As seen in our GAAP results, considering the sustained decline in our share price during the first quarter, we performed a goodwill impairment analysis . based on current market conditions and risk. and recorded a pre-tax, non-cash charge of $412 million. At the end of the quarter, net debt was $1.04 billion and available liquidity was $470 billion.
Speaker Change: Other expense was $2 million in the current period, which compared to other income of $2 million in the prior year period, largely due to losses on foreign exchange.
Speaker Change: Our tax rate was five 6% in the quarter.
Speaker Change: This low tax rate was driven by a change in evaluation allowance and primarily attributable to the non deductible goodwill impairment.
Speaker Change: As seen in our GAAP results, considering the sustained decline in our share price during the first quarter, we performed a goodwill impairment analysis.
Speaker Change: Just on current market conditions, and risks and recorded a pretax noncash charge of $412 million.
Speaker Change: At the end of the quarter net debt was $1 4 billion and available liquidity was $407 million.
Gregory Weitzel: Our net leverage ratio, as defined in our credit agreement, was 4.7 times, with about 0.8 times headroom versus our covenant level of 5.5 times. We expect leverage to start improving in Q3 of this year. As a reminder, our target leverage range is two and a half to three and a half times, and we expect to make meaningful progress toward this range in the back half of 2025 and be within the range in 2026. Our number one priority for cash flow utilization is, and continues to be, deleveraging and debt reduction. With that in mind, as Shruti mentioned, we have major strategic initiatives underway to materially improve cash flow generation throughout 2025.
Speaker Change: Our net leverage ratio as defined in our credit agreement was four seven times with about eight times headroom versus our covenant level of five five times.
Speaker Change: We expect leverage to start improving in Q3 of this year.
Speaker Change: As a reminder, our target leverage range is two 5% to three five times and we expect to make meaningful progress toward this range in the back half of 2025 and be within the range in 2026.
Speaker Change: Our number one priority for cash flow utilization is and continues to be deleveraging and debt reduction.
Speaker Change: With that in mind as <unk> mentioned, we have major strategic initiatives underway to materially improve cash flow generation throughout 2025.
Gregory Weitzel: This is first and foremost driven by the aforementioned pricing and cost optimization initiative. And we have further reduced our expected capital expenditures from an annualized rate of $55 million in 2024 to a current target of $40 million. And we are committed to reducing our year-end inventory levels by 20 to 30 million in 2025 versus 2024. With all that, we expect working capital for the full year to improve significantly from a use of cash to a source of cash of around $10 million. This will drive significant cash flow generation in 2025, which is solely intended to reduce our debt and leverage in the coming months.
Speaker Change: This is first and foremost driven by the aforementioned pricing and cost optimization initiatives.
Speaker Change: And we have further reduced our expected capital expenditures from an annualized rate of $55 million in 2024 to our current target of $40 million.
Speaker Change: And we are committed to reducing our year end inventory levels by $20 million to $30 million in 2025 versus 2024.
Speaker Change: With all that we expect working capital for the full year to improve significantly from a use of cash to a source of cash of around $10 million.
Speaker Change: This will drive significant cash flow generation in 2025, which is solely intended to reduce our debt and leverage in the coming months.
Gregory Weitzel: We did not repurchase any shares during the quarter. Once our leverage returns to our target range, we will continue to opportunistically repurchase shares to offset dilution. But the priority of cash flow until then remains on paying down debt.
Speaker Change: We did not repurchase any shares during the quarter.
Speaker Change: Once our leverage returns to our target range, we will continue to opportunistically repurchase shares to offset dilution.
Speaker Change: But the priority of cash flow until then remains on paying down debt.
Gregory Weitzel: As we look ahead, we acknowledge that market demand remains uncertain. We have not seen the expected return to pre-pandemic demand levels with additional impact from tariffs and macroeconomic policy in the market, which directly impacts the levels of sales and operating leverage we see. While we have continued to see softness in demand through early May and expect this will continue to affect our results in Q2, we expect a significant sequential step-up in adjusted EBITDA performance. This step-up will be similar to last year's step-up of $20 million and will be driven by a sequential increase in volume, especially on the SAS side, and higher fixed cost absorption.
Speaker Change: As we look ahead, we acknowledge that market demand remains uncertain, we have not seen the expected return to pre pandemic demand levels with additional impact from tariffs and macroeconomic policy in the market, which directly impacts the levels of sales and operating leverage we see.
Speaker Change: While we have continued to see softness in demand through early may and expect this will continue to affect our results in Q2 <unk>.
Speaker Change: We expect a significant sequential step up in adjusted EBITDA performance.
Speaker Change: This step up will be similar to last year's step up of $20 million and will be driven by a sequential increase in volume, especially on the SaaS side and higher fixed cost absorption as well as improved relative price versus input costs.
Gregory Weitzel: as well as improved relative price versus input cost. The seasonally higher production costs that impacted our results at the beginning of the year will not have an impact on our results for the remainder of the year. For modeling purposes for the full year 2025, we are now expecting additional cost reductions of $10 to $15 million realized in 2025. appreciation, amortization, and stock-based comp to be around $100 million. interest expense to be around $75 million plus another $9 million in fees for our AR facility. capital expenditures of around $40 million. one-time costs to be around $15 to $20 million.
Speaker Change: The seasonally higher production costs that impacted our results at the beginning of the year will not have an impact on our results for the remainder of the year.
Speaker Change: For modeling purposes for the full year 2025, we are now expecting additional cost reductions of 10% to $15 million realized in 2025.
Speaker Change: Depreciation amortization and stock based comp to be around $100 million.
Speaker Change: Interest expense to be around $75 million, plus another $9 million in fees for our AR facility.
Speaker Change: Capital expenditures of around $40 million.
Speaker Change: One time costs to be around 15% to $20 million.
Gregory Weitzel: working capital to be a $10 million source of cash driven mainly by the previously mentioned inventory reduction of $20 to $30 million. And for our normalized tax rate, we suggest using 24%.
Speaker Change: Working capital to be a $10 million source of cash driven mainly by the previously mentioned inventory reduction of $20 million to $30 million.
Speaker Change: And for our normalized tax rate, we suggest using 24%.
Shruti: With that, Shruti, I'll hand it back over to you for your closing remarks. Thank you, Greg. What I want you to take away from this call is that to undertake the necessary changes to grow market. return to sustainable and profitable growth. Strengthen the balance. and most importantly, restore value to our shareholders. we are pivoting to a much higher sense of urgency across. we will act swiftly, comprehensively, and decisively. Our teams understand that the current macro environment will not do us any favors anytime soon. and we are adopting to control our own death. Our top priority is to accelerate our pace of execution.
Speaker Change: With that <unk> I'll hand, it back over to you for your closing remarks.
Greg: Thank you Greg.
Greg: What I want you to take away from this call is.
Greg: Is that to undertake the necessary changes to grow market share.
Greg: Turning to sustainable and profitable growth.
Greg: To strengthen the balance sheet and most importantly restore value to our shareholders.
Greg: We are pivoting to a much higher sense of urgency across the company.
Greg: We will act swiftly.
Greg: Comprehensively and decisively.
Greg: Our teams understand that the current macro environment, we will not do us any favors anytime soon and we are adapting to control our own destiny.
Greg: Our top priority is to accelerate our pace of execution.
Shruti: with a focus on three key areas. Driving Enhanced Commercial Execution. sharpening our efforts to de-level the balance sheet. and conducting a strategic review of our portfolio. To drive enhanced commercial execution, we put in place multiple initiatives to align the commercial teams and product solutions with new business generation and profitable growth. to sharpen our efforts to de-lever. We are executing on a number of initiatives to materially improve our margins and cash flow generation. And to focus our operations on our course categories, we are conducting a strategic portfolio review of our assets and design. These efforts are to ensure Mativ is focused on our highest value initiatives to enable our long-term success.
Greg: With a focus on three key areas.
Greg: Driving enhanced commercial execution.
Greg: Sharpening our efforts to delever the balance sheet.
Greg: And conducting a strategic review of our portfolio.
Greg: To drive enhanced commercial execution, we put in place multiple initiatives to align our commercial teams and product solutions with new business generation and profitable growth.
Greg: To sharpen our efforts to de lever.
Greg: We are executing on a number of initiatives to materially improve our margins and cash flow generation.
Greg: And to focus our operations on our core categories. We are conducting a strategic portfolio review of our assets and business lines.
Greg: These efforts are to ensure <unk> is focused on our highest value initiatives to enable our long term success.
Shruti: We are executing against a clear strategic roadmap and are taking accelerated action. position Mativ for profitable growth while de-levering our balance sheet and creating sustainable value for our shareholders.
Greg: We are executing against a clear strategic roadmap and are taking accelerated actions to position <unk> for profitable growth, while delevering, our balance sheet and creating sustainable value for our shareholders.
Shruti: In closing, I want to thank all our employees for their unwavering passion for Mativ and their efforts to reposition our company for the future.
Greg: In closing I.
Greg: I want to thank all our employees for their unwavering passion for <unk> and their efforts to reposition our company for the future.
Shruti: a board for their support and faith in me.
Greg: Our board for their support and faith in me.
Shruti: and our shareholders for their patience as we accelerate our pace of change in support of our three key initiatives. We look forward to updating you on our progress as we move through the year.
Greg: And our shareholders for their patients as we accelerated our pace of change in support of our three key initiatives.
Greg: We look forward to updating you on our progress as we move through the year.
Operator: Thank you for joining us this morning, and please open the line for questions. Of course. We will now begin the question and answer session. As a reminder, if you would like to ask a question, please press star followed by one on your touchtone phone. We will pause here for a moment as questions are registered.
Greg: Thank you for joining us this morning, and please open the line for questions.
Greg: Of course, we will.
Greg: We'll now begin the question and answer session.
Greg: As a reminder, if you'd like to ask a question. Please press star followed by one on your Touchtone phone.
Greg: Yes, a pause here for a moment ask questions are registered.
Daniel Harriman: Our first question comes from the line of Daniel Harriman with Sidoti & Co. Your line is now open. Thank you. Good morning, guys.
Daniel Herman: Our first question comes from the line of Daniel Herman with Sidoti and co.
Greg: Your line is now open.
Speaker Change: Thank you good morning, guys and Trudy congrats on the new position.
Daniel Harriman: And, Shruti, congrats on the new position.
Shruti: Two quick questions for me today, one for Shruti and one for Greg. Shruti, obviously, you're only 60 days into your tenure. And clearly, at this stage, the level of detail you're able to provide on the portfolio review is rather small. And I was hoping you might be able to kind of provide a little bit more insight or detail into what you're thinking about.
Speaker Change: Two two quick questions for me today, one for <unk> and one for Greg.
Speaker Change: Sure <unk>, obviously, you are only 60 days into the into your tenure.
Speaker Change: And clearly at this stage a level of detail you're able to provide on the portfolio review is rather small.
Speaker Change: I was hoping you might be able to kind of provide a little bit more insight or detail into what youre thinking about.
Gregory Weitzel: And then, Greg, you've laid out multiple items to improve cash flow generation and expansion.
Speaker Change: And then Greg.
Greg: You've laid out multiple items to improve cash flow generation and expansion.
Shruti: And I was hoping you might be able to give a little bit more color on that and the timing that you see that happening. Thanks so much, guys. Thanks, Dan, for the question and appreciate your comment. As you know, we've been evaluating our portfolio periodically ever since the merger, case in point, we took the portfolio action regarding our EP divestiture. So, you know, that was successfully executed. But along with the board, we are conducting a strategic portfolio review of our assets and business lines, as I mentioned earlier. And Greg also alluded to that. We have a very diverse portfolio.
Speaker Change: And I was hoping you might be able to give a little bit more color on that and the timing that you see that happening.
Thanks, so much guys.
Speaker Change: Thanks, Dan for the question and I appreciate your comments.
Speaker Change: As you know we have been evaluating our portfolio periodically ever since the merger case in point.
Speaker Change: We took the portfolio action regarding our EP divestiture so.
Speaker Change: That was successfully executed.
Speaker Change: Along with the board we are conducting a strategic portfolio review of our assets and business lines as I mentioned earlier and Greg also alluded to that.
Speaker Change: We have a very diverse portfolio.
Shruti: And what we're looking at is how each product category contributes to Mativ's bottom line, its competitive positioning, margin profile and how it fits into the overall portfolio diversity. So we will certainly evaluate all those factors and opportunities to make sure we unlock and maximize the value to strengthen our balance sheet. However, as you also alluded to, it's early days for me and in this strategic review.
Speaker Change: And what we're looking at is how each product category contributes to <unk> bottom line, its competitive positioning margin profile and how it fits into the overall portfolio diversity.
Speaker Change: So we will.
Speaker Change: Certainly evaluate all of those factors and opportunities to make sure we unlock and maximize the value to strengthen our balance sheet.
Speaker Change: However, as you also.
Speaker Change: Alluded to it's early days for me and in this strategic review.
Shruti: But for sure, we will keep you updated in progress and opportunities as and when we identify them and are ready to talk about it.
Speaker Change: Budd.
Speaker Change: We will keep you updated and progress and opportunities as and when we identify them and not ready to talk about it.
Gregory Weitzel: For the second question, I'll turn to Greg. Hi, Daniel. Yes, on cash flow, we're expecting a significant increase from where we were last year from overall cash flow. I know when you look at the first quarter and with the negative cash flow, it's a steep climb from there, but that's really the seasonality that we see from accounts receivable and the slower volumes in Q4 and then picking up in Q1. So we should see a significant change from that level already in Q2 with positive cash flow and would expect with the actions that we're taking on the inventory reductions and the capital reductions, as well as the improved sequential EBITDA, that we would see, again, a significant increase in cash flow year over year.
Speaker Change: For the second question I'll turn it Greg.
Greg: Hi, Daniel.
Speaker Change: Yes.
Speaker Change: On cash flow, we're expecting a significant increase from where we were last year from overall cash flow I know when you look at the first quarter and with the negative cash flow.
Speaker Change: It's a steep climb from there, but thats really the seasonality that we see from accounts receivable and the slower volumes and in.
Speaker Change: In Q4, and then picking up in Q1.
Speaker Change: So we should see a significant.
Speaker Change: Change from that level already in Q2 with a positive cash flow.
Speaker Change: And would expect with the actions that we're taking on.
Speaker Change: The inventory reductions in the capital reductions.
Speaker Change: As well as the improved sequential EBITDA that.
Speaker Change: That we would see again, a significant increase in cash flow year over year.
Operator: For more information visit www.FEMA.gov Okay, thanks so much, guys, and best of luck moving forward. Thank you. Thank you for your questions.
Speaker Change: Okay. Thanks, so much guys and best of luck moving forward.
Speaker Change: Thank you.
Speaker Change: Thank you for your question.
Lars Kjellberg: Our next question comes from the line of Lars Kjellberg with Cecil.
Speaker Change: Our next question comes from the line of Lars Kjellberg with Stifel.
Lars Kjellberg: Your line is now open. Hey, good morning. Thank you for taking my questions.
Speaker Change: Your line is now open.
Speaker Change: Okay.
Speaker Change: Hey, good morning, and thank you for taking my questions.
Lars Kjellberg: Maybe we can step back a bit and kind of look at the legacy company. and where the margins were prior to the merger and then how they literally halved since. the pandemic and what we're still...
Speaker Change: Maybe we can step back a bit and kind of look at the legacy companies and where the margins were prior to the merger and then.
Speaker Change: Literally hovde since.
Speaker Change: The pandemic and movies, we still sit.
Lars Kjellberg: What in your view, have you been able to identify what are the root causes for that significant margin contraction? And we haven't really seen that in some of your So it has best to do with. you know, the complexity of the business, which are now, of course, we'll try to address. through the strategic review of the portfolio. or is it just a scale, or lack of scale? It doesn't necessarily enable you to deal with these extremely disruptive markets. So if you can get some perspective on that, that would be really interesting to hear.
Speaker Change: What are your view have you been able to identify what are the root causes significant margin contraction and we haven't really seen that in some of your peers. So it has to do with.
Speaker Change: The complexity of the business, which are now of course, we will try to address through the strategic review of the portfolio.
Speaker Change: Or is it just the SKU.
Speaker Change: On a macro scale back.
Speaker Change: Necessarily.
Speaker Change: Enable you to deal with these extremely disruptive market. So if you can give some perspective on that type of really interesting to hear.
Lars Kjellberg: The other thing which I'm thinking a bit about as you focus in on de-leveraging the balance sheet Why do we continue to pay a dividend? Wouldn't it be more value for shareholders to step away from the dividend and pause it and then really focus on the controllables? Because the other stuff may change, of course, as markets evolve.
Speaker Change: The other thing, which I can.
Speaker Change: Can you repeat about as you're focusing on delevering the balance sheet.
Speaker Change: Why do we continue to pay your dividend wouldn't that be more value for shareholders to step away from the dividend and <unk> and then really focus on and control levels.
Speaker Change: It's the other stuff may change of course with as markets evolve. That's my first question is please thank you.
Gregory Weitzel: Those are my two first questions. Yeah, I'll start on the first one and Trudy can add in if I missed anything. As far as the margins, especially if we're comparing to the first quarter of the year, those are going to be by far the most suppressed margins that we have. With the seasonality, again, the higher cost inventory that we sell through from the seasonally slower Q4, I would expect the margins for the full year to be much more in line with where we were last year with some upside to that. As far as what's even brought those levels down some, as we've talked with the fan business is primarily the biggest impact there, with most recently the films putting pressure on the margins.
Speaker Change: Yeah I'll start on the on the first one in <unk>.
Speaker Change: Sure you can add in if I Miss anything as far as the margins, especially if we're comparing to the first quarter of the year those are going to be by far the most suppressed margins that we have with the seasonality again, the higher cost inventory that we that we sell through from the seasonally slower Q4.
Speaker Change: I would expect the margins for the full year to be much more in line with your with where we were last year with some upside to that.
Speaker Change: As far as.
Speaker Change: Yes.
Speaker Change: Even those levels down some as we've talked with the.
Speaker Change: The fan business is primarily the biggest impact there with most recently the films putting pressure on the on the margins.
Gregory Weitzel: Outside of that, we still believe that we are in businesses and categories where a 15% margin is achievable and continuing to work toward that. The cost reductions that we've talked about should also make a nice step forward in improving those margins as well.
Speaker Change: Outside of outside of that we still.
Speaker Change: I believe that we are in businesses and categories.
Speaker Change: Is that are we're 15% margin is achievable and continuing to work toward that.
Speaker Change: Cost reductions that we've talked about should also make a.
Speaker Change: A nice step forward in improving those margins as well.
Gregory Weitzel: If you didn't have, then maybe on the divoting. Go ahead, Lars. Now I was going to say, you know, the, the, is there anything in this? I mean, essentially, from the predecessors, the markets, where you've been, call it 10% or thereabouts, it's literally halved from where the two companies were prior to coming together, right? So, again, is this the... scale this advantage in a disruptive market fast. kind of doesn't enable you to protect the market. And can we resolve that with this portfolio review and lessening the footprint? Yeah, as far as the planned increase, again, I think we're working really more toward a 15% margin at this point versus a 20%.
Speaker Change: If you didn't have.
Speaker Change: Maybe on the dividend.
Speaker Change: Oh go ahead.
Speaker Change: No I was going to say unity.
Speaker Change: Is there anything in this essentially from the predecessor Tomorrow.
Mark: Hey, Mark.
Mark: When you've been closer to 10% or thereabouts is literally half from where the two companies.
Mark: Prior to coming together right. So.
Mark: Again.
Mark: Steve disadvantage disrupted market.
Mark: Kind of it doesn't enable you to two.
Mark: Could protect protect.
Mark: Protect the margins.
Mark: And can we resold that quick.
Mark: Tony will review and and lessening the footprint anyway.
Mark: Yes, as far as as far as the.
Mark: The planned increase again I think we're working really more toward a 15% margin at this point versus versus a 20%.
Gregory Weitzel: The EP divestiture did lower the overall mix, some from where the historic two companies had been in the past from an overall margin standpoint. As far as the scale, you mentioned that in the earlier part of your question, that is where we've made significant efforts in reducing non-overhead SG&A costs and have more of that in scope for the next, for 25 and 26. So I think we're addressing a lot of the scale problem or issue there. As far as the portfolio, yes, if there were anything to be done there, it would be focused more on delevering.
Mark: The EP divestiture did lower the overall mix.
Mark: Some from where the historic two companies had been in the past from an overall margin standpoint.
Mark: As far as the scale.
Mark: You mentioned that in the earlier part of your question that is where we've made.
Mark: Significant efforts in.
Mark: Reducing non overhead SG&A costs and have more of that in scope for the next.
Mark: 24, 25, and 26, so I think we're we're addressing a lot of the scale problem or issue there.
Mark: As far as the.
Mark: The port portfolio, Yes, if there were anything to if there were anything to be done there it would be.
Mark: It would be focused more on.
Gregory Weitzel: Oh, the other thing, too, I think I missed was on the pricing actions. Those that went into play toward the end of the first quarter are already being realized in the second quarter and through the remainder of the year, which should also help with the margins in addition to the cost reduction.
Mark: Delevering all the other thing too I think I missed was on the pricing actions those those that went into play in the towards the end of the first quarter are already being realized in the second quarter and through the remainder of the year, which should also help with the margins. In addition to the cost reductions.
Mark: Sure.
Gregory Weitzel: Very good amended dividend question. Yeah, on the on the dividend, we've reviewed that we have have talked with the have had discussions with the board on that and at this point are planning to continue to continue to with the dividend.
Mark: Very good and then the dividend question.
Mark: Yes.
Mark: On the dividend.
Mark: A review that we have talked with have had discussions with the board on that and at this point or are planning to.
Mark: Continue to continue to.
Mark: With the dividend.
Lars Kjellberg: Okay, thank you for my questions. Thank you.
Mark: Okay. Thank you that's all my questions. Thank you.
Massimiliano Pilato: Thank you for your questions. Our next question comes from the line of Massimiliano Pilato with Stiefel. Your line is now open. Good morning. Thank you for taking my questions. There will be three for me.
Mark: Thank you for your question.
Mark: Yes.
Speaker Change: Our next question comes from the line of Matt <unk> P&L.
Speaker Change: With Stifel.
Speaker Change: Your line is now open.
Mark: Okay.
Mark: Good morning, and thank you for taking my questions.
Speaker Change: B III for me.
Massimiliano Pilato: So I appreciate all the color on the tariff situation, but relative to China, what I would like to understand, if you saw any change in domestic demand in the farm segment or some back off from Chinese in this situation of tariffs between the U.S. and China.
Speaker Change: So I appreciate all the color on the tariff situation, but.
Speaker Change: Relative to China.
Speaker Change: But I would electron understanding few.
Speaker Change: So any change in domestic demand.
Speaker Change: In the following segments or some backhaul from Chinese bank basis, given the situation.
Speaker Change: Sorry.
Speaker Change: <unk> seen good gas in China.
Massimiliano Pilato: The second question relates to inflation. So if I understand, pricing actually already benefiting Q2, but it seems that policy is easing out, energy is seasonally lower, and we haven't seen any material inflation ratings. So where do you see the price cost tied in Q2 and as well from the school year? Maybe I'll ask the third question after this.
Speaker Change: Second question.
Speaker Change: It relates to inflation, so I can understand.
Speaker Change: Alright, your next year already benefits in Q2.
Speaker Change: But it seems that policy season out energy.
Speaker Change: Some of the lower end.
Speaker Change: We haven't really seen any material inflation ratings so.
Speaker Change: Where do you see the price cost spread in Q2 and as well as for the full year.
Speaker Change: And.
Speaker Change: And maybe I'll ask another question Arthur.
Speaker Change: <unk>.
Speaker Change: Yes.
Shruti: Yeah, I can take the first question on tariffs. So as we mentioned, our exposure to China is very minimal. And then we are certainly, you know, whether it's in Europe, as I mentioned, we are local for local in terms of our supply chain and manufacturing. And we're certainly in touch with our customers to see how we can continue to penetrate the market, increase our share in those local markets that are getting impacted by the Chinese tariffs.
Speaker Change: Yes, I can take the first question on tariffs.
Speaker Change: So as we mentioned our exposure to.
Speaker Change: China is very minimal and then.
Speaker Change: Certainly.
Speaker Change: Whether it's in Europe as I mentioned, we are local for local in terms of our supply chain and manufacturing and we're certainly in touch with our customers to see how we can continue to penetrate the market increase our or our share in those local markets that are getting impacted by the Chinese.
Speaker Change: Chinese tariffs.
Gregory Weitzel: And I'll take the second question on the pricing and input costs. So we'll continue to manage selling prices to cover input costs. We occasionally do hit timing issues with quarters, and we saw that in the fourth quarter of last year, and then as reported and as expected, still ran a modest – we had modestly higher input costs than pricing actions. Our expectation is with the pricing actions in place that we'd be back to where that is a favorable contributor in Q2, and that we would end the year with also favorable pricing input costs as well.
Speaker Change: And I'll take the second question on the pricing and input cost. So we will continue to manage selling prices to cover input costs, we occasionally do hit timing issues with quarters and we saw that in the in the fourth quarter of last year, and then as reported and as expected.
Speaker Change: Still ran a.
Speaker Change: Modest moderate we had modestly higher input cost than pricing actions and our expectation is with the pricing actions in place that we'd be back to where that is a favorable contributor.
Speaker Change: In Q2 and that we would end the year with.
Speaker Change: With also favorable pricing input costs as well.
Gregory Weitzel: At this point, we're not seeing significant – we don't have expectations for significant input cost increases. And again, this would be barring any tariffs, which then we would also have pricing that would offset that. But when we look across all of our raw materials, it's really pulp, paper, and energy where we're seeing a bit of an uptick in input costs, but not in a significant way and not in a way that we are not able to cover them with price increases. Right, thank you.
Speaker Change: At this point, we're not seeing significant.
Speaker Change: We don't have expectations for significant input cost increases and again this would be borrowing any tariffs, which then we would also have pricing that would offset that.
Speaker Change: But when we look across our all of our raw materials, it's really pulp paper and energy, where we're seeing a bit of an uptick in <unk>.
Speaker Change: Input costs, but not in a significant way and not in a way that we are not able to cover them with price increases.
Speaker Change: Right.
Massimiliano Pilato: Then I'll finish with the third question, which relates to the farm segment. So of course, there have been a multitude of disruptions and some internal issues, which now seems to be resolved. But nonetheless, The underlying markets for automotive infrastructure seems pretty weak. And if I understand, you were trying to push or to prioritize the optical, medical, and dental fields, but the exposure to the transportation infrastructure is about 85%. So what more can you do to offset the weakness potentially during the year in post-multivitamin testosterone? It seems that the... feeling business is not enough to offset.
Speaker Change: Thank you Ben.
Speaker Change: <unk> finished the third question, which relates to the pharma segment.
Speaker Change: So of course there have.
Speaker Change: Being amongst multitudes of disruptions and some internal issues.
Speaker Change: Now it seems to be.
Speaker Change: Consults.
Speaker Change: But nonetheless.
Speaker Change:
Speaker Change: The underlying markets for automotive and construction teams.
Speaker Change: Pretty weak.
Speaker Change: And if.
Speaker Change: If I understand.
Speaker Change: Are you trying to push or two.
Speaker Change: Prioritize the optical medical and dental.
Speaker Change: According to the.
Speaker Change: Transportation and construction is about 85%.
Speaker Change: So what more can you do to offset the weakness potentially in during the year in both a multi day adjusted Jim Sims.
Speaker Change: B.
Speaker Change: Business, it's not enough to offset.
Massimiliano Pilato: Are there any other actions that you can undertake to drive growth in the farm sector?
Speaker Change: Are there any other actions that you can undertake to drive growth in the pharma segment.
Shruti: Yeah, so as I mentioned, there's a couple of things there on the on the FAM segment. One of this, the optical, medical and dental, we have a robust pipeline and we are, you know, those segments are growing. On the automotive and construction segments, with the change in with Ryan coming on board, building a new team, and we have successfully shown in SAS segment that building a pipeline, which is, you know, we target roughly 50% of our revenues, if having that kind of a discipline on commercial pipeline build. In albeit weaker segments of automotive construction, we still feel we can grow in those segments.
Speaker Change: Yes, so as I mentioned, there's a couple of things there on the on the <unk> segment.
Speaker Change: One of these the optical medical and dental.
Speaker Change: We have a robust pipeline and beer.
Speaker Change: Those segments are growing.
Speaker Change: On the automotive and construction segments.
Speaker Change: The change in leadership with Ryan coming on Board building, a new team and we have successfully shown in SaaS segments that building a pipeline which is <unk>.
Speaker Change: <unk> targeted roughly 50% of our revenues.
Speaker Change: Having that kind of with discipline on commercial pipeline built.
Speaker Change: In albeit weaker segments of automotive and construction, we still feel we can grow in those segments. So Orion recently took over he is he and his team are.
Shruti: So Ryan recently took over. He and his team are building the pipeline. And I expect similar growth patterns as we have demonstrated in SAS in the past. Thank you for your answer and good luck for the next quarter. Thank you.
Speaker Change: Building the pipeline and I expect.
Speaker Change: Similar growth patterns as we have demonstrated in SaaS in the past.
Speaker Change: Thank you for your answers and good luck.
Speaker Change: So the next quarter.
Speaker Change: Thank you.
Operator: Thank you for your questions. That'll conclude today's question and answer session.
Speaker Change: Thank you for your questions.
Speaker Change: That will conclude today's question and answer session.
Operator: I would now like to pass the call back to you for any further remarks. Thank you for joining us this morning for our Q1 2025 earnings call. We appreciate it. We look forward to connecting with you throughout the coming months and our next earnings call in August.
Speaker Change: I would now like to pass the call that tissue for any further remarks.
Speaker Change: Thank you for joining us this morning for our Q1 2025 earnings call. We appreciate it we look forward to connecting with you throughout the coming months in our next earnings call in August.
Operator: Have a great day, everybody. Thank you. That concludes today's call. Thank you for your participation and enjoy the rest of your day.
Speaker Change: Have a great day everybody. Thank you.
Speaker Change: That concludes today's call. Thank you for your participation.