マティブ（MATV）2026年第3四半期決算説明会：FAMの成長がSASの逆風を相殺

主要ポイント

• Mativが発表した2026年第3四半期の売上高は5億ドルで、前年同期比で報告ベースでは約3％減、既存事業ベース（オーガニック）では2％超の減少となった。調整後EBITDAは7％減の6,200万ドルとなり、マージンは50ベーシスポイント（bp）縮小して12.5％となった。
• フィルトレーション＆アドバンスト・マテリアルズ（FAM）部門は四半期として過去最高の成長を達成した。売上高は既存事業ベースで11％超増の2億1,900万ドルとなり、調整後EBITDAは20％増の4,000万ドル、マージンは150bp拡大して18.1％に達した。
• 民間宇宙関連の特殊フィルムの売上高は前年同期比で30％超増加した。同素材は顧客による認定段階から商業利用へと移行しており、2027年に向けたさらなる事業拡大に対する経営陣の期待を後押ししている。
• サステナブル＆アドヒーシブ・ソリューションズ（SAS）部門の売上高は、ウィスコンシン州での竜巻被害、ヘルスケア分野における顧客の在庫調整、およびカナダによる新たな関税の影響を受け、10％超減の2億8,100万ドルとなった。調整後EBITDAは25％減の3,300万ドルに落ち込んだ。
• 竜巻被害により、第3四半期の売上高は2,000万〜2,500万ドル減少した。経営陣によると、逸失利益ならびに追加の保管・輸送費用を含め、SAS部門の前年同期比でのEBITDA減少分の半分以上をこの影響が占めたという。
• 経営陣は、第4四半期の調整後EBITDAが前年同期比で1桁台前半のパーセンテージで減少すると見込んでいるものの、通期の売上高、利益、およびキャッシュ創出額については依然として2025年の水準を上回ると予想している。

主要財務データ

事業および業績の動向

FAM部門が主な成長エンジンとなった。航空宇宙・防衛、輸送機器向けアフターマーケット用フィルトレーション、およびペイントプロテクションフィルムにおける旺盛な需要が、高付加価値製品の販売数量増加と良好な製品ミックスを牽引した。また、製造コストの増加により一部相殺されたものの、販売価格の引き上げも同部門の追い風となった。

民間宇宙向けフィルムは顧客による認定を完了し、量産体制へと移行した。主要顧客が打ち上げスケジュールを拡大するなか、Mativは生産量を引き上げている。経営陣は、2027年にかけて同事業がさらに拡大する見通しであると述べた。

Mativはまた、エンジンの吸気、オイル、燃料フィルター向けに、リグニンを原料とするフィルターメディアの増産も進めている。同製品は化石資源由来の樹脂を植物由来のポリマーに置き換えたもので、すでに輸送機器向けアフターマーケットの大手顧客向けに量産が行われている。

SAS部門は主に3つの下押し圧力に直面した。7月にウィスコンシン州メナシャを襲った竜巻による紙・包装材の物流混乱、ヘルスケア分野の顧客による在庫調整の継続、および米国向けの一部テープ輸出に対するカナダ関税である。

同社は被災した1カ所の配送センターの代替として、暫定的に3カ所の地域倉庫を立ち上げた。出荷は72時間以内に再開され、顧客離れは発生しなかったとMativは説明した。しかし、暫定的な物流網の運用により、荷役費、保管費、輸送費が増加した。

テープ、ラベル、ライナーは前年同期比でほぼ横ばいとなった。ラベルおよびライナーは伸長したものの、テープは欧州での需要軟化と北米での関税圧迫に直面した。

業績予想（ガイダンス）

経営陣は、民間宇宙向けフィルム、フィルターメディア、ペイントプロテクションフィルムの好調に加え、紙・包装材の供給体制回復に支えられ、第4四半期は両事業部門ともに既存事業ベースの販売数量が前年同期比で増加すると予想している。

第4四半期の調整後EBITDAは前年同期比で1桁台前半のパーセンテージで減少すると見込まれる。経営陣はこの減益見通しについて、物流の一時的な非効率性、50％のカナダ関税、およびヘルスケア分野の在庫調整に伴う製品ミックスの悪化によるものとしている。

ヘルスケア分野の在庫調整は年末まで続く見込みだが、2027年初頭には発注パターンが正常化すると予想されている。また経営陣は、第3四半期における紙・包装材の売上減少は一時的なものとみており、今後数四半期にわたり逸失した売上高の大半を挽回できる見込みであると述べた。

2026年通期について、Mativは売上高、利益、キャッシュ創出額が2025年の水準を上回ると見込んでいる。余剰資金は引き続き債務返済に充当される。同社は2027年半ばまでにレバレッジ比率を目標レンジである2.5倍〜3.5倍の上限まで引き下げることを引き続き目指している。

リスクと注視すべき事項

• Mativが恒久的な物流・供給体制を確立するまで、暫定的な3拠点の倉庫ネットワークは短期的にはコスト増の逆風であり続けるとみられる。
• カナダのレンフルーから米国の顧客に輸出される電線・ケーブル用および建築用テープ完成品に対し、50％のカナダ関税が課されている。この対象事業規模は連結年間売上高の約2％に相当する。
• ヘルスケア分野の在庫調整は、複数の主要量産品ラインにおいて販売数量と製品ミックスを引き続き圧迫している。
• Mativは竜巻により被害を受けた棚卸資産について全額補償を受ける見通しだが、暴風雨に伴う追加費用に対する事業中断保険金の請求手続きは現在も進行中である。
• 2026年前半に実施された価格改定に原材料等の投入コストが追いつくため、価格とコストの差（プライス・コスト差）による好影響は第4四半期に縮小する見込みである。

アナリスト質疑応答の要点

経営陣は、FAM部門のマージン改善は主に販売数量と製品ミックス、とりわけ民間宇宙向けフィルム、自動車向けアフターマーケット用フィルトレーション、および自動車用保護フィルムの高成長が牽引したと説明した。プライス・コスト差による恩恵は縮小する見通しであるものの、これらの分野は第4四半期も引き続き下支えとなると予想されている。

竜巻被害について、経営陣は第3四半期の売上高への影響が2,000万〜2,500万ドルであったことを確認した。逸失利益および追加の物流費用が、SAS部門における前年同期比でのEBITDA減少の半分以上を占めた。同社は、緊急復旧対応から恒久的なネットワーク設計へと移行するにつれて、物流および配送の効率が改善すると見込んでいる。

第4四半期における販売数量の増加予想とEBITDA減少見通しとの乖離について、経営陣は、売上を牽引する要因はより持続的である一方、関税コスト、物流の非効率性、およびヘルスケア分野のミックス悪化圧力は一時的なものとみていることを強調した。

決算説明会トランスクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Welcome to Mativ's Third Quarter 2026 Earnings Conference Call. On the call today from Mativ are Shruti Singhal, President and Chief Executive Officer; Scott Minder, Chief Financial Officer; and Chris Kuepper, Director 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 call over to Mr. Chris Kuepper. Sir, you may begin.

Chris Kuepper

Good morning, everyone, and thank you for joining us for Mativ's Third Quarter 2026 Earnings Call. Before we begin, I'd like to remind you that comments included in today's conference call include forward-looking statements. Actual results may differ materially from these comments for reasons shown in detail in our SEC filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. Some financial metrics discussed during this call are non-GAAP financial metrics. Reconciliations of these metrics to the closest GAAP metrics are included in the appendix of the earnings release, which, along with the accompanying slide deck is now available on our website at ir.mativ.com. I will also note that unless we state otherwise, any comparisons we make to prior periods, including references to our performance since Mativ's formation are on a continuing operations basis, excluding the divested Engineered Papers business.

With that, I'll turn the call over to Shruti.

Shruti Singhal

Thanks, Chris. Good morning, everyone, and thank you for joining us today to discuss Mativ's Third Quarter 2026 Financial Results. The third quarter reinforced Mativ's improving earnings power and strategic momentum. In Filtration & Advanced Materials, or FAM, our focused investments and commercial strategy translated into strong growth, meaningful margin expansion and indicative market share gains. I'm happy to report that we reached an important commercialization milestone in our aerospace and defense end market, and our aftermarket transportation portfolio continued to win in the marketplace.

In Sustainable & Adhesive Solutions, or SAS, the quarter was affected by 2 identifiable external headwinds, the operational disruption from the July tornado in Wisconsin and the newly imposed Canadian tariffs. Importantly, underlying customer demand and commercial traction remains solid, giving us confidence that our underlying performance reflected a healthy business with solid momentum. In fact, absent the temporary volume and logistics impacts from the Wisconsin tornado, consolidated Mativ adjusted EBITDA would have grown year-over-year in the third quarter, a clear testament to the earnings power we are building across the enterprise. Taken together, Q3 demonstrates why we believe Mativ offers an increasingly compelling combination of differentiated growth platforms, operational resilience and strong financial discipline.

FAM's momentum, SAS's ongoing stabilization and our continued progress on profitability, cash generation and deleveraging strengthen our confidence in the value creation opportunity ahead. It's been encouraging to see our teams execute with discipline through a year marked by unexpected events and pockets of soft demand. Year-to-date, that execution has translated into measurable financial progress. Through the first 9 months, Mativ adjusted EBITDA grew 8% and margins expanded by 100 basis points, alongside a 5% improvement in free cash flow. As we enter the final 2026 quarter, Mativ is operating from a stronger foundation with expanding commercial momentum and a portfolio increasingly positioned towards higher-value mission-critical applications. That strength is most visible in FAM. The segment delivered an exceptional third quarter, achieving its strongest year-over-year organic sales growth in its history, up more than 11%, adjusted EBITDA up 20% and 150 basis points of margin expansion.

Organic growth was broad-based, led by strength across our films categories and solid execution in industrial and aftermarket transportation filtration. Within films, aerospace and defense remains our primary growth catalyst complemented by robust demand for paint protection films. In Filtration, our growth in priority categories shows that differentiated product performance and close customer alignment are translating into share gains.

I'll take a moment to expand on our aerospace and defense end market and how it's becoming a more meaningful growth platform for Mativ. In Q3, specialty films revenue focused on commercial space increased by more than 30% year-over-year, reinforcing both the demand profile and this business' strategic value. This growth provides tangible proof that our focus on higher-value mission-critical applications is working. We are applying differentiated capabilities in advanced coatings and precision multilayer processing to solve complex thermal, optical and weight challenges for low earth orbit vehicles. As discussed in our May call, we are a long-term development partner with a leading commercial space launch provider supplying engineered materials that enable next-generation satellite constellations to operate reliably in extreme environments. Our solutions help to reduce payload mass, improve launch economics and support reliable connectivity.

During Q3, these materials reached a key operational milestone, moving from customer qualification to commercial usage. This transition supports our partners' expanding launch cadence, scaling meaningfully across 2027 and builds an attractive long-term Mativ growth platform. This progress demonstrates how our strategic growth blueprint is translating into commercial wins that benefit financial results. It also illustrates how Mativ's technical capabilities bring value to markets where reliability, performance and customer qualification create meaningful barriers to entry.

Beyond our commercial wins in films, we continue to strengthen our innovation and sustainability profile within filtration. We are scaling a lignin-based filter media product that replaces fossil-based resins with a natural plant-derived polymer. Already validated and in production with major aftermarket transportation customers across demanding engine, air, oil and fuel filtration applications, this solution can reduce the carbon footprint of the filter media compared with conventional alternatives while maintaining filtration efficiency and durability.

Importantly, it delivers these environmental and regulatory benefits while meeting customers' performance requirements. It's a good example of how Mativ's differentiated R&D turns our customers' sustainability goals into scalable, competitive market advantages. While FAM showcased its strategic growth potential, SAS demonstrated true operational tenacity, highlighting the resilience of our customer relationships and the effectiveness of our operating teams.

In July, the severe tornado struck our primary third-party distribution center in Menasha, Wisconsin and wiped out the vast majority of our paper and packaging inventory. To restore shipping velocity with minimal downtime after this devastating event, our logistics teams orchestrated an agile transition from a single warehouse to an interim network of 3 regional warehouses. While this mix shift footprint enabled us to get back up to speed quickly, managing inventory across 3 sites introduced inefficiencies. These additional inventory handling and transportation costs increased our Q3 operational expenses and will likely remain a modest headwind in the near term as we reoptimize the network.

I have been impressed by the resilience, dedication and agility shown by our employees and operating partners throughout this ongoing recovery process. It has required difficult trade-offs, creative problem solving and cross-functional coordination under tight deadlines. Our transparent communication and commitment to restoring customer supply as quickly as possible have been well received. In fact, one of our largest paper and packaging customers suggested that Mativ could write the playbook on how to recover a warehouse post a disaster. This speaks directly to the deep commercial trust Mativ commands in the marketplace. Looking ahead, we have a firm handle on the remaining recovery process steps. Although the interim footprint will remain less efficient in the near term, order fulfillment is returning to more normalized levels, and our focus is shifting from rebuilding capabilities to network optimization and margin restoration as we look to finish 2026 strong and enter 2027 on more stable footing.

In Healthcare, performance reflected ongoing customer inventory destocking against elevated channel builds in the prior year across a handful of high-volume product lines. Tapes, labels and liners were roughly flat versus prior year. Labels and liners increased while our tapes business faced demand headwinds in Europe and the impact of newly established Canadian tariffs in North America. To provide additional color on recent cross-border trade dynamics, our Renfrew Canada facility exports finished cable and construction tapes into the U.S. building and construction market.

This exposure is relatively small, representing approximately 2% of consolidated annual revenue. However, given the magnitude of the 50% tariff, we are actively tracking customer inventory levels and order cadence to stay ahead of any demand impact. To mitigate these exposures, in the near term, we have collaborated across our customer and supplier base to protect volumes and relationships while working to minimize the net financial impact. If this trade policy prevails over the longer term, we have developed a comprehensive playbook focused on alternative sourcing, pass-throughs and targeted price increases. Overall, the SAS team is executing well and effectively navigating Q3's interim operational headwinds. Beyond managing near-term dynamics, we are structurally working to strengthen Mativ's long-term operating efficiency through AI and digital transformation. As we continue to navigate within this fast-paced technology environment, we are converting exploratory pilots into intentional business-led capabilities that improve how we operate, decide and compete.

Building on the previously shared enterprise framework, our strategy balances foundational workforce productivity, expanding employee capacity and decision speed with targeted high-return business performance initiatives. Specifically, we are driving execution across 3 core programs designed to accelerate commercial growth, automate production scheduling and improve yield and reduce waste across our manufacturing footprint. Underpinning these high-impact deployments is a relentless focus on resource optimization, driving steady margin expansion, stronger operational execution and durable long-term returns. Ultimately, these structural initiatives build upon the operational discipline our teams are demonstrating every day.

Before I hand over the call to Scott, let me summarize Q3. FAM delivered high-quality growth and margin expansion, while SAS stabilized its financial results after unplanned disruptions and our cash generation in both segments demonstrated the strength of our operating model. Mativ is poised to finish 2026 with increased commercial momentum, improving financial performance and multiple levers that create shareholder value. As near-term external pressures abate and our high-margin growth platforms continue to scale, we are positioned to unlock enhanced earnings power and free cash flow generation capabilities in 2027 and beyond.

With that, Scott can walk you through the financials in more detail.

Scott Minder

Thanks, Shruti, and good morning. I'll start by saying that Q3 showed solid underlying progress despite external disruptions that were beyond our control. While the tornado significantly impacted our business and financial results, our crisis management team made tangible progress on their restoration plan. As a result, the Q3 sales impact was between $20 million and $25 million, in line with the aggressive recovery expectations laid out on our last earnings call.

Moving to our consolidated Q3 financials. Net sales were $500 million, decreasing by more than 2% year-over-year on an organic basis and down nearly 3% as reported. Lower volume mix, primarily due to the tornadoes impact and unfavorable currency were partially offset by higher selling prices. Q3's adjusted EBITDA of $62 million decreased by 7% versus prior year. A favorable price-to-cost ratio was more than offset by lower volume mix and higher distribution expenses, partly due to the tornadoes impact as well as increased SG&A expenses and unfavorable currency.

Our adjusted EBITDA margin of 12.5% decreased by 50 basis points compared to prior year. Taking a look by segment, FAM produced its strongest ever quarterly sales growth with net sales of $219 million, rising by more than 11% on an organic basis and by more than 10% on a reported basis when compared to prior year. This growth was driven by higher volume mix in our films and filtration businesses due to strong demand from the aerospace, defense and aftermarket transportation end markets as well as higher selling prices across the segment.

FAM's adjusted EBITDA of $40 million increased by 20% year-over-year, while margins of 18.1% improved by 150 basis points. These strong gains were led by higher volume mix and a favorable price-to-cost ratio and were partially offset by increased manufacturing costs. SAS net sales of $281 million were down by more than 10% year-over-year, primarily due to 3 factors: First, the tornado effects on our Paper and Packaging business; second, the ongoing destocking impact within our Healthcare business; and lastly, the impact from newly created Canadian tariffs on select tape exports to the U.S. Lower volume mix and unfavorable currency were partially offset by higher selling prices across the segment. SAS adjusted EBITDA of $33 million decreased by 25% year-over-year due to lower volume mix and higher distribution expenses resulting from the tornado, which were partially offset by a favorable price-to-cost ratio.

Looking at corporate items, unallocated expense of $10 million increased slightly versus prior year due to higher advisory expenses. Other expense of $0.4 million compared to other expense of $3.9 million in the prior year. This improvement was primarily due to lower 2026 pension costs and foreign currency losses in 2025. Q3's tax expense was $2.6 million, resulting in a tax rate of 186% and was driven by our geographical earnings mix and our inability to benefit from losses in some jurisdictions that carry a full valuation allowance. Interest expense of $18 million increased slightly versus prior year as the benefit from lower average debt balances was more than offset by the impact from higher average borrowing rates on the floating portion of our outstanding debt.

Turning to cash generation. Q3's free cash flow was $38 million, reducing by $29 million year-over-year. This decrease was primarily driven by the tornadoes impact in a comparison to a robust prior period that included a more significant working capital release and lower capital expenditures as the business intensified its focus on cash flow optimization. Importantly, underlying cash generation remains solid, our ongoing operational discipline focused on enhancing working capital efficiency is driving greater consistency in our free cash flow generation.

In early November, we sold our previously closed Appleton, Wisconsin facility for approximately $7 million. This site was classified as an asset held for sale on our balance sheet. This transaction will be reflected in our Q4 financials and demonstrates our ongoing commitment to footprint optimization and the monetization of noncore assets. At quarter end, net debt of $879 million decreased by 6% year-over-year, primarily due to a $52 million reduction in our outstanding debt balance.

Net leverage, as defined in our credit agreement, was 3.8x at the end of Q3, improving by 400 basis points versus prior year. Taking a step back, when you look beyond the tornado-related disruption, our Q3 results extended the operating momentum evident in our strong Q2 performance. Without the storm's impact, we would have generated year-over-year adjusted EBITDA growth. In fact, our year-to-date results show measurable improvement in the company's core financial profile. Through the first 9 months, adjusted EBITDA of $185 million was up 8% year-over-year, with margins of 12.2% expanding by 100 basis points. Free cash flow of $9 million increased by 5% over prior year. These results demonstrate an improved earnings quality, greater cash flow consistency and continued progress toward our long-term objectives.

Now let's turn to Q4 and the drivers that shape our outlook. First, I'll offer a quick comment on the financial aspects of our tornado recovery efforts. Our insurance claims are proceeding, and we expect full reimbursement for all damaged inventory. Looking at the broader business, we expect continued momentum across the majority of our business categories, producing year-over-year organic volume growth in both operating segments. Order pacing through October and into November gives us confidence in this result.

Advanced films and filtration should remain key revenue and margin growth drivers with strong demand across the aerospace, defense and aftermarket transportation end markets. These businesses support our strategic portfolio shift toward differentiated higher-value applications. We expect to continue managing a few discrete well-understood headwinds in Q4. In Paper and Packaging, the distribution footprint inefficiency will continue to be a cost headwind as we finalize our long-term fulfillment architecture. For revenue, we expect Q3's negative impact to be transitory as our order fulfillment cadence returns to more normalized rates in this business.

In Healthcare, customer destocking is expected to continue through year-end with order pattern normalization in early 2027. And finally, the 50% Canadian tariffs implemented in August are creating near-term margin and volume pressures in our North American tapes business. We have actions underway to reduce the impact of these items and are confident that they won't impede the company's underlying positive trajectory. Factoring in these moving pieces, we expect fourth quarter adjusted EBITDA to remain resilient and broadly stable with a low single-digit percent moderation year-over-year, driven primarily by the temporary headwinds from storm-related costs and North American tariffs.

Looking through the near-term disruptions, we continue to strengthen our core growth engines. Supported by rigorous execution, cost discipline and close customer alignment, we remain on track to deliver full year revenue, earnings and cash generation ahead of prior year levels. We'll remain disciplined in our capital allocation using excess cash for continued debt reduction. As a result, we continue to expect reaching the upper end of our target leverage range of 2.5x to 3.5x by mid-2027. In summary, the investment case for Mativ is strengthening. Our highest value platforms are growing. Margin and cash generation are improving. Debt leverage is moving in a consistent downward direction and near-term headwinds are temporary and manageable. We believe that this combination creates a credible path to sustained shareholder value creation.

With that, I'll hand the call back to Shruti for his closing remarks.

Shruti Singhal

Thanks, Scott. I'll leave you with one key takeaway today. Mativ is becoming a stronger, more focused and more valuable enterprise. Our differentiated growth platforms are gaining momentum. Our underlying financial performance is improving, and our teams are executing with discipline on the initiatives within our control. Progress in aerospace and defense and aftermarket transportation end markets demonstrate the growth potential being unlocked in our portfolio.

At the same time, improving year-to-date EBITDA and margins, more consistent cash generation and deleveraging progress show disciplined execution. While we remain clear-eyed about near-term risk, we believe that the current headwinds temporary nature, combined with actions already underway, create meaningful tailwinds into 2027. We are confident in the company's direction and are focused on converting this momentum into durable earnings growth, stronger cash flow and shareholder value.

Thank you to our employees, customers and to our shareholders for your continued trust and support. With that, let's open the line for your questions. Operator?

Operator

Your question comes from the line of Daniel Harriman with Sidoti Company.

質疑応答

Daniel Harriman

Shruti, in A&D, you highlighted moving from customer qualification to commercial usage. Would you be able to provide some estimates for the size of that business today and what it could look like in the future? And then along the same lines, FAM margins really took a big step up in the quarter. Is this new business that's the real driver here? And what can we expect from FAM's margins moving forward?

Shruti Singhal

Thanks, Dan, for the question. I appreciate it. Maybe I'll take the first part and then let Scott talk a little bit about the margins. As I mentioned, Q3 was a really exciting quarter for our commercial space business. As I pointed out, our materials, they're included in the vehicles launched into the low earth orbit, and they were part of our customers' successful trial.

So as a result, our business now is moving into commercial production, and we are ramping up our throughput and output for this business. So in Q3, our commercial space films, they grew by more than 30% year-on-year. That's what really helped propel FAM to an organic growth rate of more than 11%. So it's really important to understand that reaching that commercial deployment milestone, that's a true validation that we can leverage our existing capabilities, know-how, assets and deliver a state-of-the-art solution under some very, very strict and tight timelines and performance requirements.

And moving from this qualification to commercialization step was a pivotal milestone in Q3 for our company and for our commercial space business. Our films are now used in standard production runs. We've proven that and qualified. And this should then continues to allow for scaling up in 2027 as our customer ramps up its launch frequency. And to sum up, this really does validate our product and process capabilities and sets up the stage very nicely for a broader profitable expansion into the fast-growing aerospace defense sector. Scott, maybe you'll comment on the margins.

Scott Minder

Sure. Thanks, Shruti. I'll take a shot at that. Yes, along with the 11% organic sales growth that Shruti pointed out, FAM segment margins did increase by 150 basis points year-over-year, reaching just over 18%. And really, the driver of that, both the sales and the profitability gains was volume and mix. And that really was a result of the higher-margin portions of FAM's portfolio, so most notably the commercial space films that Shruti mentioned, but also aftermarket automotive filtration as well as automotive films expanded faster than other portions of that portfolio. We also did still see a moderately favorable price-to-cost ratio in the quarter. So when I think about what's coming as we look ahead, Q3's favorable tailwinds really should stay with us in Q4. We expect commercial space films growth to continue as our primary customer here ramps up its schedule. And we also expect continued growth in the other categories I mentioned, aftermarket automotive, both for filtration and protective films.

One thing to remind you of, as I mentioned earlier, we did still have a favorable price-to-cost ratio, and that's really been a result of our proactive price realization in 2026 ahead of those cost inputs. We expect that to continue to taper in the fourth quarter as those input costs do start to catch up to the pricing. So the headline for me here really is Q3 success drivers largely remain in place. I think we've significantly strengthened FAM's foundation through a lot of what we've been doing. We're delivering innovation-led growth in collaboration with customers. We're gaining and in some cases recovering market share with key customers and profitable product categories. And I think really importantly, we're operating with commercial and cost discipline, both here in Mativ, but also within FAM. So when you put all that together, I think you have a really solid recipe for more consistent and profitable growth over the long term here in the FAM segment.

Daniel Harriman

That's helpful. Another one for me, just kind of shifting gears towards the tornado impact. In the remarks, you noted that adjusted EBITDA would have grown year-over-year absent the tornado impact. And it sounds to us like the top line impact was within your kind of your guided range. Can you quantify the EBITDA impact from lost sales and the logistics inefficiencies inside the SAS segment results?

Scott Minder

Yes, I can take a shot at that. So as you cited, the tornado impact on sales in Q3 was in our range of $20 million to $25 million, which we laid out on our last earnings call. That kind of makes it sounds easy when you hit the target. But to get to that result, the team had to react quickly. They literally started the recovery the next day. And in doing that, their priority was twofold: meet customer commitments and preserve long-term customer relationships, which they've done. To achieve that aggressive recovery timeline, the team worked very quickly with our third-party warehouse provider to stand up an interim distribution network. So beyond that topline impact that we called out, there were some profitability headwinds also in Q3. First, the loss contribution on those lower sales in the $20 million to $25 million range. And then the additional costs related to transportation and warehousing costs for that temporary warehouse. We now have 3 warehouse buildings instead of the one we have, which drives additional cost.

So when you think about SAS as the segment's year-over-year EBITDA decline, this tornado impact was greater than 50% of that. So while the storm created challenges, it also showed what our team was capable of accomplishing for our customers and ultimately for our business. So as we look ahead, on the top line, we expect to largely recover Q3's lost sales over the next couple of quarters, including in Q4. And on the profitability side, there are a couple of moving parts still as we head into Q4.

So I think we talked earlier that we expect our insurance coverage to offset the inventory losses and the process there is progressing. We're also working with our insurance providers on a business interruption claim for additional storm-related costs. We'll keep you posted how that works. And as we pointed out in our Q4 guidance, we do expect some of the additional costs related to our interim distribution network inefficiencies to remain as we work toward a more permanent solution in that business. So as the team pivots from reactionary response mode to more purposeful planning, we expect improvements in our fulfillment and distribution processes over time. And we do believe that these improvements will ultimately reduce operating costs and importantly, inventory levels, making our business stronger than ever before as a result of this unfortunate storm.

Shruti Singhal

Maybe I'll just be adding...

Daniel Harriman

Last one for me. Go ahead, Shruti.

Shruti Singhal

Yes. I'll just add a couple of thoughts. Thanks, Scott, for that. As you look beyond the dollars and cents, first and foremost, I really would like to thank our team for their incredible effort. This was a lot of work, their resilience and their focus on customer was greatly appreciated. We started the recovery process, as Scott mentioned, the next day, and we were shipping our customer orders within 72 hours of our distribution center being completely destroyed. So really amazing effort on behalf of the team, which has led to incredible results.

Our customer, also, we are very grateful to them for their partnership. Their response has been very consistent, positive. And while we lost sales, as we mentioned, in Q3, but expect to fully recover them within the next couple of quarters. The most important thing is, again, very grateful to our customers' partnership. We did not lose any customers. In fact, one of our largest customers actually said that we could write the book on how to recover from a warehouse disaster. So we did take myself and my leadership team in October took a time to thank the team in Menasha and our team across Wisconsin. And they went right back to work on exceeding and meeting our customers' expectations. It's how they're wired. This is who they are. They show up every day and they want to do what's right for our customers. And I'm very grateful to them. I thank them for their efforts in Q3 and continued efforts in Q4.

Daniel Harriman

Last one for me, just about the guide. You're guiding for Q4 adjusted EBITDA to remain resilient and broadly stable with only a low single-digit percentage moderation year-over-year. But to us, that seems counter to your comments for year-over-year organic volume growth in both segments. Can you kind of walk us through the moving parts within your Q4 low single-digit percentage EBITDA moderation?

Scott Minder

Sure, Dan. This is Scott. I'll take it. It's a fair question. And there really are different drivers in Q4, one for the top line and then one or a couple for the bottom line. The growth drivers are much more durable and the profit impacts that I'm going to walk through here are much more temporary in nature. So I'll start with revenue and the positives around volume growth. As we talked earlier, FAM's expected volume growth is being driven by positive contributions from commercial space films and filtration media and paint protection films for the automotive aftermarket. In SAS, we expect that the Paper & Packaging volume recovery post tornado will outpace the destocking we talked about in health care. So both segments, we expect to have volume growth.

But on the earnings side, there are a few temporary headwinds, which we did talk about, but I'll go through them here again that are offsetting the benefits from that volume growth. So first, those 50% Canadian tariffs that were implemented mid-August that applies to about 2% of our sales. Most notably here are finished tapes we produce and run through Ontario that are bound for U.S. building and construction customers. So we're working with these customers to find solutions to limit the impact, but we're still trying to preserve the long-term relationships here. We also talked about the ongoing distribution inefficiency within our tornado recovery efforts. We also talked about how we're working to solve that and ultimately make the business more efficient through cost and inventory going forward. And then lastly, the mix impact here from the customer destocking in healthcare is unfavorable for us.

So when I step back, I think it's important to view Q4 within the context of our full year trajectory and the structural improvements we've made across Mativ. So I think we here strongly believe today that Mativ is a fundamentally better business than it was 12 months ago. Year-to-date, Mativ's results have improved across the board. Gross margins increased while SG&A expenses have decreased. Adjusted EBITDA has grown by 8% and margins have expanded by 100 basis points. And free cash flow is ahead of last year's record pace, including the results from the third quarter. So despite the low single-digit percent EBITDA headwind that we cited for Q4, we remain on track to deliver full year revenue, earnings and cash generation ahead of a strong 2025 year. The earnings headwinds in Q4 are temporary, while the more durable volume growth should enable a strong start to 2027 as we start to see those temporary headwinds dissipate. Go ahead, Shruti.

Shruti Singhal

Thanks, Scott. I'll pick up on that final theme for a moment. 2026 has been a really strong year for Mativ. As we think about, as Scott pointed out, our first 9 months, first 3 quarters, we've really improved profitability and margins and matched record cash flow results. What you don't see in all those stats is behind the scenes and what the entire team at Mativ has done, all our employees and how we have successfully navigated significant disruptions, whether it came from extreme weather-related, geopolitical, et cetera.

And we've been able to do both. We've been able to literally weather the storm and improve our results because we've been able to change the fundamentals of how we operate at Mativ. So we're leading with innovation. We talked about what we are doing in the commercial space film program, the lignin-based filtration media, both which we expect to grow, have good growth potential. We're acting with discipline. We're maintaining the cost efficiency and cash generation mindset that we started off in 2025, and we are continuing with that. And we are making progress on our long-term targets, as Scott mentioned, continued leverage reduction with available free cash flow and margin expansion through execution. So in short, and summarizing, we have transformed ourselves, and we are setting up our pivot to growth in 2027.

Operator

There are no further questions at this time. I will now turn the call back to Shruti Singhal for closing remarks.

Shruti Singhal

In closing, I want to thank all of you for joining us today. We look forward to speaking with you again in February. Have a great rest of the day. Be safe. Thank you.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.