Mativ (MATV) 2026年第三季度业绩电话会：FAM增长抵消SAS逆风

核心要点

• Mativ公布2026年第三季度净销售额为5亿美元，报告口径同比下降近3%，内生同比下降超过2%。调整后EBITDA下降7%至6200万美元，利润率收窄50个基点至12.5%。
• 过滤与先进材料（FAM）业务实现创纪录的季度增长。销售额内生增长超11%至2.19亿美元，调整后EBITDA增长20%至4000万美元，利润率扩张150个基点至18.1%。
• 与商业航天相关的特种薄膜收入同比增长超过30%。相关材料已从客户认证阶段推进至商业应用阶段，支撑了管理层对2027年进一步扩大规模的预期。
• 可持续与粘合解决方案（SAS）业务销售额下降超10%至2.81亿美元，反映出威斯康星州龙卷风灾害、医疗健康客户去库存以及加拿大新关税的影响。调整后EBITDA下降25%至3300万美元。
• 龙卷风灾害导致第三季度销售额减少2000万至2500万美元。管理层表示，其影响占SAS业务EBITDA同比降幅的一半以上，其中包括利润贡献损失以及额外产生的仓储和运输费用。
• 管理层预计第四季度调整后EBITDA将同比下滑低个位数百分比，但仍预测全年营收、盈利及现金流表现将高于2025年水平。

核心财务数据

业务与经营表现

FAM是主要增长引擎。航空航天与国防、交通运输后市场过滤以及漆面保护膜的强劲需求，推动了高价值产品销量增长及有利的产品结构优化。该业务板块还受益于销售价格提升，尽管制造成本上升抵消了部分利好。

商业航天薄膜在完成客户认证后已进入标准生产阶段。随着主要客户扩大发射计划，Mativ正在提高产量。管理层表示，该业务在2027年有望进一步扩大规模。

Mativ还在扩大用于发动机空气、机油及燃油过滤的木质素基过滤介质规模。该产品采用植物源聚合物替代化石基树脂，已面向主要交通运输后市场客户投入量产。

SAS面临三大主要压力：7月威斯康星州梅纳沙龙卷风灾害后纸张与包装（Paper & Packaging）分销受阻；医疗健康客户持续去库存；以及加拿大对部分出口至美国的胶带加征关税。

公司用三个临时区域仓库替代了受损的配送中心。发货在72小时内重启，Mativ表示并未流失客户。然而，这一临时网络增加了装卸搬运、仓储和运输成本。

胶带、标签和离型纸业务同比基本持平。标签和离型纸实现增长，而胶带业务则面临欧洲需求疲软及北美关税压力。

管理层业绩指引

受商业航天薄膜、过滤介质、漆面保护膜以及纸张与包装履约恢复的支撑，管理层预计两大业务板块在第四季度均将实现内生销量同比增长。

第四季度调整后EBITDA预计将同比下滑低个位数百分比。管理层将这一预期放缓归因于暂时的分销效率低下、50%的加拿大关税以及医疗健康客户去库存导致的不利产品结构。

医疗健康领域的去库存预计将持续至年底，订单模式将在2027年初恢复正常。管理层还预计第三季度纸张与包装业务的销售受阻是暂时的，并表示流失的销售额应在未来数个季度内基本挽回。

2026年全年，Mativ预计营收、盈利及现金流表现将超过2025年水平。富余现金将继续用于削减债务。公司仍将目标定为在2027年中期达到2.5倍至3.5倍杠杆率区间的上限。

风险及关注事项

• 在Mativ建立永久性履约体系之前，由三个临时仓库组成的分销网络预计仍将是近期的成本阻力。
• 一项50%的加拿大关税影响了从加拿大伦弗鲁出口至美国客户的电缆及建筑胶带成品。该业务敞口约占合并年收入的2%。
• 医疗健康领域的去库存继续对多条高销量产品线的销量和产品结构构成压力。
• Mativ预计因龙卷风受损的存货将获得全额赔付，但针对风暴相关额外成本提出的独立营业中断索赔仍在推进中。
• 随着投入成本逐渐赶上2026年早些时候采取的提价举措，有利的价本差贡献预计将在第四季度收窄。

分析师问答亮点

管理层表示，FAM业务利润率的提升主要由销量和产品结构驱动，尤其是商业航天薄膜、汽车后市场过滤和汽车保护膜的加速增长。尽管价本差收益预计将有所放缓，但这些品类在第四季度仍有望提供支撑。

关于龙卷风灾害，管理层确认第三季度销售额受影响2000万至2500万美元。利润贡献损失及新增物流费用占SAS业务EBITDA同比降幅的一半以上。随着公司从紧急恢复转向永久性网络规划，履约与分销效率有望得到改善。

针对第四季度预期销量增长与EBITDA下滑之间的差异，管理层强调营收驱动因素更具可持续性，而关税成本、分销效率低下以及医疗健康产品结构压力被视为暂时的。

财报电话会议完整实录

完整财报电话会议逐字稿

管理层陈述

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.

分析师问答

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.