I believe MATF is better positioned than ever to capitalize on the opportunities in front of us. Thank you to our employees, customers, and shareholders for your continued trust and support. With that, let's open the line for your questions. Operator?

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question. And if you're muted locally, please remember to unmute your device. Your first question comes from the line of Daniel Harriman from Sidoti. Please go ahead.

Hey guys, good morning. Thank you for taking my questions and congrats on a great quarter. Shruti, it's really exciting to see the aerospace and defense wind progressing and it's also exciting to hear that it's focused on a space application. I'm curious if you could just kind of give us an update on how you see this evolving over the next few quarters and into the long term. And then Scott, regarding the volume growth that you expect in the third quarter, Can you just give us an update on what gives you confidence in that in that volume growth and how you see this becoming a trend over the longer term?

Thanks, Dan, for that question and appreciate your kind words. Yes, I'm really proud of every team member at MATIV on a great accomplishment in Q2. Thank you, everybody. Regarding the aerospace and defense, you know, we talked a little bit about it last quarter. We have received a sizable commitment from a global space and exploration leader. What this is is a customized, lightweight specialty film engineered for some very critical performance parameters. I can't really comment on the size of the revenue for 2026 and beyond because of confidentiality, but what you should note is that this is a high-value product. and it's a very high demanding performance requirement which of course is also leading to a high growth opportunity for our company. I'm proud to say and happy to say that we are scaling this as planned in very close collaboration with our customer. It's at a very steady and measured pace and we are accelerating as needed by our customer. Now, this is where I say I'm proud of our diversified portfolio. We're really able to leverage our technical capabilities, deep product expertise across our portfolio at Mativ. And this is helping us propel into some lucrative growth sectors. Now, this opportunity also validates our state-of-the-art product and technical and innovation capabilities. and how our process and manufacturing enables to bring these technologies to fruition. And lastly, I would say, Dan, is it also anchors our expansion into a very new high growth market, which is the vision we had starting 18 months ago. And our products and our technical capabilities and our manufacturing capabilities have presented us with a very attractive value proposition. as we're going forward. I'll let Scott comment a bit about the volume and the growth. Scott, go ahead.

Good morning, Dan. I think you're pointing out an important piece of our outlook here. I'm going to answer your question really from a longer-term point of view, so I am going to keep the impact from the Wisconsin tornado aside on our paper and packaging business. So if you look at our trend, toward volume growth has really been taking shape over the past few quarters. We've improved year over year top line performance as we progress throughout the year. In Q1, organic sales were about flat. In Q2, organic sales grew by nearly 2% with volume growth in some key categories, but really led overall by price. So in Q3, again, X the paper packaging business We anticipate adding modest volume growth to Q2's favorable organic sales growth. And the big difference, as Shruti pointed out, is really the ramp up in our films business related to that A&D win. So if you take a step back from the quarterly details, I think what we're doing here is building a business that's designed to grow and sustain itself across the business cycle. So in Q3, as we said, we're pivoting to growth on the strength of films for A&D. But this win is really the first major proof point for the strategy we talked about. Today, we're better leveraging our material science capabilities along with our advanced manufacturing technologies to serve high growth, demanding end markets. And as Shruti said, we're unlocking the integrated value that's inherent inside Mativ. So as a result, our confidence is growing in our ability to generate positive volume growth over time.

Perfect. Thanks so much, guys. And then, Scott, kind of similarly, like what you were just discussing, with the strong momentum that you're coming out of in the first half and the volume growth in Q3 that you just discussed, it seems like prior to the tornado impact, the business was on track for modest EBITDA growth in the third quarter. So to the extent that you can, could you just help us a little bit with the earnings bridge here from 2Q to 3Q? And then, Shruti, over the past 18 months during your tenure, we've seen year-over-year EBITDA growth, and obviously second quarter results were fantastic. It seems like you guys are making really great progress in all of your long-term objectives. Could you help us understand how we should think about margin progression over the next couple of years, given the momentum that you've been building?

Yeah, Dan, I can start there and happy to break that down. And as you suggested, I'm going to separate my answer here to really cover the business, excluding the tornado impact, and then I'll give some thoughts on that impact separately. So kind of as you pointed out, the business has performed well in the first half of the year. This was largely due to our focus on gross margins and costs. Heading into Q3, we talked about this, but we have competing factors impacting our EBITDA. So two are structural tailwinds and one is a transitory headwind. So I'll start by giving a little more detail on that headwind. We expect a natural tapering of our favorable price to cost ratio that we benefited from in the first half of the year. We were very proactive with our pricing actions in Q1. And that, coupled with our accounting methodology, provided a benefit, particularly to Q2's results. Raw material cost increases, which, as we know, were elevated further by the Middle East conflict in Q2, were capitalized in the quarter and will largely impact Q3's results. And this is a standard accounting practice, and it can create temporary timing mismatches in periods of rapid inflation, like we saw in Q2, or deflation. So these are temporary. But the tailwinds are really structural. So first, we're pivoting to growth as we just talked about in Q3, and we expect these additional sales to provide ongoing benefit in the second half of the year and beyond. And second, our continuing cost-out initiatives are fundamentally lowering our cost structure for this business, and that will continue to benefit us in the quarters to come. But in Q3, these competing factors, the long-term benefit from the new business wins and the cost-outs, along with the short-term impact from the price-to-cost volatility combined to only give us a small net positive in Q3. So separately, just adding a little bit around the tornado, and I want everyone to keep in mind that this event occurred about 10 days ago. We're still working through the impact and recovery details. But at this point, we do feel confident that we understand the revenue impact as the team on site has quickly restarted distribution efforts and they're working to get back to the prior shipping pace as we speak. So as a result, we expect a top line reduction of $20 to $25 million in Q3. And I think it's important to reiterate that we believe that the impact here is mostly limited to Q3. We're not prepared to provide a Q3 EBITDA impact at this time as we continue to work through the recovery efforts on site. However, I can say that we believe that we can mitigate some of the earnings impact from the delayed sales in the quarter. And we should start to recover those sales in Q4. And one last point, just to reiterate, we do have insurance coverage here. And we believe that we're going to substantially offset inventory losses and business disruption costs over time. So take a step back. You know, the momentum we've built here in the first half of 2026 is durable. It really showcases our execution capabilities and we're layering growth onto that in the second half of the year. We're delivering significantly improved results across the income statement and across the cash flow statement. And the discipline that got us to this point is now built into our DNA. And as we've talked about, we're adding growth competencies to our toolbox and we're starting to find success. We believe one of many to come. and as I said in my remarks, I believe we're in the early phases of our journey to make Matt of a best-in-class specialty materials producer and I think our best days are still in front of us. Shruti, I'll turn it back to you.

Thanks, Scott. Just pivoting from your comment about discipline to your question around margin, Dan, this is a result of a very focused and deliberate effort on behalf of the team. I can tell you the team's really proud on what we have been able to achieve in the last five quarters in a row. I have full confidence in my team, whether it's commercial or finance and the supporting teams, on how we are executing on this initiative. You know, a big driver was, as Scott mentioned before, the combination of our pricing actions that we took. We got ahead of it. and also our cost savings target that we have set for ourselves. If you recall, that was about $15 to $20 million of cost out for this year, which, by the way, is on track. We are on track to deliver that. And as you saw in today's result, our pricing strategy and how we capture values to head of the input cost, that's working. As I've said before, There's only so much we can do with cost out. And I believe strongly that we have set a good foundation for the company. That's why now we are pivoting our focus to profitable growth. We are making very deliberate, very focused choices on where we want to focus and grow, where we can win, and what will drive the highest impact to our company. So where is this growth going to be? How it's going to be accretive to our margins? How are we going to optimize the utilization across our manufacturing network and our assets? All this is a part of how we deliver long-term positive margin evolution. I hope that answers your question, Dan.

Yeah, it does. Thank you, Shruti. And then just one final one for me this morning, back to you, Shruti. I was really sorry to hear about the tornado damage of the distribution center, but very thankful that nobody was injured. I know Scott kind of touched on it a little bit, but is there any more color you can add on the overall impact there and maybe the expected recovery?

Yeah, Dan, thank you for keeping our team in your thoughts and prayers. Really appreciate it. Yes, we are very grateful that everybody at Madiv and our third party partners is safe. Earlier this week, I was there physically with my team in Wisconsin. And I also visited the extensively damaged third party distribution center for paper and packaging that we referenced. As I said, all our Madiv and third party personnel are safe. The tornado impact was very severe. I firsthand saw The havoc that Mother Nature can cause just in 20 seconds. The matter of manufacturing operations and site was not affected, and all our facilities remain fully operational. The third party distribution center was impacted and damaged, as we mentioned. We are maintaining a continuous, transparent communication with all our customers. They have been very supportive. and we are very grateful to them for working alongside with us. And as Scott mentioned, that within 72 hours, we had started shipments to our customers. I have to say, Dan, at this point, that what makes me really proud is the resilience of my teammates. What I saw with my own eyes, we had a war room set up a crisis management team that was in place. And we were on the phones, on emails with our customers, making sure we get the products to them as quickly and as safely as possible. That makes me really proud of our team and gives me a lot of confidence on the comments that you heard from Scott, that our recovery strategy is very robust and we will manage this through this very terrible tragedy in Q3 Thanks again, guys. I really appreciate it. And again, congratulations on the great quarter and performance.

At this time, there are no further questions. I will now pass the call back to Shruti Singhal, President and CEO.

In closing, I want to thank all of you for joining us today. I'm really proud of what we have achieved together as one MADF and excited about the opportunities ahead. We all look forward to speaking with you again in November. Have a great rest of your day. Thank you.

Thank you all for attending. You may now disconnect.