Clearwater Paper Corp Q3 FY2024 earnings call

• Third quarter adjusted EBITDA was $64 million, mid-range of guidance ($58M-$68M), with $5M negative impact from Hurricane Helene. • Closed sale of tissue business to Sofidel for $1.06B, netting ~$850M cash after taxes, used to pay down credit facilities, retained 2028 notes. • Board approved $100M share repurchase program. • Transforming into premier paperboard packaging supplier for North American independent converters, focusing on operational/cost improvements and product range expansion. • Discussed paperboard industry structure (SBS, CUK, CRB), cyclicality of the industry, and strategy to address market trends like lighter weight, compostable, and alternative fibers products. • Internal projects include increasing pulp consumption, adding unbleached pulping capabilities, investing in NuVo and ReMagine brands, and exploring biodegradable solutions.

Paperboard segment: In the third quarter, paperboard delivered $42 million of adjusted EBITDA, up from $11 million in the second quarter but down from $53 million last year. Revenue contribution: N/A specifically stated but paperboard is the focus after tissue sale. Tissue segment: Delivered $41 million of adjusted EBITDA in the third quarter, flat versus the second quarter and up slightly versus last year. Revenue contribution: Prior to sale, tissue was a segment, but after sale, focus is on paperboard.

• Q4 adjusted EBITDA expected to be $20M-$30M due to one month of tissue results and Augusta maintenance outage. • 2025 target adjusted EBITDA margin 8%-10%, assuming ~$1.5B-$1.6B revenue with 85% capacity utilization, $40M-$50M negative price/cost impact, 10% fixed cost reduction, and 6% SG&A spend. • Annual major maintenance outage cadence with $40M-$50M direct expenses next year, bulk in Lewiston Q2 and Augusta Q4. • Across the cycle, targeting 13%-14% adjusted EBITDA margin, 40%-50% free cash flow conversion ratio, and over $100M annual free cash flows.

• Impact of Hurricane Helene on Q3 results. • Cyclical nature of the paperboard industry leading to potential down cycles with capacity additions outpacing demand. • Market pricing fluctuations affecting margins. • Uncertainty around timing of industry recovery to balance supply and demand.

Q: Could you provide more color on investments to use more mechanical and recycled pulp consumption, timelines and impact on utilization?

A: These are small-to-medium sized investments in millions of dollars, improving pulpers to add pulp streams, aiming for lighter weight product to compete with folding box board.

Q: Talk about unbleached product competing with CUK, pivot potential?

A: Exploratory stage, sees opportunity in unbleached product to diversify production mix, geographically advantaged, in early stages.

Q: Color on cost reduction actions, cadence of savings?

A: Targeting ~10% fixed cost reduction and 6% SG&A of sales, aiming for $50M+ annual savings, planning stages with ~$30M-$40M in 2025.

Q: Color on pricing actions, Q4 2025 expectations?

A: Shy away from commenting on pricing actions, expectations embedded in Q4 guidance and 2025 outlook with ~$40M-$50M negative price/cost impact.

Q: Hurricane impact on Q4, port strikes impact?

A: ~$2M-$3M Hurricane Helene impact in Q4 embedded in guidance, no impact from port strikes.