Clearwater Paper (CLW) Q3 2024 earnings summary

Executive summary

• Completed sale of tissue business to Sofidel for $1.06 billion, netting $850 million in cash used to pay down debt and transform focus to paperboard packaging.

• Approved a $100 million share repurchase program, targeting buybacks when shares trade at a discount to intrinsic value.

• Net sales from continuing operations rose 41% year-over-year to $393 million in Q3, driven by the Augusta acquisition, but net loss from continuing operations was $10.7 million.

• Net sales from total operations increased 24% year-over-year to $644 million in Q3, with net income from total operations at $6 million.

• Now a top 3 paperboard supplier in North America, with 1.4 million tons annual SBS capacity.

Financial highlights

• Q3 2024 Adjusted EBITDA from total operations was $64 million, in line with guidance despite hurricane impacts.

• Q3 2024 net income from continuing operations was $(10.7) million; diluted EPS was $0.36 for total operations.

• Paperboard sales volumes in Q3 were 314,320 tons, up 67% year-over-year; average net selling price fell 12% to $1,192 per ton.

• Gross margin for continuing operations in Q3 was approximately 7.7%, with cost of sales up due to Augusta volume and higher input costs.

• Interest expense for Q3 2024 was $13.1 million, up from $2.2 million in Q3 2023, reflecting new debt for the Augusta acquisition.

Outlook and guidance

• Q4 2024 Adjusted EBITDA expected at $20–$30 million, reflecting the loss of tissue business and a major maintenance outage at Augusta.

• FY 2025: Adjusted EBITDA margin expected at 8–10%, revenue of $1.5–$1.6 billion, and ~85% capacity utilization.

• Price and cost headwinds of $40–$50 million expected in 2025, offset by $50 million in annual run-rate cost savings.

• Long-term targets: 13–14% Adjusted EBITDA margin, 40–50% free cash flow conversion, and over $100 million annual free cash flow.

• Management expects cash flows, cash on hand, and borrowing capacity to be adequate for the next twelve months.