Materion Corporation · NYSE:MTRN
Materion — Q1 2020 Earnings Presentation
29 slides from Materion's earnings presentation, Apr 30, 2020
Slide 1: Investor Presentation April 2020
Exhibit 99.1 INVESTOR PRESENTATION April 2020
Slide 2: Forward-looking Statements
Forward-looking Statements These slides contain (and the accompanying oral discussion will contain, where applicable) “forward- looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other fa
Slide 3: First Quarter 2020 Highlights
First Quarter 2020 Highlights ► Announced three significant strategic actions as part of our One Materion multi-pillar strategy ► Reached major business agreement with large, new customer for long-term future product supply ► Announced intent to sell LAC business to continue portfolio optimization ►
Slide 4: PAC Engineered Clad Strip Project
PAC Engineered Clad Strip Project ► Full alignment with organic growth strategy ► Technical collaboration on next-generation product with customer ► Demand for product exists today ► Non-beryllium containing product ► Materion will invest ~ $85M in new manufacturing facility to expand existing capac
Slide 5: Key Financial Trends
Key Financial Trends TTM Value-added1 (VA) Sales TTM Earnings Before Interest and Taxes (EBIT)1 $800 $90 12% 82.9 82.3 757 79.7 745 750 734 739 734 $80 11% $750 724 71.5 72.0 710 705 $70 63.8 10% $700 59.9 $60 55.0 9% $650 51.9 ($ millions) ($ $50 8% 1 1 % of VA ofVA % Sales $600 1 ($ millions) ($ $
Slide 6: Materion Company Profile
Materion Company Profile Company Overview Value-added Sales 1 1 • Materion is an integrated producer of high- 2019 VA Sales by Segment 2019 VA Sales by End Market performance advanced engineered materials Precision Performance Alloys Other Coatings & Composites Semiconductor - Leading market positio
Slide 7: Key Facts
Key Facts Share Statistics as of 4/27/2020 Q1 2020 TTM Financial Information Trading Symbol MTRN Revenues Stock Price $51.03 $1,162M Shares O/S, Diluted 20.6M 52 wk Range $26.77 - $70.96 Value-added sales1 $705M 3 Mo Avg Vol 176,778 Market Cap $1,052M Adjusted EPS1 $2.80 Enterprise Value $947M $80 M
Slide 8: Performance Alloys and Composites (PAC) Growth Drivers
Performance Alloys and Composites (PAC) Value-added Sales Growth Drivers New product development $450 428.1 20% 425.5 • New proprietary non-Be alloys with improved durability & weight-to- strength ratio $400 16% • New high strength/high conductivity alloys with exceptional formability 363.5 • Advanc
Slide 9: Advanced Materials Growth Drivers
Advanced Materials Value-added Sales Growth Drivers Market Development – High focus on Semiconductor $250 25% 228.0 223.7 224.3 • $400B market with strong growth outlook driven by macro consumer electronics, IoT, and automotive trends $200 182.8 176.3 20% • Continue to expand organically into new se
Slide 10: Precision Coatings Growth Drivers
Precision Coatings Value-added Sales Growth Drivers $110 24% Expanded Reach and Technology Leadership 101.8 • Redesigned and fully deployed global sales organization • Focus on high value products and segments with technology $100 97.7 20% 94.2 differentiation 90.7 Product and Capability Expansion $
Slide 11: Profitable Growth Strategy
Profitable Growth Strategy PROFITABLE GLOBAL GROWTH COMMERCIAL OPERATIONAL INNOVATION ACQUISITIONS DIGITAL EXCELLENCE EXCELLENCE A ONE MATERION PERFORMANCE-BASED CULTURE Deliver sustained double-digit EPS growth 11
Slide 12: Global Megatrends Play to Our Strengths
Global Megatrends Play to Our Strengths Key Trends Characteristics of our Materials • Miniaturization of electronics/IoT Conductivity • Additional electronic instruments for Corrosion resistance autos, aircraft Weight savings (lighter) • Expanding high performance optical device opportunities Purity
Slide 13: Well-diversified Market Penetration
Well-diversified Market Penetration 2019 % of Key Market VA Sales1 Drivers • Smart device growth Semiconductor 20% • Non-volatile memory • Big data (data storage) • Heavy equipment builds Industrial 18% • Plastic tooling • Fire protection (R and C construction) • Structural and electronic components
Slide 14: Innovation Leading to Organic Growth
Innovation Leading to Organic Growth New Product VA Sales1 as % of Total Example New Product Offerings Aluminum Scandium Targets • Key material used in 5G devices, fingerprint sensors, and piezoelectric 16% 16% microphones 15% • Replacement for lead-based alternatives 14% ALD Chemicals 12% • Atomic
Slide 15: Cash Flow and Working Capital Efficiency Focus
Cash Flow and Working Capital Efficiency Focus Dividends per share Cash Flow from Operations ($ in millions) $0.50 $120 $0.40 $0.30 $99.2 $100 $91.0 $0.20 $0.10 $80 $76.4 $68.2 $67.8 $0.00 2012 2013 2014 2015 2016 2017 2018 2019 $60 Improve Working Capital3 Efficiency $40 Working capital % of net sa
Slide 16: Disciplined Capital Deployment Going Forward
Disciplined Capital Deployment Going Forward Organic Growth • Invest in new products • Invest in facilities and productivity projects 35% Debt & Inorganic Growth Shareholder • Complimentary 65% products/technologies Growth • Maintain financial discipline Return Cash to Shareholders • Dividends – inc
Slide 17: Materion Investment Thesis
Materion Investment Thesis ► Clearly defined strategy and execution led by new management team ► Differentiated product portfolio aligned with global megatrends to accelerate future growth ► Driving significant improvement in profitability and cash flow growth ► Consistently delivering profitable gr
Slide 18: 2020 Forecasted Financial Guidance
2020 Forecasted Financial Guidance ► Full-year guidance ► Capex ~ $100M, including customer funded capex of ~ $70M ► Mine development investments ~ $10M ► Depreciation and amortization expense of ~ $40M ► Effective tax rate excluding special items 18% – 20% 18
Slide 19: Appendix
Appendix
Slide 20: PAC Recovery Plan Delivered
PAC Recovery Plan Delivered How did we get here? Recovery Plan PAC EBIT 1 1. Improve product portfolio mix and profitability $35 33.3 through pricing and manufacturing process changes $30 2. Reduce cost footprint and move to a more variable cost structure $25 23.6 3. Leverage beryllium market supply
Slide 21: Beryllium Market Supply Opportunity
Beryllium Market Supply Opportunity Materion – leading position in beryllium market • Only global integrated producer – Minimum of 75 years of proven reserves in Utah mine – Supplies over 70% of world’s mined beryllium • ~40% of company sales include beryllium in some form • Global stockpiled source
Slide 22: World's Only Vertically Integrated Beryllium Producer
World’s Only Vertically Integrated Beryllium Producer Ore Competitor Chemical Plant A Hydroxide Whiting Arc Pebble Plant Furnace Competitor B VCB1 / CuBe Master Be Powder Strip/Bulk Be Manufacturing Manufacturing High-Purity Be CuBe Alloy Products Products A-4 1 Vacuum Cast Billet
Slide 23: Financial Information
Financial Information
Slide 24: Reconciliation for Value-added Sales
Reconciliation for Value-added Sales $ in millions Q1 2020 Q1 2020 TTM 2019 2018 2017 2016 2015 Net Sales Performance Alloys and Composites $ 99.1 $ 472.2 $ 500.2 $ 500.6 $ 429.5 $ 387.5 $ 394.8 Advanced Materials 160.1 589.7 573.8 586.6 590.8 437.2 482.3 Precision Coatings 18.7 99.9 111.4 120.6 119
Slide 25: Reconciliation for Adjusted EPS
Reconciliation for Adjusted EPS In millions, except per share amounts Q1 2020 Q1 2020 TTM 2019 2018 2017 2016 2015 GAAP As Reported Operating (loss) profit $ (4.6) $ 41.1 $ 67.0 $ 61.5 $ 40.1 $ 27.1 $ 45.3 Non-operating (income) expense $ (0.9) $ 2.3 $ 3.4 $ 42.7 $ 1.5 $ - $ - Net (loss) income $ (3
Slide 26: Other Non-GAAP Items
Other Non-GAAP Items $ in millions Q1 2020 TTM 2019 2018 2017 2016 2015 Operating Profit $ 41.1 $ 67.0 $ 61.5 $ 40.1 $ 27.1 $ 45.3 Operating Profit Special Items 30.0 15.4 4.5 7.4 7.9 0.5 Adjusted Operating Profit $ 71.1 $ 82.4 $ 66.0 $ 47.5 $ 35.0 $ 45.8 Non-operating (Income) Expense (0.9) 3.4 42.
Slide 27: Other Non-GAAP Items
Other Non-GAAP Items $ in millions Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 TTM Adjusted EBIT $ 72.0 $ 82.3 $ 82.9 $ 79.7 $ 71.5 $ 63.8 $ 59.9 $ 55.0 $ 51.9 Total Shareholders' Equity $ 596.5 $ 610.7 $ 597.8 $ 594.8 $ 566.9 $ 553.9 $ 536.7 $ 515.7 $ 504.3 Total Debt 2.
Slide 28: Historical Financials
Historical Financials ($ in millions, except per share data) 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 2016 Q1 Q2 Q3 Q4 2017 Q1 Q2 Q3 Q4 2018 Q1 Q2 Q3 Q4 2019 Q1 VA PAC 78.2 83.4 87.2 83.2 332.0 79.2 92.7 90.6 101.0 363.5 100.3 110.1 104.9 110.1 425.5 109.6 115.2 112.0 91.3 428.1 83.7 AM 42.1 47.0 46.0 4
Slide 29: Materion
MATERION