Materion Corporation · NYSE:MTRN
Materion — Q4 2023 Earnings Presentation
29 slides from Materion's earnings presentation, Feb 15, 2024
Slide 1: Materion Corporation 4Q 2023 Earnings Call
Materion Corporation 4Q 2023 Earnings Call February 15, 2024 © 2022 Materion Corporation
Slide 2: Agenda
Agenda Introduction Kyle Kelleher – Manager, Investor Relations Opening Remarks & Jugal Vijayvargiya – President and Chief Executive Officer Business Update Financial Shelly Chadwick – Vice President and Chief Financial Officer Review Q&A Question and Answer Session 2
Slide 3: Forward-looking Statements and Non-GAAP Financial Information
Forward-looking Statements and Non-GAAP Financial Information 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
Slide 4: Opening Remarks & Business Update
Opening Remarks & Business Update Jugal Vijayvargiya President and Chief Executive Officer 4 © 2021 Materion Corporation
Slide 5: Q4 2023 Financial Highlights
Q4 2023 Financial Highlights Strong Operational Performance Drives Continued Margin Expansion Value-added (VA) sales of $289.7 million, up 1% excluding significant semiconductor weakness VA sales down 4% from prior year Diverse portfolio and organic initiatives helping offset softness in multipl
Slide 6: Diverse Portfolio Continuing to Drive Organic Growth
Diverse Portfolio Continuing to Drive Organic Growth Awarded Secured 4th order of $4M Secured record $60M $36M for R&D in Additive to supply critical of new defense orders Manufacturing across materials for space Aerospace, Defense & propulsion systems Energy Secured another Launched contract for tw
Slide 7: End Market Performance
End Market Performance Q4 2023 FY 2023 Market VA Sales vs. Q4 2022 Q4 Comments VA Sales vs. 2022 Semiconductor $64.4 -20% Continued inventory correction and customer destocking $271.6 -20% Eleventh consecutive quarter of growth in Aerospace led by increased Aerospace & $58.1 68% content and sign
Slide 8: 2023 Financial Highlights
2023 Financial Highlights Record VA Sales, Adjusted EBITDA and Adjusted EPS Delivered record VA sales of $1.13 billion, up 10% YoY excluding significant semiconductor weakness VA sales up 1% from prior year Speaks to strength of diverse portfolio and impact of organic wins Achieved record adjust
Slide 9: 2023 Performance Highlights
2023 Performance Highlights Significant Advancements on Strategic Initiatives Secured several key new business wins and customer commitments to strengthen organic pipeline Accelerated growth in exciting new space applications; secured $90M in new business orders Awarded two investments for the d
Slide 10: 2024 End-Market Growth Outlook
2024 End-Market Growth Outlook Contraction (<0%) Low Single-Digit (0-3%) Mid Single-Digit (>3%) Automotive Semiconductor Aerospace Industrial Energy Defense Telecom & Data Center Consumer Electronics Expect to outgrow underlying market projections 10
Slide 11: Looking Ahead to 2024
Looking Ahead to 2024 Expect to deliver another year of record VA sales, adjusted EBITDA and EPS Top line VA sales growth despite market softness, supported by outgrowth initiatives and second half market recovery Operational excellence initiatives will continue to drive improved performance
Slide 12: Financial Review
Financial Review Shelly Chadwick Vice President and Chief Financial Officer 12 © 2021 Materion Corporation
Slide 13: Q4 2023 Operating Performance
Q4 2023 Operating Performance Value-added Sales ($M) Adj. EBITDA ($M) Adj. EPS $303.0 $289.7 $55.6 $1.49 -4% -4% $53.3 -5% $1.41 18.4% 18.3% Q4 2022 Q4 2023 Q4 2022 Q4 2023 Q4 2022 Q4 2023 Value-added sales were $289.7 million, down Adjusted EBITDA was $53.3 million, margin of Adjusted EPS of $1.41
Slide 14: Q4 2023 Financial Comparison
Q4 2023 Financial Comparison Adjusted EBITDA of $53.3 million, or 18.4% of VA Sales Decrease YoY attributed to volume decline Offset by strong 8.6% price/mix and operational performance including the targeted cost improvement initiatives contributing to profitability Operational performance mu
Slide 15: Performance Materials Segment
Performance Materials Segment Value-added Sales ($M) Adj. EBITDA ($M) Value-added sales of $186.0 million, up 5% from prior year $186.0 +5% +4% Strong demand in the aerospace (including space) and $46.0 $177.6 $44.3 defense end markets Up 10% sequentially Record VA sales for any quarter 24.7%
Slide 16: Electronic Materials Segment
Electronic Materials Segment Value-added Sales ($M) Adj. EBITDA ($M) Value-added sales of $77.7 million Significant softness in the semiconductor market $97.8 -21% -36% Lower demand in smart glass applications $77.7 $17.1 Adjusted EBITDA of $11.0 million $11.0 Targeted cost improvement initiat
Slide 17: Precision Optics Segment
Precision Optics Segment Value-added Sales ($M) Adj. EBITDA ($M) Value-added sales of $26.0 million Strength in aerospace & defense, offset by reduced -6% PCR filter demand and general softening in the $27.7 $4.0 -5% $26.0 $3.8 consumer electronics market Adjusted EBITDA of $3.8 million, up 30 bps
Slide 18: Full Year Operating Performance
Full Year Operating Performance Value-added Sales ($M) Adj. EBITDA ($M) Adj. EPS $1,127.1 $217.7 $5.64 $1,114.4 +1% +11% +7% $196.0 $5.27 19.3% 17.6% 2022 2023 2022 2023 2022 2023 Record value-added sales of $1.13 billion, up Record adjusted EBITDA of $217.7 million, Record adjusted EPS of $5.64, up
Slide 19: Cash, Debt and Liquidity
Cash, Debt and Liquidity ($M) Q4 2022 Q4 2023 Leverage slightly below midpoint of target range Short-term Debt $21.1 $38.6 of 1.5x – 3x Approximately $180 million available on existing Long-term Debt $410.9 $387.6 credit facility Total Debt $432.0 $426.2 Adequate liquidity remains to support growt
Slide 20: Full Year 2024 Guidance
Full Year 2024 Guidance Adj. EPS Guidance $6.10 - $6.50 2024 Guidance ~12% $5.64 Full year adjusted EPS of $6.10-$6.50, an increase of 12% from 2023 at the midpoint 2023 2024E 2024 Modeling Assumptions Capital Expenditures $100M Interest Expense $30M Precision Clad Strip Plant – Phase Two $20M Eff
Slide 21: Invest in Materion as We Advance Our Strategy
Invest in Materion as We Advance Our Strategy Becoming a global leader in high-performing advanced materials serving diverse and attractive markets well aligned with megatrends Building robust pipeline with investments in R&D as we focus on developing innovative solutions for our customers Leveragin
Slide 22: Appendix
Appendix 22 © 2021 Materion Corporation
Slide 23: Reconciliation for Value-added Sales
Reconciliation for Value-added Sales ($ in millions) Q4 2023 Q4 2022 FY 2023 FY 2022 Net Sales Performance Materials $ 201.1 $ 197.6 $ 755.5 $ 671.5 Electronic Materials 193.9 209.3 805.8 971.9 Precision Optics 26.0 27.7 103.9 113.7 Other — — — — Total $ 421.0 $ 434.6 $ 1,665.2 $ 1,757.1 Less: Pass-
Slide 24: Reconciliation for Non-GAAP Measures
Reconciliation for Non-GAAP Measures ($ in millions) Q4 2023 Q4 2022 FY 2023 FY 2022 Operating Profit (Loss) Performance Materials $ 33.0 $ 37.6 $ 143.9 $ 101.4 Electronic Materials 3.8 12.3 28.6 51.3 Precision Optics (0.4) 1.1 (2.0) 1.9 Other (8.8) (11.8) (34.1) (34.8) Total $ 27.6 $ 39.2 $ 136.4 $
Slide 25: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) ($ in millions) Q4 2023 Q4 2023 FY 2023 FY 2022 Special Items Performance Materials $ 5.6 $ — $ 6.7 $ 6.8 Electronic Materials 2.8 0.6 7.3 8.2 Precision Optics 1.6 (0.4) 2.8 0.3 Other — 0.3 0.1 2.3 Total $ 10.0 $ 0.5 $ 16.9 $ 17.9 Adjusted EBITDA Excludin
Slide 26: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) We have adjusted the results for certain special items such as restructuring and cost reduction initiatives (i.e., severance), additional start up resources and scrap, merger and acquisition costs and 26 pension settlement items from the applicable GAAP f
Slide 27: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) We have adjusted the results for certain special items such as restructuring and cost reduction initiatives (i.e., severance), additional start up resources and scrap, merger and acquisition costs and 27 pension settlement items from the applicable GAAP f
Slide 28: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) We have adjusted the results for certain special items such as restructuring and cost reduction initiatives (i.e., severance), additional start up resources and scrap, merger and acquisition costs and 28 pension settlement items from the applicable GAAP f
Slide 29: Reconciliation for Free Cash Flow
Reconciliation for Free Cash Flow ($ in millions) Q4 2023 Free Cash Flow Operating Cash Flow $ 59.9 Capital Expenditures (25.3) Free Cash Flow $ 34.6 We have adjusted the results for certain special items such as restructuring and cost reduction initiatives (i.e., severance), additional start up res