Materion Corporation · NYSE:MTRN
Materion — Q2 2018 Earnings Presentation
28 slides from Materion's earnings presentation, Aug 1, 2018
Slide 1: Investor Presentation August 2018
Exhibit 99.1 INVESTOR PRESENTATION August 2018
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: Q2 2018 Highlights
Q2 2018 Highlights ► Six consecutive quarters of sales and profit growth ► Record level value-added sales of $189.9M ► Adjusted operating profit highest in past 5+ years ► PAC generated operating profit of $12.3 million, highest ever recorded by this segment ► Working capital as a % of net sales < 2
Slide 4: Materion Company Profile
Materion Company Profile Company Overview Value-added (VA) Sales 1 1 • Materion is an integrated producer of high- 2017 VA Sales by Segment 2017 VA Sales by End Market performance advanced engineered materials Precision Performance Alloys Medical Coatings & Composites Energy - Leading market positio
Slide 5: Key Facts
Key Facts Share Statistics as of 06/29/2018 Q2 2018 TTM Financial Information Trading Symbol MTRN Revenues Stock Price $54.15 $1,216M Shares O/S 20.2M 52 wk Range $36.69 - $57.20 Value-added sales1 $724M 3 Mo Avg Vol 105,960 Market Cap $1,094M Adjusted EPS1 $2.06 Enterprise Value $1,054M $60 Materio
Slide 6: Performance Alloys and Composites (PAC)
Performance Alloys and Composites (PAC) Value-added Sales Growth Drivers $450 15% New product development 402.0 • New proprietary non-Be alloys with improved durability & $400 12% weight-to-strength ratio 358.5 363.5 • New heat dissipating clad material • Improving customer yields with “near net sha
Slide 7: PAC Recovery Plan/Opportunity
PAC Recovery Plan/Opportunity How did we get here? Recovery Plan 1 PAC Operating Profit 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 berylli
Slide 8: Advanced Materials
Advanced Materials Value-added Sales Growth Drivers $250 228.0 234.3 25% Semiconductor • $400B market with strong growth outlook driven by macro $200 181.0 182.8 20% consumer electronics and IoT trends 176.3 • Continue to expand organically in core PVD and packaging applications $150 15% • Expand in
Slide 9: Precision Coatings
Precision Coatings Value-added Sales Growth Drivers $120 24% New product development • Novel electrode alloys $110 20% • Wafer level thermal imaging coatings 102.4 101.8 • 97.7 Enhanced phosphor wheels $100 16% New market development 91.8 90.7 • New applications for medical sensing films $90 12% • G
Slide 10: Consistently Deliver Profitable Growth
Consistently Deliver Profitable Growth PROFITABLE GLOBAL GROWTH COMMERCIAL OPERATIONAL INNOVATION ACQUISITIONS DIGITAL EXCELLENCE EXCELLENCE PERFORMANCE-BASED CULTURE AND RESULTS Deliver sustained double-digit EPS growth 10
Slide 11: Well-positioned with Leading Global Product Offering
Well-positioned with Leading Global Product Offering 2017 Expected Annual % of Product External Segment Growth Value-added Next 3-5 Years Sales1 Leading supplier of beryllium-containing Performance Alloys products & Composites ~39% Leading supplier of high-purity precious metal Advanced for physical
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 2017 % of Key Market Value-added Sales1 Drivers • Smart device growth Consumer • Sensing devices Electronics 30% • Internet of Things (IoT) • Heavy equipment builds Industrial • Plastic tooling Components 15% • Fire protection (R and C construction) • Blood analys
Slide 14: Innovation Leading to Organic Growth
Innovation Leading to Organic Growth New Product Value-added Sales1 as % of Total Noteworthy New Products Offerings Phosphor Wheel 17.0% • Provides high brightness, longer life 16.0% • Offers low noise characteristics, individual precision balancing, and 14.1% stable colors Aluminum/Scandium Targets
Slide 15: Cash Flow and Working Capital Efficiency Focus
Cash Flow and Working Capital Efficiency Focus Dividends per share Cash Flow from Operations $0.50 ($ in millions) $120 $0.40 $0.30 $96.8 $100 $0.20 $91.0 $0.10 $80 $0 $68.2 $67.8 2012 2013 2014 2015 2016 2017 20183 $60.3 $60 Improve Working Capital4 Efficiency Working capital % of net sales $40 28%
Slide 16: Disciplined Capital Deployment Going Forward
Disciplined Capital Deployment Going Forward Return Cash to Shareholders • Share repurchase - $50M authorization ($16M remaining) • Dividends – increased 5% in 2018 35% Debt & Organic Growth Shareholder 65% • Invest in facilities and productivity Growth projects • Invest in new products Inorganic Gr
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: 2018 Forecasted Financial Guidance
2018 Forecasted Financial Guidance ► Full-year guidance ► Adjusted EPS of $2.00 - $2.15 ► Capex ~ $30M - $35M ► Mine development capital expenditures $5M - $10M ► Depreciation and amortization expense of $35M - $40M ► Effective tax rate excluding special items 16% – 18% 18
Slide 19: Appendix
Appendix
Slide 20: Making Advanced Materials That Improve the World
Materion: Making Advanced Materials That Improve the World Industrial Components Medical 15% 9% Defense 9% Automotive Electronics Consumer Electronics 8% 30% Performance Alloys and Composites Advanced Materials 54% 33% Energy 7% Precision Coatings 13% Telecom Infrastructure 5% 0 1 % of Value-added S
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
leg Financial Information MATERION
Slide 24: Reconciliation for Value-added Sales
Reconciliation for Value-added Sales $ in millions Q2 2018 Q1 2018 Q2 2018 TTM 2017 2016 2015 2014 2013 Net Sales Performance Alloys and Composites $ 129.7 $ 118.3 $ 476.4 $ 429.5 $ 387.5 $ 394.8 $ 433.3 $ 422.9 Advanced Materials 150.4 153.5 622.9 590.8 437.2 482.3 547.3 592.0 Precision Coatings 29
Slide 25: Reconciliation for Adjusted EPS
Reconciliation for Adjusted EPS In millions, except per share amounts Q2 2018 Q1 2018 Q2 2018 TTM 2017 2016 2015 2014 2013 GAAP As Reported Operating Profit $ 15.2 $ 13.3 $ 54.8 $ 40.1 $ 27.1 $ 45.3 $ 57.6 $ 27.6 Net Income 11.1 10.6 22.8 11.5 25.7 32.2 42.1 20.2 Weighted average diluted shares outs
Slide 26: Other Non-GAAP Items
Other Non-GAAP Items $ in millions Q2 2018 TTM 2017 2016 2015 2014 2013 Operating Profit $ 54.8 $ 40.1 $ 27.1 $ 45.3 $ 57.6 $ 27.6 Special Items 1.8 7.4 7.9 0.5 (8.5) 4.9 Adjusted Operating Profit $ 56.6 $ 47.5 $ 35.0 $ 45.8 $ 49.1 $ 32.5 Depreciation, depletion, and amortization 40.4 42.8 45.7 37.8
Slide 27: Historical Financials
Historical Financials ($ in millions, except per share data) 2015 2016 20172 2018 Q1 Q2 Q3 Q4 2015 Q1 Q2 Q3 Q4 2016 Q1 Q2 Q3 Q4 2017 Q1 Q2 Sales PAC $ 103.3 $ 107.7 $ 93.6 $ 90.3 $ 394.8 $ 90.6 $ 97.7 $ 103.7 $ 95.5 $ 387.5 $ 92.6 $ 108.5 $ 109.4 $ 119.0 $ 429.5 $ 118.3 $ 129.7 AM 149.9 131.4 113.6
Slide 28: Materion
MATERION