Materion Corporation · NYSE:MTRN
Materion — Q1 2019 Earnings Presentation
29 slides from Materion's earnings presentation, May 6, 2019
Slide 1: Investor Presentation May 2019
INVESTOR PRESENTATION May 2019
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: Q1 2019 Highlights
Q1 2019 Highlights ►All-time high for quarterly operating profit and EPS ►Record Q1 value-added sales ►Nine consecutive quarters of year-over-year sales and profit growth ►Third consecutive quarter with double-digit operating profit margins and PAC operating profit margin > 15% ►Ended Q1 2019 in a n
Slide 4: Key Financial Trends
Key Financial Trends TTM Value-added1 (VA) Sales TTM Operating Profit1 (OP) $800 $80 11% 73.4 745 734 739 $750 724 $70 66.0 10% 710 62.0 $700 $60 56.7 9% 678 53.4 642 $650 627 $50 47.5 8% 605 millions) ($ 40.6 1 1 39.4 ofVA % Sales $600 $40 35.5 7% 1 ($ millions) ($ $30 6% $550 OP TTM TTMOP $500 $20
Slide 5: Materion Company Profile
Materion Company Profile Company Overview Value-added Sales 1 1 • Materion is an integrated producer of high- 2018 VA Sales by Segment 2018 VA Sales by End Market performance advanced engineered materials Precision Performance Alloys Medical Coatings & Composites - Leading market position for specia
Slide 6: Key Facts
Key Facts Share Statistics as of 5/3/2019 Q1 2019 TTM Financial Information Trading Symbol MTRN Revenues Stock Price $70.40 $1,206M Shares O/S, Diluted 20.6M 52 wk Range $42.50 - $71.97 Value-added sales1 $745 3 Mo Avg Vol 124,148 Market Cap $1,450M Adjusted EPS1 $2.69 Enterprise Value $1,411M $80 M
Slide 7: Performance Alloys and Composites (PAC) Growth Drivers
Performance Alloys and Composites (PAC) Value-added Sales Growth Drivers $450 15% New product development 425.5 • New proprietary non-Be alloys with improved durability & weight-to- strength ratio $400 12% • New high strength/high conductivity alloys with exceptional formability 358.5 363.5 • Advanc
Slide 8: Advanced Materials Growth Drivers
Advanced Materials Value-added Sales Growth Drivers Market Development – High focus on Semiconductor $250 25% 228.0 223.7 • $400B market with strong growth outlook driven by macro consumer electronics, IoT, and automotive trends $200 181.0 182.8 176.3 20% • Continue to expand organically into new se
Slide 9: Precision Coatings Growth Drivers
Precision Coatings Value-added Sales Growth Drivers $120 24% Expanded Reach and Technology Leadership • Redesigned and fully deployed global sales organization • Focus on high value products and segments with technology $110 20% 102.4 101.8 differentiation Product and Capability Expansion $100 97.7
Slide 10: Profitable Growth Strategy
Profitable Growth Strategy PROFITABLE GLOBAL GROWTH COMMERCIAL OPERATIONAL INNOVATION ACQUISITIONS DIGITAL EXCELLENCE EXCELLENCE A ONE MATERION PERFORMANCE-BASED CULTURE Deliver sustained double-digit EPS growth 10
Slide 11: Global Megatrends Play to Our Strengths
Global Megatrends Play to Our Strengths Key Trends Characteristics of our Materials • Miniaturization of electronics/IoT Conductivity • Additional electronic instruments for Corrosion resistance autos, aircraft Weight savings (lighter) • Expanding high performance optical device opportunities Purity
Slide 12: Well-diversified Market Penetration
Well-diversified Market Penetration 2018 % of Key Market Value-added Sales1 Drivers • Smart device growth Consumer • Sensing devices Electronics 29% • Internet of Things (IoT) • Heavy equipment builds Industrial • Plastic tooling Components 16% • Fire protection (R and C construction) • Precision-gu
Slide 13: Innovation Leading to Organic Growth
Innovation Leading to Organic Growth New Product Value-added Sales1 as % of Total Example New Products Offerings Phosphor Wheel • Provides high brightness, longer life • Offers low noise characteristics, 16% 16% individual precision balancing, and stable colors 14% PCRAM Targets 12% • Key material u
Slide 14: Cash Flow and Working Capital Efficiency Focus
Cash Flow and Working Capital Efficiency Focus Dividends per share Cash Flow from Operations ($ in millions) $0.50 $120 $0.40 $0.30 $100 $91.0 $0.20 $0.10 $80 $76.4 $68.2 $67.8 $0.00 2012 2013 2014 2015 2016 2017 2018 $60.3 $60 Improve Working Capital3 Efficiency $40 Working capital % of net sales4
Slide 15: Disciplined Capital Deployment Going Forward
Disciplined Capital Deployment Going Forward Organic Growth • Invest in facilities and productivity projects • Invest in new products 35% Debt & Inorganic Growth Shareholder • Complimentary 65% products/technologies Growth • Maintain financial discipline Return Cash to Shareholders • Dividends – inc
Slide 16: 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 17: 2019 Forecasted Financial Guidance
2019 Forecasted Financial Guidance ► Full-year guidance ► Adjusted EPS of $2.80 – $3.00 ► Operating cash flow > $90M ► Capex ~ $30M ► Mine development capital expenditures < $5M ► Depreciation and amortization expense of ~ $35M ► Effective tax rate excluding special items 18% – 20% 17
Slide 18: Appendix
Appendix
Slide 19: Making Advanced Materials That Improve the World
Materion: Making Advanced Materials That Improve the World Industrial Medical Components 8% 16% Defense 10% Automotive Electronics 8% Consumer Electronics Telecom Performance Alloys 29% Infrastructure and Composites Advanced Materials 5% 57% 30% Energy Precision 10% Coatings 13% 0 1 % of Value-added
Slide 20: PAC Recovery Plan Delivered
PAC Recovery Plan Delivered 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 beryllium m
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-5 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 2019 Q1 2019 TTM 2018 2017 2016 2015 2014 Net Sales Performance Alloys and Composites $ 127.1 $ 509.4 $ 500.6 $ 429.5 $ 387.5 $ 394.8 $ 433.3 Advanced Materials 144.0 577.2 586.6 590.8 437.2 482.3 547.3 Precision Coatings 30.3 119.2 120.6 119.2 1
Slide 25: Reconciliation for Adjusted EPS
Reconciliation for Adjusted EPS In millions, except per share amounts Q1 2019 Q1 2019 TTM 2018 2017 2016 2015 2014 GAAP As Reported Operating Profit $ 21.4 $ 69.7 $ 61.5 $ 40.0 $ 27.1 $ 45.3 $ 57.6 Net Income $ 16.9 $ 27.2 $ 20.8 $ 11.5 $ 25.7 $ 32.2 $ 42.1 Weighted average diluted shares outstandin
Slide 26: Other Non-GAAP Items
Other Non-GAAP Items $ in millions Q1 2019 TTM 2018 2017 2016 2015 2014 Operating Profit $ 69.7 $ 61.5 $ 40.1 $ 27.1 $ 45.3 $ 57.6 Special Items 3.7 4.5 7.4 7.9 0.5 (8.5) Adjusted Operating Profit $ 73.4 $ 66.0 $ 47.5 $ 35.0 $ 45.8 $ 49.1 Depreciation, depletion, and amortization 35.4 35.5 42.8 45.7
Slide 27: Other Non-GAAP Items
Other Non-GAAP Items $ in millions Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017 Q1 2017 TTM Adjusted Operating Profit $ 73.4 $ 66.0 $ 62.0 $ 56.7 $ 53.4 $ 47.5 $ 40.6 $ 39.4 $ 35.5 Total Shareholders' Equity $ 566.9 $ 553.9 $ 536.7 $ 515.7 $ 504.3 $ 495.0 $ 512.0 $ 503.0 $ 497.1 T
Slide 28: Historical Financials
Historical Financials ($ in millions, except per share data) 2015 2016 2017 2018 2019 Q1 Q2 Q3 Q4 2015 Q1 Q2 Q3 Q4 2016 Q1 Q2 Q3 Q4 2017 Q1 Q2 Q3 Q4 2018 Q1 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 $ 129.8 $ 12
Slide 29: Materion
MATERION