Slide 1: Materion Corporation 2Q 2023 Earnings Call
Materion Corporation 2Q 2023 Earnings Call August 2, 2023 © 2022 Materion Corporation
Slide 2: Agenda
Agenda Introduction John Zaranec – Chief Accounting Officer 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: Q2 2023 Highlights
Q2 2023 Highlights Record 2nd Quarter Adjusted EBITDA and EPS Outperformed midterm adjusted EBITDA target margin of 20% Achieved eleventh consecutive quarter of YoY growth for adjusted EBITDA and EPS Value-added (VA) sales of $268.3 million VA sales up 14% excluding the expected semiconductor mark
Slide 6: End Market Performance
End Market Performance Q2 2023 YTD 2023 Market VA Sales vs. Q2 2022 Q2 Comments VA Sales vs. YTD March sales deceleration continued through the quarter, with significant Semiconductor $61.9 -29% $147.5 -13% inventory correction for logic and communication devices Lower demand across consumer goo
Slide 7: Key Takeaways
Key Takeaways Achieved another quarter of record results Highest reported EBITDA margin of 20.7% Record 2nd quarter adjusted EBITDA and EPS Eleventh consecutive quarter of year-over-year growth in adjusted EBITDA and EPS Delivering on key strategic growth initiatives Meaningful contribution
Slide 8: Financial Review
Financial Review Shelly Chadwick Vice President and Chief Financial Officer 8 © 2021 Materion Corporation
Slide 9: Q2 2023 Operating Performance
Q2 2023 Operating Performance Value-added Sales ($M) Adj. EBITDA ($M) Adj. EPS ~0% +18% $55.5 +8% $1.38 $268.8 $268.3 $1.28 $47.0 20.7% 17.5% Q2 2022 Q2 2023 Q2 2022 Q2 2023 Q2 2022 Q2 2023 Value-added sales were $268.3 million, flat with Adjusted EBITDA was $55.5 million, margin of Adjusted EPS of
Slide 10: Q2 2023 Financial Comparison
Q2 2023 Financial Comparison Adjusted EBITDA of $55.5 million, or 20.7% of VA Sales Driven by favorable price/mix and strong performance, partially offset by lower volume 8.6% Targeted cost improvement initiatives contributing across the company 320 bps margin expansion *Performance includes t
Slide 11: Performance Materials Segment
Performance Materials Segment Value-added Sales ($M) Adj. EBITDA ($M) Value-added sales of $165.6 million, up 24% $165.6 from prior year $45.9 +24% +69% Meaningful contribution from precision clad strip Strong demand in the aerospace and telecom & data $134.0 center end markets $27.2 27.7% Adjus
Slide 12: Electronic Materials Segment
Electronic Materials Segment Value-added sales of $77.6 million Value-added Sales ($M) Adj. EBITDA ($M) Expected slowdown in the semiconductor market $105.8 $22.8 -27% -36% Inventory correction in logic and communication devices $77.6 Adjusted EBITDA of $14.6 million $14.6 Targeted cost improv
Slide 13: Precision Optics Segment
Precision Optics Segment Value-added Sales ($M) Adj. EBITDA ($M) Value-added sales of $25.1 million Decrease mainly driven by reduced PCR filter demand, $29.4 $3.6 discontinued product application and softening in the -15% -28% consumer electronics market $25.1 $2.6 Strength in aerospace & defen
Slide 14: Cash, Debt and Liquidity
Cash, Debt and Liquidity ($M) Q2 2022 Q2 2023 Leverage at midpoint of target range of 1.5x – 3x Short-term Debt $15.3 $27.5 Approximately $169 million available on existing credit facility Long-term Debt $482.0 $412.7 Adequate liquidity remains to support growth Total Debt $497.3 $440.2 initiative
Slide 15: Full Year 2023 Guidance
Full Year 2023 Guidance Adj. EPS Guidance $5.60 - $6.00 2023 Guidance ~10% $5.27 Affirming full year adjusted EPS to $5.60-$6.00, an increase of ~10% from 2022 at the midpoint 2022 2023E 2023 Modeling Assumptions Capital Expenditures $95M Interest Expense $30M HCS-Electronic Materials $11M Effecti
Slide 16: Invest in Materion as We Advance Our Strategy
Invest in Materion as We Advance Our Strategy Becoming a global leader in high-performing advanced materials serving diverse and attractive markets well aligned with megatrends Building robust pipeline with investments in R&D as we focus on developing innovative solutions for our customers Leveragin
Slide 17: Appendix
Appendix 17 © 2021 Materion Corporation
Slide 18: Reconciliation for Value-added Sales
Reconciliation for Value-added Sales ($ in millions) Q2 2023 Q2 2022 YTD 2023 YTD 2022 Net Sales Performance Materials $ 182.8 $ 154.9 $ 369.8 $ 304.5 Electronic Materials 190.7 261.0 419.5 531.8 Precision Optics 25.1 29.4 51.7 58.0 Other — — — — Total $ 398.6 $ 445.3 $ 841.0 $ 894.3 Less: Pass-thro
Slide 19: Reconciliation for Non-GAAP Measures
Reconciliation for Non-GAAP Measures ($ in millions) Q2 2023 Q2 2022 Operating Profit (Loss) Performance Materials $ 36.5 $ 21.8 Electronic Materials 9.1 18.2 Precision Optics (1.5) 0.7 Other (8.7) (8.8) Total $ 35.4 $ 31.9 Non-Operating (Income)/Expense Performance Materials $ 0.1 $ 0.1 Electronic
Slide 20: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) ($ in millions) Q2 2023 Q2 2022 Special Items Performance Materials $ 1.0 $ — Electronic Materials 1.2 0.4 Precision Optics 0.9 0.1 Other — 0.5 Total $ 3.1 $ 1.0 Adjusted EBITDA Excluding Special Items Performance Materials $ 45.9 $ 27.2 Electronic Materi
Slide 21: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) ($ in millions) Q2 2023 Q2 2022 Q2 2023 TTM Q2 2022 TTM GAAP as Reported Net income $ 24.1 $ 23.3 $ 98.4 $ 75.1 Income tax expense (benefit) 4.3 5.1 17.9 6.2 Interest expense 7.7 4.7 28.6 11.7 Depreciation, depletion, and amortization 16.3 12.9 58.8 51.2
Slide 22: 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 22 pension settlement items from the applicable GAAP f
Slide 23: 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 23 pension settlement items from the applicable GAAP f