Materion Corporation · NYSE:MTRN
Materion — Q3 2020 Earnings Presentation
34 slides from Materion's earnings presentation, Oct 30, 2020
Slide 1: Investor Presentation October 2020
Exhibit 99.1 INVESTOR PRESENTATION October 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 fac
Slide 3: Third Quarter 2020 Highlights
Third Quarter 2020 Highlights ► New customer opportunity for precision clad engineered strip product remains on schedule ► Integration activities with Optics Balzers on track ► Delivered sequential earnings growth for the second consecutive quarter amid the ongoing COVID-19 pandemic ► Continue to ma
Slide 4: Engineered Clad Strip Project
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 capacity
Slide 5: Optics Balzers Transaction Overview
Optics Balzers Transaction Overview ▪ $160 million enterprise value Transaction ▪ Represents 12x TTM EBITDA1, 8x including synergies Value ▪ Expected to be accretive to EBITDA margin, growth, and earnings ▪ Synergies from global procurement actions and gross margin management Synergies ▪ Expanded sa
Slide 6: Optics Balzers is a Global Leader in Optical Thin Film Coating Solutions
Optics Balzers is a Global Leader in Optical Thin Film Coating Solutions Company Overview Summary Financials (TTM 3/31/20) Total Revenue Adj. EBITDA Adj. EBITDA Margin ► Leading optical thin film coating solutions provider $67 $13 20% ► Broad, highly differentiated million million product portfolio
Slide 7: 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 8: Key Facts
Key Facts Share Statistics as of 10/19/2020 Q3 2020 TTM Financial Information Trading Symbol MTRN Stock Price $55.13 Revenues $1,117M Shares O/S, Diluted 20.6M 52 wk Range $26.77 - $62.84 Value-added sales1 $650M 3 Mo Avg Vol 105,473 Market Cap $1,135M Adjusted EPS1 $2.15 Enterprise Value $1,146M Ma
Slide 9: Performance Alloys and Composites (PAC)
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 10: Advanced Materials
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 11: Precision Coatings
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 12: 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 12
Slide 13: 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 14: 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 15: 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 16: 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 2020 $60 Improve Working Capital3 Efficiency $40 Working capital % of n
Slide 17: Disciplined Capital Deployment Going Forward
Disciplined Capital Deployment Going Forward Organic Growth • Invest in new products • Invest in facilities and productivity projects Inorganic Growth • Complimentary products/technologies • Maintain financial discipline Return Cash to Shareholders • Dividends – increased 8 consecutive years • Share
Slide 18: Materion Investment Thesis
Materion Investment Thesis ► Differentiated product portfolio aligned with global megatrends to accelerate future growth ► Clearly defined One Materion multi-pillar strategy ► Focused on executing significant key initiatives ► Engineered clad strip project ► Optics Balzers acquisition 18
Slide 19: 2020 Forecasted Financial Guidance
2020 Forecasted Financial Guidance ► Full-year guidance ► Capex ~ $25M, net of customer prepayments for engineered clad strip project ► Depreciation and amortization expense of ~ $42M ► Effective tax rate excluding special items 18% – 20% 19
Slide 20: Appendix
Appendix
Slide 21: Materion Key Financial Trends
Materion 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 71.5 72.0 705 $70 63.8 63.0 10% $700 671 59.9 650 $60 57.3 9% $650 ($ millions) ($ $50 8% 1 1 % of VA Sales % VA of $600 1 ($ mill
Slide 22: 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 23: 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 24: Optics Balzers Expands Portfolio to Serve Attractive Markets
Optics Balzers Expands Portfolio to Serve Attractive Markets with Exposure to Key Megatrends End Market Illustrative Applications Key Megatrends ► Fluorescence microscopy ► Opthalmologic surgery ► BNA Microarrays (Biochips) Telemedicine Life Science 33% of Revenue 3D Sensing ► Wafer level optics ► D
Slide 25: Combination Creates an Industry Leading Portfolio in Precision Coatings
Combination Creates an Industry Leading Portfolio in Precision Coatings Globally Balanced Revenue Improved End Market Diversification FY 2019 Pro Forma Optics FY 2019 Pro Forma Optics Other Automotive 6% Asia 4% Life Sciences 27% North 26% America Consumer 38% 17% EMEA Industrials Aerospace & Defens
Slide 26: Highly Complementary Platforms Drive Multiple Synergy Opportunities
Highly Complementary Platforms Drive Multiple Synergy Opportunities Leverage Optics Balzers’ Leverage Materion’s portfolio to drive growth portfolio to drive growth in the U.S. in Europe and Asia Accelerating Profitable Global Growth Elevate technology Optimize Malaysian platform to accelerate opera
Slide 27: Financial Information
Financial Information
Slide 28: Reconciliation for Value-added Sales
Reconciliation for Value-added Sales $ in millions Q3 2020 Q3 2020 TTM 2019 2018 2017 2016 2015 Net Sales Performance Alloys and Composites $ 91.2 $ 399.1 $ 500.2 $ 500.6 $ 429.5 $ 387.5 $ 394.8 Advanced Materials 165.6 624.6 573.8 586.6 590.8 437.2 482.3 Precision Coatings 30.4 93.1 111.4 120.6 119
Slide 29: Reconciliation for Adjusted EPS
Reconciliation for Adjusted EPS $ in millions, except per share amounts Q3 2020 Q3 2020 TTM 2019 2018 2017 2016 2015 GAAP As Reported Gross margin $ 46.6 $ 195.3 $ 259.4 $ 251.1 $ 212.5 $ 183.6 $ 190.8 Operating profit $ 0.7 $ 21.4 $ 67.0 $ 61.5 $ 40.1 $ 27.1 $ 45.3 Non-operating (income) expense $
Slide 30: Other Non-GAAP Items
Other Non-GAAP Items $ in millions Q3 2020 TTM 2019 2018 2017 2016 2015 Operating Profit $ 21.4 $ 67.0 $ 61.5 $ 40.1 $ 27.1 $ 45.3 Operating Profit Special Items 33.0 15.4 4.5 7.4 7.9 0.5 Adjusted Operating Profit $ 54.4 $ 82.4 $ 66.0 $ 47.5 $ 35.0 $ 45.8 Non-operating (Income) Expense (3.0) 3.4 42.
Slide 31: Other Non-GAAP Items
Other Non-GAAP Items $ in millions Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 TTM Adjusted EBIT $ 57.4 $ 63.0 $ 72.0 $ 82.3 $ 82.9 $ 79.7 $ 71.5 $ 63.8 $ 59.9 Total Shareholders' Equity $ 611.8 $ 604.9 $ 596.5 $ 610.7 $ 597.8 $ 594.8 $ 566.9 $ 553.9 $ 536.7 Total Net Deb
Slide 32: Historical Financials
Historical Financials $ in millions, except per share amounts ($ in millions, except per share data) 2017 2018 2019 2020 Q1 Q2 Q3 Q4 2017 Q1 Q2 Q3 Q4 2018 Q1 Q2 Q3 Q4 2019 Q1 Q2 Q3 Sales PAC $ 92.6 $108.5 $109.4 $119.0 $ 429.5 $118.3 $129.8 $124.1 $128.5 $ 500.6 $127.1 $135.2 $130.7 $107.2 $ 500.2 $
Slide 33: Historical Financials (con't.)
Historical Financials (con’t.) $ in millions, except per share amounts ($ in millions, except per share data) 2017 2018 2019 2020 Q1 Q2 Q3 Q4 2017 Q1 Q2 Q3 Q4 2018 Q1 Q2 Q3 Q4 2019 Q1 Q2 Q3 Operating Profit PAC 0.2 5.5 6.8 9.5 22.0 9.9 12.3 16.7 19.9 58.8 18.9 19.3 18.8 13.6 70.7 4.8 8.2 0.7 AM 6.4
Slide 34: Materion
MATERION