Materion Corporation · NYSE:MTRN
Materion — Q1 2023 Earnings Presentation
24 slides from Materion's earnings presentation, May 3, 2023
Slide 1: Materion Corporation 1Q 2023 Earnings Call
Materion Corporation 1Q 2023 Earnings Call May 3, 2023 TaN MATERION
Slide 2: Agenda
Agenda Tiigeteltfeifeye) 7 John Zaranec — Chief Accounting Officer Opening Remarks & - ‘ ? . ; Business Update Jugal Vijayvargiya — President and Chief Executive Officer Shelly Chadwick — Vice President and Chief Financial Officer Review Question and Answer Session WXN MATERION
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
Slide 5: Q1 2023 Highlights
Q1 2023 Highlights Record 15t Quarter Value-Added Sales, Adjusted EBITDA and EPS Delivered value-added (VA) sales of $298.6 million, up 15% year-over-year = 9 straight quarter of double-digit year over year VA sales growth = Strong market outgrowth in aerospace, automotive and energy combined with m
Slide 6: End Market Performance
End Market Performance Q1 2023 Market VA Sales vs. Q1 2022 Q1 Comments Semiconductor $85.5 t 3% | = Led by increased tantalum shipments, partially offset by softer precious metal target sales industrial $51.5 => om |” Continued strength in non-residential construction, offset by softness in the gene
Slide 7: Key Takeaways
Key Takeaways Achieved another quarter of record results = Record first quarter VA Sales, adjusted EBITDA, EBITDA % and EPS = Tenth consecutive quarter of year-over-year growth in organic VA sales, adjusted EBITDA and EPS = Over that time period, more than doubled quarterly run rate for organic VA s
Slide 8: Financial Review
Financial Review Shelly Chadwick Vice President and Chief Financial Officer
Slide 9: Q1 2023 Operating Performance
Q1 2023 Operating Performance Value-added Sales ($M) Adj. EBITDA ($M) Adj. EPS 4 +15% | $2086 +20% | pms +12% | $1.34 $259.1 $44.6 $120 17.9% 17.2% Q1 2022 Q1 2023 Q1 2022 Q1 2023 Q1 2022 Q1 2023 Value-added sales were $298.6 million, up 15% Adjusted EBITDA was $53.4 million, margin of Adjusted EPS
Slide 10: Q1 2023 Financial Comparison
Q1 2023 Financial Comparison Adjusted EBITDA of $53.4 million, or 17.9% of VA Sales $13.1 ME _ x = Increase driven by strong top line —— <=) 53.4 growth $(2.9) : - Unfavorable mix due to semiconductor softening in precious metal targets and 17.9% hydroxide timing $44.6 ’ = Strong operational perform
Slide 11: Performance Materials Segment
Performance Materials Segment Value-added Sales ($M) 168.0 +30% ; $129.1 Q1 2022 Q1 2023 Q1 Performance by End Market = Industrial t Aerospace & Defense t Automotive Adj. EBITDA ($M) +56% | gaze $27.5 : 25.5% at 2022 a1 2023 t Energy Telecom & Data Center y Consumer Electronics Value-added sales of
Slide 12: Electronic Materials Segment
Electronic Materials Segment Value-added sales of $103.9 million, up 2% from Value-added Sales ($M) Adj. EBITDA ($M) prior year em = = Growth from tantalum shipments, offset by softening of +2% | sson9 “24% precious metal sales $102.2 $18.9 . ss - Sales deceleration exiting the quarter $14.4 Adjuste
Slide 13: Precision Optics Segment
Precision Optics Segment Value-added Sales ($M) Adj. EBITDA ($M) eS Ne ee ee = Decrease mainly driven by discontinued product $28.5 application and softening in consumer electronics market -7T% $26.7 +23% $2.9 - Currency negatively impacted VA by $0.5M $2.4 Adjusted EBITDA of $2.9 million, or 10.8%
Slide 14: Cash, Debt and Liquidity
Cash, Debt and Liquidity ($M) Q1 2022 | Q1 2023 Leverage at midpoint of target range of 1.5x — 3x Short-term Debt $15.4 $27.7 Free Cash Flow improved ~$40M from Q1 ‘22 Long-term Debt $479.8 $405.5 Approximately $187 million available on existing credit facility Total Debt $495.2 | $433.2 ee ; = Adeq
Slide 15: Full Year 2023 Guidance
Full Year 2023 Guidance i ii $5.60 - $6.00 2023 Guidance $5.27 ~10% = Raising 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 $11M Effective Tax Rate 18-
Slide 16: Invest in Materion as We Advance Our Strategy
Invest in Materion as We Advance Our Strategy Becoming a global leader in high-performing advanced materials serving diverse and attractive markets well aligned with megatrends Building robust pipeline with investments in R&D as we focus on developing innovative solutions for our customers Leveragin
Slide 17: Appendix
Appendix
Slide 18: Reconciliation for Value-added Sales
Reconciliation for Value-added Sales ($ in millions) Net Sales Performance Materials Electronic Materials Precision Optics Other Total Less: Pass-through Metal Costs Performance Materials Electronic Materials Precision Optics Other Total Value-added Sales Performance Materials Electronic Materials P
Slide 19: Reconciliation for Non-GAAP Measures
Reconciliation for Non-GAAP Measures (S in millions) Q1 2023 Q1 2022 Operating Profit (Loss) Performance Materials $ 355 §$ 19.1 Electronic Materials 9.7 8.0 Precision Optics (0.4) (0.7) Other (7.9) (6.8) Total $ 369 §$ 19.6 Non-Operating (Income)/Expense Performance Materials $ 01 §$ 0.2 Electronic
Slide 20: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) (S in millions) Q1 2023 Q1 2022 Special Items Performance Materials $ — $ 27 Electronic Materials 0.4 68 Precision Optics 0.2 02 Other — 1.0 Total $ 06 $ 10.7 Adjusted EBITDA Excluding Special Items Performance Materials $ 428 § 275 Electronic Materials 1
Slide 21: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) ($ in millions) GAAP as Reported Net income Income tax expense (benefit) Interest expense Depreciation, depletion, and amortization Consolidated EBITDA Special Items Restructuring and cost reduction Merger and acquisition costs Pension settlement Addition
Slide 22: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) Performance Materials Electronic Materials Three Months Three Months ‘Three Months Ended Ended Ended Ended (Millions) March 31,2028 _%e0fVA__ April, 2022__%*of VA_llions) ‘March 31,2023 eof VA_ April, 2022 % of VA Net sales $ 187.0 $s 149.6 Net sales, $ 2
Slide 23: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) Three Months Three Months Ended Diluted Ended Diluted (Millions) “March 31,2023. EPS Aprill,2022_.—_—*EPS Net income and EPS $ 25.6 $ 123 $ 140 $ 0.68 Special items Restructuring and cost reduction 0.6 1 Merger and acquisition costs = 9.6 Provision for in
Slide 24: Reconciliation for Free Cash Flow
Reconciliation for Free Cash Flow (Sin millions) Q1 2023 1 2022 Free Cash Flow Operating Cash Flow $ 38.1 $ (14.3) Capital Expenditures (30.0) (19.0) Free Cash Flow $ 81 8 $ (33.3) J A ' We have adjusted the results for certain special items such as restructuring and cost reduction initiatives (i.¢.