Materion Corporation · NYSE:MTRN
Materion — Investor Presentation (May 2016)
46 slides from Materion's investor presentation, May 4, 2016
Slide 1: Investor Presentation May 2016
Investor Presentation May 2016 Exhibit 99.1
Slide 2: 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 factors that could cause the
Slide 3: Materion: Our Purpose
Materion: Our Purpose Making advanced materials that improve the world 3
Slide 4: Materion at a Glance
Materion at a Glance 4 Adjusted EPS(1) $1.60 Market cap @ 12/31/15 $560M Debt-to-capitalization 3% Operating cash flow $90M Dividend yield ~1% Revenues $1.03B Value-added sales $617.2M 2015 6.9 EV @ 12/31/15 / Adjusted EBITDA(1) (1) Non-GAAP, excludes special items
Slide 5: Materion: Mission Critical Advanced Materials
Performance Alloys & Composites 54% Advanced Materials 29% Precision Coatings 17% Consumer Electronics 26% Industrial Components 15% Medical 13% Defense 10% Automotive Electronics 9% Telecom Infrastructure 6% Energy 6% W H A T W E D O Materion: Mission Critical Advanced Materials 5 A Balanced Portfo
Slide 6: Entering a Phase of Renewed Long-term Profitable Growth
Entering a Phase of Renewed Long-term Profitable Growth Consolidation and product rationalization Sharpened execution, renewed long-term profitable growth 2002 2012 / 2014 Today Transformation: Growth in new markets and technologies 6
Slide 7: Materion: The Transformation
Materion: The Transformation GDP growth Multiples of GDP Limited markets Broader market opportunities Low margin Higher margin High infrastructure Efficient infrastructure High fixed and working capital Lower capital intensity Slow cash to cash cycle Faster cash cycle Faster growth – Higher margins
Slide 8: Performing Well Despite Headwinds
$1.67 2013 2014 2015 Performing Well Despite Headwinds Guidance Operating Margins (Adjusted EPS*) (Adjusted Op. Profit %* of Value-added Sales) 5.3% 7.7% 7.4% 2013 2014 2015 8 * Adjusted EPS and operating profit percent of value-added sales are non-GAAP results which exclude non-recurring costs in 2
Slide 9: Why Invest in Materion?
Why Invest in Materion? G O A L N E X T 3 Y E A R S : Sustained growth Double-digit EPS CAGR Strategy for sustained, profitable growth • Pathway for additional cost and working capital improvements Strong positions in growing markets • High barriers to entry 1 Promising new product launches 2 9 Stra
Slide 10: Secular Market Trends Play to our Strengths
Secular Market Trends Play to our Strengths Key Trends • Miniaturization of electronics/IOT • Additional electronic instruments for autos, aircraft • Expanding high performance optical device opportunities • Innovation in medical diagnostics and sensors • Extraction of O&G from previously inaccessib
Slide 11: Well-positioned with Leading Global Product Offering
Well-positioned with Leading Global Product Offering Product 2015 Percent of Value-added Sales Expected Annual Growth Next 3-5 Years Leading supplier of beryllium- containing products ~40% Leading supplier of high-purity precious metal for PVD market ~22% Leading supplier of high-end optical coating
Slide 12: Evolving Potential from Beryllium Supply Shortage
Evolving Potential from Beryllium Supply Shortage Materion – leading position in beryllium market • Only global integrated producer – approximately 70 years of proven reserves in Utah mine – supplies over 70% of world’s mined beryllium • 40% of company sales include beryllium in some form Signs of s
Slide 13: Why Invest in Materion?
Why Invest in Materion? G O A L N E X T 3 Y E A R S : Sustained growth Double-digit EPS CAGR Strategy for sustained, profitable growth • Pathway for additional cost and working capital improvements Strong positions in growing markets • High barriers to entry 1 Promising new product launches 2 13 Str
Slide 14: Wide Range of Strategic Investments
Wide Range of Strategic Investments… New Wafer Coating Facility ISO Class 5 for Semiconductor Cleanroom Increased Capacity LED Phosphor ToughMet® Capacity Expansion Expanded Beryllium Hydroxide Capacity Singapore Expansion 14
Slide 15: Driving Record Number of New Product Launches
… Driving Record Number of New Product Launches Examples of New Products Sales Growth Sales from new products were 12% of total value-added sales for 2015 New products Existing products Gesture Controls Dovetail Clad ToughMet® Oil & Gas Bulk Metallic Glass (Liquidmetal) 50% 50% Wafer Level Processin
Slide 16: Why Invest in Materion?
Why Invest in Materion? G O A L N E X T 3 Y E A R S : Sustained growth Double-digit EPS CAGR Strategy for sustained, profitable growth • Pathway for additional cost and working capital improvements Strong positions in growing markets • High barriers to entry 1 Promising new product launches 2 16 Str
Slide 17: Cash Flow and Working Capital Efficiency Focus
Cash Flow and Working Capital Efficiency Focus Lean Sigma • Cycle time reduction • Yield improvement • On-time shipments 17 Improve Working Capital Efficiency Working capital % of net sales 2015 2018 (F) 25% 27% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 2012 2013 2014 2015 Cash Flow from Operation
Slide 18: Disciplined Capital Deployment Going Forward
Disciplined Capital Deployment Going Forward Return Cash to Shareholders • Share repurchase - $50M authorization ($20M remaining) • Dividends – increased 6% in 2015 Capex Below Depreciation • Invest in facilities • Invest in new products Growth • Organic • Selective bolt-on acquisitions 18 35% Debt
Slide 19: Why Invest in Materion?
Why Invest in Materion? G O A L N E X T 3 Y E A R S : Sustained growth Double-digit EPS CAGR Strategy for sustained, profitable growth • Pathway for additional cost and working capital improvements Strong positions in growing markets • High barriers to entry 1 Promising new product launches 2 19 Str
Slide 20: Continuing to Execute Three Point Strategy
Continuing to Execute Three Point Strategy Grow and Diversify Revenue Expand Margins Improve Capital Utilization • New products • Asia expansion • Strategic acquisitions • Higher margin products • Cost reductions • Disciplined pricing • Lean sigma • Improve working capital efficiency 1 2 3 Creating
Slide 21: High Value-added Business Model
High Value-added Business Model 21 Identify high growth secular markets Target the fastest growing niches of those markets Expand with innovative products Add synergistic acquisitions Ensure financial discipline 01 02 03 04 05
Slide 22: Appendix
Appendix
Slide 23: Top Key Markets Over 80% of Sales
Top Key Markets Over 80% of Sales Market Q1 2016 % of Value-added Sales Macro Trends Key Drivers Consumer Electronics 26% • Smart device growth • Gesture control Industrial Components 15% • Heavy equipment builds • Plastic tooling • Fire protection (R and C construction) Medical 13% • Blood analysis
Slide 24: Strong Cash Flow and Balance Sheet
Strong Cash Flow and Balance Sheet Cash Flow Balance Sheet 2015 2015 operating cash flow Average operating cash flow last 5 years $90M >$60M Total Capitalization Debt 3% A-3
Slide 25: Materion Value-added Sales by Market
Materion Value-added Sales by Market Q1 2016 - $143.9M OP% of Value-added Sales 5% Automotive Electronics 9% Defense 10% Energy 6% Medical 13% Other 15% Telecom Infrastructure 6% Industrial Components 15% Consumer Electronics 26% A-4
Slide 26: Value-added Sales by Segment
Value-added Sales by Segment A-5 Q1 2016 - $143.9M OP% of Value-added Sales 5% Other 17% Advanced Materials 29% Performance Alloys and Composites 54%
Slide 27: Value-added Sales: Performance Alloys and Composites
Value-added Sales: Performance Alloys and Composites A-6 Telecom Infrastructure 8% Automotive Electronics 15% Defense 13% Other 16% Medical 2% Consumer Electronics 19% Industrial Components 20% Energy 7% Q1 2016 - $78.2M OP% of Value-added Sales 2%
Slide 28: Value-added Sales: Advanced Materials
Value-added Sales: Advanced Materials A-7 Telecom Infrastructure 6% Defense 3% Other 18% Industrial Components 12% Consumer Electronics 46% Q1 2016 - $42.1M OP% of Value-added Sales 12% Energy 8% Medical 7%
Slide 29: Value-added Sales: Other
Value-added Sales: Other A-8 Other 3% Medical 58% Defense 13% Industrial Components 6% Q1 2016 - $24.0M OP% of Value-added Sales 17% (Precision Coatings Group) Automotive Electronics 3% Consumer Electronics 17%
Slide 30: Core Technologies
Core Technologies A-9 1 High purity precious metal refining and life cycle management for electronics and industrial applications 2 Powder metallurgy, high pressure consolidation to processing of finished products 3 Metal surface enhancement by cladding, electroplating and surface treatments 4 Wide
Slide 31: New Product and Technology Development
New Product and Technology Development A-10 • ToughMet® alloy “strip” for high volume bearing applications • BrushForm 158 “strip” for cell phone camera suspension applications • ToughMet® for oil production couplings • ToughMet® alloy “bulk” with enhanced impact toughness • ToughMet® “alloy “sheet”
Slide 32: New Product and Technology Development
New Product and Technology Development • Expanded shield kit cleaning services – including new technology to improve precious metal returns • Materials for high brightness LEDs • Specialty inorganic compounds for thin film solar panels (solar, security) • High purity metals and chemicals for semicon
Slide 33: New Product and Technology Development
New Product and Technology Development • Thin film vapor deposited electrodes for medical diagnostics • Precision optical thin film coatings (specialty filters) • Large area format serving astronomy, space, science • Multi-hyper – spectral array filters • Precision reel-to-reel medical thin film coa
Slide 34: Applications: Smartphones
I/O Connector Contacts Battery Contacts Internal Antenna Contacts Grounding Clips and Audio Jacks Micro Mezzanine Connectors for LCD Screen Internal Electronics and LED • Thin film materials – power amplifiers, LED, SAW and BAW devices, filters, and ICs • Hermetic solutions for SAW • Refining / recy
Slide 35: Application: Aircraft
Application: Aircraft Zz Rudder tt Empennage ff ie Horizontal iy Stabilizer Sy Wing LE Slats Fuselage | Controls <) , Spoilers Io-—— Doors S ‘ Flaps a= ~ Ailerons Cockpit DH” ee Controls ci za ge a4 SZ A LE Slats Wail faeerne a a oy. @ Main Gear Folding Stairs he 23 DRO wm & MATERION
Slide 36: ToughMet Heavy Machinery Applications
ToughMet Heavy Machinery Applications A-15
Slide 37: Directional Drilling and Measurement
Directional Drilling and Measurement (Many ToughMet Components) A-16 © 2013 – Proprietary to Materion Brush Inc.
Slide 38: Applications: Oil & Gas
Under Water Wellhead Equipment Directional Drilling Equipment • Measuring While Drilling (MWD) • Logging While Drilling (LWD) • Mud Pulse Telemetry (MPT) systems Drill Bits Structural Rig Components Wellhead Control Equipment Other Oil & Gas Applications: • Artificial lift equipment • Elemental anal
Slide 39: Applications: Medical
Cardiac Rhythm Management • Electronic interconnects / components • Niobium / titanium electron beam weld Insulin Pump • EMI shielding and grounding • Electrical terminals in connectors Seizure Control • Thin film deposition implantable electrode – Parkinson's disease (R&D) External glucose analysis
Slide 40: Applications: Automotive Electronics
Lithium Ion Battery Interconnects Battery Management Resistors Electronic Power Steering Modules ABS Leadframes Engine Efficiency Oxygen Sensors Mirror & Windshield Electronic Connections Air Bag Sensors Lamp Socket Connectors Auto Dimming Mirror Connectors Hybrid Vehicle Motor & Module Connectors W
Slide 41: Applications: Defense
Applications: Defense • Infrared Sensors for fighter jet and UAV optical targeting • Electronic packaging for defense avionics, radar and electronic countermeasure systems • Structural and electronic components for satellites • X-ray windows in security imaging systems • Laser protection optical coa
Slide 42: Applications: Telecommunications Infrastructure
Applications: Telecommunications Infrastructure Base Stations • Coaxial connectors • High power amplifiers Local Area Networks • Shielding • Modular jacks • PCB sockets • Processor sockets Other Telecommunications Infrastructure Applications • Undersea repeater housings A-21
Slide 43: Applications: Solar Technologies
Technology: Amorphous Silicon (a-Si, tandem and multi-junction) Thin Film (PVD) Materials Silicon based photovoltaic cells • Front and back contact layers • TCO Transparent conductive oxide layers Technology: Cadmium Telluride (CdTe) Thin Film (PVD) Materials • Cadmium based solar cell architecture.
Slide 44: Reconciliation of Non-GAAP Measure - Profitability
Reconciliation of Non-GAAP Measure - Profitability A-23 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Net sales 214.1$ 288.4$ 1,025.3$ 1,126.9$ Gross margin 43.1 55.9 190.8$ 205.9 Operating profit 8.1 14.4 45.3$ 57.6 Net income 6.8 12.3 32.2$ 42.1 EPS - Diluted 0.33$ 0.60$ 1.58$ 2.02$ Cost
Slide 45: Glossary of Terms
Glossary of Terms 1. Debt-to-capitalization = debt/(net debt+Shareholders’ equity) 2. EV / Adjusted EBITDA = Enterprise Value/EBITDA=(Market Cap+Debt)/EBITDA 3. Total Capitalization = Net debt+Shareholders’ equity 4. Working Capital % of net sales = (A/R+Inv-A/P)/Total Sales A-24
Slide 46: Materion Businesses
mN MATERION MATERION BUSINESSES Advanced Chemicals Barr Precision Optics & Thin Film Coatings Brush Beryllium & Composites Brush Performance Alloys Ceramics Electrofusion Large Area Coatings Microelectronics & Services Natural Resources Technical Materials