Materion Corporation · NYSE:MTRN
Materion — Q3 2019 Earnings Presentation
28 slides from Materion's earnings presentation, Oct 31, 2019
Slide 1: Investor Presentation November 2019
INVESTOR PRESENTATION November 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: Q3 2019 Highlights
Q3 2019 Highlights ►Third quarter records for value-added sales, adjusted operating profit, and adjusted EPS ►Eleven consecutive quarters of year-over-year sales and adjusted profit growth ►Fifth consecutive quarter with double-digit adjusted operating profit margins and PAC operating profit margin
Slide 4: Key Financial Trends
Key Financial Trends TTM Value-added1 (VA) Sales TTM Operating Profit1 (OP) $800 $90 83.5 12% 757 80.9 745 750 734 739 $80 11% $750 724 73.4 710 $70 66.0 10% $700 678 62.0 56.7 642 $60 53.4 9% $650 47.5 ($ millions) ($ $50 8% 1 1 % of VA ofVA % Sales $600 40.6 1 ($ millions) ($ $40 7% $550 OP TTM $3
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 Other Coatings & Composites Semiconductor - Leading market positio
Slide 6: Key Facts
Key Facts Share Statistics as of 9/27/2019 Q3 2019 TTM Financial Information Trading Symbol MTRN Revenues Stock Price $61.69 $1,203M Shares O/S, Diluted 20.6M 52 wk Range $42.56 - $70.96 Value-added sales1 $757M 3 Mo Avg Vol 121,420 Market Cap $1,276M Adjusted EPS1 $3.16 Enterprise Value $1,184M $80
Slide 7: Performance Alloys and Composites (PAC)
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
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
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 $100 97.7
Slide 10: Profitable Growth Strategy
Profitable Growth Strategy PROFITABLE GLOBAL GROWTH COMMERCIAL OPERATIONAL INNOVATION ACQUISITIONS DIGITAL EXCELLENCE EXCELLENCE A ONE MATERION PERFORMANCE-BASED CULTURE Deliver sustained double-digit EPS growth 10
Slide 11: Global Megatrends Play to Our Strengths
Global Megatrends Play to Our Strengths Key Trends Characteristics of our Materials • Miniaturization of electronics/IoT Conductivity • Additional electronic instruments for Corrosion resistance autos, aircraft Weight savings (lighter) • Expanding high performance optical device opportunities Purity
Slide 12: Well-diversified Market Penetration
Well-diversified Market Penetration 2018 % of Key Market Value-added Sales1 Drivers • Smart device growth Semiconductor 20% • Non-volatile memory • Big data (data storage) • Heavy equipment builds Industrial 18% • Plastic tooling • Fire protection (R and C construction) • Structural and electronic c
Slide 13: Innovation Leading to Organic Growth
Innovation Leading to Organic Growth New Product Value-added Sales1 as % of Total Example New Products Offerings Phosphor Wheel • Provides high brightness, longer life • Offers low noise characteristics, 16% 16% individual precision balancing, and stable colors 14% PCRAM Targets 12% • Key material u
Slide 14: Cash Flow and Working Capital Efficiency Focus
Cash Flow and Working Capital Efficiency Focus Dividends per share Cash Flow from Operations ($ 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 2019 $60.3 $60 Improve Working Capital3 Efficiency $40 Working capital % of net sa
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 $3.15 – $3.20 ► Operating cash flow > $90M ► Capex ~ $25M ► Mine development capital expenditures ~ $2M ► Depreciation and amortization expense of ~ $40M ► Effective tax rate excluding special items 18% – 20% 17
Slide 18: Appendix
Appendix
Slide 19: 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 20: 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 21: 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 22: Financial Information
Financial Information
Slide 23: Reconciliation for Value-added Sales
Reconciliation for Value-added Sales $ in millions Q3 2019 Q3 2019 TTM 2018 2017 2016 2015 2014 Net Sales Performance Alloys and Composites $ 130.7 $ 521.5 $ 500.6 $ 429.5 $ 387.5 $ 394.8 $ 433.3 Advanced Materials 147.6 563.5 586.6 590.8 437.2 482.3 547.3 Precision Coatings 27.6 118.2 120.6 119.2 1
Slide 24: Reconciliation for Adjusted EPS
Reconciliation for Adjusted EPS In millions, except per share amounts Q3 2019 Q3 2019 TTM 2018 2017 2016 2015 2014 GAAP As Reported Operating Profit $ 6.3 $ 64.9 $ 61.5 $ 40.0 $ 27.1 $ 45.3 $ 57.6 Net Income $ 3.5 $ 15.1 $ 20.8 $ 11.5 $ 25.7 $ 32.2 $ 42.1 EPS - Diluted $ 0.17 $ 0.71 $ 1.01 $ 0.56 $
Slide 25: Other Non-GAAP Items
Other Non-GAAP Items $ in millions Q3 2019 TTM 2018 2017 2016 2015 2014 Operating Profit $ 64.9 $ 61.5 $ 40.1 $ 27.1 $ 45.3 $ 57.6 Special Items 18.6 4.5 7.4 7.9 0.5 (8.5) Adjusted Operating Profit $ 83.5 $ 66.0 $ 47.5 $ 35.0 $ 45.8 $ 49.1 Depreciation, depletion, and amortization $ 41.0 $ 35.5 $ 42
Slide 26: Other Non-GAAP Items
Other Non-GAAP Items $ in millions Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017 TTM Adjusted Operating Profit $ 83.5 $ 81.0 $ 73.4 $ 66.0 $ 62.0 $ 56.7 $ 53.4 $ 47.5 $ 40.6 Total Shareholders' Equity $ 597.8 $ 594.8 $ 566.9 $ 553.9 $ 536.7 $ 515.7 $ 504.3 $ 495.0 $ 512.0 T
Slide 27: Historical Financials
Historical Financials ($ in millions, except per share data) 2016 2017 2018 2019 YTD Q1 Q2 Q3 Q4 2016 Q1 Q2 Q3 Q4 2017 Q1 Q2 Q3 Q4 2018 Q1 Q2 Q3 2019 Sales PAC $ 90.6 $ 97.7 $ 103.7 $ 95.5 $ 387.5 $ 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
Slide 28: Materion
MATERION