Materion Corporation · NYSE:MTRN
Materion — Q3 2023 Earnings Presentation
25 slides from Materion's earnings presentation, Nov 1, 2023
Slide 1: Materion Corporation 3Q 2023 Earnings Call
Materion Corporation 3Q 2023 Earnings Call November 1, 2023 TaN MATERION
Slide 2: Agenda
Agenda Jiigetelifeaitye) 7 Kyle Kelleher — Manager, Investor Relations 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: Q3 2023 Highlights
Q3 2023 Highlights Record Earnings on Strong Operational Performance Outperformed adjusted EBITDA margin target for second consecutive quarter Achieved twelfth consecutive quarter of YoY growth for adjusted EBITDA and EPS Value-added (VA) sales of $270.5 million, up 8% excluding semiconductor softne
Slide 6: Space & Defense Opportunities Accelerating
Space & Defense Opportunities Accelerating Organic Growth Awarded $5M from U.S. Air Force for development of Beryllium Additive Manufacturing Notification of $10M award to supply critical materials for defense related space applications Secured 3” order of $13M to supply critical materials for space
Slide 7: End Market Performance
End Market Performance VA Sales vs. Q3 2022 Q3 2023 Q3 Comments YTD 2023 VA Sales vs. YTD programs $59.7 § -33% Continued inventory correction and customer destocking $207.2 § -20% ie Slowing non-residential construction and continued softness in = $42.2 y 19% cone iyciated ci $145.2 71% Tenth conse
Slide 8: Key Takeaways
Key Takeaways Delivered record quarterly earnings = Outperformed mid-term adjusted EBITDA margin target of 20% for second consecutive quarter = Record quarterly adjusted EPS; record 3 quarter adjusted EBITDA * Twelfth consecutive quarter of year-over-year growth in adjusted EBITDA and adjusted EPS D
Slide 9: Financial Review
Financial Review Shelly Chadwick Vice President and Chief Financial Officer
Slide 10: Q3 2023 Operating Performance
Q3 2023 Operating Performance Value-added Sales ($M) $283.5 5% Q3 2022 Q3 2023 Value-added sales were $270.5 million, down slightly from prior year + Excluding the semiconductor softness, remainder of business was up 8% « Strength across key end markets led by aerospace & defense and telecom & data
Slide 11: Q3 2023 Financial Comparison
Q3 2023 Financial Comparison Adjusted EBITDA of $55.4 million, or 20.5% of VA Sales - Driven by favorable price/mix and strong operational performance, partially offset by lower volume = Targeted cost improvement initiatives contributing across the company $6.5 = 330 bps margin expansion $48.8 17.2%
Slide 12: Performance Materials Segment
Performance Materials Segment Value-added Sales ($M) Adj. EBITDA ($M) Value-added sales of $168.9 million, up 13% from prior year $46.5 +13% | St689 +41% - Meaningful contribution from precision clad strip $148.8 » Strong demand in the aerospace (space), consumer $33.0 electronics and telecom & data
Slide 13: Electronic Materials Segment
Electronic Materials Segment Value-added sales of $75.5 million Value-added Sales ($M) Adj. EBITDA ($M) = Continued slowdown in the semiconductor market S106.9) || 29% -24% - Persistent inventory correction in logic and communication devices $17.2 $75.5 $13.0 Adjusted EBITDA of $13.0 million = 110 b
Slide 14: Precision Optics Segment
Precision Optics Segment Value-added Sales ($M) Adj. EBITDA ($M) eS $4.0 = Decrease mainly driven by reduced PCR filter demand, $28.0 [ Fo, - discontinued product application and general softening in cc “15% | $3.4 the consumer electronics market « Sequential improvement of $1M driven mainly by stre
Slide 15: Cash, Debt and Liquidity
Cash, Debt and Liquidity ($M) Q3 2022 | Q3 2023 Leverage slightly below midpoint of target range Short-term Debt $19.7 | $38.6 OF 1.5K — 3x Longeiern Debs $474.3 $422.4 Cnet tacaity? $151 million available on existing Total Debt $494.0 $461.0 - Adequate liquidity remains to support growth initiative
Slide 16: Full Year 2023 Guidance
Full Year 2023 Guidance Adj. EPS Guidance $5.70 - $5.90 2023 Guidance $5.27 ~10% = Affirming midpoint of full year adjusted EPS with a range of $5.70-$5.90 2022 2023E 2023 Modeling Assumptions Capital Expenditures $105M Interest Expense $30M HCS-Electronic Materials $11M Effective Tax Rate 15-16% Ta
Slide 17: 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 18: Appendix
Appendix
Slide 19: Reconciliation for Value-added Sales
19 Reconciliation for Value-added Sales (S in millions) 3.2023 Q3 2022 YTD 2023 YTD 2022 Net Sales Performance Materials $ 1846 $ 169.4 $ 5544 § 473.9 Electronic Materials 192.3 230.8 611.8 762.6 Precision Optics 26.2 28.0 719 86.0 Other — — — = Total $ 403.1 §$ 428.2 $ 1,244.1 $ 1,322.5 Less: Pass-
Slide 20: Reconciliation for Non-GAAP Measures
Reconciliation for Non-GAAP Measures (S in millions) Q3 2023 Q3 2022 Operating Profit (Loss) Performance Materials $ 389 §$ 22.9 Electronic Materials 6.0 12.8 Precision Optics 0.3 08 Other (8.7) (7.4) Total $ 365 §$ 29.1 Non-Operating (Income)/Expense Performance Materials $ 02 $ 0.1 Electronic Mate
Slide 21: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) (S in millions) Q3 2023 Q3 2022 Special Items Performance Materials $ 01 $ 41 Electronic Materials 29 04 Precision Optics 0.1 04 Other — 0.5 Total $ 31. $ 5.4 Adjusted EBITDA Excluding Special Items Performance Materials $ 465 § 33.0 Electronic Materials
Slide 22: Reconciliation for Non-GAAP Measures (Cont.)
2 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 Additi
Slide 23: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) Performance Materials ‘Third Quarter Ended Electronic Materials tember September Third Quarter Ended (Millions) Ss 2023 %ofVA 30, 2022 “ofVA b 2 Net sales $ 1846 $1694 (Millions) ‘Ss B23, ‘eof VA S202, tof VA Pass-through metal cost 15.7 206 Net sales $ 1
Slide 24: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) Third Quarter Ended September Diluted September Diluted (Millions) 29, 2023 EPS 30, 2022 EPS Net income and EPS $ 26.6 $ 1.27 $ 20.0 $ 0.96 Special items Restructuring and cost reduction 3.1 04 Additional start up resources and scrap 41 Merger and acquisi
Slide 25: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) Reconciliation of Adjusted Earnings per Share to GAAP Earnings per Share for Full Year 2023 Outlook and Year Ended December 31, 2022 (Unaudited) Forecasted Full Year Ended December 31, 2023 Low End Earnings per High End Earnings per Year Ended December Sh