Materion Corporation · NYSE:MTRN
Materion — Q2 2022 Earnings Presentation
27 slides from Materion's earnings presentation, Aug 3, 2022
Slide 1: Materion Corporation 2Q 2022 Earnings Call
Materion Corporation 2Q 2022 Earnings Call August 3, 2022
Slide 2: Agenda
Agenda Thigere(tfe ify 7 John Zaranec — Chief Accounting Officer Opening Remarks & - : F ‘ , Business Update Jugal Vijayvargiya — President and Chief Executive Officer Shelly Chadwick — Vice President and Chief Financial Officer eview Question and Answer Session XN 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
oi J. Opening Remarks & Business Update J oF VA ugal VE President and Chief Executive Officer
Slide 5: Q2 2022 Highlights
Q2 2022 Highlights Record Value-Added Sales, Adjusted EBITDA and EPS Delivered record value-added (VA) sales of $277.2 million, up 33% year-over-year * 12% organic growth driven by outgrowth initiatives and strong end market demand . Second full quarter of HCS-Electronic Materials (HCS); VA sales co
Slide 6: End Market Performance
End Market Performance Q2 2022 Q2 Comments alt . . a do semi uctor $94.6 98% | * Organic growth of 23% driven by increasing content and new applications; well above e+ IT market growth re = Industrial market recovery and new business wins driving expansion across segments Industrial $53.4 t 29% | =
Slide 7: Aligned with Megatrends; Driving Automotive Into the Future
Aligned with Megatrends; Driving Automotive Into the Future Emission Reduction Connectivity Autonomous Vehicles * Electrification * Cloud based * Sensor technologies + Battery technology solutions + High performance * Charging + V2V, V2X computing infrastructure « Edge computing * Al/deep learning *
Slide 8: Complete Auto Portfolio Aligned with Emerging Trends
Complete Auto Portfolio Aligned with Emerging Trends Mission critical connection systems Faster processing semiconductor chips = Connectors, switches, relays = ALD & PVD deposition materials = Resistors, shunts = Packaging materials Better thermal manage: = Thermal substrates = Thermal & structural
Slide 9: Outperforming and Well Positioned for Accelerated Growth
Outperforming and Well Positioned for Accelerated Growth Strategic Actions in Automotive Automotive 2019 vs. 2021 Broadening Our Portfolio $140M sow 100M units units 12% + Purposeful investment in strategic R&D $120M focused on EV space TEM units 80M units + Acquisitions of HCS & Optics Balzers expa
Slide 10: Advanced Chemicals For Next-Gen Battery Development
Advanced Chemicals For Next-Gen Battery Development Compelling Opportunity in EV Market Global Light Duty EV Production Projections 30M units 20M units 10M units OM units 4.5X Growth Pa Zz 6.3M units 2021 28.0M units as 2030 Partnering with Next-Gen Battery Producers New facility in Milwaukee will s
Slide 11: Key Takeaways
Key Takeaways Achieved another quarter of record results = Delivered record VA sales six quarters in a row with meaningful above market growth * Record adjusted EBITDA of ~17%, approaching mid-term target of 20% * All-time record quarterly adjusted EPS Delivering on key strategic growth initiatives
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Slide 13: Q2 2022 Operating Performance
Q2 2022 Operating Performance Value-added Sales ($M) +33% $277.2 $207.9 Q2 2021 Q2 2022 Value-added sales were $277.2 million, up 33% from prior year = Strong demand across key end markets led by semiconductor, industrial, aerospace and energy + VAup 12% organically, with significant above market gr
Slide 14: Q2 2022 Financial Comparison
Q2 2022 Financial Comparison Record adjusted EBITDA of $47.0 million or 16.9% of VA sales compared with $32.6M or 15.7% of VA sales in $7.0 the prior year period ia || $9.5 $47.0 7 [J + Significant growth in adjusted +8) EBITDA driven by strong volumes, meaningful price / mix improvements, $(4.6) —o
Slide 15: Performance Materials Segment
Performance Materials Segment Value-added Sales ($M) +23% $108.6 Q2 2021 Q2 Performance by End Market t Industrial t Aerospace & Defense A | Automotive ‘See appendix for reconciliations of value-added sales, adjusted EBITDA, adjusted EBITDA margin, adjusted EPS and EPS with acquisition amortization
Slide 16: Electronic Materials Segment
Electronic Materials Segment 9 Value-added Sales ($M) Adj. EBITDA ($M) ee sales of $114.2 million, up 71% from 471% | $114.2 - _ All-time quarterly record for organic VA sales delivering 17% growth, exceeding previous record set in Q1 ‘22 - HCS-Electronic Materials contributing meaningful VA growth
Slide 17: Precision Optics Segment
Precision Optics Segment Value-added sales of $29.4 million Value-added Sales ($M) Adj. EBITDA ($M) - Decrease mainly driven by Shanghai shutdown, lower PCR -10% -37% filter demand, discontinued consumer electronics application and currency headwinds $32.6 $29.4 - VAsales up 3% sequentially, 10% whe
Slide 18: Cash, Debt and Liquidity
Cash, Debt and Liquidity ($M) Q2 2021 | Q2 2022 Short-term Debt $0.4 $15.3 Long-term Debt $58.8 $482.0 Total Debt $59.2 $497.3 Cash & Cash Equivalents $24.3 $32.2 Net Debt (Cash) $34.9 $465.1 TTM Adjusted EBITDA $114.2 | $172.5 Net Debt (Cash) / TTM Adj. EBITDA 0.3x 2.7x Net Debt (Cash) / TTM Adj. E
Slide 19: Full Year 2022 Guidance
Full Year 2022 Guidance 2022 Guidance Adj. EPS Guidance - Affirm annual adjusted EPS of $5.50 - $5.90, an increase of 40% from 2021, at the midpoint +40% $5.50 - $5.90 2021 2022E 2022 Modeling Assumptions Capital Expenditures $100M Interest Expense $20M HCS-Electronic Materials $20M Effective Tax Ra
Slide 20: 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 21: Appendix
Slide 22: Reconciliation for Value-added Sales
Reconciliation for Value-added Sales (Sin millions) Q2 2022 Q2 2021 Net Sales Performance Materials $ 1549 $ 125.3 Electronic Materials 261.0 213.1 Precision Optics 29.4 32.6 Other — ——_— Total $ 4453 $ 371.0 Less: Pass-through Metal Costs Performance Materials $ 209 $ 16.7 Electronic Materials 146.
Slide 23: Reconciliation for Non-GAAP Measures
Reconciliation for Non-GAAP Measures (S in millions) Q2 2022 Q2 2021 Operating Profit (Loss) Performance Materials $ 218 $ 173 Electronic Materials 18.2 83 Precision Optics 07 26 Other (8.8 77) Total $ 319 $ 20. Non-Operating Income / Expense Performance Materials $ 01 $ 02 Electronic Materials - _
Slide 24: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) (Sin millions) Q2 2022 Q2 2021 Special Items Performance Materials $ — $ - Electronic Materials 04 — Precision Optics 01 01 Other 05 _ Total $ 10 $ 01 Adjusted EBITDA Excluding Special Items Performance Materials $ 272 «$ 223 Electronic Materials 228 10.4
Slide 25: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) (Sin millions) Q2 2022 Q2 2021 Q2 2022 TTM Q2 2021 TTM GAAP as Reported Net income $ 23.3 $ 179 $ 75.1 $ 48.2 Income tax expense (benefit) 51 33 62 (0.8) Interest expense 47 0s W7 40 Depreciation, depletion, and amortization 12.9 10.5 51.1 37.9 Consolidat
Slide 26: Reconciliation for Non-GAAP Measures (Cont.)
Reconciliation for Non-GAAP Measures (Cont.) Performance Materials Precision Optics Second Quarter Ended Second Quarter Ended (Gillions) July 12022 %ofVA July 2,202] Sof VA as ee anise (Gillions) July 1,202 %ofVA July 2,2021 tof VA Pass-through metal cost 09 167 Net sales $294 $326 Value-added sales
Slide 27: Reconciliation for Non-GAAP Measures (Cont.)
(Millions) ‘Net income and EPS Special items Restructuring and cost reduction Provision for income taxes‘) Total special items Reconciliation for Non-GAAP Measures (Cont.) Second Quarter Ended Diluted Diluted July 1,2022, EPS July2,2021 EPS $ 2333 $1.12 $ 179 $ 0.87 — 01 10 — (0.3) (0.2) 07 0.04 (0.