Materion Corporation · NYSE:MTRN
Materion — FY2018 Earnings Presentation
29 slides from Materion's earnings presentation, Feb 21, 2019
Slide 1: Investor Presentation February 2019
INVESTOR PRESENTATION February 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: Q4 and Full Year 2018 Highlights
Q4 and Full Year 2018 Highlights ► Record 2018 adjusted earnings of $2.38 per diluted share, the 2nd consecutive year of EPS growth > 30% ► Eight consecutive quarters of sales and profit growth ► PAC reported all-time quarterly and full year records for value-added sales, operating profit, and opera
Slide 4: Key Financial Trends
Key Financial Trends TTM Value-added1 (VA) Sales TTM Operating Profit1 (OP) $800 $70 66.0 10% 62.0 734 739 $750 724 $60 56.7 9% 710 53.4 $700 678 $50 47.5 8% 642 $650 627 39.4 40.6 605 millions) ($ 1 1 600 $40 35.5 7% ofVA % Sales 35.0 1 $600 ($ millions) ($ $30 6% $550 OP TTM TTMOP $500 $20 5% Q4 Q
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 Medical Coatings & Composites - Leading market position for specia
Slide 6: Key Facts
Key Facts Share Statistics as of 12/31/2018 2018 Financial Information Trading Symbol MTRN Revenues Stock Price $44.99 $1,208M Shares O/S, Diluted 20.6M 52 wk Range $42.50 - $65.14 Value-added sales1 $739M 3 Mo Avg Vol 110,770 Market Cap $945M Adjusted EPS1 $2.38 Enterprise Value $884M $70 Materion
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: 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 9: 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 10: 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 $100 97.7
Slide 11: Profitable Growth Strategy
Profitable Growth Strategy PROFITABLE GLOBAL GROWTH COMMERCIAL OPERATIONAL INNOVATION ACQUISITIONS DIGITAL EXCELLENCE EXCELLENCE A ONE MATERION PERFORMANCE-BASED CULTURE Deliver sustained double-digit EPS growth 11
Slide 12: Global Megatrends Play to Our Strengths
Global Megatrends Play to Our Strengths Key Trends Characteristics of our Materials • Miniaturization of electronics/IoT Conductivity • Additional electronic instruments for Corrosion resistance autos, aircraft Weight savings (lighter) • Expanding high performance optical device opportunities Purity
Slide 13: Well-diversified Market Penetration
Well-diversified Market Penetration 2018 % of Key Market Value-added Sales1 Drivers • Smart device growth Consumer • Sensing devices Electronics 29% • Internet of Things (IoT) • Heavy equipment builds Industrial • Plastic tooling Components 16% • Fire protection (R and C construction) • Precision-gu
Slide 14: Innovation Leading to Organic Growth
Innovation Leading to Organic Growth New Product Value-added Sales1 as % of Total Example New Products Offerings Phosphor Wheel • Provides high brightness, longer life • Offers low noise characteristics, 16% 16% individual precision balancing, and stable colors 14% PCRAM Targets 12% • Key material u
Slide 15: Cash Flow and Working Capital Efficiency Focus
Cash Flow and Working Capital Efficiency Focus Dividends per share Cash Flow from Operations ($ 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 $60.3 $60 Improve Working Capital3 Efficiency $40 Working capital % of net sales4
Slide 16: 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 17: 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 18: 2019 Forecasted Financial Guidance
2019 Forecasted Financial Guidance ► Full-year guidance ► Adjusted EPS of $2.62 – $2.74 ► Operating cash flow > $90M ► Capex ~ $30M ► Mine development capital expenditures of $5M – $10M ► Depreciation and amortization expense of ~ $35M ► Effective tax rate excluding special items 18% – 20% 18
Slide 19: Appendix
Appendix
Slide 20: Making Advanced Materials That Improve the World
Materion: Making Advanced Materials That Improve the World Industrial Medical Components 8% 16% Defense 10% Automotive Electronics 8% Consumer Electronics Telecom Performance Alloys 29% Infrastructure and Composites Advanced Materials 5% 57% 30% Energy Precision 10% Coatings 13% 0 1 % of Value-added
Slide 21: 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 22: 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 23: Financial Information
Financial Information
Slide 24: Reconciliation for Value-added Sales
Reconciliation for Value-added Sales $ in millions 2018 2017 2016 2015 2014 Net Sales Performance Alloys and Composites $ 500.6 $ 429.5 $ 387.5 $ 394.8 $ 433.3 Advanced Materials 586.6 590.8 437.2 482.3 547.3 Precision Coatings 120.6 119.2 144.5 148.4 147.7 Other - - - (0.2) (1.4) Total $ 1,207.8 $
Slide 25: Reconciliation for Adjusted EPS
Reconciliation for Adjusted EPS In millions, except per share amounts 2018 2017 2016 2015 2014 GAAP As Reported Operating Profit $ 61.5 $ 40.0 $ 27.1 $ 45.3 $ 57.6 Net Income 20.8 11.5 25.7 32.2 42.1 EPS - Diluted 1.01 0.56 1.27 1.58 2.02 Operating Profit Special Items Cost reductions $ 5.6 $ 0.7 $
Slide 26: Other Non-GAAP Items
Other Non-GAAP Items $ in millions 2018 2017 2016 2015 2014 Operating Profit $ 61.5 $ 40.0 $ 27.1 $ 45.3 $ 57.6 Special Items 4.5 7.4 7.9 0.5 (8.5) Adjusted Operating Profit $ 66.0 $ 47.4 $ 35.0 $ 45.8 $ 49.1 Depreciation, depletion, and amortization 35.5 42.8 45.7 37.8 42.7 Mine Amortization (inclu
Slide 27: Other Non-GAAP Items
Other Non-GAAP Items $ in millions Q4 2018 Q3 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 TTM Adjusted Operating Profit $ 66.0 $ 62.0 $ 56.7 $ 53.4 $ 47.5 $ 40.6 $ 39.4 $ 35.5 $ 35.0 Total Shareholders' Equity $ 553.9 $ 536.7 $ 515.7 $ 504.3 $ 495.0 $ 512.0 $ 503.0 $ 497.1 $ 494.1 T
Slide 28: Historical Financials
Historical Financials ($ in millions, except per share data) 2015 2016 2017 2018 Q1 Q2 Q3 Q4 2015 Q1 Q2 Q3 Q4 2016 Q1 Q2 Q3 Q4 2017 Q1 Q2 Q3 Q4 2018 Sales PAC $ 103.3 $ 107.7 $ 93.6 $ 90.3 $ 394.8 $ 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 $ 1
Slide 29: MATERION
MATERION