Materion Corporation · NYSE:MTRN
Materion — Investor Presentation (February 2017)
38 slides from Materion's investor presentation, Feb 17, 2017
Slide 1: Investor Presentation February 2017
INVESTOR PRESENTATION February 2017
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 a
Slide 3: Materion: Our Purpose
Making advanced materials that improve the world Materion: Our Purpose 3
Slide 4: Materion at a Glance
Materion at a Glance 4 Adjusted EPS1 $1.32 Adjusted EBITDA1 $81M Market cap @ 12/31/16 $791M Debt-to-capitalization1 1% Operating cash flow $67M Revenues $969M Value-added sales1 $600M 2016 ~1% Dividend yield 1 Non-GAAP, excludes special items. Refer to the Appendix for additional detail.
Slide 5: Why Invest in Materion?
Why Invest in Materion? 5 G O A L : Sustained growth Double-digit EPS CAGR Leading position in attractive markets 1 Future growth opportunities 2 Strong cash flow and balance sheet 4 3 PAC profitability improvement plan
Slide 6: Well-positioned with Leading Global Product Offering
Well-positioned with Leading Global Product Offering 6 Product 2016 % of Value-added Sales Expected Annual Growth Next 3-5 Years Leading supplier of beryllium-containing products ~43% Leading supplier of high-purity precious metal for physical vapor deposition (PVD) market ~21% Leading supplier of h
Slide 7: Top Key Markets Over 80% of Sales
Market 2016 % of Value-added Sales Macro Trends Key Drivers Consumer Electronics 28% • Smart device growth • Gesture control Industrial Components 15% • Heavy equipment builds • Plastic tooling • Fire protection (R and C construction) Medical 11% • Blood analysis test coating for medical diagnosis •
Slide 8: Why Invest in Materion?
Why Invest in Materion? 8 G O A L : Sustained growth Double-digit EPS CAGR Leading position in attractive markets 1 Future growth opportunities 2 Strong cash flow and balance sheet 4 3 PAC profitability improvement plan
Slide 9: Global Megatrends Play to our Strengths
Global Megatrends Play to our Strengths 9 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 oil and gas from previously inac
Slide 10: Innovation Leading to Organic Growth
9.7% 11.2% 11.6% 14.1% 2013 2014 2015 2016 Innovation Leading to Organic Growth 10 New Product Value-added Sales as % of Total Noteworthy New Products Offerings Phosphor Wheel • Provides high brightness, longer life • Offers low noise characteristics, individual precision balancing, and stable color
Slide 11: Heraeus – Augmentation through M&A
Heraeus – Augmentation through M&A 11 Acquisition Description ► Acquisition of high-performance target materials business of Heraeus Group ► Precious and non-precious metal targets for architectural and automotive glass, electronic display, photovoltaic, and semiconductor markets ► Facilities in Ger
Slide 12: Heraeus – A Compelling Strategic Fit for Materion
►Accelerates and solidifies global precious metal position in growth portfolio (semiconductor) ►Provides diversification through critical mass in non- semiconductor business to grow and effectively compete worldwide ►Achieves economies of scale in cost-sensitive targets business ► Improves our globa
Slide 13: Why Invest in Materion?
Why Invest in Materion? 13 G O A L : Sustained growth Double-digit EPS CAGR Leading position in attractive markets 1 Future growth opportunities 2 Strong cash flow and balance sheet 4 3 PAC profitability improvement plan
Slide 14: PAC Profitability Improvement Plan
PAC Profitability Improvement Plan 14 1. Reduce PAC cost footprint and move to a more variable cost structure 2. Improve product portfolio mix and profitability through pricing and manufacturing process changes 3. Leverage beryllium market supply opportunity $0 $5 $10 $15 $20 $25 $30 $35 2012 2013 2
Slide 15: Reduce Cost Footprint
► Exit service center in Fukaya, Japan ► Service large Japanese customers out of U.S. ► Transfer smaller customers to local distributors ► Lower in-country headcount and investments ► Reduce annual costs by $2.0 million ► Continue exploring other cost reduction options Reduce Cost Footprint 15
Slide 16: Beryllium Market Supply Opportunity
Beryllium Market Supply Opportunity 16 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 Signs of shortage ahead
Slide 17: World's Only Vertically Integrated Beryllium Producer
World’s Only Vertically Integrated Beryllium Producer 17 Ore Chemical Plant Hydroxide Whiting Arc Furnace Pebble Plant CuBe Master VCB1 / Be Powder CuBe Alloy Products High-Purity Be Products Strip/Bulk Manufacturing Be Manufacturing Competitor B Competitor A 1 Vacuum Cast Billet
Slide 18: Why Invest in Materion?
Why Invest in Materion? 18 G O A L : Sustained growth Double-digit EPS CAGR Leading position in attractive markets 1 Future growth opportunities 2 Strong cash flow and balance sheet 4 3 PAC profitability improvement plan
Slide 19: Cash Flow and Working Capital Efficiency Focus
2016 2018 (F) 25% 28% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 2013 2014 2015 2016 Cash Flow from Operations ($ in millions) Free Cash Flow Capital Expenditures Cash Flow and Working Capital Efficiency Focus 19 Improve Working Capital3 Efficiency Working capital % of net sales 1 Free Cash Flow ca
Slide 20: Disciplined Capital Deployment Going Forward
Disciplined Capital Deployment Going Forward 20 Return Cash to Shareholders • Share repurchase - $50M authorization ($17M remaining) • Dividends – increased 6% in 2016 Capex Below Depreciation • Invest in facilities • Invest in new products Growth • Organic • Selective bolt-on acquisitions 35% Debt
Slide 21: Appendix
Appendix
Slide 22: Materion: Mission Critical Advanced Materials
Performance Alloys and Composites 55% Advanced Materials 29% Precision Coatings 16% Consumer Electronics 28% Industrial Components 15% Medical 11% Defense 9% Automotive Electronics 8% Telecom Infrastructure 6% Energy 5% 0 Materion: Mission Critical Advanced Materials A Balanced Portfolio % of Value-
Slide 23: Performance Alloys and Composites
Performance Alloys and Composites A-2 Clad Strip 12% ToughMet 11% CuBe 52% Be - Alloys 9% Be – High Purity 14% Europe 20% United States 55% Rest of World 1% Asia 24% Telecom Infrastructure 9% Automotive Electronics 14% Defense 11% Industrial Components 19% Medical 2% Other 18% Consumer Electronics 2
Slide 24: Advanced Materials
0% 5% 10% 15% 20% 25% 30% $100 $125 $150 $175 $200 2012 2013 2014 2015 2016 Advanced Materials A-3 Services 15% Packaging 10% Targets 57% Chemicals 18% Europe 6% United States 78% Rest of World 1% Asia 15% Telecom Infrastructure 5% Defense 4% Other 18% Medical 7% Consumer Electronics 46% Industrial
Slide 25: Precision Coatings
New product development • New precious metal coating stacks • Novel electrode alloys • Gesture control sensing • Phosphor wheel and thermal imaging New market development • Expanding into Asia with blood glucose test strips • New applications for medical sensing films • Growing demand for optical fi
Slide 26: Applications
Applications
Slide 27: Consumer Electronics
► Advanced chemicals for OLED applications ► Multiple product offerings for smartphones, including connector material and voice coil motor (auto focus lens stabilizer) ► Phosphor wheel and opto-ceramic coatings for laser projectors ► Wafer level optical coatings for electronic devices ► 3D/gesture c
Slide 28: Medical
► Precious metal blood glucose test strips for diabetes testing ► Be material for x-ray equipment applications ► Narrow-band optical filters for spectroscopy ► Continuous glucose monitoring (CGM) electrodes for type 2 diabetes Medical 28 A-7
Slide 29: Defense
► Infrared sensors for fighter jet, unmanned aerial vehicle optical targeting ► Optical filters for precision-guided munitions ► Structural components for combat vehicles and aircraft ► Optical, structural, and electronic components for satellites Defense 29 A-8
Slide 30: Automotive Electronics
► Connector material for battery and high temperature applications ► High-performance alloys (i.e., CuBe, ToughMet®) for the powertrain ► Metal matrix composites (i.e., SupremEx®) for chassis, suspension, and braking component applications ► Optical filters: night vision, speed control, sensors, cam
Slide 31: Energy
► ToughMet couplings for oil production ► ToughMet components for oil drilling applications ► Connector materials (i.e., Dovetail®) for fuel cell batteries ► Precious metal targets for coatings on construction glass Energy 31 A-10
Slide 32: Financial Information
» Financial Information MATERION
Slide 33: Reconciliation for Value-Added Sales
Reconciliation for Value-Added Sales A-12 $ in millions Value-added sales is a non-GAAP measure that removes the impact of pass-through metal costs and allows for analysis without the distortion of the movement or volatility in metal prices. Internally, we manage our business on this basis, and a re
Slide 34: Reconciliation for Adjusted EPS
Reconciliation for Adjusted EPS A-13 As detailed in the above reconciliation, we have adjusted the results for certain special items, such as cost reduction initiatives (i.e., asset impairment charges and severance), legacy legal and environmental costs, merger and acquisition costs, and certain inc
Slide 35: Other Non-GAAP Items
Other Non-GAAP Items A-14 Adjusted EBITDA is calculated by adding depreciation, depletion, and amortization and certain special items such as cost reduction initiatives (i.e., asset impairment charges and severance), legacy legal and environmental costs, merger and acquisition costs, and certain inc
Slide 36: Quarterly Sales and Value-added Sales by Segment
($ in millions, except per share data) Q1 Q2 Q3 Q4 2014 Q1 Q2 Q3 Q4 2015 Q1 Q2 Q3 Q4 2016 Sales PAC 97.2$ 109.6$ 114.2$ 112.3$ 433.3$ 103.3$ 107.7$ 93.6$ 90.3$ 394.8$ 90.6$ 97.7$ 103.7$ 95.5$ 387.5$ AM 129.3 145.0 137.6 135.3 547.3 149.9 131.4 113.6 87.4 482.3 108.1 113.6 107.2 108.3 437.2 PC 33.9 3
Slide 37: 2017 Forecasted Financial Guidance
►Full Year Guidance ► Adjusted EPS of $1.45 - $1.60 ► Operating cash $50M - $60M ► Capex approximately $30M ► Mine development capital expenditures <$3M ► Depreciation and amortization expense of $43M - $45M ► Effective tax rate excluding special items 20% - 24% 2017 Forecasted Financial Guidance A-
Slide 38: Materion
MATERION