Financial Performance and Operations - The backlog of unshipped orders as of December 31, 2024, was $537.6 million, down from $573.4 million in 2023 and $576.2 million in 2022, with expectations to fill substantially all orders over the next 18 months [29]. - Materion employed approximately 3,037 people globally as of December 31, 2024, with 2,005 in manufacturing roles, indicating a strong employee base to support operations [33]. - The company has implemented restructuring efforts aimed at reducing costs and improving operational efficiency, but future economic disruptions may impact these initiatives [100]. - Restructuring initiatives and labor relations changes could lead to workforce interruptions, negatively affecting business operations [103]. Safety and Compliance - In 2024, Materion achieved a 20% improvement in its injury frequency rate, reflecting enhanced safety measures and training initiatives [35]. - The company is subject to various laws and regulations that may increase costs and impact operations, including trade regulations and data protection laws, necessitating material investments in compliance [32]. - Materion's compliance programs may involve significant investments in processes, training, and technology to meet increasingly complex regulations [32]. Risk Management - Materion's credit facilities are secured by substantially all assets, and a significant portion of its bank debt consists of variable-rate obligations, exposing the company to interest rate fluctuations [91]. - The company is actively pursuing acquisitions to drive growth, but there are risks associated with successfully integrating acquired businesses and achieving expected synergies [96]. - Materion's products are complex and may contain undetected defects, which could lead to installation delays and damage to reputation, impacting sales [98]. - Customer contracts may expose the company to penalties and liabilities due to issues with product functionality and delivery, potentially affecting financial results [99]. Workforce and Culture - The company has a strong focus on diversity and inclusion, with four employee resource groups established to support various demographics [38]. - Retaining qualified management and skilled employees is critical for maintaining product quality and customer relationships, with intense competition for such personnel [102]. Research and Development - Continuous investment in R&D is emphasized to maintain a competitive edge through the development of advanced coatings and optical solutions [30].

Materion Corporation 4Q 2024 Earnings Presentation February 19, 2025 © 2025 Materion Corporation | Agenda | | | --- | --- | | Introduction | Kyle Kelleher – Director, Investor Relations and Corporate FP&A | | Opening Remarks & Business Update | Jugal Vijayvargiya – President and Chief Executive Officer | | Financial Review | Shelly Chadwick – Vice President and Chief Financial Officer | | Q&A | Question and Answer Session | 2 © 2025 Materion Corporation Forward-looking Statements and Non-GAAP Financial Info ...

Core Insights - Materion (MTRN) reported revenue of $436.87 million for the quarter ended December 2024, marking a year-over-year increase of 3.8% and exceeding the Zacks Consensus Estimate of $430.95 million by 1.37% [1] - The company's EPS for the same period was $1.55, up from $1.41 a year ago, and also surpassed the consensus EPS estimate of $1.43 by 8.39% [1] Financial Performance - Value-added Sales (non-GAAP) for Performance Materials reached $195.80 million, exceeding the average estimate of $165.90 million from two analysts [4] - Value-added Sales (non-GAAP) for Precision Optics were reported at $21.70 million, which was below the average estimate of $23.35 million from two analysts [4] - Value-added Sales (non-GAAP) for Electronic Materials amounted to $78.60 million, surpassing the average estimate of $73.40 million from two analysts [4] Stock Performance - Materion's shares have returned -4.2% over the past month, contrasting with the Zacks S&P 500 composite's +4.7% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Company Performance - Materion (MTRN) reported quarterly earnings of $1.55 per share, exceeding the Zacks Consensus Estimate of $1.43 per share, and up from $1.41 per share a year ago, representing an earnings surprise of 8.39% [1] - The company posted revenues of $436.87 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.37% and increasing from $421.04 million year-over-year [2] - Over the last four quarters, Materion has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Outlook - Materion shares have declined approximately 1.9% since the beginning of the year, while the S&P 500 has gained 4% [3] - The current consensus EPS estimate for the upcoming quarter is $1.25 on revenues of $426.8 million, and for the current fiscal year, it is $5.96 on revenues of $1.8 billion [7] - The estimate revisions trend for Materion is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - Materion operates within the Zacks Mining - Miscellaneous industry, which is currently ranked in the bottom 34% of over 250 Zacks industries [8] - Research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1 [8]

Financial Performance - Fourth quarter net sales were $436.9 million, an increase from $421.0 million in the prior year period, while full-year net sales reached $1.68 billion, slightly up from $1.67 billion[4][9]. - The company reported a net loss of $48.8 million, or $2.33 loss per diluted share, compared to a net income of $19.5 million, or $0.93 per share, in the prior year quarter[7][10]. - Value-added sales for the full year were $1.10 billion, down 3% from the prior year due to weakness in key markets, partially offset by strength in space & defense[9][10]. - For the fourth quarter ended December 31, 2024, net sales increased to $436.9 million, up from $421.0 million in the same quarter of 2023, representing a growth of 1.4%[33]. - The company's net income for the fourth quarter was a loss of $48.8 million, compared to a profit of $19.5 million in Q4 2023, indicating a significant decline[34]. - Value-added sales for the fourth quarter were $296.1 million, slightly up from $289.7 million year-over-year, reflecting a growth of 0.5%[33]. EBITDA and Margins - Adjusted EBITDA for the fourth quarter was a record $61.5 million, representing 20.8% of value-added sales, compared to $53.3 million or 18.4% in the prior year[8]. - For the full year, adjusted EBITDA was $221.2 million, up from $217.7 million in the prior year, achieving a mid-term target of 20% adjusted EBITDA margin for the first time in company history[10][5]. - The company established a new mid-term adjusted EBITDA margin target of 23%, indicating an expected improvement of 300 basis points over the next several years[5]. - Adjusted EBITDA for Performance Materials was $53.6 million in Q4 2024, compared to $46.0 million in Q4 2023, with an adjusted EBITDA margin of 25.4% of net sales[36]. - Adjusted EBITDA for Electronic Materials increased to $14.7 million in Q4 2024 from $11.0 million in Q4 2023, representing an adjusted EBITDA margin of 7.2% of net sales[36]. - The company reported a total adjusted EBITDA of $178.8 million for the twelve months ended December 31, 2024, compared to $181.2 million in 2023, reflecting a slight decline year-over-year[36]. Market Outlook - Materion expects mid-single digit top-line growth in 2025, excluding precision clad strip, with earnings guidance of $5.30 to $5.70 per share, reflecting a 3% increase from the prior year at the midpoint[12][13]. - The company remains cautiously optimistic about market dynamics entering 2025, anticipating earnings growth from operational excellence and market outperformance[12][13]. Asset and Cash Flow Management - Total assets decreased from $1,762,726,000 in December 31, 2023 to $1,697,632,000 in December 31, 2024, a decline of approximately 3.7%[23]. - Total net cash provided by operating activities decreased to $87,817,000 in 2024 from $144,414,000 in 2023, representing a decline of 39.1%[27]. - Cash and cash equivalents increased to $16,713,000 at the end of 2024 from $13,294,000 at the end of 2023, an increase of 25.5%[27]. - Long-term debt rose to $407,734,000 in 2024 from $387,576,000 in 2023, an increase of 5.4%[23]. - Operating lease liabilities increased to $62,626,000 in 2024 from $53,817,000 in 2023, reflecting a rise of 16.5%[23]. Segment Performance - The company's operating profit for the Performance Materials segment was $43.4 million in Q4 2024, up from $33.0 million in Q4 2023, showing a growth of 31.1%[30]. - Precision Optics segment reported an operating loss of $77.0 million in Q4 2024, compared to a loss of $0.4 million in Q4 2023, highlighting a substantial deterioration[30]. - Performance Materials segment net sales for Q4 2024 were $211.0 million, up from $201.1 million in Q4 2023, while total net sales for the twelve months ended December 31, 2024, were $744.5 million, down from $755.5 million in 2023[36]. - Electronic Materials segment net sales increased to $204.2 million in Q4 2024 from $193.9 million in Q4 2023, with total net sales for the twelve months reaching $845.7 million, compared to $805.8 million in 2023[36]. - Precision Optics segment reported a decline in Q4 2024 net sales to $21.7 million from $26.0 million in Q4 2023, with total net sales for the twelve months at $94.5 million, down from $103.9 million in 2023[36]. Special Items and Charges - The total special items for the fourth quarter amounted to $82.0 million, significantly higher than $10.0 million in Q4 2023, indicating increased costs related to restructuring and impairments[33]. - The company reported an impairment charge of $73,201,000 in 2024, indicating significant asset write-downs[27]. - The company incurred restructuring and cost reduction expenses of $0.1 million in Q4 2024 for the Performance Materials segment, while total restructuring costs for the twelve months were $2.9 million[36].

Core Viewpoint - Wall Street analysts predict Materion (MTRN) will report quarterly earnings of $1.43 per share, reflecting a year-over-year increase of 1.4%, with revenues expected to reach $430.95 million, a 2.4% increase compared to the previous year [1]. Earnings Estimates - Over the last 30 days, the consensus EPS estimate for the quarter has been revised downward by 8.1%, indicating a collective reassessment by analysts of their initial forecasts [2]. - Changes in earnings estimates are crucial for predicting potential investor reactions, as empirical studies show a strong correlation between earnings estimate revisions and short-term stock price performance [3]. Key Metrics Forecast - Analysts forecast 'Value-added Sales (non-GAAP) - Performance Materials' to be $165.90 million, down from $186 million reported in the same quarter last year [5]. - The average estimate for 'Value-added Sales (non-GAAP) - Precision Optics' is $23.35 million, compared to $26 million reported in the same quarter last year [5]. - 'Value-added Sales (non-GAAP) - Electronic Materials' is expected to be $73.40 million, down from $77.70 million reported in the same quarter last year [6]. Market Performance - Materion shares have decreased by 4% over the past month, contrasting with the Zacks S&P 500 composite's increase of 4.7%, and the company holds a Zacks Rank 4 (Sell), indicating expected underperformance in the near term [6].

Core Viewpoint - Wall Street anticipates a year-over-year increase in earnings for Materion (MTRN) due to higher revenues, with a focus on how actual results will compare to estimates [1][2] Earnings Expectations - Materion is expected to report quarterly earnings of $1.43 per share, reflecting a +1.4% change year-over-year, with revenues projected at $430.95 million, up 2.4% from the previous year [3] Estimate Revisions - The consensus EPS estimate has been revised down by 8.09% over the last 30 days, indicating a reassessment by analysts [4] Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that the Most Accurate Estimate for Materion is higher than the consensus estimate, resulting in an Earnings ESP of +0.35% [10][11] Historical Performance - In the last reported quarter, Materion met the expected earnings of $1.41 per share, with a history of beating consensus EPS estimates two out of the last four quarters [12][13] Investment Considerations - Despite a positive Earnings ESP, Materion's Zacks Rank is 4, making it challenging to predict an earnings beat conclusively [11][16]

Financial Data and Key Metrics Changes - Sales for Q3 2024 were $263.8 million, down 2% year-over-year, primarily due to general market softness and lower precision Clad Strip sales [15][6] - Adjusted earnings per share for the quarter were $1.41, a decrease of 7% from the prior year [15] - Adjusted EBITDA was $56.7 million, representing 21.5% of value-added sales, up 2% with a 100 basis points margin expansion from the prior year [15][16] Business Line Data and Key Metrics Changes - Performance Materials segment had value-added sales of $163.6 million, down 3% year-over-year, with EBITDA of $46.5 million or 28.4% of value-added sales, flat compared to the prior year [16] - Electronic Materials segment reported value-added sales of $77.8 million, a 3% increase year-on-year, with EBITDA of $15.6 million or 20.1% of value-added sales, up 290 basis points [18] - Precision Optics segment saw value-added sales of $22.4 million, down 14% year-over-year, with EBITDA of $0.5 million or 2.2% of value-added sales [19] Market Data and Key Metrics Changes - Continued strength in the space and defense markets offset the impact of softness in airplane builds, leading to the 14th consecutive quarter of growth in overall demand for aerospace and defense [9] - The semiconductor recovery is slower than anticipated, but there was year-over-year growth in overall semiconductor sales for the second consecutive quarter [8] Company Strategy and Development Direction - The company is focusing on aligning its portfolio with global mega trends, optimizing its footprint, and improving cost structure [7][12] - Materion announced the sale of a facility in Albuquerque, New Mexico, to eliminate underperforming non-core businesses, which is expected to improve the performance of its electronic materials business [11][24] - The company is investing in R&D at an all-time high to support next-generation products and solutions [12] Management's Comments on Operating Environment and Future Outlook - Management expects sequential improvement in sales and profitability despite soft end-market conditions, aiming for a solid 2024 [14] - The defense business has been growing due to geopolitical issues, with bookings for defense in the first half of the year at levels comparable to the entire previous year [29] - The company anticipates a stronger top and bottom line in Q4, driven by higher volumes and benefits from cost and portfolio actions [21] Other Important Information - The company ended the quarter with a net debt position of approximately $477 million and $127 million of available capacity on its credit facility [20] - Full-year adjusted earnings are expected to be in the range of $5.20 to $5.40 per share [21] Q&A Session Summary Question: Can you discuss the portfolio optimization actions and potential savings? - Management indicated that the divestiture of the Albuquerque facility would eliminate $10 million in annual sales but was not profitable, leading to improved margins in electronic materials [24][25] Question: What is the outlook for the defense business given recent military needs? - The defense market has been stronger this year, with increased bookings and opportunities outside the U.S. contributing to growth [29] Question: What is the current status of the semiconductor market? - The semiconductor market remains challenging, with expectations for flattish growth in Q4 and potential improvement in the back half of 2025 [33] Question: Are there any other non-core businesses being considered for divestiture? - Management expressed satisfaction with the current portfolio but remains open to minor changes if necessary [37] Question: What are the expectations for the beryllium nickel business as destocking subsides? - Initial indications suggest improved sales for beryllium nickel in Q4, with favorable forecasts for 2025 [44] Question: How are expansion projects in electronic materials progressing? - Expansion projects in Milwaukee and Newton are on track, aimed at supporting future growth in the electronic materials market [46] Question: What are the updated margin targets for 2025? - Management aims to maintain adjusted EBITDA margins above 20% consistently, with ongoing efforts to improve performance [47] Question: How is the company broadening its customer base in the space business? - The company is focusing on both government and commercial space markets, with a strong pipeline of new programs [48]

Core Viewpoint - Materion (MTRN) reported quarterly earnings of $1.41 per share, matching the Zacks Consensus Estimate, and showing a slight increase from $1.39 per share a year ago [1] - The company posted revenues of $436.72 million for the quarter ended September 2024, exceeding the Zacks Consensus Estimate by 2.30% and up from $403.07 million year-over-year [2] Financial Performance - Materion has surpassed consensus EPS estimates two times over the last four quarters [2] - The company has also topped consensus revenue estimates two times in the same period [2] - The current consensus EPS estimate for the upcoming quarter is $1.47, with expected revenues of $440.1 million, and for the current fiscal year, the estimate is $5.25 on $1.68 billion in revenues [7] Market Position - Materion shares have declined approximately 18.1% since the beginning of the year, contrasting with the S&P 500's gain of 22.3% [3] - The Zacks Rank for Materion is currently 5 (Strong Sell), indicating expectations of underperformance in the near future [6] Industry Outlook - The Mining - Miscellaneous industry, to which Materion belongs, is currently ranked in the bottom 28% of over 250 Zacks industries, suggesting a challenging environment [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Materion's stock performance [5]

[Executive Summary](index=1&type=section&id=Executive%20Summary) Materion Corporation's executive summary provides an overview of the company's performance and strategic direction [Third Quarter 2024 Highlights](index=1&type=section&id=Third%20Quarter%202024%20Highlights) Materion Corporation reported record adjusted EBITDA margin in Q3 2024, despite weak markets, driven by strategic cost reductions Q3 2024 Key Financial Highlights | Metric | Q3 2024 (Millions) | Q3 2023 (Millions) | Change (%) | | :--------------------- | :----------------- | :----------------- | :--------- | | Net Sales | $436.7 | $403.1 | 8.3% | | Value-Added Sales | $263.8 | $270.5 | -2.5% | | Net Income | $22.3 | $26.6 | -16.2% | | Diluted EPS | $1.07 | $1.27 | -15.8% | | Operating Profit | $31.3 | $36.5 | -14.3% | | Adjusted EBITDA | $56.7 | $55.4 | 2.3% | | Adjusted EBITDA Margin | 21.5% | 20.5% | +1.0 pp | - Delivered **record quarterly adjusted EBITDA margin of 21.5%**[2](index=2&type=chunk) - Implemented strategic actions to reduce cost and deliver strong performance despite a soft environment[2](index=2&type=chunk) - Announced the sale of non-core large area targets business for architectural glass in Albuquerque, New Mexico[2](index=2&type=chunk) - Appointed a new Precision Optics President to lead business transformation[2](index=2&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Jugal Vijayvargiya highlighted strategic strengthening, operational optimization, and a focus on organic growth for long-term success - Strengthening the company by shedding low margin business, optimizing operational footprint, and improving cost structure to position for strong performance as markets recover[2](index=2&type=chunk) - Winning new business by developing solutions with customers for challenging technical problems[2](index=2&type=chunk) - Laser-focused on delivering organic growth initiatives and driving efficiencies across all business areas[2](index=2&type=chunk) - Building a solid foundation for sustainable long-term growth as global megatrends open new opportunities[2](index=2&type=chunk) [Company Overview](index=2&type=section&id=Company%20Overview) This section provides an overview of Materion Corporation, its global leadership in advanced materials solutions, and its diverse industry applications [About Materion](index=2&type=section&id=About%20Materion) Materion Corporation is a global leader in advanced materials solutions, serving high-performance industries with nearly a century of expertise - Materion Corporation is a **global leader in advanced materials solutions**[8](index=8&type=chunk) - Serves high-performance industries including semiconductor, industrial, aerospace & defense, energy, and automotive[8](index=8&type=chunk) - Expertise in specialty engineered alloy systems, inorganic chemicals and powders, precious and non-precious metals, beryllium and beryllium composites, and precision filters and optical coatings[8](index=8&type=chunk)[9](index=9&type=chunk) - Employs **over 3,500 people worldwide**, serving customers in **more than 60 countries**[9](index=9&type=chunk) [Third Quarter 2024 Detailed Financial Results](index=1&type=section&id=Third%20Quarter%202024%20Detailed%20Financial%20Results) This section details Materion's consolidated GAAP and non-GAAP financial performance for the third quarter of 2024 [Consolidated GAAP Performance](index=1&type=section&id=Consolidated%20GAAP%20Performance) Materion's net sales increased year-over-year, primarily driven by Electronic Materials, while operating profit and net income declined Consolidated GAAP Financial Performance | Metric | Q3 2024 (Millions) | Q3 2023 (Millions) | YoY Change | | :---------------- | :----------------- | :----------------- | :--------- | | Net Sales | $436.7 | $403.1 | +8.3% | | Value-Added Sales | $263.8 | $270.5 | -2.5% | | Operating Profit | $31.3 | $36.5 | -14.3% | | Net Income | $22.3 | $26.6 | -16.2% | | Diluted EPS | $1.07 | $1.27 | -15.8% | - Value-added sales decreased **2%** from the prior year, primarily due to general market softness and lower precision clad strip sales, partially offset by strength in space and defense and improvement in semiconductor[3](index=3&type=chunk) [Consolidated Non-GAAP Performance](index=2&type=section&id=Consolidated%20Non-GAAP%20Performance) Materion achieved a record 21.5% adjusted EBITDA margin in Q3 2024, driven by strong cost management despite lower volume Consolidated Non-GAAP Financial Performance | Metric | Q3 2024 (Millions) | Q3 2023 (Millions) | YoY Change | | :----------------------- | :----------------- | :----------------- | :--------- | | Adjusted EBITDA | $56.7 | $55.4 | +2.3% | | Adjusted EBITDA Margin | 21.5% | 20.5% | +1.0 pp | | Adjusted Net Income | $29.6 | $31.6 | -6.4% | | Adjusted Diluted EPS | $1.41 | $1.51 | -6.6% | - **Record quarterly adjusted EBITDA margin of 21.5%** was achieved, driven by strong cost management and operational performance despite lower volume[4](index=4&type=chunk) [Outlook](index=2&type=section&id=Outlook) This section outlines Materion's financial guidance for the full year 2024 and provides disclaimers regarding non-GAAP reconciliations [Full Year 2024 Guidance](index=2&type=section&id=Full%20Year%202024%20Guidance) Materion anticipates a solid Q4 with stronger top-line performance and expects full-year 2024 adjusted EPS between $5.20 and $5.40 - Expects a solid fourth quarter with a stronger top line[5](index=5&type=chunk) - Anticipates continued benefit from cost and footprint initiatives[5](index=5&type=chunk) Full Year 2024 Adjusted EPS Guidance | Metric | Full Year 2024 Guidance | | :---------------------- | :---------------------- | | Adjusted EPS (range) | $5.20 to $5.40 | [Adjusted Earnings Guidance Disclaimer](index=2&type=section&id=Adjusted%20Earnings%20Guidance%20Disclaimer) Reconciling forecasted adjusted earnings guidance to GAAP is not feasible due to the inability to estimate future non-routine adjustments - Unable to reconcile forecasted adjusted earnings guidance to a comparable GAAP range without unreasonable effort[6](index=6&type=chunk) - Future adjustments for items like insurance/litigation claims, environmental costs, acquisition costs, and certain tax items are not reasonably estimable[6](index=6&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) This section presents Materion's consolidated financial statements, including statements of income, balance sheets, and cash flows [Consolidated Statements of Income](index=4&type=section&id=Statements%20of%20Income) Net sales increased year-over-year, but gross margin, operating profit, and net income decreased for both Q3 and YTD 2024 Consolidated Statements of Income (Thousands) | Metric (Thousands) | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :----------------- | :----------- | :----------- | :------------ | :------------ | | Net Sales | $436,715 | $403,067 | $1,247,868 | $1,244,144 | | Cost of Sales | $355,777 | $314,131 | $1,014,859 | $974,817 | | Gross Margin | $80,938 | $88,936 | $233,009 | $269,327 | | Operating Profit | $31,259 | $36,520 | $85,570 | $108,804 | | Net Income | $22,294 | $26,564 | $54,739 | $76,234 | | Diluted EPS | $1.07 | $1.27 | $2.61 | $3.65 | [Consolidated Balance Sheets](index=5&type=section&id=Balance%20Sheets) Total assets and liabilities increased as of September 27, 2024, driven by higher current assets, inventories, and long-term debt Consolidated Balance Sheets (Thousands) | Metric (Thousands) | September 27, 2024 | December 31, 2023 | | :----------------- | :----------------- | :---------------- | | Total Assets | $1,857,018 | $1,762,726 | | Total Liabilities | $925,123 | $883,679 | | Shareholders' Equity | $931,895 | $885,053 | | Cash & Equivalents | $17,874 | $13,294 | | Inventories, net | $476,596 | $441,597 | | Long-term Debt | $457,756 | $387,576 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Statements%20of%20Cash%20Flows) Net cash from operating activities significantly decreased, while net cash from financing activities increased due to higher borrowings Consolidated Statements of Cash Flows (Thousands) | Metric (Thousands) | 9 Months 2024 | 9 Months 2023 | | :---------------------------------- | :------------ | :------------ | | Net Cash from Operating Activities | $11,564 | $84,505 | | Net Cash Used in Investing Activities | $(60,545) | $(94,160) | | Net Cash from Financing Activities | $52,926 | $13,735 | | Net Change in Cash & Equivalents | $4,580 | $3,300 | | Cash & Equivalents (End of Period) | $17,874 | $16,401 | - Significant decrease in net cash provided by operating activities, primarily due to changes in accounts receivable and inventory[14](index=14&type=chunk) - Increase in net cash provided by financing activities, mainly from higher borrowings under credit facilities[14](index=14&type=chunk) [Segment Performance Analysis](index=7&type=section&id=Segment%20Performance%20Analysis) This section analyzes Materion's financial performance across its Performance Materials, Electronic Materials, and Precision Optics segments [Net Sales and Value-Added Sales by Segment](index=7&type=section&id=Net%20Sales%20and%20Value-Added%20Sales%20by%20Segment) Electronic Materials net sales significantly increased, while Performance Materials and Precision Optics saw declines in both sales metrics Net Sales and Value-Added Sales by Segment (Millions) | Segment | Q3 2024 Net Sales (Millions) | Q3 2023 Net Sales (Millions) | Q3 2024 Value-added Sales (Millions) | Q3 2023 Value-added Sales (Millions) | | :-------------------- | :--------------------------- | :--------------------------- | :----------------------------------- | :----------------------------------- | | Performance Materials | $177.4 | $184.6 | $163.6 | $168.9 | | Electronic Materials | $236.9 | $192.3 | $77.8 | $75.5 | | Precision Optics | $22.4 | $26.2 | $22.4 | $26.1 | | Total | $436.7 | $403.1 | $263.8 | $270.5 | - Electronic Materials net sales increased significantly from **$192.3 million** in Q3 2023 to **$236.9 million** in Q3 2024[15](index=15&type=chunk) - Performance Materials value-added sales decreased from **$168.9 million** to **$163.6 million**[15](index=15&type=chunk) [Gross Margin by Segment](index=7&type=section&id=Gross%20Margin%20by%20Segment) Consolidated gross margin decreased, with declines in Performance Materials and Precision Optics, while Electronic Materials remained relatively stable Gross Margin by Segment (Millions) | Segment | Q3 2024 Gross Margin (Millions) | Q3 2023 Gross Margin (Millions) | | :-------------------- | :------------------------------ | :------------------------------ | | Performance Materials | $51.8 | $57.4 | | Electronic Materials | $23.3 | $23.1 | | Precision Optics | $5.8 | $8.4 | | Total | $80.9 | $88.9 | [Operating Profit by Segment](index=8&type=section&id=Operating%20Profit%20by%20Segment) Consolidated operating profit decreased, with Performance Materials declining and Precision Optics reporting a loss, while Electronic Materials showed an increase Operating Profit by Segment (Millions) | Segment | Q3 2024 Operating Profit (Millions) | Q3 2023 Operating Profit (Millions) | | :-------------------- | :---------------------------------- | :---------------------------------- | | Performance Materials | $34.2 | $38.9 | | Electronic Materials | $7.8 | $6.0 | | Precision Optics | $(3.0) | $0.3 | | Total | $31.3 | $36.5 | - Electronic Materials operating profit increased from **$6.0 million** to **$7.8 million**[16](index=16&type=chunk) - Precision Optics shifted from an operating profit of **$0.3 million** to an operating loss of **$(3.0) million**[16](index=16&type=chunk) [EBITDA by Segment](index=8&type=section&id=EBITDA%20by%20Segment) Consolidated EBITDA slightly decreased, with Performance Materials declining and Precision Optics turning negative, while Electronic Materials reported an increase EBITDA by Segment (Millions) | Segment | Q3 2024 EBITDA (Millions) | Q3 2023 EBITDA (Millions) | | :-------------------- | :------------------------ | :------------------------ | | Performance Materials | $44.8 | $46.4 | | Electronic Materials | $12.3 | $10.1 | | Precision Optics | $0.0 | $3.3 | | Total | $50.5 | $52.3 | - Electronic Materials EBITDA increased from **$10.1 million** to **$12.3 million**[16](index=16&type=chunk) - Precision Optics EBITDA decreased significantly from **$3.3 million** to **$0.0 million**[16](index=16&type=chunk) [Adjusted EBITDA by Segment](index=8&type=section&id=Adjusted%20EBITDA%20by%20Segment) Consolidated Adjusted EBITDA modestly increased, with Electronic Materials showing a notable rise, Performance Materials remaining stable, and Precision Optics declining Adjusted EBITDA by Segment (Millions) | Segment | Q3 2024 Adjusted EBITDA (Millions) | Q3 2023 Adjusted EBITDA (Millions) | | :-------------------- | :--------------------------------- | :--------------------------------- | | Performance Materials | $46.5 | $46.5 | | Electronic Materials | $15.6 | $13.0 | | Precision Optics | $0.5 | $3.4 | | Total | $56.7 | $55.4 | - Electronic Materials Adjusted EBITDA increased from **$13.0 million** to **$15.6 million**[16](index=16&type=chunk) - Precision Optics Adjusted EBITDA decreased from **$3.4 million** to **$0.5 million**[16](index=16&type=chunk) [Non-GAAP Reconciliations](index=9&type=section&id=Non-GAAP%20Reconciliations) This section provides detailed reconciliations of GAAP to non-GAAP financial measures, including adjusted EBITDA, net income, and gross margin [Consolidated Adjusted EBITDA Reconciliation](index=9&type=section&id=Consolidated%20Adjusted%20EBITDA%20Reconciliation) The reconciliation details adjustments to net income to arrive at adjusted EBITDA, totaling **$6.2 million** in special items for Q3 2024 Consolidated Adjusted EBITDA Reconciliation (Millions) | Metric (Millions) | Q3 2024 | Q3 2023 | | :--------------------------------- | :------ | :------ | | Net Income | $22.3 | $26.6 | | Consolidated EBITDA | $50.5 | $52.3 | | Total Special Items | $6.2 | $3.1 | | Adjusted EBITDA | $56.7 | $55.4 | | Adjusted EBITDA % of Value-added Sales | 21.5% | 20.5% | - Special items for Q3 2024 included restructuring and cost reduction (**$1.6M**), Electronic Materials inventory adjustment (**$2.8M**), business transformation costs (**$0.6M**), and additional start-up resources and scrap (**$1.2M**)[17](index=17&type=chunk) [Consolidated Adjusted Net Income and EPS Reconciliation](index=10&type=section&id=Consolidated%20Adjusted%20Net%20Income%20and%20EPS%20Reconciliation) Adjusted net income for Q3 2024 was **$29.6 million**, or **$1.41** per diluted share, after accounting for special items and acquisition amortization Consolidated Adjusted Net Income and EPS Reconciliation (Millions) | Metric (Millions) | Q3 2024 | Q3 2023 | | :---------------------------------------------- | :------ | :------ | | Net Income | $22.3 | $26.6 | | Total Special Items (net of tax) | $4.8 | $2.5 | | Adjusted Net Income | $27.1 | $29.1 | | Acquisition Amortization (net of tax) | $2.5 | $2.5 | | Adjusted Net Income excl. Amortization | $29.6 | $31.6 | | Diluted EPS | $1.07 | $1.27 | | Adjusted Diluted EPS excl. Amortization | $1.41 | $1.51 | - Adjusted diluted EPS excluding acquisition amortization decreased from **$1.51** in Q3 2023 to **$1.41** in Q3 2024[18](index=18&type=chunk) [Consolidated Adjusted Gross Margin Reconciliation](index=12&type=section&id=Consolidated%20Adjusted%20Gross%20Margin%20Reconciliation) Adjustments for special items resulted in a Q3 2024 adjusted gross margin of **$84.8 million**, an increase from GAAP gross margin Consolidated Adjusted Gross Margin Reconciliation (Millions) | Metric (Millions) | Q3 2024 | Q3 2023 | | :-------------------- | :------ | :------ | | Gross Margin (GAAP) | $80.9 | $88.9 | | Special Items | $3.9 | $1.9 | | Adjusted Gross Margin | $84.8 | $90.8 | - Special items impacting gross margin in 2024 include restructuring and cost reduction, Electronic Materials inventory adjustment, and additional start-up resources and scrap[24](index=24&type=chunk) [Segment Adjusted EBITDA Reconciliations](index=11&type=section&id=Segment%20Adjusted%20EBITDA%20Reconciliations) This section provides detailed reconciliations of segment EBITDA to adjusted EBITDA, highlighting segment-specific special items [Performance Materials Adjusted EBITDA](index=11&type=section&id=Performance%20Materials%20Adjusted%20EBITDA) Performance Materials' adjusted EBITDA remained stable at **$46.5 million** in Q3 2024, with minor adjustments for various costs Performance Materials Adjusted EBITDA Reconciliation (Millions) | Metric (Millions) | Q3 2024 | Q3 2023 | | :---------------- | :------ | :------ | | EBITDA | $44.8 | $46.4 | | Special Items | $1.7 | $0.1 | | Adjusted EBITDA | $46.5 | $46.5 | [Electronic Materials Adjusted EBITDA](index=11&type=section&id=Electronic%20Materials%20Adjusted%20EBITDA) Electronic Materials' adjusted EBITDA increased to **$15.6 million** in Q3 2024, primarily due to adjustments for restructuring and inventory Electronic Materials Adjusted EBITDA Reconciliation (Millions) | Metric (Millions) | Q3 2024 | Q3 2023 | | :---------------------------- | :------ | :------ | | EBITDA | $12.3 | $10.1 | | Restructuring & Cost Reduction | $0.5 | $2.9 | | Electronic Materials Inventory Adjustment | $2.8 | $0.0 | | Adjusted EBITDA | $15.6 | $13.0 | [Precision Optics Adjusted EBITDA](index=11&type=section&id=Precision%20Optics%20Adjusted%20EBITDA) Precision Optics' adjusted EBITDA significantly decreased to **$0.5 million** in Q3 2024, with a minor adjustment for restructuring and cost reduction Precision Optics Adjusted EBITDA Reconciliation (Millions) | Metric (Millions) | Q3 2024 | Q3 2023 | | :---------------------------- | :------ | :------ | | EBITDA | $0.0 | $3.3 | | Restructuring & Cost Reduction | $0.5 | $0.1 | | Adjusted EBITDA | $0.5 | $3.4 | [Other Segment Adjusted EBITDA](index=11&type=section&id=Other%20Segment%20Adjusted%20EBITDA) The 'Other' segment reported an adjusted EBITDA loss of **$(5.9) million**, an improvement from the prior year, after various adjustments Other Segment Adjusted EBITDA Reconciliation (Millions) | Metric (Millions) | Q3 2024 | Q3 2023 | | :---------------- | :------ | :------ | | EBITDA | $(6.6) | $(7.5) | | Special Items | $0.7 | $0.0 | | Adjusted EBITDA | $(5.9) | $(7.5) | [Additional Information](index=2&type=section&id=Additional%20Information) This section provides details on the conference call, forward-looking statements, investor and media contacts, and footnotes [Conference Call Details](index=2&type=section&id=Conference%20Call%20Details) Materion Corporation hosted an investor conference call on October 30, 2024, with webcast and dial-in options available for replay - Investor conference call held on **October 30, 2024, at 10:00 a.m. Eastern Time**[7](index=7&type=chunk) - Available via webcast on www.materion.com and by phone[7](index=7&type=chunk) - Replay available until **November 13, 2024**[7](index=7&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward%20Looking%20Statements) Actual future performance may differ materially from forward-looking statements due to various economic, market, and regulatory factors - Actual future performance may materially differ from forward-looking statements due to various factors[11](index=11&type=chunk) - Factors include global economy (inflation, recession, tariffs), market conditions, product mix, new product success, raw material costs, acquisitions, strategic plans, financial factors (tax, interest, energy costs), geopolitical events, and regulatory changes[11](index=11&type=chunk) - Risk factors are also detailed in the Company's 2023 Annual Report on Form 10-K[11](index=11&type=chunk) [Investor and Media Contacts](index=3&type=section&id=Investor%20and%20Media%20Contacts) Contact information for investor relations (Kyle Kelleher) and media relations (Jason Saragian) is provided for inquiries - Investor Contact: Kyle Kelleher, **(216) 383-4931**, kyle.kelleher@materion.com[12](index=12&type=chunk) - Media Contact: Jason Saragian, **(216) 383-6893**, jason.saragian@materion.com[12](index=12&type=chunk) [Footnotes](index=2&type=section&id=Footnotes) Key financial terms like 'Value-added sales' and 'EBITDA' are defined, with references to attachments for special items details - Value-added sales deducts the impact of pass-through metals from net sales[8](index=8&type=chunk) - EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization[8](index=8&type=chunk) - Details of special items can be found in Attachments 4 through 8[8](index=8&type=chunk)