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)

Core Viewpoint - Materion (MTRN) has revised its profitability outlook for 2024, leading to a significant shift in investor sentiment and a stock price decline to $105.35, reflecting a 4.9% change in valuation [1] Financial Performance - The adjusted EPS guidance for Materion has been lowered to a range of $5.20 to $5.40, primarily due to slower-than-expected order intake in the latter half of 2024, which has weakened investor confidence [2] - Materion's current market capitalization is approximately $2.19 billion, with a price-to-earnings (P/E) ratio of 28.09 and a price-to-book (P/B) ratio of 2.41, indicating a potential premium compared to its intrinsic value [3] Valuation Metrics - The GF Value for Materion is $98.71, suggesting that the stock is fairly valued at present [3] - The stock's price-to-sales (P/S) ratio is nearing a 1-year low, which may signal a buying opportunity for value investors [4] Financial Health Indicators - Materion has an Altman Z-score of 3.55, indicating strong financial health [4] - The company's dividend yield is approaching a 1-year high, which could attract income-focused investors [4] Risk Factors - Materion has been issuing new debt, and its return on invested capital (ROIC) is below its weighted average cost of capital (WACC), raising concerns about capital efficiency [5] - Insider transaction trends show selling activity, which may be a red flag for potential investors [5] Conclusion - Materion faces near-term challenges due to revised profitability projections and lowered price targets, but its financial health and valuation metrics present a mixed picture for investors [6]

Core Viewpoint - Investors are avoiding Materion stock due to lower-than-expected profitability projections for 2024 and a bearish outlook from analysts [1][2]. Group 1: Financial Performance and Guidance - Materion's management initially projected 2024 adjusted earnings per share (EPS) of $5.60 to $5.90, indicating a 2% increase from 2023 [4]. - The company later revised its guidance down to an adjusted EPS of $5.20 to $5.40, citing a slower intake of orders in the second half of 2024 [5]. - As a result of these changes, shares of Materion have declined by 10.7% from the end of last week to Thursday's market close [3]. Group 2: Market Reaction and Analyst Outlook - Following the revised guidance, Seaport Research lowered its price target for Materion stock from $150 to $135, reflecting a more cautious outlook [5]. - Despite the recent sell-off, Materion shares are still trading at 26.8 times trailing earnings, which may not be attractive for investors [6]. - Investors are advised to consider alternative opportunities in the semiconductor industry rather than rushing to buy Materion stock [6].

Company Overview - Materion (MTRN) shares increased by 3.5% to $100.43 in the last trading session, following a higher-than-average trading volume, contrasting with a 9.6% loss over the past four weeks [1] - An analyst at Seaport Global Securities maintained a Buy rating on MTRN but reduced the target price from $150.00 to $135.00 [1] Earnings Forecast - Materion revised its earnings per share (EPS) forecast for 2024 to a range of $5.20-5.40 due to lower-than-expected incoming order rates for the second half of 2024 [2] - The company anticipates an EBITDA margin above 20% for the second half of 2024, driven by cost-reduction initiatives and lower incentive compensation [2] Market Outlook - The analyst at Seaport expects sequential improvement in MTRN's performance in Q4 2024 and momentum into 2025, particularly from key markets such as semiconductor, aerospace & defense, and consumer electronics [3] - Materion is projected to report quarterly earnings of $1.41 per share, reflecting a year-over-year increase of 1.4%, with revenues expected to reach $444.35 million, up 10.2% from the previous year [5] Management Changes - Jason Moore has been appointed as the President of Materion's Precision Optics business segment, which focuses on customized optical and thin-film coatings for various industries including space and defense, life sciences, and automotive [4] Earnings Estimate Trends - The consensus EPS estimate for Materion has been revised 5.9% lower over the last 30 days, indicating a negative trend in earnings estimate revisions, which typically does not correlate with price appreciation [7] - Materion currently holds a Zacks Rank of 3 (Hold), indicating a neutral outlook [7]

| --- | --- | --- | --- | |-------------------------------|-------|-------|-------| | | | | | | Materion Corporation | | | | | | | | | | 2Q 2024 Earnings Presentation | | | | | August 5, 2024 | | | | | | | | | | | | | | | | | | | © 2024 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 ...

Core Viewpoint - The sustainability of immediate price changes and future earnings expectations will largely depend on management's discussion during the earnings call, with a focus on the potential for a positive EPS surprise [1]. Company Overview: Materion - Materion is expected to report quarterly earnings of $1.41 per share, reflecting a year-over-year increase of 2.2% [2]. - The consensus EPS estimate has been revised down by 1.25% over the last 30 days, indicating a reassessment by analysts [3]. - The Most Accurate Estimate for Materion aligns with the Zacks Consensus Estimate, resulting in an Earnings ESP of 0% [6]. - In the last reported quarter, Materion was expected to post earnings of $0.98 per share but delivered $0.96, resulting in a surprise of -2.04% [7]. - Materion currently holds a Zacks Rank of 4, suggesting it is not a compelling earnings-beat candidate [16][22]. Industry Overview: Nexa Resources - Nexa Resources is expected to report earnings per share of $0.18 for the quarter ended June 2024, indicating a significant year-over-year increase of 350% [10]. - Revenues for Nexa Resources are projected to be $674.2 million, up 7.6% from the previous year [10]. - The consensus EPS estimate for Nexa Resources has remained unchanged over the last 30 days, but a higher Most Accurate Estimate has resulted in an Earnings ESP of 27.78% [20]. - Nexa Resources has surpassed consensus EPS estimates two times over the last four quarters, indicating a positive trend [23]. Earnings Predictions and Market Reactions - The upcoming earnings report for Materion is anticipated to influence its stock price, depending on whether the actual results meet or exceed expectations [24]. - A positive or negative Earnings ESP reading can indicate the likely deviation of actual earnings from the consensus estimate, with predictive power being significant for positive readings only [25]. - Market reactions to earnings reports can be influenced by various factors beyond just the earnings beat or miss, including investor sentiment and unforeseen catalysts [26].

Financial Data and Key Metrics Changes - The company's first quarter 2024 results fell short of expectations, with a nearly $40 million sales decline compared to the previous year, leading to lower sales and earnings [3][4][10] - Adjusted earnings per share for Q1 were $0.96, down 28% from the prior year, while adjusted EBITDA was $45.2 million, representing 17.5% of value-added sales, down 15% from the prior year [122][101] - Despite the sales decline, EBITDA margins remained flat year-over-year, indicating strong margin performance driven by cost improvement initiatives [95][101] Business Segment Performance Changes - In the performance materials segment, value-added sales were $155.6 million, down 7% from the prior year, primarily due to lower demand in automotive, commercial aerospace, and non-residential construction [11] - The electronic materials segment saw value-added sales of $77.6 million, down 25% year-over-year, attributed to continued weakness in the semiconductor market [102] - The precision optics segment reported value-added sales of $24.6 million, down 8% compared to the prior year, mainly due to reduced demand in industrial and automotive sectors [124] Market Data and Key Metrics Changes - The semiconductor market experienced significant weakness, representing roughly half of the year-over-year sales decline [4] - Commercial aerospace build rates decreased significantly, with combined build rates for major customers dropping from around 260 planes in Q1 of last year to approximately 225 planes in the current quarter [19][20] - The space and defense markets showed strength, with significant contributions from emerging space markets and strong defense demand [10][89] Company Strategy and Development Direction - The company is focused on targeted cost actions that not only benefit short-term results but also provide long-term structural improvements to enhance profitability as key markets recover [4] - Materion is investing in expanding its electronic materials capacity to support anticipated demand growth, particularly in semiconductor products [97][75] - The company remains committed to operational excellence initiatives to drive margin improvement and is optimistic about achieving record results in 2024 despite current market challenges [96][99] Management's Comments on Operating Environment and Future Outlook - Management indicated that Q1 was the low point for the company, with expectations for a significant step-up in performance in Q2 and continued improvement in Q3 and Q4 [24][99] - The operational challenges faced in Q1 are being addressed, with confidence in returning to normal output levels in the upcoming quarters [5][122] - The company anticipates a gradual recovery in the semiconductor market, driven by demand for logic and memory chips, with expectations for a more meaningful inflection in growth by late 2025 or early 2026 [41][43] Other Important Information - The company is adjusting its full-year guidance to a wider range of $5.60 to $6.20 adjusted earnings per share, reflecting a 5% increase from the midpoint compared to the prior year [14] - Materion's leverage is currently at 2.2 times, comfortably within its target range, allowing for potential acquisition opportunities [49][145] - The company is experiencing an inventory correction in its beryllium nickel product used in non-residential construction, which is expected to impact results in the near term but is anticipated to improve in 2025 [88][144] Q&A Session Summary Question: Can you elaborate on the semiconductor market outlook? - Management believes that Q1 was the low point, with order backlog improving and expectations for sequential growth in Q2 and beyond [24][115] Question: What are the operational challenges faced in Q1? - The challenges included yield issues and delays at an outside tolling partner, which have since been addressed [21][38] Question: How is the company managing pricing in a softer volume environment? - The company continues to focus on operational excellence to offset any necessary price reductions, maintaining a generally positive pricing trend over the years [79][70]