Materion (MTRN) - 2025 Q1 - Quarterly Results

Materion Corporation Reports First Quarter 2025 Financial Results Financial & Business Highlights Materion achieved record first-quarter margins and significantly improved free cash flow in Q1 2025, driven by strong operational performance and a new Idaho National Lab agreement - CEO Jugal Vijayvargiya highlighted strong operational performance, record first-quarter margins, and significantly improved cash flow due to reduced inventory and paced investments[6] - The company is actively managing supply chains to minimize potential disruptions from tariffs, which are creating uncertainty[7] Key Financial Highlights | Metric | Q1 2025 ($ Millions) | Q1 2024 ($ Millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | 420.3 | 385.3 | +9.1% | | Value-Added Sales | 259.3 | 257.8 | +0.6% | | Net Income | 17.7 | 13.4 | +32.1% | | Diluted EPS | 0.85 | 0.64 | +32.8% | | Adjusted Diluted EPS | 1.13 | 0.96 | +17.7% | | Operating Profit | 27.2 | 22.2 | +22.5% | | Adjusted EBITDA | 48.7 | 45.2 | +7.7% | - Key operational achievements include a 130 basis point year-over-year margin improvement and a $35 million improvement in free cash flow[7] - Secured a multi-year agreement with Idaho National Lab to supply materials for nuclear energy research and development[7] First Quarter 2025 Results In Q1 2025, value-added sales grew 1% to $259.3 million, achieving a record adjusted EBITDA margin of 18.8% due to strong operational execution and cost improvements - Value-added sales increased by 1% year-over-year, driven by growth in space and energy end markets and improving semiconductor demand, partially offset by lower PMI shipments[8] - Achieved a record first-quarter adjusted EBITDA margin of 18.8% of value-added sales, up from 17.5% in the prior year, primarily due to strong operational performance and structural cost improvements[10] Q1 2025 Key Financials | Metric | Q1 2025 ($ Millions) | Q1 2024 ($ Millions) | | :--- | :--- | :--- | | Net Sales | 420.3 | 385.3 | | Value-Added Sales | 259.3 | 257.8 | | Operating Profit | 27.2 | 22.2 | | Net Income | 17.7 | 13.4 | | Adjusted Net Income | 23.7 | 20.1 | | Adjusted Diluted EPS | 1.13 | 0.96 | Full Year 2025 Outlook Materion maintains its full-year 2025 adjusted EPS guidance, while actively managing anticipated tariff headwinds in Q2 and potential further impacts in the second half - Full-year 2025 adjusted EPS guidance is maintained at $5.30 to $5.70, excluding potential impacts from the unresolved global tariff situation[11] - The second quarter is expected to be slightly better than the first, but includes an anticipated $0.10 to $0.15 EPS headwind from China tariffs causing customers to freeze orders[11] - A persistent tariff environment could lead to an additional EPS impact of $0.40 to $0.50 in the second half of the year. The company is taking measures to adjust supply chains and reduce costs to minimize this impact[11] Consolidated Financial Statements (Unaudited) Consolidated Statements of Income Materion's Q1 2025 net sales grew to $420.3 million, resulting in increased operating profit of $27.2 million and net income of $17.7 million Consolidated Statements of Income (Unaudited) | (Thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $420,330 | $385,287 | | Gross margin | $76,179 | $71,212 | | Operating profit | $27,195 | $22,249 | | Net income | $17,698 | $13,409 | | Diluted EPS | $0.85 | $0.64 | Consolidated Balance Sheets As of March 28, 2025, Materion's total assets increased to $1.75 billion, driven by higher receivables and PPE, with shareholders' equity reaching $887.9 million Consolidated Balance Sheets (Unaudited) | (Thousands) | March 28, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $759,042 | $724,224 | | Total Assets | $1,752,357 | $1,697,632 | | Total current liabilities | $267,052 | $226,734 | | Total Liabilities | $864,428 | $828,751 | | Shareholders' equity | $887,929 | $868,881 | Consolidated Statements of Cash Flows Materion generated $15.5 million in Q1 2025 net cash from operating activities, a significant improvement from the prior year, primarily due to favorable working capital management Consolidated Statements of Cash Flows (Unaudited) | (Thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $15,502 | $(13,805) | | Net cash used in investing activities | $(20,738) | $(26,299) | | Net cash provided by financing activities | $3,478 | $40,297 | | Net change in cash and cash equivalents | $(1,079) | $(190) | - The significant improvement in operating cash flow was driven by better working capital management, including a minimal change in inventory (+$0.4M vs -$26.5M YoY) and an increase in accounts payable (+$19.2M vs -$5.2M YoY)[24] Non-GAAP Reconciliations Reconciliation of Value-added Sales and EBITDA In Q1 2025, total value-added sales were $259.3 million, and after adjustments, adjusted EBITDA reached $48.7 million, with the Performance Materials segment being the largest contributor - Value-added sales is a non-GAAP measure that deducts the pass-through cost of certain metals from net sales to allow management to assess performance without the distortion of metal price volatility[26] Value-added Sales Reconciliation | (Millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $420.3 | $385.3 | | Less: Pass-through Metal Cost | $161.0 | $127.5 | | Value-added Sales | $259.3 | $257.8 | Adjusted EBITDA Reconciliation | (Millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Consolidated EBITDA | $44.4 | $39.1 | | Total special items | $4.3 | $6.1 | | Adjusted EBITDA | $48.7 | $45.2 | Reconciliation of Net Income and EPS Q1 2025 GAAP net income of $17.7 million ($0.85 per share) was adjusted for special items and amortization, resulting in an adjusted net income of $23.7 million, or $1.13 per diluted share Adjusted Net Income and EPS Reconciliation | (Millions, except EPS) | Q1 2025 | Q1 2025 EPS | Q1 2024 | Q1 2024 EPS | | :--- | :--- | :--- | :--- | :--- | | Net income and EPS | $17.7 | $0.85 | $13.4 | $0.64 | | Total special items (net of tax) | $3.8 | $0.18 | $4.2 | $0.20 | | Acquisition amortization (net of tax) | $2.2 | $0.10 | $2.5 | $0.12 | | Adjusted net income and EPS excl. amortization | $23.7 | $1.13 | $20.1 | $0.96 | Segment Performance Reconciliation Materion's Q1 2025 segment performance shows varied results, with strong growth in Performance Materials, flat sales in Electronic Materials, and a decline in Precision Optics Performance Materials The Performance Materials segment reported a 2.8% increase in value-added sales to $160.0 million in Q1 2025, with adjusted EBITDA growing 14.6% to $40.9 million and margin expanding to 25.6% Performance Materials Segment Performance | Performance Materials ($ Millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Value-added sales | $160.0 | $155.6 | | Adjusted EBITDA | $40.9 | $35.7 | | Adjusted EBITDA as a % of Value-added sales | 25.6% | 22.9% | Electronic Materials The Electronic Materials segment's Q1 2025 value-added sales were flat at $77.8 million, but adjusted EBITDA decreased 8.3% to $13.3 million, contracting the margin to 17.1% Electronic Materials Segment Performance | Electronic Materials ($ Millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Value-added sales | $77.8 | $77.6 | | Adjusted EBITDA | $13.3 | $14.5 | | Adjusted EBITDA as a % of Value-added sales | 17.1% | 18.7% | Precision Optics The Precision Optics segment's Q1 2025 value-added sales declined 12.6% to $21.5 million, resulting in a slight adjusted EBITDA loss of $0.1 million Precision Optics Segment Performance | Precision Optics ($ Millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Value-added sales | $21.5 | $24.6 | | Adjusted EBITDA | $(0.1) | $0.4 | | Adjusted EBITDA as a % of Value-added sales | (0.5)% | 1.8% | Reconciliation of Free Cash Flow Materion reported a free cash flow usage of $5.5 million in Q1 2025, a significant $34.9 million year-over-year improvement driven by increased cash from operations offsetting capital expenditures - Free cash flow (FCF) is defined as operating cash flow adjusted for capital expenditures (payments for property, plant, equipment, and mine development)[41] Free Cash Flow Reconciliation | (Millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $15.5 | $(13.8) | | Capital Expenditures (PP&E + Mine Dev.) | $(21.0) | $(26.6) | | Free cash flow | $(5.5) | $(40.4) |