Materion (MTRN) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Results Overview Financial and Business Highlights Materion reported strong Q2 2025 results with record margins and significant cash flow, despite a slowdown in demand from China. The company affirmed its full-year outlook, repurchased 100,000 shares, and completed a strategic acquisition in Asia to expand its semiconductor capabilities Q2 Financial Highlights | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Sales | $431.7M | $425.9M | | Value-Added Sales | $269.0M | $279.8M | | Net Income | $25.1M | $19.0M | | Diluted EPS | $1.21 | $0.91 | | Adjusted EPS | $1.37 | $1.42 | | Operating Profit | $36.8M | $32.1M | | Adjusted EBITDA | $55.8M | $57.8M | | Adjusted EBITDA Margin | 20.8% | 20.7% | - The CEO highlighted that the business performed very well, delivering record margins and strong cash flow despite an anticipated demand slowdown from customers in China. The company is encouraged by positive signs in several end markets and is confident in affirming its full-year guidance[5] - Generated approximately $36 million in free cash flow during the quarter[6] - The company repurchased 100,000 shares at an average price of ~$78 per share[6] - A strategic acquisition was completed to expand the company's semiconductor footprint and capabilities in Asia[6] Detailed Financial Performance In Q2 2025, net sales increased slightly year-over-year to $431.7 million. However, value-added sales saw a 2% organic decline due to lower shipments to China, which was partially offset by strength in other markets. Despite lower volumes, adjusted EBITDA margin reached a second-quarter record of 20.8%, attributed to strong operational performance and structural cost improvements Sales Performance | Sales Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $431.7M | $425.9M | +1.4% | | Value-Added Sales | $269.0M | $279.8M | -3.9% | | Organic Value-Added Sales | - | - | -2.0% | - The decline in value-added sales was primarily due to lower PMI shipments and sales into China. This was partially offset by strength in the aerospace & defense, energy, and non-China semiconductor markets[7] Profitability Metrics | Profitability Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Operating Profit | $36.8M | $32.1M | +14.6% | | Net Income | $25.1M | $19.0M | +32.1% | | Adjusted EBITDA | $55.8M | $57.8M | -3.5% | | Adjusted EBITDA Margin | 20.8% | 20.7% | +10 bps | Full-Year Outlook and Guidance Despite a volatile macroeconomic environment, Materion affirmed its full-year adjusted earnings per share guidance of $5.30 to $5.70. The company anticipates a strong second half of the year, supported by improving market dynamics and new business opportunities - The company affirmed its initial full-year adjusted earnings per share guidance of $5.30 to $5.70[9] - Management expects to deliver a strong second half, citing improving market dynamics and a focus on capturing new business opportunities in key end markets[9] - The company stated it is unable to reconcile its forecasted adjusted earnings guidance to a comparable GAAP range without unreasonable effort due to the unpredictability of future special items[10] Consolidated Financial Statements Consolidated Statements of Income For Q2 2025, Materion reported net sales of $431.7 million and net income of $25.1 million, or $1.21 per diluted share. This represents a significant increase from the prior year's Q2 net income of $19.0 million, or $0.91 per diluted share. For the first six months of 2025, net income also grew substantially year-over-year Q2 Performance (YoY) | (In thousands, except per share) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net sales | $431,658 | $425,866 | | Gross margin | $82,658 | $80,859 | | Operating profit | $36,819 | $32,062 | | Net income | $25,140 | $19,036 | | Diluted EPS | $1.21 | $0.91 | Six-Month Performance (YoY) | (In thousands, except per share) | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net sales | $851,988 | $811,153 | | Operating profit | $64,014 | $54,311 | | Net income | $42,838 | $32,445 | | Diluted EPS | $2.05 | $1.55 | Consolidated Balance Sheets As of June 27, 2025, Materion's total assets were $1.74 billion, up from $1.70 billion at year-end 2024, primarily due to an increase in net property, plant, and equipment. Total shareholders' equity also strengthened, rising to $910.6 million from $868.9 million Key Balance Sheet Items (in thousands) | Account | June 27, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $735,113 | $724,224 | | Total Assets | $1,741,207 | $1,697,632 | | Total current liabilities | $231,901 | $226,734 | | Long-term debt | $405,697 | $407,734 | | Total Shareholders' equity | $910,645 | $868,881 | Consolidated Statements of Cash Flows For the first six months of 2025, net cash from operating activities surged to $65.4 million from $6.5 million in the prior-year period, driven by higher net income and favorable working capital changes. The company used cash for investing activities ($34.9 million) and financing activities ($36.4 million), which included debt repayments and share repurchases Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $65,442 | $6,477 | | Net cash used in investing activities | ($34,912) | ($48,260) | | Net cash provided by/(used in) financing activities | ($36,377) | $46,200 | | Net change in cash and cash equivalents | ($4,122) | $3,804 | - Key financing activities in the first six months of 2025 included net repayment of borrowings, cash dividends of $5.7 million, and common stock repurchases of $7.8 million[21] Non-GAAP Financial Measures and Reconciliations Reconciliation of Value-Added Sales and Adjusted EBITDA The company provides non-GAAP metrics to offer a clearer view of operational performance. Value-added sales, which exclude pass-through metal costs, were $269.0 million in Q2 2025. After reconciling from a GAAP net income of $25.1 million and adjusting for $0.9 million in special items, Adjusted EBITDA was $55.8 million, slightly down from $57.8 million in the prior year - Value-added sales is a non-GAAP measure that deducts the cost of pass-through metals from net sales. Management uses this metric to assess profitability without the distortion of volatile metal prices[23] Q2 Reconciliation of Net Income to Adjusted EBITDA (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income | $25.1 | $19.0 | | (+) Income tax expense | $4.0 | $4.9 | | (+) Interest expense - net | $8.3 | $8.8 | | (+) Depreciation, depletion and amortization | $17.5 | $16.5 | | Consolidated EBITDA | $54.9 | $49.2 | | (+) Total special items | $0.9 | $8.6 | | Adjusted EBITDA | $55.8 | $57.8 | - Special items in Q2 2025 totaled $0.9 million and consisted of restructuring, merger/acquisition, and business transformation costs. This was significantly lower than the $8.6 million in special items from Q2 2024[25] Reconciliation of Adjusted Net Income and EPS After adjusting for special items and acquisition-related amortization, Materion's adjusted net income for Q2 2025 was $28.5 million, with an adjusted diluted EPS of $1.37. This compares to an adjusted diluted EPS of $1.42 in the same quarter of the previous year Q2 Reconciliation of GAAP to Adjusted EPS | (In millions, except EPS) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income | $25.1 | $19.0 | | Diluted EPS | $1.21 | $0.91 | | Total special items (pre-tax) | $1.2 | $8.3 | | Acquisition amortization (net of tax) | $2.2 | $2.4 | | Adjusted net income (excl. amortization) | $28.5 | $29.7 | | Adjusted EPS (excl. amortization) | $1.37 | $1.42 | Segment Performance Analysis (Non-GAAP) In Q2 2025, the Performance Materials segment was the largest contributor with $168.5 million in value-added sales and an adjusted EBITDA margin of 24.6%. The Electronic Materials segment's value-added sales declined to $76.1 million, but its adjusted EBITDA margin improved to 23.4% from 21.1% YoY. Precision Optics' value-added sales were $24.4 million with an adjusted EBITDA margin of 9.0% Performance Materials Q2 Results (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Value-added sales | $168.5 | $173.1 | | Adjusted EBITDA | $41.5 | $43.1 | | Adj. EBITDA as % of Value-added sales | 24.6% | 24.9% | Electronic Materials Q2 Results (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Value-added sales | $76.1 | $81.1 | | Adjusted EBITDA | $17.8 | $17.1 | | Adj. EBITDA as % of Value-added sales | 23.4% | 21.1% | Precision Optics Q2 Results (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Value-added sales | $24.4 | $25.6 | | Adjusted EBITDA | $2.2 | $2.1 | | Adj. EBITDA as % of Value-added sales | 9.0% | 8.2% | Reconciliation of Adjusted Gross Margin and Free Cash Flow In Q2 2025, GAAP Gross Margin was $82.6 million; with no special items impacting it, the Adjusted Gross Margin was the same. The company generated $35.7 million in free cash flow during the quarter, a substantial turnaround from a negative $1.9 million in the prior-year quarter, reflecting stronger operating cash flow Q2 Gross Margin (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Gross Margin | $82.6 | $80.9 | | Special Items | $0.0 | $4.1 | | Adjusted Gross Margin | $82.6 | $85.0 | Q2 Free Cash Flow (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $49.9 | $20.3 | | Less: Capital Expenditures & Mine Development | ($14.2) | ($22.2) | | Free cash flow (FCF) | $35.7 | ($1.9) |