Materion (MTRN) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Results Materion's Q1 2024 results show declines in sales and profit due to semiconductor and industrial weakness, partially offset by space & defense strength Financial Summary Materion's Q1 2024 net sales and value-added sales declined due to semiconductor and industrial market weakness, despite comparable adjusted EBITDA margins Q1 2024 Key Financial Metrics (vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $385.3M | $442.5M | | Value-Added Sales | $257.8M | $298.6M (calculated) | | Operating Profit | $22.2M | $36.9M | | Net Income | $13.4M | $25.6M | | Diluted EPS | $0.64 | $1.23 | | Adjusted Diluted EPS | $0.96 | $1.34 | | Adjusted EBITDA | $45.2M | $53.4M | | Adjusted EBITDA Margin | 17.5% | 17.9% | - The year-over-year decline in sales was primarily driven by continued weakness in the semiconductor and industrial markets, combined with some temporary operational challenges[2] - The sales decline was partially offset by strength in the space & defense markets[2] CEO Commentary The CEO acknowledged Q1 results fell short due to operational challenges and softer demand, while highlighting strong margins and continued strategic focus - CEO Jugal Vijayvargiya stated that "Temporary operational challenges and softer market demand led to results falling short of our expectations"[5] - Despite the challenges, the company delivered strong margins comparable to last year, thanks to quick mitigation efforts and cost improvements[5] - The company remains focused on executing its strategy, delivering on organic growth initiatives, and investing in new capacity to drive long-term value[5] 2024 Outlook Materion updated its 2024 adjusted EPS guidance, reflecting softened demand and inventory correction, with mitigation through cost reduction initiatives Full Year 2024 Guidance Materion adjusted its 2024 adjusted EPS outlook to $5.60-$6.20, reflecting market softness and higher interest, partially offset by cost reductions Full Year 2024 Adjusted EPS Guidance | Metric | Guidance Range | YoY Change (at Midpoint) | | :--- | :--- | :--- | | Adjusted EPS | $5.60 - $6.20 | +5% | - The outlook was adjusted due to several factors: softened outlook for commercial aerospace and electric vehicle end-markets, expected inventory correction from a precision clad strip customer in H2, and higher expected interest expense[7] - The company plans to mitigate these impacts through targeted cost reduction initiatives and performance improvements[7] Financial Statements (Unaudited) Unaudited financial statements detail Materion's Q1 2024 income, balance sheet, and cash flow performance, showing key changes year-over-year Consolidated Statements of Income Q1 2024 income statement shows declines in net sales, gross margin, operating profit, and net income compared to Q1 2023 Q1 2024 vs. Q1 2023 Income Statement Highlights (in thousands) | Account | Q1 2024 (ended Mar 29) | Q1 2023 (ended Mar 31) | | :--- | :--- | :--- | | Net sales | $385,287 | $442,526 | | Gross margin | $71,212 | $91,336 | | Operating profit | $22,249 | $36,940 | | Net income | $13,409 | $25,588 | | Diluted EPS | $0.64 | $1.23 | Consolidated Balance Sheets Materion's balance sheet as of March 29, 2024, shows increased total assets driven by inventories and PPE, alongside a rise in total liabilities Balance Sheet Highlights (in thousands) | Account | March 29, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $739,708 | $709,382 | | Total Assets | $1,805,184 | $1,762,726 | | Total current liabilities | $254,615 | $254,995 | | Long-term debt | $428,710 | $387,576 | | Total Liabilities | $915,261 | $877,673 | | Total Shareholders' equity | $889,923 | $885,053 | Consolidated Statements of Cash Flows Q1 2024 cash flow from operations shifted to a net use of $13.8 million, primarily due to increased inventory, contrasting with prior year's cash generation Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Mar 29, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(13,805) | $38,105 | | Net cash used in investing activities | $(26,299) | $(29,802) | | Net cash provided by (used in) financing activities | $40,297 | $(6,291) | | Net change in cash and cash equivalents | $(190) | $2,142 | Non-GAAP Financial Measures and Reconciliations This section provides consolidated and segment-level non-GAAP reconciliations, detailing adjusted financial performance for Q1 2024 Consolidated Non-GAAP Reconciliations Consolidated non-GAAP results for Q1 2024 show declines in value-added sales and adjusted EBITDA, with relatively stable adjusted EBITDA margins Reconciliation of Net Income to Adjusted EBITDA (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income | $13.4 | $25.6 | | Adjustments (Taxes, Interest, D&A) | $25.7 | $27.2 | | Consolidated EBITDA | $39.1 | $52.8 | | Special Items | $6.1 | $0.6 | | Adjusted EBITDA | $45.2 | $53.4 | Reconciliation of Net Income to Adjusted Net Income (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income | $13.4 | $25.6 | | Special Items (pre-tax) | $6.1 | $0.6 | | Tax impact of adjustments | $(1.9) | $(0.7) | | Adjusted Net Income | $17.6 | $25.5 | | Acquisition Amortization (net of tax) | $2.5 | $2.5 | | Adjusted Net Income (excl. amortization) | $20.1 | $28.0 | Segment-Level Non-GAAP Reconciliations Segment-level non-GAAP performance reveals declines in Performance Materials and Precision Optics, while Electronic Materials maintained EBITDA despite lower sales Performance Materials Performance Materials segment experienced declines in Q1 2024 value-added sales, adjusted EBITDA, and adjusted EBITDA margin year-over-year Performance Materials Q1 Performance (in millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Value-Added Sales | $155.6 | $168.0 | | Adjusted EBITDA | $35.7 | $42.8 | | Adjusted EBITDA Margin | 22.9% | 25.5% | Electronic Materials Electronic Materials segment saw decreased Q1 2024 value-added sales but maintained adjusted EBITDA, leading to a significant margin improvement Electronic Materials Q1 Performance (in millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Value-Added Sales | $77.6 | $103.9 | | Adjusted EBITDA | $14.5 | $14.4 | | Adjusted EBITDA Margin | 18.7% | 13.9% | Precision Optics Precision Optics segment reported declines in Q1 2024 value-added sales and a sharp drop in adjusted EBITDA and its corresponding margin Precision Optics Q1 Performance (in millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Value-Added Sales | $24.6 | $26.7 | | Adjusted EBITDA | $0.4 | $2.9 | | Adjusted EBITDA Margin | 1.8% | 10.8% |