Materion : First Quarter 2024 Presentation

Materion Corporation

1Q 2024 Earnings Presentation

May 1, 2024

© 2024 Materion Corporation

Agenda

Introduction

Opening Remarks & Business Update

Financial

Review

Q&A

Kyle Kelleher - Director, Investor Relations and Corporate FP&A

Jugal Vijayvargiya - President and Chief Executive Officer

Shelly Chadwick - Vice President and Chief Financial Officer

Question and Answer Session

2 © 2024 Materion Corporation

Forward-looking Statements and Non-GAAP Financial Information

These slides contain (and the accompanying oral discussion will contain, where applicable) "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results expressed or implied by these statements as a result of a variety of factors. These factors include, in addition to those mentioned elsewhere herein: the global economy, including inflationary pressures, potential future recessionary conditions and the impact of tariffs and trade agreements; the impact of any U.S. Federal Government shutdowns or sequestrations; the condition of the markets which we serve, whether defined geographically or by segment; changes in product mix and the financial condition of customers; our success in developing and introducing new products and new product ramp-up rates; our success in passing through the costs of raw materials to customers or otherwise mitigating fluctuating prices for those materials, including the impact of fluctuating prices on inventory values; our success in identifying acquisition candidates and in acquiring and integrating such businesses; the impact of the results of acquisitions on our ability to fully achieve the strategic and financial objectives related to these acquisitions; our success in implementing our strategic plans and the timely and successful start-up and completion of any capital projects; other financial and economic factors, including the cost and availability of raw materials (both base and precious metals), physical inventory valuations, metal consignment fees, tax rates, exchange rates, interest rates, pension costs and required cash contributions and other employee benefit costs, energy costs, regulatory compliance costs, the cost and availability of insurance, credit availability, and the impact of the Company's stock price on the cost of incentive compensation plans; the uncertainties related to the impact of war, hostilities, terrorist activities, and acts of God; changes in government regulatory requirements and the enactment of new legislation that impacts our obligations and operations; the conclusion of pending litigation matters in accordance with our expectation that there will be no material adverse effects; the disruptions in operations from, and other effects of, catastrophic and other extraordinary events including outbreaks from infectious diseases and the conflict between Russia and Ukraine and other hostilities; realization of expected financial benefits expected from the Inflation Reduction Act of 2022; and other risk factors disclosed in periodic reports filed with the Securities and Exchange Commission. Consequently, these forward-looking statements should be regarded as the Company's current plans, estimates, and beliefs.

The Company does not undertake and specifically declines any obligation to update or publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

To supplement our consolidated financial statements presented in accordance with GAAP, the Company considers certain financial measures that are not prepared in accordance with GAAP, including value-added sales (VA sales), adjusted earnings before interest and taxes depreciation and amortization (EBITDA), adjusted net income, adjusted earnings per diluted share and net debt (cash). The Company uses these non-GAAP financial measures, in addition to GAAP financial measures, to evaluate our operating and financial performance and to compare such performance to that of prior periods and to the performance of our competitors. Also, the Company uses these non-GAAP financial measures in making operational and financial decisions and in establishing operational goals. The Company also believes providing these non-GAAP financial measures to investors, as a supplement to GAAP financial measures, helps investors evaluate our operating and financial performance and trends in our business, consistent with how management evaluates such performance and trends. The company also believes these non-GAAP financial measures may be useful to investors in comparing its performance to the performance of other companies, although its non-GAAP financial measures are specific to the company and the non-GAAP financial measures of other companies may not be calculated in the same manner.

It is not possible for the Company to identify the amount or significance of future adjustments associated with potential insurance and litigation claims, legacy environmental costs, acquisition and integration costs, certain income tax items, or other non-routine costs that the Company adjusts in the presentation of adjusted earnings guidance. These items are dependent on future events that are not reasonably estimable at this time. Accordingly, the Company is unable to reconcile without unreasonable effort the forecasted range of adjusted earnings guidance for the full year to a comparable GAAP range. However, items excluded from the Company's adjusted earnings guidance include the historical adjustments noted in slides 18 through 24 in the appendix.

For more information on Non-GAAP measures, please refer to the appendix.

3 © 2024 Materion Corporation

Opening Remarks & Business Update

Jugal Vijayvargiya

President and Chief Executive Officer

4 © 2024 Materion Corporation

Q1 2024 Highlights

Operational Challenges and Softer Demand Impact Q1 Results;

Cost Improvement Initiatives Protect Margins

Value-added (VA) sales of $257.8 million

• VA sales down 14% from prior year driven largely by continued weakness in semiconductor and industrial end markets
• • Temporary operational challenges also contributed to the decline
  • Strong growth in space, defense and consumer electronics

Adjusted EBITDA of $45.2 million or 17.5% of VA

▪

▪

▪

Impact of lower volume, partially offset by the benefit of strong cost control Implemented structural cost improvement initiatives to benefit the full year EBITDA margin roughly flat despite significant volume decline

Adjusted EPS of $0.96

5 © 2024 Materion Corporation

See appendix for reconciliations of value-added sales, adjusted EBITDA, adjusted EBITDA margin, adjusted EPS (which excludes acquisition amortization) and free cash flow to their most comparable GAAP financial measures. Certain data presented above has been rounded for presentation purposes.

End Market Performance

			Q1 2024
Market	VA Sales	vs. Q1 2023	Q1 Comments
Semiconductor	$64.0	-25%	▪ Continued inventory correction and customer destocking
▪ Q1 expected to be the low point with quarterly sequential improvement
Aerospace &			▪ Twelfth consecutive quarter of growth in Aerospace led by significant contribution from emerging
$46.6	41%	Space market more than offsetting declines in commercial aerospace
Defense
		▪ Defense sales remain strong
Industrial	$36.7	-29%	▪ Significant inventory correction for the beryllium-nickel spring used in non-residential
			construction along with general market softness
Automotive	$15.8	-32%	▪ Compared to a very strong Q1 '23, continued inventory correction with lower projections for EV
			▪ Lower rig count impacting demand in Oil & Gas
Energy	$13.3	-36%	▪ Smart glass application impacted by market slowdown
			▪ Clean/nuclear energy projects contributing
Consumer	$12.8	15%	▪ Handheld device recovery driving growth in Asia
Electronics
Telecom &	$11.0	-22%	▪ Decline due to slowing 5G carrier buildout, partially offset by strength in undersea cable demand
Data Center

6 © 2024 Materion Corporation

Key Takeaways

Top line headwinds drove lower results

• Continued weakness in the semiconductor and industrial end markets; softer demand in commercial aerospace and EV
• Performance Materials impacted by temporary operational challenges

Significant cost actions helping to mitigate headwinds and deliver strong margins

• EBITDA margin relatively flat despite significant volume decline
• Electronic Materials delivered ~500 bps of margin expansion despite 25% VA sales decline

Precision Clad Strip opportunity contributing meaningfully

Outlook for 2024

• Meaningful top line improvement in Q2 and rest of year
• Operational challenges addressed; normalizing output in Q2
• Modest adjustment to full year guidance with strong execution offsetting market challenges
• • Market softness across commercial aerospace and electric vehicles, combined with some inventory correction from precision clad strip customer
  • Higher interest expense due to current rate outlook

7 © 2024 Materion Corporation

Financial Review

Shelly Chadwick

Vice President and Chief Financial Officer

8 © 2024 Materion Corporation

Q1 2024 Operating Performance

Value-added Sales ($M)

$298.6	-14%
	$257.8
Q1 2023	Q1 2024

Value-added sales were $257.8 million, down from prior year

Adj. EBITDA ($M)

$53.4	-15%
	$45.2
17.9%	17.5%
Q1 2023	Q1 2024

Adjusted EBITDA was $45.2 million, margin of 17.5%

Adj. EPS

	-28%
$1.34
	$0.96
Q1 2023	Q1 2024

Adjusted EPS of $0.96

▪ Interest expense headwind of ~$.03/share

▪

▪

▪

Decrease primarily due to significant semiconductor and industrial market weakness

Temporary operational challenges limited shipments

Partially offset by strength in space & defense and consumer electronics

▪

▪

EBITDA margin ~flat despite significant volume decline

Targeted cost improvement initiatives helping offset volume decline

YoY

9 © 2024 Materion Corporation

See appendix for reconciliations of value-added sales, adjusted EBITDA, adjusted EBITDA margin, adjusted EPS (which excludes acquisition amortization) and free cash flow to their most comparable GAAP financial measures. Certain data presented above has been rounded for presentation purposes.

Q1 2024 Financial Comparison

Adjusted EBITDA of $45.2 million, or 17.5% of VA Sales

• EBITDA margin strong despite sales volume decline
• Positive price partially offset by unfavorable mix
• Cost improvement initiatives helping offset headwinds

10 © 2024 Materion Corporation

See appendix for reconciliations of value-added sales, adjusted EBITDA and adjusted EBITDA margin to their most comparable GAAP financial measures. Certain data presented above has been rounded for presentation purposes.