Materion Corporation (NYSE: MTRN) today reported first quarter
2024 financial results and provided an update to 2024 earnings
guidance.
Financial Summary
- Net sales were $385.3 million; value-added sales1 were $257.8
million
- Net income was $13.4 million, or $0.64 per share, diluted, and
adjusted earnings of $0.96 per share
- Full year adjusted earnings outlook updated to $5.60-$6.20 per
share, a 5% increase year over year at the midpoint
FIRST QUARTER 2024
RESULTS
Net sales for the quarter were $385.3 million, compared to
$442.5 million in the prior year period. Value-added sales were
$257.8 million for the quarter, down 14% from the prior year
primarily due to continued semiconductor and industrial market
weakness combined with some temporary operational challenges. This
year-over-year decline was partially offset by strength in the
space & defense markets.
Operating profit for the quarter was $22.2 million and net
income was $13.4 million, or $0.64 per diluted share, compared to
operating profit of $36.9 million and net income of $25.6 million,
or $1.23 per share, in the prior year period.
Excluding special items2, adjusted EBITDA3 was $45.2 million in
the quarter or 17.5% of value-added sales, compared to $53.4
million or 17.9% of value-added sales in the prior year period.
This decline was driven by lower volume, partially offset by the
benefit of cost improvement initiatives, resulting in comparable
margins year on year.
Adjusted net income was $20.1 million excluding acquisition
amortization, or $0.96 per diluted share, compared to $1.34 per
share in the prior year period.
“Temporary operational challenges and softer market demand led
to results falling short of our expectations for the first time in
several quarters,” Materion President & CEO Jugal Vijayvargiya
said. “I am proud of our team for mobilizing quickly to mitigate
the impact to the quarter and deliver strong margins comparable to
last year. The actions taken are also driving structural
improvements that will deliver even more value as key markets
recover.”
“As we manage through the current environment to drive another
year of record results, we remain sharply focused on executing our
strategy, delivering on our organic outgrowth initiatives and
investing in new capacity and capabilities that will drive long
term value for our stakeholders.”
OUTLOOK
Despite a weaker than anticipated first quarter, we expect to
deliver another year of record results as we execute our organic
and operational excellence initiatives. Since the beginning of the
year, the outlook for the commercial aerospace and electric vehicle
end-markets has softened and we expect some inventory correction
from our precision clad strip customer in the second half. In
addition, we expect higher interest expense with the current rate
projections. While we expect to mitigate much of the impact of
these items through targeted cost reduction initiatives and
performance, we are adjusting our outlook to $5.60 to $6.20 for the
full year 2024 adjusted earnings per share, an increase of 5% from
prior year at the midpoint.
ADJUSTED EARNINGS
GUIDANCE
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 Attachments 4 through 8
to this press release.
CONFERENCE CALL
Materion Corporation will host an investor conference call with
analysts at 9:00 a.m. Eastern Time, May 2, 2024. The conference
call will be available via webcast through the Company’s website at
www.materion.com. By phone, please dial (888) 506-0062. Calls
outside the U.S. can dial (973) 528-0011; please reference
participant access code of 799148. A replay of the call will be
available until May 16, 2024 by dialing (877) 481-4010 or (919)
882-2331 if international; please reference replay ID number 49163.
The call will also be archived on the Company’s website.
FOOTNOTES 1 Value-added
sales deducts the impact of pass-through metals from net sales 2
Details of the special items can be found in Attachments 4 through
8 3 EBITDA represents earnings before interest, taxes,
depreciation, depletion and amortization
ABOUT MATERION
Materion Corporation is a global leader in advanced materials
solutions for high-performance industries including semiconductor,
industrial, aerospace & defense, energy and automotive. With
nearly 100 years of 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, Materion partners with customers to enable
breakthrough solutions that move the world forward. Headquartered
in Mayfield Heights, Ohio, the company employs more than 3,500
talented people worldwide, serving customers in more than 60
countries.
FORWARD-LOOKING
STATEMENTS
Portions of the narrative set forth in this document that are
not statements of historical or current facts are forward-looking
statements. Our actual future performance may materially differ
from that contemplated by the forward-looking 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, 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 the risk factors set forth in Part 1, Item 1A of
the Company's 2023 Annual Report on Form 10-K and in other reports
that we file with the SEC.
Attachment 1
Materion Corporation and
Subsidiaries
Consolidated Statements of
Income
(Unaudited)
First Quarter Ended
(Thousands, except per share
amounts)
March 29, 2024
March 31, 2023
Net sales
$
385,287
$
442,526
Cost of sales
314,075
351,190
Gross margin
71,212
91,336
Selling, general, and administrative
expense
35,844
40,336
Research and development expense
7,142
7,621
Restructuring expense (income)
1,620
664
Other — net
4,357
5,775
Operating profit
22,249
36,940
Other non-operating income—net
(643
)
(730
)
Interest expense — net
8,279
7,502
Income before income taxes
14,613
30,168
Income tax expense
1,204
4,580
Net income
$
13,409
$
25,588
Basic earnings per share:
Net income per share of common stock
$
0.65
$
1.24
Diluted earnings per share:
Net income per share of common stock
$
0.64
$
1.23
Weighted-average number of shares of
common stock outstanding:
Basic
20,679
20,566
Diluted
20,973
20,887
Attachment 2
Materion Corporation and
Subsidiaries
Consolidated Balance
Sheets
(Unaudited)
(Thousands)
March 29, 2024
December 31, 2023
Assets
Current assets
Cash and cash equivalents
$
13,104
$
13,294
Accounts receivable, net
188,282
192,747
Inventories, net
466,574
441,597
Prepaid and other current assets
71,748
61,744
Total current assets
739,708
709,382
Deferred income taxes
4,751
4,908
Property, plant, and equipment
1,304,336
1,281,622
Less allowances for depreciation,
depletion, and amortization
(779,893
)
(766,939
)
Property, plant, and equipment, net
524,443
514,683
Operating lease, right-of-use assets
62,055
57,645
Intangible assets, net
129,053
133,571
Other assets
25,231
21,664
Goodwill
319,943
320,873
Total Assets
$
1,805,184
$
1,762,726
Liabilities and Shareholders’
Equity
Current liabilities
Short-term debt
$
46,569
$
38,597
Accounts payable
134,542
125,663
Salaries and wages
16,030
25,912
Other liabilities and accrued items
40,602
45,773
Income taxes
2,079
5,207
Unearned revenue
14,793
13,843
Total current liabilities
254,615
254,995
Other long-term liabilities
13,304
13,300
Operating lease liabilities
59,887
53,817
Finance lease liabilities
13,242
13,744
Retirement and post-employment
benefits
25,431
26,334
Unearned income
95,978
103,983
Long-term income taxes
3,686
3,815
Deferred income taxes
20,408
20,109
Long-term debt
428,710
387,576
Shareholders’ equity
889,923
885,053
Total Liabilities and Shareholders’
Equity
$
1,805,184
$
1,762,726
Attachment 3
Materion Corporation and
Subsidiaries
Consolidated Statements of
Cash Flows
(Unaudited)
Three Months Ended
(Thousands)
March 29, 2024
March 31, 2023
Cash flows from operating activities:
Net income
$
13,409
$
25,588
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, and
amortization
16,185
15,092
Amortization of deferred financing costs
in interest expense
429
424
Stock-based compensation expense
(non-cash)
2,495
2,250
Deferred income tax (benefit) expense
(253
)
(52
)
Changes in assets and liabilities:
Accounts receivable
2,729
7,538
Inventory
(26,539
)
(12,081
)
Prepaid and other current assets
(10,274
)
(2,865
)
Accounts payable and accrued expenses
(5,194
)
(1,904
)
Unearned revenue
(5,860
)
254
Interest and taxes payable
(3,294
)
657
Unearned income due to customer
prepayments
—
7,724
Other-net
2,362
(4,520
)
Net cash (used in) provided by
operating activities
(13,805
)
38,105
Cash flows from investing activities:
Payments for purchase of property, plant,
and equipment
(21,314
)
(30,014
)
Payments for mine development
(5,333
)
—
Proceeds from sale of property, plant, and
equipment
348
212
Net cash used in investing
activities
(26,299
)
(29,802
)
Cash flows from financing activities:
Proceeds from borrowings under credit
facilities, net
56,779
4,600
Repayment of debt
(7,586
)
(3,907
)
Principal payments under finance lease
obligations
(191
)
(799
)
Cash dividends paid
(2,692
)
(2,571
)
Payments of withholding taxes for
stock-based compensation awards
(6,013
)
(3,614
)
Net cash provided by financing
activities
40,297
(6,291
)
Effects of exchange rate changes
(383
)
130
Net change in cash and cash
equivalents
(190
)
2,142
Cash and cash equivalents at beginning
of period
13,294
13,101
Cash and cash equivalents at end of
period
$
13,104
$
15,243
Attachment 4
Materion Corporation and
Subsidiaries
Reconciliation of Non-GAAP
Measure - Value-added Sales, Operating Profit, and EBITDA
(Unaudited)
First Quarter Ended
(Millions)
March 29, 2024
March 31, 2023
Net Sales
Performance Materials
$
168.6
$
187.0
Electronic Materials
192.0
228.8
Precision Optics
24.7
26.7
Other
—
—
Total
$
385.3
$
442.5
Less: Pass-through Metal Cost
Performance Materials
$
13.0
$
19.0
Electronic Materials
114.4
124.9
Precision Optics
0.1
—
Other
—
—
Total
$
127.5
$
143.9
Value-added Sales (non-GAAP)
Performance Materials
$
155.6
$
168.0
Electronic Materials
77.6
103.9
Precision Optics
24.6
26.7
Other
—
—
Total
$
257.8
$
298.6
Gross Margin
Performance Materials(1)
$
40.1
$
54.2
Electronic Materials(1)
25.0
28.6
Precision Optics(1)
6.1
8.5
Other
—
—
Total (1)
$
71.2
$
91.3
(1) See reconciliation of gross margin to
adjusted gross margin in Attachment 8
First Quarter Ended
(Millions)
March 29, 2024
March 31, 2023
Operating Profit
Performance Materials
$
22.6
$
35.5
Electronic Materials
9.8
9.7
Precision Optics
(3.3
)
(0.4
)
Other
(6.9
)
(7.9
)
Total
$
22.2
$
36.9
Non-Operating (Income) Expense
Performance Materials
$
0.1
$
0.1
Electronic Materials
—
—
Precision Optics
(0.1
)
(0.2
)
Other
(0.7
)
(0.7
)
Total
$
(0.7
)
$
(0.8
)
Depreciation, Depletion, and
Amortization
Performance Materials
$
8.2
$
7.4
Electronic Materials
4.6
4.3
Precision Optics
2.9
2.9
Other
0.5
0.5
Total
$
16.2
$
15.1
Segment EBITDA
Performance Materials
$
30.7
$
42.8
Electronic Materials
14.4
14.0
Precision Optics
(0.3
)
2.7
Other
(5.7
)
(6.7
)
Total
$
39.1
$
52.8
Special Items(2)
Performance Materials
$
5.0
$
—
Electronic Materials
0.1
0.4
Precision Optics
0.7
0.2
Other
0.3
—
Total
$
6.1
$
0.6
Adjusted EBITDA Excluding Special
Items
Performance Materials
$
35.7
$
42.8
Electronic Materials
14.5
14.4
Precision Optics
0.4
2.9
Other
(5.4
)
(6.7
)
Total
$
45.2
$
53.4
The cost of gold, silver, platinum,
palladium, copper, ruthenium, iridium, rhodium, rhenium, and osmium
is passed through to customers and, therefore, the trends and
comparisons of net sales are affected by movements in the market
price of these metals. Internally, management also reviews net
sales on a value-added basis. Value-added sales is a non-GAAP
financial measure that deducts the value of the pass-through metals
sold from net sales. Value-added sales allows management to assess
the impact of differences in net sales between periods or segments
and analyze the resulting margins and profitability without the
distortion of the movements in pass-through market metal prices.
The dollar amount of gross margin and operating profit is not
affected by the value-added sales calculation. The Company sells
other metals and materials that are not considered direct pass
throughs, and these costs are not deducted from net sales to
calculate value-added sales.
The Company’s pricing policy is to pass
the cost of these metals on to customers in order to mitigate the
impact of price volatility on the Company’s results from
operations. Value-added information is being presented since
changes in metal prices may not directly impact profitability. It
is the Company’s intent to allow users of the financial statements
to review sales with and without the impact of the pass-through
metals.
(2) See additional details of special
items in Attachment 5.
Attachment 5
Materion Corporation and
Subsidiaries
Reconciliation of Net sales to
Value-added sales, Net Income to EBITDA and Adjusted EBITDA
(Unaudited)
Three Months Ended
Three Months Ended
(Millions)
March 29, 2024
% of VA
March 31, 2023
% of VA
Net sales
$
385.3
$
442.5
Pass-through metal cost
127.5
143.9
Value-added sales
$
257.8
$
298.6
Net income
$
13.4
5.2
%
$
25.6
8.6
%
Income tax expense
1.2
0.5
%
4.6
1.5
%
Interest expense - net
8.3
3.2
%
7.5
2.5
%
Depreciation, depletion and
amortization
16.2
6.3
%
15.1
5.1
%
Consolidated EBITDA
$
39.1
15.2
%
$
52.8
17.7
%
Special items
Restructuring and cost reduction
$
2.4
0.9
%
$
0.6
0.2
%
Additional start up resources and
scrap
3.7
1.4
%
—
—
%
Total special items
6.1
2.4
%
0.6
0.2
%
Adjusted EBITDA
$
45.2
17.5
%
$
53.4
17.9
%
In addition to presenting financial
statements prepared in accordance with U.S. generally accepted
accounting principles (GAAP), this earnings release contains
financial measures, including operating profit, segment operating
profit, earnings before interest, taxes, depreciation, depletion
and amortization (EBITDA), net income, and earnings per share, on a
non-GAAP basis. As detailed in the above reconciliation and
Attachment 6, we have adjusted the results for certain special
items such as restructuring and cost reductions (which includes
costs associated with temporarily idled facilities as a result of
decreased demand) and additional start up resources and scrap.
Internally, management reviews the results of operations without
the impact of these costs in order to assess the profitability from
ongoing activities. We are providing this information because we
believe it will assist investors in analyzing our financial results
and, when viewed in conjunction with the GAAP results, provide a
more comprehensive understanding of the factors and trends
affecting our operations.
Attachment 6
Materion Corporation and
Subsidiaries
Reconciliation of Net Income
to Adjusted Net Income and Diluted Earnings per Share to Adjusted
Diluted Earnings per Share
(Unaudited)
Three Months Ended
Diluted
Three Months Ended
Diluted
(Millions)
March 29, 2024
EPS
March 31, 2023
EPS
Net income and EPS
$
13.4
$
0.64
$
25.6
$
1.23
Special items
Restructuring and cost reduction
2.4
0.6
Additional start up resources and
scrap
3.7
—
Provision for income taxes(1)
(1.9
)
(0.7
)
Total special items
4.2
0.20
(0.1
)
(0.01
)
Adjusted net income and adjusted EPS
$
17.6
$
0.84
$
25.5
$
1.22
Acquisition amortization (net of tax)
2.5
0.12
2.5
0.12
Adjusted net income and adjusted EPS excl.
amortization
$
20.1
$
0.96
$
28.0
$
1.34
(1) Provision for income taxes includes
the net tax impact on pre-tax adjustments (listed above), the
impact of discrete tax items recorded during the respective periods
as well as other adjustments to reflect the use of one overall
effective tax rate on adjusted pre-tax income in interim
periods.
Attachment 7
Reconciliation of Segment Net
sales to Segment Value-added sales and Segment EBITDA to Adjusted
Segment EBITDA
(Unaudited)
Performance Materials
Three Months Ended
Three Months Ended
(Millions)
March 29, 2024
% of VA
March 31, 2023
% of VA
Net sales
$
168.6
$
187.0
Pass-through metal cost
13.0
19.0
Value-added sales
$
155.6
$
168.0
EBITDA
$
30.7
19.7
%
$
42.8
25.5
%
Restructuring and cost reduction
1.3
0.8
%
—
—
%
Additional start up resources and
scrap
3.7
2.4
%
—
—
%
Adjusted EBITDA
$
35.7
22.9
%
$
42.8
25.5
%
Electronic Materials
Three Months Ended
Three Months Ended
(Millions)
March 29, 2024
% of VA
March 31, 2023
% of VA
Net sales
$
192.0
$
228.8
Pass-through metal cost
114.4
124.9
Value-added sales
$
77.6
$
103.9
EBITDA
$
14.4
18.6
%
$
14.0
13.5
%
Restructuring and cost reduction
0.1
0.1
%
0.4
0.4
%
Adjusted EBITDA
$
14.5
18.7
%
$
14.4
13.9
%
Precision Optics
Three Months Ended
Three Months Ended
(Millions)
March 29, 2024
% of VA
March 31, 2023
% of VA
Net sales
$
24.7
$
26.7
Pass-through metal cost
0.1
—
Value-added sales
$
24.6
$
26.7
EBITDA
$
(0.3
)
(1.0
)%
$
2.7
10.1
%
Restructuring and cost reduction
0.7
2.8
%
0.2
0.7
%
Adjusted EBITDA
$
0.4
1.8
%
$
2.9
10.8
%
Other
Three Months Ended
Three Months Ended
(Millions)
March 29, 2024
March 31, 2023
EBITDA
$
(5.7
)
$
(6.7
)
Restructuring and cost reduction
0.3
—
Adjusted EBITDA
$
(5.4
)
$
(6.7
)
Attachment 8
Materion Corporation and
Subsidiaries
Reconciliation of Non-GAAP
Measure - Gross Margin to Adjusted Gross Margin
(Unaudited)
Three Months Ended
(Millions)
March 29, 2024
March 31, 2023
Gross Margin
Performance Materials
$
40.1
$
54.2
Electronic Materials
25.0
28.6
Precision Optics
6.1
8.5
Other
—
—
Total
$
71.2
$
91.3
Special Items (1)
Performance Materials
$
4.2
$
—
Electronic Materials
—
—
Precision Optics
0.1
—
Other
—
—
Total
$
4.3
$
—
Adjusted Gross Margin
Performance Materials
$
44.3
$
54.2
Electronic Materials
25.0
28.6
Precision Optics
6.2
8.5
Other
—
—
Total
$
75.5
$
91.3
(1) Special items impacting gross margin
represent restructuring and cost reduction and additional start up
resources and scrap in 2024.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240501578376/en/
Investor Contact: Kyle Kelleher
(216) 383-4931 kyle.kelleher@materion.com Media Contact: Jason Saragian (216) 383-6893
jason.saragian@materion.com
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