MATERION Corp Q3 FY2024 earnings call

• Aligned portfolio to global mega trends, optimized footprint, and improved cost structure. - Semiconductor saw year-over-year growth, entered agreement with semiconductor processing equipment supplier. - Strength in space and defense, 14th consecutive quarter of growth in aerospace and defense, with new business wins. - Sold Albuquerque facility producing architectural glass coatings, closed Suzhou facility, and ongoing optimization of two additional Asian facilities. - R&D spend at all-time high, appointed new President for Precision Optics to review cost structure and footprint.

Performance Materials: Value added sales were $163.6 million, down 3% year-over-year. EBITDA excluding special items was $46.5 million, or 28.4% of value added sales, flat year-over-year with 90 basis points of margin expansion. Electronic Materials: Value added sales were $77.8 million, up 3% year-over-year. EBITDA excluding special items was $15.6 million, or 20.1% of value added sales, up 290 basis points year-over-year. Precision Optics: Value added sales were $22.4 million, down 14% year-over-year. EBITDA excluding special items was $0.5 million, or 2.2% of value added sales, down year-over-year due to lower volume and unfavorable price mix.

• Expect sequential improvement in sales and profitability in Q4 despite soft end markets. - Full year 2024 adjusted earnings expected in range of $5.20 to $5.40 per share. - Q4 outlook: incremental sales improvement from seasonality, strength in space and defense, step up in beryllium nickel demand as commercial construction inventory correction subsides.

• General market softness impacting sales. - Uncertainty in semiconductor recovery timing. - Geopolitical issues affecting defense business. - Inventory corrections in Clad Strip impacting sales.

Q: Talk about portfolio optimization actions in Albuquerque and Asia, timing and potential savings A: Jugal and Shelly discuss the sale of Albuquerque facility, closure of Suzhou, and ongoing optimizations in Asia, with savings from divesting unprofitable business Q: Customer rollout plans for Precision Clad Strip A: Continued inventory correction in Precision Clad Strip, discussions with customer on next year, expected sales in Q4 but not at prior levels Q: Semiconductor outlook for 2025 A: Incremental growth in high computing segments, rest of chip segment flattish, need for weekly/monthly monitoring Q: Divestiture proceeds from New Mexico sale A: Material proceeds from sale of unprofitable Albuquerque business Q: Oil and gas market outlook A: Rig counts near low point, better comparisons in 2025 Q: Cost reduction runway A: ~$15M-$20M in cost cuts, over half permanent Q: Space business customer base A: Growth in commercial space, expanding customer base beyond government Q: Seasonality in 2025 A: Typical seasonality with Q4 strong, Q1 weaker