Materion Corporation Reports Strong Fourth Quarter and Record Full-Year 2023 Financial Results and Provides 2024 Outlook

Materion Corporation (NYSE:MTRN) today reported fourth quarter and record full-year 2023 financial results, provided 2024 earnings guidance and shared an update on key strategic initiatives.

Fourth Quarter 2023 Financial Summary

• Net sales were $421.0 million; value-added sales¹ were $289.7 million
• Net income was $19.5 million, or $0.93 per share, diluted, and adjusted earnings of $1.41 per share

Full-Year 2023 Highlights

• Net sales were $1.67 billion; value-added sales were $1.13 billion, a record for the company, up 1% from prior year despite significant semiconductor market weakness
• Net income of $95.7 million, versus $86.0 million in the prior year
• Earnings per share of $4.58, diluted, versus $4.14 in the prior year, and record adjusted earnings of $5.64 per share, versus $5.27 in the prior year, an increase of 7%
• Adjusted EBITDA² of $217.7 million, or 19.3% of value-added sales, both records for the company, versus $196.0 million, or 17.6% in the prior year, with 170 bps of margin expansion year on year

Newly Announced Customer Partnerships

• Announced three new advancements as we continue to strengthen our organic pipeline
  • Secured a fourth order valued at $36 million to supply critical materials for space propulsion systems
  • Awarded $4 million from a government agency for the development of additive manufacturing processes for advanced materials to serve the Aerospace, Defense and Energy markets
  • Secured another customer contract to supply optical components for LIDAR technologies within NextGen autonomous vehicle applications in Europe

"I am proud of our global team for delivering another record year, despite the significant headwinds facing our largest end market," Materion President and CEO Jugal Vijayvargiya said. "Our strong performance reflects the power of our diverse megatrend aligned portfolio, which continues to open new pathways for growth, and the importance of our relentless focus on driving operational excellence."

"We have made remarkable progress expanding our margins, despite market softness," Vijayvargiya said. "These efforts, combined with the continued strength of our organic pipeline, leave us well-positioned to take advantage of the market recoveries as they develop."

FOURTH QUARTER 2023 RESULTS

Net sales for the quarter were $421.0 million, compared to $434.6 million in the prior year period. Value-added sales were $289.7 million for the quarter, down 4% from prior year due to significant semiconductor market weakness, partially offset by strength in aerospace & defense.

Operating profit for the quarter was $27.6 million and net income was $19.5 million, or $0.93 per diluted share, compared to operating profit of $39.2 million and net income of $28.8 million, or $1.38 per share, in the prior year period.

Excluding special items³ primarily related to targeted cost improvement initiatives and precision clad strip start-up costs, adjusted EBITDA was $53.3 million in the quarter, compared to $55.6 million in the prior year period. The strong performance was driven mainly by focused operational execution and improved mix, despite softer volume.

Adjusted net income was $29.6 million excluding acquisition amortization, or $1.41 per diluted share, compared to $1.49 per share in the prior year period.

FULL-YEAR 2023 RESULTS

Net sales for the year were $1.67 billion, compared to $1.76 billion in the prior year. Value-added sales were $1.13 billion for the year, up 1% from prior year due to strength in aerospace & defense and precision clad strip, offset by softness in several key end markets.

Operating profit for the year was $136.4 million and net income was $95.7 million, or $4.58 per diluted share, compared to operating profit of $119.8 million and net income of $86.0 million, or $4.14 per diluted share, in the prior year.

Excluding special items, adjusted EBITDA for the year was $217.7 million, compared to $196.0 million in the prior year. The increase was driven mainly by strong operational performance, including the targeted cost improvement initiatives, and improved mix driven by new business.

Adjusted net income was $118.0 million excluding acquisition amortization, or $5.64 per diluted share, an increase of 7% compared to $5.27 per diluted share in the prior year.

OUTLOOK

While we expect some of our key end markets to remain challenged in the near term due to macroeconomic conditions, we expect another year of record results driven by our organic pipeline and close customer partnerships. We believe these growth drivers, along with continued operational excellence and targeted cost improvement initiatives, will help drive earnings growth. With this, we are guiding to the range of $6.10 to $6.50 for full year 2024 adjusted earnings per share, an increase of 12% 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, February 15, 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 570395. A replay of the call will be available until February 29, 2024 by dialing (877) 481-4010 or (919) 882-2331 if international; please reference replay ID number 49161. 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 EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization

³ Details of the special items can be found in Attachments 4 through 8

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 2022 Annual Report on Form 10-K and in other reports that we file with the SEC.