Materion Corporation (NYSE: MTRN) today reported first quarter
financial results, raised 2023 earnings guidance, and shared growth
highlights.
First Quarter 2023 Highlights
- Net sales were $442.5 million; value-added sales1 increased 15%
year over year to a first quarter record of $298.6 million
- Operating profit was $36.9 million; adjusted EBITDA2 was $53.4
million, or 17.9% of value-added sales, a 70-basis point margin
expansion year over year
- Net income of $1.23 per share, diluted; adjusted earnings per
share of $1.34, another first quarter record
- Raised adjusted earnings per share outlook to $5.60 -
$6.00/share on strong performance expectations
Growth Highlights
- Delivered ninth consecutive quarter of double-digit organic
sales and earnings growth
- Awarded a $12 million second order to supply critical materials
for space propulsion systems, for a total value of $22 million this
year
- Reached a significant milestone with Kairos Power, completing
first shipment of Flibe as part of our next-gen clean energy
partnership
“I am proud of our global team for delivering another record
quarter of strong year-on-year growth in both sales and earnings,”
Jugal Vijayvargiya, Materion President and CEO said. “Despite a
challenging end-market environment, we delivered a ninth
consecutive quarter of double-digit organic growth, demonstrating
the continued power of our outgrowth initiatives.”
“As we look forward, we are continuing to execute on our
customer-focused projects while driving consistent market
outgrowth. At the same time, we are executing targeted operational
excellence initiatives to address softer demand levels where market
conditions warrant. We remain on track to deliver record results
for the third consecutive year.”
FIRST QUARTER 2023
RESULTS
Net sales for the quarter were $442.5 million, compared to
$449.0 million in the prior year period. Value-added sales were
$298.6 million for the quarter, up 15% from the prior year driven
by strong performance across several major end markets including
aerospace, automotive and energy, as well as contribution from the
precision clad strip project.
Operating profit for the quarter was $36.9 million and net
income was $25.6 million, or $1.23 per diluted share, compared to
operating profit of $19.6 million and net income of $14.0 million,
or $0.68 per diluted share in the prior year period.
Excluding special items, detailed in the attached tables,
adjusted EBITDA was $53.4 million in the quarter, compared to $44.6
million in the prior year. The increase was driven mainly by the
strong top line growth.
Adjusted net income was $28.0 million excluding acquisition
amortization, or $1.34 per diluted share, an increase of 12%
compared to $1.20 per share in the prior year period.
OUTLOOK
Despite challenges surrounding the macroeconomic environment, we
remain confident in our ability to execute and deliver another year
of record results. With our strong start to the year coupled with
our revised outlook, we are increasing our expected adjusted
earnings per share range to $5.60 to $6.00, from our previously
shared range of $5.50 to $5.90, an increase of 10% at the midpoint
versus the prior year.
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 7
to this press release.
CONFERENCE CALL
Materion Corporation will host an investor conference call with
analysts at 9:00 a.m. Eastern Time, May 3, 2023. 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 545309. A replay of the call will be
available until May 17, 2023 by dialing (877) 481-4010 or (919)
882-2331 if international; please reference replay ID number 46834.
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
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 3,400
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 the COVID-19 pandemic and the conflict between Russia and
Ukraine; 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.
Attachment 1
Materion Corporation and
Subsidiaries
Consolidated Statements of
Income
(Unaudited)
First Quarter Ended
(Thousands, except per share
amounts)
March 31, 2023
April 1, 2022
Net sales
$
442,526
$
449,045
Cost of sales
351,190
373,754
Gross margin
91,336
75,291
Selling, general, and administrative
expense
40,336
41,662
Research and development expense
7,621
7,074
Restructuring expense (income)
664
1,076
Other — net
5,775
5,873
Operating profit
36,940
19,606
Other non-operating income—net
(730
)
(1,169
)
Interest expense — net
7,502
3,735
Income before income taxes
30,168
17,040
Income tax expense
4,580
3,021
Net income
$
25,588
$
14,019
Basic earnings per share:
Net income per share of common stock
$
1.24
$
0.69
Diluted earnings per share:
Net income per share of common stock
$
1.23
$
0.68
Weighted-average number of shares of
common stock outstanding:
Basic
20,566
20,464
Diluted
20,887
20,724
Attachment 2
Materion Corporation and
Subsidiaries
Consolidated Balance
Sheets
(Unaudited)
(Thousands)
March 31, 2023
December 31, 2022
Assets
Current assets
Cash and cash equivalents
$
15,243
$
13,101
Accounts receivable, net
207,998
215,211
Inventories, net
434,485
423,080
Prepaid and other current assets
42,128
39,056
Total current assets
699,854
690,448
Deferred income taxes
3,335
3,265
Property, plant, and equipment
1,198,350
1,209,205
Less allowances for depreciation,
depletion, and amortization
(728,788
)
(760,440
)
Property, plant, and equipment, net
469,562
448,765
Operating lease, right-of-use assets
62,352
64,249
Intangible assets, net
140,430
143,219
Other assets
22,183
22,535
Goodwill
320,268
319,498
Total Assets
$
1,717,984
$
1,691,979
Liabilities and Shareholders’
Equity
Current liabilities
Short-term debt
$
27,727
$
21,105
Accounts payable
126,866
107,899
Salaries and wages
22,077
35,543
Other liabilities and accrued items
44,186
54,993
Income taxes
4,669
3,928
Unearned revenue
20,292
15,496
Total current liabilities
245,817
238,964
Other long-term liabilities
14,255
12,181
Operating lease liabilities
57,424
59,055
Finance lease liabilities
14,068
13,876
Retirement and post-employment
benefits
20,738
20,422
Unearned income
109,883
107,736
Long-term income taxes
812
665
Deferred income taxes
27,511
28,214
Long-term debt
405,482
410,876
Shareholders’ equity
821,994
799,990
Total Liabilities and Shareholders’
Equity
$
1,717,984
$
1,691,979
Attachment 3
Materion Corporation and
Subsidiaries
Consolidated Statements of
Cash Flows
(Unaudited)
Three Months Ended
(Thousands)
March 31, 2023
April 1, 2022
Cash flows from operating activities:
Net income
$
25,588
$
14,019
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, and
amortization
15,092
13,179
Amortization of deferred financing costs
in interest expense
424
511
Stock-based compensation expense
(non-cash)
2,250
1,699
Deferred income tax (benefit) expense
(52
)
401
Changes in assets and liabilities:
Accounts receivable
7,538
(15,045
)
Inventory
(12,081
)
(28,129
)
Prepaid and other current assets
(2,865
)
(5
)
Accounts payable and accrued expenses
(1,904
)
(4,177
)
Unearned revenue
254
(343
)
Interest and taxes payable
657
1,874
Unearned income due to customer
prepayments
7,724
—
Other-net
(4,520
)
1,712
Net cash (used in) provided by
operating activities
38,105
(14,304
)
Cash flows from investing activities:
Payments for purchase of property, plant,
and equipment
(30,014
)
(18,977
)
Proceeds from sale of property, plant, and
equipment
212
11
Net cash used in investing
activities
(29,802
)
(18,966
)
Cash flows from financing activities:
Proceeds from borrowings under revolving
credit agreement, net
4,600
49,067
Repayment of debt
(3,907
)
(3,839
)
Principal payments under finance lease
obligations
(799
)
(686
)
Cash dividends paid
(2,571
)
(2,520
)
Payments of withholding taxes for
stock-based compensation awards
(3,614
)
(2,717
)
Net cash provided by financing
activities
(6,291
)
39,305
Effects of exchange rate changes
130
(260
)
Net change in cash and cash
equivalents
2,142
5,775
Cash and cash equivalents at beginning
of period
13,101
14,462
Cash and cash equivalents at end of
period
$
15,243
$
20,237
Attachment 4
Materion Corporation and
Subsidiaries
Reconciliation of Non-GAAP
Measure - Value-added Sales, Operating Profit, and EBITDA
(Unaudited)
First Quarter Ended
(Millions)
March 31, 2023
April 1, 2022
Net Sales
Performance Materials
$
187.0
$
149.6
Electronic Materials
228.8
270.8
Precision Optics
26.7
28.6
Other
—
—
Total
$
442.5
$
449.0
Less: Pass-through Metal Cost
Performance Materials
$
19.0
$
20.5
Electronic Materials
124.9
168.6
Precision Optics
—
0.1
Other
—
0.7
Total
$
143.9
$
189.9
Value-added Sales (non-GAAP)
Performance Materials
$
168.0
$
129.1
Electronic Materials
103.9
102.2
Precision Optics
26.7
28.5
Other
—
(0.7
)
Total
$
298.6
$
259.1
Gross Margin
Performance Materials(1)
$
54.2
$
37.3
Electronic Materials(1)
28.6
29.5
Precision Optics
8.5
8.5
Other
—
—
Total (1)
$
91.3
$
75.3
(1)Adjusted gross margin without special
items impacting COGS for Performance Materials for the quarter
ended April 1, 2022 was $39.9 million. Adjusted gross margin
without special items impacting COGS for Electronic Materials for
the quarter ended April 1, 2022 was $34.5 million. Consolidated
adjusted gross margin without special items impacting COGS for the
quarter ended April 1, 2022 was $82.9 million. There were no
special items impacting gross margin in the first quarter of
2023.
First Quarter Ended
(Millions)
March 31, 2023
April 1, 2022
Operating Profit
Performance Materials
$
35.5
$
19.1
Electronic Materials
9.7
8.0
Precision Optics
(0.4
)
(0.7
)
Other
(7.9
)
(6.8
)
Total
$
36.9
$
19.6
Non-Operating (Income) Expense
Performance Materials
$
0.1
$
0.2
Electronic Materials
—
—
Precision Optics
(0.2
)
(0.2
)
Other
(0.7
)
(1.1
)
Total
$
(0.8
)
$
(1.1
)
Depreciation, Depletion, and
Amortization
Performance Materials
$
7.4
$
5.9
Electronic Materials
4.3
4.1
Precision Optics
2.9
2.7
Other
0.5
0.5
Total
$
15.1
$
13.2
Segment EBITDA
Performance Materials
$
42.8
$
24.8
Electronic Materials
14.0
12.1
Precision Optics
2.7
2.2
Other
(6.7
)
(5.2
)
Total
$
52.8
$
33.9
Special Items
Performance Materials
$
—
$
2.7
Electronic Materials
0.4
6.8
Precision Optics
0.2
0.2
Other
—
1.0
Total
$
0.6
$
10.7
Adjusted EBITDA Excluding Special
Items
Performance Materials
$
42.8
$
27.5
Electronic Materials
14.4
18.9
Precision Optics
2.9
2.4
Other
(6.7
)
(4.2
)
Total
$
53.4
$
44.6
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.
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 31, 2023
% of VA
April 1, 2022
% of VA
Net sales
$
442.5
$
449.0
Pass-through metal cost
143.9
189.9
Value-added sales
$
298.6
$
259.1
Net income
$
25.6
8.6
%
$
14.0
5.4
%
Income tax expense
4.6
1.5
%
3.0
1.2
%
Interest expense - net
7.5
2.5
%
3.7
1.4
%
Depreciation, depletion and
amortization
15.1
5.1
%
13.2
5.1
%
Consolidated EBITDA
$
52.8
17.7
%
$
33.9
13.1
%
Special items
Restructuring and cost reduction
$
0.6
0.2
%
$
1.1
0.4
%
Merger and acquisition costs
—
—
%
9.6
3.7
%
Total special items
0.6
0.2
%
10.7
4.1
%
Adjusted EBITDA
$
53.4
17.9
%
$
44.6
17.2
%
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 and merger and acquisition costs.
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 31, 2023
EPS
April 1, 2022
EPS
Net income and EPS
$
25.6
$
1.23
$
14.0
$
0.68
Special items
Restructuring and cost reduction
0.6
1.1
Merger and acquisition costs
—
9.6
Provision for income taxes(1)
(0.7
)
(2.3
)
Total special items
(0.1
)
(0.01
)
8.4
0.40
Adjusted net income and adjusted EPS
$
25.5
$
1.22
$
22.4
$
1.08
Acquisition amortization (net of tax)
2.5
0.12
2.5
0.12
Adjusted net income and adjusted EPS excl.
amortization
$
28.0
$
1.34
$
24.9
$
1.20
(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 31, 2023
% of VA
April 1, 2022
% of VA
Net sales
$
187.0
$
149.6
Pass-through metal cost
19.0
20.5
Value-added sales
$
168.0
$
129.1
EBITDA
$
42.8
25.5
%
$
24.8
19.2
%
Merger and acquisition costs
—
—
%
2.7
2.1
%
Adjusted EBITDA
$
42.8
25.5
%
$
27.5
21.3
%
Electronic Materials
Three Months Ended
Three Months Ended
(Millions)
March 31, 2023
% of VA
April 1, 2022
% of VA
Net sales
$
228.8
$
270.8
Pass-through metal cost
124.9
168.6
Value-added sales
$
103.9
$
102.2
EBITDA
$
14.0
13.5
%
$
12.1
11.8
%
Restructuring and cost reduction
0.4
0.4
%
0.8
0.8
%
Merger and acquisition costs
—
—
%
6.0
5.9
%
Adjusted EBITDA
$
14.4
13.9
%
$
18.9
18.5
%
Precision Optics
Three Months Ended
Three Months Ended
(Millions)
March 31, 2023
% of VA
April 1, 2022
% of VA
Net sales
$
26.7
$
28.6
Pass-through metal cost
—
0.1
Value-added sales
$
26.7
$
28.5
EBITDA
$
2.7
10.1
%
$
2.2
7.7
%
Restructuring and cost reduction
0.2
0.7
%
0.2
0.7
%
Adjusted EBITDA
$
2.9
10.8
%
$
2.4
8.4
%
Other
Three Months Ended
Three Months Ended
(Millions)
March 31, 2023
April 1, 2022
EBITDA
$
(6.7
)
$
(5.2
)
Restructuring and cost reduction
—
0.1
Merger and acquisition costs
—
0.9
Adjusted EBITDA
$
(6.7
)
$
(4.2
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230502006238/en/
Investor Contact: Kyle Kelleher
(216) 383-4931 kyle.kelleher@materion.com
Media Contact: Jason Saragian (216)
383-6893 jason.saragian@materion.com
https://materion.com Mayfield Hts-g
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