Materion Corporation Reports Record Fourth Quarter and Full-Year 2022 Financial Results and Provides 2023 Outlook

Materion Corporation (NYSE: MTRN) today reported record fourth quarter and full-year 2022 financial results, provided 2023 earnings guidance, and shared an update on key strategic initiatives.

Fourth Quarter 2022 Highlights

• Net sales were $434.6 million; value-added sales¹ increased 30% year over year to a record $309.2 million
• Operating profit was $39.2 million; adjusted earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) was a record at $55.6 million, or 18.0% of value-added sales, a 120-basis point margin expansion year over year
• Net income of $1.38 per share, diluted; adjusted earnings per share of $1.49, up 32% year over year and an all-time record for the Company

Full Year 2022 Highlights

• Net sales were $1.76 billion; value-added sales were a record $1.14 billion, up 33% from the prior year
• Operating profit was $119.8 million; adjusted earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) was an annual record at $196.0 million, or 17.1% of value-added sales
• Net income of $4.14 per share, diluted; record adjusted earnings per share of $5.27, up 30% from prior year

Announcing Two New Customer Partnerships

• Secured a customer funded project with a $15 million upfront investment to expand production capabilities to supply critical materials for clean energy power generation
• Awarded a 3-year supply agreement, with an initial $10 million order, to supply materials for space propulsion systems

“Our people continue to execute exceptionally well, growing our pipeline of organic initiatives, building out a leading-edge portfolio and developing new and deeper partnerships with our customers,” Jugal Vijayvargiya, Materion President and CEO said. “Our global team continues to raise the bar for performance, delivering another quarter of outstanding results, capping off another record year for our company.”

“This year we made many important advancements in our transformation, starting with the successful integration of HCS Electronic Materials, where the power of our combined teams is generating value beyond our expectations,” Vijayvargiya added. “The combination of our organic and inorganic initiatives has led to eleven consecutive quarters of top line growth and has positioned us well to continue our growth trajectory in 2023.”

FOURTH QUARTER 2022 RESULTS

Net sales for the quarter were $434.6 million, compared to $397.2 million in the prior year period. Value-added sales of $309.2 million were a quarterly record, up 30% from the prior year. In addition to the benefit of the HCS-Electronic Materials acquisition, organic² value-added sales were up 26% driven by strong performance across several major end markets including industrial, energy and aerospace, as well as contribution from the precision clad strip project.

Operating profit for the quarter was $39.2 million and net income was $28.8 million, or $1.38 per diluted share, compared to operating profit of $15.5 million and net income of $19.7 million, or $0.95 per diluted share in the prior year period.

Excluding special items, detailed in the attached tables, adjusted EBITDA was $55.6 million in the quarter, another quarterly record for the company, compared to $39.8 million in the prior year. The increase was driven by higher volume and favorable pricing more than offsetting cost inflation.

Adjusted net income was $30.9 million excluding acquisition amortization, or $1.49 per diluted share, an increase of 32% compared to $1.13 per share in the prior year period.

FULL-YEAR 2022 RESULTS

Net sales were $1.76 billion, an increase of 16% as compared to the prior year. Value-added sales of $1.14 billion were up 33% from the prior year. Double-digit organic value-added sales growth across most major end markets, as well as incremental sales related to the acquisition of HCS-Electronic Materials drove the increase.

Operating profit for the full year was $119.8 million and net income was $86.0 million, or $4.14 per diluted share, compared to operating profit of $77.1 million and net income of $72.5 million, or $3.50 per diluted share in the prior year period.

Excluding special items, detailed in the attached tables, adjusted EBITDA was $196.0 million for the full year, another annual record for the company, compared to $143.6 million in the prior year. The significant increase was driven mainly by higher volume, favorable pricing more than offsetting cost inflation and the benefit of the HCS Electronic Materials acquisition.

Adjusted net income was $109.5 million excluding acquisition amortization, or $5.27 per diluted share, an increase of 30% compared to $4.06 per share in the prior year period.

OUTLOOK

Despite an expectation of short-term softness in certain markets, we expect another year of strong end market outgrowth as a direct result of our organic initiatives. With this, we are guiding to the range of $5.50 to $5.90 for full year 2023 adjusted earnings per share, an increase of 8% 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, February 16, 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 450253. A replay of the call will be available until March 2, 2023 by dialing (877) 481-4010 or (919) 882-2331 if international; please reference replay ID number 46830. 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 Organic results exclude the impact of both acquisition and currency

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: our ability to achieve the strategic and other objectives related to the acquisition of HCS-Electronic Materials, including any expected synergies; our ability to successfully integrate the HCS-Electronic Materials business and other such acquisitions and achieve the expected results of the acquisition, the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition, and liquidity; the global economy, including inflationary pressures, potential future recessionary conditions, and the impact of tariffs and trade agreements; 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 implementing our strategic plans and the timely and successful completion and start-up 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 Materion’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 on operations from, and other effects of, catastrophic and other extraordinary events; and the risk factors set forth in Part 1, Item 1A of our 2021 Annual Report on Form 10-K.