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8-K - 8-K - MATERION Corp | mtrn_2016816x8k.htm |
Investor Presentation
August 2016
EXHIBIT 99.1
These slides contain (and the accompanying oral discussion will contain, where applicable) “forward-
looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These
statements involve known and unknown risks, uncertainties and other factors that could cause the
actual results of the Company to differ materially from the results expressed or implied by these
statements, including health issues, litigation and regulation relating to our business, our ability to
achieve and/or maintain profitability, significant cyclical fluctuations in our customers’ businesses,
competitive substitutes for our products, risks associated with our international operations, including
foreign currency rate fluctuations, energy costs and the availability and prices of raw materials, and
other factors disclosed in periodic reports filed with the Securities and Exchange Commission.
Consequently, these forward-looking statements should be regarded as the Company’s current plans,
estimates and beliefs.
The Company does not undertake and specifically declines any obligation to publicly release the results
of any revisions to these forward-looking statements that may be made to reflect any future events or
circumstances after the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
These slides include certain non-GAAP financial measures as defined by the rules and regulations of
the Securities and Exchange Commission. A reconciliation of those measures to the most directly
comparable GAAP equivalent is provided in the Appendix to this presentation as well as a glossary of
non-GAAP definitions.
Forward-looking Statements
2
Materion: Our Purpose
Making advanced materials that
improve the world
3
Materion at a Glance
4
Adjusted EPS(1) $1.60
Market cap @ 12/31/15 $560M
Debt-to-capitalization 3%
Operating cash flow $90M
Dividend yield ~1%
Revenues $1.03B
Value-added sales $617.2M
2015
6.9 EV @ 12/31/15 / Adjusted EBITDA(1)
(1) Non-GAAP, excludes special items
Consumer
Electronics
28%
Industrial
Components
15%
Medical
11%
Defense
10%
Automotive
Electronics
9%
Telecom
Infrastructure
7%
Energy
5%
Performance Alloys
and Composites
54%
Advanced
Materials
31%
Precision
Coatings
15%
W H A T W E D O
Materion: Mission Critical Advanced Materials
A Balanced Portfolio
2016
5
% of Value-added Sales
Q2 – 2016
Performance Alloys and Composites
6
Clad Strip
12%
ToughMet
12%
CuBe
49%
Be - Alloys
8%
Be – High Purity
13%
Europe
21%
United States
57%
Rest of World
2%
Asia
20%
Telecom
Infrastructure 9%
Automotive
Electronics 16%
Defense 12%
Industrial
Components
21%
Medical
2%
Consumer
Electronics
20%
Other
15%
Energy
5%
0%
2%
4%
6%
8%
10%
12%
14%
$100
$150
$200
$250
$300
$350
$400
2012 2013 2014 2015 Q2 2016
TTM
$337 $340
$359
$335 $320
Product Mix Geographic Mix Value-added Sales by Market
New product development
• New proprietary non-Be alloys with improved durability &
weight-to-strength ratio
• New heat dissipating clad material
• Improving customer yields with “near net shape” products
New application development
• Clad material serving the renewable energy market
• Precision rolling to thinner strips opening new application
opportunities
Changing Beryllium demand
• World’s only fully integrated producer
• 70 years of proven mine reserves in Delta, UT
• Primary Be competitor is consuming stockpiled ore
Growth Drivers Value-added Sales
O
P
%
o
f
V
A
S
al
e
s
V
A
S
al
e
s
(
$ mill
io
n
s
)
Hydroxide
6%
0%
5%
10%
15%
20%
25%
30%
$100
$125
$150
$175
$200
2012 2013 2014 2015 Q2 2016
TTM
Advanced Materials
7
Services
15%
Packaging
11%
Targets
56%
Chemicals
17%
Europe
5%
United States
63%
Rest of World
2%
Asia
30%
Telecom
Infrastructure 5%
Defense
4%
Other 20%
Medical 6%
Consumer
Electronics
46%
Industrial
Components
12%
Energy 7%
$172
$169
$181 $183
$174
Product Mix Geographic Mix Value-added Sales by Market
Value Proposition
New product development
• Highly technical advanced materials and alloys, including
evaporation materials and larger PVD targets
• High-value products with capacity to scale
Semiconductor
• Long-term high growth market
• Best in class purity and cleanliness
• Quality and reliability highly valued
Growing Asia demand
• High growth region for our products
• Customers exploiting excess Asian fab capacity
• Use current material set and seed new business from US
Growth Drivers Value-added Sales
O
P
%
o
f
V
A
S
al
e
s
V
A
S
al
e
s
(
$ mill
io
n
s
)
0%
4%
8%
12%
16%
20%
24%
$60
$70
$80
$90
$100
$110
$120
2012 2013 2014 2015 Q2 2016
TTM
Precision Coatings
8
BGTS
44%
Projection Display
Components
18%
Optical Filters
& Arrays 38%
Europe
8%
United States
75%
Rest of World
1%
Asia
16%
Automotive
Electronics 2%
Defense 16%
Other 3%
Medical 54%
Consumer
Electronics
22%
Industrial
Components 3%
$106
$104
$102 $102 $102
Product Mix Geographic Mix Value-added Sales by Market
New product development
• New precious metal coating stacks
• Gesture control sensing
• Phosphor wheel and thermal imaging
New market development
• Expanding into Asia with blood glucose test strips
• New applications for medical sensing films
• Growing demand for optical filters in consumer electronics
and automotive sensors
Expanded service offering
• Optical coating is the critical sensor assembly application
• Wafer level processing
• Film slitting to size
Growth Drivers Value-added Sales
O
P
%
o
f
V
A
S
al
e
s
V
A
S
al
e
s
(
$ mill
io
n
s
)
Why Invest in Materion?
G O A L
N E X T 3 Y E A R S :
Sustained growth
Double-digit EPS
CAGR
Strong positions in growing markets
• High barriers to entry
1
Promising new product launches 2
9
Strategy for sustained, profitable growth 4
3
Solid cash flow organic growth,
acquisitions, dividends, share buybacks
Secular Market Trends Play to our Strengths
Key Trends
• Miniaturization of electronics/IOT
• Additional electronic instruments
for autos, aircraft
• Expanding high performance
optical device opportunities
• Innovation in medical diagnostics
and sensors
• Extraction of O&G from previously
inaccessible locations
• Alternative energy
• New aircraft builds and retrofits
• Advancements in lighting (LED)
Characteristics
of our Materials
Conductivity
Corrosion resistance
Weight savings (lighter)
Purity
Wavelength management
Heat resistance
Lubricity
Reliability
Durability
Miniaturization
Strength
10
Well-positioned with Leading Global Product Offering
Product
2015
Percent of
Value-added
Sales
Expected
Annual Growth
Next 3-5 Years
Leading supplier of beryllium-
containing products ~40%
Leading supplier of high-purity precious
metal for PVD market ~22%
Leading supplier of
high-end optical coatings ~9%
Leading supplier of specialty coating test
strips for medical diagnosis ~7%
Only supplier of unique copper-
nickel-tin materials, ToughMet® ~6%
Double digit growth Single digit growth
Key Differentiated Products
11
Evolving Potential from Beryllium Supply Shortage
Materion – leading position in beryllium market
• Only global integrated producer
– approximately 70 years of proven reserves in Utah mine
– supplies over 70% of world’s mined beryllium
• 40% of company sales include beryllium in some form
Signs of shortage ahead
• Global stockpiled sources depleting
• No other commercially active bertrandite ore mine
• Materion positioned to support world demand
• Significant incremental profit potential
12
Top Key Markets Over 80% of Sales
Market
2015 % of
Value-added Sales
Macro
Trends
Key
Drivers
Consumer
Electronics 26%
• Smart device growth
• Gesture control
Industrial
Components 15%
• Heavy equipment builds
• Plastic tooling
• Fire protection (R and C construction)
Medical 12%
• Blood analysis test coating for medical diagnosis
• Nuclear diagnostics equipment
Automotive
Electronics 9%
• Increasing global car production
• Electronic systems and engine control
Defense 8%
• Night vision system optics
• Structural and electronic components for
satellites
Telecom
Infrastructure 6%
• Undersea repeater housings
• Shielding, modular jacks, PCB and processor
sockets for local area networks
Energy 6%
• Deep sea drilling and completion
• Directional drilling
• Solar, batteries and smart grid devices
Total 82%
13
Why Invest in Materion?
G O A L
N E X T 3 Y E A R S :
Sustained growth
Double-digit EPS
CAGR
Strong positions in growing markets
• High barriers to entry
1
Promising new product launches 2
14
Strategy for sustained, profitable growth 4
3
Solid cash flow organic growth,
acquisitions, dividends, share buybacks
Wide Range of Strategic Investments…
New Wafer Coating
Facility
ISO Class 5 for Semiconductor
Cleanroom
Increased Capacity
LED Phosphor
ToughMet® Capacity
Expansion
Expanded Beryllium
Hydroxide Capacity
Singapore
Expansion
15
… Driving Record Number of New Product Launches
Examples of New Products Sales Growth
Sales from new products were 12% of total value-added sales for 2015
New
products
Existing
products
Gesture
Controls
Dovetail
Clad
ToughMet®
Oil & Gas
Bulk Metallic Glass
(Liquidmetal)
50%
50%
Wafer Level
Processing
Dovetail
Connectors
16
Why Invest in Materion?
G O A L
N E X T 3 Y E A R S :
Sustained growth
Double-digit EPS
CAGR
Strong positions in growing markets
• High barriers to entry
1
Promising new product launches 2
17
Strategy for sustained, profitable growth 4
3
Solid cash flow organic growth,
acquisitions, dividends, share buybacks
Cash Flow and Working Capital Efficiency Focus
Lean Sigma
• Cycle time reduction
• Yield improvement
• On-time shipments
18
Improve Working Capital
Efficiency
Working capital % of net sales
2015 2018 (F)
25%
27%
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2012 2013 2014 2015
Cash Flow from Operations
($ in millions)
Disciplined Capital Deployment Going Forward
Return Cash to Shareholders
• Share repurchase - $50M
authorization ($20M remaining)
• Dividends – increased 6% in 2015
Capex Below Depreciation
• Invest in facilities
• Invest in new products
Growth
• Organic
• Selective bolt-on acquisitions
19
35% Debt &
Shareholder
65%
Growth
Why Invest in Materion?
G O A L
N E X T 3 Y E A R S :
Sustained growth
Double-digit EPS
CAGR
Strong positions in growing markets
• High barriers to entry
1
Promising new product launches 2
20
Strategy for sustained, profitable growth 4
3
Solid cash flow organic growth,
acquisitions, dividends, share buybacks
Continuing to Execute Three Point Strategy
Grow and
Diversify Revenue
Expand Margins
Improve Capital
Utilization
• New products
• Asia expansion
• Strategic acquisitions
• Higher margin
products
• Cost reductions
• Disciplined pricing
• Lean sigma
• Improve working
capital efficiency 1
2
3 Creating Shareholder Value
21
High Value-added Business Model
22
Identify high
growth secular
markets
Target the fastest
growing niches of
those markets
Expand with
innovative
products
Add synergistic
acquisitions
Ensure
financial
discipline
01
02
03 04
05
Appendix
$1.67
2013 2014 2015
Performing Well Despite Headwinds
Operating Margins Adjusted EPS*
(Adjusted Op. Profit %* of Value-added Sales)
5.3%
7.7%
7.4%
2013 2014 2015
A-1
* Adjusted EPS and operating profit percent of value-added sales are non-GAAP results which exclude non-recurring
costs in 2013 of $0.15 per share, non-recurring gains of $0.35 per share in 2014 and non-recurring gains of $0.02 per
share in 2015.
$1.12
$1.60
Strong Cash Flow and Balance Sheet
Cash Flow Balance Sheet
2015
2015 operating
cash flow
Average operating cash
flow last 5 years
$90M
>$60M
Total Capitalization
Debt
3%
A-2
Entering a Phase of Renewed Long-term Profitable
Growth
Consolidation
and product
rationalization
Sharpened execution,
renewed long-term
profitable growth
2002 2012 / 2014 Today
Transformation:
Growth in new markets
and technologies
A-3
Materion: The Transformation
GDP growth Multiples of GDP
Limited markets Broader market opportunities
Low margin Higher margin
High infrastructure Efficient infrastructure
High fixed and working capital Lower capital intensity
Slow cash to cash cycle Faster cash cycle
Faster growth – Higher margins – Stronger balance sheet
A-4
I/O Connector Contacts
Battery Contacts
Internal Antenna Contacts
Grounding Clips
and Audio Jacks
Micro Mezzanine
Connectors for
LCD Screen
Internal Electronics and LED
• Thin film materials – power
amplifiers, LED, SAW and BAW
devices, filters, and ICs
• Hermetic solutions for SAW
• Refining / recycling
• Precision parts cleaning
Other Smart Phone Applications:
• Circuit board and IC inspection
• RoHS compliance assurance
• Cellular infrastructure with high power RF packaging
Internal Electronics
• Precursor materials for GaAs wafer
production
Applications: Smartphones
Voice Coil Motor (auto focus
lens stabilizer)
A-5
Application: Aircraft
A-6
ToughMet Heavy Machinery Applications
A-7
Directional Drilling and Measurement
(Many ToughMet Components)
A-8
© 2013 – Proprietary to Materion Brush Inc.
Under Water
Wellhead Equipment
Directional Drilling Equipment
• Measuring While Drilling (MWD)
• Logging While Drilling (LWD)
• Mud Pulse Telemetry (MPT) systems
Drill Bits
Structural Rig
Components
Wellhead Control
Equipment
Other Oil & Gas Applications:
• Artificial lift equipment
• Elemental analysis
• Down hole x-ray inspection
• Remote operated vehicles, blow
out preventers, hydraulic
actuators, control fluid couplings
Applications: Oil & Gas
A-9
Cardiac Rhythm Management
• Electronic interconnects / components
• Niobium / titanium electron beam weld
Insulin Pump
• EMI shielding and grounding
• Electrical terminals in connectors
Seizure Control
• Thin film deposition implantable
electrode – Parkinson's disease
(R&D)
External glucose analysis
• Subcutaneous sensors for
glucose measurement
Subcutaneous Glucose Analysis
• Thin film coatings – electrode
monitoring device
Radiation Therapy –
Neutron Reflectors
X-Ray Mammography
Other Medical Applications:
• DNA sequencing optics
• CT scan
• Diagnostic x-rays
• Advanced drug delivery components
• Diagnostic electronic components
• Anesthesia monitoring components
• Operating instruments
• Medical radioisotopes (production reactors)
• RF connectors for MRI equipment,
communication devices
• RF connectors for portable diagnostic /
therapeutic equipment
Applications: Medical
Battery Contacts for
Hearing Aids
A-10
Lithium Ion Battery
Interconnects
Battery
Management
Resistors
Electronic
Power Steering
Modules
ABS
Leadframes
Engine Efficiency
Oxygen Sensors
Mirror & Windshield
Electronic Connections
Air Bag
Sensors
Lamp
Socket
Connectors
Auto Dimming
Mirror Connectors
Hybrid Vehicle
Motor & Module
Connectors
Window and
Door Switches
Fuel Pump and
Fuel Level
Sensors
Battery
Terminals
Engine Ignition
and Control
Modules
Battery & Relay
Control
Modules
Turn Signal and
Emergency Flasher
Relays
On Board
Telematics
Applications: Automotive Electronics
Night Vision Optics
Speed Control
Optics
Camera Optics
Navigation
System
Contacts
Start-Stop
System
A-11
Applications: Defense
• Infrared Sensors for fighter jet and UAV optical targeting
• Electronic packaging for defense avionics, radar and electronic
countermeasure systems
• Structural and electronic components for satellites
• X-ray windows in security imaging systems
• Laser protection optical coatings
• Night vision system optics
A-12
Applications: Telecommunications Infrastructure
Base Stations
• Coaxial connectors
• High power amplifiers
Local Area Networks
• Shielding
• Modular jacks
• PCB sockets
• Processor sockets
Other Telecommunications
Infrastructure Applications
• Undersea repeater housings
A-13
Technology: Amorphous Silicon (a-Si,
tandem and multi-junction)
Thin Film (PVD) Materials Silicon based
photovoltaic cells
• Front and back contact layers
• TCO Transparent conductive oxide layers
Technology: Cadmium Telluride (CdTe)
Thin Film (PVD) Materials
• Cadmium based solar cell architecture.
N and P type cadmium semiconductor
materials
• TCO transparent conductive
oxide layers
• Front and back-contact layers
Technology: Concentrator Photovoltaic (CPV)
Thin Film (PVD) Materials
• Solar technology based on concentrating solar
rays into a semiconductor device via large lens
• Anti-reflection coating materials
• Precious metal contact materials
Micro Electronic Packaging Products
• Bonding ribbon – Au & Ag
• Lead-free solders
• Metalized ceramic substrates
Technology: Flexible Solar Cells /
Building Integrated Photovoltaic
Thin Film Services
• Solar cells built in flexible substrates to
accommodate applications such as
roofing tiles or defense
Technology: Crystalline
Silicon (Si)
Interconnect Materials
• Front and backplane systems
for high efficiency designs
Applications: Solar Energy
A-14
Technology: Copper Indium
Gallium Selenide (CIGS)
Thin Film (PVD) Materials as
well as Powders for Printing
CIGS applications
• Copper indium gallium selenide
thin film and screen printing
applications for flexible and rigid
solar cells
25 Alloy Strip
• Panel interconnects
Reconciliation of Non-GAAP Measure - Profitability
A-15
Glossary of Terms
1. Debt-to-capitalization = debt/(net debt+Shareholders’ equity)
2. EV / Adjusted EBITDA = Enterprise Value/EBITDA=(Market
Cap+Debt)/EBITDA
3. Total Capitalization = Net debt+Shareholders’ equity
4. Working Capital % of net sales = (A/R+Inv-A/P)/Total Sales
A-16