Materion Corporation

Greetings and welcome to the Materion Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Zaranec. Vice President, Corporate Controller, Investor Relations. Please go ahead, sir.

Good morning, and thank you everyone for joining us on our third quarter 2021 earnings conference call. This is John Zaranec, Vice President, Corporate Controller, and Investor Relations for Materion Corporation. Before we begin our remarks this morning, I would like to point out that we have posted materials on the company's website that we'll reference as part of today's review of the quarterly results. You can also access the materials throughout the download feature on the earnings call webcast link. With me today is Jugal Vijayvargiya, President and Chief Executive Officer, and Shelly Chadwick, Vice President and Chief Financial Officer. Our format for today's conference call is as follows. Jugal will provide opening comments on the quarter and an update on key strategic initiatives. Following Jugal, Shelly will review detailed financial results for the quarter, and then we will open the call for questions. Let me remind investors that any forward-looking statements made in this presentation, including those in the outlook section and during the question and answer portion, are based on current expectations. The company's actual future performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. Those factors are listed in the earnings press release we issued this morning. Additionally, comments regarding earnings before interest and taxes, net income, and Earnings Per Share reflect the adjusted GAAP numbers shown in attachment 5 in this morning's press release. The adjustments are made in the prior year period for comparative purposes and remove special items, non-cash charges and certain discrete income tax adjustments. And now, I'll turn over the call to Jugal for his comments.

Thanks, John, and welcome, everyone. We are really excited to be with you this morning to share details of our third quarter record performance and to talk more about the acquisition of HCF Electronic Materials, which closed yesterday. This is an exciting time we're turning on. Our sales are at an all-time high. Our pipeline of organic growth projects is robust and contributing significantly to top-line growth. Our plants are performing well and delivering for our customers in some challenging conditions. And we've just closed on the largest and most strategically important acquisition in our company's history. We are delivering on all fronts, and it's all thanks to our dedicated employees around the world. In the third quarter, we delivered a record $216 million in value added sales, up 31% from prior year. Underlying market demand continues to be strong across many of our key end markets, and we're starting to see recovery in aerospace and oil and gas. Aerospace has now grown year on year for two consecutive quarters. Oil and gas saw a second consecutive quarter of growth. But what's most exciting to us is we are outgrowing markets as a result of our organic initiatives. Our focus on investments in R&D over the past few years is paying off as we are launching more new products and applications than ever before. Applications which span across all key markets and in support of important megatrends. Our sales into the EV market are doubling for the second consecutive year. Growth in the semiconductor space is far outpacing market as we forge ahead with new applications in support of increased electronics content. Introductions of new products such as ToughNet 2 are increasing our total addressable market. And our earnings are even more impressive, up 120% year-on-year. delivering highest level of EPS at date. Margins are almost 13%, approaching our target of mid-teens. To achieve this level of profitability in the face of challenges such as SAP, supply chain, and inflationary pressures is something we are extremely proud of. We're not immune to these challenges, but our teams have stepped up and are delivering for our customers, working closely with our suppliers, and maintaining operational excellence. We continue to effectively manage global supply chains and staffing needs through hard work and proactive planning. Our value-based pricing model, precious metal pass-through agreements, and vertical integration continue to assist in mitigating the effects of inflationary pressures, and our teams are keenly focused on operational excellence and effective cost control. Along with our record financial performance, we continue to execute well on our key growth initiatives, including the engineered precision quad strip project. Our new facility is now in the process of commissioning equipment and qualifying product in preparation for serving higher levels of demand next year. We also continue to make other global investments in our facilities and R&D to support our broad growth objectives. In addition to our organic growth investments, we are extremely excited to highlight the completion of the HCS electronic materials acquisition. This highly strategic and transformative addition significantly increases our access to the high-growth semiconductor market and aligns us with the top semiconductor manufacturers globally. We announced the close of the transaction yesterday and we're even more confident in the combined power of Materion and HCS Electronic Materials as we move forward as one company. As a reminder, HCS Electronic Materials is a leading provider of high purity tantalum thin film materials used in the semiconductor industry, as well as leading edge tantalum and niobium applications for the industrial and aerospace and defense markets. With a state of the art center of excellence with highly skilled and technical talent, HCS Electronic Materials serves all of the top semiconductor manufacturers globally. With this end market comprising 80% of their sales, There is no market more compelling to us given the massive growth of chip demand and usage driven by new technologies we're all exposed to every day. The proliferation of smart devices, high-speed connectivity, autonomous driving, artificial intelligence, and the cloud all drive the need for greater computing power, and semiconductors are at the heart of each of these global megatrends. We expect the demand for semiconductor applications to be sustainable and long-lasting. HCS Electronic Materials is a natural fit for Materion because it really checks all of the boxes for us. It aligns well with our strategy, brings high value for proprietary products with critical scale, and has compelling financial profile that will be immediately accretive to earnings and margins. The addition of HCS Electronic Materials is the right next step for Materion as we accelerate our global leadership as an advanced materials solutions provider. Well aligned with the evolving growth megatrends. If you missed the announcement of this acquisition in September, I encourage you to visit our investor website for more details. Now, let me share some comments on the remainder of this year and our expectation for full year results. We've delivered three consecutive quarters of exceptional performance and expect to continue this high level of performance as we finish out the year strong. Taking into account normal year-end seasonality, We expect two-four earnings in the range of $0.95 to $1.05, raising our full-year guidance once again to $3.73 to $3.83, an increase of 86% from the prior year. I cannot stress how proud I am of our global team's dedication to meeting our customers' needs and executing on our organic and inorganic growth initiatives. I would like to thank our teams for the hard work and dedication as we finish out this record-setting year and as we officially welcome the HCS Electronic Materials employees to the Materion family. Now, let me turn the call over to Shelly to cover the financial details.