Materion Corporation

Greetings and welcome to the Maturian fourth quarter 2021 earnings conference call. There will be a Q&A session for today's conference following the presentation. Please press star one on your phone if you wish to enter the Q&A queue at any time. 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 and Investor Relations. Please go ahead, sir.

Good morning and thank you everyone for joining us on our fourth 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, a recap of the year, and an update on key strategic initiatives. Following Jugal, Shelly will review the detailed financial results for the quarter and the year, in addition to discussing our expectations for 2022. Then we will open up 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 gap numbers shown in attachments four and five in this morning's press release. The adjustments are made in the prior year period for comparative purposes and removes 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. I'm pleased to share details of our record performance in both the fourth quarter and for the full year, as we look forward to an exciting year ahead in 22. The stage is set for another year of advancing our transformation strategy, resulting in above-market growth aligned with megatrends, increased earnings, and margin expansion. We delivered record sales and earnings in the fourth quarter, finishing out a tremendous year for our company. Sales grew 27% year over year, while EBIT was up 50%. Not only did demand in our market show continued strength, but our organic initiatives helped to drive double-digit growth. We are showing the power of our outgrowth initiatives as we continue to build our pipeline of exciting opportunities and place a sharp focus on commercialization and execution. I'm very proud of our team for delivering for our customers. despite the challenges the Omicron spike brought about. Like most companies, we saw record COVID cases and related absences during the second half of December that persisted into January, temporarily slowing our shipping rates, but we expect we'll make up those sales by the second quarter. Despite the impact of these challenges, we still delivered record results and expanded EBIT margins in Q4. While our vertical integration and pass-through pricing mechanisms keep us fairly insulated from major raw material pressures, we are closely managing the impact of other costs and labor inflation and implementing selective price adjustments. The fourth quarter also marked the closure of the largest and most exciting acquisition in our company's history, HCS Electronic Materials. So far, the integration has been seamless. and our teams are coming together quickly and collaboratively with a sharp focus on delivering for our customers while managing strong growth. Thus far, this business is everything we expected it to be with great people, high quality products and countless opportunities to create value. Financially, the acquisition contributed in line with expectations in the fourth quarter and we expect a strong 2022. 2021 has been a remarkable year for Maternia as we delivered record levels of sales and earnings while making significant advancements in our strategy. We grew value-added sales almost 30% while increasing EBIT an impressive 79% year over year. We are truly transforming our company into an advanced materials leader and becoming our customers' partner of choice. I'm excited about the many advancements we've made with our customer focused projects this year as we work together to deliver products and solutions for their next generation applications. Construction of our precision clad strip plant is complete and we're moving on to the qualification phase. We are receiving excellent feedback from our customer giving us confidence that the qualification will continue to progress smoothly. This opportunity is set to contribute more meaningfully this year as we start to ramp production in Q2. This year, we significantly increased our penetration in automotive, particularly in high-growth EV applications with strong upside potential. We also delivered tremendous above-market growth across several of our other end markets. Our R&D investments are contributing to this above-market growth as we're able to develop new products for our customers' latest applications. 2021 marked the first year our R&D spend crossed 3% of sales, and we expect to continue to drive increased levels of investment spending to fuel the opportunity pipeline. On the operational excellence front, our plants supported unprecedented levels of demand in the face of continued COVID uncertainty and labor challenges. In order to continue our efficiency progress, we implemented a pilot manufacturing AI initiative aimed at improving first-time quality and improving yields. Early results of this effort look quite promising. We continued our progress on the inorganic front with the transformative acquisition of HCS electronic materials, increasing our portfolio alignment with hydro megatrends. As I mentioned, the acquisition is proving to be a very strong strategic fit. as we combine our portfolios to further advance our presence in the semiconductor market with all of the top customers. With the acquisition of Optics Balzers, we delivered $2 million of cost synergies in 2021 ahead of our planned pace while building a robust pipeline of opportunities that will drive future above market growth. As we look forward to 2022, I'm really excited about what our team is set to deliver. We expect to exceed $1 billion in VA sales for the first time as we grow our business and continue to outpace the end markets, which are poised for another year of solid growth. We are entering the year with the strongest order book we've seen in our company's history. To support our growth expectations, we are planning another year of robust capital spending. as we invest to build new capabilities for our customers and respond to increasing levels of demand. And we have the most talented and motivated team that is well aligned around our growth objectives. While challenges persist in today's environment, we expect we will successfully navigate and offset the impacts of labor constraints, inflationary pressures, and supply chain issues as we have in 2021. With all of that, I'm highly confident we can achieve another year of record value-added sales, earnings, and EPS along with expanded margins. In closing, let me reiterate how proud I am of what our team has accomplished in 2021, delivering record performance while building a strong pipeline of opportunities for the future. We are very optimistic about 2022 and look forward to another exciting year. Now, Let me turn the call over to Shelly to cover the financials.