Materion Corporation

Welcome to the Materion first quarter 2023 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. Please note this conference is being recorded. I will now turn the conference over to your host, John Zoranek, Chief Accounting Officer. You may begin.

Good morning, and thank you for joining us on our first quarter 2023 earnings conference call. This is John Zoranek, Chief Accounting Officer. 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 will reference as part of today's review of the quarterly results. You can also access the materials through the download feature on the earnings call webcast link. With me today is Jugal Vijay Varghia, 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 as well as an update on key strategic initiatives. Following Jugal, Shelly will review the detailed financial results for the quarter. in addition to discussing our expectations for the remainder of 2023. We will then open up the call for questions. Let me remind investors that any forward-looking statements made in the presentation, including those in the outlook section and during the question and answer portion, are based on current expectations. The company's actual 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, taxes, depreciation, depletion, and amortization, net income, and earnings per share reflect the adjusted gap numbers shown in attachments four through seven 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. It's great to be with you today to share details on our strong first quarter performance. Coming off an outstanding 2022, I'm pleased to report that we have continued that momentum into this year, delivering a record first quarter for value added sales, EBITDA, and EPS. We continue to see the power of our transformation into a global leader in high performance advanced materials, as strong execution on our strategic initiatives is enabling us to consistently outgrow our end markets. We continue to build out our healthy pipeline of growth projects as our customers partner with us to develop next-generation solutions aligned with global megatrends. These strategic partnerships continue to position us for future growth and enable us to deliver today, even in the face of softness in some markets. In the first quarter, we once again saw double-digit organic sales earnings growth with meaningful margin expansion. For a combination of strong volume, operational execution, and diligent cost control, we achieved value-added sales growth of 15%, EBITDA growth of 20%, and EPS growth of 12%. These results reflect the 10th straight quarter of year-over-year improvement across all three metrics, more than doubling our quarterly sales, EBITDA, and EPS over that time period. Led by our new precision clad strip project, our many outgrowth initiatives contributed to our record performance. We also continue to benefit from our diversified market strategy with strong end market demand across aerospace, automotive, and energy. Our advanced capabilities have enabled us to increase our content across multiple applications in these markets, where we have driven a more than 70% content increase for auto, more than 25% for aerospace, and more than 20% for oil and gas since 2019. These advances helped us deliver continued organic growth that outpaced the expected slowing of semiconductor and consumer electronics. In total, our outgrowth initiatives drove top and bottom line growth with strong margin expansion. reaching nearly 18% EBITDA in the quarter, tracking well towards our midterm target of 20%. Our new precision clad strip facility is contributing meaningfully. The construction of our expansion of this facility is progressing as planned, and we are on track to begin production late next year. The build out of our new facility in Milwaukee is also on track, and production capabilities are scheduled to come online in the first half of next year. This site will expand our capacity to support production of the most sophisticated semiconductor chips, as well as broaden our advanced chemicals capabilities to produce materials for next generation batteries for electric vehicles. On our last call, we noted that we had been awarded a $10 million order to supply critical materials for space propulsion systems. I am pleased to report that the customer has awarded us a second order worth $12 million. for a total of $22 million to date. We recently began shipping product and expect to fulfill the first order this year. Our products, which are designed to withstand the harsh and demanding conditions of space travel, are crucial for carrying out critical missions. We continue to work closely with our increasing portfolio of space customers to align our products and meet the evolving requirements of the industry today and well into the future. The clean energy megatron continues to create opportunities for us as well, as the properties of many of our products are ideal for leading-edge solutions. To that end, we achieved a major milestone in our partnership with Kairos Power last month as we completed the first delivery of FLY. FLY is a reliable, safe, and cost-effective molten salt coolant used in nuclear energy production. This customer-funded molten salt purification plant is off to a fantastic start. Our customer-funded growth initiatives and winning opportunities with new and existing customers are perhaps the most compelling examples of how we are building customer confidence through our deep expertise to help them continuously enable what's next. With the success and progress on our outgrowth initiatives, we remain confident that we're on pace to deliver a strong 2023, even as the environment grows more challenging, particularly in the semiconductor and consumer electronics markets. With that in mind, our global team remains laser focused on driving operational excellence and targeted cost management actions to ensure we continue to deliver consistent results in an uneven environment. At the same time, we'll continue to advance and invest in our output initiatives, positioning Materion for long-term growth and success. I'm very proud of our team's performance. as we remain on track to deliver record results on both the top and bottom for the third consecutive year. Despite increasing headwinds in certain areas with the strength of our portfolio and diversified end market exposure, coupled with our targeted operational excellence initiatives, I am pleased to share that we are raising our full year guidance for 2023. Now, let me turn the call over to Shelly to cover more details on the financials.