Materion Corporation

the Materian Second Quarter 2024 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, Kyle Kelleher, Director of Investor Relations and Corporate FP&A. Kyle, you may begin.

Good morning, and thank you for joining us on our second quarter 2024 earnings conference call. This is Kyle Kelleher, Director, Investor Relations and Corporate FB&A. 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 B.J. Varghia, President and Chief Executive Officer, and Shelley Chadwick, Vice President and Chief Financial Officer. Our format for today's call is as follows. Jugal will provide opening comments on the quarter. Following Jugal, Shelley will review the detailed financial results for the quarter in addition to discussing our expectations for the second half of 2024. 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 yesterday afternoon. 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 eight in yesterday'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 the call over to Jugal for his comments.

Thanks, Kyle, and welcome, everyone. It's nice to be with you today to discuss our record second quarter performance as well as our outlook for the second half of the year. After a challenging start to the year, I'm pleased to share the Maturion is back on track, delivering record results again in the second quarter. Top line improvements coming mainly from organic initiatives combined with our focus on strong operational performance and cost management led to the highest quarterly EBITDA in the history of our company. I'm especially proud of our team for achieving these strong results while continuing to secure several new business wins and customer partnerships that will seed the pipeline for long-term, sustainable growth. Value-added sales were a second-quarter record, up 4% year-over-year, largely driven by strength in aerospace and defense and consumer electronics, in addition to a gradual semiconductor rebound now starting to flow through to our order box. The operational challenges we faced in the first quarter have largely been mitigated, and we're seeing the impact of the targeted cost improvement initiatives enhancing our bottom line, as we outperform our midterm margin target of 20% for a third time in the last five quarters. While we're seeing softer demand across select markets, including industrial and automotive, the momentum we're building across other large markets, like aerospace and defense, combined with our operational initiatives and targeted cost management, continues to drive strong performance. With new partnerships and business wins in space and defense, we are demonstrating once again the ability of our products and technologies to drive solutions for some of our customers' most demanding technical challenges. In aerospace and defense, our customers are developing new products and applications that require the highest level of performance reliability in the harshest conditions. The criticality of our materials to these applications is affirmed through rising demand for our products, as well as customer investments to secure the supply of these key materials. I am pleased to announce that a leading aerospace and defense customer has agreed to invest approximately $10 million in new capacity and capabilities at one of our existing sites in support of their growing demand. The growth of commercial space is driving new opportunities for us. as Materion remains uniquely suited to serve the needs of this expanding market. Our reputation as an innovative and reliable supplier for highly visible space projects, like the James Webb Space Telescope, have paved the way for opportunities to support the next generation of applications. In the second quarter, we secured a $150 million multi-year agreement to supply critical materials for space propulsion systems. This announcement follows four previously announced orders over the past 18 months, further solidifying our position as a long-term key partner to this important customer. Defense continues to be a growing market for us as advances in technology drive new government initiatives and modernization programs around the world. So far this year, we've received approximately $60 million of new orders in this market, with potential for significant upside in future years as these programs gain traction. The pace of incoming orders for defense is at roughly twice the pace we saw last year. In the second quarter, semiconductor recovery drove single-digit increases in both sequential and year-over-year comparisons for VA sales, mostly driven by growth in logic and memory applications. Although the pace of recovery for SEMI is looking to be slower than anticipated, we expect to see growth in the second half, as we're seeing a pickup in order rates for the remainder of the year. As the rebound occurs, we're expanding our capabilities to serve customers who are rapidly innovating to power advancements in support of rapid digitization and the shift toward artificial intelligence. The expansion of our portfolio to include ALD, or atomic layer deposition products, is allowing us to support the production of the most sophisticated semiconductor products. This quarter, we were pleased to receive an overall excellent supplier award from a leading ALD customer. Our team has collaborated with this customer to innovate multiple ALD materials, which will see expansion, the rapid growth of AI, and the increasing demand for the most complex chips. Another source of meaningful growth for Materion has been the important precision clad strip project that we started in 2020. Together with funding from the customer, we built a new state of the art facility to produce higher volumes of product in support of the global rollout of their next generation products. Today, we are pleased to be able to share that the customer who invested with us is Philip Morris International. Our precision-clad strip is used in PMI's Heat Not Burn consumables for the Icos Aluma, a smoke-free product that heats tobacco instead of burning it. It is an alternative for adult smokers who would otherwise continue to smoke that is gaining popularity in Europe and Japan. This business win has created a unique avenue to further diversify our portfolios. enabling us to continue to deliver strong performance, even as some large markets have experienced softness in recent months. We are proud of our team's ability to work with the customer in support of this application and successfully ramp up a new production facility to meet the customer's needs. These many examples demonstrate the power of the Materion strategy, which is grounded in our team's ability to harness our advanced materials expertise to create solutions that enable our customers breakthrough solutions. Our focus on our customers' needs across our diverse portfolio is helping us to navigate short-term headwinds across some end markets while also building our pipeline to ensure long-term organic outgrowth. With a laser focus on operational excellence and maintaining the benefits of the structural cost improvements we've put in place, we are positioning ourselves for strong earnings growth throughout the balance of the year. While we're taking down the top end of our guidance range to reflect a softer in-market environment, we are well-positioned to deliver another record year of material. Now, let me turn the call over to Shelly to cover more details on the financials.