Materion Corporation

Greetings and welcome to the Materion third quarter 2024 earnings conference call. At this time all participants are on a listen only mode and 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 Mr. Kyle Kelleher, Director, Investor Relations and Corporate FP&A. Sir, the floor is yours.

Good morning, and thank you for joining us on our third quarter 2024 earnings conference call. This is Kyle Kelleher, Director, Investor Relations and Corporate FP&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 Vijay Varghia, President and Chief Executive Officer, and Shelley 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. Following Jugal, Shelley will review the detailed financial results for the quarter in addition to discussing expectations for the remainder 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 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 eight 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, Kyle, and welcome, everyone. It's nice to be with you today to discuss our third quarter results. and provide an update on our outlook for the remainder of the year. Sales for the quarter were down slightly, with the expected inventory corrections in clad strip, as well as general market softness across several of our end markets, while we continue to see strength in space and defense. Despite these market headwinds, our team has been laser-focused on delivering strong performance. For the quarter, we achieved record EBITDA margins of 21.5%, In fact, for four of the last six quarters, our team has delivered north of 20% EBITDA margins, which has been our overall margin target. While the markets have been soft over the last several quarters, we have focused on aligning our portfolio to global megatrends, optimizing our footprint, and improving the cost structure of the company. Let me highlight some details around each of these areas. Although the semiconductor recovery is materializing slower than we anticipated, this was the second quarter in a row that we saw year-over-year growth in overall semi-sales. With higher demand for logic and memory applications driving this volume increase, we have been able to capitalize on related opportunities with our broad portfolio of semiconductor products and solutions. We're pleased to announce that Materion has entered into an agreement to serve as a technology partner for a major global supplier of semiconductor processing equipment. We will support this customer in its development of a new deposition material that will pave the way for a wide range of next-generation consumer and automotive electronic devices. Strength in the emerging space market and steady year-over-year growth in defense is more than offsetting the impact of continued softness in airplane build. leading to the 14th consecutive quarter of growth in overall demand for the aerospace and defense market. We continued our momentum this quarter with new business wins in defense, including the selection of our Supremex lightweight composite material for use on the prototype for the U.S. Army's future tilt-rotor long-range aircraft. This win is just another example of how Materion's products are uniquely suited for next-generation applications. In space, one of our newest high-performance products, the Aeontex alloy, was selected for a new telescope mirror that will be tested by NASA in its cryogenic test facility. This opportunity allows us to continue to build on our legacy of innovation leading to advances in space discovery while demonstrating the full potential of some of our most advanced materials. Just as we're adding to our portfolio in support of megatrends, we are taking steps to eliminate underperforming non-core businesses. Today, we're announcing the sale of a facility in Albuquerque, New Mexico that produces coatings for architectural glass mainly used in commercial construction. We've taken a number of additional steps to optimize our footprint over the last year with a focus on driving scale and efficiency. We closed a facility in Suzhou, China, consolidating production into other facilities in both Asia and North America. We are also in the midst of rightsizing two additional facilities in Asia, which should be completed by early next year. And we'll be closing a facility in Albuquerque, New Mexico, in conjunction with the business sale I mentioned earlier. Many of these actions are focused on improving the performance of our electronic materials As a result, this business is now delivering approximately 20% EBITDA margins, representing close to 400 basis points improvement so far this year on lower volume. Regarding our cost structure, we have been taking a series of decisive actions to streamline our organization and position us for greater efficiency. Over the last year, we have reduced 150 positions through targeted reductions and optimizing back office operations while controlling discretionary spend. At the same time, we remain focused on investing for the future. Our R&D spend this year is at an all-time high as we focus on partnering with our customers to deliver next-generation products and solutions. Even through periods of market softness, we have remained focused on investing for the future, further aligning the business to high-growth opportunities supported by global megatrends. Across our plants, We are improving yields and profitability through process and technical innovations and continuous improvement initiatives. Turning to precision optics. We're in the early stages of driving a meaningful transformation in that business and have appointed a new president, Jason Moore, to lead the efforts. While this business has experienced some speed bumps over the past couple of years, we believe the long-term fundamentals remain strong. As a reminder, we provide the world's most extensive offering of precision optical components, thin film coatings, and assemblies, enabling a number of different technologies and applications in many of the markets we serve. Jason is quickly working with his team to review the overall cost structure and footprint to ensure we're maximizing the value of this important business and prioritizing the many growth opportunities the business is developing. The number of careful and deliberate actions we're executing have allowed us to deliver record performance and are setting the stage for even stronger performance in the future. I'm proud of our team's unwavering focus on delivering for our customers while also taking the necessary steps to manage costs and improve performance. As we look ahead to the rest of the year, we expect to deliver sequential improvement in sales and profitability despite the soft end market conditions. We will continue our disciplined focus and deliver a solid 2024, further cementing the strong foundation we've built to accelerate results as markets recover. Now, let me turn the call over to Shelley to cover more details on the financials.