Materion Corporation

Greetings, welcome to the Materion Second Quarter 2025 earnings conference call. At this time all participants have been placed on 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. 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 Jubal B.J. Varghia, President and Chief Executive Officer of the B.J. Varghia Company. I would like to welcome you to our conference call. Our format for today's conference call is as follows. Jubal will provide opening comments on the quarter. Following Jubal, Shelley will review the detailed financial results for the quarter in addition to discussing expectations for the remainder of 2025. 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 different from that contemplated by the forward-looking statements as a result of a variety of factors. Those factors are listed in the earnings call press release 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 4-9 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 Jubal for its comments.

Thank you, Kyle, and welcome everyone. It's a pleasure to be with you today to discuss our second quarter results and provide an update on our outlook for the remainder of 2025. Our business performed very well in the quarter, delivering record second quarter margins and strong pre-cash flow. Although sales were down 2% organically, we experienced solid growth in aerospace and defense and energy, as well as in semiconductor outside of China. EBITDA was strong at $56 million, and we continue to deliver margins above 20%, despite some pockets of softness still moving through our top line. I am particularly proud of our electronic materials team as they delivered an all-time high EBITDA margin of 23.4%, demonstrating the power of the work that has been done to optimize the cost structure and improve operational efficiencies in that segment. We have reached a new level of performance with EM, and I expect the business to deliver very good margin expansion for the full year. Precision optics also showed a significant improvement in the second quarter as the transformation continues. Sales improved 14% sequentially, and EBITDA increased more than $2 million, marking the second consecutive quarter of improvement. Beyond the cost structure improvements that have been implemented, the business is making excellent progress on new business initiatives that should begin contributing by the end of the year. As we have discussed over the last few quarters, cash flow generation remains a key focus for us, as evidenced by our Q2 results. We generated $36 million in pre-cash flow, the strongest we've seen in any second quarter. Our disciplined approach to managing working capital and pacing capital investments is driving the performance. Earlier this month, we acquired the manufacturing assets for Tantrum Solutions from Conosal, a Korean manufacturer serving the semiconductor and adjacent markets. This acquisition expands our semiconductor footprint in Asia, allowing us to better serve the large tier 1 chip manufacturers in that region and insource more of the target manufacturing value chain. This move expands our position as a leading global supplier of deposition materials. The integration is progressing well, and we have begun producing samples for customer qualifications. While the results for the quarter were very strong, what is perhaps more encouraging are many positive signs we're seeing in order rates, signaling promising momentum as we move through the back half of 2025 and into 2026. As the broader semiconductor market is showing signs of improvement, with wafer starts up and customer inventories coming in line, our order rates are improving, especially within data storage, power, and communication devices. Sequentially, our order rates improved double digit, excluding China, where the customers are still showing terra-filater hesitance. Defense is an area that is getting a significant amount of attention globally, and this is leading to many new opportunities for Materion. Our pipeline of new business opportunities is rapidly accelerating, with over $100 million of requests for quotation received in the second quarter alone. In the first half of 2025, we saw record bookings of $75 million, and our initiative to grow our defense business outside the U.S. has resulted in a 60% -on-year sales increase. I expect the pace of defense-related activity will continue picking up for the back half of the year. In space, we continue to win new applications and expand our reach. Our order backlog has more than doubled in the last year, and we recently won a new application for ground station equipment for the leading U.S. space customer. Leveraging our larger space proposal systems win in the U.S., we also secured an order for the same application for the customer in Europe. I also want to highlight our business activity in the energy and market. Our sales are up 28% -on-year for the first half of 2025, as we are growing new and existing business to meet the world's increasing energy demands. We have a particular focus on initiatives in new energy, where our first half sales have exceeded the full year sales of 2024. As our business is well aligned to this global mega trend, we expect this area to be a growth driver for the company for the foreseeable future. When we released our first quarter earnings in late April, there was considerable uncertainty surrounding the tariff environment, which we noted as a qualifier to our guidance. While much remains to be finalized, we are more confident affirming our initial full year earnings guide despite the risk that remains, thanks to our strong -to-date performance, new business wins, and the increased order activity we are seeing. I would like to thank our global team for their unwavering commitment to driving our business forward while navigating the current environment. Now, let me turn the call over to Shelley to cover more details on the financials.