Materion Corporation

Greetings. Welcome to the Materion Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in 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. You may begin.

Good morning, and thank you for joining us on our fourth quarter 2025 earnings conference call. This is Kyle Keller, 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 and full year 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 and full year, and following Jugal, Shelley will review the detailed financial results in addition to discussing expectations for 2026. 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 good morning, everyone. It's great to be with you today to discuss our fourth quarter and full year 2025 results and to provide an overview of our growth expectations for 2026. Our fourth quarter sales were impacted by a quality event with our largest customer. Excluding this event, we delivered very strong financial results led by outperformance on both top and bottom line in our electronic materials and precision optics businesses. This performance combined with new business growth and the momentum we are seeing across our markets and in our order rates, we are entering 2026 with confidence. Let me first address the quality event. In Q4, our large precision cloud strip customer alerted us to a performance issue with our material during their production process. Our team responded swiftly and decisively, collaborating closely with the customer to identify the root cause. To thoroughly assess and address the situation, we temporarily idled our two precision clad strip facilities, allowing us time to implement corrective actions. We conducted a comprehensive evaluation of the issue's scope, made targeted modifications to our processes and procedures, and introduced enhanced quality control measures designed to minimize the risk of any future occurrences. Both facilities came back online toward the end of the quarter and our ramping production, supported by additional resources and oversight. We are determined to deliver quality product to our customer and not impact 2026 planned volumes. The foundation of our company is built upon the strong partnerships we have cultivated with our customers by consistently providing high quality, critical materials to help solve their most complex technical challenges. We take our role as a trusted partner and supplier very seriously. Moving beyond this issue, I'm excited to share that we delivered 7% year-on-year organic growth in the fourth quarter, excluding precision clad strip. Our outgrowth initiatives coupled with strong end market dynamics are contributing to this level of growth and building our order backlog to continue the trajectory into 2026. Electronic Materials experienced its strongest sales quarter in nearly three years, with a 20% increase in BA, driven by accelerating growth in the semiconductor market. This growth is fueled by the rapid expansion of AI technologies and the rising need for high-performance computing and data storage solutions. EBITDA was up an impressive 50%, with 470 basis points of margin expansion, as the power of the work our team has done to streamline and strengthen that business is magnified by increasing volumes and a strong mix. Precision Optics continued its transformation journey, delivering a 26% increase in sales, marking the third consecutive quarter of top line improvement. The business is tracking ahead of plan, led by new business wins in semiconductor, space, defense, and automotive. This level of growth combined with an improved cost structure and operational efficiencies allowed the business to reach nearly 16% EBITDA margin. Performance material sales were impacted by the clad strip quality event. The business delivered strong margins on a lower sales base while focusing their energies on getting clad back online and building a strong pipeline of new business for 2026. Reflecting on 2025, I'm extremely proud of the significant progress we made while navigating some turbulent times, particularly in the first half, with the uncertainty around tariffs and the related impact to our China business. Let me highlight some significant accomplishments which will directly contribute to 2026 performance. Our electronic materials business delivered record results with nearly 23% EBITDA margins, up 300 basis points year on year. The transformation of precision optics achieved 7% year-on-year sales growth, reaching nearly 10% EBITDA margins, up almost 800 basis points. And our performance materials business reached 25% plus EBITDA margins for the third consecutive year. Our specialized comprehensive materials portfolio resulted in new business wins, which combined with improved market dynamics, have led to a 7% year-on-year increase in backlog. More importantly, backlog in the second half of the year improved 12% versus first half. We have seen a significant uptick in order rates led by our semiconductor business, up 6% year-on-year, 14% excluding China. And we completed acquisition of Conasol's semiconductor manufacturing footprint in Korea which will position us to deliver local to the leading semiconductor manufacturers. Our focus on growing in the new energy market in support of accelerating energy needs resulted in more than doubling sales year on year. For this market, we signed a multi-year supply agreement with Commonwealth Fusion Systems, a leading developer of fusion energy solutions. We surpassed $100 million in defense sales for the second consecutive year, and have delivered 10% yearly growth since 2020. New business bookings reached nearly $140 million, highest ever, with another $35 million booked so far this year. And we have approximately a $200 million pipeline of new business RFQs. These demand levels are aligned with the record levels of global defense spending while the U.S. and allied nations are prioritizing replenishment and modernization. In support of our accelerating growth in the defense market, we secured a $65 million investment from a major US defense prime to expand our beryllium capacity. This investment will not only enhance our capacity, it strengthens our strategic partnership with this customer, setting the stage for long-term growth in defense. While we will support meaningful near-term growth with our existing capacity, the new investment will enable us to support continued double-digit growth in the out years. Looking ahead to 2026, we expect to deliver approximately 15% earnings growth on a strong top-line sales growth. New business wins and continued market recovery will further expand our order book, particularly in markets like defense, semiconductor, energy, and space. We anticipate continued progress toward our midterm EBITDA margin target of 23%, supported by top-line growth, ongoing operational improvements, disciplined cost management, and the benefits of our portfolio transformation. Pre-cash flow generation is expected to strengthen as we optimize working capital, make thoughtful investments, and realize higher levels of profitability. The transformation of Precision Optics will advance further unlocking additional growth and margin expansion opportunities. Electronic materials will continue to benefit from the proliferation of AI and data center demand, driving sustained outgrowth. In performance materials, we expect marked operational improvements and top-line growth led by the defense, energy, and space and markets. We remain focused on delivering value for our customers and shareholders through innovation, operational excellence, and strategic investments. I want to thank our global team for their dedication, hard work, and unwavering focus on execution. Their commitment to innovation, quality, and customer service is the foundation of our company. I also want to thank our customers and shareholders for their continued trust and support. With that, I'll turn the call over to Shelley to review the financial details.