Materion Corp. Files Q3 2024 10-Q

TL;DR

**MATERION Q3 2024 10-Q FILED. FINANCIALS AVAILABLE.**

AI Summary

Materion Corp. reported its third-quarter results for the period ending September 27, 2024. The company's financial performance for this quarter is detailed in the 10-Q filing. Specific revenue, cost of goods sold, and interest expense figures are available within the document.

Why It Matters

This filing provides investors and analysts with the latest financial performance data for Materion Corp., crucial for understanding the company's current operational health and future prospects.

Risk Assessment

Risk Level: low — This is a standard quarterly financial filing (10-Q) and does not inherently present new risks.

Key Numbers

• 2024-01-01 to 2024-09-27 — Reporting Period (Year-to-date period covered by the filing)
• 2024-06-29 to 2024-09-27 — Q3 Reporting Period (Third quarter period covered by the filing)
• 2023-07-01 to 2023-09-29 — Prior Year Q3 Period (Third quarter period for the previous year for comparison)

Key Players & Entities

• MATERION Corp (company) — Filer of the 10-Q report
• 20240927 (date) — End of the reporting period
• 20241030 (date) — Filing date of the report
• 0001104657 (company) — Central Index Key for Materion Corp.

FAQ

Filing Documents

• mtrn-20240927.htm (10-Q) — 1704KB
• mtrn-ex311_2024q310q.htm (EX-31.1) — 18KB
• mtrn-ex312_2024q310q.htm (EX-31.2) — 18KB
• mtrn-ex32_2024q310q.htm (EX-32) — 7KB
• mtrn-ex95_2024q310q.htm (EX-95) — 13KB
• 0001104657-24-000146.txt ( ) — 8226KB
• mtrn-20240927.xsd (EX-101.SCH) — 38KB
• mtrn-20240927_cal.xml (EX-101.CAL) — 70KB
• mtrn-20240927_def.xml (EX-101.DEF) — 166KB
• mtrn-20240927_lab.xml (EX-101.LAB) — 523KB
• mtrn-20240927_pre.xml (EX-101.PRE) — 368KB
• mtrn-20240927_htm.xml (XML) — 1705KB

Financial Statements

Item 1. Financial Statements Materion Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) Third Quarter Ended Nine Months Ended (Thousands, except per share amounts) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 Net sales $ 436,715 $ 403,067 $ 1,247,868 $ 1,244,144 Cost of sales 355,777 314,131 1,014,859 974,817 Gross margin 80,938 88,936 233,009 269,327 Selling, general, and administrative expense 35,009 38,806 104,454 118,053 Research and development expense 7,868 6,322 22,712 21,098 Restructuring expense (income) 1,493 1,077 6,161 3,194 Other—net 5,309 6,211 14,112 18,178 Operating profit 31,259 36,520 85,570 108,804 Other non-operating (income)—net ( 642 ) ( 685 ) ( 1,925 ) ( 2,141 ) Interest expense—net 8,839 7,678 25,920 22,820 Income before income taxes 23,062 29,527 61,575 88,125 Income tax expense 768 2,963 6,836 11,891 Net income $ 22,294 $ 26,564 $ 54,739 $ 76,234 Basic earnings per share: Net income per share of common stock $ 1.07 $ 1.29 $ 2.64 $ 3.70 Diluted earnings per share: Net income per share of common stock $ 1.07 $ 1.27 $ 2.61 $ 3.65 Weighted-average number of shares of common stock outstanding: Basic 20,749 20,640 20,723 20,611 Diluted 20,920 20,905 20,935 20,891 See notes to these consolidated financial statements. 2 Materion Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (Unaudited) Third Quarter Ended Nine Months Ended September 27, September 29, September 27, September 29, (Thousands) 2024 2023 2024 2023 Net income $ 22,294 $ 26,564 $ 54,739 $ 76,234 Other comprehensive income (loss): Foreign currency translation adjustment 7,579 ( 3,259 ) 2,030 ( 1,313 ) Derivative and hedging activity, net of tax ( 4,452 ) 2,019 ( 2,606 ) 2,860 Pension and post-employment benefit adjustment, net of tax ( 62 ) ( 145 ) ( 298 ) ( 466 ) Other comprehensive loss 3,065 ( 1,385 ) ( 874 ) 1,081 Comprehensive income $ 25,359 $ 25,179 $

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) Note A — Accounting Policies Basis of Presentation: The accompanying consolidated financial statements of Materion Corporation and its subsidiaries (referred to herein as the Company, our, we, or us) contain all of the adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods reported. All material adjustments were of a normal and recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's 2023 Annual Report on Form 10-K. The interim period results are not necessarily indicative of the results to be expected for the full year. Certain prior year amounts have been reclassified to conform with the current year presentation. These reclassifications had no effect on the reported results of operations, cash flows or financial position. Specifically, the net sales related to the previously disclosed precision clad strip project have been reclassified from the other end market to the consumer electronics end market within Note B. New Pronouncements Adopted: In November 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-07 "Improvements to Reportable Segment Disclosures (Topic 280)". This ASU updates current reportable segment disclosure requirements to require disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (CODM) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and deciding how to allocate resources. This ASU will be effective for the annual period ending December 31, 2024. Adoption of thi

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) The below table presents financial information for each segment and a reconciliation of EBITDA to Net Income (the most directly comparable GAAP financial measure) for the third quarter and first nine months of 2024 and 2023: (Thousands) Third Quarter 2024 Third Quarter 2023 First Nine Months 2024 First Nine Months 2023 Net sales: Performance Materials (1) $ 177,376 $ 184,642 $ 533,534 $ 554,427 Electronic Materials (1) 236,906 192,305 641,564 611,855 Precision Optics 22,433 26,120 72,770 77,862 Other — — — — Net sales 436,715 403,067 1,247,868 1,244,144 Segment EBITDA: Performance Materials $ 44,802 $ 46,366 $ 115,893 $ 134,061 Electronic Materials 12,309 10,155 40,118 37,504 Precision Optics ( 39 ) 3,261 1,297 7,654 Other ( 6,578 ) ( 7,497 ) ( 18,522 ) ( 21,750 ) Total Segment EBITDA 50,494 52,285 138,786 157,469 Income tax expense 768 2,963 6,836 11,891 Interest expense - net 8,839 7,678 25,920 22,820 Depreciation, depletion and amortization 18,593 15,080 51,291 46,524 Net income $ 22,294 $ 26,564 $ 54,739 $ 76,234 (1) Excludes inter-segment sales of $ 1.6 million for the third quarter of 2024 and $ 4.8 million for the first nine months of 2024 for Electronic Materials. Excludes inter-segment sales of $ 3.2 million for the third quarter of 2023 and $ 7.3 million for the first nine months of 2023 for Electronic Materials. There were no material inter-segment sales for Performance Materials in 2024 or 2023. Inter-segment sales are eliminated in consolidation. The following table disaggregates revenue for each segment by end market for the third quarter and first nine months of 2024 and 2023: 9 Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) (Thousands) Performance Materials Electronic Materials Precision Optics Other Total Third Quarter 2024 End Market Semiconductor $ 2,097 $ 198,790 $ 798 $ — $ 201,685 Industrial 33,494 7,352 6,254 — 47,100 Aerospace and defense 44,940 975 5,126 — 51,041 Consumer electronics 49,131 172 4,006 — 53,309 Automotive 18,123 1,724 1,780 — 21,627 Energy 12,819 20,810 — — 33,629 Telecom and data center 7,929 75 — — 8,004 Other 8,843 7,008 4,469 — 20,320 Total $ 177,376 $ 236,906 $ 22,433 $ — $ 436,715 Third Quarter 2023 End Market Semiconductor $ 2,712 $ 151,388 $ 624 $ — $ 154,724 Industrial 32,046 7,958 6,954 — 46,958 Aerospace and defense 30,938 1,102 7,124 — 39,164 Consumer electronics 59,486 144 4,254 — 63,884 Automotive 19,447 1,747 2,606 — 23,800 Energy 13,013 25,179 — — 38,192 Telecom and data center 15,685 10 — — 15,695 Other 11,315 4,777 4,558 — 20,650 Total $ 184,642 $ 192,305 $ 26,120 $ — $ 403,067 10 Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) (Thousands) Performance Materials Electronic Materials Precision Optics Other Total First Nine Months 2024 End Market Semiconductor $ 6,059 $ 533,312 $ 1,877 $ — $ 541,248 Industrial 91,765 25,466 19,399 — 136,630 Aerospace and defense 129,011 4,260 16,980 — 150,251 Consumer electronics 166,797 309 11,272 — 178,378 Automotive 54,190 5,367 5,459 — 65,016 Energy 30,191 53,480 — — 83,671 Telecom and data center 28,913 131 — — 29,044 Other 26,608 19,239 17,783 — 63,630 Total $ 533,534 $ 641,564 $ 72,770 $ — $ 1,247,868 First Nine Months 2023 End Market Semiconductor $ 9,713 $ 487,361 $ 2,279 $ — $ 499,353 Industrial 111,436 25,102 22,400 — 158,938 Aerospace and defense 92,734 4,670 17,771 — 115,175 Consumer electronics 162,180 526 11,075 — 173,781 Automotive 66,753 4,966 7,090 — 78,809 Energy 38,597 71,940 — — 110,537 Telecom and data center 49,223 68 — — 49,291 Other 23,791 17,222 17,247 — 58,260 Total $ 554,427 $ 611,855 $ 77,862 $ — $ 1,244,144 Note C — Revenue Recognition Net sales consist primarily of revenue from the sale of precious and non-precious specialty metals, beryllium and copper-based alloys, beryllium composites, and other products into numerous end markets. The Company requires an agreement with a customer that creates enforceable rights and performance obligations. The Company generally recognizes revenue in an amount that reflects the consideration to which it expects to be entitled upon satisfaction of a performance obligation by transferring control over a product to the customer. Control over a product is generally transferred to the customer when the Company has a present right to payment, the customer has legal title, the customer has physical possession, the customer has the significant risks and rewards of ownership, and/or the customer has accepted the product. Transaction Price Allocated to Future Performance Obligations: Accounting Standards Codification

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) Contract Balances : The timing of revenue recognition, billings, and cash collections resulted in the following contract assets and contract liabilities: (Thousands) September 27, 2024 December 31, 2023 $ change % change Accounts receivable, trade $ 215,420 $ 193,345 $ 22,075 11 % Unbilled receivables 38,098 29,524 8,574 29 % Unearned revenue 15,497 13,843 1,654 12 % Accounts receivable, trade represents payments due from customers relating to the transfer of the Company's products and services. The Company believes that its receivables are collectible and appropriate allowances for doubtful accounts have been recorded. Impairment losses (bad debt) incurred related to our receivables were immaterial during the third quarter of 2024. Unbilled receivables represent expenditures on contracts, plus applicable profit margin, not yet billed. Unbilled receivables are generally billed and collected within one year. Billings made on contracts are recorded as a reduction of unbilled receivables. Unearned revenue is recorded for consideration received from customers in advance of satisfaction of the related performance obligations. The Company recognized approximately $ 13.5 million of the December 31, 2023 short-term unearned amounts as revenue during the first nine months of 2024. As a practical expedient, the Company does not adjust the promised amount of consideration for the effects of a significant financing component because the period between the transfer of a product or service to a customer and when the customer pays for that product or service will be one year or less. The Company does not include extended payment terms in its contracts with customers. Note D — Restructuring The Company implemented various restructuring initiatives across the Performance Materials, Electronic Materials, Precision Optics and Other segments to improve operational efficiency during the three and nine months

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) Note F — Income Taxes The Company's effective tax rate for the third quarter of 2024 and 2023 was 3.3 % and 10.0 %, respectively, and 11.1 % and 13.5 % in the first nine months of 2024 and 2023, respectively. The effective tax rate for 2024 is lower than the statutory tax rate primarily due to the impact of percentage depletion, research and development and production tax credits, and the foreign derived intangible income deduction. The effective tax rate for 2023 was lower than the statutory tax rate primarily due to the impact of percentage depletion, research and development and production tax credits, and the foreign derived intangible income deduction. The effective tax rate for the first nine months of 2024 includes a nominal amount of discrete income tax expense primarily consisting of $ 1.0 million of excess tax benefits from stock-based compensation awards offset by a $ 1.1 million valuation allowance recorded against deferred tax assets that are not likely to be realized for one of the Company's foreign subsidiaries. The effective tax rate for the first nine months of 2023 included a net discrete income tax benefit of $ 3.4 million, primarily related to an optimization of our foreign-derived intangible income deduction benefit, excess tax benefits from stock-based compensation awards, and return to provision adjustments. Government Tax Credits Pursuant to The Inflation Reduction Act of 2022 (IRA), the Company is eligible for the Advanced Manufacturing Production Credit (production credit) beginning in 2023. The production credit provides an annual cash benefit for a portion of the production costs for the sale of certain critical minerals produced in the U.S. and sold during the year. On October 24, 2024, the U.S. Treasury Department published final regulations on the production credit that include clarifying guidance regarding the definition of production costs included in the computation of t

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) Note G — Earnings Per Share (EPS) The following table sets forth the computation of basic and diluted EPS: Third Quarter Ended Nine Months Ended September 27, September 29, September 27, September 29, (Thousands, except per share amounts) 2024 2023 2024 2023 Numerator for basic and diluted EPS: Net income $ 22,294 $ 26,564 $ 54,739 $ 76,234 Denominator: Denominator for basic EPS: Weighted-average shares outstanding 20,749 20,640 20,723 20,611 Effect of dilutive securities: Stock appreciation rights 75 79 83 87 Restricted stock units 44 84 61 89 Performance-based restricted stock units 52 102 68 104 Diluted potential common shares 171 265 212 280 Denominator for diluted EPS: Adjusted weighted-average shares outstanding 20,920 20,905 20,935 20,891 Basic EPS $ 1.07 $ 1.29 $ 2.64 $ 3.70 Diluted EPS $ 1.07 $ 1.27 $ 2.61 $ 3.65 Adjusted weighted-average shares outstanding - diluted exclude securities totaling 148,038 and 47,250 for the quarters ended September 27, 2024 and September 29, 2023, respectively, and 110,555 and 36,927 for the nine months ended September 27, 2024 and September 29, 2023, respectively. These securities are primarily related to restricted stock units (RSUs) and stock appreciation rights (SARs) with fair market values and exercise prices greater than the average market price of the Company's common shares and were excluded from the dilution calculation as the effect would ha