Materion Corporation (NYSE:MTRN) Q4 2025 Earnings Call Transcript

Materion Corporation (NYSE:MTRN) Q4 2025 Earnings Call Transcript February 12, 2026

Materion Corporation beats earnings expectations. Reported EPS is $1.53, expectations were $1.51.

Operator: Greetings. Welcome to the Materion Corporation Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press. 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.

Kyle Kelleher: Good morning.

Kyle Kelleher: Thank you for joining us on our Fourth Quarter 2025 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 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 K. Vijayvargiya, President and Chief Executive Officer and Shelly M. 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.

Following Jugal, Shelly 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 GAAP numbers shown in Attachments 4 through 8 in this morning’s press release.

The adjustments are made in the prior year period for comparative purposes and remove special items, noncash charges, and certain discrete income tax adjustments.

Kyle Kelleher: And now I will turn over the call to Jugal for his comments.

Jugal K. Vijayvargiya: Thanks, Kyle.

Jugal K. Vijayvargiya: Good morning, everyone.

Jugal K. Vijayvargiya: It is 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.

Jugal K. Vijayvargiya: This performance, combined with new business growth,

Jugal K. Vijayvargiya: and the momentum we are seeing across our markets,

Jugal K. Vijayvargiya: and in our order rates,

Jugal K. Vijayvargiya: are entering 2026 with confidence. Let me first address the quality event. In Q4, our large Precision Clad 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 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 are 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 am 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 VA, 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, allow the business to reach nearly 16% EBITDA margin.

Performance Materials 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 am 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 that 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.

Jugal K. Vijayvargiya: Our specialized

Jugal K. Vijayvargiya: 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 manufacturer. 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 multiyear supply agreement with Commonwealth Fusion Systems, a leading developer of fusion energy solutions.

We surpassed $100,000,000 in defense sales for the second consecutive year, and have delivered 10% yearly growth since 2020. New business bookings reached nearly $140,000,000, highest ever, with another $35,000,000 booked so far this year. And we have approximately a $200,000,000 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 $65,000,000 investment from a major U.S. 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 mid-term EBITDA margin target of 23%, supported by top line growth, ongoing operational improvements, disciplined cost management, and the benefits of our portfolio transformation. Free 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 end 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, turn the call over to Shelly to review the financial details.

Shelly M. Chadwick: Thanks, Jugal, and good morning, everyone. During my comments, I will reference the slides posted on our website this morning starting on Slide 13. In the fourth quarter, value-added sales, which exclude the impact of pass-through precious metal costs, were $253,900,000, up 7% organically from the prior year excluding Precision Clad Strip. All in, value-added sales were down 14%. This decrease is largely attributed to the quality event we experienced during the quarter that limited sales to our largest customer. Electronic Materials experienced 20% growth led by strength in semiconductor, and Precision Optics was up 26% driven by overall market improvement and new business wins. When looking at earnings per share, we delivered quarterly adjusted earnings of $1.053, up 9% sequentially.

Moving to Slide 14, adjusted EBITDA was $57,000,000 or 22.5% of value-added sales in the quarter, down 7% year over year but up 170 basis points from a margin perspective. The decrease was attributable to the Clad Strip volume decline, partially offset by higher volume, strong price/mix, and improved performance in Electronic Materials and Precision Optics. Moving to Slide 15, let me review fourth quarter performance by business segment. Starting with Performance Materials, value-added sales of $132,400,000 in the quarter, down 32% year over year. This decrease was driven primarily by lower Precision Clad Strip sales, partially offset by strength in energy, and telecom and data center. Adjusted EBITDA was $35,800,000 or 27% of value-added sales, down 33% compared to the prior year.

This decrease was driven by the lower Clad Strip volume, partially offset by strong price/mix. Looking out to 2026, we expect to see strong top line growth led by space, defense, and energy initiatives. We also expect improved operational performance as we continue to execute on a number of initiatives aimed at increasing uptime and yields across our facilities. Next, turning to Electronic Materials on Slide 16. Value-added sales were $94,100,000, up 20% from the prior year and up 18% sequentially. EM delivered 8% organic growth for the year with sales increasing sequentially each quarter, driven by the strengthening semiconductor market. The top line growth, strong mix, and an improved cost structure delivered $22,000,000 in adjusted EBITDA or 23.4% with nearly 500 basis points improvement year over year.

Looking ahead to 2026, we anticipate another year of strong top line growth fueled by the semiconductor market strength and contributions from new business initiatives alongside continued strong margin performance. Turning to the Precision Optics segment on Slide 17, value-added sales were $27,400,000, up 26% compared to the prior year. This year-over-year increase was driven largely by new business wins and growth across several end markets, marking the strongest quarter since 2022, and the third consecutive quarter of top line growth. EBITDA excluding special items was $4,300,000 or 15.7% of value-added sales in the quarter, with significant year-over-year margin expansion. The increase was driven by higher volume, favorable price/mix, improved performance, and the impact of structural cost adjustments.

This marks the fourth consecutive quarter of improved bottom line results and the second straight quarter of double-digit margin performance. Looking out to 2026, we expect both the top and bottom line to continue to grow as new business initiatives advance and the transformation continues to unfold. Now let me recap the full year results on Slide 18. Value-added sales were approximately $1,050,000,000, up 4% organically, excluding Precision Clad Strip, driven by strength in semiconductor, energy, and telecom and data center. All-in value-added sales saw a 4% decrease organic from prior year, as a result of the lower Precision Clad Strip volume. This was a meaningful year-on-year headwind. Many parts of the business saw strong growth, with Electronic Materials up 8% organically, and Precision Optics up 7% for the year.

Despite the slight decline in VA sales, we delivered our fifth consecutive year of higher adjusted EBITDA margins at 20.7% of value-added sales, which was up 50 basis points from 2025. We are very pleased to have delivered our second straight year of 20 plus percent adjusted margins for the full year. And we are making good progress towards our new 23% midterm objective. Adjusted EBITDA was $217,000,000, down 2% from the prior year driven by the lower Precision Clad Strip volume, partially offset by higher volume across the rest of the company, favorable price/mix, and strong operational performance in Electronic Materials and Precision Optics. Adjusted earnings per share was $5.44 for the year, up 2% as compared to the prior year. Lower interest expense and the benefit of tax initiatives contributed to the uptick.

Moving now to cash, debt, and liquidity on Slide 19. We ended the quarter with a net debt position of approximately $445,000,000 and $224,000,000 of available capacity on the company’s existing credit facility with leverage slightly below the midpoint of our target range at 2.1 times. The Clad Strip quality event impacted our cash flow performance in the quarter, as inventory and cash receipts related to this business came to a temporary halt. Lastly, let me transition to Slide 20 and address the full year outlook for the company. As we move into 2026, expect to continue the momentum we built in 2025, to deliver strong organic top line growth and higher earnings, while continuing to make progress towards our midterm EBITDA margin target of 23%.

We also expect a marked improvement in free cash flow performance with higher cash earnings, improved working capital, and thoughtful capital investments. The first quarter will be a slower start to the year, normal seasonality and the ramping of Clad Strip production that comes along with some additional costs we are incurring to ensure a smooth and efficient restart. For the year, we expect to deliver earnings in the range of $6 to $6.50 adjusted earnings per share, an increase of 15% from prior year at the midpoint. This concludes our prepared remarks. We will now open the line for questions.

Q&A Session

Operator: Thank you. At this time, we will be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. And the first question today is coming from Michael Joseph Harrison from Seaport Research. Mike, your line is live. Hi. Good morning. Congrats on,

Michael Joseph Harrison: nice finish to the year and and sounds like some nice momentum into next year.

Jugal K. Vijayvargiya: I wanted to start

Michael Joseph Harrison: with a couple of questions just on the Precision Clad Strip situation. I guess, first, any any additional detail you can provide on on the quality issues that occurred and and, I guess, some of the actions that were required to address that and what that means for the business going forward. And then second, can you talk about, that that key customer PMI and maybe what you have heard from them about their expectations for FDA or other approvals for their device and what that could mean for growth expectations in PCS for next year?

Jugal K. Vijayvargiya: Yeah. Mike, let me start with the first one, which is, the quality event. Give a little bit more color on it. In our production process, in one of the steps, we had a control failure. We were not able to detect the control failure through our quality system that we have. So the nonconformity that was produced as a result of that reached the customer. The customer actually discovered it in their manufacturing process. And in working, of course, closely with the customer, that is where we halted the production. We went through, and we thoroughly looked at the situation, investigated, determined the root cause, we implemented fixes for the root cause. But more importantly, we implemented a very much robust, revised quality system across the entire plant that I think makes us a much stronger company and a much stronger supplier to our customer.

And that is important. We want to make sure that we are producing good product for them and supply for them. So we feel good with where we are at now. We certainly did not have the necessary means in the system to be able to catch the nonconformity that happened earlier. So we are actively, working with them, ramping, production here in the first quarter. The customers actually visited our facility. They have looked through the changes that we have made. We have got the right, I would say, quality leadership and quality resources at the facility. And in general, additional resources to make sure that the changes that we have made are being are being worked and doing the right things for producing good quality product for our customer. So that is that is the issue that occurred.

We feel good about, I think, the changes we made, and I would say where the, where the product is going. We are fully prepared to support them, as they go through, their ’26 volumes. We expect our ’26 volumes to be better than ’25. Of course, we are going to go through a ramp here in Q1. But then higher production in Q2 and beyond to ensure that we can support them in the right way. As for the other items that you mentioned, like, for example, the FDA approval, I mean, they are working through it. We do not have any other new information that we can communicate with you. I am sure, you know, if whenever it is that they reach that, you know, they will share that with us. And then we will see what the impact may be to our delivery, you know, that they want.

So I I think, you know, this is a is certainly a situation that occurred in Q4 that we dealt with, but I feel good with where we are coming out, and I feel good with the the quality systems that we have placed and, and making us a stronger supplier to this customer.

Michael Joseph Harrison: All right. Very helpful. And then my my second question is on the Electronic Materials business. Obviously, nice to see some recovery happening in value-added sales. I was a little bit surprised to see that sequentially, value-added sales were up about $15,000,000, but it it does not really seem like sequentially that contributed to much EBITDA growth. So I am just curious, why did not we see better leverage on the strong sequential top line growth in Electronic Materials? And maybe if you could take it a step further and talk a little bit about how we should think about margin performance in Electronic Materials in a growth environment in 2026?

Jugal K. Vijayvargiya: Yeah.

Jugal K. Vijayvargiya: So first of all, let me just talk about the top line growth. I mean, we are very excited with where things are at. You know, we have talked about our product portfolio. So let me just talk a little bit about that. Right? We have a very good diverse portfolio that cuts across pretty much all parts of semiconductor. Whether it is logic, memory, power, communications, data storage. I think we are seeing the power of that. We are seeing the fact that our sales growth that you mentioned sequentially, highest in nearly three years, it is really cutting across all those areas. So as the proliferation of AI is happening, high performance computing is coming in place, data storage is increasing, high performance memory is increasing.

I think it is giving us a good backdrop to be able to say that not only do we have a good Q4 increase, sequential increase that you are mentioning, which is nearly the best quarter in the last three years, but it also speaks to the incoming order rate that we have which is up, sizable, you know, on a year-over-year basis and kind of I would say, how we feel about, ’26. We expect that ’26 will continue to improve, and we are looking forward to be able to capitalize on that improvement. So I think from a top line perspective, we are feeling we are feeling very good. I think from a margin perspective, we have to keep in mind that this business, along with our other businesses, there are significant mix factors that go into play from a quarter-to-quarter standpoint.

Right? So we look at a margin profile from a more of an on a on a larger sort of sample size, you could say, sort of sort of longer time frame. So, you know, more like a two, three, four quarters on a full year basis. Up 300 basis points on a year-over-year basis. We had some onetime items in Q3. We have some mix issues in Q4. So when you put that together, we do not have the same level of, let us say, percent performance in Q4. But we feel really good about the overall improvement that this business has made through the cost actions, the operational efficiency actions, and we expect those to carry through into ’26 as well. So I think, yeah, with where I see EM in total, I feel good about how we finished the year. And I feel good about, I think, where this business is going to go in terms of the top line, in terms of bottom line.

Continued progress. I think from where we were in in ’25.

Michael Joseph Harrison: All right. Thank you for that. My last question is is just on kind of where we stand on beryllium capacity. I know you called out the $65,000,000 investment from a defense prime. Sounds like that additional capacity is going to be coming on ’27. But there is a lot of talk out there about building up strategic mineral reserves in the United States. I am curious, do you expect beryllium to be among the minerals that the government would want to add to that reserve and what does that mean for potential further investments that might be needed in capacity? What does that mean for supply and demand of beryllium and maybe some of the products that you have within the Performance Materials segment.

Jugal K. Vijayvargiya: Yeah. So let me, number of different topics. Right, on beryllium there. Let me just first start with the strategic reserve part of it and and just say that I am not able to talk about that in in any level of detail. We work very with the government in a number of different areas. And we have been doing that for for, obviously, a number of years. And and and there is a, you know, longstanding relationship that we have in in ways the mining CapEx, I would say it is just a a normal part of a what we are seeing. Right? We indicated that we have had 10% plus CAGR of the business over the last five, six years. We have crossed in the defense side, over $100,000,000 for for the second, consecutive year. We have got new defense orders, $140,000,000.

We have got a long pipeline. Of course, beryllium is not only used in defense, but it is a it is a good part of our business. And so as we move forward, we would expect that we are using more beryllium to be able to support some of the growth not only in only in defense, but we have talked about energy. Right? Energy is a big part, and we are looking at beryllium applications in energy. We are looking at applications in other parts of our markets as well. So that that is definitely a a a, I would say, general business growth is is a contributing factor to, you know, our mining CapEx. Thank you. And just wanted also just some

Operator: clarification, if you could, on the first quarter in terms of what you are anticipating from an earnings perspective maybe relative to last year? And then just a second part in terms of the modeling for the year. I wanted to confirm, you said you expected the sort of the China semi sales to be relatively stable? Thanks.

Shelly M. Chadwick: Yes, I will take that one. Hi, Phil. So the first quarter, as I mentioned in my remarks, will start off a little slow. That typically happens for us. Part of that is some normal seasonality. Defense and semi tend to be softer in Q1. We are also going to have the additional cost around the ramp. So as Jugal talked about, all of the resources and changes that we have put in place we are being extra careful during this ramp period and are going to bear some additional costs to make sure that this is a flawless execution. So going to see a little bit of a lower Q1. Still a step up from last year, probably roughly 10% higher than last year is what we are thinking right now. And then we will have sequential step ups in earnings all year.

Jugal K. Vijayvargiya: Yeah. Let and and let me talk about China and and semiconductor. I think, you know, so we have highlighted this over the last year or so in particular that that we saw a decrease in our sales in China just based on all the the geopolitical issues, tariff issues, etcetera. We do not anticipate and we are not assuming a further decrease from ’25 to ’26 in our China business. At the same time, we have highlighted that we are very much focused on making sure we are growing our business globally. You know, China is one component, and we do not want to let that be a determining factor for where our growth rates are. And so I am very excited about where the semiconductor business is, the growth rates that we are seeing.

I indicated, I think, in our remarks that, excluding China, our order rates for semiconductor are up 14% on a year-over-year basis, so ’24 to ’25. And, we continue to see good order rates, and we anticipate good order rates, you know, as we as we go forward. With our new business activities, we have talked about, for example, atomic layer deposition or ALD products. And at the same time, with existing business that is seeing, really good growth in areas like data storage and high performance computing, high performance memory, all being driven through many of the things that are going on through AI. So, you know, certainly, China is an important market for us, and we are very much focused on it. But we are not letting that market sort of drive what we think our growth rates are going to be.

We we are really, really focused on making sure we are driving global growth across all of our businesses.

Operator: Thanks so much.

Shelly M. Chadwick: Thanks, Phil. Thanks.

Operator: The next question will be from Daniel Joseph Moore from CJS Securities.

Operator: Dan, your line is live.

Operator: Hi. This is Will on for Dan. Hi, Will. In industrial, are are you seeing any green shoots or signs of recovery entering 2026? Or is it more of the same?

Jugal K. Vijayvargiya: Yeah. So, you know, in in industrial, we have a couple of, things that we typically talk about. One is we have a beryllium nickel spring business, which is something that has seen recovery. It was at a low point in the ’24 time frame. Saw good recovery in in ’25, and we expect to see continued, recovery going into ’26. So that part of the business, we expect it to be good. I would say the rest of industrial is is at this stage, our expectation is about, you know, GDP type of a a a growth. Nothing nothing too exciting, but but I think our overall industrial business I expect it to move forward, based on, particularly, based on our beryllium nickel spring business.

Operator: Thank you. That is helpful. And you have given a lot of great color on the momentum in defense. Can you talk about energy and space and the momentum in each of those end markets as we head into 2026?

Jugal K. Vijayvargiya: Yeah. I mean, energy has been an exciting market for us. You know, especially over the last last year or so. We have been a strong player in what I call more of the traditional energy, oil and gas area, but we have really focused a lot over the last two, three years on developing partnerships of that area into more of the new energy space. You are all aware of the partnership that we announced with, with Kairos on on new energy solutions. Last year, we announced a partnership with Commonwealth Fusion Systems again on new energy solutions. I think this area is quite exciting for us. We all know from a market standpoint that the demand for energy is increasing almost sort of at a exponential rate. And we want to make sure that we are working with all the leading players and and providing materials for them and enabling them so that they can they can participate in that.

Our new energy business was the order rate was up 50% or over 50%. Our new energy business, I should say, doubled more than doubled on a year-over-year basis. So we are very excited about where I think overall energy market can go for us in the next three to five years. On space, we have had very good success on a number of different programs, on the space side. We have one large customer, but we have been working very diligently on gaining other customers. Certainly, those customers are smaller customers. We have also been working very diligently on making sure that more of our products are are being sold at the large customer, but also at the more emerging customers. So, we are expecting to see continued improvement in our in our space market over the next over the next three to five years as well.

Operator: Thank you.

Operator: Thank you. And once again, it will be star one if you wish to ask a question on today’s call. The next question will be from David Silver from Freedom Capital.

David Silver: Okay. Hi. Good morning. Thank you. Morning, David. Yeah. So I admit I I have a bit of a scatter of questions. But the the first question would would generally be, you know, just

David Silver: checking on potential bottlenecks that might prevent you from achieving, you know, your targeted growth in 2026? So for instance, in Electronic Materials, you know, you have made recent in both, you know, Newton and, Milwaukee. And, you know, if if growth was to continue at the the recent trend rate, 20% or so, I mean, is are you comfortable with the idea that you will not be running into bottlenecks during 2026 from, you know, is the capacity you have in place, the the spare capacity sufficient, you know, to handle, you know, expected demand. And then just along with those lines, you know, you did purchase the facility in Korea about middle of last year. So has that unit been completed? And is that currently contributing, or will that be a contributing, asset in 2026.

I will I will kinda stop there for now. Thank thank you. But just kinda how do you feel about your spare capacity or your ability to meet, you know, based on your order book, what looks to be, you know, a meaningful surge in new orders or or demand.

David Silver: Yeah.

Jugal K. Vijayvargiya: David, I I would say in general, I think we are well positioned to be able to support our customers’ needs in in in all of our facilities for, look.

Shelly M. Chadwick: Materials. We

Jugal K. Vijayvargiya: are seeing good order rates, across a number of different areas. And the investments that we have made, the operational improvements that we have made over the last few years, I think, position us well to be able to support to to be able to support their needs. We are continuing to, of course, look at other, ways that we increase our capacity. One of the ones that you just mentioned is is an acquisition that we made in the the middle of, you know, in the middle of last year, where we, acquired a facility in in Korea. We are in the process of of getting that qualified. We expect the the qualification of that to be back half of this year. And I would say, really, any meaningful sales would be into next year and maybe some sample and and qualification sales, you know, can be can be at at the end of end of this year. But but I I expect we are going to be able to support our customers at the at the levels at the the level that they are looking for.

David Silver: Okay. Great. And I apologize if I missed this, but just a clarification. I think one of Mike’s, questions earlier regarded the status of the next stage of Precision Clad Strip for your key customer there. It did you discuss the timeline or your latest thoughts about when that customer might be, you know, requiring production from that that new Precision Clad Strip capacity?

Jugal K. Vijayvargiya: Yeah. I we we did not specifically discuss a timeline along that. But what I can tell you is that we are very much focused on making sure that we are ramping up for in our facility this quarter. Getting the facilities back up in a way that is producing good quality product and delivering to our customers. And we are we are positioned to support them on a year-over-year volume improvement, which we will do. And certainly, if they have more need due to, you know, U.S. approval or other, needs, we are we are prepared to to support them in that way, in that way as well.

David Silver: Okay. And

David Silver: unusual topic for me, but I did want to ask about your working capital needs.

David Silver: So

David Silver: if I have this right, I mean, 2025 was the fifth consecutive year where, you know, if you look at the cash flow statement where the change in assets and liabilities was a a net use of capital and fairly significant one in most years. I was just wondering, I mean, certainly, you are in a growth mode, so some of that is, you know, self-explanatory. But is there anything unusual along those lines that we should think about? In other words, is working capital growing in line with kind of the growth in your business? Or is it, you know, is there a buildup due to, you know, you have some certain parts of your business are especially working capital intensive or maybe, you know, in the back half of 2025, have you purposely been building, you know, working capital to meet what you anticipate to be kind of, you know, stronger demand in 2026?

Shelly M. Chadwick: Yes. So let me start on that one. So you are correct. With the growth trajectory that we have been in and the new pieces of business that we have been on, there have been step ups especially in inventory. You know, when we bring on an acquisition, like, the HCS Electronic Materials, when we, you know, ramped the business for Clad Strip, those took pretty big step ups with the inventory. Certainly, we look to manage that efficiently and get the turns in line, but, you know, it does create an increase. So sort of a onetime step up. When I think about, you know, other new business that we have brought on, the beryllium business, as you know, is vertically integrated. So when beryllium grows, that inventory cycle is pretty long.

So that does require a bit more inventory. But we do identify this as an area of opportunity. Number one, you know, there was an issue. The the quality issue did impact working capital at the end of the year. As I mentioned in my comments, inventory did not move. The receipts did not come in. So that was really a temporary pause that caused us to be high at the end of the year. And even from that, we have got a number of working capital initiatives to manage inventory specifically, but also AR and AP to keep looking to bring that number down as a percent of sales and both and in days, to to keep it more efficient and generate cash.

David Silver: Okay. And then thank you for that. And and I yeah, I should have accounted for, you know, the fourth quarter issues in Precision Clad Strip. Just just one more question. And this has to do with metals or your your procurement needs or or maybe some contract terms. But, you know, whether it is precious metals or other critical materials, I mean, the pricing and and in certain cases, availability issues have been, you know, topics, you know, across the industries that you serve. I am just wondering. I this is purely speculative. I do not know. But are any of your contracts, you know, contingent

David Silver: on

David Silver: metals prices not topping a a certain amount. In other words, is any of your business at risk because of, you know, where copper or gold or silver or other critical materials that you require, you know, are, you know, currently priced? I mean, availability, I guess, is a separate issue. But but, you you know, is there any kind of risk or uncertainty to your order book, you know, based on the the procurement prices of the critical materials that your customer’s products utilize?

Jugal K. Vijayvargiya: Yeah. I would say in general, the answer is no. We do not have those types of contracts, with our customer. I think, you know, we have a very good transparency with our customers on what our materials prices are and how we handle that with them. Certainly, if there is materials that a customer is using and those materials are now much more costly than perhaps other materials that may be available out there, the customer can consider substitution. But that substitution requires a requalification, you know, developing a solution that actually works for them, and then requalification, which in most cases is is unlikely because these things can be temporary in nature. So I would say in general, that is really not a a a topic for us that that, you know, that we look at.

David Silver: Okay. Great. I appreciate all the color. Thanks very much.

Shelly M. Chadwick: Thanks, David.

Operator: Thank you. And the next question is coming from David Joseph Storms from Stonegate. Dave, your line is live.

David Joseph Storms: Morning. For taking my questions. This is

Shelly M. Chadwick: Morning, John.

Jugal K. Vijayvargiya: Thanks. I just wanted to ask a

David Joseph Storms: quick one on

David Joseph Storms: the energy end market. I was hoping to clarify. The new contribution from the CFS shipment, it was mentioned in the

David Joseph Storms: slides that that is an initial shipment. Just trying to think about, can we is that

David Joseph Storms: a nonrecurring shipment, or is this kind of the new normal

David Joseph Storms: for energy given the the start up of that contract?

Jugal K. Vijayvargiya: Yeah. We we announced, you know, last year that we had signed an agreement with them. And then as part of that agreement, we had received an initial contract that goes over a couple of years. And as part of that, we made the first shipment, into Q4, and we will continue to do that, this year. And what happens, I would say, really beyond that, we will continue to work with them on what their needs are and and support appropriately.

David Joseph Storms: Understood. Very helpful. Thank you.

David Joseph Storms: And then also, just thinking about your order book and backlog,

David Joseph Storms: with the new $65,000,000 defense contract having about a two year burn rate, this is maybe just a little bit longer than your traditional burn rate that you have mentioned in your 10-Qs of about eighteen months. Are you seeing that be maybe the new normal for your backlog burn rate, or is this maybe more of a onetime, you know, thing?

Jugal K. Vijayvargiya: Yeah. Let me let me just talk first about the $65,000,000 investment. That is actually an investment into increasing our capacity for being able to produce beryllium and beryllium-related products. So that is a capital project. And that will be done over this year and next year. So approximately about a 24-month time frame is when we will get that implemented and and and and put that in place. What we have indicated is that that will give us more capacity to produce product and certainly whatever, then we are able to supply to our customers in the out years with that, that will happen. The orders and the and the and the new orders that we are talking about, which is, you know, $140,000,000 of orders that we have talked about, that we booked, the the $35,000,000 that we booked already this year.

Those can be within the quarter delivery. They can be within the year delivery. In some cases, they actually go a little bit into the into the following year, you know, maybe maybe over a six-quarter, you know, time frame or something. So that is a I am sure the eighteen, you know, months or something that that that you may be referring to is is that. Those those that come in. If we get new orders, because of the increased capacity in beryllium, you know, those will be negotiated over let us say, the rest of this year. And because those will go into effect, you know, then in the in the ’28, and sort of year ’28 and beyond beyond time frame.

David Joseph Storms: Understood. Thank you for that clarification, and good luck in 2026.

Shelly M. Chadwick: Thank you. Thanks, Dave.

Operator: Thank you. There were no other questions at this time. I would now like to hand the call back to Kyle Kelleher for closing remarks.

Kyle Kelleher: Thank you. This concludes our Fourth Quarter 2025 earnings call. Record playback of this call will be available on the company’s website, materion.com. I would like to thank you for participating on this call and your interest in Materion Corporation. I have you available for any follow-up questions. My number is (216) 383-4931. Thank you again.

Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.