What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-07-30 compared with 2025-05-01 · 245 added, 123 removed, 136 unchanged (73% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are an integrated producer of high-performance advanced engineered materials used in a variety of electrical, electronic, thermal, and structural applications.

We are an integrated producer of high-performance advanced engineered materials used in a variety of electronic, thermal, and structural applications.

Our products are sold into numerous end markets, including semiconductor, industrial, aerospace and defense, automotive, consumer electronics, energy, and telecom and data center.

RESULTS OF OPERATIONS

First Quarter

First Quarter Ended

March 28, March 29, $ %

Second Quarter

Second Quarter Ended

June 27, June 28, $ %

(Thousands, except per share data) 2025 2024 Change Change

10 unchanged sentences

R&D expense as a % of value-added sales 2 % 3 %

Restructuring (income) expense 2,038 1,620 418 26 %

Restructuring expense 479 3,048 (2,569) n.m.

Other—net 3,908 4,446 (538) (12) %

3 unchanged sentences

Income before income taxes 29,156 23,900 5,256 22 %

Income tax expense (benefit) 3,246 1,204 2,042 170 %

Income tax expense 4,016 4,864 (848) (17) %

Net income $ 25,140 $ 19,036 $ 6,104 32 %

Diluted earnings per share $ 1.21 $ 0.91 $ 0.30 33 %

NM = Not Meaningful

Net sales of $420.3 million in the first quarter of 2025 increased $35.0 million from $385.3 million in the first quarter of 2024.

An increase in net sales in the Electronic Materials and Performance Materials segments were partially offset by decreased net sales in the Precision Optics segment.

The increase in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $40.5 million when compared to the prior year period.

At the Company level, volume increases in the energy (45%) and semiconductor (7%) end markets were partially offset by a volume decrease in the consumer electronics (14%) end market.

Additionally, there was a $6.2 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the first quarter of 2024.

Net sales of $431.7 million in the second quarter of 2025 increased $5.8 million from $425.9 million in the second quarter of 2024.

The increase in net sales was primarily attributable to the Electronic Materials segment.

The increase in net sales in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $38.0 million when compared to the prior year period.

At the Company level, volume decreases in the consumer electronics (11%) and semiconductor (4%) end markets were partially offset by volume increases in the aerospace and defense (6%) and energy (4%) end markets.

Additionally, there was a $3.8 million year over year decrease in the volume of raw material beryllium hydroxide sales compared to the second quarter of 2024.

See Note B to the Consolidated Financial Statements for additional details on the year over year changes in our net sales by segment and market.

Value-added sales is a non-GAAP financial measure that removes the impact of pass-through metal costs and allows for analysis without the distortion of the movement or volatility in metal prices and changes in mix due to customer-supplied material.

Value-added sales is a non-GAAP financial measure that removes the impact of pass-through precious metal market costs and allows for analysis without the distortion of the movement or volatility in precious metal market prices and changes in mix due to customer-supplied material.

Internally, we manage our business on this basis, and a reconciliation of net sales, the most directly comparable GAAP financial measure, to value-added sales is included herein.

Value-added sales of $259.3 million in the first quarter of 2025 increased $1.5 million, or 1%, compared to the first quarter of 2024.

The increase was driven by volume increase in the energy (47%) and semiconductor (7%) end markets partially offset by a sales volume decrease in the consumer electronics (17%) end market.

Additionally, there was a $6.2 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the first quarter of 2024.

Gross margin in the first quarter of 2025 was $76.2 million, an increase of 7% compared to the first quarter of 2024.

Gross margin expressed as a percentage of net sales was 18% in both the first quarter of 2025 and 2024.

Gross margin expressed as a percentage of value-added sales increased to 29% in the first quarter of 2025 from 28% in the first quarter of 2024.

In the first quarter of the prior year, the Company incurred significant pre-production costs and manufacturing inefficiencies associated with the ramp of the wide area clad facility and overall lower sales volumes, resulting in lower margins.

In addition to improved manufacturing performance in 2025, the increase in hydroxide sales favorably impacted margins in the first quarter of 2025 compared to the same period in 2024.

SG&A expense was $35.4 million in the first quarter of 2025, compared to $35.8 million in the first quarter of 2024.

SG&A expense remained relatively flat from the prior year period due to continue cost control initiatives.

Expressed as a percentage of net sales, SG&A expense decreased from 9% in the first quarter of 2024 to 8% in the first quarter of 2025, primarily due to the impact of precious metal pricing on net sales.

Expressed as a percentage of value-added sales, SG&A expense was 14% in both the first quarter of 2025 and 2024.

R&D expense consists primarily of direct personnel costs for pre-production evaluation and testing of new products, prototypes, and applications.

R&D spend was 2% of net sales in both the first quarter of 2025 and 2024 and 3% of value-added sales in the first quarter of 2025 and 2024.

Value-added sales of $269.0 million in the second quarter of 2025 decreased $10.9 million, or 4%, compared to the second quarter of 2024.

Volume decreases in the consumer electronics (12%) and semiconductor (4%) end markets were partially offset by increases in the aerospace and defense (5%) and energy (9%) end markets.

Additionally, there was a $3.8 million year over year decrease in the volume of raw material beryllium hydroxide sales compared to the second quarter of 2024.

Gross margin in the second quarter of 2025 was $82.7 million, an increase of 2% compared to the second quarter of 2024.

Gross margin expressed as a percentage of net sales was 19% in both the second quarter of 2025 and 2024.

Gross margin expressed as a percentage of value-added sales was 31% in second quarter of 2025, compared to 29% in the second quarter of 2024.

The increase in gross margins is primarily due to improved manufacturing performance in 2025.

Additionally in the second quarter of the prior year, the Company incurred significant pre-production costs and manufacturing inefficiencies associated with the ramp of the wide area clad facility, resulting in lower margins.

SG&A expense was $35.0 million in the second quarter of 2025, compared to $33.6 million in the second quarter of 2024.

The increase in SG&A expense was primarily due to timing of the incentive compensation accruals due to year to date performance.

Expressed as a percentage of net sales, SG&A expense was 8% of net sales in both the second quarter of 2025 and 2024.

Expressed as a percentage of value-added sales, SG&A expense was 13% and 12% in the second quarter of 2025 and 2024, respectively.

R&D expense consists primarily of direct personnel costs for product innovation including pre-production development, evaluation, and testing of new products, prototypes, and applications to deliver new high performing advanced materials to our customers.

R&D expense accounted for 1% of net sales in the second quarter of 2025 and 2% of net sales in the second quarter of 2024.

R&D expense accounted for 2% of value-added sales in the second quarter of 2025 and 3% of value-added sales in the second quarter of 2024.

The decrease was driven by project timing.

Restructuring expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure.

In the first quarter of 2025, we recorded a combined total of $2.0 million of restructuring charges in our Precision Optics, Electronic Materials and Performance Materials segments, compared to $1.6 million of restructuring charges across all segments in the first quarter of 2024.

Other-net was $5.0 million of expense in the first quarter of 2025, or a $0.6 million increase from the first quarter of 2024, impacted by a $0.2 million increase in metal consignment fees.

Refer to Note E to the Consolidated Financial Statements for details of the major components within Other-net.

Other non-operating (income) expense-net includes components of pension and post-retirement expense other than service costs.

In the second quarter of 2025, we recorded a combined total of $0.5 million of restructuring charges in our Performance Materials, Electronic Materials and Precision Optics segments.

In the second quarter of 2024, we incurred restructuring costs across all segments due to the Company's efforts to realign its cost structure.

Refer to Note E to the Consolidated Financial Statements for details.

Other-net was $3.9 million of expense in the second quarter of 2025, or a decrease of $0.5 million from the second quarter of 2024.

Refer to Note D to the Consolidated Financial Statements for details of the major components within Other-net.

Other non-operating (income)-net includes components of pension and post-retirement expense other than service costs.

Refer to Note J to the Consolidated Financial Statements for details of the components.

Interest expense-net was $6.9 million and $8.3 million in the first quarter of 2025 and 2024, respectively.

Interest expense-net was $8.2 million and $8.8 million in the second quarter of 2025 and 2024, respectively.

The decrease in interest expense was primarily due to a decrease in interest rates and decreased borrowings compared to the prior year period.

Income tax expense for the second quarter of 2025 was $4.0 million, compared to $4.9 million in the second quarter of 2024.

The Company's effective tax rate for the second quarter of 2025 and 2024 was 13.8% and 20.4%, respectively.

The effective tax rate for the second quarter of 2025 is lower than the statutory tax rate primarily due to the impact of percentage depletion and the advanced manufacturing production credit.

The effective tax rate for the second quarter of 2024 was lower than the statutory tax rate primarily due to the impact of percentage depletion and the foreign derived intangible income deduction.

See Note F to the Consolidated Financial Statements for additional discussion.

Six Months Ended

June 27, June 28, $ %

(Thousands, except per share data) 2025 2024 Change Change

Net sales $ 851,988 $ 811,153 $ 40,835 5 %

Value-added sales 528,316 537,681 (9,365) (2) %

Gross margin 158,837 152,071 6,766 4 %

Gross margin as a % of net sales 19 % 19 %

Gross margin as a % of value-added sales 30 % 28 %

SG&A expense 70,484 69,445 1,039 1 %

SG&A expense as a % of net sales 8 % 9 %

SG&A expense as a % of value-added sales 13 % 13 %

R&D expense 12,918 14,844 (1,926) (13) %

R&D expense as a % of net sales 2 % 2 %

R&D expense as a % of value-added sales 2 % 3 %

Restructuring expense 2,517 4,668 (2,151) (46) %

Other—net 8,904 8,803 101 1 %

Operating profit 64,014 54,311 9,703 18 %

Other non-operating (income)—net (1,233) (1,283) 50 (4) %

Interest expense—net 15,147 17,081 (1,934) (11) %

Income before income taxes 50,100 38,513 11,587 30 %

Income tax expense 7,262 6,068 1,194 20 %

Net income $ 42,838 $ 32,445 $ 10,393 32 %

Diluted earnings per share $ 2.05 $ 1.55 $ 0.50 32 %

Net sales of $852.0 million in the first six months of 2025 increased $40.8 million from $811.2 million in the first six months of 2024.

The increase in net sales was primarily attributable to the Electronic Materials segment.

The increase in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $78.5 million when compared to the prior year period.

At the Company level, a volume decrease in the consumer electronics (13%) end market was partially offset by a volume increase in the energy (25%) end market.

Additionally, there was a $2.5 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the same period in the prior year.

See Note B to the Consolidated Financial Statements for additional details on the year over year changes in our net sales by segment and market.

Value-added sales of $528.3 million in the first six months of 2025 decreased $9.4 million, or 2%, compared to the first six months of 2024.

A volume decrease in the consumer electronics (14%) end market was partially offset by a volume increase in the energy (28%) end market.

Additionally, there was a $2.5 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the same period in the prior year.

Gross margin in the first six months of 2025 was $158.8 million, an increase of 4% compared to the first six months of 2024.

Gross margin expressed as a percentage of net sales was 19% in the first six months of 2025 and 2024.

Gross margin expressed as a percentage of value-added sales increased to 30% in the first six months of 2025 from 28% in the first six months of 2024.

Despite the impact of lower sales volumes in the first six months of 2025, the Company experiences improved manufacturing performance, resulting in favorable margins in 2025.

The lower gross margin in the first six months of 2024 was impacted by the significant pre-production costs and manufacturing inefficiencies associated with the ramp of the wide area clad facility.

SG&A expense was $70.5 million in the first six months of 2025, compared to $69.4 million in the first six months of 2024.

The increase in SG&A expense was primarily due to timing of incentive compensation accruals due to year to date performance.

Expressed as a percentage of net sales, SG&A expense was 8% and 9% in the first six months of 2025 and 2024, respectively.

Expressed as a percentage of value-added sales, SG&A expense was 13% in the first six months of 2025 and 2024.

R&D expense accounted for 2% of net sales in the first six months of 2025 and 2024.

R&D expense accounted for 2% of value-added sales in the first six months of 2025 and 3% of value-added sales in the first six months of 2024.

The decrease was driven by project timing.

Restructuring expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure.

In the first six months of 2025, we recorded a combined total of $2.5 million of restructuring charges in our Performance Materials, Electronic Materials and Precision Optics segments.

In the first six months of 2024, we recorded a combined total of $4.7 million of restructuring charges in our Performance Materials, Electronic Materials, Precision Optics and Other segments.

Refer to Note E to the Consolidated Financial Statements for details.

Other-net was $8.9 million of expense in the first six months of 2025, or a $0.1 million increase from the first six months of 2024.

Refer to Note D to the Consolidated Financial Statements for details of the major components within Other-net.

Other non-operating (income)-net includes components of pension and post-retirement expense other than service costs.

Refer to Note J to the Consolidated Financial Statements for details of the components.

Interest expense-net was $15.1 million and $17.1 million in the first six months of 2025 and 2024, respectively.

The decrease in interest expense is primarily due to an decrease in interest rates and borrowings compared to the prior year period.

Income tax expense for the first quarter of 2025 was expense of $3.2 million, compared to $1.2 million in the first quarter of 2024.

The effective tax rate for the first quarter of 2025 and 2024 was 15.5% and 8.2%, respectively.

The effective tax rate for the first quarter of 2025 is lower than the statutory tax rate primarily due to the impact of percentage depletion, foreign derived intangible income deduction and production credit.

The effective tax rate for the first quarter of 2024 was lower than the statutory tax rate primarily due to the impact of percentage depletion, the foreign derived intangible income deduction, and excess tax benefits from stock-based compensation awards.

The effective tax rate for the first three months of 2025 and 2024 included a net discrete income tax effect from stock-based compensation awards of $0.1 million expense and $1.2 million benefit, respectively.

Income tax expense for the first half of 2025 was $7.3 million, compared to $6.1 million in the first half of 2024.

The Company's effective tax rate for the first six months of 2025 and 2024 was 14.5% and 15.8%, respectively.

The effective tax rate for the first six months of 2025 is lower than the statutory tax rate primarily due to the impact of percentage depletion and the advanced manufacturing production credit.

The effective tax rate for the first six months of 2024 was lower than the statutory tax rate primarily due to the impact of percentage depletion and the foreign derived intangible income deduction.

The effective tax rate for the first six months of 2025 includes net discrete income tax expense of $0.6 million, primarily consisting of $0.2 million expense for stock-based compensation awards and $0.4 million expense for unrecognized tax benefits recorded.

The effective tax rate for the first six months of 2024 included a net discrete income tax benefit of $0.2 million, which primarily consisted 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 were not likely to be realized for one of the Company’s foreign subsidiaries.

See Note F to the Consolidated Financial Statements for additional discussion.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law in the U.S.

The OBBBA includes a broad range of tax provisions affecting businesses including extending permanently, with modification, certain business and international tax provisions enacted as part of the Tax Cuts and Jobs Act of 2017 and expanding certain Inflation Reduction Act tax incentives while accelerating the phase-out of others.

Key provisions of the OBBBA relevant to our operations include the phase-out of the advanced manufacturing production credit beginning in 2031, the immediate expensing of certain capital expenditures and domestic research and development expenses beginning in 2025, adjustments to interest expense limitations, and changes to various U.S international tax provisions.

The Company is still evaluating the impact of the OBBBA on our consolidated financial statements.

We expect to reflect the effects of the OBBBA in our financial statements for the quarter ending September 26, 2025, in accordance with the ASC 740.

Value-Added Sales - Reconciliation of Non-GAAP Financial Measure

A reconciliation of net sales to value-added sales, a non-GAAP financial measure, for each reportable segment and for the total Company for the first quarter of 2025 and 2024 is as follows:

First Quarter Ended

March 28, March 29,

A reconciliation of net sales to value-added sales, a non-GAAP financial measure, for each reportable segment and for the total Company for the second quarter and first six months of 2025 and 2024 is as follows:

Second Quarter Ended Six Months Ended

June 27, June 28, June 27, June 28,

(Thousands) 2025 2024 2025 2024

2 unchanged sentences

Precision Optics 24,453 25,666 46,001 50,337

Other — — — —

Total $ 431,658 $ 425,866 $ 851,988 $ 811,153

3 unchanged sentences

Precision Optics 42 44 104 71

Other — — — —

Total $ 162,688 $ 146,033 $ 323,672 $ 273,472

3 unchanged sentences

Precision Optics 24,411 25,622 45,897 50,266

Other — — — —

Total $ 268,970 $ 279,833 $ 528,316 $ 537,681

Internally, management reviews net sales on a value-added basis.

Value-added sales is a non-GAAP financial measure that deducts the value of the pass-through metal costs from net sales.

Value-added sales allow management to assess the impact of differences in net sales between periods, segments, or markets, and analyze the resulting margins and profitability without the distortion of movements in pass-through metal costs.

Value-added sales is a non-GAAP financial measure that deducts the value of the pass-through precious metal market costs from net sales.

The dollar amount of gross margin and operating profit is not affected by the value-added sales calculation.

2 unchanged sentences

The cost of gold, silver, platinum, palladium, copper, ruthenium, iridium, rhodium, rhenium, and osmium can be quite volatile.

Our pricing policy is to directly pass the cost of these metals on to the customer in order to mitigate the impact of metal price volatility on our results from operations.

Our pricing policy is to directly pass the market cost of these metals on to the customer in order to mitigate the impact of metal price volatility on our results from operations.

Trends and comparisons of net sales are affected by movements in the market prices of these metals, but changes in net sales due to metal price movements may not have a proportionate impact on our profitability.

9 unchanged sentences

The Other reportable segment includes unallocated corporate costs.

The primary measurement used by management to measure the financial performance of each segment is EBITDA.

Refer to Note B to the Consolidated Financial Statements for the reconciliation of EBITDA by segment to consolidated net income.

Performance Materials

First Quarter

First Quarter Ended

March 28, March 29, $ %

Second Quarter

Second Quarter Ended

June 27, June 28, $ %

(Thousands) 2025 2024 Change Change

2 unchanged sentences

EBITDA 41,094 40,415 679 2 %

Net sales from the Performance Materials segment of $174.0 million in the first quarter of 2025 increased 3% compared to net sales of $168.6 million in the first quarter of 2024.

The increase in sales was due to a $6.2 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the first quarter of 2024 as well as a volume increase in the energy end market (97%), partially offset by a sales volume decrease in the consumer electronics end market (17%).

Value-added sales of $160.0 million in the first quarter of 2025 were 3% higher than value-added sales of $155.6 million in the first quarter of 2024.

The increase in value-added sales was due to the same factors driving the increase in net sales.

EBITDA for the Performance Materials segment was $40.7 million in the first quarter of 2025 compared to $30.7 million in the first quarter of 2024.

The increase in EBITDA was primarily due to pre-production costs associated with the production ramp of the new wide area clad facility in the first quarter of 2024 that did not recur in the first quarter of 2025 as well as the favorable impact of other manufacturing efficiencies in the first quarter of 2025.

In addition, the increase in hydroxide sales favorably impacted margins.

Net sales from the Performance Materials segment of $182.8 million in the second quarter of 2025 decreased 3% compared to net sales of $187.5 million in the second quarter of 2024.

The decrease in net sales was due to lower sales volumes in the consumer electronics (11%) end market and a $3.8 million year over year decrease in the volume of raw material beryllium hydroxide sales compared to the second quarter of 2024, partially offset by increased volumes in the energy (38%) and aerospace and defense (3%) end markets.

Value-added sales of $168.5 million in the second quarter of 2025 were 3% lower than value-added sales of $173.1 million in the second quarter of 2024.

The decrease in value-added sales was due to the same factors driving the decrease in net sales.

EBITDA for the Performance Materials segment was $41.1 million in the second quarter of 2025 compared to $40.4 million in the second quarter of 2024.

Despite lower sales volumes, EBITDA was favorably impacted by production efficiencies in the second quarter of 2025.

Additionally, there were higher costs associated with the production ramp of the precision clad strip facility in the second quarter of 2024 that did not recur in 2025.

Six Months Ended

June 27, June 28, $ %

(Thousands) 2025 2024 Change Change

Net sales $ 356,765 $ 356,158 $ 607 — %

Value-added sales 328,557 328,643 (86) — %

EBITDA 81,767 71,091 10,676 15 %

Net sales from the Performance Materials segment of $356.8 million in the first six months of 2025 were relatively flat year over year.

The decrease in sales volumes in the consumer electronics (14%) end market was partially offset by increased volumes in the energy (67%) end market when compared to the first six months of 2024.

Additionally, there was a $2.5 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the first six months of 2024.

Value-added sales of $328.6 million in the first six months of 2025 were were relatively flat year over year.

The change in value-added sales was due to the same factors driving the change in net sales.

EBITDA for the Performance Materials segment was $81.8 million in the first six months of 2025 compared to $71.1 million in the first six months of 2024.

EBITDA was favorably impacted by production efficiencies in the first six months of 2025.

Additionally, there were higher costs associated with the production ramp of the precision clad strip facility in the first six months of 2024 that did not recur in 2025.

Electronic Materials

First Quarter

First Quarter Ended

March 28, March 29, $ %

Second Quarter

Second Quarter Ended

June 27, June 28, $ %

(Thousands) 2025 2024 Change Change

2 unchanged sentences

EBITDA 17,601 13,456 4,145 31 %

Net sales from the Electronic Materials segment of $224.8 million in the first quarter of 2025 increased 17% from net sales of $192.0 million in the first quarter of 2024.

The increase in net sales was due to higher pass-through metal pricing, accounting for an increase of $40.5 million compared to the first quarter of 2024, and an increase in sales volumes in the semiconductor end market (5%).

These increases were partially offset by lower volume of precious metal sales and a decrease in sales volumes in the energy end market (19%).

Value-added sales of $77.8 million in the first quarter of 2025 were relatively flat compared to value-added sales of $77.6 million in the first quarter of 2024.

The increase in semiconductor sales noted above was partially offset by the decrease in the energy end market.

EBITDA for the Electronic Materials segment was $11.1 million in the first quarter of 2025 compared to $14.4 million in the first quarter of 2024.

EBITDA in the first quarter of 2025 was impacted by approximately $1.6 million of incremental one-time costs related to the continued wind-down of the refinery at the Company's Albuquerque, New Mexico facility as well as the impacts of unfavorable price/mix.

Net sales from the Electronic Materials segment of $224.4 million in the second quarter of 2025 increased by 6% compared to net sales of $212.7 million in the second quarter of 2024.

The increase in net sales was due to higher pass-through metal pricing, accounting for an increase of $38.0 million compared to the second quarter of 2024.

This increase was partially offset by lower volume of precious metal sales and a decrease in sales volumes in the energy (16%) and semiconductor (5%) end markets.

Value-added sales of $76.0 million in the second quarter of 2025 decreased 6% compared to value-added sales of $81.1 million in the second quarter of 2024.

The decrease in value-added sales was due a decrease in sales volumes in the energy (32%) and semiconductor (5%) end markets.

EBITDA for the Electronic Materials segment was $17.6 million in the second quarter of 2025 compared to $13.5 million in the second quarter of 2024.

Despite lower sales, EBITDA was favorably impacted by production efficiencies in the second quarter of 2025 and a $0.9 million reduction in restructuring expense when compared to the second quarter of 2024.

Six Months Ended

June 27, June 28, $ %

(Thousands) 2025 2024 Change Change

Net sales $ 449,222 $ 404,658 $ 44,564 11 %

Value-added sales 153,862 158,772 (4,910) (3) %

EBITDA 28,679 27,809 870 3 %

Net sales from the Electronic Materials segment of $449.2 million in the first six months of 2025 increased by 11% compared to net sales of $404.7 million in the first six months of 2024.

The increase in net sales was due to higher pass-through metal pricing, accounting for an increase of $78.5 million compared to the first six months of 2024, partially offset by a lower volume of precious metal sales.

Value-added sales of $153.9 million in the first half of 2025 decreased 3% compared to value-added sales of $158.8 million in the first half of 2024.

The decrease in value-added sales was due a decrease in sales volumes in the energy (27%) end market.

EBITDA for the Electronic Materials segment was $28.7 million in the first six months of 2025 compared to $27.8 million in the first six months of 2024.

Despite decreased sales volumes, EBITDA increased slightly as a result of production efficiencies in the first six months of 2025, partially offset by $1.6 million of incremental costs related to the wind-down of the refinery at the Company's Albuquerque, New Mexico facility.

Precision Optics

First Quarter

(Thousands) First Quarter Ended

March 28, March 29, $ %

Second Quarter

(Thousands) Second Quarter Ended

June 27, June 28, $ %

2025 2024 Change Change

1 unchanged sentence

Value-added sales 24,411 25,622 (1,211) (5) %

EBITDA (1,482) (252) (1,230) NM

Net sales from the Precision Optics segment of $21.5 million in the first quarter of 2025 decreased 13% compared to net sales of $24.7 million in the first quarter of 2024.

EBITDA 2,099 1,589 510 32 %

Net sales from the Precision Optics segment of $24.5 million in the second quarter of 2025 decreased 5% compared to net sales of $25.7 million in the second quarter of 2024.

The decrease was primarily due to lower sales volumes in the life sciences end market (22%).

Value-added sales of $21.5 million in the first quarter of 2025 decreased 13% compared to value-added sales of $24.6 million in the first quarter of 2024.

Value-added sales of $24.4 million in the second quarter of 2025 decreased 5% compared to value-added sales of $25.6 million in the second quarter of 2024.

The decrease in value-added sales was due to the same factors driving the decrease in net sales.

EBITDA for the Precision Optics segment was a loss of $1.5 million in the first quarter of 2025, compared to a loss of $0.3 million in the first quarter of 2024.

The decrease in EBITDA was primarily driven by a $1.0 million increase in restructuring expense in the first quarter of 2025 compared to the first quarter of 2024, as well as the impact of lower sales volumes.

First Quarter

(Thousands) First Quarter Ended

March 28, March 29, $ %

EBITDA for the Precision Optics segment was $2.1 million in the second quarter of 2025 compared to $1.6 million in the second quarter of 2024.

Despite lower sales volumes, various cost control initiatives implemented in 2024 and throughout 2025 drove the increase in EBITDA when comparing the second quarter of 2025 to the second quarter of 2024.

(Thousands) Six Months Ended

June 27, June 28, $ %

2025 2024 Change Change

2 unchanged sentences

EBITDA 617 1,336 (719) (54) %

Net sales from the Precision Optics segment of $46.0 million in the first half of 2025 decreased 9% compared to net sales of $50.3 million in the first half of 2024.

The decrease was primarily due to lower sales volumes in the life sciences end market (31%).

Value-added sales of $45.9 million in the first half of 2025 decreased 9% compared to value-added sales of $50.3 million in the first half of 2024.

The decrease in value-added sales was due to the same factors driving the decrease in net sales.

EBITDA for the Precision Optics segment was $0.6 million in the first six months of 2025 compared to $1.3 million in the first six months of 2024.

The decrease in EBITDA was primarily driven by a $0.7 million increase in restructuring expense in the first six months of 2025 compared to the first six months of 2024.

Second Quarter

(Thousands) Second Quarter Ended

June 27, June 28, $ %

2025 2024 Change Change

Net sales $ — $ — $ — — %

Value-added sales — — — — %

EBITDA (5,899) (6,245) 346 (6) %

The Other reportable segment in total includes unallocated corporate costs.

Corporate costs were $5.9 million in the first quarter of 2025 compared to $5.7 million in the first quarter of 2024.

Corporate costs were 1% of Company-wide net sales in the first quarter of 2025 and 2024.

Corporate costs were 2% of Company-wide value-added sales in the first quarter of 2025 and 2024.

Corporate costs remained relatively consistent with the prior year period due to continued cost control initiatives implemented throughout 2024 and in the first quarter of 2025.

Corporate costs were $5.9 million in the second quarter of 2025 compared to $6.2 million in the second quarter of 2024.

Corporate costs were 1% of Company-wide net sales in the second quarter of 2025 and 2024.

Corporate costs were 2% of Company-wide value-added sales in the second quarter of 2025 and 2024.

Corporate costs remained relatively consistent with the prior year period due to continued cost control initiatives implemented throughout 2024 and into 2025.

(Thousands) Six Months Ended

June 27, June 28, $ %

2025 2024 Change Change

Net sales $ — $ — $ — — %

Value-added sales — — — — %

EBITDA (11,769) (11,944) 175 (1) %

Corporate costs were $11.8 million in the first half of 2025 compared to $11.9 million in the first half of 2024.

Corporate costs were 1% of Company-wide net sales in the first six months of 2025 and 2024.

Corporate costs were 2% of Company-wide value-added sales in the first six months of 2025 and 2024.

Corporate costs remained relatively consistent with the prior year period due to continued cost control initiatives implemented throughout 2024 and into 2025.

FINANCIAL POSITION

A summary of cash flows provided by (used in) operating, investing, and financing activities is as follows:

Three Months Ended

March 28, March 29, $

Six Months Ended

June 27, June 28, $

(Thousands) 2025 2024 Change

Net cash (used in) provided by operating activities $ 15,502 $ (13,805) $ 29,307

Net cash provided by operating activities $ 65,442 $ 6,477 $ 58,965

Net cash (used in) investing activities (34,912) (48,260) 13,348

Net cash provided by financing activities 3,478 40,297 (36,819)

Net cash (used in)/provided by financing activities (36,377) 46,200 (82,577)

Effects of exchange rate changes 1,725 (613) 2,338

Net change in cash and cash equivalents $ (4,122) $ 3,804 $ (7,926)

Net cash provided by operating activities totaled $15.5 million in the first three months of 2025 compared to net cash used in operating activities of $13.8 million in the prior-year period.

The favorable change in cash provided by operating activities was primarily driven by continued focus on working capital, specifically efforts focused around inventory management, which resulted in a net cash benefit of $0.4 million in the first quarter of 2025 compared to a usage of $26.5 million in the first quarter of 2024 when inventory levels increased.

The increase in Account Receivable and Account Payable during the first quarter of 2025 was primarily due to the significant increase in precious metal pricing from year end, compared to decreases in the same period in the prior year.

Net cash used in investing activities was $20.7 million in the first quarter of 2025 compared to $26.3 million in the prior-year period.

The decrease in cash used in investing activities is due to lower capital expenditures, partially offset by an increase in mine development in the first quarter of 2025 compared to the first quarter of 2024.

Net cash provided by operating activities totaled $65.4 million in the first six months of 2025 versus $6.5 million in the prior-year period.

In addition to the $9.7 million increase in operating income, the increase in cash provided by operating activities was favorably impacted by the Company’s continued working capital initiatives, specifically efforts focused around inventory management.

In the prior year the Company saw inventory levels rise through the first half of 2024 to support organic growth.

Throughout 2025, the Company has focused on maintaining reduced inventory levels consistent with the levels achieved at December 31, 2024.

This resulted in incremental cash flow of approximately $24.4 million.

Additionally, there was a net cash inflow of $4.2 million in the first six months of 2025 compared to a usage of $20.9 million in the first six months of 2024 for payables and accruals due to continued focus on working capital and timing of quarter-end payments.

Lastly, there was a decrease in prepaid assets in the first six months of 2025 compared to an increase in the first six months of 2024, resulting in an increase in operating cash flow of $12.7 million, when comparing the first six months of 2025 to the first six months of 2024.

The change is primarily due to timing of of payments on annual renewals.

Net cash used in investing activities was $34.9 million in the first six months of 2025 compared to $48.3 million in the prior-year period.

The decrease in cash used in investing activities is due to a decrease in capital expenditures.

Capital expenditures are made primarily for new product development, replacing and upgrading equipment, infrastructure investments, and implementing information technology initiatives.

For the full year 2025, the Company expects payments for property, plant, and equipment to be approximately $70 million.

Net cash provided by financing activities totaled $3.5 million in the first three months of 2025 compared to net cash provided by financing activities of $40.3 million in the prior-year period.

The decrease in borrowings in 2025 from the same period in the prior year was a result of favorable operating cash flow and lower capital expenditures in 2025.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the inherent use of estimates and management’s judgment in establishing those estimates.

For additional information regarding critical accounting policies, please refer to our 2024 Annual Report on Form 10-K.

Net cash used in financing activities totaled $36.4 million in the first six months of 2025 and compared to net cash provided by financing activities of $46.2 million in the comparable prior-year period.

The net financing cash outflow in the first six months of 2025 was primarily driven by debt repayments, made possible by increased cash levels resulting from the Company's ongoing working capital initiatives and lower capital spend, compared to an inflow in the prior year used to support business growth.

We believe cash flow from operations plus the available borrowing capacity and our current cash balance are adequate to support operating requirements, capital expenditures, projected pension plan contributions, the current dividend program, environmental remediation projects, and strategic acquisitions for at least the next twelve months and for the foreseeable future thereafter.

At March 28, 2025, cash and cash equivalents held by our foreign operations totaled $14.6 million.

At June 27, 2025, cash and cash equivalents held by our foreign operations totaled $11.6 million.

We do not expect restrictions on repatriation of cash held outside of the United States to have a material effect on our overall liquidity, financial condition, or results of operations for the foreseeable future.

A summary of key data relative to our liquidity, including outstanding debt, cash, and available borrowing capacity, as of March 28, 2025 and December 31, 2024 is as follows:

March 28, December 31,

Other sources of liquidity include uncommitted short-term lines of credit for certain of the Company's foreign subsidiaries, which currently provide for borrowings of up to $22.8 million.

At June 27, 2025, the Company had borrowings outstanding of $2.0 million, which reduced the aggregate availability under these facilities to $20.8 million.

A summary of key data relative to our liquidity, including outstanding debt, cash, and available borrowing capacity, as of June 27, 2025 and December 31, 2024 is as follows:

June 27, December 31,

(Thousands) 2025 2024

8 unchanged sentences

The available borrowing capacity in the table above represents the additional amounts that could be borrowed under our revolving credit facility and other secured lines existing as of the end of each period depicted.

The applicable debt covenants have been taken into account when determining the available borrowing capacity, including the covenant that restricts borrowing capacity to a multiple of the twelve-month trailing earnings before interest, income taxes, depreciation and amortization, and other adjustments.

In January 2023, we amended the agreement governing our $375.0 million revolving credit facility and term loan (Credit Agreement).

Pursuant to the amendment, we transitioned U.S.

dollar denominated borrowings from LIBOR to SOFR for both the revolving credit facility and the term loan and increased the cap on precious metals consignment line from $550 million to $615 million.

The Company had previously amended and restated the Credit Agreement in connection with the HCS-Electronic Materials acquisition in November 2021.

A $300 million delayed draw term loan facility was added to the Credit Agreement and the maturity date of the Credit Agreement was extended from 2024 to 2026.

Moreover, the Credit Agreement also provides for an uncommitted incremental facility whereby, under certain conditions, the Company may be able to borrow additional term loans in an aggregate amount not to exceed $150.0 million.

The Credit Agreement provides the Company and its subsidiaries with additional capacity to enter into facilities for the consignment of precious metals and copper, and provides enhanced flexibility to finance acquisitions and other strategic initiatives.

Borrowings under the Credit Agreement are secured by substantially all of the assets of the Company and its direct subsidiaries, with the exception of non-mining real property, precious metal, copper and certain other assets.

The Credit Agreement allows the Company to borrow money at a premium over SOFR, following the January 2023 amendment, or prime rate and at varying maturities.

The premium resets quarterly according to the terms and conditions stipulated in the agreement.

The applicable debt covenants have been taken into account when determining the available borrowing capacity, including the covenant that restricts the borrowing capacity to a multiple of the twelve-month trailing earnings before interest, income taxes, depreciation, depletion and amortization, and other adjustments.

In June 2025, the Company entered into a Fifth Amended and Restated Credit Agreement (Credit Agreement).

The Credit Agreement refinances the revolving credit facility and term loan facility provided under Materion's previous Fourth Amended and Restated Credit Agreement, dated October 27, 2021 (as amended).

Among other things, the Credit Agreement provides for a $450 million senior secured revolving credit facility (the "Revolving Credit Facility") and a $225 million senior secured term loan facility (the "Term Loan Facility" and, together with the Revolving Credit Facility, the "Credit Facilities").

The Term Loan Facility was fully drawn on June 26, 2025.

The Credit Facilities mature on June 26, 2030.

The Credit Agreement also provides for an uncommitted incremental facility whereby, subject to the satisfaction of certain conditions, the Company may be able to borrow additional term loans in an aggregate amount not to exceed $250.0 million.

The Credit Agreement provides the Company and its subsidiaries with additional capacity to enter into facilities for the consignment of precious metals, copper, nickel and tantalum, and provides enhanced flexibility to finance acquisitions and other strategic initiatives.

The Credit Agreement allows the Company to borrow money at a premium over SOFR, or prime rate and at varying maturities.

The Credit Agreement includes restrictive covenants relating to restrictions on additional indebtedness, acquisitions, dividends, and stock repurchases.

In addition, the Credit Agreement includes covenants that limit the Company to a maximum leverage ratio and a minimum interest coverage ratio.

We were in compliance with all of our debt covenants as of March 28, 2025 and December 31, 2024.

We were in compliance with all of our debt covenants as of June 27, 2025 and December 31, 2024.

Cash on hand up to $35 million can benefit the covenants and may benefit the borrowing capacity under the Credit Agreement.

In November 2021, we completed the acquisition of HCS-Electronic Materials.

The Company financed the purchase price for the HCS-Electronic Materials acquisition with a new $300 million five-year term loan pursuant to its delayed draw term loan facility under the Credit Agreement and $103 million of borrowings under its amended revolving credit facility.

The interest rate for the term loan is based on SOFR, following the January 2023 amendment, plus a tiered rate determined by the Company's quarterly leverage ratio.

Portions of our business utilize off-balance sheet consignment arrangements allowing us to use metal owned by precious metal consignors as we manufacture product for our customers.

2 unchanged sentences

In August 2022, we entered into a precious metals consignment agreement, maturing on August 31, 2025, which replaced the consignment agreements that would have matured on August 27, 2022.

The available and unused capacity under the metal consignment agreements expiring in August 2025 totaled approximately $198.2 million as of March 28, 2025, compared to $233.4 million as of December 31, 2024.

The available and unused capacity under the metal consignment agreements expiring in August 2025 totaled approximately $235.7 million as of June 27, 2025, compared to $233.4 million as of December 31, 2024.

The availability is determined by Board approved levels and actual capacity.

2 unchanged sentences

There is no minimum quantity requirement to repurchase our common stock for a given year, and the repurchases may be discontinued at any time.

We did not repurchase any shares under this program in the first quarter of 2025.

Since the approval of the repurchase plan, we have purchased 1,254,264 shares at a total cost of $41.7 million, or an average of $33.23 per share.

We paid cash dividends of $2.8 million on our common stock in the first quarter of 2025.

We repurchased 100,000 shares under this program in the second

quarter of 2025, for a total cost of $7.8 million.

Since the approval of the repurchase plan, we have purchased 1,354,264 shares at a total cost of $49.5 million.

We paid cash dividends of $2.9 million and $5.7 million on our common stock in the second quarter and first six months of 2025, respectively.

We intend to pay a quarterly dividend on an ongoing basis, subject to a determination that the dividend remains in the best interest of our shareholders.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

OFF-BALANCE SHEET ARRANGEMENTS AND CASH OBLIGATIONS

We maintain the majority of the precious metals and portions of the copper we use in production on a consignment basis in order to reduce our exposure to metal price movements and to reduce our working capital investment.

The notional value of off-balance sheet precious metals and copper was $416.8 million and $381.6 million as of March 28, 2025 and December 31, 2024, respectively.

We were in compliance with all of the covenants contained in the consignment agreements as of March 28, 2025.

For additional information on our contractual and other obligations, refer to our 2024 Annual Report on Form 10-K.

The notional value of off-balance sheet precious metals and copper was $379.3 million and $381.6 million as of June 27, 2025 and December 31, 2024, respectively.

We were in compliance with all of the covenants contained in the consignment agreements as of June 27, 2025.

For additional information on our material cash obligations, refer to our 2024 Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES

For additional information regarding critical accounting policies, please refer to our 2024 Annual Report on Form 10-K.

Forward-looking Statements:

14 unchanged sentences

the uncertainties related to the impact of war, terrorist activities, and acts of God;

changes in government regulatory requirements and the enactment of new legislation that impacts our obligations and operations;

changes in government regulatory requirements and the enactment of new legislation that impacts our obligations and operations, including changes in tax regulations or guidance promulgated pursuant to the new legislation implemented in the One Big Beautiful Bill Act;

the conclusion of pending litigation matters in accordance with our expectation that there will be no material adverse effects;

the disruptions in operations from, and other effects of, catastrophic and other extraordinary events including the conflict between Russia and Ukraine;

realization of financial benefits expected from the Inflation Reduction Act of 2022;

the disruptions in operations from, and other effects of, catastrophic and other extraordinary events including outbreaks of infectious diseases and the conflict between Russia and Ukraine;

realization of expected financial benefits expected from the Inflation Reduction Act of 2022;

and the risk factors set forth in Part 1, Item 1A of the Company's 2024 Annual Report on Form 10-K.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis