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Item 2. Management’s Discussion and Analysis

2025-10-30 compared with 2025-07-30 · 188 added, 180 removed, 201 unchanged (65% of the section changed)

3 unchanged sentences

RESULTS OF OPERATIONS

Second Quarter

Second Quarter Ended

June 27, June 28, $ %

Third Quarter

Third Quarter Ended

September 26, September 27, $ %

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

10 unchanged sentences

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

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

Restructuring expense 212 1,493 (1,281) (86) %

Other—net 6,164 5,309 855 16 %

6 unchanged sentences

Diluted earnings per share $ 1.22 $ 1.07 $ 0.15 14 %

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 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.

Net sales of $444.8 million in the third quarter of 2025 increased $8.1 million from $436.7 million in the third quarter of 2024.

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

The increase in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $48.5 million when compared to the prior year period, partially offset by a decrease in volume of precious metal sales of $27.5 million driven by.

The decrease in precious metal sales was primarily due to the impact of the divestiture of the target business in Albuquerque, New Mexico that occurred in the fourth quarter of 2024.

Sales volumes for the Performance Materials segment were unfavorably impacted by equipment downtime.

At the Company level, a decrease in the energy (17%) end market was partially offset by a $4.8 million increase in the volume of raw material beryllium hydroxide sales compared to the same period in the prior year.

See Note C 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 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 $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.

Value-added sales in the third quarter of 2025 was relatively flat with the third quarter of 2024.

Volume decreases were impacted by equipment downtime in the Performance Materials segment as well as a decrease in the energy (24%) end market.

These decreases were partially offset by a $4.8 million year over year increase in raw material beryllium hydroxide sales compared to the third quarter of 2024.

Gross margin in the third quarter of 2025 was $86.1 million, an increase of 6% compared to the third quarter of 2024.

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

Gross margin expressed as a percentage of value-added sales was 33% in the third quarter of 2025 compared to 31% in the third quarter of 2024.

The increase in gross margin is primarily due to favorable mix, primarily in the Electronic Materials segment, partially offset by production inefficiencies in the Performance Materials segment.

SG&A expense was $38.3 million in the third quarter of 2025, compared to $35.0 million in the third quarter 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 9% and 8% in the third quarter of 2025 and 2024, respectively.

Expressed as a percentage of value-added sales, SG&A expense was 14% and 13% in the third quarter of 2025 and 2024, respectively.

R&D expense consists primarily of direct personnel and material 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% and 2% of net sales in the third quarter of 2025 and 2024, respectively.

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

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 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.

In the third quarter of 2025, we recorded $0.2 million of restructuring charges primarily in our Electronic Materials segment.

In the third quarter of 2024, we recorded $1.5 million of restructuring charges across all segments.

See Note E to the Consolidated Financial Statements for further discussion.

Other-net was $6.2 million of expense in the third quarter of 2025, or a $0.9 million increase from the third quarter of 2024.

Refer to Note F 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 $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, $ %

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

Interest expense-net was $7.5 million and $8.8 million in the third quarter 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 third quarter of 2025 was $2.7 million, compared to $0.8 million in the third quarter of 2024.

The effective tax rate for the third quarter of 2025 and 2024 was 9.6% and 3.3%, respectively.

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

The effective tax rate for 2024 was lower than the statutory tax rate primarily due to the impact of percentage depletion, research and development and production tax credits, and the foreign derived intangible income deduction.

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

One Big Beautiful Bill Act

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 accelerating the phase-out of certain Inflation Reduction Act tax incentives.

The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented in future years.

We have evaluated the impact of the OBBBA on our consolidated financial statements, including the effects on our annual effective tax rate, deferred tax assets and liabilities, and cash flows.

Based on our analysis, we expect there to be a positive impact on cash flow in 2025 and future years, primarily driven by the changes to the limitation on the deductibility of interest expense in the OBBBA.

We do not expect the OBBBA to have a material impact on our annual effective tax rate in 2025.

Nine Months Ended

September 26, September 27, $ %

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

10 unchanged sentences

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

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

Restructuring (income) expense 2,729 6,161 (3,432) (56) %

Other—net 15,068 14,112 956 7 %

6 unchanged sentences

Diluted earnings per share $ 3.27 $ 2.61 $ 0.66 25 %

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.

Net sales of $1,296.8 million in the first nine months of 2025 increased $48.9 million from $1,247.9 million in the first nine months of 2024.

Increases in net sales in the Electronic Materials and Precision Optics segments were partially offset by a decrease in the Performance Materials segment.

The increase in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $127.0 million when compared to the prior year period, partially offset by a decrease in precious metal sales of $58.6 million.

The decrease in precious metal sales was primarily due to the impact of the divestiture of the target business in Albuquerque, New Mexico that occurred in the fourth quarter of 2024.

At the Company level, a volume decreases in the consumer electronics (9%) end market was partially offset by a volume increase in the energy (8%) end market.

Additionally, there was a $7.2 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.

See Note C 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 $792.3 million in the first nine months of 2025 decreased $9.2 million, or 1%, compared to the first nine months of 2024.

The decrease in value-added sales was impacted by a $10.5 million decrease in sales in the first nine months of 2025 compared to the same period in the prior year due to the divestiture of the target business in Albuquerque, New Mexico that occurred in the fourth quarter of 2024.

Additionally, there was a volume decrease in the consumer electronics (11%) end market, which was partially offset by an increase in the energy (8%) end market.

In addition, there was a $7.2 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 nine months of 2025 was $245.0 million, an increase of 5% compared to the first nine months of 2024.

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

Gross margin expressed as a percentage of value-added sales increased to 31% in the first nine months of 2025 from 29% in the first nine months of 2024.

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

Gross margin in the first nine months of 2024

was unfavorably impacted by the significant pre-production costs and manufacturing inefficiencies associated with the ramp of the wide area clad facility.

SG&A expense was $108.7 million in the first nine months of 2025, compared to $104.5 million in the first nine 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.

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

Expressed as a percentage of value-added sales, SG&A expense was 14% and 13% in the first nine months of 2025 and 2024, respectively.

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

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

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

In the first nine months of 2025, we recorded a combined total of $2.7 million of restructuring charges in our Electronic Materials, Precision Optics, Performance Materials and Other segments.

In the first nine months of 2024, we recorded a combined total of $6.2 million of restructuring charges primarily in our Precision Optics, Electronic Materials, Performance Materials 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-net was $15.1 million of expense in the first nine months of 2025, or a $1.0 million increase from the first nine months of 2024.

Refer to Note F 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.

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

Interest expense-net was $22.7 million and $25.9 million in the first nine 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 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.

Income tax expense for the first nine months of 2025 was $10.0 million, compared to $6.8 million in the nine months of 2024.

The Company's effective tax rate for the first nine months of 2025 and 2024 was 12.7% and 11.1%, respectively.

The effective tax rate for the first nine months of 2025 includes a net discrete income tax benefit of $0.7 million, primarily consisting of prior year return-to-provision adjustments recorded.

The effective tax rate for the first nine months of 2024 included a nominal amount of discrete income tax expense primarily consisting of $1.0 million of excess tax benefits from stock-based compensation awards offset by a $1.1 million valuation allowance recorded against deferred tax assets that are not likely to be realized for one of the Company’s foreign subsidiaries.

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

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 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,

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 third quarter and first nine months of 2025 and 2024 is as follows:

Third Quarter Ended Nine Months Ended

September 26, September 27, September 26, September 27,

(Thousands) 2025 2024 2025 2024

28 unchanged sentences

In either case, we generally earn our margin based upon our fabrication efforts.

The relationship of this margin to net sales can change depending upon whether or not the product was made from our metal or the customer’s metal.

The relationship of this margin to net sales can change depending upon whether or not the

product was made from our metal or the customer’s metal.

The use of value-added sales removes the potential distortion in the comparison of net sales caused by changes in the level of customer-supplied metal.

5 unchanged sentences

Performance Materials

Second Quarter

Second Quarter Ended

June 27, June 28, $ %

Third Quarter

Third Quarter Ended

September 26, September 27, $ %

(Thousands) 2025 2024 Change Change

2 unchanged sentences

EBITDA 36,911 44,802 (7,891) (18) %

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.

Net sales from the Performance Materials segment of $170.8 million in the third quarter of 2025 decreased 4% compared to net sales of $177.4 million in the third quarter of 2024.

The decrease in sales was due to lower sales volumes in the energy (34%), aerospace and defense (10%) and automotive (16%) end markets primarily due to equipment downtime.

These decreases were partially offset by a $4.8 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the third quarter of 2024.

Value-added sales of $157.1 million in the third quarter of 2025 were 4% lower than value-added sales of $163.6 million in the third 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, $ %

EBITDA for the Performance Materials segment was $36.9 million in the third quarter of 2025, compared to $44.8 million in the third quarter of 2024.

The decrease in EBITDA was driven by lower sales volumes as a result of equipment down time.

Nine Months Ended

September 26, September 27, $ %

(Thousands) 2025 2024 Change Change

2 unchanged sentences

EBITDA 118,678 115,893 2,785 2 %

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.

Net sales from the Performance Materials segment of $527.6 million in the first nine months of 2025 decreased 1% compared to net sales of $533.5 million in the first nine months of 2024.

The decrease in sales was due to lower sales volumes in the consumer electronics (10%) and automotive (11%) end markets.

These decreases were partially offset by increased volumes in the energy (24%) end market.

Additionally, there was a $7.2 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the first nine months of 2024.

Value-added sales of $485.7 million in the first nine months of 2025 were 1% lower than value-added sales of $492.3 million in the first nine months 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 $118.7 million in the first nine months of 2025 compared to $115.9 million in the first nine months of 2024.

The unfavorable impacts of lower sales volumes were partially offset by manufacturing efficiencies and improved margins for the first nine months of 2025 compared to the first nine months of 2024.

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

Electronic Materials

Second Quarter

Second Quarter Ended

June 27, June 28, $ %

Third Quarter

Third Quarter Ended

September 26, September 27, $ %

(Thousands) 2025 2024 Change Change

2 unchanged sentences

EBITDA 20,925 12,309 8,616 70 %

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, $ %

Net sales from the Electronic Materials segment of $246.8 million in the third quarter of 2025 were 4% higher than net sales of $236.9 million in the third quarter of 2024.

The increase in net sales was primarily due to higher precious metal pass through costs, which increased net sales by $48.5 million compared to the third quarter of 2024.

This was partially offset by a decrease in precious metal sales of $27.5 million in the third quarter of 2025 compared to the third quarter of 2024.

The decrease in precious metal sales was primarily due to the impact of the divestiture of the target business in Albuquerque, New Mexico that occurred in the fourth quarter of 2024.

Value-added sales of $79.7 million in the third quarter of 2025 increased 2% compared to value-added sales of $77.8 million in the third quarter of 2024.

Overall sales volumes were relatively flat in the third quarter of 2025 compared to the third quarter of 2024, consistent with value-added sales.

EBITDA for the Electronic Materials segment was $20.9 million in the third quarter of 2025 compared to $12.3 million in the third quarter of 2024.

EBITDA was impacted by favorable price/mix and production efficiencies in the third quarter of 2025, compared to the same period in the prior year.

Nine Months Ended

September 26, September 27, $ %

(Thousands) 2025 2024 Change Change

2 unchanged sentences

EBITDA 49,604 40,118 9,486 24 %

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.

Net sales from the Electronic Materials segment of $696.1 million in the first nine months of 2025 were 8% higher than net sales of $641.6 million in the first nine months of 2024.

The increase in net sales was primarily due to higher precious metal pass through costs, increasing net sales by approximately $127.0 million when compared to the prior year period, partially offset by a decrease in precious metal sales of $58.6 million.

The decrease in precious metal sales was primarily due to the impact of the divestiture of the target business in Albuquerque, New Mexico that occurred in the fourth quarter of 2024.

Additionally, there were lower sales volumes in the automotive (40%) end market in the first nine months of 2025, compared to the same period in the prior year.

Value-added sales of $233.6 million in the first nine months of 2025 decreased 1% compared to value-added sales of $236.6 million in the first nine months of 2024.

The decrease in value-added sales was driven by decreased sales volumes in the energy (19%) end markets as well as decrease in sales volumes due to the impact of the divestiture of the target business in Albuquerque, New Mexico that occurred in the fourth quarter of 2024.

EBITDA for the Electronic Materials segment was $49.6 million in the first nine months of 2025 compared to $40.1 million in the first nine months of 2024.

EBITDA was impacted by favorable price/mix and production efficiencies in the first nine months of 2025, compared to the same period in the prior year.

Precision Optics

Second Quarter

(Thousands) Second Quarter Ended

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Third Quarter

(Thousands) Third Quarter Ended

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2025 2024 Change Change

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Value-added sales 27,143 22,381 4,762 21 %

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 $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 $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, $ %

EBITDA 3,231 (39) 3,270 n.m.

Net sales from the Precision Optics segment of $27.2 million in the third quarter of 2025 increased 21% compared to net sales of $22.4 million in the third quarter of 2024.

The increase was primarily due to higher sales volumes in the aerospace and defense end market (62%).

Value-added sales of $27.1 million in the third quarter of 2025 increased 21% compared to value-added sales of $22.4 million in the third quarter of 2024.

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

EBITDA for the Precision Optics segment was $3.2 million in the third quarter of 2025 compared to a slight loss in the third quarter of 2024.

The increase in EBITDA was due to the impact of higher sales volumes as well as the various cost control initiatives implemented in 2024 and throughout 2025.

(Thousands) Nine Months Ended

September 26, September 27, $ %

2025 2024 Change Change

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EBITDA 3,848 1,297 2,551 197 %

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

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Net sales from the Precision Optics segment of $73.2 million in the first nine months of 2025 increased 1% compared to net sales of $72.8 million in the first nine months of 2024.

The increase was primarily due to higher sales volumes in the aerospace and defense (28%) end market.

Value-added sales of $73.0 million in the first nine months of 2025 increased 1% compared to value-added sales of $72.6 million in the first nine months of 2024.

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

EBITDA for the Precision Optics segment was $3.8 million in the first nine months of 2025 compared to $1.3 million in the first nine months of 2024.

The increase in EBITDA was due to the impact of the various cost control initiatives implemented in 2024 and throughout 2025.

Third Quarter

(Thousands) Third Quarter Ended

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2025 2024 Change Change

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The Other reportable segment in total includes unallocated corporate costs.

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, $ %

Corporate costs were $7.9 million in the third quarter of 2025 compared to $6.6 million in the third quarter of 2024.

Corporate costs as a percent of Company-wide value-added sales increased from 2% in the third quarter of 2024 to 3% in the third quarter of 2025.

The increase in corporate costs in the third quarter of 2025 compared to the third quarter of 2024 is primarily driven by changes in variable-based compensation and incentives.

(Thousands) Nine Months Ended

September 26, September 27, $ %

2025 2024 Change Change

2 unchanged sentences

EBITDA (19,678) (18,522) (1,156) 6 %

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.

Corporate costs were $19.7 million in the first nine months of 2025 compared to $18.5 million in the first nine months of 2024.

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

The increase in corporate costs was driven by changes in variable-based compensation and incentives.

This increase was partially offset by a decrease in corporate expenses 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:

Six Months Ended

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Nine Months Ended

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(Thousands) 2025 2024 Change

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Net change in cash and cash equivalents $ (302) $ 4,580 $ (4,882)

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.

Net cash provided by operating activities totaled $83.7 million in the first nine months of 2025 versus $11.6 million in the prior year period.

In addition to the $13.4 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 cash collection, which resulted in incremental cash flow of $23.6 million, and timing of quarter-end payments related to payables and accruals, which resulted in incremental cash flow of $17.8 million.

Further, 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 $12.2 million, when comparing to the first nine months of 2024.

Lastly, there was a smaller increase in prepaid assets in the first nine months of 2025 compared to the increase in the first nine months of 2024, primarily due to an increase in prepaid taxes in the prior year, resulting in an increase in operating cash flow of $3.6 million.

Net cash used in investing activities was $77.3 million in the first nine months of 2025 compared to $60.5 million in the prior year period.

The increase in cash used is primarily due to the July 2025 acquisition of certain manufacturing assets for tantalum solutions from Konasol, Co., Ltd., a Korean manufacturer serving the semiconductor and adjacent market, resulting in a $19.5 million outflow.

Refer to Note B for additional detail.

Additionally, the usage related to payments for mine development increased $9.6 million, offset by a lower decrease in cash used for capital expenditures of $12.0 million, when compared to the first nine months of 2024.

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 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.

Net cash used in financing activities totaled $8.4 million in the first nine months of 2025 and compared to net cash provided by financing activities of $52.9 million in the comparable prior year period.

The net financing cash outflow in the first nine 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 June 27, 2025, cash and cash equivalents held by our foreign operations totaled $11.6 million.

At September 26, 2025, cash and cash equivalents held by our foreign operations totaled $15.0 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.

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,

At September 26, 2025, the Company had borrowings outstanding of $1.3 million, which reduced the aggregate availability under these facilities to $21.5 million.

A summary of key data relative to our liquidity, including outstanding debt, cash, and available borrowing capacity, as of September 26, 2025 and December 31, 2024 is as follows:

September 26, December 31,

(Thousands) 2025 2024

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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").

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

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

4 unchanged sentences

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

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

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 June 27, 2025 and December 31, 2024.

We were in compliance with all of our debt covenants as of September 26, 2025 and December 31, 2024.

Cash on hand up to $35.0 million can benefit the covenants and may benefit the borrowing capacity under the Credit Agreement.

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In August 2025, we entered into a precious metals consignment agreement, maturing on August 31, 2028, which replaced the consignment agreements that would have matured on August 31, 2025.

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 available and unused capacity under the metal consignment agreements expiring in August 2028 totaled approximately $121.2 million as of September 26, 2025, compared to $233.4 million as of December 31, 2024.

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

In January 2014, our Board of Directors approved a plan to repurchase up to $50.0 million of our common stock.

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.

In October 2025, we announced that our Board of Directors had approved a new plan to repurchase up to $50.0 million of our common stock,

replacing the plan approved in 2014.

The timing of the share repurchases will depend on several factors, including market and business conditions, our cash flow, debt levels, and other investment opportunities.

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 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 paid cash dividends of $2.9 million and $8.6 million on our common stock in the third quarter and first nine 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.

1 unchanged sentence

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 $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.

The notional value of off-balance sheet precious metals and copper was $493.8 million and $381.6 million as of September 26, 2025 and December 31, 2024, respectively.

We were in compliance with all of the covenants contained in the consignment agreements as of September 26, 2025.

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

22 unchanged sentences

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

the amount and timing of any repurchases of our shares;

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