MATERION Corp 10-Q

Item 1. Financial Statements Materion Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) First Quarter Ended (Thousands, except per share amounts) April 3, 2026 March 28, 2025 Net sales $ 549,824 $ 420,330 Cost of sales 467,989 344,151 Gross margin 81,835 76,179 Selling, general, and administrative expense 36,200 35,445 Research and development expense 6,157 6,505 Restructuring expense 2,295 2,038 Other—net 9,008 4,996 Operating profit 28,175 27,195 Other non-operating income—net ( 309 ) ( 666 ) Interest expense—net 7,578 6,917 Income before income taxes 20,906 20,944 Income tax expense 1,533 3,246 Net income $ 19,373 $ 17,698 Basic earnings per share: Net income per share of common stock $ 0.93 $ 0.85 Diluted earnings per share: Net income per share of common stock $ 0.92 $ 0.85 Weighted-average number of shares of common stock outstanding: Basic 20,762 20,780 Diluted 21,007 20,913 See notes to these consolidated financial statements. 2 Materion Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (Unaudited) First Quarter Ended April 3, March 28, (Thousands) 2026 2025 Net income $ 19,373 $ 17,698 Other comprehensive income (loss): Foreign currency translation adjustment ( 1,365 ) 3,628 Derivative and hedging activity, net of tax ( 78 ) ( 1,356 ) Pension and post-employment benefit adjustment, net of tax 154 1,075 Other comprehensive income (loss) ( 1,289 ) 3,347 Comprehensive income $ 18,084 $ 21,045 See notes to these consolidated financial statements. 3 Materion Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) April 3, Dec. 31, (Thousands) 2026 2025 Assets Current assets Cash and cash equivalents $ 16,189 $ 13,681 Accounts receivable, net 267,209 222,916 Inventories, net 493,687 461,231 Prepaid and other current assets 98,664 91,692 Total current assets 875,749 789,520 Deferred income taxes 7,718 7,727 Property, plant, and equipment 1,390,729 1,376,703 Less allowances for depreciation, depletion, and amortization ( 860,870 ) ( 841,245 ) Property, plant, and equipment, net 529,859 535,458 Operating lease, right-of-use assets 59,024 62,036 Intangible assets, net 102,739 105,874 Other assets 21,975 21,529 Goodwill 280,335 280,657 Total Assets $ 1,877,399 $ 1,802,801 Liabilities and Shareholders’ Equity Current liabilities Short-term debt $ 23,050 $ 22,445 Accounts payable 189,036 148,642 Salaries and wages 12,751 19,312 Other liabilities and accrued items 47,563 45,445 Income taxes 4,156 5,054 Unearned revenue 11,929 12,685 Total current liabilities 288,485 253,583 Other long-term liabilities 12,680 12,556 Operating lease liabilities 59,539 60,568 Finance lease liabilities 12,950 13,384 Retirement and post-employment benefits 23,360 23,931 Unearned income 53,303 55,862 Long-term income taxes 536 532 Deferred income taxes 2,712 2,760 Long-term debt 466,871 436,348 Shareholders’ equity Serial preferred stock (no par value; 5,000 authorized shares, none issued) — — Common stock (no par value; 60,000 authorized shares, issued shares of 27,148 at April 3 and December 31) 368,264 351,901 Retained earnings 928,796 912,361 Common stock in treasury ( 295,362 ) ( 277,473 ) Accumulated other comprehensive loss ( 51,870 ) ( 50,581 ) Other equity 7,135 7,069 Total shareholders' equity 956,963 943,277 Total Liabilities and Shareholders’ Equity $ 1,877,399 $ 1,802,801 See the notes to these consolidated financial statements. 4 Materion Corporation and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Three Months Ended April 3, March 28, (Thousands) 2026 2025 Cash flows from operating activities: Net income $ 19,373 $ 17,698 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization 18,426 16,538 Amortization of deferred financing costs in interest expense 239 450 Stock-based compensation expense (non-cash) 3,371 2,986 Deferred income tax (benefit) expense ( 3 ) 22 Changes in assets and liabilities: Accounts receivable ( 45,097 ) ( 24,912 ) Inventory ( 28,916 ) 421 Prepaid and other current assets ( 8,406 ) ( 10,428 ) Accounts payable and accrued expenses 36,420 19,191 Unearned revenue ( 1,956 ) ( 4,616 ) Interest and taxes payable ( 179 ) ( 404 ) Other-net 2,421 ( 1,444 ) Net cash provided by (used in) operating activities ( 4,307 ) 15,502 Cash flows from investing activities: Payments for purchase of property, plant, and equipment ( 15,289 ) ( 12,321 ) Payments for mine development ( 60 ) ( 8,683 ) Proceeds from sale of property, plant, and equipment — 266 Net cash used in investing activities ( 15,349 ) ( 20,738 ) Cash flows from financing activities: Proceeds from (repayments of) borrowings under credit facilities, net 32,783 16,190 Repayment of debt ( 1,572 ) ( 7,522 ) Principal payments under finance lease obligations ( 153 ) ( 163 ) Cash dividends paid ( 2,905 ) ( 2,803 ) Payments of withholding taxes for stock-based compensation awards ( 5,772 ) ( 2,224 ) Net cash provided by financing activities 22,381 3,478 Effects of exchange rate changes ( 217 ) 679 Net change in cash and cash equivalents 2,508 ( 1,079 ) Cash and cash equivalents at beginning of period 13,681 16,713 Cash and cash equivalents at end of period $ 16,189 $ 15,634 See notes to these consolidated financial statements. 5 Materion Corporation and Subsidiaries Consolidated Statements of Shareholders' Equity (Unaudited) Common Shares Shareholders' Equity (Thousands, except per share amounts) Common Shares Common Shares Held in Treasury Common Stock Retained Earnings Common Stock in Treasury Accumulated Other Comprehensive Loss Other Equity Total Balance at December 31, 2025 20,735 6,413 $ 351,901 $ 912,361 $ ( 277,473 ) $ ( 50,581 ) $ 7,069 $ 943,277 Net income — — — 19,373 — — — 19,373 Other comprehensive loss — — — — — ( 1,289 ) — ( 1,289 ) Cash dividends declared ($ 0.140 per share) — — — ( 2,905 ) — — — ( 2,905 ) Stock-based compensation activity 102 ( 102 ) 16,332 ( 33 ) ( 12,066 ) — — 4,233 Payments of withholding taxes for stock-based compensation awards ( 36 ) 36 — — ( 5,772 ) — — ( 5,772 ) Directors’ deferred compensation — — 31 — ( 51 ) — 66 46 Balance at April 3, 2026 20,801 6,347 $ 368,264 $ 928,796 $ ( 295,362 ) $ ( 51,870 ) $ 7,135 $ 956,963 Balance at December 31, 2024 20,764 6,384 $ 336,136 $ 849,111 $ ( 261,880 ) $ ( 61,046 ) $ 6,560 $ 868,881 Net income — — — 17,698 — — — 17,698 Other comprehensive loss — — — — — 3,347 — 3,347 Cash dividends declared ($ 0.135 per share) — — — ( 2,803 ) — — — ( 2,803 ) Stock-based compensation activity 75 ( 75 ) 6,597 ( 4 ) ( 3,607 ) — — 2,986 Payments of withholding taxes for stock-based compensation awards ( 25 ) 25 — — ( 2,224 ) — — ( 2,224 ) Directors’ deferred compensation — — 26 — ( 45 ) — 63 44 Balance at March 28, 2025 20,814 6,334 $ 342,759 $ 864,002 $ ( 267,756 ) $ ( 57,699 ) $ 6,623 $ 887,929 See notes to these consolidated financial statements. 6 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note A — Accounting Policies Basis of Presentation: The accompanying consolidated financial statements of Materion Corporation and its subsidiaries (referred to herein as the Company, our, we, or us) contain all of the adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods reported. All adjustments were of a normal and recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's 2025 Annual Report on Form 10-K. The interim period results are not necessarily indicative of the results to be expected for the full year. New Accounting Guidance Issued and Not Yet Adopted: In November 2024, the Financial Accounting Standards Board (FASB) issued a final ASU to require disaggregated disclosure of income statement expenses. This new standard requires public business entities to provide detailed disclosures in the notes to financial statements disaggregating specific expense categories, including employee compensation, depreciation, and intangible asset amortization, as well as certain other disclosures to provide enhanced transparency into the nature and function of expenses. This guidance is effective for annual periods beginning in the Company’s fiscal year 2027 and interim periods following annual adoption, with early adoption permitted. This guidance will be applied on a prospective basis with retrospective application permitted. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures. In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-internal-use software (Subtopic 350-40): Targeted Improvements to the Accounting for internal-use software . The amendments in this ASU make targeted improvements to Subtopic 350-40, Intangibles-Goodwill and Other-internal-use software, to increase the operability of the recognition guidance considering different methods of software development. This ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its condensed consolidated financial statements and related disclosures. In December 2025, the FASB issued 2025‑10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities . This ASU establishes comprehensive U.S. GAAP guidance for the recognition, measurement, and presentation of government grants received by business entities. The amendments incorporate principles similar to those in International Accounting Standards (IAS) 20 and are intended to reduce diversity in practice by providing a consistent framework for accounting for monetary and tangible nonmonetary government grants. This ASU is effective for fiscal years beginning after December 15, 2028, and interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its condensed consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-scope improvements. The amendments clarify the scope, form, and content of interim financial statement disclosures and improve the navigability of Topic 270 without changing existing interim reporting requirements. This ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its interim financial reporting and related disclosures. Note B — Acquisition On July 9, 2025, the Company completed the acquisition of certain manufacturing assets for tantalum solutions in Dangjin City, South Korea, from Konasol Co., Ltd., a Korean manufacturer serving the semiconductor and adjacent markets. This strategic investment expands the Company’s global footprint with a facility in Asia to better serve semiconductor customers in that region. 7 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) The total purchase price was approximately $ 19.5 million, which was paid in cash on the date of acquisition. The acquisition and related fees and expenses were funded through available cash and borrowings under the Company's revolving credit facility. Acquisition-related transaction and integration costs totaled $ 1.8 million in 2025 with no material costs incurred in 2026. These costs are included in selling, general, and administrative expenses in the Consolidated Statements of Income. The Company accounted for the transaction as a business combination using the acquisition method of accounting and a third-party valuation appraisal, and included the results of operations of the acquisition in its consolidated financial statements from the effective date of the acquisition. The operating results are included within the Company's Electronic Materials segment. Pro forma financial information has not been presented, as revenue and expenses related to the acquisition do not have a material impact on the Company’s consolidated financial statements. The total purchase price was allocated to identifiable assets and liabilities based upon the preliminary estimates of fair value at the date of the acquisition, which primarily included property, plant and equipment, and a developed technology intangible asset of $ 2.1 million. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired, such excess was allocated to goodwill and approximated $ 14.9 million. The goodwill is deductible for Korean tax purposes. The fair value of the acquired intangible asset is determined based on an income approach, using estimates and assumptions that are deemed reasonable by the Company. These assumptions are subject to revision as additional information is obtained about the facts and circumstances that existed as of the acquisition date, primarily related to intangible assets, which may result in adjustments to the preliminary values discussed above as valuations are finalized. We expect to finalize these amounts as soon as possible, but no later than the end of the third quarter of 2026. Note C — Segment Reporting The Company has the following reportable segments: Performance Materials, Electronic Materials, Precision Optics, and Other. The Company’s reportable segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the Chief Executive Officer, the Company's chief operating decision maker, in determining how to allocate the Company’s resources and evaluate performance. Performance Materials provides advanced engineered solutions comprised of beryllium and non-beryllium containing alloy systems and custom engineered parts in strip, bulk, rod, plate, bar, tube, and other customized shapes. Electronic Materials produces advanced chemicals, microelectric packaging, precious metal, non-precious metal, and specialty metal products, including vapor deposition targets, frame lid assemblies, clad and precious metal preforms and high temperature braze materials. Precision Optics produces thin film coatings, optical filter materials, sputter-coated, and precision-converted thin film materials. The Other reportable segment includes unallocated corporate costs and assets. The primary measurement used by management to measure the financial performance of each segment is earnings before interest, taxes, depreciation and amortization (EBITDA). The below table presents financial information for each segment and a reconciliation of EBITDA to Net Income (the most directly comparable GAAP financial measure) for the first quarter of 2026 and 2025: 8 First quarter ended April 3, 2026 Performance Materials Electronic Materials Precision Optics Other Consolidated Net sales (1) $ 155,665 $ 363,364 $ 30,795 $ — $ 549,824 Less: Cost of sales 124,608 323,566 19,816 ( 1 ) 467,989 Selling, general and administrative expense 14,065 10,171 5,207 6,757 36,200 Other segment items (2) 4,207 8,731 3,384 829 17,151 Plus: Segment depreciation, depletion and amortization 11,016 4,633 2,286 491 18,426 Segment EBITDA $ 23,801 $ 25,529 $ 4,674 $ ( 7,094 ) $ 46,910 Income tax expense 1,533 Interest expense - net 7,578 Depreciation, depletion and amortization 18,426 Net Income $ 19,373 First quarter ended March 28, 2025 Performance Materials Electronic Materials Precision Optics Other Consolidated Net sales (1) $ 173,987 $ 224,795 $ 21,548 $ — $ 420,330 Less: Cost of sales 125,756 201,057 17,324 14 344,151 Selling, general and administrative expense 13,981 10,619 4,386 6,459 35,445 Other segment items (2) 3,007 6,308 3,675 ( 117 ) 12,873 Plus: Segment depreciation, depletion and amortization 9,430 4,267 2,355 486 16,538 Segment EBITDA $ 40,673 $ 11,078 $ ( 1,482 ) $ ( 5,870 ) $ 44,399 Income tax expense 3,246 Interest expense - net 6,917 Depreciation, depletion and amortization 16,538 Net Income $ 17,698 9 (1) Excludes inter-segment sales of $ 2.7 million for the first quarter of 2026 and $ 2.6 million for the first quarter of 2025 for Electronic Materials. Inter-segment sales are eliminated in consolidation. (2) Other segment items for each reportable segment include: • Research and development expense • Restructuring expense • Other operating expense - primarily comprised of metal consignment fees, intangible amortization and foreign currency (gains)/losses as further detailed in Note F • Non-operating expenses primarily related to pension costs The following table disaggregates revenue for each segment by end market for the first quarter of 2026 and 2025: (Thousands) Performance Materials Electronic Materials Precision Optics Other Total First Quarter 2026 End Market Semiconductor $ 2,306 $ 314,258 $ 1,798 $ — $ 318,362 Industrial 33,199 10,980 7,678 — 51,857 Aerospace and defense 43,552 5,424 10,030 — 59,006 Consumer electronics 23,254 3,640 4,076 — 30,970 Automotive 17,046 240 1,944 — 19,230 Energy 13,317 33,336 — — 46,653 Life sciences 1,859 ( 8,596 ) 5,206 — ( 1,531 ) Other 21,132 4,082 63 — 25,277 Total $ 155,665 $ 363,364 $ 30,795 $ — $ 549,824 First Quarter 2025 End Market Semiconductor $ 3,628 $ 183,749 $ 775 $ — $ 188,152 Industrial 31,277 9,755 6,273 — 47,305 Aerospace and defense 42,090 1,702 6,241 — 50,033 Consumer electronics 45,035 1,108 3,093 — 49,236 Automotive 16,202 726 1,335 — 18,263 Energy 16,420 20,230 — — 36,650 Life sciences 2,575 5,874 3,692 — 12,141 Other 16,760 1,651 139 — 18,550 Total $ 173,987 $ 224,795 $ 21,548 $ — $ 420,330 Note D — Revenue Recognition Net sales consist primarily of revenue from the sale of precious and non-precious specialty metals, beryllium and copper-based alloys, beryllium composites, and other products into numerous end markets. The Company requires an agreement with a customer that creates enforceable rights and performance obligations. The Company generally recognizes revenue in an amount that reflects the consideration to which it expects to be entitled upon satisfaction of a performance obligation by transferring control over a product to the customer. Control over a product is generally transferred to the customer when the Company has a present right to payment, the customer has legal title, the customer has physical possession, the customer has the significant risks and rewards of ownership, and/or the customer has accepted the product. 10 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Transaction Price Allocated to Future Performance Obligations: Accounting Standards Codification 606, Revenue from Contracts with Customers, requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied at April 3, 2026. Remaining performance obligations include non-cancelable purchase orders and customer contracts. The guidance provides certain practical expedients that limit this requirement. As such, the Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. After considering the practical expedient at April 3, 2026 and December 31, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $ 14.0 million and $ 21.9 million, respectively. Contract Balances : The timing of revenue recognition, billings, and cash collections resulted in the following contract assets and contract liabilities: (Thousands) April 3, 2026 December 31, 2025 $ change % change Accounts receivable, trade $ 267,764 $ 223,763 $ 44,001 20 % Unbilled receivables 47,461 46,548 913 2 % Unearned revenue 11,929 12,685 ( 756 ) ( 6 ) % Accounts receivable, trade represents payments due from customers relating to the transfer of the Company’s products and services. The Company believes that its receivables are collectible and appropriate allowances for doubtful accounts have been recorded. Impairment losses (bad debt) incurred related to our receivables were immaterial during the first three months of 2026 and 2025. During 2024, the Company entered into a factoring agreement to sell certain receivables to a third-party financial institution. The transfer of the receivables constitute purchases and sales of receivables resulting in a reduction of trade receivables on the consolidated balance sheets and the proceeds are included in the cash flows from operating activities in the consolidated statements of cash flows. The Company sold $ 8.1 million of receivables in the first quarter of 2026 and recorded a loss on sale of $ 0.1 million. The Company did not sell any receivables in the fourth quarter of 2025. Total receivables sold under this program amount to $ 116.4 million. Unbilled receivables represent expenditures on contracts, plus applicable profit margin, not yet billed. Unbilled receivables are generally billed and collected within one year. Billings made on contracts are recorded as a reduction of unbilled receivables. Unbilled receivables are included within the prepaid and other current assets line item on the Consolidated Balance Sheet. Unearned revenue is recorded for consideration received from customers in advance of satisfaction of the related performance obligations. The Company recognized approximately $ 5.4 million of the December 31, 2025 unearned amounts as revenue during the first three months of 2026. As a practical expedient, the Company does not adjust the promised amount of consideration for the effects of a significant financing component because the period between the transfer of a product or service to a customer and when the customer pays for that product or service will be one year or less. The Company does not include extended payment terms in its contracts with customers. 11 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note E — Restructuring In fiscal years 2025 and 2024, we announced restructuring plans that were both designed to reduce costs and expenses in response to macroeconomic conditions and current operating performance. These actions impacted all three of our business segments as well as Corporate. The restructuring programs are expected to result in the reduction in annual cost of sales and operating expenses. In 2026, the Company continued to implement restructuring actions, across all segments. In connection with these actions, we recorded restructuring expenses of $ 2.3 million in the three months ended April 3, 2026, compared to $ 2.0 million in the three months ended March 28, 2025. All of these charges were associated with workforce reduction, including severance and other personnel-related costs. We expect to substantially complete the remaining restructuring activities by the end of the second quarter of fiscal year 2026. The activity in the accrued balances incurred in relation to restructuring during the three months ended April 3, 2026 and March 28, 2025, were as follows: Reduction in Force (Thousands) Performance Materials Electronic Materials Precision Optics Other Consolidated Balance at December 31, 2025 $ — $ 83 $ 59 $ 9 $ 151 Additional Charges 615 409 839 432 2,295 Cash Payments ( 365 ) ( 370 ) ( 425 ) ( 337 ) ( 1,497 ) Balance at April 3, 2026 $ 250 $ 122 $ 473 $ 104 $ 949 Reduction in Force (Thousands) Performance Materials Electronic Materials Precision Optics Other Consolidated Balance at December 31, 2024 $ 56 $ 293 $ 60 $ 408 $ 817 Additional Charges 196 453 1,358 31 2,038 Cash Payments ( 66 ) ( 648 ) ( 1,015 ) ( 129 ) ( 1,858 ) Balance at March 28, 2025 $ 186 $ 98 $ 403 $ 310 $ 997 Note F — Other-net Other-net for the first quarter of 2026 and 2025 is summarized as follows: First Quarter Ended April 3, March 28, (Thousands) 2026 2025 Metal consignment fees $ 6,080 $ 2,215 Amortization of intangible assets 2,605 2,889 Foreign currency loss (gain) 609 ( 153 ) Other items, net ( 286 ) 45 Total $ 9,008 $ 4,996 Note G — Income Taxes The Company's effective tax rate for the first quarter of 2026 and 2025 was 7.3 % and 15.5 %, respectively. The effective tax rate for the first quarter of 2026 is lower than the statutory tax rate primarily due to the impact of the foreign-derived deduction eligible income, excess tax benefits from stock-based compensation awards and percentage depletion. The effective tax rate for the first quarter of 2025 was lower than the statutory tax rate primarily due to the impact of percentage 12 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) depletion, the foreign-derived intangible income deduction, and the advanced manufacturing production credit. The effective tax rate for the first quarter of 2026 and 2025 included a net discrete income tax effect of $ 1.6 million benefit and $ 0.1 million expense, respectively, primarily related to stock-based compensation awards. Government Tax Credits Pursuant to The Inflation Reduction Act of 2022 (IRA), the Company is eligible for the Advanced Manufacturing Production Credit (production credit). The production credit provides an annual cash benefit for a portion of the production costs for the sale of certain critical minerals produced in the U.S. and sold during the year. The Company records the production credit as a reduction in cost of goods sold as the applicable items are produced and sold. U.S. GAAP does not address the accounting for government grants received by a business entity that are outside the scope of ASC 740. Our accounting policy is to analogize to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, under IFRS Accounting Standards. We recognize the benefit of the production credit by applying IAS 20 in pretax income on a systematic basis in line with its recognition of the expenses that the grant is intended to compensate. Pillar Two The Organization for Economic Co-operation and Development (OECD) introduced rules to establish a global minimum corporate tax rate, commonly referred to as Pillar Two. Many of the key non-U.S. jurisdictions where the Company operates have enacted Pillar Two legislation. While the U.S. has negotiated a “side-by-side” arrangement for the existing U.S. minimum taxes with the intent to exempt U.S. multinational companies from certain Pillar Two provisions, the timing and consistency of implementation across jurisdictions continue to evolve. The Pillar Two minimum tax is treated as a period cost and is not expected to have a material impact on the Company’s effective tax rate or consolidated results of operations, financial position, or cash flows in 2026. We will continue to evaluate the impact of Pillar Two legislation on the current and future reporting periods. Note H — Earnings Per Share (EPS) The following table sets forth the computation of basic and diluted EPS: First Quarter Ended April 3, March 28, (Thousands, except per share amounts) 2026 2025 Numerator for basic and diluted EPS: Net income $ 19,373 $ 17,698 Denominator: Denominator for basic EPS: Weighted-average shares outstanding 20,762 20,780 Effect of dilutive securities: Stock appreciation rights 76 45 Restricted stock units 106 53 Performance-based restricted stock units 63 35 Diluted potential common shares 245 133 Denominator for diluted EPS: Adjusted weighted-average shares outstanding 21,007 20,913 Basic EPS $ 0.93 $ 0.85 Diluted EPS $ 0.92 $ 0.85 13 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Adjusted weighted-average shares outstanding - diluted exclude securities totaling 77,423 and 141,249 for the quarters ended April 3, 2026 and March 28, 2025, respectively. These securities are primarily related to restricted stock units (RSUs) and stock appreciation rights (SARs) with fair market values and exercise prices greater than the average market price of the Company's common shares and were excluded from the dilution calculation as the effect would have been anti-dilutive. Note I — Inventories Inventories on the Consolidated Balance Sheets are summarized as follows: April 3, December 31, (Thousands) 2026 2025 Raw materials and supplies $ 133,942 $ 108,040 Work in process 292,328 298,695 Finished goods 67,417 54,496 Inventories, net $ 493,687 $ 461,231 The Company maintains the majority of the precious metals and portions of copper and nickel used in production on a consignment basis in order to reduce its exposure to metal price movements and to reduce its working capital investment. The notional value of off-balance sheet precious metals, copper and nickel was $ 579.7 million and $ 526.2 million as of April 3, 2026 and December 31, 2025, respectively. Note J — Customer Prepayments In 2020, the Company entered into an investment agreement and a master supply agreement with a customer to procure equipment to manufacture product for the customer. The customer provided prepayments to the Company to fund the necessary infrastructure improvements and procure the equipment necessary to supply the customer with the desired product. The Company owns, operates and maintains the equipment that is being used to manufacture product for the customer. Revenue will be recognized as the Company fulfills purchase orders and ships the commercial product to the customer, as product delivery is considered the satisfaction of the performance obligation. Additionally, during the second quarter of 2022, the Company entered into an amendment to the investment agreement with the same customer to procure additional equipment to manufacture product for the customer. In 2023, the Company received the remaining prepayment related to this amendment, the total of which approximated $ 38.6 million. As of April 3, 2026 and December 31, 2025, $ 46.6 million and $ 47.5 million, respectively, of prepayments are classified as Unearned income on the Consolidated Balance Sheets. The prepayments will remain in Unearned income until commercial purchase orders are received for product serviced out of the equipment, at which time a portion of the purchase order value related to prepayments will be reclassified to Unearned revenue. As of April 3, 2026 and December 31, 2025, $ 1.7 million and $ 2.4 million, respectively, of the prepayments are classified as Unearned revenue. 14 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note K — Pensions and Other Post-employment Benefits The following is a summary of the net periodic benefit (income)/cost for the first quarter of 2026 and 2025 for the pension plans as shown below. The Pension Benefits columns aggregate defined benefit pension plans in the U.S., Germany, Liechtenstein, England, and the U.S. supplemental retirement plans. The Other Benefits columns include the domestic retiree medical and life insurance plan. Pension Benefits Other Benefits First Quarter Ended First Quarter Ended April 3, March 28, April 3, March 28, (Thousands) 2026 2025 2026 2025 Components of net periodic benefit (income) cost Service cost $ 292 $ 286 $ — $ 11 Interest cost 1,841 1,910 31 58 Expected return on plan assets ( 2,374 ) ( 2,504 ) — — Amortization of prior service cost (benefit) ( 22 ) ( 21 ) — — Amortization of net loss (gain) 258 89 ( 104 ) ( 87 ) Total net benefit (income) cost $ ( 5 ) $ ( 240 ) $ ( 73 ) $ ( 18 ) The Company did not make any contributions to its defined benefit plan in the first quarter of 2026 or 2025. The Company reports the service cost component of net periodic benefit cost in the same line item as other compensation costs in operating expenses and the non-service cost components of net periodic benefit cost in Other non-operating (income) expense. 15 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note L — Accumulated Other Comprehensive Income (Loss) Changes in the components of accumulated other comprehensive income, including the amounts reclassified, for the first quarter of 2026 and 2025 are as follows: Gains and Losses on Cash Flow Hedges (Thousands) Foreign Currency Interest Rate Precious Metals Total Pension and Post-Employment Benefits Foreign Currency Translation Total Balance at December 31, 2025 $ 1,406 $ 899 $ 2 $ 2,307 $ ( 52,441 ) $ ( 447 ) $ ( 50,581 ) Other comprehensive income (loss) before reclassifications 7 374 — 381 — ( 1,365 ) ( 984 ) Amounts reclassified from accumulated other comprehensive income (loss) 2 ( 484 ) — ( 482 ) 195 ( 287 ) Net current period other comprehensive (loss) income before tax 9 ( 110 ) — ( 101 ) 195 ( 1,365 ) ( 1,271 ) Deferred taxes 2 ( 25 ) — ( 23 ) 41 — 18 Net current period other comprehensive (loss) income after tax 7 ( 85 ) — ( 78 ) 154 ( 1,365 ) ( 1,289 ) Balance at April 3, 2026 $ 1,413 $ 814 $ 2 $ 2,229 $ ( 52,287 ) $ ( 1,812 ) $ ( 51,870 ) Balance at December 31, 2024 $ 1,638 $ 3,545 $ 2 $ 5,185 $ ( 54,702 ) $ ( 11,529 ) $ ( 61,046 ) Other comprehensive (loss) income before reclassifications ( 279 ) ( 686 ) — ( 965 ) 1,553 3,628 4,216 Amounts reclassified from accumulated other comprehensive income (loss) ( 34 ) ( 763 ) — ( 797 ) ( 103 ) — ( 900 ) Net current period other comprehensive (loss) income before tax ( 313 ) ( 1,449 ) — ( 1,762 ) 1,450 3,628 3,316 Deferred taxes ( 72 ) ( 334 ) — ( 406 ) 375 — ( 31 ) Net current period other comprehensive (loss) income after tax ( 241 ) ( 1,115 ) — ( 1,356 ) 1,075 3,628 3,347 Balance at March 28, 2025 $ 1,397 $ 2,430 $ 2 $ 3,829 $ ( 53,627 ) $ ( 7,901 ) $ ( 57,699 ) Reclassifications from accumulated other comprehensive income (loss) of gains and losses on foreign currency cash flow hedges are recorded in Net sales in the Consolidated Statements of Income (Loss). Reclassifications from accumulated other comprehensive income (loss) of gains and losses on commodity and cash flow hedges are recorded in Cost of sales in the Consolidated Statements of Income. Reclassifications from accumulated other comprehensive income (loss) of gains and losses on the interest rate cash flow hedge is recorded in Interest expense in the Consolidated Statements of Income. Refer to Note O for additional details on cash flow hedges. Reclassifications from accumulated other comprehensive income (loss) for pension and post-employment benefits are included in the computation of the net periodic pension and post-employment benefit expense. Refer to Note K for additional details on pension and post-employment expenses. 16 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note M — Stock-based Compensation Expense Stock-based compensation expense, which includes awards settled in shares was $ 3.4 million and $ 3.0 million in the first quarter of 2026 and 2025, respectively. The Company granted 47,436 SARs to certain employees during the first quarter of 2026. The weighted-average exercise price per share and weighted-average fair value per share of the SARs granted during the three months ended April 3, 2026 were $ 166.59 and $ 56.70 , respectively. The Company estimated the fair value of the SARs using the following weighted-average assumptions in the Black-Scholes model: Risk-free interest rate 3.62 % Dividend yield 0.34 % Volatility 34.0 % Expected term (in years) 4.8 The Company granted 75,870 stock-settled RSUs to certain employees during the first quarter of 2026. The Company measures the fair value of stock-settled RSUs based on the closing market price of a share of Materion common stock on the date of the grant. The weighted-average fair value per share was $ 156.21 for stock-settled RSUs granted to employees during the three months ended April 3, 2026. RSUs are generally expensed over the vesting period of three years for employees. The Company granted stock-settled performance-based restricted stock units (PRSUs) to certain employees in the first quarter of 2026. The weighted-average fair value of the stock-settled PRSUs was $ 206.28 per share and will be expensed over the vesting period of three years . The final payout to the employees for all PRSUs will be based upon the Company’s return on invested capital and its total return to shareholders over the vesting period relative to a peer group’s performance over the same period. At April 3, 2026, unrecognized compensation cost related to the unvested portion of all stock-based awards was approximately $ 33.6 million, and is expected to be recognized over the remaining vesting period of the respective grants. Note N — Fair Value of Financial Instruments The Company measures and records financial instruments at fair value. A hierarchy is used for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three levels: Level 1 — Quoted market prices in active markets for identical assets and liabilities; Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable; and Level 3 — Unobservable inputs developed using estimates and assumptions developed by the Company, which reflect those that a market participant would use. 17 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) The following table summarizes the financial instruments measured at fair value in the Consolidated Balance Sheets as of April 3, 2026 and December 31, 2025: (Thousands) Total Carrying Value in the Consolidated Balance Sheets Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) 2026 2025 2026 2025 2026 2025 2026 2025 Financial Assets Deferred compensation investments $ 7,213 $ 7,175 $ 7,213 $ 7,175 $ — $ — $ — $ — Foreign currency forward contracts 492 80 — — 492 80 — — Interest rate swaps 1,176 1,491 — — 1,176 1,491 — — Precious metal swaps — — — — — — — — Total $ 8,881 $ 8,746 $ 7,213 $ 7,175 $ 1,668 $ 1,571 $ — $ — Financial Liabilities Deferred compensation liability $ 7,213 $ 7,175 $ 7,213 $ 7,175 $ — $ — $ — $ — Foreign currency forward contracts 80 490 — — 80 490 — — Interest rate swaps 120 325 — — 120 325 — — Precious metal swaps — — — — — — — — Total $ 7,413 $ 7,990 $ 7,213 $ 7,175 $ 200 $ 815 $ — $ — The Company uses a market approach to value the assets and liabilities for financial instruments in the table above. Outstanding contracts are valued through models that utilize market observable inputs, including both spot and forward prices, for the same underlying currencies, metals, and interest rates. The carrying values of the other working capital items and debt in the Consolidated Balance Sheets approximate fair values as of April 3, 2026 and December 31, 2025. The Company's deferred compensation investments and liabilities are based on the fair value of the investments corresponding to the employees’ investment selections, primarily in mutual funds, based on quoted prices in active markets for identical assets. Deferred compensation investments are primarily presented in Other assets. Deferred compensation liabilities are primarily presented in Other long-term liabilities. Note O — Derivative Instruments and Hedging Activity The Company may use derivative contracts to hedge exposure to movements in interest rates associated with borrowings, foreign currency exposures, and metal exposures. The objectives and strategies for using derivatives in these areas are as follows: Interest Rate. On March 4, 2022, the Company entered into a $ 100.0 million interest rate swap to hedge the interest rate risk on the Credit Agreement described in Note Q. The swap hedges the change in 1-month Secured Overnight Financial Rate (SOFR) from March 4, 2022 to November 2, 2026. On March 21, 2023, the Company entered into two $ 50.0 million interest rate swaps to hedge the interest rate risk on the Credit Agreement. Additionally, on April 2, 2026, the Company entered into a forward starting interest rate swap of $ 25.0 million to hedge the interest rate risk on the Credit Agreement. The swap will hedge the change in 1-month SOFR from November 2, 2026 to June 25, 2030. The purpose of these hedges is to manage the risk of changes in the monthly interest payments attributable to changes in the benchmark interest rate. Foreign Currency. The Company sells a portion of its products to overseas customers in their local currencies, primarily the euro and yen. The Company secures foreign currency derivatives, mainly forward contracts and options, to hedge these anticipated sales transactions. The purpose of the hedge program is to protect against the reduction in the dollar value of foreign currency sales from adverse exchange rate movements. Should the dollar strengthen 18 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) significantly, the decrease in the translated value of the foreign currency sales should be partially offset by gains on the hedge contracts. Depending upon the methods used, the hedge contracts may limit the benefits from a weakening U.S. dollar. The use of forward contracts locks in a firm rate and eliminates any downside from an adverse rate movement as well as any benefit from a favorable rate movement. The Company may from time to time choose to hedge with options or a tandem of options, known as a collar. These hedging techniques can limit or eliminate the downside risk but can allow for some or all of the benefit from a favorable rate movement to be realized. Unlike a forward contract, a premium is paid for an option; collars, which are a combination of a put and call option, may have a net premium but can be structured to be cash neutral. The Company will primarily hedge with forward contracts due to the relationship between the cash outlay and the level of risk. The use of foreign currency derivative contracts is governed by policies approved by the Audit Committee of the Board of Directors. A team consisting of senior financial managers reviews the estimated exposure levels, as defined by budgets, forecasts, and other internal data, and determines the timing, amounts, and nature of instruments to use to hedge exposures. Management analyzes the effective hedged rates and the actual and projected gains and losses on the hedging transactions against the program objectives, targeted rates, and levels of risk assumed. Foreign currency contracts are typically layered in at different times for a specified exposure period in order to minimize the impact of market rate movements. Precious Metals. The Company maintains the majority of its precious metal production requirements on consignment in order to reduce its working capital investment and the exposure to metal price movements. When a product containing precious metal is fabricated and delivered to the customer, the metal content is purchased out of consignment based on the current market price. The price paid by the Company for the precious metal forms the basis for the price charged to the customer for the metal content in the product. This methodology allows for changes in either direction in the market prices of the precious metals used by the Company to be passed through to the customer and reduces the impact that changes in prices could have on the Company's margins and operating profit. The consigned metal is owned by precious metal consignors that charge the Company consignment fees based upon the value of the metal as it fluctuates while on consignment. Each precious metal consignor retains title to its consigned precious metal until it is purchased by the Company, and it is the Company’s typical practice to purchase metal out of consignment only after a product containing that metal has been purchased by one of our customers. In certain instances, a customer may want to fix the price for the precious metal at the time the sales order is placed rather than at the time of shipment. Setting the sales price at a different date than when the material would be purchased out of consignment potentially creates an exposure to movements in the market price of the metal. Therefore, in these limited situations, the Company may elect to enter into a forward contract to purchase precious metal. The forward contract allows the Company to purchase metal at a fixed price on a specific future date. The price in the forward contract serves as the basis for the price to be charged to the customer. By doing so, the selling price and purchase price are matched, and the Company's price exposure is reduced. The Company refines precious metal-containing materials for its customers and typically will purchase the refined metal from the customer at current market prices. In limited circumstances, the customer may want to fix the price to be paid at the time of the order as opposed to when the material is refined. The customer may also want to fix the price for a set period of time. The Company may then elect to enter into a hedge contract, either a forward contract or a swap, to fix the price for the estimated quantity of metal to be refined and purchased, thereby reducing the exposure to adverse movements in the price of the metal. The Company may also enter into hedges to mitigate the risk relating to the prices of the metals that we process or refine. In certain circumstances, the Company also refines metal from the customer and may retain a portion of the refined metal as payment. The Company may elect to enter into a forward contract to sell precious metal to reduce the Company's price exposure in these instances. The Company may, from time to time, elect to purchase precious metal and hold in inventory rather than on consignment due to potential consignment line limitations or other factors. These purchases are infrequent and, when made are typically held for a short duration. A forward contract will be secured at the time of the purchase to fix the 19 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) price to be paid when the metal is transferred back to the consignment line, thereby limiting any price exposure during the time when the metal was owned by the Company. The Company will only enter into a derivative contract if there is an underlying identified exposure. Contracts are typically held to maturity. The Company does not engage in derivative trading activities and does not use derivatives for speculative purposes. The Company only uses hedge contracts that are denominated in the same currency or metal as the underlying exposure. All derivatives are recorded on the balance sheet at fair value. If a derivative is designated and effective as a cash flow hedge, changes in the fair value of the derivative are recognized in other comprehensive income (OCI) and reclassified into income in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of a derivative's fair value, if any, is recognized in earnings immediately. If a derivative is not a hedge, changes in the fair value are adjusted through income. The fair values of the outstanding derivatives are recorded on the balance sheet as assets (if the derivatives are in a gain position) or liabilities (if the derivatives are in a loss position). The derivative assets and liabilities are classified as short-term or long-term depending upon the contract maturity date. The following table summarizes the notional amount and the fair value of the Company’s outstanding derivatives not designated as hedging instruments (on a gross basis) and the balance sheet classification as of April 3, 2026 and December 31, 2025: April 3, 2026 December 31, 2025 (Thousands) Notional Amount Fair Value Notional Amount Fair Value Foreign currency forward contracts Prepaid and other current assets $ 48,186 $ 480 $ 6,240 $ 76 Other liabilities and accrued items 5,039 80 56,174 489 These outstanding foreign currency derivatives were related to balance sheet hedges and intercompany loans. Other-net included $ 0.8 million of foreign currency gains and $ 0.5 million of foreign currency losses related to derivatives in the first quarter of 2026 and 2025, respectively. 20 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) The following table summarizes the notional amount and the fair value of the Company’s outstanding derivatives designated as cash flow hedges (on a gross basis) and the balance sheet classification as of April 3, 2026 and December 31, 2025: April 3, 2026 Fair Value (Thousands) Notional Amount Prepaid and other current assets Other assets Other liabilities and accrued items Other long-term liabilities Foreign currency forward contracts - yen $ 388 $ 12 $ — $ — $ — Foreign currency forward contracts - euro — — — — — Precious metal swaps — — — — — Interest rate swaps 225,000 1,176 — 93 27 Total $ 225,388 $ 1,188 $ — $ 93 $ 27 December 31, 2025 Fair Value Notional Amount Prepaid and other current assets Other assets Other liabilities and accrued items Other long-term liabilities Foreign currency forward contracts - yen $ 579 $ 3 $ — $ — $ — Foreign currency forward contracts - euro — — — — — Precious metal swaps — — — — — Interest rate swaps 200,000 1,491 — 325 — Total $ 200,579 $ 1,494 $ — $ 325 $ — All of the contracts summarized above were designated and effective as cash flow hedges. We expect to reclassify $ 1.1 million of gains into earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. At April 3, 2026, the maximum term of derivative instruments that hedge forecasted transactions was approximately four years . Refer to Note L for additional OCI details. The following table summarizes the amounts reclassified from accumulated other comprehensive income related to the Company’s outstanding derivatives designated as cash flow hedges and associated income statement classification as of the first quarter of 2026 and 2025: First Quarter Ended (Thousands) April 3, 2026 March 28, 2025 Hedging relationship Line item Foreign currency forward contracts Net sales $ 2 $ ( 34 ) Precious metal swaps Cost of sales — — Interest rate swap Interest expense - net ( 484 ) ( 763 ) Total $ ( 482 ) $ ( 797 ) Note P — Contingencies Legal Proceedings . The Company is party to several pending legal proceedings and claims arising in the normal course of business. The Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In the event the Company determines that a loss is not probable, but is reasonably possible, and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will include disclosure related to such matters. To the extent there is a reasonable possibility that the losses could exceed any amounts accrued, the Company will adjust the accrual in the period the determination is made, disclose an estimate of the 21 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) additional loss or range of loss, indicate that the estimate is immaterial with respect to its financial statements as a whole or, if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made. Environmental Proceedings. The Company has an active environmental compliance program and records reserves for the probable cost of identified environmental remediation projects. The reserves are established based upon analyses conducted by the Company’s engineers and outside consultants and are adjusted from time to time based upon ongoing studies, the difference between actual and estimated costs, and other factors. The reserves may also be affected by rulings and negotiations with regulatory agencies. The undiscounted reserve balance was $ 2.4 million and $ 2.5 million at April 3, 2026 and December 31, 2025, respectively, and is included in Other liabilities and accrued items and Other long-term liabilities on the Consolidated Balance Sheet. Environmental projects tend to be long-term, and the final actual remediation costs may differ from the amounts currently recorded. Note Q — Debt (Thousands) April 3, 2026 December 31, 2025 Borrowings under Credit Agreement $ 253,125 $ 221,125 Borrowings under the Term Loan Facility 220,781 222,188 Overdraft Sweep Facility 8,780 15,659 Foreign debt 8,981 1,670 Total debt outstanding 491,667 460,642 Current portion of long-term debt ( 23,050 ) ( 22,445 ) Gross long-term debt 468,617 438,197 Unamortized deferred financing fees ( 1,746 ) ( 1,849 ) Long-term debt $ 466,871 $ 436,348 As of April 3, 2026 and December 31, 2025, the Company had $ 253.1 million outstanding at an average interest rate of 5.17 % and $ 221.1 million outstanding at an average interest rate of 5.26 % respectively, under its revolving credit facility. The available borrowing capacity under the revolving credit facility as of April 3, 2026 was $ 191.7 million. The Company has the option to repay or borrow additional funds under the revolving credit facility until the maturity date in 2030. In connection with the revolving credit facility, the administrative agent provides the Company with an overdraft sweep facility that the Company uses on a daily basis for short-term cash needs. As of April 3, 2026, the overdraft sweep facility had a balance of $ 8.8 million. The overdraft sweep facility allows for an additional $ 30.0 million of liquidity. The amended and restated credit agreement governing the revolving credit facility (Credit Agreement) includes covenants subject to a maximum leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with all of our debt covenants as of April 3, 2026. Other sources of liquidity include uncommitted short-term lines of credit for certain of the Company's foreign subsidiaries, which currently provide for borrowings up to $ 22.6 million. At April 3, 2026 the Company had borrowings outstanding of $ 8.3 million, which reduced the aggregate availability under these facilities to $ 14.3 million. The balance outstanding on the term loan facility as of April 3, 2026 and December 31, 2025 was $ 220.8 million and $ 222.2 million, respectively. At April 3, 2026 and December 31, 2025, there was $ 5.2 million outstanding against the letters of credit sub-facility . 22