Materion (MTRN) 2026财年第三季度业绩电话会：销售额创新高，上调每股收益指引

核心要点

• Materion公布2026财年第三季度高附加值销售额达到创纪录的3.137亿美元，同比增长19%；同时调整后每股收益（EPS）增长37%，达到创纪录的1.93美元。
• 调整后EBITDA增长27%至7070万美元。调整后EBITDA利润率扩大150个基点至22.5%，接近管理层23%的中期目标。
• 增长呈现广泛性。半导体业务销售额创下季度新高，航空航天与国防业务销售额同比增长超40%，电信与数据中心业务销售额同比增长超70%。
• 电子材料业务部门领跑部门盈利能力，高附加值销售额增长30%至1.034亿美元，调整后EBITDA增长54%至3320万美元。该部门利润率扩大500个基点至32.1%。
• 管理层将全年调整后每股收益指引从6.80-7.20美元上调至7.10-7.40美元，目前预计2026财年营收将实现高双位数（high-teens）增长。
• Materion在季度末收官时新接订单和积压订单均创下历史新高。管理层表示，自2026年初以来，订单率同比增长约25%，而积压订单增长约35%。

核心财务数据

业务与运营表现

电子材料

受半导体需求、新业务拓展及广泛市场动能的推动，电子材料业务实现高附加值销售额1.034亿美元，同比增长30%。调整后EBITDA达到创纪录的3320万美元，同比增长54%，利润率提升500个基点至32.1%。

管理层表示，半导体业务销售额已连续六个季度实现增长。今年迄今半导体业务增长率约为26%，而管理层引用的晶圆投片量预期增幅约为11%。增长动力包括高性能计算、高带宽内存、更小制程节点芯片、数据存储以及原子层沉积（ALD）产品组合。

性能材料

性能材料业务实现高附加值销售额1.787亿美元，同比增长14%。增长主要来自航空航天与国防、电信与数据中心、工业市场以及新业务拓展。

调整后EBITDA增长12%至4260万美元，占高附加值销售额的23.8%。销量与价格提升带来的增长被不利的产品组合部分抵消。在大型国防订单以及其他终端市场需求加速的支撑下，管理层预计第四季度销售额将实现显著增长。

精密光学

精密光学业务高附加值销售额增长17%至3160万美元，创下2021年初以来的最高季度水平，同时也是该部门连续第六个季度实现营收改善。

调整后EBITDA增长72%至550万美元。利润率扩大560个基点至17.4%，反映出销量增加、有利的价格/产品组合、新项目斩获以及运营改善。

终端市场动能

航空航天与国防业务销售额同比增长超40%，国防、民用航空和航天应用领域均实现增长。电信与数据中心销售额增长超70%，创下该市场自2019年以来的最强季度表现。

工业市场销售额在第三季度增长8%，今年迄今增长11%。管理层还强调了公司铍镍业务的持续强劲势头。

管理层业绩指引

Materion将2026财年调整后每股收益指引从先前的6.80-7.20美元上调至7.10-7.40美元。管理层表示，按中点值计算，新指引意味着约33%的同比增长。这是该公司在2026财年第三次上调业绩指引。

管理层目前预计全年营收将实现高双位数（high-teens）增长，并预计第四季度销售额将大幅加速。这一展望得到了创纪录的积压订单、持续的订单动能、新业务贡献以及半导体、航空航天与国防、电信与数据中心、工业和能源应用领域需求的支撑。

在收益提升和营运资金改善的支撑下，公司预计将再迎来一个强劲的现金流生成季度。管理层仍专注于持续实现23%的调整后EBITDA利润率目标，然后再考虑制定更高的目标。

风险与关注事项

• 消费电子是Materion今年迄今唯一出现负增长的终端市场，原因在于此前与第四季度质量问题相关的特定精密包覆（Precision Clad）项目问题。管理层表示，生产已恢复至甚至略超出现问题前的水平。
• 管理层指出，发货时间因素是半导体销售额环比大幅增长的部分原因，但也提到了市场份额扩大、新业务赢得以及基于价值的定价策略的推动作用。
• 本季度性能材料业务的盈利能力受到了不利产品组合的影响。
• 尽管调整后EBITDA利润率达到了22.5%，但管理层表示，目前宣布已可持续实现23%的目标还为时过早。

分析师问答要点

需求可见度：管理层强调，增长并不依赖于单一市场。创纪录的订单和积压订单分布于多个终端市场，同时半导体需求在数据中心、内存、逻辑芯片、通信和存储领域均表现广泛。

产能投资：Materion计划将生产力提升与针对性的产能扩充相结合。此前宣布的6500万美元国防投资预计将于2027年底前投入运营。在过去两到三年中，公司还对高性能计算和钽产能进行了投资。

全球制造布局：管理层意图在保留核心技术中心的同时，在客户附近扩大本地化制造能力。管理层特别提到了在韩国和欧洲的投资，并表示有机投资和并购（M&A）均可支持增加区域产能。

研发资源：公司表示，列报的研发支出反映了外部资金以及与客户、政府及财团的合作。Materion还在利用技术销售团队、技术营销和AI相关工具来支持研发效率与客户项目。

业绩电话会议完整文字记录

完整财报电话会议逐字稿

管理层陈述

Operator

Greetings. Welcome to the Materion Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to your host, Kyle Kelleher, Director, Investor Relations and Corporate FP&A. Please go ahead.

Kyle Kelleher

Good morning, and thank you for joining us on our third quarter 2026 earnings conference call. This is Kyle Kelleher, Director, Investor Relations and Corporate FP&A. Before we begin our remarks this morning, I would like to point out that we have posted materials on the company's website that we will reference as part of today's review of the quarterly results. You can also access the materials through the download feature on the earnings call webcast link.

With me today is Jugal Vijayvargiya, President and Chief Executive Officer; and Shelly Chadwick, Vice President and Chief Financial Officer. Our format for today's conference call is as follows: Jugal will provide opening comments on the quarter. Following Jugal, Shelly will review the detailed financial results in addition to discussing expectations for the remainder of 2026. We will then open up the call for questions.

Let me remind investors that any forward-looking statements made in the presentation, including those in the outlook section and during the question-and-answer portion, are based on current expectations. The company's actual performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. Those factors are listed in the earnings press release we issued this morning. Additionally, comments regarding earnings before interest, taxes, depreciation, depletion and amortization, net income and earnings per share reflect the adjusted GAAP numbers shown in Attachments 4 through 9 in this morning's press release. The adjustments are made in the prior year period for comparative purposes and remove special items, noncash charges and certain discrete income tax adjustments.

And now I'll turn over the call to Jugal for his comments.

Jugal Vijayvargiya

Thanks, Kyle, and good morning, everyone. I'm pleased to be with you today to discuss our third quarter performance and the outstanding momentum we continue to build across Materion. Q3 was an exceptional quarter and a powerful reflection of the strength of our Advanced Materials portfolio, the attractiveness of our end market exposure and the disciplined execution of our global team. Demand continued to accelerate across many of our key markets, and our business delivered outstanding performance, resulting in record sales, earnings, incoming orders and backlog. These results underscore both the resilience of our business model and our ability to capitalize on favorable market dynamics.

We delivered record value-added sales of approximately $314 million and highest ever adjusted earnings per share of $1.93, marking another milestone quarter for the company. Each business segment achieved double-digit year-over-year growth in both sales and earnings, underscoring the strength of our strategy and execution. Importantly, these results were not driven by any single business, customer or end market. Growth was widespread across the organization, and that breadth gives us considerable confidence in the sustainability of our momentum. Just as importantly, we expanded margins for the fourth consecutive quarter on a year-over-year basis and continue to make meaningful progress toward our midterm adjusted EBITDA margin target of 23%. These results highlight the inherent leverage in our business model and reflect the benefits of our ongoing focus on operational excellence, portfolio optimization, value-based pricing and disciplined execution across the organization. As a result, we are translating strong demand into profitable growth and increasing shareholder value.

The semiconductor market remained a significant source of growth in the quarter, driving the highest quarterly sales in the company's history. Customers continue to invest in next-generation semiconductor technologies, while our strategic growth initiatives generated additional momentum across the business. We delivered our fifth consecutive quarter of year-over-year growth, reinforcing our strong competitive position in the semiconductor value chain. Aerospace and defense was another standout performer during the quarter with sales increasing more than 40% year-over-year. Strength was broad-based across defense, commercial aerospace and space applications, reflecting both favorable market conditions and the value we bring to our customers' most demanding programs. Customer engagement remains robust. Our opportunity pipeline continues to expand, and we are securing positions on an increasing number of mission-critical programs and platforms with strong long-term demand prospects.

These trends reinforce our confidence that aerospace and defense will remain a significant driver of growth for Materion in the years ahead. Another end market demonstrating significant momentum for us is telecom and data center. Sales increased more than 70% year-over-year, delivering our strongest quarterly performance since 2019. Demand continues to be fueled by ongoing investments in data center infrastructure, high-speed connectivity and network expansion to support accelerating global data consumption. We believe these secular trends position us well for continued growth as customers invest to support rapidly expanding data and connectivity needs.

Perhaps most encouraging is the broad-based nature of the demand we are experiencing across our portfolio. Strong contributions from semiconductor, aerospace and defense, telecom and data center, industrial and energy applications demonstrate the strength and diversity of our business. Rather than relying on any single market or growth driver, we are benefiting from multiple end markets that are positioned favorably and supported by long-term secular trends. This reinforces the value of our portfolio strategy and gives us confidence in our ability to generate sustainable growth and create value across varying market conditions. Over the past several years, we have transformed Materion into a more focused, higher-performing advanced materials company aligned with attractive secular growth trends. The performance we are delivering today reflects the success of that transformation.

We are capturing larger opportunities, expanding our presence across multiple growth markets, improving profitability, generating strong cash flow and further strengthening our competitive standing. Most importantly, an increasing share of our business is concentrated in highly differentiated applications where our materials, technologies and technical expertise enable critical customer outcomes and create lasting competitive advantages. This evolution has strengthened the quality of our portfolio and position Materion to deliver sustainable growth.

As strong as our quarterly results were, what excites me most is the momentum we are seeing beneath the surface. We exited the quarter with the highest level of incoming orders and the largest backlog in Materion's history. Year-to-date incoming orders reached a new record and backlog continued to expand meaningfully, providing strong visibility into future demand. More importantly, this strength is broad-based. This momentum is being fueled by expanding customer technology road maps, growing participation in long-duration programs, new business wins and rising demand for the advanced material solutions that enable our customers' most critical applications. Together, these indicators provide confidence that the growth opportunities ahead of us remain sustainable.

Looking ahead, we are entering the fourth quarter with unprecedented momentum. Record backlog, record incoming orders, continued strength across our end markets and strong operating performance provide us with confidence as we move into the final quarter of the year. Our optimism is not based solely on the results we have achieved to date. It is reinforced by what we see on the horizon, expanding customer opportunities, strong demand indicators and direct feedback from customers that points to continued investment in the markets we serve.

Based on the momentum we are seeing across the business, we expect a meaningful acceleration in sales during the fourth quarter, resulting in high teens top line growth for the full year. Reflecting this strength, we are raising our full year adjusted earnings outlook to a range of $7.10 to $7.40 per share. At the midpoint, this represents approximately 33% growth over the prior year and reflects both our strong performance year-to-date and our expectations for continued momentum as we conclude what is shaping up to be a record year for Materion.

I would like to thank our employees around the world for their dedication, innovation and commitment to excellence. Their unwavering focus on safety, quality, operational performance and customer service continues to be the foundation of Materion's success. I also want to thank our customers and shareholders for their continued trust, confidence and partnership. With that, I'll turn the call over to Shelly to review the financial details.

Shelly Chadwick

Thanks, Jugal, and good morning. During my comments, I will reference the slides posted on our website this morning, starting on Slide 10. In the third quarter, value-added sales, which exclude the impact of pass-through precious metal costs, were a record $313.7 million, up 19% from the prior year. Adjusted earnings per share were a record $1.93, up 37% from prior year. As Jugal outlined, the strength in the quarter was seen across the company. I'll focus my comments on how that growth translated into higher earnings, margin expansion and strong cash generation.

Turning to Slide 11. Adjusted EBITDA was $70.7 million or 22.5% of value-added sales, an increase of 27% year-over-year with 150 basis points of margin expansion. This marks our fourth consecutive quarter of year-over-year margin expansion and represents continued progress toward our 23% midterm adjusted EBITDA margin target. The increase in the quarter was driven by higher volume and favorable price/mix, demonstrating strong incremental profitability on the quarter's sales growth.

Moving to Slide 12. Let me review third quarter results by business segment. Starting with Performance Materials, value-added sales were $178.7 million in the quarter, up 14% year-over-year. This increase was driven primarily by market growth and new business wins across aerospace and defense, telecom and data center and industrial. Adjusted EBITDA was $42.6 million or 23.8% of value-added sales, up 12% compared to the prior year period. The year-over-year increase was driven by higher volume and pricing, partially offset by unfavorable mix. Looking out to the fourth quarter, we expect to finish the year strong with a meaningful step-up in sales driven by large incoming defense orders and continued order acceleration across other end markets.

Turning to Slide 13. Electronic Materials delivered another outstanding quarter. Value-added sales were $103.4 million, up 30% year-over-year, led by continued momentum across the semiconductor market. New business wins and accelerating broad-based demand are fueling the strong growth. Adjusted EBITDA was a record $33.2 million or 32.1% of value-added sales, up 54% year-over-year with 500 basis points of margin expansion. This marks the sixth consecutive quarter of year-over-year margin expansion in EM. These results reflect higher volume and favorable price/mix, together with contributions from new business and the benefit of the cost optimization work completed over the past several years.

Looking at the fourth quarter, we expect to see strong top and bottom line results, driven by continued semiconductor outperformance and contributions from new business. On Slide 14, Precision Optics value-added sales were $31.6 million, up 17% year-over-year, driven by strength across most end markets, coupled with new business. This marks the segment's sixth consecutive quarter of top line improvement and the highest quarterly sales since early 2021. Adjusted EBITDA was $5.5 million or 17.4% of VA sales, up 72% year-over-year with 560 basis points of margin expansion. This increase was driven by higher volume and strong price/mix and signifies the fifth consecutive quarter of double-digit year-over-year improvement. new program wins and operational improvements are translating into sustained profitable growth. Looking into the fourth quarter, we expect continued top and bottom line improvement to close out an impressive step forward in the transformation of Precision Optics.

Moving now to cash, debt and liquidity on Slide 15. We ended the quarter with a net debt position of approximately $382 million and $276 million of available capacity on our existing credit facility with leverage at 1.5x, the low end of our targeted range. We generated $46 million of free cash flow in the quarter, bringing year-to-date free cash flow to $85 million with conversion of approximately 120% in the quarter and 88% year-to-date. Looking ahead, we expect to deliver another strong cash performance in the fourth quarter, supported by higher earnings and continued working capital improvements.

Lastly, turning to Slide 16, I'll cover our 2026 outlook. Our performance through the first 9 months has positioned us to deliver a record year. Strong year-to-date results, coupled with record backlog and continued order rate momentum give us increased confidence as we close out the year. We now anticipate high teens top line growth for 2026 and are raising our adjusted EPS outlook to $7.10 to $7.40 compared to our prior guidance range of $6.80 to $7.20. At the midpoint, this represents approximately 33% growth year-over-year. This is our third outlook increase of the year, reflecting broad-based demand, strong operational execution and earnings contribution from new business wins.

Taken together, our record sales and earnings, sustained margin expansion, strong cash generation and strengthening balance sheet leave us well positioned to continue investing in growth while creating long-term value for shareholders. This concludes our prepared remarks. We will now open the line for questions.

Operator

[Operator Instructions] First question comes from Daniel Moore with CJS Securities.

分析师问答

Dan Moore

Congrats on obviously strong results and execution. I guess start with the stock has been all over the place following sort of the AI and semiconductor sentiment. And you gave great detail in the prepared remarks, but maybe contrast that with the cadence of how your demand is building for the core precious metals and tantalum targets in the semi side of the business as well as what we're seeing in aerospace and defense and industrial. As you look sort of deeper into the crystal ball, what does the runway look like? And I'll stop there and maybe kind of shift gears to margins, but just trying to compare and contrast what is going on with operations in the marketplace versus the core underlying momentum that is building in the business.

Jugal Vijayvargiya

Yes. Dan, I think with regard to our growth, the one thing that I would highlight to start with is that it is really broad-based. We have growth across all of our end markets. If you look at the year-to-date growth, we are positive and in fact, significantly positive on all the end markets. The only end market that's negative for us is consumer electronics, but that's really a specific project issue with the PMI, which we've discussed a number of times. Other than that, I mean, we have significant positive growth on a year-to-date basis across all of our markets.

Our semiconductor market, as you know, we delivered record results here in the third quarter, but we've had growing results for the last 6 quarters. In aerospace and defense, all 3 segments of our aerospace and defense. So we talk about commercial aerospace, we talk about space and we talk about defense. All 3 continue to grow, and they grew in the third quarter. In our industrial business, PMI index continues to be north of 50. Our year-to-date growth is 11%. In Q3, we grew 8%. Our Berlin nickel business, which is part of the industrial business, continues to be strong and continues to support all the build activities and infrastructure improvements that are happening in the U.S.

Our Telecom and data center business continues to do well, highest quarter of sales since 2019 and so on. So I think what we want to highlight here is that our growth is not based on one particular vertical. It's really based on many, many things that are going on in the marketplace, but then also the new business activities that we have going on in each of our markets. So we're quite excited about where we are. Our order rate, you highlighted it, is about 25% higher since the beginning of the year on a year-over-year basis. Our backlog growing again. And this is sort of a continuing theme that we have given quarter in, quarter out, but our backlog continues to increase. And now we're up to approximately 35% increase on a year-over-year basis for our backlog. And again, that goes across our end markets.

So certainly, the AI side, the data center side is important. The high-performance computing is important. In the semiconductor market, it's also broad-based, whether it's data centers, whether it's memory, whether it's logic, communication, et cetera, it's really a broad-based growth that we have in each of the markets as well as across the company. So we're excited about kind of where things ended up in Q3. We're really excited about where things are positioned for Q4, as you've noted -- as we've noted with our guide change that we have done. And hopefully, these things will then continue as we go on over the next year to more years.

Dan Moore

Maybe just talk to your capacity as you look across the businesses, looking to '27 and beyond, given the strength that you're seeing, are there areas that you may be looking to increase investment or capacity given those strong tailwinds?

Jugal Vijayvargiya

Yes, absolutely. We -- as you know, we've made good investments over the last several years. We've made a lot of organic investments. Our capacity has been an important part of that. Our operational excellence in general has been an important part of that. And we'll continue to do that across the plants where we think we need the capacity. But our teams have done a great job of driving efficiency, driving higher productivity, getting more out from our facilities with the capacity that we have. But like you said, at the same time, we're adding capacity. We announced you'll recall an investment, $65 million investment on the defense side, where we're putting that in. That should be in by the end of next year. So that capacity is going to certainly help us.

We made significant capacity investments over the last 2, 3 years actually in our high-performance computing. So Tantalum business you highlighted. And so that, I think, gives us more opportunities. So we are making capacity improvements and investments. We'll continue to do that. But I think our teams have done a really nice job of driving more output with the capacity -- with the equipment and plants that we have and making the incremental investments on an as-needed basis.

Dan Moore

Last one, I'll jump out. Very nice, I would say, rebound but uptick in adjusted EBITDA margins up to 22.5% already approaching that near-term target. So careful what you wish for. But looking into '27 and beyond, just talk to the sustainability of those margins and how much upside might there be as you look out over the next few years? I know we've got that near-term target. Just talk to the kind of operating leverage from here if we continue to see healthy organic growth as we've seen.

Jugal Vijayvargiya

Yes. Well, you'll recall, Daniel, our midterm target was 20% just a couple of years back. And we wanted to make sure that we could deliver that on a more sustainable basis, get a few quarters under our belt. Once we did that, we were able to go in and say, okay, we're going to raise that to 23%. And now we've been delivering consistently north of 20%, and we are approaching, as you said, 23%. We want to make sure that we can get there and deliver it for a few quarters. And I think as we can do that, then we'll sit back and look at what more could be possible. But right now, I think our focus is on making sure that we are delivering 23% on a consistent quarterly basis. Our teams are fully engaged on that, and we'll continue to drive towards that.

Shelly Chadwick

Yes. Jugal, just to add on a little bit to that. When we set that 23% target, we talked about the fact that we saw the path. We knew what it would take to get there and why we thought 23% was the right number for us to target for. I think our businesses are performing ahead of our expectations, right? So maybe we're getting there a little bit sooner. We're not ready to claim we're here at '23, but we're certainly seeing that momentum taking us forward a little bit faster than what we saw when we set that target.

Operator

Next question from Samuel McKinney with KeyBanc.

Samuel McKinney

Can you hear me?

Jugal Vijayvargiya

Yes. We can hear you now.

Samuel McKinney

Consumer electronics sales, they didn't change much sequentially. Can you provide us with the latest on the path back to normalized volumes for the Precision Clad, and any more details behind the timing that you cited in the slide?

Jugal Vijayvargiya

Yes. So on PMI, we indicated, I think, last time, and I would say the same, that is that we are at production levels that are -- that were there prior to the quality issue in Q4 that we had. So we continue to make good progress. And I think we'll continue to be at those levels here as we enter Q4 as well. So really, the rest of the consumer electronics is a smaller portion of our business. It fluctuates just based on timing and things quarter-to-quarter. So I wouldn't really put too much focus on the rest of the business, but we've made great progress on the PMI front, and we are at the production levels or slightly even better than what we were prior to the quality issue taking place in Q4.

Samuel McKinney

And then certainly, your goal is to outpace the general end market, but the semiconductor value-added sales blew that out. It increased 20% sequentially. Can you just talk about how you view sustainability of that quarterly value-added sales figure safely above $90 million and what in particular drove such massive growth this quarter?

Jugal Vijayvargiya

Well, I mean, part of the semiconductor change, as you can imagine, a little bit of timing. But I think in general, our teams have done a fantastic job of not only, as you said, growing with the market, but actually gaining share and winning new business. And certainly value-based pricing is a part of that as well. So we typically compare ourselves to wafer starts. Wafer starts are projected to be somewhere in the 11-ish percent on a year-over-year basis. Our year-to-date sales are roughly around north of 25%, so maybe around 26% on semiconductor. The quarter was at 40%. We continue to have great momentum in high-performance computing and making sure that our products are being used on the smaller node, high bandwidth memory, lower or smaller node chips.

We continue to have great pursuit in data storage, making sure we're gaining share and becoming a larger part on the data storage side. And a number of other, I would say, growth initiatives. When you look at our ALD portfolio, we've talked about the atomic position portfolio, strong growth in that business and continues to do well. So it is really, I would say, a broad-based growth on the semiconductor side in sort of all the subverticals of semiconductor with almost twice or actually a little bit more than twice the wafer start projections for the year when you look at it on a year-to-date basis.

I think we're well positioned. Your question about sustainability, I think we're well positioned to participate in the semiconductor space as we go forward. And so we'll put that together in Q4 and kind of get a feel for where we think '27 is going to be. But I think in general, we are well positioned to be in these subcategories of semiconductor.

Operator

Next question from David Silver with Freedom Capital Markets.

David Silver

So a very robust outlook that you've painted. I'm kind of scratching my head, and I'm going to maybe ask you about resourcing maybe from a somewhat different angle. But I've heard you say the -- discuss the diversity of end markets that you're now serving and the increasing share of what you call highly differentiated products that you're working on. And when I do look at your financial -- your income statement, I mean, your R&D spend is kind of flat with the year before and lower than a couple of years ago.

And I'm just wondering about whether from a talent issue, you have the resources in-house to kind of support what seems to be very strong growth and very impressive string of new business wins. I mean, with that order book, I think, comes the thinking about how to service the customers, not just the immediate order, but longer term. So maybe discuss the collaborative nature of your R&D or technical support? And what should we think about in terms of your resourcing at the R&D or technical support level going forward?

Jugal Vijayvargiya

Yes. Great question and one that I think we continue to be very focused on and making sure we're making all the right investments in the growth areas, and I'm convinced that we are. We are continuing to leverage, in fact, our partners. So when you see our R&D spending, keep in mind that as we leverage our partners, customers, governments, consortiums, et cetera, we are looking at more of a net spending. And so our gross spending continues to be good. We continue to make sure that the right things are being done and focused on. At the same time, we also have AI-related activities. I mean we're using sort of technology or AI-related activities to sort of augment, I think, on the R&D side.

When we also look at, I think, I'll call it R&D or you mentioned the collaborative nature, our sales and marketing efforts are much more technical, right? So you don't have a typical sales organization. We have technical sales. So when we look at our overall pursuit of business, you're looking at the technical sales side, technical marketing, the R&D, the funding that's happening from external sources and now certainly leveraging AI tools to be able to drive more efficiency and more productivity in our R&D side. So I'm convinced that we're making the right type of investments to be able to support the order book that's coming in, the backlog that's happening and I think being able to deliver in a really nice way to our customers.

David Silver

If I could just ask, you have -- I think Daniel or another questioner talked about your proactive, I would say, investments in adding new capacity a little bit ahead of demand and whatnot. If you were to kind of look at your footprint, your global footprint. You added capacity in Korea and whatnot and in electronic materials more broadly. Is it the case that you want to be as close to your customers as possible as you build out, let's say, electronic materials? Or is this the case where you think that the footprint that you've established right now will sustain your growth trajectory, let's say, for the next couple of years at least?

Jugal Vijayvargiya

Yes. I think we're going to do both, right? We want to have these core centers of expertise that we have established in our electronic materials business and our other businesses as well, but I'll focus on electronic materials since that's what you mentioned. We've established sort of core centers of expertise for each of our facilities. At the same time, we want to make investments, and we have done that. The most recent being the investment that we made in Korea, where we are putting in capacity outside the U.S., close to our customers. We have made investments in our facility in Europe to make sure that we can support the growth that is there. And we'll continue to look for both organic investments, but then also M&A investments.

We want to make sure that we're leveraging -- I mean you've seen kind of what we've been able to do with our balance sheet, and we want to be able to leverage that to be able to do perhaps more capacity-related M&A near to our customers like you mentioned. So I think we want to leverage both -- best of both worlds where we have core centers of expertise. But then at the same time, we have local manufacturing to be able to support our customers in region.

Operator

We have reached the end of the question-and-answer session, and I will turn the call back over to Kyle Kelleher for closing remarks.

Kyle Kelleher

Thank you. This concludes our third quarter 2026 earnings call. A recorded playback of this call will be available on the company's website, materion.com. I'd like to thank you for participating on this call and your interest in Materion. I'll be available for any follow-up questions. My number is (216) 383-4931. Thank you again.

Operator

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.