Q4 2022 Materion Corp Earnings Call
[music].
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your phone keypad. Please note. This conference is being recorded I would now turn the conference over to your highest Mr. Jones.
Chief Accounting Officer John .
T.
Good morning, and thank you for joining us on our fourth quarter 2022 earnings Conference call. This is John <unk>, Chief Accounting Officer.
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, <unk>, President and Chief Executive Officer, and Shelly Chadwick, Vice President and Chief Financial Officer.
Our format for todays conference call is as follows.
Hugo will provide opening comments on the quarter and the full year as well as an update on key strategic initiatives.
Following jugal Shelly will review the detailed financial results for the quarter and the year. In addition to discussing our expectations for 2023.
We will then open the call for questions.
Let me remind investors that any forward looking statements made in this presentation, including those in the outlook section and during the question and answer portion are based on current expectations.
The Companys actual performance may materially differ from that contemplated by the forward looking statements as a result of a variety of factors.
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 the attachments four through seven in this morning's press release.
The adjustments are made in the prior year period for comparative purposes, and removed special items noncash charges and certain discrete income tax adjustments.
And now I'll turn it over the call to jugal for his comments.
Thanks, John and welcome everyone.
It's great to be with you today and share details on another record quarter from a train.
Which closes out a record year.
This year, we marked several milestones for our company.
Crossing $1 billion in value added sales.
Delivering over $300 million and quarterly sales.
Reaching nearly $200 million EBITDA.
EBITDA and.
And crossing $5 EPS.
Our transformation into a global leader in high performance advanced materials is deliberate.
We're driving a step change in both our sales and earnings.
Our strong execution and delivery on strategic growth initiatives are enabling us to consistently outgrow our end markets.
An expanding list of customers continue to place their trust in us.
Development of next generation solutions align with global Mega trends.
These strategic partnerships are helping to build a healthy pipeline for future growth and strengthening our position for 2023.
We brought this year until a record closed with an incredible 11th consecutive quarter of VA sales growth.
The new facility for precision clouds for project contributed meaningfully as we fully qualified the facility.
In addition, we continue to supply <unk> from our legacy clients.
Our acquisition of HCS electronic materials continued to outperform delivering on robust demand from our customers.
In total the <unk>.
Progress, we've made on organic and inorganic initiatives drove record top and bottom line growth with EBITDA margins, reaching 18% in the quarter tracking well towards our midterm target of 20%.
Contributing to record quarterly earnings of $1 49 per share.
For the full year, we delivered year on year increases of 30% or more across sales EBITDA and EPS.
It was an exceptional year in our company's transformation.
Organic growth investments and strategic customer partnerships contribute more meaningfully to our results.
The integration of HCS electronic materials has gone extremely well.
Power of our combined teams generated significant commercial and operational opportunities, but are driving growth beyond our already strong synergy expectations.
We're investing more than $20 million and the new facility to expand capacity and capabilities to service demand in the semiconductor industrial and aerospace and defense markets.
Our precision Kladstrup facility was completed and qualified during the year and is now achieving significant production levels, a noteworthy accomplishment given the size and scale of that project.
As we've shared the customer is investing an additional $40 million with us to increase capacity after the initial investment of $80 million.
Struction for phase II capacity remains on track and we anticipate that capacity coming online in late 2024.
The buildout of our new facility in Milwaukee is progressing nicely as we are installing new equipment over the next few quarters with production capabilities coming online in the first half of next year.
This site will expand our capacity to support production of the most sophisticated semiconductor chips as well as broaden our advanced chemicals capabilities to produce materials for next generation batteries for electric vehicles.
This year, we also announced the partnership with <unk> energy to support clean energy development.
With the establishment of a molten salt purification plant produces fly a reliable safe and cost effective molten salt coolant used in nuclear energy production.
Today, I am happy to announce two additional customer partnerships and further develop our growth pipeline.
First we secured another customer funded investment of $15 million to expand our capabilities and supply critical materials for clean energy power generation.
We expect equipment installation to be complete in this year at our facilities and look forward to completing delivery of the materials by end of next year.
We also continue to see great interest in our capabilities for critical space applications.
We recently signed a three year agreement filed materials for space propulsion systems.
We have already received an initial $10 million order, which we will start to ship middle of this year.
This partnership further establishes <unk> as a leading partner for innovative solutions that deliver the level of performance and reliability required for critical space missions.
Strategic growth projects are the cornerstone of our strategy and in 2022, our team demonstrated an ability to execute on our commitments and to continue developing important customer partnerships.
There is no better evidence of our global success is in advanced materials leader.
Customers, who continue to choose maturing on and make upfront financial contributions. So that we can solve the most pressing challenges.
<unk> performance over the past two years has seen sales growth, 70% with earnings more than doubled.
And as indicated by a growing list of customer partnerships, we are continuing to build for the future. The remaining laser focused on outpacing the growth rate of the markets, we serve and continuing to align ourselves with mega trends that will open additional growth avenues for years to come.
With the success and progress of our outgrowth initiatives, we're heading into 2023 with excellent momentum.
We will continue to drive market outgrowth, even as the environment experienced pockets of general softness, particularly in the semiconductor space.
Operational excellence disciplined cost management combined with our outgrowth will ensure we continue to advance the earnings power of our company.
We will continue to drive our transformation and differentiate maturing on through unparalleled technical expertise innovation and strong performance as.
As we continue to build our pipeline, we expect to deliver another year of record results at both top and bottom.
I'm proud of our global team as they continue to support our customers and help them exceed expectations.
Thanks to our team's talent and dedication we have delivered record results for two consecutive years.
Together, we are driving long term value creation for a cut.
<unk>, our shareholders and RP.
Now, let me turn the call over to Shelly to cover the financials.
Thanks, Joel and good morning, everyone. During my comments I will reference the slides posted on our website. This morning, starting on slide 13.
Hugo outlined in his opening remarks, we achieved another record quarter of value added sales adjusted EBITDA and earnings per share and now.
Now you added sales, which exclude the impact of pass through precious metal costs were $309 2 million for the quarter up 30% for the prior year.
This significant increase was driven by strong demand across the industrial aerospace and energy markets, along with higher precision clad strip sales in the fourth quarter.
Organic sales, excluding the impact of acquisitions and currency increased approximately 26% compared to the prior year with significant above market growth.
We delivered adjusted earnings of $1 49 per share in the fourth quarter up 32% as compared to the prior year despite substantial interest headwinds.
Moving to slide 14, adjusted EBITDA in the quarter was $55 6 million or 18% of value added sales up 40% from the prior year.
The increase was largely driven by higher volume favorable price mix and positive contribution from our HTS electronic materials acquisition.
These strong growth drivers were partially offset by commercial and R&D investments as we continue to support our organic growth initiatives.
Now, let me review fourth quarter performance by business segment.
Starting with our performance materials business on slide 15 value added sales were a record $1 77, 6 million, an increase of 53% compared to prior year.
The increase was driven by strong performance in the industrial energy and aerospace end markets and higher defense and hydroxide shipments in.
In addition, the new precision clad strict plant contributed near full run rate with additional shipments from our legacy.
EBITDA, excluding special items was a record at $44 3 million and a record 25% of value added sales up 96% compared to $22 6 million in the fourth quarter of 'twenty one.
The increase in EBITDA was primarily due to increased volume favorable price cost and a strong mix.
Moving to the 2023 outlook the order books for performance materials remains strong and we expect another year of above market growth.
The largest market share, including industrial aerospace and energy should all see growth in 2023.
And with our precision clad strip business exiting 'twenty two near the full run rate, we expect meaningful contribution in 2023.
Next turning to electronic materials on slide 16.
Fourth quarter value added sales were $104 million up 16% versus the prior year and up 2% organically.
The organic growth rate has been decelerating with slower shipments in semiconductor as customers work through inventory correction.
Sequentially electronic materials EBITDA declined 9% organically.
EBITDA, excluding special items was $17 1 million or 16, 4% of value added sales in the quarter, an increase of 8% from the prior year.
The increase was driven largely by increased HCS volume and favorable price cost.
This business also saw significant margin expansion from the third quarter of 130 basis points due to a richer mix combined with our cost control efforts.
As we look forward to the coming year, we expect the electronic materials business to outgrow softening markets and you continue to see positive contribution from HTS electronic materials with higher volumes and improved price cost from that portion of the business.
Finally, turning to the precision optics segment on slide 17 value added sales were $27 7 million down 15% compared to the prior year.
This decrease was driven mainly by the discontinued consumer electronics application and another quarter of foreign currency headwinds negatively impacting the top line by approximately $2 million.
EBITDA, excluding special items was 4 million or 14, 6% of value added sales down from the prior year due to the lower sales volume.
Despite this volume reduction EBITDA margins have continued to expand each quarter in 2022 as we have successfully manage costs. While we are building the growth pipeline.
For 2023, we expect quarterly sequential improvement supported by new business and defense automotive and space exploration.
Moving to slide 18, let me quickly review the record results we saw in full year 2022.
As we did in 'twenty, one we delivered another record year of value added sales adjusted EBITDA and adjusted earnings per share.
VA sales reached an all time high of $1 1 billion up 33% from the prior year.
This year over year increase resulted from strong demand across the semiconductor industrial energy and aerospace end markets as well as the impact of our clad strip project and the addition of HTS electronic materials.
Excluding the impact of acquisitions and currency organic VA increased approximately 18% when compared to the prior year, representing clear market outgrowth.
Adjusted EBITDA for the year was $196 million or 17, 1% of value added sales up 37% from the prior year.
The increase was largely driven by higher volume favorable price cost and the impact of the HCS electronic materials acquisition.
We delivered $5 27, and adjusted earnings per share for the year up 30% compared to the prior year.
This resulted from the company's strong performance. Despite an additional 70 cents of interest expense when compared to 21.
Moving now to cash debt and liquidity on slide 19, we ended the quarter with a net debt position of approximately $419 million and $185 million of available capacity on the company's credit facility.
Our leverage at two one times at the midpoint of our target range with our expanding EBITDA and $62 million of debt pay down in the fourth quarter funded by our strong free cash flow.
Lastly, transitioning to slide 20, let me address our 2023 outlook.
While we remain confident in our expanding organic initiatives pipeline, we will continue to see some end market softening, particularly in the semiconductor space.
Despite this we expect to deliver another record year for sales and earnings with adjusted EPS in the range of $5 50.
The $5 90 per share representing an 8% increase at the midpoint.
We've also provided some updated modeling assumptions as we move into 'twenty three.
We are anticipating another strong year of growth investment with capital expenditures forecast at approximately $95 million for both new and in process projects.
We're also forecasting roughly $11 million and mine development costs to occur in the back half of 'twenty three relating to a new pit opening at our beryllium mine.
In closing despite some market headwinds 2023 is shaping up to be another exciting year of strong market outgrowth and execution for material.
Adding to record results and long term sustainable value creation for our stakeholders.
This concludes our prepared remarks, we will now open the line for questions.
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Thank you. Your first question is coming from Daniel Moore of CJS Securities Daniel Lee Your line is life.
Good morning, Jules morning, Shelley, Thanks for taking the questions good morning going dense.
Start with that.
The two new partnerships that you announced this morning, maybe just a little bit more detail on the specific products applications for each and what the revenue opportunity and ramp could look like over the next one to two years.
Yeah. So.
So great partnerships.
The first one we announced is funded one with about a $15 million investment that we indicated that investment will be spent this year really putting capacity in place. We expect to have the sales completed I would say this year and really primarily next year.
In this project.
As I said, a exciting partnership I'm not able to go too much into detail Dan on what the what the product. There are specific material that will be supplied just based on the confidential nature of the contract that we have.
But it is quite exciting actually impacts a couple of our facilities that we will put capacity increases.
And then be able to supply as I said between this year and next year with the with the majority of it I would say next year.
The second partnership this isn't one that we actually have capacity today. So there's not really any funding required for the second item, which is the critical space application, we're going to utilize our existing capacity that.
That we that we have.
It is a pre year three year agreement that we reached with the customer as you know space is an important megatrend for us we've talked about it about a year ago with one of our calls.
And this is just a really exciting application and proposal systems, so our materials being utilized.
For for that.
We're going to start delivering yet I would say this year in the second half of this year of that initial $10 million order and then and then into.
Into next year and our expectation is that we'll continue to do that over that three year timeframe and then of course.
And that as well both of these opportunities are part of our.
Performance materials segment.
So quite excited about continued organic growth opportunities.
In our in our company.
Very helpful. Overall sounds like Youre looking for kind of a positive that would be low to mid single digits.
Growth year for value added sales.
Is that a hearing that correctly, putting all the pieces together number one number two what does the cadence look like are we likely to start off in that clip or maybe a little slower given some of the near term headwinds in semi.
Yes, I mean, let's just start with semi because that is as you know sort of.
A question Mark I think that many companies have right now.
<unk> us.
I would say that in general it's probably.
Lower first half as inventory correction works, and then better better second half as the as the pick up as expected.
So that means about a third of our business. So that certainly has an impact on our overall company and so I would expect the first half to be a little bit slower than the second half in terms of sales and I guess, you can kind of extrapolate that too to the earnings power of the company as well.
We think we think when you look at our markets chart, which.
We have included in our deck I think it's slide 10.
Majority of the markets that we participate in are we believe we're going to be positive.
It's a little north of zero to three or a little bit more than three for a couple of them, which is aerospace and energy semi is the big one as we indicated which.
He is going to be perhaps a little bit.
More more negative so I think your assessment is probably reasonable in terms of the type of growth maybe that the company may.
Experience overall, but I certainly would say that it is going to be up first half start a bit on the software side, but then really deliver much more in the second half, but overall, we're excited I mean, because youre looking at an 8% growth on the EPS side I mean, the operational performance we think.
The company is going to be somewhere in the $2014 15, maybe type of a range.
We have a little bit more interest of course that we have to deal with so the EPS is around eight but I think overall, it's going to be up it's going to be.
A good year for us.
And then maybe since you talked about timing I would just talk about the sequential Q4 to Q1, we had a really strong Q4 still talked about we'll see the semi softening in Q1. So we certainly expect to be up year on year, maybe 10% earnings from Q4 to Q1, but be a little bit potentially softer than Q4.
Very helpful. Shelly last for me and I'll jump out.
Cash flow picked up nicely in the quarter obviously.
You gave the outlook for Capex, just talk about kind of what your expectations are for working capital and cash generation in fiscal 'twenty three.
With the balance sheet now leverage down to that kind of midpoint of the range and declining any shifts in order of priority for capital allocation. Thanks, Yeah, great. Great question, and we were pleased that our cash flow generation in Q4, certainly were keeping that in view to make sure that our leverage is in.
The low to mid part of that range I think is what we're targeting at this point given where we are kind of in the cycle of things.
Our capex was a bit lower as we had some capex and in accounts payable at year end. So that means in Q1, we're going to have a bigger payment for capex than maybe normal. So I don't think we're going to see a real strong free cash flow number out of Q1, but expect a good number for the whole year, and we will bring that debt down a bit more.
Don't think we're going to put that is number one priority as you saw the Capex number is still healthy we've got a lot of growth opportunities, but youll see youll see that that number come down right. Now are two <unk>, one will certainly be in the high ones.
Next time this year.
Time next year.
Perfect jump back with any follow ups. Thank you.
Yes.
Thank you very much. Your next question is coming from Phil Gibbs Phil Your line is life.
Phil.
Are you on mute.
Maybe we'll go to the next and we'll come back yet.
Yep, Okay, just one second.
So there's no issue with tea.
Okay.
Yes.
Just by way of asking that might be a technical issue with the panel hang on a second I'm really sorry, Hey, Jamie This is helping out Phil Gibbs will be our next question.
Bill Your line is live please go ahead.
Can you hear me now yeah.
Yes, we can hear you alright.
Alright, perfect good morning.
Good morning, how are we something right.
Yes.
Our first question is just on the defense and hydroxide piece that you mentioned I know, it's typically a good kick or to your mix and we saw a lot of our other companies in the specialty metals arena have good quarters and defense, partially maybe because of the war.
National demand so what was the pick up quarter on quarter four P. AACE meeting how outsized was it and then what should we expect to persist to some of these.
Geopolitical and macro things persist.
Yes. So we had mentioned when you look at defense I think when we in our Q3 call. We had mentioned that there may be some defense orders on timing that we have been waiting on and trying to get them in.
<unk> benefit in Q4, and that's exactly what happened and they benefited here in Q4.
We expect defense to be a good market.
In terms of going into 'twenty three we have noted in our slide 10, but it's probably somewhere in the zero to three type of a range. So from a mid growth type of a market for us.
But that's certainly that's certainly was a positive for us in Q4, and then hydroxide I should note that one we typically have one or two.
<unk> per quarter, depending on depending on the needs of the customer may have and we happen to have we happened to have a ship.
Shipment extra shipment in Q4 that benefited us.
We would expect the shipment timing for 'twenty three to be relatively in line with let's say the historical rate that we've had so I wouldn't expect anything.
Unusually positive or negative from the hydroxide shipments and maybe just to add some color on Q4.
Sales of defense shipments can be kind of lumpy.
In chunks versus the consistent throughout the year so year on year in Q4, you saw a pretty significant growth in the twenties.
What percentage wise, which certainly helped with our mix.
Okay. That's helpful and then as a second question I know.
<unk>.
The tantalum.
Misalignment impacted Q4, Q3, I think to the tune of $4 million to $5 million not really sure. What it was in the fourth quarter, but I remember you expected some of those things to gradually get better I don't think the first quarter was inclusive of that but.
Some better contracts and some and some things tightening up a little bit better by the second quarter.
Can you can you give some color in terms of where those things stand.
Yes, maybe I'll start on that one so yeah, we talked about the $4 million in Q4.
Looked better in Q3 and are closer to $3 million, we will see that still work out in Q1 as a reckon through some higher cost inventory.
The negotiations with the customers are largely behind us. So we're seeing some of that pricing start to feather in as we enter the year, but some contracts renegotiate in the year as well. So that's why we will still see a little bit of that hangover as we start out 23.
Is that still reasonable lose suspect that that's done by the second quarter for the most part.
Yes, I think what we had indicated is for the most part it would start to phase out in the second quarter and then the second half we expected it to be a little bit on the clean side. So that's the that's the expectation.
Thanks, so much.
Thank you. Your next question is coming from Dave storms from Stonegate capital markets.
Steve Your line is live please proceed.
Good morning, and thanks for taking my questions.
Joining where historically was.
Good morning.
There were stronger year over year, EBIT margin expansion and performance metals on a value add level.
Can we expect any of that to be stickier or is that more just a product.
Maybe inflation moderate her more macro trends.
Well our performance materials business, certainly did really well in Q4, I mean, theres a number of factors.
The business is continuing to drive organic growth as we move forward some of the operational challenges that we had in Q3, we got those challenges behind US. We just mentioned for example, the positive mix with the defense and <unk>.
Hydroxide, both of those kind of tend to go a little bit more on the performance materials business.
We also had the precision cloud business ramp much more in Q4, so that certainly was a favorable item.
So I would expect that as we move forward. Some of these things are going to continue to benefit and then some certainly the one time type of things like with defense on hydroxide.
Are going to are going to taper off so we expect proposed materials to continue to.
Do well into 'twenty, three but I'm not sure. The the run rate the rate that was delivered in Q4 is something that we can replicate four times this year, yes.
It's not the new floor right now EBIT was at around 20% or 18% sorry for the year and 20%, 21% in the quarter I think we'll do better than the year.
21, certainly not before.
That's perfect and just touching on the precision micro quick Charlie I know.
You mentioned in your comments that that was near full run rate. Just curious is there any color as to what.
On rate would look like.
So, yes, I would say we exited the year near full run rate probably not from the new facility at run rate at full run rate for the whole quarter, but we did have the benefit of also shipping from our legacy facilities. So in total that's really favorable volume we do expect to have all the volume coming out of the of the new facility in <unk>.
And we're getting very close to full ramp.
In that facility.
Yes.
That's perfect. Thank you well one more if I could.
Just wondering Shelly you also mentioned the order book looks really good.
Was wondering if there was anything specific.
China on the reopening over there and if theres any corporate tax we can expect from a supply chain or anything of that nature.
Yes, no. Our order book continues to look strong I mean, the mix of our order book certainly is changing a little bit just based on the market conditions. So for example, we've talked about semiconductor and what that market is doing so.
The order book on that one is a little bit stressed, but we have a really positive order book on some of the other markets. So I think overall, our order book continues to be favorable and one that supports our guide that we've provided for 'twenty, three which is a substantial growth from 'twenty to 'twenty two levels.
China opening up certainly has.
They are positive.
But our business in China is relatively small.
In comparison to our total company.
It has.
Small positive impact, but nothing of.
Meaningful.
Okay.
That's perfect. Thank you both very much.
Yeah.
Thank you and as a reminder, ladies and gentlemen, if you would like to join the queue to ask a question you May press star one on your telephone keypad to join the queue. Once again that'll be star one on your keypad, if you'd like to ask a question.
And our next question is coming from David Silver from CL King David Your line is live. Please go ahead.
Yes, hi, good morning. Thank.
Thank you.
Good morning, David.
Yeah. So.
Couple of questions I apologize there'll probably be a little hopscotching around here.
First thing I wanted to ask you about was the effect of currency on your operations this year.
And also what are your assumptions for currency impacting but what was the currency impact assumed in the fiscal year 2023, EPS guidance range.
Could I mean is there a revenue with delta on the revenues Delta on the adjusted EPS. If you had that that would be great. Thank you.
So one good thing about our business, where we have currency exposure, we've got pretty good matching on costs. So what we see on the revenue line.
Really much bigger than what we would see on the on the EBITDA line. So we're well protected from that perspective, when we go into a new year.
We're often looking at.
Keeping it stable with where we ended the year. So we don't make big calls on what we think is going to happen with currency. What we saw this year was not.
Not overly meaningful.
Talking maybe $10 million or so for the top line, but nothing near that to the bottom line.
Okay, and then just maybe kind of a more of a theoretical question or false philosophical question, but a number of my industrial and electronic materials companies have talked about.
The significant impact of inventory destocking during the fourth quarter, both direct their sales, but also indirect maybe affecting their their customers downstream.
I may have missed it I did not hear too much reference to that and I'm just wondering.
Was destocking and issue do you think it'll be an issue in the first half of 2023 or is it the case that maybe the more advanced materials.
<unk> of your portfolio doesn't doesn't lend itself as readily to.
The kind of buffer stock buildup in drawdown.
Maybe has been characteristic of some of your end markets more broadly thank you.
Well I think the inventory correction issue or Destocking that you mentioned is definitely an issue in the semiconductor space.
Yes.
Not only are we seeing it but I think the entire market.
The semi space.
Seeing that we expect that to work its way out I would say in the first half and then pick back up in the second half.
That's one of the reasons why we've got semiconductor as a market up perhaps a little bit less than lose the lesson zero.
From a year over year perspective, so I think that is an issue David and it is it is something that I think we're experiencing.
And certainly I would say pretty much the entire semi industry is experiencing when I look at our other markets I don't see destocking as a as a.
And importantly, I think all of the other markets.
Our continuing to move forward I mean, as we've highlighted in our in our chart chart 10 of kind of how we see 23 coming along.
We do see in general I would say a little bit softer first half versus the second half, but a lot of that is due to the semiconductor side, just because that business is about a third of our third of our business. So it is it is an issue for part of our business, but I would say not an issue for some other parts of our business.
Okay.
The next couple of questions I think are going to be on the.
Would be on the electronic materials business.
And I'm going to quote just a sentence from the press release this morning.
So you said.
The successful I'm going to paraphrase, but the successful integration of HCS.
Stay on the power of our combined teams is quote unquote generating value beyond our expectations unquote, so the generating value beyond their expectations is what I was wondering about.
In particular, when I think about that in the context of some of the goals or some of the opportunities with combining HCS I'm thinking more along the lines of maybe revenue synergies in other words cost synergies we're probably.
As expected.
B.
Could be identified at a time to a certain extent, whereas revenue synergies.
There is potential but the timing is always.
The timing and execution are always highly uncertain, but.
Maybe if you could comment on what the beyond our expectations element of the HCS acquisition integration combination is.
How that has played out.
Yes.
First of all.
The Acs acquisition, and just like our quarter indicators.
Has delivered really well for us our teams combined with the ACS team have worked on so many different fronts.
To deliver.
During the year, we were able to add.
Over 20% head count to the facility and increase our output from the facility, we announced over $20 million worth of capital investments that we're putting in place to be able to put new capacity.
Hold on for the business.
The number of initiatives that our teams have been working on what they have worked together to go and offer our complete portfolio of electronic materials to the top 15 semiconductor manufacturers has been has been very powerful so I think theres a number of things that have happened certainly all of those things by the way have led to great great.
Financial.
Results as well for that business I would say much better than what the what the synergies levels that we had we had indicated.
I think the other thing that's been very interesting and we've talked about this is when you look at tantalum and the application of tantalum.
<unk> continues to increase in general right.
The smaller of the nodes.
Getting the more application for tantalum.
And so even though there is the short term.
Softness on the memory side, the logic side is continuing very strong.
And we would expect the memory side to be recovering so the long term trend of this business is extremely good and extremely healthy.
So I think it's a combination of things when we say beyond expectations combination of how things have turned out on our top line.
With the synergy combination of of the investments that we've made the people that we've actually put in place.
As as well as I think the future opportunities that we have for our combined portfolio. So all of that put together I think is very very favorable for us and we're excited about this business.
Okay, I'd like to kind of follow up on the.
Electronic materials outlook.
Yes.
I apologize in advance this is.
This question will be a little more disjointed than normal but.
In the United States. There is a number of very large wafer fabs and related units being put coming on stream are underdevelopment now due to come on stream between let's say early 2024 through <unk>.
2026, and its my opinion that the.
The wafer fab development is moving maybe a little bit faster than what I would call the <unk>.
Ecosystem, the suppliers in support and logistics and whatnot.
And along those lines two things I was wondering if you could comment on generally on how you see the opportunities for your.
Products and services developing as those big new wafer Fabs are completed in.
Get commissions and ramp up and then secondly, how does the chips act or the the new level of <unk> that's available.
For semiconductor manufacturer in this country how how.
How does that play into your growth strategies or your ability to tap into that.
Source of financial support et cetera. So.
The the growth that had already been announced and now the financial support at the federal level. Thank you.
Yes.
First of all as we've already indicated I think on the call and we continue to indicate this is a space that we're very excited about.
The acquisition that we did of course is in the semiconductor space. We see this as a long term growth play for us.
It's producing good short term results and we expect it to produce good long term results.
Our footprint.
R&D footprint and our manufacturing footprint is.
Is primarily in North America, and the acquisition that we made here about a year ago is also in North America. So I think we're very well positioned to continue to work with all of the semiconductor manufacturers as we indicated we have access to all the top 15 semiconductor manufacturers and.
And then we are able to have both the R&D as well as manufacturing in region to support them. So we see that as a very positive for us on a go forward go forward basis.
When you look at then what additional things we can do I mean, we certainly are involved in.
The chips Act discussions we're studying it very carefully we're looking at what options are there could be we're looking at which of these capabilities and skill sets that we have that we could further strengthen.
And so we're involved in a number of discussions on how we can take advantage up and support the chip manufacturers as they grow their capacity so as we have more.
On that to communicate we certainly we certainly will.
But yes that is definitely one of the initiatives that we're engaged in.
Okay, and then just last question and I apologize one Shelley was going through this this part of her discussion I was tiny tiny bit distracted but.
Just to touch base on the third segment. The optics I think you were saying that.
Yes.
You were indicating that maybe the restructuring reshaping had kind of reached a.
Point, where.
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The unit there has been stabilized and could be positioned for growth and I believe you mentioned, a healthy backlog, but would it be fair to say that we should.
Look for kind of an inflection point or a turnaround to growth overall in that segment full year 'twenty three versus full year 2002. Thank you.
Yes, I think Thats I think thats fair to say that.
As we look at our 'twenty, three and kind of look at the new business initiatives.
Businesses involved then we would expect that those things to kick in during the year certainly the back half of the year than we would have more of a benefit than the front half of the year, but on a full year basis, we would expect that business to have.
On a year over year basis on the double top and bottom line.
We're excited about that I mean, this is a great.
It's been a great business for us it's gone some guidance with some headwinds here over the last 12 months or so just based on.
Customer decisions and some of the life life Sciences product discontinuation that happened, but but in general this is a great business for us and we're looking forward to.
Be able to share the turnaround here during the year.
Very helpful. Thank you very much.
Thanks, David.
Thank you.
There are no further questions in queue I would now like to turn the floor over to John Zaro, Nick for any closing remarks.
Thank you. This concludes our fourth quarter of 2022 earnings call. A recorded playback of this call will be available on the company's website materially dot com.
Thank you for participating on the call this morning, and your interest in material.
I'll be available for any follow up questions. My number is 206 3834010.
Thanks again.
Thank you. This does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.